<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 21, 1997
Registration No.
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------
ATRIUM COMPANIES, INC.
and Certain Subsidiaries identified in footnote (1) below
(Exact name of registrant as specified in its charter)
DELAWARE 3442 75-2642488
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
9001 AMBASSADOR ROW
DALLAS, TEXAS 75247
(214) 634-9663
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
--------------------
RANDALL S. FOJTASEK
ATRIUM COMPANIES, INC.
9001 AMBASSADOR ROW
DALLAS, TEXAS 75247
(214) 634-9663
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
--------------------
COPIES TO:
DEREK R. MCCLAIN JEFF L. HULL
HAROLD J. HERMAN ATRIUM COMPANIES, INC.
VINSON & ELKINS L.L.P. 2100 E. UNION BOWER
3700 TRAMMELL CROW CENTER IRVING, TEXAS 75061
2001 ROSS AVENUE (972) 438-4787
DALLAS, TEXAS 75201-2975
(214) 220-7797
--------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement
--------------------
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
======================================================================================================================
Proposed Maximum Proposed Maximum Amount of
Title of Each Class of Amount to be Offering Price Aggregate Registration
Securities to be Registered Registered Per Note (2) Offering Price (2) Fee
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
10 1/2% Senior Subordinated
Notes due 2006 . . . . . . . . . $100,000,000 100% $100,000,000 $30,303.04
- ----------------------------------------------------------------------------------------------------------------------
Senior Subordinated Guarantees (3) -- -- -- --
======================================================================================================================
</TABLE>
(1) The following direct and indirect subsidiaries of Atrium Companies, Inc.
are Co-Registrants, each of which is incorporated in the jurisdiction and
has the I.R.S. Employer Identification Number indicated: H-R Window
Supply, Inc., a Texas corporation (75-2382008); Vinyl Building Specialties
of Connecticut, Inc., a Connecticut corporation (06-0765499); Bishop
Manufacturing Co. of New York, Inc., a Connecticut corporation
(06-1351269); Bishop Manufacturing Company, Incorporated, a Connecticut
corporation (06-0735384); and Bishop Manufacturing Company of New England,
Inc., a Connecticut corporation (06-1251035).
(2) Estimated solely for the purpose of calculating the registration fee.
(3) The 10 1/2% Senior Subordinated Notes due 2006 are guaranteed by the
Co-Registrants on a senior subordinated basis. No separate consideration
will be paid in respect of these guarantees.
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, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
================================================================================
<PAGE> 2
PROSPECTUS DATED AS OF JANUARY 21, 1997
OFFER FOR ALL OUTSTANDING
10 1/2% SENIOR SUBORDINATED NOTES DUE 2006
IN EXCHANGE FOR
10 1/2% SENIOR SUBORDINATED NOTES DUE 2006
OF
ATRIUM COMPANIES, INC.
------------------------------
Interest Payable May 15 and November 15
Atrium Companies, Inc. (the "Company") is offering upon the terms and
subject to the conditions set forth in this Prospectus and the accompanying
letter of transmittal (the "Letter of Transmittal") (which together constitute
the "Exchange Offer") to exchange $1,000 principal amount of its new 10 1/2%
Senior Subordinated Notes due 2006 (the "New Notes") for each $1,000 principal
amount of its outstanding 10 1/2% Senior Subordinated Notes due 2006 (the "Old
Notes") in the aggregate principal amount of $100,000,000. The form and terms
of the New Notes are identical to the form and terms of the Old Notes except
that the Old Notes were offered and sold in reliance upon certain exemptions
from registration under the Securities Act of 1933, as amended (the "Securities
Act"), while the offering and sale of the New Notes in exchange for the Old
Notes has been registered under the Securities Act, with the result that the
New Notes will not bear any legends restricting their transfer. The New Notes
will evidence the same debt as the Old Notes and will be issued pursuant to,
and entitled to the benefits of, the Indenture (as herein defined) governing
the Old Notes. The Exchange Offer is being made in order to satisfy certain
contractual obligations of the Company. See "The Exchange Offer" and
"Description of New Notes." The New Notes and the Old Notes are sometimes
collectively referred to herein as the "Notes."
Interest on the New Notes will be payable semiannually on May 15 and
November 15 of each year, commencing on May 15, 1997. The New Notes will
mature on November 15, 2006. Except as described below, the Company may not
redeem the New Notes prior to November 15, 2001. On or after such date, the
Company may redeem the New Notes, in whole or in part, at the redemption prices
set forth herein, together with accrued and unpaid interest, if any, to the
date of redemption. In addition, at any time and from time to time on or prior
to November 15, 2000, the Company may, subject to certain requirements, redeem
the New Notes with the net cash proceeds of one or more Equity Offerings (as
defined) at a price equal to 110 1/2% of the principal amount to be redeemed,
together with accrued and unpaid interest, if any, to the date of redemption,
provided that at least $65 million of the aggregate principal amount of the
Notes remains outstanding after each such redemption. The New Notes will not
be subject to any sinking fund requirement. Upon the occurrence of a Change of
Control (as defined), (i) the Company will have the option, at any time on or
prior to November 15, 2001 (but in any event within 90 days after the
occurrence of the respective Change of Control), to redeem the New Notes, in
whole but not in part, at a redemption price equal to 100% of the principal
amount thereof plus the Applicable Premium (as defined), together with accrued
and unpaid interest, if any, to the date of redemption, and (ii) if the New
Notes are not redeemed, the Company will be required to make an offer to
repurchase the Notes at a price equal to 101% of the principal amount thereof,
together with accrued and unpaid interest, if any, to the date of repurchase.
In addition, under certain circumstances the Company will be obligated to make
an offer to repurchase the New Notes at 100% of the principal amount, plus
accrued and unpaid interest to the date of repurchase, with the net cash
proceeds of certain sales or other dispositions of assets. See "Description of
New Notes."
The New Notes will be unsecured and will be subordinated to all
existing and future Senior Indebtedness (as defined) of the Company. The New
Notes will rank pari passu with any future Senior Subordinated Indebtedness (as
defined) of the Company and will rank senior to all other subordinated
indebtedness of the Company. The New Notes will be unconditionally guaranteed
(the "Subsidiary Guarantees") on an unsecured, senior subordinated basis, by
each of the Company's subsidiaries on the issue date of the New Notes and by
each subsidiary (excluding foreign subsidiaries and Unrestricted Subsidiaries)
of the Company acquired thereafter (collectively, the "Subsidiary Guarantors").
The Indenture (as defined) permits the Company to incur additional indebtedness
(including Senior Indebtedness), subject to certain limitations. See
"Description of New Notes." As of November 27, 1996, after giving effect to
the Transaction (as defined) and the Offering of Old Notes (the "Offering")
(collectively, the "Financing"), the aggregate amount of the Company's
outstanding Senior Indebtedness was approximately $2.2 million (excluding
unused commitments) and the
(Cover page continued on next page)
<PAGE> 3
Company had no Senior Subordinated Indebtedness outstanding other than the
Notes. See "Description of New Notes -- Ranking and Subordination."
The Exchange Offer will expire at 5:00 p.m., New York City time,
____________________, 1997, or such later date and time to which it is extended
(the "Expiration Date").
Each broker-dealer that receives New Notes for its own account in
exchange for Old Notes, where the Old Notes were acquired by that broker-dealer
as a result of market-making activities or other trading activities, must
acknowledge that it will deliver a prospectus in connection with any resale of
such New Notes. This Prospectus, as it may be amended or supplemented from time
to time, may be used by a broker-dealer in connection with resales of New Notes
received in exchange for Old Notes where such Old Notes were acquired as a
result of market-making activities or other trading activities. See "The
Exchange Offer" and "Plan of Distribution."
The Old Notes are designated for trading in the Private Offerings,
Resales and Trading through Automated Linkages ("PORTAL") market. To the extent
Old Notes are tendered and accepted in the Exchange Offer, the principal amount
of outstanding Old Notes will decrease with a resulting decrease in the
liquidity in the market therefor. Following the consummation of the Exchange
Offer, holders of Old Notes who were eligible to participate in the Exchange
Offer but who did not tender their Old Notes will not be entitled to certain
rights under the Registration Rights Agreement (as herein defined) and such Old
Notes will continue to be subject to certain restrictions on transfer.
Accordingly, the liquidity in the market for the Old Notes could be adversely
affected. No assurance can be given as to the liquidity of the trading market
for either the Old Notes or the New Notes.
-------------------------
FOR A DISCUSSION OF CERTAIN FACTORS TO BE CONSIDERED IN CONNECTION WITH
AN INVESTMENT IN THE NEW NOTES, SEE "RISK FACTORS" BEGINNING ON PAGE ___.
-------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
January 21, 1997
(Cover page continued on next page)
2
<PAGE> 4
CERTAIN DEFINITIONS AND MARKET AND INDUSTRY DATA
On November 8, 1996, Fojtasek Companies, Inc., a Texas corporation
("Fojtasek"), and a wholly-owned subsidiary of FCI Holding Corp., a Delaware
corporation ("FCI Holding"), was merged with and into FCI Holding, a
wholly-owned subsidiary of Atrium Corporation ("Holding"). As a result of the
merger, the surviving Delaware corporation was renamed "Atrium Companies,
Inc.," which is the issuer of the Notes and a direct wholly-owned subsidiary of
Holding.
As used in this Prospectus, unless the context otherwise requires:
(i) the "Company" refers to Atrium Companies, Inc., the
surviving corporation following the merger of Fojtasek with and into
FCI Holding, and its consolidated subsidiaries;
(ii) the "Heritage Transaction" refers to a
recapitalization transaction effected on July 3, 1995 pursuant to
which Fojtasek became a wholly-owned subsidiary of newly-formed FCI
Holding and Heritage Fund I, L.P., an equity investment fund
("Heritage"), purchased 62.0% of FCI Holding's outstanding common
stock (including 49.5% of its outstanding voting common stock).
Concurrently with the acquisition of Bishop (as defined) the
then-existing common and preferred stock of FCI Holding (including
such stock owned by Heritage) was exchanged by the holders thereof for
the same number of securities, with the same rights, in Holding, with
the result that FCI Holding became a wholly-owned subsidiary of
Holding;
(iii) the "acquisition of Keller" or the "Keller
acquisition" refers to the acquisition by the Company of certain
capital assets in June 1996 and inventory in September 1996 of Keller
Aluminum Products of Texas ("Keller"), a division of Keller Building
Products, which was owned by Keller Industries, Inc.;
(iv) the "acquisition of Bishop" or the "Bishop
acquisition" refers to a transaction, effective as of September 30,
1996, pursuant to which FCI Holding became a wholly-owned subsidiary
of Holding and the Company acquired all the outstanding capital stock
of Vinyl Building Specialties of Connecticut, Inc. and Bishop
Manufacturing Co. of New York, Inc. (collectively with their
consolidated subsidiaries, "Bishop"); and
(v) the "Transaction" refers to a recapitalization
transaction that closed concurrent with the closing of the Offering
pursuant to which (A) affiliates of Hicks, Muse, Tate & Furst
Incorporated ("Hicks Muse") purchased a number of shares of Common
Stock of Holding representing approximately 82% of the shares of
Common Stock outstanding and (B) certain outstanding shares, and
certain options and warrants to acquire shares, of Common Stock of
Holding and all outstanding shares of preferred stock of Holding were
redeemed (the "Redemption").
Balance sheet data for the Company as of September 30, 1996 reflect
the Keller acquisition. Financial data for periods ending on or prior to
September 30, 1996 reflect operation of the assets acquired in the Keller
acquisition only from the commencement of the Company's operation of such
assets in September 1996. Pro forma financial information included herein does
not give effect to the acquisition of Keller except to the extent reflected in
historical data as of the commencement of operations.
Except for balance sheet data as of September 30, 1996 and information
that is identified as pro forma (both of which reflect the Company's
acquisition of Bishop), financial data included herein for the Company as of
dates or for periods ending on or prior to September 30, 1996 do not include
financial data of Bishop. Unless the context otherwise required, references
herein to the capital stock of Holding give effect to a recapitalization of
Holding's three classes of common stock into a single class of Common Stock,
which was effected in connection with the Transaction.
Unless otherwise indicated, all references in this Prospectus to
window market unit data and housing starts are derived from the September 1996
Summary Reports on Window Frame Materials prepared by F.W. Dodge and all
references to other industry data are derived from sources believed by the
Company to be reliable.
3
<PAGE> 5
SUMMARY
The following summary is qualified in its entirety by, and should be
read in conjunction with, the more detailed information and financial
statements, including the notes thereto, appearing elsewhere in this
Prospectus. Certain of the statements contained in this summary and elsewhere
in this Prospectus, including information with respect to the Company's
business strategy, are forward-looking statements. See "Risk Factors" for a
discussion of important factors that could affect such matters.
THE COMPANY
The Company, founded in 1953, is a leading manufacturer and
distributor of residential windows and doors in the Southwest, South and
Southeast regions of the United States. The Company's primary market, which in
1995 represented 75.1% of the Company's revenues and 37.2% of total U.S.
housing starts, consists of Arizona, Colorado, Florida, Georgia, Louisiana,
Nevada, New Mexico, Oklahoma, Tennessee and Texas (collectively, the "Primary
Market"). The Primary Market includes certain of the fastest growing
residential housing markets in the United States with a compound annual growth
rate ("CAGR") in single-family housing starts of 10.3% for the five-year period
ended December 31, 1995 compared to 5.9% nationally for the same period. The
Company is also one of a limited number of window and door manufacturers that
offers a diversified product line, consisting of aluminum, vinyl and wood
products. The Company estimates that its market share of aluminum window units
sold in its Primary Market has increased from 11.9% in 1991 to 17.6% in 1995
and that its share of total window units sold in its Primary Market has
increased from 7.6% to 10.3% during the same period. The Company's revenues
and total window unit shipments in its Primary Market have increased at CAGRs
of 19.3% and 19.0%, respectively, in this period. The Company's pro forma net
sales and EBITDA (as defined in the Notes to the "Unaudited Pro Forma
Statements of Operations") for the year ended December 31, 1995 were $150.0
million and $20.7 million, respectively, and for the twelve-month period ended
September 30, 1996 were $160.7 million and $26.2 million, respectively.
Historically, the Company has emphasized the sale of aluminum windows
and doors, as aluminum windows are the product of choice and regional standard
in the Company's Primary Market. In 1995, aluminum windows accounted for 71.3%
of residential new construction window units and 43.0% of residential
remodel/replacement window units within the Company's Primary Market as
compared to 40.9% and 30.1%, respectively, on a national basis for the same
period. The Company believes that the preference for aluminum windows over
vinyl and wood windows in the Company's Primary Market is attributable to
aluminum's lower cost, greater durability and lower maintenance requirements,
as well as the reduced need for thermal efficiency in homes in moderate
Southern climates.
The Company believes that, in 1995, United States residential window
and door expenditures were approximately $6.5 billion, of which new
construction and remodel/replacement expenditures represented approximately
$2.0 billion and $4.5 billion, respectively. The Company believes that it is
one of the two largest aluminum window manufacturers in its Primary Market and
that it enjoys purchasing, manufacturing and distribution advantages compared
to smaller regional manufacturers. Excluding wood manufacturers, the Company
believes that the window and door industry is highly fragmented and is
characterized primarily by small regional manufacturers of windows and doors.
This industry fragmentation also presents opportunities for growth through
acquisition, a strategy that the Company has implemented through the recent
acquisitions of Bishop and Keller. Bishop manufactures and sells primarily
vinyl windows and doors to the remodel/replacement market in the Northeast.
This acquisition expands the Company's vinyl window product offering and
increases its penetration of the remodel/replacement market. The Keller
acquisition increases the Company's aluminum extrusion capacity by
approximately 35% and provides the Company with new equipment and tooling for
fabricating several types of vinyl window and door products and a full line of
single- and multi-family aluminum windows and storm doors. The Company intends
to continue to pursue strategic acquisitions to enhance its market share and
expand its product offering.
The Company is vertically integrated with operations that include (i)
the extrusion of aluminum and vinyl, which is utilized internally in the
Company's fabrication operations or sold to third parties ("Extrusion"), (ii)
the assembly of window and door units and sale of such units to wholesalers,
lumberyards, do-it-yourself ("DIY") home centers and homebuilders
("Fabrication") and (iii) the sale of finished products to homebuilders,
remodelers and contractors through four Company-owned distribution centers
located in Dallas, Texas; Las Vegas, Nevada; Phoenix, Arizona; and Farmingdale,
New York (the "Distribution Centers"). The Company performs these operations
at facilities that comprise an aggregate of approximately 1.4 million square
feet.
4
<PAGE> 6
The Company currently sells its products under five brand names,
"Atrium," "Skotty," "H-R," "KBP," and "Bishop." The Company believes that
Atrium has significant national brand name recognition at the building trade
and consumer level, while Skotty, H-R, KBP and Bishop each have significant
regional brand name recognition within their primary channels of distribution.
The Company has been effective in utilizing these brand names to establish
relationships with leading wholesalers, lumberyards and builders in each of its
markets and to gain distribution in new markets. The Company distributes its
windows and doors through (i) one-step distribution to major retail DIY home
centers, lumberyards and the Company's Distribution Centers, (ii) two-step
distribution to wholesalers who resell to DIY home centers and lumberyards and
(iii) direct sales to homebuilders (of both single-family and multi-family
housing), remodelers and contractors. See "Business -- Distribution and
Marketing."
OPERATIONS
Following is a breakdown of the Company's consolidated revenue by
operating component (excluding intercompany sales) from 1991 through 1995:
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------------
1991 1992 1993 1994 1995 CAGR
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
(dollars in thousands)
Extrusion ............ $ 15,981 $ 17,673 $ 19,527 $ 26,100 $ 28,052 15.1%
Fabrication........... 49,111 58,190 70,416 81,391 90,240 16.4
Distribution Centers.. 3,138 4,717 8,809 16,080 17,186 53.0
---------- ---------- ---------- ---------- ---------- ----------
Net Revenue $ 68,230 $ 80,580 $ 98,752 $ 123,571 $ 135,478 18.7%
========== ========== ========== ========== ========== ==========
</TABLE>
Extrusion. Aluminum extrusion is a process that converts raw aluminum
billet into product components that can be used in the fabrication of windows
and doors. The Company also extrudes vinyl pellets into sub-components used in
the fabrication of aluminum, vinyl and wood windows and doors. During 1995,
54.1% of the Company's extrusion revenue was derived from sales to third
parties, including businesses outside of the window and door industry, with the
remainder sold internally to the Company's fabrication operations. By
extruding aluminum and vinyl in-house as opposed to purchasing components from
outside suppliers, the Company is able to secure a low-cost, reliable source of
extrusions, control product quality and reduce inventory levels. The Company
extrudes aluminum at divisions in Wylie, TX ("Extruders") and Woodville, TX
(near Houston) ("Woodville Extruders"). Vinyl is extruded at Dow-Tech Plastics
("Dow-Tech") in Carrollton, TX.
Fabrication. The Company fabricates and distributes a broad line of
aluminum, vinyl and wood windows and doors at its six fabrication divisions.
Window products include single- and double-hung windows, sliding windows,
casement windows and specialty windows such as half rounds, transoms and
ellipticals. Door products include center-hinge patio doors, French patio
doors and sliding patio doors. The fabrication process includes frame and sash
cutting and welding, glass processing and final assembly of completed windows
and doors. The Company's six fabrication divisions include (i) Skotty Aluminum
(Irving, TX), (ii) H-R Windows (Dallas, TX), (iii) Atrium Vinyl (Dallas, TX),
(iv) Atrium Wood (Dallas, TX), (v) Kel-Star Building Products (Woodville, TX)
and (vi) Bishop (Bridgeport, CT and Clinton, MA). The Company designs,
manufactures and repairs its fabrication equipment at North Texas Die & Tool,
based in Irving, TX.
Distribution. The Company owns and operates four Distribution
Centers, consisting of Atrium Door & Window Distributors of Arizona, Nevada,
New York and Texas. The Arizona Distribution Center carries Skotty and Atrium
products and sells directly to large homebuilders in the area. The Nevada
Distribution Center markets primarily Skotty products and sells directly to
homebuilders in its region. The New York Distribution Center markets Bishop
products primarily to remodelers and contractors in a seven-state region in the
Northeast. The Texas Distribution Center sells Atrium products and distributes
directly to large homebuilders in Texas.
5
<PAGE> 7
COMPETITIVE STRENGTHS
The Company's market leadership and financial performance are
attributable to a number of factors, including the following:
o LEADING SHARE IN PRIMARY MARKET
The Company believes that it is one of the two largest manufacturers
of aluminum windows in its Primary Market, with an estimated unit market share
in 1995 of approximately 17.6%, compared to 11.9% in 1991. The Company
believes that its market share in 1995 of all window units sold in its Primary
Market, including aluminum, vinyl and wood, was approximately 10.3%, compared
to 7.6% in 1991. The Company's market share position provides competitive
advantages in the areas of purchasing, manufacturing and distribution.
o ESTABLISHED BRAND NAMES AND REPUTATION
The Company believes that it has significant brand name recognition
across each of its product lines, with such brand names as "Atrium," "Skotty,"
"H-R," "KBP" and "Bishop." The Company believes that each of these brands has
an established reputation within the building trade for product quality and
that this brand name recognition and reputation have enabled it to establish
relationships with leading wholesalers, builders and DIY home centers in each
of its markets. Further, the Company has been effective in leveraging the
strength of its brand names and reputation to gain distribution in new markets.
o STRENGTH IN MULTIPLE DISTRIBUTION CHANNELS
Each of the Company's fabrication divisions distributes its products
through a combination of wholesalers, lumberyards, DIY home centers and direct
sales to large homebuilders and independent contractors. In addition, more
than one Company division may sell its products into the same geographic market
through the use of different brand names and distribution channels. The
Company believes that this distribution strategy maximizes the Company's market
penetration and reduces reliance upon any one distribution channel for the sale
of its products. As a manufacturer and distributor of windows and doors for
the past 43 years, the Company has developed many long-standing relationships
with key distributors.
o LOW-COST PRODUCTION PROCESSES
The Company believes that its low-cost operations are attributable to
its vertical integration and efficient production processes. Extrusion allows
the Company to ensure a low-cost, reliable source of extrusions, control
product quality and reduce inventory levels. The Company has been successful
in improving the efficiency of its operations through the rationalization of
product lines, reduction of overhead, reconfiguration of production processes,
reduction of inventory levels and the implementation of a management
information system. The Company believes that its low-cost operations provide
better margins and increased pricing flexibility in its markets relative to its
competition.
o EXPERIENCED, ENTREPRENEURIAL MANAGEMENT
The Company has assembled a strong management team at both the
corporate and operating levels. The Company's general managers have an average
of 27 years of experience in the window industry and 13 years with the Company.
At the operating level, each division is managed on a stand-alone basis with a
general manager supported by sales and production managers. Incentives are
created for general managers through a combination of equity ownership and
bonus-based compensation based on divisional financial performance. All
divisional managers own Common Stock or options to purchase Common Stock of
Holding.
6
<PAGE> 8
BUSINESS STRATEGY
In order to enhance its leading market share position and to maximize
profitability and cash flow, the Company's principal strategic objectives are
as follows:
o TARGET FAST-GROWING MARKETS
The Company intends to further strengthen its market position in its
fast-growing Primary Market and to evaluate opportunities for expansion into
developing high-growth markets in other regions of the United States. The
Company's Primary Market includes some of the fastest growing residential
housing markets in the United States with a CAGR of single-family housing
starts of 10.3% from 1991 to 1995 compared to 5.9% nationally for the same
period. Additionally, in the Company's Primary Market, unit sales of windows
into the new construction and remodel/replacement markets had CAGRs of 11.7%
and 8.8% from 1991 to 1995, respectively, compared to 5.7% and 5.0% for the
same period, respectively, on a national basis.
o FOCUS ON PRODUCTS OF CHOICE
The Company's strategy is to manufacture the window products of choice
in its targeted markets. In the Southwest, South and Southeast regions of the
United States, aluminum windows have historically been the product preferred by
homebuilders, remodelers, contractors and homeowners in the residential new
construction and remodel/replacement markets. This strong regional preference
for aluminum windows over vinyl or wood windows is attributable to the lower
cost, lower maintenance requirements and greater durability of aluminum
windows, as well as the reduced need for thermal efficiency in homes in
moderate Southern climates. In the Northeast, wood and vinyl windows have been
the products of choice due in part to their superior insulating qualities. The
Company's acquisition of Bishop, a vinyl window and door manufacturer, together
with the Company's existing wood window capabilities, will enable the Company
to provide the preferred products in the Northeast market.
o EXPAND INTO VINYL
The Company plans to continue to expand its presence in the vinyl
window and door market. In the Company's Primary Market, vinyl windows
represented 10.8% and 28.3% of residential new construction and
remodel/replacement units, respectively, during 1995. The Company has
significantly increased its vinyl window and door fabrication capacity through
the commencement of operations at Atrium Vinyl in 1995 and the acquisitions of
Bishop and Keller. The Company's pro forma sales of vinyl windows and doors
for the twelve months ended September 30, 1996 were $19.3 million. The Company
intends to utilize its nationally recognized "Atrium" brand name and
well-established distribution channels to further penetrate the highly
fragmented vinyl window market.
o EXTEND ATRIUM BRAND NAME
The Company is seeking to leverage the strength of its nationally
recognized "Atrium" brand name by (i) introducing Atrium-branded vinyl products
into existing distribution channels in the Company's Primary Market and in
Bishop's primary market in the Northeast and (ii) renaming the Las Vegas,
Phoenix, Dallas and Farmingdale distributors as the Atrium Door & Window
Distributors of Nevada, Arizona, Texas and New York, respectively. The Company
believes that the extension of the Atrium brand name to its vinyl products will
accelerate the Company's expansion into the vinyl window and door market.
o EXPAND THROUGH STRATEGIC ACQUISITIONS
The Company will pursue opportunities to make acquisitions that
complement and expand its core business or enable the Company to enter into new
markets for its products. The Company operates in a highly fragmented industry
in which, with few exceptions, competitors are privately-owned, regional
companies with sales under $100 million. The Company believes that significant
opportunities exist to make selected strategic acquisitions at attractive
valuations. Strategic acquisitions would allow the Company to (i) leverage its
highly recognized brand names, (ii) achieve significant cost reductions through
purchasing synergies and the application of the Company's best practices and
(iii) diversify the Company's geographic, product and market focus. The Bishop
and Keller acquisitions are two recent examples of focused, value-added
acquisitions that are consistent with the Company's overall business strategy.
7
<PAGE> 9
RECENT ACQUISITIONS
The Company purchased from Keller certain capital assets in June 1996
and inventory in September 1996. The acquired capital assets include an
aluminum extrusion line, a painting line and vinyl window and door and aluminum
window and storm door fabrication equipment and tooling. The extrusion line
will increase the Company's aluminum extrusion capacity by approximately 35%
and will enable it to extrude in-house virtually all of its anticipated
aluminum extrusion requirements. The vinyl fabrication equipment and tooling
will extend the Company's product offering to include the fabrication of vinyl
sliding patio doors, vinyl casement windows, vinyl horizontal sliding windows
and vinyl double-hung windows and the assembly of vinyl bay and bow windows.
This equipment and tooling has been relocated to the Company's Atrium Vinyl
division in Dallas. Additionally, equipment for the fabrication of a full line
of single- and multi-family aluminum windows and storm doors is being utilized
in the Woodville division near Houston, Texas. The Company has established two
new divisions named Kel-Star Building Products and Woodville Extruders that
will operate the assets acquired pursuant to the Keller acquisition. Kel-Star
Building Products will market its products under the "KBP" brand to take
advantage of existing name recognition of Keller Building Products.
In September 1996, the Company completed the acquisition of Bishop,
which manufactures and sells primarily vinyl windows and doors to the
remodel/replacement market in the Northeast. The Company acquired Bishop to
(i) increase the Company's presence in the fast-growing vinyl window market,
(ii) diversify geographically and (iii) increase its presence in the
remodel/replacement market. The Bishop acquisition allows the Company to
extend its vinyl product offering to include sliding patio doors, French patio
doors, casement windows, horizontal sliding windows, bay and bow windows,
double-hung windows and storm doors. In addition, a distribution facility
owned by Bishop has been renamed Atrium Door & Window Distributors of New York.
For its fiscal year ended September 30, 1996, Bishop had sales of $14.4 million
and EBITDA (as defined in "Selected Consolidated Historical Financial Data") of
$4.2 million. See the Consolidated Financial Statements of Bishop included
elsewhere in this Prospectus.
8
<PAGE> 10
THE EXCHANGE OFFER
The Exchange Offer applies to $100 million aggregate principal amount
of the Old Notes. The form and terms of the New Notes are identical to the
form and terms of the Old Notes except that the Old Notes were offered and sold
in reliance upon certain exemptions from registration under the Securities Act
of 1933, as amended (the "Securities Act"), while the offering and sale of the
New Notes in exchange for the Old Notes has been registered under the
Securities Act, with the result that the New Notes will not bear any legends
restricting their transfer. See "Description of New Notes."
The Exchange Offer . . . . . . . . . $1,000 principal amount of New Notes
in exchange for each $1,000 principal
amount of Old Notes. As of the date
hereof, Old Notes representing $100
million aggregate principal amount
were outstanding. The terms of the
New Notes and the Old Notes are
substantially identical.
Based on an interpretation by the
Commission's staff set forth in
no-action letters issued to third
parties unrelated to the Company, the
Company believes that, with the
exceptions discussed herein, New
Notes issued pursuant to the Exchange
Offer in exchange for Old Notes may
be offered for resale, resold and
otherwise transferred by any person
receiving the New Notes, whether or
not that person is the holder (other
than any such holder or such other
person that is an "affiliate" of the
Company within the meaning of Rule
405 under the Securities Act),
without compliance with the
registration and prospectus delivery
provisions of the Securities Act,
provided that (i) the New Notes are
acquired in the ordinary course of
business of that holder or such other
person, (ii) neither the holder nor
such other person is engaging in or
intends to engage in a distribution
of the New Notes, and (iii) neither
the holder nor such other person has
an arrangement or understanding with
any person to participate in the
distribution of the New Notes.
However, the Company has not sought,
and does not intend to seek, its own
no-action letter, and there can be no
assurance that the Commission's staff
would make a similar determination
with respect to the Exchange Offer.
See "The Exchange Offer -- Purpose
and Effect." Each broker-dealer that
receives New Notes for its own
account in exchange for Old Notes,
where those Old Notes were acquired
by the broker-dealer as a result of
its market-making activities or other
trading activities, must acknowledge
that it will deliver a prospectus in
connection with any resale of those
New Notes. See "Plan of
Distribution."
Exchange and Registration Rights
Agreement . . . . . . . . . . . . . The Old Notes were sold by the
Company on November 27, 1996 in a
private placement. In connection
with the sale, the Company entered
into an Exchange and Registration
Rights Agreement with the initial
purchasers of the Old Notes (the
"Registration Rights Agreement")
providing for the Exchange Offer.
See "The Exchange Offer -- Purpose
and Effect."
Expiration Date . . . . . . . . . . . The Exchange Offer will expire at
5:00 P.M., New York City time,
_____________, 1997, or such later
date and time to which it is
extended.
Withdrawal Rights . . . . . . . . . . The tender of Old Notes pursuant to
the Exchange Offer may be withdrawn
at any time prior to 5:00 p.m., New
York City time, on the Expiration
Date. Any Old Notes not accepted for
exchange for any reason will be
returned without expense to the
tendering holder thereof as promptly
as practicable after the expiration
or termination of the Exchange Offer.
9
<PAGE> 11
Interest on the New Notes
and Old Notes . . . . . . . . . . . Interest on each New Note will accrue
from the date of issuance of the Old
Note for which the New Note is
exchanged or from the date of the
last periodic payment of interest on
such Old Note, whichever is later.
Conditions to the Exchange
Offer . . . . . . . . . . . . . . . The Exchange Offer is subject to
certain customary conditions, certain
of which may be waived by the
Company. See "The Exchange Offer --
Conditions."
Procedures for Tendering
Old Notes . . . . . . . . . . . . . Each holder of Old Notes wishing to
accept the Exchange Offer must
complete, sign and date the Letter of
Transmittal, or a copy thereof, in
accordance with the instructions
contained herein and therein, and
mail or otherwise deliver the Letter
of Transmittal, or the copy, together
with the Old Notes and any other
required documentation, to the
Exchange Agent at the address set
forth herein. Persons holding Old
Notes through the Depository Trust
Company (the "DTC") and wishing to
accept the Exchange Offer must do so
pursuant to the DTC's Automated
Tender Offer Program, by which each
tendering Participant (as defined)
will agree to be bound by the Letter
of Transmittal. By executing or
agreeing to be bound by the Letter of
Transmittal, each holder will
represent to the Company that, among
other things, (i) any Exchange Notes
to be received by it will be acquired
in the ordinary course of its
business, (ii) it has no arrangement
with any person to participate in the
distribution of the Exchange Notes
and (iii) it is not an "affiliate,"
as defined in Rule 405 of the
Securities Act, of the Company or any
of the Subsidiary Guarantors, or if
it is an affiliate, it will comply
with the registration and prospectus
delivery requirements of the
Securities Act to the extent
applicable. If the holder is not a
broker-dealer, it will be required to
represent that it is not engaged in,
and does not intend to engage in, the
distribution of the Exchange Notes.
If the holder is a broker-dealer that
will receive Exchange Notes for its
own account in exchange for Notes
that were acquired as a result of
market-making activities or other
trading activities, it will be
required to acknowledge that it will
deliver a prospectus in connection
with any resale of such Exchange
Notes.
Pursuant to the Registration Rights
Agreement, the Company is required to
file a registration statement for a
continuous offering pursuant to Rule
415 under the Securities Act in
respect of the Old Notes if existing
Commission interpretations are
changed such that the New Notes
received by holders in the Exchange
Offer are not or would not be, upon
receipt, transferable by each such
holder (other than an affiliate of
the Company or any of the Subsidiary
Guarantors) without restriction under
the Securities Act. See "The
Exchange Offer -- Purpose and
Effect."
Acceptance of Old Notes and
Delivery of New Notes . . . . . . . The Company will accept for exchange
any and all Old Notes which are
properly tendered in the Exchange
Offer prior to 5:00 p.m., New York
City time, on the Expiration Date.
The New Notes issued pursuant to the
Exchange Offer will be delivered
promptly following the Expiration
Date. See "The Exchange Offer --
Terms on the Exchange Offer."
Exchange Agent . . . . . . . . . . . United States Trust Company of New
York is serving as Exchange Agent in
connection with the Exchange Offer
and is also serving as Trustee under
the Indenture.
10
<PAGE> 12
Federal Income Tax
Considerations . . . . . . . . . . The exchange pursuant to the Exchange
Offer will not be a taxable event for
federal income tax purposes. See
"Certain United States Federal Income
Tax Considerations."
Effect of Not Tendering . . . . . . . Old Notes that are not tendered or
that are tendered but not accepted
will, following the completion of the
Exchange Offer, continue to be
subject to the existing restrictions
upon transfer thereof. The Company
will have no further obligation to
provide for the registration under
the Securities Act of such Old Notes.
11
<PAGE> 13
TERMS OF THE NEW NOTES
Issuer . . . . . . . . . . . . . . . Atrium Companies, Inc.
Securities . . . . . . . . . . . . . 100,000,000 aggregate principal
amount of 10 1/2% Senior Subordinated
Notes due 2006.
Maturity . . . . . . . . . . . . . . November 15, 2006
Interest Payment Dates . . . . . . . Interest will accrue from the date
of original issuance and will be
payable semiannually in arrears on
May 15 and November 15 of each year,
commencing May 15, 1997.
Sinking Fund . . . . . . . . . . . . None.
Optional Redemption . . . . . . . . . The New Notes are redeemable, in
whole or in part, at the option of
the Company on or after November 15,
2001, at the redemption prices set
forth herein plus accrued and unpaid
interest to the date of redemption.
In addition, at any time or from time
to time on or prior to November 15,
2000, the Company, at its option, may
redeem the Notes with the net cash
proceeds of one or more Equity
Offerings at a redemption price equal
to 110 1/2% of the principal amount
thereof plus accrued and unpaid
interest to the date of redemption;
provided, that at least $65 million
of the aggregate principal amount of
the Notes remains outstanding after
any such redemption. See
"Description of New Notes --
Redemption."
Ranking . . . . . . . . . . . . . . . The New Notes will be unsecured and
will be subordinated in right of
payment to all existing and future
Senior Indebtedness of the Company.
The New Notes will rank pari passu
with any future Senior Subordinated
Indebtedness of the Company and will
rank senior to all other subordinated
indebtedness of the Company. The
Subsidiary Guarantees will be
general, unsecured obligations of the
Subsidiary Guarantors, subordinated
in right of payment to all existing
and future Guarantor Senior
Indebtedness (as defined) of the
Subsidiary Guarantors. As of November
27, 1996, after giving effect to the
Transaction and the New Credit
Facility, the aggregate principal
amount of the Company's outstanding
Senior Indebtedness was $2.2 million
(excluding unused commitments) and
the Company had no Senior
Subordinated Indebtedness outstanding
other than the Notes and no
Subordinated Obligations outstanding.
As of the same date, the aggregate
principal amount of Guarantor Senior
Indebtedness of the Subsidiary
Guarantors outstanding was $2.2
million ($2.2 of which represented
guarantees under the New Credit
Facility). See "Description of New
Notes -- Ranking and Subordination."
12
<PAGE> 14
Subsidiary Guarantees . . . . . . . . The New Notes will be unconditionally
guaranteed (the "Subsidiary
Guarantees") on an unsecured, senior
subordinated basis by each of the
Company's Subsidiaries (as defined)
existing on the issue date of the
Notes and by each Subsidiary of the
Company (other than foreign
Subsidiaries and Unrestricted
Subsidiaries) created or acquired
thereafter (collectively, the
"Subsidiary Guarantors"). See
"Description of New Notes --
Subsidiary Guarantees."
Change of Control . . . . . . . . . . Upon the occurrence of a Change of
Control, (i) the Company will have
the option, at any time on or prior
to November 15, 2001 (but in any
event within 90 days after the
occurrence of the respective Change
of Control), to redeem the New Notes
in whole but not in part at a
redemption price equal to 100% of the
principal amount thereof plus the
Applicable Premium set forth herein,
together with accrued and unpaid
interest, if any, to the date of
redemption, and (ii) if the New Notes
are not redeemed, the Company will be
required to make an offer to
repurchase the New Notes at a price
equal to 101% of the principal amount
thereof, together with accrued and
unpaid interest, if any, to the date
of repurchase. See "Description of
New Notes -- Change of Control."
Restrictive Covenants . . . . . . . . The Indenture imposes certain
limitations on the ability of the
Company and its Restricted
Subsidiaries to, among other things,
incur additional indebtedness, pay
dividends or make certain other
restricted payments, consummate
certain asset sales, enter into
certain transactions with affiliates,
merge or consolidate with any other
person or sell, assign, transfer,
lease, convey or otherwise dispose of
all or substantially all of the
assets of the Company and its
Restricted Subsidiaries.
For additional information regarding
the Notes, see "Description of New
Notes."
RISK FACTORS
Holders of Old Notes should carefully consider all of the information set
forth in this Prospectus and, in particular, should evaluate the specific
factors set forth under "Risk Factors" for risks involved with an investment in
the New Notes.
13
<PAGE> 15
THE TRANSACTION
The Company is a wholly-owned subsidiary of Holding. The Old Notes were
offered in connection with the purchase by affiliates of Hicks Muse of shares
of Common Stock of Holding for $32.0 million. Such shares, after giving effect
to the other elements of the Transaction, represent approximately 82% of the
outstanding shares of Common Stock. Hicks Muse is a private investment firm
based in Dallas, New York, St. Louis and Mexico City that specializes in
acquisitions, recapitalizations and other principal investing activities.
Since the firm's inception in 1989, Hicks Muse has completed or has pending
more than 60 transactions having a combined transaction value exceeding $10
billion.
In connection with the offering of Old Notes, Holding effected the
Redemption of certain shares of its Common Stock and all of its preferred
stock, as well as certain options and warrants to purchase shares of its
capital stock. As a result of the Transaction, on the closing date, certain
stockholders of Holding and Company managers (the "Other Stockholders") own the
remaining outstanding shares of Common Stock. The parties whose Common Stock
and options and warrants in Holding were redeemed (the "Selling
Securityholders") received approximately $59.4 million (subject to adjustment)
in the Transaction. See "The Transaction" and "Beneficial Ownership and
Certain Transactions."
Holding required approximately $134.2 million in cash to consummate the
Transaction, consisting of $59.4 million in Redemption payments to the Selling
Securityholders, $54.3 million, representing all outstanding indebtedness under
the Old Credit Facility (as defined) and debt assumed in connection with its
acquisition of Bishop, $12.5 million in Redemption payments to preferred
stockholders of Holding (including cumulative dividends in arrears) and $8.0
million of fees and expenses. The funds required to consummate the Transaction
were provided by (i) the proceeds of the Offering, (ii) $32.0 million in equity
financing from the issuance by Holding of Common Stock to affiliates of Hicks
Muse and (iii) drawings of $2.2 million under the Company's new senior secured
credit facility (the "New Credit Facility") (see "Description of New Credit
Facility").
For financial reporting purposes, the Transaction has been accounted for as
a recapitalization and, accordingly, the assets and liabilities of the Company
were not revalued.
The following table sets forth the actual sources and uses of funds in
connection with the Transaction, as completed on November 27, 1996.
<TABLE>
<CAPTION>
Amount
---------------------
(dollars in millions)
<S> <C>
SOURCES OF FUNDS:
New Credit Facility(1) .................................................. $ 2.2
Old Notes ............................................................... 100.0
Issuance of Common Stock to Hicks Muse affiliates ....................... 32.0
----------
Total Sources ........................................................ $ 134.2
==========
USES OF FUNDS:
Redemption payments to Selling Securityholders .......................... $ 59.4
Repayment of old debt(2) ................................................ 54.3
Redemption of preferred stock (including cumulative dividends in arrears) 12.5
Fees and expenses(3) .................................................... 8.0
----------
Total Uses ........................................................... $ 134.2
==========
</TABLE>
(1) The New Credit Facility provides the Company with a revolving loan
facility of up to $20.0 million.
(2) Represents all amounts outstanding as of November 27, 1996 (the
"Closing Date") under the Company's revolving credit facility and term
loan facility (collectively, the "Old Credit Facility") and $0.2
million of indebtedness assumed in connection with the acquisition of
Bishop.
(3) Includes the underwriting discount to BT Securities Corporation of $3
million and $5 million of other fees and expenses related to legal
fees, financial advisory fees, accounting fees and printing expenses
incurred in connection with the Offering, the Transaction and the
establishment of the New Credit Facility. See "Use of Proceeds" and
"Beneficial Ownership and Certain Transactions -- Certain Transactions
-- The Transaction."
14
<PAGE> 16
UNAUDITED SUMMARY PRO FORMA FINANCIAL DATA
The pro forma statement of operations, other financial and balance
sheet data for the year ended December 31, 1995, the twelve months ended
September 30, 1996 and the nine months ended September 30, 1995 and 1996, shown
below give effect to (i) the acquisition of Bishop, (ii) the Financing and
(iii) the Exchange Offer as if they had occurred on January 1, 1995. The pro
forma balance sheet data gives effect to the Financing and the Exchange Offer
as if they had occurred September 30, 1996. The summary pro forma financial
data are not necessarily indicative of either future results of operations or
the results that would have occurred if those events had been consummated on
the indicated dates. The following information should be read in conjunction
with the Consolidated Financial Statements of the Company, the Combined
Consolidated Financial Statements of Bishop and the Unaudited Pro Forma
Financial Statements and, in each case, the related notes thereto, included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
Twelve Months Nine Months Ended
Year Ended Ended ---------------------------
December 31, September 30, September 30, September 30,
1995 1996 1995 1996
------------ ------------ ------------ ------------
(dollars in thousands)
<S> <C> <C> <C> <C>
Statement of Operations Data (1):
Net sales ................................ $ 149,974 $ 160,653 $ 112,784 $ 123,487
Cost of sales ............................ 100,400 102,076 77,874 79,271
------------ ------------ ------------ ------------
Gross profit ............................. 49,574 58,577 34,910 44,216
Selling, general and administrative
expenses ............................... 33,788 36,102 25,014 27,453
Special charges (2) ...................... 7,188 621 6,567 --
------------ ------------ ------------ ------------
Income from operations ................... $ 8,598 $ 21,854 $ 3,329 $ 16,763
============ ============ ============ ============
OTHER FINANCIAL DATA(1):
EBITDA (3) ............................... $ 20,717 $ 26,207 $ 13,474 $ 19,290
Depreciation and amortization ............ 2,842 3,372 1,959 2,492
Capital expenditures (4) ................. 2,702 2,461 2,353 2,280
Ratio of earnings to fixed charges (5) ... -- 1.9x 1.9x
BALANCE SHEET DATA (END OF PERIOD):
Working capital (excluding current portion of
long-term debt) ........................ $ 24,554
Total assets ............................. 74,853
Total debt ............................... 103,887
</TABLE>
- ------------------------
(1) Bishop's fiscal year ends September 30. The historical amounts in the
pro forma statement of operations for the year ended December 31, 1995
represent (i) the operations of the Company for the year ended December
31, 1995, and (ii) the operations of Bishop for the year ended
September 30, 1995. The historical amounts in the pro forma statements
of operations for the twelve months ended September 30, 1996 and the
nine months ended September 30, 1995 and 1996 represent the operations
of the Company and Bishop for the actual periods stated.
(2) Special charges include officer and management bonuses and
restructuring charges for severance of $6,380 and $400, respectively,
in connection with the Heritage Transaction and consulting fees of
$408 for the year ended December 31, 1995. These charges were $0,
$400 and $221, respectively, for the twelve months ended September 30,
1996, and $6,380, $0 and $187, respectively, for the nine months ended
September 30, 1995.
(3) EBITDA represents income before income taxes, interest, depreciation
and amortization and certain non-recurring expenses. See the Notes to
the Unaudited Pro Forma Statements of Operations regarding the
components of EBITDA.
(4) Capital expenditures for the twelve months and nine months ended
September 30, 1996 include the capital assets acquired from Keller for
$1,150 as part of the Keller acquisition.
(5) For purposes of calculating the pro forma ratio of earnings to fixed
charges, earnings represent income (loss) before income taxes and
fixed charges. Fixed charges consist of the total of (i) interest,
whether expensed or capitalized; (ii) amortization of debt expense and
discount or premium relating to any indebtedness, whether expensed or
capitalized; and (iii) that portion of rental expense considered to
represent interest cost (assumed to be one-third). Additional
earnings of $998 for the year ended December 31, 1995 would have been
necessary to cover fixed charges. The pro forma ratio of earnings to
fixed charges for the year ended December 31, 1995 excluding the 1995
pre-tax special charge was 1.5x.
15
<PAGE> 17
RISK FACTORS
Prospective investors should carefully consider the following factors
in addition to the other information included in this Prospectus before
exchanging any of the Old Notes for New Notes.
SUBSTANTIAL LEVERAGE AND NEGATIVE NET WORTH
The Company is highly leveraged and has substantial indebtedness. As
of November 27, 1996, after giving effect to the Financing, the Company and its
consolidated subsidiaries had an aggregate of $102.2 million of outstanding
indebtedness. In addition, on a pro forma basis the Company had a
stockholder's deficit of $46.4 million at September 30, 1996. The Indenture
permits the Company to incur additional indebtedness, including Senior
Indebtedness, subject to certain limitations. See "Capitalization" and
"Description of New Notes."
The Company's high degree of leverage could have important
consequences to the holders of the New Notes, including the following: (i) the
Company's ability to obtain additional financing for working capital, capital
expenditures, acquisitions, general corporate purposes or other purposes may be
impaired in the future; (ii) a substantial portion of the Company's cash flow
from operations must be dedicated to the payment of principal and interest on
its indebtedness, thereby reducing the funds available to the Company for other
purposes; (iii) certain of the Company's borrowings will be at variable rates
of interest (including borrowings under the New Credit Facility), which expose
the Company to the risk of increased interest rates; (iv) the indebtedness
outstanding under the New Credit Facility is secured and matures prior to the
maturity of the New Notes; (v) the Company may be substantially more leveraged
than certain of its competitors, which may place the Company at a competitive
disadvantage; and (vi) the Company's substantial degree of leverage may limit
its flexibility to adjust to changing market conditions, reduce its ability to
withstand competitive pressures and make it more vulnerable to a downturn in
general economic conditions or its business. See "Description of New Credit
Facility" and "Description of New Notes."
ABILITY TO SERVICE DEBT
The Company's ability to make scheduled payments or to refinance its
obligations with respect to its Indebtedness will depend on its financial and
operating performance, which, in turn, is subject to prevailing economic
conditions and to certain financial, business and other factors beyond its
control. If the Company's cash flow and capital resources are insufficient to
fund its debt service obligations, the Company may be forced to reduce or delay
planned expansion and capital expenditures, sell assets, obtain additional
equity capital or restructure its debt. There can be no assurance that the
Company's operating results, cash flow and capital resources will be sufficient
for payment of its Indebtedness in the future. In the absence of such
operating results and resources, the Company could face substantial liquidity
problems and might be required to dispose of material assets or operations to
meet its debt service and other obligations, and there can be no assurance as
to the timing of such sales or the proceeds that the Company could realize
therefrom. In addition, because the Company's obligations under the New Credit
Facility bears interest at floating rates, an increase in interest rates could
adversely affect, among other things, the Company's ability to meet its debt
service obligations. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources" and
"Description of New Credit Facility."
The ability of the Company to service its indebtedness is dependent
upon the future performance of the Company. In addition, the Company believes
that its ability to repay portions of its long-term indebtedness (including the
New Notes) is dependent on the availability of refinancing indebtedness. The
future performance of the Company and the availability of refinancing
indebtedness each is subject to general economic and market conditions and to
financial, competitive, business and other factors, including factors beyond
the Company's control.
SUBORDINATION OF THE NEW NOTES
The New Notes are unsecured, senior subordinated obligations of the
Company and are subordinated in right of payment to all existing and future
Senior Indebtedness of the Company, including without limitation any amounts
outstanding under the New Credit Facility. As of November 27, 1996, after
giving effect to the Financing, the Company had approximately $2.2 million of
Senior Indebtedness outstanding. The Company can also incur additional Senior
Indebtedness under the terms of the Indenture. Consequently, in the event of a
bankruptcy, liquidation, dissolution, reorganization or similar proceeding with
respect to the Company, assets of the Company will be available to pay
16
<PAGE> 18
obligations on the New Notes, only after all Senior Indebtedness has been paid
in full, and there can be no assurance that there will be sufficient assets to
pay amounts due on all or any of the New Notes. See "Description of New Notes
- -- Ranking and Subordination."
Similarly, the Indebtedness evidenced by the Subsidiary Guarantees of
the New Notes by the Subsidiary Guarantors will be subordinated to the prior
payment in full of all existing and future Guarantor Senior Indebtedness (as
defined under "Description of New Notes"), including all amounts owing pursuant
to their guarantees of the New Credit Facility. As of the Closing Date, after
giving effect to the Financing, the liabilities of the Company's subsidiaries
(including trade credit but excluding the Subsidiary Guarantees and the
subsidiary guarantees of, and borrowings backed by letters of credit issued
pursuant to, the New Credit Facility) totaled approximately $2.1 million (none
of which would have been Guarantor Senior Indebtedness). The Subsidiary
Guarantors can also incur additional Guarantor Senior Indebtedness under the
terms of the Indenture. See "Description of New Notes -- Ranking and
Subordination" and "-- Subsidiary Guarantees."
FRAUDULENT CONVEYANCE CONSIDERATIONS
The incurrence by the Company of a portion of the indebtedness
evidenced by the Notes to finance the Redemption as described under "Summary --
The Transaction" is subject to review under relevant federal and state
fraudulent conveyance statutes in a bankruptcy or reorganization case or a
lawsuit by or on behalf of creditors of the Company. Under these statutes, if
a court were to find that obligations (such as the Notes) were incurred with
the intent of hindering, delaying or defrauding present or future creditors,
that the Company received less than a reasonably equivalent value or fair
consideration for those obligations or that the Company contemplated insolvency
with a design to prefer one or more creditors to the exclusion, in whole or in
part, of other creditors and, at the time of the occurrence of the obligations,
the obligor either (i) was insolvent or rendered insolvent by reason thereof,
(ii) was engaged or was about to engage in a business or transaction for which
its remaining unencumbered assets constituted unreasonably small capital or
(iii) intended to or believed that it would incur debts beyond its ability to
pay such debts as they matured or became due, such court could void the
Company's obligations under the Notes, subordinate the Notes to other
indebtedness of the Company or take other action detrimental to the holders of
the Notes. Some courts have held that an obligor's purchase of its own capital
stock does not constitute reasonably equivalent value or fair consideration for
indebtedness incurred to finance that purchase.
The measure of insolvency for purposes of a fraudulent conveyance
claim will vary depending upon the law of the jurisdiction being applied.
Generally, however, a company will be considered insolvent at a particular time
if the sum of its debts at that time is greater than the then fair value of its
assets or if the fair salable value of its assets at that time is less than the
amount that would be required to pay its probable liability on its existing
debts as they become absolute and mature. The Company believes that, after
giving effect to the Transaction and the Offering, the Company will be (i)
neither insolvent nor rendered insolvent by the incurrence of indebtedness in
connection with the Transaction and the Offering, (ii) in possession of
sufficient capital to run its business effectively and (iii) incurring debts
within its ability to pay as the same mature or become due.
There can be no assurance, however, as to what standard a court would
apply in order to evaluate the parties' intent or to determine whether the
Company was insolvent at the time of, or rendered insolvent upon consummation
of, the Transaction or the sale of the Notes or that, regardless of the method
of valuation, a court would not determine that the Company was insolvent at the
time of, or rendered insolvent upon consummation of, the Transaction.
In addition, the Subsidiary Guarantees may be subject to review under
relevant federal and state fraudulent conveyance and similar statutes in a
bankruptcy or reorganization case or a lawsuit by or on behalf of creditors of
any of the Subsidiary Guarantors. In such a case, the analysis set forth above
would generally apply, except that the Subsidiary Guarantees could also be
subject to the claim that, since the Subsidiary Guarantees were incurred for
the benefit of the Company (and only indirectly for the benefit of the
Subsidiary Guarantors), the obligations of the Subsidiary Guarantors thereunder
were incurred for less than reasonably equivalent value or fair consideration.
A court could avoid a Subsidiary Guarantor's obligation under the Subsidiary
Guarantee, subordinate the Subsidiary Guarantee to other indebtedness of a
Subsidiary Guarantor or take other action detrimental to the holders of the
Notes.
To the extent any Subsidiary Guarantee was avoided as a fraudulent
conveyance, limited as described above, or held unenforceable for any other
reason, holders of the Notes would, to such extent, cease to have a claim in
respect
17
<PAGE> 19
of such Subsidiary Guarantee and, to such extent, would be creditors solely of
the Company and any Subsidiary Guarantor whose Subsidiary Guarantee was not
avoided, limited or held unenforceable. In such event, the claims of the
holders of the Notes against the issuer of an avoided, limited or unenforceable
Subsidiary Guarantee would be subject to the prior payment of all liabilities
of such Subsidiary Guarantor. There can be no assurance that, after providing
for all prior claims, there would be sufficient assets to satisfy the claims of
the holders of Notes.
RESTRICTIVE DEBT COVENANTS
The New Credit Facility contains a number of significant covenants
that, among other things, restrict the ability of the Company and its
subsidiaries to dispose of assets, incur additional indebtedness, incur
guarantee obligations, repay other indebtedness or amend other debt
instruments, pay dividends, create liens on assets, enter into leases, make
investments, loans or advances, make acquisitions, engage in mergers or
consolidations, make capital expenditures, engage in certain transactions with
subsidiaries and affiliates and otherwise restrict corporate activities. In
addition, under the New Credit Facility, the Company is required to comply with
specified financial ratios and tests, including a minimum interest coverage
ratio and a trailing four quarter minimum EBITDA test. See "Description of New
Credit Facility."
Since consummation of the Financing, the Company has been in
compliance with the covenants and restrictions contained in the New Credit
Facility and in the Indenture. However, its ability to continue to comply may
be affected by events beyond its control, including prevailing economic,
financial and industry conditions. The breach of any of such covenants or
restrictions could result in a default under the New Credit Facility and the
Indenture, which would permit the senior lenders or the holders of the Notes,
as the case may be, to declare all amounts borrowed thereunder to be due and
payable, together with accrued and unpaid interest, and the commitments of the
senior lenders to make further extensions of credit under the New Credit
Facility could be terminated. If the Company were unable to repay its
indebtedness to its senior lenders, such lenders could proceed against the
collateral securing such indebtedness as described under "Description of New
Credit Facility."
LIMITATION ON CHANGE OF CONTROL
Upon a Change of Control (as defined under "Description of New Notes")
the Company will be required to offer to purchase all of the outstanding Notes
at a price equal to 101% of the principal amount thereof to the date of
repurchase plus accrued and unpaid interest, if any, to the date of repurchase.
The Change of Control purchase feature of the Notes may in certain
circumstances discourage or make more difficult a sale or takeover of the
Company. In particular, a Change of Control may cause an acceleration of, or
require an offer to repurchase under, the New Credit Facility and certain other
indebtedness, if any, of the Company and its subsidiaries, in which case such
indebtedness would be required to be repaid in full before repurchase of the
Notes. See "Description of New Notes -- Change of Control" and "Description of
New Credit Facility." The inability to repay such indebtedness, if accelerated,
and to purchase all of the tendered Notes would constitute an event of default
under the Indenture. Finally, there can be no assurance that the Company will
have funds available to repurchase the Notes upon the occurrence of a Change of
Control.
FLUCTUATIONS IN RAW MATERIALS COST AND SUPPLY
The Company purchases aluminum, vinyl, wood, glass and other raw
materials from various suppliers. While all such materials are available from
numerous independent suppliers, commodity raw materials are subject to
fluctuations in price. Because such materials in the aggregate constitute
significant components of the Company's cost of goods sold, such fluctuations
could have a material adverse effect on the Company's results of operations.
Although the Company believes that it can pass on gradual increases in raw
material prices, there can be no assurance that the Company will continue to be
able to do so in the future. In addition, sharp increases in material prices
are more difficult to pass through to the customer in a short period of time
and may negatively impact the short-term financial performance of the Company.
See "Business -- Raw Materials."
ENVIRONMENTAL MATTERS
The past and present business operations of the Company and the past
and present ownership and operation of real property by the Company are subject
to extensive and changing federal, state, local and foreign environmental laws
and regulations pertaining to the discharge of materials into the environment,
the handling and disposal of wastes
18
<PAGE> 20
(including solid and hazardous wastes) or otherwise relating to health, safety
and protection of the environment. As such, the nature of the Company's
operations and previous operations by others at real property owned by the
Company expose the Company to the risk of claims under environmental, health
and safety laws and regulations, and there can be no assurance that material
costs or liabilities will not be incurred in connection with such claims.
Based on its experience to date, the Company does not expect such claims or the
costs of compliance with federal, state, local and foreign environmental,
health and safety laws and regulations to have a material impact on its capital
expenditures, earnings or competitive position. No assurance can be given,
however, that the discovery of presently unknown environmental conditions,
changes in environmental, health and safety laws and regulations or their
interpretation, or other unanticipated events will not give rise to
expenditures or liabilities that may have such an effect. The Company has been
named as a potentially responsible party at two superfund sites pursuant to the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980
or comparable state statutes. Based on currently available information, the
Company believes that its liability, if any, associated with remediation of
these sites or facilities will not have a material adverse effect on the
Company's financial condition or results of operations. See "Business --
Government Regulation and Environmental Matters."
SEASONALITY
Markets for the Company's building-related products are seasonal, with
peak activity in the second and third quarters of the year due to increased
construction during those periods. The Company expects to use the New Credit
Facility to meet seasonal variations in its working capital requirements.
CYCLICALITY
Demand in the window and door manufacturing industry is influenced by
new home construction activity and the demand for replacement products. For
1995, the Company believes that approximately 70% of its pro forma revenue was
related to new home construction. Although the Company is targeting a more
balanced mix of new home construction and remodel/replacement revenue to reduce
cyclicality, there can be no assurance that the Company will achieve such mix.
Even if such mix were achieved, it would not insulate the Company from the
effects of cyclicality. Trends in the housing sector (the most important of
which to the Company is new housing starts in the Company's Primary Market)
directly impact the financial performance of the Company. Accordingly, the
strength of the U.S. economy, the age of existing home stock, job growth,
interest rates and migration of the inter/intra U.S. population have a direct
impact on the Company. Any declines in new housing starts and/or demand for
replacement products may adversely impact the Company and there can be no
assurance that any such adverse effects would not be material.
GEOGRAPHIC CONCENTRATION
The Company sells its products primarily in the Southwest, South and
Southeast United States. Although the Company intends to expand its operations
into new geographic areas, 34.8% of the Company's pro forma revenues for the
year ended December 31, 1995 were derived from customers in the state of Texas.
No other state accounted for more than 7.5% of pro forma revenues for the year
ended December 31, 1995. As a result of this geographic concentration,
unfavorable changes in economic conditions affecting the Southwest, South and
Southeast United States, and particularly the state of Texas, could have a
materially adverse effect on the Company's business, financial condition or
results of operations. See "Business."
DEPENDENCE ON KEY PERSONNEL
The success of the Company's business is materially dependent upon the
continued services of its President and Chief Executive Officer, Randall S.
Fojtasek, and other key officers and employees. The loss of Mr. Fojtasek or
such other key personnel due to death, disability or termination of employment
could have a material adverse effect on the results of operations or financial
condition, or both, of the Company. While the Company has non-competition
agreements with Mr. Fojtasek and certain other key officers and employees,
there can be no guarantee that a court will find such agreements fully
enforceable under relevant state law.
19
<PAGE> 21
CONTROLLING STOCKHOLDER
Affiliates of Hicks Muse own approximately 82% of the outstanding
shares of Common Stock of Holding. As a result of this ownership and the
provisions of the Stockholders Agreement executed by the stockholders of
Holding in connection with the Transaction, Hicks Muse is able to direct the
election of four of the six members of the Board of Directors of Holding and
therefore direct the management and policies of the Company. The interests of
Hicks Muse and its affiliates may differ from the interests of holders of the
Notes. See "Beneficial Ownership and Certain Transactions."
COMPETITION
The Company competes with other national and regional manufacturers in
many product segments. Certain of the Company's principal competitors are less
highly-leveraged than the Company and have greater financial resources than the
Company. Accordingly, such competitors may be better able to withstand changes
in conditions within the industries in which the Company operates and have
significantly greater operating and financial flexibility than the Company. As
a result of the competitive environment in the markets in which the Company
operates, the Company faces (and will continue to face) pressure on sales
prices of its products from competitors, as well as from large customers. As a
result of such pricing pressures, the Company may in the future experience
reductions in the profit margins on its sales, or may be unable to pass future
raw material price or labor cost increases on to its customers (which would
also reduce profit margins).
There can be no assurance that the Company will not encounter
increased competition in the future, which could have a material adverse effect
on the Company's business. See "Business -- Competition."
POTENTIAL LABOR DISPUTES
Approximately 1,000 of the Company's hourly employees are covered by
collective bargaining agreements which expire in 1998, and approximately 100
additional hourly employees are covered by collective bargaining agreements
which expire in 2001. Although the Company has experienced union-organizing
activities and as a result has entered into collective bargaining agreements,
the Company believes that its relations with its employees are satisfactory.
There can be no assurance, however, that the Company will not experience work
stoppages or slowdowns in the future. In addition, there can be no assurance
that the Company's non-union facilities will not become subject to labor union
organizational efforts or that labor costs will not materially increase. See
"Business -- Employees."
LACK OF PUBLIC MARKET; RESTRICTIONS ON TRANSFERABILITY
The Old Notes are designated for trading in the PORTAL market. There
is no established trading market for the New Notes. The Company does not
currently intend to list the New Notes on any securities exchange or to seek
approval for quotation through any automated quotation system. Accordingly,
there can be no assurance as to the development of any market or the liquidity
of any market that may develop for the New Notes. If such a market were to
exist, no assurance can be given as to the trading prices of the New Notes.
Future trading prices of the New Notes will depend on many factors, including,
among other things, prevailing interest rates, the Company's operating results
and the market for similar securities.
The liquidity of, and trading market for, the New Notes may be
adversely affected by general declines in the market for similar securities.
Such a decline may adversely affect such liquidity and trading markets
independent of the financial performance of, and prospects for, the Company.
20
<PAGE> 22
THE TRANSACTION
GENERAL
The Company is a wholly-owned subsidiary of Holding. The Old Notes
were offered in connection with the purchase by affiliates of Hicks Muse of
shares of Common Stock of Holding for $32.0 million. Such shares, after giving
effect to the other elements of the Transaction, represented approximately 82%
of the outstanding shares of Common Stock. Hicks Muse is a private investment
firm based in Dallas, New York, St. Louis and Mexico City that specializes in
acquisitions, recapitalizations and other principal investing activities.
Since the firm's inception in 1989, Hicks Muse has completed or has pending
more then 60 transactions having a combined transaction value exceeding $10
billion.
Concurrently with the closing of the Offering and as part of the
Transaction, Holding effected the Redemption of certain shares of its Common
Stock and all of its preferred stock, as well as certain options and warrants
to purchase shares of its capital stock. As a result of the Transaction, on
the Closing Date, the Other Stockholders own the remaining outstanding shares
of Common Stock. The Selling Securityholders received through the Redemption
approximately $59.4 million (subject to adjustment) in the Transaction. See
"Summary -- The Transaction" and "Beneficial Ownership and Certain
Transactions."
The Company is the primary operating company of the companies
illustrated in the following chart.
[ORGANIZATIONAL CHART SHOWING THE ORGANIZATIONAL STRUCTURE
OF HOLDING, THE COMPANY AND THE SUBSIDIARY GUARANTORS]
21
<PAGE> 23
Holding required approximately $134.2 million in cash to consummate
the Transaction, consisting of $59.4 million in Redemption payments to the
Selling Securityholders, $54.3 million, representing all outstanding
indebtedness under the Old Credit Facility and debt assumed in connection with
its acquisition of Bishop, $12.5 million in Redemption payments to preferred
stockholders of Holding (including cumulative dividends in arrears) and $8.0
million in fees and expenses. The funds required to consummate the Transaction
were provided by (i) the proceeds of the Offering, (ii) $32.0 million in equity
financing from the issuance by Holding of Common Stock to affiliates of Hicks
Muse and (iii) drawings of $2.2 million under the New Credit Facility.
USE OF PROCEEDS
There will be no cash proceeds to the Company from the Exchange Offer.
The Company used the $100.0 million of gross proceeds from the
Offering, together with borrowings of approximately $2.2 million under the New
Credit Facility and $32.0 million in equity financing from the issuance by
Holding of Common Stock to affiliates of Hicks Muse as follows: (i) $59.4
million in Redemption payments; (ii) $54.3 million to repay indebtedness; (iii)
$12.5 million in Redemption payments to preferred stockholders of Holding and
(iv) $8.0 million in fees and expenses.
CAPITALIZATION
The following table presents the unaudited historical capitalization
of the Company at September 30, 1996, on an actual basis and on a pro forma
basis at such date after giving effect to the Transaction, the issuance of the
Old Notes and the application of the proceeds of the Offering. The table
should be read in conjunction with the Consolidated Financial Statements of the
Company, the Unaudited Pro Forma Financial Statements, the related notes
thereto in each case and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
September 30, 1996
--------------------------------------------
Pro Forma Pro Forma
for the for the
Actual Financing Exchange Offer
------------ ------------ ------------
(in thousands)
<S> <C>
New Credit Facility (1) ....................... $ -- $ 3,887 $ 3,887
Old Credit Facility (2) ....................... 55,981 -- --
Old Notes ..................................... -- 100,000 --
New Notes ..................................... -- -- 100,000
Other debt .................................... 188 -- --
------------ ------------ ------------
Total debt ................................ 56,169 103,887 103,887
------------ ------------ ------------
Total stockholder's deficit (2)(3)......... (1,945) (46,413) (46,413)
------------ ------------ ------------
Total capitalization ...................... $ 54,224 $ 57,474 $ 57,474
============ ============ ============
</TABLE>
- --------------------
(1) The New Credit Facility provides the Company with a revolving loan
facility of up to $20.0 million. See "Description of New Credit
Facility." Had the Transaction been consummated on September 30, 1996,
the Company would have borrowed $3.9 million under the revolving loan
facility. The actual amount of the borrowings on November 27, 1996 were
$2.2 million.
(2) The repayment of the Company's Old Credit Facility resulted in an
extraordinary charge related to the write-off of deferred financing
costs in the quarter the Transaction is consummated, which is reflected
in the above pro forma adjustments to stockholder's deficit. Had the
Financing been consummated at September 30, 1996, the Company would have
recorded an extraordinary charge of $1.1 million, net of income tax
benefit of approximately $0.6 million. The actual amount of repayment
on November 27, 1996 was $54.3 million.
(3) As a result of the Heritage Transaction, the Company has a stockholder's
deficit for accounting purposes as of September 30, 1996 of $1.9
million. As a result of the Transaction, there will be an increase in
the stockholder's deficit as shown in the table above. However,
affiliates of Hicks Muse paid $32.0 million for approximately 82% of the
Common Stock of Holding.
22
<PAGE> 24
SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA
The selected consolidated historical financial data presented below
(i) as of and for each of the years in the four year period ended December 31,
1995, were derived from the audited consolidated financial statements of the
Company, and (ii) as of and for the year ended December 31, 1991, were derived
from unaudited financial statements of the Company. The selected consolidated
financial data for Bishop were derived from the audited consolidated financial
statements of Bishop (for the years ended September 30, 1994, 1995 and 1996),
and from unaudited consolidated financial statements for the year ended
September 30, 1993. The data should be read in conjunction with the
consolidated financial statements, related notes and other financial
information included elsewhere in this Prospectus. The selected consolidated
financial data of the Company presented below as of and for the nine-month
periods ended September 30, 1995 and 1996 have not been audited, but, in the
opinion of the Company, include all adjustments (consisting only of normal,
recurring adjustments) necessary to present fairly, in all material respects,
such information in accordance with GAAP applied on a consistent basis.
Interim results are not necessarily indicative of the Company's results for the
full fiscal year, principally because of the seasonal nature of the Company's
business. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
THE COMPANY:
<TABLE>
<CAPTION>
Nine Months Ended
Year Ended December 31, September 30,
---------------------------------------------------------- ----------------------
1991 1992 1993 1994 1995 1995 1996
--------- --------- --------- --------- --------- --------- ---------
(unaudited) (unaudited) (unaudited)
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales ....................... $ 68,230 $ 80,580 $ 98,752 $ 123,571 $ 135,478 $ 102,280 $ 113,046
Cost of sales(1) ................ 50,360 54,349 66,465 85,572 93,975 73,218 73,882
--------- --------- --------- --------- --------- --------- ---------
Gross profit .................... 17,870 26,231 32,287 37,999 41,503 29,062 39,164
Selling, general and
administrative expenses ......... 20,667 18,322 22,710 26,895 29,749 22,136 25,065
Special charges(2) .............. -- -- -- -- 7,188 6,567 --
--------- --------- --------- --------- --------- --------- ---------
Income (loss) from operations.... (2,797) 7,909 9,577 11,104 4,566 359 14,099
--------- --------- --------- --------- --------- --------- ---------
Net income (loss)(3) ............ $ 470 $ 8,344 $ 10,083 $ 9,191 $ 1,849 $ (508) $ 7,216
========= ========= ========= ========= ========= ========= =========
OTHER FINANCIAL DATA:
EBITDA(4) ....................... $ 1,861 $ 9,899 $ 12,030 $ 14,576 $ 15,864 $ 9,900 $ 16,076
EBITDA excluding Atrium Wood(5).. 7,847 11,586 14,991 17,418 21,134 15,138 17,680
Depreciation and amortization.... 710 935 1,407 1,678 2,229 1,506 2,049
Capital expenditures(6) ......... 1,065 1,843 3,686 3,389 2,337 2,078 2,060
Ratio of earnings to fixed
charges(7).................... 1.3x 11.0x 14.8x 12.5x 1.9x -- 4.1x
BALANCE SHEET DATA (END OF PERIOD):
Working capital, excluding
current portion of
long-term debt ............... $ 17,114 $ 19,792 $ 22,517 $ 22,867 $ 20,760 $ 22,903 $ 24,554 (8)
Total assets .................... 45,263 48,079 52,517 58,507 48,569 48,681 71,603 (8)
Total debt ...................... 10,707 9,162 7,614 6,786 49,000 54,300 56,169 (8)
Stockholder's equity (deficit)(9) 29,119 34,150 38,167 40,365 (14,544) (18,039) (1,945)(8)
</TABLE>
BISHOP:
<TABLE>
<CAPTION>
Year Ended September 30,
---------------------------------------------
1993 1994 1995 1996
--------- --------- --------- ---------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net Sales ................................... $ 10,658 $ 14,006 $ 14,496 $ 14,409
Cost of sales ............................... 5,203 7,494 6,425 7,437
--------- --------- --------- ---------
Gross profit ................................ 5,455 6,512 8,071 6,972
Selling, general and administrative expenses 4,753 5,183 5,945 5,790
--------- --------- --------- ---------
Income from operations ...................... 702 1,329 2,126 1,182
--------- --------- --------- ---------
Net income .................................. $ 441 $ 759 $ 1,254 $ 385
========= ========= ========= =========
OTHER FINANCIAL DATA:
EBITDA(4) ................................... $ 2,214 $ 3,852 $ 4,853 $ 4,167
Depreciation and amortization ............... 181 312 303 290
Capital expenditures ........................ 807 355 365 230
Ratio of earnings to fixed charges (7) ...... 5.0x 12.0x 20.8x 11.5x
BALANCE SHEET DATA (END OF PERIOD):
Working capital, excluding current portion of
long-term debt............................ $ 3,326 $ 4,105 $ 5,845 N/A(8)
Total assets ................................ 5,535 7,053 8,683 N/A(8)
Total debt .................................. 453 439 425 N/A(8)
Stockholders' equity ........................ 4,087 4,845 6,100 N/A(8)
</TABLE>
23
<PAGE> 25
(1) Effective January 1, 1994, the Company elected to change its method of
accounting for inventory from the first-in, first-out (FIFO) method to the
last-in, first-out (LIFO) method. The LIFO provision in 1994 increased
cost of sales and decreased income from operations by $2,721. See Note 1
to the Consolidated Financial Statements of the Company. The LIFO
provision for the year ended December 31, 1995 and for the nine months
ended September 30, 1996 decreased cost of sales and increased income from
operations by $851 and $144, respectively.
(2) Special charges include officer and management bonuses and restructuring
charges for severance of $6,380 and $400, respectively, in connection with
the Heritage Transaction and consulting fees of $408 for the year ended
December 31, 1995. These charges were $6,380, $0 and $187, respectively,
for the nine months ended September 30, 1995.
(3) Prior to the Heritage Transaction, the Company was a subchapter S
corporation, and, for federal income tax purposes, all income or loss was
allocated to the stockholders for inclusion in their respective federal
income tax returns. The Company made periodic distributions to
stockholders for their pro rata portion of federal income taxes payable.
In conjunction with the Heritage Transaction, the Company became a C
corporation. Pro forma income tax expense (benefit) prior to July 3, 1995,
had the Company been subject to corporate federal income taxes, would have
been as follows:
<TABLE>
<CAPTION>
Nine Months Ended
Year Ended December 31, September 30,
-------------------------------------------------------------- ------------------
1991 1992 1993 1994 1995 1995
---------- ---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Income tax expense (benefit).. $ 165 $ 3,067 $ 3,750 $ 4,032 $ 1,109 $ (41)
========== ========== ========== ========== ========== =========
</TABLE>
(4) EBITDA represents income before income taxes, interest, depreciation and
amortization and certain non-recurring expenses. The non-recurring
expenses are as follows:
<TABLE>
<CAPTION>
Nine Months
Ended
Year Ended December 31, September 30,
--------------------------------------------------------- ---------------------
1991 1992 1993 1994 1995 1995 1996
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
THE COMPANY:
Special charges (see note 2). $ -- $ -- $ -- $ -- $ 7,188 $ 6,567 $ --
Labor union negotiation and
other professional expenses . -- -- -- 1,203 439 439 --
Write-down of real estate ... -- -- -- 1,545 -- -- --
--------- --------- --------- --------- --------- --------- ---------
Total ....................... $ -- $ -- $ -- $ 2,748 $ 7,627 $ 7,006 $ --
========= ========= ========= ========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
Year Ended September 30,
---------------------------------------------
1993 1994 1995 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
BISHOP:
Adjustment to compensation expense of former owners $ 1,189 $ 2,186 $ 2,216 $ 2,326
Professional expenses ............................. -- -- -- 350
--------- --------- --------- ---------
Total ............................................. $ 1,189 $ 2,186 $ 2,216 $ 2,676
========= ========= ========= =========
</TABLE>
While EBITDA is not intended to represent cash flow from operations as
defined by GAAP and should not be considered as an indicator of operating
performance or an alternative to cash flow (as measured by GAAP) or as a
measure of liquidity, it is included herein to provide additional
information with respect to the ability of the Company to meet its future
debt service, capital expenditures and working capital requirements. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
(5) EBITDA without Atrium Wood represents EBITDA as defined in (4) above plus
the EBITDA losses that the Atrium Wood division has incurred during each of
the periods presented. These losses were as follows (in thousands):
<TABLE>
<CAPTION>
Nine Months Ended
Year Ended December 31, September 30,
------------------------------------------------------- ---------------------
1991 1992 1993 1994 1995 1995 1996
-------- --------- --------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Atrium Wood loss ............. $ (5,986) $ (1,687) $ (2,961) $ (2,842) $ (2,770) $ (2,738) $ (1,604)
Inventory and other reserves . -- -- -- -- (2,500) (2,500) --
-------- -------- -------- -------- -------- -------- --------
Atrium Wood EBITDA loss ...... $ (5,986) $ (1,687) $ (2,961) $ (2,842) $ (5,270) $ (5,238) $ (1,604)
======== ======== ======== ======== ======== ======== ========
</TABLE>
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" for a discussion of the Company's plans for Atrium
Wood.
24
<PAGE> 26
(6) Capital expenditures for the nine months ended September 30, 1996 include
the capital assets acquired from Keller for $1,150 as part of the Keller
acquisition. Capital expenditures for the year ended December 31, 1993 and
1994 includes $1,098 and $1,429 related to expenditures for assets which
are no longer a part of the Company as a result of the Heritage Transaction
and the sale of the Company's truck fleet.
(7) For the purpose of calculating the ratio of earnings to fixed charges,
earnings represent income (loss) before income taxes and fixed charges.
Fixed charges consist of the total (i) interest, whether expensed or
capitalized; (ii) amortization of debt expense and discount or premium
relating to any indebtedness, whether expensed or capitalized; and (iii)
that portion of rental expense considered to represent interest cost
(assumed to be one-third). Additional earnings of $112 for the nine months
ended September 30, 1995 would have been necessary to cover fixed charges.
The ratio of earnings to fixed charges for the nine months ended September
30, 1995, excluding the pre-tax special charge of $6,567, was 3.8x.
(8) The Company's consolidated balance sheet at September 30, 1996 reflects the
acquisition of Bishop. All significant intercompany transactions and
balances have been eliminated in consolidation.
(9) In conjunction with the Heritage Transaction, a third party contributed
$22,100 to acquire common and preferred stock of FCI Holding. FCI Holding
contributed the $22,100 to the Company, and the Company used such proceeds
in addition to proceeds from bank borrowings of approximately $57,154 to
pay stockholder distributions of approximately $74,768 and transaction
costs.
25
<PAGE> 27
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma financial statements (the "Pro Forma
Financial Statements") of the Company are based on the audited and unaudited
consolidated financial statements of the Company and Bishop included elsewhere
in this Prospectus, as adjusted to illustrate the estimated effects of the
Financing and the Exchange Offer. The unaudited pro forma financial statements
do not give effect to the acquisition of Keller, as the historical results of
operations are not expected to be indicative of ongoing operations.
The Pro Forma Financial Statements of the Company have been prepared to
give effect to the acquisition of Bishop, the Financing (and the application of
the net proceeds therefrom) and the Exchange Offer as though such transactions
had occurred as of September 30, 1996, for the balance sheet data, and as of
January 1, 1995, for the results of operations data. The pro forma adjustments
are based upon available information and certain assumptions that the Company
believes are reasonable. The Pro Forma Financial Statements should be read in
conjunction with the historical financial statements of the Company and Bishop
included elsewhere herein. Bishop's fiscal year end is September 30. The
historical amounts in the pro forma statement of operations for the year ended
December 31, 1995 represent (i) the operations of the Company for the year
ended December 31, 1995, and (ii) the operations of Bishop for the year ended
September 30, 1995. The historical amounts in the pro forma statements of
operations for the nine months ended September 30, 1996 and 1995 and the twelve
months ended September 30, 1996 represent the operations of the Company and
Bishop for the actual periods.
The Pro Forma Financial Statements do not purport to be indicative of
what the Company's financial position or results of operations would have been
had the Financing and the Exchange Offer been completed as of the assumed date
and for the periods presented or that may be obtained in the future.
26
<PAGE> 28
ATRIUM COMPANIES, INC.
UNAUDITED PRO FORMA BALANCE SHEET
AS OF SEPTEMBER 30, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS
Pro Forma
Historical (1) Adjustments Total
------------- ------------ ------------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents ................................ $ 337 $ -- $ 337
Accounts receivable, net ................................. 22,751 -- 22,751
Inventories .............................................. 15,572 -- 15,572
Prepaid expenses and other current assets ................ 343 -- 343
Deferred tax benefit ..................................... 1,432 -- 1,432
------------ ------------ ------------
Total current assets .................................. 40,435 -- 40,435
------------ ------------ ------------
Property, plant and equipment, net ....................... 13,270 -- 13,270
Goodwill ................................................. 12,417 -- 12,417
Other assets ............................................. 5,481 3,250 (2) 8,731
------------ ------------ ------------
Total assets .......................................... $ 71,603 $ 3,250 $ 74,853
============ ============ ============
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
Current liabilities:
Accounts payable ......................................... $ 8,396 $ -- $ 8,396
Current portion of notes payable ......................... 5,250 (5,250)(3) --
Accrued liabilities ...................................... 7,485 -- 7,485
------------ ------------ ------------
Total current liabilities ............................. 21,131 (5,250) 15,881
------------ ------------ ------------
Notes payable ............................................ 50,919 52,968 (3) 103,887
Other liabilities ........................................ 1,498 -- 1,498
Stockholder's deficit .................................... (1,945) (44,468)(4) (46,413)
------------ ------------ ------------
Total liabilities and stockholder's equity (deficit) .. $ 71,603 $ 3,250 $ 74,853
============ ============ ============
</TABLE>
(1) The Company's consolidated balance sheet at September 30, 1996
reflects the acquisition of Bishop. All significant intercompany
transactions and balances have been eliminated in consolidation.
(2) Reflects (i) the capitalization of deferred financing fees in the
amount of approximately $4,350 associated with the Financing and (ii)
the write-off of $1,100 of deferred financing fees associated with the
repayment of the Company's Old Credit Facility.
(3) Reflects the following:
<TABLE>
<S> <C>
Issuance of the Old Notes and effect of the
Exchange Offer ..................................... $ 100,000
Borrowings under the New Credit Facility .............. 3,887
---------
Total .............................................. 103,887
Repayment of old debt ................................. (56,169)
---------
Net increase in long-term debt .................. $ 47,718
=========
</TABLE>
(4) The adjustment reflects the net effect of the items discussed below:
<TABLE>
<S> <C> <C>
Historical stockholder's deficit ...................................... $ (1,945)
Pro forma adjustments:
Effect of affiliates of Hicks Muse equity (net of related
expenses of $3,650)............................................. $ 28,350
Effect of Redemption of Selling Securityholders .................... (59,418)
Effect of Redemption of preferred stock of Holding ................. (12,300)
Effect of extraordinary charge related to write-off of deferred
financing fees (net of income tax benefit of $600).............. (1,100)
Total pro forma adjustment ......................................... ---------- (44,468)
----------
Pro forma stockholder's deficit ....................................... $ (46,413)
==========
</TABLE>
27
<PAGE> 29
ATRIUM COMPANIES, INC.
UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
Historical
--------------------------- Pro Forma
The Company Bishop Adjustments Total
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales ............................... $ 135,478 $ 14,496 $ -- $ 149,974
Cost of sales ........................... 93,975 6,425 -- 100,400
------------ ------------ ------------ ------------
Gross profit ............................ 41,503 8,071 -- 49,574
Selling, general and administrative
expenses.............................. 29,749 5,945 (1,906)(1) 33,788
Special charges(2) ...................... 7,188 -- -- 7,188
------------ ------------ ------------ ------------
Income from operations ............ 4,566 2,126 1,906 8,598
Interest expense ........................ 2,615 44 8,587(3) 11,246
Other income ............................ 1,442 208 -- 1,650
------------ ------------ ------------ ------------
Income (loss) before income taxes ....... 3,393 2,290 (6,681) (998)
Provision (benefit) for income taxes .... 1,544 1,036 (2,949)(4) (369)
------------ ------------ ------------ ------------
Net income (loss) ....................... $ 1,849 $ 1,254 $ (3,732) $ (629)
============ ============ ============ ============
EBITDA(5) ............................... $ 15,864 $ 4,853 $ -- $ 20,717
Ratio of earnings to fixed charges(6) ... --
SUPPLEMENTAL INFORMATION:
Depreciation and amortization ..... $ 2,229 $ 303 $ 310 $ 2,842
</TABLE>
FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
Historical
--------------------------- Pro Forma
The Company Bishop Adjustments Total
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales ............................... $ 146,244 $ 14,409 $ -- $ 160,653
Cost of sales ........................... 94,639 7,437 -- 102,076
------------ ------------ ------------ ------------
Gross profit ............................ 51,605 6,972 -- 58,577
Selling, general and administrative
expenses.............................. 32,678 5,790 (2,366)(1) 36,102
Special charges(2) ...................... 621 -- -- 621
------------ ------------ ------------ ------------
Income from operations ............ 18,306 1,182 2,366 21,854
Interest expense ........................ 3,908 35 7,303(3) 11,246
Other income ............................ 341 19 -- 360
------------ ------------ ------------ ------------
Income (loss) before income taxes ....... 14,739 1,166 (4,937) 10,968
Provision (benefit) for income taxes .... 5,166 781 (1,889)(4) 4,058
------------ ------------ ------------ ------------
Net income (loss) ....................... $ 9,573 $ 385 $ (3,048) $ 6,910
============ ============ ============ ============
EBITDA(5) ............................... $ 22,040 $ 4,167 $ -- $ 26,207
Ratio of earnings to fixed charges(6) ... 1.9x
SUPPLEMENTAL INFORMATION:
Depreciation and amortization ..... $ 2,772 $ 290 $ 310 $ 3,372
</TABLE>
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
<CAPTION>
Historical
--------------------------- Pro Forma
The Company Bishop Adjustments Total
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales ............................... $ 102,280 $ 10,504 $ -- $ 112,784
Cost of sales ........................... 73,218 4,656 -- 77,874
------------ ------------ ------------ ------------
Gross profit ............................ 29,062 5,848 -- 34,910
Selling, general and administrative
expenses.............................. 22,136 4,307 (1,429)(1) 25,014
Special charges(2) ...................... 6,567 -- -- 6,567
------------ ------------ ------------ ------------
Income from operations .............. 359 1,541 1,429 3,329
Interest expense ........................ 1,500 32 6,902(3) 8,434
Other income ............................ 1,029 151 -- 1,180
------------ ------------ ------------ ------------
Income (loss) before income taxes ....... (112) 1,660 (5,473) (3,925)
Provision (benefit) for income taxes .... 396 751 (2,599)(4) (1,452)
------------ ------------ ------------ ------------
Net income (loss) ....................... $ (508) $ 909 $ (2,874) $ (2,473)
============ ============ ============ ============
EBITDA(5) ............................... $ 9,900 $ 3,574 $ -- $ 13,474
SUPPLEMENTAL INFORMATION:
Depreciation and amortization ....... $ 1,506 $ 220 $ 233 $ 1,959
</TABLE>
28
<PAGE> 30
ATRIUM COMPANIES, INC.
UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
(in thousands)
<TABLE>
<CAPTION>
Historical
--------------------------- Pro Forma
The Company Bishop Adjustments Total
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales ............................... $ 113,046 $ 10,441 $ -- $ 123,487
Cost of sales ........................... 73,882 5,389 -- 79,271
------------ ------------ ------------ ------------
Gross profit ............................ 39,164 5,052 -- 44,216
Selling, general and administrative
expenses.............................. 25,065 4,288 (1,900)(1) 27,453
------------ ------------ ------------ ------------
Income from expenses ................ 14,099 764 1,900 16,763
Interest expense ........................ 2,793 25 5,616 (3) 8,434
Other income (expense) .................. (72) 107 -- 35
------------ ------------ ------------ ------------
Income (loss) before income taxes ....... 11,234 846 (3,716) 8,364
Provision (benefit) for income taxes .... 4,018 566 (1,489)(4) 3,095
------------ ------------ ------------ ------------
Net income (loss) ....................... $ 7,216 $ 280 $ (2,227) $ 5,269
============ ============ ============ ============
EBITDA(5) ............................... $ 16,076 $ 3,214 $ -- $ 19,290
Ratio of earnings to fixed charges(6) ... 1.9x
SUPPLEMENTAL INFORMATION:
Depreciation and amortization ....... $ 2,049 $ 210 $ 233 $ 2,492
</TABLE>
NOTES TO THE UNAUDITED PRO FORMA
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
(1) SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:
To reverse the compensation expense of the owners of Bishop offset by
the compensation that would have been received pursuant to a
three-year employment agreement if such employment agreement to be
entered into were in effect, to recognize the amortization of goodwill
over 40 years and to reverse non-recurring professional expenses, as
follows:
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
Year Ended Twelve Months Ended --------------------------------
December 31, 1995 September 30, 1996 1995 1996
------------------ ------------------- -------------- --------------
<S> <C> <C> <C> <C>
Adjustment to compensation
expense of former owners ....... $ 2,216 $ 2,326 $ 1,662 $ 1,783
Amortization of goodwill .......... (310) (310) (233) (233)
Non-recurring professional expenses -- 350 -- 350
-------------- -------------- -------------- --------------
Net adjustment ................. $ 1,906 $ 2,366 $ 1,429 $ 1,900
============== ============== ============== ==============
</TABLE>
(2) SPECIAL CHARGES:
Special charges include officer and management bonuses and
restructuring charges for severance of $6,380 and $400, respectively,
in connection with the Heritage Transaction and consulting fees of
$408 for the year ended December 31, 1995. These charges were $0,
$400 and $221, respectively, for the twelve months ended September
30, 1996 and $6,380, $0 and $187, respectively, for the nine months
ended September 30, 1995.
(3) INTEREST EXPENSE:
To reflect the interest expense (at assumed rates as indicated below)
associated with the Notes, the borrowings under the New Credit
Facility, the amortization of deferred financing costs and the
elimination of historical interest expense as follows: Nine Months
Ended
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
Year Ended Twelve Months Ended --------------------------------
December 31, 1995 September 30, 1996 1995 1996
------------------ ------------------- -------------- --------------
<S> <C> <C> <C> <C>
The Notes at 10 1/2% ..................... $ 10,500 $ 10,500 $ 7,875 $ 7,875
New Credit Facility at 8%* ............... 311 311 233 233
Amortization of deferred financing
costs.................................. 435 435 326 326
Elimination of historical interest expense (2,659) (3,943) (1,532) (2,818)
-------------- -------------- -------------- --------------
Net adjustment ................ $ 8,587 $ 7,303 $ 6,902 $ 5,616
============== ============== ============== ==============
</TABLE>
* Computed using the pro forma borrowings outstanding upon
consummation of the Financing (as if the closing of the
Financing had occurred on September 30, 1996), which the
Company believes is representative of average borrowings for
purposes of these pro forma statements of operations.
29
<PAGE> 31
ATRIUM COMPANIES, INC.
NOTES TO THE UNAUDITED PRO FORMA
STATEMENTS OF OPERATIONS -- (CONTINUED)
(IN THOUSANDS)
(4) PROVISION (BENEFIT) FOR INCOME TAXES:
To recognize the reduction in federal and state income taxes resulting
from the pro forma adjustments, and to recognize federal and state
income taxes as if the Company, Bishop and their subsidiaries were C
corporations for the entire period, at an assumed effective tax rate
of approximately 37%.
(5) EBITDA:
EBITDA represents income before income taxes, interest, depreciation
and amortization and certain non-recurring expenses. While EBITDA is
not intended to represent cash flow from operations as defined by GAAP
and should not be considered as an indicator of operating performance
or an alternative to cash flow (as measured by GAAP) or as a measure
of liquidity, it is included herein to provide additional information
with respect to the ability of the Company to meet its future debt
service, capital expenditures and working capital requirements.
The following table sets forth the historical EBITDA for the Company
and Bishop, respectively.
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
Year Ended Twelve Months Ended --------------------------------
December 31, 1995 September 30, 1996 1995 1996
------------------ ------------------- -------------- --------------
<S> <C> <C> <C> <C>
THE COMPANY:
Earnings before interest and taxes............... $ 6,008 $ 18,647 $ 1,388 $ 14,027
Depreciation and amortization ................... 2,229 2,772 1,506 2,049
Non-recurring expenses:
Special charges (see note 2) .................. 7,188 621 6,567 --
Labor union negotiation and
other professional fees ......................... 439 -- 439 --
-------------- -------------- -------------- --------------
COMPANY EBITDA .................................... $ 15,864 $ 22,040 $ 9,900 $ 16,076
============== ============== ============== ==============
BISHOP:
Earnings before interest and taxes............... $ 2,334 $ 1,201 $ 1,692 $ 871
Depreciation and amortization ................... 303 290 220 210
Non-recurring expenses:
Adjustment to compensation
expense of former owners .................... 2,216 2,326 1,662 1,783
Professional expenses ......................... -- 350 -- 350
-------------- -------------- -------------- --------------
BISHOP EBITDA ................................... $ 4,853 $ 4,167 $ 3,574 $ 3,214
============== ============== ============== ==============
PRO FORMA COMBINED EBITDA ......................... $ 20,717 $ 26,207 $ 13,474 $ 19,290
============== ============== ============== ==============
</TABLE>
While EBITDA is not intended to represent cash flow from operations as
defined by GAAP and should not be considered as an indicator of
operating performance or an alternative to cash flow (as measured by
GAAP) or as a measure of liquidity, it is included herein to provide
additional information with respect to the ability of the Company to
meet its future debt service, capital expenditures and working capital
requirements.
(6) RATIO OF EARNINGS TO FIXED CHARGES:
For purposes of calculating the pro forma ratio of earnings to fixed
charges, earnings represent income (loss) before income taxes and
fixed charges. Fixed charges consist of the total of (i) interest,
whether expensed or capitalized; (ii) amortization of debt expense and
discount or premium relating to any indebtedness, whether expensed or
capitalized; and (iii) that portion of rental expense considered to
represent interest cost (assumed to be one-third). Additional
earnings of $998 for the year ended December 31, 1995 would have been
necessary to cover fixed charges. The pro forma ratio of earnings to
fixed charges for the year ended December 31, 1995 excluding the 1995
pre-tax special charge of $7,188 was 1.5x.
30
<PAGE> 32
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
GENERAL
The following discussion and analysis should be read in conjunction
with the Consolidated Financial Statements of the Company which appear
elsewhere in this Prospectus and, to the extent the discussion and analysis
specifically relates to Bishop, Bishop's historical financial statements also
included herein.
The Company's results are generally impacted by the level of activity
in residential new construction and remodel/replacement in the Company's
Primary Market and throughout the United States. This activity is influenced
by regional and national economic trends, such as availability of consumer
credit, interest rates, job formation, age of housing stock, inter/intra U.S.
migration and consumer confidence. The Company's operating results reflect
significant sales growth during the five-year period ended December 31, 1995.
The Company's CAGR in sales during this period was 18.7%, which can be
attributed to increased market share and product demand in its markets. During
the same period, single-family housing starts in the Company's Primary Market
increased at a CAGR of 10.3% as compared to 5.9% on a national basis. The
Company's market share of aluminum window units sold in its Primary Market
increased from 11.9% in 1991 to 17.6% in 1995, and its share of total window
units sold increased from 7.6% to 10.3% during the same period. The Company
attributes these market share gains to its brand name recognition, strong
customer service, new product offerings, expanded distribution, including the
opening of new Company-owned Distribution Centers, and increased sales to the
DIY home center market.
The Company has implemented measures to enhance manufacturing
efficiencies and reduce operating costs. These initiatives include the
realignment of workflow processes and the reduction of scrap and direct labor
costs. The Company has also outsourced delivery operations and improved
customer service. Further, the Company is implementing an integrated
management information system. This system is expected to provide additional
production efficiencies and optimize inventory management, as well as enhance
financial reporting.
Atrium Wood
The Company has also focused on measures to reduce operating losses at
Atrium Wood. Originally, Atrium Wood manufactured primarily premium patio
doors. Through 1988, Atrium Wood sold its wood door products through
wholesalers who also carried wood windows manufactured by Andersen Corporation
("Andersen"). The wholesaler combined the door and window products to offer a
complete package to its customers. In 1988, Andersen introduced its own wood
door line and the wholesalers began packaging the Andersen doors and windows
together. As a result, Atrium Wood in 1988 began experiencing substantial
sales declines. In response, the Company established an internal sales force
to regain distribution with wholesalers, redesigned its wood doors and
broadened its product offering to include windows. These measures proved
unsuccessful, and sales and EBITDA at Atrium Wood continued to decline.
Although Atrium Wood is currently operating at a loss (see Note 5 to
"Selected Consolidated Historical Financial Data"), the Company believes there
are strategic benefits to offering its customers wood products in addition to
its aluminum and vinyl products. As a result, the Company has continued to
restructure Atrium Wood through the elimination of unprofitable products,
changes in management, reduction of inventory, product redesign and the
streamlining of manufacturing operations. In addition, the Company has cut
fixed selling expenses by utilizing primarily commission-based independent
sales representatives rather than salary and commission-based Company sales
representatives. The Company believes that the measures it has implemented,
combined with the Bishop acquisition which provides it with an expanded,
established distribution channel into the Northeast, a major wood door market,
will result in improved results for Atrium Wood. The Company continues to
review its strategic options with respect to the wood product line.
31
<PAGE> 33
RECAPITALIZATIONS AND ACQUISITIONS
The Transaction
On November 7, 1996, Holding entered into a purchase agreement with an
affiliate of Hicks Muse pursuant to which affiliates of Hicks Muse subsequently
purchased a number of shares of Common Stock that represents approximately 82%
of the outstanding shares of Common Stock. See "The Transaction." The
Transaction was accounted for as a recapitalization, and, accordingly, the
assets and liabilities of the Company were not revalued. The Transaction
resulted in cash and non-cash charges of $4.3 million and $3.7 million,
respectively, related to management bonuses, compensatory stock options and the
write-off of deferred financing costs. The cash charges were funded by part of
the proceeds of the Offering.
Bishop Acquisition
On September 30, 1996, the Company completed the Bishop acquisition at
a purchase price of $19.5 million (including the purchase of $3.3 million of
cash). Included in this amount is $5.0 million of non-cash consideration,
representing the estimated value on the acquisition date of shares of Common
Stock of Holding issued to the former shareholders of Bishop (such shares
representing approximately 9% of the shares of Common Stock then outstanding
after giving effect to such acquisition), and a $1.0 million deferred payment
to be paid to the former shareholders of Bishop if certain financial targets
are met. The acquisition of Bishop was accounted for under the purchase method
of accounting effective September 30, 1996. As such, the assets and
liabilities of Bishop have been recorded at their estimated fair market values.
An amount equal to the excess of the purchase price over the fair value of
assumed liabilities will be allocated to inventories, property and equipment,
identifiable intangible assets and goodwill. Goodwill will be amortized over
40 years. The purchase allocation is preliminary and subject to change.
Keller Acquisition
On June 13, 1996, the Company purchased certain capital assets of
Keller at a purchase price of $1.2 million in cash. Additionally, inventory
was purchased from Keller for $0.5 million on September 4, 1996. Both
purchases have been recorded at cost.
Heritage Transaction
On July 3, 1995, the stockholders of FCI Holding, the Company's direct
parent and a direct subsidiary of Holding, executed a stock purchase agreement
with Heritage for the purchase by Heritage of 62.0% of FCI Holding's
outstanding common stock (including 49.5% of its outstanding voting common
stock). This transaction has been accounted for as a recapitalization.
Accordingly, the assets and liabilities of the Company were not revalued.
The Agreement provided for a cash distribution of approximately $75.4
million to the stockholders of the Company. The distribution to the
stockholders was funded by a $40.0 million term loan, a $25.0 million revolving
line of credit and the issuance of preferred and common stock of FCI Holding.
See Note 10 to the Company's Consolidated Financial Statements.
RAW MATERIAL COSTS AND INFLATION
During the past several years, the rate of general inflation has been
relatively low and has not had a significant impact on the Company's results of
operations. The Company purchases raw materials, including aluminum, glass,
wood and vinyl, that are subject to fluctuations in price that may not reflect
the rate of general inflation. These materials fluctuate in price based on
supply and demand. Historically, there have been periods of significant and
rapid aluminum and wood price changes, both upward and downward, with a
concurrent short-term impact on the Company's operating margins. The Company
has historically mitigated the effects of these fluctuations over the long-term
by passing through price increases to its customers. The Company also enters
into forward commitments for aluminum billet to hedge against price changes.
32
<PAGE> 34
RESULTS OF OPERATIONS
THE COMPANY
The following table sets forth, for the periods indicated, information
derived from the Company's consolidated statements of income expressed as a
percentage of net sales.
<TABLE>
<CAPTION>
Nine Months Ended
Year Ended December 31, September 30,
---------------------------------- ---------------------
1993 1994 1995 1995 1996
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net sales ....................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales ................................... 67.3 69.2 69.4 71.6 65.4
-------- -------- -------- -------- --------
Gross profit .................................... 32.7 30.8 30.6 28.4 34.6
Selling, general and administrative expenses .... 23.0 21.8 22.0 21.6 22.1
Special charges ................................. -- -- 5.3 6.4 --
-------- -------- -------- -------- --------
Income from operations ....................... 9.7 9.0 3.3 0.4 12.5
Interest expense ................................ (0.4) (0.3) (1.9) (1.5) (2.5)
Other income (expense) .......................... 1.1 (0.8) 1.1 1.0 (0.1)
-------- -------- -------- -------- --------
Income (loss) before income taxes ............... 10.4 7.9 2.5 (0.1) 9.9
Provision (benefit) for income taxes ............ 0.2 0.5 1.1 0.4 3.6
-------- -------- -------- -------- --------
Net income (loss) ............................... 10.2% 7.4% 1.4% (0.5)% 6.3%
======== ======== ======== ======== ========
EBITDA .......................................... 12.2% 11.8% 11.7% 9.7% 14.2%
======== ======== ======== ======== ========
</TABLE>
Accounting Adjustments. Certain accounting adjustments affect the
comparability of the Company's operating results for the periods presented.
Prior to the Heritage Transaction, the Company was a subchapter S corporation
for tax purposes and all federal income taxes were paid by the Company's
stockholders. Had the Company been a C corporation for all periods presented,
income tax expense would have been $3.7 million, $4.0 million and $1.1 million
for 1993, 1994 and 1995, respectively. Also, in 1994, the Company changed its
inventory valuation method from FIFO to LIFO resulting in a LIFO provision of
$2.7 million in 1994, a $0.9 million benefit in 1995 and a $0.1 million benefit
in the nine months ended September 30, 1996.
Nine Months Ended September 30, 1996 Compared to Nine Months Ended September
30, 1995
Net Sales. Net sales increased $10.7 million from $102.3 million
during the first nine months of 1995 to $113.0 million during the 1996 period.
The increase resulted primarily from increased volume of sales at the Skotty
Aluminum division to independent distributors, DIY home centers and builders of
multi-family units and at the Atrium Vinyl division, which commenced operation
in June 1995. Multi-family sales were $5.1 million for the first nine months
of 1995 compared to $7.2 million during the 1996 period. The increase in net
sales was partly offset by a decrease in sales at Atrium Wood.
Cost of Sales. Cost of sales decreased from 71.6% of net sales during
the first nine months of 1995 to 65.4% of net sales during the same period for
1996. This improvement was due largely to the reduction in non-recurring 1995
charges of $2.5 million associated with inventory and other product reserves at
Atrium Wood. The remainder was due to a decrease in raw material prices and
the replacement of a significant low margin H-R customer with customers at
higher margins. Depreciation and amortization included in cost of sales was
$0.5 million and $0.6 million during the first nine months of 1995 and 1996,
respectively.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $3.0 million from $22.1 million (which
represented 21.6% of sales during the first nine months of 1995) to $25.1
million (which represented 22.1% of sales during the 1996 period).
Depreciation and amortization included in selling, general and administrative
expenses increased $0.5 million from $1.0 million during the first nine months
of 1995 to $1.5 million during the 1996 period. The increase was primarily due
to amortization of certain non-compete agreements and the deferred financing
charges incurred in connection with the Heritage Transaction.
33
<PAGE> 35
Special Charges. Special charges during the first nine months of 1995
include officer and management bonuses of $6.4 million in connection with the
Heritage Transaction and consulting fees of $0.2 million. There were no
special charges during the nine months ended 1996.
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994
Net Sales. Net sales increased $11.9 million from $123.6 million in
1994 to $135.5 million in 1995. The increase resulted primarily from increased
volume of sales at the Skotty Aluminum division to multi-family builders,
independent distributors and DIY home centers and at the Company Distribution
Centers to homebuilders. Multi-family sales were $1.8 million in 1994 compared
to $6.8 million during 1995. Sales increased at Extruders as a result of
increased prices, partly offset by decreased volume. Sales at the Atrium Vinyl
division, increased significantly during 1995. The increase in net sales was
partly offset by a decrease in sales at Atrium Wood.
Cost of Sales. Cost of sales increased from 69.2% of net sales during
1994 to 69.4% of net sales during 1995. This was due largely to non-recurring
1995 charges of $2.5 million associated with inventory and other product
reserves at Atrium Wood and certain low margin sales to an H-R customer. These
costs were partially offset by a decrease in raw material prices and the
adoption of LIFO in 1994, which resulted in a benefit of $0.9 million in 1995
compared to a provision of $2.7 million in 1994. Depreciation included in cost
of sales was $0.6 million and $0.7 million during the years ended 1994 and
1995, respectively.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $2.8 million from $26.9 million (which
represented 21.8% of sales during 1994) to $29.7 million (which represented
22.0% of sales during 1995). Depreciation and amortization included in
selling, general and administrative expenses increased $0.4 million from $1.1
million during 1994 to $1.5 million during 1995 and rent expense increased $0.5
million over 1994. These increases were primarily due to amortization of
certain non-compete agreements and the deferred financing charges incurred, and
certain property distributions, in connection with the Heritage Transaction.
Professional fees related to the negotiation of a union contract were $0.4
million in 1995 and $1.2 million in 1994.
Special Charges. Special charges during 1995 include officer and
management bonuses of $6.4 million, and restructuring charges for severance of
$0.4 million in connection with the Heritage Transaction and consulting fees of
$0.4 million. There were no special charges during 1994.
Year Ended December 31, 1994 Compared to Year Ended December 31, 1993
Net Sales. Net sales increased $24.8 million from $98.8 million in
1993 to $123.6 million in 1994. Increased sales at Skotty Aluminum, H-R
Windows, Atrium Wood and the Arizona and Nevada Distribution Centers were
largely the result of volume increases due to increases in housing starts and
continued growth in the area of multi-family sales, which the Company initially
entered into during 1993. Additionally, the Company passed along slight price
increases throughout most product lines. Sales growth at Extruders was
primarily due to increased sales to other window manufacturers.
Cost of Sales. Cost of sales increased from 67.3% of net sales during
1993 to 69.2% of net sales during 1994. The increase was primarily due to a
change in inventory accounting method from FIFO to LIFO. Without this change,
cost of goods sold as a percentage of sales would have been 67.1% during 1994.
Depreciation included in cost of sales was $0.4 million and $0.6 million during
the years ended 1993 and 1994, respectively. The increase in depreciation was
due to capital expenditures of $3.4 million in 1994.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $4.2 million from $22.7 million (which
represented 23.0% of sales during 1993) to $26.9 million (which represented
21.8% of sales during 1994). Included in general and administrative expenses
during 1994 was $1.2 million in professional fees relating to the negotiation
of union contracts. Depreciation included in selling, general and
administrative expenses increased $0.2 million from $0.9 million during 1993 to
$1.1 million during 1994. The increase in depreciation was due to capital
expenditures of $3.7 million and $3.4 million in 1993 and 1994, respectively.
These increases were offset by a decrease in fixed expenses as a percentage of
sales.
34
<PAGE> 36
BISHOP
The following table sets forth, for the periods indicated, information
derived from the consolidated statements of income of Bishop expressed as a
percentage of net sales.
<TABLE>
<CAPTION>
Year Ended September 30,
----------------------------------
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
Net sales ..................................................... 100.0% 100.0% 100.0%
Cost of sales ................................................. 53.5 44.3 51.6
-------- -------- --------
Gross profit .................................................. 46.5 55.7 48.4
Selling, general and administrative expenses .................. 37.0 41.0 40.2
-------- -------- --------
Income from operations ..................................... 9.5 14.7 8.2
Interest expense .............................................. (0.5) (0.3) (0.2)
Other income (expense) ........................................ 0.2 1.4 0.1
-------- -------- --------
Income (loss) before income taxes ............................. 9.2 15.8 8.1
Provision (benefit) for income taxes .......................... 3.8 7.1 5.4
-------- -------- --------
Net income (loss) ............................................. 5.4% 8.7% 2.7%
======== ======== ========
EBITDA ........................................................ 26.6% 33.5% 28.9%
======== ======== ========
</TABLE>
Bishop's sales have remained stable since 1994, reflecting the
relatively stable nature of the remodel/replacement construction market and the
general maturity of the housing market in the Northeastern states in which
Bishop operates. Bishop has emphasized high margin customers as opposed to
volume-driven sales. This strategy has resulted in gross margins in excess of
45% in the years ended September 30, 1994, 1995 and 1996, respectively. Cost
of sales of 44.3% in the year ended September 30, 1995 versus 53.5% and 51.6%
for the years ended September 30, 1994 and 1996, respectively, reflects
Bishop's strategy to take advantage of raw material buying opportunities. This
included purchasing annual materials requirements in a single delivery and
taking delivery during winter months, which are non-peak periods for vendors.
Significant purchasing discounts were obtained in late 1994, which benefitted
the 1995 operations. The increase in selling, general and administrative
expenses as a percentage of net sales from 1994 to 1995 and 1996 reflects the
increased compensation paid to Bishop's owners in 1995 and 1996. With regard
to income taxes, Bishop has not historically filed a consolidated tax return
for its subsidiaries and affiliates. As a result, the effective tax rates for
Bishop on a historical basis are higher than the statutory rate of 34%. In the
future, Bishop will be included in the Company's consolidated tax return.
LIQUIDITY AND CAPITAL RESOURCES
The Company's historical requirements for capital have been primarily
for servicing debt, capital expenditures and working capital. For the year
ended December 31, 1995 and the nine months ended September 30, 1996, additions
to property, plant and equipment were $2.3 million and $2.1 million,
respectively. Scheduled principal payments on debt were $1.0 million, $1.0
million and $1.3 million for the first three quarters of 1996, and estimated
tax payments were $0.8 million, $0.9 million and $1.9 million for such
quarters. The Company also made additional principal payments of approximately
$3.5 million during 1996. As of September 30, 1996, borrowings of $56.2
million were outstanding under the Company's Old Credit Facility and the
Company had unused borrowing capacity thereunder of $7.3 million. The Company
amended the Old Credit Facility to increase the amount available as a term loan
under the Old Credit Facility from $32.5 million to $38.5 million in order to
complete the Bishop acquisition.
As of the Closing Date, the debt service costs associated with the
borrowings under the Notes significantly increased liquidity requirements. The
Company has a $20.0 million credit facility available to fund working capital
needs. The Company believes that, based on current and anticipated financial
performance, cash flow from operations, together with other sources of funds,
will be adequate to meet its anticipated requirements for working capital,
capital expenditures, lease payments and scheduled principal and interest
payments, although the Company believes that its ability to pay the Notes at
maturity is dependent on the availability of refinancing indebtedness. The
Company expects that capital expenditures (exclusive of acquisitions) will be
approximately $2.5 million in 1997, however, actual capital requirements may
change, particularly as a result of acquisitions the Company may make. The
ability of the Company to meet its debt service and working capital obligations
and capital expenditure requirements is dependent, however, upon the future
performance of the Company and its subsidiaries which, in turn, will be subject
to general economic conditions and to financial, business and other factors,
including factors beyond the Company's control. As of
35
<PAGE> 37
December 31, 1996, the Company had $20.0 million available for borrowings under
the New Credit Facility. See "Description of New Credit Facility."
SEASONALITY
The Company's business is seasonal. The warmer months generally allow
for a higher level of building, generating a higher level of sales for the
Company. Consequently, the second and third calendar quarters have
traditionally represented the highest level of sales during the year.
CYCLICALITY
Demand in the window and door manufacturing industry is influenced by
new home construction activity and the demand for replacement products. Trends
in the housing sector (the most important of which to the Company is new
housing starts in its Primary Market) directly impact the financial performance
of the Company. Accordingly, the strength of the U.S. economy, the age of
existing home stock, job growth, consumer confidence, consumer credit, interest
rates and migration of the inter/intra U.S. population have a direct impact on
the Company. Any declines in new housing starts and/or demand for replacement
products may adversely impact the Company and there can be no assurance that
any such adverse effects would not be material.
ENVIRONMENTAL REGULATION
The Company has been named as a potentially responsible party at two
superfund sites pursuant to the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980 or comparable state statutes. Based on
currently available information, the Company believes that its liability, if
any, associated with remediation of these sites or facilities will not have a
material adverse effect on the Company's financial condition or results of
operations.
NEW ACCOUNTING STANDARDS
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation." The Company expects to adopt this statement in 1996
through disclosure in its annual financial statements, which will not have an
impact on the results of operations.
36
<PAGE> 38
DESCRIPTION OF NEW CREDIT FACILITY
The description set forth below does not purport to be complete and is
qualified in its entirety by reference to the underlying agreements of the
Senior Bank Facilities, which have been filed as exhibits to the registration
statement of which this Prospectus is a part.
GENERAL
The Company entered into a Credit Agreement providing for a new
revolving credit facility (the "New Credit Facility") with Bankers Trust
Company ("BTCo"). The New Credit Facility enables the Company to obtain
revolving credit loans and the issuance of Letters of Credit for the account of
the Company from time to time for working capital and general corporate
purposes in an aggregate amount outstanding not to exceed $20.0 million. As of
December 31, 1996, no borrowings under the New Credit Facility were
outstanding. The revolving credit loans bear interest at a rate based upon the
lender's prime rate plus a borrowing margin of 1.5% or a LIBOR-based rate plus
a borrowing margin of 2.5%. The Company paid certain fees with respect to the
New Credit Facility, which fees are included in the $8.0 million of expenses
that were incurred by the Company in connection with the Transaction. The New
Credit Facility terminates on the fifth anniversary of the date of the
consummation of the Offering, unless terminated sooner upon an event of default
(defined in the New Credit Facility), and outstanding revolving credit loans
are payable on such date or such earlier date as may be accelerated following
the occurrence of any event of default. The Company had $20.0 million of
availability under the New Credit Facility as of December 31, 1996.
The obligations of the Company and its subsidiaries under the New
Credit Facility will rank senior in right of payment to the Notes. The
obligations under the New Credit Facility, but not the Notes or the Subsidiary
Guarantees, are secured by a first priority lien on all of Holding's and its
subsidiaries' real and personal property and on all of the capital stock of the
Company and its subsidiaries, and all proceeds thereof. The obligations under
the New Credit Facility are guaranteed by Holding and the Company's
subsidiaries. The Notes and the Subsidiary Guarantee are effectively
subordinated to the obligations under the New Credit Facility and to any other
senior debt of the Company and the Subsidiary Guarantors.
CERTAIN COVENANTS
The New Credit Facility contains various covenants that will restrict
the Company from taking various actions and that will require that the Company
achieve and maintain certain financial covenants. The New Credit Facility
includes covenants relating to minimum EBITDA, minimum interest coverage ratio,
and limitations on capital expenditures, investments, indebtedness, liens,
dividends, acquisitions, sales of assets, guarantee obligations, prepayments of
other indebtedness, mergers or consolidations, change in business activities,
affiliate transactions and certain corporate activities. The New Credit
Facility also prohibits the Company from prepaying the Notes and prohibits
certain changes in control of the Company.
EVENTS OF DEFAULT
The New Credit Facility contains customary events of default,
including nonpayment of principal, interest or fees, violation of covenants,
inaccuracy of representations or warranties in any material respect, cross
default and cross acceleration to certain other indebtedness, bankruptcy,
ERISA, environmental matters, material judgments and liabilities and change of
control.
37
<PAGE> 39
BUSINESS
COMPANY HISTORY
The Company was founded in 1953 as Lumberman Sash & Door Co. by Joe
Fojtasek and operated as Fojtasek Companies, Inc. from 1988 to November 1996.
Early Company divisions included Skotty Aluminum, Extruders and Atrium Wood.
Over time, the Company started new business divisions such as Atrium Door &
Window Distributors of Arizona (1979), North Texas Die & Tool (1989) and Atrium
Vinyl (1995). The Company added various businesses to its portfolio through
acquisitions, including H-R Windows (1988), Dow-Tech (1990) and the Atrium Door
& Window Distributors of Nevada (1993). Until 1993, the operations were
principally managed by Joe Fojtasek. In 1993, Randall S. Fojtasek, Joe
Fojtasek's son, became Chief Executive Officer and President. He and Executive
Vice President Louis W. Simi, Jr., who has been with the Company for the past
30 years, are responsible for day-to-day operations. In July 1995, the Company
completed an equity recapitalization transaction with Heritage, an equity
investment fund. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Recapitalizations and Acquisitions."
The Company purchased from Keller certain capital assets in June 1996
and inventory in September 1996. The acquired capital assets include an
aluminum extrusion line, a painting line and vinyl window and door and aluminum
window and storm door fabrication equipment and tooling. The extrusion line
will increase the Company's aluminum extrusion capacity by approximately 35%
and will enable it to extrude in-house virtually all of its anticipated
aluminum extrusion requirements. The vinyl fabrication equipment and tooling
will extend the Company's product offering to include the fabrication of vinyl
sliding patio doors, vinyl casement windows, vinyl horizontal sliding windows
and vinyl double-hung windows and the assembly of vinyl bay and bow windows.
This equipment and tooling has been relocated to the Company's Atrium Vinyl
division in Dallas. Additionally, equipment for the fabrication of a full line
of single- and multi-family aluminum windows and storm doors is being utilized
in the Woodville division near Houston, Texas. The Company has established two
new divisions named Kel-Star Building Products and Woodville Extruders that
will operate the assets acquired pursuant to the Keller acquisition. Kel-Star
Building Products will market its products under the "KBP" brand to take
advantage of existing name recognition of Keller Building Products.
In September 1996, the Company completed the acquisition of Bishop,
which manufactures and sells primarily vinyl windows and doors to the
remodel/replacement market in the Northeast. The Company acquired Bishop to
(i) increase the Company's presence in the fast-growing vinyl window market,
(ii) diversify geographically and (iii) increase its presence in the
remodel/replacement market. The Bishop acquisition allows the Company to
extend its vinyl product offerings to include sliding patio doors, French patio
doors, casement windows, horizontal sliding windows, bay and bow windows,
double-hung windows and storm doors. As part of the Bishop acquisition, the
Company also acquired a distribution facility which has been renamed Atrium
Door & Window Distributors of New York. For its fiscal year ended September
30, 1996, Bishop had sales of $14.4 million and EBITDA (as defined in "Selected
Consolidated Historical Financial Data") of $4.2 million. See the Consolidated
Financial Statements of Bishop included elsewhere in this Prospectus.
In November 1996, the Company completed an equity recapitalization
transaction with Hicks Muse. See "Summary -- The Transaction."
COMPANY OVERVIEW
The Company is a leading manufacturer and distributor of residential
windows and doors in the Southwest, South and Southeast regions of the United
States. The Company's Primary Market, which in 1995 represented 75.1% of the
Company's revenues and 38.3% of total U.S. housing starts, consists of Arizona,
Colorado, Florida, Georgia, Louisiana, Nevada, New Mexico, Oklahoma, Tennessee
and Texas. The Primary Market includes certain of the fastest growing
residential housing markets in the United States with a CAGR in single-family
housing starts of 10.3% for the five-year period ended December 31, 1995
compared to 5.9% nationally for the same period. The Company is also one of a
limited number of window and door manufacturers that offers a diversified
product line, consisting of aluminum, vinyl and wood products. The Company
estimates that its market share of aluminum window units sold in its Primary
Market has increased from 11.9% in 1991 to 17.6% in 1995 and that its share of
total window units sold in its Primary Market has increased from 7.6% to 10.3%
during the same period. The Company's revenues and total window unit shipments
in the Primary Market have increased at CAGRs of 19.3% and 19.0%, respectively,
in this period. The
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<PAGE> 40
Company's pro forma net sales and EBITDA (as defined in the Notes to the
"Unaudited Pro Forma Statements of Operations") for the year ended December 31,
1995 were $150.0 million and $20.7 million, respectively, and for the
twelve-month period ended September 30, 1996 were $160.7 million and $26.2
million, respectively.
Historically, the Company has emphasized the sale of aluminum windows
and doors, as aluminum windows are the product of choice and regional standard
in the Company's Primary Market. In 1995, aluminum windows accounted for 71.3%
of residential new construction window units and 43.0% of residential
remodel/replacement window units within the Company's Primary Market as
compared to 40.9% and 30.1%, respectively, on a national basis for the same
period. The Company believes that the preference for aluminum windows over
vinyl and wood windows in the Company's Primary Market is attributable to
aluminum's lower cost, greater durability and lower maintenance requirements,
as well as the reduced need for thermal efficiency in homes in moderate
Southern climates.
The Company believes that, in 1995, United States residential window
and door expenditures were approximately $6.5 billion, of which new
construction and remodel/replacement expenditures represented approximately
$2.0 billion and $4.5 billion, respectively. The Company believes that it is
one of the two largest aluminum window manufacturers in its Primary Market and
that it enjoys purchasing, manufacturing and distribution advantages compared
to smaller regional manufacturers. Excluding wood manufacturers, the Company
believes that the window and door industry is highly fragmented and is
characterized primarily by small regional manufacturers of windows and doors.
This industry fragmentation also presents opportunities for growth through
acquisition, a strategy that the Company has implemented through the recent
acquisitions of Bishop and Keller. Bishop manufactures and sells primarily
vinyl windows and doors to the remodel/replacement market in the Northeast.
This acquisition expands the Company's vinyl window product offering and
increases its penetration of the remodel/replacement market. The Keller
acquisition increases the Company's aluminum extrusion capacity by
approximately 35% and provides the Company with new equipment and tooling for
fabricating several types of vinyl window and door products and a full line of
single- and multi-family aluminum windows and storm doors. The Company intends
to continue to pursue strategic acquisitions to enhance its market share and
expand its product offering.
The Company is vertically integrated with operations that include (i)
Extrusion, the extrusion of aluminum and vinyl, which is utilized internally in
the Company's fabrication operations or sold to third parties, (ii)
Fabrication, the assembly of window and door units and sale of such units to
wholesalers, lumberyards, DIY home centers and homebuilders and (iii)
Distribution Centers, the sale of finished products to homebuilders, remodelers
and contractors through four Company-owned Distribution Centers located in
Dallas, Texas; Las Vegas, Nevada; Phoenix, Arizona; and Farmingdale, New York.
The Company performs these operations at facilities that comprise an aggregate
of approximately 1.4 million square feet.
The Company currently sells its products under five brand names,
"Atrium," "Skotty," "H-R," "KBP," and "Bishop." The Company believes that
Atrium has significant national brand name recognition at the building trade
and consumer level, while Skotty, H-R, KBP and Bishop each have significant
regional brand name recognition within their primary channels of distribution.
The Company has been effective in utilizing these brand names to establish
relationships with leading wholesalers, lumberyards and builders in each of its
markets and to gain distribution in new markets. The Company distributes its
windows and doors through (i) one-step distribution to major retail DIY home
centers, lumberyards and the Company's Distribution Centers, (ii) two-step
distribution to wholesalers who resell to DIY home centers and lumberyards and
(iii) direct sales to homebuilders (of both single-family and multi-family
housing), remodelers and contractors. See "Business -- Distribution and
Marketing."
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<PAGE> 41
OPERATIONS
Following is a breakdown of the Company's consolidated revenue by
operating component (excluding intercompany sales) from 1991 through 1995:
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------
1991 1992 1993 1994 1995 CAGR
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Extrusion ......................... $ 15,981 $ 17,673 $ 19,527 $ 26,100 $ 28,052 15.1%
Fabrication ....................... 49,111 58,190 70,416 81,391 90,240 16.4
Distribution Centers .............. 3,138 4,717 8,809 16,080 17,186 53.0
-------- -------- -------- -------- -------- --------
Net Revenue ....................... $ 68,230 $ 80,580 $ 98,752 $123,571 $135,478 18.7%
======== ======== ======== ======== ======== ========
</TABLE>
EXTRUSION
Aluminum extrusion is performed by two divisions: Extruders and
Woodville Extruders. In the aluminum extrusion process, aluminum billet is
heated in an oven and hydraulically pressed through a die to form a shaped
lineal, or rail. The lineal is then air-cooled, straightened, cut into the
finished product length and tempered in an aging oven. The extrusion may then
be painted at the Company's painting operations or anodized by a third party.
In addition to producing aluminum extrusions for the Company's fabrication of
windows and doors, Extruders also provides aluminum extrusions to other window
and door manufacturers, as well as for customers outside of the window and door
industry. Extruders operates two extrusion presses on two 10-hour shifts, five
to six days a week. In connection with the Keller acquisition, the Company
acquired a third extrusion press that will eliminate the need for the
outsourcing of extrusion during peak production periods, as well as provide
capacity for future growth.
Extrusion of vinyl is performed at Dow-Tech. In the vinyl extrusion
process, vinyl pellets are vacuum-loaded into hoppers feeding each of
Dow-Tech's nine extrusion lines. The material is heated and extruded through a
die by an extrusion screw. The extrusion is water-cooled as it is pulled from
the die at varying rates depending on the profile being extruded. Flexible
vinyl is typically rolled onto reels and rigid vinyl is cut to the stock length
of 12 feet or to other lengths according to the customer's order. Dow-Tech
provides vinyl extrusions used by the Company's window fabrication divisions
and by outside customers. The Company intends to expand its vinyl extrusion
capabilities as the volume of its sales of vinyl products increases.
During 1995, approximately 54.1% of the Company's extrusion revenue
was derived from sales to third parties, including businesses outside of the
window and door industry, with the remainder sold internally to the Company's
fabrication operation. By extruding aluminum and vinyl in-house rather than
purchasing from outside suppliers, the Company is able to secure a low-cost,
reliable source of extrusions, control product quality and reduce inventory
levels. The table set forth below provides the Company's estimate of the
capacity of its three extrusion facilities and of such facilities' percentage
utilization during 1995.
<TABLE>
<CAPTION>
Capacity
-------- 1995
Facility Product (million pounds) Utilization%
----------------------------------------- ------------------- -------------------- -------------------
<S> <C> <C> <C>
Extruders . . . . . . . . . . . . . . . Aluminum extrusion 43 84%
Woodville Extruders . . . . . . . . . . Aluminum extrusion 15 N/A
Dow-Tech . . . . . . . . . . . . . . . Vinyl extrusion 10 38%
</TABLE>
o Extruders
Extruders, founded in 1974, extrudes aluminum product components used
in the fabrication of the Company's products. Extruders provides extrusions
for other window and door manufacturers, as well as non-window extrusions such
as trailer rails, hand rails and products for the heating, ventilation and air
conditioning markets.
o Woodville Extruders
Woodville Extruders, purchased as part of the recent Keller
acquisition, provides the Company and third party customers with aluminum
extrusions. Woodville Extruders operates one extrusion line consisting of an
extrusion press, a billet oven and a paint line. The Company believes that the
addition of Woodville Extruders increases its extrusion
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<PAGE> 42
capacity by approximately 35% and will enable it to extrude in-house all of its
anticipated aluminum extrusion requirements. In addition, Woodville Extruders
has sufficient plant capacity to install another extrusion press.
o Dow-Tech
Dow-Tech, acquired in 1990, extrudes vinyl sub-components used in the
fabrication of aluminum, vinyl and wood windows and doors. A majority of
Dow-Tech's volume in 1995 was sold to third party customers with the remainder
used in the fabrication of the Company's products. In addition, Dow-Tech will
provide Bishop with vinyl sub-components, thereby reducing Bishop's raw
material costs.
FABRICATION
The Company fabricates and distributes a broad line of aluminum, vinyl
and wood windows and doors at its six fabrication divisions. Windows include
single- and double-hung windows, sliding windows, casement windows and
specialty windows such as half rounds, transoms and ellipticals. Doors include
center-hinge patio doors, French patio doors and sliding patio doors. These
products can be manufactured as single- or double-pane (insulated) windows with
different levels of thermal efficiency. In 1995, more than 90% of the
Company's net revenues were derived from sales of windows. The Company's six
fabrication divisions include (i) Skotty Aluminum (Irving, TX), (ii) H-R
Windows (Dallas, TX), (iii) Atrium Vinyl (Dallas, TX), (iv) Atrium Wood
(Dallas, TX), (v) Kel-Star Building Products (Woodville, TX) and (vi) Bishop
(Bridgeport, CT and Clinton, MA). The Company designs, manufactures and
repairs its fabrication equipment at North Texas Die & Tool, based in Irving,
TX.
In the aluminum window fabrication process, extrusions are cut to size
and notched and mechanically fastened to form frames, comprised of sills and
jambs, and sashes, comprised of center bars, lock rails, lift rails and sash
rails. Raw glass, purchased cut-to-size or sized in-house with a
computer-numerically-controlled glass optimizer, is insulated and finished.
Along assembly lines set up according to product type, prepared glass and
component parts are assembled and transferred to a staged shipping area.
In the vinyl fabrication process, vinyl frame extrusions are cut,
notched and welded. The frame is then placed on assembly lines on which
insulated glass and sashes are installed. In the fabrication of wood window
and door products, pre-cut, precision-milled wood components are glued and
screwed together, sanded and affixed with appropriate hardware. These units
are then glazed and packaged for final shipment.
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<PAGE> 43
Following is a description of the fabrication divisions:
<TABLE>
<CAPTION>
Division Products Type of Distribution Customer Base Geographic Focus
--------------- ----------------------- -------------------- ----------------------------- ------------------
<S> <C> <C> <C> <C>
Skotty Aluminum windows and One-step Lumberyards/DIY home Arizona, Georgia,
Aluminum doors distribution centers/Company Distribution Nevada, Texas
Centers
Two-step Wholesalers
distribution
Direct Homebuilders
H-R Windows Aluminum windows and One-step Lumberyards/DIY home centers Florida, New
doors distribution Mexico, Oklahoma,
Tennessee, Texas
Direct Homebuilders
Two-step Wholesalers
distribution
Atrium Vinyl Vinyl windows and doors One-step Lumberyards/DIY home Georgia, North
distribution centers/Company Distribution Carolina, South
Centers Carolina,
Tennessee
Two-step Wholesalers
distribution
Atrium Wood Wood doors and wood and One-step Lumberyards California,
aluminum-clad wood distribution Nevada, Oregon,
windows Texas, Washington
Two-step Wholesalers
distribution
Direct Homebuilders
Kel-Star Vinyl and aluminum One-step Lumberyards Arkansas,
Building windows and aluminum distribution Louisiana,
Products storm doors Mississippi,
Oklahoma, Texas
Two-step Wholesalers
distribution
Direct Homebuilders
Bishop Vinyl and aluminum One-step Company Distribution Centers Connecticut,
windows and doors distribution Remodeler/Contractor Maine,
Direct Massachusetts,
New Hampshire,
New Jersey, New
York, Rhode
Island
</TABLE>
o Skotty Aluminum
Skotty Aluminum, founded in 1960, manufactures a broad product line of
aluminum windows and doors under the "Skotty" brand name. Skotty Aluminum
distributes primarily through one-step distribution to DIY home centers,
lumberyards and Company Distribution Centers, as well as through two-step and
direct distribution. Skotty Aluminum sells its products primarily in the South
and Southeast regions of the United States.
o H-R Windows
H-R Windows, acquired in 1988, manufactures aluminum windows and doors
under the "H-R" brand name. The Company believes that approximately 30% of H-R
Windows' sales are direct to homebuilders, with the remainder of sales
primarily through the one-step distribution channel, including DIY home centers
and regional lumberyards. Although the "Skotty" and "H-R" product lines are
substantially similar, H-R's direct distribution to homebuilders offers the
Company an opportunity to penetrate a segment of the market typically not
captured by Skotty products sold through wholesalers. H-R Windows sells its
products primarily in Texas and the Southeast region of the United States.
o Atrium Vinyl
In order to expand its presence in the vinyl window and door market in
the South, the Company opened the Atrium Vinyl division in 1995. Atrium Vinyl
manufactures and sells vinyl windows under the "Atrium" brand name. Atrium
brand products are distributed primarily through one-step distribution. In
connection with the Keller acquisition, equipment and tooling was acquired
which will expand Atrium Vinyl's product offering to include vinyl sliding
patio doors, vinyl casement windows, vinyl horizontal sliding windows, vinyl
bay and bow windows and vinyl double-hung windows, primarily in the South and
Southeast regions of the United States. In addition, the Company plans to
extend the "Atrium" brand name to selected Bishop vinyl window units. The
Company believes that Atrium Vinyl will benefit
42
<PAGE> 44
from Bishop's expertise in manufacturing vinyl windows and doors and from
purchasing synergies. Atrium Vinyl sells its products primarily in the
Southeast region of the United States.
o Atrium Wood
Through the Atrium Wood division, founded in 1965, the Company
manufactures and sells wood doors and wood and aluminum-clad wood windows under
the "Atrium" brand name. The division's products are distributed primarily
through one-step distribution to lumberyards and through wholesalers.
Approximately 80% of Atrium Wood's sales in 1995 were door products. Atrium
Wood sells its products primarily in the Western region of the United States
and in Texas.
o Kel-Star Building Products
Kel-Star Building Products, whose assets were purchased as part of the
Keller acquisition, manufactures and sells a full line of vinyl and aluminum
windows and aluminum storm doors under the "KBP" brand. While part of Keller
Industries, Inc., this division enjoyed significant brand recognition as "KBP"
("Keller Building Products"). The Company has renamed this division "Kel-Star
Building Products" and its products will be branded "KBP" to leverage Keller's
name recognition. Kel-Star Building Products markets its products primarily
through one-step distribution in the Southern region of the United States.
o Bishop
Bishop, founded in 1958, manufactures vinyl windows and doors under
the "Bishop" brand in the Northeast. The Company believes that approximately
90% of Bishop's sales in 1995 were to remodel/replacement contractors which
resulted in higher profit margins than sales to one- or two-step distributors.
The Company plans to extend the "Atrium" name to certain of Bishop's vinyl
products, as well as aluminum storm doors. Bishop's geographic focus is the
Northeast, primarily Connecticut, Maine, Massachusetts, New Hampshire, New
Jersey, New York and Rhode Island.
o North Texas Die & Tool
North Texas Die & Tool designs, manufactures and repairs fabrication
saws and dies. Fabrication saws are used to cut aluminum extrusions to the
proper length, while fabrication dies stamp the end of extrusions into shapes
which can be interlocked with other components to form windows.
DISTRIBUTION
The Company owns and operates four Distribution Centers, consisting of
Atrium Door & Window Distributors of Arizona, Nevada, New York and Texas. The
Arizona Distribution Center carries Skotty and Atrium products and sells
directly to large homebuilders in the area. The Nevada Distribution Center
markets primarily Skotty products and sells directly to homebuilders in its
region. The New York Distribution Center markets Bishop products primarily to
remodelers and contractors in a seven-state region in the Northeast. The Texas
Distribution Center sells Atrium products and distributes directly to large
homebuilders in Texas.
43
<PAGE> 45
COMPETITIVE STRENGTHS
The Company's market leadership and financial performance are
attributable to a number of factors, including the following:
o LEADING SHARE IN PRIMARY MARKET
The Company believes that it is one of the two largest manufacturers
of aluminum windows in its Primary Market, with an estimated unit market share
in 1995 of approximately 17.6%, compared to 11.9% in 1991. The Company
believes that its market share in 1995 of all window units sold in its Primary
Market, including aluminum, vinyl and wood, was approximately 10.3%, compared
to 7.6% in 1991. The Company's market share position provides competitive
advantages in the areas of purchasing, manufacturing and distribution.
o ESTABLISHED BRAND NAMES AND REPUTATION
The Company believes that it has significant brand name recognition
across each of its product lines, with such brand names as "Atrium," "Skotty,"
"H-R," "KBP" and "Bishop." The Company believes that each of these brands has
an established reputation within the building trade for product quality and
that this brand name recognition and reputation have enabled it to establish
relationships with leading wholesalers, builders and DIY home centers in each
of its markets. Further, the Company has been effective in leveraging the
strength of its brand names and reputation to gain distribution in new markets.
o STRENGTH IN MULTIPLE DISTRIBUTION CHANNELS
Each of the Company's fabrication divisions distributes its products
through a combination of wholesalers, lumberyards, DIY home centers and direct
sales to large homebuilders and independent contractors. In addition, more
than one Company division may sell its products into the same geographic market
through the use of different brand names and distribution channels. The
Company believes that this distribution strategy maximizes the Company's market
penetration and reduces reliance upon any one distribution channel for the sale
of its products. As a manufacturer and distributor of windows and doors for
the past 43 years, the Company has developed many long-standing relationships
with key distributors.
o LOW-COST PRODUCTION PROCESSES
The Company believes that its low-cost operations are attributable to
its vertical integration and efficient production processes. Extrusion allows
the Company to ensure a low-cost, reliable source of extensions, control
product quality and reduce inventory levels. The Company has been successful
in improving the efficiency of its operations through the rationalization of
product lines, reduction of overhead, reconfiguration of production processes,
reduction of inventory levels and the implementation of a management
information system. The Company believes that its low-cost operations provide
better margins and increased pricing flexibility in its markets relative to its
competition.
o EXPERIENCED, ENTREPRENEURIAL MANAGEMENT
The Company has assembled a strong management team at both the
corporate and operating levels. The Company's general managers have an average
of 27 years of experience in the window industry and 13 years with the Company.
At the operating level, each division is managed on a stand-alone basis with a
general manager supported by sales and production managers. Incentives are
created for general managers through a combination of equity ownership and
bonus-based compensation based on divisional financial performance. All
divisional managers own Common Stock or options to purchase Common Stock of
Holding.
44
<PAGE> 46
BUSINESS STRATEGY
In order to enhance its leading market share position and to maximize
profitability and cash flow, the Company's principal strategic objectives are
as follows:
o TARGET FAST-GROWING MARKETS
The Company intends to further strengthen its market position in its
fast-growing Primary Market and to evaluate opportunities for expansion into
developing high-growth markets in other regions of the United States. The
Company's Primary Market includes some of the fastest growing residential
housing markets in the United States with a CAGR of single-family housing
starts of 10.3% from 1991 to 1995 compared to 5.9% nationally for the same
period. Additionally, in the Company's Primary Market, unit sales of windows
into the new construction and remodel/replacement markets had CAGRs of 11.7%
and 8.8% from 1991 to 1995, respectively, compared to 5.7% and 5.0% for the
same period, respectively, on a national basis.
o FOCUS ON PRODUCTS OF CHOICE
The Company's strategy is to manufacture the window products of choice
in its targeted markets. In the Southwest, South and Southeast regions of the
United States, aluminum windows have historically been the product preferred by
homebuilders, remodelers, contractors and homeowners in the residential new
construction and remodel/replacement markets. This strong regional preference
for aluminum windows over vinyl or wood windows is attributable to the lower
cost, lower maintenance requirements and greater durability of aluminum
windows, as well as the reduced need for thermal efficiency in homes in
moderate Southern climates. In the Northeast, wood and vinyl windows have been
the products of choice due in part to their superior insulating qualities. The
Company's acquisition of Bishop, a vinyl window and door manufacturer, together
with the Company's existing wood window capabilities, will enable the Company
to provide the preferred products in the Northeast market.
o EXPAND INTO VINYL
The Company plans to continue to expand its presence in the vinyl
window and door market. In the Company's Primary Market, vinyl windows
represented 10.8% and 28.3% of residential new construction and
remodel/replacement units, respectively, during 1995. The Company has
significantly increased its vinyl window and door fabrication capacity through
the commencement of operations at Atrium Vinyl in 1995 and the acquisitions of
Bishop and Keller. The Company's pro forma sales of vinyl windows and doors
for the twelve months ended September 30, 1996 were $19.3 million. The Company
intends to utilize its nationally recognized "Atrium" brand name and
well-established distribution channels to further penetrate the highly
fragmented vinyl window market.
o EXTEND ATRIUM BRAND NAME
The Company is seeking to leverage the strength of its nationally
recognized "Atrium" brand name by (i) introducing Atrium-branded vinyl products
into existing distribution channels in the Company's Primary Market and in
Bishop's primary market in the Northeast and (ii) renaming the Las Vegas,
Phoenix, Dallas and Farmingdale distributors as the Atrium Door & Window
Distributors of Nevada, Arizona, Texas and New York, respectively. The Company
believes that the extension of the Atrium brand name to its vinyl products will
accelerate the Company's expansion into the vinyl window and door market.
o EXPAND THROUGH STRATEGIC ACQUISITIONS
The Company will pursue opportunities to make acquisitions that
complement and expand its core business or enable the Company to enter into new
markets for its products. The Company operates in a highly fragmented industry
in which, with few exceptions, competitors are privately-owned, regional
companies with sales under $100 million. The Company believes that significant
opportunities exist to make selected strategic acquisitions at attractive
valuations. Strategic acquisitions would allow the Company to (i) leverage its
highly recognized brand names, (ii) achieve significant cost reductions through
purchasing synergies and the application of the Company's best practices and
(iii) diversify the Company's geographic, product and market focus. The Bishop
and Keller acquisitions are two recent examples of focused, value-added
acquisitions that are consistent with the Company's overall business strategy.
45
<PAGE> 47
INDUSTRY OVERVIEW
In 1995, new construction spending in the United States totalled $547
billion, of which residential and commercial spending totalled $237 billion and
$310 billion, respectively. Within the residential construction market, new
construction spending and remodel/replacement spending totalled $163 billion
and $74 billion, respectively. The Company believes that, in 1995, United
States residential window and door expenditures were approximately $6.5
billion, of which new construction and remodel/replacement expenditures
represented approximately $2.0 billion and $4.5 billion, respectively. Total
residential window expenditures in the United States represented $1.5 billion
in the new construction market and $3.0 billion in the remodel/replacement
market for the same period.
The residential construction market consists of single-family and
multi-family housing construction. In 1995, housing starts in the United
States totalled approximately 1.2 million, of which 1.0 million were
single-family homes and 0.2 million were multi-family homes. During 1995,
approximately 95% of the Company's window and door sales were to the
single-family housing construction market, and the remaining 5% of sales were
to the multi-family housing construction market.
In 1995, residential new construction and remodel/replacement window
sales in the Company's Primary Market totalled approximately $445 million and
$450 million, respectively, representing 30.3% and 14.7% of the total U.S. new
construction and remodel/replacement markets, respectively.
As illustrated in the chart below, window unit growth in the Company's
Primary Market has outpaced unit growth in the United States in both the new
construction and remodel/replacement markets. In the United States window
units for new construction increased from 13.3 million units in 1991 to 16.6
million units in 1995, representing a CAGR of 5.7%, while window units for the
remodel/replacement market increased from 30.1 million units in 1991 to 36.6
million units in 1995 for a CAGR of 5.0%.
<TABLE>
<CAPTION>
WINDOW SALES (UNITS)
1991-1995
1991 1992 1993 1994 1995 CAGR
-------- -------- -------- -------- -------- --------
(units in millions)
UNITED STATES
<S> <C> <C> <C> <C> <C> <C>
New construction ........................ 13.3 14.4 15.0 17.2 16.6 5.7%
Remodel/replacement ..................... 30.1 29.3 33.3 36.3 36.6 5.0
-------- -------- -------- -------- -------- --------
Total United States ................ 43.3 43.7 48.2 53.5 53.1 5.2%
======== ======== ======== ======== ======== ========
PRIMARY MARKET
New construction ........................ 3.9 4.7 5.0 6.1 6.1 11.7%
Remodel/replacement ..................... 4.2 3.9 5.1 5.7 5.9 8.8
-------- -------- -------- -------- -------- --------
Total Primary Market ............... 8.1 8.6 10.1 11.8 12.0 10.2%
======== ======== ======== ======== ======== ========
</TABLE>
Source: F.W. Dodge
In 1995, residential housing starts in the Company's Primary Market
totalled 471,778 units, of which 365,670 were single-family homes and 106,108
were multi-family homes. From 1991 to 1995, single-family housing starts in
the Company's Primary Market outpaced growth in the United States, with a CAGR
of 10.3% compared to 5.9% for the total United States. In 1995, the Company's
Primary Market comprised 37.2% of total United States single-family housing
starts.
<TABLE>
<CAPTION>
HOUSING STARTS
1991-1995
1991 1992 1993 1994 1995 CAGR
------------ ------------ ------------ ------------ ------------ ------------
(units in millions)
<S> <C> <C> <C> <C> <C> <C>
TOTAL UNITED STATES
Single family ........... 781,989 954,144 1,027,445 1,056,201 982,832 5.9%
% Growth ................ --% 22.0% 7.7% 2.8% (6.9)%
PRIMARY MARKET
Single family ........... 247,310 312,242 363,828 382,909 365,670 10.3%
% Growth ................ --% 26.3% 16.5% 5.2% (4.5)%
</TABLE>
Source: F.W. Dodge
46
<PAGE> 48
Window and Door Industry Overview
As illustrated in the charts below, the percentage of total window
units made of aluminum, wood or vinyl varies by region. In the United States,
aluminum windows comprised 40.9% of the residential new construction market and
30.1% of the residential remodel/replacement market, respectively, in 1995. In
the Company's Primary Market, aluminum windows comprised 71.3% of the
residential new construction market and 43.0% of the residential
remodel/replacement market, respectively.
UNIT MARKET SHARE
[Six pie charts comparing the use of vinyl, aluminum, wood and other
materials in the fabrication of window units for the United States and
the Company's Primary Market by new construction, repair and remodel,
and total residential construction.]
Source: F.W. Dodge
A homebuilder's or homeowner's choice of materials generally is based
upon such considerations as cost, thermal efficiency, maintenance,
architectural tastes and customs. The following table outlines the Company's
estimate of the average cost to homebuilders of a standard single-family house
package, consisting of 15 windows (including two specialty windows) and two
patio doors, for a $100,000 home and demonstrates aluminum's cost advantage:
<TABLE>
<CAPTION>
Cost to Premium to Aluminum
MATERIAL Homebuilder Window Package
-------- ---------------------- -------------------------
<S> <C> <C>
Aluminum . . . . . . . . . . . . . . . . . . . . . $1,350 N/A
Vinyl . . . . . . . . . . . . . . . . . . . . . . . $2,225 65%
Wood . . . . . . . . . . . . . . . . . . . . . . . $3,900 189%
</TABLE>
Aluminum
In the Company's Primary Market, aluminum windows are the products of
choice and regional standard because of their low cost, durability and
suitability to warm climates. Because aluminum is the least expensive window
alternative, homebuilders generally prefer aluminum to control costs, as a home
buyer is not generally willing to pay for the increased cost of vinyl or wood.
Aluminum is not utilized as frequently in homes in the North and the Northeast
regions of the United States due to historical architectural trends and the
superior insulating qualities of wood and vinyl windows. In 1995, sales of
aluminum windows nationwide totaled 17.8 million units, or 33.5% of all window
units, while aluminum windows sales in the Company's Primary Market totaled 6.9
million, or 57.3% of all window units.
47
<PAGE> 49
Vinyl
Vinyl windows represent the middle price point of windows. Vinyl
windows have thermal efficiency characteristics that approach those of wood
windows, but some home owners do not consider them as aesthetically pleasing.
Historically, vinyl windows have not been as popular as aluminum windows in
warmer climates such as those found in the Company's Primary Market because of
the increased cost of vinyl and because early vinyl windows suffered from ultra
violet degradation, which caused the vinyl to become brittle after prolonged
exposure to the sun. However, in recent years, advances in plastics have
increased the quality and durability of vinyl windows. In 1995, unit sales of
vinyl windows in the United States totaled 16.2 million units, or 30.4% of all
window units, while vinyl window sales in the Company's Primary Market totaled
2.3 million units, or 19.5% of all window units.
Wood
Wood is the most thermally efficient window material, however, it is
the most expensive and requires the greatest amount of maintenance. Since
1991, unit sales of windows with all-wood frames have declined from 6.2 million
to 5.8 million in 1995. Unit sales of aluminum-clad and vinyl-clad wood
windows, which are classified as wood, have grown so that, overall, the wood
window market share has been stable for the last several years. In clad
windows, composite materials such as aluminum, vinyl, fiberglass or industrial
coating are applied to the exterior of the window frame so that the frame
inside the house has the desired aesthetics while the exterior frame has the
desired durability or insulating features. Due to maintenance issues
surrounding all-wood windows, the Company believes that the trend towards
aluminum- and vinyl-clad wood windows and composite frame materials will
continue. In 1995, sales of wood windows, including vinyl- and aluminum-clad
wood windows nationwide totaled 18.3 million units, or 34.5% of all window
units sold, while wood window sales in the Company's Primary Market totaled 2.6
million units, or 21.6% of all window units sold.
COMPETITION
The residential window and door industry is highly fragmented. With
few exceptions, competitors are privately-owned, regional companies with sales
under $100 million. The Company's major competitors throughout its Primary
Market for the sale of aluminum windows are Alenco, a division of Redman
Building Products, and Caradon Better-Bilt Inc. In addition, the Company
competes with various other companies in specific regions within its Primary
Market.
In the vinyl window and door segment, there is no large dominant
manufacturer of vinyl windows that operates on a national basis. The segment
is characterized by small regional manufacturers that compete on a local and
regional basis. Historically, demand for vinyl windows and doors has been
concentrated in the cooler regions of the United States. Bishop's major
competitors for the sale of vinyl windows are SilverLine Building Products and
Milgard Manufacturing Inc. In addition, the Company competes with a number of
regional manufacturers that sell directly to vinyl contractors.
In the wood window and door segment of the industry, two large
manufacturers, Andersen Corporation and Pella Corporation, sell premium
products on a national basis. The Company's wood windows and doors are sold at
a medium price point primarily in the West and Southwest regions of the United
States. The Company has many competitors in the wood window and door segment,
including Kolbe & Kolbe Millwork Co. Inc. and Hurd Millwork Co. Inc.
48
<PAGE> 50
DISTRIBUTION
The Company uses multiple distribution channels and brand names to
maximize market penetration. The Company distributes its windows and doors
through (i) one-step distribution to major retail DIY home centers, lumberyards
and the Company's Distribution Centers, (ii) two-step distribution to
wholesalers who resell to DIY home centers and lumberyards and (iii) direct
sales to homebuilders (of both single-family and multi-family housing),
remodelers and contractors. To enhance its market coverage, the Company
markets its windows and doors under five brand names, "Atrium," "Skotty,"
"H-R," "KBP" and "Bishop." Following is a breakdown of the Company's
distribution channels:
[Chart illustrating the use of the Company's three distribution
channels, direct, one-step and two- step.]
In one-step distribution, the Company distributes to DIY home centers
and lumberyards and through its Distribution Centers. These customers maintain
low levels of inventory and therefore require more frequent deliveries and
generally higher levels of customer service than two-step distributors. In
two-step distribution, the Company sells to wholesalers who resell the products
to lumberyards and DIY home centers. Two-step distributors, who often carry
the Company's products on an exclusive basis, are primarily utilized to service
smaller retailers in rural areas that do not generate enough volume to purchase
directly from the Company. In contrast to one-step distributors, two-step
distributors often carry large inventory positions in order to service the
needs of its retail customers who generally carry limited amounts of inventory.
Two-step distribution is more common in rural areas since urban areas are
serviced by DIY home centers and lumberyards.
During 1995, approximately 13% of the Company's sales were made
through three Company-owned Distribution Centers located in Arizona, Nevada and
Texas, primarily through direct distribution channels. The Arizona
Distribution Center carries Skotty and Atrium products and sells directly to
large homebuilders in the area. The Nevada Distribution Center markets
primarily Skotty products and sells directly to homebuilders in its region.
The Texas Distribution Center sells Atrium products and distributes directly to
large homebuilders in Texas. As part of the Bishop acquisition, the Company
added a fourth Distribution Center in New York, which markets Bishop products
primarily to building supply dealers and contractors in a seven-state region in
the Northeast.
49
<PAGE> 51
Although in 1995 the Company had sales in the 48 contiguous states,
sales in its Primary Market represented 75.1% of the Company's net revenue.
The Company believes that substantially all of Bishop's sales in 1995 were in
the Bishop primary market, as identified below.
[A map of the United States identifying the Company's Primary and
Secondary markets and Bishop's Primary Market. The map also identifies
the locations of fabrication, extrusion and distribution operations.]
MARKETING
The Company markets its products through a sales force consisting of
Company salaried and commissioned sales representatives and independent
commissioned sales representatives, as well as customer service
representatives. Each of the Company's divisions, with the exception of
Dow-Tech, is supported by a sales manager, direct sales representatives and
independent representatives. Bishop markets its products exclusively through a
direct sales force. The sales managers coordinate marketing activities among
Company and independent representatives. Company sales representatives focus
primarily on direct sales to homebuilders, remodelers and contractors, while
independent sales representatives sell to DIY home centers, lumberyards and
wholesalers. Independent sales representatives carry the Company's window and
door products on an exclusive basis, although they may carry other related
items from other manufacturers.
The Company believes that customer service plays a key role in the
marketing process. On-time delivery of products, order fill rate, consistency
of service and flexibility in meeting changing customer requirements have
enabled the Company to build a large and loyal customer base which includes
companies such as Home Depot, Centex Homes and Continental Homes.
RAW MATERIALS
The primary raw materials used in the production of the Company's
windows and doors are aluminum, glass, wood and vinyl. These materials are
readily available and may be procured from numerous suppliers. Historically,
aluminum billet has been purchased primarily from one source. However, the
Company has recently begun purchasing from several different suppliers. Glass
is purchased from several sources at prices negotiated annually by the Company
at the corporate level. This allows the Company's general managers to purchase
glass, as needed, at pre-negotiated prices. Currently, wood is purchased
primarily from a single source, and vinyl is purchased from multiple sources.
50
<PAGE> 52
EMPLOYEES
The Company employs approximately 1,675 persons, of whom approximately
1,625 are employed at the Company's manufacturing facilities and distribution
centers and approximately 50 are employed at corporate headquarters. Of these
employees, approximately 1,275 are hourly and approximately 400 are salaried.
Approximately 1,100 of the Company's hourly employees are covered by collective
bargaining agreements. As a result of union organizing activities in 1994, the
Company entered into collective bargaining agreements in 1995 with the United
Needle and Industrial Trade Employee Union, SWRJB, ACTWU, AFL-CIO-CLC, covering
certain employees at the Skotty Aluminum, H-R Windows, Atrium Wood and
Extruders manufacturing facilities, all of which expire on May 20, 1998. The
Company anticipates that all such collective bargaining agreements will be
extended and renegotiated in the ordinary course of business.
In addition, in connection with the Keller acquisition, the Company
has collective bargaining agreements with The Sheet Metal International
Association Local Union NO. 54, due to expire on September 30, 2001, for its
Kel-Star operations and Local Union 2743, Southern Council of Industrial
Workers, Chartered By United Brotherhood of Carpenters and Joiners of America,
AFL/CIO, due to expire on October 6, 2001, for its Woodville Extruders
operations. There are no union affiliations in connection with the Bishop
facilities. The Company may experience additional union-organizing activities
in the future, which may result in the negotiation of additional collective
bargaining agreements. There is no assurance that any additional negotiations
or collective bargaining agreements would not have an adverse effect on the
results of operations of the Company. The Company believes that its
relationship with its employees is satisfactory.
51
<PAGE> 53
PROPERTIES
The Company's operations are conducted at the owned or leased
facilities described below:
<TABLE>
<CAPTION>
CAPACITY
(SQUARE OWNED/
LOCATION PRINCIPAL USE FEET) LEASED
-------- ------------- ----- ------
<S> <C> <C> <C>
Dallas, Texas Fabrication (H-R Windows) 186,000
Fabrication (Atrium Wood) 266,000
Fabrication (Atrium Vinyl) 90,000
---------
542,000 Leased*
Irving, Texas Fabrication (Skotty Aluminum Products) 147,218
Extrusion (North Texas Die & Tool) 1,400
---------
148,618 Owned
Irving, Texas Corporate Offices 10,000
Distribution (Atrium Door & Window 22,000
Distributors of Texas)
Fabrication (Skotty Aluminum Products) 88,000
---------
120,000 Owned
Wylie, Texas Extrusion (Extruders) 100,000 Owned
Carrollton, Texas Extrusion (Dow-Tech) 25,200 Leased
Phoenix, Arizona Distribution (Atrium Door & Window Distributors 44,743 Leased
of Arizona)
Las Vegas, Nevada Distribution (Atrium Door & Window Distributors 30,400 Leased
of Nevada)
Woodville, Texas Fabrication (Kel-Star Building Products) 180,000
Extrusion (Woodville Extruders) 120,000
--------
300,000 Leased
Clinton, Massachusetts Fabrication (Bishop Manufacturing of New England) 31,000 Owned
Bridgeport, Fabrication (Bishop Manufacturing Co.) 75,000 Leased
Connecticut Fabrication (Vinyl Building Specialties
of Connecticut)
Farmingdale, New York Distribution (Atrium Door & Window Distributors
of New York) 6,000 Leased
---------
Total 1,422,961
=========
</TABLE>
*Leased from an affiliate of certain stockholders. See "Certain
Transactions--Other."
The Company believes that its manufacturing plants are generally in
good operating condition and are adequate to meet anticipated future
requirements.
The Company recently signed a seven-year lease to move its corporate
headquarters to Dallas, Texas. The new facilities will offer approximately
11,000 square feet.
52
<PAGE> 54
BACKLOG AND MATERIAL CUSTOMERS
The Company has no material long-term contracts. Orders are generally
filled within 7 days of receipt. The Company's backlog is subject to
fluctuation due to various factors, including the size and timing of orders for
the Company's products and is not necessarily indicative of the level of future
revenue. For the year ended December 31, 1995, no customer accounted for more
than 10% or more of the Company's sales.
GOVERNMENT REGULATION AND ENVIRONMENTAL MATTERS
The Company is subject to numerous federal and state statutes and
regulations relating to, among other things, air and water quality, the
discharge of materials into the environment and safety and health issues. The
Company does not expect compliance with such provisions to have a material
impact on the Company's earnings or competitive position in the foreseeable
future. Additionally, no significant capital expenditures are anticipated
related to compliance with such provisions.
LEGAL PROCEEDINGS
The Company is involved from time to time in litigation arising in the
ordinary course of its business, none of which, after giving effect to the
Company's existing insurance coverage, is expected to have a material adverse
effect on the Company.
MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES
The following table provides information concerning the directors and
the executive officers of the Company. The directors of the Company are also
the directors of Holding. All directors hold office until the next annual
meeting of stockholders of Holding and until their successors have been duly
elected and qualified.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Randall S. Fojtasek.... 33 President, Chief Executive Officer and Director
Louis W. Simi, Jr...... 56 Executive Vice President and General Manager of Skotty
Aluminum
Jeff L. Hull........... 31 Corporate Controller
Howard S. Saffan....... 37 Vice President and General Manager of Bishop
Russell S. Fojtasek.... 35 Vice President and Plant Manager of Skotty Aluminum
Horace T. Hicks........ 60 Vice President and General Manager of H-R Windows
Arthur G. Frost........ 64 Vice President and General Manager of Extruders
Michael J. Hillmeyer... 57 General Manager of Atrium Wood and Atrium Vinyl
John R. Muse........... 45 Director
Michael J. Levitt...... 38 Director
Stephen M. Humphrey.... 52 Director
C. Dean Metropoulos.... 49 Director
Michel Reichert........ 46 Director
</TABLE>
Randall S. Fojtasek has served as President and Chief Executive
Officer of the Company since 1993. From 1990 to 1993, he served as Vice
President of Operations and General Manager of Atrium Door & Window Company.
Mr. Fojtasek also is a director of Holding.
Louis W. Simi, Jr. has served as General Manager of Skotty Aluminum
since 1971 and has served in other capacities with the Company since 1966. In
1993, Mr. Simi was promoted to the position of Executive Vice President of the
Company with oversight for the Company's operations.
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<PAGE> 55
Jeff L. Hull has served as Corporate Controller since April 1996.
From June 1995, Mr. Hull managed the asset/liability department of AmVestors
Financial Corporation (NYSE:AMV). From 1990 to 1995, he was an audit manager
with the accounting firm of Deloitte & Touche. Mr. Hull is a certified public
accountant.
Howard S. Saffan has served as Vice President and General Manager of
Bishop since the Bishop acquisition in September 1996. From 1986 to 1996, Mr.
Saffan served as Chairman of the Board and Chief Executive Officer of Bishop.
Prior to 1986, Mr. Saffan held positions with the law firms of Sullivan and
Cromwell, PC, and Ottenbourg, Seindeler, Houston and Rosen and with the
Securities and Exchange Commission.
Russell S. Fojtasek, Randall S. Fojtasek's brother, has served as Vice
President and Plant Manager of Skotty Aluminum since 1992. From 1983 to 1992,
Mr. Fojtasek served in various capacities for Skotty Aluminum.
Horace T. Hicks has served as Vice President and General Manager of
H-R Windows since 1993. From 1988 to 1993, he was the General Manager of H-R
Windows. Mr. Hicks has worked in the window and door fabrication industry
since 1953.
Arthur G. Frost has served as Vice President and General Manager of
Extruders since 1977. Mr. Frost has approximately 20 years of experience in
the extrusion industry.
Michael J. Hillmeyer has served as General Manager of Atrium Wood and
Atrium Vinyl since July 1996. From 1991 to 1996, Mr. Hillmeyer was employed by
the Construction Products Group of Aluminum Company of America ("Alcoa"),
serving as Vice President and General Manager of Alcoa Vinyl Window from 1994
to 1996 and as Vice President of Manufacturing and Engineering for Caradco
Window from 1991 to 1994. Prior to joining Alcoa, Mr. Hillmeyer was Vice
President of Manufacturing for Peachtree Doors, Inc.
John R. Muse became a director of the Company in November 1996
concurrently with the closing of the Transaction. Mr. Muse is a Managing
Director and Principal of Hicks Muse. Prior to the formation of Hicks Muse in
1989, Mr. Muse headed the merchant/investment banking operations of Prudential
Securities in the Southwestern region of the United States. Mr. Muse also
serves as a director of Hedstrom Corporation, Hat Brands, The Morningstar
Group, Inc., Crain Holdings Corp., Ghirardelli Chocolate Company and Olympus
Real Estate Corporation.
Michael J. Levitt became a director of the Company in November 1996
concurrently with the closing of the Transaction. Mr. Levitt is a Managing
Director and Principal of Hicks Muse. Before joining Hicks Muse, Mr. Levitt
was a Managing Director and Deputy Head of Investment Banking with Smith Barney
Inc. from 1993 through 1995. From 1986 through 1993, Mr. Levitt was with
Morgan Stanley & Co. Incorporated, most recently as a Managing Director
responsible for the New York-based Financial Entrepreneurs Group. Mr. Levitt
also serves as a director of Ghirardelli Chocolate Company and International
Home Foods, Inc.
Stephen M. Humphrey became a director of the Company in November 1996
concurrently with the closing of the Transaction. From 1994 to 1996, Mr.
Humphrey served as President and Chief Executive Officer of National Gypsum
Company. Prior to joining National Gypsum, Mr. Humphrey served as President of
On-Highway Products from 1991 to 1994 and Executive Vice President from 1989 to
1991. On-Highway Products is a subsidiary of Rockwell International
Corporation.
C. Dean Metropoulos became a director of the Company in November 1996
concurrently with the closing of the Transaction. Mr. Metropoulos is the Chief
Executive Officer of C. Dean Metropoulos & Co., a management services company.
From 1983 through 1993, Mr. Metropoulos served as President and Chief Executive
Officer of Stella Foods, Inc. Before then, Mr. Metropoulos served in a variety
of U.S. and international executive positions with GTE Corporation, including
Vice President and General Manager-Europe and Vice President and Controller,
GTE International. Mr. Metropoulos also serves as a director of The
Morningstar Group Inc., Ghirardelli Chocolate Company and International Home
Foods, Inc.
Michel Reichert has been a director of the Company since 1995. Mr.
Reichert is the managing general partner of Heritage Partners, Inc., a
Boston-based principal investment firm. Prior to founding Heritage Partners,
Inc. in 1993, Mr. Reichert was a Managing Director of BancBoston Capital's
Equity Partners, a direct equity investment unit of Bank
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<PAGE> 56
of Boston. In addition to serving as a director of Holding, Mr. Reichert is a
director of AmerTac Holdings, Inc., Jordan's Foods and Klearfold, Inc.
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning
compensation of the Company's Chief Executive Officer and its four other most
highly compensated executive officers (collectively, the "Named Officers") for
services rendered in all capacities during the fiscal year ended December 31,
1996:
COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
----------------------------------------- -------------------------------
Name and Principal Position Salary Bonus Other Options # Compensation
- ------------------------------------------------- ---------- --------- -------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Randall S. Fojtasek ............................. $ 303,865 $3,075,000(1) $4,000(2) 2,195,222 $ 221,500(3)
President and Chief Executive Officer
Louis W. Simi, Jr ............................... 125,008 270,681 3,905(2) 161,237 282,886(3)
Executive Vice President and
General Manager of Skotty
Aluminum
Howard S. Saffan ................................ 114,010 990,875(4) -- 700,000 --
Vice President and General Manager of the
Bishop Companies
Arthur G. Frost ................................. 100,006 224,701 310(2) 120,707 716,711(3)
Vice President and General Manager of Extruders
Horace T. Hicks ................................. 100,006 110,938 1,140(2) 60,353 123,172(3)
Vice President and General Manager of H-R
Windows
</TABLE>
- -----------------------
(1) Includes one-time bonus in the amount of $3,000,000 for completion of
the Transaction.
(2) Includes automobile allowances and reimbursement of expenses.
(3) Includes compensatory portion of options exercised in connection with
the Transaction.
(4) Includes $940,875 of bonus received while serving as Chairman of the
Board and Chief Executive Officer of the Bishop Companies.
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<PAGE> 57
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------
% OF TOTAL
NUMBER OF OPTIONS ASSUMED ANNUAL RATES OF
SECURITIES GRANTED TO STOCK PRICE APPRECIATION
UNDERLYING EMPLOYEES EXERCISE OR FOR OPTION TERM(1)
OPTIONS IN FISCAL BASE PRICE EXPIRATION ---------------------------
NAME GRANTED(#) YEAR ($/SH) DATE 5%($) 10%($)
---- ----------- --------------- ------------ ----------- ------------ ------------
<S> <C> <C>
Randall S. Fojtasek .......... 1,333,333(2) 32.5 .01 11/27/2006 2,159,999 3,439,999
861,889(3) 21.0 1.00 11/27/2006 542,990 1,370,404
Louis W. Simi, Jr ............ 161,237(4) 3.9 1.00 11/27/2006 101,579 256,367
Howard S. Saffan ............. 700,000(3) 17.0 1.00 11/27/2006 441,000 1,113,000
Arthur G. Frost .............. 120,707(5) 2.9 1.00 11/27/2006 76,045 191,924
Horace T. Hicks .............. 60,353(4) 1.5 1.00 11/27/2006 38,022 95,961
</TABLE>
(1) The assumed rates are compounded annually for the full terms of the
options.
(2) Options vested November 27, 1996 concurrent with the Transaction.
(3) Options vest ratably each day during the first three years of the
option period and may be exercised at such time as the Company's board
of directors determines in good faith that an 8% internal rate of
return has been achieved on Hicks Muse's investment in the Company.
(4) Options vest ratably over five years.
(5) 20% of the Options will vest each year for the first 2 years of the
option period, with the remaining Options to vest at the end of the
third year.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FY-END OPTION VALUES
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
FY-End(#) FY-End($)
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise(#) Realized($) Unexercisable Unexercisable
---- ----------------- ------------- -------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
Randall S. Fojtasek 253,850 253,850 1,333,333/861,889 1,333,333/--
Louis W. Simi, Jr . 286,929 286,926 --/511,237 --/350,000
Howard S. Saffan .. -- -- --/700,000 --/--
Arthur G. Frost ... 721,919 721,919 --/320,707 --/200,000
Horace T. Hicks ... 125,329 125,329 --/160,353 --/100,000
</TABLE>
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<PAGE> 58
COMPENSATION AND INCENTIVE PROGRAM
BONUS PLAN
The Company maintains a bonus plan providing for annual bonus awards
to certain key general managers. Such bonus amounts are based on the Company
and the divisions meeting certain performance goals established by the
Company's Board of Directors.
OTHER BENEFIT PROGRAMS
The executive officers also participate in other employee benefit
programs including health insurance, group life insurance, and a savings and
supplemental retirement plan (the "401(k) Plan") on the same basis as other
employees of the Company.
EMPLOYMENT AGREEMENTS
On November 27,1996, the Company entered into an employment agreement
with Randall S. Fojtasek, pursuant to which Mr. Fojtasek serves as President
and Chief Executive Officer. Pursuant to the agreement, Mr. Fojtasek receives
an annual base salary in the amount of $350,000, subject to increase at the
discretion of the Board of Directors, and such benefits as are customarily
accorded to other executives of the Company and such other benefits as the
Board of Directors may establish. In addition, Mr. Fojtasek shall be eligible
to receive an annual performance bonus in such amount, if any (which amount
shall not exceed $150,000), as determined by the Board of Directors pursuant to
the annual performance bonus plan adopted by the Board. Holding granted to Mr.
Fojtasek a warrant exercisable for 2,195,222 shares of Common Stock. Of such
shares, up to 1,333,333 may be immediately purchased upon exercise of the
warrant at a price of $0.01 per share, and the remaining 861,889 shares may be
purchased upon exercising the warrant at a price of $1.00 per share, with the
right to purchase such shares vesting ratably each day during the first three
years of the term of the warrant, provided that the Board of Directors has
determined in good faith that the affiliates of Hicks Muse have achieved an
internal rate of return of at least 8% on their investment in the shares of
Common Stock purchased pursuant to the Transaction. Mr. Fojtasek's agreement
terminates three years after November 27, 1996. If his employment with the
Company is terminated without cause (as defined), or if Mr. Fojtasek terminates
his employment for good reason (as defined), the Company shall pay to Mr.
Fojtasek (i) in a lump sum cash in the amount of his annual base salary earned
or accrued through the termination date, reimbursement of his reasonable and
necessary expenses, any unpaid accrued vacation pay and any amount arising from
his benefits to be received pursuant to the Company's investment plans, (ii) in
regular installments his annual base salary (plus an amount in reimbursement
for certain expenses equal to $2,000 per month) for a period that ends on the
later of (A) the last day of his employment term or (B) 18 months from the
termination date and (iii) an annual bonus in the amount equal of $50,000 for
each year in the remainder of his employment term. Mr. Fojtasek agreed not to
compete with the Company until the later of the expiration of the term of his
employment agreement and 18 months after the termination of his employment
under the agreement.
In connection with the Heritage Transaction in 1995, the Company
entered into five-year noncompete agreements with Randall S. Fojtasek and
Russell S. Fojtasek, in exchange for which such officers were paid one-time
payments of $2,000,000 and $250,000, respectively.
Messrs. Simi, Hicks, Frost and Saffan have entered into employment
agreements with the Company. The compensation to be provided to Messrs. Simi,
Hicks, Frost and Saffan under their agreements includes an annual base salary
of $125,000, $100,000, $100,000 and $150,000, respectively, subject to
increases at the discretion of the Board of Directors, and such benefits as are
customarily accorded the executives of the Company. In addition, Messrs. Simi,
Hicks and Frost are eligible for incentive bonuses equal to 3% of the pre-tax
profits of the Company divisions that they manage and Mr. Saffan is eligible
for an incentive bonus equal to 2% of the pre-tax profits of the divisions that
he manages.
Each of Messrs. Simi's, Hicks' and Frost's employment agreement
terminates on December 31, 1997. If any of Messrs. Simi's, Hicks' or Frost's
employment with the Company is terminated by the Company for any reason other
than for cause (as defined), such individual will continue to
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<PAGE> 59
be paid his salary for 12 months, together with the incentive bonus, pro-rated
to the date of termination, unless such termination follows a change of
control, in which case he is to be paid the following for the remaining term of
his agreement: his then current salary and the incentive bonus based on an
average of his division's pre-tax profit for the three preceding fiscal years.
If any of Messrs. Simi, Hicks or Frost terminates his employment prior to the
expiration of his agreement's term (and, in Mr. Hicks' case, for any reason
other than a material breach of his agreement by the Company), and he has not
materially breached any provision of his agreement, such individual will be
paid his salary through the date of termination, together with the incentive
bonus, pro-rated to the date of termination.
The initial term of Mr. Saffan's employment agreement continues
through July 1, 1999, and is renewed automatically for additional 1 year terms
unless terminated by either party. Mr. Saffan's employment agreement may be
terminated immediately by the Company for cause (as defined), by him on 30 days
written notice, or by the Company upon 90 days written notice and the payment
(i) his base salary through remainder of the initial or renewal term as
applicable plus (ii) any incentive bonus pro-rated from the first day of the
then current incentive period to the date of such termination plus (iii) if
coverage under the Company's health plan is elected, coverage on the same basis
as prior to termination for a period of twelve months.
Each of Messrs. Simi and Frost have agreed not to compete with the
Company in certain geographic areas for so long as the Company pays salary to
him and for a period of one year thereafter. Mr. Saffan has agreed not to
compete with the Company in certain geographic areas, or to divert any
customers to competitors or to solicit other employees to leave the employment
of the Company for a period of one year after the termination of his employment
agreement. Mr. Hicks has agreed not to compete with the Company in certain
geographic areas for so long as the Company pays salary to him and for a period
of one year thereafter, provided that the Company has not materially breached
his employment agreement, and provided that if he completes the full term of
his employment agreement and he and the Company do not agree on mutually
acceptable terms for the continuation of his employment, and if he has not
materially breached his employment agreement, he shall not be restricted from
engaging in competition with the Company.
DIRECTOR LIABILITY
As authorized by the Delaware General Corporation Law ("GCL"), the
Company's Certificate of Incorporation (the "Certificate") provides that, to
the full extent permitted by the GCL or any other applicable laws as presently
or hereafter in effect, no Director of the Company in his or her capacity shall
be personally liable to the Company in his or her capacity as director of the
Company. The GCL does not permit limitation of liability of any director (i)
for breach of the director's duty of loyalty to the Company or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) in respect of
certain unlawful dividend payments or stock redemptions or repurchases, or (iv)
for any transaction from which the director derived an improper personal
benefit. The Company has entered into certain agreements ("Indemnification
Agreements") with each of its directors and executive officers designed to give
effect to the foregoing provisions of the Certificate and to provide certain
additional assurances against the possibility of uninsured liability. The
effect of these provisions and the Indemnification Agreements will be to
eliminate the rights of the Company and its stockholders (through stockholders'
derivative suits on behalf of the Company) to recover monetary damages against
a director for breach of fiduciary duty as a director (including breaches
resulting from negligence or gross negligence) except in the situations
described in clauses (i)-(iv) of the second sentence of this paragraph. These
provisions and the Indemnification Agreements will not alter the liability of
Directors of the Company under federal securities laws.
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<PAGE> 60
BENEFICIAL OWNERSHIP AND CERTAIN TRANSACTIONS
STOCK OWNERSHIP
The Company is a wholly-owned subsidiary of Atrium Corporation.
Atrium Corporation's address is P.O. Box 226957, Dallas, Texas 75222. The
following table sets forth certain information regarding the beneficial
ownership of Common Stock of Atrium Corporation, by each person who owns
beneficially more than 5% of the outstanding Common Stock of Atrium Corporation
and by the directors and certain executive officers of Atrium Corporation.
Unless otherwise indicated below, to the knowledge of the Company, all persons
listed below have sole voting and investment power with respect to their shares
of Common Stock.
ATRIUM CORPORATION SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS
<TABLE>
<CAPTION>
Number of Percentage
Shares of Shares
-------------- -------------
<S> <C> <C>
5% Stockholders:
Hicks Muse parties (1) .................................................... 32,000,000 82.2%
c/o Hicks, Muse, Tate & Furst Incorporated
200 Crescent Court, Suite 1600
Dallas, Texas 75201
Heritage Fund I, L.P. ..................................................... 3,525,000 9.1%
30 Rowes Wharf
Suite 300
Boston, Massachusetts 02110
Officers and Directors:
Randall S. Fojtasek (2) ................................................... 2,333,333 5.9%
Louis W. Simi, Jr ......................................................... -- --
Horace T. Hicks ........................................................... -- --
Howard S. Saffan (3) ...................................................... 750,000 1.9%
Arthur G. Frost ........................................................... -- --
John R. Muse (1) .......................................................... 32,000,000 82.2%
Michael J. Levitt (1) ..................................................... 32,000,000 82.2%
Stephen M. Humphrey ....................................................... -- --
C. Dean Metropoulos ....................................................... -- --
Michel Reichert (4) ....................................................... 3,525,000 9.0%
All directors and executive officers as a group (12 persons) .............. 39,858,333 98.9%
</TABLE>
- ----------------------
(1) Includes shares owned of record by HM3 Coinvestors, L.P.
("Coinvestors") and Hicks, Muse, Tate & Furst Equity Fund III, L.P.
("Hicks Muse Fund III, L.P."). The ultimate general partner of each
of Coinvestors and Hicks Muse Fund III, L.P. is Hicks, Muse Fund III
Incorporated. Thomas O. Hicks, whose address is the same as that for
Hicks Muse, is a controlling stockholder of Hicks Muse and serves as
its Chairman of the Board, Chief Executive Officer, Chief Operating
Officer, President and Secretary. Accordingly, Mr. Hicks may be
deemed to be the beneficial owner of these shares. Mr. Hicks
disclaims beneficial ownership of these shares. Each of Mr. Muse and
Mr. Levitt is a Managing Director and Principal of Hicks Muse and may
also be deemed a beneficial owner of these shares. Each of them
disclaims such beneficial ownership.
(2) Includes 1,333,333 shares that Mr. Fojtasek has the right to acquire
within 60 days of the Closing Date upon exercise of certain warrants
granted to him in connection with the Transaction. Excludes 47,227
shares subject to another warrant granted to Mr. Fojtasek that will
vest within 60 days of the Closing Date subject to the satisfaction of
an internal rate of return condition.
(3) Excludes 38,356 shares subject to an option granted to Mr. Saffan that
will vest within 60 days of the Closing Date subject to the
satisfaction of an internal rate of return condition.
(4) Includes shares owned by Heritage of which Mr. Reichert is managing
general partner. Accordingly, Mr. Reichert may be deemed to be the
beneficial owner of these shares. Mr. Reichert disclaims beneficial
ownership of these shares.
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<PAGE> 61
CERTAIN TRANSACTIONS
The Acquisition of Bishop
Pursuant to a Stock Purchase Agreement dated September 27, 1996 (the
"Bishop Stock Purchase Agreement"), effective on September 30, 1996, Howard S.
Saffan and the other stockholder of Vinyl Building Specialties of Connecticut,
Inc. ("VBS") and Bishop Manufacturing Co. of New York, Inc. ("BNY") sold to
Fojtasek certain of the outstanding shares of capital stock of VBS and BNY for
an aggregate of approximately $13.0 million cash and 9% of the shares of Common
Stock of Holding then outstanding. Simultaneously with such sale, pursuant to
a Securities Exchange Agreement dated as of August 22, 1996 (the "Bishop
Exchange Agreement"), Howard S. Saffan and the other stockholder of VBS and BNY
exchanged the remaining outstanding shares of capital stock of such
corporations for newly-issued shares of capital stock of newly-formed Holding.
At such time, the holders of the outstanding shares of capital stock of FCI
Holding, including Heritage, Joe Fojtasek, Randall S. Fojtasek and Russell S.
Fojtasek, also exchanged all of such outstanding shares for shares of capital
stock of Holding, with the result that FCI Holding became a wholly-owned
subsidiary of Holding. Holding then contributed the shares of the capital
stock of VBS and BNY acquired by it pursuant to the Bishop Exchange Agreement
to Fojtasek, with the result that VBS and BNY became wholly-owned subsidiaries
of Fojtasek. Howard S. Saffan received approximately $6.0 million and 4.2% of
the outstanding shares of common stock of Holding in connection with the
transaction. In exchange for all of their outstanding shares of common stock
of FCI Holdings, Heritage, Joe Fojtasek, Randall S. Fojtasek and Russell S.
Fojtasek received approximately 55.2%, 19.6%, 9.9% and 3.4%, respectively, of
the outstanding shares of common stock of Holding. Heritage also received in
exchange for the Heritage FCI Holding Warrant and the Heritage FCI Holding
Preferred Stock substantially similar securities of Holding.
Pursuant to the Bishop Stock Purchase Agreement, the former
shareholders of VBS and BNY will receive as deferred payment for the shares of
VBS and BNY sold thereunder (i) $500,000 if the Consolidated EBIT (as defined)
of Bishop for the period from July 1, 1996 through December 31, 1996 is at
least $1.5 million and (ii) $500,000 if the Consolidated EBIT of Bishop for the
year ending December 31, 1997 is at least $2.5 million. Howard S. Saffan will
receive 50% of any amounts so paid. In connection with the acquisition of
Bishop, Howard S. Saffan also entered into a three-year employment agreement
pursuant to which he will receive an annual salary of $150,000 plus an amount
equal to 2% of Bishop's income from operations.
The Transaction
The descriptions set forth below do not purport to be complete and are
qualified in their entirety by reference to the applicable agreements,
including the Stock Purchase Agreement, dated as of November 7, 1996, between
affiliates of Hicks Muse ("Hicks Muse Affiliates"), Holding and certain stock
and option holders of Holding (the "Stock Purchase Agreement"). In connection
with the Transaction, Heritage, Joe Fojtasek, Randall S. Fojtasek, Russell S.
Fojtasek and Howard S. Saffan received Redemption payments relating to their
shares of Common Stock, warrants and options of $33.4 million (net of the $2.0
million reduction described below), $9.7 million, $4.7 million, $1.7 million
and $2.0 million, respectively. In addition, Heritage received Redemption
payments on account of its preferred stock of Holding of approximately $12.5
million (including cumulative dividends in arrears). Upon the closing of the
Transaction, the Company paid Randall S. Fojtasek a bonus of $3.0 million.
Pursuant to an agreement between Heritage and Holding, $2.0 million of
Redemption payments that would otherwise have been payable to Heritage were
withheld by Holding for the purpose of funding a portion of such bonus. See
"The Transaction" and "Management -- Compensation and Incentive Program."
On the Closing Date, the Company, certain stockholders of the Company,
Hicks Muse and Hicks Muse Affiliates entered into a stockholders agreement (the
"Stockholders Agreement") under which the parties agreed to take all actions
required to cause the Board of Directors of Holding at all times to consist of
at least five directors, of whom one shall be designated by Joe Fojtasek,
Randall S. Fojtasek, Russell S. Fojtasek and Howard S. Saffan, one shall be
designated by Heritage Fund I, L.P. and the remainder shall be designated by
Hicks Muse and Hicks Muse Affiliates.
The parties to the Stockholders Agreement agreed, until the earlier of
(i) the tenth anniversary of the date of the Stockholders Agreement or (ii) the
consummation of a firm commitment initial public offering, that in connection
with any sale by Hicks Muse Affiliates of more than 50% of their shares of
Holding Common Stock, Hicks Muse Affiliates shall have the right to require
each other stockholder who is a party to the Stockholders Agreement to sell the
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<PAGE> 62
portion of its Common Stock that represents the same percentage of the
Fully-Diluted Common Stock (as defined) held by that stockholder as the shares
being disposed of by Hicks Muse Affiliates represent of the Fully-Diluted
Common Stock held by Hicks Muse Affiliates. At least 30 days prior to the
closing of any sale by Hicks Muse Affiliates (including a sale described in the
preceding sentence in connection with which Hicks Muse Affiliates do not
exercise their right to require such other stockholders to participate in the
sale), Hicks Muse shall cause Hicks Muse Affiliates to offer to include in the
sale the percentage of each such other stockholder's Common Stock that
represents the same percentage of the Fully-Diluted Common Stock held by that
stockholder as the shares being disposed of by Hicks Muse Affiliates represent
of the Fully-Diluted Common Stock held by Hicks Muse Affiliates; provided that
only stockholders which are Accredited Investors (as defined in Rule 501(a)(1),
(2), (3) and (7) under the Securities Act) shall be entitled to participate in
sales in which the consideration for the sale includes securities, unless the
transferee consents otherwise. If any such stockholder accepts the offer,
Hicks Muse shall cause Hicks Muse Affiliates to reduce, to the extent
necessary, the number of shares of Common Stock it otherwise would have sold in
the proposed transfer so as to permit those stockholders who have accepted the
offer to sell the number of shares of Common Stock that they are entitled to
sell under the above terms. The rights described above do not apply to any
exchange, reclassification or other conversion of the shares pursuant to a
merger or consolidation of Holding or any subsidiary or to a sale or transfer
by Holding or any subsidiary of substantially all its assets. In addition,
these rights do not apply to any transfer, sale or disposition of shares of
Common Stock solely among the members of Hicks Muse Affiliates.
Pursuant to the Stockholders Agreement, the stockholders who are
parties to the Stockholders Agreement that are not Hicks Muse Affiliates
agreed, until the earlier of (i) the tenth anniversary of the date of the
Stockholders Agreement or (ii) the consummation of a firm commitment initial
public offering, not to sell any Common Stock or securities that are
exercisable for or convertible into Common Stock without first notifying Hicks
Muse and affording Hicks Muse an opportunity to buy all, but not less than all,
of the offered shares on terms and conditions of the proposed transfer by the
non-Hicks Muse Affiliates stockholders. If Hicks Muse or an assignee of Hicks
Muse rejects the non-Hicks Muse Affiliates stockholder's offer, the stockholder
may transfer within 30 days all, but not less than all, of the offered
securities on terms no more favorable than those proposed to Hicks Muse,
provided that the transfer complies with the Securities Act. If the securities
are not so transferred, and the non-Hicks Muse Affiliates stockholder still
desires to transfer the securities, the securities must be reoffered to Hicks
Muse.
Until the tenth anniversary of the date of the Stockholders Agreement
and subject to certain exceptions, Holding agreed not to issue or sell or
permit any Affiliated Successor (as defined) to issue or sell, any shares of
Common Stock or securities that are exercisable for or convertible into Common
Stock, without first notifying each stockholder and offering to sell to any
stockholder who is an Accredited Investor, on the same terms, all or part of
that stockholder's pro rata portion of such securities as calculated under the
provisions of the Stockholders Agreement.
The Stockholders Agreement includes registration rights provisions
under which Hicks Muse, on behalf of Hicks Muse Affiliates, will be entitled to
exercise three demand and an unlimited number of "piggyback" registration
rights, and Randall S. Fojtasek, on behalf of certain non-Hicks Muse
Affiliates, or Heritage, on behalf of certain affiliates of Heritage, will be
entitled to make (in the aggregate) one demand and an unlimited number of
piggyback registrations to require Holding to register under the Securities Act
certain shares of Common Stock held by them. Hicks Muse may exercise its
demand rights if the offering shall be a firm commitment initial underwritten
offer of Holding's Common Stock under the Securities Act where the proceeds to
Holding exceed $10 million and after such offering such shares are listed on
the New York Stock Exchange or quoted or listed on the NASDAQ National Market,
and either Hicks Muse, Randall S. Fojtasek or Heritage may exercise their
respective demand rights for 270 days after the initial underwritten offering.
In addition, the demand rights may be exercised only with respect to a number
of shares that represent, in the aggregate, more than 4.0% of the Fully-Diluted
Common Stock or have an aggregate gross offering price of at least $5.0
million. The exercise of the demand and piggy-back rights are subject to other
limitations and conditions that are customary in registration rights
agreements.
On the Closing Date, Holding and the Company entered into a ten-year
agreement (the "Monitoring and Oversight Agreement") with an affiliate of Hicks
Muse ("Hicks Muse Partners") pursuant to which Holding and the Company agreed
to pay Hicks Muse Partners an annual fee of $320,000 for oversight and
monitoring services to the Company. The annual fee is adjustable on January 1
of each calendar year to an amount equal to 0.2% of the budgeted consolidated
net sales of
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<PAGE> 63
the Company and its subsidiaries for the then-current fiscal year, but in no
event may the fee be less than $320,000. Upon the acquisition by the Company
or any of its subsidiaries of another entity or business, the fee shall be
adjusted prospectively in the same manner using the pro forma budgeted
consolidated annual net sales of the Company and its subsidiaries (including
the sales of the acquired entity or business). John R. Muse and Michael J.
Levitt, directors of Holding and the Company, are each principals of Hicks Muse
Partners. In addition, Holding and the Company, jointly and severally, have
agreed to indemnify Hicks Muse Partners, its affiliates, and their respective
directors, officers, controlling persons, agents and employees from and against
all claims, liabilities, losses, damages, expenses and fees related to or
arising out of or in connection with the services rendered by Hicks Muse
Partners under the Monitoring and Oversight Agreement and not resulting
primarily from the bad faith, gross negligence or willful misconduct of Hicks
Muse Partners. The Monitoring and Oversight Agreement makes available to the
Company and its subsidiaries the personnel resources of Hicks Muse Partners
concerning a variety of financial and operational matters. The services that
have been and will continue to be provided to the Company by Hicks Muse
Partners could not otherwise be obtained by the Company without the addition of
personnel or the engagement of outside professional advisors. In the Company's
opinion, the fees provided for under the Monitoring and Oversight Agreement
reasonably reflect the benefits received and to be received by Holding and the
Company.
On the Closing Date, Holding and the Company also entered into a
ten-year agreement (the "Financial Advisory Agreement"), pursuant to which
Hicks Muse Partners received a financial advisory fee of $2 million on the
Closing Date as compensation for its services as financial advisor to the
Company in connection with the Transaction. Hicks Muse Partners also will be
entitled to receive a fee equal to 1.5% of the "transaction value" (as defined)
for each "add-on transaction" (as defined) in which the Company or any of its
subsidiaries is involved. The term "transaction value" means the total value
of the add-on transaction, including without limitation, the aggregate amount
of the funds required to complete the add-on transaction (excluding any fees
payable pursuant to the Financial Advisory Agreement), including the amount of
any indebtedness, preferred stock or similar items assumed (or remaining
outstanding). The term "add-on transaction" means any future proposal for a
tender offer, acquisition, sale, merger, exchange offer, recapitalization,
restructuring or other similar transaction directly involving the Company or
any of its subsidiaries, and any other person or entity. In addition, Holding
and the Company, jointly and severally, will indemnify Hicks Muse Partners, its
affiliates, and their respective directors, officers, controlling persons,
agents and employees from and against all claims, liabilities, losses, damages,
expenses and fees related to or arising out of or in connection with the
services rendered by Hicks Muse Partners under the Financial Advisory Agreement
and not resulting primarily from the bad faith, gross negligence or willful
misconduct of Hicks Muse Partners. The Financial Advisory Agreement makes
available to the Company and its subsidiaries the personnel resources of Hicks
Muse Partners concerning a variety of financial and operational matters. The
services that have been and will continue to be provided by Hicks Muse Partners
could not otherwise be obtained by the Company without the addition of
personnel or the engagement of outside professional advisors. In the Company's
opinion, the fees provided of under the Financial Advisory Agreement reasonably
reflect the benefits received and to be received by the Company.
On the Closing Date, the Company entered into indemnification
agreements with each of its directors and executive officers under which the
Company will indemnify the director or officer to the fullest extent permitted
by law, and to advance expenses, if the director or officer becomes a party to
or witness or other participant in any threatened, pending or completed action,
suit or proceeding (a "Claim") by reason of any occurrence related to the fact
that the person is or was a director, officer, employee, agent or fiduciary of
the Company or a subsidiary of the Company or another entity at the Company's
request (an "Indemnifiable Event"), unless a reviewing party (either outside
counsel or a director or directors appointed by the Board of Directors)
determines that the person would not be entitled to indemnification under
applicable law. In addition, if a change in control or a potential change in
control of the Company occurs and if the person indemnified so requests, The
Company will establish a trust for the benefit of the indemnitee and fund the
trust in an amount sufficient to satisfy all expenses reasonably anticipated at
the time of the request to be incurred in connection with any Claim relating to
an Indemnifiable Event. The reviewing party will determine the amount
deposited in the trust. An indemnitee's rights under his or her
indemnification agreement are not exclusive of any other rights under the
Company's Articles of Incorporation or By-Laws or applicable law.
At the closing of the Transaction, Holding entered into a Replacement
Option Agreement with certain of its option holders under which such option
holders are entitled to acquire upon exercise of such option shares of Common
Stock.
Holding and certain of its option holders entered into Disposition
Option Agreements under which such option holders were granted the right to
acquire, under certain circumstances, shares of Common Stock. On the Closing
Date, all such Disposition Option Agreements were redeemed by Holding in
exchange for an aggregate of $742,500.
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On the Closing Date, a Hicks Muse Affiliate, Holding, Heritage,
Randall S. Fojtasek (on behalf of certain Selling Securityholders) and
Citibank, N.A. entered into an indemnification escrow agreement, funded in the
amount of $2.0 million by the Selling Securityholders, securing the
indemnification obligations of such Selling Securityholders to Hicks Muse and
its affiliates (including, after the closing of the Transaction, Holding) under
the stock purchase agreement related to the Transaction. On the Closing Date,
a Hicks Muse Affiliate, Holding, the Company and Howard Saffan (on behalf of
himself and other former Bishop stockholders) entered into another
indemnification escrow agreement, funded in the amount of $3.0 million by the
former Bishop stockholders, which secured the indemnification obligations of
the former Bishop stockholders to the Company and Hicks Muse and its affiliates
(including Holding) under the agreements related to the acquisition of Bishop
and under the stock purchase agreement related to the Transaction.
Other
On July 3, 1995, Fojtasek Industrial Properties, Ltd., a limited
partnership in which Joe Fojtasek, Randall S. Fojtasek and Russell S. Fojtasek
own equity interests of approximately 49.1%, 10.2% and 10.2% respectively
executed a lease with the Atrium Wood division with respect to Atrium Woods's
and Atrium Vinyl's facility (the "Atrium Lease") and a lease with the H-R
Windows division with respect to its facility (the "H-R Windows Lease"). Both
leases are absolute net leases. The Atrium Lease is for an initial three-year
term with two five-year renewal options. The H-R Windows Lease is for an
initial ten-year term with two five-year renewal options. The amounts paid
under these two leases totaled $312,225 in 1995. See Note 9 to the Company's
Consolidated Financial Statements .
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THE EXCHANGE OFFER
PURPOSE AND EFFECT
The Old Notes were sold by the Company on November 27, 1996 in a
private placement pursuant to certain exemptions from registration under the
Securities Act. In connection with that placement, the Company and the
Subsidiary Guarantors entered into the Registration Rights Agreement which
requires that the Company and the Subsidiary Guarantors file a registration
statement under the Securities Act with respect to the New Notes on or prior to
60 days after the date of issuance of the Old Notes (the "Issue Date") and,
upon the effectiveness of that registration statement, offer to the holders of
the Old Notes the opportunity to exchange their Old Notes for a like principal
amount of New Notes, which will be issued without a restrictive legend and may
be reoffered and resold by the holder without registration under the Securities
Act. The Registration Rights Agreement further provides that the Company and
the Subsidiary Guarantors must use their reasonable best efforts to cause the
registration statement with respect to the Exchange Offer to be declared
effective within 135 days following the Issue Date and use their reasonable
best efforts to consummate the Exchange Offer within 165 days of the Issue
Date. A copy of the Registration Rights Agreement has been filed as an exhibit
to the registration statement of which this Prospectus is a part.
In order to participate in the Exchange Offer, a holder must represent
to the Company, among other things, that (i) any New Notes to be received by it
will be acquired in the ordinary course of its business, (ii) it has no
arrangement with any person to participate in the distribution of the New Notes
and (iii) it is not an "affiliate," as defined in Rule 405 of the Securities
Act, of the Company or any of the Subsidiary Guarantors, or if it is an
affiliate, it will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable.
If the holder is not a broker-dealer, it will be required to represent
that it is not engaged in, and does not intend to engage in, the distribution
of the New Notes. If the holder is a broker-dealer that will receive New Notes
for its own account in exchange for Old Notes that were acquired as a result of
market-making activities or other trading activities, it will be required to
acknowledge that it will deliver a prospectus in connection with any resale of
such New Notes.
The Old Notes are designated for trading in the PORTAL market. To the
extent Old Notes are tendered and accepted in the Exchange Offer, the principal
amount of outstanding Old Notes will decrease with a resulting decrease in the
liquidity in the market therefor. Following the consummation of the Exchange
Offer, holders of Old Notes who were eligible to participate in the Exchange
Offer but who did not tender their Old Notes will not be entitled to certain
rights under the Registration Rights Agreement and such Old Notes will continue
to be subject to certain restrictions on transfer. Accordingly, the liquidity
of the market for the Old Notes could be adversely affected. No assurance can
be given as to the liquidity of the trading market for either the Old Notes or
the New Notes.
Based on an interpretation by the Commission's staff set forth in
no-action letters issued to third parties unrelated to the Company, the Company
believes that, with the exceptions discussed herein, New Notes issued pursuant
to the Exchange Offer in exchange for Old Notes may be offered for resale,
resold and otherwise transferred by any person receiving the New Notes, whether
or not that person is the holder (other than any such holder or such other
person that is an "affiliate" of the Company within the meaning of Rule 405
under the Securities Act), without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that (i) the New
Notes are acquired in the ordinary course of business of that holder or such
other person, (ii) neither the holder nor such other person is engaging in or
intends to engage in a distribution of the New Notes, and (iii) neither the
holder nor such other person has an arrangement or understanding with any
person to participate in the distribution of the New Notes. Each broker-
dealer that receives New Notes for its own account in exchange for Old Notes,
where those Old Notes were acquired by the broker-dealer as a result of its
market-making activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of those New Notes.
See "Plan of Distribution."
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon. In general,
the Old Notes may not be offered or sold, unless registered under the
Securities Act and applicable state securities laws, except pursuant to an
exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. The Company does not intend to register the
Old Notes under the Securities Act and, after consummation of the
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Exchange Offer, will not be obligated to do so. Based on an interpretation by
the staff of the Commission set forth in a series of no-action letters issued
to third parties, the Company believes that, except as set forth in the next
sentence, New Notes issued pursuant to the Exchange Offer in exchange for Old
Notes may be offered for resale, resold or otherwise transferred by holders
thereof (other than any such holder that is an "affiliate" of the Company
within the meaning of Rule 405 under the Securities Act) without compliance
with the registration and prospectus delivery provisions of the Securities Act,
provided that such Old Notes are acquired in the ordinary course of such
holders' business and such holders have no arrangement with any person to
participate in the distribution of such New Notes. Each broker-dealer that
receives New Notes for its own account in exchange for Old Notes, where such
Old Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such New Notes. See "Plan of
Distribution."
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this
Prospectus and in the Letter of Transmittal, the Company will accept any and
all Old Notes validly tendered and not withdrawn prior to 5:00 p.m., New York
City time, on the Expiration Date. The Company will issue $1,000 principal
amount of New Notes in exchange for each $1,000 principal amount of outstanding
Old Notes accepted in the Exchange Offer. Holders may tender some or all of
their Old Notes pursuant to the Exchange Offer. However, Old Notes may be
tendered only in integral multiples of $1,000 in principal amount.
The form and terms of the New Notes are identical to the form and
terms of the Old Notes except that the Old Notes were offered and sold in
reliance upon certain exemptions from registration under the Securities Act of
1933, as amended (the "Securities Act"), while the offering and sale of the New
Notes in exchange for the Old Notes has been registered under the Securities
Act, with the result that the New Notes will not bear any legends restricting
their transfer. The New Notes will evidence the same debt as the Old Notes and
will be issued pursuant to, and entitled to the benefits of, the Indenture
pursuant to which the Old Notes were, and the New Notes will be, issued.
As of the date of this Prospectus, $100,000,000 aggregate principal
amount of the Old Notes were outstanding. The Company has fixed the close of
business on _______________ as the record date for the Exchange Offer for
purposes of determining the persons to whom this Prospectus, together with the
Letter of Transmittal, will initially be sent. As of such date, there were
_____ registered holders of the Old Notes. Holders of Old Notes do not have
any appraisal or dissenters' rights under the General Corporation Law of the
State of Delaware or the Indenture in connection with the Exchange Offer. The
Company intends to conduct the Exchange Offer in accordance with the applicable
requirements of the Exchange Act and the rules and regulations of the
Commission promulgated thereunder.
The Company shall be deemed to have accepted validly tendered Old
Notes when, as, and if the Company has given oral or written notice thereof to
the Exchange Agent. The Exchange Agent will act as agent for the tendering
holders for the purpose of receiving the New Notes from the Company. If any
tendered Old Notes are not accepted for exchange because of an invalid tender,
the occurrence of certain other events set forth herein or otherwise,
certificates for any such unaccepted Old Notes will be returned, without
expense, to the tendering holder thereof as promptly as practicable after the
Expiration Date.
Holders who tender Old Notes in the Exchange Offer will not be
required to pay brokerage commissions or fees or, subject to the instructions
in the Letter of Transmittal, transfer taxes with respect to the exchange of
Old Notes pursuant to the Exchange Offer. The Company will pay all charges and
expenses, other than certain applicable taxes, in connection with the Exchange
Offer. See "The Exchange Offer -- Solicitation of Tenders; Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time,
on _______________, 1997, unless the Company, in its sole discretion, extends
the Exchange Offer, in which case the term "Expiration Date" shall mean the
latest date and time to which the Exchange Offer is extended. In order to
extend the Exchange Offer, the Company will notify the Exchange Agent of any
extension by oral or written notice prior to 9:00 a.m., New York City time, on
the next business day after the previously scheduled Expiration Date. The
Company reserves the right, in its sole discretion, (i) to delay accepting any
Old Notes, to extend the Exchange Offer or, if any of the conditions set forth
under "The Exchange Offer -- Conditions" shall not have been satisfied, to
terminate the Exchange Offer, by giving oral or written
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notice of such delay, extension or termination to the Exchange Agent, or (ii)
to amend the terms of the Exchange Offer in any manner.
INTEREST ON THE NEW NOTES
The New Notes will bear interest from November 27, 1996, the date of
original issuance of the Old Notes. No interest will be paid on the Old Notes
accepted for exchange.
PROCEDURES FOR TENDERING
Only a holder of Old Notes may tender the Old Notes in the Exchange
Offer. Except as set forth under "The Exchange Offer -- Book Entry Transfer,"
to tender in the Exchange Offer a holder must complete, sign and date the
Letter of Transmittal, or a copy thereof, have the signatures thereon
guaranteed if required by the Letter of Transmittal, and mail or otherwise
deliver the Letter of Transmittal or copy to the Exchange Agent prior to the
Expiration Date. In addition, either (i) certificates for such Old Notes must
be received by the Exchange Agent along with the Letter of Transmittal, (ii) a
timely confirmation of a book-entry transfer (a "Book-Entry Confirmation") of
such Old Notes, if that procedure is available, into the Exchange Agent's
account at The Depository Trust Company (the "DTC" or the "Book-Entry Transfer
Facility") pursuant to the procedure for book-entry transfer described below,
must be received by the Exchange Agent prior to the Expiration Date, or (iii)
the holder must comply with the guaranteed delivery procedures described below.
To be tendered effectively, the Old Notes, Letter of Transmittal and other
required documents must be received by the Exchange Agent at the address set
forth under "The Exchange Offer -- Exchange Agent" prior to the Expiration
Date.
The tender by a holder that is not withdrawn before the Expiration
Date will constitute an agreement between that holder and the Company in
accordance with the terms and subject to the conditions set forth herein and in
the Letter of Transmittal.
THE METHOD OF DELIVERY OF OLD NOTES AND THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK
OF THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE
AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE AND
PROPER INSURANCE SHOULD BE OBTAINED. NO LETTER OF TRANSMITTAL OR OLD NOTES
SHOULD BE SENT TO THE COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS,
DEALERS, COMMERCIAL BANKS, TRUST COMPANIES, OR NOMINEES TO EFFECT THESE
TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner whose Old Notes are registered in the name of a
broker, dealer, commercial bank, trust company, or other nominee and who wishes
to tender should contact the registered holder promptly and instruct the
registered holder to tender on the beneficial owner's behalf. If the
beneficial owner wishes to tender on the owner's own behalf, the owner must,
prior to completing and executing the Letter of Transmittal and delivering the
owner's Old Notes, either make appropriate arrangements to register ownership
of the Old Notes in the beneficial owner's name or obtain a properly completed
bond power from the registered holder. The transfer of registered ownership
may take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal, as
the case may be, must be guaranteed by an Eligible Institution (as defined
herein) unless Old Notes tendered pursuant thereto are tendered (i) by a
registered holder who has not completed the box titled "Special Registration
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal
or (ii) for the account of an Eligible Institution. If signatures on a Letter
of Transmittal or a notice of withdrawal, as the case may be, are required to
be guaranteed, the guarantee must be by any eligible guarantor institution that
is a member of or participant in the Securities Transfer Agents Medallion
Program, the New York Stock Exchange Medallion Signature Program, the Stock
Exchange Medallion Program, or an "eligible guarantor institution" within the
meaning of Rule 17Ad-15 under the Exchange Act (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the
registered holder of any Old Notes listed therein, the Old Notes must be
endorsed or accompanied by a properly completed bond power, signed by the
registered holder as that registered holder's name appears on the Old Notes.
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If the Letter of Transmittal or any Old Notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations, or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and evidence
satisfactory to the Company of their authority to so act must be submitted with
the Letter of Transmittal unless waived by the Company.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Old Notes will be determined by
the Company in its sole discretion, which determination will be final and
binding. The Company reserves the absolute right to reject any and all Old
Notes not properly tendered or any Old Notes the Company's acceptance of which
would, in the opinion of counsel for the Company, be unlawful. The Company
also reserves the right to waive any defects, irregularities or conditions of
tender as to particular Old Notes. The Company's interpretation of the terms
and conditions of the Exchange Offer (including the instructions in the Letter
of Transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Old Notes must be cured
within such time as the Company shall determine. Although the Company intends
to notify holders of defects or irregularities with respect to tenders of Old
Notes, neither the Company, the Exchange Agent nor any other person shall incur
any liability for failure to give such notification. Tenders of Old Notes will
not be deemed to have been made until such defects or irregularities have been
cured or waived. Any Old Notes received by the Exchange Agent that the Company
determines are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned by the Exchange
Agent to the tendering holders, unless otherwise provided in the Letter of
Transmittal, as soon as practicable following the Expiration Date.
In addition, the Company reserves the right in its sole discretion to
purchase or make offers for any Old Notes that remain outstanding after the
Expiration Date or, as set forth under "The Exchange Offer -- Conditions," to
terminate the Exchange Offer and, to the extent permitted by applicable law,
purchase Old Notes in the open market, in privately negotiated transactions or
otherwise. The terms of any such purchases or offers could differ from the
terms of the Exchange Offer.
By tendering, each holder will represent to the Company that, among
other things, (i) the New Notes acquired pursuant to the Exchange Offer are
being acquired in the ordinary course of business of the person receiving such
New Notes, whether or not such person is the holder, (ii) if it is not a
broker-dealer, neither the holder nor any such other person is engaging in or
intends to engage in a distribution of such New Notes, (iii) neither the holder
nor any such other person has an arrangement or understanding with any person
to participate in the distribution of such New Notes, and (iv) neither the
holder nor any such other person is an "affiliate" (as defined in Rule 405 of
the Securities Act) of the Company. Each broker-dealer that receives New Notes
for its own account in exchange for Old Notes, where such Old Notes were
acquired by such broker-dealer as a result of market-making activities or other
trading activities (other than Old Notes acquired directly from the Company),
may participate in the Exchange Offer but may be deemed an "underwriter" under
the Securities Act and, therefore, must acknowledge in the Letter of
Transmittal that it will deliver a prospectus in connection with any resale of
such New Notes. The Letter of Transmittal states that by so acknowledging and
by delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act. See "Plan of
Distribution."
In all cases, issuance of New Notes for Old Notes that are accepted
for exchange pursuant to the Exchange Offer will be made only after timely
receipt by the Exchange Agent of certificates for such Old Notes or a timely
Book-Entry Confirmation of such Old Notes into the Exchange Agent's account at
the Book-Entry Transfer Facility, a properly completed and duly executed Letter
of Transmittal (or, with respect to the DTC and its participants, electronic
instructions in which the tendering holder acknowledges its receipt of and
agreement to be bound by the Letter of Transmittal), and all other required
documents. If any tendered Old Notes are submitted for a greater principal
amount than the holder desires to exchange, such unaccepted or non-exchanged
Old Notes will be returned without expense to the tendering holder thereof (or,
in the case of Old Notes tendered by book-entry transfer into the Exchange
Agent's account at the Book-Entry Transfer Facility pursuant to the book-entry
transfer procedures described below, such non-exchanged Old Notes will be
credited to an account maintained with such Book-Entry Transfer Facility) as
promptly as practicable after the expiration or termination of the Exchange
Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with
respect to the Old Notes at the Book-Entry Transfer Facility for purposes of
the Exchange Offer within two business days after the date of this Prospectus,
and any
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financial institution that is a participant in the Book-Entry Transfer Facility
system may make book-entry delivery of Old Notes being tendered by causing the
Book-Entry Transfer Facility to transfer such Old Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility in accordance with such
Book-Entry Transfer Facility's procedures for transfer. However, although
delivery of Old Notes may be effected through book-entry transfer at the
Book-Entry Transfer Facility, the Letter of Transmittal or copy thereof, with
any required signature guarantees and any other required documents, must, in
any case other than as set forth in the following paragraph, be transmitted to
and received by the Exchange Agent at the address set forth under "The Exchange
Offer -- Exchange Agent" on or prior to the Expiration Date or the guaranteed
delivery procedures described below must be complied with.
The DTC's Automated Tender Offer Program ("ATOP") is the only method
of processing exchange offers through the DTC. To accept the Exchange Offer
through ATOP, participants in the DTC must send electronic instructions to the
DTC through the DTC's communication system in place of sending a signed, hard
copy Letter of Transmittal. The DTC is obligated to communicate those
electronic instructions to the Exchange Agent. To tender Old Notes through
ATOP, the electronic instructions sent to the DTC and transmitted by the DTC to
the Exchange Agent must contain the character by which the participant
acknowledges its receipt of and agrees to be bound by the Letter of
Transmittal.
GUARANTEED DELIVERY PROCEDURES
If a registered holder of the Old Notes desires to tender such Old
Notes and the Old Notes are not immediately available, or time will not permit
such holder's Old Notes or other required documents to reach the Exchange Agent
before the Expiration Date, or the procedure for book-entry transfer cannot be
completed on a timely basis, a tender may be effected if (i) the tender is made
through an Eligible Institution, (ii) prior to the Expiration Date, the
Exchange Agent received from such Eligible Institution a properly completed and
duly executed Letter of Transmittal (or a facsimile thereof) and Notice of
Guaranteed Delivery, substantially in the form provided by the Company (by
telegram, telex, facsimile transmission, mail or hand delivery), setting forth
the name and address of the holder of Old Notes and the amount of Old Notes
tendered, stating that the tender is being made thereby and guaranteeing that
within three New York Stock Exchange ("NYSE") trading days after the date of
execution of the Notice of Guaranteed Delivery, the certificates for all
physically tendered Old Notes, in proper form for transfer, or a Book-Entry
Confirmation, as the case may be, and any other documents required by the
Letter of Transmittal will be deposited by the Eligible Institution with the
Exchange Agent, and (iii) the certificates for all physically tendered Old
Notes, in proper form for transfer, or a Book-Entry Confirmation, as the case
may be, and all other documents required by the Letter of Transmittal, are
received by the Exchange Agent within five NYSE trading days after the date of
execution of the Notice of Guaranteed Delivery.
WITHDRAWAL RIGHTS
Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m.,
New York City time, on the Expiration Date.
For a withdrawal of a tender of Old Notes to be effective, a written
or (for DTC participants) electronic ATOP transmission notice of withdrawal
must be received by the Exchange Agent at its address set forth herein prior to
5:00 p.m., New York City time, on the Expiration Date. Any such notice of
withdrawal must (i) specify the name of the person having deposited the Old
Notes to be withdrawn (the "Depositor"), (ii) identify the Old Notes to be
withdrawn (including the certificate number or numbers and principal amount of
such Old Notes), (iii) be signed by the holder in the same manner as the
original signature on the Letter of Transmittal by which such Old Notes were
tendered (including any required signature guarantees) or be accompanied by
documents of transfer sufficient to have the Trustee with respect to the Old
Notes register the transfer of such Old Notes into the name of the person
withdrawing the tender, and (iv) specify the name in which any such Old Notes
are to be registered, if different from that of the Depositor. All questions
as to the validity, form and eligibility (including time of receipt) of such
notices will be determined by the Company, in its sole discretion, whose
determination shall be final and binding on all parties. Any Old Notes so
withdrawn will be deemed not to have been validly tendered for exchange for
purposes of the Exchange Offer. Any Old Notes which have been tendered for
exchange but which are not exchanged for any reason will be returned to the
holder thereof without cost to such holder as soon as practicable after
withdrawal, rejection of tender or termination of the Exchange Offer. Properly
withdrawn Old Notes may be retendered by following one of the procedures
described under "The Exchange Offer -- Procedures for Tendering" at any time
on or prior to the Expiration Date.
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CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Company
shall not be required to accept for exchange, or exchange New Notes for, any
Old Notes, and may terminate the Exchange Offer as provided herein before the
acceptance of such Old Notes, if:
(a) the Exchange Offer shall violate applicable law or
any applicable interpretation of the staff of the Commission; or
(b) any action or proceeding is instituted or threatened
in any court or by any governmental agency that might materially
impair the ability of the Company to proceed with the Exchange Offer
or any material adverse development has occurred in any existing
action or proceeding with respect to the Company; or
(c) any governmental approval has not been obtained,
which approval the Company shall deem necessary for the consummation
of the Exchange Offer.
If the Company determines in its sole discretion that any of the
conditions are not satisfied, the Company may (i) refuse to accept any Old
Notes and return all tendered Old Notes to the tendering holders (or, in the
case of Old Notes tendered by book-entry transfer into the Exchange Agent's
account at the Book-Entry Transfer Facility pursuant to the book-entry transfer
procedures described above, such Old Notes will be credited to an account
maintained with such Book-Entry Transfer Facility), (ii) extend the Exchange
Offer and retain all Old Notes tendered prior to the expiration of the Exchange
Offer, subject, however, to the rights of holders to withdraw such Old Notes
(see "-- Withdrawal Rights") or (iii) waive such unsatisfied conditions with
respect to the Exchange Offer and accept all properly tendered Old Notes which
have not been withdrawn. If such waiver constitutes a material change to the
Exchange Offer, the Company will promptly disclose such waiver by means of a
prospectus supplement that will be distributed to the registered holders, and
the Company will extend the Exchange Offer for a period of five to ten business
days, depending upon the significance of the waiver and the manner of
disclosure to the registered holders, if the Exchange Offer would otherwise
expire during such five-to-ten-business-day period.
EXCHANGE AGENT
All executed Letters of Transmittal should be directed to the Exchange
Agent. United States Trust Company of New York has been appointed as Exchange
Agent for the Exchange Offer. Questions, requests for assistance and requests
for additional copies of this Prospectus or of the Letter of Transmittal should
be directed to the Exchange Agent addressed as follows:
By Registered or Certified Mail,
by Overnight Courier or by Hand:
United States Trust Company of New York
P.O. Box 844
Cooper Station
New York, New York 10276-0844
By Hand:
United States Trust Company of New York
111 Broadway
Lower Level
Corporate Trust Window
New York, New York 10006
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By Overnight Courier:
United States Trust Company of New York
770 Broadway
New York, New York 10003
Attn: Corporate Trust
By Facsimile:
(212) 420-6152
Confirm by Telephone:
(800) 548-6565
SOLICITATIONS OF TENDERS; FEES AND EXPENSES
The Company will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The principal solicitation is
being made by mail; however, additional solicitations may be made in person or
by telephone by officers and employees of the Company.
The Company has not retained any dealer-manager or similar agent in
connection with the Exchange Offer and will not make any payments to brokers,
dealers or others soliciting acceptances of the Exchange Offer. The Company,
however, will pay the Exchange Agent reasonable and customary fees for its
services and will reimburse it for its reasonable out- of-pocket expenses in
connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer
will be paid by the Company. Such expenses include fees and expenses of the
Exchange Agent and Trustee, accounting and legal fees and printing costs, among
others.
TRANSFER TAXES
Holders who tender their Old Notes for exchange will not be obligated
to pay any transfer taxes in connection therewith, except that holders who
instruct the Company to register New Notes in the name of, or request that Old
Notes not tendered or not accepted in the Exchange Offer be returned to, a
person other than the registered tendering holder will be responsible for the
payment of any applicable transfer tax thereon.
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DESCRIPTION OF NEW NOTES
GENERAL
The Old Notes were and the New Notes will be issued under an
Indenture, dated as of November 27, 1996 (the "Indenture"), among the Company,
the Subsidiary Guarantors and United States Trust Company of New York, as
Trustee (the "Trustee"), a copy of which is available upon request to the
Company. The terms of the New Notes are identical in all material respects to
the Old Notes, except that the New Notes have been registered under the
Securities Act and, therefore, will not bear legends restricting their
transfer. Upon the issuance of the New Notes, the Indenture will be subject to
and governed by the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"). The following summary of certain provisions of the Indenture
and the New Notes does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, all the provisions of the Indenture
(including the definitions of certain terms therein and those terms made a part
thereof by the Trust Indenture Act) and the Notes. The Old notes and the New
Notes are sometimes collectively referred to herein as the "Notes."
Principal of, premium, if any, and interest on the New Notes will be
payable, and the New Notes may be exchanged or transferred, at the office or
agency of the Company in the Borough of Manhattan, The City of New York (which
initially shall be the corporate trust office of the Trustee in New York, New
York), except that, at the option of the Company, payment of interest may be
made by check mailed to the address of the holders as such address appears in
the Note Register. Initially, the Trustee will act as Paying Agent and
Registrar for the New Notes. The New Notes may be presented for registration
of transfer and exchange at the offices of the Registrar, which initially will
be the Trustee's corporate trust office. The Company may change any Paying
Agent and Registrar without notice to holders of the New Notes.
The New Notes will be issued only in fully registered form, without
coupons, in denominations of $1,000 and any integral multiple of $1,000. No
service charge will be made for any registration of transfer or exchange of New
Notes, but the Company may require payment of a sum sufficient to cover any
transfer tax or other similar governmental charge payable in connection
therewith.
Old Notes that remain outstanding after the consummation of the
Exchange Offer and New Notes issued in connection with the Exchange Offer will
be entitled to vote or consent on all matters as a single class of securities
under the Indenture.
TERMS OF NOTES
The New Notes will be unsecured, senior subordinated obligations of
the Company, limited to $100 million aggregate principal amount, and will
mature on November 15, 2006. Each New Note will bear interest at the rate of
10 1/2% per annum from the date of issuance, or from the most recent date to
which interest has been paid or provided for, and will be payable semiannually
on and of each year, commencing on May 15, 1997, to holders of record at the
close of business on the May 1 or November 1 immediately preceding the interest
payment date. Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months. The New Notes will not be entitled to the
benefit of any mandatory sinking fund.
OPTIONAL REDEMPTION
Except as set forth below, the New Notes will not be redeemable at the
option of the Company prior to November 15, 2001. On and after such date, the
New Notes will be redeemable, at the Company's option, in whole or in part, at
any time upon not less than 30 nor more than 60 days' prior notice mailed by
first-class mail to each holder's registered address, at the following
redemption prices (expressed in percentages of principal amount), if redeemed
during the 12-month period commencing on November 15 of the years set forth
below, plus accrued and unpaid interest to the redemption date (subject to the
right of holders of record on the relevant record date to receive interest due
on the relevant interest payment date):
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<TABLE>
<CAPTION>
PERIOD REDEMPTION PRICE
------
<S> <C>
2001 . . . . . . . . . . . . . . . . . . . . . . . 105.250%
2002 . . . . . . . . . . . . . . . . . . . . . . . 103.500%
2003 . . . . . . . . . . . . . . . . . . . . . . . 101.750%
2004 and thereafter . . . . . . . . . . . . . . . 100.000%
</TABLE>
In addition, at any time and from time to time prior to November 15,
2000, the Company may, at its option, redeem the New Notes, in part, with net
cash proceeds of one or more Equity Offerings by the Company or Holding (to the
extent, in the case of Holding, that net cash proceeds thereof are contributed
to the common or non-redeemable preferred equity capital of the Company) so
long as there is a Public Market at the time of such redemption, at a
redemption price equal to 110 1/2% of the principal amount thereof, plus
accrued and unpaid interest thereon, if any, to the date of redemption;
provided, however, that after any such redemption the aggregate principal
amount of the Notes outstanding must equal at least $65 million. In order to
effect the foregoing redemption with the proceeds of any Equity Offering, the
Company shall make such redemption not more than 12 months after the
consummation of any such Equity Offering.
At any time on or prior to November 15, 2001, the Notes may also be
redeemed as a whole at the option of the Company upon the occurrence of a
Change of Control, upon not less than 30 nor more than 60 days' prior notice
(but in no event more than 90 days after the occurrence of such Change of
Control) mailed by first-class mail to each holder's registered address, at a
redemption price equal to 100% of the principal amount thereof plus the
Applicable Premium as of, and accrued and unpaid interest, if any, to, the date
of redemption (the "Redemption Date") (subject to the right of holders of
record on the relevant record date to receive interest due on the relevant
interest payment date).
"Applicable Premium" means, with respect to a Note at any Redemption
Date, the greater of (i) 1.0% of the principal amount of such Note and (ii) the
excess of (A) the present value at such time of (1) the redemption price of
such Note at November 15, 2001 (such redemption price being described under "--
Optional Redemption") plus (2) all required interest payments due on such Note
through November 15, 2001, computed using a discount rate equal to the Treasury
Rate plus 100 basis points, over (B) the principal amount of such Note.
"Treasury Rate" means the yield to maturity at the time of computation
of United States Treasury securities with a constant maturity (as compiled and
published in the most recent Federal Reserve Statistical Release H.15 (519)
which has become publicly available at least two business days prior to the
Redemption Date (or, if such Statistical Release is no longer published, any
publicly available source or similar market data)) most nearly equal to the
period from the Redemption Date to November 15, 2001; provided, however, that
if the period from the Redemption Date to November 15, 2001 is not equal to the
constant maturity of a United States Treasury security for which a weekly
average yield is given, the Treasury Rate shall be obtained by linear
interpolation (calculated to the nearest one-twelfth of a year) from the weekly
average yields of United States Treasury securities for which such yields are
given, except that if the period from the Redemption Date to November 15, 2001
is less than one year, the weekly average yield on actually traded United
States Treasury securities adjusted to a constant maturity of one year shall be
used.
Selection. In the case of any partial redemption, selection of the
Notes for redemption will be made by the Trustee on a pro rata basis, by lot or
by such other method as the Trustee in its sole discretion shall deem to be
fair and appropriate; provided, however, that if a partial redemption is made
with proceeds of an Equity Offering, selection of the Notes or portion thereof
for redemption shall be made by the Trustee only on a pro rata basis, unless
such method is otherwise prohibited. Notes may be redeemed in part in
multiples of $1,000 principal amount only. Notice of redemption will be sent,
by first class mail, postage prepaid, at least 45 days (unless a shorter period
is acceptable to the Trustee) prior to the date fixed for redemption to each
holder whose Notes are to be redeemed at the last address for such holder then
shown on the registry books. If any Note is to be redeemed in part only, the
notice of redemption that relates to such Note shall state the portion of the
principal amount thereof to be redeemed. A new Note in principal amount equal
to the unredeemed portion thereof will be issued in the name of the holder
thereof upon cancellation of the original Note. On and after any redemption
date, interest will cease to accrue on the Notes or part thereof called for
redemption as long as the Company has deposited with the Paying Agent funds in
satisfaction of the redemption price pursuant to the Indenture.
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<PAGE> 74
RANKING AND SUBORDINATION
The payment of the principal of, premium (if any), and interest on the
Notes is subordinated in right of payment, as set forth in the Indenture, to
the payment when due of all Senior Indebtedness of the Company. However,
payment from the money or the proceeds of U.S. Government Obligations held in
any defeasance trust described under "Defeasance" below is not subordinate to
any Senior Indebtedness or subject to the restrictions described herein. As of
September 30, 1996, on a pro forma basis after giving effect to the Transaction
and related borrowings under the New Credit Facility, the outstanding Senior
Indebtedness of the Company would have been $3.9 million (exclusive of unused
commitments). Although the Indenture contains limitations on the amount of
additional Indebtedness that the Company may incur, under certain circumstances
the amount of such Indebtedness could be substantial and, in any case, such
Indebtedness may be Senior Indebtedness. See "Certain Covenants -- Limitation
on Indebtedness" below.
"Senior Indebtedness" is defined, whether outstanding on the Issue
Date or thereafter issued, as all obligations under the New Credit Facility and
all other Indebtedness of the Company, including interest and fees thereon,
unless, in the instrument creating or evidencing the same or pursuant to which
the same is outstanding, it is provided that the obligations in respect of such
Indebtedness are not superior in right of payment to the Notes; provided,
however, that Senior Indebtedness will not include (1) any obligation of the
Company to any Subsidiary, (2) any liability for Federal, state, foreign, local
or other taxes owed or owing by the Company, (3) any accounts payable or other
liability to trade creditors arising in the ordinary course of business
(including Guarantees thereof or instruments evidencing such liabilities), or
(4) any Indebtedness, Guarantee or obligation of the Company that is expressly
subordinate or junior in right of payment to any other Indebtedness, Guarantee
or obligation of the Company, including any Senior Subordinated Indebtedness
and any Subordinated Obligations.
Only Indebtedness of the Company that is Senior Indebtedness will rank
senior to the Notes in accordance with the provisions of the Indenture. The
Notes will in all respects rank pari passu with all other Senior Subordinated
Indebtedness of the Company. The Company has agreed in the Indenture that it
will not incur, directly or indirectly, any Indebtedness that is subordinate or
junior in ranking in any respect to Senior Indebtedness unless such
Indebtedness is Senior Subordinated Indebtedness or is contractually
subordinated in right of payment to Senior Subordinated Indebtedness. In
addition, no Subsidiary Guarantor shall incur any Indebtedness if such
Indebtedness is subordinate or junior in ranking in any respect to any
Guarantor Senior Indebtedness of such Subsidiary Guarantor unless such
Indebtedness is Guarantor Senior Subordinated Indebtedness of such Subsidiary
Guarantor or is contractually subordinated in right of payment to Guarantor
Senior Subordinated Indebtedness of such Subsidiary Guarantor. Unsecured
Indebtedness is not deemed to be subordinate or junior to Secured Indebtedness
merely because it is unsecured.
The Company may not pay principal of, premium (if any), or interest
on, the Notes or make any deposit pursuant to the provisions described under
"Defeasance" below and may not otherwise purchase or retire any Notes
(collectively, "pay the Notes") if (i) any Senior Indebtedness is not paid when
due or (ii) any other default on Senior Indebtedness occurs and the maturity of
such Senior Indebtedness is accelerated in accordance with its terms unless, in
either case, the default has been cured or waived and/or any such acceleration
has been rescinded or such Senior Indebtedness has been paid in full; provided,
however, the Company may pay the Notes without regard to the foregoing if the
Company and the Trustee receive written notice approving such payment from the
Representative of the Senior Indebtedness with respect to which either of the
events set forth in clause (i) or (ii) of the immediately preceding sentence
has occurred and is continuing. During the continuance of any default (other
than a default described in clause (i) or (ii) of the preceding sentence) with
respect to any Designated Senior Indebtedness pursuant to which the maturity
thereof may be accelerated immediately without further notice (except such
notice as may be required to effect such acceleration) or the expiration of any
applicable grace periods, the Company may not pay the Notes (except (i) in
Qualified Capital Stock issued by the Company to pay interest on the Notes or
issued in exchange for the Notes, (ii) in securities substantially identical to
the Notes issued by the Company in payment of interest accrued thereon or (iii)
in securities issued by the Company which are subordinated to the Senior Debt
at least to the same extent as the Notes and having an Average Life at least
equal to the remaining Average Life of the Notes) for a period (a "Payment
Blockage Period") commencing upon the receipt by the Trustee (with a copy to
the Company) of written notice (a "Blockage Notice") of such default from the
Representative of the holders of such Designated Senior Indebtedness specifying
an election to effect a Payment Blockage Period and ending 179 days thereafter
(or earlier if such Payment Blockage Period is terminated (i) by written notice
to the Trustee and the Company from the Person or Persons who gave such
Blockage Notice, (ii) because the default giving rise to such Blockage Notice
is no longer continuing or (iii) because such Designated Senior Indebtedness
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has been repaid in full). Notwithstanding the provisions described in the
immediately preceding sentence, but subject to the provisions of the first
sentence of this paragraph and the provisions of the immediately succeeding
paragraph, the Company may resume payments on the Notes after the end of such
Payment Blockage Period. Not more than one Blockage Notice may be given in any
consecutive 360-day period, irrespective of the number of defaults with respect
to Designated Senior Indebtedness during such period.
Upon any payment or distribution of the assets of the Company upon a
total or partial liquidation or dissolution or reorganization or bankruptcy of
or similar proceeding relating to the Company or its property, the holders of
Senior Indebtedness will be entitled to receive payment in full of the Senior
Indebtedness before the holders of the Notes are entitled to receive any
payment, and until the Senior Indebtedness is paid in full, any payment or
distribution to which holders of the Notes would be entitled but for the
subordination provisions of the Indenture will be made to holders of the Senior
Indebtedness as their interests may appear. If a distribution is made to
holders of the Notes that, due to the subordination provisions, should not have
been made to them, such holders are required to hold it in trust for the
holders of Senior Indebtedness and pay it over to them as their interests may
appear.
If payment of the Notes is accelerated because of an Event of Default,
the Company or the Trustee shall promptly notify the Representative (if any) of
any issue of Designated Senior Indebtedness which is then outstanding:
provided, however, that the Company and the trustee shall be obligated to
notify such a Representative only if such Representative has delivered or
caused to be delivered an address for the service of such a notice to the
Company and the trustee (and the Company and the trustee shall only be
obligated to deliver the notice to the address so specified). If a notice is
required pursuant to the immediate preceding sentence, the Company may not pay
the Notes until five Business Days after the respective Representative of the
Designated Senior Indebtedness receives notice (at the address specified in the
preceding sentence) of such acceleration and, thereafter, may pay the Notes
only if the subordination provisions of the Indenture otherwise permit payment
at that time.
By reason of such subordination provisions contained in the Indenture,
in the event of insolvency, creditors of the Company who are holders of Senior
Indebtedness may recover more, ratably, than the Noteholders, and creditors of
the Company who are not holders of Senior Indebtedness (including holders of
the Notes) may recover less, ratably, than holders of Senior Indebtedness.
SUBSIDIARY GUARANTIES
Each Subsidiary Guarantor unconditionally guarantees, jointly and
severally, to each holder and the Trustee, on a senior subordinated basis, the
full and prompt payment of principal of and interest on the Notes, and of all
other obligations of the Company under the Indenture.
The Indebtedness evidenced by each Subsidiary Guarantee (including the
payment of principal of, premium, if any, and interest on the Notes) will be
subordinated to Guarantor Senior Indebtedness on substantially the same basis
as the Notes are subordinated to Senior Indebtedness. As of November 27, 1996,
after giving effect to the Financing, the Company had approximately $2.2
million of Guarantor Senior Indebtedness ($2.2 million of which would have
represented guarantees of borrowings under the New Credit Facility). Although
the Indenture contains limitations on the amount of additional Indebtedness
that the Company's Restricted Subsidiaries may incur, under certain
circumstances the amount of such Indebtedness could be substantial and, in any
case, such Indebtedness may be Guarantor Senior Indebtedness. See "Certain
Covenants -- Limitation or Indebtedness" below. See "-- Ranking and
Subordination" above.
The obligations of each Subsidiary Guarantor are limited to the
maximum amount as will, after giving effect to all other contingent and fixed
liabilities of such Subsidiary Guarantor (including, without limitation, any
guarantees under the New Credit Facility) and after giving effect to any
collections from or payments made by or on behalf of any other Subsidiary
Guarantor in respect of the obligations of such other Subsidiary Guarantor
under its Subsidiary Guarantee or pursuant to its contribution obligations
under the Indenture, result in the obligations of such Subsidiary Guarantor
under the Subsidiary Guarantee not constituting a fraudulent conveyance or
fraudulent transfer under federal or state law. Each Subsidiary Guarantor that
makes a payment or distribution under a Subsidiary Guarantee shall be entitled
to contribution from each other Subsidiary Guarantor in a pro rata amount based
on the Adjusted Net Assets of each Subsidiary Guarantor.
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Each Subsidiary Guarantor may consolidate with or merge into or sell
its assets to the Company or another Subsidiary Guarantor without limitation.
Each Subsidiary Guarantor may consolidate with or merge into or sell all or
substantially all its assets to a corporation, partnership or trust other than
the Company or another Subsidiary Guarantor (whether or not affiliated with the
Subsidiary Guarantor). Upon the sale or disposition of a Subsidiary Guarantor
(or all or substantially all of its assets) to a Person (whether or not an
Affiliate of the Subsidiary Guarantor) which is not a Subsidiary of the
Company, which sale or disposition is otherwise in compliance with the
Indenture (including the covenant described under "Certain Covenants --
Limitation on Sales of Assets and Subsidiary Stock"), such Subsidiary Guarantor
shall be deemed released from all its obligations under the Indenture and its
Subsidiary Guarantee and such Subsidiary Guarantee shall terminate; provided,
however, that any such termination shall occur only to the extent that all
obligations of such Subsidiary Guarantor under the New Credit Facility and all
of its guarantees of, and under all of its pledges of assets or other security
interests which secure, any other Indebtedness of the Company shall also
terminate upon such release, sale or transfer.
Subsequent to the Issuance Date, separate financial information for
the Subsidiary Guarantors will not be provided except to the extent required by
Regulation S-X under the Securities Act.
CHANGE OF CONTROL
Upon the occurrence of any of the following events (each a "Change of
Control"), each holder will have the right to require the Company to repurchase
all or any part of such holder's Notes at a purchase price in cash equal to
101% of the principal amount thereof plus accrued and unpaid interest, if any,
to the date of purchase (subject to the right of holders of record on the
relevant record date to receive interest due on the relevant interest payment
date): (i) any sale, lease, exchange or other transfer (collectively, a
"Transfer") (in one transaction or a series of related transactions) of all or
substantially all of the assets of the Company and its Subsidiaries to any
Person or group of related Persons for purposes of Section 13(d) of the
Exchange Act (a "Group") (whether or not otherwise in compliance with the
provisions of the Indenture), other than a Transfer to Hicks Muse or any of its
Affiliates, officers and directors (the "Permitted Holders"); or (ii) a
majority of the Board of Directors of Holding or the Company or of any direct
or indirect holding company thereof shall consist of Persons who are not
Continuing Directors of Holding or the Company, as the case may be; or (iii)
the acquisition by any Person or Group (other than the Permitted Holders) of
the power, directly or indirectly, to vote or direct the voting of securities
having more than 50% of the ordinary voting power for the election of directors
of Holding or the Company or of any direct or indirect holding company thereof.
Within 30 days following any Change of Control, unless the Company has
mailed a redemption notice with respect to all the outstanding Notes in
connection with such Change of Control, the Company shall mail a notice to each
holder with a copy to the Trustee stating: (1) that a Change of Control has
occurred and that such holder has the right to require the Company to purchase
such holder's Notes at a purchase price in cash equal to 101% of the principal
amount thereof plus accrued and unpaid interest, if any, to the date of
purchase (subject to the right of holders of record on a record date to receive
interest on the relevant interest payment date); (2) the repurchase date (which
shall be no earlier than 30 days nor later than 60 days from the date such
notice is mailed); and (3) the procedures determined by the Company, consistent
with the Indenture, that a holder must follow in order to have its Notes
purchased.
The Company will comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Notes pursuant to this
covenant. To the extent that the provisions of any securities laws or
regulations conflict with provisions of the Indenture, the Company will comply
with the applicable securities laws and regulations and shall not be deemed to
have breached its obligations described in the Indenture by virtue thereof.
The definition of "Change of Control" includes, among other
transactions, a disposition of all or substantially all of the property and
assets of the Company and its Subsidiaries. With respect to the disposition of
property or assets, the phrase "all or substantially all" as used in the
Indenture varies according to the facts and circumstances of the subject
transaction, has no clearly established meaning under New York law (which is
the choice of law under the Indenture) and is subject to judicial
interpretation. Accordingly, in certain circumstances there may be a degree of
uncertainty in ascertaining whether a particular transaction would involve a
disposition of "all or substantially all" of the property or assets of a
Person, and therefore it may be unclear as to whether a Change of Control has
occurred and whether the Company is required to make an offer to repurchase the
Notes as described above.
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The occurrence of certain of the events that would constitute a Change
of Control would constitute a default under the New Credit Facility. Future
Senior Indebtedness of the Company and its Subsidiaries may also contain
prohibitions of certain events that would constitute a Change of Control or
require such Senior Indebtedness to be repurchased upon a Change of Control.
Moreover, the exercise by the holders of their right to require the Company to
repurchase the Notes could cause a default under such Senior Indebtedness, even
if the Change of Control itself does not, due to the financial effect of such
repurchase of the Company. Finally, the Company's ability to pay cash to the
holders upon a repurchase may be limited by the Company's then existing
financial resources. There can be no assurance that sufficient funds will be
available when necessary to make any required repurchases. Even if sufficient
funds were otherwise available, the terms of the New Credit Facility may
prohibit the Company's prepayment of Notes prior to their scheduled maturity.
Consequently, if the Company is not able to prepay the Indebtedness under the
New Credit Facility and any other Senior Indebtedness containing similar
restrictions or obtain requisite consents, as described above, the Company will
be unable to fulfill its repurchase obligations if holders of Notes exercise
their repurchase rights following a Change of Control, thereby resulting in a
default under the Indenture.
CERTAIN COVENANTS
The Indenture contains certain covenants including, among others, the
following:
Limitation on Indebtedness.
(a) The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, Incur any Indebtedness; provided, however, that the
Company and any of its Restricted Subsidiaries may Incur Indebtedness if on the
date thereof the Consolidated Coverage Ratio would be greater than 2.00:1.00,
if such Indebtedness is Incurred on or prior to the second anniversary of the
Issue Date, and 2.25:1.00, if such Indebtedness is Incurred thereafter.
(b) Notwithstanding the foregoing paragraph (a), the Company and
its Restricted Subsidiaries may Incur the following Indebtedness: (i)
Indebtedness Incurred pursuant to (A) the New Credit Facility (including,
without limitation, any renewal, extension, refunding, restructuring,
replacement or refinancing thereof referred to in the definition thereof) or
(B) any other agreements or indentures governing Senior Indebtedness; provided,
however, that the aggregate principal amount of all Indebtedness Incurred
pursuant to this clause (i) does not exceed $20 million at any time
outstanding, less the aggregate principal amount thereof repaid with the net
proceeds of Asset Dispositions (to the extent, in the case of a repayment of
revolving credit indebtedness, the commitment to advance loans has been
terminated); (ii) Indebtedness represented by Capitalized Lease Obligations,
mortgage financings or purchase money obligations, in each case Incurred for
the purpose of financing all or any part of the purchase price or cost of
construction or improvement of property used in a Related Business or Incurred
to refinance any such purchase price or cost of construction or improvement, in
each case Incurred no later than 365 days after the date of such acquisition or
the date of completion of such construction or improvement; provided, however,
that the principal amount of any Indebtedness Incurred pursuant to this clause
(ii) shall not exceed $10 million at any time outstanding; (iii) Permitted
Indebtedness; and (iv) Indebtedness (other than Indebtedness described in
clauses (i) - (iii)) in a principal amount which, when taken together with the
principal amount of all other Indebtedness Incurred pursuant to this clause
(iv) and then outstanding, will not exceed $15 million (it being understood
that any Indebtedness Incurred under this clause (iv) shall cease to be deemed
Incurred or outstanding for purposes of this clause (iv) (but shall be deemed
to be Incurred for purposes of paragraph (a)) from and after the first date on
which the Company or its Restricted Subsidiaries could have Incurred such
Indebtedness under the foregoing paragraph (a) without reliance upon this
clause (iv)).
(c) Neither the Company nor any Restricted Subsidiary shall Incur
any Indebtedness under paragraph (b) above if the proceeds thereof are used,
directly or indirectly, to refinance any Subordinated Obligations of the
Company unless such Indebtedness shall be subordinated to the Notes to at least
the same extent as such Subordinated Obligations. No Restricted Subsidiary
shall Incur any Indebtedness under paragraph (b) above if the proceeds thereof
are used, directly or indirectly, to refinance any Guarantor Subordinated
Obligation of such Subsidiary Guarantor unless such Indebtedness shall be
subordinated to the obligations of such Subsidiary Guarantor under the
Subsidiary Guaranty to at least the same extent as such Guarantor Subordinated
Obligation.
(d) In addition, the Company shall not Incur any Secured
Indebtedness which is not Senior Indebtedness unless contemporaneously
therewith effective provision is made to secure the Notes equally and ratably
with such Secured Indebtedness for so long as such Secured Indebtedness is
secured by a Lien. No Subsidiary Guarantor shall
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Incur any Secured Indebtedness which is not Guarantor Senior Indebtedness
unless contemporaneously therewith effective provision is made to secure such
Subsidiary Guarantor's obligations under the Subsidiary Guaranty equally and
ratably with such Secured Indebtedness for so long as such Secured Indebtedness
is secured by a Lien.
(e) The Company will not permit any Unrestricted Subsidiary to
Incur any Indebtedness other than Non-Recourse Debt.
Limitation on Layering. The Company shall not Incur any Indebtedness
if such Indebtedness is subordinate or junior in ranking in any respect to any
Senior Indebtedness unless such Indebtedness is Senior Subordinated
Indebtedness or is contractually subordinated in right of payment to all Senior
Subordinated Indebtedness (including the Notes). No Subsidiary Guarantor shall
Incur any Indebtedness if such Indebtedness is contractually subordinate or
junior in ranking in any respect to any Guarantor Senior Indebtedness of such
Subsidiary Guarantor unless such Indebtedness is Guarantor Senior Subordinated
Indebtedness of such Subsidiary Guarantor or is contractually subordinated in
right of payment to all Guarantor Senior Subordinated Indebtedness of such
Subsidiary Guarantor (including its Guarantee of the Notes).
Limitation on Restricted Payments. (a) The Company shall not, and
shall not permit any of its Restricted Subsidiaries, directly or indirectly, to
(i) declare or pay any dividend or make any distribution on or in respect of
its Capital Stock (including any payment in connection with any merger or
consolidation involving the Company or any of its Restricted Subsidiaries)
except (A) dividends or distributions payable in its Capital Stock (other than
Disqualified Stock) or in options, warrants or other rights to purchase such
Capital Stock, and (B) dividends or distributions payable to the Company or a
Restricted Subsidiary of the Company which holds the equity interest in the
paying Restricted Subsidiary (and if the Restricted Subsidiary paying the
dividend or making the distribution is not a Wholly-Owned Subsidiary, to its
other holders of Capital Stock on a pro rata basis), (ii) purchase, redeem,
retire or otherwise acquire for value any Capital Stock of the Company held by
Persons other than a Restricted Subsidiary of the Company or any Capital Stock
of a Restricted Subsidiary of the Company held by any Affiliate of the Company,
other than another Restricted Subsidiary (in either case, other than in
exchange for its Capital Stock (other than Disqualified Stock)), (iii)
purchase, repurchase, redeem, defease or otherwise acquire or retire for value,
prior to scheduled maturity, scheduled repayment or scheduled sinking fund
payment, any Subordinated Obligations (other than the purchase, repurchase or
other acquisition of Subordinated Obligations purchased in anticipation of
satisfying a sinking fund obligation, principal installment or final maturity,
in each case due within one year of the date of purchase, repurchase or
acquisition) or (iv) make any Investment (other than a Permitted Investment) in
any Person (any such dividend, distribution, purchase, redemption, repurchase,
defeasance, other acquisition, retirement or Investment as described in
preceding clauses (i) through (iv) being referred to as a "Restricted
Payment"); if at the time the Company or such Restricted Subsidiary makes such
Restricted Payment: (1) a Default shall have occurred and be continuing (or
would result therefrom); or (2) the Company is not able to incur an additional
$1.00 of Indebtedness pursuant to paragraph (a) under "Limitation on
Indebtedness"; or (3) the aggregate amount of such Restricted Payment and all
other Restricted Payments declared or made subsequent to the Issue Date would
exceed the sum of: (A) 50% of the Consolidated Net Income accrued during the
period (treated as one accounting period) from the first day of the fiscal
quarter beginning on or after the Issue Date to the end of the most recent
fiscal quarter ending prior to the date of such Restricted Payment as to which
financial results are available (but in no event ending more than 135 days
prior to the date of such Restricted Payment) (or, in case such Consolidated
Net Income shall be a deficit, minus 100% of such deficit); (B) the aggregate
net proceeds received by the Company from the issue or sale of its Capital
Stock (other than Disqualified Stock) or other capital contributions subsequent
to the Issue Date (other than net proceeds received from an issuance or sale of
such Capital Stock to a Subsidiary of the Company or an employee stock
ownership plan or similar trust); provided, however, that the value of any
non-cash net proceeds shall be as determined by the Board of Directors in good
faith, except that in the event the value of any non-cash net proceeds shall be
$5 million or more, the value shall be as determined in writing by an
independent investment banking firm of nationally recognized standing; (C) the
aggregate Net Cash Proceeds received by the Company from the issue or sale of
its Capital Stock (other than Disqualified Stock) to an employee stock
ownership plan or similar trust subsequent to the Issue Date; provided,
however, that if such plan or trust Incurs any Indebtedness to or Guaranteed by
the Company or any of its Restricted Subsidiaries to finance the acquisition of
such Capital Stock, such aggregate amount shall be limited to such Net Cash
Proceeds less such Indebtedness Incurred or Guaranteed by the Company or any of
its Restricted Subsidiaries and any increase in the Consolidated Net Worth of
the Company resulting from principal repayments made by such plan or trust with
respect to Indebtedness Incurred by it to finance the purchase of such Capital
Stock; (D) the amount by which Indebtedness of the Company is reduced on the
Company's balance sheet upon the conversion or exchange (other than by a
Restricted Subsidiary of the Company) subsequent to the Issue Date of any
Indebtedness of the Company convertible or exchangeable for Capital Stock of
the
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Company (less the amount of any cash, or other property, distributed by the
Company upon such conversion or exchange); (E) the amount equal to the net
reduction in Investments (other than Permitted Investments) made after the
Issue Date by the Company or any of its Restricted Subsidiaries in any Person
resulting from (i) repurchases or redemptions of such Investments by such
Person, proceeds realized upon the sale of such Investment to an unaffiliated
purchaser, repayments of loans or advances or other transfers of assets by such
Person to the Company or any Restricted Subsidiary of the Company or (ii) the
redesignation of Unrestricted Subsidiaries as Restricted Subsidiaries (valued
in each case as provided in the definition of "Investment") not to exceed, in
the case of any Unrestricted Subsidiary, the amount of Investments previously
included in the calculation of the amount of Restricted Payments; provided,
however, that no amount shall be included under this Clause (E) to the extent
it is already included in Consolidated Net Income; and (F) the aggregate Net
Cash Proceeds received by a Person in consideration for the issuance of such
Person's Capital Stock (other than Disqualified Stock) which are held by such
Person at the time such Person is merged with and into the Company in
accordance with the "Merger and Consolidation" covenant subsequent to the Issue
Date; provided, however, that concurrently with or immediately following such
merger the Company uses an amount equal to such Net Cash Proceeds to redeem or
repurchase the Company's Capital Stock.
(b) The provisions of paragraph (a) shall not prohibit: (i) any
purchase or redemption of Capital Stock or Subordinated Obligations of the
Company made by exchange for, or out of the proceeds of the substantially
concurrent sale of, Capital Stock of the Company (other than Disqualified Stock
and other than Capital Stock issued or sold to a Subsidiary or an employee
stock ownership plan or similar trust); provided, however, that (A) such
purchase or redemption shall be excluded in the calculation of the amount of
Restricted Payments and (B) the Net Cash Proceeds from such sale shall be
excluded from clause (3)(B) of paragraph (a); (ii) any purchase or redemption
of Subordinated Obligations of the Company made by exchange for, or out of the
proceeds of the substantially concurrent sale of, Subordinated Obligations of
the Company; provided, however, that such purchase or redemption shall be
excluded in the calculation of the amount of Restricted Payments; (iii) any
purchase or redemption of Subordinated Obligations from Net Available Cash to
the extent permitted under "Limitation on Sales of Assets and Subsidiary Stock"
below; provided, however, that such purchase or redemption shall be excluded in
the calculation of the amount of Restricted Payments; (iv) dividends paid
within 60 days after the date of declaration if at such date of declaration
such dividend would have complied with this provision; provided, however, that
such dividend shall be included in the calculation of the amount of Restricted
Payments; (v) payments by the Company to fund the payment by any direct or
indirect holding company thereof of audit, accounting, legal or other similar
expenses, to pay franchise or other similar taxes and to pay other corporate
overhead expenses, so long as such dividends are paid as and when needed by its
respective direct or indirect holding company and so long as the aggregate
amount of payments pursuant to this clause (v) does not exceed $500,000 in any
calendar year; (vi) payments by the Company to fund taxes of Holding for a
given taxable year in an amount equal to the lesser of (x) the Company's
"separate return liability" and (y) the portion of the tax liability of the
"affiliated group" (within the meaning of Section 1504(a)(1) of the Code (as
defined)) of which the Company is a member in accordance with the method
described in Treasury Regulations Section 1.1552-1(a)(1) pursuant to (x) or (y)
of this clause (vi) to the extent that the Company files a combined or
consolidated income tax return with Holding under any state or local income tax
law for a taxable year, the payment by the Company to Holding to fund such tax
liability for such taxable year shall be provided for in a manner as similar as
possible to that provided for United States federal income taxes (for purposes
of this clause (vi) "separate return liability" for a given taxable year shall
mean the hypothetical United States tax liability of the Company defined as if
the Company had filed its own U.S. federal tax return for such taxable year);
(vii) payments of dividends on the Company's common stock after an initial
public offering of common stock of the Company or of Holding in an annual
amount not to exceed 6.0% of the gross proceeds (before deducting underwriting
discounts and commissions and other fees and expenses of the offering) received
by the Company (directly or as a common equity contribution from Holding) from
shares of common stock sold for the account of the Company or of Holding, as
the case may be (and not for the account of any stockholder), in such initial
public offering; (viii) payments by the Company to repurchase, or to enable
Holding to repurchase, Capital Stock or other securities of Holding from
members of management of Holding or the Company in an aggregate amount not to
exceed $2 million; (ix) payments to enable Holding to redeem or repurchase
stock purchase or similar rights granted by Holding with respect to its Capital
Stock in an aggregate amount not to exceed $1 million; (x) payments, not to
exceed $200,000 in the aggregate, to enable Holding to make cash payments to
holders of its Capital Stock in lieu of the issuance of fractional shares of
its Capital Stock; (xi) payments made pursuant to any merger, consolidation or
sale of assets effected in accordance with the "Merger and Consolidation"
covenant; provided, however, that no such payment may be made pursuant to this
clause (xi) unless, after giving effect to such transaction (and the incurrence
of any Indebtedness in connection therewith and the use of the proceeds
thereof), the Company would be able to incur $1.00 of additional Indebtedness
in compliance with paragraph (a) under the "Limitation on Indebtedness"
covenant and such that, after
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Incurring that $1.00 of additional Indebtedness, the Leverage Ratio would be
less than 3.50:1.00; (xii) the redemption payments to be made by the Company on
the Issue Date in connection with the Transaction as described in the
Prospectus; and (xiii) payments to the former Bishop stockholders required
pursuant to the Stock Purchase Agreement dated as of August 22, 1996 relating
to the Company's acquisition of Bishop, which payments shall not exceed
$1,000,000 in the aggregate, provided, however, that in the case of clauses
(vii), (viii), (ix), (x) and (xi) no Default or Event of Default shall have
occurred or be continuing at the time of such payment or as a result thereof.
(c) For purposes of determining compliance with the foregoing
covenant, Restricted Payments may be made with cash or non-cash assets,
provided that any Restricted Payment made other than in cash shall be valued at
the fair market value (determined, subject to the additional requirements of
the immediately succeeding proviso, in good faith by the Company) of the assets
so utilized in making such Restricted Payment, provided, further that (i) in
the case of any Restricted Payment made with capital stock or indebtedness,
such Restricted Payment shall be deemed to be made in an amount equal to the
greater of the fair market value thereof and the liquidation preference (if
any) or principal amount of the capital stock or indebtedness, as the case may
be, so utilized, and (ii) in the case of any Restricted Payment in an aggregate
amount in excess of $5.0 million, a written opinion as to the fairness of the
valuation thereof (as determined by the Company) for purposes of determining
compliance with the "Limitation on Restricted Payments" covenant in the
Indenture shall be issued by an independent investment banking firm of national
standing.
Limitation on Restrictions on Distributions from Restricted
Subsidiaries. The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, create or permit to exist or become effective any
consensual encumbrance or restriction on the ability of any such Restricted
Subsidiary to (i) pay dividends or make any other distributions on its Capital
Stock or pay any Indebtedness or other obligation owed to the Company, (ii)
make any loans or advances to the Company or (iii) transfer any of its property
or assets to the Company, except: (a) any encumbrance or restriction pursuant
to an agreement in effect at or entered into on the Issue Date, including the
New Credit Facility; (b) any encumbrance or restriction with respect to such a
Restricted Subsidiary pursuant to an agreement relating to any Indebtedness
issued by such Restricted Subsidiary on or prior to the date on which such
Restricted Subsidiary was acquired by the Company and outstanding on such date
(other than indebtedness issued as consideration in, or to provide all or any
portion of the funds or credit support utilized to consummate, the transaction
or series of related transactions pursuant to which such Restricted Subsidiary
became a Restricted Subsidiary of the Company or was acquired by the Company);
(c) any encumbrance or restriction with respect to such a Restricted Subsidiary
pursuant to an agreement evidencing Indebtedness Incurred without violation of
the Indenture or effecting a refinancing of Indebtedness issued pursuant to an
agreement referred to in clauses (a) or (b) or this clause (c) or contained in
any amendment to an agreement referred to in clauses (a) or (b) or this clause
(c); provided, however, that the encumbrances and restrictions with respect to
such Restricted Subsidiary contained in any of such agreement, refinancing
agreement or amendment, taken as a whole, are no less favorable to the holders
in any material respect, as determined in good faith by the senior management
of the Company or Board of Directors of the Company, than encumbrances and
restrictions with respect to such Restricted Subsidiary contained in agreements
in effect at, or entered into on, the Issue Date; (d) in the case of clause
(iii), any encumbrance or restriction (A) that restricts in a customary manner
the subletting, assignment or transfer of any property or asset that is a
lease, license, conveyance or contract or similar property or asset, (B) by
virtue of any transfer of, agreement to transfer, option or right with respect
to, or Lien on, any property or assets of the Company or any Restricted
Subsidiary not otherwise prohibited by the Indenture, (C) that is included in a
licensing agreement to the extent such restrictions limit the transfer of the
property subject to such licensing agreement or (D) arising or agreed to in the
ordinary course of business and that does not, individually or in the
aggregate, detract from the value of property or assets of the Company or any
of its Subsidiaries in any manner material to the Company or any such
Restricted Subsidiary; (e) in the case of clause (iii) above, restrictions
contained in security agreements, mortgages or similar documents securing
Indebtedness of a Restricted Subsidiary to the extent such restrictions
restrict the transfer of the property subject to such security agreements; (f)
any restriction with respect to such a Restricted Subsidiary imposed pursuant
to an agreement entered into for the sale or disposition of all or
substantially all the Capital Stock or assets of such Restricted Subsidiary
pending the closing of such sale or disposition; and (g) encumbrances or
restrictions arising or existing by reason of applicable law.
Limitation on Sales of Assets and Subsidiary Stock. (a) The Company
shall not, and shall not permit any of its Restricted Subsidiaries to, make any
Asset Disposition unless (i) the Company or such Restricted Subsidiary receives
consideration at the time of such Asset Disposition at least equal to the fair
market value, as determined in good faith by the Company's senior management or
the Board of Directors (including as to the value of all non-cash
consideration), of the shares and assets subject to such Asset Disposition,
(ii) at least 75% of the consideration thereof received by the
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Company or such Restricted Subsidiary is in the form of cash or cash
equivalents and (iii) an amount equal to 100% of the Net Available Cash from
such Asset Disposition is applied by the Company (or such Restricted
Subsidiary, as the case may be) (A) first, to the extent the Company or any
Restricted Subsidiary elects (or is required by the terms of any Senior
Indebtedness), to prepay, repay or purchase (x) Senior Indebtedness or (y)
Indebtedness (other than Preferred Stock) of a Wholly-Owned Subsidiary (in each
case other than Indebtedness owed to the Company) within 180 days from the
later of the date of such Asset Disposition or the receipt of such Net
Available Cash; (B) second, within one year from the receipt of such Net
Available Cash, to the extent of the balance of such Net Available Cash after
application in accordance with clause (A), at the Company's election either (x)
to the investment in or acquisition of Additional Assets or (y) to prepay,
repay or purchase (1) Senior Indebtedness or (2) Indebtedness (other than
Preferred Stock) of a Wholly-Owned Subsidiary (in each case other than
Indebtedness owed to the Company); (C) third, within 45 days after the later of
the application of Net Available Cash in accordance with clauses (A) and (B)
and the date that is one year from the receipt of such Net Available Cash, to
the extent of the balance of such Net Available Cash after application in
accordance with clauses (A) and (B), to make an offer to purchase Notes at par
plus accrued and unpaid interest, if any, thereon; and (D) fourth, to the
extent of the balance of such Net Available Cash after application in
accordance with clauses (A), (B) and (C), to (w) the investment in or
acquisition of Additional Assets, (x) the making of Temporary Cash Investments,
(y) the prepayment, repayment or purchase of Indebtedness of the Company (other
than Indebtedness owing to any Subsidiary of the Company) or Indebtedness of
any Subsidiary (other than Indebtedness owed to the Company or any of its
Subsidiaries) or (z) any other purpose otherwise permitted under the Indenture,
in each case within the later of 45 days after the application of Net Available
Cash in accordance with clauses (A), (B) and (C) or the date that is one year
from the receipt of such Net Available Cash; provided, however, that, in
connection with any prepayment, repayment or purchase of Indebtedness pursuant
to clause (A), (B), (C) or (D) above, the Company or such Restricted Subsidiary
shall retire such Indebtedness and shall cause the related loan commitment (if
any) to be permanently reduced in an amount equal to the principal amount so
prepaid, repaid or purchased. Notwithstanding the foregoing provisions, the
Company and its Restricted Subsidiaries shall not be required to apply any Net
Available Cash in accordance herewith except to the extent that the aggregate
Net Available Cash from all Asset Dispositions which are not applied in
accordance with this covenant at any time exceed $5 million. The Company shall
not be required to make an offer for Notes pursuant to this covenant if the Net
Available Cash available therefor (after application of the proceeds as
provided in clauses (A) and (B)) is less than $5 million for any particular
Asset Disposition (which lesser amounts shall be carried forward for purposes
of determining whether an offer is required with respect to the Net Available
Cash from any subsequent Asset Disposition).
For the purposes of this covenant, the following will be deemed to be
cash: (x) the assumption by the transferee of Senior Indebtedness of the
Company or Indebtedness of any Restricted Subsidiary of the Company and the
release of the Company or such Restricted Subsidiary from all liability on such
Senior Indebtedness or Indebtedness in connection with such Asset Disposition
(in which case the Company shall, without further action, be deemed to have
applied such assumed Indebtedness in accordance with clause (A) of the
preceding paragraph) and (y) securities received by the Company or any
Restricted Subsidiary of the Company from the transferee that are promptly (and
in any event within 60 days) converted by the Company or such Restricted
Subsidiary into cash.
Notwithstanding the foregoing, the Company and its Restricted
Subsidiaries will be permitted to consummate an Asset Swap if (i) at the time
of entering into such Asset Swap and immediately after giving effect to such
Asset Swap, no Default or Event of Default shall have occurred or be continuing
or would occur as a consequence thereof, (ii) in the event such Asset Swap
involves an aggregate amount in excess of $1 million, the terms of such Asset
Swap have been approved by a majority of the members of the Board of Directors
of the Company, and (iii) in the event such Asset Swap involves an aggregate
amount in excess of $5 million, the Company has received a written opinion from
an independent investment banking firm of nationally recognized standing that
such Asset Swap is fair to the Company or such Restricted Subsidiary, as the
case may be, from a financial point of view.
(b) In the event of an Asset Disposition that requires the
purchase of Notes pursuant to clause (a)(iii)(C), the Company will be required
to purchase Notes tendered pursuant to an offer by the Company for the Notes at
a purchase price of 100% of their principal amount plus accrued and unpaid
interest, if any, to the purchase date in accordance with the procedures
(including prorating in the event of oversubscription) set forth in the
Indenture. If the aggregate purchase price of the Notes tendered pursuant to
the offer is less than the Net Available Cash allotted to the purchase of the
Notes, the Company will apply the remaining Net Available Cash in accordance
with clause (a)(iii)(D) above.
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(c) The Company will comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Notes pursuant to the
Indenture. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this covenant, the Company will comply
with the applicable securities laws and regulations and will not be deemed to
have breached its obligations under the Indenture by virtue thereof.
Limitation on Affiliate Transactions. (a) The Company will not, and
will not permit any of its Restricted Subsidiaries to, directly or indirectly,
enter into or conduct any transaction or series of related transactions
(including the purchase, sale, lease or exchange of any property or the
rendering of any service) with or for the benefit of any Affiliate of the
Company other than a Wholly-Owned Subsidiary (an "Affiliate Transaction")
unless: (i) the terms of such Affiliate Transaction are no less favorable to
the Company or such Restricted Subsidiary, as the case may be, than those that
could be obtained at the time of such transaction in arm's-length dealings with
a Person who is not such an Affiliate; (ii) in the event such Affiliate
Transaction involves an aggregate amount in excess of $2.5 million, the terms
of such transaction have been approved by a majority of the members of the
Board of Directors of the Company and by a majority of the disinterested
members of such Board, if any (and such majority or majorities, as the case may
be, determines that such Affiliate Transaction satisfies the criteria in (i)
above); and (iii) in the event such Affiliate Transaction involves an aggregate
amount in excess of $5 million, the Company has received a written opinion from
an independent investment banking firm of nationally recognized standing that
such Affiliate Transaction is fair to the Company or such Restricted
Subsidiary, as the case may be, from a financial point of view.
(b) The foregoing paragraph (a) shall not apply to (i) any
Restricted Payment permitted to be made pursuant to the covenant described
under "Limitation on Restricted Payments," (ii) any issuance of securities, or
other payments, awards or grants in cash, securities or otherwise pursuant to,
or the funding of, employment arrangements, or any stock options and stock
ownership plans for the benefit of employees, officers and directors,
consultants and advisors approved by the Board of Directors of the Company,
(iii) loans or advances to employees in the ordinary course of business of the
Company or any of its Restricted Subsidiaries, (iv) any transaction between
Wholly-Owned Subsidiaries, (v) indemnification agreements with, and the payment
of fees and indemnities to, directors, officers and employees of the Company
and its Restricted Subsidiaries, in each case in the ordinary course of
business, (vi) transactions pursuant to agreements in existence on the Issue
Date which are (x) described in the Prospectus or (y) otherwise, in the
aggregate, immaterial to the Company and its Restricted Subsidiaries taken as a
whole, (vii) any employment, non-competition or confidentiality agreements
entered into by the Company or any of its Restricted Subsidiaries with its
employees in the ordinary course of business, (viii) payments made in
connection with the Transaction, including fees to Hicks Muse, as described in
the Prospectus, (ix) the issuance of Capital Stock of the Company (other than
Disqualified Stock) and (x) any obligations of the Company pursuant to the
Monitoring and Oversight Agreement and the Financial Advisory Agreement as in
effect on the Issue Date.
Limitation on Capital Stock of Restricted Subsidiaries. The Company
will not permit any of its Restricted Subsidiaries to issue any Capital Stock
(other than Preferred Stock) to any Person (other than to the Company or a
Wholly-Owned Subsidiary of the Company) or permit any Person (other than the
Company or a Wholly-Owned Subsidiary of the Company) to own any Capital Stock
(other than Preferred Stock) of a Restricted Subsidiary of the Company, if in
either case as a result thereof such Restricted Subsidiary would no longer be a
Restricted Subsidiary of the Company; provided, however, that this provision
shall not prohibit (x) the Company or any of its Restricted Subsidiaries from
selling, leasing or otherwise disposing of all of the Capital Stock of any
Restricted Subsidiary or (y) the designation of a Restricted Subsidiary as an
Unrestricted Subsidiary in compliance with the Indenture.
SEC Reports. The Company will file with the Trustee and provide to
the holders of the Notes, within 15 days after it files them with the
Commission, copies of the annual reports and of the information, documents and
other reports (or copies of such portions of any of the foregoing as the
Commission may by rules and regulations prescribe) which the Company files with
the Commission pursuant to Section 13 or 15(d) of the Exchange Act. In the
event that the Company is not required to file such reports with the Commission
pursuant to the Exchange Act, the Company will nevertheless deliver such
Exchange Act information to the holders of the Notes within 15 days after it
would have been required to file it with the Commission.
Merger and Consolidation. The Company shall not consolidate with or
merge with or into, or convey, transfer or lease all or substantially all of
its assets to, any Person, unless: (i) the resulting, surviving or transferee
Person (the "Successor Company") shall be a corporation, partnership, trust or
limited liability company organized and existing under
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the laws of the United States of America, any State thereof or the District of
Columbia and the Successor Company (if not the Company) shall expressly assume,
by supplemental indenture, executed and delivered to the Trustee, in form
satisfactory to the Trustee, all the obligations of the Company under the Notes
and the Indenture; (ii) immediately after giving effect to such transaction
(and treating any Indebtedness that becomes an obligation of the Successor
Company or any Subsidiary of the Successor Company as a result of such
transaction as having been incurred by the Successor Company or such Restricted
Subsidiary at the time of such transaction), no Default or Event of Default
shall have occurred and be continuing; (iii) immediately after giving effect to
such transaction, the Successor Company would be able to incur at least an
additional $1.00 of Indebtedness pursuant to paragraph (a) of "Limitation on
Indebtedness"; and (iv) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental indenture (if any)
comply with the Indenture.
The Successor Company will succeed to, and be substituted for, and may
exercise every right and power of, the Company under the Indenture, but, in the
case of a lease of all or substantially all its assets, the Company will not be
released from the obligation to pay the principal of and interest on the Notes.
Notwithstanding the foregoing clauses (ii) and (iii), (1) any
Restricted Subsidiary of the Company may consolidate with, merge into or
transfer all or part of its properties and assets to the Company and (2) the
Company may merge with an Affiliate incorporated solely for the purpose of
reincorporating the Company in another jurisdiction to realize tax or other
benefits.
EVENTS OF DEFAULT
Each of the following constitutes an Event of Default under the
Indenture: (i) a default in any payment of interest on any Note when due,
continued for 30 days, whether or not such payment is prohibited by the
provisions described under "Ranking and Subordination" above, (ii) a default in
the payment of principal of any Note when due at its Stated Maturity, upon
optional redemption, upon required repurchase, upon declaration or otherwise,
whether or not such payment is prohibited by the provisions described under
"Ranking and Subordination" above, (iii) the failure by the Company to comply
with its obligations under the "Merger and Consolidation" covenant described
under "Certain Covenants" above, (iv) the failure by the Company to comply for
30 days after notice with any of its obligations under the covenants described
under "Change of Control" above or under covenants described under "Certain
Covenants" above (in each case, other than a failure to purchase Notes which
shall constitute an Event of Default under clause (ii) above), other than "--
Merger and Consolidation," (v) the failure by the Company or any Subsidiary
Guarantor to comply for 60 days after notice with its other agreements
contained in the Indenture, (vi) Indebtedness of the Company or any Restricted
Subsidiary is not paid within any applicable grace period after final maturity
or is accelerated by the holders thereof because of a default and the total
amount of such Indebtedness unpaid or accelerated exceeds $5 million and such
default shall not have been cured or such acceleration rescinded after a 10-day
period (the "cross acceleration provision"), (vii) certain events of
bankruptcy, insolvency or reorganization of the Company or a Significant
Subsidiary (the "bankruptcy provisions"), (viii) any judgment or decree for the
payment of money in excess of $5 million (to the extent not covered by
insurance) is rendered against the Company or a Significant Subsidiary and such
judgment or decree shall remain undischarged or unstayed for a period of 60
days after such judgment becomes final and non-appealable (the "judgment
default provision") or (ix) any Subsidiary Guarantee by a Significant
Subsidiary ceases to be in full force and effect (except as contemplated by the
terms of the Indenture) or any Subsidiary Guarantor that is a Significant
Subsidiary denies or disaffirms its obligations under the Indenture or its
Subsidiary Guarantee and such Default continues for 10 days. However, a
default under clause (iv) or (v) will not constitute an Event of Default until
the Trustee or the holders of 25% in principal amount of the outstanding Notes
notify the Company of the default and the Company does not cure such default
within the time specified in clause (iv) or (v) hereof after receipt of such
notice.
If an Event of Default occurs and is continuing, the Trustee or the
holders of at least 25% in principal amount of the outstanding Notes by notice
to the Company may declare the principal of and accrued and unpaid interest, if
any, on all the Notes to be due and payable. Upon such a declaration, such
principal and accrued and unpaid interest shall be due and payable immediately.
If an Event of Default relating to certain events of bankruptcy, insolvency or
reorganization of the Company occurs, the principal of and accrued and unpaid
interest on all the Notes will become and be immediately due and payable
without any declaration or other act on the part of the Trustee or any holders.
Under certain circumstances, the holders of a majority in principal amount of
the outstanding Notes may rescind any such acceleration with respect to the
Notes and Its consequences.
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Subject to the provisions of the Indenture relating to the duties of
the Trustee, if an Event of Default occurs and is continuing, the Trustee will
be under no obligation to exercise any of the rights or powers under the
Indenture at the request or direction of any of the holders unless such holders
have offered to the Trustee reasonable indemnity or security against any loss,
liability or expense. Except to enforce the right to receive payment of
principal, premium (if any) or interest when due, no holder may pursue any
remedy with respect to the Indenture or the Notes unless (i) such holder has
previously given the Trustee notice that an Event of Default is continuing,
(ii) holders of at least 25% in principal amount of the outstanding Notes have
requested the Trustee to pursue the remedy, (iii) such holders have offered the
Trustee reasonable security or indemnity against any loss, liability or
expense, (iv) the Trustee has not complied with such request within 60 days
after the receipt of the request and the offer of security or indemnity and (v)
the holders of a majority in principal amount of the outstanding Notes have not
given the Trustee a direction that, in the opinion of the Trustee, is
inconsistent with such request within such 60-day period. Subject to certain
restrictions, the holders of a majority in principal amount of the outstanding
Notes are given the right to direct the time, method and place of conducting
any proceeding for any remedy available to the Trustee or of exercising any
trust or power conferred on the Trustee. The Trustee, however, may refuse to
follow any direction that conflicts with law or the Indenture or that the
Trustee determines is unduly prejudicial to the rights of any other holder or
that would involve the Trustee in personal liability. Prior to taking any
action under the Indenture, the Trustee shall be entitled to indemnification
satisfactory to it in its sole discretion against all losses and expenses
caused by taking or not taking such action.
The Indenture provides that if a Default occurs and is continuing and
is known to the Trustee, the Trustee must mail to each holder notice of the
Default within 90 days after it occurs. Except in the case of a Default in the
payment of principal of, premium (if any) or interest on any Note, the Trustee
may withhold notice if and so long as its board of directors, a committee of
its board of directors or a committee of its Trust officers in good faith
determines that withholding notice is in the interests of the Noteholders. In
addition, the Company is required to deliver to the Trustee, within 120 days
after the end of each fiscal year, a certificate indicating whether the signers
thereof know of any Default that occurred during the previous year. The
Company also is required to deliver to the Trustee, within 30 days after the
occurrence thereof, written notice of any events which would constitute certain
Defaults.
AMENDMENTS AND WAIVERS
Subject to certain exceptions, the Indenture may be amended with the
consent of the holders of a majority in principal amount of the Notes then
outstanding and any past default or compliance with any provisions may be
waived with the consent of the holders of a majority in principal amount of the
Notes then outstanding. However, without the consent of each holder of an
outstanding New Note affected, no amendment may, among other things, (i) reduce
the amount of Notes whose holders must consent to an amendment, (ii) reduce the
stated rate of or extend the stated time for payment of interest on any New
Note, (iii) reduce the principal of or extend the Stated Maturity of any New
Note, (iv) reduce the premium payable upon the redemption or repurchase of any
New Note or change the time at which any New Note may be redeemed as described
under "Optional Redemption" above, (v) make any New Note payable in money other
than that stated in the New Note, (vi) impair the right of any holder to
receive payment of principal of and interest on such holder's Notes on or after
the due dates therefor or to institute suit for the enforcement of any payment
on or with respect to such holder's Notes or (vii) make any change in the
amendment provisions which require each holder's consent or in the waiver
provisions.
Without the consent of any holder, the Company and the Trustee may
amend the Indenture to cure any ambiguity, omission, defect or inconsistency,
to provide for the assumption by a successor corporation, partnership, trust or
limited liability company of the obligations of the Company under the
Indenture, to provide for uncertificated Notes in addition to or in place of
certificated Notes (provided that the uncertificated Notes are issued in
registered form for purposes of Section 163(f) of the Code, or in a manner such
that the uncertificated Notes are described in Section 163(f)(2)(B) of the
Code), to add further Guarantees with respect to the Notes, to secure the
Notes, to add to the covenants of the Company for the benefit of the holders or
to surrender any right or power conferred upon the Company, to make any change
that does not adversely affect the rights of any holder or to comply with any
requirement of the Commission in connection with the qualification of the
Indenture under the Trust Indenture Act. However, any amendment made to the
subordination provisions of the Indenture that adversely affects the rights of
any holder of Senior Indebtedness then outstanding shall not be effective as to
the holders of such outstanding Senior Indebtedness unless the holders of such
Senior Indebtedness (or any group or representative thereof authorized to give
a consent) consent to such change.
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The consent of the holders is not necessary under the Indenture to
approve the particular form of any proposed amendment. It is sufficient if
such consent approves the substance of the proposed amendment.
After an amendment under the Indenture becomes effective, the Company
is required to mail to the holders a notice briefly describing such amendment.
However, the failure to give such notice to all the holders or any defect
therein, will not impair or affect the validity of the amendment.
DEFEASANCE
The Company at any time may terminate all its obligations under the
Notes and the Indenture ("legal defeasance"), except for certain obligations,
including those respecting the defeasance trust and obligations to register the
transfer or exchange of the Notes, to replace mutilated, destroyed, lost or
stolen Notes and to maintain a registrar and paying agent in respect of the
Notes. The Company at any time may terminate its obligations under covenants
described under "Certain Covenants" (other than "Merger and Consolidation"),
the operation of the cross acceleration provision, the bankruptcy provisions
with respect to Significant Subsidiaries, the judgment default provision and
the Subsidiary Guaranty provision described under "Events of Default" above and
the limitations contained in clauses (iii) and (iv) under "Certain Covenants --
Merger and Consolidation" above ("covenant defeasance").
The Company may exercise its legal defeasance option notwithstanding
its prior exercise of its covenant defeasance option. If the Company exercises
its legal defeasance option, payment of the Notes may not be accelerated
because of an Event of Default with respect thereto. If the Company exercises
its covenant defeasance option, payment of the Notes may not be accelerated
because of an Event of Default specified in clause (iv), (vi), (vii) (with
respect only to Significant Subsidiaries), (viii) or (ix) under "Events of
Default" above or because of the failure of the Company to comply with clause
(iii) or (iv) under "Certain Covenants -- Merger and Consolidation" above.
In order to exercise either defeasance option, the Company must
irrevocably deposit in trust (the "defeasance trust") with the Trustee money or
U.S. Government Obligations for the payment of principal, premium (if any) and
interest on the Notes to redemption or maturity, as the case may be, and must
comply with certain other conditions, including delivery to the Trustee of an
Opinion of Counsel to the effect that holders of the Notes will not recognize
income, gain or loss for Federal income tax purposes as a result of such
deposit and defeasance and will be subject to Federal income tax on the same
amount and in the same manner and at the same times as would have been the case
if such deposit and defeasance had not occurred (and, in the case of legal
defeasance only, such Opinion of Counsel must be based on a ruling of the
Internal Revenue Service or other change in applicable Federal income tax law.
CONCERNING THE TRUSTEE
United States Trust Company of New York is to be the Trustee under the
Indenture and has been appointed by the Company as Registrar and Paying Agent
with regard to the New Notes.
The Indenture contains certain limitations on the rights of the
Trustee, should it become a creditor of the Company, to obtain payment of
claims in certain cases, or to realize on certain property received in respect
of any such claim a security or otherwise. The Trustee will be permitted to
engage in other transactions; however, if it acquires any conflicting interest
(as defined) it must eliminate such conflict or resign.
The holders of a majority in aggregate principal amount of the then
outstanding Notes issued under the Indenture will have the right to direct the
time, method and place of conducting any proceeding for exercising any remedy
available to the Trustee. The Indenture provides that in case an Event of
Default shall occur (which shall not be cured) the Trustee will be required, in
the exercise of its power, to use the degree of care of a prudent man in the
conduct of his own affairs. Subject to such provisions, the Trustee will be
under no obligation to exercise any of its rights or powers under the Indenture
at the request of any of the holders of the Notes issued thereunder, unless
they shall have offered to the Trustee security and indemnity satisfactory to
it.
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GOVERNING LAW
The Indenture provides that it and the Notes will be governed by, and
construed in accordance with, the laws of the State of New York without giving
effect to applicable principles of conflicts of law to the extent that the
application of the law of another jurisdiction would be required thereby.
CERTAIN DEFINITIONS
"Additional Assets" means (i) any property or assets (other than
Indebtedness and Capital Stock) in a Related Business; (ii) the Capital Stock
of a Person that becomes a Restricted Subsidiary as a result of the acquisition
of such Capital Stock by the Company or a Restricted Subsidiary of the Company;
(iii) Capital Stock constituting a minority interest in any Person that at such
time is a Restricted Subsidiary of the Company; or (iv) Permitted Investments
of the type and in the amounts described in clause (viii) of the definition
thereof; provided, however, that, in the case of clauses (ii) and (iii), such
Restricted Subsidiary is primarily engaged in a Related Business.
"Adjusted Net Assets" of a Subsidiary Guarantor at any date shall mean
the lesser of the amount by which (x) the fair value of the property of such
Subsidiary Guarantor exceeds the total amount of liabilities, including,
without limitation, the probable liability of such Subsidiary Guarantor with
respect to its contingent liabilities (after giving effect to all other fixed
and contingent liabilities incurred or assumed on such date), but excluding
liabilities under the Subsidiary Guarantee, of such Subsidiary Guarantor at
such date and (y) the present fair salable value of the assets of such
Subsidiary Guarantor at such date exceeds the amount that will be required to
pay the probable liability of such Subsidiary Guarantor on its debts (after
giving effect to all other fixed and contingent liabilities incurred or assumed
on such date and after giving effect to any collection from any Subsidiary by
such Subsidiary Guarantor in respect of the obligations of such Subsidiary
under the Subsidiary Guarantee), excluding debt in respect of the Subsidiary
Guarantee, as they become absolute and matured.
"Affiliate" of any specified person means any other Person, directly
or indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Asset Disposition" means any sale, lease, transfer, issuance or other
disposition (or series of related sales, leases, transfers, issuances or
dispositions that are part of a common plan) of shares of Capital Stock (or any
other equity interests in) of a Restricted Subsidiary (other than directors'
qualifying shares) or of any other property or other assets (each referred to
for the purposes of this definition as a "disposition") by the Company or any
of its Restricted Subsidiaries (including any disposition by means of a merger,
consolidation or similar transaction) other than (i) a disposition by a
Restricted Subsidiary to the Company or by the Company or a Restricted
Subsidiary to a Wholly-Owned Subsidiary, (ii) a disposition of inventory in the
ordinary course of business, (iii) a disposition of obsolete or worn out
equipment or equipment that is no longer useful in the conduct of the business
of the Company and its Restricted Subsidiaries and that is disposed of in each
case in the ordinary course of business, (iv) dispositions of property for net
proceeds which, when taken collectively with the net proceeds of any other such
dispositions under this clause (iv) that were consummated since the beginning
of the calendar year in which such disposition is consummated, do not exceed $1
million, and (v) transactions permitted under "Certain Covenants -- Merger and
Consolidation" above. Notwithstanding anything to the contrary contained
above, a Restricted Payment made in compliance with the "Limitation on
Restricted Payments" covenant shall not constitute an Asset Disposition except
for purposes of determinations of the Consolidated Coverage Ratio (as defined)
and the Leverage Ratio (as defined).
"Asset Swap" means the execution of a definitive agreement, subject
only to customary closing conditions that the Company in good faith believes
will be satisfied, for a substantially concurrent purchase and sale, or
exchange, of Productive Assets between the Company or any of its Restricted
Subsidiaries and another Person or group of affiliated Persons; provided,
however, that any amendment to or waiver of any closing condition that
individually or in the aggregate is material to the Asset Swap shall be deemed
to be a new Asset Swap.
"Attributable Indebtedness" in respect of a Sale/Leaseback Transaction
means, as at the time of determination, the present value (discounted at the
interest rate borne by the Is, compounded annually) of the total obligations of
the
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lessee for rental payments during the remaining term of the lease included in
such Sale/Leaseback Transaction (including any period for which such lease has
been extended).
"Average Life" means, as of the date of determination, with respect to
any indebtedness, the quotient obtained by dividing (i) the sum of the products
of the numbers of years (rounded upwards to the nearest month) from the date of
determination to the dates of each successive scheduled principal payment of
such Indebtedness or redemption multiplied by the amount of such payment by
(ii) the sum of all such payments.
"Capitalized Lease Obligations" means an obligation that is required
to be classified and accounted for as a capitalized lease for financial
reporting purposes in accordance with GAAP, and the amount of Indebtedness
represented by such obligation shall be the capitalized amount of such
obligation determined in accordance with GAAP, and the Stated Maturity thereof
shall be the date of the last payment of rent or any other amount due under
such lease prior to the first date such lease may be terminated without
penalty.
"Capital Stock" of any Person means any and all shares, interests,
rights to purchase, warrants, options, participations or other equivalents of
or interests in (however designated) equity of such Person, including any
Preferred Stock, but excluding any debt securities convertible into such
equity.
"Consolidated Cash Flow" for any period means the Consolidated Net
Income for such period, plus the following to the extent deducted in
calculating such Consolidated Net Income: (i) income tax expense, (ii)
Consolidated Interest Expense, (iii) depreciation expense, (iv) amortization
expense, (v) exchange or translation losses on foreign currencies, and (vi) all
other non-cash items reducing Consolidated Net Income (excluding any non-cash
item to the extent it represents an accrual of or reserve for cash
disbursements for any subsequent period prior to the stated maturity of the
Notes) and less, to the extent added in calculating Consolidated Net Income,
(x) exchange or translation gains on foreign currencies and (y) non-cash items
(excluding such non-cash items to the extent they represent an accrual for cash
receipts reasonably expected to be received prior to the Stated Maturity of the
Notes), in each case for such period. Notwithstanding the foregoing, the
income tax expense, depreciation expense and amortization expense of a
Subsidiary of the Company shall be included in Consolidated Cash Flow only to
the extent (and in the same proportion) that the net income of such Subsidiary
was included in calculating Consolidated Net Income.
"Consolidated Coverage Ratio" as of any date of determination means
the ratio of (i) the aggregate amount of Consolidated Cash Flow for the period
of the most recent four consecutive fiscal quarters ending prior to the date of
such determination and as to which financial statements are available to (ii)
Consolidated Interest Expense for such four fiscal quarters; provided, however,
that (1) if the Company or any of its Restricted Subsidiaries has incurred any
Indebtedness since the beginning of such period and through the date of
determination of the Consolidated Coverage Ratio that remains outstanding or if
the transaction giving rise to the need to calculate Consolidated Coverage
Ratio is an incurrence of Indebtedness, or both, Consolidated Cash Flow and
Consolidated Interest Expense for such period shall be calculated after giving
effect on a pro forma basis to (A) such Indebtedness as if such Indebtedness
had been incurred on the first day of such period (provided that if such
Indebtedness is incurred under a revolving credit facility (or similar
arrangement or under any predecessor revolving credit or similar arrangement)
only that portion of such Indebtedness that constitutes the one year projected
average balance of such Indebtedness (as determined in good faith by senior
management of the Company) shall be deemed outstanding for purposes of this
calculation), and (B) the discharge of any other Indebtedness repaid,
repurchased, defeased or otherwise discharged with the proceeds of such new
Indebtedness as if such discharge had occurred on the first day of such period,
(2) if since the beginning of such period any Indebtedness of the Company or
any of its Restricted Subsidiaries has been repaid, repurchased, defeased or
otherwise discharged (other than Indebtedness under a revolving credit or
similar arrangement unless such revolving credit Indebtedness has been
permanently repaid and has not been replaced), Consolidated Interest Expense
for such period shall be calculated after giving pro forma effect thereto as if
such Indebtedness had been repaid, repurchased, defeased or otherwise
discharged on the first day of such period, (3) if since the beginning of such
period the Company or any of its Restricted Subsidiaries shall have made any
Asset Disposition or if the transaction giving rise to the need to calculate
the Consolidated Coverage Ratio is an Asset Disposition, Consolidated Cash Flow
for such period shall be reduced by an amount equal to the Consolidated Cash
Flow (if positive) attributable to the assets which are the subject of such
Asset Disposition for such period or increased by an amount equal to the
Consolidated Cash Flow (if negative) attributable thereto for such period, and
Consolidated Interest Expense for such period shall be (i) reduced by an amount
equal to the Consolidated Interest Expense attributable to any Indebtedness of
the Company or any of its Restricted Subsidiaries repaid, repurchased, defeased
or otherwise discharged with respect to the Company and its continuing
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Restricted Subsidiaries in connection with such Asset Disposition for such
period (or, if the Capital Stock of any Restricted Subsidiary of the Company is
sold, the Consolidated Interest Expense for such period directly attributable
to the Indebtedness of such Restricted Subsidiary to the extent the Company and
its continuing Restricted Subsidiaries are no longer liable for such
Indebtedness after such sale) and (ii) increased by interest income
attributable to the assets which are the subject of such Asset Disposition for
such period, (4) if since the beginning of such period the Company or any of
its Restricted Subsidiaries (by merger or otherwise) shall have made an
Investment in any Restricted Subsidiary of the Company (or any Person which
becomes a Restricted Subsidiary of the Company as a result thereof) or an
acquisition of assets occurring in connection with a transaction causing a
calculation to be made hereunder which constitutes all or substantially all of
an operating unit of a business, Consolidated Cash Flow and Consolidated
Interest Expense for such period shall be calculated after giving pro forma
effect thereto (including the incurrence of any Indebtedness) as if such
Investment or acquisition occurred on the first day of such period and (5) if
since the beginning of such period any Person (that subsequently became a
Restricted Subsidiary of the Company or was merged with or into the Company or
any Restricted Subsidiary of the Company since the beginning of such period)
shall have made any Asset Disposition, Investment or acquisition of assets that
would have required an adjustment pursuant to clause (3) or (4) above if made
by the Company or a Restricted Subsidiary of the Company during such period,
Consolidated Cash Flow and Consolidated Interest Expense for such period shall
be calculated after giving pro forma effect thereto as if such Asset
Disposition, Investment or acquisition occurred on the first day of such
period. For purposes of this definition, whenever pro forma effect is to be
given to an acquisition of assets, the amount of income or earnings relating
thereto and the amount of Consolidated Interest Expense associated with any
Indebtedness incurred in connection therewith, the pro forma calculations shall
be determined in good faith by a responsible financial or accounting officer of
the Company. If any Indebtedness bears a floating rate of interest and is
being given pro forma effect, the interest expense on such Indebtedness shall
be calculated as if the rate in effect on the date of determination had been
the applicable rate for the entire period (taking into account any Interest
Rate Agreement applicable to such Indebtedness if such Interest Rate Agreement
has a remaining term in excess of 12 months).
"Consolidated Interest Expense" means, for any period, the total
interest expense of the Company and its Restricted Subsidiaries, plus, to the
extent not included in such interest expense (i) interest expense attributable
to capital leases, (ii) amortization of debt discount, (iii) capitalized
interest, (iv) non-cash interest expense, (v) commissions, discounts and other
fees and charges owed with respect to letters of credit and bankers' acceptance
financing, (vi) interest actually paid by the Company or any such Restricted
Subsidiary under any Guarantee of Indebtedness or other obligation of any other
Person, (vii) net payments (whether positive or negative) pursuant to Interest
Rate Agreements, (viii) the cash contributions to any employee stock ownership
plan or similar trust to the extent such contributions are used by such plan or
trust to pay interest or fees to any Person (other than the Company) in
connection with Indebtedness Incurred by such plan or trust and (ix) cash and
Disqualified Stock dividends in respect of all Preferred Stock of Subsidiaries
and Disqualified Stock of the Company held by Persons other than the Company or
a Wholly Owned Subsidiary and less (a) to the extent included in such interest
expense, the amortization of capitalized debt issuance costs and (b) interest
income. Notwithstanding the foregoing, the Consolidated Interest Expense with
respect to any Restricted Subsidiary of the Company, that was not a
Wholly-Owned Subsidiary, shall be included only to the extent (and in the same
proportion) that the net income of such Restricted Subsidiary was included in
calculating Consolidated Net Income.
"Consolidated Net Income" means, for any period, the consolidated net
income (loss) of the Company and its consolidated Subsidiaries determined in
accordance with GAAP; provided, however, that there shall not be included in
such Consolidated Net income: (i) any net income (loss) of any person acquired
by the Company or any of its Restricted Subsidiaries in a pooling of interests
transaction for any period prior to the date of such acquisition, (ii) any net
income of any Restricted Subsidiary of the Company if such Restricted
Subsidiary is subject to restrictions, directly or indirectly, on the payment
of dividends or the making of distributions by such Restricted Subsidiary,
directly or indirectly, to the Company (other than restrictions in effect on
the Issue Date with respect to a Restricted Subsidiary of the Company and other
than restrictions that are created or exist in compliance with the "Limitation
on Restrictions on Distributions from Restricted Subsidiaries" covenant), (iii)
any gain or loss realized upon the sale or other disposition of any assets of
the Company or its consolidated Restricted Subsidiaries (including pursuant to
any Sale/Leaseback Transaction) which are not sold or otherwise disposed of in
the ordinary course of business any gain or loss realized upon the sale or
other disposition of any Capital Stock of any Person, (iv) any extraordinary
gain or loss, (v) the cumulative effect of a change in accounting principles,
(vi) non-cash restructuring charges or writeoffs recorded within the one year
period following the Issue Date in an aggregate amount not to exceed $7.5
million, (vii) the net income of any Person, other than a Restricted
Subsidiary, except to the extent of the lesser of (A) dividends or
distributions paid to the Company or any of its Restricted Subsidiaries by such
Person and (B) the net income of such Person (but in no event less than zero),
and
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the net loss of such Person (other than an Unrestricted Subsidiary) shall be
included only to the extent of the aggregate Investment of the Company or any
of its Restricted Subsidiaries in such Person and (viii) any non-cash expenses
attributable to grants or exercises of employee stock options. Notwithstanding
the foregoing, (A) Consolidated Net Income for any period shall be reduced by
the aggregate amount of dividends paid during such period pursuant to clause
(v) of paragraph (b) of the "Limitation on Restricted Payments" covenant and
(B) for the purpose of the covenant described under "Certain Covenants --
Limitation on Restricted Payments" only, there shall be excluded from
Consolidated Net Income any dividends, repayments of loans or advances or other
transfers of assets from Unrestricted Subsidiaries to the Company or a
Restricted Subsidiary to the extent such dividends, repayments or transfers
increase the amount of Restricted Payments permitted under such covenant
pursuant to clause (a)(3)(E) thereof.
"Consolidated Net Worth" means the total of the amounts shown on the
balance sheet of the Company and its consolidated Restricted Subsidiaries,
determined on a consolidated basis in accordance with GAAP, as of the end of
the most recent fiscal quarter of the Company ending prior to the taking of any
action for the purpose of which the determination is being made and for which
financial statements are available (but in no event ending more than 135 days
prior to the taking of such action), as (i) the par or stated value of all
outstanding Capital Stock of the Company plus (ii) paid in capital or capital
surplus relating to such Capital Stock plus (iii) any retained earnings or
earned surplus less (A) any accumulated deficit and (B) any amounts
attributable to Disqualified Stock.
"Continuing Director" of any Person means, as of the date of
determination, any Person who (i) was a member of the Board of Directors of
such Person on the date of the Indenture, (ii) was nominated for election or
elected to the Board of Directors of such Person with the affirmative vote of a
majority of the Continuing Directors of such Person who were members of such
Board of Directors at the time of such nomination or election, or (iii) is a
representative of a Permitted Holder.
"Currency Agreement" means, in respect of a Person any foreign
exchange contract, currency swap agreement or other similar agreement as to
which such Person is a party or a beneficiary.
"Default" means any event which is, or after notice or passage of time
or both would be, an Event of Default.
"Designated Senior Indebtedness" means (i) all obligations under the
New Credit Facility in the case of the Company, (ii) any Guarantee by a
Subsidiary Guarantor of such obligations under the New Credit Facility in the
case of such Subsidiary Guarantor and (iii) any other Senior Indebtedness in
the case of the Company or Guarantor Senior Indebtedness in the case of such
Subsidiary Guarantor which, at the date of determination, has an aggregate
principal amount outstanding of, or under which, at the date of determination,
the holders thereof are committed to lend up to, at least $5 million and is
specifically designated by the Company or such Subsidiary Guarantor in the
instrument evidencing or governing such Senior Indebtedness or Guarantor Senior
Indebtedness as "Designated Senior Indebtedness" for purposes of the Indenture.
"Disqualified Stock" means any Capital Stock which, by its terms (or
by the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event (other than an event which
would constitute a Change of Control), (i) matures (excluding any maturity as
the result of an optional redemption by the issuer thereof) or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is
redeemable at the option of the holder thereof, in whole or in part, on or
prior to the final stated maturity of the Notes, or (ii) is convertible into or
exchangeable (unless at the sole option of the issuer thereof) for (a) debt
securities or (b) any Capital Stock referred to in (i) above, in each case at
any time prior to the final stated maturity of the Notes.
"Equity Offering" means an offering for cash by Holding or the Company
of its common stock, or options, warrants or rights with respect to its common
stock.
"Financial Advisory Agreement" means the Financial Advisory Agreement
between Hicks Muse Partners and the Company as in effect on the Issue Date.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect as of the date of the Indenture, including those
set forth in the opinions and pronouncements of the Accounting Principles Board
of the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of
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the accounting profession. All ratios and computations based on GAAP contained
in the Indenture shall be computed in conformity with GAAP.
"Guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness of any other Person
and any obligation, direct or indirect, contingent or otherwise, of such Person
(i) to purchase or pay (or advance or supply funds for the purchase or payment
of) such Indebtedness of such other Person (whether arising by virtue of
partnership arrangements, or by agreement to keep-well, to purchase assets,
goods, securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise) or (ii) entered into for purposes of
assuring in any other manner the obligee of such Indebtedness of the payment
thereof or to protect such obligee against loss in respect thereof (in whole or
in part); provided, however, that the term "Guarantee" shall not include
endorsements for collection or deposit in the ordinary course of business. The
term "Guarantee" used as a verb has a corresponding meaning.
"Guarantor Senior Indebtedness" means, with respect to a Subsidiary
Guarantor, whether outstanding on the Issue Date or thereafter issued, the
obligations under any Guarantee of the New Credit Facility by such Subsidiary
Guarantor, all other Guarantees by such Subsidiary Guarantor of Senior
Indebtedness of the Company and all Indebtedness of such Subsidiary Guarantor,
including interest and fees thereon, unless, in the instrument creating or
evidencing the same or pursuant to which the same is outstanding, it is
provided that the obligations of such Subsidiary Guarantor in respect of such
Indebtedness are not superior in right of payment to the obligations of such
Subsidiary Guarantor under the Subsidiary Guaranty; provided, however, that
Guarantor Senior Indebtedness shall not include (1) any obligations of such
Subsidiary Guarantor to the Company or any other Subsidiary of the Company, (2)
any liability for Federal, state, local or other taxes owed or owing by such
Subsidiary Guarantor, (3) any accounts payable or other liability to trade
creditors arising in the ordinary course of business (including Guarantees
thereof or instruments evidencing such liabilities) or (4) any Indebtedness,
Guarantee or obligation of such Subsidiary Guarantor that is expressly
subordinate or junior in right of payment to any other Indebtedness, Guarantee
or obligation of such Subsidiary Guarantor, including any Guarantor Senior
Subordinated Indebtedness and Guarantor Subordinated Obligations of such
Subsidiary Guarantor.
"Guarantor Senior Subordinated Indebtedness" means, with respect to a
Subsidiary Guarantor, the obligations of such Subsidiary Guarantor under the
Subsidiary Guaranty and any other Indebtedness of such Subsidiary Guarantor
that specifically provides that such Indebtedness is to rank pari passu in
right of payment with the obligations of such Subsidiary Guarantor under the
Subsidiary Guaranty and is not subordinated by its terms in right of payment to
any Indebtedness or other obligation of such Subsidiary Guarantor which is not
Guarantor Senior Indebtedness of such Subsidiary Guarantor.
"Guarantor Subordinated Obligation" means, with respect to a
Subsidiary Guarantor, any Indebtedness of such Subsidiary Guarantor (whether
outstanding on the Issue Date or thereafter incurred) which is subordinate or
junior in right of payment to the obligations of such Subsidiary Guarantor
under the Subsidiary Guaranty pursuant to a written agreement.
"Incur" means issue, assume, guarantee, incur or otherwise become
liable for; provided, however, that any indebtedness or Capital Stock of a
Person existing at the time such person becomes a Restricted Subsidiary
(whether by merger, consolidation, acquisition or otherwise) shall be deemed to
be incurred by such Restricted Subsidiary at the time it becomes a Restricted
Subsidiary.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication), (i) the principal of and premium (if any)
in respect of indebtedness of such Person for borrowed money, (ii) the
principal of and premium (if any) in respect of obligations of such Person
evidenced by bonds, debentures, notes or other similar instruments, (iii) all
obligations of such Person in respect of letters of credit or other similar
instruments (including reimbursement obligations with respect thereto) (other
than obligations with respect to letters of credit securing obligations (other
than obligations described in clauses (i), (ii) and (v)) entered into in the
ordinary course of business of such Person to the extent that such letters of
credit are not drawn upon or, if and to the extent drawn upon, such drawing is
reimbursed no later than the third business day following receipt by such
Person of a demand for reimbursement following payment on the letter of
credit), (iv) all obligations of such Person to pay the deferred and unpaid
purchase price of property or services (except trade payables and accrued
expenses incurred in the ordinary course of business), which purchase price is
due more than six months after the date of placing such property in service
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or taking delivery and title thereto or the completion of such services, (v)
all Capitalized Lease Obligations and all Attributable Indebtedness of such
Person, (vi) all Indebtedness of other Persons secured by a Lien on any asset
of such Person, whether or not such Indebtedness is assumed by such Person,
(vii) all Indebtedness of other Persons to the extent Guaranteed by such
Person, (viii) the amount of all obligations of such Person with respect to the
redemption, repayment or other repurchase of any Disqualified Stock or, with
respect to any Restricted Subsidiary of the Company, any Preferred Stock of
such Restricted Subsidiary to the extent such obligation arises on or before
the Stated Maturity of the Notes (but excluding, in each case, accrued
dividends) and (ix) to the extent not otherwise included in this definition,
obligations under Currency Agreements and Interest Rate Agreements. The amount
of Indebtedness of any Person at any date shall be the outstanding principal
amount of all unconditional obligations as described above, as such amount
would be reflected on a balance sheet prepared in accordance with GAAP, and the
maximum liability of such Person, upon the occurrence of the contingency giving
rise to the obligation, of any contingent obligations described above at such
date.
"Interest Rate Agreement" means, with respect to any Person any
interest rate protection agreement, interest rate future agreement, interest
rate option agreement, interest rate swap agreement, interest rate cap
agreement, interest rate collar agreement, interest rate hedge agreement or
other similar agreement or arrangement as to which such Person is party or a
beneficiary.
"Investment" in any Person means any direct or indirect advance, loan
(other than advances to customers in the ordinary course of business that are
recorded as accounts payable on the balance sheet of such Person) or other
extension of credit (including by way of Guarantee or similar arrangement, but
excluding any debt or extension of credit represented by a bank deposit other
than a time deposit) or capital contribution to (by means of any transfer of
cash or other property to others or any payment for property or services for
the account or use of others), or any purchase or acquisition of Capital Stock,
Indebtedness or other similar instruments issued by such Person. For purposes
of the "Limitation on Restricted Payments" covenant, (i) "Investment" shall
include the portion (proportionate to the Company's equity interest in a
Restricted Subsidiary to be designated as an Unrestricted Subsidiary) of the
fair market value of the net assets of such Restricted Subsidiary of the
Company at the time that such Restricted Subsidiary is designated an
Unrestricted Subsidiary; provided, however, that upon a redesignation of such
Subsidiary as a Restricted Subsidiary, the Company shall be deemed to continue
to have a permanent "Investment" in an Unrestricted Subsidiary in an amount (if
positive) equal to (x) the Company's "Investment" in such Subsidiary at the
time of such redesignation less (y) the portion (proportionate to the Company's
equity interest in such Subsidiary) of the fair market value of the net assets
of such Subsidiary at the time that such Subsidiary is so re-designated a
Restricted Subsidiary; and (ii) any property transferred to or from an
Unrestricted Subsidiary shall be valued at its fair market value at the time of
such transfer, in each case as determined in good faith by the Board of
Directors and evidenced by a resolution of such Board of Directors certified in
an Officers' Certificate to the Trustee.
"Issue Date" means the date on which the Notes are originally issued.
"Leverage Ratio" shall mean, as to any Person, the ratio of (i) the
sum of the aggregate outstanding amount of Indebtedness of such Person and its
Subsidiaries as of the date of calculation on a consolidated basis to (ii) the
Consolidated Cash Flow of such Person for the last four full fiscal quarters
(the "Four Quarter Period") ending on or prior to the date of determination.
For purposes of this definition, the aggregate outstanding principal
amount of Indebtedness of the Person and its Subsidiaries for which such
calculation is made shall be determined on a pro forma basis as if the
Indebtedness giving rise to the need to perform such calculation had been
incurred and the proceeds therefrom had been applied, and all other
transactions in respect of which such Indebtedness is being incurred had
occurred, on the date the respective calculation is required. In addition to
the foregoing, for purposes of this definition, "Consolidated Cash Flow" shall
be calculated on a pro forma basis after giving effect to (i) the incurrence of
the Indebtedness of such Person and its Subsidiaries (and the application of
the proceeds therefrom) giving rise to the need to make such calculation and
any incurrence (and the application of the proceeds therefrom) or repayment of
other Indebtedness, other than the incurrence or repayment of Indebtedness
pursuant to working capital facilities, at any time subsequent to the beginning
of the Four Quarter Period and on or prior to the date of determination, as if
such incurrence (and the application of the proceeds thereof), or the
repayment, as the case may be, occurred on the first day of the Four Quarter
Period and (ii) any Asset Disposition at any time on or subsequent to the first
day of the Four Quarter Period and on or prior to the date of determination, as
if such Asset Disposition occurred on the first day of the Four Quarter Period.
Furthermore, in calculating "Consolidated Interest Expense" for purposes of the
calculation of "Consolidated Cash Flow," (i) interest on Indebtedness
determined
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on a fluctuating basis as of the date of determination (including Indebtedness
actually incurred on the date of the transaction giving rise to the need to
calculate the Leverage Ratio) and which will continue to be so determined
thereafter shall be deemed to have accrued at a fixed rate per annum equal to
the rate of interest on such Indebtedness as in effect on the date of
determination and (ii) notwithstanding (i) above, interest determined on a
fluctuating basis, to the extent such interest is covered by Interest Rate
Agreements, shall be deemed to accrue at the rate per annum resulting after
giving effect to the operation of such agreements so long as the respective
Interest Rate Agreement has a remaining term in excess of 12 months.
"Lien" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including any conditional sale or other title
retention agreement or lease in the nature thereof).
"Monitoring and Oversight and Agreement" means the Monitoring and
Oversight Agreement between Hicks Muse Partners, Holding and the Company as in
effect on the Issue Date.
"Net Available Cash" from an Asset Disposition means cash payments
received (including any cash payments received by way of deferred payment of
principal pursuant to a note or installment receivable or otherwise, but only
as and when received, but excluding any other consideration received in the
form of assumption by the acquiring Person of Indebtedness or other obligations
relating to the properties or assets subject to such Asset Disposition)
therefrom in each case net of (i) all legal, title and recording tax expenses,
commissions and other fees and expenses incurred, and all Federal, state,
foreign and local taxes required to be paid or accrued as a liability under
GAAP, as a consequence of such Asset Disposition, (ii) all payments made on any
Indebtedness which is secured by any assets subject to such Asset Disposition,
in accordance with the terms of any Lien upon such assets, or which must by its
terms, or in order to obtain a necessary consent to such Asset Disposition or
by applicable law, be repaid out of the proceeds from such Asset Disposition,
(iii) all distributions and other payments required to be made to any Person
owning a beneficial interest in assets subject to sale or minority interest
holders in Subsidiaries or joint ventures as a result of such Asset
Disposition, (iv) the deduction of appropriate amounts to be provided by the
seller as a reserve, in accordance with GAAP, against any liabilities
associated with the assets disposed of in such Asset Disposition, provided
however, that upon any reduction in such reserves (other than to the extent
resulting from payments of the respective reserved liabilities), Net Available
Cash shall be increased by the amount of such reduction to reserves, and
retained by the Company or any Restricted Subsidiary of the Company after such
Asset Disposition and (v) any portion of the purchase price from an Asset
Disposition placed in escrow (whether as a reserve for adjustment of the
purchase price, for satisfaction of indemnities in respect of such Asset
Disposition or otherwise in connection with such Asset Disposition) provided,
however, that upon the termination of such escrow, Net Available Cash shall be
increased by any portion of funds therein released to the Company or any
Restricted Subsidiary.
"Net Cash Proceeds," with respect to any issuance or sale of Capital
Stock, means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result of such issuance or sale.
"New Credit Facility" means the Credit Agreement, to be dated as of
November 27, 1996, among the Company, Holding, Bankers Trust Company, as agent,
and any other financial institutions from time to time party thereto, together
with the related documents thereto (including, without limitation, any
guarantee agreements and security documents), in each case as such agreements
may be amended (including any amendment and restatement thereof), supplemented
or otherwise modified from time to time, including any agreement extending the
maturity of, refinancing, replacing or otherwise restructuring (including by
way of adding Subsidiaries of the Company as additional borrowers or guarantors
thereunder) all or any portion of the Indebtedness under such agreement or any
successor or replacement agreement and whether by the same or any other agent,
lender or group of lenders.
"Non-Recourse Debt" means Indebtedness (i) as to which neither the
Company nor any Restricted Subsidiary (a) provides any guarantee or credit
support of any kind (including any undertaking, guarantee, indemnity, agreement
or instrument that would constitute Indebtedness) or (b) is directly or
indirectly liable (as a guarantor, general partner or otherwise) and (ii) no
default with respect to which (including any rights that the holders thereof
may have to take enforcement action against an Unrestricted Subsidiary) would
permit (upon notice, lapse of time or both) any holder of any other
Indebtedness of the Company or any Restricted Subsidiary to declare a default
under such other Indebtedness or cause the payment thereof to be accelerated or
payable prior to its stated maturity.
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"Permitted Indebtedness" means (i) Indebtedness of the Company owing
to and held by any Wholly-Owned Subsidiary or Indebtedness of a Restricted
Subsidiary owing to and held by the Company or any Wholly-Owned Subsidiary;
provided, however, that any subsequent issuance or transfer of any Capital
Stock or any other event which results in any such Wholly-Owned Subsidiary
ceasing to be a Wholly-Owned Subsidiary or any subsequent transfer of any such
Indebtedness (except to the Company or any Wholly-Owned Subsidiary) shall be
deemed, in each case, to constitute the Incurrence of such Indebtedness by the
issuer thereof; (ii) Indebtedness represented by (x) the Notes, (y) any
indebtedness (other than the Indebtedness described in clauses (i), (ii) and
(iv) of paragraph (b) of the covenant described under "Limitation on
Indebtedness" and other than Indebtedness Incurred pursuant to clause (i) above
or clauses (iv), (v) or (vi) below) outstanding on the Issue Date and (z) any
Refinancing Indebtedness Incurred in respect of any Indebtedness described in
this clause (ii) or Incurred pursuant to paragraph (a) of the covenant
described under "Limitation on Indebtedness"; (iii) (A) Indebtedness of a
Restricted Subsidiary Incurred and outstanding on the date on which such
Restricted Subsidiary was acquired by the Company (other than Indebtedness
Incurred as consideration in, or to provide all or any portion of the funds or
credit support utilized to consummate the transaction or series of related
transactions pursuant to which such Restricted Subsidiary became a Subsidiary
or was otherwise acquired by the Company); provided, however, that at the time
such Restricted Subsidiary is acquired by the Company, the Company would have
been able to incur $1.00 of additional Indebtedness pursuant to paragraph (a)
of the covenant described under "Limitation on Indebtedness" above after giving
effect to the Incurrence of such Indebtedness pursuant to this clause (iii) and
(B) Refinancing, Indebtedness Incurred by a Restricted Subsidiary in respect of
Indebtedness Incurred by such Restricted Subsidiary pursuant to this clause
(iii); (iv) Indebtedness (A) in respect of performance bonds, bankers'
acceptances and surety or appeal bonds provided by the Company or any of its
Restricted Subsidiaries to their customers in the ordinary course of their
business, (B) in respect of performance bonds or similar obligations of the
Company or any of its Restricted Subsidiaries for or in connection with
pledges, deposits or payments made or given in the ordinary course of business
in connection with or to secure statutory, regulatory or similar obligations,
including obligations under health, safety or environmental obligations, (C)
arising from Guarantees to suppliers, lessors, licensees, contractors,
franchises or customers of obligations (other than Indebtedness) incurred in
the ordinary course of business and (D) under Currency Agreements and Interest
Rate Agreements; provided, however, that in the case of Currency Agreements and
Interest Rate Agreements, such Currency Agreements and Interest Rate Agreements
are entered into for bona fide hedging purposes of the Company or its
Restricted Subsidiaries (as determined in good faith by the Board of Directors
or senior management of the Company) and correspond in terms of notional
amount, duration, currencies and interest rates as applicable, to Indebtedness
of the Company or its Restricted Subsidiaries Incurred without violation of the
Indenture or to business transactions of the Company or its Restricted
Subsidiaries on customary terms entered into in the ordinary course of
business; (v) Indebtedness arising from agreements providing for
indemnification, adjustment of purchase price or similar obligations, or from
Guarantees or letters of credits, surety bonds or performance bonds securing
any obligations of the Company or any of its Restricted Subsidiaries pursuant
to such agreements, in each case incurred in connection with the disposition of
any business assets or Restricted Subsidiary of the Company (other Guarantees
of Indebtedness or other obligations incurred by any Person acquiring all or
any portion of such business assets or Restricted Subsidiary of the Company for
the purpose of financing such acquisition) in a principal amount not to exceed
the gross proceeds actually received by the Company or any of its Restricted
Subsidiaries in connection with such disposition; provided, however, that the
principal amount of any Indebtedness incurred pursuant to this clause (v) when
taken together with all Indebtedness incurred pursuant to this clause (v) and
then outstanding, shall not exceed $10 million; (vi) Indebtedness consisting of
(A) Guarantees by the Company or a Subsidiary Guarantor of Indebtedness
incurred by a Wholly-Owned Subsidiary without violation of the Indenture and
(B) Guarantees by a Restricted Subsidiary of Senior Indebtedness incurred by
the Company without violation of the Indenture (so long as such Restricted
Subsidiary could have incurred such Indebtedness directly without violation of
the Indenture); and (vii) Indebtedness arising from the honoring by a bank or
other financial institution of a check, draft or similar instrument drawn
against insufficient funds in the ordinary course of business, provided that
such Indebtedness is extinguished within two business clays of its incurrence.
"Permitted Investment" means an Investment by the Company or any of
its Restricted Subsidiaries in (i) a Wholly-Owned Subsidiary of the Company;
provided, however, that the primary business of such Wholly-Owned Subsidiary is
a Related Business; (ii) another Person if as a result of such Investment such
other Person becomes a Wholly-Owned Subsidiary of the Company or is merged or
consolidated with or into, or transfers or conveys all or substantially all its
assets to, the Company or a Wholly-Owned Subsidiary of the Company; provided,
however, that in each case such Person's primary business is a Related
Business; (iii) Temporary Cash Investments; (iv) receivables owing to the
Company or any of its Restricted Subsidiaries, created or acquired in the
ordinary course of business and payable or dischargeable in accordance with
customary trade terms; (v) payroll, travel and similar advances to cover
matters that
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are expected at the time of such advances ultimately to be treated as expenses
for accounting purposes and that are made in the ordinary course of business;
(vi) loans or advances to employees for purposes of purchasing the Company's
common stock in an aggregate amount outstanding at any one time not to exceed
$500,000 and other loans and advances to employees made in the ordinary course
of business consistent with past practices of the Company or such Restricted
Subsidiary; (vii) stock, obligations or securities received in settlement of
debts created in the ordinary course of business and owing to the Company or
any of its Restricted Subsidiaries or in satisfaction of judgments or claims;
(viii) a Person engaged in a Related Business or a loan or advance to the
Company the proceeds of which are used solely to make an investment in a Person
engaged in a Related Business or a Guarantee by the Company of Indebtedness of
any Person in which such Investment has been made provided, however, that no
Permitted Investments may be made pursuant to this clause (viii) to the extent
the amount thereof would, when taken together with all other Permitted
Investments made pursuant to this clause (viii), exceed $10 million in the
aggregate (plus, to the extent not previously reinvested, any return of capital
realized on Permitted Investments made pursuant to this clause (viii), or any
release or other cancellation of any Guarantee constituting such Permitted
Investment); (ix) Persons to the extent such Investment is received by the
Company or any Restricted Subsidiary as consideration for asset dispositions
effected in compliance with the covenant described under "Limitations on Sales
of Assets and Subsidiary Stock"; (x) prepayments and other credits to suppliers
made in the ordinary course of business consistent with the past practices of
the Company and its Restricted Subsidiaries; and (xi) Investments in connection
with pledges, deposits, payments or performance bonds made or given in the
ordinary course of business in connection with or to secure statutory,
regulatory or similar obligations, including obligations under health, safety
or environmental obligations.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization,
government or any agency or political subdivision hereof or any other entity.
"Preferred Stock," as applied to the Capital Stock of any corporation,
means Capital Stock of any class or classes (however designated) which is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
"Productive Assets" means assets of a kind used or usable by the
Company and its Restricted Subsidiaries in the Company's business or any
Related Business.
A "Public Market" exists at any time with respect to the common stock
of Holding or the Company if (a) the common stock of Holding or the Company is
then registered with the Securities and Exchange Commission pursuant to Section
12(b) or 12(g) of the Exchange Act and traded either on a national securities
exchange or in the National Association of Securities Dealers Automated
Quotation System and (b) at least 15% of the total issued and outstanding
common stock of Holding or the Company, as applicable, has been distributed
prior to such time by means of an effective registration statement under the
Securities Act of 1933.
"Qualified Capital Stock" of any Person shall mean any Capital Stock
of such Person which is not Disqualified Stock.
"Refinancing Indebtedness" means Indebtedness that refunds,
refinances, replaces, renews, repays or extends (including pursuant to any
defeasance or discharge mechanism) (collectively, "refinances," and
"refinanced" shall have a correlative meaning) any Indebtedness existing on the
date of the Indenture or Incurred in compliance with the Indenture (including
Indebtedness of the Company that refinances Indebtedness of any Restricted
Subsidiary and Indebtedness of any Restricted Subsidiary that refinances
Indebtedness of another Restricted Subsidiary) including Indebtedness that
refinances Refinancing Indebtedness; provided, however, that (i) the
Refinancing Indebtedness has a Stated Maturity no earlier than the earlier of
(A) the first anniversary of the Stated Maturity of the Notes and (B) Stated
Maturity of the Indebtedness being refinanced, (ii) the Refinancing
Indebtedness has an Average Life at the time such Refinancing Indebtedness is
Incurred that is equal to or greater than the lesser of (A) the Average Life of
the Notes and (B) the Average Life of the Indebtedness being refinanced and,
(iii) the Refinancing Indebtedness is in an aggregate principal amount (or if
issued with original issue discount, an aggregate issue price) that is equal to
(or 101% of, in the case of a refinancing of the Notes in connection with a
Change of Control) or less than the sum of the aggregate principal amount (or
if issued with original issue discount, the aggregate accreted value) then
outstanding of the Indebtedness being refinanced.
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"Related Business" means any business which is the same as or related,
ancillary or complementary to any of the businesses of the Company and its
Restricted Subsidiaries on the date of the Indenture, as reasonably determined
by the Company's Board of Directors.
"Representative" means any trustee, agent or representative (if any)
of an issue of Senior Indebtedness.
"Restricted Subsidiary" means any Subsidiary of the Company other an
Unrestricted Subsidiary.
"Sale/Leaseback Transaction" means an arrangement relating to property
now owned or hereafter acquired whereby the Company or a Restricted Subsidiary
transfers such property to a Person and the Company or a Subsidiary leases it
from such Person.
"Secured Indebtedness" means any Indebtedness of the Company or a
Subsidiary Guarantor secured by a Lien.
"Senior Subordinated Indebtedness" means the Notes and any other
Indebtedness of the Company that specifically provides that such Indebtedness
is to rank pari passu with the Notes in right of payment and is not
subordinated by its terms in right of payment to any Indebtedness or other
obligation of the Company which is not Senior Indebtedness.
"Significant Subsidiary" means any Restricted Subsidiary that would be
a "Significant Subsidiary" of the Company within the meaning of Rule 1-02 under
Regulation S-X promulgated by the SEC.
"Stated Maturity" means, with respect to any security, the date
specified in such security as the fixed date on which the payment of principal
of such security is due and payable, including pursuant to any mandatory
redemption provision.
"Subordinated Obligation" means any Indebtedness of the Company
(whether outstanding on the Issue Date or thereafter Incurred) which is
subordinate or junior in right of payment to the Notes pursuant to a written
agreement.
"Subsidiary" of any Person means any corporation, association,
partnership or other business entity of which more than 50% of the total voting
power of shares of Capital Stock or other interests (including partnership
interests) entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers or trustees thereof is at the time
owned or controlled, directly or indirectly, by (i) such Person, (ii) such
Person and one or more Subsidiaries of such Person or (iii) one or more
Subsidiaries of such Person. Unless otherwise specified herein, each reference
to a Subsidiary shall refer to a Subsidiary of the Company.
"Subsidiary Guarantee" means the Guarantee of the Notes by a Subsidiary
Guarantor.
"Subsidiary Guarantor" means each Subsidiary of the Company in
existence on the Issue Date and each Subsidiary (other than foreign
subsidiaries and Unrestricted Subsidiaries) created or acquired by the Company
after the Issue Date.
"Temporary Cash Investments" means any of the following: (i) any
Investment in direct obligations of the United States of America or any agency
thereof or obligations Guaranteed by the United States of America or any agency
thereof, (ii) Investments in time deposit accounts, certificates of deposit and
money market deposits maturing within 180 days of the date of acquisition
thereof issued by a bank or trust company which is organized under the laws of
the United States of America, any state thereof or any foreign country
recognized by the United States of America having capital surplus and undivided
profits aggregating in excess of $250 million (or the foreign currency
equivalent thereof) and whose long-term debt, or whose parent holding company's
long-term debt, is rated "A" (or such similar equivalent rating) or higher by
at least one nationally recognized statistical rating organization (as defined
in Rule 436 under the Securities Act), (iii) repurchase obligations with a term
of not more than 30 days for underlying securities of the types described in
clause (i) above entered into with a bank meeting the qualifications described
in clause (ii) above, (iv) Investments in commercial paper, maturing not more
than 180 days after the date of acquisition, issued by a corporation (other
than an Affiliate of the Company) organized and in existence under the laws of
the United States of America or any foreign country recognized by the United
States of America with a rating at the time as of which any investment therein
is made of "P-1" (or higher) according to Moody's Investors Service, Inc. or
"A-1" (or higher) according to Standard and Poor's
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Ratings Group, (v) Investments in securities with maturities of six months or
less from the date of acquisition issued or fully guaranteed by any state,
commonwealth or territory of the United States of America, or by any political
subdivision or taxing authority thereof, and rated at least "A" by Standard &
Poor's Ratings Group or "A" by Moody's Investors Service, Inc. and (vi)
Investments in mutual funds whose investment guidelines restrict such funds'
investments to those satisfying the provisions of clauses (i) through (v)
above.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that
at the time of determination shall be designated an Unrestricted Subsidiary by
the Board of Directors in the manner provided below and (ii) any Subsidiary of
an Unrestricted Subsidiary. The Board of Directors may designate any
Subsidiary of the Company (including any newly acquired or newly formed
Subsidiary of the Company) to be an Unrestricted Subsidiary unless such
Subsidiary or any of its Subsidiaries owns any Capital Stock or Indebtedness
of, or owns or holds any Lien on any property of, the Company or any Restricted
Subsidiary of the Company that is not a Subsidiary of the Subsidiary to be so
designated; provided, however, that either (A) the Subsidiary to be so
designated has total consolidated assets of $10,000 or less or (B) if such
Subsidiary has consolidated assets greater than $10,000, then such designation
would be permitted under "Limitation on Restricted Payments." The Board of
Directors may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary; provided, however, that immediately after giving effect to such
designation (x) the Company could Incur $1.00 of additional Indebtedness under
clause (a) of "Limitation on Indebtedness" and (y) no Default shall have
occurred and be continuing. Any such designation by the Board of Directors
shall be evidenced to the Trustee by promptly filing with the Trustee a copy of
the Board Resolution giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the foregoing
provisions.
"U.S. Government Obligations" means direct obligations (or
certificates representing an ownership interest in such obligations) of the
United States of America (including any agency or instrumentality thereof) for
the payment of which the full faith and credit of the United States of America
is pledged and which are not callable or redeemable at the issuer's option.
"Voting Stock" of a corporation means all classes of Capital Stock of
such corporation then outstanding and normally entitled to vote in the election
of directors.
"Wholly-Owned Subsidiary" means a Restricted Subsidiary of the
Company, at least 99% of the Capital Stock of which (other than directors'
qualifying shares) is owned by the Company or another Wholly-Owned Subsidiary.
95
<PAGE> 97
BOOK-ENTRY; DELIVERY AND FORM
The certificates representing the Old Notes were issued, and the
certificates representing the New Notes will be issued, in fully registered
form, without coupons. The Old Notes are represented by two permanent global
certificates in definitive, fully registered form without interest coupons in
the aggregate amount of $100,000,000 (the "Initial Global Notes"). Except as
described in the next paragraph, the New Notes initially will be represented by
one or more permanent global certificates in definitive, fully registered form
(the "Global Notes") and will be deposited with, or on behalf of, the DTC (the
"Depositary"), and registered in the name of Cede & Co., as the DTC's nominee
or will remain in the custody of the Trustee pursuant to a FAST Balance
Certificate Agreement between the DTC and the Trustee. If any holder of Old
Notes whose interest in such Old Notes is represented by an Initial Global Note
fails to tender in the Exchange Offer, the Company may issue and deliver to
such holder a separate certificate representing such holder's Old Notes in
registered form without interest coupons.
New Notes exchanged for Old Notes originally purchased by or
transferred to (i) institutional "accredited investors" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act) who are not "qualified
institutional buyers" (as defined in Rule 144A under the Securities Act)
("QIBs") or (ii) QIBs who elect to take physical delivery of their certificates
(collectively, "Non-Global Purchasers") will be issued in registered form
without interest coupons (the "Certificated Securities"). Upon the transfer to
a QIB of Certificated Securities initially issued to a Non-Global Purchaser,
such Certificated Securities will, unless the transferee requests otherwise or
the Global Note has previously been exchanged in whole for Certificated
Securities, be exchanged for an interest in the Global Note.
The Depository has advised the Company that it is (i) a limited
purpose trust company organized under the laws of the State of New York, (ii) a
member of the Federal Reserve System, (iii) a "clearing corporation" within the
meaning of the Uniform Commercial Code, as amended, and (iv) a "Clearing
Agency" registered pursuant to Section 17A of the Exchange Act. The Depository
was created to hold securities for its participants (collectively, the
"Participants") and facilitates the clearance and settlement of securities
transactions between Participants through electronic book entry changes to the
accounts of its Participants, thereby eliminating the need for physical
transfer and delivery of certificates. The Depository's Participants include
securities brokers and dealers (including the initial purchasers of the Old
Notes), banks and trust companies, clearing corporations and certain other
organizations. Access to the Depository's system is also available to other
entities such as banks, brokers, dealers and trust companies (collectively, the
"Indirect Participants") that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly. QIBs may elect
to hold New Notes purchased by them through the Depository. QIBs who are not
Participants may beneficially own securities held by or on behalf of the
Depository only through Participants or Indirect Participants. Persons that
are not QIBs may not hold New Notes through the Depository.
The Company has been advised by the Depository that upon deposit of
the Global Notes, (i) the Depository will credit the accounts of Participants
with portions of the principal amount of the Global Notes and (ii) ownership of
the New Notes evidenced by the Global Notes will be shown on, and the transfer
of ownership thereof will be effected only through, records maintained by the
Depository (with respect to the interests of the Depository's Participants),
the Depository's Participants and the Depository's Indirect Participants. The
laws of some states require that certain persons take physical delivery in
definitive form of securities that they own and that security interests in
negotiable instruments can only be perfected by delivery of certificates
representing the instruments. Consequently, the ability to transfer New Notes
or to pledge the New Notes as collateral will be limited to such extent.
So long as the Depository or its nominee is the registered owner of
the Global Notes, the Depository or such nominee, as the case may be, will be
considered the sole owner or holder of the New Notes represented by the Global
Notes for all purposes under the Indenture. Except as provided below, owners
of beneficial interests in a Global Note will not be entitled to have New Notes
represented by such Global Note registered in their names and will not be
considered the owners or holders thereof under the Indenture for any purpose,
including with respect to giving of any directions, instruction or approval to
the Trustee thereunder. As a result, the ability of a person having a
beneficial interest in New Notes represented by a Global Note to pledge such
interest to persons or entities that do not participate in the Depository's
system or to otherwise take action with respect to such interest, may be
affected by the lack of a physical certificate evidencing such interest.
Payments with respect to the principal of, premium, if any, and
interest on any New Notes represented by a Global Note registered in the name
of the Depository or its nominee on the applicable record date will be payable
by the
96
<PAGE> 98
Trustee to or at the direction of the Depository or its nominee in its capacity
as the registered Holder of the Global Note representing such New Notes under
the Indenture. Under the terms of the Indenture, the Company and the Trustee
may treat the persons in whose names the New Notes, including the Global Notes,
are registered as the owners thereof for the purpose of receiving such payment
and for any and all other purposes whatsoever. Consequently, neither the
Company nor the Trustee has or will have any responsibility or liability for
the payment of such amounts to beneficial owners of New Notes (including
principal, premium, if any, and interest), or to immediately credit the
accounts of the relevant Participants with such payment, in amounts
proportionate to their respective holdings in principal amount of beneficial
interest in the Global Note as shown on the records of the Depository.
Payments by the Participants and the Indirect Participants to the beneficial
owners of New Notes will be governed by standing instructions and customary
practice and will be the responsibility of the Participants or the Indirect
Participants.
CERTIFICATED SECURITIES
If (i) the Company notifies the Trustee in writing that the Depository
is no longer willing or able to act as a depository and the Company is unable
to locate a qualified successor within 90 days, (ii) the Company, at its
option, notifies the Trustee in writing that it elects to cause the issuance of
New Notes in definitive form under the Indenture, or (iii) upon the occurrence
of certain other events, then, upon surrender by the Depository of its Global
Notes, Certificated Securities will be issued to each person that the
Depository identifies as the beneficial owner of the New Notes represented by
the Global Notes. In addition, subject to certain conditions, any person
having a beneficial interest in a Global Note may, upon request to the Trustee,
exchange such beneficial interest for Certificated Securities. Upon any such
issuance, the Trustee is required to register such Certificated Securities in
the name of such person or persons (or the nominee of any thereof) and cause
the same to be delivered thereto.
Neither the Company nor the Trustee shall be liable for any delay by
the Depository or any Participant or Indirect Participant in identifying the
beneficial owners of the related New Notes and each such person may
conclusively rely on, and shall be protected in relying on, instructions from
the Depository for all purposes (including with respect to the registration and
delivery, and the respective principal amounts, of the New Notes to be issued).
97
<PAGE> 99
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is a summary of certain federal income tax
considerations relevant to the exchange of Old Notes for New Notes, but does
not purport to be a complete analysis of all potential tax effects. The
discussion is based upon the Internal Revenue Code of 1986, as amended,
Treasury regulations, Internal Revenue Service rulings and pronouncements and
judicial decisions now in effect, all of which are subject to change at any
time by legislative, judicial or administrative action. Any such changes may
be applied retroactively in a manner that could adversely affect a holder of
the New Notes. The description does not consider the effect of any applicable
foreign, state, local or other tax laws or estate or gift tax considerations.
EACH HOLDER SHOULD CONSULT HIS OR HER OWN TAX ADVISOR AS TO THE
PARTICULAR TAX CONSEQUENCES TO IT OF EXCHANGING OLD NOTES FOR NEW NOTES,
INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS.
The exchange of Old Notes for New Notes should not be an exchange or
otherwise a taxable event to a holder for federal income tax purposes.
Accordingly, a holder should have the same adjusted issue price, adjusted basis
and holding period in the New Notes as it had in the Old Notes immediately
before the exchange.
98
<PAGE> 100
PLAN OF DISTRIBUTION
Based on an interpretation by the Commission's staff set forth in
no-action letters issued to third parties unrelated to the Company, the Company
believes that, with the exceptions set forth below, New Notes issued pursuant
to the Exchange Offer in exchange for Old Notes may be offered for resale,
resold and otherwise transferred by any person receiving such New Notes,
whether or not such person is the holder (other than any such holder or such
other person which is an "affiliate" of the Company within the meaning of Rule
405 under the Securities Act), without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that the New
Notes are acquired in the ordinary course of business of the holder or such
other person and neither the holder nor such other person has an arrangement or
understanding with any person to participate in the distribution of such New
Notes. The Company, however, has not sought, and does not intend to seek, its
own no-action letter and there can be no assurance that the Commission's staff
would make a similar determination with respect to the Exchange Offer. Any
holder who tenders in the Exchange Offer for the purpose of participating in a
distribution of the New Notes cannot rely on this interpretation by the
Commission's staff and must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with a secondary
resale transaction.
Each broker-dealer that receives New Notes for its own account in
exchange for Old Notes, where the Old Notes were acquired by that broker-dealer
as a result of market-making activities or other trading activities, must
acknowledge that it will deliver a prospectus in connection with any resale of
such New Notes. This Prospectus, as it may be amended or supplemented from
time to time, may be used by a broker-dealer in connection with resales of New
Notes received in exchange for Old Notes where such Old Notes were acquired as
a result of market-making activities or other trading activities. The Company
and the Subsidiary Guarantors have agreed that they will, for a period of 90
days following the Expiration Date, make this Prospectus, as amended or
supplemented, available to any broker-dealer for use in connection with any
such resale for such period of time as such persons must comply with such
requirements in order to resell the New Notes.
Neither the Company nor the Subsidiary Guarantors will receive any
proceeds from any sale of New Notes by broker-dealers. New Notes received by
broker-dealers for their own account pursuant to the Exchange Offer may be sold
from time to time in one or more transactions in the over-the-counter market,
in negotiated transactions, through the writing of options on the New Notes or
a combination of such methods of resale, at market prices prevailing at the
time of resale, at prices related to such prevailing market prices or
negotiated prices. Any such resale may be made directly to purchasers or to or
through brokers or dealers who may receive compensation in the form of
commissions or concessions from any such broker-dealer or the purchasers of any
such New Notes. Any broker-dealer that resells New Notes that were received by
it for its own account pursuant to the Exchange Offer and any broker or dealer
that participates in a distribution of such New Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act, and any profit on any
such resale of New Notes and any commissions or concessions received by any
such persons may be deemed to be underwriting compensation under the Securities
Act. The Letter of Transmittal states that by acknowledging that it will
deliver and by delivering a prospectus, a broker-dealer will not be deemed to
admit that it is an "underwriter" within the meaning of the Securities Act.
The Company will promptly send additional copies of this Prospectus
and any amendment or supplement to this Prospectus to any broker-dealer that
requests such documents in the Letter of Transmittal for such period of time as
such persons must comply with such requirements in order to resell the New
Notes. The Company and the Subsidiary Guarantors have agreed to pay all
expenses incident to the Exchange Offer other than commissions or concessions
of any brokers or dealers.
LEGAL MATTERS
The validity of the New Notes offered hereby will be passed upon for
the Company by Vinson & Elkins L.L.P., Dallas, Texas.
99
<PAGE> 101
CHANGE IN ACCOUNTANT
The Company, with the approval of the Board of Directors, in December
1996 changed its independent accountants from Arthur Andersen LLP ("Arthur
Andersen") to Coopers & Lybrand L.L.P. Arthur Andersen's report on the
financial statements of the Company for fiscal years 1995 and 1994 was
unqualified and did not contain an adverse opinion or disclaimer of opinion.
Additionally, no reportable conditions or material weaknesses were identified
during Arthur Andersen's audit of the financial statements. This change in
accountants was not preceded by a disagreement with Arthur Andersen on any
matter of accounting principles or practices, financial statement disclosure or
auditing scope of procedure which if not resolved to Arthur Andersen's
satisfaction would have caused Arthur Andersen to make reference to the subject
matter of the disagreement in connection with Arthur Andersen's reports on the
Company's financial statements.
EXPERTS
The consolidated balance sheets as of December 31, 1995 and 1994 and
the consolidated statements of operations, stockholder's equity (deficit) and
cash flows for each of the three years in the period ended December 31, 1995,
included in this Prospectus, have been included herein in reliance on the
report of Coopers & Lybrand L.L.P., independent accountants, given on the
authority of that firm as experts in accounting and auditing.
The financial statements of Bishop as of September 30, 1996, 1995, and
1994, and for each of the three years in the period ended September 30, 1996,
included in this Prospectus have been audited by Arthur Andersen, independent
public accountants, as indicated in their report with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in
accounting and auditing in giving said report.
100
<PAGE> 102
AVAILABLE INFORMATION
The Company has filed with the Commission a registration statement
under the Securities Act with respect to the New Notes offered hereby. As
permitted by the rules and regulations of the Commission, this Prospectus does
not contain all of the information set forth in the Registration Statement.
For further information with respect to the Company and the New Notes offered
hereby, reference is made to the Registration Statement, including the exhibits
and schedules filed therewith. Statements contained in this Prospectus
concerning the provisions of any contract, agreement or other document referred
to herein or therein are not necessarily complete, but contain a summary of the
material terms of such contracts, agreements or other documents. With respect
to each contract, agreement or other document filed as an exhibit to the
Registration Statement, reference is made to the exhibit for the complete
contents of the exhibit, and each statement concerning its provisions is
qualified in its entirety by such reference. The Registration Statement may be
inspected, without charge, at the offices of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 and at its regional offices at 7 World
Trade Center, New York, New York, 10048 and Citicorp Center, 500 West Madison
Street, Chicago, Illinois 60661-2551. Copies of such materials may also be
obtained by mail at prescribed rates from the Public Reference Section of the
Commission at its principal office at 450 Fifth Street, N.W., Washington, D.C.
20549. Copies of such materials may also be obtained from the web site that
the Commission maintains at www.sec.gov.
101
<PAGE> 103
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ATRIUM COMPANIES, INC.:
Report of Independent Public Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-2
Consolidated Financial Statements:
Consolidated Balance Sheets as of September 30, 1996 (unaudited) and
December 31, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-3
Consolidated Statements of Operations for the nine-months ended
September 30, 1996 and 1995 (unaudited) and the years ended
December 31, 1995, 1994, and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-4
Consolidated Statements of Stockholder's Equity for the nine-months
ended September 30, 1996 (unaudited) and the years ended
December 31, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-5
Consolidated Statements of Cash Flows for the nine-months ended
September 30, 1996 and 1995 (unaudited) and the years ended
December 31, 1995, 1994, and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-6
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . F-7
BISHOP MANUFACTURING COMPANIES:
Report of Independent Public Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-16
Consolidated Financial Statements:
Combined Consolidated Balance Sheets as of September 30, 1996 and 1995 . . . . . . . . . . . . F-17
Combined Consolidated Statements of Operations and Retained Earnings
for the years ended September 30, 1996, 1995, and 1994 . . . . . . . . . . . . . . . . . . . F-18
Combined Consolidated Statements of Cash Flows for the years ended
September 30, 1996, 1995, and 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-19
Notes to Combined Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . F-20
</TABLE>
F-1
<PAGE> 104
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Atrium Companies, Inc.:
We have audited the accompanying consolidated balance sheets of Atrium
Companies, Inc., a wholly-owned subsidiary of Atrium Corporation, as of
December 31, 1995 and 1994 and the related consolidated statements of
operations, stockholder's equity (deficit) and cash flows for each of the three
years in the period ended December 31, 1995. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits 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 consolidated financial position of Atrium
Companies, Inc. as of December 31, 1995 and 1994, and the consolidated results
of its operations and its cash flows for each of the three years in the period
ended December 31, 1995 in conformity with generally accepted accounting
principles.
As discussed in Note 1 to the financial statements, effective January
1, 1994, the Company changed its method of accounting for inventories.
COOPERS & LYBRAND L.L.P.
Dallas, Texas,
January 17, 1997
F-2
<PAGE> 105
ATRIUM COMPANIES, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
December 31,
------------------------------------
September 30, 1996 1995 1994
----------------------- ---------------- -----------------
(unaudited)
<S> <C>
CURRENT ASSETS:
Cash and cash equivalents . . . . . . . . . . . . $ 336,476 $ 85,250 $ 1,207,268
Accounts receivable, net . . . . . . . . . . . . 22,750,827 16,845,297 16,322,450
Inventories . . . . . . . . . . . . . . . . . . . 15,572,350 13,953,284 14,493,510
Prepaid expenses and other current assets . . . . 343,011 994,249 1,460,966
Deferred tax benefit . . . . . . . . . . . . . . 1,432,315 1,216,365 --
-------------- -------------- -------------
Total current assets . . . . . . . . . . . . . 40,434,979 33,094,445 33,484,194
PROPERTY, PLANT, AND EQUIPMENT, net . . . . . . . . 13,270,445 11,047,182 19,968,127
OTHER INVESTMENTS . . . . . . . . . . . . . . . . . -- -- 3,125,625
GOODWILL . . . . . . . . . . . . . . . . . . . . . 12,416,721 -- --
OTHER ASSETS . . . . . . . . . . . . . . . . . . . 5,481,348 4,427,506 1,929,067
-------------- -------------- -------------
Total assets . . . . . . . . . . . . . . . . . $ 71,603,493 $ 48,569,133 $ 58,507,013
============== ============= =============
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable . . . . . . . . . . . . . . . . $ 8,396,316 $ 7,521,053 $ 5,852,973
Current portion of notes payable . . . . . . . . 5,250,000 4,500,000 930,675
Short-term note payable . . . . . . . . . . . . . -- -- 102,288
Accrued liabilities . . . . . . . . . . . . . . . 7,486,148 4,813,796 4,662,352
-------------- -------------- -------------
Total current liabilities . . . . . . . . . . 21,132,464 16,834,849 11,548,288
LONG-TERM LIABILITIES:
Notes payable . . . . . . . . . . . . . . . . . . 50,918,736 44,500,000 5,854,977
Notes payable--officers' life and other insurance -- -- 348,449
Other liabilities . . . . . . . . . . . . . . . . 1,498,206 1,778,206 390,000
-------------- -------------- -------------
Total long-term liabilities . . . . . . . . . 52,416,942 46,278,206 6,593,426
-------------- -------------- -------------
Total liabilities . . . . . . . . . . . . . . 73,549,406 63,113,055 18,141,714
-------------- -------------- -------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S EQUITY (DEFICIT):
Common stock--$.01 par value, 100 shares
authorized, issued and outstanding . . . . . . 1 1 1
Paid-in capital--common stock . . . . . . . . . . 28,849,551 23,467,182 484,472
Retained earnings (deficit) . . . . . . . . . . . (30,795,465) (38,011,105) 39,880,826
-------------- -------------- -------------
Total stockholder's equity (deficit) . . . . . (1,945,913) (14,543,922) 40,365,299
-------------- -------------- -------------
Total liabilities and stockholder's equity
(deficit) . . . . . . . . . . . . . . . $ 71,603,493 $ 48,569,133 $ 58,507,013
============== ============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-3
<PAGE> 106
ATRIUM COMPANIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Years Ended December 31,
-------------------------------- ------------------------------------------------
1996 1995 1995 1994 1993
--------------- --------------- -------------- -------------- --------------
(unaudited)
<S> <C> <C> <C> <C> <C>
NET SALES . . . . . . . . . . . $ 113,046,234 $ 102,279,550 $ 135,477,856 $ 123,570,987 $ 98,751,942
COST OF GOODS SOLD . . . . . . 73,882,122 73,217,349 93,974,912 85,571,855 66,465,380
-------------- -------------- ------------- -------------- --------------
Gross profit . . . . . . . . 39,164,112 29,062,201 41,502,944 37,999,132 32,286,562
OPERATING EXPENSES:
Selling, delivery, general
and administrative expenses. 25,065,484 22,136,385 29,749,327 26,895,269 22,709,842
Special charges . . . . . . -- 6,567,039 7,187,624 -- --
-------------- -------------- ------------- -------------- --------------
25,065,484 28,703,424 36,936,951 26,895,269 22,709,842
-------------- -------------- ------------- -------------- --------------
Income from operations . . . 14,098,628 358,777 4,565,993 11,103,863 9,576,720
OTHER INCOME (EXPENSE), net . . (2,864,873) (471,001) (1,173,172) (1,309,063) 669,638
-------------- -------------- ------------- -------------- --------------
Income (loss) before income
taxes . . . . . . . . . . . 11,233,755 (112,224) 3,392,821 9,794,800 10,246,358
PROVISION FOR INCOME TAXES . . 4,018,115 395,537 1,543,762 604,219 163,666
-------------- -------------- ------------- -------------- --------------
NET INCOME (LOSS) . . . . . . . $ 7,215,640 $ (507,761) $ 1,849,059 $ 9,190,581 $ 10,082,692
============== ============== ============= ============== ==============
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-4
<PAGE> 107
ATRIUM COMPANIES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY (DEFICIT)
<TABLE>
<CAPTION>
Total
Common Stock Retained Stockholder's
-------------------- Paid-In Capital Earnings Equity
Shares Amount Common Stock (Deficit) (Deficit)
-------- --------- --------------- ------------------ ---------------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1993 . . . 100 $ 1 $ 484,472 $ 37,682,992 $ 38,167,465
Net distributions . . . . . . -- -- -- (6,992,747) (6,992,747)
Net income . . . . . . . . . . -- -- -- 9,190,581 9,190,581
--- ----- ------------- --------------- --------------
BALANCE, December 31, 1994 . . . 100 1 484,472 39,880,826 40,365,299
Contribution from parent . . . -- -- 22,100,000 22,100,000
Net distributions . . . . . . -- -- -- (79,740,990) (79,740,990)
Land contribution . . . . . . -- -- 574,460 -- 574,460
Deferred compensation . . . . -- -- 308,250 -- 308,250
Net income . . . . . . . . . . -- -- -- 1,849,059 1,849,059
--- ----- ------------- --------------- --------------
BALANCE, December 31, 1995 . . . 100 1 23,467,182 (38,011,105) (14,543,922)
Contribution from parent
(unaudited) . . . . . . . . -- -- 5,000,000 -- 5,000,000
Capital contribution
(unaudited) . . . . . . . . -- -- 12,500 -- 12,500
Deferred compensation
(unaudited) . . . . . . . . -- -- 369,869 -- 369,869
Net income (unaudited) . . . . -- -- -- 7,215,640 7,215,640
--- ----- ------------- --------------- --------------
BALANCE, September 30, 1996
(unaudited) . . . . . . . . . 100 $ 1 $ 28,849,551 $ (30,795,465) $ (1,945,913)
==== ===== ============= =============== ==============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 108
ATRIUM COMPANIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months
Ended September 30, Years Ended December 31,
----------------------------- --------------------------------------------
1996 1995 1995 1994 1993
------------ ------------- ------------ ------------ -------------
(unaudited)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) . . . . . . . . . $ 7,215,640 $ (507,761) $ 1,849,059 $ 9,190,581 $10,082,692
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities--
Depreciation and amortization . . 1,679,417 1,352,103 1,916,735 1,677,688 1,406,596
Write-down of investments in
rental real estate. . . . . . . -- -- -- 1,544,540 --
Noncash bonuses . . . . . . . . . -- 1,608,526 1,608,526 -- --
Loss on life and other insurance
contracts . . . . . . . . . . . -- -- -- -- 125,136
Gain on retirement of assets . . . (7,034) (429,413) (429,413) (31,125) (128,783)
Deferred compensation . . . . . . 369,869 154,126 308,250 -- --
Changes in assets and liabilities,
net of effects from purchase of
Bishop Manufacturing Companies
in 1996--
Accounts and notes receivable,
net . . . . . . . . . . . . . (3,832,581) (2,523,741) (522,847) (3,890,867) (3,821,873)
Inventories . . . . . . . . . 203,120 1,968,296 540,226 (2,341,857) (1,017,552)
Prepaid expenses and other
current assets . . . . . . 691,651 692,093 171,351 (266,272) (193,062)
Deferred taxes . . . . . . . -- -- 202,010 -- --
Accounts payable . . . . . . 503,633 315,303 1,668,080 3,270,447 1,051,014
Accrued liabilities and other 285,454 201,738 541,445 1,297,327 710,784
------------ ------------ ------------ ------------ -----------
Net cash provided by
operating activities . . 7,109,169 2,831,270 7,853,422 10,450,462 8,214,952
------------ ------------ ------------ ------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and
equipment . . . . . . . . . . . . (2,060,202) (2,078,133) (2,336,774) (3,389,155) (3,685,901)
Proceeds from asset sales . . . . . 8,440 711,790 783,676 150,843 283,719
Decrease (increase) in other assets. (1,601,266) (3,660,121) (3,804,352) (1,132,573) 283,818
Payment for purchase of Bishop
Manufacturing Company, net of
cash acquired . . . . . . . . . (10,198,676) -- -- -- --
------------ ------------ ------------ ------------ -----------
Net cash used in investing
activities. . . . . . . . . . . (13,851,704) (5,026,464) (5,357,450) (4,370,885) (3,118,364)
------------ ------------ ------------ ------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of notes payable . . . . . . (6,759,000) (3,304,795) (8,604,795) (1,375,901) (1,577,492)
Proceeds from issuance of notes
payable . . . . . . . . . . . . 13,740,261 57,154,441 57,154,441 592,006 --
Contribution from parent . . . . . . -- 22,100,000 22,100,000 -- --
Distributions to stockholders . . . -- (74,767,636) (74,267,636) (6,992,747) (6,065,545)
Capital contributions . . . . . . . 12,500 -- -- -- --
------------ ------------ ------------ ------------ -----------
Net cash provided by (used in)
financing activities . . . . . 6,993,761 1,182,010 (3,617,990) (7,776,642) (7,643,037)
------------ ------------ ------------ ------------ -----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS . . . . . . . . . . 251,226 (1,013,184) (1,122,018) (1,697,065) (2,546,449)
CASH AND CASH EQUIVALENTS, beginning
of year . . . . . . . . . . . . . . 85,250 1,207,268 1,207,268 2,904,333 5,450,782
------------ ------------ ------------ ------------ -----------
CASH AND CASH EQUIVALENTS, end
of year . . . . . . . . . . . . . . $ 336,476 $ 194,084 $ 85,250 $ 1,207,268 $ 2,904,333
============ ============ ============ ============ ===========
SUPPLEMENTAL DISCLOSURE:
Cash paid during the period for--
Interest . . . . . . . . . . . . . $ 2,581,298 $ 1,153,096 $ 2,420,242 $ 355,095 $ 376,754
Income taxes . . . . . . . . . . . 3,374,000 1,000,000 1,063,669 292,392 105,643
Noncash distributions . . . . . . . -- 4,898,894 4,898,894 -- --
Noncash contribution . . . . . . . . 5,000,000 -- -- -- --
The Company purchased all of the capital stock of Bishop for a combined purchase price of $19,486,847. In
conjunction with the acquisition, liabilities were assumed as follows:
Fair value of assets acquired . . . . . . . . . . . . . . . . . . . . . . $21,152,850
Payable to seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000
Cash paid for capital stock, including cash acquired of $3,288,171 . . . 13,486,847
Common stock issued by Atrium Corporation . . . . . . . . . . . . . . 5,000,000
-----------
Liabilities assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,666,003
===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-6
<PAGE> 109
ATRIUM COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994, AND 1993
1. BASIS OF PRESENTATION AND ACCOUNTING POLICIES:
Atrium Companies, Inc.(the "Company") (formerly Fojtasek Companies,
Inc.), a Texas corporation, is engaged in the manufacture and sale of doors,
windows, and various building materials throughout the United States. A
significant portion of the Company's sales relates to new home construction
activity which is cyclical in nature.
On July 3, 1995, the stockholders of the Company executed a stock
purchase agreement (the "Heritage Transaction") whereby a portion of the
Company's common stock was purchased by a third party. In conjunction with the
Heritage Transaction, a Delaware holding company was established by the name of
FCI Holding Corp. ("FCI Holding"). On September 30, 1996, the Company acquired
a manufacturer of vinyl replacement windows and doors. In conjunction with the
acquisition, a parent company was established by the name of Atrium Corporation
("Holding"), which owned 100% of FCI Holding and the Company. On November 8,
1996, Fojtasek Companies, Inc., a wholly-owned subsidiary of FCI Holding, was
merged with and into FCI Holding. As a result of the merger, the surviving
Delaware corporation was renamed "Atrium Companies, Inc." The consolidated
financial statements of Atrium Companies, Inc. do not include the accounts of
Holding.
Basis of Consolidation
The consolidated financial statements include the accounts of Atrium
Companies, Inc., which is the primary operating entity, Bishop Manufacturing
Companies, acquired in September 1996 (see Note 12), and H-R Window Supply,
Inc. All significant intercompany transactions and balances have been
eliminated in consolidation.
Interim Information
The financial data for the nine months ended September 30, 1996 and
1995, were derived from unaudited consolidated financial statements of the
Company, which in the opinion of management of the Company contain all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation thereof. The consolidated results of operations for the nine
months ended September 30, 1996 and 1995, are not necessarily indicative of the
results to be expected for the full year. Certain information and footnote
disclosures related to the interim information normally included in the
consolidated financial statements prepared in accordance with generally
accepted accounting principles have been omitted for the interim periods.
Cash and Cash Equivalents
The Company considers all highly-liquid investments with original
maturities of three months or less to be cash equivalents.
Allowance for Doubtful Accounts
Accounts receivable are net of allowances for doubtful accounts of
$1,154,723 and $1,300,000 as of December 31, 1995 and 1994, respectively.
Concentrations of Credit Risk
Financial instruments which potentially expose the Company to
concentrations of credit risk consist primarily of trade accounts receivable.
The Company's customers are not concentrated in any specific geographic region
but are concentrated in the distribution and sale of building products. No
customer accounts for more than 10% of consolidated sales. The Company
performs ongoing credit evaluations of its customers' financial condition. The
Company establishes an allowance for doubtful accounts based upon factors
surrounding the credit risk of specific customers, historical trends, and other
information.
F-7
<PAGE> 110
ATRIUM COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Inventories
Effective January 1, 1994 the Company elected to change its method of
accounting for inventory from the first-in, first-out (FIFO) method to the
last-in, first-out (LIFO) method. Management believes that the LIFO method
results in a better matching of current costs with current revenues.
The effect of the change in 1994 was to decrease inventories and
income from operations by $2,720,570. The effect of this accounting change on
prior years' inventories and income from operations has not been included
because such effects are not reasonably determinable.
Depreciation and Amortization
The Company provides for depreciation and amortization using straight-
line and accelerated methods to allocate the cost of the assets over their
estimated useful lives, as follows:
<TABLE>
<CAPTION>
ESTIMATED USEFUL LIFE
---------------------
<S> <C>
Buildings and improvements . . . . . . . . . . . . . . . . . . 5-40 years
Machinery and equipment . . . . . . . . . . . . . . . . . . . 3-12 years
</TABLE>
Other Investments
Other investments in 1994 primarily consist of investments in rental
real estate. During 1994, the Company wrote down certain investments in rental
real estate to the appraised values, resulting in a charge of approximately
$1.5 million, which is recorded in other expense, net, in the accompanying 1994
consolidated statement of operations.
During 1994, the Company moved its Phoenix, Arizona, operations from a
facility owned by the Company to a leased facility. The owned facility has
been leased to an outside third party; consequently, the net book value of the
facility, $1,123,145, has been included in other investments in the
accompanying 1994 consolidated balance sheet.
During 1995 and prior to the Heritage Transaction, the Company
distributed its investments in rental real estate to the Company's stockholders
and to affiliates of the stockholders. The net book value of the properties
distributed was approximately $3.1 million. The stockholders and affiliates
also assumed the notes payable which were collateralized by the property. The
outstanding balance of the notes payable transferred was approximately $2.3
million.
Use of Estimates
The preparation of consolidated 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 these estimates.
Reclassifications
Certain reclassifications have been made to the 1995 and 1994 balances
in order to conform with the 1996 presentation.
F-8
<PAGE> 111
ATRIUM COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
2. INVENTORIES:
Inventories are valued at the lower of cost or market using the
last-in, first-out (LIFO) method of accounting. Work-in-process and finished
goods inventories consist of materials, labor, and manufacturing overhead.
Inventories consisted of the following at December 31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Raw materials . . . . . . . . . . . . . . . . . . . . . . . $ 11,653,927 $ 13,423,527
Work-in-process . . . . . . . . . . . . . . . . . . . . . . 686,424 518,625
Finished goods . . . . . . . . . . . . . . . . . . . . . . 3,483,437 3,271,928
------------ ------------
15,823,788 17,214,080
LIFO reserve . . . . . . . . . . . . . . . . . . . . . . . (1,870,504) (2,720,570)
------------ ------------
$ 13,953,284 $ 14,493,510
============ ============
</TABLE>
3. PROPERTY, PLANT, AND EQUIPMENT:
Property, plant, and equipment, stated at cost, consisted of the
following at December 31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
----------- -------------
<S> <C> <C>
Land . . . . . . . . . . . . . . . . . . . . . . . . . . $ 608,490 $ 1,765,000
Buildings and improvements . . . . . . . . . . . . . . . 6,554,099 14,218,951
Machinery and equipment . . . . . . . . . . . . . . . . . 8,801,957 8,451,910
Construction-in-process . . . . . . . . . . . . . . . . . -- 1,279,827
----------- -------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . 15,964,546 25,715,688
Less--Accumulated depreciation and amortization . . . . . (4,917,364) (5,747,561)
----------- -------------
Net property, plant, and equipment . . . . . . . . . . . $11,047,182 $ 19,968,127
=========== =============
</TABLE>
During 1995 and prior to the Heritage Transaction, the Company
distributed the land, building, and improvements related to two of its primary
operating divisions to the Company's stockholders. The net book value of the
property distributed totaled approximately $9.3 million. The Company executed
a lease with an affiliate of the stockholders to continue its use of the
property (see Note 9). The affiliate of the stockholders also assumed the
industrial development revenue bonds which were collateralized by the property.
The outstanding balance of the bonds net of the cash restricted for debt
service transferred was approximately $3.8 million.
4. OTHER ASSETS:
Other assets, stated at cost, consisted of the following at December 31, 1995
and 1994:
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Noncompete agreements . . . . . . . . . . . . . . . . . . $ 2,025,000 $ --
Deferred financing and organization costs . . . . . . . . 1,989,407 --
Prepaid officers' life insurance premiums . . . . . . . . -- 1,460,860
Cash--Restricted for debt service . . . . . . . . . . . . -- 305,254
Deposits and other . . . . . . . . . . . . . . . . . . . 413,099 162,953
------------ ------------
$ 4,427,506 $ 1,929,067
============ ============
</TABLE>
During 1995 and prior to the Heritage Transaction, the Company
transferred the cash surrender value of the officers' life insurance policies,
prepaid life insurance premiums, and the related life insurance notes payable
to the Company's stockholders and to affiliates of the stockholders. The
Company transferred a portion of the cash value of the insurance policies to an
affiliate of the stockholders in return for $850,000 of cash. The remaining
net book value of the assets and liabilities distributed to the stockholders
and affiliates was approximately $322,000. The cost of the
F-9
<PAGE> 112
ATRIUM COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
noncompete agreements and the deferred financing and organization costs are
being amortized over a period of five years. Amortization expense for 1995 was
$362,870.
5. ACCRUED LIABILITIES:
Accrued liabilities include the following at December 31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Accrued salaries and wages . . . . . . . . . . . . . . . . $ 1,799,335 $ 2,860,318
Accrued taxes payable . . . . . . . . . . . . . . . . . . . 1,369,842 965,174
Accrued insurance obligation . . . . . . . . . . . . . . . 246,406 482,143
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,398,213 354,717
------------ ------------
$ 4,813,796 $ 4,662,352
============ ============
</TABLE>
6. NOTES PAYABLE:
Notes payable consisted of the following at December 31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
------------ ----------
<S> <C> <C>
Note payable . . . . . . . . . . . . . . . . . . . . . . . $ 38,000,000 $ --
Revolving line of credit . . . . . . . . . . . . . . . . . 11,000,000 --
Texas Small Business Industrial Development Corporation
Revenue Bonds Series 1986; variable rate, maturing
December 1, 1996; collateralized by certain operating real
estate; personally guaranteed by a stockholder; assumed as
part of assets distributed in 1995 . . . . . . . . . . . -- 4,400,313
Note payable to a bank at prime (8.5% at December 31, 1994);
principal of $14,560 and interest due in quarterly
installments; maturing December 31, 1999; collateralized by
certain real estate in Phoenix, Arizona; assumed as part of
assets distributed in 1995 . . . . . . . . . . . . . . . -- 889,885
Notes payable to a bank at prime (8.5% at December 31, 1994);
principal of $34,424 and interest due in quarterly
installments; maturing December 31, 1999; collateralized by
certain nonoperating rental real estate in Texas; assumed
as part of assets distributed in 1995 . . . . . . . . . . -- 1,495,454
------------ -----------
49,000,000 6,785,652
Less--Current maturities . . . . . . . . . . . . . . . . . (4,500,000) (930,675)
------------ -----------
$ 44,500,000 $ 5,854,977
============ ===========
</TABLE>
In conjunction with the Heritage Transaction, a $40 million term loan
agreement (the "Note Payable") and a $25 million revolving credit agreement
(the "Line of Credit") (collectively, the "Debt Agreements") were executed with
a bank group. The Note Payable matures on June 30, 2001, and is payable in
quarterly principal payments which range from $1 million in 1995 to $2.5
million in 2001. The Company initially borrowed $17.2 million under the Line
of Credit, which matures on June 30, 2000. Under the Line of Credit,
borrowings may not exceed a borrowing base, generally defined as 85% of
eligible accounts receivable and 50% of inventories accounted for on a
first-in, first-out basis. The Line of Credit requires the Company to pay a
commitment fee of .375% to .5% on the unborrowed portion of the facility. The
Company may choose between a base rate or a LIBOR rate on the Debt Agreements,
as defined (8.5% at
F-10
<PAGE> 113
ATRIUM COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
December 31, 1995). The Debt Agreements contain limitations on incurring
additional indebtedness and restrictions on making certain investments. The
Debt Agreements also require the Company to maintain certain financial
covenants, including a minimum net worth and a cash flow ratio, as defined.
The Company was in compliance with such covenants at December 31, 1995. The
Debt Agreements are collateralized by the assets of the Company including
accounts receivable, inventory, and property.
Principal payments due during the next five years on long-term notes
payable as of December 31, 1995, are as follows:
<TABLE>
<S> <C>
1996 . . . . . . . . . . . . . . . . $ 4,500,000
1997 . . . . . . . . . . . . . . . . 5,500,000
1998 . . . . . . . . . . . . . . . . 6,500,000
1999 . . . . . . . . . . . . . . . . 7,500,000
2000 . . . . . . . . . . . . . . . . 20,000,000
Thereafter . . . . . . . . . . . . . 5,000,000
-----------
$49,000,000
===========
</TABLE>
7. FEDERAL INCOME TAX:
Prior to the Heritage Transaction, the Company was a S corporation,
and, for federal income tax purposes, all income or loss was allocated to the
stockholders for inclusion in their respective federal income tax returns. The
Company made periodic distributions to stockholders for their pro rata portion
of federal income taxes payable. In conjunction with the Heritage Transaction,
the Company became a C corporation. Accordingly, subsequent to the Heritage
Transaction, the Company accounts for income taxes in accordance with SFAS No.
109, "Accounting for Income Taxes," which requires that deferred income tax
expenses be provided based upon the liability method.
The components of the provision for income taxes are as follows for
the years ended December 31, 1995, 1994, and 1993:
<TABLE>
<CAPTION>
1995 1994 1993
------------ ---------- ----------
<S> <C> <C> <C>
Current federal income tax . . . . . . $ 1,420,242 $ -- $ --
Deferred federal income tax . . . . . . 202,010 -- --
State income tax expense (benefit) . . (78,490) 604,219 163,666
------------ ---------- ----------
Provision for income taxes . . . . . . $ 1,543,762 $ 604,219 $ 163,666
============ ========== ==========
</TABLE>
Pro forma income tax expense, had the Company been subject to
corporate income taxes for 12 months in 1995, 1994, and 1993, was $1,108,997,
$4,032,399, and $3,749,891, respectively.
Temporary differences which give rise to the deferred income tax
assets and liabilities are as follows as of December 31, 1995:
<TABLE>
<S> <C>
DEFERRED INCOME TAX ASSETS:
Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . $ 427,248
Inventory cost capitalization and valuation . . . . . . . . . . . . . 473,691
Accrued vacation . . . . . . . . . . . . . . . . . . . . . . . . . . 150,590
Deferred stock compensation . . . . . . . . . . . . . . . . . . . . . 114,053
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 381,286
-----------
1,546,868
DEFERRED INCOME TAX LIABILITIES:
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 634,534
Deferred financing and organization costs . . . . . . . . . . . . . . 694,175
-----------
1,328,709
-----------
Net deferred income tax asset . . . . . . . . . . . . . . . . . . . . . . 218,159
Less--Current deferred tax benefit . . . . . . . . . . . . . . . . . . . (1,216,365)
-----------
Long-term deferred tax liability . . . . . . . . . . . . . . . . . . . . $ 998,206
===========
</TABLE>
F-11
<PAGE> 114
ATRIUM COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The provision for income taxes was different than the amount computed
using the statutory federal income tax rate prior to 1995 due to the Company's
status as an S corporation. The provision for income taxes for the year ended
December 31, 1995, was different than the amount computed using the statutory
federal income tax rate for the reasons set forth in the following table:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1995
-----------------
<S> <C>
Tax computed at statutory rate . . . . . . . . . . . . . . . . . . . . . $1,153,559
Income tax benefit not recognized on S corporation tax deductions . . . . 655,501
Effects of SFAS No. 109 adoption, state taxes and other . . . . . . . . . (265,298)
----------
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . $1,543,762
==========
</TABLE>
8. RELATED PARTIES:
Included in prepaid expenses and other current assets are the following
receivables due from related parties at December 31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
-------- ---------
<S> <C> <C>
Receivables from stockholders, net of advances . . . . $414,151 $ 59,505
Receivables from officers . . . . . . . . . . . . . . . 37,864 150,595
Receivables from employees . . . . . . . . . . . . . . 50,899 148,926
Receivables from H-R Window Supply . . . . . . . . . . -- 279,604
</TABLE>
Included in accounts payable are payables to H-R Window Supply of
$106,877 at December 31, 1994.
9. COMMITMENTS AND CONTINGENCIES:
Commitments
The Company has entered into operating lease agreements for office and
manufacturing space with unrelated third parties and with certain affiliates of
the stockholders of the Company. Total rent expense for the years ended
December 31, 1995, 1994, and 1993, was $3,155,788, $1,499,086, and $1,099,802,
respectively. Of these totals, amounts paid to related parties were $313,225,
$226,070, and $226,070 in 1995, 1994, and 1993, respectively. Future minimum
rents due under operating leases with initial or remaining terms greater than
12 months are as follows:
<TABLE>
<CAPTION>
Related Other
Parties Parties Total
----------- ---------- -----------
<S> <C> <C> <C>
1996 . . . . . . . . . . . . . . . . . . . . . . $ 668,681 $ 217,559 $ 886,240
1997 . . . . . . . . . . . . . . . . . . . . . . 795,368 171,784 967,152
1998 . . . . . . . . . . . . . . . . . . . . . . 649,770 177,416 827,186
1999 . . . . . . . . . . . . . . . . . . . . . . 419,715 90,116 509,831
2000 . . . . . . . . . . . . . . . . . . . . . . 419,715 -- 419,715
Thereafter . . . . . . . . . . . . . . . . . . . 2,075,257 -- 2,075,257
----------- ---------- -----------
$ 5,028,506 $ 656,875 $5,685,381
=========== ========== ==========
</TABLE>
During 1995, the Company sold its fleet of truck tractors to a third
party but retained its fleet of truck trailers. In conjunction with the sale,
the Company entered into a dedicated contract arrangement with a transportation
company to provide truck transportation and related services to the Company.
Under the agreement, the Company is required to pay an adjustable fee
contingent on transportation activity. The Company incurred $5,225,000 of
related expenses in 1995. The agreement expires on December 31, 2001, but may
be canceled at the option of the Company within 90 days of providing written
notice.
F-12
<PAGE> 115
ATRIUM COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The Company has contracts with various suppliers to purchase aluminum
for use in the manufacturing process. The contracts vary from one to twelve
months and are at fixed quantities and fixed and floating prices.
Contingencies
The Company is a party to various claims, legal actions, and
complaints arising in the ordinary course of business. In the opinion of
management, all such matters are without merit or are of such kind, or involve
such amounts, that an unfavorable disposition would not have a material effect
on the financial position of the Company.
During 1993, factory employees voted to unionize and become members of
Amalgamated Clothing and Textile Workers Union. A three-year union contract
was executed during 1995. In addition, in connection with the Keller
Acquisition, the Company became a party to collective bargaining arrangements
due to expire in 2001. The union contract did not have a material effect on
the financial position of the Company.
10. STOCK PURCHASE AGREEMENT:
Stock Purchase
On July 3, 1995, in connection with the Heritage Transaction, a
holding company was established by the name of FCI Holding Corp. ("FCI
Holding"). In conjunction with the Heritage Transaction, a wholly owned
subsidiary of Sub-Holding ("Acquisition Corp.") purchased a majority of the
Company's voting common stock, and the stockholders of the Company exchanged
their remaining shares of voting common stock to FCI Holding for 49.5% of
Sub-Holding's voting common stock. Acquisition Corp. and the Company were
merged, retaining the Company's name.
The Company authorized and issued 100 shares of its common stock to
stockholders at a conversion rate of one share of newly issued common stock for
237 shares of common stock previously held. All common stock and par value
amounts in the accompanying consolidated financial statements have been
adjusted retroactively to give effect to the stock conversion and the change in
authorized shares.
The Heritage Transaction provided for a cash distribution of
approximately $75 million to the stockholders of the Company; required the
stockholders to retire existing borrowings outstanding of approximately $6.2
million; and required the Company to execute and fund five-year noncompete
agreements totaling $2.25 million with two officers of the Company. In order
to fund the distribution to the stockholders, FCI Holding contributed $22.1
million to the Company and the Company executed a Line of Credit and a
term-loan agreement with a bank as discussed in Note 6.
In conjunction with the Heritage Transaction, FCI Holding issued
options (the "Substitute Options") to certain members of management to purchase
shares of FCI Holding's common stock. The Options vest ratably over five years
or immediately upon a public offering or a sale of substantially all the assets
of Sub-Holding or a subsidiary of Parent. As of July 3, 1995, $1,350,000 in
compensation expense has been deferred, based on the difference between the
market value and the exercise price of the options, and will be recognized over
the vesting period. Compensation expense of approximately $308,000 related to
the options was recognized by the Company in 1995. In connection with the
Hicks Muse Transaction discussed in Note 12, these options vested, resulting in
special cash charges subsequent to September 30, 1996.
FCI Holding also issued stock options (the "Disposition Options") to
certain members of management to purchase shares of FCI Holding's common stock,
which become exercisable upon a public offering or a sale of substantially all
the assets of FCI Holding or a subsidiary of FCI Holding (the "Exercise Date").
A percentage of the Disposition Options are earned when the Company's value
exceeds a defined market value on the Exercise Date (approximately $47 million
on December 31, 1995). As of December 31, 1995, there were no options
exercisable on the Exercise Date. In the future, Disposition Options earned
(if any) will result in compensation expense to the Company. See Note 12.
F-13
<PAGE> 116
ATRIUM COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Special Charges Associated with the Stock Purchase
Included in special charges in the accompanying 1995 consolidated
statement of operations are consulting fees of $408,000, officer and management
bonuses of $6,380,000, and restructuring charges of $400,000 incurred in
connection with the Heritage Transaction.
11. OTHER INCOME (EXPENSE) NET:
Other income (expense) consists of the following for the years ended
December 31, 1995, 1994, and 1993:
<TABLE>
<CAPTION>
1995 1994 1993
------------ ----------- -----------
<S> <C> <C> <C>
Rental, interest, and other income . . . . $ 1,012,187 $ 559,447 $ 917,609
Interest expense . . . . . . . . . . . . . (2,614,772) (355,095) (376,754)
Write-down of investments in rental real
estate . . . . . . . . . . . . . . . . . -- (1,544,540) --
Gain on sale of assets . . . . . . . . . . 429,413 31,125 128,783
------------ ----------- -----------
$ (1,173,172) $(1,309,063) $ 669,638
============ =========== ===========
</TABLE>
12. SUBSEQUENT EVENTS:
Acquisition
Effective September 30, 1996, the Company acquired the stock of Bishop
Manufacturing Companies ("Bishop"), a manufacturer of vinyl replacement windows
and doors for the residential market in the northwest region of the United
States, for approximately $20 million. The acquisition was accounted for using
the purchase method of accounting. To consummate the acquisition, the Company
paid approximately $13.6 million to Bishop's shareholders (the "Sellers"),
issued a $1 million note payable to the Seller, and Holding exchanged $5.0
million of its stock in exchange for all of Bishop's stock. Holding
subsequently contributed its portion of Bishop's stock to the Company.
Consequently, as of September 30, 1996, the Company owns all of Bishop's stock.
In conjunction with the acquisition of Bishop, the Company recorded
approximately $12.4 million of goodwill which will be amortized over 40 years.
The purchase allocation is preliminary in nature and subject to change.
The following table presents the operating results of the Company for
the nine-months ended September 30, 1996 and 1995, compared to pro forma
operating results for such periods. The unaudited pro forma information
presents consolidated operating results as though the acquisition of Bishop and
the Hicks Muse Transaction (as defined) had occurred at the beginning of the
period.
<TABLE>
<CAPTION>
Nine Months Nine Months
Ended September 30, 1996 Ended September 30, 1995
---------------------------------- ---------------------------------
Actual Pro Forma Actual Pro Forma
--------------- ---------------- --------------- ---------------
(in thousands) (in thousands)
<S> <C> <C> <C> <C>
Net sales . . . . . . . . . . $113,046 $123,487 $102,280 $112,784
Net income (loss) . . . . . . 7,216 5,269 (508) (2,473)
</TABLE>
F-14
<PAGE> 117
ATRIUM COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Issuance of Notes
The Company issued unsecured senior subordinated notes which mature in
2006. These notes are subordinated to all future senior indebtedness. Bishop
unconditionally, on a joint and several basis, guarantees the notes.
Accordingly, the following combined consolidated balance sheet data as of
September 30, 1996 is presented for Bishop Manufacturing Co., Inc., Vinyl
Building Specialties of Connecticut, Inc., Bishop Manufacturing Co. of New
York, Inc. and Bishop Manufacturing Co. of New England, Inc.:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
(POST ACQUISITION)
------------------
<S> <C>
ASSETS:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . $ 363,292
Accounts receivable, net . . . . . . . . . . . . . . . . . . . . . . 2,072,949
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,822,186
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . 256,363
Property, plant and equipment, net . . . . . . . . . . . . . . . . . 1,206,215
Intangibles and other assets . . . . . . . . . . . . . . . . . . . . 12,506,966
Advances from Atrium . . . . . . . . . . . . . . . . . . . . . . . . 2,924,879
-------------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . $ 21,152,850
=============
LIABILITIES AND ATRIUM'S INVESTMENT:
Liabilities:
Current liabilities . . . . . . . . . . . . . . . . . . . . . . . $ 1,478,528
Other noncurrent liabilities . . . . . . . . . . . . . . . . . . 187,475
-------------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . 1,666,003
-------------
Atrium's investment . . . . . . . . . . . . . . . . . . . . . . . 19,486,847
-------------
Total liabilities and Atrium's investment . . . . . . . . . . $ 21,152,850
=============
</TABLE>
Hicks Muse Transaction
Pursuant to a Stock Purchase Agreement dated November 7, 1996, whereby
Holding agreed to sell approximately 82% of its stock to affiliates of Hicks
Muse Tate & Furst Incorporated. This transaction, which was completed on
November 27, 1996, required approximately $134.2 million to complete,
consisting of $59.4 million in Redemption payments to the Selling
Securityholders, $54.3 million, representing all outstanding indebtedness under
the Old Credit Facility and debt assumed in connection with its acquisition of
Bishop, $12.5 million in Redemption payments to preferred stockholders of
Holding (including cumulative dividends in arrears) and $8.0 million of fees
and expenses. The funds required to consummate the Transaction were provided
by (i) the proceeds of the Offering, (ii) $32.0 million in equity financing
from the issuance by Holding of Common Stock to affiliates of Hicks Muse and
(iii) drawings of $2.2 million under the Company's new senior secured credit
facility.
The Hicks Muse Transaction resulted in special cash and non-cash
charges of $4.3 million and $3.7 million, respectively, related to management
bonuses, stock options, and the write off of deferred financing costs, and were
recorded subsequent to September 30, 1996.
F-15
<PAGE> 118
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of
Atrium Companies, Inc.:
We have audited the accompanying consolidated balance sheets of Vinyl
Building Specialties of Connecticut, Inc. and subsidiaries combined with
Bishop Manufacturing Co. of New York, Inc. (a wholly owned subsidiary of Atrium
Companies, Inc., formerly Fojtasek Companies, Inc.) (collectively referred to as
"Bishop Manufacturing") as of September 30, 1996 and 1995, and the related
combined consolidated statements of operations and retained earnings and cash
flows for each of the three years in the period ended September 30, 1996.
These financial statements are the responsibility of the Companies' 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 Bishop
Manufacturing as of September 30, 1996 and 1995, and the results of its
operations and its cash flows for each of the three years in the period ended
September 30, 1996, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Stamford, Connecticut,
October 21, 1996
F-16
<PAGE> 119
BISHOP MANUFACTURING COMPANIES
COMBINED CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 1996 AND 1995
<TABLE>
<CAPTION>
ASSETS
1996 1995
------------- --------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . $ 363,292 $ 3,824,076
Due from Atrium Companies, Inc . . . . . . . . . . . . . . . . . . 2,924,879 --
Accounts receivable, less allowance for doubtful accounts of $80,877
and $44,210, respectively . . . . . . . . . . . . . . . . . . 2,072,949 1,449,145
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,747,059 1,714,195
Prepaid costs . . . . . . . . . . . . . . . . . . . . . . . . . . 575 1,794
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . 215,950 201,950
Other current assets . . . . . . . . . . . . . . . . . . . . . . . 39,838 78,985
------------- --------------
Total current assets . . . . . . . . . . . . . . . . . . . . . 7,364,542 7,270,145
PROPERTY, PLANT AND EQUIPMENT:
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,000 25,000
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 685,330 685,330
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . 124,373 162,182
Machinery and equipment . . . . . . . . . . . . . . . . . . . . . 1,181,800 955,111
Transportation equipment and vehicles . . . . . . . . . . . . . . 390,619 530,664
Furniture and fixtures . . . . . . . . . . . . . . . . . . . . . . 102,246 105,276
------------- --------------
2,509,368 2,463,563
Less--accumulated depreciation . . . . . . . . . . . . . . . . . . . (1,303,153) (1,053,856)
------------- --------------
1,206,215 1,409,707
------------- --------------
OTHER ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90,245 3,535
------------- --------------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,661,002 $ 8,683,387
============= ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . $ 371,630 $ 230,056
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . 894,225 637,717
Notes payable (Note 4) . . . . . . . . . . . . . . . . . . . . . . 8,148 15,500
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . 212,673 557,042
------------- --------------
Total current liabilities . . . . . . . . . . . . . . . . . . 1,486,676 1,440,315
------------- --------------
NOTES PAYABLE (Note 4) . . . . . . . . . . . . . . . . . . . . . . . 179,327 409,193
OTHER LONG-TERM LIABILITIES . . . . . . . . . . . . . . . . . . . . . -- 573,821
MINORITY INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . -- 160,226
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . 231,438 10,000
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . 6,763,561 6,089,832
------------- - -- ---------
Total stockholders' equity . . . . . . . . . . . . . . . . . . 6,994,999 6,099,832
------------- --------------
Total liabilities and stockholders' equity . . . . . . . . . . $ 8,661,002 $ 8,683,387
============= ==============
</TABLE>
The accompanying notes to combined consolidated financial statements
are an integral part of these combined consolidated balance sheets.
F-17
<PAGE> 120
BISHOP MANUFACTURING COMPANIES
COMBINED CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
FOR THE YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
------------- ------------- -------------
<S> <C> <C> <C>
Net sales . . . . . . . . . . . . . . . . . . . . . . . $ 14,409,175 $ 14,496,026 $ 14,006,354
Cost of goods sold . . . . . . . . . . . . . . . . . . 7,436,703 6,425,234 7,494,446
------------- ------------- -------------
Gross profit . . . . . . . . . . . . . . . . . . . . 6,972,472 8,070,792 6,511,908
Selling, general and administrative expenses . . . . . 5,789,812 5,944,428 5,182,883
------------- ------------- -------------
Income from operations . . . . . . . . . . . . . . . 1,182,660 2,126,364 1,329,025
Interest income (expense), net . . . . . . . . . . . . 85,996 87,055 (60,028)
Other (expense) income . . . . . . . . . . . . . . . . (103,246) 76,635 24,605
------------- ------------- -------------
Income before provision for income taxes . . . . . . 1,165,410 2,290,054 1,293,602
Provision for income taxes (Note 6) . . . . . . . . . . 780,510 1,035,540 535,000
------------- ------------- -------------
Net income . . . . . . . . . . . . . . . . . . . . . 384,900 1,254,514 758,602
RETAINED EARNINGS, beginning of period . . . . . . . . 6,089,832 4,835,318 4,076,716
Minority interest acquired . . . . . . . . . . . . . . 288,829 -- --
------------- ------------- -------------
RETAINED EARNINGS, end of period . . . . . . . . . . . $ 6,763,561 $ 6,089,832 $ 4,835,318
============= ============= =============
</TABLE>
The accompanying notes to combined consolidated financial statements
are an integral part of these combined consolidated statements.
F-18
<PAGE> 121
BISHOP MANUFACTURING COMPANIES
COMBINED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995 1994
---------- ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . . . . . $ 384,900 $ 1,254,514 $ 758,602
---------- ------------ ------------
Adjustments to reconcile net income to net cash (used)
provided by operating activities:
Depreciation . . . . . . . . . . . . . . . . . . . . 294,920 303,020 312,017
Gain on sale of fixed assets . . . . . . . . . . . . (14,900) -- --
Officers' compensation other than cash . . . . . . . 153,172 -- --
Minority interest . . . . . . . . . . . . . . . . . 128,603 9,934 79,764
Change in allowance for doubtful accounts . . . . . 36,667 -- 9,072
Deferred income taxes . . . . . . . . . . . . . . . (14,000) (17,000) (103,876)
Changes in assets and liabilities:
(Increase) in due from Atrium . . . . . . . . . . (2,924,879) -- --
(Increase) decrease in accounts receivable . . . (660,471) 411,123 (472,731)
(Increase) in inventories . . . . . . . . . . . . (32,864) (491,351) (409,065)
Decrease (increase) in prepaid costs . . . . . . 1,219 491,492 (489,586)
Decrease (increase) in other current assets . . . 39,147 (35,093) 28,520
(Increase) decrease in other assets . . . . . . . (86,710) 2,693 (2,693)
Increase (decrease) in accounts payable . . . . . 141,574 (697,513) 362,537
Increase in accrued liabilities . . . . . . . . . 256,508 126,718 174,821
(Decrease) increase in income taxes payable . . . (344,369) 401,613 155,429
(Decrease) increase in other long-term
liabilities . . . . . . . . . . . . . . . . . (573,821) 549,998 --
---------- ------------ ------------
Total adjustments . . . . . . . . . . . . . . (3,600,204) 1,055,634 (355,791)
---------- ------------ ------------
Net cash (used) provided by operating
activities . . . . . . . . . . . . . . . . (3,215,304) 2,310,148 402,811
---------- ------------ ------------
CASH USED IN INVESTING ACTIVITIES:
Capital expenditures, net . . . . . . . . . . . . . . . (229,700) (365,379) (355,236)
---------- ------------ ------------
CASH FLOW FROM FINANCING ACTIVITIES:
Repayments of notes payable . . . . . . . . . . . . . . (237,218) (14,495) (13,544)
Capital contribution . . . . . . . . . . . . . . . . . . 221,438 -- --
---------- ------------ ------------
Net cash (used) in financing activities . . . . . . . (15,780) (14,495) (13,544)
---------- ------------ ------------
Net (decrease) increase in cash and cash equivalents (3,460,784) 1,930,274 34,031
CASH AND CASH EQUIVALENTS, beginning of period . . . . . . 3,824,076 1,893,802 1,859,771
---------- ------------ ------------
CASH AND CASH EQUIVALENTS, end of period . . . . . . . . . $ 363,292 $ 3,824,076 $ 1,893,802
========== ============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest . . . . . . . . . . . . . . . . . . . . . . $ 35,140 $ 43,140 $ 54,049
Income taxes . . . . . . . . . . . . . . . . . . . . $ 923,221 $ 834,060 $ 364,284
</TABLE>
The accompanying notes to combined consolidated financial statements
are an integral part of these combined consolidated statements.
F-19
<PAGE> 122
BISHOP MANUFACTURING COMPANIES
NOTES TO COMBINED CONSOLIDATED FINANCIAL STATEMENTS
(1) ATRIUM ACQUISITION:
Effective June 30, 1996, the shareholders of Vinyl Building
Specialties of Connecticut, Inc. ("VBS") and its subsidiaries, Bishop
Manufacturing Company, Inc. ("BMC"), a Connecticut corporation, Bishop
Manufacturing Company of New England, Inc. ("BNE"), a Massachusetts
corporation, combined with Bishop Manufacturing Company of New York, Inc.
("BNY") a Connecticut corporation, (collectively referred to as the
"Companies") entered into a securities and exchange agreement and a stock
purchase agreement (the "Agreement"), with Atrium Companies, Inc. and its
affiliate ("Atrium"), in which Atrium agreed to acquire 100% of the Companies'
Capital Stock.
Atrium completed the transaction effective September 30, 1996 and the
Companies became a wholly-owned subsidiary of Atrium.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of presentation--
The accompanying financial statements have been prepared on the
accrual basis of accounting. All significant intercompany balances and
transactions have been eliminated.
Nature of operations--
The Company manufactures vinyl windows and doors and primarily sells
to independent contractors for use in residential construction.
Use of estimates--
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.
Inventories--
Inventories are stated at the lower of cost (first-in, first-out
method) or market.
Property, plant and equipment--
Property, plant and equipment used in the business are stated at cost
less related accumulated depreciation. Repairs and maintenance of a routine
nature are charged to operations, while those which improve or extend the lives
of existing assets are capitalized. Depreciation and amortization are provided
primarily on a straight-line basis over the economic useful lives ranging from
five to thirty years.
Income taxes--
The Company follows Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes".
BNY is an S corporation for income tax reporting purposes. Under this
reporting, no provision (benefit) has been provided for income taxes relating
to the results of operations of BNY because the taxable income or loss will be
included with the income of the shareholders on their related individual income
tax returns. As a result of the Agreement, Atrium terminated BNY's
S-Corporation status as of October 1, 1996.
F-20
<PAGE> 123
BISHOP MANUFACTURING COMPANIES
NOTES TO COMBINED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(3) INVENTORIES:
Inventories are comprised of the following:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Raw materials . . . . . . . . . . . . . . . . . . . . . . . . $1,330,743 $1,360,809
Work in process . . . . . . . . . . . . . . . . . . . . . . . 71,472 17,232
Finished goods . . . . . . . . . . . . . . . . . . . . . . . 344,844 336,154
---------- ----------
$1,747,059 $1,714,195
========== ==========
</TABLE>
(4) NOTES PAYABLE:
Notes Payable consist of the following:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Mortgage note (a) . . . . . . . . . . . . . . . . . . . . . . $ -- $ 231,133
Promissory note (b) . . . . . . . . . . . . . . . . . . . . . 187,475 193,560
--------- ---------
187,475 424,693
Less: current portion . . . . . . . . . . . . . . . . . . . 8,148 15,500
--------- ---------
Notes payable--non current . . . . . . . . . . . . . . . . . $ 179,327 $ 409,193
========= =========
</TABLE>
(a) In fiscal 1993, BNE entered into a fifteen year mortgage note with a
bank. The note beared interest at the prime rate plus one percent
(9.75% September 30, 1995). The note was repaid in full in September
1996 by the Companies.
(b) In fiscal 1993, BNE, entered into a promissory note with an agent of
the U.S. Small Business Administration. The promissory note is due in
monthly installments including interest at 6.36%. The final payment
is due on July 1, 2013. The promissory note is secured by BNE's real
estate and is guaranteed by BMC.
(5) COMMITMENTS:
The Companies lease warehouse and distribution facilities and
transportation equipment under operating leases. Future annual lease
commitments under these operating leases as of September 30, 1996 are as
follows:
<TABLE>
<CAPTION>
Fiscal Years Ending September 30, Lease Commitments
---------------------------------- -----------------
<S> <C>
1997 . . . . . . . . . . . $ 78,016
1998 . . . . . . . . . . . 54,812
1999 . . . . . . . . . . . 33,205
2000 . . . . . . . . . . . 16,239
2001 . . . . . . . . . . . 15,562
--------
$197,834
========
</TABLE>
Rental expense for the year ended September 30, 1996, 1995, and 1994
was $227,957, $218,870 and $175,744, respectively.
On February 22, 1996, VBS entered into a Stockholders Agreement with
Team Pros America Corporation ("Team Pros"), a customer of the Companies. In
connection with agreement, the Companies have agreed to lend Team Pros $48,000
payable in five installments commencing on the date of this agreement. As of
September 30, 1996, the Company has loaned Team Pros $38,000.
F-21
<PAGE> 124
BISHOP MANUFACTURING COMPANIES
NOTES TO COMBINED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(6) INCOME TAXES:
The components of the income tax provision as of September 30, 1996,
1995, and 1994 are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------------- -------------- --------------
<S> <C> <C> <C>
Current:
Federal . . . . . . . . . . . . . . . . . . . $ 572,060 $ 774,263 $ 498,693
State . . . . . . . . . . . . . . . . . . . . 222,450 278,500 140,183
-------------- -------------- --------------
Total current provision . . . . . . . . . 794,510 1,052,763 638,876
-------------- -------------- --------------
Deferred:
Federal . . . . . . . . . . . . . . . . . . . (10,080) (13,244) (81,553)
State . . . . . . . . . . . . . . . . . . . . (3,920) (3,979) (22,323)
-------------- -------------- --------------
Total deferred benefit . . . . . . . . . . (14,000) (17,223) (103,876)
-------------- -------------- --------------
Total provision . . . . . . . . . . . . . $ 780,510 $ 1,035,540 $ 535,000
============== ============== ==============
</TABLE>
The differences between the U.S. statutory federal income tax rate and
the effective income tax rate as reflected in the accompanying statements of
operations result primarily from BNY losses, state income taxes and
intercompany profit earned on sales from BMC to BNY that do not eliminate for
tax purposes.
Temporary differences that comprise the net deferred tax asset
primarily pertain to accrued liabilities not currently deductible.
(7) RELATED PARTY TRANSACTIONS:
On September 30, 1996, Atrium made a capital contribution to the
Companies of $221,438. The proceeds of contribution were used to reduce the
Companies' debt.
F-22
<PAGE> 125
<TABLE>
<S> <C>
================================================= ===========================
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN
AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN $100,000,000
CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR BY ANY INITIAL ATRIUM COMPANIES,
PURCHASER OF THE OLD NOTES. THIS PROSPECTUS DOES INC.
NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER
THAN THOSE TO WHICH IT RELATES OR AN OFFER TO
SELL, OR A SOLICITATION OF AN OFFER TO BUY, TO ANY
PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER OR 10 1/2% SENIOR SUBORDINATED
SOLICITATION WOULD BE UNLAWFUL. NEITHER THE NOTES DUE 2006
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
TABLE OF CONTENTS
PAGE
----
Certain Definitions and Market and
Industry Data . . . . . . . . . . . . . 3
Summary . . . . . . . . . . . . . . . . . 4 ----------------
Risk Factors . . . . . . . . . . . . . . 16 PROSPECTUS
The Transaction . . . . . . . . . . . . . 21 January __, 1997
Use of Proceeds . . . . . . . . . . . . . 22 ----------------
Capitalization . . . . . . . . . . . . . 22
Selected Consolidated Historical Financial
Data . . . . . . . . . . . . . . . . . 23
Management's Discussion and Analysis
of Financial Condition and Results
of Operations . . . . . . . . . . . . . 31
Description of New Credit Facility . . . 37
Business . . . . . . . . . . . . . . . . 38
Beneficial Ownership and Certain
Transactions . . . . . . . . . . . . . 59
The Exchange Offer . . . . . . . . . . . 64
Description of New Notes . . . . . . . . 71
Book-Entry; Delivery and Form . . . . . . 96
Certain United States Federal Income
Tax Considerations . . . . . . . . . . 98
Plan of Distribution . . . . . . . . . . 99
Legal Matters . . . . . . . . . . . . . . 99
Experts . . . . . . . . . . . . . . . . . 100
Available Information . . . . . . . . . . 101
UNTIL ____________, 1997 (25 DAYS AFTER THE DATE
OF THIS PROSPECTUS), ALL DEALERS EFFECTING
TRANSACTIONS IN THE NOTES OFFERED HEREBY, 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.
================================================= ===========================
</TABLE>
<PAGE> 126
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
DIRECTOR LIABILITY
As authorized by the Delaware General Corporation Law ("GCL"), the
Company's Certificate of Incorporation (the "Certificate") provides that, to
the full extent permitted by the GCL or any other applicable laws as presently
or hereafter in effect, no Director of the Company in his or her capacity shall
be personally liable to the Company in his or her capacity as director of the
Company. The GCL does not permit limitation of liability of any director (i)
for breach of the director's duty of loyalty to the Company or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) in respect of
certain unlawful dividend payments or stock redemptions or repurchases, or (iv)
for any transaction from which the director derived an improper personal
benefit. The Company has entered into certain agreements ("Indemnification
Agreements") with each of its directors and executive officers designed to give
effect to the foregoing provisions of the Certificate and to provide certain
additional assurances against the possibility of uninsured liability. The
effect of these provisions and the Indemnification Agreements will be to
eliminate the rights of the Company and its stockholders (through stockholders'
derivative suits on behalf of the Company) to recover monetary damages against
a director for breach of fiduciary duty as a director (including breaches
resulting from negligence or gross negligence) except in the situations
described in clauses (i)-(iv) of the second sentence of this paragraph. These
provisions and the Indemnification Agreements will not alter the liability of
Directors of the Company under federal securities laws.
At the closing of the Transaction, the Company entered into
indemnification agreements with each of its directors and executive officers
under which the Company has agreed to indemnify the director or officer to the
fullest extent permitted by law, and to advance expenses, if the director or
officer becomes a party to or witness or other participant in any threatened,
pending or completed action, suit or proceeding (a "Claim") by reason of any
occurrence related to the fact that the person is or was a director, officer,
employee, agent or fiduciary of the Company or a subsidiary of the Company or
another entity at the Company's request (an "Indemnifiable Event"), unless a
reviewing party (either outside counsel or a director or directors appointed by
the Board of Directors) determines that the person would not be entitled to
indemnification under applicable law. In addition, if a change in control or a
potential change in control of the Company occurs and if the person indemnified
so requests, The Company will establish a trust for the benefit of the
indemnitee and fund the trust in an amount sufficient to satisfy all expenses
reasonably anticipated at the time of the request to be incurred in connection
with any Claim relating to an Indemnifiable Event. The reviewing party will
determine the amount deposited in the trust. An indemnitee's rights under his
or her indemnification agreement are not exclusive of any other rights under
the Company's Articles of Incorporation or By-Laws or applicable law.
II-1
<PAGE> 127
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS:
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibits
- ------ -----------------------
<S> <C>
2.1*+ -- Stock Purchase Agreement by and among HMTF Acquisition Corp., Atrium Corporation and the Selling
Securityholders dated as of November 7, 1996
2.2*+ -- Securities Exchange Agreement among Atrium Corporation, FCI Holding Corp, Heritage Fund I, L.P. Randall
Fojtasek, et. al. dated August 22, 1996, as amended
2.3*+ -- Stock Purchase Agreement by and among Fojtasek Companies, Inc., Howard S. Saffan, Leslie Goldbloom and
Kevin Schumacher dated August 22, 1996, as amended
3.1* -- Certificate of Incorporation of Atrium Companies, Inc., as amended
3.2* -- Bylaws of Atrium Companies, Inc.
3.3* -- Certificate of Incorporation of Vinyl Building Specialties of Connecticut, Inc.
3.4* -- Bylaws of Vinyl Building Specialties of Connecticut, Inc.
3.5* -- Certificate of Incorporation of Bishop Manufacturing Co. of New York, Inc.
3.6* -- Bylaws of Bishop Manufacturing Co. of New York, Inc.
3.7* -- Certificate of Incorporation of Bishop Manufacturing Company, Incorporated
3.8* -- Bylaws of Bishop Manufacturing Company, Incorporated
3.9* -- Certificate of Incorporation of Bishop Manufacturing Company of New England, Inc.
3.10* -- Bylaws of Bishop Manufacturing Company of New England, Inc.
3.11* -- Articles of Incorporation of H-R Window Supply, Inc.
3.12* -- Bylaws of H-R Window Supply, Inc.
4.1* -- Exchange and Registration Rights Agreement made as of November 27, 1996 by and among Atrium Companies,
Inc., the Subsidiary Guarantors and BT Securities Corporation
4.2* -- Indenture dated as of November 27, 1996 by and among Atrium Companies, Inc., the Subsidiary Guarantors
and United States Trust Company of New York
5.1** -- Opinion of Vinson & Elkins L.L.P.
10.1* -- Financial Advisory Agreement dated as of November 27, 1996 among Atrium Corporation, the Company and
Hicks, Muse & Co. Partners, L.P.
10.2* -- Stockholders Agreement dated as of November 27, 1996, by and among Atrium Corporation, the
securityholders listed therein and Hicks, Muse, Tate & Furst Incorporated
10.3* -- Indemnification Agreement dated as of November 27, 1996 by and between Atrium Corporation and Randall S.
Fojtasek, together with a schedule identifying substantially identical documents and setting forth
material details in which those documents differ from the foregoing documents
10.4** -- Credit Agreement by and among Atrium Companies, Inc., the Banks, Parties thereto, and Bankers Trust
Company dated November 27, 1996
10.5* -- Monitoring and Oversight Agreement among Atrium Corporation, the Company and Hicks, Muse & Co. Partners,
L.P. dated November 27, 1996
10.6* -- Atrium Indemnification Escrow Agreement among Hicks, Muse, Tate & Furst Equity Fund III, L.P., the
Company, Randall S. Fojtasek, Heritage Fund I, L.P., and Citibank N.A. dated November 27, 1996
10.7* -- Bishop Indemnification Escrow Agreement among Hicks, Muse, Tate & Furst Equity Fund III, L.P., the
Company, Howard S. Saffan and Citibank N.A. dated November 27, 1996
10.8* -- Atrium Corporation 1996 Stock Purchase Plan
10.9* -- Atrium Corporation 1996 Stock Option Plan
10.10* -- Employment Agreement dated November 7, 1996 between Atrium Corporation and Randall S. Fojtasek
10.11* -- Employment and Non-Competition Agreement between the Company and Howard S. Saffan dated September 30,
1996
10.12* -- Employment Agreement between the Company and Horace T. Hicks dated January 1, 1995
10.13* -- Employment Agreement between the Company and Louis W. Simi, Jr. dated January 1, 1995
10.14* -- Employment Agreement between the Company and Arthur G. Frost dated January 1, 1995
10.15** -- Escrow Agreement dated July 3, 1995 among Fojtasek/Heritage Acquisition Company, The Company, Randall
Fojtasek and the First National Bank of Boston
</TABLE>
II-2
<PAGE> 128
<TABLE>
<S> <C>
10.16* -- Non-Competition Agreement dated July 3, 1995 by and among Randall Fojtasek and Fojtasek/Heritage
Acquisition Company.
10.17* -- Atrium Lease Agreement, as amended
10.18* -- H-R Windows Lease Agreement
12.1* -- Computation of Ratio of Earnings to Fixed Charges
16.1* -- Letter regarding change in certifying accountant
21.1* -- Subsidiaries of the Company
23.1* -- Consent of Coopers & Lybrand L.L.P., Independent Public Accountants
23.2* -- Consent of Arthur Andersen LLP, Independent Public Accountants
23.3** -- Consent of Vinson & Elkins L.L.P. (included in Exhibit 5.1)
24.1* -- Powers of Attorney (set forth on signature page)
25.1* -- Form T-1 of United States Trust Company of New York
27.1* -- Financial Data Schedule
99.1** -- Form of Letter of Transmittal
99.2** -- Form of Notice of Guaranteed Delivery
</TABLE>
- -----------------
* Filed herewith
** To be filed by amendment
+ The Company will furnish upon request of the Commission any omitted
schedule or exhibit.
(b) FINANCIAL STATEMENT SCHEDULES:
The following financial statement schedule is included in this
Registration Statement:
Report of Independent Public Accountants
II -- Valuation and Qualifying Accounts
ITEM 22. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) to include any prospectus required by section 10(a)(3) of the
Securities Act of 1933 (the "Securities Act");
(ii) to reflect in the prospectus any facts or events arising after
the effective date of this Registration Statement (or the most recent
post-effective amendment hereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in this
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range may
be reflected in the form of prospectus filed with the Securities and Exchange
Commission pursuant to rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in this
Registration Statement when it becomes effective;
(iii) to include any material information with respect to the plan
of distribution not previously disclosed in this Registration Statement or any
material change to such information in this Registration Statement;
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
II-3
<PAGE> 129
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Exchange Act that is incorporated by reference in this Registration Statement
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes to file an application
for the purpose of determining the eligibility of the trustee to act under
subsection (a) of Section 310 of the Trust Indenture Act in accordance with the
rules and regulations prescribed by the Commission under Section 305(b)(2) of
the Trust Indenture Act.
The undersigned Registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus pursuant
to Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of this Registration Statement through
the date of responding to the request.
The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in this Registration Statement when it became effective.
II-4
<PAGE> 130
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Company has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Dallas, State of Texas, on the 17th day of January, 1997.
ATRIUM COMPANIES, INC.
By: /s/ Randall S. Fojtasek
----------------------------------------
Randall S. Fojtasek, President and Chief
Executive Officer
Each person whose signature appears below authorizes Randall S. Fojtasek as
attorney-in-fact to execute in the name of each such person who is then an
officer or director of the Company and to file any amendments to this
Registration Statement necessary or advisable to enable the Company to comply
with the Securities Act of 1933, as amended, and any rules, regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the registration of the securities which are the subject of this
Registration Statement, which amendments may make such changes in the
Registration Statement as such attorney may deem appropriate. Pursuant to the
requirements of the Securities Act of 1933, this registration statement has been
signed by the following person in the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Capacity Date
--------- -------- ----
<S> <C> <C>
/s/ Randall S. Fojtasek President, Chief Executive Officer and January 17, 1997
------------------------------------ Director (Principal Executive Officer)
Randall S. Fojtasek
/s/ Jeff L. Hull Corporate Controller January 17, 1997
------------------------------------ (Principal Financial and Accounting
Jeff L. Hull Officer)
/s/ John R. Muse Director January 17, 1997
------------------------------------
John R. Muse
/s/ Michael J. Levitt Director January 17, 1997
------------------------------------
Michael J. Levitt
/s/ Stephen M. Humphrey Director January 17, 1997
------------------------------------
Stephen M. Humphrey
/s/ C. Dean Metropoulos Director January 17, 1997
------------------------------------
C. Dean Metropoulos
/s/ Michel Reichert Director January 17, 1997
------------------------------------
Michel Reichert
</TABLE>
<PAGE> 131
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Company has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Dallas, State of Texas, on the 17th day of January, 1997.
H-R WINDOW SUPPLY, INC.
By: /s/ Robert W. Wolf
-------------------------
Robert W. Wolf, President
Each person whose signature appears below authorizes Robert W. Wolf as
attorney-in-fact to execute in the name of each such person who is then an
officer or director of the Company and to file any amendments to this
Registration Statement necessary or advisable to enable the Company to comply
with the Securities Act of 1933, as amended, and any rules, regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the registration of the securities which are the subject of
this Registration Statement, which amendments may make such changes in the
Registration Statement as such attorney may deem appropriate. Pursuant to the
requirements of the Securities Act of 1933, this registration statement has
been signed by the following person in the capacities and on the date
indicated.
<TABLE>
<CAPTION>
Signature Capacity Date
--------- -------- ----
<S> <C> <C>
/s/ Robert W. Wolf President and Director (Principal January 17, 1997
- ------------------------------------ Executive Officer)
Robert W. Wolf
/s/ Jeff L. Hull Corporate Controller January 17, 1997
- ------------------------------------ (Principal Financial and Accounting
Jeff L. Hull Officer)
</TABLE>
<PAGE> 132
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Company has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Dallas, State of Texas, on the 17th day of January, 1997.
VINYL BUILDING SPECIALTIES
OF CONNECTICUT, INC.
By: /s/ Randall S. Fojtasek
---------------------------------
Randall S. Fojtasek, President
Each person whose signature appears below authorizes Randall S.
Fojtasek as attorney-in-fact to execute in the name of each such person who is
then an officer or director of the Company and to file any amendments to this
Registration Statement necessary or advisable to enable the Company to comply
with the Securities Act of 1933, as amended, and any rules, regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the registration of the securities which are the subject of
this Registration Statement, which amendments may make such changes in the
Registration Statement as such attorney may deem appropriate. Pursuant to the
requirements of the Securities Act of 1933, this registration statement has
been signed by the following person in the capacities and on the date
indicated.
<TABLE>
<CAPTION>
Signature Capacity Date
--------- -------- ----
<S> <C> <C>
/s/ Randall S. Fojtasek President and Director January 17, 1997
- ------------------------------------ (Principal Executive Officer)
Randall S. Fojtasek
/s/ Jeff L. Hull Chief Financial Officer January 17, 1997
- ------------------------------------ (Principal Financial and Accounting
Jeff L. Hull Officer)
</TABLE>
<PAGE> 133
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Company has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Dallas, State of Texas, on the 17th day of January, 1997.
BISHOP MANUFACTURING CO. OF NEW YORK, INC.
By: /s/ Randall S. Fojtasek
-----------------------------------
Randall S. Fojtasek, President
Each person whose signature appears below authorizes Randall S.
Fojtasek as attorney-in-fact to execute in the name of each such person who is
then an officer or director of the Company and to file any amendments to this
Registration Statement necessary or advisable to enable the Company to comply
with the Securities Act of 1933, as amended, and any rules, regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the registration of the securities which are the subject of
this Registration Statement, which amendments may make such changes in the
Registration Statement as such attorney may deem appropriate. Pursuant to the
requirements of the Securities Act of 1933, this registration statement has
been signed by the following person in the capacities and on the date
indicated.
<TABLE>
<CAPTION>
Signature Capacity Date
--------- -------- ----
<S> <C> <C>
/s/ Randall S. Fojtasek President and Director January 17, 1997
------------------------------------ (Principal Executive Officer)
Randall S. Fojtasek
/s/ Jeff L. Hull Chief Financial Officer January 17, 1997
------------------------------------ (Principal Financial and Accounting
Jeff L. Hull Officer)
</TABLE>
<PAGE> 134
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Company has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Dallas, State of Texas, on the 17th day of January, 1997.
BISHOP MANUFACTURING COMPANY, INCORPORATED
By: /s/ Randall S. Fojtasek
-----------------------------------
Randall S. Fojtasek, President
Each person whose signature appears below authorizes Randall S.
Fojtasek as attorney-in-fact to execute in the name of each such person who is
then an officer or director of the Company and to file any amendments to this
Registration Statement necessary or advisable to enable the Company to comply
with the Securities Act of 1933, as amended, and any rules, regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the registration of the securities which are the subject of
this Registration Statement, which amendments may make such changes in the
Registration Statement as such attorney may deem appropriate. Pursuant to the
requirements of the Securities Act of 1933, this registration statement has
been signed by the following person in the capacities and on the date
indicated.
<TABLE>
<CAPTION>
Signature Capacity Date
--------- -------- ----
<S> <C> <C>
/s/ Randall S. Fojtasek President and Director (Principal January 17, 1997
- ------------------------------------ Executive Officer)
Randall S. Fojtasek
/s/ Jeff L. Hull Chief Financial Officer January 17, 1997
- ------------------------------------ (Principal Financial and Accounting
Jeff L. Hull Officer)
</TABLE>
<PAGE> 135
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Company has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Dallas, State of Texas, on the 17th day of January, 1997.
BISHOP MANUFACTURING COMPANY
OF NEW ENGLAND, INC.
By: /s/ Randall S. Fojtasek
------------------------------------
Randall S. Fojtasek, President
Each person whose signature appears below authorizes Randall S.
Fojtasek as attorney-in-fact to execute in the name of each such person who is
then an officer or director of the Company and to file any amendments to this
Registration Statement necessary or advisable to enable the Company to comply
with the Securities Act of 1933, as amended, and any rules, regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the registration of the securities which are the subject of
this Registration Statement, which amendments may make such changes in the
Registration Statement as such attorney may deem appropriate. Pursuant to the
requirements of the Securities Act of 1933, this registration statement has
been signed by the following person in the capacities and on the date
indicated.
<TABLE>
<CAPTION>
Signature Capacity Date
--------- -------- ----
<S> <C> <C>
/s/ Randall S. Fojtasek President and Director January 17, 1997
- ------------------------------------ (Principal Executive Officer)
Randall S. Fojtasek
/s/ Jeff L. Hull Chief Financial Officer January 17, 1997
- ------------------------------------ (Principal Financial and Accounting
Jeff L. Hull Officer)
</TABLE>
<PAGE> 136
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Atrium Companies, Inc.:
In connection with our audits of the consolidated financial statements of
Atrium Companies, Inc. as of December 31, 1995 and 1994 and for each of the
three years in the period ended December 31, 1995, which financial statements
are included in the Prospectus, we have also audited the financial statement
schedule of Atrium Companies, Inc. listed in Item 21(b) herein.
In our opinion, this financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, presents fairly, in all
material respects, the information required to be included therein.
COOPERS & LYBRAND L.L.P.
Dallas, Texas
January 17, 1997
<PAGE> 137
ATRIUM COMPANIES, INC.
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Column B - Column C-
Balance at Charged to Column D - Column E -
beginning costs and Deductions - Balance at end
Column A - Description of period expenses Write-offs (1) of period
-------------------------------- ------------- ------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts
Year ended December 31, 1993 $ 1,300,000 $ 521,275 $ (521,275) $ 1,300,000
Year ended December 31, 1994 1,300,000 (45,850) 45,850 1,300,000
Year ended December 31, 1995 1,300,000 486,166 (631,443) 1,154,723
</TABLE>
(1) net of recoveries
<PAGE> 1
EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
BY AND AMONG
HMTF ACQUISITION CORP.,
ATRIUM CORPORATION
AND
THE SELLING SECURITYHOLDERS NAMED HEREIN
DATED AS OF
NOVEMBER 7, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I
THE PURCHASE; THE REDEMPTIONS; OTHER ACTIONS
1.1. Charter Amendment; Conversion . . . . . . . . . . . . . . . . 2
1.2. Bylaw Amendment . . . . . . . . . . . . . . . . . . . . . . . 3
1.3. Purchase and Sale of Purchase Shares . . . . . . . . . . . . . 3
1.4. Redemption of New Common Stock. . . . . . . . . . . . . . . . 3
1.5. Warrant Redemption . . . . . . . . . . . . . . . . . . . . . . 4
1.6. Partial Redemption of Substitute Options; Replacement Options 4
1.7. Escrows . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.8. Other Actions . . . . . . . . . . . . . . . . . . . . . . . . 8
1.9. Withholding of Redemption Price Payable to Heritage . . . . . 10
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1. Representations and Warranties of the Company . . . . . . . . 11
2.2. Representations and Warranties of the Selling Securityholders 27
2.3. Representations and Warranties of Buyer . . . . . . . . . . . 28
ARTICLE III
COVENANTS RELATING TO CONDUCT OF BUSINESS
3.1. Covenants of the Company and the Selling Securityholders other
than the Bishop Indemnitors . . . . . . . . . . . . . . . . . 30
ARTICLE IV
ADDITIONAL AGREEMENTS OF THE COMPANY AND
THE SELLING SECURITYHOLDERS
OTHER THAN THE BISHOP INDEMNITORS
4.1. No Solicitation of Transactions . . . . . . . . . . . . . . . 32
4.2. Access and Information . . . . . . . . . . . . . . . . . . . . 33
4.3. Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . 33
4.4. Compliance With Laws . . . . . . . . . . . . . . . . . . . . . 34
4.5. Notification of Certain Matters . . . . . . . . . . . . . . . 35
4.6. Third Party Consents . . . . . . . . . . . . . . . . . . . . . 35
4.7. Stockholders Agreement . . . . . . . . . . . . . . . . . . . . 35
</TABLE>
(i)
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
4.8. Monitoring and Oversight Agreement . . . . . . . . . . . . . . 35
4.9. Financial Advisory Agreement . . . . . . . . . . . . . . . . . 35
4.10. [Intentionally Omitted] . . . . . . . . . . . . . . . . . . . 35
4.11. Termination Agreement . . . . . . . . . . . . . . . . . . . . 35
4.12. Repayment of Indebtedness for Borrowed Money . . . . . . . . . 36
4.13. Indemnification Agreement . . . . . . . . . . . . . . . . . . 36
4.14. Board of Directors; Officers . . . . . . . . . . . . . . . . . 36
4.15. Stockholder Loans . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE IV.A
ADDITIONAL AGREEMENTS OF THE BISHOP INDEMNITORS
4A.1 No Solicitation of Transactions . . . . . . . . . . . . . . . 36
4A.2 Termination Agreement . . . . . . . . . . . . . . . . . . . . 37
4A.3 Buy-Sell Agreements . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE V
COVENANTS OF BUYER
5.1. Notification of Certain Matters . . . . . . . . . . . . . . . 37
ARTICLE VI
MUTUAL COVENANTS
6.1. Governmental Consents . . . . . . . . . . . . . . . . . . . . 37
6.2. Brokers or Finders . . . . . . . . . . . . . . . . . . . . . . 38
6.3. Additional Agreements . . . . . . . . . . . . . . . . . . . . 38
ARTICLE VII
CONDITIONS PRECEDENT
7.1. Conditions to Each Party's Obligation . . . . . . . . . . . . 38
7.2. Conditions to Obligation of Buyer . . . . . . . . . . . . . . 39
7.3. Conditions to Obligations of the Company and the Selling
Securityholders . . . . . . . . . . . . . . . . . . . . . . . 40
</TABLE>
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<TABLE>
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ARTICLE VIII
CLOSING
8.1. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.2. Actions to Occur at Closing . . . . . . . . . . . . . . . . . 41
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.1. Termination . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.2. Effect of Termination . . . . . . . . . . . . . . . . . . . . 45
ARTICLE X
INDEMNIFICATION
10.1. Indemnification of Buyer Indemnified Parties . . . . . . . . . 45
10.2. Indemnification of the Seller Indemnified Parties . . . . . . 47
10.3. Defense of Third-Party Claims . . . . . . . . . . . . . . . . 47
10.4. Direct Claims . . . . . . . . . . . . . . . . . . . . . . . . 48
10.5. Limitations . . . . . . . . . . . . . . . . . . . . . . . . . 48
10.6. Recourse against Escrowed Funds . . . . . . . . . . . . . . . 50
10.7. Instructions to Escrow Agent . . . . . . . . . . . . . . . . . 54
10.8. Appointment of Atrium Indemnitor Representative . . . . . . . 55
10.9. Appointment of Bishop Indemnitor Representative . . . . . . . 56
10.10. No Contribution . . . . . . . . . . . . . . . . . . . . . . . 57
10.11. Rights Under Bishop Agreements . . . . . . . . . . . . . . . . 57
ARTICLE XI
GENERAL PROVISIONS
11.1. Survival of Representations, Warranties, and Covenants . . . . 58
11.2. Amendment and Modification . . . . . . . . . . . . . . . . . . 58
11.3. Waiver of Compliance . . . . . . . . . . . . . . . . . . . . . 58
11.4. Specific Performance . . . . . . . . . . . . . . . . . . . . . 58
11.5. Severability . . . . . . . . . . . . . . . . . . . . . . . . . 58
11.6. Expenses and Obligations . . . . . . . . . . . . . . . . . . . 59
11.7. Parties in Interest . . . . . . . . . . . . . . . . . . . . . 60
11.8. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
11.9. Interpretation . . . . . . . . . . . . . . . . . . . . . . . . 61
11.10. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 61
</TABLE>
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11.11. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . 61
11.12. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 62
11.13. Public Announcements . . . . . . . . . . . . . . . . . . . . . 62
11.14. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . 62
11.15. Further Assurances . . . . . . . . . . . . . . . . . . . . . . 62
11.16. Director and Officer Liability . . . . . . . . . . . . . . . . 62
11.17. Certain Definitions . . . . . . . . . . . . . . . . . . . . . 62
11.18. No Waiver Relating to Claims for Fraud. . . . . . . . . . . . 64
</TABLE>
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<TABLE>
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EXHIBITS:
<S> <C> <C>
Exhibit A -- Form of Charter Amendment
Exhibit B -- Form of Bylaw Amendment
Exhibit C -- Form of Replacement Option Agreement
Exhibit D -- Form of Atrium Indemnification Escrow
Agreement
Exhibit E -- Form of Bishop Indemnification Escrow
Agreement
Exhibit F -- Form of Seller Escrow Agreement
Exhibit G -- Form of Disposition Option Redemption
Agreement
Exhibit H -- The Atrium Corporation 1996 Stock Purchase
Plan
Exhibit I -- Form of Exercise Agreement
Exhibit J -- Form of Bishop Buy-Sell Amendment
Exhibit K -- Form of Fojtasek Escrow Amendment
Exhibit L -- Existing Plan Amendment
Exhibit M -- Atrium Corporation 1996 Stock Option Plan
Exhibit N -- Form of Stockholders Agreement
Exhibit O -- Form of Monitoring and Oversight Agreement
Exhibit P -- Form of Financial Advisory Agreement
Exhibit Q-1 -- Form of Saffan Buy-Sell Agreement
Exhibit Q-2 -- Form of Schumacher Buy-Sell Agreement
Exhibit R -- Form of Termination Agreement
Exhibit S -- Form of Indemnification Agreement
Exhibit T -- Form of Opinion of Bingham, Dana & Gould LLP
SCHEDULES:
- ---------
Schedule I -- Selling Securityholders
Schedule II -- Stockholders
Schedule III -- Option Holders
Schedule IV -- Common Stockholders and Results of
Redemption
Schedule V -- Indemnitors
Schedule VI -- Disposition Option Holders
Schedule VII -- Key Employees
Schedule VIII -- Selling Securityholders Who Will be Parties
to Certain Agreements
Schedule 2.1(a) -- Qualification to do Business and Good
Standing
Schedule 2.1(b) -- Subsidiaries
Schedule 2.1(c) -- Capital Structure
Schedule 2.1(e) -- Conflicts, Filings and Consents
Schedule 2.1(f) -- Unrecorded Liabilities and Conduct of
Business
Schedule 2.1(g) -- Licenses and Permits
Schedule 2.1(h) -- Litigation
Schedule 2.1(i) -- Insurance
Schedule 2.1(j) -- Real Estate
Schedule 2.1(k) -- Personal Property
Schedule 2.1(l) -- Liens
</TABLE>
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<TABLE>
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Schedule 2.1(m) -- Environmental Matters
Schedule 2.1(o) -- Certain Agreements
Schedule 2.1(p) -- Employee Benefit Plans
Schedule 2.1(q) -- Patents, Trademarks; Etc.
Schedule 2.1(r) -- Affiliate Relationships
Schedule 2.1(u) -- Recent Monthly Balance Sheet
Schedule 2.1(v) -- Inventories
Schedule 2.1(w) -- Long-Term Indebtedness for Borrowed Money
</TABLE>
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<PAGE> 8
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of November 7, 1996, by and among Atrium Corporation, a Delaware
corporation (the "Company"), each of the persons identified on Schedule I (the
"Selling Securityholders") and HMTF Acquisition Corp., a Texas corporation
("Buyer").
R E C I T A L S
A. Each Selling Securityholder identified on Schedule II
(collectively, the "Stockholders") owns the number of shares of the Company's
Class A Voting, Class B Non-Voting and/or Class C Voting Common Stock, par
value $0.01 per share (collectively, the "Common Stock"), and/or Preferred
Stock, par value $1.00 per share ("Preferred Stock"), set forth opposite such
Stockholder's name in Column A of Schedule II.
B. Each Selling Securityholder identified on Schedule III
(collectively, the "Option Holders") holds options and/or warrants to purchase
the number of shares of Common Stock set forth opposite such Selling
Securityholder's name in Column A of Schedule III.
C. Buyer desires to purchase from the Company, and the Company
desires to issue and sell to Buyer, 32,000,000 shares (the "Purchase Shares")
of New Common Stock (hereinafter defined) in consideration for the Purchase
Price (hereinafter defined), upon the terms and subject to the conditions set
forth herein.
D. In connection with the contemplated issuance and sale of the
Purchase Shares to Buyer (the "Purchase"), the Company and the Stockholders
desire to amend and restate the Company's Certificate of Incorporation in order
to, among other things, (i) increase the number of shares of capital stock
which the Company is authorized to issue, (ii) effect a subdivision of the
outstanding shares of Common Stock, (iii) convert all authorized, issued and
outstanding shares of Common Stock into a single class of common stock, par
value $0.01 per share ("New Common Stock"), and (iv) convert all issued and
outstanding shares of Preferred Stock into the right to receive a cash payment,
upon the terms and subject to the conditions set forth herein.
E. In connection with the Purchase, the Company desires to redeem
from the Stockholders, and the Stockholders desire to sell to the Company,
certain shares of New Common Stock and all of the Preferred Stock owned by them
at the Closing (hereinafter defined), upon the terms and subject to the
conditions set forth herein.
F. In connection with the Purchase, (i) the Company and the Option
Holders desire to cancel certain options and all warrants held by such Option
Holders for cash and, with respect to options not so cancelled, effect certain
amendments thereto, and (ii) the Company desires to issue to certain Selling
Securityholders and certain other individuals options to purchase New Common
Stock after the Closing.
<PAGE> 9
A G R E E M E N T S
NOW, THEREFORE, in consideration of the respective representations,
warranties, agreements and conditions hereinafter set forth, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, hereby agree
as follows:
ARTICLE I
THE PURCHASE; THE REDEMPTIONS; OTHER ACTIONS
1.1. Charter Amendment; Conversion.
(a) Charter Amendment. Upon the terms and subject to the
conditions set forth herein, prior to the Closing the Company shall take all
actions necessary to amend and restate its Certificate of Incorporation by
filing with the Delaware Secretary of State an Amended and Restated Certificate
of Incorporation in the form of Exhibit A hereto (the "Charter Amendment"),
executed by a duly authorized officer of the Company. By his, her or its
execution and delivery of this Agreement, each Stockholder hereby consents (in
his, her or its capacity as a stockholder of the Company) to the approval of
the Charter Amendment and to the execution and filing of the Charter Amendment
with the Delaware Secretary of State, and agrees that such Stockholder will not
withdraw, revoke, rescind or alter such consent in any way without the prior
written consent of Buyer.
(b) Conversion of Common Stock. Each share of Common Stock
shall, upon the filing of the Charter Amendment and without any further action
by the Company, any Stockholder or any other party, be converted into the right
to receive 602.8555 shares of New Common Stock, and as a result thereof each
Stockholder named in Part 1 of Schedule II shall have the right to receive the
number of shares of New Common Stock set forth opposite such Stockholder's name
in Column B of Part 1 of Schedule II, subject to the provisions of the Charter
Amendment relating to the cancellation of fractional shares upon such
conversion. As a result of their conversion upon the filing of the Charter
Amendment, all such converted shares of Common Stock (collectively, the
"Converted Common Shares") shall cease to be outstanding, and each certificate
previously evidencing the Converted Common Shares shall be deemed for all
purposes to evidence solely the right to receive shares of New Common Stock as
described in this Section 1.1(b).
(c) Conversion of Preferred Stock. The 11,000 shares of the
Company's Preferred Stock outstanding immediately prior to the filing of the
Charter Amendment, all of which are owned by Heritage Fund I, L.P.
("Heritage"), shall, upon the filing of the Charter Amendment and without any
further action by the Company, any Stockholder or any other party, be converted
into the right to receive the sum of (i) $12,397,150.68, plus (ii) $2,863.01
for each day from (but excluding) November 1, 1996 through (and including) the
Closing Date (the "Preferred Redemption Price"), and as a result of their
conversion upon the filing of the Charter Amendment, all such converted shares
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<PAGE> 10
of Preferred Stock (collectively, the "Converted Preferred Shares") shall cease
to be outstanding, and each certificate previously evidencing the Converted
Preferred Shares shall be deemed for all purposes to evidence solely the right
to receive the pro rata amount of the Preferred Redemption Price represented
thereby as described in this Section 1.1(c). The Preferred Redemption Price
shall be paid (subject to Sections 1.7 and 1.9) by or on behalf of the Company
by wire transfer of immediately available funds to an account of Heritage
designated in writing to the Company prior to the Closing Date or, if not so
designated, by certified or official bank check payable in immediately
available funds to the order of Heritage. Heritage shall deliver to the
Company at the Closing, against payment (subject to Sections 1.7 and 1.9) of
the Preferred Redemption Price as provided herein, one or more share
certificates representing the Converted Preferred Shares.
1.2. Bylaw Amendment. Upon the terms and subject to the conditions
set forth herein, prior to the Closing the Company shall take all actions
necessary to amend and restate its Bylaws by causing Amended and Restated
Bylaws in the form of Exhibit B hereto (the "Bylaw Amendment") to be adopted by
the Company and to become the Company's Bylaws, and to be inserted into and
kept with the corporate records of the Company by a duly authorized officer of
the Company. By his, her or its execution and delivery of this Agreement, each
Stockholder hereby consents (in his, her or its capacity as a stockholder of
the Company) to the approval of the Bylaw Amendment, and agrees that such
Stockholder will not withdraw, revoke, rescind or alter such consent in any way
without the prior written consent of Buyer.
1.3. Purchase and Sale of Purchase Shares.
(a) Purchase and Sale. Upon the terms and subject to the
conditions set forth in this Agreement, at Closing the Company shall issue and
sell to Buyer, and Buyer shall purchase from the Company, the Purchase Shares,
free and clear of all liens, security interests, claims, rights of another and
encumbrances of any kind or character. The Company shall deliver the Purchase
Shares to Buyer at the Closing by delivering to Buyer, against payment of the
Purchase Price as provided herein, a share certificate representing the total
number of Purchase Shares to be purchased by Buyer hereunder, executed by a
duly authorized officer of the Company.
(b) Purchase Price. The purchase price payable by Buyer to
the Company in consideration for the issuance and sale of the Purchase Shares
shall be $1.00 per share, for an aggregate purchase price equal to $32,000,000
(the "Purchase Price"). Payment of the Purchase Price shall be made at the
Closing by or on behalf of Buyer by wire transfer of immediately available
funds to an account of the Company designated in writing to Buyer prior to the
Closing Date or, if not so designated, by certified or official bank check
payable in immediately available funds to the order of the Company.
1.4. Redemption of New Common Stock. Upon the terms and subject to
the conditions set forth herein, at Closing the Company shall redeem (the
"Common Stock Redemption") from each Stockholder identified on Schedule IV, and
each such Stockholder shall sell, assign, transfer and convey to the Company,
the number of shares of New Common Stock set forth opposite such
3
<PAGE> 11
Stockholder's name in Column B of Schedule IV (collectively, the "Redeemed
Common Shares") in exchange for the amount set forth opposite such
Stockholder's name in Column C of Schedule IV (which represents a redemption
price of $1.00 per share for an aggregate of $48,068,776.53 (the "Common
Redemption Price")). Each such Stockholder's share of the Common Redemption
Price (as set forth opposite such Stockholder's name in Column C of Schedule
IV) shall be paid (subject to Sections 1.7 and 1.9) by or on behalf of the
Company to each such Stockholder at Closing by wire transfer of immediately
available funds to an account of such Stockholder designated in writing to the
Company prior to the Closing Date or, if not so designated, by certified or
official bank check payable in immediately available funds to the order of such
Stockholder. Each of the Stockholders named on Schedule IV shall deliver the
Redeemed Common Shares held by them to the Company at the Closing by delivering
to the Company, against payment (subject to Sections 1.7 and 1.9) of the Common
Redemption Price as provided herein, one or more share certificates
representing (as described in Section 1.1(b)) the right to receive the total
number of shares of New Common Stock set forth opposite the name of such
Stockholder in Column A of Schedule IV. Upon receipt of such stock
certificates, the Company shall issue to each such Stockholder a certificate
representing the total number of shares of New Common Stock set forth opposite
such Stockholder's name in Column D of Schedule IV, executed by a duly
authorized officer of the Company.
1.5. Warrant Redemption. Pursuant to the Warrant dated September 30,
1996, granted by the Company in favor of Heritage (the "Warrant"), Heritage has
been granted the right to acquire, under certain circumstances, 8,780,300.99
shares (assuming conversion as contemplated in Section 1.1(b)) of Common Stock
(the "Underlying Warrant Shares"). Upon the terms and subject to the
conditions set forth herein, at the Closing the Company shall redeem (the
"Warrant Redemption") from Heritage, and Heritage shall sell, assign, transfer
and convey to the Company, the Warrant in exchange for $1.00 per Underlying
Warrant Share, for an aggregate redemption price of $8,780,300.99 (the "Warrant
Redemption Price"). The Warrant Redemption Price shall be paid (subject to
Sections 1.7 and 1.9) at the Closing by or on behalf of the Company by wire
transfer of immediately available funds to an account of Heritage designated in
writing to the Company prior to the Closing Date or, if not so designated, by
certified or official bank check payable in immediately available funds to the
order of Heritage. Upon receipt by Heritage of the Warrant Redemption Price
(subject to Sections 1.7 and 1.9), the Warrant shall terminate and be of no
further force and effect and Heritage shall deliver to the Company at the
Closing the Warrant marked "CANCELLED" by a duly authorized representative of
Heritage.
1.6. Partial Redemption of Substitute Options; Replacement Options .
The Company and each Option Holder listed in Part 2 of Schedule III agree that
the sale of the Purchase Shares to Buyer and the consummation of the other
transactions contemplated in this Agreement constitute a "Disposition Event,"
as such term is defined in the Agreement(s) (each, a "Substitute Option
Agreement"), pursuant to which each such Option Holder has been granted the
right (each, a "Substitute Option") to acquire, under certain circumstances,
the number of shares of Common Stock (assuming conversion as contemplated in
Section 1.1(b)) set forth opposite such Option Holder's name in Column A of
Schedule III (collectively, the "Underlying Substitute Option Shares"). Upon
the terms and subject to the conditions set forth herein, at the Closing the
Company shall redeem (the
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<PAGE> 12
"Substitute Option Redemption") from each Option Holder listed in Part 2 of
Schedule III, and each such Option Holder shall sell, assign, transfer and
convey to the Company, such Option Holder's right to acquire the number of
Underlying Substitute Option Shares set forth opposite such Option Holder's
name in Column C of Schedule III in exchange for the amount (subject to
Sections 1.7) set forth opposite such Option Holder's name in Column C of
Schedule III (which represents a redemption price of $1.00 for each such
Underlying Substitute Option Share, for an aggregate redemption price of
$1,825,922.24 (the "Substitute Option Redemption Price")). The Preferred Stock
Redemption, the Common Stock Redemption, the Warrant Redemption and the
Substitute Option Redemption are sometimes collectively referred to herein as
the "Redemptions." The Preferred Redemption Price, the Common Redemption
Price, the Warrant Redemption Price and the Substitute Option Redemption Price,
when added together, are collectively referred to herein as the "Redemption
Price." Each such Option Holder's share of the Substitute Option Redemption
Price (as set forth opposite such Option Holder's name in Column C of Schedule
III) shall be paid (subject to Section 1.7 and any applicable withholding
requirements) at Closing by or on behalf of the Company by wire transfer of
immediately available funds to an account of such Option Holder designated in
writing to the Company prior to the Closing Date or, if not so designated, by
certified or official bank check payable in immediately available funds to the
order of such Option Holder. At the Closing and simultaneously with such
Option Holder's receipt of the portion of the Substitute Option Redemption
Price set forth opposite such Option Holder's name in Column C of Schedule III,
the Company and each such Option Holder shall execute and deliver a Replacement
Option Agreement in the form of Exhibit C (each, a "Replacement Option
Agreement") pursuant to which, among other things, such Option Holder's
Substitute Option Agreement shall be amended and restated to provide that the
number of shares of New Common Stock which such Option Holder shall be entitled
to acquire upon exercise of such option shall be equal to the number of shares
of New Common Stock set forth opposite such Option Holder's name in Column D of
Schedule III.
1.7. Escrows.
(a) Atrium Indemnitors. Pursuant to Article X hereof, the
Selling Securityholders listed on Part 1 of Schedule V (the "Atrium
Indemnitors") have jointly and severally agreed to indemnify the Buyer
Indemnified Parties (hereinafter defined) from and against certain Buyer
Indemnified Costs (hereinafter defined). On or prior to Closing, Heritage, the
Atrium Indemnitor Representative (hereinafter defined) (on behalf of the Atrium
Indemnitors other than Heritage), Buyer and Citibank, N.A. (or such other
person as Buyer, Heritage and the Atrium Indemnitor Representative shall
mutually select) (the "Escrow Agent") shall enter into an Indemnification
Escrow Agreement in the form of Exhibit D, subject only to the comments, if
any, of the Escrow Agent as to its rights and obligations thereunder (the
"Atrium Indemnification Escrow Agreement"). Notwithstanding any other
provision in this Agreement to the contrary, in order to secure the indemnity
obligations of the Atrium Indemnitors to the Buyer Indemnified Parties under
this Agreement, a portion of the Redemption Price which would otherwise be
delivered to the Atrium Indemnitors at Closing equal to $2,000,000 (the "Atrium
Escrowed Amount") shall be deposited into and held in escrow pursuant to the
terms of the Atrium Indemnification Escrow Agreement. The Company is directed
by each Atrium Indemnitor to deposit the amount set forth opposite such
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<PAGE> 13
Atrium Indemnitor's name in Column A of Schedule V with the Escrow Agent at the
Closing and the Company shall make such deposit as directed.
(b) Bishop Indemnitors. Pursuant to Article X hereof, the
Selling Securityholders listed on Part 2 of Schedule V (the "Bishop
Indemnitors") have agreed to indemnify the Buyer Indemnified Parties from and
against certain Buyer Indemnified Costs. Pursuant to (i) the Stock Purchase
Agreement (the "Bishop Purchase Agreement") dated as of August 22, 1996 by and
among Fojtasek Companies, Inc. and the Bishop Indemnitors and (ii) the
Securities Exchange Agreement (the "Bishop Exchange Agreement", and
collectively with the Bishop Purchase Agreement, the "Bishop Agreements") dated
as of August 22, 1996 by and among the Company, FCI Holding Corp., the Bishop
Indemnitors and the FCI Holders (as defined in the Bishop Exchange Agreement),
the Bishop Indemnitors have also agreed to indemnify the Company, FCI Holding
Corp., the FCI Holders (as defined in the Bishop Exchange Agreement), Fojtasek
Companies, Inc., the Bishop Subsidiaries (hereinafter defined) and their
respective directors, officers, employees and affiliates (collectively, the
"Bishop Indemnitees") from and against certain "Losses" (as defined in Section
13.1 of the Bishop Purchase Agreement and Section 11.1 of the Bishop Exchange
Agreement, also referred to herein as "Losses"). On or prior to Closing, the
Company, the Bishop Indemnitor Representative (hereinafter defined) (on behalf
of the Bishop Indemnitors), Buyer and Escrow Agent shall enter into, and the
Company shall cause Fojtasek Companies, Inc. to enter into, an Indemnification
Escrow Agreement in the form of Exhibit E, subject only to the comments, if
any, of Escrow Agent as to its rights and obligations thereunder (the "Bishop
Indemnification Escrow Agreement") and the Company and the Bishop Indemnitor
Representative shall enter into, and the Company shall cause Fojtasek
Companies, Inc. to enter into, and use its best efforts to cause Bingham, Dana
& Gould LLP to enter into, the Bishop Buy-Sell Amendment referred to in Section
1.8(c). Notwithstanding any other provision in this Agreement to the contrary,
in order to secure (i) the indemnity obligations of the Bishop Indemnitors to
the Buyer Indemnified Parties under this Agreement, and (ii) the indemnity
obligations of the Bishop Indemnitors to the Bishop Indemnitees under the
Bishop Agreements, a portion of the Redemption Price which would otherwise be
delivered to the Bishop Indemnitors at Closing equal to $3,000,000 (the "Bishop
Escrowed Amount") shall be deposited into and held in escrow pursuant to the
terms of the Bishop Indemnification Escrow Agreement. The Company is directed
by each Bishop Indemnitor to deposit the amount set forth opposite such Bishop
Indemnitor's name in Column A of Schedule V with the Escrow Agent at the
Closing, and the Company shall make such deposit as directed. Subject to the
provisions of this Section 1.7(b) and the provisions of Section 1.7(c) below,
the remaining portion of each Bishop Indemnitor's share of the Common
Redemption Price shall be paid by the Company to such Bishop Indemnitor at
Closing upon the terms and conditions set forth in Section 1.4.
(c) Selling Securityholders. On or prior to the Closing,
Heritage, the Selling Securityholder Representative (hereinafter defined) and
State Street Bank and Trust Company (or such other person as Heritage and the
Selling Securityholder Representative shall mutually select) (the "Seller
Escrow Agent") shall enter into an Atrium Corporation Selling Securityholders'
Escrow Agreement in the form of Exhibit F, subject only to the comments, if
any, of the Seller Escrow Agent as to its rights and obligations thereunder
(the "Seller Escrow Agreement"). Notwithstanding any
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<PAGE> 14
other provision in this Agreement to the contrary, a portion of the Redemption
Price which would otherwise be delivered to the Selling Securityholders at
Closing equal to $400,000 (the "Seller Expense Holdback Amount") shall be
utilized for the payment of those fees and expenses of the Company and the
Selling Securityholders resulting from or related to the transactions
contemplated hereby which are to be borne by and are payable by the Selling
Securityholders pursuant to Section 11.6 below, and the amount (the "Seller
Escrowed Amount") by which the Seller Expense Holdback Amount exceeds the
aggregate amount of such fees and expenses paid at Closing shall be deposited
into and held in escrow pursuant to the terms of the Seller Escrow Agreement in
order to secure the payment of any such fees and expenses not paid at Closing.
The Company is directed by each Selling Securityholder to pay at Closing such
fees and expenses (including fees and expenses previously incurred by the
Company and its subsidiaries which the Selling Securityholders are required to
bear pursuant to Section 11.6) as Heritage and the Selling Securityholder
Representative may direct in instructions to be delivered in writing prior to
the Closing Date, and to deposit the Seller Escrowed Amount (if any) with the
Seller Escrow Agent, and the Company shall make such payments and deposits as
directed; provided that the aggregate amount so paid or deposited by the
Company shall not exceed the Seller Expense Holdback Amount.
By execution and delivery of this Agreement, each Selling Securityholder
(other than Heritage) hereby irrevocably constitutes and appoints Randall S.
Fojtasek as the true and lawful agent and attorney-in-fact (the "Selling
Securityholder Representative") of such Selling Securityholder with full power
of substitution to act in the name, place and stead of such Selling
Securityholder with respect to (a) the power to execute the Seller Escrow
Agreement and any amendment thereto as the Selling Securityholder
Representative shall deem necessary or appropriate in his sole discretion, (b)
delivery of written instructions to the Seller Escrow Agent to release the
Seller Escrowed Amount, and (c) the performance of the obligations and rights
of such Selling Securityholder under the Seller Escrow Agreement, including,
without limitation, the power to do or refrain from doing all such further acts
and things, and to execute, deliver and receive all such documents, waivers,
extensions and amendments as such Selling Securityholder Representative shall
deem necessary or appropriate in his sole discretion in connection with the
administration of the Seller Escrow Agreement (and any such actions shall be
binding on such Selling Securityholder).
Buyer, the Company, Heritage and any other person may conclusively and
absolutely rely, without inquiry, upon any action of the Selling Securityholder
Representative as the action of each Selling Securityholder (other than
Heritage) in all matters referred to in this Section 1.7(c), and each such
Selling Securityholder confirms all that the Selling Securityholder
Representative shall do or cause to be done by virtue of his appointment as
Selling Securityholder Representative. All actions taken by the Selling
Securityholder Representative are acknowledged by the parties hereto to be
taken by it solely as agent and attorney-in-fact for each Selling
Securityholder (other than Heritage). By the execution of this Agreement,
Randall S. Fojtasek has accepted his appointment as Selling Securityholder
Representative and in consideration for Randall S. Fojtasek's agreement to act
as the Selling Securityholder Representative, each Selling Securityholder
(other than Heritage) hereby agrees to indemnify and hold Randall S. Fojtasek
harmless from and against all damages, losses, liabilities, charges, penalties,
costs and expenses (including court costs and attorneys' fees and
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<PAGE> 15
expenses, if any) incurred by him in connection with his performance as Selling
Securityholder Representative. Each Selling Securityholder (other than
Heritage) covenants and agrees that he or she will not voluntarily revoke the
power of attorney conferred in this Section 1.7(c). If any Selling
Securityholder dies or becomes incapacitated, disabled or incompetent (such
deceased, incapacitated, disabled or incompetent Selling Securityholder being a
"Former Selling Securityholder") and, as a result, the power of attorney
conferred by this Section 1.7(c) is revoked by operation of law, it shall not
be a breach under this Agreement if the heirs, beneficiaries, estate,
administrator, executor, guardian, conservator or legal representative of such
Former Selling Securityholder (each a "Successor Selling Securityholder")
confirms the appointment of the Selling Securityholder Representative as agent
and attorney-in-fact for such Successor Selling Securityholder. If at any time
Randall S. Fojtasek dies or resigns from his position as the Selling
Securityholder Representative, the other Selling Securityholders (other than
Heritage) shall designate a successor to Randall S. Fojtasek as soon as
practicable.
1.8. Other Actions.
(a) Disposition Option Redemption. The Company and each
person listed in Schedule VI (each, a "Disposition Option Holder") have
previously entered into an Agreement (each, a "Disposition Option Agreement"),
pursuant to which each such Disposition Option Holder has been granted the
right (each, a "Disposition Option") to acquire, under certain circumstances,
the number of shares of Common Stock set forth opposite such Disposition Option
Holder's name in Column A of Schedule VI (collectively, the "Underlying
Disposition Option Shares"). The Company represents and warrants to Buyer that
the Company and each of the Disposition Option Holders listed in Schedule VI
have entered into a Redemption Agreement in the form of Exhibit G (each, a
"Disposition Option Redemption Agreement"), pursuant to which the Company has
agreed to redeem (the "Disposition Option Redemption") from each such
Disposition Option Holder, and each such Disposition Option Holder has agreed
to sell, assign, transfer and convey to the Company, the Disposition Option
owned by such Disposition Option Holder in exchange for the amount (subject to
applicable withholding) set forth opposite such Disposition Option Holder's
name in Column B of Schedule VI, for an aggregate redemption price of $742,500
(the "Disposition Option Redemption Price")). The Company agrees that it shall
not, and shall not agree to, terminate, amend, modify, supplement or otherwise
alter any of the Disposition Stock Option Redemption Agreements, or waive any
provision thereunder, prior to Closing without the prior written consent of
Buyer. The Company shall comply with, and will use its best efforts to cause
the Disposition Option Holders to comply with, all covenants, obligations or
undertakings made by any of them under the Disposition Option Redemption
Agreements.
(b) Employee Stock Purchases.
(i) Atrium Corporation 1996 Stock Purchase Plan.
Attached to this Agreement as Exhibit H is the Atrium Corporation 1996 Employee
Stock Purchase Plan (the "1996 Stock Purchase Plan"). By his, her or its
execution and delivery of this Agreement, each Stockholder (in his, her or its
capacity as a stockholder of the Company) hereby consents to the adoption of
the
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1996 Stock Purchase Plan and agrees that such Stockholder will not withdraw,
revoke, rescind or alter such consent in any way without the prior written
consent of Buyer. The Company and each of the Selling Securityholders agree
that they shall not amend, modify, supplement or otherwise alter the 1996 Stock
Purchase Plan prior to Closing without the prior written consent of Buyer.
(ii) Exercise Agreements. The Company represents and
warrants to Buyer that the Company and each of the individuals named on
Schedule VII (the "Key Employees") have, pursuant to the 1996 Stock Purchase
Plan, entered into an Exercise Agreement in the form of Exhibit I hereto (each,
an "Exercise Agreement"), pursuant to which the Company has agreed to issue and
sell to each Key Employee, and each Key Employee has agreed to purchase from
the Company, the number of shares of New Common Stock set forth opposite such
Key Employee's name on Schedule VII (collectively, the "Key Employee Shares")
in exchange for an exercise price of $1.00 per share, for an aggregate exercise
price of $375,000 (the "Key Employee Purchase Price"). The Company agrees that
it shall not, and shall not agree to, terminate, amend, modify, supplement or
otherwise alter, or waive any provision under, any of the Exercise Agreements
prior to Closing without the prior written consent of Buyer. The Company shall
comply with, and will use its best efforts to cause the Key Employees to comply
with, all covenants, obligations or undertakings made by any of them under the
Exercise Agreements.
(c) Amendment to Bishop Buy-Sell Agreement. The Company,
Fojtasek Companies, Inc., the Bishop Indemnitors and Bingham, Dana & Gould LLP
have entered into the Buy-Sell Agreement (the "Bishop Buy-Sell Agreement")
dated as of September 30, 1996. At the Closing, the Company and each of the
Bishop Indemnitors shall, and the Company shall cause Fojtasek Companies, Inc.
to, and the Company and the Bishop Indemnitors shall use their best efforts to
cause Bingham, Dana & Gould LLP to, execute and enter into an amendment to the
Bishop Buy-Sell Agreement in the form of Exhibit J hereto (the "Bishop Buy-Sell
Amendment").
(d) Fojtasek Escrow Amendment. Pursuant to the Stock Purchase
Agreement (the "Fojtasek Purchase Agreement") dated as of July 3, 1995 by and
between Fojtasek/Heritage Acquisition Company and the stockholders listed on
Part 3 of Schedule V hereto (collectively, the "Fojtasek Indemnitors"), the
Fojtasek Indemnitors have agreed to indemnify Fojtasek/Heritage Acquisition
Company, Fojtasek Companies, Inc. and their respective directors, officers,
employees and affiliates (collectively, the "Fojtasek Indemnitees") from
certain Damages (as defined in the Fojtasek Purchase Agreement). To secure the
obligations of the Fojtasek Indemnitors under the Fojtasek Purchase Agreement,
Fojtasek/Heritage Acquisition Company, the Fojtasek Indemnitors and The First
National Bank of Boston, as escrow agent, entered into that certain Escrow
Agreement dated as of July 3, 1995 (the "Fojtasek Escrow Agreement"). In order
to secure certain specific indemnity obligations of the Atrium Indemnitors to
the Buyer Indemnified Parties under this Agreement and to limit continuing
indemnity obligations of the Fojtasek Indemnitors to the Fojtasek Indemnitees
under the Fojtasek Purchase Agreement, at the Closing the Company, Buyer and
the Fojtasek Indemnitors shall, and the Company shall cause Fojtasek Companies,
Inc. to, and the Company, Buyer and the Fojtasek Indemnitors shall use their
best efforts to cause State Street Bank and Trust Company, as successor to The
First National Bank of Boston (the "Fojtasek Escrow
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<PAGE> 17
Agent") to, amend and restate the Fojtasek Escrow Agreement in the form of
Exhibit K hereto, subject only to the comments, if any, of the Fojtasek Escrow
Agent as to its rights and obligations thereunder (the "Fojtasek Escrow
Amendment").
(e) Atrium Corporation 1996 Original Stock Option Plan.
Attached to this Agreement as Exhibit L is an amendment and restatement of the
Atrium Corporation 1996 Stock Option Plan (the "Existing Plan Amendment"). By
his, her or its execution and delivery of this Agreement, each Stockholder (in
his, her or its capacity as a stockholder of the Company) and each Option
Holder named in Part 2 of Schedule III hereto (in his, her or its capacity as a
holder of Substitute Options) hereby consents to the adoption of the Existing
Plan Amendment and agrees that such Stockholder or Option Holder will not
withdraw, revoke, rescind or alter such consent in any way without the prior
written consent of Buyer. The Company and each of the Selling Securityholders
agree that they shall not amend, modify, supplement or otherwise alter the
Existing Plan Amendment prior to Closing without the prior written consent of
Buyer.
(f) Atrium Corporation 1996 Employee Stock Option Plan.
Attached to this Agreement as Exhibit M is the Atrium Corporation 1996 Employee
Stock Option Plan (the "1996 Option Plan"). By his, her or its execution and
delivery of this Agreement, each Stockholder (in his, her or its capacity as a
stockholder of the Company) hereby consents to the adoption of the 1996 Option
Plan and agrees that such Stockholder will not withdraw, revoke, rescind or
alter such consent in any way without the prior written consent of Buyer. The
Company and each of the Selling Securityholders agree that they shall not
amend, modify, supplement or otherwise alter the 1996 Option Plan prior to
Closing without the prior written consent of Buyer. At the Closing the Company
will issue to each person listed in Part 3 of Schedule III (each, a "Grantee")
an option (each, a "1996 Option") to purchase the number of shares of New
Common Stock set forth opposite the name of such Grantee in Column E of
Schedule III (collectively, the "Underlying 1996 Option Shares"). At the
Closing the Company and each Grantee shall execute and enter into a Stock
Option Agreement in the form attached to the 1996 Option Plan (each, a "1996
Option Agreement"), each of which shall provide that (i) each Grantee shall
receive the right to acquire the number of Underlying 1996 Option Shares set
forth opposite such Grantee's name in Column E of Schedule III, (ii) the
exercise price per Underlying 1996 Option Share shall be as set forth opposite
such Grantee's name in Column F of Schedule III, and (iii) such option shall
vest (and have such other terms) as described in Column G of Schedule III.
1.9. Withholding of Redemption Price Payable to Heritage. The Board
of Directors of the Company has agreed to pay to Randall S. Fojtasek a bonus of
$3,000,000. Heritage has agreed to provide a portion of the funds necessary to
pay such bonus. Notwithstanding any other provision in this Agreement to the
contrary, Heritage and the Company agree with Buyer that a portion of the
Redemption Price which would otherwise be delivered to Heritage at Closing
equal to $2,000,000 shall be withheld by the Company for the purpose of
permitting the Company to fund a portion of such bonus. The Company agrees
with Heritage and Buyer that such amount (subject to applicable withholding)
shall be paid to Randall S. Fojtasek at Closing. By his, her or its execution
and delivery of this Agreement, each Stockholder (in his, her or its capacity
as a stockholder of the
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Company) hereby consents to the payment by the Company to Randall S. Fojtasek
of a $3,000,000 bonus at Closing and agrees with Buyer and Heritage that such
Stockholder will not withdraw, revoke, rescind or alter such consent in any
way.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1. Representations and Warranties of the Company. The Company and
each Atrium Indemnitor hereby jointly and severally represent and warrant to
Buyer as follows (with the understanding that Buyer is relying on such
representations and warranties in entering into and performing this Agreement):
(a) Organization, Good Standing, Etc. Each of the Company and
its subsidiaries (as defined in Section 11.17) is a corporation or other entity
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation (or organization), has all requisite corporate
power and authority to own, lease and operate its properties and to carry on
its business as now being conducted and is duly qualified and in good standing
to do business in each state listed on Schedule 2.1(a), which states represent
every jurisdiction in which the nature of its business or the ownership or
leasing of its properties makes such qualification necessary, except where the
failure to so qualify or be in good standing has not had, or could not be
reasonably expected to have, a Material Adverse Effect. The Company has
delivered to Buyer true and complete copies of the Certificates or Articles of
Incorporation and Bylaws (or equivalent organizational documents) of the
Company and each of its subsidiaries, as in effect at the date of this
Agreement. Neither the Company nor any subsidiary is in violation of any
provisions of its Certificate or Articles of Incorporation, Bylaws or
equivalent organizational documents.
(b) Subsidiaries of the Company. Schedule 2.1(b) sets forth a
true and complete list of all of the Company's subsidiaries, together with the
jurisdiction of incorporation or organization of each such subsidiary and the
percentage of each such subsidiary's outstanding capital stock or other equity
interests owned by the Company or another subsidiary of the Company. Except as
disclosed on Schedule 2.1(b), the Company does not own, directly or indirectly,
any subsidiaries or own, or have the right, pursuant to a contract or
otherwise, to acquire any capital stock, equity interest or other similar
investment in any corporation, partnership, joint venture, association, limited
liability company, trust or other entity.
(c) Capital Structure. Immediately prior to the Closing and
the consummation of the transactions described in Article I hereof, the
authorized capital stock of the Company consists of (i) 350,000 shares of
Common Stock, 150,000 of which are designated "Class A Voting Common Stock,"
150,000 of which are designated "Class B Non-Voting Common Stock" and 50,000 of
which are designated "Class C Voting Common Stock," and (ii) 50,000 shares of
Preferred Stock. There are 30,545.40 shares of Class A Voting Common Stock,
29,709.78 shares of Class B Non-Voting
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Common Stock, 30,386.4 shares of Class C Voting Common Stock and 11,000 shares
of Preferred Stock issued and outstanding. No shares of Common Stock or
Preferred Stock are held by the Company in its treasury. Except for 34,770.5
shares of Class B Non-Voting Common Stock which are reserved for issuance upon
the exercise of the options and warrants listed on Schedule 2.1(c), no shares
of capital stock of the Company are reserved for issuance for any other
purpose. As of the date hereof, there are no bonds, debentures, notes or other
indebtedness issued or outstanding having the right to vote ("Voting Debt") on
any matters on which holders of Common Stock or Preferred Stock may vote. All
of the issued and outstanding shares of capital stock of the Company are duly
authorized, validly issued, fully paid and nonassessable and have not been
issued in violation of any preemptive or similar rights. Except as disclosed
on Schedule 2.1(c), there are no options, warrants, calls, rights, commitments
or agreements of any character to which the Company or any of its subsidiaries
is a party or by which any of them is bound obligating the Company or any of
its subsidiaries to issue, deliver, or sell, or cause to be delivered or sold,
additional shares of capital stock or any Voting Debt of the Company or any of
its subsidiaries, or obligating the Company or any of its subsidiaries to
grant, extend or enter into any such option, warrant, call, right, commitment
or agreement. Except as disclosed on Schedule 2.1(c), there are no outstanding
contractual obligations of the Company or any subsidiary to repurchase, redeem
or otherwise acquire any shares of Common Stock, Preferred Stock or other
capital stock of the Company or any capital stock of, or any equity interest
in, any subsidiary listed on Schedule 2.1(b). Schedule 2.1(c) also sets forth
the capitalization of each subsidiary of the Company listed on Schedule 2.1(b),
including the number of authorized shares of each class of capital stock and
the par value (if any) thereof, the number of shares of each class of capital
stock held in the treasury of the subsidiary, and the number of issued and
outstanding shares of each class of capital stock and the names of (and number
of shares held by) the record owners thereof. All the issued and outstanding
shares of capital stock of each subsidiary of the Company are duly authorized,
validly issued, fully paid and nonassessable and have not been issued in
violation of any preemptive or similar rights.
(d) Authority. The Company, and each subsidiary of the
Company, if applicable, has all requisite corporate power and authority to
enter into this Agreement and each other agreement, document and instrument
required to be executed in accordance herewith, including, without limitation,
each of the documents the forms of which are attached as Exhibits hereto
(collectively, the "Transaction Documents"), to which the Company or such
subsidiary is to be a party and to consummate the transactions contemplated
hereby or thereby. The execution and delivery of the Transaction Documents by
the Company, and each subsidiary of the Company, if applicable, and the
consummation by the Company and each such subsidiary of the transactions
contemplated thereby have been duly authorized by all necessary corporate
action on the part of the Company and each such subsidiary. This Agreement has
been, and at Closing each of the other Transaction Documents to which the
Company or any subsidiary of the Company, if applicable, is to be a party will
be, duly executed and delivered by the Company and each such subsidiary, and
this Agreement constitutes, and upon execution and delivery thereof by the
Company or any such subsidiary, the other Transaction Documents to which the
Company or any such subsidiary is to be a party will constitute, the valid and
binding obligations of the Company and each such subsidiary, enforceable
against it in accordance with its respective terms, subject to applicable
bankruptcy,
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insolvency, fraudulent conveyance, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally and subject, as to
enforceability, to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity). Without limiting
the other representations and warranties set forth in this Section 2.1(d), (i)
the Charter Amendment has been unanimously approved by the members of the
Company's Board of Directors and by each holder of the Company's capital stock
entitled to vote on the approval of the Charter Amendment, (ii) the Bylaw
Amendment has been unanimously approved by the members of the Company's Board
of Directors and by each holder of the Company's capital stock entitled to vote
on the approval of the Bylaw Amendment, (iii) the 1996 Option Plan has been
unanimously approved by the members of the Company's Board of Directors and by
each holder of the Company's capital stock entitled to vote on the approval of
the 1996 Option Plan, (iv) the 1996 Stock Purchase Plan has been unanimously
approved by the members of the Company's Board of Directors and by each holder
of the Company's capital stock entitled to vote on the approval of the 1996
Stock Purchase Plan, (v) the 1996 Option Plan shall automatically become
effective at the Closing without any further action by any party, and (vi) no
other consents or approvals are required from any person in order to approve
the Charter Amendment, the Bylaw Amendment, the 1996 Option Plan or the 1996
Stock Purchase Plan.
(e) No Conflict; Required Filings and Consents. Except as
disclosed on Schedule 2.1(e), the execution and delivery of the Transaction
Documents by the Company and its subsidiaries, as applicable, do not, and the
performance by the Company and its subsidiaries, as applicable, of the
transactions contemplated hereby or thereby will not, subject to making the
filings and obtaining the consents, approvals, authorizations and permits
described in this Section 2.1(e), (i) violate, conflict with, or result in any
breach of any provision of the Certificates or Articles of Incorporation or
Bylaws or equivalent organizational documents, in each case as amended or
restated, of the Company or any of its subsidiaries, (ii) violate, conflict
with, or result in a violation or breach of, or constitute a default (with or
without due notice or lapse of time or both) under, or permit the termination
of, or result in the acceleration of, or entitle any party to accelerate
(whether as a result of a change in control of the Company or any of its
subsidiaries or otherwise) any obligation, or result in the loss of any
benefit, or give any person the right to require any security to be
repurchased, or give rise to the creation of any lien, charge, security
interest or encumbrance upon any of the properties or assets of the Company or
any of its subsidiaries under any of the terms, conditions, or provisions of,
any loan or credit agreement, note, bond, mortgage, indenture or deed of trust,
or any license, lease, agreement or other instrument or obligation to which any
of them is a party or by which any of them or any of their properties or assets
may be bound or subject, except for such violations, conflicts, breaches,
defaults, terminations, accelerations, losses or other such events as have not
had, or could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect, or (iii) violate any order, writ,
judgment, injunction, decree, statute, rule or regulation of any court or any
federal, state or local administrative agency or commission or other
governmental authority or instrumentality (a "Governmental Entity") applicable
to the Company or any of its subsidiaries or by which or to which any of their
respective properties or assets is bound or subject ("Applicable Laws"), except
for such violations as have not had, or could not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect. No consent,
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approval, order, or authorization of, or registration, declaration, or filing
with, any Governmental Entity is required by or with respect to the Company or
any of its subsidiaries in connection with the execution and delivery of the
Transaction Documents by the Company or the consummation of the transactions
contemplated hereby or thereby, except for (A) the filing of a premerger
notification report under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"), and (B) applicable requirements, if any, of
the Securities Act of 1933, as amended (the "Securities Act"), and the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and state
securities or blue sky laws.
(f) Reports; Financial Statements; Absence of Certain Changes
or Events.
(i) The Company and its subsidiaries have filed all
forms, reports, statements and other documents required to be filed with
any and all Governmental Entities (all such forms, reports, statements
and other documents being referred to herein, collectively, as the
"Company Reports"), other than those which the failure to file has not
had, or could not reasonably be expected to have, a Material Adverse
Effect. The Company Reports were prepared in accordance with the
requirements of Applicable Law.
(ii) The Company has delivered to Buyer copies of (A)
the audited consolidated balance sheets of FCI Holding Corp. ("FCI") as
of December 31, 1995, December 31, 1994 and December 31, 1993, together
with the related audited consolidated statements of income,
stockholders' equity and cash flows of FCI for the periods then ended,
and the notes thereto, accompanied by the report thereon of Arthur
Andersen LLP, independent public accountants (collectively, the "Audited
Financial Statements"), (B) the unaudited consolidated balance sheet of
FCI as of September 30, 1996 (the "Balance Sheet"), together with the
related unaudited consolidated statement of income and stockholder's
equity of FCI for the six months then ended (collectively, the
"Unaudited Financial Statements," and together with the Audited
Financial Statements, the "Financial Statements"). The Financial
Statements, including the notes thereto, were prepared in accordance
with GAAP applied on a consistent basis throughout the periods covered
thereby (except to the extent disclosed therein or required by changes
in GAAP) and present fairly the consolidated financial position, results
of operations, stockholders' equity and cash flows of FCI as of such
dates and for the periods then ended.
(iii) Except as disclosed in Schedule 2.1(f), there is no
liability or obligation of any kind, whether accrued, absolute, fixed,
contingent or otherwise, of FCI or its subsidiaries that is not
reflected or reserved against in the Balance Sheet, other than (A)
liabilities incurred in the ordinary course of business in a manner
consistent with past practice since September 30, 1996 (the "Balance
Sheet Date"), or (B) any such liability or obligation which would not be
required to be presented in financial statements prepared in conformity
with GAAP, applied in a manner consistent with past practice, in the
preparation of the Financial Statements.
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(iv) Except as disclosed in Schedule 2.1(f), since the
Balance Sheet Date, the Company and its subsidiaries have conducted
their respective businesses only in the ordinary course consistent with
past practice and nothing has occurred that would have been prevented by
Section 3.1 if the terms of such section had been in effect as of and
after the Balance Sheet Date. Since the Balance Sheet Date, there has
been no material adverse change in the business, operations, properties,
condition (financial or otherwise), results of operations, assets,
liabilities or prospects of the Company or its subsidiaries.
(g) Compliance with Applicable Laws.
(i) Except as set forth in Part I of Schedule 2.1(g),
the businesses of the Company and its subsidiaries have been conducted
in compliance with each applicable law, ordinance, regulation, judgment,
decree, injunction, rule or order of any Governmental Entity binding on
the Company or any of its subsidiaries or their respective properties or
assets ("Applicable Laws"), except for such failures to comply as have
not had, or could not reasonably be expected to have, a Material Adverse
Effect. No investigation or review by any Governmental Entity with
respect to the Company or any of its subsidiaries is pending or, to the
Knowledge of the Company, threatened.
(ii) Part II of Schedule 2.1(g) lists all material
licenses, permits, permissions or authorizations issued to the Company
or any of its subsidiaries by any Governmental Entities and held by them
as of the date of this Agreement. Such licenses, permits, permissions
and authorizations, and all applications for modification, extension, or
renewal thereof or for new licenses, permits, permissions or
authorizations are collectively referred to herein as the "Licenses."
Part II of Schedule 2.1(g) lists the legally authorized holder(s) of the
Licenses, each of which is in full force and effect. The businesses of
the Company and its subsidiaries have been operated in all material
respects in accordance with the terms of the Licenses. There are no
proceedings pending or, to the Knowledge of the Company, threatened with
respect to the Company or any of its subsidiaries which reasonably may
be expected to result in the revocation, material adverse modification,
non-renewal or suspension of any of the Licenses, the denial of any
pending applications for Licenses, the issuance against the Company or
any of its subsidiaries of any cease and desist order, or the imposition
of any administrative actions by any Governmental Entity with respect to
the Licenses, or which reasonably may be expected to materially
adversely affect the ability of the Company and its subsidiaries to
operate as currently operated.
(h) Absence of Litigation. Except as set forth on Schedule
2.1(h), there is no claim, action, suit, inquiry, judicial or administrative
proceeding, grievance or arbitration pending or, to the Knowledge of the
Company, threatened against the Company or any of its subsidiaries or any of
their respective properties or assets by or before any arbitrator or
Governmental Entity, nor to the Knowledge of the Company are there any
investigations relating to the Company or any of its subsidiaries or any of
their respective properties or assets pending or threatened by or before any
arbitrator or Governmental Entity. Except as set forth in Schedule 2.1(h),
there is no judgment,
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decree, injunction, order, determination, award, finding or letter of
deficiency of any Governmental Entity or arbitrator outstanding against the
Company or any of its subsidiaries or any of their respective properties or
assets. There is no action, suit, inquiry, judicial or administrative
proceeding pending or, to the Knowledge of the Company, threatened against the
Company or any of its subsidiaries relating to the transactions contemplated by
this Agreement and the other Transaction Documents. Except as set forth on
Schedule 2.1(h), there are no unfunded settlements or other settlements or
letters of commitment or conciliation agreements that the Company has entered
into with any party, including any Governmental Entity.
(i) Insurance. During each of the past five calendar years
the Company and each of its subsidiaries have been insured against such risks
as companies engaged in a similar business would, in accordance with good
business practice, customarily be insured. Schedule 2.1(i) sets forth a
summary of all fire, general liability, malpractice liability, theft and other
forms of insurance and all fidelity bonds held by or applicable to the Company
or any of its subsidiaries. No event has occurred, including the failure by
the Company or any of its subsidiaries to give any notice or information or the
delivery of any inaccurate or erroneous notice or information, which limits or
impairs the rights of the Company or any of its subsidiaries under any such
insurance policies in such a manner as could have a Material Adverse Effect.
Excluding insurance policies that have expired and been replaced in the
ordinary course of business, no insurance policy has been canceled within the
last two years prior to the date hereof.
(j) Real Estate. Each of the Company and its subsidiaries has
good and marketable title in fee simple to all real properties owned by it and
valid leaseholds in all real estate leased by it, except to the extent
marketability may be affected by the existence of Permitted Liens (as defined
in Section 2.1(l)). Schedule 2.1(j) contains a complete and accurate list of
each lease agreement relating to parcels of real property leased by the Company
or any of its subsidiaries, true and complete copies of which have previously
been delivered to Buyer. Each such lease is valid, without default thereunder
by the lessee or, to the Knowledge of the Company, the lessor. Schedule 2.1(j)
lists (i) the street address of each parcel of real property owned by the
Company or any of its subsidiaries, and (ii) the street address for each parcel
of real property leased by the Company or any of its subsidiaries under leases
with a term other than month-to-month.
(k) Personal Property. Except for property held under capital
leases, the Company and its subsidiaries have good title to all the items of
machinery, equipment, furniture, fixtures, inventory, receivables and other
tangible or intangible personal property reflected on the Balance Sheet and all
such property acquired by the Company or its subsidiaries since the Balance
Sheet Date, except for any such property or assets sold or otherwise disposed
of in the ordinary course of business and consistent with past practices since
the Balance Sheet Date. Except as disclosed in Schedule 2.1(k), to the
Knowledge of the Company there are no material defects in any tangible personal
property or fixtures owned or used by the Company or any of its subsidiaries
that are necessary for the operation of their respective businesses. The
Company or any of its subsidiaries owns or holds under valid leases all of the
tangible personal property and fixtures necessary to conduct the businesses of
the Company and its subsidiaries as presently conducted.
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(l) Liens and Encumbrances. Except as disclosed on Schedule
2.1(l), all properties and assets, including leases, owned by the Company and
its subsidiaries are free and clear of all liens, pledges, claims, security
interests, restrictions, mortgages, tenancies and other possessory interests,
conditional sale or other title retention agreements, assessments, easements,
rights of way, covenants, restrictions, rights of first refusal, defects in
title, encroachments, and other burdens, options or encumbrances of any kind
(collectively, "Liens") except (i) statutory Liens securing payments not yet
delinquent or the validity of which are being contested in good faith by
appropriate actions, (ii) purchase money Liens arising in the ordinary course,
(iii) Liens for taxes not yet delinquent, (iv) Liens reflected in the Balance
Sheet (which have not been discharged), (v) Liens which in the aggregate do not
materially detract from the value or materially impair the present and
continued use of the properties or assets subject thereto in the usual and
normal conduct of the business of the Company and its subsidiaries, (vi) Liens
on leases arising from the provisions of such leases, and (vii) Liens on real
property owned by the Company and its subsidiaries which are described in the
commitments to issue title insurance listed on Schedule 2.1(l) (the Liens
referred to in clauses (i) through (vii) being "Permitted Liens").
(m) Environmental Matters. Except as disclosed on Schedule
2.1(m):
(i) The real property and facilities owned, operated,
and leased by the Company or its subsidiaries and the operations of the
Company or its subsidiaries thereon comply in all material respects
with, and have at all times complied in all material respects with, all
applicable federal, state and local laws, statutes, codes, rules,
regulations, ordinances, orders, determinations and rules of common law
pertaining to the environment, natural resources and public or employee
health and safety including, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA"), the
Superfund Amendments and Reauthorization Act of 1986, as amended, the
Resource Conservation and Recovery Act of 1976, as amended, the Clean
Air Act, as amended, the Federal Water Pollution Control Act, as
amended, The Oil Pollution Act of 1990, as amended, the Safe Drinking
Water Act, as amended, the Hazardous Materials Transportation Act, as
amended, the Toxic Substances Control Act, as amended, and other
environmental conservation or protection laws (collectively
"Environmental Laws"); provided, that the Occupational Safety and Health
Act of 1970, as amended, shall not be deemed to be an "Environmental
Law" for purposes of this Agreement;
(ii) No judicial proceedings are pending or, to the
Knowledge of the Company, threatened against the Company or its
subsidiaries (other than the Bishop Subsidiaries) alleging the violation
of any Environmental Laws, and there are no administrative proceedings
pending or, to the Knowledge of the Company, threatened against the
Company or its subsidiaries (other than the Bishop Subsidiaries),
alleging the violation of any Environmental Laws and no notice from any
Governmental Entity or any private or public person has been received by
the Company or its subsidiaries (other than the Bishop Subsidiaries)
claiming any violation of any Environmental Laws in connection with any
real property or facility owned, operated or leased by the Company or
its subsidiaries (other than
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<PAGE> 25
the Bishop Subsidiaries), or requiring any remediation, clean-up,
modification, repairs, work, construction, alterations or installations
on or in connection with any real property or facility owned, operated
or leased by the Company or its subsidiaries (other than the Bishop
Subsidiaries) that are necessary to comply with any Environmental Laws
and that have not been complied with or otherwise resolved to the
satisfaction of the party giving notice;
(iii) to the Company's Knowledge
(A) no judicial proceedings are pending or
threatened against any of the Bishop Subsidiaries alleging the violation
of any Environmental Laws,
(B) there are no administrative proceedings
pending or threatened against any of the Bishop Subsidiaries alleging
the violation of any Environmental Laws, and
(C) no notice from any Governmental Entity or
any private or public person has been received by any of the Bishop
Subsidiaries claiming any violation of any Environmental Laws in
connection with any real property or facility owned, operated or leased
by the Bishop Subsidiaries, or requiring any remediation, clean-up,
modification, repairs, work, construction, alterations or installations
on or in connection with any real property or facility owned, operated
or leased by any of the Bishop Subsidiaries that are necessary to comply
with any Environmental Laws and that have not been complied with or
otherwise resolved to the satisfaction of the party giving notice;
(iv) All material permits, registrations, licenses,
authorizations, and the like ("Environmental Permits") required to be
obtained or filed by each of the Company and its subsidiaries under any
Environmental Laws in connection with the Company's and its
subsidiaries' operations, including those activities relating to the
generation, use, storage, treatment, disposal, release or remediation of
Hazardous Substances (as such term is defined in Section 2.1(m)(v)
hereof), have been duly obtained or filed, and each of the Company and
its subsidiaries are and have at all times complied in all material
respects with the terms and conditions of all such Environmental
Permits;
(v) All Hazardous Substances used or generated by the
Company or its subsidiaries or any of their predecessors on, in, or
under any of the owned, operated or leased real property or facilities
are and have at all times been generated, stored, used, treated,
disposed of and released by such persons or on their behalf in such
manner as not to result in any Environmental Costs or Liabilities.
"Hazardous Substances" means (A) any hazardous materials, hazardous
wastes, hazardous substances, toxic wastes, and toxic substances as
those or similar terms are defined under any Environmental Laws; (B) any
asbestos or any material which contains any hydrated mineral silicate,
including chrysolite, amosite, crocidolite, tremolite, anthophylite
and/or actinolite, whether friable or non-friable; (C) PCBs, or PCB-
containing materials or fluids; (D) radon; (E) any other hazardous,
radioactive, toxic or noxious substance, material, pollutant,
contaminant, constituent, or
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<PAGE> 26
solid, liquid or gaseous waste; (F) any petroleum, petroleum
hydrocarbons, petroleum products, crude oil and any fractions or
derivatives thereof, any oil or gas exploration or production waste, and
any natural gas, synthetic gas and any mixtures thereof; (G) any
substance that, whether by its nature or its use, is subject to
regulation under any Environmental Laws or with respect to which any
Environmental Laws or Governmental Entity requires environmental
investigation, monitoring or remediation; and (H) any underground
storage tanks, dikes, or impoundments as defined under any Environmental
Laws. "Environmental Costs or Liabilities" means any losses,
liabilities, obligations, damages, fines, penalties, judgments,
settlements, actions, claims, costs and expenses (including, without
limitation, reasonable fees, disbursements and expenses of legal
counsel, experts, engineers and consultants, and the costs of
investigation or feasibility studies and performance of remedial or
removal actions and cleanup activities) arising from or under any
Environmental Laws, order of, or contract of the Company or its
subsidiaries with, any Governmental Entity or any private or public
persons;
(vi) There are not now, nor have there been in the past,
on, in or under any property or facilities when owned, leased, or
operated by the Company or its subsidiaries or when owned, leased, or
operated by any of their predecessors, any Hazardous Substances that are
in a condition that materially violates any Environmental Law or that
reasonably could be expected to require remediation under any
Environmental Laws;
(vii) The Company and its subsidiaries have not received,
and, to the Knowledge of the Company, do not expect to receive, any
notification from any source advising the Company or such subsidiaries
that: (A) it is a potentially responsible party under CERCLA or any
other Environmental Laws; (B) any real property or facility currently or
previously owned, operated, or leased by it is identified or proposed
for listing as a federal National Priorities List ("NPL") (or state-
equivalent) site or a Comprehensive Environmental Response, Compensation
and Liability Information System ("CERCLIS") list (or state-equivalent)
site; and (C) any facility to which it has ever transported or otherwise
arranged for the disposal of Hazardous Substances is identified or
proposed for listing as an NPL (or state-equivalent) site or CERCLIS (or
state-equivalent) site; and
(viii) Notwithstanding any other provision set forth in
this Agreement, the representations and warranties of the Company and
the Atrium Indemnitors set forth in this Section 2.1(m) relating to the
condition, operation or maintenance of real property or facilities
owned, operated or leased by the Company or its subsidiaries shall not
be deemed to have been made by the Company or any of the Atrium
Indemnitors with respect to the aluminum extrusions and window
manufacturing facility in Woodville, Texas which is leased by Fojtasek
Companies, Inc. from the Tyler County Industrial Corporation.
(n) Taxes. Each of the Company and its subsidiaries has
timely filed all tax returns, reports, statements and other documents ("Tax
Returns"') required to be filed with all Governmental Entities, except for any
such Governmental Entity, the failure to file with which has
19
<PAGE> 27
not had, or could not reasonably be expected to have, a Material Adverse
Effect, and all such Tax Returns which have been filed are accurate and
complete in all material respects. No extension of time within which to file
any Tax Return which has not been filed has been requested or granted. Each of
the Company and its subsidiaries has paid (or there has been paid on its
behalf), or has set up an adequate reserve for the payment of, all taxes
required to be paid, withheld, or deducted, or for which the Company or any of
its subsidiaries are liable, in respect of the periods covered by such Tax
Returns, and with respect to each tax, from the end of the period covered by
the most recently filed Tax Return to the date hereof, and the Balance Sheet
reflects an adequate reserve for all taxes payable, or required to be withheld
and remitted, by the Company or any of its subsidiaries, or for which the
Company or any of its subsidiaries are liable, accrued through the Balance
Sheet Date. No deficiencies for any taxes have been proposed, asserted or
assessed against the Company or any of its subsidiaries and are pending, and no
requests for waivers of the time to assess any such taxes are pending. The
federal income tax Returns of the Company and its subsidiaries have not been
examined by the Internal Revenue Service. None of the Company or its
subsidiaries (i) has filed a consent under section 341(f) of the Internal
Revenue Code of 1986, as amended (the "Code"), (ii) has made, or is obligated
or may become obligated to make, any payments that will not be deductible by
reason of section 280G of the Code, (iii) has been a member of an affiliated
group of corporations which has filed a consolidated federal income tax return
(other than the group of which the Company is the common parent) or otherwise
has any liability for the taxes of any person (other than the Company and its
subsidiaries) under Treas. Reg. Section 1.1502-6, any similar provision of
state, local, or foreign law, or by reason of its status as a transferee,
successor, indemnitor or otherwise, (iv) is a party to or bound by (nor will
become a party to or bound by) any tax indemnity, tax sharing or tax allocation
agreement, except as disclosed on Schedule 2.1(n), or (v) has agreed to make,
nor is required to make, any adjustment under Section 481 of the Code by reason
of a change in accounting method or otherwise. For the purposes of this
Agreement, the term "taxes" shall include all federal, state, local, foreign
and other income, gross receipts, use, ad valorem, transfer, franchise,
profits, license, payroll, severance, occupation, property, sales, excise,
withholding, unemployment compensation, social security and other taxes and
charges of any nature whatsoever (including interest, penalties and additions
to tax relating to any of the specified items).
(o) Certain Agreements. Except as set forth in Part I of
Schedule 2.1(o), neither the Company nor any of its subsidiaries (other than
the Bishop Subsidiaries) is a party to any oral or written agreement, plan or
arrangement with any officer, director or employee of the Company or its
subsidiaries (i) the benefits of which are contingent, or the terms of which
are materially altered, upon, or result from, the occurrence of a transaction
involving the Company or any of its subsidiaries of the nature of any of the
transactions contemplated by the Transaction Documents, (ii) providing
severance benefits or other benefits after the termination of employment or
other contractual relationship regardless of the reason for such termination
and regardless of whether such termination is before or after a change of
control, (iii) under which any person may receive payments subject to the tax
imposed by Section 4999 of the Code, or (iv) any of the benefits of which may
be increased, or the vesting of benefits of which may be accelerated, by the
occurrence of any of the transactions contemplated by the Transaction Documents
or the value of any of the benefits of which may be calculated on the basis of
any of the transactions contemplated by the Transaction
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<PAGE> 28
Documents. Part I of Schedule 2.1(o) hereto lists each oral or written (A)
agreement, contract, indenture, or other instrument relating to the borrowing
of money or the guarantee of any obligation for the borrowing of money, (B)
Employee Benefit Plan (as defined in Section 2.1(p)), (C) employment or
consulting contract, or (D) contract, agreement or commitment under which any
party thereto remains obligated to provide goods or services having a value, or
to make payments aggregating, in excess of $50,000 per year, in any such case
to which the Company or any of its subsidiaries (other than the Bishop
Subsidiaries) is a party or bound and which is not terminable without liability
or penalty to the Company or any of its subsidiaries on 30 days or less notice.
Each such agreement, contract or obligation described in Part I of Schedule
2.1(o) or required to be so described is a valid and binding obligation of the
Company or one of its subsidiaries, as the case may be, and is in full force
and effect without amendment, except where not being a valid and binding
obligation or in full force and effect without amendment would not have a
Material Adverse Effect. The Company or one of its subsidiaries (other than
the Bishop Subsidiaries), as the case may be, and, to the Knowledge of the
Company, each other party to such contracts, has performed the obligations
required to be performed by it under the agreements described in Part I of
Schedule 2.1(o) and is not (with or without lapse of time or the giving of
notice, or both) in material breach or default thereunder. Except as disclosed
in Part I of Schedule 2.1(o), neither the Company nor any of its subsidiaries
(other than the Bishop Subsidiaries) has received (i) any notice, written or
otherwise, of default by the Company or such subsidiary under any contract
listed on Schedule 2.1(o),or (ii) any notice, written or otherwise, that any
other party to any such contract has terminated or cancelled, or intends to
terminate or cancel, such contract. Schedule 2.1(o) identifies, as to each
agreement, contract or obligation listed thereon, whether the consent of the
other party thereto is required in order for such agreement, contract or
obligation to continue in full force and effect upon the consummation of the
transactions contemplated hereby and by the other Transaction Documents or
whether such agreement, contract or obligation can be cancelled by the other
party without liability to such other party due to the consummation of the
transactions contemplated in the Transaction Documents. A copy of each written
agreement, contract, obligation, plan or arrangement and a description of each
oral agreement, contract, obligation, plan or arrangement set forth in Schedule
2.1(o) has been provided to Buyer.
Part II of Schedule 2.1(o) contains a complete and accurate list
of (i) all contracts which were listed on Schedule 4.15 to the Bishop Purchase
Agreement and other material contracts listed in the other schedules thereto,
and (ii) any agreement, contract or obligation to which any Bishop Subsidiary
has become a party since September 30, 1996 that would otherwise be required to
be disclosed in Part I of Schedule 2.1(o) if the Bishop Subsidiaries were
considered "subsidiaries" for purposes of this Section 2.1(o) (the "Material
Bishop Agreements"). Part II of Schedule 2.1(o) identifies, as to each
Material Bishop Agreement listed thereon, whether the consent of the other
party thereto is required in order for such Material Bishop Agreement to
continue in full force and effect upon the consummation of the transactions
contemplated hereby and by the other Transaction Documents and whether such
Material Bishop Agreement can be cancelled by the other parties thereto without
liability to such other party due to the consummation of the transactions
contemplated in the Transaction Documents.
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<PAGE> 29
(p) ERISA Compliance; Labor.
(i) The present value of all accrued benefits (vested
and unvested) under all the "employee pension benefit plans" as such term is
defined in Section 3(2) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), which the Company or any other trades or businesses under
common control within the meaning of Section 4001(b)(1) of ERISA with the
Company (collectively, the "ERISA Group") maintains, or to which the Company or
any member of the ERISA Group is obligated to contribute (the "Pension Plans"),
did not, as of the respective last annual valuation dates for such Pension
Plans, exceed the value of the assets of such Pension Plan allocable to such
benefits. None of the Pension Plans subject to Section 302 of ERISA has
incurred any "accumulated funding deficiency," as such term is defined in
Section 302 of ERISA (whether or not waived) since the effective date of such
Section 302. Neither the Company nor any member of the ERISA Group, nor any
officer of the Company or any member of the ERISA Group, or any trustee or
administrator of any Employee Benefit Plan or trust created thereunder, has
engaged in a "prohibited transaction," as such term is described in Section
4975 of the Code, which has subjected or which could subject the Company or any
member of the ERISA Group, any officer of the Company or any of its
subsidiaries or any of such plans or any trust to any tax or penalty on
prohibited transactions imposed by such Section 4975. The ERISA Group does not
maintain any Pension Plans subject to Title IV of ERISA. Except as set forth
on Schedule 2.1(p), neither the Company nor any member of the ERISA Group has
contributed or been obligated to contribute to any "multiemployer plan" as such
term is defined in Section 3(37) or Section 4001(a)(3) of ERISA. Neither the
Company nor any member of the ERISA Group would be subject to any withdrawal
liability under Title IV of ERISA in the event that either the Company or any
member of the ERISA Group completely or partially withdrew from any such
multiemployer plan as of Closing. Except as set forth on Schedule 2.1(p),
there are no "employee benefit plans" within the meaning of Section 3(3) of
ERISA or any bonus, pension, profit sharing, deferred compensation, incentive
compensation, stock ownership, stock purchase, stock option, phantom stock,
retirement, vacation, severance, disability, death benefit, hospitalization,
insurance, or other plan or arrangement or understanding providing benefits to
any present or former employee or contractor of the Company or as to which the
Company or any member of the ERISA Group has any liability or obligation
(collectively, "Employee Benefit Plans").
(ii) True, correct, and complete copies of each of the
Employee Benefit Plans, and related trusts, if applicable, have been furnished
to Buyer, along with the most recent report filed on Form 5500 and summary plan
description with respect to each Employee Benefit Plan required to file Form
5500. All reports and disclosures relating to the Employee Benefit Plans
required to be filed with or furnished to governmental agencies or plan
participants or beneficiaries have been furnished in material compliance with
applicable law. Each Employee Benefit Plan has been maintained in material
compliance with ERISA and the Code, and each Employee Benefit Plan intended to
be qualified under Section 401 of the Code satisfies the requirements of such
Section and has received a favorable determination letter from the Internal
Revenue Service regarding its qualified status and has not, since receipt of
the most recent favorable determination letter, been amended or, to the
Knowledge of the Company, operated in a manner which would adversely affect
22
<PAGE> 30
such qualified status. There are no actions, suits, or claims pending (other
than routine claims for benefits) or, to the knowledge of the Company,
threatened against, or with respect to any of the Employee Benefit Plans. All
material contributions required to be made to the Employee Benefit Plans
pursuant to their terms have been timely made. To the knowledge of the
Company, there is no matter pending with respect to any of the Employee Benefit
Plans before the Internal Revenue Service, Department of Labor or the Pension
Benefit Guaranty Corporation. Except as required by applicable law or as set
forth on Schedule 2.1(p), none of the Employee Benefit Plans provides medical
insurance coverage following retirement. Except as set forth on Schedule
2.1(p), each Employee Benefit Plan which is an "employee welfare benefit plan,"
as defined in Section 3(1) of ERISA, by its terms provides that it may be
unilaterally amended or terminated in its entirety without liability except as
to benefits accrued prior to such amendment or termination.
(iii) Schedule 2.1(p) lists each collective bargaining
agreement to which the Company or any of its subsidiaries is a party. Except
for those unions which are parties to one or more of the listed collective
bargaining agreements or as otherwise listed on Schedule 2.1(p), neither the
Company nor any of its subsidiaries has agreed to recognize any union or other
collective bargaining representative, nor has any union or other collective
bargaining representative been certified as the exclusive bargaining
representative of any of their employees. Except as disclosed on Schedule
2.1(p), each of the Company and its subsidiaries (A) is, and has been since
January 1, 1993, in material compliance with all applicable laws regarding
labor, employment and employment practices, including but not limited to laws
regarding terms and conditions of employment, equal employment opportunity,
affirmative action, wages and hours, employee benefits, plant closing and mass
layoff, occupational safety and health, immigration and workers' compensation,
(B) is not engaged in any unfair labor practices, nor has it since January 1,
1993, engaged in any unfair labor practices, and has no, and has not had since
January 1, 1993, any, unfair labor practice charges or complaints before the
National Labor Relations Board initiated against it or, to the Knowledge of the
Company, threatened against it, (C) has no, and has not had since January 1,
1993, any, grievances, arbitrations, or other proceedings arising or asserted
to arise under any collective bargaining agreement, initiated or, to the
Knowledge of the Company, threatened against it, and (D) has no, and has not
had since January 1, 1993, any, charges, complaints or proceedings before the
Equal Employment Opportunity Commission, Department of Labor or any other
Governmental Entity responsible for regulating employment practices, initiated,
or, to the Knowledge of the Company, threatened against it. There is no labor
strike, slowdown, work stoppage or lockout pending or, to the Knowledge of the
Company, threatened against or affecting the Company or its subsidiaries, and
neither the Company nor its subsidiaries has experienced any labor strike,
slowdown, work stoppage or lockout since January 1, 1993. Except as set forth
on Schedule 2.1(p), to the Knowledge of the Company, no union organizational
campaign or representation petition is currently pending or threatened with
respect to the employees of the Company or its subsidiaries.
(q) Patents, Trademarks, Etc. Schedule 2.1(q) lists
each extant patent, patent application, design patent, design patent
application, industrial model, utility model, provisional or preliminary patent
application, trademark, registered trademark, application for registration of
trademark, service mark, registered service mark, application for registration
of
23
<PAGE> 31
service mark, trade name, registered trade name, application for registration
of trade name, copyright, registered copyright, application for registration of
copyright and any other proprietary intellectual property right, both United
States and foreign, (A) owned by the Company or any of its subsidiaries, or (B)
in which the Company or any of its subsidiaries has any right, license or
interest (collectively, "Intellectual Rights"). True and complete copies of
all such Intellectual Rights, and all license agreements or contracts
pertaining to any such Intellectual Rights, have previously been provided to
Buyer. Except as disclosed in Schedule 2.1(q):
(i) The Company or its subsidiaries has good title,
free and clear of all Liens, to each item of Intellectual Rights owned by the
Company or any of its subsidiaries;
(ii) For each United States and foreign patent, patent
application, design patent, design patent application, utility model and
industrial model listed in Schedule 2.1(q) as owned by the Company or any of
its subsidiaries, all maintenance fees, renewal fees or other fees required to
be paid to avoid abandonment have been timely paid, and any applicable working
requirements have been timely met;
(iii) For each United States and foreign registered
trademark, registered service mark and registered trade name listed in Schedule
2.1(q) as owned by the Company or any of its subsidiaries, all appropriate
affidavits and associated fees necessary to show continued use, and all
renewals and associated fees, have been timely filed with the appropriate
administrative or governmental office;
(iv) Each United States and foreign patent application
and design patent application, and each United States and foreign application
for registration of a trademark, service mark, trade name or copyright listed
in Schedule 2.1(q) as owned by the Company or any of its subsidiaries, remains
pending and has not been abandoned;
(v) Each license agreement or contract, under which the
Company or any of its subsidiaries has any license, right or interest in the
Intellectual Rights is a valid, binding and enforceable agreement which remains
in full force and effect, and for each such license agreement or contract, the
Company or its subsidiaries has a paid-up, royalty-free, perpetual license, and
no restrictions exist which would prohibit or impair the ability of the Company
or its subsidiaries to assign each such license agreement or contract to Buyer;
(vi) No product used, sold or manufactured by the
Company or any of its subsidiaries, nor the conduct of the business of the
Company or any of its subsidiaries as it is currently conducted, infringes on
or otherwise violates the patent, design patent, trademark, service mark, trade
name, copyright, industrial model, utility model, trade secret or other
intellectual property rights of any third party;
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<PAGE> 32
(vii) To the Knowledge of the Company, no third party is
challenging or infringing or otherwise violating any of the Intellectual Rights
owned by the Company or any of its subsidiaries;
(viii) To the Knowledge of the Company, no third party is
challenging or infringing or otherwise violating the Intellectual Rights under
which the Company or any of its subsidiaries has any right, license, or
interest;
(ix) To the Knowledge of the Company and its
subsidiaries, there are no restrictions that would materially impair the use of
any United States or foreign trademark, service mark or trade name listed in
Schedule 2.1(q) by Buyer or the transfer of any United States or foreign
trademark, service mark or trade name listed in Schedule 2.1(q) to Buyer; and
(x) To the extent that the Company or any of its
subsidiaries has any trade secrets or confidential information regarding their
businesses, the Company and its subsidiaries have taken, and will continue to
take, commercially reasonable precautions to maintain the confidentiality of
such trade secrets and confidential information, including, without limitation,
obtaining appropriate confidentiality agreements from employees or third
parties to which such trade secrets or confidential information are disclosed.
(r) Affiliate Relationships. Schedule 2.1(r) sets forth a
complete list of all contracts or other arrangements involving the Company or
any of its subsidiaries in which any of their respective officers, directors,
stockholders or affiliates have a financial interest, including indebtedness
owed to the Company or its subsidiaries.
(s) Status of Purchase Shares. The issuance and sale of the
Purchase Shares have been duly authorized by all necessary corporate action on
the part of the Company, and such Purchase Shares, when delivered to Buyer at
the Closing against payment of the Purchase Price as provided herein, will be
validly issued, fully paid and non-assessable. The issuance and sale of the
Purchase Shares are not, and will not be, subject to preemptive rights of any
other holder of capital stock of the Company.
(t) Private Offering. Neither the Company nor any person
acting on its behalf has taken or will take any action (including, without
limitation, any offering of any securities of the Company under circumstances
which would require the integration of such offering with the offering of the
Purchase Shares under the Securities Act) which might subject the offering,
issuance or sale of the Purchase Shares to Buyer to the registration
requirements of Section 5 of the Securities Act.
(u) Accounts Receivable. Subject to the reserves established
on the most recent monthly balance sheet prepared by the Company and attached
hereto as Schedule 2.1(u), to the Company's Knowledge each of the Company's and
its subsidiaries' accounts receivable will be collected in accordance with the
normal experience of the Company and its subsidiaries with respect to
collection of their accounts receivable, and the Company is not aware of any
event, condition,
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<PAGE> 33
circumstance or fact the occurrence of which would impair the ability of the
Company or any of its subsidiaries to collect such accounts receivable in
accordance with such normal collection experience.
(v) Inventories. Except as disclosed in Schedule 2.1(v), the
inventory and supplies of the Company and its subsidiaries (other than the
Bishop Subsidiaries) are adequate for present needs, and are in usable or
saleable condition in the ordinary course of business, subject only to reserves
for obsolescence reflected on the Company's most recent balance sheet attached
hereto as Schedule 2.1(u). Except as disclosed in Schedule 2.1(v), to the
Company's Knowledge, the inventory and supplies of the Bishop Subsidiaries are
adequate for present needs, and are in usable or saleable condition in the
ordinary course of business, subject only to reserves for obsolescence
reflected on the Company's most recent balance sheet attached hereto as
Schedule 2.1(u)
(w) Indebtedness. Schedule 2.1(w) accurately sets forth the
amount of all of the Company's (and its subsidiaries) long-term indebtedness
for borrowed money as of the date of this Agreement. The repayment at the
Closing by the Company and/or any of its subsidiaries of all such indebtedness
will not create an obligation on the part of the Company or any of its
subsidiaries to pay any premium, prepayment penalty or similar payment under
any of the terms, conditions or provisions of any loan or credit agreement,
note, bond, mortgage, indenture, deed of trust, agreement or other instrument
or obligation relating to such indebtedness to be repaid.
(x) Disclosure. No representation or warranty by the Company
or the Selling Securityholders contained in this Agreement or in any
certificate furnished pursuant to this Agreement contains or will contain any
untrue statement of a material fact, or omits or will omit to state any
material fact necessary, in light of the circumstances under which it was or
will be made, in order to make the statements herein or therein not misleading.
(y) Business Relations. No supplier or customer of material
importance to the Company and its subsidiaries has cancelled or otherwise
terminated, or threatened to cancel or otherwise to terminate, its relationship
with the Company or any of its subsidiaries or has during the last twelve (12)
months decreased materially, or threatened to decrease or limit materially, its
services, supplies or materials for use by the Company or any of its
subsidiaries or its usage or purchase of the services or products except for
normal cyclical changes related to customers' businesses, and to the Company's
Knowledge, the consummation of the transaction contemplated herein will not
adversely affect the relationship of the Company or any of its subsidiaries
with any such supplier or customer.
(z) Breach of Representations, Warranties or Covenants. There
has occurred no failure to comply with, or breach of, any representation or
warranty, covenant, obligation or undertaking made by the Company under the
Bishop Agreements and, to the Company's Knowledge, there has occurred no
failure to comply with, or breach of, any representation or warranty, covenant,
obligation or undertaking made under the Bishop Agreements by any other party
thereto which would result in Losses (as defined in the Bishop Agreements) that
would be subject to the $250,000
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deductible described in Section 13.5(a) of the Bishop Purchase Agreement or
Section 11.6(b) of the Bishop Exchange Agreement.
2.2. Representations and Warranties of the Selling Securityholders.
Each Selling Securityholder or, as applicable, the named Selling
Securityholder, severally as to him, her or it and not jointly, represents and
warrants to Buyer and the Company as follows:
(a) Owners of Redemption Shares, Options and Warrants. As of
the date hereof, each such Selling Securityholder identified on Schedule II is
the holder of record and beneficially owns and, immediately prior to the
effectiveness of the Charter Amendment, will be the holder of record and will
beneficially own, the number of shares of Common Stock set forth in Column A
opposite his, her or its name on Schedule II. At the Closing, each such
Selling Securityholder will transfer to the Company good and valid title to the
Redeemed Common Shares owned by such Selling Securityholder, free and clear of
all Liens.
As of the date hereof, each such Selling Securityholder
identified on Schedule III is the holder of record and beneficially owns and,
immediately prior to the effectiveness of the Charter Amendment, will be the
holder of record and will beneficially own, options or warrants to purchase
that number of shares of Class B Non-Voting Common Stock set forth opposite
such Selling Securityholder's name in Column B on Schedule III.
(b) Authority. (i) If such Selling Securityholder is an
entity (i.e., not a natural person), such Selling Securityholder has been duly
created and is validly existing under the laws of the jurisdiction of its
creation; such Selling Securityholder has all requisite power and authority to
execute and deliver this Agreement and the other Transaction Documents to which
it is a party and to perform its obligations hereunder and thereunder, and the
execution, delivery and performance by such Selling Securityholder of this
Agreement and other Transaction Documents to which it is a party and the
consummation by such Selling Securityholder of the transactions contemplated
hereby and thereby have been duly authorized by all necessary action on the
part of such Selling Securityholder.
(ii) Such Selling Securityholder has full legal capacity
to execute and deliver this Agreement and the other Transaction Documents to
which it is a party and to perform the obligations of such Selling
Securityholder hereunder and thereunder. This Agreement has been duly and
validly executed and delivered by such Selling Securityholder and, assuming
this Agreement constitutes a valid and binding obligation of Buyer and the
Company, constitutes a valid and binding obligation of such Selling
Securityholder, enforceable against it in accordance with its terms, subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium, and similar laws affecting creditors' rights and remedies generally
and subject, as to enforceability, to general principles of equity, including
principles of commercial reasonableness, good faith, and fair dealing
(regardless of whether enforcement is sought in a proceeding at law or in
equity). Each consent, authorization, order, or approval of, or filing or
registration with, any Governmental Entity required by applicable law on or
before the Closing for or in connection with
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the execution and delivery by such Selling Securityholder of this Agreement, or
the performance by such Selling Securityholder of his, her or its obligations
hereunder or under any other Transaction Documents , will have been obtained or
made on or before the Closing, except where the failure to obtain any such
consent, authorization, order, approval, filing, or registration would not
affect such Selling Securityholder's ability to perform his, her, or its
obligations under this Agreement or under any other Transaction Documents in
any material respect.
(c) No Conflicts. The execution, delivery, and performance by
such Selling Securityholder of this Agreement and the other Transaction
Documents to which it is a party does not (i) violate or breach any provision
of any law or statute applicable to such Selling Securityholder (and, if such
Selling Securityholder is a legal entity, any provision of its organizational
or constituent documents), except where such violation or breach would not
affect such Selling Securityholder's ability to perform its obligations under
the Transaction Documents or (ii) violate, breach, cause a default under, or
result in the creation of a Lien pursuant to, any agreement or instrument to
which such Selling Securityholder is a party or to which it or any of its
properties may be subject, except where the violation, breach, default, or
creation of a Lien would not affect such Selling Securityholder's ability to
perform its obligations under the Transaction Documents.
(d) New Common Stock. Each Selling Securityholder listed on
Schedule IV represents and warrants to Buyer and the Company that such Selling
Securityholder has no plan or intention to sell or otherwise dispose of the
shares of New Common Stock to be held by such Selling Securityholder
immediately after the Closing.
(e) Breach of Representations, Warranties or Covenants. Each
of the Bishop Indemnitors represents and warrants to Buyer that, to such Bishop
Indemnitor's Knowledge, as of September 30, 1996, there had occurred no failure
to comply with, or breach of, any representation or warranty, covenant,
obligation or undertaking made under the Bishop Agreements by any party
thereto, except for such failures to comply or breaches as (x) were disclosed
on the Schedules to the Bishop Agreements, or (y) have been expressly waived in
writing by the parties to the Bishop Agreements.
2.3. Representations and Warranties of Buyer. Buyer represents and
warrants to the Company and the Selling Securityholders as follows (with the
understanding that the Company and the Selling Securityholders are relying on
such representations and warranties in entering into and performing this
Agreement):
(a) Organization, Standing and Power. Buyer is a corporation
duly organized, validly existing and in good standing under the laws of Texas
and has all requisite power and authority to own, lease, and operate its
properties and to carry on its business as now being conducted.
(b) Authority. Buyer has all requisite corporate power and
authority to enter into this Agreement and the other Transaction Documents to
which Buyer is to be a party and to
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consummate the transactions contemplated hereby and thereby. The execution and
delivery by Buyer of this Agreement and the other Transaction Documents to
which Buyer is to be a party and the consummation by Buyer of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action on the part of Buyer. This Agreement has been duly executed
and delivered and constitutes, and when duly executed and delivered by Buyer
the other Transaction Documents to which Buyer is to be a party will
constitute, the valid and binding obligation of Buyer, enforceable against
Buyer in accordance with its terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally and subject, as to
enforceability, to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity).
(c) No Conflicts. The execution and delivery of this
Agreement and the other Transaction Documents to which Buyer is to be a party
does not, and the consummation of the transactions contemplated hereby and
thereby and compliance with the provisions hereof and thereof will not,
conflict with, or result in any violation of, or default (with or without
notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation, or acceleration of any material obligation or to a
loss of a material benefit under, any provision of any loan or credit
agreement, note, bond, mortgage, indenture, lease, or other agreement,
instrument, permit, concession, franchise, license, judgment, order, decree,
statute, law, ordinance, rule, or regulation applicable to Buyer or its
properties or assets, except for any such conflicts, violations, defaults,
terminations, cancellations, or accelerations which individually or in the
aggregate do not have a material adverse effect on Buyer's ability to perform
its obligations hereunder.
(d) Consents. No consent, approval, order or authorization
of, or registration, declaration or filing with, any Governmental Entity is
required by or with respect to Buyer in connection with the execution and
delivery by Buyer of this Agreement and the other Transaction Documents to
which Buyer is to be a party or the consummation by it of the transactions
contemplated hereby, except for (i) the filing of a premerger notification
report under the HSR Act, and (ii) applicable requirements, if any, of the
Securities Act and the Exchange Act and the rules and regulations thereunder
and state securities or blue sky laws.
(e) Litigation. As of the date hereof, there is no action,
suit, inquiry, judicial or administrative proceeding pending or, to the
Knowledge of Buyer, threatened against it relating to the transactions
contemplated by this Agreement or by the other Transaction Documents.
(f) Investment Intent. The Purchase Shares to be acquired by
Buyer hereunder are being acquired for its own account, for investment and with
no intention of distributing or reselling such Purchase Shares or any part
thereof or interest therein in any transaction which would be a violation of
the securities laws of the United States of America or any state or any foreign
country or jurisdiction.
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(g) Investment Status. (i) At the time Buyer was offered the
Purchase Shares, it was, (ii) at the date hereof, Buyer is, and (iii) at the
Closing Date Buyer will be, an "Accredited Investor" as defined in Rule 501
under the Securities Act, and Buyer has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the Company and an investment in the Purchase Shares, and is able to bear the
economic risks of such investment.
ARTICLE III
COVENANTS RELATING TO CONDUCT OF BUSINESS
3.1. Covenants of the Company and the Selling Securityholders other
than the Bishop Indemnitors. Except as set forth in Schedule 3.1 or as
otherwise contemplated by this Agreement, or to the extent that Buyer shall
otherwise consent in writing, from the date of this Agreement until the
Closing, the Company covenants and agrees with Buyer that the Company shall
not, and shall not permit any of its subsidiaries to, and each Selling
Securityholder other than the Bishop Indemnitors covenants and agrees that such
Selling Securityholder will not permit the Company or any of its subsidiaries
to:
(a) conduct its business in any manner except in the ordinary
course consistent with past practice; or
(b) fail to use all commercially reasonable efforts to
preserve intact the Company's present business organization and to keep
available the services of its present officers and managerial personnel
(collectively, the "Management") and employees or independent contractors and
preserve its relationships with customers, suppliers and others having business
dealings with it to the end that its goodwill and ongoing business shall not be
materially impaired at the Closing Date; or
(c) split, combine, divide, distribute or reclassify any
shares of its capital stock, declare, pay or set aside for payment any dividend
or other distribution in respect of its capital stock (whether in cash, shares
of stock or otherwise), or directly or indirectly, redeem, purchase or
otherwise acquire any shares of its capital stock or other securities; provided
that nothing herein shall prevent any of its subsidiaries from paying dividends
or making other distributions to the Company; or
(d) issue, sell, pledge, dispose of, encumber or deliver
(whether through the issuance or granting of any options, warrants,
commitments, subscriptions, rights to purchase or otherwise) any stock of any
class or any securities convertible into or exercisable or exchangeable for
shares of stock of any class (other than the issuance of certificates in
replacement of lost certificates); or
(e) change or amend its charter documents or bylaws; or
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(f) enter into, materially amend, terminate or fail to use all
commercially reasonable efforts to renew any material contract (i.e., a
contract or agreement of the type required to be described in Schedule 2.1(o))
(provided that neither the Company nor its subsidiaries shall be required to
renew any material contract on terms that are less favorable to the Company or
its subsidiaries), or default in any material respect (or take or omit to take
any action that, with or without the giving of notice or passage of time, would
constitute a material default) under any material contract, except for
amendments, terminations (without payment of material penalty or damages),
renewals, or failures to renew (without payment of material penalty or damages)
of employment agreements in the ordinary course of business and consistent with
past practice (subject to prior consultation with Buyer reasonably in advance
thereof, provided that no contract of the Company or any of its subsidiaries
with any of their executive officers shall be amended or otherwise modified
without the prior written consent of Buyer); or
(g) merge or consolidate with or into any other legal entity,
dissolve, or liquidate; or
(h) incur or assume any debt (including obligations in respect
of capital leases and for interest), assume, guarantee, endorse, or otherwise
become liable or responsible (whether directly, contingently, or otherwise) for
the obligations of any other person (other than endorsements of checks in the
ordinary course) or make any loans, advances, or capital contributions to, or
investments in, any person (other than advances to employees in the ordinary
course of business); or
(i) adopt or amend any Employee Benefit Plan or collective
bargaining agreement, or increase in any manner the compensation or fringe
benefits of any director, officer or employee (whether employees or independent
contractors) or pay any benefit not by any existing agreement, except in the
ordinary course of business and consistent with past practices or as required
by law, provided that, before increasing or agreeing to increase the
compensation, bonuses or other benefits of any Management in the ordinary
course of business or as required by law, the Company shall first have
consulted in good faith with Buyer with respect to such increase or change in
compensation, bonuses, or other benefits; or
(j) acquire (including, without limitation, by merger,
consolidation, or the acquisition of any equity interest or assets) or sell
(whether by merger, consolidation, or the sale of an equity interest or
assets), lease or dispose of any assets except in the ordinary course of
business and consistent with past practice or, even if in the ordinary course
of business and consistent with past practices (other than sales of surplus or
obsolete equipment), whether in one or more transactions, in no event having a
fair market value in excess of $50,000; or
(k) mortgage, pledge, or subject to any material Lien any of
its properties or assets, tangible or intangible, other than in the ordinary
course of business consistent with past practice; or
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(l) except as required by GAAP, Applicable Law or
circumstances which did not exist as of the Balance Sheet Date, change any of
the material accounting principles or practices used by it; or
(m) make any settlement of or compromise any tax liability,
change any tax election or tax method of accounting or make any new tax
election or adopt any new tax method of accounting which settlement,
compromise, method, or election is material to the Company and its
subsidiaries, taken as a whole; or
(n) pay, discharge, or satisfy any material claims,
liabilities, or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than in the ordinary course of business
consistent with past practice, or fail to pay or otherwise satisfy (except if
being contested in good faith) any material accounts payable, claims,
liabilities, or obligations on a basis, and within the time, consistent with
past practice; or
(o) change in any material respect its existing practices and
procedures with respect to the collection of accounts receivable and, except
with respect to good faith attempts consistent with past practice to obtain
payment of a past due receivable, or except in accordance with existing
practices, a contested receivable, offer to discount the amount of any
outstanding receivable or extend any other incentive (whether to the account
debtor or any employee or third party responsible for the collection of
receivables) to accelerate the collection thereof; or
(p) agree to or make any commitment, orally or in writing, to
take any actions prohibited by this Agreement.
ARTICLE IV
ADDITIONAL AGREEMENTS OF THE COMPANY
AND THE SELLING SECURITYHOLDERS
OTHER THAN THE BISHOP INDEMNITORS
4.1. No Solicitation of Transactions. The Company and each of the
Selling Securityholders other than the Bishop Indemnitors hereby covenant and
agree with Buyer that the Company and such Selling Securityholder shall not,
nor shall they permit their respective subsidiaries or affiliates to, directly
or indirectly, through any officer, director, agent, or otherwise, solicit,
initiate, or encourage the submission of any proposal or offer from any person
relating to any acquisition or purchase of all or any material portion of the
assets of, or any equity interest in, the Company or any of its subsidiaries or
any merger, consolidation, share exchange, business combination, or other
similar transaction with the Company or any of its subsidiaries or participate
in any negotiations regarding, or furnish to any other person any information
with respect to, or otherwise cooperate in any way with, or assist or
participate in, facilitate, or encourage, any effort or attempt by any other
person to do or seek to do any of the foregoing. The Company and each of
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the Selling Securityholders other than the Bishop Indemnitors shall promptly
communicate to Buyer the material terms of any such proposal (and the identity
of the party making such proposal) which the Company or such Selling
Securityholders may receive. The Company and each of the Selling
Securityholders other than the Bishop Indemnitors agree not to release any
third party from, or waive any provision of, any confidentiality or standstill
agreement to which the Company or any such Selling Securityholder other than
the Bishop Indemnitors is a party. The Company and each of the Selling
Securityholders immediately shall cease and cause to be terminated all existing
discussions or negotiations with any parties conducted heretofore with respect
to any of the foregoing.
4.2. Access and Information. (a) Until the Closing, the Company shall
afford to Buyer and its representatives (including accountants and counsel)
full access, during normal business hours, upon reasonable notice and in such
manner as will not unreasonably interfere with the conduct of the business of
the Company or its subsidiaries, to all properties, books, records, and tax
returns of the Company and its subsidiaries and all other information with
respect to its business, together with the opportunity to make copies of such
books, records, and other documents and to discuss the business of the Company
and its subsidiaries with such corporate officers, managerial personnel,
accountants, consultants, and counsel for the Company as Buyer deems reasonably
necessary or appropriate for the purposes of familiarizing itself with the
Company and the business of the Company and its subsidiaries, including the
right to visit the offices and facilities of the Company and its subsidiaries.
In furtherance of the foregoing, the Company shall authorize and instruct
Arthur Andersen LLP to meet with Buyer and its representatives, including its
independent public accountants, to discuss the business and accounts of the
Company and to make available (with the opportunity to make copies) to Buyer
and its representatives, including its independent public accountants, all the
work papers of Arthur Andersen LLP related to their audit of the consolidated
financial statements and tax returns of the Company. The Company will provide
any indemnification required by Arthur Andersen LLP in connection with the
aforementioned work papers.
(b) Within 30 days after the end of each calendar month, the
Company shall deliver to Buyer, for the Company and its subsidiaries, monthly
operating statements (in a form consistent with the monthly operating
statements previously supplied to Buyer) prepared in the ordinary course of
business for internal purposes, including comparisons to comparable prior year
periods and current year budget. Further, within 45 days after the end of each
calendar quarter, the Company shall deliver to Buyer quarterly statements
prepared in the ordinary course for internal purposes.
(c) Without duplication of Section 4.2(b), at such time as the
Company provides the same to its lenders, the Company shall provide Buyer with
copies of the financial statements and other information delivered by the
Company to such lenders.
4.3. Assistance. If Buyer requests, the Company will cooperate and
will cause each of its subsidiaries to cooperate, and will cause Arthur
Andersen LLP to cooperate, in all reasonable respects with the efforts of Buyer
to finance the transactions contemplated by this Agreement
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(whether obtained through senior debt financing by the Company or any of its
subsidiaries from a commercial lender, the issuance of subordinated debt in a
private placement or otherwise), including providing assistance in the
preparation of one or more offering circulars, private placement memoranda,
registration statements or other offering documents relating to debt and/or
equity financing by the Company or any of its subsidiaries and any other
filings that may be made with the United States Securities and Exchange
Commission (the "SEC"). The Company shall, and shall cause its subsidiaries
to, (a) furnish to Arthur Andersen LLP, as independent accountants to the
Company, such customary management representation letters as Arthur Andersen
LLP may require of the Company as a condition to its execution of any required
accountants' consents or necessary in connection with the delivery of any
"comfort" letters requested by Buyer's financing sources, (b) furnish to Buyer
all financial statements (audited and unaudited) and other information in the
possession of the Company or its representatives or agents as Buyer shall
reasonably determine is necessary or appropriate for the preparation of such
offering documents, registration statements or filings, and (c) execute and
deliver such agreements, instruments and other documents as Buyer shall
reasonably request to effect the debt and/or equity financing of the
transactions contemplated by this Agreement. If all conditions precedent to
each party's obligation to effect the Purchase, the Redemptions, the
Disposition Option Redemption and the other transactions contemplated hereby
have been satisfied or waived, the Company will, and will cause its
subsidiaries to, simultaneously with the Closing, consummate such financing
upon terms acceptable to Buyer (and, if such financing is provided to one or
more subsidiaries of the Company, the Company shall cause such subsidiaries to
provide the proceeds of such financing to the Company upon terms acceptable to
Buyer, including, if requested by Buyer, causing one or more of such
subsidiaries to merge), and in consideration therefor, if the Closing does not
occur, Buyer will indemnify and hold harmless the Company and its officers,
directors and controlling persons against any and all claims, losses,
liabilities, damages, costs or expenses (including reasonable attorneys' fees
and expenses) that may arise out of or with respect to the efforts by Buyer to
finance the transactions contemplated hereby, including any registration
statement, prospectus, offering circular, private placement memoranda, offering
documents, and other filings related thereto; provided, however, that subject
to the limitations and provisions of this Agreement, nothing herein shall
prevent Buyer from asserting any claim for breach of representation or warranty
under this Agreement.
4.4. Compliance With Laws. The Company hereby covenants and agrees
with Buyer that the Company shall cause the businesses of the Company and its
subsidiaries to be operated in compliance with all Applicable Laws, except for
such failures to comply as would not have a Material Adverse Effect. If the
Company (or its counsel) receives an administrative or other order or
notification relating to any violation or claimed violation of any Applicable
Law that could affect the Company's ability to consummate the transactions
contemplated hereby and by the other Transaction Documents, the Company shall
promptly notify Buyer in writing and use its commercially reasonable efforts to
take such steps as may be necessary to remove any such impediment to the
transactions contemplated by this Agreement and by the other Transaction
Documents.
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4.5. Notification of Certain Matters. The Company shall give prompt
written notice to Buyer of (a) the occurrence, or failure to occur, of any
event of which it becomes aware that has caused or that would be likely to
cause any representation or warranty of the Company contained in this Agreement
to be untrue or inaccurate at any time from the date hereof to the Closing
Date, (b) the failure of the Company, or any officer, director, employee, or
agent thereof, to comply with or satisfy in any material respect any covenant,
condition, or agreement to be complied with or satisfied by it hereunder, and
(c) the occurrence of any threat by any officer of the Company or any of its
subsidiaries or any managerial personnel to resign or otherwise terminate their
employment or independent contractor relationship with the Company or its
subsidiaries. No such notification shall affect the representations or
warranties of the parties or the conditions to their respective obligations
hereunder.
4.6. Third Party Consents. The Company hereby covenants and agrees
with Buyer that after the date hereof and prior to the Closing, the Company
shall use all commercially reasonable efforts to obtain the written consent
from any party to an agreement or instrument identified in Schedule 2.1(o)
which is required to permit the consummation of the transactions contemplated
hereby.
4.7. Stockholders Agreement. At the Closing, the Company, Buyer and
the Selling Securityholders listed in Part 1 of Schedule VIII shall execute,
deliver and enter into the Stockholders Agreement in the form attached hereto
as Exhibit N (the "Stockholders Agreement").
4.8. Monitoring and Oversight Agreement. The Company hereby covenants
and agrees with Buyer that at the Closing, the Company shall, and shall cause
Fojtasek Companies, Inc. to, execute, deliver and enter into a Monitoring and
Oversight Agreement with Hicks, Muse & Co. Partners, L.P. in the form attached
hereto as Exhibit O (the "Monitoring and Oversight Agreement").
4.9. Financial Advisory Agreement. The Company hereby covenants and
agrees with Buyer that at the Closing, the Company shall, and shall cause
Fojtasek Companies, Inc. to, execute, deliver and enter into a Financial
Advisory Agreement with Hicks, Muse & Co. Partners, L.P. in the form attached
hereto as Exhibit P (the "Financial Advisory Agreement"). The Financial
Advisory Agreement will provide that at the Closing the Company shall pay
Hicks, Muse & Co. Partners, L.P. a transaction fee in the amount of $2,000,000
(the "Transaction Fee"). Payment of the Transaction Fee shall be made by the
Company to Hicks, Muse & Co. Partners, L.P. by wire transfer of immediately
funds to an account designated to the Company in writing prior to Closing Date,
or if not so designated, by certified or official bank check payable in
immediately available funds to the order of Hicks, Muse & Co. Partners, L.P.
4.10. [Intentionally Omitted].
4.11. Termination Agreement. The Company and the Selling
Securityholders listed in Part 2 of the Schedule VIII hereby covenant and agree
with Buyer that at the Closing, they shall, and
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the Company shall cause FCI Holding Corp. to, execute, deliver and enter into
the Termination Agreement in the form attached hereto as Exhibit R (the
"Termination Agreement").
4.12. Repayment of Indebtedness for Borrowed Money. The Company hereby
covenants and agrees with Buyer that at the Closing, upon receipt of the
proceeds from the financing contemplated in Section 4.3 and the Purchase, the
Company will repay, and will cause its subsidiaries to repay, all of the
indebtedness for borrowed money described in Schedule 2.1(w).
4.13. Indemnification Agreement. The Company hereby covenants and
agrees with Buyer that at the closing the Company shall execute and enter into
an Indemnification Agreement with each of the Company's executive officers and
directors in the form attached hereto as Exhibit S.
4.14. Board of Directors; Officers. At the Closing, the Company shall
deliver to Buyer letters from each director of the Company, other than Randall
S. Fojtasek and Michel Reichert, pursuant to which such directors shall resign
from their positions on the Company's board of directors. The Company agrees
to deliver to Buyer at Closing letters from each executive officer of the
Company as Buyer may request, other than Randall S. Fojtasek, pursuant to which
such executive officers shall resign from their positions as executive officers
of the Company. The Company and each Selling Securityholder holding shares of
the Company's capital stock entitled to vote on the election of directors
covenant and agree with Buyer to cause to be elected to the Company's board of
directors such nominees as the Buyer shall designate, effective immediately
upon the consummation of the Purchase.
4.15. Stockholder Loans. All loans or advances made by the Company or
any of its subsidiaries to any of the Stockholders shall have been paid to the
Company or such subsidiary in full.
ARTICLE IV.A
ADDITIONAL AGREEMENTS OF THE BISHOP INDEMNITORS
4A.1 No Solicitation of Transactions. Each of the Bishop Indemnitors
hereby covenant and agree with Buyer that such Bishop Indemnitor shall not,
directly or indirectly, solicit, initiate, or encourage the submission of any
proposal or offer from any person relating to any acquisition or purchase of
all or any material portion of the assets of, or any equity interest in, the
Company or any of its subsidiaries or any merger, consolidation, share
exchange, business combination, or other similar transaction with the Company
or any of its subsidiaries or participate in any negotiations regarding, or
furnish to any other person any information with respect to, or otherwise
cooperate in any way with, or assist or participate in, facilitate, or
encourage, any effort or attempt by any other person to do or seek to do any of
the foregoing. Each of the Bishop Indemnitors shall promptly communicate to
Buyer the material terms of any such proposal (and the identity of the party
making such proposal) which the Company or such Bishop Indemnitors may receive.
Each of the Bishop Indemnitors agree not to release any third party from, or
waive any provision of, any confidentiality
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or standstill agreement to which such Bishop Indemnitor is a party. Each of
the Bishop Indemnitors immediately shall cease and cause to be terminated all
existing discussions or negotiations with any parties conducted heretofore with
respect to any of the foregoing.
4A.2 Termination Agreement. The Company and the Bishop Indemnitors
hereby covenant and agree with Buyer that at the Closing, they shall execute,
deliver and enter into the Termination Agreement in the form attached hereto as
Exhibit R (the "Termination Agreement").
4A.3 Buy-Sell Agreements. The Company and Howard S. Saffan hereby
covenant and agree with Buyer that at the Closing, they shall execute, deliver
and enter into a Buy-Sell Agreement in the form attached hereto as Exhibit Q-1
(the "Saffan Buy-Sell Agreement"). The Company and Kevin Schumacher hereby
covenant and agree with Buyer that at the Closing, they shall execute, deliver
and enter into a Buy-Sell Agreement in the form attached hereto as Exhibit Q-2
(the "Schumacher Buy-Sell Agreement," and collectively with the Saffan Buy-Sell
Agreement, the "Buy-Sell Agreements").
ARTICLE V
COVENANTS OF BUYER
5.1. Notification of Certain Matters. Buyer shall give to the Company
prompt written notice of (a) the occurrence, or failure to occur, of any event
of which it becomes aware that has caused or that would be likely to cause any
representation or warranty of Buyer contained in this Agreement to be untrue or
inaccurate at any time from the date hereof to the Closing Date, and (b) the
failure of Buyer, or any officer, director, employee or agent thereof, to
comply with or satisfy in any material respect any covenant, condition or
agreement to be complied with or satisfied by it hereunder. No such
notification shall affect the representations or warranties of the parties or
the conditions to their respective obligations hereunder.
ARTICLE VI
MUTUAL COVENANTS
6.1. Governmental Consents. Promptly following the execution of this
Agreement, the parties shall proceed to prepare and file with the appropriate
Governmental Entities such requests, reports or notifications as may be
required in connection with this Agreement, and shall diligently and
expeditiously prosecute, and shall cooperate fully with each other in the
prosecution of, such matters. Without limiting the foregoing, the parties
shall (a) file promptly with the Federal Trade Commission and the Antitrust
Division of the Department of Justice the notifications and other information
(if any) required to be filed under the HSR Act with respect to the
transactions contemplated hereby and shall use their commercially reasonable
efforts to cause all applicable
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waiting periods under the HSR Act to expire or be terminated as of the earliest
possible date and (b) subject to the provisions of Section 11.6 hereof, make
all necessary filings, and thereafter make any other required submissions with
respect to the transactions contemplated hereby under the Securities Act and
the rules and regulations thereunder, and any other applicable federal or state
securities laws.
6.2. Brokers or Finders. (a) Buyer represents and warrants to the
Company and the Selling Securityholders other than the Bishop Indemnitors, and
the Company and such Selling Securityholders represent and warrant to Buyer,
that, other than the Transaction Fee described in Section 4.9 and the fees and
commissions to be paid in connection with the financing of the transactions
contemplated by this Agreement, no agent, broker, investment banker or other or
person is or will be entitled to any broker's or finder's fee or any other
commission or similar fee in connection with any of the transactions
contemplated by this Agreement.
(b) Buyer represents and warrants to the Bishop Indemnitors,
and the Bishop Indemnitors represent and warrant to their best Knowledge to
Buyer, that, other than the Transaction Fee described in Section 4.9 and the
fees and commissions to be paid in connection with the financing of the
transactions contemplated by this Agreement, no agent, broker, investment
banker or other person is or will be entitled to any broker's or finder's fee
or any other commission or similar fee in connection with any of the
transactions contemplated by this Agreement.
6.3. Additional Agreements. Subject to the terms and conditions of
this Agreement, each of the parties hereto will use its commercially reasonable
efforts to take, or cause to be taken all action and to do, or cause to be
done, all things necessary, proper or advisable under Applicable Laws to
consummate and make effective the transactions contemplated by this Agreement.
If at any time after the Closing Date, any further action is necessary to carry
out the purposes of this Agreement, the parties to this Agreement and their
duly authorized representatives shall take all such actions.
ARTICLE VII
CONDITIONS PRECEDENT
7.1. Conditions to Each Party's Obligation. The respective
obligations of each party to effect the transactions contemplated hereby are
subject to the satisfaction on or prior to the Closing Date of the following
conditions:
(a) Consents and Approvals. All authorizations, consents,
orders, or approvals of, or declarations or filings with, or expirations of
waiting periods imposed by, any Governmental Entity necessary for the
consummation of the transactions contemplated by this Agreement shall have been
filed, occurred or been obtained, including, without limitation, those required
by the HSR Act.
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(b) No Injunctions or Restraints. No temporary restraining
order, preliminary or permanent injunction, or other order issued by any court
of competent jurisdiction or other legal restraint or prohibition preventing
the consummation of the transactions contemplated by this Agreement shall be in
effect.
(c) No Action. No action shall have been taken nor any
statute, rule or regulation shall have been enacted by any Governmental Entity
that makes the consummation of the transactions contemplated by this Agreement
illegal.
7.2. Conditions to Obligation of Buyer. The obligation of Buyer to
effect the transactions contemplated by this Agreement is subject to the
satisfaction of the following conditions unless waived, in whole or in part, by
Buyer:
(a) Representations and Warranties. The representations and
warranties of the Company and each of the Selling Securityholders set forth in
this Agreement shall be true and correct as of the date of this Agreement and
as of the Closing Date as though made on and as of the Closing Date, and Buyer
shall have received a certificate signed by the chief executive officer or by
the chief financial officer with respect to the Company and by each of the
Selling Securityholders with respect to such Selling Securityholder certifying
that the representations and warranties of the Company or such Selling
Securityholder, as the case may be, are true and correct as of the Closing Date
as though made on and as of the date hereof, except for changes contemplated in
this Agreement.
(b) Performance of Obligations. The Company and each Selling
Securityholder shall have performed in all material respects all obligations
required to be performed by it or each such Selling Securityholder under this
Agreement prior to the Closing Date, and Buyer shall have received a
certificate to such effect signed by the chief executive officer or by the
chief financial officer with respect to the Company and by each such Selling
Securityholder with respect to such Selling Securityholder.
(c) Consents Under Agreements. Buyer shall have been
furnished with evidence reasonably satisfactory to it of the consent or
approval of each person that is a party to a contract or agreement identified
in Schedule 2.1(o) whose consent or approval shall be required in order to
permit the consummation of the transactions contemplated by this Agreement.
(d) Legal Opinions. Buyer shall have received from Bingham,
Dana & Gould LLP one or more opinions dated the Closing Date, in substantially
the form attached as Exhibit T hereto, which opinion shall expressly provide
that it may be relied upon by the lenders, underwriters or other sources of
financing with respect to the transactions contemplated by this Agreement.
(e) Financing. Financing contemplated by that certain letter
dated October 4, 1996 from Bankers Trust Company to Buyer, including a Rule
144A private placement of senior subordinated notes on terms which are
satisfactory to Buyer which generates gross proceeds to the
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Company or one or more of its subsidiaries of no less than $100,000,000, shall
have been consummated.
(f) Closing Deliveries. All documents and instruments
required to be delivered by the Company and the Selling Securityholders
pursuant to Section 8.2(b) shall have been delivered.
(g) Change in the Business of Bishop Subsidiaries. No failure
to comply with, or breach of, any representation or warranty, covenant,
obligation or undertaking made under the Bishop Agreements which has resulted,
or could reasonably be expected to result, in Losses to the Company in excess
of $3,000,000 shall have occurred; and there shall have been no material
adverse change in the business, operations, properties, condition (financial or
otherwise), results of operations, liabilities or assets of any of the Bishop
Subsidiaries.
(h) Other Documents. All deliveries required to be made under
or pursuant to the Disposition Option Redemption Agreements and the Exercise
Agreements shall have been made, including, without limitation, the payment of
any amounts required to be made thereunder and the delivery of any stock
certificates, cancelled option agreements or other documents required to be
made thereunder.
7.3. Conditions to Obligations of the Company and the Selling
Securityholders. The obligation of the Company and the Selling Securityholders
to effect the transactions contemplated by this Agreement is subject to the
satisfaction of the following conditions unless waived, in whole or in part, by
the Company and the Selling Securityholders.
(a) Representations and Warranties. The representations and
warranties of Buyer set forth in this Agreement shall be true and correct as of
the date of this Agreement and as of the Closing Date as though made on and as
of the Closing Date, and the Company and the Selling Securityholders shall have
received a certificate signed by the chief executive officer or by the chief
financial officer of Buyer certifying that such representations and warranties
are true and correct as of the Closing Date as though made on and as of the
date hereof, except for changes contemplated in this Agreement.
(b) Performance of Obligations. Buyer shall have performed in
all material respects all obligations required to be performed by it under this
Agreement prior to the Closing Date, and the Company and the Selling
Securityholders shall have received a certificate signed on behalf of Buyer by
the chief executive officer or by the chief financial officer of Buyer to such
effect.
(c) Solvency Opinion. The Selling Securityholders shall have
received an opinion addressed to, and in form and substance reasonably
satisfactory to, the Selling Securityholders from an investment banker,
certified public accountant, appraiser or other similarly-qualified person
reasonably acceptable to the Selling Securityholders to the effect that the
Company is, and after giving effect to the transactions contemplated hereby
(including without limitation the payment of the Redemption Price) will be
solvent; provided, that if any such opinion is received and accepted
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by any underwriter, lender or other financial institution in connection with
the financing contemplated in Section 7.2(e) above, the Selling Securityholders
agree that the person giving such opinion shall be deemed to be acceptable to
the Selling Securityholders.
(d) Redemption Price. The Selling Securityholders shall have
received the Redemption Price.
(e) Closing Deliveries. All documents and instruments
required to be delivered by Buyer pursuant to Section 8.2(a) shall have been
delivered.
ARTICLE VIII
CLOSING
8.1. Closing. The closing of the Purchase, the Redemptions and the
other transactions contemplated by this Agreement (the "Closing") will take
place at the offices of Vinson & Elkins L.L.P., Dallas, Texas, at 10:00 a.m.,
local time, or at such other place and time as Buyer and the Company may agree,
on the 5th business day after the conditions specified in Article VII have been
satisfied or waived by the appropriate party. For purposes of this Agreement,
each and every event referred to in this Article VIII that is to occur on the
Closing Date shall be deemed to have occurred contemporaneously.
8.2. Actions to Occur at Closing.
(a) At the Closing, Buyer shall deliver to the Company the
following:
(i) the Purchase Price as provided in Section 1.3(b);
(ii) the certificates referenced in Sections 7.3(a) and
(b);
(iii) counterparts of the Atrium Indemnification Escrow
Agreement executed by Buyer;
(iv) counterparts of the Bishop Indemnification Escrow
Agreement executed by Buyer;
(v) counterparts of the Stockholders Agreement executed
by Buyer;
(vi) counterparts of the Monitoring and Oversight
Agreement executed by Hicks, Muse & Co. Partners, L.P.; and
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(vii) counterparts of the Financial Advisory Agreement
executed by Hicks, Muse & Co Partners, L.P.; and
(viii) counterparts of the Fojtasek Escrow Amendment
executed by Buyer.
(b) At the Closing:
(i) the Company and the Selling Securityholders shall
deliver to Buyer the certificates described in Sections 7.2(a)
and (b);
(ii) the Company and the Selling Securityholders shall
deliver to Buyer the opinions of counsel described in Section
7.2(d);
(iii) the Company shall deliver to Buyer one or more
stock certificates evidencing the Purchase Shares, executed by a
duly authorized officer of the Company;
(iv) the Company and the Selling Securityholders who are
to be signatories to the Stockholders Agreement shall deliver to
Buyer counterparts of the Stockholders Agreement executed by such
persons;
(v) the Atrium Indemnitors shall deliver to Buyer
counterparts of the Atrium Indemnification Escrow Agreement duly
executed by the Atrium Indemnitor Representative;
(vi) the Bishop Indemnitors shall deliver to Buyer
counterparts of the Bishop Indemnification Escrow Agreement duly
executed by the Bishop Indemnitor Representative;
(vii) the Company shall deliver to Buyer counterparts of
the Monitoring and Oversight Agreement and the Financial Advisory
Agreement, duly executed by the Company;
(viii) each of the Company and the Selling Securityholders
who are signatories to the Termination Agreement shall deliver to
the Buyer counterparts of the Termination Agreement duly executed
by such persons;
(ix) the Company shall deliver to the Selling
Securityholders the Redemption Price as provided in Article I;
(x) the Company shall deliver to the Disposition Option
Holders the Disposition Option Redemption Price;
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(xi) the Company shall deliver to the Key Employees one
or more stock certificates evidencing the Key Employee Shares,
duly executed by an authorized officer of the Company, and the
Key Employees shall deliver the Key Employee Purchase Price to
the Company; and
(xii) the Selling Securityholders shall deliver to the
Company certificates representing the Converted Common Shares and
the Converted Preferred Shares accompanied by executed stock
transfer powers or otherwise endorsed for transfer to Buyer's
reasonable satisfaction;
(xiii) Heritage shall deliver to the Company the Warrant
marked "CANCELLED" by a duly authorized representative of
Heritage;
(xiv) the Company shall deliver to Buyer a fully-executed
copy of each Replacement Option Agreement;
(xv) the Selling Securityholders and the Company shall
deliver to Buyer a fully-executed copy of the Seller Escrow
Agreement;
(xvi) the Company shall deliver to Buyer a fully-executed
copy of the Bishop Buy-Sell Amendment;
(xvii) the Company shall deliver to Buyer a fully-executed
copy of each of the Buy-Sell Agreements;
(xviii) the Fojtasek Indemnitors shall deliver to
Buyer counterparts of the Fojtasek Escrow Amendment duly executed
by each Fojtasek Indemnitor;
(xix) the Company shall pay to Randall S. Fojtasek a
bonus in the amount of $3,000,000;
(xx) the Company shall pay to Hicks, Muse & Co.
Partners, L.P. the Transaction Fee;
(xxi) the Company shall deliver to Buyer resignation
letters duly executed by each director and/or executive officer
of the Company which Buyer requests pursuant to Section 4.14
hereof; and
(xxii) the Company and the Selling Securityholders shall
deliver to Buyer each and every other agreement, document or
instrument executed or entered to by any party to this Agreement
in connection with the transactions contemplated by this
Agreement, duly executed by all parties to such agreement,
including but not limited to those agreements the forms of which
are attached as exhibits to this Agreement.
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ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.1. Termination. This Agreement may be terminated prior to the
Closing:
(a) by mutual consent of Buyer, the Company and Heritage;
(b) by any of Buyer, the Company or Heritage:
(i) if a court of competent jurisdiction or other
Governmental Entity shall have issued an order, decree, or ruling or taken any
other action (which order, decree or ruling the parties hereto shall use their
best efforts to lift), in each case permanently restraining, enjoining, or
otherwise prohibiting the transactions contemplated by this Agreement, and such
order, decree, ruling, or other action shall have become final and
nonappealable;
(ii) if the Closing shall not have occurred by 5:00
p.m., Dallas, Texas time on December 20, 1996; provided, however, that the
right to terminate this Agreement under this clause (ii) shall not be available
to any party whose breach of this Agreement has been the cause of, or resulted
in, the failure of the Closing to occur on or before such date; or
(c) by Buyer:
(i) if there shall have been any breach of any
representation or warranty or any material breach of any covenant or agreement
set forth in this Agreement on the part of the Company or a Selling
Securityholder, which breach shall not have been cured within 20 days following
receipt by the breaching party of written notice of such breach; and
(ii) if either of the Company or any Selling
Securityholder shall fail to perform any of their respective obligations under
Section 8.2(b);
(d) by the Company or Heritage:
(i) if Buyer shall breach any representation or
warranty or materially breach any covenant or agreement on the party of Buyer
set forth in this Agreement, which breach shall not have been cured within 20
days following receipt by Buyer of written notice to such breach; and
(ii) if Buyer shall fail to perform any of its
obligations under Section 8.2(a).
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The right of any party hereto to terminate this Agreement pursuant to this
Section 9.1 shall remain operative and in full force and effect regardless of
any investigation made by or on behalf of any party hereto, any person
controlling any such party or any of their respective officers, directors,
employees, accountants, consultants, legal counsel, agents or other
representatives whether prior to or after the execution of this Agreement.
Notwithstanding anything in the foregoing to the contrary, no party that is in
material breach of this Agreement shall be entitled to terminate this Agreement
except with the consent of the other parties hereto who have the right to
terminate this Agreement.
9.2. Effect of Termination. In the event of a termination of this
Agreement as provided above, there shall be no liability on the part of any of
the Company, the Selling Securityholders or Buyer, except for liability arising
out of a breach of this Agreement.
ARTICLE X
INDEMNIFICATION
10.1. Indemnification of Buyer Indemnified Parties. Subject to the
overall limitations, minimum amounts and time limitations set forth in Section
10.5 below and the limitations on recourse set forth in Section 10.6 below:
(a) The Company and each Atrium Indemnitor, jointly and
severally, agree to indemnify and hold harmless Buyer and each officer,
director, employee, consultant, stockholder and affiliate of Buyer (which after
the Closing shall include the Company and its subsidiaries) (collectively, the
"Buyer Indemnified Parties") from and against any and all damages, losses,
claims, liabilities, demands, charges, suits, penalties, costs and expenses
(including court costs and attorneys' fees and expenses incurred in
investigating and preparing for any litigation or proceeding) (collectively,
"Buyer Indemnified Costs") which any of the Buyer Indemnified Parties may
sustain, or to which any of Buyer Indemnified Parties may be subjected,
relating to or arising directly or indirectly out of:
(i) any claim, action, suit, inquiry, judicial or
administrative proceeding, grievance or arbitration pending or which may
be brought against the Company or any of its subsidiaries, or any of
their respective properties or assets, arising out of, in connection
with or as a result of any facts or circumstances existing on or before
the Closing Date (regardless of whether such matters have been disclosed
to Buyer in the Schedules to this Agreement or otherwise, but
specifically excluding (A) all matters referred to in Section 2.1(m) or
disclosed on Schedule 2.1(m) and (B) all matters which are pending or
which may be brought against any of the Bishop Subsidiaries, or any of
their respective properties or assets, arising out of, in connection
with or as a result of any facts or circumstances existing on or before
September 30, 1996) (such indemnified claims, matters, suits, inquiries,
proceedings, grievances or arbitrations are referred to herein as
"Litigation Matters");
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(ii) any claim, action, suit, inquiry, judicial or
administrative proceeding, grievance or arbitration pending or which may
be brought against the Company or any of its subsidiaries, or any of
their respective properties or assets, arising out of, in connection
with or as a result of any environmental matters disclosed in Part I of
Schedule 2.1(m) (the "Pre-Existing Fojtasek Environmental Matters"),
including, but not limited to, any costs and expenses which any Buyer
Indemnified Party may sustain in connection with any remediation, clean-
up, modification, repairs, work, construction, alterations or
installations on or in connection with any real property to which the
Pre-Existing Fojtasek Environmental matters relate; and
(iii) any breach or default by the Company or any of the
Atrium Indemnitors of or under any of the representations, warranties or
other provisions of Section 2.1.
Buyer Indemnified Costs relating to or arising directly or indirectly out of
Litigation Matters are herein referred to as "Buyer Indemnified Litigation
Costs."
(b) Each Selling Securityholder other than the Bishop
Indemnitors severally agrees to indemnify and hold harmless each of the Buyer
Indemnified Parties from and against any and all Buyer Indemnified Costs which
any of the Buyer Indemnified Parties may sustain, or to which any of the Buyer
Indemnified Parties may be subjected, arising out of any breach or default by
such Selling Securityholder of or under any of the representations, warranties,
covenants, agreements or provisions of this Agreement or any of the other
Transaction Documents, other than the representations, warranties or other
provisions of Section 2.1 (for which the Company and the Atrium Indemnitors
have agreed under Section 10.1(a) to indemnify the Buyer Indemnified Parties);
(c) The Company and each Selling Securityholder other than the
Bishop Indemnitors, jointly and severally, agree to indemnify and hold harmless
each of the Buyer Indemnified Parties from and against any and all Buyer
Indemnified Costs which any of the Buyer Indemnified Parties may sustain, or to
which any of the Buyer Indemnified Parties may be subjected, arising out of any
breach or default by the Company of or under any of the representations,
warranties, covenants, agreements or provisions of this Agreement or any of the
other Transaction Documents, other than the representations, warranties or
other provisions of Section 2.1 (for which the Company and the Atrium
Indemnitors have agreed under Section 10.1(a) to indemnify the Buyer
Indemnified Parties); and
(d) Each Bishop Indemnitor severally agrees to indemnify and
hold harmless each of the Buyer Indemnified Parties from and against any and
all Buyer Indemnified Costs which any of the Buyer Indemnified Parties may
sustain, or to which any of the Buyer Indemnified Parties may be subjected,
arising out of any breach or default by such Bishop Indemnitor of or under any
of the representations, warranties, covenants, agreements or provisions of this
Agreement applicable to such Bishop Indemnitor or of any of the Transaction
Documents to which such Bishop Indemnitor is a party.
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10.2. Indemnification of the Seller Indemnified Parties. Buyer agrees
to indemnify and hold harmless each of the Selling Securityholders and each
officer, authorized representative, employee, consultant, limited partner,
general partner or affiliate of any Selling Securityholder which is not a
natural person (collectively, the "Seller Indemnified Parties" and together
with Buyer Indemnified Parties, the "Indemnified Parties") from and against any
and all damages, losses, claims, liabilities, demands, charges, suits,
penalties, costs and expenses (including court costs and reasonable attorneys'
fees and expenses incurred in investigating and preparing for any litigation or
proceeding) (collectively, the "Seller Indemnified Costs" and together with
Buyer Indemnified Costs, the "Indemnified Costs") which any of the Seller
Indemnified Parties may sustain, or to which any of the Seller Indemnified
Parties may be subjected, arising out of or relating to any breach or default
by Buyer of or under any of the representations, warranties, covenants,
agreements or other provisions of this Agreement or any agreement or document
executed in connection herewith.
10.3. Defense of Third-Party Claims. An Indemnified Party shall give
prompt written notice to any entity or person who is obligated to provide
indemnification hereunder (an "Indemnifying Party") of the commencement or
assertion of any action, proceeding, demand or claim by a third party
(collectively, a "third-party action") in respect of which such Indemnified
Party shall seek indemnification hereunder. Any failure so to notify an
Indemnifying Party shall not relieve such Indemnifying Party from any liability
that it, he or she may have to such Indemnified Party under this Article X
unless the failure to give such notice materially and adversely prejudices such
Indemnifying Party. The Indemnifying Party shall have the right to assume
control of the defense of, settle, or otherwise dispose of such third-party
action on such terms as they deem appropriate; provided, however, that:
(a) The Indemnified Party shall be entitled, at his, her or
its own expense, to participate in the defense of such third-party action
(provided, however, that the Indemnifying Parties shall pay the attorneys' fees
of the Indemnified Party if (i) the employment of separate counsel shall have
been authorized in writing by any such Indemnifying Party in connection with
the defense of such third-party action, (ii) the Indemnifying Parties shall not
have employed counsel reasonably satisfactory to the Indemnified Party to have
charge of such third-party action, or (iii) the Indemnified Party's counsel
shall have advised the Indemnified Party in writing, with a copy to the
Indemnifying Party, that there is a conflict of interest that could make it
inappropriate under applicable standards of professional conduct to have common
counsel);
(b) The Indemnifying Party shall obtain the prior written
approval of the Indemnified Party before entering into or making any
settlement, compromise, admission, or acknowledgment of the validity of such
third-party action or any liability in respect thereof if, pursuant to or as a
result of such settlement, compromise, admission, or acknowledgment, injunctive
or other equitable relief would be imposed against the Indemnified Party;
(c) No Indemnifying Party shall consent to the entry of any
judgment or enter into any settlement that does not include as an unconditional
term thereof the giving by each claimant or
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plaintiff to each Indemnified Party of a release from all liability in respect
of such third-party action; and
(d) The Indemnifying Party shall not be entitled to control
(but shall be entitled to participate at their own expense in the defense of),
and the Indemnified Party shall be entitled to have sole control over, the
defense or settlement, compromise, admission, or acknowledgment of any third-
party action (i) as to which the Indemnifying Party fails to assume the defense
within a reasonable length of time or (ii) to the extent the third-party action
seeks an order, injunction, or other equitable relief against the Indemnified
Party which, if successful, would materially adversely affect the business,
operations, assets, or financial condition of the Indemnified Party; provided,
however, that the Indemnified Party shall make no settlement, compromise,
admission, or acknowledgment that would give rise to liability on the part of
any Indemnifying Party without the prior written consent of such Indemnifying
Party.
The parties hereto shall extend reasonable cooperation in connection with the
defense of any third-party action pursuant to this Article X and, in connection
therewith, shall furnish such records, information, and testimony and attend
such conferences, discovery proceedings, hearings, trials, and appeals as may
be reasonably requested.
10.4. Direct Claims. In any case in which an Indemnified Party seeks
indemnification hereunder which is not subject to Section 10.3 because no
third-party action is involved, the Indemnified Party shall notify the
Indemnifying Party in writing of any Indemnified Costs which such Indemnified
Party claims are subject to indemnification under the terms hereof. The
failure of the Indemnified Party to exercise promptness in such notification
shall not amount to a waiver of such claim unless the resulting delay
materially prejudices the position of the Indemnifying Party with respect to
such claim.
10.5. Limitations. Subject to Section 11.18 hereof, the following
provisions of this Section 10.5 shall be applicable after the time of the
Closing:
(a) Minimum Loss.
(i) No Indemnifying Party shall be required to
indemnify an Indemnified Party under this Article X for a breach of any
representation or warranty except to the extent that the aggregate amount of
Indemnified Costs for which the Indemnified Party is otherwise entitled to
indemnification pursuant to this Article X exceeds $750,000 (the "Minimum
Loss"), whereupon the Indemnified Party shall be entitled to be paid the excess
of (A) the aggregate amount of such Indemnified Costs over (B) the Minimum
Loss, subject to the limitations on recovery and recourse set forth in this
Section 10.5 and in Section 10.6 below; provided, however, that the Buyer
Indemnified Costs relating to or arising directly or indirectly out of any
inaccuracies in any representation or warranty made by any of the Selling
Securityholders in Section 2.2 (other than the representations and warranties
made in Section 2.2(e)) (collectively, "Unlimited Claims") shall be indemnified
in their entirety by such Selling Securityholder or Selling Securityholders, as
applicable,
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and shall not be subject to either the Minimum Loss requirement described
above, the liability caps referred to in Section 10.5(d) or the limitations as
to recourse referred to in Sections 10.6 below. For purposes of determining
the aggregate amount of Minimum Loss suffered by an Indemnified Party, each
representation and warranty contained in this Agreement for which
indemnification can be or is sought hereunder shall be read (including, without
limitation, for purposes of determining whether a breach of such representation
or warranty has occurred) without regard to materiality (including Material
Adverse Effect) qualifications that may be contained therein. In addition, in
determining whether an Indemnifying Party shall be required to indemnify an
Indemnified Party under this Article X, once the Minimum Loss requirement set
forth in this clause (i) has been satisfied, each representation and warranty
contained in this Agreement for which indemnification can be or is sought
hereunder shall be read (including, without limitation for purposes of
determining whether a breach of such representation or warranty has occurred)
without regard to materiality (including Material Adverse Effect)
qualifications that may be contained therein. As used in the foregoing
provisions of this Section 10.5(a), an "Indemnified Party" refers to all of the
Buyer Indemnified Parties on the one hand and all of the Seller Indemnified
Parties on the other hand, and an "Indemnifying Party" refers to the Buyer on
the one hand and the Company and each of the Selling Securityholders, taken
together, on the other hand.
(ii) Notwithstanding the foregoing clause (i), no Buyer
Indemnified Litigation Costs shall be included in calculating the Minimum Loss
amount until the total amount of such Buyer Indemnified Litigation Costs
exceeds $450,000 (such amount, the "Litigation Deductible"), and no Buyer
Indemnified Litigation Costs shall be indemnifiable under this Article X unless
and until both (A) the total amount of Buyer Indemnified Litigation Costs
exceeds the $450,000 Litigation Deductible and (B) the $750,000 Minimum Loss
requirement set forth in clause (i) above has been satisfied (whether due to
the incurrence of Buyer Indemnified Litigation Costs or other Buyer Indemnified
Costs).
(b) Minimum Claim. Notwithstanding anything to the contrary
stated herein, if any third-party action or direct claim results in any
damages, losses, liabilities, charges, penalties, costs and expenses (including
court costs and attorneys' fees and expenses incurred in investigating and
preparing for any litigation or proceeding) which do not in the aggregate
exceed $1,000, such damages, losses, liabilities, charges, penalties, costs and
expenses shall not be deemed to be Indemnified Costs.
(c) Limitation as to Time. No Indemnifying Party shall be
liable for any Indemnified Costs pursuant to this Article X unless a written
claim for indemnification in accordance with Section 10.3 or 10.4 is given by
the Indemnified Party to the Indemnifying Party with respect thereto within
eighteen (18) months after the Closing, except that this time limitation shall
not apply to any (i) claims for Indemnified Costs relating to or arising
directly or indirectly out of any Unlimited Claims, (ii) claims relating to
Pre-Existing Fojtasek Environmental Matters or Pre-Existing Fojtasek Litigation
Matters, or (iii) claims contemplated by Section 11.18. Nothing in this
Section 10.5(c) shall (x) extend or limit, or shall be deemed to extend or
limit the period of time during which claims may be bought by the Bishop
Indemnitees for Losses which are indemnifiable
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under the Bishop Agreements, as to which Losses, (including without limitation,
Losses arising from Unlimited Claims (as defined in Section 11.6(b) of the
Bishop Exchange Agreement and in Section 13.5(a) of the Bishop Purchase
Agreement (collectively, the "Bishop Agreements Unlimited Claims")) and Cash
Tax Claims (as defined in Section 13.6 of the Bishop Purchase Agreement, also
being referred to in this Agreement as "Cash Tax Claims")), the time limits set
forth in the Bishop Agreements, if any, shall apply, or (y) affect any term of
the Bishop Buy-Sell Agreement (as amended by the Bishop Buy-Sell Amendment) or
the Bishop Indemnification Escrow Agreement, including but not limited to the
provisions thereof which relate to the terms and conditions upon which, and the
time at which, the Bishop Escrowed Amount shall be released.
(d) Liability Cap. Without limiting any of the foregoing
provisions of this Section 10.5, the parties hereto agree that (i) subject to
the separate and independent limitations referred to in Section 10.6(c) below
with respect to the Pre-Existing Fojtasek Environmental Matters and the
litigation matters listed as arising pre-July 3, 1995 on the "Litigation
Schedule" attached to Schedule 2.1(h) (the "Pre-Existing Fojtasek Litigation
Matters"), the Atrium Indemnitors shall be liable to the Buyer Indemnified
Parties for no more than $2,000,000 in Indemnified Costs, except for Buyer
Indemnified Costs arising from Unlimited Claims and claims contemplated in
Section 11.18; and (ii) the Bishop Indemnitors shall be liable to the Buyer
Indemnified Parties and the Bishop Indemnitees for no more than $3,000,000 in
the aggregate for Indemnified Costs under this Agreement and Losses under the
Bishop Agreements, except for (x) Buyer Indemnified Costs arising from
Unlimited Claims and, if appplicable, claims contemplated in Section 11.18; and
(y) Losses arising from Bishop Agreements Unlimited Claims and Cash Tax Claims.
10.6. Recourse against Escrowed Funds. Subject to Section 11.18
hereof, the following provisions of this Section 10.6 shall be applicable after
the time of the Closing.
(a) Atrium Indemnitors. With respect to any claim by a Buyer
Indemnified Party against any Atrium Indemnitor for Buyer Indemnified Costs
payable under this Article X (including, without limitation, Unlimited Claims),
the Buyer Indemnified Party shall first seek payment only out of the Atrium
Escrowed Amount for all amounts due to the Buyer Indemnified Party from such
Atrium Indemnitor with respect to such claim in an amount not to exceed the
Maximum Escrow Amount (as defined below) of such Atrium Indemnitor. In no
event shall the Buyer Indemnified Party be entitled to be paid out of the
Atrium Escrowed Amount in respect of claims against an Atrium Indemnitor an
amount in excess of such Atrium Indemnitor's Maximum Escrow Amount; provided,
that if such Atrium Indemnitor's Maximum Escrow Amount has been reduced to zero
pursuant to this Section 10.6(a), the Buyer Indemnified Party shall be
entitled, subject to the terms and conditions of this Agreement, to seek
payment from such Atrium Indemnitor directly for all amounts remaining due or
thereafter becoming due to the Buyer Indemnified Party from such Atrium
Indemnitor for Unlimited Claims under this Article X and for claims
contemplated in Section 11.18. In the event of any claim by a Buyer
Indemnified Party against one or more Atrium Indemnitors other than an
Unlimited Claim or a claim contemplated by Section 11.18, each Atrium
Indemnitor's Maximum Escrow Amount shall be reduced (but not below zero) by
such Atrium Indemnitor's pro rata portion, determined in accordance with the
percentage set forth opposite such Atrium
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Indemnitor's name in Column B on Schedule V, of the amount paid out of the
Atrium Escrowed Amount in respect of such claim (or, if applicable, such Atrium
Indemnitor's Maximum Escrow Amount shall be reduced (but not below zero), by
the portion of such Atrium Indemnitor's Maximum Escrow Amount as may be set
forth in written release instructions executed and delivered to the Escrow
Agent by Heritage or the Atrium Indemnitor Representative on behalf of any
Atrium Indemnitor other than Heritage, as the case may be), and, to the extent
that the portion of such claim for which such Atrium Indemnitor is liable
exceeds such Atrium Indemnitor's Maximum Escrow Amount as of the time of
payment of such claim out of the Atrium Escrowed Amount, then the Buyer
Indemnified Party shall not be entitled to seek payment from such Atrium
Indemnitor directly for such excess; provided, that the Buyer Indemnified Party
shall then be entitled to seek the remaining amount of such claim from such
other Atrium Indemnitors whose respective Maximum Escrow Amounts exceed zero,
pro rata based upon the Maximum Escrow Amounts of such Atrium Indemnitors as of
the time of payment of such claim, until such claim has been paid in full or
each Atrium Indemnitor's Maximum Escrow Amount has been reduced to zero. In
the event of any such claim against an Atrium Indemnitor by a Buyer Indemnified
Party which is an Unlimited Claim, such Atrium Indemnitor's Maximum Escrow
Amount shall be reduced (but not below zero) by the amount paid out of the
Atrium Escrowed Amount in respect of such claim, and to the extent that the
amount of such claim exceeds such Atrium Indemnitor's Maximum Escrow Amount as
of the time of payment of such claim out of the Atrium Escrowed Amount, the
Buyer Indemnified Party shall be entitled to seek payment from such Atrium
Indemnitor for such excess. For purposes of this Section 10.6(a), an Atrium
Indemnitor's "Maximum Escrow Amount" shall mean, at any time, such Atrium
Indemnitor's pro rata share of the Atrium Escrowed Amount, less any amounts
previously deducted from such Atrium Indemnitor's Maximum Escrow Amount in
accordance with this Section 10.6(a). The parties hereto intend and agree
that, notwithstanding anything to the contrary stated in any other paragraph of
this Article X, the Buyer Indemnified Parties' sole recourse against the Atrium
Indemnitors for indemnification hereunder (other than with respect to Unlimited
Claims (as to which no such recourse limitation shall apply), and with respect
to, Pre-Existing Fojtasek Environmental Matters and Pre-Existing Fojtasek
Litigation Matters (as to which the recourse limitations set forth in Section
10.6(c) shall apply)) shall be governed by, and subject to the terms and
provisions of, the Atrium Indemnification Escrow Agreement, and that the
maximum aggregate liability for the Atrium Indemnitors under this Article X
(other than in respect of Unlimited Claims, as to which no such limit shall
apply, and Pre-Existing Fojtasek Environmental Claims, as to which the limit
set forth in Section 10.6(c)(i) shall apply) shall in no event exceed the
Atrium Escrowed Amount.
(b) Bishop Indemnitors. With respect to any claim by a Buyer
Indemnified Party against any Bishop Indemnitor for Buyer Indemnified Costs
payable under Article X of this Agreement (including, without limitation,
Unlimited Claims), the Buyer Indemnified Party shall first seek payment only
out of the Bishop Escrowed Amount for all amounts due to the Buyer Indemnified
Party from such Bishop Indemnitor with respect to such claim in an amount not
to exceed the Maximum Escrow Amount (as defined below) of such Bishop
Indemnitor. In no event shall the Buyer Indemnified Party be entitled to be
paid out of the Bishop Escrowed Amount in respect of claims for Buyer
Indemnified Costs under this Agreement against a Bishop Indemnitor
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an amount in excess of such Bishop Indemnitor's Maximum Escrow Amount;
provided, that if such Bishop Indemnitor's Maximum Escrow Amount has been
reduced to zero pursuant to this Section 10.6(b), the Buyer Indemnified Party
shall be entitled, subject to the terms and conditions of this Agreement, to
seek payment from such Bishop Indemnitor directly for all amounts remaining due
or thereafter becoming due to the Buyer Indemnified Party from such Bishop
Indemnitor for Unlimited Claims under this Article X and for claims
contemplated in Section 11.18. In the event of any claim by a Buyer
Indemnified Party against one or more Bishop Indemnitors other than an
Unlimited Claim or a claim contemplated by Section 11.18, each Bishop
Indemnitor's Maximum Escrow Amount shall be reduced (but not below zero) by
such Bishop Indemnitor's pro rata portion, determined in accordance with the
percentage set forth opposite such Bishop Indemnitor's name in Column B on
Schedule V, of the amount paid out of the Bishop Escrowed Amount in respect of
such claim, and, to the extent that the portion of such claim for which such
Bishop Indemnitor is liable exceeds such Bishop Indemnitor's Maximum Escrow
Amount as of the time of payment of such claim out of the Bishop Escrowed
Amount, then the Buyer Indemnified Party shall not be entitled to seek payment
from such Bishop Indemnitor directly for such excess; provided, that the Buyer
Indemnified Party shall then be entitled to seek the remaining amount of such
claim from such other Bishop Indemnitors whose respective Maximum Escrow
Amounts exceed zero, pro rata based upon the Maximum Escrow Amounts of such
Bishop Indemnitors as of the time of payment of such claim, until such claim
has been paid in full or each Bishop Indemnitor's Maximum Escrow Amount has
been reduced to zero. In the event of any such claim against a Bishop
Indemnitor by a Buyer Indemnified Party which is an Unlimited Claim, such
Bishop Indemnitor's Maximum Escrow Amount shall be reduced (but not below zero)
by the amount paid out of the Bishop Escrowed Amount in respect of such claim,
and to the extent that the amount of such claim exceeds such Bishop
Indemnitor's Maximum Escrow Amount as of the time of payment of such claim out
of the Bishop Escrowed Amount, the Buyer Indemnified Party shall be entitled to
seek payment from such Bishop Indemnitor for such excess. For purposes of this
Section 10.6(b), a Bishop Indemnitor's "Maximum Escrow Amount" shall mean, at
any time, such Bishop Indemnitor's pro rata share of the Bishop Escrowed
Amounts, less any amounts previously deducted from such Bishop Indemnitor's
Maximum Escrow Amount in accordance with this Section 10.6(b). The parties
hereto intend and agree that, notwithstanding anything to the contrary stated
in any other paragraph of this Article X, (i) the Buyer Indemnified Parties'
sole recourse against the Bishop Indemnitors for indemnification hereunder
(other than with respect to Unlimited Claims, as to which no such recourse
limitation shall apply) shall be governed by, and subject to the terms and
provisions of, the Bishop Indemnification Escrow Agreement, and that the
maximum aggregate liability for the Bishop Indemnitors under this Article X
(other than in respect of Unlimited Claims, as to which no such limit shall
apply) shall in no event exceed the Bishop Escrowed Amount, and (ii) the
respective rights of the Bishop Indemnitors and the Bishop Indemnitees under
the Bishop Agreements shall not be extended, limited, reduced or otherwise
affected in any way by any provisions set forth in this Agreement, including,
but not limited to, the provisions of this Article X; provided, that the Bishop
Indemnitors shall be liable to the Buyer Indemnified Parties and the Bishop
Indemnitees for no more than $3,000,000 in the aggregate for Indemnified Costs
under this Agreement and Losses under the Bishop Agreements, except for (x)
Buyer Indemnified Costs arising from Unlimited Claims and claims contemplated
in Section 11.18; and (y) Losses arising from Bishop Agreements Unlimited
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Claims and Cash Tax Claims. Notwithstanding any other provision set forth in
this Agreement or the Bishop Agreements to the contrary, no Indemnified Party
may recover under this Agreement for any Indemnified Costs as to which such
Indemnified Party has already received, or is simultaneously receiving,
indemnification pursuant to the Bishop Agreements and no Bishop Indemnitee may
recover under the Bishop Agreements for any Losses as to which such Bishop
Indemnitee has already received, or is simultaneously receiving,
indemnification pursuant to this Agreement.
(c) Limitations with Respect to Certain Fojtasek Matters. The
parties hereto intend and agree that, notwithstanding anything to the contrary
stated in any other paragraph of this Article X:
(i) the Buyer Indemnified Parties' sole recourse
against the Atrium Indemnitors for indemnification with respect to any
of the Pre-Existing Fojtasek Environmental Matters shall be limited to
the $600,000 amount held pursuant to the Fojtasek Escrow Agreement, as
amended by the Fojtasek Escrow Amendment referred to in Section 1.8(d)
above (such amount, the "Retained Fojtasek Escrow Amount"). Indemnified
Costs with respect to the Pre-Existing Fojtasek Environmental Matters
shall not be subject to the time limitations or requirements of Minimum
Loss set forth in Section 10.5(a) and 10.5(c);
(ii) the Buyer Indemnified Parties shall not be entitled
to seek payment from the Atrium Indemnitors or from the Atrium Escrow
Amount for indemnification with respect to any Pre-Existing Fojtasek
Litigation Matters until both of the following conditions shall have
been satisfied: (A) Buyer Indemnified Litigation Costs shall have
exceeded the Litigation Deductible, and (B) the Minimum Loss requirement
referred to in Section 10.5(a) shall have been satisfied (whether due to
the incurrence of Buyer Indemnified Litigation Costs or other Buyer
Indemnified Costs);
(iii) if the conditions described in Section 10.6(c)(ii)
have been satisfied, any Buyer Indemnified Party shall first seek
payment for Buyer Indemnified Costs arising in connection with the Pre-
Existing Fojtasek Litigation Matters from the Retained Fojtasek Escrow
Amount for all amounts due to the Buyer Indemnified Party from the
Atrium Indemnitors with respect to such claim, and to the extent that
the amount of any such claim(s) exceeds the remaining balance, if any,
of the Retained Fojtasek Escrow Amount as of the time of payment of such
claim, the Buyer Indemnified Party shall be entitled to seek payment
from the Atrium Indemnitors for such excess; and
(iv) on the date which is 18 months after the Closing
Date, Buyer and the Atrium Indemnitor Representative (on behalf of the
Atrium Indemnitors) shall, and the Company shall cause Fojtasek
Companies, Inc. to, execute and deliver to the Fojtasek Escrow Agent
joint written instructions to release to the Atrium Indemnitor
Representative such amounts of the Retained Fojtasek Escrow Amount as
Buyer shall determine (in Buyer's discretion after consultation with the
Atrium Indemnitor Representative) will not be
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necessary to compensate the Buyer Indemnified Parties for Buyer
Indemnified Costs relating to Pre-Existing Fojtasek Environmental
Matters and Pre-Existing Fojtasek Litigation Matters.
10.7. Instructions to Escrow Agent.
(a) Individual Atrium Indemnitors. Each Atrium Indemnitor
(other than Heritage) hereby covenants and agrees with Buyer that, if such
Atrium Indemnitor is or becomes obligated to indemnify a Buyer Indemnified
Party for Buyer Indemnified Costs under this Article X, such Atrium Indemnitor
hereby authorizes and directs the Atrium Indemnitor Representative (hereinafter
defined) to, on behalf of such Atrium Indemnitor, execute and deliver to the
Escrow Agent written instructions to release to such Buyer Indemnified Party
such amounts of the Atrium Escrowed Amount as are necessary to indemnify the
Buyer Indemnified Party for such Buyer Indemnified Costs. Each Atrium
Indemnitor (other than Heritage) hereby covenants and agrees with Buyer that,
if such Atrium Indemnitor is or becomes obligated to indemnify a Buyer
Indemnified Party for Buyer Indemnified Costs under this Article X with respect
to Pre-Existing Fojtasek Environmental Matters or Pre-Existing Fojtasek
Litigation Matters, such Atrium Indemnitor hereby authorizes and directs the
Atrium Indemnitor Representative to, on behalf of such Atrium Indemnitor,
execute and deliver to the Fojtasek Escrow Agent written instructions to
release to such Buyer Indemnified Party such amounts of the Retained Fojtasek
Escrow Amount as are necessary to indemnify such Buyer Indemnified Party for
such Buyer Indemnified Costs. Each Atrium Indemnitor (other than Heritage)
hereby covenants and agrees with Buyer that, if Heritage executes and delivers
to the Escrow Agent written instructions to release to a Buyer Indemnified
Party an amount no greater than Heritage's Maximum Escrow Amount from the
Atrium Escrowed Amount, such Atrium Indemnitor hereby authorizes and directs
the Atrium Indemnitor Representative to, on behalf of such Atrium Indemnitor,
execute and deliver to the Escrow Agent written instructions to release to such
Buyer Indemnified Parties such amounts as are set forth in the written
instructions executed by Heritage.
(b) Bishop Indemnitors. Each Bishop Indemnitor hereby
covenants and agrees with Buyer that, if such Bishop Indemnitor is or becomes
obligated to indemnify a Buyer Indemnified Party for Buyer Indemnified Costs
under this Article X, such Bishop Indemnitor hereby authorizes and directs the
Bishop Indemnitor Representative (hereinafter defined) to, on behalf of such
Bishop Indemnitor, execute and deliver to the Escrow Agent written instructions
to release to such Buyer Indemnified Party such amounts of the Bishop Escrowed
Amount as are necessary to indemnify such Buyer Indemnified Party for such
Buyer Indemnified Costs.
(c) Heritage. Heritage hereby covenants and agrees with Buyer
that, if it is or becomes obligated to indemnify a Buyer Indemnified Party for
Buyer Indemnified Costs under this Article X, it shall execute and deliver to
the Escrow Agent or the Fojtasek Escrow Agent, as applicable, written
instructions to release to such Buyer Indemnified Party such amounts of the
Atrium Escrowed Amount or the Retained Fojtasek Escrow Amount, as applicable,
as are necessary to indemnify such Buyer Indemnified Party for such Buyer
Indemnified Costs. Heritage hereby covenants and agrees with Buyer that, if
the Atrium Indemnitor Representative executes and delivers
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to the Escrow Agent written instructions to release to a Buyer Indemnified
Party from the Atrium Escrowed Amount an amount not to exceed the Maximum
Escrow Amount for any Atrium Indemnitor, Heritage shall execute and deliver to
the Escrow Agent written instructions to release to such Buyer Indemnified
Party the amounts set forth in the written instructions executed by the Atrium
Indemnitor Representative.
10.8. Appointment of Atrium Indemnitor Representative. By the
execution and delivery of this Agreement, each Atrium Indemnitor (other than
Heritage) hereby irrevocably constitutes and appoints Randall S. Fojtasek as
the true and lawful agent and attorney-in-fact (the "Atrium Indemnitor
Representative") of such Atrium Indemnitor with full power of substitution to
act in the name, place and stead of such Atrium Indemnitor with respect to (a)
the power to execute any amendment to this Agreement as the Atrium Indemnitor
Representative shall deem necessary or appropriate in his sole discretion, (b)
delivery of the written instructions described in Section 10.7(a) on behalf of
such Atrium Indemnitor, and (c) the performance of the obligations and rights
of such Atrium Indemnitor under the Atrium Indemnification Escrow Agreement,
including, without limitation, the power to execute the Atrium Indemnification
Escrow Agreement and any amendments thereto on behalf of such Atrium
Indemnitor, to do or refrain from doing all such further acts and things, and
to execute, deliver and receive all such documents, waivers, extensions and
amendments as such Atrium Indemnitor Representative shall deem necessary or
appropriate in his sole discretion in connection with the administration of the
Atrium Indemnification Escrow Agreement (and any such actions shall be binding
on such Atrium Indemnitor).
Buyer, the other Buyer Indemnified Parties, and any other person, may
conclusively and absolutely rely, without inquiry, upon any action of the
Atrium Indemnitor Representative as the action of each Atrium Indemnitor (other
than Heritage) in all matters referred to herein, and each such Atrium
Indemnitor confirms all that the Atrium Indemnitor Representative shall do or
cause to be done by virtue of his appointment as Atrium Indemnitor
Representative. All actions by the Atrium Indemnitor Representative are
acknowledged by the parties hereto to be taken by it solely as agent and
attorney-in-fact for each Atrium Indemnitor (other than Heritage). By the
execution of this Agreement, Randall S. Fojtasek has accepted his appointment
as Atrium Indemnitor Representative and in consideration for Randall S.
Fojtasek's agreement to act as the Atrium Indemnitor Representative, each
Atrium Indemnitor (other than Heritage) hereby agrees to indemnify and hold
Randall S. Fojtasek harmless from and against all damages, losses, liabilities,
charges, penalties, costs and expenses (including court costs and attorneys'
fees and expenses, if any) incurred by him in connection with his performance
as Atrium Indemnitor Representative. Each Atrium Indemnitor (other than
Heritage) covenants and agrees that he or she will not voluntarily revoke the
power of attorney conferred in this Section 10.8. If any Atrium Indemnitor
dies or becomes incapacitated, disabled or incompetent (such deceased,
incapacitated, disabled or incompetent Atrium Indemnitor being a "Former Atrium
Indemnitor") and, as a result, the power of attorney conferred by this Section
10.8 is revoked by operation of law, it shall not be a breach under this
Agreement if the heirs, beneficiaries, estate, administrator, executor,
guardian, conservator or other legal representative of such Former Atrium
Indemnitor (each a "Successor Atrium Indemnitor") confirms the appointment of
the Atrium Indemnitor Representative as agent and attorney-in-fact for
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such Successor Atrium Indemnitor. If the power of attorney conferred by this
Section 10.8 is revoked by operation of law and thereafter not reconfirmed by
the Successor Atrium Indemnitor prior to the Closing, such revocation shall not
be deemed a breach of any of the provisions of this Agreement provided that
such Successor Atrium Indemnitor executes and delivers such other certificates,
documents or instruments (including, without limitation, any amendments hereto
and the Atrium Indemnification Escrow Agreement) that would have been delivered
on its behalf by the Atrium Indemnitor Representative had such Successor Atrium
Indemnitor reconfirmed the agency and power of attorney conferred by this
Section 10.8. If at any time Randall S. Fojtasek dies or resigns from his
position as the Atrium Indemnitor Representative, the other Atrium Indemnitors
(other than Heritage) shall designate a successor to Randall S. Fojtasek as
soon as practicable.
10.9. Appointment of Bishop Indemnitor Representative. By the
execution and delivery of this Agreement, each Bishop Indemnitor hereby
irrevocably constitutes and appoints Howard S. Saffan as the true and lawful
agent and attorney-in-fact (the "Bishop Indemnitor Representative") of such
Bishop Indemnitor with full power of substitution to act in the name, place and
stead of such Bishop Indemnitor with respect to (a) the power to execute any
amendment to this Agreement as the Bishop Indemnitor Representative shall deem
necessary or appropriate in his sole discretion, (b) delivery of the written
instructions described in Sections 10.7(b) on behalf of such Bishop Indemnitor,
and (c) the performance of the obligations and rights of such Bishop Indemnitor
under the Bishop Indemnification Escrow Agreement, including, without
limitation, the power to execute the Bishop Indemnification Escrow Agreement
and any amendments thereto on behalf of such Bishop Indemnitor, to do or
refrain from doing all such further acts and things, and to execute, deliver
and receive all such documents, waivers, extensions and amendments as such
Bishop Indemnitor Representative shall deem necessary or appropriate in his
sole discretion in connection with the administration of the Bishop
Indemnification Escrow Agreement (and any such actions shall be binding on such
Bishop Indemnitor).
Buyer, the other Buyer Indemnified Parties, and any other person, may
conclusively and absolutely rely, without inquiry, upon any action of the
Bishop Indemnitor Representative as the action of each Bishop Indemnitor in all
matters referred to herein, and each such Bishop Indemnitor confirms all that
the Bishop Indemnitor Representative shall do or cause to be done by virtue of
his appointment as Bishop Indemnitor Representative. All actions by the Bishop
Indemnitor Representative are acknowledged by the parties hereto to be taken by
it solely as agent and attorney-in-fact for each Bishop Indemnitor. By the
execution of this Agreement, Howard S. Saffan has accepted his appointment as
Bishop Indemnitor Representative and in consideration for Howard S. Saffan's
agreement to act as the Bishop Indemnitor Representative, each Bishop
Indemnitor hereby agrees to indemnify and hold Howard S. Saffan harmless from
and against all damages, losses, liabilities, charges, penalties, costs and
expenses (including court costs and attorneys' fees and expenses, if any)
incurred by him in connection with his performance as Bishop Indemnitor
Representative. Each Bishop Indemnitor covenants and agrees that he or she
will not voluntarily revoke the power of attorney conferred in this Section
10.9. If any Bishop Indemnitor dies or becomes incapacitated, disabled or
incompetent (such deceased, incapacitated, disabled or incompetent Bishop
Indemnitor being a "Former Bishop Indemnitor") and, as a result, the power of
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attorney conferred by this Section 10.9 is revoked by operation of law, it
shall not be a breach under this Agreement if the heirs, beneficiaries, estate,
administrator, executor, guardian, conservator or other legal representative of
such Former Bishop Indemnitor (each a "Successor Bishop Indemnitor") confirms
the appointment of the Bishop Indemnitor Representative as agent and
attorney-in-fact for such Successor Bishop Indemnitor. If the power of
attorney conferred by this Section 10.9 is revoked by operation of law and
thereafter not reconfirmed by the Successor Bishop Indemnitor prior to the
Closing, such revocation shall not be deemed a breach of any of the provisions
of this Agreement provided that such Successor Bishop Indemnitor executes and
delivers such other certificates, documents or instruments (including, without
limitation, any amendments hereto and the Bishop Indemnification Escrow
Agreement) that would have been delivered on its behalf by the Bishop
Indemnitor Representative had such Successor Bishop Indemnitor reconfirmed the
agency and power of attorney conferred by this Section 10.9. If at any time
Howard S. Saffan dies, becomes incapacitated or resigns from his position as
the Bishop Indemnitor Representative, the other Bishop Indemnitors shall, as
soon as practicable, designate another person to serve as the Bishop Indemnitor
Representative.
10.10. No Contribution. In the event the Closing occurs, the Selling
Securityholders, and not the Company, shall be fully liable for any Buyer
Indemnified Costs sustained by any Buyer Indemnified Parties; accordingly, the
Selling Securityholders shall not be entitled to contribution or any other
payments from the Company for any Buyer Indemnified Costs that the Selling
Securityholders are obligated to pay pursuant to this Agreement or under
applicable law.
10.11. Rights Under Bishop Agreements. Notwithstanding any other
provision set forth in this Article X, none of the provisions set forth in this
Article X are intended to, nor shall they be deemed to, increase, decrease,
amend, modify, alter or otherwise affect in any way the indemnification
obligations of the Bishop Indemnitors to the Bishop Indemnitees under the
Bishop Agreements; provided, that the Bishop Indemnitors shall be liable to
the Buyer Indemnified Parties and the Bishop Indemnitees for no more than
$3,000,000 in the aggregate for Indemnified Costs under this Agreement and
Losses under the Bishop Agreements, except for (x) Buyer Indemnified Costs
arising from Unlimited Claims and claims contemplated in Section 11.18; and (y)
Losses arising from Bishop Agreements Unlimited Claims and Cash Tax Claims.
Notwithstanding any other provision set forth in this Agreement or the Bishop
Agreements to the contrary, no Indemnified Party may recover under this
Agreement for any Indemnified Costs as to which such Indemnified Party has
already received, or is simultaneously receiving, indemnification pursuant to
the Bishop Agreements and no Bishop Indemnitee may recover under the Bishop
Agreements for any Losses as to which such Bishop Indemnitee has already
received, or is simultaneously receiving, indemnification pursuant to this
Agreement.
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ARTICLE XI
GENERAL PROVISIONS
11.1. Survival of Representations, Warranties, and Covenants. Each
representation, warranty and covenant set forth in this Agreement shall survive
the Closing. Regardless of any investigation at any time made by or on behalf
of any party hereto or of any information any party may have in respect
thereof, each of the representations, warranties, covenants and agreements made
hereunder or pursuant hereto or in connection with the transactions
contemplated hereby shall survive the Closing. Each representation, warranty,
covenant and agreement made by any of the parties to this Agreement shall
expire on the last day, if any, that any claims for breaches of such
representation, warranty, covenant or agreement may be made pursuant to Section
10.5 hereof, except that any such representation, warranty, covenant or
agreement that has been made the subject of a third-party or direct claim prior
to such expiration date shall survive with respect to such claim until the
final resolution of such claim pursuant to Article X. Except as otherwise
specifically stated in this Agreement, all covenants and agreements in this
Agreement shall survive the Closing indefinitely.
11.2. Amendment and Modification. This Agreement may not be amended
except by an instrument in writing signed by the parties hereto.
11.3. Waiver of Compliance. Any failure of Buyer on the one hand, or
the Company or the Selling Securityholders, on the other hand, to comply with
any obligation, covenant, Agreement, or condition contained herein may be
waived only if set forth in an instrument in writing signed by the party or
parties to be bound thereby, but such waiver or failure to insist upon strict
compliance with such obligation, covenant, Agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any other failure.
11.4. Specific Performance. The parties recognize that in the event
the Company or the Selling Securityholders should refuse to perform under the
provisions of this Agreement, monetary damages alone will not be adequate.
Buyer shall therefore be entitled, in addition to any other remedies which may
be available, including monetary damages, to obtain specific performance of the
terms of this Agreement. In the event of any action to enforce this Agreement
specifically, the Company and the Selling Securityholders hereby waive the
defense that there is an adequate remedy at law.
11.5. Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of applicable
law, or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated herein is not affected in any
manner materially adverse to any party. Upon such determination that any term
or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in a mutually
58
<PAGE> 66
acceptable manner in order that the transactions contemplated hereby be
consummated as originally contemplated to the fullest extent possible.
11.6. Expenses and Obligations. Except as otherwise expressly provided
in this Agreement or as provided by law:
(a) In the event that the Closing does not occur, all costs
and expenses incurred by the parties hereto in connection with the transactions
contemplated in this Agreement or in the other Transaction Documents (including
the costs and expenses incurred by the parties hereto in connection with the
financing of such transactions) shall be borne solely and entirely by the party
which has incurred such expenses. For purposes of this Section 11.6(a), the
costs and expenses incurred by Buyer in connection with the transactions
contemplated in this Agreement shall be deemed to include the fees and expenses
of Vinson & Elkins L.L.P., the costs and expenses that Buyer or the Company
incurs in preparing, printing or reproducing any offering materials relating to
the financing of the transactions, any fees and expenses of Coopers & Lybrand
L.L.P and Arthur Andersen LLP (other than fees and expenses of Arthur Andersen
LLP payable in respect of services performed for the Company in the ordinary
course of the Company's business, including services performed in connection
with regular audits of the Company's financial statements) and any fees of any
bond rating agencies or similar fees and expenses incurred in the marketing or
distribution of any bonds to be issued in connection with the financing of the
transaction. For purposes of this Section 11.6(a), the costs and expenses
incurred by the Company and Selling Securityholders in connection with the
transactions contemplated in this Agreement shall be the fees and expenses of
Bingham, Dana & Gould LLP, Adair, Morris & Osborn, P.C. and Arthur Andersen LLP
(but only for the fees and expenses of Arthur Andersen LLP payable in respect
of services performed for the Company in the ordinary course of the Company's
business, including services performed in connection with regular audits of the
Company's financial statements) and any other fees and expenses specifically
authorized by the Company in connection with the transactions contemplated in
this Agreement; and
(b) If the Closing occurs, any and all costs and expenses
incurred by the Company and the Selling Securityholders in connection with the
consummation of the transactions contemplated in this Agreement or in the other
Transaction Documents (including the financing of the transactions contemplated
herein) shall be borne, or reimbursed to the Company, by the Selling
Securityholders, and any such costs and expenses incurred by the Buyer shall be
paid, or reimbursed to Buyer, by the Company.
Notwithstanding the foregoing, the filing fees incurred in connection with the
filings made pursuant to the HSR Act shall be borne by the Company. In the
event of a dispute between the parties in connection with this Agreement and
the transactions contemplated hereby, each of the parties hereto hereby agrees
that the prevailing party shall be entitled to reimbursement by the other party
of reasonable legal fees and expenses incurred in connection with any action or
proceeding.
59
<PAGE> 67
11.7. Parties in Interest. This Agreement shall be binding upon and,
except as provided below, inure solely to the benefit of each party hereto and
their successors and assigns, and nothing in this Agreement, except as set
forth below, express or implied, is intended to confer upon any other person
any rights or remedies of any nature whatsoever under or by reason of this
Agreement.
11.8. Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally or mailed by
registered or certified mail (return receipt requested) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
(a) If to Buyer, to
HMTF Acquisition Corp.
200 Crescent Court, Suite 1600
Dallas, Texas 75201
Attn: Lawrence D. Stuart, Jr.
Facsimile: (214) 740-7313
with a copy to
Vinson & Elkins L.L.P.
3700 Trammell Crow Center
2001 Ross Avenue
Dallas, Texas 75201
Attn: Michael D. Wortley
Facsimile: (214) 220-7716
(b) If to the Company, to
Atrium Corporation
1341 West Mockingbird Lane
Suite 1200W
Dallas, Texas 75247
Attn: Randall S. Fojtasek
Facsimile: (214) 631-4231
60
<PAGE> 68
with a copy to
Bingham, Dana & Gould LLP
150 Federal Street
Boston, Massachusetts 02110-1726
Attn: Robert M. Wolf
Facsimile: (617) 951-8736
(c) If to a Selling Securityholder, to the address set forth
below such Selling Securityholder's name on Schedule I.
11.9. Interpretation. All references in this Agreement to Exhibits,
Schedules, Articles, Sections, subsections, and other subdivisions refer to the
corresponding Exhibits, Schedules, Articles, Sections, subsections, and other
subdivisions of this Agreement unless expressly provided otherwise. Titles
appearing at the beginning of any Articles, Sections, subsections or other
subdivision of this Agreement are for convenience only, do not constitute any
part of such Articles, Sections, subsections, or other subdivisions, and shall
be disregarded in construing the language contained therein. The words "this
Agreement," "herein," "hereby," "hereunder," and "hereof," and words of similar
import, refer to this Agreement as a whole and not to any particular
subdivision unless expressly so limited. The words "this Section" and "this
subsection" and words of similar import, refer only to the Sections or
subsections hereof in which such words occur. The word "or" is not exclusive,
and the word "including" (in its various forms) means "including without
limitation." Pronouns in masculine, feminine, or neuter genders shall be
construed to state and include any other gender and words, terms, and titles
(including terms defined herein) in the singular form shall be construed to
include the plural and vice versa, unless the context otherwise expressly
requires. Unless the context otherwise requires, all defined terms contained
herein shall include the singular and plural and the conjunctive and
disjunctive forms of such defined terms. The table of contents and headings
contained in this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agreement.
11.10. Counterparts. This Agreement may be executed and delivered
(including by facsimile transmission) in one or more counterparts, all of which
shall be considered one and the same agreement and shall become effective when
one or more counterparts have been signed by each of the parties and delivered
to the other parties, it being understood that all parties need not sign the
same counterpart.
11.11. Entire Agreement. This Agreement (which term shall be deemed to
include the exhibits and schedules hereto and the other certificates, documents
and instruments delivered hereunder) constitutes the entire agreement of the
parties hereto and supersedes all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof.
There are no representations or warranties, agreements or covenants other than
those expressly set forth in this Agreement.
61
<PAGE> 69
11.12. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE. ANY SUIT OR PROCEEDING
BROUGHT HEREUNDER SHALL BE SUBJECT TO THE EXCLUSIVE JURISDICTION OF THE COURTS
LOCATED IN DELAWARE.
11.13. Public Announcements. Neither Buyer, the Company nor the Selling
Securityholders shall issue any press release or otherwise make any public
statements with respect to this Agreement or the transactions contemplated
hereby without the prior written consent of, in the case of a release or
statement by Buyer, the Company and, in the case of a release or statement by
the Company or a Selling Securityholder, the Buyer, except as may be required
by applicable law. Prior to the Closing, the Company will not issue any press
release or otherwise make any public statements regarding any other matter
without the prior written consent of Buyer, except as may be required by
Applicable Law.
11.14. Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto, whether by operation of law or otherwise; provided, however, that (a)
upon notice to the Company and without releasing Buyer from any of its
obligations or liabilities hereunder, Buyer may assign or delegate any or all
of its rights or obligations under this Agreement to any affiliate thereof, and
(b) nothing in this Agreement shall limit Buyer's ability to make a collateral
assignment of its rights under this Agreement to any institutional lender that
provides funds to Buyer or Buyer's designee without the consent of the
Company. The Company or Buyer's designee shall execute an acknowledgment of
such assignment(s) and collateral assignments in such forms as Buyer or its
institutional lenders may from time to time reasonably request; provided,
however, that unless written notice is given to the Company that any such
collateral assignment has been foreclosed upon, the Company shall be entitled
to deal exclusively with Buyer as to any matters arising under this Agreement
or any of the other agreements delivered pursuant hereto. In the event of such
an assignment, the provisions of this Agreement shall inure to the benefit of
and be binding on Buyer's assigns.
11.15. Further Assurances. At the Closing or from time to time
thereafter, the parties hereto shall execute and deliver such other
instruments of assignment, transfer and delivery and shall take such other
actions as the other reasonably may request in order to consummate, complete
and carry out the transactions contemplated by this Agreement.
11.16. Director and Officer Liability. The directors, officers and
stockholders of Buyer and its affiliates shall not have any personal liability
or obligation arising under this Agreement (including any claims that the
Company or the Selling Securityholders may assert) other than as an assignee of
this Agreement.
11.17. Certain Definitions. For purposes of this Agreement, the term:
62
<PAGE> 70
(a) "affiliate" of a specified person means a person who,
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, such specified person;
(b) "beneficial owner" with respect to any shares means a
person who shall be deemed to be the beneficial owner of such shares (i) which
such person or any of its affiliates or associates (as such term is defined in
Rule 12b-2 promulgated under the Exchange Act) beneficially owns, directly or
indirectly, (ii) which such person or any of its affiliates or associates has,
directly or indirectly, (A) the right to acquire (whether such right is
exercisable immediately or subject only to the passage of time), pursuant to
any agreement, arrangement or understanding or upon the exercise of rights,
exchange rights, warrants or options, or otherwise, or (B) the right to vote
pursuant to any agreement, arrangement or understanding, (iii) which are
beneficially owned, directly or indirectly, by any other persons with whom such
person or any of its affiliates or associates or any person with whom such
person or any of its affiliates or associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or disposing of any
such shares, or (iv) pursuant to Section 13(d) of the Exchange Act and any
rules or regulations promulgated thereunder;
(c) "Bishop Subsidiaries" shall mean the collective reference
to Vinyl Building Specialties of Connecticut, Inc., a Connecticut corporation,
Bishop Manufacturing Company, Incorporated, a Connecticut corporation, Bishop
Manufacturing Company of New England, Inc., a Connecticut corporation, and
Bishop Manufacturing Co. of New York, Inc., a Connecticut corporation.
(d) "business day" means any day on which the principal
offices of the SEC in Washington, D.C. are open to accept filings, or, in the
case of determining a date when any payment is due, any day on which banks are
not required or authorized to close in New York, New York.
(e) "control" (including the terms "controlled by" and "under
common control with") means the possession, directly or indirectly or as
trustee or executor, of the power to direct or cause the direction of the
management and policies of a person, whether through the ownership of voting
securities, as trustee or executor, by contract or credit arrangement or
otherwise;
(f) "Knowledge" means, with respect to a specified party
hereto, the actual knowledge of such party. With respect to the Company,
"Knowledge" shall mean the actual knowledge of the following individuals:
Randall S. Fojtasek, Mark Biersmith, Jeff Hull, Lou W. Simi, Horace T. Hicks,
Arthur G. Frost, Dow Pointer, Steven Rosenthal or Michael Hillmeyer;
(g) "Material Adverse Effect" means the occurrence of any
event, condition, circumstance or fact that has had, or could reasonably be
expected to have, a material adverse effect on the business, operations,
properties, condition (financial or otherwise), results of operations, assets
or liabilities of the Company and its subsidiaries, taken as a whole.
63
<PAGE> 71
(h) "person" means an individual, corporation, limited
liability company, partnership, limited partnership, syndicate, person
(including, without limitation, a "person" as defined in Section 13(d)(3) of
the Exchange Act), trust, association or other legal entity or government,
political subdivision, agency or instrumentality of a government; and
(i) "subsidiary" or "subsidiaries" of any person means any
corporation, partnership, joint venture or other legal entity of which such
person (either alone or through or together with any other subsidiary), owns or
has rights to acquire, directly or indirectly, 50% or more of the capital stock
or other equity interests the holders of which are generally entitled to vote
for the election of the board of directors or other governing body of such
corporation or other legal entity; provided, the term "subsidiary" shall only
be deemed to include the Bishop Subsidiaries for purposes of the provisions set
forth in Section 2.1 as follows: (i) for the representations and warranties set
forth in Sections 2.1(a), (b), (c), (d), (e), (u) and (w), the term
"subsidiaries" shall be deemed to include the Bishop Subsidiaries for all
purposes and for all time periods, and (ii) for all other provisions in Section
2.1, the term "subsidiaries" shall be deemed to include the Bishop Subsidiaries
only with respect to the occurrence of any event, condition, circumstance or
fact arising after September 30, 1996.
11.18. No Waiver Relating to Claims for Fraud. The liability of any
party under Article X shall be in addition to, and not exclusive of any other
liability that such party may have at law or equity based on such party's
fraudulent acts or omission. None of the provisions set forth in this
Agreement, including but not limited to the provisions set forth in Sections
10.5(a) (relating to Minimum Loss), 10.5(b) (relating to minimum claims),
10.5(c) (relating to limitations on the period of time during which a claim for
indemnification may be brought), 10.5(d) (relating to liability caps) or 10.6
(relating to recourse against escrowed funds), shall be deemed a waiver by any
party to this Agreement of any right or remedy which such party may have at law
or equity based on any other party's fraudulent acts or omissions, nor shall
any such provisions limit, or be deemed to limit, (i) the amounts of recovery
sought or awarded in any such claim for fraud, (ii) the time period during
which a claim for fraud may be brought, or (iii) the recourse which any such
party may seek against another party with respect to a claim for fraud;
provided, that with respect to such rights and remedies at law or equity, the
parties further acknowledge and agree that none of the provisions of this
Section 11.18, nor any references to this Section 11.18 throughout this
Agreement, shall be deemed a waiver of any defenses which may be available in
respect of actions or claims for fraud, including but not limited to, defenses
of statutes of limitations or limitations of damages.
64
<PAGE> 72
IN WITNESS WHEREOF, Buyer and the Company have caused this Agreement to
be signed, all as of the date first written above.
BUYER:
HMTF ACQUISITION CORP.
/s/ JEFFRY S. FRONTERHOUSE
---------------------------------------------
By: Jeffry S. Fronterhouse
-------------------------------------
Its: Vice President
-------------------------------------
COMPANY:
ATRIUM CORPORATION
/s/ RANDALL S. FOJTASEK
--------------------------------------------
By: Randall S. Fojtasek
----------------------------------------
Its: President
----------------------------------------
SELLING SECURITYHOLDERS:
/s/ JOE FOJTASEK
---------------------------------------------
Joe Fojtasek
/s/ RANDALL S. FOJTASEK
---------------------------------------------
Randall S. Fojtasek
/s/ RUSSELL FOJTASEK
---------------------------------------------
Russell Fojtasek
[SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT]
S-1
<PAGE> 73
/s/ LOUIS W. SIMI, JR.
---------------------------------------------
Louis W. Simi, Jr.
/s/ NORMAN FOJTASEK
---------------------------------------------
Norman Fojtasek
/s/ JOE EDWARD FOJTASEK
---------------------------------------------
Joe Edward Fojtasek
/s/ RICHARD FOJTASEK
---------------------------------------------
Richard Fojtasek
/s/ RANDALL FOJTASEK
---------------------------------------------
Randall Fojtasek, as Trustee of the Fojtasek
Trusts
/s/ RICHARD FOJTASEK
---------------------------------------------
Richard Fojtasek, as Trustee of the Fojtasek
Trusts
/s/ RANDALL FOJTASEK
---------------------------------------------
Randall Fojtasek, as Trustee of the Joe
Fojtasek Trust
/s/ RICHARD FOJTASEK
---------------------------------------------
Richard Fojtasek, as Trustee of the Joe
Fojtasek Trust
[SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT]
S-2
<PAGE> 74
/s/ O. HAYNES MORRIS, JR.
---------------------------------------------
O.Haynes Morris, Jr., as Trustee of the Joe
Fojtasek II Trust
/s/ O. HAYNES MORRIS, JR.
---------------------------------------------
O.Haynes Morris, Jr., as Trustee of the P.
Michael Fojtasek Trust
/s/ JOE FOJTASEK
---------------------------------------------
Joe Fojtasek, as custodian under the Texas
UTMA for Joe Fojtasek II
/s/ JOE FOJTASEK
---------------------------------------------
Joe Fojtasek, as custodian under the Texas
UTMA for P. Michael Fojtasek
/s/ HOWARD S. SAFFAN
---------------------------------------------
Howard S. Saffan
/s/ LESLIE GOLDBLOOM
---------------------------------------------
Leslie Goldbloom
/s/ KEVIN SCHUMACHER
---------------------------------------------
Kevin Schumacher
[SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT]
S-3
<PAGE> 75
SELLING SECURITYHOLDER:
HERITAGE FUND I, L.P.
By: HF Partners I, L.P., its general partner
By: /s/ MICHAEL F. GILLIGAN
------------------------------------------
Name: Michael F. Gilligan
----------------------------------------
Title: General Partner
---------------------------------------
<PAGE> 76
/s/ JOE BIEGEL
---------------------------------------------
Joe Biegel
/s/ GEORGE FROST
---------------------------------------------
George Frost
/s/ WILLIAM ROBINSON
---------------------------------------------
William Robinson
/s/ SHIRLEY CRUTCHER
---------------------------------------------
Shirley Crutcher
/s/ MARK BIERSMITH
---------------------------------------------
Mark Biersmith
/s/ HORACE HICKS
---------------------------------------------
Horace Hicks
[SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT]
S-4
<PAGE> 77
SCHEDULE I
SELLING SECURITYHOLDERS
<TABLE>
<S> <C> <C>
Joe Fojtasek Randall S. Fojtasek Russell Fojtasek
4005 Cochran Chapel Road 3801 Maplewood Avenue 2853 Thomas Avenue
Dallas, TX 75209 Dallas, TX 75205 Dallas, TX 75204
Louis W. Simi, Jr. Norman Fojtasek Joe Edward Fojtasek
2901 Hickory Hill Street P.O. Box 1302 P.O. Box 92197
Colleyville, TX 76034 Kapaauh, HI 76755-1302 Austin, TX 78709-2197
Richard Fojtasek Randall S. and Richard Fojtasek, as Randall S.and Richard Fojtasek,as Trustees of
2825 Earlshire Lane Trustees of the Fojtasek Trusts the Joe Fojtasek Trust
Carrollton, TX 75008 3801 Maplewood Avenue 3801 Maplewood Avenue
Dallas, Texas 75205 Dallas, Texas 75205
O. Haynes Morris, Jr., as Trustee O. Haynes Morris, Jr., as Trustee Joe Fojtasek, as custodian under the Texas UTMA
of the Joe Fojtasek II Trust of the P. Michael Fojtasek Trust for Joe Fojtasek II
Adair, Morris & Osborn Adair, Morris & Osborn 4005 Cochran Chapel Road
1201 Main Street 1201 Main Street Dallas, TX 75209
835 One Main Place 835 One Main Place
Dallas, Texas Dallas, Texas
Joe Fojtasek, as custodian under the Heritage Fund I, L.P. Howard S. Saffan
Texas UTMA for P. Michael Fojtasek 30 Rowes Wharf, Suite 300 60 Sutton Place South
4005 Cochran Chapel Road Boston, MA 02110 Apt. 4JS
Dallas, TX 75209 New York, New York 10022
</TABLE>
<PAGE> 78
<TABLE>
<S> <C> <C>
Leslie Goldbloom Kevin Schumacher Joe Biegel
174 Marlborough Street 5 Flint Meadow Lane 504 Tiffany Trail
Boston, MA 02116 Shrewsbury, MA 01545 Richardson, TX 75081
George Frost William Robinson Shirley Crutcher
P.O. Box 1034 825 Hyatt 500 MacArthur Court
Wylie, TX 75098 Copper Canyon, TX 75008 Irving, TX 75061
Mark Biersmith Horace Hicks
3313 Stafford 1068 Greenwood Lane
Dallas, TX 75225 Lewisville, TX 75067
</TABLE>
<PAGE> 79
SCHEDULE II
STOCKHOLDERS
<TABLE>
<CAPTION>
Column A Column B
-------------------------------- ------------------------------
Share of New Common Stock
Shares of Stock Owned Received Upon Effectiveness of
Name as of the Date of the Agreement Charter Amendment
---- -------------------------------- ------------------------------
<S> <C> <C> <C> <C>
PART 1. COMMON STOCK
a. Class A Voting Joe Fojtasek 17,727.80 10,687,302.03
Randall S. Fojtasek 8,959.90 5,401,525.14
Russell Fojtasek 3,122.60 1,882,476.64
Louis W. Simi, Jr. 159.10 95,914.31
Norman Fojtasek 84.00 50,639.86
Joe Edward Fojtasek 84.00 50,639.86
Richard Fojtasek 84.00 50,639.86
Fojtasek Trusts 72.00 43,405.60
Joe Fojtasek Trust 12.00 7,234.27
Joe Fojtasek II Trust 45.00 27,128.50
P. Michael Fojtasek
Trust 45.00 27,128.50
Joe Fojtasek, cust. for
Joe Fojtasek II 75.00 45,214.16
Joe Fojtasek, cust. for
P. Michael Fojtasek 75.00 45,214.16
----------- ----------------
30,545.40 18,414,462.39
</TABLE>
<PAGE> 80
<TABLE>
<CAPTION>
Column A Column B
-------------------------------- ------------------------------
Share of New Common Stock
Shares of Stock Owned Received Upon Effectiveness of
Name as of the Date of the Agreement Charter Amendment
---- -------------------------------- ------------------------------
<S> <C> <C> <C> <C>
b. Class B Non-Voting Heritage 19,613.60 11,824,166.96
Howard S. Saffan 4,620.74 2,785,638.60
Leslie Goldbloom 4,620.74 2,785,638.60
Kevin Schumacher 695.60 419,346.30
Joe Biegel 159.10 95,914.31
----------- ----------------
29,709.78 17,910,704.28
c. Class C Voting Heritage 30,386.40 18,318,608.87
PART 2. PREFERRED STOCK, $1.00 Heritage 11,000.00 N/A
par value
</TABLE>
<PAGE> 81
SCHEDULE III
OPTION HOLDERS
<TABLE>
<CAPTION>
Column A Column B Column C Column D
---------------- ---------------------- ----------- -----------------
Underlying Shares
With Respect to Underlying
Underlying Which a Substitute Substitute
Option Shares as Option is to be Option Option Shares
of the Date of Redeemed Redemption Following
Name the Agreement (assuming conversion) Price ($) Closing
----------- ---------------- ---------------------- ----------- -----------------
<S> <C> <C> <C> <C>
PART 1. WARRANT
Heritage 14,564.52 8,780,301.23 8,780,301.23 --
PART 2. SUBSTITUTE OPTIONS
TO BE PARTIALLY REDEEMED
George Frost 863,168.50 663,168.53 663,168.53 200,000
L. W. Simi 575,425.57 225,425.59 225,425.59 350,000
W. Robinson 479,571.55 229,571.56 229,571.56 250,000
S. Crutcher 383,657.24 333,657.25 333,657.25 50,000
M. Biersmith 286,356.36 186,356.37 186,356.37 100,000
H. Hicks 191,828.63 91,828.63 91,828.63 100,000
J. Biegel 95,914.31 95,914.31 95,914.31 --
<CAPTION>
Column E Column F Column G
-------------- ------------- ----------
Underlying
1996 Exercise Vesting
Name Option Shares Price (A or B)*
----------- -------------- ------------- ----------
PART 3. 1996 OPTIONS
TO BE ISSUED AT CLOSING
<S> <C> <C> <C>
Howard Saffan 700,000.00 1.00/sh A
Lou Simi 161,237.28 1.00/sh B
Russell Fojtasek 140,883.77 1.00/sh B
George Frost 120,707.02 1.00/sh C
Horace Hicks 60,353.31 1.00/sh B
W. Robinson 125,883.77 1.00/sh B
M. Biersmith 60,353.51 1.00/sh B
K. Schumacher 30,176.75 1.00/sh B
M. Hillmeyer 100,000.00 1.00/sh B
D. Pointer 100,000.00 1.00/sh B
Jeff Hull 100,000.00 1.00/sh B
John Craine 30,176.50 1.00/sh B
James Wright 30,176.50 1.00/sh B
Edwin Beachly 30,176.50 1.00/sh B
James Gresham 65,088.38 1.00/sh B
Richard Kettle 15,088.38 1.00/sh B
Thomas Bowen 15,088.38 1.00/sh B
Eric Long 25,000.00 1.00/sh B
</TABLE>
* A -- 1/1095 Options will vest each day during the first three years of
the option period and may be exercised at such time as the
Company's board of directors determines in good faith that an 8%
interest rate of return has been achieved on Buyer's investment
in the Shares. "Cause" under this Option Agreement will be
defined as in the Employment and Non-Competition Agreement dated
September 30, 1996 between the Company and Howard S. Saffan. In
the event of a change of control or a termination of Howard S.
Saffan's employment with the Company, if the Company elects to
exercise its repurchase option, it must pay Mr. Saffan in cash,
as opposed to a promissory note.
* B -- 20% of the Options will vest each year for the first 5 years of
the option period.
* C -- 20% of the Options will vest each year for the first 2 years of
the option period, with the remaining Options to vest at the end
of the third year.
<PAGE> 82
SCHEDULE IV
NEW COMMON STOCKHOLDERS AND RESULTS OF REDEMPTION
<TABLE>
<CAPTION>
Column A Column B
----------------------- ------------------------
Number of Shares of
New Common Stock Owned
Immediately After Charter Number of Shares of
Name Amendment and Prior to the New Common Stock to be
- ---- Common Stock Redemption Redeemed
----------------------- ------------------------
<S> <C> <C>
Joe Fojtasek 10,687,302.03 9,687,302.03
Randall S. Fojtasek 5,401,525.14 4,401,525.14
Russell Fojtasek 1,882,476.64 1,632,476.64
Louis W. Simi, Jr 95,914.31 95,914.31
Norman Fojtasek 50,639.86 50,639.86
Joe Edward Fojtasek 50,639.86 50,639.86
Richard Fojtasek 50,639.86 50,639.86
Fojtasek Trusts 43,405.60 43,405.60
Joe Fojtasek Trust 7,234.27 7,234.27
Joe Fojtasek II Trust 27,128.50 27,128.50
P. Michael Fojtasek Trust 27,128.50 27,128.50
Joe Fojtasek, cust. for Joe Fojtasek II 45,214.16 45,214.16
Joe Fojtasek, cust. for P. Michael Fojtasek 45,214.16 45,214.16
Heritage 30,142,775.83 26,617,775.83
Howard S. Saffan 2,785,638.60 2,035,638.60
Leslie Goldbloom 2,785,638.60 2,785,638.60
Kevin Schumacher 419,346.30 369,346.30
Joe Biegel 95,914.31 95,914.31
------------------ --------------
Total 54,643,776.53 48,068,776.53
<CAPTION>
Column C D Column
---------------------------- --------------------
Number of Shares
Amount to be Paid to of New Common Stock
Common Stockholder Owned Immediately
Name Exchange for Redeemed After the Common
Common Shares ($1.00/share) Redemption Stock
---------------------------- --------------------
<S> <C> <C>
Joe Fojtasek $ 9,687,302.03 1,000,000
Randall S. Fojtasek 4,401,525.14 1,000,000
Russell Fojtasek 1,632,476.64 250,000
Louis W. Simi, Jr 95,914.31 --
Norman Fojtasek 50,639.86 --
Joe Edward Fojtasek 50,639.86 --
Richard Fojtasek 50,639.86 --
Fojtasek Trusts 43,405.60 --
Joe Fojtasek Trust 7,234.27 --
Joe Fojtasek II Trust 27,128.50 --
P. Michael Fojtasek Trust 27,128.50 --
Joe Fojtasek, cust. for Joe Fojtasek II 45,214.16 --
Joe Fojtasek, cust. for P. Michael Fojtasek 45,214.16 --
Heritage 26,617,775.83 3,525,000
Howard S. Saffan 2,035,638.60 750,000
Leslie Goldbloom 2,785,638.60 --
Kevin Schumacher 369,346.30 50,000
Joe Biegel 95,914.31 --
------------------ ----------------
Total 48,068,776.53 6,575,000
</TABLE>
<PAGE> 83
SCHEDULE V
<TABLE>
<CAPTION>
COLUMN B
COLUMN A PRO RATA PORTION OF
NAME ESCROWED AMOUNT INDEMNIFIABLE CLAIMS
---- --------------- --------------------
<S> <C> <C> <C>
PART 1. ATRIUM INDEMNITORS Joe Fojtasek 364,615.17 18.23
Randall S. Fojtasek 165,666.64 8.28
Russell Fojtasek 61,443.91 3.07
George Frost 24,960.64 1.25
Louis Simi 12,094.74 .61
W. Robinson 8,640.72 .43
S. Crutcher 12,558.35 .63
M. Biersmith 7,014.17 .35
H. Hicks 3,456.29 .17
J. Beigel 7,220.13 .36
Heritage 1,332,329.24 66.62
--------------- ---------------
2,000,000.00 100.00
PART 2. BISHOP INDEMNITORS Howard Saffan 1,395,000.00 46.50
Leslie Goldbloom 1,395,000.00 46.50
Kevin Schumacher 210,000.00 7.00
--------------- ---------------
3,000,000.00 100.00
</TABLE>
<PAGE> 84
PART 3. FOJTASEK INDEMNITORS Joe Fojtasek
Randall S. Fojtasek
Russell S. Fojtasek
Norman Lee Fojtasek
Richard Wayne Fojtasek
Joe Ed Fojtasek
<PAGE> 85
SCHEDULE VI
DISPOSITION OPTION HOLDERS
<TABLE>
<CAPTION>
COLUMN A COLUMN B
-------- --------
UNDERLYING OPTION
NAME OPTION SHARES REDEMPTION PRICE
---- ------------- ----------------
<S> <C> <C>
Richard Kettle 186,856.50 $ 15,000
Joe Fojtasek 720,412.32 59,750
Randy Rice 90,428.33 7,500
Thomas Bowen 90,428.33 7,500
Dow Pointer 150,713.88 12,500
George Frost 708,355.21 58,750
Edwin P. Beachly 90,428.33 7,500
Jamey M. Rentfrow 105,499.71 8,750
Joseph L. Biegel 319,513.42 26,500
Jeanne Smith 75,356.94 6,250
Stephen L. Rosenthal 75,356.94 6,250
James Hayes 60,285.55 5,000
Robert Adams 60,285.55 5,000
Randall S. Fojtasek 3,060,697.37 253,850
Horace Hicks 391,856.08 32,500
Herschel M. Hicks 105,499.71 8,750
W. R. Robinson, Jr 319,513.42 26,500
</TABLE>
<PAGE> 86
<TABLE>
<CAPTION>
COLUMN A COLUMN B
-------- --------
UNDERLYING OPTION
NAME OPTION SHARES REDEMPTION PRICE
---- ------------- ----------------
<S> <C> <C>
Dian L. Beverly 60,285.55 5,000
Ronald L. Stephens 90,428.33 7,500
Russell S. Fojtasek 972,405.92 80,650
Louis W. Simi, Jr 741,512.27 61,500
James Wright 90,428.33 7,500
Bobby Boone 90,428.33 7,500
Mark Biersmith 301,427.75 25,000
</TABLE>
<PAGE> 87
SCHEDULE VII
<TABLE>
<CAPTION>
NAME KEY EMPLOYEES' SHARES TO BE PURCHASED
---- -------------------------------------
<S> <C>
Mike Hillmeyer 50,000
Dow Pointer 50,000
Jeff Hull 50,000
John Crain 50,000
James Wright 50,000
Edwin Beachly 50,000
James Gresham 25,000
Richard Kettle 25,000
Thomas Bowen 25,000
--------
Total 375,000
</TABLE>
<PAGE> 88
SCHEDULE VIII
SELLING SECURITYHOLDERS WHO WILL BE PARTIES
TO THE CERTAIN AGREEMENTS
NAME
----
PART 1.
Heritage Fund I, L.P.
Joe Fojtasek
Randall S. Fojtasek
Russell Fojtasek
Howard S. Saffan
PART 2. Heritage Fund I, L.P.
Randall S. Fojtasek
Joe Fojtasek (for himself and as
Custodian for Joe Fojtasek II
and Phillip Michael Fojtasek)
Russell S. Fojtasek
Joe Biegel
Louis W. Simi, Jr.
Norman Fojtasek
<PAGE> 89
NAME
----
Joe Edward Fojtasek
Richard Fojtasek
Howard S. Saffan
Leslie Goldbloom
Kevin Schumacher
<PAGE> 1
EXHIBIT 2.2
SECURITIES EXCHANGE AGREEMENT
THIS SECURITIES EXCHANGE AGREEMENT is dated as of this 22nd day of
August, 1996, by and among ATRIUM CORPORATION, a Delaware corporation
("Atrium"), FCI HOLDING CORP., a Delaware corporation ("FCI"), HERITAGE FUND I,
L.P., a Delaware limited partnership ("Heritage"), RANDALL FOJTASEK, an
individual residing at 3801 Maplewood, Dallas, TX 75205, JOE FOJTASEK, an
individual residing at 4005 Cochran Chapel Road, Dallas, TX 75209, for himself
and as custodian for JOE FOJTASEK II and PHILLIP MICHAEL FOJTASEK, under the
Texas Uniform Minors Act, RUSSELL FOJTASEK, an individual residing at 2853
Thomas Avenue, Dallas, Texas 75204, LOUIS W. SIMI, JR., an individual residing
at 2901 Hickory Hill Street, Colleyville, TX 76034, JOE BIEGEL, an individual
residing at 504 Tiffany Trail, Richardson, TX 75081, NORMAN FOJTASEK, an
individual with an address at P.O. Box 1302, Kapaauh, Hawaii 76755-1302, JOE
EDWARD FOJTASEK, an individual with an address at P.O. Box 92197, Austin, TX
78709-2197, RICHARD FOJTASEK, an individual residing at 2825 Earlshire Lane,
Carrollton, TX 75008 , (Heritage and such individuals being referred to herein
collectively as the "FCI Holders", and singly, an "FCI Holder") and HOWARD S.
SAFFAN, an individual residing at 85 Beachside Avenue, Westport, CT 06880
("Saffan"), LESLIE GOLDBLOOM, an individual residing at 660 Silver Spring Road,
Fairfield, CT 06430 ("Goldbloom") and KEVIN SCHUMACHER, an individual residing
at 5 Flint Meadow Lane, Shrewsbury, MA 01545 ("Schumacher") (Saffan and
Goldbloom together, the "VBS Stockholders"; and together with Schumacher,
collectively, the "Bishop Holders", and singly, a "Bishop Holder"). The Bishop
Holders and the FCI Holders are sometimes referred to herein collectively as
the "Holders", and each individually as a "Holder".
WHEREAS, the FCI Holders are the owners of all the issued and
outstanding shares of the capital stock of FCI (the "FCI Stock").
WHEREAS, the FCI Holders desire to contribute the FCI Stock to Atrium in
exchange for certain shares of the capital stock of Atrium ("Atrium Stock"),
and Atrium desires to accept the FCI Stock from the FCI Holders and to issue
certain shares of Atrium Stock to the FCI Holders in exchange therefor, upon
the terms and subject to the conditions set forth in this Agreement;
WHEREAS, the VBS Stockholders are the owners of all of the issued and
outstanding shares of capital stock ("VBS Stock") of Vinyl Building Specialties
of Connecticut, Inc., a Connecticut corporation ("VBS");
WHEREAS, the VBS Stockholders desire to contribute certain shares of VBS
Stock (the "VBS Exchanged Shares") to Atrium in exchange for Atrium Stock, and
to sell their remaining shares of VBS Stock (the "VBS Purchased Shares") to
Fojtasek Companies, Inc., a Texas corporation ("Fojtasek") pursuant to a Stock
Purchase Agreement dated of even date herewith by and among Fojtasek and the
Bishop Holders (the "Purchase Agreement") and Atrium desires to accept the VBS
<PAGE> 2
Exchanged Shares from the VBS Stockholders and to issue Atrium Stock in
exchange therefor, upon the terms and subject to the conditions set forth in
this Agreement;
WHEREAS, Schumacher is the owner of 200 of the issued and outstanding
shares of capital stock (the "BNE Stock") of Bishop Manufacturing Company of
New England, Inc., a Connecticut corporation ("BNE");
WHEREAS, Schumacher desires to contribute certain of his shares of BNE
Stock (the "BNE Exchanged Shares"; together with the VBS Exchanged Shares, the
"Bishop Stock", and together with the FCI Stock, the "Stock") to Atrium in
exchange for Atrium Stock and to sell his remaining shares of BNE Stock (the
"BNE Purchased Shares") to Fojtasek pursuant to the Purchase Agreement, and
Atrium desires to accept the BNE Exchanged Shares from Schumacher and to issue
Atrium Stock in exchange therefor, upon the terms and subject to the conditions
set forth in this Agreement;
WHEREAS, the VBS Stockholders are the owners of all of the issued and
outstanding shares of the capital stock (the "BNY Stock") of Bishop
Manufacturing Co. of New York, Inc., a Connecticut corporation ("BNY"; together
with BNE, VBS and Bishop Manufacturing Co., Inc. a Connecticut corporation
("BMC"), collectively, the "Bishop Companies," and singly, a "Bishop Company");
WHEREAS, the VBS Stockholders desire to sell their shares of BNY Stock
to Fojtasek, and Fojtasek desire to purchase the BNY Stock, the VBS Purchased
Shares and the BNE Purchased Shares pursuant to the Purchase Agreement, upon
the terms and subject to the conditions set forth therein; and
WHEREAS, it is a condition precedent to the effectiveness of the
Purchase Agreement that the exchanges of the FCI Stock, the VBS Exchanged
Shares and the BNE Exchanged Shares described above (collectively, the
"Exchange") shall have been completed pursuant to and in accordance with the
provisions of this Agreement.
NOW, THEREFORE, in consideration of the mutual agreements and covenants
herein contained, the parties hereto agree as follows:
1. CONTRIBUTION AND EXCHANGE. At the Closing referred to in Section
2 of this Agreement, subject to the terms and conditions set forth in this
Agreement:
(a) each of the Holders agrees to contribute to Atrium, and Atrium
agrees to accept from such Holder, all of the outstanding shares of FCI Stock,
all of the VBS Exchanged Shares and all of the BNE Exchanged Shares owned by
such Holder as set forth opposite such Holder's name on Schedule 1 hereto, in
exchange for Atrium Stock in the amounts and of the classes set forth opposite
such Holder's name on such Schedule 1 (collectively, the "Atrium Exchange
Shares"), and Atrium and each of the Holders acknowledge and agree that such
exchange of stock is intended to qualify as an
<PAGE> 3
"exchange" within the meaning of Section 351 of the Internal Revenue Code of
1986, as amended (the "Code");
(b) Heritage agrees to deliver to Atrium the original Variable Amount
Common Stock Purchase Warrant No. W-1 of FCI (the "Heritage Warrant"), and upon
completion of the Exchange described herein FCI and Heritage shall cancel the
Heritage Warrant and Atrium shall issue to Heritage a variable amount common
stock purchase warrant for shares of Atrium Stock in the form attached hereto
as Exhibit A (the "New Warrant"); and
(c) the FCI Holders (other than Heritage) shall use their best efforts
to procure the delivery to Atrium of the original Stock Option Agreements
entered into between FCI and each of the optionees listed on Schedule 2 hereto
(the "Original Options"), and upon completion of the Exchange described herein
FCI shall use its best efforts to procure the substitution of each of the
Original Options by an option identical in form to such Original Option, except
for the substitution of the right to purchase shares of Atrium Stock in the
amounts set forth opposite such optionee's name on Schedule 2 hereto for the
right to purchase shares of FCI Stock in the Original Options (such substitute
options, collectively, the "New Options").
2. CLOSING.
2.1. Time and Place. The closing of the contribution of the Stock in
exchange for the Atrium Exchange Shares (the "Closing") shall be held at the
offices of Bingham, Dana & Gould LLP, 150 Federal Street, Boston,
Massachusetts, at 10:00 A.M., on September 24, 1996, or at such other time, or
at such other place as Atrium and the Holders may agree. The date on which the
Closing is actually held hereunder is sometimes referred to herein as the
"Closing Date".
2.2. Transactions at Closing. At the Closing, in addition to the
delivery of any other instruments or documents referred to herein:
(a) the FCI Holders shall deliver to Atrium, free and clear of any
lien, claim or encumbrance, certificates representing the FCI Stock, duly
endorsed in blank or with duly executed stock powers attached;
(b) the Bishop Holders shall deliver to Atrium, free and clear of any
lien, claim or encumbrance, certificates representing the VBS Exchanged Shares
and the BNE Exchanged Shares, duly endorsed in blank or with duly executed
stock powers attached;
(c) Atrium shall deliver certificates representing all of the Atrium
Exchange Shares, other than the Escrowed Shares (as defined in Section 2.2(e)
below), to the Holders as set forth on Schedule 1 hereto;
<PAGE> 4
(d) each of Fojtasek and the Bishop Holders shall complete the
"Closing" under and as defined the Purchase Agreement;
(e) each of Atrium, Fojtasek, the Bishop Holders and Bingham, Dana &
Gould LLP, in its capacity as Escrow Agent (the "Escrow Agent") shall execute
and deliver the Buy-Sell Agreement substantially in the form of Exhibit B
hereto (the "Buy-Sell Agreement") pursuant to which the Atrium Exchange Shares
to be issued to the Bishop Holders hereunder (the "Escrowed Shares") are to be
held in escrow by the Escrow Agent to secure certain of the Bishop Holders'
potential indemnification obligations to Fojtasek under the Purchase Agreement;
(f) Atrium shall deliver certificates representing all of the
Escrowed Shares to the Escrow Agent pursuant to and in accordance with the Buy-
Sell Agreement, and each of the Bishop Holders shall deliver stock powers, duly
executed in blank, in respect of the Escrowed Shares owned by such Bishop
Holder to the Escrow Agent under and pursuant to the Buy-Sell Agreement;
(g) Atrium shall contribute the VBS Exchanged Shares and the BNE
Exchanged Shares to FCI, FCI shall contribute the VBS Exchanged Shares and the
BNE Exchanged Shares to Fojtasek, Fojtasek shall contribute the BNE Exchanged
Shares and the BNE Purchased Shares to VBS, and VBS shall contribute the BNE
Exchanged Shares and the BNE Purchased Shares to BMC;
(h) each of the Holders shall execute and deliver the Atrium
Corporation Stockholder Agreement in the form of Exhibit C hereto (the
"Stockholder Agreement");
(i) Atrium and each of the Holders shall execute and deliver a
Registration Rights Agreement in the form of Exhibit D hereto (the
"Registration Rights Agreement");
(j) Atrium, FCI and Heritage shall execute and deliver an Amendment
to the Securities Purchase Agreement dated as of July 3, 1995, originally
entered into between FCI and Heritage, and Atrium, FCI and each of the FCI
Holders (other than Heritage) shall execute and deliver Amendments to the Stock
Exchange Agreements dated as of July 3, 1995 originally entered into between
FCI and each of such FCI Holders, in each case substantially identical to the
originals of such agreements other than for the substitution of Atrium and
Atrium Stock in place of FCI and FCI Stock (collectively, the "FCI Equity
Amendment Documents");
(k) upon cancellation of their respective Original Stock Options,
Atrium shall execute and issue to each of the optionees set forth on Schedule 2
hereto the New Options; and
(l) Atrium shall execute and deliver to Heritage the New Warrant.
3. REPRESENTATIONS AND WARRANTIES OF EACH OF THE BISHOP HOLDERS.
Each of the Bishop Holders severally represents and warrants to Atrium, to FCI
and to the FCI Holders as follows:
<PAGE> 5
3.1. Right to Sell Bishop Stock, Approvals, Binding Effect. Such
Bishop Holder has all requisite power and full legal right to enter into this
Agreement and the other Transaction Documents to which such Holder is a party,
to perform all of such Holder's agreements and obligations hereunder and
thereunder, each in accordance with its respective terms, and to transfer to
Atrium all of the outstanding shares of Bishop Stock owned by such Holder.
Each Transaction Document to which such Bishop Holder is a party has been duly
executed and delivered by such Holder and constitutes the legal, valid and
binding obligation of such Holder, enforceable against such Holder in
accordance with its terms, except as the enforceability thereof may be limited
by any applicable bankruptcy, reorganization, insolvency or other laws
affecting creditors' rights generally or by general principles of equity.
3.2. Non-Contravention. The execution and delivery by such Bishop
Holder of this Agreement and the other Transaction Documents to which such
Bishop Holder is a party, and the consummation by such Bishop Holder of the
transactions contemplated hereby and thereby, will not (a) violate or conflict
with any provision of the Certificates of Incorporation or By-Laws of any of
the Bishop Companies, each as amended to date; or (b) constitute a violation
of, or be in conflict with, or constitute or create a default under, or result
in the creation or imposition of any encumbrance upon any property of any of
the Bishop Companies pursuant to, (i) any agreement or instrument to which such
Bishop Holder or any of the Bishop Companies is a party or by which any of them
or any of their properties is bound or to which such Bishop Holder or any of
the Bishop Companies or any of such properties is subject, or (ii) to the
knowledge of the Bishop Holders, any statute, judgment, decree, order,
regulation or rule of any court or governmental or regulatory authority except
where such violation, conflict, default or encumbrance could not have a
Material Adverse Effect with respect to any of the Bishop Companies.
3.3. Governmental Consents. Except as set forth on Schedule 3.3, no
consent, approval or authorization of, or registration, qualification or filing
with, any governmental agency or authority is required for the execution and
delivery by such Bishop Holder of the Transaction Documents to which it is a
party or for the consummation by such Bishop Holder of the transactions
contemplated hereby or thereby.
3.4. Title to Bishop Stock, Liens, etc. Such Bishop Holder has, and as
of the consummation of the Closing Atrium will have, sole record and beneficial
ownership of all of the shares of Bishop Stock set forth opposite such Holder's
name on Schedule 1 hereto and to be exchanged hereunder, free and clear of any
mortgage, lien, pledge, charge, security interest, encumbrance, title retention
agreement, option, equity or other adverse claim thereto.
3.5. Purchase Agreement Representations. Each of the representations
and warranties made by such Bishop Holder as a "Seller" in the Purchase
Agreement is true and complete, and does not
<PAGE> 6
contain and will not contain any untrue statement of a material fact, or omit
or will omit to state a material fact required to be stated therein or
necessary to make the statements contained therein not false or misleading.
3.6. Investment Representations. Such Bishop Holder is acquiring Atrium
Exchange Shares for the purpose of investment and not with a view to
distribution or resale thereof. The acquisition by such Bishop Holder of
Atrium Exchange Shares shall constitute a confirmation of this representation.
Such Bishop Holder further represents that he or she has been furnished access
to such of the business records of the Bishop Companies and the Fojtasek
Companies (as defined in Section 4.1 below) and to such additional information
and documents as he or she has requested, and has been afforded an opportunity
to ask questions of and receive answers from representatives of Atrium
concerning the business and prospects of Atrium and its Subsidiaries following
completion of the transactions contemplated hereby and the merits or risks of
his or her acquisition of Atrium Exchange Shares pursuant to this Agreement.
Such Bishop Holder has sufficient expertise in business, financial and
investment matters to be able to evaluate the risks involved in his or her
acquisition of Atrium Exchange Shares and to make an informed investment
decision with respect to his or her acquisition of Atrium Exchange Shares.
Such Bishop Holder can afford a complete loss of the value of his or her Atrium
Exchange Shares and is able to bear the economic risk of holding such shares
for an indefinite period. Such Bishop Holder further represents that he or she
understands and agrees that until registered under the Securities Act of 1933,
as amended, or transferred pursuant to the provisions of Rule 144 thereunder,
or any similar provision as promulgated by the Securities and Exchange
Commission, all certificates evidencing any of Atrium Stock, whether upon
initial issuance or upon any transfer thereof, shall bear a legend, prominently
stamped or printed thereon, reading substantially as set forth on Schedule 3.6
hereto.
4. REPRESENTATIONS AND WARRANTIES OF EACH OF THE FCI HOLDERS. Each
of the FCI Holders severally represents and warrants to Atrium, to FCI and to
the Bishop Holders as follows:
4.1 Rights to Sell FCI Stock, Approvals, Binding Effect. Such FCI
Holder has all requisite power and full legal right to enter into this
Agreement and the other Transaction Documents to which such Holder is a party,
to perform all of such Holder's agreements and obligations hereunder and
thereunder, each in accordance with its respective terms, and to transfer to
Atrium all of the outstanding shares of FCI Stock owned by such Holder. Each
Transaction Document to which such FCI Holder is a party has been duly executed
and delivered by such Holder and constitutes the legal, valid and binding
obligation of such Holder, enforceable against such Holder in accordance with
its terms except as the enforceability thereof may be limited by any applicable
bankruptcy, reorganization, insolvency or other laws affecting creditors'
rights generally or by general principles of equity.
4.2 Non-Contravention. The execution and delivery by such FCI Holder
of the Transaction Documents to which such FCI Holder is a party and the
consummation by such FCI Holder of the
<PAGE> 7
transactions contemplated hereby and thereby will not (a) violate or conflict
with any provision of the Certificates or Articles of Incorporation or By-Laws
of FCI, Fojtasek or H-R Window Supply, Inc., a Texas corporation (collectively,
the "Fojtasek Companies") each as amended to date; or (b) constitute a
violation of, or be in conflict with, or constitute or create a default under,
or result in the creation or imposition of any encumbrance upon any property of
any of the Fojtasek Companies pursuant to, (i) any agreement or instrument to
which such FCI Holder or any of the Fojtasek Companies is a party or by which
any of them or any of their properties is bound or to which such FCI Holder or
any of the Fojtasek Companies or any of such properties is subject, or (ii) to
the knowledge of the FCI Holders, any statute, judgment, decree, order,
regulation or rule of any court or governmental or regulatory authority except
where such violation, conflict, default or encumbrance could not have a
material adverse effect on the business, operations or financial condition of
any of the Fojtasek Companies.
4.3. Governmental Consents. Except as set forth on Schedule 4.3, no
consent, approval or authorization of, or registration, qualification or filing
with, any governmental agency or authority is required for the execution and
delivery by such FCI Holder of the Transaction Documents to which they are a
party or for the consummation by such FCI Holder of the transactions
contemplated hereby or thereby.
4.4. Title to FCI Stock, Liens, etc. Such FCI Holder has, and as of
the consummation of the Closing Atrium will have, sole record and beneficial
ownership of all of the FCI Stock set forth opposite such Holder's name on
Schedule 1 hereto and to be exchanged hereunder, free and clear of any
mortgage, lien, pledge, charge, security interest, encumbrance, title retention
agreement, option, equity or other adverse claim thereto.
4.5. Investment Representations. Such FCI Holder is acquiring Atrium
Exchange Shares for the purpose of investment and not with a view to
distribution or resale thereof. The acquisition by such FCI Holder of Atrium
Exchange Shares shall constitute a confirmation of this representation. Such
FCI Holder further represents that he or it has been furnished access to such
of the business records of the Bishop Companies and the Fojtasek Companies and
to such additional information and documents as he or it has requested, and has
been afforded an opportunity to ask questions of and receive answers from
representatives of Atrium concerning the business and prospects of Atrium and
its Subsidiaries following completion of the transactions contemplated hereby
and the merits or risks of his or its acquisition of Atrium Exchange Shares
pursuant to this Agreement. Such FCI Holder has sufficient expertise in
business, financial and investment matters to be able to evaluate the risks
involved in his or her acquisition of Atrium Exchange Shares and to make an
informed investment decision with respect to his or her acquisition of Atrium
Exchange Shares. Such FCI Holder can afford a complete loss of the value of
his or her Atrium Exchange Shares and is able to bear the economic risk of
holding such shares for an indefinite period. Such FCI Holder further
represents that he or it understands and agrees that until registered under the
Securities Act of 1933,
<PAGE> 8
as amended, or transferred pursuant to the provisions of Rule 144 thereunder,
or any similar provision as promulgated by the Securities and Exchange
Commission, all certificates evidencing any of Atrium Stock, whether upon
initial issuance or upon any transfer thereof, shall bear a legend, prominently
stamped or printed thereon, reading substantially as set forth on Schedule 3.6
hereto.
5. REPRESENTATIONS AND WARRANTIES OF ATRIUM AND FCI. Each of Atrium
and FCI jointly and severally represents and warrants to each of the Holders as
follows:
5.1. Organization; Authority. Each of Atrium and the Fojtasek
Companies is a corporation duly organized, validly existing and in good
standing under the laws of its respective jurisdiction of incorporation. Each
of Atrium and the Fojtasek Companies is duly qualified and in good standing as
a foreign corporation in all jurisdictions in which the character of the
properties owned or leased or the nature of the activities conducted by it
makes such qualification necessary, except where the failure to so qualify
would not have a Material Adverse Effect. Each of Atrium and the Fojtasek
Companies have delivered to the Bishop Holder Representative (as defined in
Section 13.15) copies of their respective Certificates or Articles of
Incorporation and By-Laws, and all amendments thereto. Each of Atrium and the
Fojtasek Companies has all requisite power and authority to own or lease and
operate its properties and to carry on its business as such business is now
conducted.
5.2. Corporate Approval; Binding Effect. Each of Atrium and the
Fojtasek Companies has obtained all necessary authorizations and approvals from
its Board of Directors and stockholders required for the execution and delivery
of the Transaction Documents to which it is a party and the consummation of the
transactions contemplated hereby and thereby. Each of the Transaction
Documents to which any of Atrium and the Fojtasek Companies is a party has been
duly executed and delivered by Atrium or such Fojtasek Company, as the case may
be, and constitutes the legal, valid and binding obligation of such Person,
enforceable against it in accordance with its terms, except as enforceability
thereof may be limited by any applicable bankruptcy, reorganization, insolvency
or other laws affecting creditors' rights generally or by general principles of
equity.
5.3. Non-Contravention. The execution and delivery by Atrium of the
Transaction Documents to which it is a party and the consummation by Atrium of
the transactions contemplated hereby and thereby will not (a) violate or
conflict with any provisions of the Certificates or Articles of Incorporation
or By-Laws of Atrium or any of the Fojtasek Companies, each as amended to date;
or (b) constitute a violation of, or be in conflict with, constitute or create
a default under, or result in the creation or imposition of any lien upon any
property of Atrium or any of the Fojtasek Companies pursuant to (i) any
agreement or instrument to which Atrium or any of the Fojtasek Companies is a
party or by which Atrium or any of the Fojtasek Companies or any of its or
their properties is bound or to which Atrium or any of the Fojtasek Companies
or any of its or their properties is subject, or (ii) any statute, judgment,
decree, order, regulation or rule of any court or governmental authority to
which Atrium or any of the Fojtasek Companies is subject, except where such
violation, conflict, default or lien could not have a Material Adverse Effect
on Atrium or any of the Fojtasek Companies.
<PAGE> 9
5.4. Governmental Consents. Except as set forth in Schedule 5.4
hereto, no consent, approval or authorization of, or registration,
qualification or filing with, any governmental agency or authority is required
for the execution and delivery by Atrium or any of the Fojtasek Companies of
the Transaction Documents to which it is a party or for the consummation by
Atrium or the Fojtasek Companies of the transactions contemplated hereby or
thereby.
5.5. Issuance of the Atrium Exchange Shares. Atrium has obtained all
necessary authorizations and approvals required for the issuance and delivery
of the Atrium Exchange Shares. As of the Closing and after giving effect to
the transactions contemplated by this Agreement, the authorized, issued and
outstanding capital stock of Atrium will be as set forth on Schedule 5.5
hereto. Such shares of capital stock shall be held of record as set forth on
such Schedule 5.5. When issued in accordance with the terms of this Agreement,
the Atrium Exchange Shares will be duly authorized, validly issued, fully paid
and nonassessable. When issued in accordance with the terms of this Agreement,
the Atrium Exchange Shares issued to the Bishop Holders in exchange for the FCI
Stock, the VBS Exchanged Shares and the BNE Exchanged Shares shall constitute
in the aggregate nine percent (9%) of the shares of the common stock of Atrium,
on a Fully-Diluted Basis (as defined below). As of the Closing, except for the
New Warrant, the New Options, any of the Original Options which have not yet
been replaced by New Options pursuant to Section 1(c), and as otherwise set
forth on Schedule 5.5, there will be no commitments for the purchase or sale
of, and no options, warrants or other rights to subscribe for or purchase, any
securities of Atrium or any of its Subsidiaries. As used with respect to the
capital stock of Atrium, "Fully-Diluted Basis" shall mean at any time, after
issuance of all shares of common stock of Atrium issuable upon exercise of all
warrants and options outstanding and exerciseable at such time, including,
without limitation, the New Warrants and the New Options.
5.6. Subsidiaries. H-R Supply Windows Inc. is a wholly-owned
Subsidiary of Fojtasek. Fojtasek is a wholly-owned Subsidiary of FCI. As of
the Closing and after giving effect to the transactions contemplated by this
Agreement and the Purchase Agreement, FCI will be a direct wholly-owned
Subsidiary of Atrium and the Bishop Companies will be indirect wholly-owned
Subsidiaries of Atrium. Attached hereto as Schedule 5.6 is a complete and
correct organizational chart of FCI and Subsidiaries immediately prior to
giving effect to the Exchange. Except as stated in this Section 5.6 or as set
forth on Schedules 5.6, 5.7(a) and 5.7(b) hereto, neither Atrium nor any of the
Fojtasek Companies has any Subsidiaries nor do any of them own or hold of
record and/or beneficially any shares of any class in the capital of any
corporations. Neither Atrium nor any of the Fojtasek Companies owns any legal
and/or beneficial interests in any limited liability companies, partnerships,
business trusts or joint ventures or in any other unincorporated trade or
business enterprises.
5.7. Capitalization. The authorized capital of each of the Fojtasek
Companies, the number of shares of each Fojtasek Company issued and outstanding
and the owners of record
<PAGE> 10
and beneficially of such shares, each on the date hereof, are as set forth on
Schedule 5.7(a). As of the Closing and after giving effect to the transactions
contemplated by this Agreement, the authorized capital of each of the Fojtasek
Companies, the number of shares of each Fojtasek Company issued and outstanding
and the owners of record and beneficially of such shares will be as set forth
on Schedule 5.7(b).
5.8. Financial Statements. Atrium has delivered the following
financial statements (the "Financial Statements") to the Bishop Holder
Representative, and there are attached as Schedule 5.8 hereto: (a) the audited
consolidated balance sheet of the Fojtasek Companies as of December 31, 1995
(the "Audited Balance Sheet"), and the related audited consolidated statements
of income and retained earnings for the fiscal year then ended, and (b) the
unaudited consolidated balance sheet of the Fojtasek Companies as of June 30,
1996 and the related unaudited consolidated statements of income and retained
earnings for the six-month period then ended (the "Interim Financials").
Subject to year-end audit adjustment and the absence of footnotes in the case
of the Interim Financials, each of the Financial Statements has been prepared
in accordance with generally accepted accounting principles applied on a basis
consistent with prior periods; each of such balance sheets fairly presents the
consolidated financial condition of the Fojtasek Companies as of its respective
date; and each of such statements of income and retained earnings fairly
presents the results of consolidated operations of the Fojtasek Companies for
the period covered thereby.
5.9. Outstanding Indebtedness. Except as set forth on Schedule 5.9
hereto, neither Atrium nor any of the Fojtasek Companies has outstanding on the
date hereof, nor will any of them have outstanding as of the consummation of
the Closing, any Indebtedness, the aggregate principal amount of which exceeds
$50,000.
5.10. Absence of Certain Changes. Except as set forth on Schedule 5.10
hereto or as contemplated by this Agreement or the Purchase Agreement, since
June 30, 1996 there has not been: (a) any change in the assets, liabilities,
sales, income or business of any of the Fojtasek Companies or in the
relationships of any of the Fojtasek Companies with suppliers, customers or
lessors, other than changes which both arose in the ordinary course of business
and have not had a Material Adverse Effect; (b) any acquisition or disposition
by any of the Fojtasek Companies of any asset or property other than in the
ordinary course of business; (c) any damage, destruction or loss, whether or
not covered by insurance, which has had, either in any case or in the
aggregate, a Material Adverse Effect; (d) any increase in the compensation,
pension or other benefits payable or to become payable by any of the Fojtasek
Companies to any of its officers or employees, or any bonus payments or
arrangements made to or with any of them (other than pursuant to the terms of
any existing written agreement or plan or other than annual or periodic
increases made in the ordinary course of business consistent with the Fojtasek
Companies' past practice); (e) any entry by any of the Fojtasek Companies into
any transaction other than in the ordinary course of business or as
contemplated herein; (f) any incurrence by any of the Fojtasek Companies of
any material obligations or material liabilities,
<PAGE> 11
whether absolute, accrued, contingent or otherwise (including, without
limitation, liabilities as guarantor or otherwise with respect to obligations
of others), other than obligations and liabilities incurred in the ordinary
course of business or as contemplated herein; or (g) any discharge or
satisfaction by any of the Fojtasek Companies of any lien or encumbrance or
payment by any of the Fojtasek Companies of any material obligation or material
liability (fixed or contingent) other than in the ordinary course of business
or as contemplated herein.
5.11. Litigation, etc. Except as set forth on Schedule 5.11 hereto, no
action, suit, proceeding or investigation is pending or, to the knowledge of
the Sellers, threatened, against Atrium or any of the Fojtasek Companies which
either individually or in the aggregate would have a Material Adverse Effect.
5.12. Conformity to Law. To the knowledge of Atrium, each of the
Fojtasek Companies has complied with, and is in compliance with, all laws,
statutes and governmental regulations and all judicial or administrative
tribunal orders, judgments, writs, injunctions or decrees applicable to its
business except where any or all failures of such compliance, either
individually or in the aggregate, would not have a Material Adverse Effect.
Except as set forth in Schedule 5.12 hereto, none of the Fojtasek Companies has
been charged with any violation of any provision of any federal, state or local
law or administrative regulation in respect of its business which, either
individually or in the aggregate, would have a Material Adverse Effect.
5.13. Broker. Except as set forth on Schedule 5.13, neither Atrium nor
any of the Fojtasek Companies has retained, utilized or been represented by any
broker, agent, finder or other intermediary in connection with the negotiation
or consummation of the transactions contemplated by this Agreement.
5.14. Disclosure. No representation or warranty by Atrium or any of
the Fojtasek Companies in this Agreement or in any exhibit, schedule, written
statement, certificate or other document delivered or to be delivered by Atrium
or any of the Fojtasek Companies pursuant hereto or in connection with the
consummation of the transactions contemplated hereby contains or will contain
any untrue statement of a material fact or omits or will omit to state a
material fact required to be stated therein or necessary to make the statements
contained therein not false or misleading. To Atrium's knowledge, as of the
date hereof and the Closing Date, the representations and warranties made by
the "Principal Sellers" in Section 4 of that certain Stock Purchase Agreement
dated as of July 3, 1995 by and among Fojtasek/Heritage Acquisition Company and
each of the then shareholders of Fojtasek (a true and complete copy of which
has been delivered to the Bishop Holders prior to the date hereof) are and
shall be true and complete, except to the extent that any inaccuracy or
incompleteness therein does not or would not have a Material Adverse Effect.
<PAGE> 12
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF ATRIUM AND FCI HOLDERS.
The obligation of Atrium and the FCI Holders to consummate the Closing shall be
subject to the satisfaction at or prior to the Closing of each of the following
conditions (to the extent noncompliance is not waived in writing by Atrium):
6.1. Representations and Warranties. The representations and
warranties made by the Bishop Holders in or pursuant to this Agreement and in
any other Transaction Document shall have been correct when made and shall be
correct at and as of the Closing.
6.2. Compliance with Agreement. The Bishop Holders shall have
performed and complied with all of their obligations under this Agreement and
any other Transaction Document to be performed or complied with by them prior
to the Closing Date.
6.3. Closing Certificate. The Bishop Holders shall have executed and
delivered to Atrium in writing, at and as of the Closing certificates, in form
and substance satisfactory to Atrium and Atrium's counsel, certifying that the
conditions specified in each of Sections 6.1 and 6.2 have been satisfied.
6.4. Opinions of Counsel. Hunton & Williams, legal counsel to the
Bishop Holders, shall have delivered to Atrium a written opinion addressed to
Atrium and dated the Closing Date, substantially in the form of Exhibit C to
the Purchase Agreement, and local Connecticut counsel to the Bishop Holders and
the Bishop Companies shall have delivered to Atrium a written opinion
reasonably acceptable to Atrium, addressed to Atrium and dated the Closing
Date, substantially in the form of Exhibit D to the Purchase Agreement.
6.5. Purchase Agreement. Each of the Bishop Holders shall have
executed and delivered the Purchase Agreement and each of the conditions
precedent to the Bishop Holders' performance obligations under the Purchase
Agreement, other than the closing of the Exchange hereunder, shall have been
fulfilled.
6.6. Buy-Sell Agreement. Each of the Bishop Holders and the Escrow
Agent shall have executed and delivered the Buy-Sell Agreement and shall have
delivered to Atrium stock powers, undated and duly executed in blank, with
respect to the Escrowed Shares owned by such Bishop Holder.
6.7. Stockholder and Registration Rights Agreements. Each of the
Bishop Holders shall have executed and delivered the Stockholder Agreement and
the Registration Rights Agreement with Atrium and its other shareholders.
6.8. Proceedings and Documents Satisfactory. All proceedings in
connection with the transactions contemplated by this Agreement and the other
Transaction Documents and all certificates and documents delivered to Atrium in
connection with the transactions
<PAGE> 13
contemplated by this Agreement and the other Transaction Documents shall be
satisfactory in all reasonable respects to Atrium and Atrium's counsel, and
Atrium shall have received the originals or certified or other copies of all
such records and documents as Atrium may reasonably request.
7. CONDITIONS PRECEDENT TO BISHOP HOLDERS' OBLIGATIONS. The obligation
of the Bishop Holders to consummate the Closing shall be subject to the
satisfaction at, or prior to the Closing of each of the following conditions
(to the extent noncompliance is not waived in writing by the Bishop Holder
Representative):
7.1. Representations and Warranties. The representations and
warranties made by Atrium, FCI and the FCI Holders in or pursuant to this
Agreement and in any other Transaction Documents, and by Atrium, any of the
Fojtasek Companies or any of the FCI Holders in any statement, certificate or
other instrument delivered to the Bishop Holders pursuant hereto or pursuant to
any of the Transactions Documents, or in connection with the transactions
contemplated hereby and thereby, shall have been correct when made and shall be
correct at and as of the Closing.
7.2. Compliance with Agreement. Atrium, each of the Fojtasek Companies
and each of the FCI Holders shall have performed and complied with all of its
or their obligations under this Agreement and any other Transaction Documents
to be performed or complied with by any of them prior to or at the Closing.
7.3. Closing Certificate. Atrium, FCI and each of the FCI Holders
shall have executed and delivered to the Holders at and as of the Closing a
certificate, in form and substance satisfactory to the Holders and the Holders'
counsel, to the effect that the conditions in each of Sections 7.1 and 7.2 have
been satisfied.
7.4. Opinion of Counsel. Bingham, Dana & Gould LLP, special counsel to
Atrium, shall have delivered to the Holders a written opinion, dated the
Closing Date, addressed to the Holders and substantially in the form of Exhibit
E hereto.
7.5. Purchase Agreement. Fojtasek shall have executed and delivered
the Purchase Agreement and each of the conditions precedent to Fojtasek's
performance obligations under the Purchase Agreement, other than the closing of
the Exchange hereunder, shall have been fulfilled.
7.6. Buy-Sell Agreement. Each of Atrium, Fojtasek and the Escrow Agent
shall have executed and delivered the Buy-Sell Agreement.
<PAGE> 14
7.7. Proceedings and Documents Satisfactory. All proceedings in
connection with the transactions contemplated by this Agreement and the other
Transaction Documents and all certificates and documents delivered to the
Bishop Holders in connection with the transactions contemplated by this
Agreement and the other Transaction Documents shall be satisfactory in all
reasonable respects to the Bishop Holders and their counsel, and the Bishop
Holders shall have received the originals or certified or other copies of all
such records and documents as the Bishop Holders may reasonably request.
8. CERTAIN DEFINITIONS. As used herein the following terms not
otherwise defined have the following respective meanings:
"Indebtedness": As applied to any Person (as defined in this Section
8), (a) all indebtedness of such Person for borrowed money, whether current or
funded, or secured or unsecured, (b) all indebtedness of such Person for the
deferred purchase price of property or services represented by a note or other
security, (c) all indebtedness of such Person created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such Person (even though the rights and remedies of the seller or
lender under such agreement in the event of default are limited to repossession
or sale of such property), (d) all indebtedness of such Person secured by a
purchase money mortgage or other lien to secure all or part of the purchase
price of property subject to such mortgage or lien, (e) all obligations under
leases which shall have been or must be, in accordance with generally accepted
accounting principles, recorded as capital leases in respect of which such
Person is liable as lessee, (f) any liability of such Person in respect of
banker's acceptances or letters of credit, and (g) all indebtedness referred to
in clause (a), (b), (c), (d), (e) or (f) above which is directly or indirectly
guaranteed by such Person or which such Person has agreed (contingently or
otherwise) to purchase or otherwise acquire or in respect of which it has
otherwise assured a creditor against loss.
"IRS": The United States Internal Revenue Service.
"Material Adverse Effect": With respect to any Person, a material
adverse effect on the business, operations or financial condition of such
Person.
"Person": A corporation, an association, a partnership, a limited
liability company, an organization, a business, an individual, a government or
political subdivision thereof or a governmental agency.
"state": Any state or commonwealth of the United States of America; the
District of Columbia; the Commonwealth of Puerto Rico; and any other
dependency, possession or territory of the United States of America.
<PAGE> 15
"Subsidiary": With respect to any Person, any corporation a majority
(by number of votes) of the outstanding shares of any class or classes of which
shall at the time be owned by such Person or by a Subsidiary of such Person, if
the holders of the shares of such class or classes (a) 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 the issuer thereof,
even though the right so to vote has been suspended by the happening of such a
contingency, or (b) are at the time entitled, as such holders, to vote for the
election of a majority of the directors (or persons performing similar
functions) of the issuer thereof, whether or not the right so to vote exists by
reason of the happening of a contingency.
"Transaction Documents": This Agreement, the Purchase Agreement, the
Buy-Sell Agreement, the New Options, the New Warrant, the Employment
Agreements (as defined in the Purchase Agreement), the FCI Equity Amendment
Documents, the Stockholder Agreement, the Registration Rights Agreement, any
other document or instrument which is a "Transaction Document" as defined in
the Purchase Agreement, and any other documents or instruments executed and/or
delivered in connection with the transactions described herein or therein.
9. CONFIDENTIAL INFORMATION. Any and all information disclosed by
any party as a result of the negotiations leading to the execution of this
Agreement, or in furtherance thereof, including information on the Schedules to
this Agreement, which information was not already known to the other parties
hereto, as the case may be, shall remain confidential to the first party and
their respective employees and agents until the Closing Date, except to the
extent that Atrium or any of the Fojtasek Companies in its reasonable judgment
must disclose any such information to its lenders in the syndicate for which
The First National Bank of Boston acts as Agent in the process of procuring the
loan or loans of funds for the purchase contemplated by the Purchase Agreement.
If the Closing does not take place for any reason, the parties hereto agree not
to further divulge or disclose or use for their benefit or purposes any such
information at any time in the future unless it has otherwise become public.
The information intended to be protected hereby shall include, but not be
limited to, financial information, customers, suppliers, sales representatives,
and anything else having an economic or pecuniary benefit to Atrium or any of
the Holders, respectively.
10. TERMINATION. This Agreement may be terminated by either Atrium,
FCI, the FCI Holders or the Bishop Holders in writing, without liability to the
terminating party on account of such termination (provided the terminating
party is not otherwise in default or in breach of this Agreement), if (a) the
Closing shall not have occurred on or before September 30, 1996, and (b) the
Purchase Agreement shall have been terminated pursuant to Section 14 thereof,
in each case other than as a consequence of (i) a failure to fulfill the
conditions precedent to the effectiveness of the Purchase Agreement referred to
in Sections 7.15 and 8.7 thereof, in which case the foregoing date shall be
extended until the next business day following
<PAGE> 16
the expiration of any applicable waiting period under the HSR Act (as defined
in the Purchase Agreement), provided that the foregoing date shall not be
extended in any event after October 31, 1996, or (ii) intentional breach or
intentional default by the terminating party.
11. INDEMNIFICATION.
11.1. Indemnity by Atrium and FCI. Subject to the overall limitations,
minimum amounts and time limitations set forth in Section 11.6 below, Atrium
and FCI jointly and severally agree to indemnify and hold each of the Bishop
Holders harmless from and with respect to any and all claims, liabilities,
losses, damages, costs and expenses, including without limitation the
reasonable fees and disbursements of counsel (individually, a "Loss" and
collectively, the "Losses") related to or arising, directly or indirectly, out
of any failure or any breach by Atrium and/or FCI of any representation or
warranty, covenant, obligation or understanding made by Atrium and/or FCI in
this Agreement, any Schedule or Exhibit hereto, any other Transaction Documents
or any other statement or certificate delivered pursuant hereto or thereto.
11.2. Indemnity by Bishop Holders. Subject to the overall limitations,
minimum amounts and time limitations set forth in Section 11.6 below, each of
the Bishop Holders severally and on its own behalf agrees to indemnify and hold
each of Atrium, FCI and the FCI Holders harmless from and with respect to any
and all Losses related to or arising, directly or indirectly, out of any
failure or any breach by such Bishop Holder of any representation or warranty
in Sections 3.1 through 3.4 and Section 3.6 of this Agreement.
11.3. Indemnity by FCI Holders. Subject to the overall limitations,
minimum amounts and time limitations set forth in Section 11.6 below, each of
the FCI Holders severally and on its own behalf agrees to indemnify and hold
each of Atrium, FCI and the Bishop Holders harmless from and with respect to
any and all Losses related to or arising, directly or indirectly, out of any
failure or any breach by such FCI Holder of any representation or warranty in
Section 4 of this Agreement.
11.4. Claims.
(a) Notice. Any Person seeking indemnification hereunder (the
"Indemnified Party") shall promptly notify the party from whom it is seeking
indemnification hereunder (the "Indemnifying Party") of any action, suit,
proceeding, demand or breach (a "Claim") with respect to which the Indemnified
Party claims indemnification hereunder, provided that failure of the
Indemnified Party to give such notice shall not relieve the Indemnifying Party
of its obligations under this Section 11 except to the extent, if at all, that
the Indemnifying Party shall have been prejudiced thereby.
<PAGE> 17
(b) Third Party Claims. If such Claim relates to any action, suit,
proceeding or demand instituted against the Indemnified Party by a third party
(a "Third Party Claim"), the Indemnifying Party shall be entitled to
participate in the defense of such Third Party Claim after receipt of notice of
such claim from the Indemnified Party. Within thirty (30) days after receipt
of notice of a particular matter from the Indemnified Party, the Indemnifying
Party may assume the defense of such Third Party Claim, in which case the
Indemnifying Party shall have the authority to negotiate, compromise and settle
such Third Party Claim, if and only if the Indemnifying Party shall have
confirmed in writing that it is obligated hereunder to indemnify the
Indemnified Party with respect to such Third Party Claim. The Indemnified
Party shall retain the right to employ its own counsel and to participate in
the defense of any Third Party Claim, the defense of which has been assumed by
the Indemnifying Party pursuant hereto, but the Indemnified Party shall bear
and shall be solely responsible for its own costs and expenses in connection
with such participation.
11.5. Method and Manner of Paying Claims. In the event of any Claims
under this Section 11, the claimant shall advise the party or parties who are
required to provide indemnification therefor in writing of the amount and
circumstances surrounding such claim. With respect to liquidated Claims, if
within thirty (30) days the Indemnifying Party has not contested such Claim in
writing, then, and subject to the limitations with respect to Claims set forth
in Section 11.6 below, the Indemnifying Party will pay the full amount of such
liquidated Claim within ten (10) days after the expiration of such thirty-day
period. Any amount owed by any of the Bishop Holders as an Indemnifying Party
hereunder with respect to any Claim (other than Unlimited Claims, as defined
below) shall be paid in accordance with, and subject to the recourse
limitations referred to in, Section 11.7 below. The unpaid balance of a Claim
shall bear interest at a rate per annum equal to the rate announced by The
First National Bank of Boston from time to time as its "Base Rate" plus two
percent (2%) from the date notice thereof is given by the Indemnified Party to
the Indemnifying Party.
11.6. Limitations on Indemnification.
(a) In the event that any Loss is calculated by reference to the
aggregate liabilities, losses or damages incurred or suffered by Atrium or the
Fojtasek Companies, rather than by reference to the liabilities, losses or
damages incurred or suffered individually by a shareholder of Atrium, Atrium
and/or FCI shall only be required to indemnify the Bishop Holders for that
portion of any such Loss which is equal to the product of (A) the aggregate
amount of such Loss multiplied by (B) a fraction, the numerator of which is the
total number of shares of common stock of Atrium on a fully-diluted basis, and
the denominator of which is the total number of shares of common stock of
Atrium then owned by the Bishop Holders. For the avoidance of doubt, this
Section 11.6(a) shall not operate to reduce the amount payable to the Bishop
<PAGE> 18
Holders or any of them with respect to any Loss which has been directly
suffered or incurred by any Bishop Holder.
(b) No Indemnifying Party shall be required to indemnify an
Indemnified Party hereunder except to the extent that the aggregate amount of
Losses for which the Indemnified Party is otherwise entitled to indemnification
pursuant to this Section 11 exceeds $250,000, whereupon the Indemnified Party
shall be entitled to be paid the excess of (i) the aggregate amount of all such
Losses over (ii) $250,000, subject to the overall limitation on maximum amount
of recovery set forth in Section 11.6(c) below; provided, however, that Losses
related to or arising directly or indirectly out of any inaccuracies in any
representation or warranty made by any of the Bishop Holders in Section 3.4 or
by any of the FCI Holders in Section 4.4 (collectively, "Unlimited Claims")
shall be indemnified in their entirety by the applicable Bishop Holder or FCI
Holder, as the case may be, and shall not be subject to the limitations as to
amount set forth in this Section 11.6(b) or the limitation on maximum amount of
recovery set forth in Section 11.6(c) below, or (in the case of an Unlimited
Claim against any Bishop Holder) the limitations as to recourse referred to in
Section 11.7 below.
(c) Subject to the first sentence of Section 11.7 and notwithstanding
anything else to the contrary otherwise stated herein or in any other
Transaction Document, the aggregate amount actually payable by either (i)
Atrium and/or FCI as an Indemnifying Party on the one hand or (ii) the Sellers
as Indemnifying Parties on the other hand pursuant to this Section 11 and
Section 13 of the Purchase Agreement, with respect to all Claims against such
Indemnifying Party or Indemnifying Parties, as the case may be, other than
Unlimited Claims (as to which no such limit shall apply), shall in no event
exceed $5,000,000 (as such amount may be reduced from time to time pursuant to
Section 3(d) of the Buy-Sell Agreement).
(d) No Indemnifying Party shall be liable for any Losses pursuant to
this Section 11 unless a written claim for indemnification in accordance with
Section 11.4 is given by the Indemnified Party to such Indemnifying Party with
respect thereto within eighteen (18) months after the Closing, except that this
time limitation shall not apply to any Losses related to or arising directly or
indirectly out of any Unlimited Claims, as to which in each case the applicable
statute of limitations shall apply.
(e) No Indemnified Party may recover hereunder or under the Buy-Sell
Agreement for any Loss as to which such Indemnified Party has already received
or is simultaneously receiving indemnification pursuant to the Purchase
Agreement.
11.7. Buy-Sell Agreement; Limitation of Recourse Against Bishop
Holders. The parties hereto intend and agree that, notwithstanding anything to
the contrary stated in any other paragraph of this Section 11, each Indemnified
Party's sole recourse against the Bishop Holders for indemnification with
respect to any Claims, other than Unlimited Claims, shall be governed by, and
subject to the terms and provisions of, the Buy-Sell Agreement. The
<PAGE> 19
provisions of this Section 11.7 shall not apply in any event to any Loss with
respect to an Unlimited Claim, the full amount of which shall be indemnifiable
and as to which recourse shall not be limited to the provisions of the Buy-Sell
Agreement.
12. GENERAL.
12.1. Survival of Representations and Warranties. The representations
and warranties of the parties hereto contained in this Agreement or otherwise
made in writing in connection with the transactions contemplated hereby (in
each case except as affected by the transactions contemplated by this
Agreement) shall be deemed material and, notwithstanding any investigation by
Atrium, FCI or any of the Holders, as the case may be, shall be deemed to have
been relied on by Atrium, FCI and each of the Holders, as applicable, and shall
survive the Closing, and the consummation of the transactions contemplated
hereby. Each representation and warranty made by Atrium in Section 5 of this
Agreement shall expire on the last day, if any, that Claims for breach of such
representation or warranty may be made pursuant to Section 11.6(d) hereof,
except that any such representation or warranty that has been made the subject
of a claim prior to such expiration date shall survive with respect to such
claim until the final resolution of such claim.
12.2. Expenses. Each Holder shall pay all transfer and sales taxes
payable in connection with the exchange of such Holder's Stock and the receipt
of such Holder's Atrium Exchange Shares. All expenses of the preparation,
execution and consummation of this Agreement and of the transactions
contemplated hereby, including without limitation attorneys', accountants' and
outside advisers' fees and disbursements, shall be borne by the party incurring
such expenses, provided that (a) the Bishop Holders jointly and severally shall
pay the brokerage fees of any broker referred to on Schedule 4.29 of the
Purchase Agreement, (b) Fojtasek shall at Closing pay to the Bishop Holders
50%, up to a maximum amount payable by Fojtasek under this Section 12.2 and
Section 15.3 of the Purchase Agreement of $30,000, of the fees and expenses of
the Companies' Accountants incurred in preparation of the June Balance Sheet
and any other financial statements, calculations and certifications referred to
in Section 3 of the Purchase Agreement, (c) Fojtasek shall pay the fee required
to be paid in connection with the filing of any notification and report form
under the HSR Act, as referred to in Section 9 of the Purchase Agreement and
(d) the Bishop Companies shall pay the Accrued Transaction Expenses, as defined
in Section 15.3 of the Purchase Agreement.
12.3. Notices. All notices, demands and other communications hereunder
shall be in writing or by written telecommunication, and shall be deemed to
have been duly given if delivered personally or if mailed by certified mail,
return receipt requested, postage prepaid, or if sent by overnight courier, or
sent by written telecommunication, as follows:
<PAGE> 20
If to the Bishop Holders, to:
Howard S. Saffan
Bishop Manufacturing Co., Inc.
305 Knowlton Street
Bridgeport, CT 06608
Fax: 203-579-2493
with a copy sent contemporaneously to:
John R. Fallon, Jr., Esq.
Hunton & Williams
200 Park Avenue
New York, NY 10166
Fax: 212-309-1100
If to Atrium, to:
Randall Fojtasek
c/o Fojtasek Companies, Inc.
P.O. Box 226957
Dallas, TX 75222
Fax: 214-438-8117
with copies sent contemporaneously to Heritage as set forth below.
If to Heritage, to:
<PAGE> 21
T. Brook Parker
Heritage Partners Inc.
30 Rowes Wharf, Suite 300
Boston, MA 02110
Fax: 617-439-0689
with a copy sent contemporaneously to:
Robert M. Wolf, Esq.
Bingham, Dana & Gould LLP
150 Federal Street
Boston, MA 02110
Fax: 617-951-8736
If to any of the FCI Holders (other than Heritage):
Randall Fojtasek
P.O. Box 226957
Dallas, TX 75222
Fax: 214-438-8117
with a copy sent contemporaneously to:
O. Haynes Morris, Jr., Esq.
Adair, Morris & Osborn, P.C.
1201 Main Street, Suite 835
Dallas, TX 75202
Fax: 214-761-0658
Any such notice shall be effective (a) if delivered personally, when
received, (b) if sent by overnight courier, when receipted for, (c) if mailed,
three (3) days after being mailed as described above, and (d) if sent by
written telecommunication, when dispatched.
12.5. Entire Agreement, etc. This Agreement contains the entire
understanding of the parties, supersedes all prior agreements and
understandings relating to the subject matter hereof and shall not be amended
except by a written instrument hereafter signed by all of the parties hereto.
<PAGE> 22
12.6. Governing Law. The validity and construction of this Agreement
shall be governed by and construed and enforced in accordance with the internal
laws (and not the choice-of-law rules) of the State of New York.
12.7. Counterparts. This Agreement may be executed by the parties in
separate counterparts, each of which when so executed and delivered shall be
an original, but all such counterparts shall together constitute but one and
the same instrument.
12.8. Section Headings. All enumerated subdivisions of this Agreement
are herein referred to as "Section" or "subsection." The headings of Sections
or subsections are for reference only and shall not limit or control the
meaning thereof.
12.9. Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, successors and
permitted assigns. Neither this Agreement nor the obligations of any party
hereunder shall be assignable or transferable by such party without the prior
written consent of the other party hereto; provided, however, that nothing
contained in this Section 12.9 shall prevent Atrium, without the consent of any
of the Holders, (a) from transferring or assigning this Agreement or its rights
or obligations hereunder to another entity controlling, under the control of,
or under common control with Atrium or (b) from assigning all or part of its
rights or obligations hereunder by way of collateral assignment to any bank or
financing institution providing financing for the acquisition contemplated
hereby, but no such transfer or assignment made pursuant to clauses (a) or (b)
shall relieve Atrium of its obligations under this Agreement.
12.10. Severability. In the event that any covenant, condition, or
other provision herein contained is held to be invalid, void, or illegal by any
court of competent jurisdiction, the same shall be deemed to be severable from
the remainder of this Agreement and shall in no way affect, impair, or
invalidate any other covenant, condition, or other provision contained herein.
12.11. Further Assurances. The parties agree to take such reasonable
steps and execute such other and further documents as may be necessary or
appropriate to cause the terms and conditions contained herein to be carried
into effect.
12.12. No Implied Rights or Remedies. Except as otherwise expressly
provided herein, nothing herein expressed or implied is intended or shall be
construed to confer upon or to give any person, firm or corporation, other than
the Holders and Atrium, any rights or remedies under or by reason of this
Agreement.
12.13. Satisfaction of Conditions Precedent. Each of the Holders and
Atrium will use commercially reasonable efforts to cause the satisfaction of
the conditions precedent contained in this Agreement; provided, however, that
nothing contained in this Section 12.13 shall obligate either party hereto to
waive any right or condition under this Agreement.
<PAGE> 23
12.14. Public Statements or Releases. Each of the parties hereto
agrees that no party to this Agreement will make, issue or release any public
announcement, statement or acknowledgment of the existence of, or reveal the
status of, this Agreement or the transactions provided for herein, without
first obtaining the consent of the other party hereto; provided that after the
Closing, Atrium may make such disclosures as it deems necessary or appropriate
in connection with the transactions contemplated hereby or in connection with
its business or operations. Subject to the provisions of Section 9 above,
nothing contained in this Section 12.14 shall prevent either party from making
such disclosures as such party may consider necessary to satisfy such party's
legal or contractual obligations.
12.15. Bishop Holder Representative. By the execution and delivery of
this Agreement, the Bishop Holders hereby irrevocably constitute and appoint
Howard S. Saffan as the true and lawful agent and attorney-in-fact (the "Bishop
Holder Representative") of the Bishop Holders with full power of substitution
to act in the name, place and stead of the Bishop Holders with respect to the
transfer of the Stock owned by the Bishop Holders to Atrium in accordance with
the terms and provisions of this Agreement, and to act on behalf of the Bishop
Holders in any litigation or arbitration involving this Agreement, to do or
refrain from doing all such further acts and things, and to execute all such
documents as the Bishop Holder Representative shall deem necessary or
appropriate in connection with the transactions contemplated by this Agreement,
including, without limitation, the power:
(i) to act for the Bishop Holders with regard to matters
pertaining to indemnification referred to in this Agreement, including
the power to compromise any Claim on behalf of the Bishop Holders and to
transact matters of litigation;
(ii) to execute and deliver all ancillary agreements,
certificates and documents that the Bishop Holder Representative deems
necessary or appropriate in connection with the consummation of the
transactions contemplated by this Agreement;
(iii) to receive funds and give receipts for funds;
(iv) to do or refrain from doing any further act or deed on
behalf of the Bishop Holders that the Bishop Holder Representative deems
necessary or appropriate in his sole discretion relating to the subject
matter of this Agreement as fully and completely as the Bishop Holders
could do if personally present; and
(v) to receive service of process in connection with any
claims under this Agreement.
<PAGE> 24
If Howard S. Saffan dies or otherwise becomes incapacitated and unable
to serve as Bishop Holder Representative, Leslie Goldbloom shall serve as the
new Bishop Holder Representative. The appointment of the Bishop Holder
Representative shall be deemed coupled with an interest and shall be
irrevocable, and Atrium and any other Person may conclusively and absolutely
rely, without inquiry, upon any action of the Bishop Holder Representative in
all matters referred to herein. All payments and notices made or delivered by
Atrium to the Bishop Holder Representative for the benefit of the Bishop
Holders shall discharge in full all liabilities and obligations of Atrium to
the Bishop Holders with respect thereto. The Bishop Holders hereby confirm
all that the Bishop Holder Representative shall do or cause to be done by
virtue of his appointment as the Bishop Holder Representative of the Bishop
Holders. The Bishop Holder Representative shall act for the Bishop Holders on
all of the matters set forth in this Agreement in the manner the Bishop Holder
Representative believes to be in the best interest of the Bishop Holders and
consistent with the obligations under this Agreement, but the Bishop Holder
Representative shall not be responsible to the Bishop Holders for any loss or
damages the Bishop Holders may suffer by the performance of his duties under
this Agreement, other than loss or damage arising from willful violation of the
law or gross negligence in the performance of his or her duties under this
Agreement.
12.16. FCI Holder Representative. By the execution and delivery of
this Agreement, the FCI Holders other than Heritage (collectively, the
"Individual FCI Holders") hereby irrevocably constitute and appoint Randall
Fojtasek as the true and lawful agent and attorney-in-fact (the "FCI Holder
Representative") of the Individual FCI Holders with full power of substitution
to act in the name, place and stead of the Individual FCI Holders with respect
to the transfer of the Stock owned by the Individual FCI Holders to Atrium in
accordance with the terms and provisions of this Agreement, and to act on
behalf of the Individual FCI Holders in any litigation or arbitration involving
this Agreement, to do or refrain from doing all such further acts and things,
and to execute all such documents as the Individual FCI Holder Representative
shall deem necessary or appropriate in connection with the transactions
contemplated by this Agreement, including, without limitation, the power:
(i) to act for the Individual FCI Holders with regard to
matters pertaining to indemnification referred to in this Agreement,
including the power to compromise any Claim (as defined in the Purchase
Agreement) on behalf of the Individual FCI Holders and to transact
matters of litigation;
(ii) to execute and deliver all ancillary agreements,
certificates and documents that the FCI Holder Representative deems
necessary or appropriate in connection with the consummation of the
transactions contemplated by this Agreement;
(iii) to receive funds and give receipts for funds;
<PAGE> 25
(iv) to do or refrain from doing any further act or deed on
behalf of the Individual FCI Holders that the FCI Holder Representative
deems necessary or appropriate in his sole discretion relating to the
subject matter of this Agreement as fully and completely as the
Individual FCI Holders could do if personally present; and
(v) to receive service of process in connection with any
claims under this Agreement.
If Randall Fojtasek dies or otherwise becomes incapacitated and unable
to serve as FCI Holder Representative, Joe Fojtasek shall serve as the new FCI
Holder Representative. The appointment of the FCI Holder Representative shall
be deemed coupled with an interest and shall be irrevocable, and Atrium and any
other Person may conclusively and absolutely rely, without inquiry, upon any
action of the FCI Holder Representative in all matters referred to herein. All
payments and notices made or delivered by Atrium to the FCI Holder
Representative for the benefit of the Individual FCI Holders shall discharge in
full all liabilities and obligations of Atrium to the Individual FCI Holders
with respect thereto. The Individual FCI Holders hereby confirm all that the
FCI Holder Representative shall do or cause to be done by virtue of his
appointment as the FCI Holder Representative of the Individual FCI Holders.
The FCI Holder Representative shall act for the Individual FCI Holders on all
of the matters set forth in this Agreement in the manner the FCI Holder
Representative believes to be in the best interest of the Individual FCI
Holders and consistent with the obligations under this Agreement, but the FCI
Holder Representative shall not be responsible to the Individual FCI Holders
for any loss or damages the Individual FCI Holders may suffer by the
performance of his duties under this Agreement, other than loss or damage
arising from willful violation of the law or gross negligence in the
performance of his or her duties under this Agreement.
12.17 Knowledge of Holders. Whenever the phrase "to the knowledge of
the Holders" or another similar qualification is used herein (other than with
respect to Heritage), the relevant knowledge is limited solely to the actual
knowledge of each such Holder, without imputing to such Holder any knowledge of
any other Person. Whenever the phrase "to the knowledge of the Holders" or
another similar qualification is used herein with respect to Heritage, the
relevant knowledge is limited solely to the actual knowledge of Michel Reichert
and T. Brook Parker, without imputing to either of such Persons or to Heritage
any knowledge of any other Person.
12.18. Knowledge of Atrium. Whenever the phrase "to the knowledge of
Atrium" or another similar qualification is used herein, the relevant knowledge
is limited solely to the actual knowledge of Randall Fojtasek, Joe Biegel, Mark
Biersmith, Louis W. Simi, Jr., and the Persons charged with knowledge with
respect to Heritage pursuant to Section 12.17 above, without imputing to any of
such Persons or to Atrium any knowledge of any other Person.
<PAGE> 26
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as an instrument under seal as of the day and year first above written.
ATRIUM and FCI:
ATRIUM CORPORATION
By: /s/ RANDALL S. FOJTASEK
------------------------------
Title: Secretary
FCI HOLDING CORP.
By: /s/ RANDALL S. FOJTASEK
------------------------------
Title: Secretary
FCI HOLDERS:
HERITAGE FUND I, L.P.
By: HF Partners I, L.P.
By: /s/
------------------------------
Title:
/s/ RANDALL FOJTASEK
---------------------------------
Randall Fojtasek
/s/ JOE FOJTASEK
---------------------------------
Joe Fojtasek, for himself and as
custodian for Joe Fojtasek II and
Phillip Michael Fojtasek
/s/ RUSSELL FOJTASEK
---------------------------------
Russell Fojtasek
<PAGE> 27
/s/ JOE BIEGEL
---------------------------------
Joe Biegel
/s/ LOUIS W. SIMI, JR.
---------------------------------
Louis W. Simi, Jr.
/s/ NORMAN FOJTASEK
---------------------------------
Norman Fojtasek
/s/ JOE EDWARD FOJTASEK
---------------------------------
Joe Edward Fojtasek
/s/ RICHARD FOJTASEK
---------------------------------
Richard Fojtasek
BISHOP HOLDERS:
/s/ HOWARD S. SAFFAN
---------------------------------
Howard S. Saffan
/s/ LESLIE GOLDBLOOM
---------------------------------
Leslie Goldbloom
/s/ KEVIN SCHUMACHER
---------------------------------
Kevin Schumacher
<PAGE> 28
August 22, 1996
VIA FAX AND FEDEX
Fojtasek Companies, Inc.
Atrium Corporation
c/o Heritage Partners, Inc.
30 Rowes Wharf - Suite 300
Boston, Massachusetts 02110
Attention: T. Brook Parker
Re: Bishop - Fojtasek Transaction
Gentlemen:
Reference is made to the Stock Purchase Agreement, and the Securities
Exchange Agreement, each in respect to the above-entitled transaction.
Capitalized terms not defined herein are as used in the Stock Purchase
Agreement.
By executing this letter in the space provided below, Buyer and Atrium
acknowledge and agree that Sellers will be removing from the Companies the
vehicles described on Exhibit A hereto, with title to each of the vehicles
transferred to the name of each person noted on Exhibit A.
Atrium and Buyer also acknowledge and agree that these vehicles were
included as assets on the June 30, 1996 financial statements of the Companies
and have been paid out of the Companies with the consent of Atrium and Buyer.
Sincerely,
John R. Fallon, Jr.
Acknowledged and Agreed to
this ___ day of August, 1996
FOJTASEK COMPANIES, INC.
By:
---------------------------------------
Name:
------------------------------
Title:
-----------------------------
ATRIUM CORPORATION
By:
---------------------------------------
Name:
------------------------------
Title:
-----------------------------
<PAGE> 29
EXHIBIT A
<TABLE>
<CAPTION>
VEHICLE VEHICLE IDENTIFICATION NUMBER NEW OWNER
------- ----------------------------- ---------
<S> <C> <C>
1995 Porsche WPOCA2990SS342918 Leslie Goldbloom
1996 Jeep Cherokee 1J4EZ78Y5TC126866 Leslie Goldbloom
1995 BMW 840 WBAEF632XSCC89796 Howard S. Saffan
1993 Volvo 945 Wagon YV1JW8707P3089401 Kevin Schumacher
</TABLE>
<PAGE> 1
EXHIBIT 2.3
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT is dated as of this 22nd day of August,
1996 by and among FOJTASEK COMPANIES, INC., a Delaware corporation (the
"Buyer"), and HOWARD S. SAFFAN, an individual residing at 85 Beachside Avenue,
Westport, Connecticut 06880 ("Saffan"), LESLIE GOLDBLOOM, an individual
residing at 660 Silver Spring Road, Fairfield, Connecticut 06430 ("Goldbloom")
and KEVIN SCHUMACHER, an individual residing at 5 Flint Meadow Lane,
Shrewsbury, Massachusetts 01545 ("Schumacher") (Saffan and Goldbloom together,
the "Parent Stockholders"; and together with Schumacher, collectively, the
"Sellers", and singly, a "Seller").
WHEREAS, the Parent Stockholders are the owners of all of the issued and
outstanding shares of common stock, $25.00 par value per share (the "VBS
Stock") of Vinyl Building Specialties of Connecticut, Inc., a Connecticut
corporation ("VBS");
WHEREAS, the Parent Stockholders intend to exchange certain shares of
VBS Stock (the "VBS Exchanged Shares") for shares of capital stock of Atrium
Corporation, a Delaware corporation ("Atrium"), pursuant to a Stock Exchange
Agreement dated of even date herewith by and among the Sellers, Atrium, FCI
Holding Corp. and the shareholders of FCI Holding Corp. (the "Exchange
Agreement"), and to sell their remaining shares of VBS Stock (the "VBS
Purchased Shares") to the Buyer hereunder;
WHEREAS, Schumacher is the owner of 200 of the issued and outstanding
shares of common stock, no par value (the "BNE Stock") of Bishop Manufacturing
Company of New England, Inc., a Connecticut corporation ("BNE");
WHEREAS, Schumacher intends to exchange certain shares of BNE Stock (the
"BNE Exchanged Shares") for shares of capital stock of Atrium pursuant to the
Exchange Agreement, and to sell his remaining shares of BNE Stock (the "BNE
Purchased Shares") to the Buyer hereunder;
WHEREAS, the Parent Stockholders are the owners of all of the issued and
outstanding shares of the common stock, no par value (the "BNY Stock") of
Bishop Manufacturing Co. of New York, Inc., a Connecticut corporation ("BNY";
together with BNE, VBS and Bishop Manufacturing Co., Inc. a Connecticut
corporation ("BMC"), collectively, the "Companies," and singly, a "Company");
WHEREAS, the Parent Stockholders intend to sell their shares of BNY
Stock (together with the VBS Purchased Shares and the BNE Purchased Shares,
being referred to herein as "Stock") to the Buyer hereunder; and
<PAGE> 2
-2-
WHEREAS, the Buyer desires to purchase the Stock from the Sellers, upon
the terms and subject to the conditions contained in this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and agreements
set forth herein, the parties hereto agree as follows:
1. PURCHASE AND SALE OF STOCK.
1.1. Purchase and Sale. Subject to the terms and conditions set forth
in this Agreement, each of the Sellers agrees to sell to the Buyer, and the
Buyer agrees to purchase from such Seller, at the Closing referred to in
Section 2 of this Agreement, all of the outstanding shares of Stock owned by
such Seller as set forth opposite such Seller's name on Schedule 1 hereto, in
exchange for the payment of the aggregate Purchase Price as described below.
1.2. Delivery of Purchase Price. At the Closing (as defined in Section
2.1), the Buyer shall pay to the Sellers, as the initial aggregate purchase
price for the Stock (the "Initial Purchase Price"), the sum of (a) $10,000,000
less (b) the sum of (i) the aggregate Pay-off Amounts (as defined in Section
2.2(c)) with respect to the Discharged Indebtedness (as defined in Section 12)
of the Companies, plus (ii) all payments of principal, interest and other
amounts made with respect to Indebtedness of the Companies (other than Assumed
Indebtedness) between July 1, 1996 and the Closing, plus (c) the amount of the
Net Working Capital Adjustment, as defined in Section 3(b) below. In addition,
subject to the conditions set forth in Sections 1.3 - 1.5 below, the Sellers
will be entitled to receive as additional purchase price for the Stock (the
"Deferred Purchase Price") the amounts payable pursuant to Sections 1.3 - 1.5
below, as applicable. The sum of the Initial Purchase Price and the Deferred
Purchase Price is referred to herein as the "Purchase Price." The portion of
the Purchase Price payable to each Seller shall be based on the percentage
allocations to each Seller as set forth opposite such Seller's name on Schedule
1 (such Seller's "Pro Rata Share ").
1.3. Deferred Purchase Price.
(a) In addition to the Initial Purchase Price, the Sellers
shall be entitled to receive, as Deferred Purchase Price for the Stock, the
following payments (each referred to herein as a "Deferred Payment"): (i)
$500,000 if Consolidated EBIT (as defined in Section 12) of the Companies for
the period between July 1, 1996 and December 31, 1996 is at least $1,500,000
and (ii) $500,000 if Consolidated EBIT of the Companies for the fiscal year
ending December 31, 1997 is at least $2,500,000. The Deferred Payments shall
be calculated on the basis of the Buyer's calculations (in conformity with
generally accepted accounting principles and consistent with the principles
used in the preparation of the Year-End Balance Sheet, as defined in Section
4.8 below) of Consolidated EBIT of the Companies for the relevant fiscal year
(such calculations, the "Buyer's Proposed Calculations"), which shall be
notified to the Seller Representative (as defined in Section 15.16)
<PAGE> 3
-3-
within thirty (30) days after the completion of the Buyer's audited financial
statements for such fiscal year. If earned, each Seller's Pro Rata Share of
the Deferred Payments shall be paid to such Seller no later than April 15, 1997
or April 15, 1998, respectively (each such date, a "Deferred Payment Date"), in
each case subject to paragraphs (b) and (c) below).
(b) The Seller Representative and Arthur Andersen, L.L.P. (the
"Companies' Accountants") shall be given reasonable opportunity, at the
Sellers' expense, to review and inspect the books and records of the Companies
in order to verify the Consolidated EBIT of the Companies for the fiscal years
ending December 31, 1996 and December 31, 1997. The Seller Representative and
the Companies' Accountants shall complete such review and inspection within
forty-five (45) days after the Sellers' receipt of the Buyer's audited
financial statements for the relevant fiscal year. If the Seller
Representative and the Companies' Accountants, after such review, disagree with
the Buyer's Proposed Calculations, then the Companies' Accountants shall,
within fifteen (15) days after the rejection of the Buyer's Proposed
Calculations, notify the Buyer of their proposed alternative calculations (the
"Sellers' Proposed Calculations"). If the Buyer does not accept the Sellers'
Proposed Calculations, then the Sellers and the Buyer shall select another
nationally recognized independent accounting firm (the "Independent
Accountants"), other than the Companies' Accountants and the Buyer's
independent accountants, to resolve the disputed items (the "Disputed Items")
by conducting its own review and inspection of the books and records of the
Companies for the relevant fiscal year, and, within thirty (30) days of its
appointment, selecting either the Buyer's or the Sellers' Proposed Calculations
of the Disputed Items, or an amount in between the two. The Buyer and each of
the Sellers agrees that it shall be bound by the Independent Accountants'
determination of the Disputed Items. The fees and expenses of the Independent
Accountants shall be paid jointly by the Buyer and the Sellers, provided that
if either the Buyer's or the Sellers' Proposed Calculations of Consolidated
EBIT for any period either exceeds or is less than the amount thereof for such
period as calculated by the Independent Accountants (the "Final Consolidated
EBIT") by an amount which exceeds five percent (5%) of Final Consolidated EBIT,
then the party whose Proposed Calculations most widely diverged from Final
Consolidated EBIT shall, in addition to paying the fees and expenses of its own
accountants, pay all of the fees and expenses of the Independent Accountants
and all fees and expenses of the other party's accountants incurred in
connection with any review or inspection of, or dispute with respect to, the
Buyer's audited financial statements.
(c) If, upon determination pursuant to Section 1.3(b) of
Consolidated EBIT for any fiscal year, it is determined that a Deferred Payment
is due and owing to the Sellers, then any such payment shall be made by the
Buyer to the Sellers, in accordance with Section 1.3(a) above, in cash or same
day funds within five (5) business days after such determination. Any such
amount which is not paid when due shall accrue interest from and after the
Deferred Payment Date upon which such amount would, but for the application of
Section 1.3(b) above, have been due and payable, at a rate equal to the rate
announced by The First National Bank of Boston from time to time
<PAGE> 4
-4-
as its "Base Rate" plus two per cent (2%) per annum, until payment in full of
such amount, such interest to be payable by the Buyer upon the demand of the
Seller Representative.
1.4. Reimbursement for Tax Receivable. If the Companies receive any
benefit directly attributable to the amount identified on the June Balance
Sheet (as defined in Section 3(a)) as the "Income tax receivable" (the "Tax
Receivable"), then (a) if such benefit is received at any time between the date
hereof and the Closing Date, the amount of such benefit shall be paid to the
Sellers together with the Initial Purchase Price in accordance with Section 1.2
above, and (b) if such benefit is received at any time on or after the Closing
Date then the Buyer shall pay to the Sellers their Pro Rata Share of the amount
of such benefit within ten (10) days after the receipt thereof by the
Companies. For the avoidance of doubt, benefits directly attributable to the
Tax Receivable shall include the use by the Companies of any portion thereof to
offset any current tax liability (including, without limitation, the payment
for or reduction of quarterly estimated income tax payments), and the receipt
by the Companies of any amount in respect thereof by way of payment, repayment
or refund from the Internal Revenue Service or any state or local government
taxing authority. On or before December 31, 1996, the Buyer shall ensure
either that the Tax Receivable is applied to offset the Companies' current tax
liabilities or that all available claims for payment or repayment of the Tax
Receivable have been duly made or filed, and any amounts received by the Buyer
as a result thereof shall be paid to the Sellers within ten (10) days after the
receipt of such amounts by the Companies.
1.5. Interest. In the event that the Closing shall not have occurred
on or before September 30, 1996 solely as a result of a failure to fulfill the
conditions precedent to the effectiveness of this Agreement referred to in
Sections 7.15 and 8.7 hereof, then, without in any way limiting the parties'
respective rights and obligations under Sections 7, 8, 14 and 15.13 hereof, the
Buyer agrees to pay to the Sellers at the Closing, together with the Initial
Purchase Price and in accordance with Section 1.2 above, interest on the first
$10,000,000 of the Initial Purchase Price at a rate per annum equal to 5.5%,
such interest to accrue from day to day commencing on October 1, 1996 until and
including the Closing Date. The Buyer's obligation to pay interest pursuant to
this Section 1.5 shall terminate and be of no further force and effect
immediately upon any termination of this Agreement in accordance with the terms
hereof.
2. CLOSING.
2.1. Time and Place. The closing of the sale and purchase of the Stock
(the "Closing") shall be held at the offices of Bingham, Dana & Gould LLP, 150
Federal Street, Boston, Massachusetts, at 10:00 a.m. on September 24, 1996, or
at such other time or place as the Buyer and the Sellers may agree. The date
on which the Closing is actually held hereunder is sometimes referred to herein
as the "Closing Date".
<PAGE> 5
-5-
2.2. Transactions at Closing. At the Closing, in addition to any other
instruments or documents referred to herein:
(a) The Sellers shall deliver to the Buyer, free and clear of
any lien, claim or encumbrance, certificates representing all of the Stock,
duly endorsed in blank or with duly executed stock powers attached.
(b) The Buyer shall deliver the Initial Purchase Price to the
Sellers in the respective amounts set forth on Schedule 1 by certified or bank
check or by wire transfer.
(c) The Sellers shall deliver to the Buyer pay-off letters
stating the amounts payable on the Closing Date to discharge all of the
Discharged Indebtedness of the Companies (each such amount, a "Pay-off
Amount"), and containing agreements satisfactory to the Buyer on the part of
the relevant lender or creditor to discharge any lien on any property of any of
the Companies upon such lender's or creditor's receipt of the Pay-Off Amount
specified in the applicable pay-off letter.
(d) The Buyer and each of Saffan and Schumacher shall execute
and deliver Employment and Non-Competition Agreements substantially in the form
of Exhibits A-1 and A-2 attached hereto, respectively (the "Employment
Agreements").
(e) The Sellers shall deliver the Sellers' Closing Certificate
referred to in Section 7.13.
(f) The "Exchange", as defined in the Exchange Agreement,
shall be completed by delivery of such certificates representing the stock of
Atrium as may be required to be exchanged pursuant to the terms thereof for the
VBS Exchanged Shares, the BNE Exchanged Shares and the FCI Stock, each as
defined in the Exchange Agreement.
(g) The Sellers, Atrium, the Buyer and the Escrow Agent (as
defined therein) shall execute and deliver a Buy-Sell Agreement substantially
in the form of Exhibit B attached hereto (the "Buy-Sell Agreement"), pursuant
to which (among other things) the shares of stock of Atrium to be exchanged for
the VBS Exchanged Shares and the BNE Exchanged Shares (sometimes referred to
herein as the "Escrowed Shares) shall be held by the Escrow Agent subject to
certain rights of the Sellers to tender such shares in payment of certain
indemnity claims under Section 13 hereof, and certain rights of the Buyer to
require the tender of such shares in payment of such claims.
<PAGE> 6
-6-
3. NET WORKING CAPITAL ADJUSTMENT TO PURCHASE PRICE.
(a) (i) Attached hereto as Schedule 3(a)(i) is an audited
consolidated balance sheet of the Companies (the "June Balance Sheet") as of
the close of business on June 30, 1996 (the "Calculation Date"), together with
the related statements of income, retained earnings and cash flow for the nine
(9) month period ended on the Calculation Date (together with the June Balance
Sheet, the "June Financial Statements"), in each case audited by the Companies'
Accountants and prepared in accordance with generally accepted accounting
principles applied on a basis consistent with the Year-End Balance Sheet (as
defined in Section 4.8). Attached hereto as Schedule 3(a)(ii) is a calculation
prepared and certified by the Companies' Accountants showing the amount of Net
Working Capital (as defined in Section 12) of the Companies as of the
Calculation Date to be $5,291,823.00 (the "Calculation Date Net Working
Capital").
(b) Because the Calculation Date Net Working Capital is
greater than $2,500,000, the Initial Purchase Price payable at the Closing
shall be increased by $2,791,823.00, being the amount equal to the amount of
such excess (the "Net Working Capital Adjustment").
4. REPRESENTATIONS AND WARRANTIES OF THE SELLERS. Each of the Sellers
jointly and severally (except with respect to the representations and
warranties of each of the Sellers contained in Sections 4.2 and 4.5 hereof,
which are made severally by each of the Sellers on its own behalf and not
jointly) represents and warrants to the Buyer as follows:
4.1. Organization of the Companies; Authority. Each of the Companies
is a corporation duly organized, validly existing and in good standing under
the laws of the State of Connecticut. Each of the Companies is duly qualified
and in good standing as a foreign corporation in all jurisdictions in which the
character of the properties owned or leased or the nature of the activities
conducted by it makes such qualification necessary. The Sellers have delivered
to the Buyer complete and correct copies of the Certificates of Incorporation
and By-Laws of each of the Companies, and all amendments thereto. Each of the
Companies has all requisite power and authority to own or lease and operate its
properties and to carry on its business as such business is now conducted.
4.2. Rights to Sell Outstanding Shares; Approvals; Binding Effect.
Each Seller has all requisite power and full legal right to enter into this
Agreement and each of the other Transaction Documents, if any, to which it is a
party, to perform all of such Seller's agreements and obligations hereunder and
thereunder, each in accordance with their respective terms, and to sell to the
Buyer all of the outstanding shares of Stock owned by such Seller. Each of
this Agreement and the other Transaction Documents, if any, to which such
Seller is a party has been duly executed and delivered by such Seller and
constitutes the legal, valid and binding obligation of such Seller enforceable
against such Seller in accordance with its terms, except as the enforceability
thereof may be limited by any applicable bankruptcy, reorganization, insolvency
or other laws affecting creditors' rights generally or by general principles of
equity.
<PAGE> 7
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4.3. Subsidiaries. BNY and BNE do not have any Subsidiaries (as
defined in Section 12). BNE is the sole Subsidiary of BMC, and BMC is the sole
Subsidiary of VBS. The Companies do not own or hold of record and/or
beneficially any shares of any class in the capital of any other corporation.
The Companies do not own any legal and/or beneficial interests in any limited
liability companies, partnerships, business trusts or joint ventures or in any
other unincorporated trade or business enterprises.
4.4. Capitalization.
(a) The authorized capital of BNY consists of 5,000 shares of
common stock, no par value, of which 1,000 shares are issued and outstanding,
all of which are owned of record and beneficially by the Parent Stockholders as
set forth in Schedule 4.4(a).
(b) The authorized capital of VBS consists of 100 shares of
common stock, par value $25.00 per share, of which 100 shares are issued and
outstanding, all of which were owned of record and beneficially as set forth in
Schedule 4.4(a) immediately prior to completion of the "Exchange" under and as
defined in the Exchange Agreement (the "Exchange"), and all of which will be
owned of record and beneficially as set forth in Schedule 4.4(b) immediately
following completion of the Exchange.
(c) The authorized capital of BMC consists of 150 shares of
common stock, no par value, of which 150 shares are issued and outstanding, all
of which are owned of record and beneficially by VBS.
(d) The authorized capital of BNE consists of 5,000 shares of
common stock, no par value, of which 1,000 shares are issued and outstanding,
all of which were owned of record and beneficially as set forth in Schedule
4.4(a) immediately prior to completion of the Exchange, and all of which will
be owned of record and beneficially as set forth in Schedule 4.4(b) immediately
following completion of the Exchange.
(e) All of the capital stock of the Companies is validly
issued and outstanding, fully paid and non-assessable. There are no
commitments for the purchase or sale of, and no options, warrants or other
rights to subscribe for or purchase, any capital stock or other securities of
any of the Companies.
4.5. Title to Stock, Liens, etc. The Sellers have, and as of the
consummation of the Closing the Buyer will have, sole record and beneficial
ownership of all of the Stock, free and clear of any mortgage, lien, pledge,
charge, security interest, encumbrance, title retention agreement, option,
equity or other adverse claim thereto.
<PAGE> 8
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4.6. Non-Contravention. The execution and delivery of this Agreement
and the other Transaction Documents, if any, to which each such Seller is a
party and the consummation by the Sellers of the transactions contemplated
hereby and thereby will not (a) violate or conflict with any provision of the
Certificate of Incorporation or By-Laws of any of the Companies, each as
amended to date; or (b) constitute a material violation of, or be in conflict
with, or constitute or create a default under, or result in the creation or
imposition of any encumbrance upon any property of any of the Companies
pursuant to (i) any agreement or instrument to which any of the Companies is a
party or by which any of their properties is bound, or (ii) to the knowledge of
the Sellers, any statute, judgment, decree, order, regulation or rule of any
court or governmental or regulatory authority.
4.7. Governmental Consents; Transferability of Licenses, Etc. Except
as set forth on Schedule 4.7, no consent, approval or authorization of, or
registration, qualification or filing with, any governmental agency or
authority is required for the execution and delivery by the Sellers of this
Agreement, or the other Transaction Documents, if any, to which such Seller is
a party or for the consummation by the Sellers of the transactions contemplated
hereby or thereby. Each of the Companies has and maintains, and the permits
listed on Schedule 4.7 hereto include, to the knowledge of the Sellers, all
material licenses, permits and other authorizations from all governmental
authorities (collectively, the "Permits") as are necessary for the conduct of
the Companies' business as currently operated. Except as expressly designated
on Schedule 4.7, all of the Permits are transferable to the Buyer, and true and
complete copies of such Permits have previously been delivered to the Buyer.
4.8. Financial Statements. The Sellers have delivered the following
financial statements (collectively, the "Financial Statements") to the Buyer:
(a) the audited consolidated balance sheets of the Companies as of September
30, 1994 and September 30, 1995 (such balance sheet as of September 30, 1995
being referred to herein as the "Year-End Balance Sheet"), and the related
consolidated statements of income, retained earnings and cash flows of the
Companies for each of the fiscal years then ended, which (together with the
Year-End Balance Sheet) are attached hereto as Schedule 4.8; and (b) the June
Financial Statements, as defined in Section 3(a) and attached hereto as
Schedule 3(a)(i). Each of the Financial Statements are true and correct and
have been prepared in accordance with generally accepted accounting principles;
each of the balance sheets included in the Financial Statements fairly and
accurately presents the financial condition of the Companies as of its
respective date; and each of the statements of income, retained earnings and
cash flows included in the Financial Statements fairly and accurately present
the results of operations of the Companies for the periods covered thereby.
The calculation of Calculation Date Net Working Capital by the Companies'
Accountants in the form attached hereto as Schedule 3(a)(ii) is correct.
4.9. Absence of Certain Changes. Except as set forth on Schedule 4.9
hereto, since June 30, 1996, each of the Companies has carried on its business
only in the ordinary course, and there has not been (a) any change in the
assets, liabilities, sales, income or business of any of the Companies
<PAGE> 9
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or in the relationships with suppliers, customers or lessors, other than
changes which were both in the ordinary course of business and have not been,
either in any case or in the aggregate, materially adverse; (b) any acquisition
or disposition by any of the Companies of any asset or property other than in
the ordinary course of business; (c) any damage, destruction or loss, whether
or not covered by insurance, materially and adversely affecting, either in any
case or in the aggregate, the property or business of any of the Companies; (d)
any declaration, setting aside or payment of any dividend or any other
distributions in respect of any capital stock of any of the Companies; (e) any
issuance of any shares of the capital stock of any of the Companies or any
direct or indirect redemption, purchase or other acquisition of any shares of
the capital stock of any of the Companies other than pursuant to the Exchange
Agreement; (f) any increase in the compensation, pension or other benefits
payable or to become payable by any of the Companies to any of their officers
or employees, or any bonus payments or arrangements made to or with any of them
(other than pursuant to the terms of any existing written agreement or plan of
which the Buyer has been supplied complete and correct copies); (g) any
forgiveness or cancellation of any debt or claim by any of the Companies or any
waiver of any right of material value other than compromises of accounts
receivable in the ordinary course of business; (h) any entry by any of the
Companies into any transaction other than in the ordinary course of business;
(i) any incurrence by any of the Companies of any obligations or liabilities,
whether absolute, accrued, contingent or otherwise (including, without
limitation, liabilities as guarantor or otherwise with respect to obligations
of others), other than obligations and liabilities incurred in the ordinary
course of business; (j) any mortgage, pledge, lien, lease, security interest or
other charge or encumbrance on any of the assets, tangible or intangible, of
any of the Companies; or (k) any discharge or satisfaction by any of the
Companies of any lien or encumbrance or payment by any of the Companies of any
obligation or liability (fixed or contingent) other than (A) current
liabilities included in the Year-End Balance Sheet and (B) current liabilities
incurred since the date of the Year-End Balance Sheet in the ordinary course of
business.
4.10. Litigation, Etc. Except as set forth on Schedule 4.10 hereto, no
action, suit, proceeding or investigation is pending or, to the knowledge of
any of the Sellers, threatened against any of the Companies. The Companies
have and will have no liabilities or obligations in respect to any of the
action, suits, proceedings and investigations referred to in Schedule 4.10
hereto which are not fully covered by the Companies' insurance policies.
4.11. Conformity to Law. Except as set forth on Schedule 4.11 hereto
and subject to the last sentence of this Section 4.11, each of the Companies
has materially complied with, and is in material compliance with (a) all laws,
statutes, governmental regulations and all judicial or administrative tribunal
orders, judgments, writs, injunctions, or decrees applicable to any of the
Companies or any of its properties and (b) all unwaived terms and provisions of
all contracts, agreements and indentures to which any of the Companies is a
party, or by which any of the Companies or any of their properties is subject.
Except as set forth in Schedule 4.11 and subject to the last sentence of this
Section 4.11, none of the Companies has received written notification of, or,
to the knowledge
<PAGE> 10
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of any of the Sellers, been under investigation with respect to, any material
violation of any provision of any federal, state or local law or administrative
regulation in respect of any of the Companies, their businesses or any of their
properties. To the extent that any health and safety, zoning or environmental
matter is covered both by the representations and warranties in this Section
4.11 and by the representations and warranties in Section 4.13 below, if such
matter does not, under the terms of Section 4.13, constitute a breach of the
representations and warranties made in Section 4.13, then such matter shall not
constitute a breach of the representations and warranties made in this Section
4.11.
4.12. Title to Property, Real Property Leases, etc. Except as set
forth on Schedule 4.12(a) hereto, each of the Companies has good and marketable
title to all of its personal properties and assets, all free and clear of all
liens, pledges, charges, security interests, encumbrances or title retention
agreements of any kind or nature ("Liens"). All such properties and assets and
all real property owned or leased by the Companies (the "Real Property") are in
good condition and repair (normal wear and tear excepted) and are adequate and
sufficient to carry on the business of the Companies as presently conducted.
Schedule 4.12(b) hereto sets forth a complete and correct list of all capital
assets of the Companies having a book or fair market value in excess of $10,000
and all Real Property. There are no material defects in any such capital
assets or Real Property, as to title or condition, not described on Schedule
4.12(b). Neither the Sellers nor any of the Companies have received any notice
that either the whole or any portion of the Real Property is to be condemned,
requisitioned or otherwise taken by any public authority. Neither the Sellers
nor the Companies have any knowledge of any public improvements that may result
in special assessments against or otherwise affect any of the Real Property.
Schedule 4.12(c) hereto sets forth (i) a complete and correct description of
all leases of Real Property to which any of the Companies is a party and (ii) a
complete and accurate list of the street addresses of all real property leased
by any of the Companies. Except with respect to the lease of the Real Property
located at 305 Knowlton Street, Bridgeport, Connecticut, complete and correct
copies of all such leases have been delivered to the Buyer. Each such lease is
valid and subsisting, and no action has been taken or omitted by any of the
Sellers of the Companies and, to the knowledge of the Sellers, no other event
or condition exists, which constitutes, or after notice or lapse of time or
both would constitute, a default under any such lease. The leasehold interests
of the Companies are subject to no lien or other encumbrance, and the Companies
are in quiet possession of the properties covered by such leases.
4.13. Health and Safety, Zoning and Environmental Matters.
(a) Except as set forth on Schedule 4.13 hereto or in the
environmental report prepared by Roux Associates, Inc. and dated July 24, 1996:
(i) none of the Companies nor any operator of any real
property presently owned or leased by any of the Companies nor, to the
knowledge of the Sellers, any operator of any
<PAGE> 11
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real property formerly owned, leased or operated by any of the
Companies, is in material violation or is alleged (based on written
notification received by any of the Companies or any of the Sellers) to
be in material violation of any judgment, decree, order, law, license,
rule or regulation pertaining to environmental matters, including
without limitation those arising under the Resource Conservation and
Recovery Act ("RCRA"), the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 as amended ("CERCLA"), the
Superfund Amendments and Reauthorization Act of 1986 ("SARA"), the
Federal Water Pollution Control Act, the Solid Waste Disposal Act, as
amended, the Federal Clean Water Act, the Federal Clean Air Act, the
Toxic Substances Control Act, or any state or local statute, regulation,
ordinance, order or decree relating to health and safety or the
environment (hereinafter "Environmental Laws") (excluding matters
arising under the Occupational Safety and Health Act of 1970, as amended
("OSHA"), or its state or local requirements);
(ii) none of the Sellers or the Companies have received written
notice from any third party, including without limitation any federal,
state or local governmental authority, (A) that any of the Companies or
any predecessor in interest has been identified by the United States
Environmental Protection Agency ("EPA") as a potentially responsible
party under CERCLA with respect to a site listed on the National
Priorities List, 40 C.F.R. Part 300 Appendix B (1986); (B) that any
hazardous waste, as defined by 42 U.S.C. Section 6903(5), any hazardous
substance as defined by 42 U.S.C. Section 9601(14), any pollutant or
contaminant as defined by 42 U.S.C. Section 9601(33) or any toxic
substance, oil or hazardous material or other chemical or substance
regulated by any Environmental Laws ("Hazardous Substances") which any
of the Companies or any predecessor in interest has generated,
transported or disposed of has been found at any site at which a
federal, state or local agency or other third party has conducted or has
ordered that any of the Companies or any predecessor in interest conduct
a remedial investigation, removal or other response action pursuant to
any Environmental Law; or (C) that any of the Companies or any
predecessor in interest is or shall be a named party to any claim,
action, cause of action, complaint or legal or administrative proceeding
arising out of any third party's incurrence of costs, expenses, losses
or damages of any kind whatsoever in connection with the release of
Hazardous Substances; and
(iii) (A) no portion of any real property presently owned,
leased or operated by any of the Companies or, to the knowledge of the
Sellers, formerly owned, leased or operated by any of the Companies has
been used by any of the Companies or, to the Sellers' knowledge, any
other Person, for the handling, manufacturing, processing, storage or
disposal of Hazardous Substances except in material compliance with
applicable Environmental Laws; and no underground tank or other
underground storage receptacle for Hazardous Substances is located on
such properties; (B) in the course of any activities conducted by any of
the
<PAGE> 12
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Companies or operators of any real property presently owned, leased or
operated by any of the Companies or, to the knowledge of the Sellers,
formerly owned, leased or operated by any of the Companies, no Hazardous
Substances have been generated or are being used on such properties
except in material compliance with applicable Environmental Laws; (C)
none of the real properties presently owned, leased or operated by any
of the Companies or, to the knowledge of the Sellers, formerly owned,
leased or operated by any of the Companies, contains friable asbestos,
urea formaldehyde foam insulation, transformers or other equipment
containing polychlorinated biphenyls, or any other Hazardous Substance,
except for Hazardous Substances which are present on any such property
in the ordinary course of business and in material compliance with
applicable Environmental Laws; (D) none of the Companies have released
and, to the knowledge of the Sellers, there have been no other releases
(i.e., any past or present release, spill, leak, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, disposing or
dumping) of Hazardous Substances on, upon, into or from any real
property presently or formerly owned, leased or operated by any of the
Companies except in material compliance with applicable Environmental
Laws; (E) to the knowledge of the Sellers, there have been no releases
on, upon, from or into any real property in the vicinity of any real
property presently or formerly owned, leased or operated by any of the
Companies which, through soil or groundwater contamination, may have
come to be located on such real property; and (F) to the knowledge of
the Sellers, any Hazardous Substances that have been generated on any
real property presently or formerly owned, leased or operated by any of
the Companies have been transported offsite only by carriers having
identification numbers issued by the EPA and have been treated or
disposed of only by treatment or disposal facilities maintaining valid
permits as required under applicable Environmental Laws, which
transporters and facilities have been and are, to the best of the
Sellers' knowledge, operating in material compliance with such permits
and applicable Environmental Laws.
(b) no operations on any real property presently owned, leased
or operated by any of the Companies generate sufficient quantities of
"hazardous waste", as defined in Connecticut Gen. Statutes Section 22a-134 et
seq., as revised pursuant to Public Law 95-183 (the "Connecticut Transfer
Act"), to require the notification to the Connecticut state authorities of the
transactions contemplated hereby pursuant to the aforesaid Connecticut Transfer
Act, and no real property presently owned, leased or operated by any of the
Companies is an "establishment" under and as defined in the Connecticut
Transfer Act.
(c) Attached as part of Schedule 4.13 is a list of all
reports, site assessments and memoranda in any of the Companies' or Sellers'
possession which contain any material information with respect to material
environmental liabilities associated with any real property presently or
formerly owned, leased or operated by any of the Companies and relating to
compliance with Environmental Laws or the environmental condition of such
properties and adjacent properties. The
<PAGE> 13
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Sellers have furnished to the Buyer complete and accurate copies of all of the
reports, site assessments and memoranda listed on Schedule 4.13.
(d) None of the plants, offices or properties operated by any
of the Companies, nor the activities carried on therein or thereon, are in
material violation of any federal, state or local zoning, health or safety law
or regulation, including without limitation OSHA.
4.14. Insurance. Schedule 4.14 hereto lists all policies of fire,
liability, workmen's compensation, life, property and casualty and other
insurance owned or held by any of the Companies. All such policies (a) are in
full force and effect, (b) are sufficient for compliance by any of the
Companies with all requirements of law and all agreements to which any of the
Companies is a party, (c) provide that they will remain in full force and
effect through the respective dates set forth in such Schedule and (d) will not
in any way be affected by, or terminate or lapse by reason of, the transactions
contemplated by this Agreement. None of the Companies is in default with
respect to its obligations under any of such insurance policies and has not
received any notification of cancellation of any such insurance policies.
4.15. Contracts. Schedule 4.15 sets forth a complete and accurate list
of all material contracts to which any of the Companies is a party or by or to
which any of the Companies or any of their assets or properties is bound or
subject, except (i) material contracts entered into in the ordinary course of
business after the date hereof and prior to the Closing, which will be
identified to the Buyer in writing prior to the Closing, (ii) material
contracts terminable by the Company party thereto upon 30 days' notice or less
without the payment of any termination fee or penalty, (iii) material contracts
listed in other Schedules hereto and (iv) contracts under which the liability
of the Company party thereto does not exceed and shall at no time exceed
$10,000, provided that the aggregate amount of the Companies' liability under
such contracts not otherwise disclosed in Schedule 4.15 or the other Schedules
hereto does not exceed and shall at no time exceed $25,000. As used in this
Section 4.15, the word "contract" means and includes every agreement or
understanding of any kind, written or oral, which is legally enforceable by or
against any of the Companies, and specifically includes (a) contracts and other
agreements with any current or former officer, director, employee, consultant
or shareholder or any partnership, corporation, joint venture or any other
entity in which any such person has an interest; (b) agreements with any labor
union or association representing any employee; (c) contracts and other
agreements for the provision of services by any of the Companies; (d) bonds or
other security agreements provided by any party in connection with the business
of the Companies; (e) contracts and other agreements for the sale of any of the
Companies' assets or properties other than in the ordinary course of business
or for the grant to any person of any preferential rights to purchase any of
the Companies' assets or properties; (f) joint venture agreements relating to
the assets, properties or business of any of the Companies or by or to which
any of them or any of their assets or properties are bound or subject; (g)
contracts or other agreements under which any of the Companies agrees to
indemnify any party, to share tax
<PAGE> 14
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liability of any party, or to refrain from competing with any party; (h) any
contracts or other agreements with regard to Indebtedness; or (i) any other
contract or other agreement whether or not made in the ordinary course of
business. The Sellers have delivered to the Buyer true, correct and complete
copies of all such contracts, together with all modifications and supplements
thereto. Each of the contracts listed on Schedule 4.15 hereto or any of the
other Schedules hereto is in full force and effect, none of the Companies is in
material breach of any of the provisions of any such contract, nor, to the
knowledge of any of the Sellers, is any other party to any such contract in
default thereunder, nor does any event or condition exist which with notice or
the passage of time or both would constitute a default thereunder. Each of the
Companies has in all material respects performed all obligations required to be
performed by it to date under each such contract. No approval or consent of
any person is needed in order that the contracts listed on Schedule 4.15 and
other Schedules hereto continue in full force and effect following the
consummation of the transactions contemplated by this Agreement, and no such
contract includes any provision the effect of which may be to enlarge or
accelerate any obligations of any of the Companies thereunder or give
additional rights to any other party thereto or will in any other way be
affected by, or terminate or lapse by reason of, the transactions contemplated
by this Agreement.
4.16. Employment of Officers, Employees. Schedule 4.16 sets forth the
name and current annual salary and other compensation payable by any of the
Companies to each exempt non-hourly employee whose current total annual
compensation or estimated compensation from any of the Companies (including but
not limited to wages, salary, commissions, normal ordinary type bonus, profit
sharing, deferred compensation and other extra compensation) is $50,000 or
more.
4.17. Employee Benefit Plans. (a) Except for the arrangements set
forth on Schedule 4.17(a), none of the Companies now maintains or contributes
to, nor in the current or preceding six (6) calendar years has maintained or
contributed to, any pension, profit-sharing, deferred compensation, bonus,
stock option, share appreciation right, severance, group or individual health,
dental, medical, life insurance, survivor benefit, or similar plan, policy or
arrangement, whether formal or informal, for the benefit of any director,
officer, consultant or employee, whether active or terminated, of any of the
Companies. Each of the arrangements set forth on Schedule 4.17(a) is
hereinafter referred to as an "Employee Benefit Plan", except that any such
arrangement which is a multi-employer plan shall be treated as an Employee
Benefit Plan only for purposes of Sections 4.17(d)(iv), (vi) and (viii) and
4.17(g) below.
(b) The Sellers have heretofore delivered to Buyer true, correct and
complete copies of each Employee Benefit Plan of any of the Companies, and with
respect to each such Plan (i) any associated trust, custodial, insurance or
service agreements, (ii) any annual report, actuarial report, or disclosure
materials (including specifically any summary plan descriptions) submitted to
any governmental agency or distributed to participants or beneficiaries
thereunder in the current or any
<PAGE> 15
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of the six (6) preceding calendar years and (iii) the most recently received
IRS determination letters and any governmental advisory opinions or rulings.
(c) Each Employee Benefit Plan is and has heretofore been maintained
and operated in material compliance with the terms of such Plan and with the
requirements prescribed (whether as a matter of substantive law or as necessary
to secure favorable tax treatment) by any and all statutes, governmental or
court orders, or governmental rules or regulations in effect from time to time,
including but not limited to the Employee Retirement Income Security Act of
1974, as amended ("ERISA") and the Internal Revenue Code of 1986, as amended
(the "Code") and applicable to such Plan. Each Employee Benefit Plan which is
intended to qualify under Section 401(a) of the Code has been determined to be
so qualified by the IRS and nothing has occurred since the date of the last
such determination which has resulted or is likely to result in the revocation
of such determination.
(d) Except as set forth on Schedule 4.17(d),
(i) there is no pending or, to the knowledge of the Sellers,
threatened legal action, proceeding or investigation, other than routine
claims for benefits, concerning any Employee Benefit Plan or to the best
knowledge of the Sellers and the Companies any fiduciary or service
provider thereof and, to the best knowledge of the Sellers and the
Companies, there is no basis for any such legal action or proceeding;
(ii) no liability (contingent or otherwise) to the Pension
Benefit Guaranty Corporation ("PBGC") or any multi-employer plan has
been incurred by any of the Companies or any affiliate thereof (other
than insurance premiums satisfied in due course);
(iii) no reportable event, or event or condition which presents
a material risk of termination by the PBGC, has occurred with respect to
any Employee Benefit Plan, or any retirement plan of an affiliate of any
of the Companies, which is subject to Title IV of ERISA;
(iv) no Employee Benefit Plan nor any party in interest with
respect thereof, has engaged in a prohibited transaction which could
subject any of the Companies directly or indirectly to liability under
Section 409 or 502(i) of ERISA or Section 4975 of the Code;
(v) no communication, report or disclosure has been made which,
at the time made, did not accurately reflect the terms and operations of
any Employee Benefit Plan;
(vi) no Employee Benefit Plan provides welfare benefits
subsequent to termination of employment to employees or their
beneficiaries (except to the extent required by applicable state
insurance laws and Title I, Part 6 of ERISA);
<PAGE> 16
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(vii) no benefits due under any Employee Benefit Plan have been
forfeited subject to the possibility of reinstatement (which possibility
would still exist at or after Closing); and
(viii) none of the Companies has undertaken to maintain any
Employee Benefit Plan for any period of time and each such Plan is
terminable at the sole discretion of the sponsor thereof, subject only
to such constraints as may be imposed by applicable law.
(e) With respect to each Employee Benefit Plan for which a separate
fund of assets is or is required to be maintained, full payment has been made
of all amounts that any of the Companies is required, under the terms of each
such Plan, to have paid as contributions to that Plan as of the end of the most
recently ended plan year of that Plan, and no accumulated funding deficiency
(as defined in Section 302 of ERISA and Section 412 of the Code), whether or
not waived, exists with respect to any such Plan. The current value of the
assets of each such Employee Benefit Plan, as of the end of the most recently
ended plan year of that Plan, exceeded the current value of all accrued
benefits under that Plan.
(f) The execution of this Agreement and the consummation of the
transactions contemplated hereby will not result in any payment (whether of
severance pay or otherwise) becoming due from any Employee Benefit Plan to any
current or former director, officer, consultant or employee of any of the
Companies or result in the vesting, acceleration of payment or increases in the
amount of any benefit payable to or in respect of any such current or former
director, officer, consultant or employee.
(g) No Employee Benefit Plan is a multi-employer plan.
(h) For purposes of this Section 4.17, "multi-employer plan", "party
in interest", "current value", "accrued benefit", "reportable event" and
"benefit liability" have the same meaning assigned such terms under Sections 3,
4043(b) or 4001(a) of ERISA, and "affiliate" means any entity which under
Section 414 of the Code is treated as a single employer with any of the
Companies.
4.18. Labor Relations. Except as set forth on Schedule 4.18, each of
the Companies is in material compliance with all federal and state laws
respecting employment and employment practices, terms and conditions of
employment, wages and hours and nondiscrimination in employment, and is not
engaged in any unfair labor practice. Except as set forth on Schedule 4.18,
there is no charge pending or, to the knowledge of any of the Sellers,
threatened against any of the Companies alleging unlawful discrimination in
employment practices before any court or agency and there is no charge of or
proceeding with regard to any unfair labor practice against any of the
Companies pending before the National Labor Relations Board. There is no labor
strike, dispute, slow-down or work stoppage actually pending or, to the
knowledge of any of the Sellers, threatened
<PAGE> 17
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against or involving any of the Companies. No one has petitioned within the
last five (5) years, and no one is now petitioning, for union representation of
any of the Companies' employees. No grievance or arbitration proceeding
arising out of or under any collective bargaining agreement is pending against
any of the Companies and no claim therefor has been asserted. None of the
employees of the Companies is covered by any collective bargaining agreement,
and no collective bargaining agreement is currently being negotiated by any of
the Companies. Except as fully described on Schedule 4.18 hereto, none of the
Companies has experienced any work stoppage during the last five years.
4.19. Potential Conflicts of Interest. Except as set forth on Schedule
4.19, no officer, director or stockholder of any of the Companies (a) owns,
directly or indirectly, any interest in (excepting not more than 1% stock
holdings for investment purposes in securities of publicly held and traded
companies) or is an officer, director, employee or consultant of any Person
which is a competitor, lessor, lessee, customer or supplier of any of the
Companies; (b) owns, directly or indirectly, in whole or in part, any tangible
or intangible property which any of the Companies is using or the use of which
is necessary for the business of any of the Companies; or (c) has any cause of
action or other claim whatsoever against, or owes any amount to, any of the
Companies, 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.
4.20. Trademarks, Patents, Etc. Schedule 4.20 hereto sets forth a
complete and accurate list of (a) all patents, trademarks, trade names and
copyrights registered in the name of any of the Companies or used or proposed
to be used by any of the Companies, all applications therefor, and all licenses
(as licensee or licensor) and other agreements relating thereto, and (b) all
written agreements relating to other technology, know-how and processes which
any of the Companies is licensed or authorized by others to use or which any of
the Companies has licensed or authorized for use by others. Except to the
extent set forth in Schedule 4.20, each of the Companies owns or has the right
to use without restrictions all patents, trademarks, trade names, copyrights,
technology, know-how and processes used in or necessary for the ordinary course
of business as presently conducted or proposed to be conducted, and the
consummation of the transactions contemplated hereby will not alter or impair
any such right. No claims have been asserted, and no claims are pending, by
any person regarding the use of any such patents, trademarks, trade names,
copyrights, technology, know-how or processes, or challenging or questioning
the validity or effectiveness of any license or agreement, and to the knowledge
of the Sellers there is no basis for such claim. To the knowledge of the
Sellers, the use by each of the Companies of such patents, trademarks, trade
names, copyrights, technology, know-how or processes in the ordinary course of
business does not infringe on the rights of any person.
4.21. Suppliers and Customers. Schedule 4.21 hereto sets forth the ten
(10) largest suppliers and ten (10) largest customers of the Companies, taken
together, for the twelve (12) month period
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ending on the last calendar month end preceding the date hereof. The
relationships of the Companies with such suppliers and customers are good
commercial working relationships and, except as set forth on Schedule 4.21, no
supplier or customer of material importance to any of the Companies has
canceled or otherwise terminated, or threatened to cancel or otherwise to
terminate, its relationship with any of the Companies or has during the last
twelve (12) months decreased materially, or threatened to decrease or limit
materially, its services, supplies or materials for use by any of the Companies
or its usage or purchase of the services or products of any of the Companies
except for normal cyclical changes related to customers' businesses. None of
the Sellers has any knowledge that any such supplier or customer intends to
cancel or otherwise substantially modify its relationship with any of the
Companies or to decrease materially or limit its services, supplies or
materials to any of the Companies, or its usage or purchase of any of the
services or products of any of the Companies, and to the knowledge of the
Sellers, the communication of the transactions contemplated hereby will not
adversely affect the relationship of the Buyer with any such supplier or
customer.
4.22. Accounts Receivable. All accounts and notes receivable reflected
on the Interim Balance Sheet, and all accounts and notes receivable arising
subsequent to the date of such Interim Balance Sheet, have arisen in the
ordinary course of business, represent valid obligations owing to the Companies
and have been collected or, to the knowledge of the Sellers, are collectible in
the aggregate recorded amounts thereof in accordance with their terms, net of
the reserve for uncollected accounts to be set forth on the June Balance Sheet.
4.23. No Undisclosed Liabilities. Except to the extent (a) reflected
or reserved against in the Interim Balance Sheet, (b) incurred in the ordinary
course of business after the date of the Interim Balance Sheet and either
discharged prior to Closing or, if incurred on or before the Calculation Date,
reflected on the June Balance Sheet, or (c) described on any Schedule hereto,
none of the Companies has any liabilities or obligations of any nature, whether
accrued, absolute, contingent or otherwise (including without limitation as
guarantor or otherwise with respect to obligations of others), other than
performance obligations with respect to the its contracts that would not be
required to be reflected or reserved against on a balance sheet prepared in
accordance with generally accepted accounting principles or in the footnotes
thereto.
4.24. Taxes. BNY is, and at all times since its incorporation on May
27, 1993 has been, qualified as a corporation for which a valid election to be
taxed under the provisions of Subchapter S, Chapter 1, Subtitle A of the Code
has been filed and is in effect under such Subchapter S, and has, and has had,
a corresponding election in effect under the laws of the State of New York for
each taxable period during the period since its incorporation. Each of the
Companies has duly filed with the appropriate government agencies all of the
income, sales, use, employment and other tax returns and reports required to be
filed by it. No waiver of any statute of limitations relating to taxes has
been executed or given by any of the Companies. All taxes, assessments, fees
and other governmental charges upon any of the Companies or upon any of their
properties, assets, revenues,
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income and franchises which are owed by any of the Companies with respect to
any periods have been paid, other than those currently payable without penalty
or interest, accruals against which will be accurately reflected on the June
Balance Sheet. Each of the Companies has withheld and paid all taxes required
to be withheld or paid in connection with amounts paid or owing to any
director, officer, employee, creditor, independent contractor or third party.
No federal tax return of any of the Companies is currently under audit by the
IRS (as defined in Section 12), and no other tax return of any of the Companies
is currently under audit by any other taxing authority. Neither the IRS nor
any other taxing authority is now asserting or, to the knowledge of the
Sellers, threatening to assert against any of the Companies any deficiency or
claim for additional taxes or interest thereon or penalties in connection
therewith or any adjustment that would have an adverse effect on any of the
Companies.
4.25. Indebtedness. Except for the Assumed Indebtedness described on
Schedule 4.25(a) hereto and the Discharged Indebtedness described on Schedule
4.25(b), none of the Companies has any Indebtedness outstanding at the date
hereof. Except as disclosed on Schedule 4.25(c) hereto, none of the Companies
is in default with respect to any outstanding Indebtedness or any instrument
relating thereto and no such Indebtedness or any instrument or agreement
relating thereto purports to limit the issuance of any securities by any of the
Companies or the operation of the business of any of the Companies. Complete
and correct copies of all instruments (including all amendments, supplements,
waivers and consents) relating to any Indebtedness of any of the Companies have
been furnished to the Buyer.
4.26. Bank Accounts, Signing Authority, Powers of Attorney. Except as
set forth on Schedule 4.26 hereto, none of the Companies has any account or
safe deposit box in any bank and no Person has any power, whether singly or
jointly, to sign any checks on behalf of any of the Companies to withdraw any
money or other property from any bank, brokerage or other account of any of the
Companies or to act under any power of attorney granted by any of the Companies
at any time for any purpose. Schedule 4.26 also sets forth the names of all
persons authorized to borrow money or sign notes on behalf of each of the
Companies.
4.27. Inventory. The inventory and supplies of the Companies are
adequate for present needs, and are in usable and salable condition in the
ordinary course of business, subject only to appropriate reserves for
obsolescence to be reflected on the June Balance Sheet.
4.28. Minute Books. Except as set forth on Schedule 4.28, the minute
books of the Companies made available to the Buyer for inspection accurately
record therein all actions taken by the Board of Directors and shareholders of
each of the Companies.
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4.29. Broker. Except as set forth on Schedule 4.29, none of the
Sellers has retained, utilized or been represented by any broker, agent, finder
or intermediary in connection with the negotiation or consummation of the
transactions contemplated by this Agreement.
4.30. Warranty Claims; Product Liability. Except as set forth on
Schedule 4.30 hereto, the Companies have no actual or alleged liability for
death or injury to person or property as a result of any actual or alleged
defect in any product sold or manufactured by any of the Companies on or prior
to the Closing Date in any amount which is not either fully reserved for on the
June Balance Sheet or fully covered by the Companies' insurance policies, and
there are no contractual product warranty claims arising out of defects in any
product shipped by any of the Companies on or prior to the Closing Date in
amounts which are not either fully reserved for on the June Balance Sheet or
fully covered by the Companies' insurance policies.
4.31. Disclosure. No representation or warranty by any of the Sellers
in this Agreement or in any exhibit, schedule, written statement, certificate
or other document delivered or to be delivered to the Buyer pursuant hereto or
in connection with the consummation of the transactions contemplated hereby
contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact required to be stated therein or necessary
to make the statements contained therein not misleading. To the knowledge of
the Sellers, there is no fact which the Sellers have not disclosed to the Buyer
in writing which materially adversely affects the business or condition
(financial or other) of any of the Companies or the ability of the Sellers to
perform this Agreement or any of the transactions contemplated hereby.
5. REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer represents
and warrants to each of the Sellers as follows:
5.1. Organization of Buyer; Authority. The Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. The Buyer has all requisite power and authority to execute and
deliver this Agreement, and each of the other Transaction Documents to which it
is a party and to carry out all of the actions required of it pursuant to the
terms thereof.
5.2. Corporate Approval; Binding Effect. The Buyer has obtained all
necessary authorizations and approvals from its Board of Directors and
stockholders required for the execution and delivery of this Agreement, and the
other Transaction Documents to which it is a party and the consummation of the
transactions contemplated hereby and thereby. Each of this Agreement, and the
other Transaction Documents to which it is a party has been duly executed and
delivered by the Buyer and constitutes the legal, valid and binding obligation
of the Buyer, enforceable against the Buyer in accordance with their respective
terms, except as enforceability thereof may be limited by
<PAGE> 21
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any applicable bankruptcy, reorganization, insolvency or other laws affecting
creditors' rights generally or by general principles of equity.
5.3. Non-Contravention. The execution and delivery by the Buyer of
this Agreement, and each of the other Transaction Documents to which it is a
party and the consummation by the Buyer of the transactions contemplated hereby
and thereby will not (a) violate or conflict with any provisions of the
Certificate of Incorporation or By-Laws of the Buyer, each as amended to date;
or (b) constitute a violation of, or be in conflict with, constitute or create
a default under, or result in the creation or imposition of any lien upon any
property of the Buyer pursuant to (i) any agreement or instrument to which the
Buyer is a party or by which the Buyer or any of its properties is bound or to
which the Buyer or any of its properties is subject, or (ii) to the knowledge
of the Buyer, any statute, judgment, decree, order, regulation or rule of any
court or governmental authority to which the Buyer is subject.
5.4. Governmental Consents. Except as set forth in Schedule 5.4
hereto, no consent, approval or authorization of, or registration,
qualification or filing with, any governmental agency or authority is required
for the execution and delivery by the Buyer of this Agreement, or any of the
Transaction Documents to which it is a party or for the consummation by the
Buyer of the transactions contemplated hereby or thereby.
5.5. Broker. Except as set forth in Schedule 5.5 hereto, the Buyer has
not retained, utilized or been represented by any broker, agent, finder or
other intermediary in connection with the negotiation or consummation of the
transactions contemplated by this Agreement.
6. CONDUCT OF BUSINESS BY THE COMPANIES PENDING CLOSING. Each of the
Sellers jointly and severally covenants and agrees that, from and after the
date of this Agreement and until the Closing, except as otherwise specifically
consented to or approved by the Buyer in writing:
6.1. Full Access. The Sellers shall cause the Companies to afford to
the Buyer and its authorized representatives full access during normal business
hours to all leased or owned properties, books, records, contracts and
documents of the Companies and a full opportunity to make such reasonable
investigations as they shall desire to make of the Companies, and the Sellers
shall furnish or cause to be furnished to the Buyer and its authorized
representatives all such information with respect to the affairs and businesses
of the Companies as the Buyer may reasonably request. Without limiting the
foregoing, the Sellers shall cause the Companies to co-operate with the Buyer's
environmental consultants, Roux Associates, Inc., and to grant full access
during normal business hours to all leased or owned properties of the Companies
to Roux Associates, Inc. and its employees and consultants in connection with
their review of the environmental matters referred to in Section 7.11 below and
any further testing required to be conducted in connection with such review,
<PAGE> 22
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provided that such access, review and testing does not unreasonably interfere
with the business of the Companies.
6.2. Carry on in Regular Course. The Sellers shall cause each of the
Companies to maintain its personal property in good operating condition and
repair (normal wear and tear excepted), and to make all necessary renewals,
additions and replacements thereto, and to carry on its business diligently and
substantially in the same manner as heretofore and not make or institute any
unusual or novel methods of manufacture, purchase, sale, lease, management,
accounting or operation. No payments shall be made on any Indebtedness of the
Companies, other than scheduled payments due in accordance with the terms
thereof.
6.3. No General Increases. The Sellers shall not permit any of the
Companies to grant any general or uniform increase in the rates of pay of its
employees, nor grant any general or uniform increase in the benefits under any
bonus or pension plan or other contract or commitment to, for or with any such
employees; and none of the Companies shall increase the compensation payable or
to become payable to officers, key salaried employees or agents, or increase
any bonus, insurance, pension or other benefit plan, payment or arrangement
made to, for or with any such officers, key salaried employees or agents.
Notwithstanding the foregoing, with effect from July 1, 1996, Saffan shall be
compensated at a level consistent with, and shall receive no other compensation
than as provided in, his Employment Agreement referred to in Section 7.8 below.
6.4. No Dividends, Issuances, Repurchases, etc. The Sellers shall not
permit any of the Companies to declare or pay any dividends (whether in cash,
shares of stock or otherwise) on, or make any other distribution in respect of,
any shares of its capital stock, or issue, purchase, redeem or acquire for
value any shares of its capital stock.
6.5. Contracts and Commitments. The Sellers shall not permit any of
the Companies to enter into any contract or commitment or engage in any
transaction not in the usual and ordinary course of business and consistent
with the business practices of such Company.
6.6. Purchase and Sale of Capital Assets. The Sellers shall not permit
the Companies to purchase or sell or otherwise dispose of any capital asset
with a market value in excess of $5,000, or of capital assets of market value
aggregating in excess of $20,000 without the prior written consent of the
Buyer, and in no event shall the Companies purchase, sell or otherwise dispose
of any capital asset other than in the ordinary course of business.
6.7. Insurance. The Sellers shall cause each of the Companies to
maintain with reputable insurance companies, funds or underwriters, adequate
insurance (including without limitation the insurance described on Schedule
4.14) of the kinds, covering such risks and in such amounts and with such
deductibles and exclusions as are consistent with prudent business practice.
<PAGE> 23
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6.8. Preservation of Organization. The Sellers shall use commercially
reasonable efforts to cause each of the Companies to preserve its business
organization intact, to keep available to the Buyer the present key officers
and employees of such Company and to preserve for the Buyer the present
relationships of such Company's suppliers and customers and others having
business relations with any of the Companies.
6.9. No Default. The Sellers shall not permit the Companies to do any
act or omit to do any act, or permit any act or omission to act, which will
cause a material breach of any contract, commitment or obligation of any of the
Companies.
6.10. Compliance with Laws. The Sellers shall cause each of the
Companies to comply in all material respects with all laws, regulations and
orders applicable with respect to its business.
6.11. Advice of Change. The Sellers will promptly advise the Buyer in
writing of any material adverse change in the business, condition, operations,
prospects or assets of any of the Companies.
6.12. No Shopping. The Sellers shall not, and shall not permit any of
the Companies to negotiate for, solicit or enter into any agreement with
respect to the sale of the Stock or any substantial portion of the assets of
any of the Companies or any merger or other business combination of any of the
Companies, to or with any Person other than the Buyer or (pursuant to the
Exchange Agreement) Atrium.
6.13. Consents of Third Parties. The Sellers will employ commercially
reasonable efforts to secure, before the Closing Date, the consent, in form and
substance satisfactory to the Buyer and the Buyer's counsel, to the
consummation of the transactions contemplated by this Agreement by each party
to any material contract, commitment or obligation of any of the Companies,
under which such transactions would constitute a default, would accelerate
obligations of any of the Companies or would permit cancellation of any such
contract.
6.14. Satisfaction of Conditions Precedent. The Sellers will use
commercially reasonable efforts to cause the satisfaction of the conditions
precedent contained herein.
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS. The obligation of the
Buyer to consummate the Closing shall be subject to the satisfaction at or
prior to the Closing of each of the following conditions (to the extent
noncompliance is not waived in writing by the Buyer):
7.1. Representations and Warranties True at Closing. The
representations and warranties made by the Sellers in or pursuant to this
Agreement or the other Transaction Documents to which
<PAGE> 24
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it is a party shall be true and correct at and as of the Closing Date with the
same effect as though such representations and warranties had been made or
given at and as of the Closing Date.
7.2. Compliance with Agreement. The Sellers shall have performed and
complied with all of their material obligations under this Agreement and the
other Transaction Documents to be performed or complied with by them on or
prior to the Closing Date.
7.3. No Material Change. There shall not have been, or threatened to
be, any material damage to or loss or destruction of any properties or assets
owned or leased by any of the Companies (whether or not covered by insurance)
or any material adverse change in the condition (financial or otherwise),
operations, business, prospects or assets of any of the Companies or imposition
of any laws, rules or regulations which would materially adversely affect the
condition (financial or otherwise), operations, business, prospects or assets
of the Companies.
7.4. Sellers' Certificate. The Sellers shall have delivered to the
Buyer in writing, at and as of the Closing, a certificate duly executed by each
of the Sellers, in form and substance satisfactory to the Buyer and the Buyer's
counsel, certifying that the conditions in each of Section 7.1 and 7.2 have
been satisfied.
7.5. Opinions of Counsel. Hunton & Williams, counsel to the Sellers
and the Companies, shall have delivered to the Buyer a written opinion,
addressed to the Buyer and dated the Closing Date, substantially in the form of
Exhibit C hereto, and local Connecticut counsel to the Sellers and the
Companies shall have delivered to the Buyer a written opinion reasonably
acceptable to the Buyer, addressed to the Buyer and dated the Closing Date,
substantially in the form of Exhibit D hereto.
7.6. Approvals. All corporate and other approvals in connection with
the transactions contemplated by this Agreement and the other Transaction
Documents and the form and substance of all certificates and other documents
delivered hereunder shall be reasonably satisfactory in form and substance to
the Buyer and its counsel.
7.7. No Litigation. No restraining order or injunction shall prevent
the transactions contemplated by this Agreement or the other Transaction
Documents and no action, suit or proceeding shall be pending or threatened
before any court or administrative body (a) in which it will be or is sought to
restrain or prohibit or obtain damages or other relief in connection with this
Agreement or the other Transaction Documents or the consummation of the
transactions contemplated hereby or thereby, or (b) in connection with any
claim for damages in excess of $5,000 against any of the Companies (except for
the matters disclosed on Schedule 4.10 hereto).
<PAGE> 25
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7.8. Employment Agreements. Saffan and Schumacher shall each have
executed and delivered to the Buyer the Employment Agreements, and each of the
Employment Agreements shall be in full force and effect.
7.9. Exchange Agreement. The Sellers, FCI Holding Corp. and each of
the shareholders of FCI Holding Corp. shall have executed and delivered to
Atrium the Exchange Agreement, and the "Exchange" as defined therein shall have
been completed.
7.10 Resignations of Directors and Officers. Except as set forth on
Schedule 7.10 hereto, all of the directors and officers of the Companies shall
have resigned their positions with the Companies on or prior to the Closing
Date, and prior thereto shall have executed such appropriate documents with
respect to the transfer or establishment of bank accounts, signing authority,
etc., as the Buyer shall have reasonably requested.
7.11. Environmental Matters. All of the underground storage tanks
located at 10 Parker Street, Clinton, Massachusetts, shall have been abandoned
in place in accordance with all applicable Environmental Laws and with all
necessary approvals in form and substance reasonably satisfactory to the Buyer,
including the approval of the Clinton Fire Department, all at Sellers' expense.
All of the underground storage tanks located at 305 Knowlton Street,
Bridgeport, Connecticut (the "Bridgeport Tanks") shall have either been
removed, or, in the case of the Bridgeport Tank located under the building at
305 Knowlton Street, shall have been abandoned in place in accordance with all
applicable Environmental Laws and with all necessary approvals in form and
substance reasonably satisfactory to the Buyer, and the Sellers shall have
completed any clean-up required pursuant to applicable Environmental Laws of
discharges (if any) from any of the Bridgeport Tanks, all at Sellers' expense,
provided, however, that if the Sellers shall have notified the Buyer in
writing prior to the Buyer's close of business on September 23, 1996 that the
Sellers' good faith estimate of the costs of removal of, and clean-up
associated with, the Bridgeport Tanks (all of such costs in the aggregate being
referred to herein as the "Bridgeport Clean-Up Costs") exceeds $200,000, then
the Sellers shall only be obligated to consummate the Closing hereunder if the
Buyer shall first have agreed to limit the aggregate liability of the Sellers
for the Bridgeport Clean-Up Costs to $200,000, which liability shall be joint
and several among the Sellers and shall be paid promptly upon demand made by
the Buyer upon the Sellers, and if not so paid shall be satisfied by the
Sellers by set-off against the Deferred Payments which may from time to time be
owed by the Buyer to the Sellers pursuant to Section 1.3 hereof (without
limiting the Buyer's recourse against the Sellers for the amounts set forth in
this Section 7.11 in the event no such Deferred Payments are owed hereunder).
7.12. Title Insurance. The Buyer shall have received a title insurance
policy on the Real Property on the Closing Date issued by a title insurer
reasonably acceptable to, and in form reasonably acceptable to, the Buyer and
naming the Companies as the insured.
<PAGE> 26
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7.13. Seller's Closing Certificate; Pay-off Letters. The Sellers shall
have delivered to the Buyer (a) a certificate of the President(s) and
Treasurer(s) of the Companies dated as of the Closing Date (the "Sellers'
Closing Certificate"), certifying the amounts of all Assumed Indebtedness and
Discharged Indebtedness of the Companies outstanding as of the Closing Date,
and the Pay-Off Amounts with respect to all such Discharged Indebtedness, and
(b) each of the pay-off letters with respect to the Discharged Indebtedness
referred to in Section 2.2(d) hereof, all in form and substance satisfactory to
the Buyer.
7.14. Financing. The Buyer shall have obtained debt and equity
financing on terms reasonably satisfactory to it, providing the Buyer with
sufficient funds to pay the Initial Purchase Price and all fees and expenses of
the Buyer arising in connection with the transactions contemplated by this
Agreement and providing the Buyer with sufficient availability to finance its
working capital needs following the Closing, and all conditions precedent to
funding under such financing arrangements (other than the purchase and sale
contemplated hereby) shall have been satisfied or waived.
7.15. HSR Act. Any applicable waiting period under the HSR Act (as
defined in Section 9) shall have expired or been terminated.
7.16. Consents of Third Parties. The Sellers will have obtained the
consent, in form and substance satisfactory to the Buyer and the Buyer's
counsel, to the consummation of the transactions contemplated by this Agreement
and the other Transaction Documents by each party to any material contract,
commitment or other obligation of any of the Companies under which such
transactions would constitute a default, would accelerate obligations of any of
the Companies or the Buyer or would permit cancellation of any such contract.
7.17. Proceedings and Documents Satisfactory. All proceedings in
connection with the transactions contemplated by this Agreement and the other
Transaction Documents and all certificates and documents delivered to the
Buyer in connection with the transactions contemplated by this Agreement and
the other Transaction Documents shall be satisfactory in all reasonable
respects to the Buyer and the Buyer's counsel, and the Buyer shall have
received the originals or certified or other copies of all such records and
documents as the Buyer may reasonably request.
8. CONDITIONS PRECEDENT TO THE SELLERS' OBLIGATIONS. The obligation of
the Sellers to consummate the Closing shall be subject to the satisfaction, at
or prior to the Closing, of each of the following conditions (to the extent
noncompliance is not waived in writing by the Sellers):
8.1. Representations and Warranties True at Closing. The
representations and warranties made by the Buyer in this Agreement and the
other Transaction Documents to which it is a party
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shall be true and correct at and as of the Closing Date with the same effect as
though such representations and warranties had been made or given at and as of
the Closing Date.
8.2. Compliance with Agreement. The Buyer shall have performed and
complied with all of its obligations under this Agreement and the other
Transaction Documents that are to be performed or complied with by it at or
prior to the Closing.
8.3. Closing Certificate. The Buyer shall have delivered to each of
the Sellers in writing, at and as of the Closing, a certificate duly executed
by each of the President and Treasurer of the Buyer, in form and substance
satisfactory to the Sellers and the Seller's counsel, to the effect that the
conditions in each of Sections 8.1 and 8.2 have been satisfied.
8.4. Opinion of Counsel. Adair, Morris & Osborn, P.C., counsel to the
Buyer, shall have delivered to each of the Companies a written opinion, dated
the Closing Date and addressed to each of the Companies and Sellers,
substantially in the form of Exhibit E hereto.
8.5. Employment Agreements. The Buyer shall have executed and
delivered to each of Saffan and Schumacher his respective Employment Agreement.
8.6. Exchange Agreement. FCI and each of the shareholders of FCI
Holding Corp. shall have executed and delivered to Atrium the Exchange
Agreement, and the "Exchange" as defined therein shall have been completed.
8.7. HSR Act. Any applicable waiting period under the HSR Act (as
defined in Section 9) shall have expired or been terminated.
8.8. Environmental Matters. In the event that, prior to the Buyer's
close of business on September 23, 1996, the Sellers shall have notified the
Buyer in writing that their good faith estimate of the amount of the Bridgeport
Clean-Up Costs exceeds $200,000, the Buyer shall have agreed to limit the
liability of the Sellers for such Bridgeport Clean-Up Costs to $200,000, on the
terms and conditions described in Section 7.11 above. For the avoidance of
doubt, in the event that the Sellers shall have given the notification referred
to in the preceding sentence, the Buyer's failure to agree to limit the
Sellers' liability as set forth in the preceding sentence shall not extend the
date upon which this Agreement becomes terminable under Section 14 hereof and
the Exchange Agreement becomes terminable under Section 10 thereof.
8.9. Proceedings and Documents Satisfactory. All proceedings in
connection with the transactions contemplated by this Agreement and the other
Transaction Documents and all certificates and documents delivered to the
Sellers in connection with the transactions contemplated by this Agreement and
the other Transaction Documents shall be satisfactory in all reasonable
<PAGE> 28
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respects to the Sellers and their counsel, and the Sellers shall have received
the originals or certified or other copies of all such records and documents as
the Sellers may reasonably request.
9. HART-SCOTT-RODINO. Each of the Buyer and the Sellers agrees that it
will prepare and file no later than three (3) business days after the date
hereof any required notification and report form under the Hart-Scott-Rodino
Act of 1976, as amended (the "HSR Act"), in connection with the transactions
contemplated hereby.
10. CONFIDENTIAL INFORMATION. Any and all information disclosed by the
Buyer to any of the Sellers or by any of the Sellers to the Buyer as a result
of the negotiations leading to the execution of this Agreement, or in
furtherance thereof, which information was not already known to the Sellers or
to the Buyer, as the case may be, shall remain confidential to each of the
Sellers and the Buyer and their respective employees and agents until the
Closing Date, except to the extent that the Buyer, in its reasonable judgment,
must disclose any such information to its lenders in the syndicate for which
The First National Bank of Boston acts as Agent in the process of procuring the
loan or loans of funds for the purchase contemplated hereby. If the Closing
does not take place for any reason, each of the Sellers and the Buyer agrees
not to further divulge or disclose or use for its benefit or purposes any such
information at any time in the future unless it has otherwise become public.
The information intended to be protected hereby shall include, but not be
limited to, Confidential Information (as defined in Section 11.2 below) of the
Buyer or of the Companies, and anything else having an economic or pecuniary
benefit to the Buyer or the Sellers, respectively.
11. NON-COMPETITION.
11.1. Non-Competition. Each of the Sellers jointly and severally
acknowledges that the covenants and agreements in this Section 11 are a
condition precedent to the Buyer's obligations to purchase the Stock from the
Sellers under this Agreement, and that the Buyer would not purchase the Stock
but for the Sellers' agreements with the Buyer in this Section 11. Each of the
Sellers and the Buyer acknowledges that from and after the Closing Date the
Companies will sell products to customers located in markets throughout the
world and that engagement by any of the Sellers in the Designated Industry (as
hereinafter defined) otherwise than with the Buyer or any of its Affiliates (as
defined below) anywhere in the Territory (as defined below) could cause the
Buyer and its Affiliates (including the Companies) irreparable damage. For a
period of five (5) years after the Closing Date (the "Restricted Period"), the
Sellers will not (i) engage in the Designated Industry anywhere in the
Territory, alone or as a shareholder, partner, officer, director, employee or
consultant of any other business organization other than the Buyer or any of
its Affiliates, (ii) divert to any competitor of the Buyer or of the Companies
any customer of the Buyer or any of the Companies, nor (iii) solicit or
encourage any officer, employee or consultant of the Buyer or any of the
Companies to leave its employ for employment by or with any competitor of the
Buyer or any of the Companies. The foregoing restriction shall not prevent any
of the Sellers from owning five
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percent (5%) or less of the equity securities of any publicly traded company.
For purposes of this Section 11.1, the term "Designated Industry" shall mean
the business of manufacturing or distributing aluminum, wood or vinyl windows
or doors; the term "Affiliate" of any Person shall mean any other Person
controlling, controlled by or under common control with such Person; and the
term "Territory" shall mean New England, New York, New Jersey and Pennsylvania.
If at any time the provisions of this Section 11.1 shall be determined to be
invalid or unenforceable, by reason of being vague or unreasonable as to area,
duration or scope of activity, this Section 11.1 shall be considered divisible
and shall become and be immediately amended to only such area, duration and
scope of activity as shall be determined to be reasonable and enforceable by
the court or other body having jurisdiction over the matter; and each of the
Sellers agrees that this Section 11.1 as so amended shall be valid and binding
as though any invalid or unenforceable provision had not been included herein.
11.2. Continuing Confidentiality Obligations. Each of the Sellers
recognizes and acknowledges that certain of the assets of the Companies,
including without limitation, information regarding customers, sales
representatives, pricing policies, methods of operation, proprietary computer
programs, sales, products, profits, costs, markets, key personnel, formulae,
product applications, technical processes, and trade secrets (hereinafter
called "Confidential Information") are valuable, special, and unique assets of
the Companies. During the Restricted Period none of the Sellers shall, without
the prior written consent of the Buyer, disclose any or any part of the
Confidential Information to any person, firm, corporation, association, or any
other entity for any reason or purpose whatsoever, directly or indirectly,
except as required by law, unless and until such Confidential Information
becomes publicly known or available other than as a consequence of the breach
by any of the Sellers of his or her confidentiality obligations hereunder.
11.3. Remedies. Each of the Sellers acknowledges and agrees that the
Buyer's remedy at law for a breach or threatened breach of any of the
provisions of this Section 11 would be inadequate and, in recognition of this
fact, in the event of a breach or threatened breach by any of the Sellers of
any of the provisions of this Section 11 it is agreed that, in addition to its
remedies at law, the Buyer shall be entitled, without posting any bond, to
equitable relief in the form of specific performance, temporary restraining
order, temporary or permanent injunction or any other equitable remedy which
may then be available. Nothing herein contained shall be construed as
prohibiting the Buyer from pursuing any other remedies available to it for such
breach or any threatened breach, including any indication, verbal or otherwise,
of any Seller's intention to breach, or of any Seller's impending breach of,
any of the provisions of this Section 11.
12. DEFINITIONS. As used herein the following terms not otherwise
defined have the following respective meanings:
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"Assumed Indebtedness": The Indebtedness of the Companies as set forth
on Schedule 4.25(a) which will not be discharged by the Buyer in connection
with the transactions described herein.
"Cash": As of any date, the aggregate amount of the Companies' cash on
hand or in bank accounts minus outstanding checks issued by the Companies,
provided, however that any amount deducted herein shall not be treated as a
liability of the Companies for purposes of determining Net Working Capital.
"Consolidated EBIT": For any period, the consolidated earnings (or
loss) from the operation of the Companies for such period, after all expenses
and other proper charges but before payment of or provision for any income
taxes or interest expense for such period, determined in accordance with
generally accepted accounting principles, but excluding all expenses incurred
by the Companies in transactions with Atrium and other Subsidiaries of Atrium,
other than expenses directly attributable to the purchase of goods or services,
other than management services, actually supplied to the Companies.
"Discharged Indebtedness": The Indebtedness of the Companies as set
forth in Schedule 4.25(b), which will be discharged by the Buyer's payment of
the Pay-Off Amounts (as defined in Section 2.2(d) hereof) in respect thereof.
"Indebtedness": As applied to any Person (as defined in this Section
12), (a) all indebtedness of such Person for borrowed money, whether current or
funded, or secured or unsecured, (b) all indebtedness of such Person for the
deferred purchase price of property or services represented by a note or other
security, (c) all indebtedness of such Person created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such Person (even though the rights and remedies of the seller or
lender under such agreement in the event of default are limited to repossession
or sale of such property), (d) all indebtedness of such Person secured by a
purchase money mortgage or other lien to secure all or part of the purchase
price of property subject to such mortgage or lien, (e) all obligations under
leases which shall have been or must be, in accordance with generally accepted
accounting principles, recorded as capital leases in respect of which such
Person is liable as lessee, (f) any liability of such Person in respect of
banker's acceptances or letters of credit, and (g) all indebtedness referred to
in clause (a), (b), (c), (d), (e) or (f) above which is directly or indirectly
guaranteed by such Person or which such Person has agreed (contingently or
otherwise) to purchase or otherwise acquire or in respect of which it has
otherwise assured a creditor against loss.
"IRS": The United States Internal Revenue Service.
<PAGE> 31
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"Net Working Capital": As at any date, the Cash, accounts receivable
(less allowance for doubtful accounts), inventories, prepaid costs and employee
loans included in other current assets of the Companies as of such date (but
excluding any deferred taxes and other miscellaneous accounts) minus current
liabilities (including all accrued liabilities, but excluding current
maturities of Indebtedness) of the Companies as of such date, determined in
accordance with generally accepted accounting principles.
"Person": A corporation, an association, a partnership (general or
limited), a limited liability company, an organization, a business, an
individual, a government or political subdivision thereof or a governmental
agency.
"state": Any state or commonwealth of the United States of America; the
District of Columbia; the Commonwealth of Puerto Rico; and any other
dependency, possession or territory of the United States of America.
"Subsidiary": With respect to any Person, any corporation a majority
(by number of votes) of the outstanding shares of any class or classes of which
shall at the time be owned by such Person or by a Subsidiary of such Person, if
the holders of the shares of such class or classes (a) 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 the issuer thereof,
even though the right so to vote has been suspended by the happening of such a
contingency, or (b) are at the time entitled, as such holders, to vote for the
election of a majority of the directors (or persons performing similar
functions) of the issuer thereof, whether or not the right so to vote exists by
reason of the happening of a contingency.
"Transaction Documents": This Agreement, the Employment Agreements, the
Buy-Sell Agreement, the Exchange Agreement, each of the "Transaction
Documents", as defined in the Exchange Agreement, and any other documents
executed and/or delivered in connection with the transactions described herein
and therein.
13. INDEMNIFICATION.
13.1. Indemnity by the Sellers. Subject to the overall limitations,
minimum amounts and time limitations set forth in Section 13.5 below and
excluding liabilities in respect of the Bridgeport Clean-Up Costs (as defined
in Section 7.11 above), as to which liabilities the terms and provisions of
Sections 7.11 and 8.8 shall control, the Sellers jointly and severally agree to
indemnify and hold the Buyer and each of the Companies (and their respective
directors, officers, employees and affiliates) harmless from and with respect
to any and all claims, liabilities, losses, damages, costs and expenses,
including without limitation the reasonable fees and disbursements of counsel
<PAGE> 32
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(individually a "Loss", and collectively, the "Losses") related to or arising,
directly or indirectly, out of:
(i) any failure or any breach by the Sellers of any
representation or warranty, covenant, obligation or undertaking made by
any of the Sellers in this Agreement, any Schedule or Exhibit hereto,
any other Transaction Document, or any other statement or certificate
delivered pursuant hereto or thereto;
(ii) any actual or alleged income, sales, use, employment, or
other tax liability of the Companies in respect of any period through
the Closing Date to the extent such liability is not adequately
reflected or reserved against on the June Balance Sheet; and
(iii) any matters arising out of (A) any of the exceptions to
title insurance listed on Schedule 13.1(A) hereto with respect to the
Real Property located at 10 Parker Street, Clinton, Massachusetts or on
Schedule 13.1(B) hereto with respect to the Real Property located at
286-288 Knowlton Street, Bridgeport, Connecticut, (B) any other
exceptions reasonably acceptable to the Buyer and the Sellers which may
be added to any commitment for title insurance with respect to such
properties issued on or prior to the Closing Date, and (C) any
exceptions taken under any policy for title insurance issued pursuant to
any such commitment after the Closing Date, except (in each case) for
any Liens securing or arising from any of the Assumed Indebtedness or
from any liability for taxes which has either been paid in full prior to
the Closing Date or accrued for on the June Balance Sheet.
13.2. Indemnity by the Buyer. The Buyer agrees to indemnify and hold
the Sellers (and their respective directors, officers, employees and
affiliates) harmless from and with respect to any and all Losses related to or
arising from, directly or indirectly, any failure or any breach by the Buyer of
any representation or warranty, covenant, obligation or undertaking made by the
Buyer in this Agreement, any Schedule or Exhibit hereto, any other Transaction
Documents or any other statement or certificate delivered pursuant hereto or
thereto.
13.3. Claims.
(a) Notice. Any party seeking indemnification hereunder (the
"Indemnified Party") shall promptly notify the other party hereto (the
"Indemnifying Party") of any action, suit, proceeding, demand or breach (a
"Claim") with respect to which the Indemnified Party claims indemnification
hereunder, provided that failure of the Indemnified Party to give such notice
shall not relieve the Indemnifying Party of its obligations under this Section
13 except to the extent, if at all, that such Indemnifying Party shall have
been prejudiced thereby.
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(b) Third Party Claims. If such Claim relates to any action, suit,
proceeding or demand instituted against the Indemnified Party by a third party
(a "Third Party Claim"), other than any such Claim asserting any Losses related
to or arising directly or indirectly out of any inaccuracies in any
representation or warranty made by the Sellers in Section 4.24 or payable with
respect to claims for indemnification made with respect to Section 13.1(ii)
(collectively, "Tax Claims"), to the extent to which paragraph (c) below shall
apply to such Tax Claims, the Indemnifying Party shall be entitled to
participate in the defense of such Third Party Claim after receipt of notice of
such claim from the Indemnified Party. Within thirty (30) days after receipt
of notice of a particular matter from the Indemnified Party, the Indemnifying
Party may assume the defense of such Third Party Claim, in which case the
Indemnifying Party shall have the authority to negotiate, compromise and settle
such Third Party Claim, if and only if the Indemnifying Party shall have
confirmed in writing that it is obligated hereunder to indemnify the
Indemnified Party with respect to such Third Party Claim. The Indemnified
Party shall retain the right to employ its own counsel and to participate in
the defense of any Third Party Claim, the defense of which has been assumed by
the Indemnifying Party pursuant hereto, but the Indemnified Party shall bear
and shall be solely responsible for its own costs and expenses in connection
with such participation.
(c) Tax Claims. If such Claim is a Tax Claim, the Indemnified Party
shall have the authority to negotiate, compromise or settle such Tax Claim
without the prior consent of the Indemnifying Party, provided that (i) all
settlements made pursuant to this paragraph (c) do not exceed in the aggregate
$500,000 and (ii) the Indemnifying Party shall have the right to participate in
the defense of any such Tax Claim, at its own expense, and to receive prior
notice of any such settlement. For the avoidance of doubt, the prior consent
of the Indemnifying Party shall not be required for settlements by the
Indemnified Party of Tax Claims so long as the aggregate amount payable by the
Indemnifying Party pursuant to such settlements does not exceed $500,000, but
if any such settlement results in the total amount payable by the Indemnifying
Party pursuant to all settlements of Tax Claims exceeding $500,000 in the
aggregate, then such settlement shall require the consent of the Indemnifying
Party.
13.4. Method and Manner of Paying Claims. In the event of any Claims
under this Section 13, the claimant shall advise the party or parties who are
required to provide indemnification therefor in writing of the amount and
circumstances surrounding such claim. With respect to liquidated Claims, if
within thirty (30) days the other party has not contested such Claim in
writing, then, and subject to the limitations with respect to Claims set forth
in Section 13.5 below, the other party will pay the full amount of such
liquidated Claim within ten (10) days after the expiration of such thirty-day
period. Any amount owed by any of the Sellers as an Indemnifying Party
hereunder with respect to any Claim (other than Unlimited Claims and Cash Tax
Claims, each as defined below) shall be paid in accordance with, and subject to
the recourse limitations referred to in, Section 13.6 below. The unpaid
balance of a Claim shall bear interest at a rate per annum equal to the rate
announced by The First National Bank of Boston from time to time as its "Base
Rate" plus two
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percent (2%) from the date notice thereof is given by the Indemnified Party to
the Indemnifying Party.
13.5. Limitations on Indemnification.
(a) No Indemnifying Party shall be required to indemnify an
Indemnified Party hereunder except to the extent that the aggregate amount of
Losses for which the Indemnified Party is otherwise entitled to indemnification
pursuant to this Section 13 exceeds $250,000, whereupon the Indemnified Party
shall be entitled to be paid the excess of (i) the aggregate amount of all such
Losses over (ii) $250,000, subject to the limitations on recovery and recourse
set forth in Sections 13.5(b) and 13.6 below; provided, however, that (A) Cash
Tax Claims (as defined in Section 13.6 below) shall not be subject to either
the $250,000 deductible described above or to the limitations as to recovery
and recourse referred to below, and (B) Losses related to or arising directly
or indirectly out of any inaccuracies in any representation or warranty made by
any of the Sellers in Section 4.5 or Section 4.29 (collectively, "Unlimited
Claims") shall be indemnified in their entirety by such Seller or the Sellers,
as applicable, and shall not be subject to either the $250,000 deductible
described above or to the limitations as to recovery and recourse referred to
below.
(b) Subject to the first sentence of Section 13.6 and notwithstanding
anything else to the contrary otherwise stated herein or in any other
Transaction Document, the aggregate amount actually payable by either (i) the
Buyer as an Indemnifying Party on the one hand or (ii) the Sellers as
Indemnifying Parties on the other hand pursuant to this Section 13 and Section
11 of the Exchange Agreement, with respect to all Claims against such
Indemnifying Party or Indemnifying Parties, as the case may be, other than
Unlimited Claims (as to which no such limit shall apply), shall in no event
exceed $5,000,000 (as such amount may be reduced from time to time pursuant to
Section 3(d) of the Buy-Sell Agreement).
(c) No Indemnifying Party shall be liable for any Losses pursuant to
this Section 13 unless a written claim for indemnification in accordance with
Section 13.4 is given by the Indemnified Party to the Indemnifying Party with
respect thereto within eighteen (18) months after the Closing, except that this
time limitation shall not apply to any Losses related to or arising directly or
indirectly out of any Tax Claims or Unlimited Claims, as to which in each case
the applicable statute of limitations shall apply.
(d) No Indemnified Party may recover hereunder or under the Buy-Sell
Agreement for any Loss as to which such Indemnified Party has already received
or is simultaneously receiving indemnification pursuant to the Exchange
Agreement.
13.6. Buy-Sell Agreement; Limitation of Recourse Against Sellers. The
parties hereto intend and agree that, notwithstanding anything to the contrary
stated in any other paragraph of this Section
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13, the Buyer's and the Companies' sole recourse against the Sellers for
indemnification with respect to any Claims, other than Unlimited Claims and
Cash Tax Claims (as defined below), shall be governed by, and subject to the
terms and provisions of, the Buy-Sell Agreement. The provisions of this
Section 13.6 shall not apply in any event to (a) any Loss with respect to an
Unlimited Claim, the full amount of which shall be indemnifiable and as to
which recourse shall not be limited to the provisions of the Buy-Sell
Agreement, and (b) Losses with respect to Tax Claims, to the extent (but only
to the extent) that all such Losses aggregate $750,000 or less ("Cash Tax
Claims"), all of which shall be fully indemnifiable without recourse being
limited to the Buy-Sell Agreement.
14. TERMINATION. This Agreement may be terminated by either the
Buyer or the Sellers in writing, without liability to the terminating party on
account of such termination (provided the terminating party is not otherwise in
default or in breach of this Agreement), if the Closing shall not have occurred
on or before September 30, 1996, other than as a consequence of (a) a failure
to fulfill the conditions precedent to the effectiveness of this Agreement
referred to in Sections 7.15 and 8.7 hereof, in which case the foregoing date
shall be extended until the next business day following the expiration of any
applicable waiting period under the HSR Act, provided that the foregoing date
shall not be extended in any event after October 31, 1996, or (b) intentional
breach or intentional default by the terminating party.
15. GENERAL.
15.1. Survival of Representations and Warranties. The representations
and warranties of the parties hereto contained in this Agreement or otherwise
made in writing in connection with the transactions contemplated hereby (in
each case except as affected by the transactions contemplated by this
Agreement) shall be deemed material and, notwithstanding any investigation by
the Buyer, shall be deemed to have been relied on by the Buyer and shall
survive the Closing, and the consummation of the transactions contemplated
hereby. Each representation and warranty made by any of the Sellers or the
Buyer in this Agreement shall expire on the last day, if any, that Claims for
breaches of such representation or warranty may be made pursuant to Section
13.5 hereof, except that any such representation or warranty that has been made
the subject of a Claim prior to such expiration date shall survive with respect
to such Claim until the final resolution of such Claim pursuant to Section 13.
15.2. Section 338(h)(10) Election. The Buyer and the Parent
Stockholders hereby agree that the Buyer and BNY will join in making an
election under Section 338(h)(10) of the Code (a "Section 338(h)(10) Election")
with respect to the purchase and sale of the BNY Stock. The Buyer will be
responsible for preparing and filing all documents and materials necessary in
connection with making the Section 338(h)(10) Election, and each of the Parent
Stockholders agrees to cooperate with the Buyer in connection therewith
(including, without limitation, signing and returning to the Buyer any
documents sent to such Parent Stockholder for his or her signature in
connection therewith
<PAGE> 36
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within ten (10) business days of his or her receipt of such documents). The
parties agree that, for purposes of the Section 338(h)(10) Election, the fair
market value of the assets of the Companies shall be as set forth in Schedule
15.2 hereto. The Buyer and the Parent Stockholders will file all tax returns
on a basis consistent with the Section 338(h)(10) Election and the valuation of
assets set forth in Schedule 15.2, and all taxes imposed on the deemed sale of
assets resulting from the Section 338(h)(10) Election will be included in the
tax returns of the Parent Stockholders, as applicable, and will be paid by the
Parent Stockholders.
15.3. Expenses. The Sellers shall pay all transfer and sales taxes
payable in connection with the sale of the Stock. All expenses of the
preparation, execution and consummation of this Agreement and of the
transactions contemplated hereby, including without limitation attorneys',
accountants' and outside advisers' fees and disbursements, shall be borne by
the party incurring such expenses, provided that (a) the Sellers jointly and
severally shall pay the brokerage fees of any broker referred to on Schedule
4.29 hereto, (b) the Buyer shall at Closing pay to the Sellers 50%, up to a
maximum amount payable by the Buyer under this Section 15.3 and Section 12.2 of
the Exchange Agreement of $30,000, of the fees and expenses of the Companies'
Accountants incurred in preparation of the June Balance Sheet and any other
financial statements, calculations and certifications referred to in Section 3
hereof, (c) the Buyer shall pay the fee required to be paid in connection with
the filing of any notification and report form under the HSR Act, as referred
to in Section 9 hereof and (d) the Companies shall pay professional fees and
expenses, including without limitation attorneys', accountants' and outside
advisers' fees and disbursements, incurred in connection with the transactions
contemplated hereby and accrued as liabilities of the Companies on the June
Balance Sheet, up to a maximum amount of such fees and expenses of $150,000.00
(collectively, the "Accrued Transaction Expenses").
15.4. Notices. All notices, demands and other communications hereunder
shall be in writing or by written telecommunication, and shall be deemed to
have been duly given if delivered personally or if mailed by certified mail,
return receipt requested, postage prepaid, or if sent by overnight courier, or
sent by written telecommunication, as follows:
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If to the Sellers, to:
Mr. Howard S. Saffan
Bishop Manufacturing Co., Inc.
305 Knowlton Street
Bridgeport, CT 06608
Fax: 203-579-2493
with a copy sent contemporaneously to:
John R. Fallon, Jr., Esq.
Hunton & Williams
200 Park Avenue
New York, NY 10166
Fax: 212-309-1100
If to the Buyer, to:
Randall Fojtasek
Fojtasek Companies, Inc.
P.O. Box 226957
Dallas, TX 75222
Fax: 214-438-8117
with copies sent contemporaneously to:
T. Brook Parker
Heritage Partners Inc.
30 Rowes Wharf, Suite 300
Boston, MA 02110
Fax: 617-439-0689
and to:
Robert M. Wolf, Esq.
Bingham, Dana & Gould LLP
150 Federal Street
Boston, MA 02110
Fax: 617-951-8736
<PAGE> 38
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Any such notice shall be effective (a) if delivered personally, when
received, (b) if sent by overnight courier, when receipted for, (c) if mailed,
three (3) days after being mailed as described above, and (d) if sent by
written telecommunication, when dispatched.
15.5. Entire Agreement. This Agreement contains the entire
understanding of the parties, supersedes all prior agreements and
understandings relating to the subject matter hereof and shall not be amended
except by a written instrument hereafter signed by all of the parties hereto.
15.6. Governing Law. The validity and construction of this Agreement
shall be governed and construed and enforced in accordance with the internal
laws (and not the choice-of-law rules) of the State of New York.
15.7. Sections and Section Headings. The headings of sections and
subsections are for reference only and shall not limit or control the meaning
thereof.
15.8. Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, successors and
permitted assigns. Neither this Agreement nor the obligations of any party
hereunder shall be assignable or transferable by such party without the prior
written consent of the other party hereto; provided, however, that nothing
contained in this Section 15.8 shall prevent the Buyer (a) from transferring or
assigning this Agreement or its rights or obligations hereunder, with the prior
written consent of the Sellers, which may be withheld for any reason, to
another entity controlling, under the control of, or under common control with
the Buyer, or (b) from assigning all or part of its rights or obligations
hereunder, without the consent of the Sellers, by way of collateral assignment
to any bank or financing institution providing financing for the acquisition
contemplated hereby, but no such transfer or assignment made pursuant to
clauses (a) or (b) shall relieve the Buyer of its obligation under this
Agreement.
15.9. Severability. In the event that any covenant, condition, or
other provision herein contained is held to be invalid, void, or illegal by any
court of competent jurisdiction, the same shall be deemed to be severable from
the remainder of this Agreement and shall in no way affect, impair, or
invalidate any other covenant, condition, or other provision contained herein.
15.10. Further Assurances. The parties agree to take such reasonable
steps and execute such other and further documents as may be necessary or
appropriate to cause the terms and conditions contained herein to be carried
into effect.
15.11. No Implied Rights or Remedies. Except as otherwise expressly
provided herein, nothing herein expressed or implied is intended or shall be
construed to confer upon or to give any person, firm or corporation, other than
the Sellers and the Buyer and their respective shareholders, if any, any rights
or remedies under or by reason of this Agreement.
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15.12. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
15.13. Satisfaction of Conditions Precedent. Each of the Sellers and
the Buyer will use its best efforts to cause the satisfaction of the conditions
precedent contained in this Agreement; provided, however, that nothing
contained in this Section 15.13 shall obligate either party hereto to waive any
right or condition under this Agreement.
15.14. Public Statements or Releases. Each of the parties hereto
agrees that prior to the consummation of the Closing no party to this Agreement
will make, issue or release any public announcement, statement or
acknowledgment of the existence of, or reveal the status of, this Agreement or
the transactions provided for herein, without first obtaining the consent of
the other party hereto. Nothing contained in this Section 15.14 shall prevent
either party from making such disclosures as such party may consider necessary
to satisfy such party's legal or contractual obligations.
15.15. Knowledge. Whenever the phrase "to the knowledge of the
Sellers" or another similar qualification is used herein, the relevant
knowledge shall refer to the actual knowledge of any of the Sellers.
15.16. Seller Representative. By the execution and delivery of this
Agreement, the Sellers hereby irrevocably constitute and appoint Howard S.
Saffan as the true and lawful agent and attorney-in-fact (the "Seller
Representative") of the Sellers with full power of substitution to act in the
name, place and stead of the Sellers with respect to the transfer of the Stock
owned by the Sellers to the Buyer in accordance with the terms and provisions
of this Agreement, and to act on behalf of the Sellers in any litigation or
arbitration involving this Agreement, do or refrain from doing all such further
acts and things, and execute all such documents as the Seller Representative
shall deem necessary or appropriate in connection with the transactions
contemplated by this Agreement, including, without limitation, the power:
(i) to act for the Sellers with regard to matters pertaining
to indemnification referred to in this Agreement, including the power to
compromise any Claim on behalf of the Sellers and to transact matters of
litigation;
(ii) to execute and deliver all ancillary agreements,
certificates and documents that the Seller Representative deems
necessary or appropriate in connection with the consummation of the
transactions contemplated by this Agreement;
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(iii) to receive funds and give receipts for funds, including in
respect of any adjustments to the Purchase Price;
(iv) to do or refrain from doing any further act or deed on
behalf of the Sellers that the Seller Representative deems necessary or
appropriate in his sole discretion relating to the subject matter of
this Agreement as fully and completely as the Sellers could do if
personally present; and
(v) to receive service of process in connection with any
Claims under this Agreement.
If Howard S. Saffan dies or otherwise becomes incapacitated and unable
to serve as Seller Representative, Leslie Goldbloom shall serve as the new
Seller Representative. The appointment of the Seller Representative shall be
deemed coupled with an interest and shall be irrevocable, and the Buyer and
any other Person may conclusively and absolutely rely, without inquiry, upon
any action of the Seller Representative in all matters referred to herein. All
payments and notices made or delivered by the Buyer to the Seller
Representative for the benefit of the Sellers shall discharge in full all
liabilities and obligations of the Buyer to the Sellers with respect thereto.
The Sellers hereby confirm all that the Seller Representative shall do or cause
to be done by virtue of his appointment as the Seller Representative. The
Seller Representative shall act for the Sellers on all of the matters set forth
in this Agreement in the manner the Seller Representative believes to be in the
best interest of the Sellers and consistent with the obligations under this
Agreement, but the Seller Representative shall not be responsible to the
Sellers for any loss or damages the Sellers may suffer by the performance of
his duties under this Agreement, other than loss or damage arising from willful
violation of the law or gross negligence in the performance of his or her
duties under this Agreement.
<PAGE> 41
-41-
IN WITNESS WHEREOF, and intending to be legally bound hereby, the
parties hereto have caused this Agreement to be duly executed and delivered as
a sealed instrument as of the date and year first above written.
BUYER:
FOJTASEK COMPANIES, INC.
By: /s/ RANDALL S. FOJTASEK
--------------------------------
Title:
SELLERS:
/s/ HOWARD S. SAFFAN
-----------------------------------
Howard S. Saffan
/s/ LESLIE GOLDBLOOM
-----------------------------------
Leslie Goldbloom
/s/ KEVIN SCHUMACHER
-----------------------------------
Kevin Schumacher
<PAGE> 42
-42-
INDEX OF EXHIBITS AND SCHEDULES
<TABLE>
<CAPTION>
Exhibits
- --------
<S> <C>
Exhibit A-1 - Form of Employment Agreement with Howard S. Saffan
Exhibit A-2 - Form of Employment Agreement with Kevin Schumacher
Exhibit B - Form of Buy-Sell Agreement
Exhibit C - Form of Legal Opinion of Hunton & Williams
Exhibit D - Form of Legal Opinion of Sellers' Connecticut Counsel
Exhibit E - Form of Legal Opinion of Adair, Morris & Osborn, P.C.
Schedules
- ---------
1. Sellers and Stock
3(a)(i) June Financial Statements
3(a)(ii) Calculation Date Net Working Capital
4.4 Capitalization
4.7 Governmental Consents (Sellers); Permits and Licenses
4.8 Year-End Financial Statements
4.9 Certain Changes
4.10 Litigation, Etc.
4.11 Conformity to Law
4.12(a) Liens
4.12(b) Capital Assets; Real Property
4.12(c) Lease Descriptions; Addresses of Leased Property
4.13 Environmental Matters
4.14 Insurance
4.15 Contracts
4.16 Payroll Information
4.17 Employee Benefit Plans
4.18 Labor Relations
4.19 Potential Conflicts of Interest
4.20 Trademarks, Patents, etc.
4.21 Suppliers and Customers
4.25(a) Assumed Indebtedness
4.25(b) Discharged Indebtedness
4.25(c) Defaults, etc.
4.26 Bank Accounts, etc.
4.29 Seller's Broker
4.30 Warranty Claims; Product Liability
</TABLE>
<PAGE> 43
-43-
<TABLE>
<S> <C>
5.4 Governmental Consents (Buyer)
5.5 Buyer's Broker
13.1(A) Title Exceptions (Clinton, MA)
13.1(B) Title Exceptions (Bridgeport, CT)
15.2 Allocation of Asset Values pursuant to Section 338(h)(10)
Election
</TABLE>
<PAGE> 44
August 22, 1996
VIA FAX AND FEDEX
Fojtasek Companies, Inc.
Atrium Corporation
c/o Heritage Partners, Inc.
30 Rowes Wharf - Suite 300
Boston, Massachusetts 02110
Attention: T. Brook Parker
Re: Bishop - Fojtasek Transaction
Gentlemen:
Reference is made to the Stock Purchase Agreement, and the Securities
Exchange Agreement, each in respect to the above-entitled transaction.
Capitalized terms not defined herein are as used in the Stock Purchase
Agreement.
By executing this letter in the space provided below, Buyer and Atrium
acknowledge and agree that Sellers will be removing from the Companies the
vehicles described on Exhibit A hereto, with title to each of the vehicles
transferred to the name of each person noted on Exhibit A.
Atrium and Buyer also acknowledge and agree that these vehicles were
included as assets on the June 30, 1996 financial statements of the Companies
and have been paid out of the Companies with the consent of Atrium and Buyer.
Sincerely,
John R. Fallon, Jr.
Acknowledged and Agreed to
this ___ day of August, 1996
FOJTASEK COMPANIES, INC.
By:
---------------------------------------
Name:
------------------------------
Title:
-----------------------------
ATRIUM CORPORATION
By:
---------------------------------------
Name:
------------------------------
Title:
-----------------------------
<PAGE> 45
EXHIBIT A
<TABLE>
<CAPTION>
VEHICLE VEHICLE IDENTIFICATION NUMBER NEW OWNER
------- ----------------------------- ---------
<S> <C> <C>
1995 Porsche WPOCA2990SS342918 Leslie Goldbloom
1996 Jeep Cherokee 1J4EZ78Y5TC126866 Leslie Goldbloom
1995 BMW 840 WBAEF632XSCC89796 Howard S. Saffan
1993 Volvo 945 Wagon YV1JW8707P3089401 Kevin Schumacher
</TABLE>
<PAGE> 46
September 9, 1996
VIA FAX AND FEDEX
Fojtasek Companies, Inc.
9001 Ambassador Row
Dallas, Texas 75247
Attention: Randall S. Fojtasek
Re: Bishop - Fojtasek Transaction
Gentlemen:
Reference is made to the Stock Purchase Agreement, dated as of August
22, 1996, by and among Buyer and Sellers, in respect to the above-entitled
transaction. Capitalized terms not defined herein are as used in the Stock
Purchase Agreement.
By executing this letter in the space provided below, Buyer accepts and
agrees with Sellers that for the purposes of Section 13.3(c) of the Stock
Purchase Agreement, the term Tax Claim shall mean and be limited only to
executive compensation matters.
Please indicate your acceptance and agreement to the matters addressed
in this letter by executing both originals of this letter and returning a
signed original to the undersigned.
Sincerely,
John R. Fallon, Jr.
Accepted and Agreed to
this 9th day of September, 1996
FOJTASEK COMPANIES, INC.
By:
---------------------------
Name: Randall S. Fojtasek
---------------------------
Title: President
---------------------------
<PAGE> 1
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
FCI HOLDING CORP.
FIRST: The name of the corporation is: FCI Holding Corp.
SECOND: The address of its registered office in the State of Delaware
is 1013 Centre Road in the City of Wilmington, County of New Castle. The name
of its registered agent at such address is Corporation Service Company.
THIRD: The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
FOURTH: The total number of shares of capital stock which the
corporation shall have authority to issue is Three Thousand (3,000) and the par
value of each of such shares is One Cent ($0.01), amounting in the aggregate to
Thirty Dollars ($30.00) of capital stock.
FIFTH: The name and mailing address of the sole incorporator is as
follows:
<TABLE>
<CAPTION>
NAME MAILING ADDRESS
---- ---------------
<S> <C>
Pamela A. Stiglitz c/o Bingham, Dana & Gould
150 Federal Street
Boston, Massachusetts 02110
</TABLE>
SIXTH: The following provisions are inserted for the management of the
business and for the conduct of the affairs of the corporation and for defining
and regulating the powers of the corporation and its directors and stockholders
and are in furtherance and not in limitation of the powers conferred upon the
corporation by statute:
(a) The election of directors need not be by written ballot.
(b) The Board of Directors shall have the power and authority:
(1) to adopt, amend or repeal by-laws of the corporation,
subject only to such limitation, if any, as may be from
time to time imposed by law or by the by-laws; and
(2) to the full extent permitted or not prohibited by law, and
without the consent of or other action by the
stockholders, to authorize or create mortgages, pledges or
other liens or encumbrances upon any or all of the assets,
real, personal or mixed, and franchises of the
corporation, including after-acquired property, and to
exercise all of the powers of the corporation in
connection therewith; and
<PAGE> 2
(3) subject to any provision of the by-laws, to determine
whether, to what extent, at what times and places and
under what conditions and regulations the accounts, books
and papers of the corporation (other than the stock
ledger), or any of them, shall be open to the inspection
of the stockholders, and no stockholder shall have any
right to inspect any account, book or paper of the
corporation except as conferred by statute or authorized
by the by-laws or by the Board of Directors.
SEVENTH: No director of the corporation shall be personally liable to
the corporation or to any of its stockholders for monetary damages for breach
of fiduciary duty as a director, notwithstanding any provision of law imposing
such liability; provided, however, that to the extent required from time to
time by applicable law, this Article Seventh shall not eliminate or limit the
liability of a director, to the extent such liability is provided by applicable
law, (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 Delaware Code, or (iv) for any transaction from which the
director derived an improper personal benefit. No amendment to or repeal of
this Article Seventh shall apply to or have any effect on the liability or
alleged liability of any director for or with respect to any acts or omissions
of such director occurring prior to the effective date of such amendment or
repeal.
THE UNDERSIGNED, being the sole incorporator hereinbefore named, for the
purpose of forming a corporation pursuant to the General Corporation Law of the
State of Delaware, does make this certificate, hereby declaring an certifying
that this is my act and deed and the facts stated herein are true, and
accordingly have hereunto set my hand this 23rd day of June, 1995.
/s/ Pamela A. Stiglitz
------------------------------
Pamela A. Stiglitz
2
<PAGE> 3
FCI HOLDING CORP.
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
FCI Holding Corp., a Delaware corporation (the "Corporation") does
hereby certify, pursuant to Section 241 of the General Corporation Law of the
State of Delaware, that:
First: The Corporation has not received any payment for any of its
stock.
Second: Pursuant to Section 141(f) of the General Corporation Law of
the State of Delaware and Section 3.17 of the Corporation's By-Laws, by written
consent of the Board of Directors of the Corporation dated June 29, 1995, the
Amendment to the Corporation's Certificate of Incorporation changing Article
Fourth of the Certificate of Incorporation and referred to in the following
resolutions was duly adopted:
RESOLVED: That it is deemed advisable and in the best
interest of the Corporation to amend Article Fourth
of its Certificate of Incorporation to read as set
forth in Exhibit A, attached hereto.
RESOLVED: That the Corporation be and it hereby is authorized
and directed to amend its Certificate of
Incorporation as set forth in the foregoing
resolution, and that the appropriate officers of
the Corporation be and they hereby are authorized
and directed to execute and deliver any and all
documents or certificates deemed necessary to
effectuate the proposed amendment outlined above,
including, pursuant to Section 241 of the General
Corporation Law of the State of Delaware, a
Certificate of Amendment to the Certificate of
Incorporation for filing with the Delaware
Secretary of State.
Accordingly, Article Fourth of the Certificate of Incorporation of the
Corporation is hereby amended to read as set forth in Exhibit A attached
hereto.
<PAGE> 4
IN WITNESS WHEREOF, FCI Holding Corp. has caused this Certificate of
Amendment to its Certificate of Incorporation to be executed by Michel
Reichert, its President, and attested by Michael F. Gilligan, its Secretary,
this 29th day of June, 1995.
FCI HOLDING CORP.
By: /s/ Michel Reichert
-------------------------------
Michel Reichert, President
Attest:
By: /s/ Michael F. Gilligan
--------------------------------
Michael F. Gilligan, Secretary
2
<PAGE> 5
EXHIBIT A
AMENDMENT TO CERTIFICATE OF INCORPORATION
OF
FCI HOLDING CORP.
* * * * * * *
FOURTH: The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 400,000, consisting solely of:
50,000 shares of preferred stock, $1.00 par value per share (the
"Preferred Stock");
150,000 shares of Class A Voting Common Stock, $.01 par value per share
(the "Class A Common Stock");
150,000 shares of Class B Non-Voting Common Stock, $.01 par value per
share (the "Class B Common Stock"); and
50,000 shares of Class C Voting Common Stock, $.01 par value per share
(the "Class C Common Stock").
As used in this Article Fourth:
"Change of Control" means any merger, consolidation, sale of Common
Stock or other transfer, as a result of which, the holders of 80% of the
Corporation's outstanding Common Stock prior to such transaction or series of
related transactions (calculated on a fully-diluted basis) shall cease to hold
at least 80% of such Common Stock subsequent to such transaction or series of
related transactions (calculated on a fully-diluted basis).
"Common Stock" means, collectively, the Class A Common Stock, the Class
B Common Stock and the Class C Common Stock.
"Default Period" means that period commencing on delivery to the
Corporation at its principal office of a Special Rights Notice, and ending on
the first to occur of the last day of the second full fiscal quarter of the
Corporation thereafter during which no Special Event of Default exists.
"Dividend Payment Date" has the meaning set forth in Part A, Section
1.1(a) of this Article Fourth.
"Special Event of Default" has the meaning set forth in Section 8.2(b)
of the Securities Purchase Agreement.
<PAGE> 6
"Junior Stock" has the meaning set forth in Part A, Section 1.1(b) of
this Article Fourth.
"Liquidation" has the meaning set forth in Part A, Section 1.2(a) of
this Article Fourth.
"Liquidation Value" has the meaning set forth in Part A, Section 1.2(a)
of this Article Fourth.
"Person" means an individual, partnership, corporation, association,
trust, joint venture, unincorporated organization, or any government,
governmental department or agency or political subdivision thereof.
"Qualified Public Offering" means Qualified Public Offering shall mean
the Corporation's underwritten public offering pursuant to an effective
registration statement under the Securities Act covering the offer and sale of
shares of Common Stock in which not less than $20,000,000 of gross proceeds
from such public offering are received by the Corporation for the account of
the Corporation.
"Redemption Date" as to any share of Preferred Stock, means the
redemption date for such share of Preferred Stock determined pursuant to Part
A, Section 1.4 of this Article Fourth.
"Redemption Event" means the occurrence of any of the following: (a) the
sale of all or substantially all of the assets of the Corporation or of all or
substantially all of the assets of any Subsidiary or Subsidiaries which
constitute all or substantially all of the assets of the Corporation, (b) a
Change of Control or (c) an initial public offering of the Common Stock
pursuant to a public offering registered under the Securities Act of 1933, as
amended.
"Securities Purchase Agreement" means the Securities Purchase Agreement,
dated as of July 3, 1995, among the Corporation and Heritage Fund I, L.P., a
Delaware limited partnership, as the same may be amended, restated, modified or
supplemented and in effect from time to time.
"Special Rights Notice" means a written notice to the Corporation at its
principal office by holders of not less than 51% of the then outstanding Class
C Common Stock stating that a Special Event of Default has occurred and is
continuing and specifying the nature of such default.
"Subsidiary" means any Person of which the Corporation or other
specified Person now or hereafter shall at the time own directly or indirectly
through a Subsidiary at least a majority of the outstanding capital stock (or
other shares of beneficial interest) ordinarily entitled to vote for the
election of such Person's directors (or, in the case of a Person that is not a
corporation, for those Persons exercising functions similar to directors of a
corporation).
The following is a statement of the designations, powers, privileges and
rights, and the qualifications, limitations and restrictions, in respect of
each class of capital stock of the Corporation.
2
<PAGE> 7
A. PREFERRED STOCK
1. Terms Applicable to Preferred Stock.
1.1 Dividends.
(a) The Corporation will pay preferential dividends to the holders of
the Preferred Stock as provided in this Section 1.1. Dividends on each
outstanding share of Preferred Stock will accrue cumulatively on a daily basis
during each fiscal quarter of the Corporation at the rate of 9 1/2% per annum
on the Liquidation Value thereof. Dividends accrued on the Preferred Stock
through June 30, 1998 will be payable by the Corporation upon the redemption of
such shares of Preferred Stock pursuant to Section 1.4 hereof. Dividends
accrued on the Preferred Stock during each fiscal quarter ending after June 30,
1998 will be payable on the last day of each fiscal quarter of the Corporation
(each such date, a "Dividend Payment Date"). In the event that any dividends
accrued during any fiscal quarter are not paid on the Dividend Payment Date
with respect thereto, or, in the case of any Dividend Payment Date that is not
a business day, on the next succeeding business day, the dividend rate on each
share of Preferred Stock shall be increased to provide that an additional
dividend shall be paid with respect to such accrued and unpaid dividends at the
rate of 12% per annum, compounded quarterly, until such time as such dividends
shall have been declared and paid as provided herein.
(b) Dividends on each share of Preferred Stock will accrue from and
including the date of issuance of such share to and including the date on which
the Liquidation Value (plus all then accrued but unpaid dividends thereon) of
such share is paid, whether or not they have been declared and whether or not
there are profits, surplus or other funds of the Corporation legally available
for the payment of dividends. The date on which the Corporation initially
issues any share of Preferred Stock will be deemed to be its "date of
issuance," regardless of the number of times transfer of such share is made on
the stock records maintained by or for the Corporation and regardless of the
number of certificates which may be issued to evidence such share. No
dividends or other distributions will be paid, declared or set apart with
respect to the Common Stock or any other shares of capital stock of the
Corporation ranking on liquidation junior to the Preferred Stock (together with
the Common Stock, "Junior Stock") without the prior written consent of the
holders of a majority of the then outstanding shares of Preferred Stock, unless
all accrued but unpaid dividends on the Preferred Stock shall have been paid.
(c) If at any time the Corporation pays less than the total amount of
dividends then accrued with respect to the Preferred Stock, such payment will
be distributed ratably among the holders of the Preferred Stock based upon the
aggregate accrued but unpaid dividends on the shares of Preferred Stock held by
each such holder.
(d) All dividends payable on the Preferred Stock pursuant to this
Section 1.1 shall be paid in cash.
3
<PAGE> 8
1.2 Liquidation.
(a) Upon any voluntary or involuntary liquidation, dissolution or
winding up of the Corporation (each such event being hereafter referred to as a
"liquidation"), the holders of Preferred Stock will be entitled to be paid,
before any payment shall be made to the holders of Junior Stock, an amount in
cash equal to $1,000 per share of Preferred Stock, subject to appropriate
adjustment in the event of any stock dividend, stock split, combination or
other similar recapitalization affecting the Preferred Stock (as so adjusted,
the "Liquidation Value"), plus all then accrued and unpaid dividends to the
date of payment, and the holders of Preferred Stock will not be entitled to any
further payment. If, upon any Liquidation, the Corporation's assets to be
distributed among the holders of the Preferred Stock are insufficient to permit
payment to such holders of the full amount to which they are entitled
hereunder, then the entire assets to be distributed will be distributed ratably
among such holders based upon the ten aggregate Liquidation Value (plus all
then accrued but unpaid dividends) of the Preferred Stock held by each such
holder.
(b) Upon and after any Liquidation, unless and until the holder of
each share of Preferred Stock receives payment in full of the Liquidation Value
plus all accrued and unpaid dividends on such share of Preferred Stock, the
Corporation shall not redeem, repurchase or otherwise acquire for value, or
declare or pay any dividend or other distribution on or with respect to, any
class or series of Junior Stock. Upon any after any Liquidation, after the
payment of all preferential amounts required to be paid to the holders of
Preferred Stock and any other class or series of stock of the Corporation
ranking on liquidation on a parity with the Preferred Stock, the holders of
Junior Stock then outstanding shall be entitled to receive the remaining assets
of the Corporation available for distribution to its stockholders.
1.3 Voting Rights.
(a) General. Except as otherwise provided in subsection (b) of this
Section 1.3, or as otherwise required by law, the holders of Preferred Stock
shall have no right to vote on any matter submitted to stockholders of the
Corporation for vote, consent or approval.
(b) No Amendment, Alteration or Repeal. The Corporation will not
amend, alter or repeal the preferences, special rights or other powers of the
Preferred Stock so as to affect adversely the Preferred Stock without the
written consent or affirmative vote of the holders of at least two-thirds of
the then outstanding shares of Preferred Stock, given in writing or by vote at
a meeting, consenting or voting (as the case may be) separately as a class.
For this purpose, without limiting the generality of the foregoing, the
increase in the number of authorized shares of Preferred Stock or the
authorization or issuance of any series of preferred stock with either
preference or priority over the Preferred Stock or parity with the Preferred
Stock as to the right to receive either dividends or amounts distributable upon
a Liquidation of the Corporation shall be deemed to affect adversely the
Preferred Stock.
4
<PAGE> 9
1.4 Redemptions.
(a) Redemption upon Occurrence of Redemption Event. The Corporation
will, upon the occurrence of any Redemption Event, redeem all of the Preferred
Stock then outstanding at a price per share equal to the Liquidation Value
thereof (plus all then accrued but unpaid dividends thereon) unless, in the
case of such Redemption Event, the holders of a majority of the outstanding
shares of Preferred Stock advise the Corporation in writing that they do not
wish to be redeemed in connection with such Redemption Event, in which case no
shares of Preferred Stock shall be redeemed in connection with such Redemption
Event.
(b) Late Payments. If any share of Preferred Stock is not redeemed
on the date scheduled for redemption pursuant to this Section 1.4 other than
with the consent of the holders of a majority of the outstanding shares of
Preferred Stock, the dividend rate applicable to such share shall be increased
to 12% per annum, compounded quarterly, accruing from such scheduled redemption
date to the date on which such share actually shall be redeemed.
(c) Notice of Redemption. The Corporation shall provide written
notice of any event giving rise to the redemption of Preferred Stock pursuant
to this Section 1.4 specifying the time and place of redemption and the
redemption price per share, by first class or registered mail, postage prepaid,
to each holder of record of Preferred Stock at the address for such holder last
shown on the records of the transfer agent therefor (or the records of the
Corporation, if it serves as its own transfer agent), not more than 60 nor less
than 30 days prior to the date on which such redemption is to be made. If less
than all the shares of Preferred Stock owned by such holder are then to be
redeemed, the notice will also specify the number of shares of Preferred Stock
which are to be redeemed.
(d) Redemption Price and Priority of Payment. For each share of
Preferred Stock which is to be redeemed, the Corporation will be obligated on
the applicable Redemption Date to pay to the holder thereof (upon surrender by
such holder at the Corporation's principal office of the certificate
representing such share of Preferred Stock), in immediately available funds, an
amount equal to the Liquidation Value thereof (plus all then accrued but unpaid
dividends thereon). If the funds of the Corporation legally available for
redemption of shares of Preferred Stock on any Redemption Date are insufficient
to redeem the total number of shares of Preferred Stock to be redeemed on such
date, those funds which are legally available will be used to redeem the
maximum possible number of shares of Preferred Stock ratably among the holders
of such shares to be redeemed based upon the aggregate Liquidation Value of
such shares (plus all then accrued but unpaid dividends thereon) held by each
such holder. At any time thereafter when additional funds of the Corporation
are legally available for the redemption of Preferred Stock, such funds will
immediately be used to redeem the balance of the shares which the Corporation
has become obligated to redeem on any Redemption Date, but which it has not
redeemed. In case fewer than the total number of shares of Preferred Stock
represented by any certificate are redeemed, a new certificate representing the
number of unredeemed shares will be issued to the holder thereof without cost
to such holder within seven business days after surrender of the certificate
representing the redeemed shares of Preferred Stock.
(e) Pro Rata Treatment of Preferred Stock. The Corporation shall not
redeem, repurchase or otherwise acquire any Preferred Stock except as expressly
authorized herein or pursuant to a
5
<PAGE> 10
purchase offer made pro rata to all holders of Preferred Stock on the basis of
the aggregate Liquidation Value (plus all then accrued but unpaid dividends
thereon) of shares of Preferred Stock owned by each such holder.
(f) Dividends after Redemption Date. No share of Preferred Stock is
entitled to any dividends accruing after the date on which the Liquidation
Value (plus all then accrued but unpaid dividends thereon) of such share is
paid. On such date all rights of the holder of such share of Preferred Stock
will cease, and such share of Preferred Stock will be deemed not to be
outstanding.
(g) Payments on Junior Stock. If and so long as there are any shares
of Preferred Stock outstanding which the Corporation has become obligated to
redeem pursuant to this Section 1.4, until the Corporation has redeemed all of
such shares of Preferred Stock, the Corporation shall not redeem, repurchase or
otherwise acquire for value, or declare or pay and dividend or other
distribution on or with respect to, any class or series of Junior Stock.
B. COMMON STOCK
1. Terms Applicable to Common Stock.
1.1 Dividend and Other Rights of Common Stock.
(a) Ratable Treatment. Except as specifically otherwise provided
herein, all shares of Common Stock shall be identical and shall entitle the
holders thereof to the same rights and privileges. The Corporation shall not
subdivide or combine any shares of Common Stock, or pay any dividend or retire
any share or make any other distribution on any share of Common Stock, or
accord any other payment, benefit or preference to any share of Common Stock,
except by extending such subdivision, combination, distribution, payment,
benefit or preference equally to all shares of Common Stock. If dividends are
declared which are payable in shares of Common Stock, such dividends shall be
payable in shares of Class A Common Stock to holders of Class A Common Stock,
in shares of Class B Common Stock to holders of Class B Common Stock and in
shares of Class C Common Stock to holders of Class C Common Stock.
(b) Dividends. Subject to the rights of the holders of Preferred
Stock, the holders of Common Stock shall be entitled to dividends out of funds
legally available therefor, when declared by the Board of Directors in respect
of Common Stock, and, upon a Liquidation of the Corporation, to share ratably
in the assets of the Corporation available for distribution to the holders of
Common Stock.
1.2 Voting Rights of Common Stock.
(a) Class A Common Stock. Except as otherwise provided by law, the
holders of Class A Common Stock shall have full voting rights and powers to
vote on all matters submitted to stockholders of the Corporation for vote,
consent or approval, and each holder of Class A Common Stock shall be entitled
to one vote for each share of Class A Common Stock held of record by such
holder.
6
<PAGE> 11
(b) Class B Common Stock. Except as otherwise provided by law, the
holders of Class B Common Stock shall have no rights to vote on any matter
submitted to stockholders of the Corporation for vote, consent or approval, and
the Class B Common Stock shall not be included in determining the number of
shares voting or entitled to vote on such matters.
(c) Class C Common Stock.
(i) Except as otherwise provided by law, the holders of Class
C Common Stock shall have full voting rights and powers to vote on all
matters submitted to stockholders of the Corporation for vote, consent
or approval. Except as provided in Section 1.2(c)(ii) below, each
holder of Class C Common Stock shall be entitled to one vote for each
share of Class C Common Stock held of record by such holder, and holders
of Class A Common Stock and Class C Common Stock shall vote together as
a single class.
(ii) (A) So long as any Special Event of Default shall be
continuing, the holders of not less than 51% of the then outstanding
shares of Class C Common Stock shall be entitled to deliver a Special
Rights Notice to the Corporation. Upon delivery of a Special Rights
Notice and during the resulting Default Period, each holder of Class C
Common Stock shall be entitled to have 1,000 votes for each share of
Class C Common stock held of record by such holder. During a Default
Period, the holders of Class C Common Stock shall be entitled to the
rights with respect to the election of directors set forth in Section
1.2(c)(ii)(B) below and shall be entitled to vote with the holders of
Class A Common Stock, voting together as a single class, on all matters,
other than the election or removal of directors, submitted to
stockholders of the Corporation for vote, consent or approval. Within
ten days after any delivery of a Special Rights Notice, the Board of
Directors shall call a special meeting of stockholders for the election
of directors to be held upon not less than 15 nor more than 30 days'
notice to such holders. If such notice of meeting is not given within
the ten days required above, those holders of Class C Common Stock
delivering the Special Rights Notice may call such meeting and shall
have access to the stock books and records of the Corporation for such
purpose. At any meeting so called or at any other meeting held (or
consent action taken) during a Default Period, holders of Class C Common
Stock shall be entitled to the number of votes per share provided in
this Section 1.2(c)(ii)(A). At any such meeting, the holders of a
majority of the aggregate number of the then outstanding shares of Class
C Common Stock present in person or by proxy, shall be sufficient to
constitute a quorum.
(B) At any meeting of stockholders for the purpose of election
of directors called as provided in Section 1.2(c)(ii)(A) above, holders
of Class C Common Stock, voting together as a separate class, shall be
entitled to elect the smallest number of directors to the Board of
Directors of the Corporation that shall constitute a majority of the
authorized number of directors on the Board of Directors of the
Corporation. In each such election, holders of Class C Common Stock
shall vote together as a separate class and not with holders of Class A
Common Stock; and holders of Class A Common Stock, voting as a separate
class, shall be entitled to elect the remaining members of the Board of
Directors. Upon the election by holders of Class C Common Stock of the
directors they are entitled to
7
<PAGE> 12
elect as provided above, the terms of office of all persons who were
previously directors of the Corporation shall immediately terminate.
(C) In case of any vacancy in the office of any director
occurring among the directors elected by holders of Class C Common Stock
pursuant to the provisions of the foregoing subsection (ii), the
remaining directors elected by holders of Class C Common Stock, by
affirmative vote of a majority thereof, or the remaining director so
elected if there be but one, may, if permitted by law and subject to the
provisions of subsection (B) above, elect a successor or successors to
hold office for the unexpired terms of the director or directors whose
place or places shall be vacant. Any director who shall have been
elected by holders of Class C Common Stock (or by any directors so
elected by directors elected by the holders of Class C Common Stock as
provided in this subsection (C)) may be removed during his term of
office, either with or without cause, by, and only by, the affirmative
vote of holders of Class C Common Stock given at a special meeting of
such stockholders duly called for that purpose.
(D) The provisions of this Section 1.2(c) shall not be
amended, modified or waived without the written consent or affirmative
vote of the holders of at least two-thirds of the then outstanding
shares of Class C Common Stock, given in writing or by vote at a
meeting, consenting or voting (as the case may be) separately as a
class.
2. Conversion.
(a) Conversion of Class A Common Stock. Subject to and upon
compliance with the provisions of this Section 2, each record holder of Class A
Common Stock is entitled at any time and from time to time to convert any or
all of the shares of Class A Common Stock held by it into the same number of
shares of Class B Common Stock.
(b) Conversion of Class C Common Stock. Subject to and upon
compliance with the provisions of this Section 2, each record holder of Class C
Common Stock is entitled at any time and from time to time to convert any or
all of the shares of Class C Common Stock held by it into the same number of
shares of Class B Common Stock.
(c) Automatic Conversion. Upon the closing of a Qualified Public
Offering, all shares of Class B Common Stock then issued and outstanding and
all shares of Class C Common Stock then issued and outstanding shall be
converted, without any further action by the holders thereof, into shares of
Class A Common Stock.
(d) Conversion Procedure.
(i) Each conversion of shares of Class A Common Stock, shares
of Class B Common Stock or shares of Class C Common Stock will be
effected by the surrender to the Corporation of the certificate or
certificates representing the shares to be converted, duly endorsed or
assigned in blank, with signatures guaranteed if reasonably requested by
the Corporation, at the principal office of the Corporation (or such
other office or agency of the Corporation as the Corporation may
designate in writing to the holder or holders of the
8
<PAGE> 13
Common Stock) at any time during its usual business hours, and in the
case of the conversion of Class A Common Stock or Class C Common Stock
pursuant to paragraphs (a) or (b) of this Section 2, the delivery of
written notice by the holder of such Class A Common Stock or Class C
Common Stock stating that such holder desires to convert all or a stated
number of the shares of Class A Common Stock or Class C Common Stock
represented by such certificate or certificates into Class B Common
Stock, which notice will also state the name or names (with addresses)
and denominations in which the certificate or certificates for such
shares will be issued and will include instructions for delivery
thereof.
(ii) Promptly after such surrender and the receipt of such
written notice and statement, the Corporation will issue and deliver in
accordance with such instructions the certificate or certificates for
the Class A Common Stock or Class B Common stock issuable upon such
conversion. In addition, the Corporation will deliver to the converting
holder a certificate representing any portion of the shares of Class A
Common Stock or Class C Common Stock which had been represented by the
certificate or certificates delivered to the Corporation in connection
with such conversion but which were not converted. Such conversion, to
the extent permitted by law, will be deemed to have been effected as of
the close of business on the date on which such certificate or
certificates have been surrendered in accordance herewith and such
notice has been received in the case of any conversion pursuant to
paragraphs (a) or (b) of this Section 2, and upon the closing of a
Qualified Public Offering in the case of a conversion pursuant to
paragraph (c) of this Section 2, and at such time the rights of the
holder of such Class A Common Stock, Class B Common Stock or Class C
Common Stock, as the case may be (or specified portion thereof), as such
holder will cease, and the person or persons in whose name or names the
certificate or certificates for shares of Class A Common Stock or Class
B Common Stock are to be issued upon such conversion will be deemed to
have become the holder or holders of record of the shares of Class A
Common Stock or Class B Common Stock represented thereby.
(iii) The Corporation will at all times (A) reserve and keep
available out of its authorized but unissued shares of Class A Common
Stock or its treasury shares of Class A Common Stock, solely for the
purpose of issuance upon the conversion of the Class B Common Stock and
Class C Common Stock as provided in this Section, such number of shares
of Class A Common Stock as are then issuable upon conversion of all then
outstanding shares of Class B Common Stock and Class C Common Stock into
shares of Class A Common Stock hereunder, and (B) reserve and keep
available out of its authorized but unissued shares of Class B Common
Stock or its treasury shares of Class B Common Stock, solely for the
purpose of issuance upon conversion of the Class A Common Stock and
Class C Common Stock as provided in this Section, such number of shares
of Class B Common Stock as are then issuable upon conversion of all then
outstanding shares of Class A Common Stock and Class C Common Stock into
shares of Class B Common Stock hereunder. Notwithstanding the
foregoing, if, at any time, there shall be an insufficient number of
authorized or treasury shares of Class A Common stock available for
issuance upon conversion of Class B Common Stock or Class C Common
Stock, or an insufficient number of authorized or treasury shares of
Class B Common Stock available for issuance upon conversion of Class A
Common Stock or Class C Common Stock, the Corporation will take all
action necessary to propose and recommend to the stockholders of the
Corporation
9
<PAGE> 14
that this Certificate of Incorporation be amended to authorize
additional shares in an amount sufficient to provide adequate reserves
of shares for issuance upon such conversion, including the diligent
solicitation of votes and proxies to vote in favor of such an amendment.
All shares of Class A Common Stock and Class B Common Stock which are
issuable upon conversion hereunder will, when issued, be duly and
validly issued, fully paid and nonassessable.
(iv) The issuance of certificates for shares of Class A Common
Stock upon automatic conversion of Class B Common Stock or Class C
Common Stock and for shares of Class B Common Stock upon conversion of
shares of Class A Common Stock and Class C Common Stock will be made
without charge to any original holder of any shares of Common Stock for
any issuance tax in respect thereof, or other cost incurred by the
Corporation in connection with such conversion and the related issuance
of Class A Common Stock or Class B Common Stock, provided that the
Corporation will not be required to pay any such taxes or costs which
may be payable in respect of any such conversion by any other person or
in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than that of the registered holder of the
shares converted.
C. PROVISIONS OF COMMON APPLICATION
1.1 Registration of Transfer. The Corporation will keep at its
principal office or at the office of its legal counsel a register for the
registration of Preferred Stock and all classes of Common Stock. Upon the
surrender of any certificate representing Preferred Stock or Common Stock at
such place, the Corporation will, at the request of the record holder of such
certificate, execute and deliver a new certificate or certificates in exchange
therefor representing in the aggregate the number of shares of Preferred Stock
or Common Stock represented by the surrendered certificate. Each such new
certificate will be registered in such name and will represent such number of
shares of Preferred Stock or Common Stock as is requested by the holder of the
surrendered certificate and will be substantially identical in form to the
surrendered certificate, and, with respect to the Preferred Stock, dividends
will accrue on the Preferred Stock represented by such new certificate from the
date to which dividends have been fully paid on such Preferred Stock
represented by the surrendered certificate. The issuance of new certificates
will be made without charge to the holders of the surrendered certificates for
any issuance tax in respect thereof or other cost incurred by the Corporation
in connection with such issuance, unless such issuance is made in connection
with a transfer of Preferred Stock or Common stock, in which case the
transferring holder will pay all taxes arising from such transfer.
1.2 Replacement. Upon receipt of evidence reasonably satisfactory to
the Corporation (an affidavit of the registered holder will be satisfactory) of
the ownership and the loss, theft, destruction or mutilation of any certificate
evidencing shares of Preferred Stock or Common Stock, and in the case of any
such loss, theft or destruction upon receipt of indemnity reasonably
satisfactory to the Corporation, or, in the case of any such mutilation upon
surrender of such certificate, the Corporation will (at its expense) execute
and deliver in lieu of such certificate a new certificate of like kind
representing the number of shares of Preferred Stock or number of shares and
class of Common Stock represented by such lost, stolen, destroyed or mutilated
certificate and dated
10
<PAGE> 15
the date of such lost, stolen, destroyed or mutilated certificate, and, with
respect to Preferred Stock, dividends will accrue on the Preferred Stock
represented by such new certificate from the date to which dividends have been
fully paid on such lost, stolen, destroyed or mutilated certificate.
1.3 Notices. Except as otherwise provided, all notices referred to
herein will be in writing and will be deemed properly delivered if either
personally delivered or sent by overnight courier or mailed certified or
registered mail, return receipt requested, postage prepaid, to the recipient
(i) in the case of any Stockholder, at such holder's address as it appears in
the stock records of the Corporation (unless otherwise indicated by any such
holder) and (ii) in the case of the Corporation, at its principal office. Any
such notice shall be effective (i) if delivered personally, when received, (ii)
if sent by overnight courier, when receipted for, and (iii) if mailed, 3 days
after being mailed as described above.
--------------------
11
<PAGE> 16
CERTIFICATE OF OWNERSHIP AND MERGER
MERGING
FOJTASEK COMPANIES, INC.
INTO
FCI HOLDING CORP.
The undersigned corporations do hereby certify, pursuant to Section 253
of the General Corporation Law of the State of Delaware, to the following
information relating to the merger (the "Merger") of FOJTASEK COMPANIES, INC.,
a Texas corporation and a direct, wholly-owned subsidiary of FCI (as defined
below) ("Fojtasek"), with and into FCI HOLDING CORP., a Delaware corporation
("FCI"):
1. FCI was incorporated on June 23, 1995, pursuant to and in
accordance with the General Corporation Law of the State of Delaware.
2. FCI owns 100% of the issued and outstanding shares of common
stock, par value $.01 per share, of Fojtasek, a corporation incorporated on
September 4, 1970, pursuant to and in accordance with the Texas Business
Corporation Act.
3. The Texas Business Corporation Act permits the merger of
corporations organized under the laws of the State of Texas with and into
corporations organized under the laws of other jurisdictions.
4. The Board of Directors of FCI unanimously consented on November
6, 1996 to the adoption of the following resolutions, which resolutions
provided that Fojtasek be merged (the "Merger") with and into FCI and set forth
the terms and conditions of the Merger:
RESOLVED: That, pursuant to the terms of the Agreement and Plan of Merger,
dated as of November 6, 1996 (the "Merger Agreement"), Fojtasek
shall merge with and into FCI such that the separate corporate
existence of Fojtasek shall cease, FCI, as the surviving company
(the "Surviving Company"), shall assume all of the liabilities
and obligations of Fojtasek, and the Merger shall be effective
upon filing a Certificate of Ownership and Merger with the
Secretary of State of the State of Delaware and Articles of
Merger with the Secretary of State of the State of Texas (the
"Effective Time").
RESOLVED: That, in connection with the foregoing, the form, terms and
provisions of the Merger Agreement, and the Merger, be, and they
hereby are, in all respects ratified, adopted and approved.
RESOLVED: That, at the Effective Time, the Certificate of Incorporation, as
amended, of FCI, as in effect immediately prior to the Effective
Time, shall be the Certificate of Incorporation of the Surviving
Company, except that the Certificate of Incorporation of FCI
shall be amended at the Effective Time by (a) deleting Articles
First and
12
<PAGE> 17
Fourth thereof in their entireties, and (b) substituting in lieu
thereof the following Article First:
********************
FIRST: The name of the corporation is: Atrium Companies, Inc.
********************
RESOLVED: That, at the Effective Time, the By-Laws of FCI, as in effect
immediately prior to the Effective Time, shall be the By-Laws of
the Surviving Company.
RESOLVED: That, at the Effective Time, the officers of Fojtasek and the
directors of FCI immediately prior to the Effective Time, shall
be the officers and directors of the Surviving Company.
RESOLVED: That, at the Effective Time, by virtue of the Merger,
automatically and without any action on the part of the holders
thereof, (i) each share of the Preferred Stock of FCI, $1.00 par
value per share, of the Class B Non-Voting Common Stock of FCI,
$.01 par value per share, and of the Class C Voting Common Stock
of FCI, $.01 par value per share, issued and outstanding
immediately prior to the Effective Time (including such shares,
if any, held as treasury stock by FCI) shall be canceled and
retired and shall cease to exist, (ii) one hundred (100) shares
of the Class A Voting Common Stock of FCI, $.01 par value per
share (the "Class A Stock"), issued and outstanding immediately
prior to the Effective Time, shall become and be deemed for all
purposes to represent one hundred (100) shares of the common
stock of the Surviving Company, par value $.01 per share, and
(iii) the remainder of the Class A Stock outstanding immediately
prior to the Effective Time (including such shares, if any, held
as treasury stock by FCI) shall be canceled and retired and shall
cease to exist.
RESOLVED: That, the officers of FCI be, and each of them hereby is,
directed and authorized to execute and deliver the Merger
Agreement, and to execute and deliver a Certificate of Ownership
and Merger and Articles of Merger setting forth a copy of the
resolutions adopted by FCI's Board of Directors to merge Fojtasek
with and into FCI, and the date of adoption thereof, and to file
the same with the Secretary of State of the State of Delaware and
the Secretary of State of the State of Texas, respectively, and
to cause a certified copy of the Certificate of Ownership and
Merger to be recorded in the office of the Recorder of Deeds of
the County in the State of Delaware in which the registered
office of FCI is located; and that the officers of FCI be, and
each of them hereby is, authorized and directed to take any and
all actions necessary and proper, in the judgment of said
officers, to effect the Merger.
5. Notwithstanding anything to the contrary contained in this
Certificate of Ownership and Merger, the Merger may be amended or terminated
and abandoned by the Board of Directors of FCI at any time prior to the date of
filing said Certificate of Ownership and Merger and said Articles of Merger.
13
<PAGE> 18
IN WITNESS WHEREOF, FCI HOLDING CORP. has caused this Certificate of
Ownership and Merger to be executed by Louis W. Simi, Jr., its Executive Vice
President, and attested by Shirley Crutcher, its Secretary, this 6th day of
November, 1996.
FCI HOLDING CORP.
By: /s/ Louis W. Simi, Jr.
--------------------------------
Louis W. Simi, Jr.
Executive Vice President
[SEAL]
Attest:
By: /s/ Shirley Crutcher
-------------------------------
Shirley Crutcher, Secretary
FOJTASEK COMPANIES, INC.
By: /s/ Louis W. Simi, Jr.
--------------------------------
Louis W. Simi, Jr.
Executive Vice President
[SEAL]
Attest:
By: /s/ Shirley Crutcher
-------------------------------
Shirley Crutcher, Secretary
14
<PAGE> 19
ATRIUM COMPANIES, INC.
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
Atrium Companies, Inc., a Delaware corporation (the "Corporation"), does
hereby certify, pursuant to Section 242 of the General Corporation Law of the
State of Delaware, that:
1. Pursuant to Section 141(f) of the General Corporation Law of the
State of Delaware, by unanimous written consent of the Board of
Directors of the Corporation dated November 6, 1996, the Board
resolved to amend the Corporation's Certificate of Incorporation
by deleting Article Fourth thereof and substituting in lieu
thereof the following Article Fourth:
FOURTH: The total number of shares of capital stock which
the corporation shall have authority to issue is
Three Thousand (3,000) shares of common stock, and
the par value of each of such shares is One Cent
($0.01), amounting in the aggregate to Thirty
Dollars ($30.00) of Capital Stock.
2. Pursuant to Section 228 of the General Corporation Law of the
State of Delaware, the sole stockholder of the Corporation by
written consent dated November 8, 1996, has voted in favor of the
amendment to the Corporation's Certificate of Incorporation
described above.
3. Accordingly, Article Fourth of the Corporation's Certificate of
Incorporation is hereby amended to read as follows:
FOURTH: The total number of shares of capital stock which
the corporation shall have authority to issue is
Three Thousand (3,000) shares of common stock, and
the par value of each of such shares is One Cent
($0.01), amounting in the aggregate to Thirty
Dollars ($30.00) of Capital Stock.
1
<PAGE> 20
IN WITNESS WHEREOF, Atrium Companies, Inc. has caused this Certificate
of Amendment to its Certificate of Incorporation to be executed by Randall S.
Fojtasek, its President, and attested by Shirley Crutcher, its Secretary, this
8th day of November, 1996.
ATRIUM COMPANIES, INC.
By: /s/ Randall S. Fojtasek
------------------------
Randall S. Fojtasek
President
Attest:
By: /s/ Shirley Crutcher
---------------------
Shirley Crutcher, Secretary
2
<PAGE> 1
EXHIBIT 3.2
FCI HOLDING CORP.
BY-LAWS
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Title Page
- ----- ----
<S> <C>
Article I - General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1. Offices . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2. Seal . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.3. Fiscal Year . . . . . . . . . . . . . . . . . . . . . . 1
Article II - Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2.1. Place of Meetings . . . . . . . . . . . . . . . . . . . 1
Section 2.2. Annual Meeting . . . . . . . . . . . . . . . . . . . . 1
Section 2.3. Quorum . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2.4. Right to Vote; Proxies . . . . . . . . . . . . . . . . 2
Section 2.5. Voting . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2.6. Notice of Annual Meetings . . . . . . . . . . . . . . . 2
Section 2.7. Stockholders' List . . . . . . . . . . . . . . . . . . 2
Section 2.8. Special Meetings . . . . . . . . . . . . . . . . . . . 3
Section 2.9. Notice of Special Meetings . . . . . . . . . . . . . . 3
Section 2.10. Inspectors . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.11. Stockholders' Consent in Lieu of Meeting . . . . . . . 3
Article III - Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 3.1. Number of Directors . . . . . . . . . . . . . . . . . . 4
Section 3.2. Change in Number of Directors; Vacancies . . . . . . . 4
Section 3.3. Resignation . . . . . . . . . . . . . . . . . . . . . . 4
Section 3.4. Removal . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 3.5. Place of Meetings and Books . . . . . . . . . . . . . . 4
Section 3.6. General Powers . . . . . . . . . . . . . . . . . . . . 5
Section 3.7. Executive Committee . . . . . . . . . . . . . . . . . . 5
Section 3.8. Other Committees . . . . . . . . . . . . . . . . . . . 5
Section 3.9. Powers Denied to Committees . . . . . . . . . . . . . . 5
Section 3.10. Substitute Committee Member . . . . . . . . . . . . . . 5
Section 3.11. Compensation of Directors . . . . . . . . . . . . . . . 6
Section 3.12. Annual Meeting . . . . . . . . . . . . . . . . . . . . 6
Section 3.13. Regular Meetings . . . . . . . . . . . . . . . . . . . 6
Section 3.14. Special Meetings . . . . . . . . . . . . . . . . . . . 6
Section 3.15. Quorum . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3.16. Telephonic Participation in Meetings . . . . . . . . . 6
Section 3.17. Action by Consent . . . . . . . . . . . . . . . . . . . 6
</TABLE>
(i)
<PAGE> 2
<TABLE>
<S> <C>
Article IV - Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 4.1. Selection; Statutory Officers . . . . . . . . . . . . . 7
Section 4.2. Time of Election . . . . . . . . . . . . . . . . . . . 7
Section 4.3. Additional Officers . . . . . . . . . . . . . . . . . . 7
Section 4.4. Terms of Office . . . . . . . . . . . . . . . . . . . . 7
Section 4.5. Compensation of Officers . . . . . . . . . . . . . . . 7
Section 4.6. Chairman of the Board . . . . . . . . . . . . . . . . . 7
Section 4.7. President . . . . . . . . . . . . . . . . . . . . . . . 7
Section 4.8. Vice-Presidents . . . . . . . . . . . . . . . . . . . . 8
Section 4.9. Treasurer . . . . . . . . . . . . . . . . . . . . . . . 8
Section 4.10. Secretary . . . . . . . . . . . . . . . . . . . . . . . 8
Section 4.11. Assistant Secretary . . . . . . . . . . . . . . . . . . 8
Section 4.12. Assistant Treasurer . . . . . . . . . . . . . . . . . . 8
Section 4.13. Subordinate Officers . . . . . . . . . . . . . . . . . 9
Article V - Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 5.1. Stock . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 5.2. Fractional Share Interests . . . . . . . . . . . . . . 9
Section 5.3. Transfers of Stock . . . . . . . . . . . . . . . . . . 9
Section 5.4. Record Date . . . . . . . . . . . . . . . . . . . . . . 10
Section 5.5. Transfer Agent and Registrar . . . . . . . . . . . . . 10
Section 5.6. Dividends . . . . . . . . . . . . . . . . . . . . . . . 10
1. Power to Declare . . . . . . . . . . . . . . . . 10
2. Reserves . . . . . . . . . . . . . . . . . . . . 10
Section 5.7. Lost, Stolen or Destroyed Certificates . . . . . . . . 11
Section 5.8. Inspection of Books . . . . . . . . . . . . . . . . . . 11
Article VI - Miscellaneous Management Provisions . . . . . . . . . . . . . . 11
Section 6.1. Checks, Drafts and Notes . . . . . . . . . . . . . . . 11
Section 6.2. Notices . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 6.3. Conflict of Interest . . . . . . . . . . . . . . . . . 11
Section 6.4. Voting of Securities owned by this Corporation . . . . 12
Article VII - Indemnification . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 7.1. Right to Indemnification . . . . . . . . . . . . . . . 12
Section 7.2. Right of Indemnitee to Bring Suit. . . . . . . . . . 13
Section 7.3. Non-Exclusivity of Rights . . . . . . . . . . . . . . . 14
Section 7.4. Insurance . . . . . . . . . . . . . . . . . . . . . . . 14
Section 7.5. Indemnification of Employees and Agents of the
Corporation . . . . . . . . . . . . . . . . . . . . . . 14
Article VIII - Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 8.1. Amendments . . . . . . . . . . . . . . . . . . . . . . 14
Article IX - Special Provisions . . . . . . . . . . . . . . . . . . . . . . . 14
Section 9.1. Special Provisions . . . . . . . . . . . . . . . . . . 14
</TABLE>
(ii)
<PAGE> 3
FCI HOLDING CORP.
BY-LAWS
ARTICLE I - GENERAL
Section 1.1. Offices. The registered office shall be in the City of
Wilmington, County of New Castle, State of Delaware. The Corporation may also
have offices at such other places both within and without the State of Delaware
as the Board of Directors may from time to time determine or the business of
the Corporation may require.
Section 1.2. Seal. The seal of the Corporation shall be in the form of
a circle and shall have inscribed thereon the name of the Corporation, the year
of its organization and the words "Corporate Seal, Delaware".
Section 1.3. Fiscal Year. The fiscal year of the Corporation shall be
the period from January 1 through December 31.
ARTICLE II - STOCKHOLDERS
Section 2.1. Place of Meetings. All meetings of the stockholders shall
be held at the office of the Corporation in the State of Texas except such
meetings as the Board of Directors expressly determine shall be held elsewhere,
in which case meetings may be held upon notice as hereinafter provided at such
other place or places within or without the State of Texas as the Board of
Directors shall have determined and as shall be stated in such notice.
Section 2.2. Annual Meeting. The annual meeting of the stockholders
shall be held on such date and at such time as the Board of Directors may
determine. At each annual meeting the stockholders entitled to vote shall
elect a Board of Directors by plurality vote by ballot, and they may transact
such other corporate business as may properly be brought before the meeting.
At the annual meeting any business may be transacted, irrespective of whether
the notice calling such meeting shall have contained a reference thereto,
except where notice is required by law, the Certificate of Incorporation, or
these by-laws.
Section 2.3. Quorum. At all meetings of the stockholders the holders
of a majority of the stock issued and outstanding and entitled to vote thereat,
present in person or represented by proxy, shall constitute a quorum requisite
for the transaction of business except as otherwise provided by law, by the
Certificate of Incorporation or by these by-laws. If, however, such majority
shall not be present or represented at any meeting of the stockholders, the
stockholders entitled to vote thereat, present in person or by proxy, by a
majority vote, shall have power to adjourn the meeting from time to time
without notice other than announcement at the meeting until the requisite
amount of voting stock shall be present. If the adjournment is for more than
thirty (30) days, or if after the adjournment a new record date is fixed for
the adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting. At such adjourned
meeting, at which the requisite amount of voting stock shall be represented,
any business may be transacted which might have been transacted if the meeting
had been held as originally called.
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Section 2.4. Right to Vote; Proxies. Each holder of a share or shares
of capital stock of the Corporation having the right to vote at any meeting
shall be entitled to one vote for each such share of stock held by him. Any
stockholder entitled to vote at any meeting of stockholders may vote either in
person or by proxy, but no proxy which is dated more than three years prior to
the meeting at which it is offered shall confer the right to vote thereat
unless the proxy provides that it shall be effective for a longer period. A
proxy may be granted by a writing executed by the stockholder or his authorized
officer, director, employee or agent or by transmission or authorization of
transmission of a telegram, cablegram, or other means of electronic
transmission to the person who will be the holder of the proxy or to a proxy
solicitation firm, proxy support service organization or like agent duly
authorized by the person who will be the holder of the proxy to receive such
transmission, subject to the conditions set forth in Section 212 of the
Delaware General Corporation Law, as it may be amended from time to time (the
"Delaware GCL").
Section 2.5. Voting. At all meetings of stockholders, except as
otherwise expressly provided for by statute, the Certificate of Incorporation
or these by-laws, (a) in all matters other than the election of directors, the
affirmative vote of a majority of shares present in person or represented by
proxy at the meeting and entitled to vote on such matter shall be the act of
the stockholders and (b) directors shall be elected by a plurality of the votes
of the shares present in person or represented by proxy at the meeting and
entitled to vote on the election of directors. Except as otherwise expressly
provided by law, the Certificate of Incorporation or these by-laws, at all
meetings of stockholders the voting shall be by voice vote, but any stockholder
qualified to vote on the matter in question may demand a stock vote, by shares
of stock, upon such question, whereupon such stock vote shall be taken by
ballot, each of which shall state the name of the stockholder voting and the
number of shares voted by him, and, if such ballot be cast by a proxy, it shall
also state the name of the proxy.
Section 2.6. Notice of Annual Meetings. Written notice of the annual
meeting of the stockholders shall be mailed to each stockholder entitled to
vote thereat at such address as appears on the stock books of the Corporation
at least ten (10) days (and not more than sixty (60) days) prior to the
meeting. It shall be the duty of every stockholder to furnish to the Secretary
of the Corporation or to the transfer agent, if any, of the class of stock
owned by him, his post-office address and to notify said Secretary or transfer
agent of any change therein.
Section 2.7. Stockholders' List. A complete list of the stockholders
entitled to vote at any meeting of stockholders, arranged in alphabetical order
and showing the address of each stockholder, and the number of shares
registered in the name of each stockholder, shall be prepared by the Secretary
and filed either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held, at least ten days
before such meeting, and shall at all times during the usual hours for
business, and during the whole time of said election, be open to the
examination of any stockholder for a purpose germane to the meeting.
Section 2.8. Special Meetings. Special meetings of the stockholders
for any purpose or purposes, unless otherwise provided by statute, may be
called by the Board of Directors, the Chairman of the Board, if any, the
President or any Vice President.
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Section 2.9. Notice of Special Meetings. Written notice of a special
meeting of stockholders, stating the time and place and object thereof shall be
mailed, postage prepaid, not less than ten (10) nor more than sixty (60) days
before such meeting, to each stockholder entitled to vote thereat, at such
address as appears on the books of the Corporation. No business may be
transacted at such meeting except that referred to in said notice, or in a
supplemental notice given also in compliance with the provisions hereof, or
such other business as may be germane or supplementary to that stated in said
notice or notices.
Section 2.10. Inspectors.
1. One or more inspectors may be appointed by the Board of Directors
before or at any meeting of stockholders, or, if no such appointment shall have
been made, the presiding officer may make such appointment at the meeting. At
the meeting for which the inspector or inspectors are appointed, he or they
shall open and close the polls, receive and take charge of the proxies and
ballots, and decide all questions touching on the qualifications of voters, the
validity of proxies and the acceptance and rejection of votes. If any
inspector previously appointed shall fail to attend or refuse or be unable to
serve, the presiding officer shall appoint an inspector in his place.
2. At any time at which the Corporation has a class of voting stock
that is (a) listed on a national securities exchange, (b) authorized for
quotation on an inter-dealer quotation system of a registered national
securities association, or (c) held of record by more than 2,000 stockholders,
the provisions of Section 231 of the Delaware GCL with respect to inspectors of
election and voting procedures shall apply, in lieu of the provisions of
paragraph (1) of this Section 2.10.
Section 2.11. Stockholders' Consent in Lieu of Meeting. Unless
otherwise provided in the Certificate of Incorporation, any action required by
law to be taken at any annual or special meeting of stockholders of the
Corporation, or any action which may be taken at any annual or special meeting
of such stockholders, may be taken without a meeting, without prior notice and
without a vote, if a consent or consents in writing, setting forth the action
so taken, shall be signed by the holders of outstanding stock having not less
than the minimum number of votes that would be necessary to authorize or take
such action at a meeting at which all shares entitled to vote thereon were
present and voted and shall be delivered to the Corporation by delivery to its
registered office in the State of Delaware, its principal place of business, or
an officer or agent of the Corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. Delivery made to the
Corporation's registered office shall be by hand or by certified or registered
mail, return receipt requested. Every written consent shall bear the date of
signature of each stockholder who signs the consent and no written consent
shall be effective to take the corporate action referred to therein unless,
within sixty days of the earliest dated consent delivered in the manner
required by this Section 2.11 to the Corporation, written consents signed by a
sufficient number of stockholders to take action are delivered to the
Corporation by delivery to its registered office in the State of Delaware, its
principal place of business, or an officer or agent of the Corporation having
custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to the Corporation's registered office shall be by
hand or by certified or registered mail, return receipt requested. Prompt
notice of the taking of the corporate action without a meeting by less than
unanimous written consent shall be given to those stockholders who have not
consented in writing.
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ARTICLE III - DIRECTORS
Section 3.1. Number of Directors. Except as otherwise provided by law,
the Certificate of Incorporation or these by-laws, the property and business of
the Corporation shall be managed by or under the direction of a board of not
less than one nor more than thirteen directors. Within the limits specified,
the number of directors shall be determined by resolution of the Board of
Directors or by the stockholders at the annual meeting. Directors need not be
stockholders, residents of Delaware or citizens of the United States. The
directors shall be elected by ballot at the annual meeting of the stockholders
and each director shall be elected to serve until his successor shall be
elected and shall qualify or until his earlier resignation or removal; provided
that in the event of failure to hold such meeting or to hold such election at
such meeting, such election may be held at any special meeting of the
stockholders called for that purpose. If the office of any director becomes
vacant by reason of death, resignation, disqualification, removal, failure to
elect, or otherwise, the remaining directors, although more or less than a
quorum, by a majority vote of such remaining directors may elect a successor or
successors who shall hold office for the unexpired term.
Section 3.2. Change in Number of Directors; Vacancies. The maximum
number of directors may be increased by an amendment to these by-laws adopted
by a majority vote of the Board of Directors or by a majority vote of the
capital stock having voting power, and if the number of directors is so
increased by action of the Board of Directors or of the stockholders or
otherwise, then the additional directors may be elected in the manner provided
above for the filling of vacancies in the Board of Directors or at the annual
meeting of stockholders or at a special meeting called for that purpose.
Section 3.3. Resignation. Any director of this Corporation may resign
at any time by giving written notice to the Chairman of the Board, if any, the
President or the Secretary of the Corporation. Such resignation shall take
effect at the time specified therein, at the time of receipt if no time is
specified therein and at the time of acceptance if the effectiveness of such
resignation is conditioned upon its acceptance. Unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective.
Section 3.4. Removal. Any director or the entire Board of Directors
may be removed, with or without cause, by the holders of a majority of the
shares then entitled to vote at an election of directors.
Section 3.5. Place of Meetings and Books. The Board of Directors may
hold their meetings and keep the books of the Corporation outside the State of
Delaware, at such places as they may from time to time determine.
Section 3.6. General Powers. In addition to the powers and authority
expressly conferred upon them by these by-laws, the board may exercise all such
powers of the Corporation and do all such lawful acts and things as are not by
statute or by the Certificate of Incorporation or by these by-laws directed or
required to be exercised or done by the stockholders.
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Section 3.7. Executive Committee. There may be an executive committee
of one or more directors designated by resolution passed by a majority of the
whole board. The act of a majority of the members of such committee shall be
the act of the committee. Said committee may meet at stated times or on notice
to all by any of their own number, and shall have and may exercise those powers
of the Board of Directors in the management of the business affairs of the
Company as are provided by law and may authorize the seal of the Corporation to
be affixed to all papers which may require it. Vacancies in the membership of
the committee shall be filled by the Board of Directors at a regular meeting or
at a special meeting called for that purpose.
Section 3.8. Other Committees. The Board of Directors may also
designate one or more committees in addition to the executive committee, by
resolution or resolutions passed by a majority of the whole board; such
committee or committees shall consist of one or more directors of the
Corporation, and to the extent provided in the resolution or resolutions
designating them, shall have and may exercise specific powers of the Board of
Directors in the management of the business and affairs of the Corporation to
the extent permitted by statute and shall have power to authorize the seal of
the Corporation to be affixed to all papers which may require it. Such
committee or committees shall have such name or names as may be determined from
time to time by resolution adopted by the Board of Directors.
Section 3.9. Powers Denied to Committees. Committees of the Board of
Directors shall not, in any event, have any power or authority to amend the
Certificate of Incorporation (except that a committee may, to the extent
authorized in the resolution or resolutions providing for the issuance of
shares adopted by the Board of Directors as provided in Section 151(a) of the
Delaware GCL, fix the designations and any of the preferences or rights of such
shares relating to dividends, redemption, dissolution, any distribution of
assets of the Corporation or the conversion into, or the exchange of such
shares for, shares of any other class or classes or any other series of the
same or any other class or classes of stock of the Corporation or fix the
number of shares of any series of stock or authorize the increase or decrease
of the shares of any series), adopt an agreement of merger or consolidation,
recommend to the stockholders the sale, lease or exchange of all or
substantially all of the Corporation's property and assets, recommend to the
stockholders a dissolution of the Corporation or a revocation of a dissolution
or to amend the by-laws of the Corporation. Further, no committee of the Board
of Directors shall have the power or authority to declare a dividend, to
authorize the issuance of stock or to adopt a certificate of ownership and
merger pursuant to Section 253 of the Delaware GCL, unless the resolution or
resolutions designating such committee expressly so provides.
Section 3.10. Substitute Committee Member. In the absence or on the
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the Board
of Directors to act at the meeting in the place of such absent or disqualified
member. Any committee shall keep regular minutes of its proceedings and report
the same to the board as may be required by the board.
Section 3.11. Compensation of Directors. The Board of Directors shall
have the power to fix the compensation of directors and members of committees
of the Board. The directors may be
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paid their expenses, if any, of attendance at each meeting of the Board of
Directors and may be paid a fixed sum for attendance at each meeting of the
Board of Directors or a stated salary as director. No such payment shall
preclude any director from serving the Corporation in any other capacity and
receiving compensation therefor. Members of special or standing committees may
be allowed like compensation for attending committee meetings.
Section 3.12. Annual Meeting. The newly elected board may meet at such
place and time as shall be fixed and announced by the presiding officer at the
annual meeting of stockholders, for the purpose of organization or otherwise,
and no further notice of such meeting shall be necessary to the newly elected
directors in order legally to constitute the meeting, provided a quorum shall
be present, or they may meet at such place and time as shall be stated in a
notice given to such directors two (2) days prior to such meeting, or as shall
be fixed by the consent in writing of all the directors.
Section 3.13. Regular Meetings. Regular meetings of the board may be
held without notice at such time and place as shall from time to time be
determined by the board.
Section 3.14. Special Meetings. Special meetings of the board may be
called by the Chairman of the Board, if any, or the President, on two (2) days'
notice to each director, or such shorter period of time before the meeting as
will nonetheless be sufficient for the convenient assembly of the directors so
notified; special meetings shall be called by the Secretary in like manner and
on like notice, on the written request of two or more directors.
Section 3.15. Quorum. At all meetings of the Board of Directors, a
majority of the total number of directors shall be necessary and sufficient to
constitute a quorum for the transaction of business, and the act of a majority
of the directors present at any meeting at which there is a quorum shall be the
act of the Board of Directors, except as may be otherwise specifically
permitted or provided by statute, or by the Certificate of Incorporation, or by
these by-laws. If at any meeting of the board there shall be less than a
quorum present, a majority of those present may adjourn the meeting from time
to time until a quorum is obtained, and no further notice thereof need be given
other than by announcement at said meeting which shall be so adjourned.
Section 3.16. Telephonic Participation in Meetings. Members of the
Board of Directors or any committee designated by such board may participate in
a meeting of the board or committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to this
section shall constitute presence in person at such meeting.
Section 3.17. Action by Consent. Unless otherwise restricted by the
Certificate of Incorporation or these by-laws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee
thereof may be taken without a meeting, if written consent thereto is signed by
all members of the board or of such committee as the case may be and such
written consent is filed with the minutes of proceedings of the board or
committee.
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ARTICLE IV - OFFICERS
Section 4.1. Selection; Statutory Officers. The officers of the
Corporation shall be chosen by the Board of Directors. There shall be a
President, a Secretary and a Treasurer, and there may be a Chairman of the
Board of Directors, one or more Vice Presidents, one or more Assistant
Secretaries, and one or more Assistant Treasurers, as the Board of Directors
may elect. Any number of offices may be held by the same person, except that
the offices of President and Secretary shall not be held by the same person
simultaneously.
Section 4.2. Time of Election. The officers above named shall be
chosen by the Board of Directors at its first meeting after each annual meeting
of stockholders. None of said officers need be a director.
Section 4.3. Additional Officers. The board may appoint such other
officers and agents as it shall deem necessary, who shall hold their offices
for such terms and shall exercise such powers and perform such duties as shall
be determined from time to time by the board.
Section 4.4. Terms of Office. Each officer of the Corporation shall
hold office until his successor is chosen and qualified, or until his earlier
resignation or removal. Any officer elected or appointed by the Board of
Directors may be removed at any time by the Board of Directors.
Section 4.5. Compensation of Officers. The Board of Directors shall
have power to fix the compensation of all officers of the Corporation. It may
authorize any officer, upon whom the power of appointing subordinate officers
may have been conferred, to fix the compensation of such subordinate officers.
Section 4.6. Chairman of the Board. The Chairman of the Board of
Directors shall preside at all meetings of the stockholders and directors, and
shall have such other duties as may be assigned to him from time to time by the
Board of Directors.
Section 4.7. President. Unless the Board of Directors otherwise
determines, the President shall be the chief executive officer and head of the
Corporation. Unless there is a Chairman of the Board, the President shall
preside at all meetings of directors and stockholders. Under the supervision
of the Board of Directors and of the executive committee, the President shall
have the general control and management of its business and affairs, subject,
however, to the right of the Board of Directors and of the executive committee
to confer any specific power, except such as may be by statute exclusively
conferred on the President, upon any other officer or officers of the
Corporation. The President shall perform and do all acts and things incident
to the position of President and such other duties as may be assigned to him
from time to time by the Board of Directors or the executive committee.
Section 4.8. Vice-Presidents. The Vice-Presidents shall perform such
of the duties of the President on behalf of the Corporation as may be
respectively assigned to them from time to time by the Board of Directors or by
the executive committee or by the President. The Board of Directors or the
executive committee may designate one of the Vice-Presidents as the Executive
Vice-
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<PAGE> 10
President, and in the absence or inability of the President to act, such
Executive Vice-President shall have and possess all of the powers and discharge
all of the duties of the President, subject to the control of the board and of
the executive committee.
Section 4.9. Treasurer. The Treasurer shall have the care and custody
of all the funds and securities of the Corporation which may come into his
hands as Treasurer, and the power and authority to endorse checks, drafts and
other instruments for the payment of money for deposit or collection when
necessary or proper and to deposit the same to the credit of the Corporation in
such bank or banks or depository as the Board of Directors or the executive
committee, or the officers or agents to whom the Board of Directors or the
executive committee may delegate such authority, may designate, and he may
endorse all commercial documents requiring endorsements for or on behalf of the
Corporation. He may sign all receipts and vouchers for the payments made to
the Corporation. He shall render an account of his transactions to the Board
of Directors or to the executive committee as often as the board or the
committee shall require the same. He shall enter regularly in the books to be
kept by him for that purpose full and adequate account of all moneys received
and paid by him on account of the Corporation. He shall perform all acts
incident to the position of Treasurer, subject to the control of the Board of
Directors and of the executive committee. He shall when requested, pursuant to
vote of the Board of Directors or the executive committee, give a bond to the
Corporation conditioned for the faithful performance of his duties, the expense
of which bond shall be borne by the Corporation.
Section 4.10. Secretary. The Secretary shall keep the minutes of all
meetings of the Board of Directors and of the stockholders; he shall attend to
the giving and serving of all notices of the Corporation. Except as otherwise
ordered by the Board of Directors or the executive committee, he shall attest
the seal of the Corporation upon all contracts and instruments executed under
such seal and shall affix the seal of the Corporation thereto and to all
certificates of shares of capital stock of the Corporation. He shall have
charge of the stock certificate book, transfer book and stock ledger, and such
other books and papers as the Board of Directors or the executive committee may
direct. He shall, in general, perform all the duties of Secretary, subject to
the control of the Board of Directors and of the executive committee.
Section 4.11. Assistant Secretary. The Board of Directors or any two of
the officers of the Corporation acting jointly may appoint or remove one or
more Assistant Secretaries of the Corporation. Any Assistant Secretary upon
his appointment shall perform such duties of the Secretary, and also any and
all such other duties as the executive committee or the Board of Directors or
the President or the Executive Vice-President or the Treasurer or the Secretary
may designate.
Section 4.12. Assistant Treasurer. The Board of Directors or any two of
the officers of the Corporation acting jointly may appoint or remove one or
more Assistant Treasurers of the Corporation. Any Assistant Treasurer upon his
appointment shall perform such of the duties of the Treasurer, and also any and
all such other duties as the executive committee or the Board of Directors or
the President or the Executive Vice-President or the Treasurer or the Secretary
may designate.
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Section 4.13. Subordinate Officers. The Board of Directors may select
such subordinate officers as it may deem desirable. Each such officer shall
hold office for such period, have such authority, and perform such duties as
the Board of Directors may prescribe. The Board of Directors may, from time to
time, authorize any officer to appoint and remove subordinate officers and to
prescribe the powers and duties thereof.
ARTICLE V - STOCK
Section 5.1. Stock. Each stockholder shall be entitled to a
certificate or certificates of stock of the Corporation in such form as the
Board of Directors may from time to time prescribe. The certificates of stock
of the Corporation shall be numbered and shall be entered in the books of the
Corporation as they are issued. They shall certify the holder's name and
number and class of shares and shall be signed by both of (a) either the
President or a Vice-President, and (b) any one of the Treasurer or an Assistant
Treasurer or the Secretary or an Assistant Secretary, and shall be sealed with
the corporate seal of the Corporation. If such certificate is countersigned
(1) by a transfer agent other than the Corporation or its employee, or, (2) by
a registrar other than the Corporation or its employee, the signature of the
officers of the Corporation and the corporate seal may be facsimiles. In case
any officer or officers who shall have signed, or whose facsimile signature or
signatures shall have been used on, any such certificate or certificates shall
cease to be such officer or officers of the Corporation, whether because of
death, resignation or otherwise, before such certificate or certificates shall
have been delivered by the Corporation, such certificate or certificates may
nevertheless be adopted by the Corporation and be issued and delivered as
though the person or persons who signed such certificate or certificates or
whose facsimile signature shall have been used thereon had not ceased to be
such officer or officers of the Corporation.
Section 5.2. Fractional Share Interests. The Corporation may, but
shall not be required to, issue fractions of a share. If the Corporation does
not issue fractions of a share, it shall (a) arrange for the disposition of
fractional interests by those entitled thereto, (b) pay in cash the fair value
of fractions of a share as of the time when those entitled to receive such
fractions are determined, or (c) issue scrip or warrants in registered or
bearer form which shall entitle the holder to receive a certificate for a full
share upon the surrender of such scrip or warrants aggregating a full share. A
certificate for a fractional share shall, but scrip or warrants shall not
unless otherwise provided therein, entitle the holder to exercise voting
rights, to receive dividends thereon, and to participate in any of the assets
of the Corporation in the event of liquidation. The Board of Directors may
cause scrip or warrants to be issued subject to the conditions that they shall
become void if not exchanged for certificates representing full shares before a
specified date, or subject to the conditions that the shares for which scrip or
warrants are exchangeable may be sold by the Corporation and the proceeds
thereof distributed to the holders of scrip or warrants, or subject to any
other conditions which the Board of Directors may impose.
Section 5.3. Transfers of Stock. Subject to any transfer restrictions
then in force, the shares of stock of the Corporation shall be transferable
only upon its books by the holders thereof in person or by their duly
authorized attorneys or legal representatives and upon such transfer the old
certificates shall be surrendered to the Corporation by the delivery thereof to
the person in charge of the stock and transfer books and ledgers or to such
other person as the directors may designate by
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whom they shall be cancelled and new certificates shall thereupon be issued.
The Corporation shall be entitled to treat the holder of record of any share or
shares of stock as the holder in fact thereof and accordingly shall not be
bound to recognize any equitable or other claim to or interest in such share on
the part of any other person whether or not it shall have express or other
notice thereof save as expressly provided by the laws of Delaware.
Section 5.4. Record Date. For the purpose of determining the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or the allotment of any rights, or entitled to exercise any rights
in respect of any change, conversion, or exchange of stock or for the purpose
of any other lawful action, the Board of Directors may fix, in advance, a
record date, which shall not be more than sixty (60) days nor less than ten
(10) days before the date of such meeting, nor more than sixty (60) days prior
to any other action. If no such record date is fixed by the Board of
Directors, the record date for determining stockholders entitled to notice of
or to vote at a meeting of stockholders shall be at the close of business on
the day next preceding the day on which notice is given, or, if notice is
waived, at the close of business on the day next preceding the day on which the
meeting is held; the record date for determining stockholders entitled to
express consent to corporate action in writing without a meeting, when no prior
action by the Board of Directors is necessary, shall be the day on which the
first written consent is expressed; and the record date for determining
stockholders for any other purpose shall be at the close of business on the day
on which the Board of Directors adopts the resolution relating thereto. A
determination of stockholders of record entitled to notice of or to vote at any
meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for
the adjourned meeting.
Section 5.5. Transfer Agent and Registrar. The Board of Directors may
appoint one or more transfer agents or transfer clerks and one or more
registrars and may require all certificates of stock to bear the signature or
signatures of any of them.
Section 5.6. Dividends.
1. Power to Declare. Dividends upon the capital stock of the
Corporation, subject to the provisions of the Certificate of Incorporation, if
any, may be declared by the Board of Directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in
shares of the capital stock, subject to the provisions of the Certificate of
Incorporation and the laws of Delaware.
2. Reserves. Before payment of any dividend, there may be set aside
out of any funds of the Corporation available for dividends such sum or sums as
the directors from time to time, in their absolute discretion, think proper as
a reserve or reserves to meet contingencies, or for equalizing dividends, or
for repairing or maintaining any property of the Corporation, or for such other
purpose as the directors shall think conducive to the interest of the
Corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
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Section 5.7. Lost, Stolen or Destroyed Certificates. No certificates
for shares of stock of the Corporation shall be issued in place of any
certificate alleged to have been lost, stolen or destroyed, except upon
production of such evidence of the loss, theft or destruction and upon
indemnification of the Corporation and its agents to such extent and in such
manner as the Board of Directors may from time to time prescribe.
Section 5.8. Inspection of Books. The stockholders of the Corporation,
by a majority vote at any meeting of stockholders duly called, or in case the
stockholders shall fail to act, the Board of Directors shall have power from
time to time to determine whether and to what extent and at what times and
places and under what conditions and regulations the accounts and books of the
Corporation (other than the stock ledger) or any of them, shall be open to
inspection of stockholders; and no stockholder shall have any right to inspect
any account or book or document of the Corporation except as conferred by
statute or authorized by the Board of Directors or by a resolution of the
stockholders.
ARTICLE VI - MISCELLANEOUS MANAGEMENT PROVISIONS
Section 6.1. Checks, Drafts and Notes. All checks, drafts or orders
for the payment of money, and all notes and acceptances of the Corporation
shall be signed by such officer or officers, agent or agents as the Board of
Directors may designate.
Section 6.2. Notices.
1. Notices to directors may, and notices to stockholders shall, be
in writing and delivered personally or mailed to the directors or stockholders
at their addresses appearing on the books of the Corporation. Notice by mail
shall be deemed to be given at the time when the same shall be mailed. Notice
to directors may also be given by telegram, telecopy or orally, by telephone or
in person.
2. Whenever any notice is required to be given under the provisions
of the statutes or of the Certificate of Incorporation of the Corporation of
the Corporation or of these by-laws, a written waiver of notice, signed by the
person or persons entitled to said notice, whether before or after the time
stated therein or the meeting or action to which such notice relates, shall be
deemed equivalent to notice. Attendance of a person at a meeting shall
constitute a waiver of notice of such meeting except when the person attends a
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called or
convened.
Section 6.3. Conflict of Interest. No contract or transaction between
the Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the board of or committee thereof which
authorized the contract or transaction, or solely because his or their votes
are counted for such purpose, if: (a) the material facts as to his
relationship or interest and as to the contract or transaction are disclosed or
are known to the Board of Directors or the committee and
-11-
<PAGE> 14
the board or committee in good faith authorizes the contract or transaction by
the affirmative vote of a majority of the disinterested directors, even though
the disinterested directors be less than a quorum; or (b) the material facts as
to his relationship or interest and as to the contract or transaction are
disclosed or are known to the stockholders of the Corporation entitled to vote
thereon, and the contract or transaction as specifically approved in good faith
by vote of such stockholders; or (c) the contract or transaction is fair as to
the Corporation as of the time it is authorized, approved or ratified, by the
Board of Directors, a committee or the stockholders. Common or interested
directors may be counted in determining the presence of a quorum at a meeting
of the Board of Directors or of a committee which authorizes the contract or
transaction.
Section 6.4. Voting of Securities owned by this Corporation. Subject
always to the specific directions of the Board of Directors, (a) any shares or
other securities issued by any other Corporation and owned or controlled by
this Corporation may be voted in person at any meeting of security holders of
such other corporation by the President of this Corporation if he is present at
such meeting, or in his absence by the Treasurer of this Corporation if he is
present at such meeting, and (b) whenever, in the judgment of the President, it
is desirable for this Corporation to execute a proxy or written consent in
respect to any shares or other securities issued by any other Corporation and
owned by this Corporation, such proxy or consent shall be executed in the name
of this Corporation by the President, without the necessity of any
authorization by the Board of Directors, affixation of corporate seal or
countersignature or attestation by another officer, provided that if the
President is unable to execute such proxy or consent by reason of sickness,
absence from the United States or other similar cause, the Treasurer may
execute such proxy or consent. Any person or persons designated in the manner
above stated as the proxy or proxies of this Corporation shall have full right,
power and authority to vote the shares or other securities issued by such other
corporation and owned by this Corporation the same as such shares or other
securities might be voted by this Corporation.
ARTICLE VII - INDEMNIFICATION
Section 7.1. Right to Indemnification. Each person who was or is made
a party or is threatened to be made a party to or is otherwise involved in any
action, suit or proceeding, whether civil, criminal, administrative or
investigative (a "Proceeding"), by reason of being or having been a director or
officer of the Corporation or serving or having served at the request of the
Corporation as a director, trustee, officer, employee or agent of another
corporation or of a partnership, joint venture, trust or other enterprise,
including service with respect to an employee benefit plan (an "Indemnitee"),
whether the basis of such proceeding is alleged action or failure to act in an
official capacity as a director, trustee, officer, employee or agent or in any
other capacity while serving as a director, trustee, officer, employee or
agent, shall be indemnified and held harmless by the Corporation to the fullest
extent authorized by the Delaware General Corporation Law, as the same exists
or may hereafter be amended (but, in the case of any such amendment, only to
the extent that such amendment permits the Corporation to provide broader
indemnification rights than permitted prior thereto) (as used in this Article
VII, the "Delaware Law"), against all expense, liability and loss (including
attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts
paid in settlement) reasonably incurred or suffered by such Indemnitee in
connection therewith and such indemnification shall continue as to an
Indemnitee who has ceased to be a director, trustee, officer,
-12-
<PAGE> 15
employee or agent and shall inure to the benefit of the Indemnitee's heirs,
executors and administrators; provided, however, that, except as provided in
Section 7.2 hereof with respect to Proceedings to enforce rights to
indemnification, the Corporation shall indemnity any such Indemnitee in
connection with a Proceeding (or part thereof) initiated by such Indemnitee
only if such Proceeding (or part thereof) was authorized by the board of
directors of the Corporation. The right to indemnification conferred in this
Article VII shall be a contract right and shall include the right to be paid by
the Corporation the expenses (including attorneys' fees) incurred in defending
any such Proceeding in advance of its final disposition (an "Advancement of
Expenses"); provided, however, that, if the Delaware Law so requires, an
Advancement of Expenses incurred by an Indemnitee shall be made only upon
delivery to the Corporation of an undertaking (an "Undertaking"), by or on
behalf of such Indemnitee, to repay all amounts so advanced if it shall
ultimately be determined by final judicial decision from which there is no
further right to appeal (a "Final Adjudication") that such Indemnitee is not
entitled to be indemnified for such expenses under this Article VII or
otherwise.
Section 7.2. Right of Indemnitee to Bring Suit. If a claim under
Section 7.1 hereof is not paid in full by the Corporation within sixty days
after a written claim has been received by the Corporation, except in the case
of a claim for an Advancement of Expenses, in which case the applicable period
shall be twenty days, the Indemnitee may at any time thereafter bring suit
against the Corporation to recover the unpaid amount of the claim. If
successful in whole or in part in any such suit, or in a suit brought by the
Corporation to recover an Advancement of Expenses pursuant to the terms of an
Undertaking, the Indemnitee shall be entitled to be paid also the expense of
prosecuting or defending such suit. In (i) any suit brought by the Indemnitee
to enforce a right to indemnification hereunder (but not in a suit brought by
the Indemnitee to enforce a right to an Advancement of Expenses) it shall be a
defense that, and (ii) in any suit by the Corporation to recover an Advancement
of Expenses pursuant to the terms of an Undertaking the Corporation shall be
entitled to recover such expenses upon a Final Adjudication that, the
Indemnitee has not met the applicable standard of conduct set forth in the
Delaware Law. Neither the failure of the Corporation (including its board of
directors, independent legal counsel, or its stockholders) to have made a
determination prior to the commencement of such suit that indemnification of
the Indemnitee is proper in the circumstances because the Indemnitee has met
the applicable standard of conduct set forth in the Delaware Law, nor an actual
determination by the Corporation (including its board of directors, independent
legal counsel, or its stockholders) that the Indemnitee has not met such
applicable standard of conduct, shall create a presumption that the Indemnitee
has not met the applicable standard of conduct or, in the case of such a suit
brought by the Indemnitee, be a defense to such suit. In any suit brought by
the Indemnitee to enforce a right to indemnification or to an Advancement of
Expenses hereunder, or by the Corporation to recover an Advancement of Expenses
pursuant to the terms of an Undertaking, the burden of proving that the
Indemnitee is not entitled to be indemnified, or to such Advancement of
Expenses, under this Article VII or otherwise shall be on the Corporation.
Section 7.3. Non-Exclusivity of Rights. The rights to indemnification
and to the Advancement of Expenses conferred in this Article VII shall not be
exclusive of any other right which any person may have or hereafter acquire
under any statute, the Corporation's Certificate or Incorporation, by-law,
agreement, vote of stockholders or disinterested directors or otherwise.
-13-
<PAGE> 16
Section 7.4. Insurance. The Corporation may maintain insurance, at its
expense, to protect itself and any director, officer, employee or agent of the
Corporation or another corporation, partnership, joint venture, trust or other
enterprise against any expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such expense,
liability or loss under this Article VII or under the Delaware Law.
Section 7.5. Indemnification of Employees and Agents of the
Corporation. The Corporation may, to the extent authorized from time to time
by the board of directors, grant rights to indemnification, and to the
Advancement of Expenses, to any employee or agent of the Corporation to the
fullest extent of the provisions of this Article VII with respect to the
indemnification and Advancement of Expenses of directors and officers of the
Corporation.
ARTICLE VIII - AMENDMENTS
Section 8.1. Amendments. The by-laws of the Corporation may be
altered, amended or repealed at any meeting of the Board of Directors upon
notice thereof in accordance with these by-laws, or at any meeting of the
stockholders by the vote of the holders of the majority of the stock issued and
outstanding and entitled to vote at such meeting, in accordance with the
provisions of the Certificate of Incorporation of the Corporation and of the
laws of Delaware.
ARTICLE IX - SPECIAL PROVISIONS
Section 9.1. Special Provisions. Notwithstanding any other provisions
herein to the contrary, (a) at any time while any Heritage Stockholder (as
defined in the Stockholder Agreement referred to below) has designated any
directors on the Corporation's Board of Directors, the majority of the total
number of directors required in order to constitute a quorum for any action set
forth in Schedule 2 to the Stockholder Agreement, dated as of July 3, 1995, as
amended from time to time, among the Corporation, the Heritage Stockholders and
the other stockholders of the Corporation (as amended and in effect from time
to time, the "Stockholder Agreement"), shall include all of the directors
designated by the Heritage Stockholders, pursuant to the Stockholder Agreement,
(b) for any action set forth on Schedule 2 to the Stockholder Agreement
(including any amendment to these By-Laws), the act of a majority of the
directors present at any meeting at which there is a quorum must include the
affirmative votes of all of the directors designated by the Heritage
Stockholders at any time while directors designated by the Heritage
Stockholders are serving on the Corporation's Board of Directors and (c) the
number of directors, the election of directors and the filling of vacancies on
the Board of Directors shall be determined in accordance with the provisions of
the Stockholder Agreement until the Stockholder Agreement has been terminated
in accordance with its terms. C:\CHA\ACI.BYL
-14-
<PAGE> 1
EXHIBIT 3.3
CERTIFICATE OF INCORPORATION
(Stock Corporation)
We, the incorporators, certify that we hereby associate ourselves as a
body politic and corporate under the Stock Corporation Act of the State of
Connecticut.
1. The name of the corporation is CAPITOL BUILDING SPECIALTIES, INC.
2. The name of the town in Connecticut in which the corporation is
to be located is Bridgeport.
3. The nature of the business to be transacted, or the purposes to
be promoted or carried out by the corporation, are as follows:
(a) To engage in the operation of a home improvement business and the
business of buying and selling real and personal property, and to do all
things and perform all functions necessary and incidental in the
conducting of said business as aforesaid; and otherwise to own, operate,
manage, and conduct business of any and every kind not contrary to or
prohibited by law.
(b) To make and execute contracts and agreements for the purchase, sale,
leasing, and mortgaging, and to purchase, sell, lease, or mortgage such
real and personal estate as the corporation shall have or shall need for
the carrying on of its business.
(c) To acquire, own, and hold such real and personal property as may be
necessary or convenient for the transaction of its business, and to
lease, sublet or underlet such real property as may be necessary or
convenient for the carrying on of its business.
(d) To purchase and acquire property, business rights or franchise; to incur
debt; and to raise, borrow and secure the payment of money in any lawful
manner, including the issuing of negotiable and transferable instruments
and affidavits or indebtedness of all kinds, whether secured by
mortgage, pledge, deed, trust or otherwise.
(e) To make and perform contracts of all kinds or description in carrying on
its business, or for the purpose of attaining or furthering any of its
business, or to do any or all things which a co-partnership or any
natural person could do and execute, and which now and hereafter may be
authorized by law.
<PAGE> 2
4. The designation of each class of shares, the authorized number of
shares of each such class, and the par value (if any) of each share thereof,
are as follows:
One Hundred (100) shares, common stock, at Twenty-five $25.00)
Dollars par value.
5. The terms, limitations and relative rights and preferences of
each class of shares and series thereof (if any), or an express grant of
authority to the board of directors pursuant to Section 33-341, 1959 Supp.
Conn. G.S., are as follows:
NONE
6. The minimum amount of stated capital with which the corporation
shall commence business is Twenty-five Hundred ($2500.00) dollars. (Not less
than one thousand dollars.)
7, 8. None (Other provisions)
Dated at Bridgeport, Conn. this 29th day of July, 1961.
/s/ Hugo Puglisi
/s/ Thelma Puglisi
/s/ Bernice Goldbloom
/s/ Abraham Goldbloom
(Incorporators)
STATE OF CONNECTICUT )
)SS. Bridgeport July 29, 1961
COUNTY OF FAIRFIELD )
Personally appeared HUGO PUGLISI, THELMA PUGLISI, BERNICE GOLDBLOOM and
ABRAHAM GOLDBLOOM, and made oath to the truth of the foregoing certificate by
them signed, before me.
/s/
------------------------------
Commissioner of Superior Court
(To be accompanied by Appointment of Statutory Agent for Service)
<PAGE> 3
CERTIFICATE AMENDING OR RESTATING CERTIFICATE OF INCORPORATION BY
ACTION OF BOARD OF DIRECTORS AND SHAREHOLDERS
(Stock Corporation)
1. The name of the corporation is CAPITOL BUILDING SPECIALTIES, INC.
2. The Certificate of Incorporation (check one only)
X (a) is amended only
-------
(b) is amended and restated
-------
(c) is restated only
-------
by the following resolution of directors and shareholders:
BE IT RESOLVED, that the name of the corporation is changed to
BISHOP BUILDING SPECIALTIES, INC.
3. (Omit if Par. 2(a) is checked)
(a) The above resolution merely restates and does not change the
provisions of the original Certificate of Incorporation as
supplemented and amended to date, except as follows: (Indicate
amendments made, if any; if none, so indicate.)
(b) Other than as indicated in Par. 3(a), there is no discrepancy
between the provisions of the original Certificate of
Incorporation as supplemented and amended to date, and the
provisions of this Certificate Restating the Certificate of
Incorporation.
4. The above resolution was adopted by the board of directors and by
shareholders.
5. Vote of Shareholders:
(a) (Use if no shares are required to be voted as a class.)
<TABLE>
<CAPTION>
Number of Shares Total Voting Power of Vote Required Vote Favoring
Entitled to Vote Shares Entitled to Vote for Adoption Adoption
========================= ========================= ======================== =========================
<S> <C> <C> <C>
100 100% 51% 100%
</TABLE>
(b) (Use if any shares are required to be voted as a class.)
Describe clearly the vote required for adoption and state the actual
vote favoring adoption: include the designation and number of shares of
each class entitled to vote on the resolution as a class, the voting
power of each such class, and the actual vote of each such class.
Dated at Bridgeport, Conn. this 25th day of September, 1962.
/s/ Hugo Puglisi
------------------------------
President or Vice President
/s/ Abraham Goldbloom
------------------------------
Secretary or Asst. Secretary
<PAGE> 4
STATE OF CONNECTICUT )
)SS. Bridgeport September 25, 1962
COUNTY OF FAIRFIELD )
Personally appeared HUGO PUGLISI and ABRAHAM GOLDBLOOM and made oath to
the truth of the foregoing certificate by them signed, before me.
/s/
------------------------------
Commissioner of Superior
Court for Fairfield County
<PAGE> 5
CERTIFICATE
AMENDING OR RESTATING CERTIFICATE
OF INCORPORATION BY ACTION OF BOARD OF DIRECTORS
AND SHAREHOLDERS (Stock Corporation)
STATE OF CONNECTICUT
SECRETARY OF THE STATE
================================================================================
1. NAME OF CORPORATION DATE
BISHOP BUILDING SPECIALITIES, INC. April 30, 1979
2. The Certificate of Incorporation is A. AMENDED ONLY by the
following resolution:
RESOLVED, that the name of this corporation be changed to DAY-LEE
SALES, INC., and that Article 1 of the Certificate of Incorporation of
this corporation be, and it hereby is, amended to read as follows:
"1. The name of the corporation is DAY-LEE SALES, INC."
3. (Omit if 2A is checked)
(a) The above resolution merely restates and does not change the
provisions of the original Certificate of Incorporation as
supplemented and amended to date, except as follows: (Indicate
amendments made, if any; if none, so indicate.)
(b) Other than as indicated in Par. 3(a), there is no discrepancy
between the provisions of the original Certificate of
Incorporation as supplemented to date, and the provisions of this
Certificate Restating the Certificate of Incorporation.
4. The above resolution was adopted by the board of directors and by
shareholders.
5. Vote of shareholders:
(a) (Use if no shares are required to be voted as a class)
<TABLE>
<CAPTION>
NUMBER OF SHARES TOTAL VOTING VOTE REQUIRED VOTE FAVORING
ENTITLED TO VOTE POWER FOR ADOPTION ADOPTION
<S> <C> <C> <C> <C>
100 100 51 100
</TABLE>
(b) (if the shares of any class are entitled to vote as a class,
indicate the designation and number of outstanding shares of each
such class, the voting power thereof, and the vote of each such
class for the amendment resolution.)
We hereby declare under the penalties of false statement that the statements
made in the foregoing certificate are true.
<TABLE>
- ------------------------------------------------------------------------------------------------
<S> <C>
NAME OF PRESIDENT OF VICE PRESIDENT NAME OF SECRETARY OR ASSISTANT SECRETARY
(Print or Type) (Print or Type)
MICHAEL HERMAN SUSAN HERMAN
- ------------------------------------------------------------------------------------------------
SIGNED (President or Vice President) SIGNED (Secretary or Assistant Secretary)
/s/ Michael Herman /s/ Susan Herman
- ------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 6
CERTIFICATE
AMENDING OR RESTATING CERTIFICATE
OF INCORPORATION BY ACTION OF BOARD OF DIRECTORS
AND SHAREHOLDERS (Stock Corporation)
STATE OF CONNECTICUT
SECRETARY OF THE STATE
================================================================================
1. NAME OF CORPORATION DATE
DAY-LEE SALES, INC March 24, 1984
2. The Certificate of Incorporation is A. AMENDED ONLY by the
following resolution:
RESOLVED, that the name of this corporation be changed to VINYL
BUILDING SPECIALITIES OF CONNECTICUT, INC. and that Article 1 of the
Certificate of Incorporation of this corporation be, and it hereby is,
amended to read as follows:
"1. The name of the corporation is VINYL BUILDING
SPECIALTIES OF CONNECTICUT, INC."
3. (Omit if 2A is checked)
(a) The above resolution merely restates and does not change the
provisions of the original Certificate of Incorporation as
supplemented and amended to date, except as follows: (Indicate
amendments made, if any; if none, so indicate.)
(b) Other than as indicated in Par. 3(a), there is no discrepancy
between the provisions of the original Certificate of
Incorporation as supplemented to date, and the provisions of this
Certificate Restating the Certificate of Incorporation.
4. The above resolution was adopted by the board of directors and by
shareholders.
5. Vote of shareholders:
(a) (Use if no shares are required to be voted as a class)
<TABLE>
<CAPTION>
NUMBER OF SHARES TOTAL VOTING POWER VOTE REQUIRED FOR ADOPTION VOTE FAVORING ADOPTION
ENTITLED TO VOTE SHARES ENTITLED TO VOTE
<S> <C> <C> <C>
100 100 67 100
</TABLE>
(b) (if the shares of any class are entitled to vote as a class,
indicate the designation and number of outstanding shares of each
such class, the voting power thereof, and the vote of each such
class for the amendment resolution.)
We hereby declare under the penalties of false statement that the statements
made in the foregoing certificate are true.
<TABLE>
- ----------------------------------------------------------------------------------------------------
<S> <C>
NAME OF PRESIDENT (Print or Type) NAME OF SECRETARY (Print or Type)
MICHAEL HERMAN SUSAN HERMAN
- ----------------------------------------------------------------------------------------------------
SIGNED (President or Vice President) SIGNED (Secretary or Assistant Secretary)
/s/ Michael Herman /s/ Susan Herman
- ----------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 1
EXHIBIT 3.4
BY-LAWS
OF
VINYL BUILDING SPECIALTIES OF CONNECTICUT, INC.
ARTICLE I
MANAGEMENT BY BOARD OF DIRECTORS
SECTION 1. The Stock, property and affairs of this Corporation shall
be under the care and management of the Board of Directors, who shall be chosen
annually at the Annual Meeting of the Shareholders. Members of the Board need
not be Shareholders of the Corporation. If any corporation shall own stock in
the Corporation it may, by action of its Board of Directors, specify certain of
its Directors and/or Executive Officers to be elected as Directors of this
Corporation.
SECTION 2. The Board of Directors shall consist of not less than two
(2), nor more than eleven (11) persons. Provided, however, that in the event
that there are less than two (2) Shareholders the Board of Directors shall be
composed of the same number of Directors as there are Shareholders. A quorum
shall consist of a majority of the members of the Board of Directors. The
Shareholders, at a special or regular Meeting of the Shareholders, shall have
the right to fill any vacancy by a fifty-one (51%) percent vote of all
Shareholders. The Board of Directors shall have the right to appoint
additional Board members between Shareholder Meetings subject to subsequent
ratification by the Shareholders.
<PAGE> 2
SECTION 3. The first Board of Directors shall he elected at the
organization meeting of the Corporation. Thereafter Directors shall be elected
at the first meeting of the shareholders held for that purpose and at each
subsequent annual meeting. Each Director shall hold office for the term for
which he is elected and until his successor has been elected and qualified,
unless he shall cease to be in office prior to that time.
ARTICLE II
COMPENSATION OF DIRECTORS
Unless otherwise restricted by the Certificate of Incorporation or these
By-Laws, the Board of Directors shall have the authority to fix the
compensation of Directors. The Directors may be paid their expenses, if any,
for attendance at each Meeting of the Board of Directors and may be paid a
fixed sum for attendance at each Meeting of the Board of Directors or a stated
salary as a Director. No such payment shall preclude any Director from serving
the Corporation in any other capacity in receiving compensation therefor.
Members of special or standing committees may be allowed like compensation for
attending committee Meetings.
ARTICLE III
REMOVAL OF DIRECTORS
Unless otherwise restricted by the Certificate of Incorporation or these
By-Laws, any Director or the entire Board of Directors may be removed, with or
without cause, by the holders of a majority of shares entitled to vote in an
election of Directors.
-2-
<PAGE> 3
ARTICLE IV
MEETING OF THE BOARD OF DIRECTORS
SECTION 1. The Board of Directors of the Corporation may hold
Meetings, both regular and special, either within or without the State of
Connecticut.
SECTION 2. The first Meeting of each newly elected Board of Directors
shall be held at such time and place as shall be fixed by the vote of the
Shareholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected Directors in order legally to constitute the
meeting, provided a quorum shall be present. In the event of the failure of
the Shareholders to fix the time and place of such first meeting of the newly
elected Board of Directors, or in the event such meeting is not held at the
time and pace so fixed by the Shareholders, the meeting may be held at such
time and place as shall be specified in a notice given as hereinafter provided
for Special Meetings of the Board of Directors, or as shall be specified in a
written waiver signed by all of the Directors.
SECTION 3. Regular meetings of the Board of Directors may be held
without notice at such time and at such place as shall from time to time be
determined by the Board.
SECTION 4. Special meetings of the Board may be called by the
President on five (5) days' notice to each Director, either personally or by
mail or by telegram; special meetings shall be called by the President or
Secretary in like manner and on like
-3-
<PAGE> 4
notice on the written request of two (2) Directors. Provided, however, that in
the event that there are less than two (2) Directors, the special meeting shall
be called by the president or secretary in like manner and on like notice on
the written request of one (1) Director.
SECTION 5. At all meetings of the Board, Directors shall constitute a
quorum for the transaction of business and the act of the majority of the
Directors present at any meeting at which there is a quorum shall be the act of
the Board of Directors, except as may be otherwise specifically provided by
statute or by the Certificate of Incorporation. If a quorum shall not be
present at any meeting of the Board of Directors, the Directors present may
adjourn the meeting from time to time, without notice other than announcement
at the meeting, until a quorum shall be present.
SECTION 6. Unless otherwise restricted by the Certificate of
Incorporation or these By-Laws, any action required or permitted to be taken at
any meeting of the Board of Directors or of any Committee thereof may be taken
without a meeting, if all members of the Board of Directors or Committee as the
case may be, consent thereto in writing, and the writing or writings are filed
with the Minutes of proceedings of the Board of Committee.
SECTION 7. The Board of Directors may, by resolution passed by a
majority of the whole Board, designate one (1) or more committees, each
committee to consist of one (1) or more of the Directors of the Corporation.
The Board may designate one (1) or
-4-
<PAGE> 5
more Directors as alternate members of any committee, who may replace any
absent or disqualified member at any meeting of the committee.
In the absence or disqualification of a member of a committee, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act in the place of any such absent
of disqualified member.
Any such committee, to the extent provided in the resolution of the
Board of Directors, shall have and may exercise all the powers and authority of
the Board of Directors in the management of the business and affairs of the
Corporation, and may authorize the seal of the Corporation to be affixed to all
papers which may require it. No such committee shall have the power or
authority in reference to amending the Certificate of Incorporation, adopting
an agreement of merger or consolidation, recommending to the Shareholders the
sale, lease or exchange of all or substantially all of the Corporation's
property and assets, recommending to the Shareholders a dissolution of the
Corporation or a revocation of the dissolution, or amending the By-Laws of the
Corporation. Unless the resolution or the Certificate of Incorporation
expressly so provide, no such committee shall have the power or authority to
declare a dividend or to authorize the issuance of stock. Such
-5-
<PAGE> 6
committee shall have such name or names as may be determined from time to time
by resolution adopted by the Board of Directors.
SECTION 8. Unless otherwise restricted by the Certificate of
Incorporation or these By-Laws, members of the Board of Directors, or any
Committee designated by the Board of Directors, may participate in a meeting of
the Board of Directors, or any Committee, by means of conference telephone or
similar communications equipment, by means of which all persons participating
in the meeting can hear each other, and such participation in the meeting shall
constitute presence in person.
SECTION 9. Each committee shall keep regular minutes of its meetings
and report the same to the Board of Directors. The Board of Directors shall
keep regular Minutes of its meetings which shall be placed on file with the
corporate records.
SECTION 10. When all members of the Board of Directors shall consent
in writing to the passage of a resolution, such written consent shall have the
same force and effect as if the resolutions had been passed by the Board of
Directors in Meeting assembled.
ARTICLE V
MEETINGS OF SHAREHOLDERS
SECTION 1. All Meetings of the Shareholders for the election of
Directors shall be held at such time and place as may be fixed from time to
time by the Board of Directors and stated in the Notice of the Meeting.
Meetings of Shareholders for any other
-6-
<PAGE> 7
purpose may be held at such time and place, within or without the State of
Connecticut, as shall be stated in the Notice of the Meeting or in a duly
executed Waiver of Notice thereof.
SECTION 2. Annual Meetings of the Shareholders, commencing with the
calendar year ending December 31, 1961, shall be held on the first (1st)
Tuesday of December in each year, if not a legal holiday, and if a legal
holiday, then an the next secular day following, at 12:00 P.M., or at such
other date and time as shall be designated from time to time by the Board of
Directors and stated in the Notice of the Meeting, at which they shall elect by
plurality vote a Board of Directors, and transact such other business as may
properly be brought before the Meeting.
SECTION 3. Written Notice of the annual meeting stating the place,
date and hour of the Meeting shall be given to each Shareholder entitled to
vote at such Meeting not less than seven (7) nor more than fifty (50) days
before the date of the Meeting.
SECTION 4. The Officer who has charge of the Stock ledger of the
Corporation shall prepare and make, at least five (5) days before every Meeting
of Shareholders of which at least seven (7) days notice is given, a complete
list of the Shareholders entitled to vote at the Meeting arranged in
alphabetical order, and showing the address of each Shareholder and the number
of shares registered in the name of each Shareholder. Such list shall be open
to the examination of any Shareholder, for any purpose germane to the Meeting,
during ordinary business hours, for a period of at least
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<PAGE> 8
five (5) days prior to the Meeting, at the principal office of the Corporation.
The list shall also be produced and kept open and shall be subject for any such
proper purpose to such inspection during the whole time of the meeting.
SECTION 5. Special Meetings of the Shareholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the Certificate of
Incorporation, may be called by the President and shall be called by the
President or Secretary at the request in writing of a majority of the Board of
Directors, or at the request in writing of Shareholders owning a majority of
the capital stock of the Corporation issued and outstanding and entitled to
vote. Such request shall state the purpose or purposes of the proposed
Meeting. All Shareholder entitled to vote shall be present in person or
by proxy and no objection to the meeting shall be made in order for action
taken thereat to be valid.
SECTION 6. Written notice of a Special Meeting stating the place,
date and hour of the Meeting and the purpose or purposes for which the Meeting
is called shall be given not less than five (5) nor more than fifty (50) days
before the date of the Meeting, to each Shareholder entitled to vote at such
Meeting.
SECTION 7. Business transacted at any Special Meeting of Shareholders
shall be limited to the purposes stated in the Notice.
SECTION 8. The holders of fifty-one (51%) percent of the stock issued
and outstanding and entitled to vote, present in
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<PAGE> 9
person or represented by proxy, shall constitute a quorum at all Meetings of
the Shareholders for the transaction of business except as otherwise provided
by statute or by Certificate of Incorporation. If, however, such quorum shall
not be present or represented at any Meeting of the Shareholders, the
Shareholders entitled to vote, present in person or represented by proxy, shall
have power to adjourn the Meeting from time to time, without notice other than
announcement at the Meeting, until a quorum shall be present or represented.
At such adjourned Meeting at which a quorum shall be present or represented,
any business may be transacted which might have been transacted at the Meeting
as originally notified. If the adjournment is for more than thirty (30) days,
or if after the adjournment a new record date is fixed for the adjourned
Meeting, a Notice of the adjourned Meeting shall be given to each Shareholder
of record entitled to vote at the Meeting.
SECTION 9. When a quorum is present at the Meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such Meeting,
unless the questions is one upon which by express provision of statute or of
the Certificate of Incorporation, a different vote is required in which case
such express provision shall govern and control the decision of such question.
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<PAGE> 10
SECTION 10. Unless otherwise provided in the Certificate of
Incorporation, each Shareholder shall at every Meeting of the Shareholders be
entitled to one (1) vote in person or by proxy for each share of the capital
stock having voting power held by such Shareholder, but no proxy shall be voted
on after three (3) years from its date, unless the proxy provides for a longer
period.
At all elections of the Directors of the Corporation, each Shareholder
having voting power shall be entitled to exercise the right of cumulative
voting as provided in the Certificate of Incorporation.
SECTION 11. Unless otherwise provided in the Certificate of
Incorporation, any action required to be taken at any Annual or Special
Meeting of Shareholders of the Corporation, or any action which may be taken at
any annual or Special Meeting of such Shareholders, may be taken without a
Meeting, without prior Notice and without a vote, if a consent in writing,
setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would
be necessary to authorize or take such action at a Meeting at which all shares
entitled to vote thereon were present and voted. Prompt notice of the taking
of the corporate action without a Meeting by less than unanimous written
consent shall be given to those Shareholders who have not consented in writing.
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<PAGE> 11
ARTICLE VI
OFFICERS
SECTION 1. The Officers of the Corporation shall be elected by the
Board of Directors, to hold office for the term of one year or until others are
chosen in their place and stead by the Board of Directors. All officers may be
removed in the Board's absolute discretion. The officers shall consist of a
President, Vice President, Secretary, Treasurer, and when deemed necessary by
the Board of Directors, a Chairman of the Board and such other Officers as the
Directors shall from time to time determine to appoint. The Board of Directors
may appoint from time to time such other representatives and agents as it deems
necessary. The offices of President and Treasurer, or of Secretary and
Treasurer or of Vice President and Assistant Treasurer, may be held by the same
person.
SECTION 2. CHAIRMAN OF THE BOARD. The Chairman of the Board of
Directors, if one shall be elected, shall call and preside at all Meetings of
the Shareholders and at all meetings of the Board of Directors. He shall,
unless otherwise provided by the Board of Directors, be an ex officio member of
all committees.
SECTION 3. PRESIDENT. In the absence of a Chairman of the Board, the
President shall preside at all Meetings of the Board of Directors and at all
meetings of the Shareholders. He shall cause to be called Regular and Special
Meetings of the Stockholders and Directors in accordance with these By-Laws.
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<PAGE> 12
He shall appoint and remove, employ and discharge and fix the
compensation of all servants, agents, employees and clerks of the Corporation,
other than duly appointed officers, subject to the approval of the Board of
Directors.
He shall assign and make all contracts and agreements in the name of the
Corporation. He shall see that the books, reports, statements and Certificates
required by statute are properly kept, made and filed according to law.
He shall assign all certificates of stock, notes, drafts and/or bills of
exchange, warrants or other orders for the payment of money duly drawn by the
Treasurer.
He shall enforce these By-Laws and perform all duties incident to the
position and office which are required by law.
He shall have the powers and duties of Executive Management usually
vested in the office of the Chief Executive Officer and such other powers as
may be assigned by the Board.
SECTION 4. VICE PRESIDENT. During the absence and inability of the
President to render and perform his duties or exercise his powers as set forth
in these By-Laws or in the acts under which this Corporation is organized, the
same shall be performed and exercised by the Vice President, (or in the event
there is more than one Vice Presidents in the order designated by the Directors
or in the absence of any designations, then in the order of their election),
and when so acting, he shall have all the
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<PAGE> 13
powers and be subject to all the responsibilities hereby given to or imposed
upon such President.
SECTION 5. SECRETARY. The Secretary shall keep the Minutes of the
Meetings of the Board of Directors and of the Shareholders.
He shall give and serve all notices of the Corporation.
He shall be custodian of the records and of the seal of the Corporation,
and affix the latter when required.
He shall keep the stock and transfer books in the manner prescribed by
law, so as to show at all times the amount of capital stock, the manner and the
time the same was paid in, the names of the owners thereof, alphabetically
arranged, their respective places of residence, their post-office address, the
number of shares owned by each, the time at which each person became such
owner, and the amount paid thereon, and keep such stock and transfer books open
daily during business hours at the office of the Corporation, subject to the
inspection of any Shareholder of the Corporation, and permit such Shareholder
to make extracts from said books to the extent and as prescribed by law.
He shall sign all Certificates of Stock.
He shall present to the Board of Directors at their stated Meetings all
communications addressed to him officially by the President or any officer of
Shareholder of the Corporation.
He shall attend to all correspondence and perform all the duties
incident to the office of Secretary.
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<PAGE> 14
SECTION 6. TREASURER. The Treasurer shall have the care and custody
of and be responsible for all funds and securities of the Corporation, and
deposit all such funds in the name of the Corporation, in such bank or banks,
trust company or trust companies or safe deposit vaults as the Board of
Directors may designate.
He shall sign, make, and endorse in the name of the Corporation, all
checks, drafts, warrants and orders for the payment of money, and pay out and
dispose of the same and receipt therefor, under the direction of the President
or the Board of Directors.
He shall exhibit at all reasonable times his books and accounts to any
Director or Shareholder of the Company upon application at the office of the
Corporation during business hours.
He shall render a statement of the condition of the finances of the
Corporation at each regular meeting of the Board of Directors, and at such
other times as shall be required of him, and he shall render a full financial
report at the annual meeting of the Shareholders. He shall keep at the office
of the Corporation, correct books of account of all its business and
transactions and such other books of account as the Board of Directors may
require.
SECTION 7. All vacancies in any office shall be filled by the Board
of Directors without undue delay, at its regular meeting, or at a meeting
specially called for that purpose. The vacancy shall be filled for the
unexpired portion of the term of office.
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<PAGE> 15
SECTION 8. The officers shall receive such salary or compensation as
may be determined by the Board of Directors from time to time.
ARTICLE IX
STOCK CERTIFICATES AND STOCK TRANSFERS
Subject to the provisions of the Laws of the State of Connecticut,
transfers of shares shall be made only upon the books of the Corporation, by
the holder in person or by an attorney duly authorized in a writing attested to
by at least one (1) witness, and filed with the Secretary of the Corporation,
and shall be made only on the surrender of the Certificate or Certificates of
such stock then outstanding; provided, however, that the Board of Directors may
authorize the issue of new Certificates in place of Certificates alleged to be
lost or destroyed, upon being furnished with satisfactory indemnification
and/or satisfactory evidence of the probability of such loss or destruction.
Should any of the Certificates of the Corporation be subject to special
restrictions as a result of any agreements between Shareholders and the
corporation, said restrictions shall be noted on the Certificates themselves.
ARTICLE X
FISCAL YEAR
The fiscal year of the Corporation shall begin on the 1st day of January
and end on the 31st day of December of each year.
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<PAGE> 16
ARTICLE XI
AMENDMENTS TO BY-LAWS
These By-Laws may be amended, altered or replaced at any legal Meeting
of the Shareholders, regular or special, only by fifty-one (51%) percent vote
of all of the outstanding stock held by all of the Shareholders of the
Corporation.
ARTICLE XII
DIVIDENDS
Dividends upon the capital stock of the Corporation, subject to the
provisions of the Certificate of Incorporation, if any, may be declared by the
Board of Directors at any regular or Special Meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of the capital stock,
subject to the provisions of the Certificate of Incorporation.
Before payment of any dividend, there may be set aside out of any funds
of the Corporation available from time to time, in their absolute discretion,
as a reserve or reserves to meet contingencies, or for equalizing dividends, or
for repairing or maintaining any property of the Corporation, or for such other
purpose as the Directors shall think conducive to the interest of the
Corporation, and the Directors may modify or abolish any such reserve in the
manner in which it was created.
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<PAGE> 17
ARTICLE XIII
NOTICES
Whenever under the provisions of the statutes or of the Certificate of
Incorporation or of these By-Laws notice is required to be given to any
Director or Shareholder, it shall not be construed to mean personal notice.
Such notice may be given in writing by mail addressed to such Director or
Shareholder at his address as it appears on the records of the Corporation with
postage thereon prepaid, and such notice shall be deemed to be given at the
time when the same shall be deposited in the United States mail. Notice to
Directors may also be given by telegram. Whenever any notice is required to be
given under the provisions of the statutes or the Certificate of Incorporation
or of these By-Laws, a waiver thereof in writing signed by the person or
persons entitled to said notice, whether before or after the time stated
therein, shall be deemed equivalent thereto.
ARTICLE XIV
STOCK
Each Shareholder of the Corporation, whose stock has been paid for in
full, whether in money, property or otherwise, shall be entitled to a
Certificate or Certificates showing the number of shares of stock outstanding
on the books of the Corporation in his name. The Certificates of stock shall
be issued under the seal of the Corporation, and in such form as the Board of
Directors may direct or approve. Each Certificate shall be signed jointly by
the
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<PAGE> 18
President and Secretary of the Corporation, and in the event of the inability
of any of these Officers to act, the Board of Directors may designate another
person to act for the officer unable to act.
ARTICLE XV
SIGNATURE
The President or Treasurer or the Secretary of the Corporation shall
sign all checks, drafts, notes, orders for payment of money, deeds, leases,
mortgages, agreements, and other obligations and instruments which the Board of
Directors may order to be executed, or which may be necessary or proper in
carrying on the business of the Corporation.
ARTICLE XVI
PRE-EMPTIVE STOCK RIGHTS
Except as otherwise provided in the general Corporation Laws of the
State of Connecticut, there shall be no pre-emptive rights to acquire stock to
be newly issued in the Corporation by existing Shareholders.
ARTICLE XVII
CORPORATE SEAL
The Corporate Seal shall be in the following form:
The Seal shall be in the custody of the Secretary, who shall affix it to
all Certificates of Stock and to other instruments requiring the Seal of the
Company.
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<PAGE> 19
ANNUAL STATEMENT
The Board of Directors shall present at each annual Meeting, and at any
Special Meeting of the Shareholders when called for by the vote of the
Shareholders, a full and clear statement of the business and condition of the
Corporation.
INDEMNIFICATION
The Corporation shall indemnify its Officers, Directors, Employees and
Agents to the extent permitted by the General Statutes of Connecticut.
END OF BY-LAWS
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<PAGE> 1
EXHIBIT 3.5
CERTIFICATE OF INCORPORATION
STOCK CORPORATION
STATE OF CONNECTICUT
SECRETARY OF THE STATE
The undersigned incorporator(s) hereby form(s) a corporation under the Stock
Corporation Act of the State of Connecticut:
1. The name of the corporation is Bishop Manufacturing Co. of New York,
Inc.
2. The nature of the business to be transacted, or the purposes to be
promoted or carried out by the corporation, are as follows:
To engage in and do every act, matter and thing a corporation organized
under the laws of the State of Connecticut may now or hereafter lawfully
do, as set forth in Chapter 599 of the Connecticut General Statutes as
revised and amended, and to do every act, matter and thing necessary,
desirable, suitable, convenient, or proper for, or in connection with,
or incidental to, the accomplishment of any one of the purposes stated
therein or herein, or in the attainment of any one or more of the
objects therein or herein enumerated, designed directly or indirectly,
to promote the interest of this corporation or to enhance the value of
its property or properties. The enumeration of specific powers shall
not be taken to limit or abridge the general powers of the corporation.
3. The designation of each class of shares, the authorized number of shares
of each such class, and the par value (if any) of each share thereof are
as follows:
Designation: Common Stock
Authorized Number of Shares: 5,000 shares
Par Value: No par value
4. The terms, limitations and relative rights and preferences of each class
of shares and series thereof (if any), or an express grant of authority
to the board of directors pursuant to Section 33-41, 1959 Supp. Conn.
G.S., are as follows:
The entire voting stock of the corporation will be vested in the common
stock with the holder of record of each share of common stock being
entitled to one vote for each share held. There is an expressed grant
of authority to the Board of Directors pursuant to Sec. 33-341 of the
Connecticut General Statutes so made and provided.
The corporation and the shareholders thereof shall have pre-emptive
rights as are more fully set forth in the minutes of said corporation.
5. The minimum amount of stated capital with which the corporation shall
commence business is ONE THOUSAND AND 00/100 ($1,000.00) dollars. (Not
less than one thousand dollars)
6. (7) - Other provisions
<PAGE> 2
The duration of the corporation is perpetual.
Dated this 21st day of May, 1993.
I/We hereby declare, under the penalties of false statement, that the
statements made in the foregoing certificate are true.
This certificate of incorporation must be signed by each
incorporator.
-------------------------------------------------------------------
NAME OF INCORPORATOR (Print or NAME OF INCORPORATOR (Print or
Type) Type)
Leslie Goldbloom Howard Saffan
-------------------------------------------------------------------
SIGNED (Print or Type)
/s/ Leslie Goldbloom /s/ Howard Saffan
-------------------------------------------------------------------
<PAGE> 3
APPOINTMENT OF STATUTORY AGENT FOR SERVICE
DOMESTIC CORPORATION
SECRETARY OF STATE
30 TRINITY STREET
HARTFORD, CT 06106
<TABLE>
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
NAME OF CORPORATION:
Bishop Manufacturing Co. of New York, Inc.
- -------------------------------------------------------------------------------------------------------------------
THE ABOVE CORPORATION APPOINTS AS ITS STATUTORY AGENT FOR SERVICE, ONE OF THE FOLLOWING:
- -------------------------------------------------------------------------------------------------------------------
NAME OF NATURAL PERSON WHO IS RESIDENT OF BUSINESS ADDRESS ZIP CODE
CONNECTICUT 40 Center Street, Prospect, CT 06712
BUSINESS ADDRESS ZIP CODE
Stephen A. Longo 28 Fairview Avenue, Meriden CT 06450
NAME OF CONNECTICUT CORPORATION ADDRESS OF PRINCIPAL OFFICE IN CONN. (IF NONE,
ENTERED ADDRESS OF APPOINTEE'S STATUTORY AGENT FOR
Bishop Manufacturing Co. of New York, Inc. SERVICE)
305 Knowlton Street, Bridgeport, CT 06608
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
AUTHORIZATION
<TABLE>
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
NAME OF INCORPORATOR (PRINT OR TYPE) SIGNED (INCORPORATOR) DATE
Leslie Goldbloom /s/ Leslie Goldbloom 5/21/93
- --------------------------------------------------------------------------------------------------------
NAME OF INCORPORATOR (PRINT OR TYPE) SIGNED (INCORPORATOR)
Howard Saffan /s/ Howard Saffan 5/21/93
- --------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 1
EXHIBIT 3.6
BY-LAWS
OF
BISHOP MANUFACTURING CO. OF NEW YORK, INC.
ARTICLE I
MANAGEMENT BY BOARD OF DIRECTORS
SECTION 1. The Stock, property and affairs of this Corporation shall
be under the care and management of the Board of Directors, who shall be chosen
annually at the Annual Meeting of the Shareholders. Members of the Board need
not be Shareholders of the Corporation. If any corporation shall own stock in
the Corporation it may, by action of its Board of Directors, specify certain of
its Directors and/or Executive Officers to be elected as Directors of this
Corporation.
SECTION 2. The Board of Directors shall consist of not less than two
(2), nor more than eleven (11) persons. Provided, however, that in the event
that there are less than two (2) Shareholders the Board of Directors shall be
composed of the same number of Directors as there are Shareholders. A quorum
shall consist of a majority of the members of the Board of Directors. The
Shareholders, at a special or regular Meeting of the Shareholders, shall have
the right to fill any vacancy by a fifty-one (51%) percent vote of all
Shareholders. The Board of Directors shall have the right to appoint
additional Board members between Shareholder Meetings subject to subsequent
ratification by the Shareholders.
<PAGE> 2
SECTION 3. The first Board of Directors shall be elected at the
organization meeting of the Corporation. Thereafter Directors shall be elected
at the first meeting of the shareholders held for that purpose and at each
subsequent annual meeting. Each Director shall hold office for the term for
which he is elected and until his successor has been elected and qualified,
unless he shall cease to be in office prior to that time.
ARTICLE II
COMPENSATION OF DIRECTORS
Unless otherwise restricted by the Certificate of Incorporation or these
By-Laws, the Board of Directors shall have the authority to fix the
compensation of Directors. The Directors may be paid their expenses, if any,
for attendance at each Meeting of the Board of Directors and may be paid a
fixed sum for attendance at each Meeting of the Board of Directors or a stated
salary as a Director. No such payment shall preclude any Director from serving
the Corporation in any other capacity in receiving compensation therefor.
Members of special or standing committees may be allowed like compensation for
attending committee Meetings.
ARTICLE III
REMOVAL OF DIRECTORS
Unless otherwise restricted by the Certificate of Incorporation or these
By-Laws, any Director or the entire Board of Directors may be removed, with or
without cause, by the holders of a majority of shares entitled to vote in an
election of Directors.
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<PAGE> 3
ARTICLE IV
MEETING OF THE BOARD OF DIRECTORS
SECTION 1. The Board of Directors of the Corporation may hold
Meetings, both regular and special, either within or without the State of
Connecticut.
SECTION 2. The first meeting of each newly elected Board of Directors
shall be held at such time and place as shall be fixed by the vote of the
Shareholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected Directors in order legally to constitute the
meeting, provided a quorum shall be present. In the event of the failure of
the Shareholders to fix the time and place of such first meeting of the newly
elected Board of Directors, or in the event such meeting is not held at the
time and pace so fixed by the Shareholders, the meeting may be held at such
time and place as shall be specified in a notice given as hereinafter provided
for Special Meetings of the Board of Directors, or as shall be specified in a
written waiver signed by all of the Directors.
SECTION 3. Regular meetings of the Board of Directors may be held
without notice at such time and at such place as shall from time to time be
determined by the Board.
SECTION 4. Special meetings of the Board may be called by the
President on five (5) days' notice to each Director, either personally or by
mail or by telegram; special meetings shall be called by the President or
Secretary in like manner and on like
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<PAGE> 4
notice on the written request of two (2) Directors. Provided, however, that in
the event that there are less than two (2) Directors, the special meeting shall
be called by the president or secretary in like manner and on like notice on
the written request of one (1) Director.
SECTION 5. At all meetings of the Board, Directors shall constitute a
quorum for the transaction of business and the act of the majority of the
Directors present at any meeting at which there is a quorum shall be the act of
the Board of Directors, except as may be otherwise specifically provided by
statute or by the Certificate of incorporation. If a quorum shall not be
present at any meeting of the Board of Directors, the Directors present may
adjourn the meeting from time to time, without notice other than announcement
at the meeting, until a quorum shall be present.
SECTION 6. Unless otherwise restricted by the Certificate of
Incorporation or these By-Laws, any action required or permitted to be taken at
any meeting of the Board of Directors or of any Committee thereof may be taken
without a meeting, if all members of the Board of Directors or Committee as the
case may be, consent thereto in writing, and the writing or writings are filed
with the Minutes of proceedings of the Board of Committee.
SECTION 7. The Board of Directors may, by resolution passed by a
majority of the whole Board, designate one (1) or more committees, each
committee to consist of one (1) or more of the Directors of the Corporation.
The Board may designate one (1) or
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<PAGE> 5
more Directors as alternate members of any committee, who may replace any
absent or disqualified member at any meeting of the committee.
In the absence or disqualification of a member of a committee, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act in the place of any such absent
of disqualified member.
Any such committee, to the extent provided in the resolution of the
Board of Directors, shall have and may exercise all the powers and authority of
the Board of Directors in the management of the business and affairs of the
Corporation, and may authorize the seal of the Corporation to be affixed to all
papers which may require it. No such committee shall have the power or
authority in reference to amending the Certificate of Incorporation, adopting
an agreement of merger or consolidation, recommending to the Shareholders the
sale, lease or exchange of all or substantially all of the Corporation's
property and assets, recommending to the Shareholders a dissolution of the
Corporation or a revocation of the dissolution, or amending the By-Laws of the
Corporation. Unless the resolution or the Certificate of Incorporation
expressly so provide, no such committee shall have the power or authority to
declare a dividend or to authorize the issuance of stock. Such
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<PAGE> 6
committee shall have such name or names as may be determined from time to time
by resolution adopted by the Board of Directors.
SECTION 8. Unless otherwise restricted by the Certificate of
Incorporation or these By-Laws, members of the Board of Directors, or any
Committee designated by the Board of Directors, may participate in a meeting of
the Board of Directors, or any Committee, by means of conference telephone or
similar communications equipment, by means of which all persons participating
in the meeting can hear each other, and such participation in the meeting shall
constitute presence in person.
SECTION 9. Each committee shall keep regular minutes of its meetings
and report the same to the Board of Directors. The Board of Directors shall
keep regular Minutes of its meetings which shall be placed on file with the
corporate records.
SECTION 10. When all members of the Board of Directors shall consent
in writing to the passage of a resolution, such written consent shall have the
same force and effect as if the resolutions had been passed by the Board of
Directors in Meeting assembled.
ARTICLE V
MEETINGS OF SHAREHOLDERS
SECTION 1. All Meetings of the Shareholders for the election of
Directors shall be held at such time and place as may be fixed from time to
time by the Board of Directors and stated in the Notice of the Meeting.
Meetings of Shareholders for any other
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<PAGE> 7
purpose may be held at such time and place, within or without the State of
Connecticut, as shall be stated in the Notice of the meeting or in a duly
executed Waiver of Notice thereof.
SECTION 2. Annual Meetings of the Shareholders, commencing with the
calendar year ending December 31, 1993, shall be held on the first (1st)
Tuesday of December in each year, if not a legal holiday, and if a legal
holiday, then on the next secular day following, at 12:00 P.M., or at such
other date and time as shall be designated from time to time by the Board of
Directors and stated in the Notice of the Meeting, at which they shall elect by
plurality vote a Board of Directors, and transact such other business as may
properly be brought before the Meeting.
SECTION 3. Written Notice of the annual meeting stating the place,
date and hour of the Meeting shall be given to each Shareholder entitled to
vote at such Meeting not less than seven (7) nor more than fifty (50) days
before the date of the Meeting.
SECTION 4. The Officer who has charge of the Stock ledger of the
Corporation shall prepare and make, at least five (5) days before every Meeting
of Shareholders of which at least seven (7) days notice is given, a complete
list of the Shareholders entitled to vote at the Meeting arranged in
alphabetical order, and showing the address of each Shareholder and the number
of shares registered in the name of each Shareholder. Such list shall be open
to the examination of any Shareholder, for any purpose germane to the Meeting,
during ordinary business hours, for a period of at least
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<PAGE> 8
five (5) days prior to the Meeting, at the principal office of the Corporation.
The list shall also be produced and kept open and shall be subject for any such
proper purpose to such inspection during the whole time of the meeting.
SECTION 5. Special Meetings of the Shareholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the Certificate of
Incorporation, may be called by the President and shall be called by the
President or Secretary at the request in writing of a majority of the Board of
Directors, or at the request in writing of Shareholders owning a majority of
the capital stock of the Corporation issued and outstanding and entitled to
vote. Such request shall state the purpose or purposes of the proposed
Meeting. All Shareholder entitled to vote shall be present in person or
by proxy and no objection to the meeting shall be made in order for
action taken thereat to be valid.
SECTION 6. Written notice of a Special Meeting stating the place,
date and hour of the Meeting and the purpose or purposes for which the Meeting
is called shall be given not less than five (5) nor more than fifty (50) days
before the date of the Meeting, to each Shareholder entitled to vote at such
Meeting.
SECTION 7. Business transacted at any Special Meeting of Shareholders
shall be limited to the purposes stated in the Notice.
SECTION 8. The holders of fifty-one (51%) percent of the stock issued
and outstanding and entitled to vote, present in
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<PAGE> 9
person or represented by proxy, shall constitute a quorum at all Meetings of
the Shareholders for the transaction of business except as otherwise provided
by statute or by Certificate of Incorporation.
If, however, such quorum shall not be present or represented at any
Meeting of the Shareholders, the Shareholders entitled to vote, present in
person or represented by proxy, shall have power to adjourn the Meeting from
time to time, without notice other than announcement at the Meeting, until a
quorum shall be present or represented. At such adjourned Meeting at which a
quorum shall be present or represented, any business may be transacted which
might have been transacted at the Meeting as originally notified. If the
adjournment is for more than thirty (30) days, or if after the adjournment a
new record date is fixed for the adjourned Meeting, a Notice of the adjourned
Meeting shall be given to each Shareholder of record entitled to vote at the
Meeting.
SECTION 9. When a quorum is present at the Meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such Meeting,
unless the questions is one upon which by express provision of statute or of
the Certificate of Incorporation, a different vote is required in which case
such express provision shall govern and control the decision of such question.
-9-
<PAGE> 10
SECTION 10. Unless otherwise provided in the Certificate of
Incorporation, each Shareholder shall at every Meeting of the Shareholders be
entitled to one (1) vote in person or by proxy for each share of the capital
stock having voting power held by such Shareholder, but no proxy shall be voted
on after three (3) years from its date, unless the proxy provides for a longer
period.
At all elections of the Directors of the Corporation, each Shareholder
having voting power shall be entitled to exercise the right of cumulative
voting as provided in the Certificate of Incorporation.
SECTION 11. Unless otherwise provided in the Certificate of
Incorporation, any action required to be taken at any Annual or Special Meeting
of Shareholders of the Corporation, or any action which may be taken at any
annual or Special Meeting of such Shareholders, may be taken without a Meeting,
without prior Notice and without a vote, if a consent in writing, setting forth
the action so taken, shall be signed by the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a Meeting at which all shares entitled to vote thereon
were present and voted. Prompt notice of the taking of the corporate action
without a Meeting by less than unanimous written consent shall be given to
those Shareholders who have not consented in writing.
-10-
<PAGE> 11
ARTICLE VI
OFFICERS
SECTION 1. The Officers of the Corporation shall be elected by the
Board of Directors, to hold office for the term of one year or until others are
chosen in their place and stead by the Board of Directors. All officers may be
removed in the Board's absolute discretion. The officers shall consist of a
President, Vice-President, Secretary, Treasurer, and when deemed necessary by
the Board of Directors, a Chairman of the Board and such other Officers as the
Directors shall from time to time determine to appoint. The Board of Directors
may appoint from time to time such other representatives and agents as it deems
necessary. The offices of President and Treasurer, or of Secretary and
Treasurer or of Vice-President and Assistant Treasurer, may be held by the same
person
SECTION 2. CHAIRMAN OF THE BOARD. The Chairman of the Board of
Directors, if one shall be elected, shall call and preside at all Meetings of
the Shareholders and at all meetings of the Board of Directors. He shall,
unless otherwise provided by the Board of Directors, be an ex officio member of
all committees.
SECTION 3. PRESIDENT. In the absence of a Chairman of the Board, the
President shall preside at all Meetings of the Board of Directors and at all
meetings of the Shareholders. He shall cause to be called Regular and Special
Meetings of the Stockholders and Directors in accordance with these By-Laws.
-11-
<PAGE> 12
He shall appoint and remove, employ and discharge and fix the
compensation of all servants, agents, employees and clerks of the Corporation,
other than duly appointed officers, subject to the approval of the Board of
Directors.
He shall assign and make all contracts and agreements in the name of the
Corporation. He shall see that the books, reports, statements and Certificates
required by statute are properly kept, made and filed according to law.
He shall assign all certificates of stock, notes, drafts and/or bills of
exchange, warrants or other orders for the payment of money duly drawn by the
Treasurer.
He shall enforce these By-Laws and perform all duties incident to the
position and office which are required by law.
He shall have the powers and duties of Executive Management usually
vested in the office of the Chief Executive Officer and such other powers as
may be assigned by the Board.
SECTION 4. VICE PRESIDENT. During the absence and inability of the
President to render and perform his duties or exercise his powers as set forth
in these By-Laws or in the acts under which this Corporation is organized, the
same shall be performed and exercised by the Vice-President, (or in the event
there is more than one Vice-Presidents in the order designated by the Directors
or in the absence of any designations, then in the order of their election),
and when so acting, he shall have all the
-12-
<PAGE> 13
powers and be subject to all the responsibilities hereby given to or imposed
upon such President.
SECTION 5. SECRETARY. The Secretary shall keep the Minutes of the
Meetings of the Board of Directors and of the Shareholders.
He shall give and serve all notices of the Corporation.
He shall be custodian of the records and of the seal of the Corporation,
and affix the latter when required.
He shall keep the stock and transfer books in the manner prescribed by
law, so as to show at all times the amount of capital stock, the manner and the
time the same was paid in, the names of the owners thereof, alphabetically
arranged, their respective places of residence, their post office address, the
number of shares owned by each, the time at which each person became such
owner, and the amount paid thereon, and keep such stock and transfer books open
daily during business hours at the office of the Corporation, subject to the
inspection of any Shareholder of the Corporation, and permit such Shareholder
to make extracts from said books to the extent and as prescribed by law.
He shall sign all Certificates of Stock.
He shall present to the Board of Directors at their stated Meetings all
communications addressed to him officially by the President or any officer of
Shareholder of the Corporation.
He shall attend to all correspondence and perform all the duties
incident to the office of Secretary.
-13-
<PAGE> 14
SECTION 6. TREASURER. The Treasurer shall have the care and custody
of and be responsible for all funds and securities of the Corporation, and
deposit all such funds in the name of the Corporation, in such bank or banks,
trust company or trust companies or safe deposit vaults as the Board of
Directors may designate.
He shall sign, make, and endorse in the name of the Corporation, all
checks, drafts, warrants and orders for the payment of money, and pay out and
dispose of the same and receipt therefor, under the direction of the President
or the Board of Directors.
He shall exhibit at all reasonable times his books and accounts to any
Director or Shareholder of the Company upon application at the office of the
Corporation during business hours.
He shall render a statement of the condition of the finances of the
Corporation at each regular meeting of the Board of Directors, and at such
other times as shall be required of him, and the shall render a full financial
report at the annual meeting of the Shareholders. He shall keep at the office
of the Corporation, correct books of account of all its business and
transactions and such other books of account as the Board of Directors may
require.
SECTION 7. All vacancies in any office shall be filled by the Board
of Directors without undue delay, at its regular meeting, or at a meeting
specially called for that purpose. The vacancy shall be filled for the
unexpired portion of the term of office.
-14-
<PAGE> 15
SECTION 8. The officers shall receive such salary or compensation as
may be determined by the Board of Directors from time to time.
ARTICLE IX
STOCK CERTIFICATES AND STOCK TRANSFERS
Subject to the provisions of the Laws of the State of Connecticut,
transfers of shares shall be made only upon the books of the Corporation, by
the holder in person or by an attorney duly authorized in a writing attested to
by at least one (1) witness, and filed with the Secretary of the Corporation,
and shall be made only on the surrender of the Certificate or Certificates of
such stock then outstanding; provided, however, that the Board of Directors may
authorize the issue of new Certificates in place of Certificates alleged to be
lost or destroyed, upon being furnished with satisfactory indemnification
and/or satisfactory evidence of the probability of such loss or destruction.
Should any of the Certificates of the Corporation be subject to special
restrictions as a result of any agreements between Shareholders and the
Corporation, said restrictions shall be noted on the Certificates themselves.
ARTICLE X
FISCAL YEAR
The fiscal year of the Corporation shall begin on the 1st day of January
and end on the 31st day of December of each year.
-15-
<PAGE> 16
ARTICLE XI
AMENDMENTS TO BY-LAWS
These By-Laws may be amended, altered or replaced at any legal Meeting
of the Shareholders, regular or special, only by fifty-one (51%) percent vote
of all of the outstanding stock held by all of the Shareholders of the
Corporation.
ARTICLE XII
DIVIDENDS
Dividends upon the capital stock of the Corporation, subject to the
provisions of the Certificate of Incorporation, if any, may be declared by the
Board of Directors at any regular or Special Meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of the capital stock,
subject to the provisions of the Certificate of Incorporation.
Before payment of any dividend, there may be set aside out of any funds
of the Corporation available from time to time, in their absolute discretion,
as a reserve or reserves to meet contingencies, or for equalizing dividends, or
for repairing or maintaining any property of the Corporation, or for such other
purpose as the Directors shall think conducive to the interest of the
Corporation, and the Directors may modify or abolish any such reserve in the
manner in which it was created.
-16-
<PAGE> 17
ARTICLE XIII
NOTICES
Whenever under the provisions of the statutes or of the Certificate of
Incorporation or of these By-Laws notice is required to be given to any
Director or Shareholder, it shall not be construed to mean personal notice.
Such notice may be given in writing by mail addressed to such Director or
Shareholder at his address as it appears on the records of the Corporation with
postage thereon prepaid, and such notice shall be deemed to be given at the
time when the same shall be deposited in the United States mail. Notice to
Directors may also be given by telegram. Whenever any notice is required to be
given under the provisions of the statutes or the Certificate of Incorporation
or of these By-Laws, a waiver thereof in writing signed by the person or
persons entitled to said notice, whether before or after the time stated
therein, shall be deemed equivalent thereto.
ARTICLE XIV
STOCK
Each Shareholder of the Corporation, whose stock has been paid for in
full, whether in money, property or otherwise, shall be entitled to a
Certificate or Certificates showing the number of shares of stock outstanding
on the books of the Corporation in his name. The Certificates of stock shall
be issued under the seal of the Corporation, and in such form as the Board of
Directors may direct or approve. Each Certificate shall be signed jointly by
the
-17-
<PAGE> 18
President and Secretary of the Corporation, and in the event of the inability
of any of these Officers to act, the Board of Directors may designate another
person to act for the officer unable to act.
ARTICLE XV
SIGNATURE
The President or Treasurer or the Secretary of the Corporation shall
sign all checks, drafts, notes, orders for payment of money, deeds, leases,
mortgages, agreements, and other obligations and instruments which the Board of
Directors may order to be executed, or which may be necessary or proper in
carrying on the business of the Corporation.
ARTICLE XVI
PRE-EMPTIVE STOCK RIGHTS
Except as otherwise provided in the general Corporation Laws of the
State of Connecticut, there shall be no pre-emptive rights to acquire stock to
be newly issued in the Corporation by existing Shareholders.
ARTICLE XVII
CORPORATE SEAL
The Corporate Seal shall be in the following form:
The Seal shall be in the custody of the Secretary, who shall affix it to
all Certificates of Stock and to other instruments requiring the Seal of the
Company.
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<PAGE> 19
ANNUAL STATEMENT
The Board of Directors shall present at each annual Meeting, and at any
Special Meeting of the Shareholders when called for by the vote of the
Shareholders, a full and clear statement of the business and condition of the
Corporation.
INDEMNIFICATION
The Corporation shall indemnify its Officers, Directors, Employees and
Agents to the extent permitted by the General Statutes of the State of
Connecticut.
END OF BY-LAWS
-19-
<PAGE> 1
EXHIBIT 3.7
CERTIFICATE OF INCORPORATION
BE IT KNOWN, That We, The subscribers, certify that we do hereby
associate ourselves as a body politic and corporate under the statute laws at
the State of Connecticut; and we further certify:
FIRST: That the name of the Corporation is BISHOP MANUFACTURING
COMPANY, INCORPORATED.
SECOND: That the said corporation is to be located in the City of
Bridgeport, Connecticut County of Fairfield and State of Connecticut.
THIRD: That the nature of the business to be transacted and the
purposes to be promoted or carried out by said Corporation, are as follows:
a.) To manufacture, buy, sell, export, import, act as
manufacturers and others' agent, and generally to deal in
doors, windows, and sash of all sizes, types and
descriptions, and parts and supplies of all kinds and
descriptions incidental to the manufacture, construction,
repair and maintenance of doors, windows, and sash of all
sizes, types and descriptions.
b.) To manufacture, sell or otherwise dispose of aluminum
combination storm doors, screens, windows and jealousies
to acquire by purchase, lease, option, or contract, or
otherwise, and to hold, maintain, manage, work, develop,
let, sublet, sell, exchange, mortgage, encumber, bond or
dispose of both real and personal property of every kind
and nature whatsoever.
c.) To manufacture, buy, sell and generally deal in metal
horizontal and vertical sliding doors and windows and
parts and supplies of all kinds and descriptions
incidental to the manufactures, construction, repair, and
maintenance of metal horizontal and vertical sliding doors
and windows.
d.) To design, construct, and fabricate metal windows, frames,
sashes, jaulosies and carry on all other business
incident.
e.) To sell, buy, construct, lease and otherwise acquire,
operate, dispose of, maintain and conduct offices, plants,
warehouse facilities for the conduct of this business.
f.) To borrow or raise money, to lend, advance, extend credit
in any manner and to make gifts contributions, and
donations within reason to further goodwill toward the
corporation.
g.) To acquire, and make payment, therefore, in cash or stocks
or bonds of the Corp., or by undertaking or assuming the
obligations and liabilities of the
<PAGE> 2
transferor, or in any other way, the good will, rights and
property, the whole or any part of the assets, tangible or
intangible, and to undertake or assume the liabilities of,
any person, firm, association, or corporation and to hold
or in any manner dispose of the whole or any of the
property so purchased, to conduct in any lawful manner the
whole or any part of the business so acquired and to
exercise all the powers necessary and convenient for
the conduct and management thereof.
h.) And to engage in all other activities related to the
success of this business venture.
FOURTH: That the amount of the Capital stock of said corporation hereby
authorized is 150 shares without par value and in one class, common; the voting
power vested exclusively in the common share holder.
FIFTH: That the amount of capital stock with which this corporation
shall commence business is $3,000.00 (Three Thousand Dollars).
SIXTH: That the Duration of said corporation is unlimited.
SIGNATURES
/s/ Abe Meizel OF 87 Barnyard Lane, Long Island STATE OF New York
/s/ David Siegler OF 8 Fairfield Bard, Kings Point STATE OF New York
/s/ Sydney Isler OF 1723 E. 16th St., Brooklyn STATE OF New York
Dated at Bridgeport, this 9th day of October, A.D. 1958.
<PAGE> 3
STATE OF CONNECTICUT )
COUNTY OF FAIRFIELD )ss. Bridgeport October 9 1958
Personally appeared
ABE MEIZEL /s/ Abe Meizel
DAVID SIEGLER /s/ David Siegler
SYDNEY ISLER /s/ Sydney Isler
BEING all of the incorporators of BISHOP MANUFACTURING CO., INC. and
made solemn oath to the truth of the foregoing certificate by them respectively
subscribed before me.
/s/
----------------------------
COMMISSIONER OF THE SUPERIOR
COURT FOR FAIRFIELD COUNTY
<PAGE> 1
EXHIBIT 3.8
BY-LAWS OF BISHOP MANUFACTURING CO., INC.
ARTICLE I
SHAREHOLDERS MEETING
1. Annual Meeting.
The annual meeting of the shareholders of BISHOP MANUFACTURING
CO., INC. shall be held in May or June at such place in the State of
Connecticut, at such time and day, not a legal holiday, as the President shall
designate. At such meeting the shareholders shall elect, by a majority vote, a
board to consist of not less than the number of shareholders of record nor more
than seven (7) Directors for the ensuing year and the shareholders may transact
such other business as shall properly come before them.
2. Special Meetings.
A special meeting of the shareholders may be called on any day
not a legal holiday by the President or any two Directors or upon written
request, stating the reason therefor, of one or more shareholders holding at
least one-tenth of the total number of shares issued and outstanding, and the
President or Secretary shall cause notice thereof to be given.
3. Voting.
Each shareholder in person or by proxy may cast one vote per
share of stock standing in his name on the books of the company. Cumulative
voting shall not be allowed. To the extent permitted by law, a shareholder may
consent to action taken at a meeting at which he was not present. At any
meeting of shareholders with a quorum being present, the vote of a majority of
the shares voted shall constitute the action of the shareholders.
<PAGE> 2
4. Quorum.
A majority of the voting stock issued, represented either in
person or by proxy, shall constitute a quorum for the transaction of business
at any shareholders meeting. If a quorum be not present at any meeting, the
shareholders present, by majority vote in person or by proxy, may adjourn to
such future time as shall be agreed upon by them, and notice of such
adjournment shall be given to each shareholder as herein provided.
5. Notice.
Notice in written or printed form setting out the day, place,
hour and subject matter of all shareholders meetings shall be given by the
President or Secretary to each shareholder by leaving such notice with him or
at his residence or usual place of business or by mailing a copy thereof to him
at his last known post office address at least five (5) days before such
meeting; except that any meeting at which the holders of all of the outstanding
shares of capital stock are present in person or by proxy shall constitute a
valid meeting for the transaction of business irrespective of requirements of
notice.
ARTICLE II
DIRECTORS
1. Powers, Duties and Functions.
The Board of Directors shall manage the property and affairs of
the corporation and shall exercise all powers in connection therewith which are
permitted by the Certificate of Incorporation, these By-Laws and the laws of
Connecticut, Directors need not be shareholders.
The Directors shall elect Officers in the manner hereinafter
provided and are authorized in their discretion to appoint from time to
-2-
<PAGE> 3
time such committees with such powers as the Directors shall deem necessary and
appropriate.
The Directors shall be empowered to vote the payment of dividends
or other distribution of assets as they shall see fit, but no such payment or
distribution shall be made except from net profit or annual surplus unless in
accordance with the law allowing the reduction of the stock or upon dissolution
of the corporation. At least once in each year, Directors shall make a
complete and detailed report of the financial condition of the corporation to
its shareholders, which report shall be filed with the Treasurer and be subject
to inspection by the shareholders.
The Directors may close the stock transfer books for a period not
exceeding twenty (20) days prior to shareholders meetings or payment of
dividends or for such other reasons as they may see fit.
2. Meetings.
The Board of Directors shall hold their annual meeting
immediately after the shareholders annual meeting. Special meetings of the
Board may be called by the President or any two (2) directors.
3. Quorum.
A majority of the whole Board shall constitute a quorum at any
regular or special meeting. All voting shall be in person only.
4. Notice.
Notice of the day, place, hour and subject matter of all
Directors meetings shall be given by the President or Secretary to each
Director not less than five (5) days before such meeting, except that any
meeting at which all Directors are present shall constitute a valid meeting for
the transaction of business irrespective of requirements of notice.
-3-
<PAGE> 4
ARTICLE III
OFFICERS
1. Titles.
The officers of the corporation shall consist of a President, a
Secretary and a Treasurer, and such other officers and agents as may from time
to time be chosen. Officers shall be elected for one (1) year, or until their
successors are elected and qualified, by a majority vote of the whole Board at
the annual Directors meeting. The same person may fill two offices, except
that the same person may not fill the offices of President and Secretary. Any
officer may be removed at any time, with or without cause, by the affirmative
vote of at least a majority of those present at a meeting of the Directors
called for said purpose, a quorum being present.
2. President.
The President shall preside at all meetings; shall have general
supervision of the affairs of the company; shall sign or countersign all stock
certificates, bonds, contracts or other obligations of the company as
authorized by the Board of Directors and shall perform any other duties
incident to his office which are properly required by the Board of Directors.
3. Secretary.
The Secretary shall keep a record of all votes and minutes of the
proceedings of all shareholders and directors meetings, and shall give notice
of all such meetings as these By-Laws require. He shall have custody and
charge of the corporate books, corporate seal and other papers and records
incident to his office and shall perform such other duties as are properly
required of him.
-4-
<PAGE> 5
4. Treasurer.
The Treasurer shall keep accounts of all moneys of the
corporation received or disbursed and shall deposit all moneys and valuables in
the name of and to the credit of the corporation in such banks or depositories
as the Directors shall designate. He shall sign or countersign such
instruments as require his signature and shall perform such other duties as are
properly required.
ARTICLE IV
VACANCIES
In the case of the death, disability or resignation of one or more of
the Directors or Officers, the remaining Directors, although less than a
quorum, may fill any vacancy for the unexpired term.
ARTICLE V
STOCK
1. Issuance.
Certificate of stock shall be issued in numerical order, and each
shareholder shall be entitled to a certificate signed by the President and
Treasurer or Secretary, sealed with the corporate seal, certifying to the
number of shares owned by him. A record of each certificate issued, showing
the number of shares issued, the consideration therefor, and the name of the
shareholder, shall be kept on the appropriate books of the company.
2. Transfers.
Every transfer of stock shall be made in the manner prescribed by
the Uniform Stock Transfer Act. Transfers shall be recorded on the books of
the company, and before a new certificate is issued, the old certificate,
except in the case of loss or destruction of the same, shall be surrendered for
cancellation.
-5-
<PAGE> 6
ARTICLE VI
AMENDMENT OF BY-LAWS
Any of these By-Laws may be amended, repealed or altered by a
majority vote of the shareholders at any meeting called for the purpose.
-6-
<PAGE> 1
EXHIBIT 3.9
CERTIFICATE OF INCORPORATION
STOCK CORPORATION
STATE OF CONNECTICUT
SECRETARY OF THE STATE
The undersigned incorporator(s) hereby form(s) a corporation under the Stock
Corporation Act of the State of Connecticut:
1. The name of the corporation is Bishop Manufacturing of New England, Inc.
2. The nature of the business to be transacted, or the purposes to be
promoted or carried out by the corporation, are as follows:
A. To hold, own, rent, lease, develop, manage, and sell real
property of every kind and description.
B. To manufacture, buy, hold, own, mortgage, sell, and deal
in any articles, wares, merchandise or commodities of every manner and
description; to acquire and carry on a general merchandise business; to
acquire, hold, use, assign, or mortgage letters patent of the United
States or any foreign countries, patent rights, copy rights, licenses,
privileges, and trademarks relating to or useful in connection with any
business of the Corporation.
C. To buy, sell, build, lease, rent, own, mortgage real and
personal property of any description whatsoever situated and to do all
other acts necessary for the proper conduct of such business.
D. To acquire by purchase or otherwise, hold and enjoy the
whole or any part of the properties, businesses and goodwill of any
persons, firms, corporations or any other entities engaged in the
operation of any business of any character whatsoever.
E. To borrow money and issue Promissory Notes, bonds,
debentures, and any other evidence of indebtedness in connection with
such borrowing and to secure any such borrowing by mortgages on real
property of the corporation and by security interest granted on any
personal property of the Corporation, all on whatever terms are deemed
desirable by the Corporation.
F. To lend money to any persons, firms, corporations, or
other entities on whatever terms may be deemed desirable in connection
with the making of such loans, without any limitation whatsoever, and to
accept whatever security in connection with such loans as the
Corporation may deem desirable.
G. It is understood that the foregoing statement of the
nature of the businesses to be transacted and the purposes to be
promoted or carried out by the Corporation is not intended to limit or
restrict in any manner the exercise of all powers and rights conferred
upon the Corporation by the General Corporation Laws of the State of
Connecticut nor is the foregoing intended to limit the Corporation from
doing any and all acts not expressly prohibited under the General
Corporation Laws of the State of Connecticut, and the Corporation is
expressly granted the right to perform all acts not expressly prohibited
under, said General Corporation Laws of the State of Connecticut; and it
is further understood that nothing contained herein is to be construed
as an attempt to secure the powers to the Corporation not property
obtainable by a corporation organized under the laws of the State of
Connecticut.
<PAGE> 2
3. The designation of each class of shares, the authorized number of shares
of each such class, and the par value (if any) of each share thereof are
as follows:
The Corporation is authorized to issue five thousand
(5,000) shares of no par value common stock.
4. The terms, limitations and relative rights and preferences of each class
of shares and series thereof (if any), or an express grant of authority
to the board of directors pursuant to Section 33-341, 1959 Supp. Conn.
G.S. are as follows:
NONE.
5. The minimum amount of stated capital with which the corporation shall
commence business is One Thousand ($1,000.00) dollars. (Not less than
one thousand dollars)
6. (7) - Other provisions
The duration for the Corporation's existence under the
laws of the State of Connecticut is unlimited.
Dated at Bridgeport this 1st day of November, 1988
I/We hereby declare, under the penalties of false statement, that the
statements made in the foregoing certificate are true.
This certificate of incorporation must be signed by one or more incorporators.
<TABLE>
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Name of Incorporator (Print or Name of Incorporator (Print or Name of Incorporator (Print or
Type) Type) Type)
1. Howard S. Saffan 2. Leslie R. Goldbloom 3. Leonard C. Blum
- ---------------------------------------------------------------------------------------------------------
Signed (Incorporator) Signed (Incorporator) Signed (Incorporator)
1. /s/ Howard S. Saffan 2. /s/ Leslie R. Goldbloom 3. /s/ Leonard C. Blum
- ---------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 3
APPOINTMENT OF STATUTORY AGENT FOR SERVICE
DOMESTIC CORPORATION
TO: The Secretary of the State of Connecticut
Name of Corporation
Bishop Manufacturing of New England, Inc.
APPOINTMENT
The above corporation appoints as its statutory agent for service, one of the
following:
<TABLE>
- ---------------------------------------------------------------------------------------------------
<S> <C>
NAME OF NATURAL PERSON WHO IS RESIDENT OF CONNECTICUT BUSINESS ADDRESS
Howard S. Saffan 305 Knowlton Street, Bridgeport, CT
- ---------------------------------------------------------------------------------------------------
RESIDENCE ADDRESS
660 Silver Spring Road, Fairfield, CT
- ---------------------------------------------------------------------------------------------------
AUTHORIZATION
- ---------------------------------------------------------------------------------------------------
NAME OF INCORPORATOR (Print or type) SIGNED (Incorporator) DATE
- ---------------------------------------------------------------------------------------------------
Howard S. Saffan /s/ Howard S. Saffan 11/1/88
- ---------------------------------------------------------------------------------------------------
Leslie R. Goldbloom /s/ Leslie R. Goldbloom 11/1/88
- ---------------------------------------------------------------------------------------------------
Leonard C. Blum /s/ Leonard C. Blum 11/1/88
- ---------------------------------------------------------------------------------------------------
ACCEPTANCE
- ---------------------------------------------------------------------------------------------------
NAME OF STATUTORY AGENT FOR SERVICE (Print or SIGNED (Statutory Agent for
Type) Service)
- ---------------------------------------------------------------------------------------------------
Accepted: Howard S. Saffan /s/ Howard S. Saffan
- ---------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 4
CERTIFICATE AMENDING OR RESTATING CERTIFICATE OF
INCORPORATION BY ACTION OF BOARD OF DIRECTORS AND
SHAREHOLDERS (Stock Corporation)
STATE OF CONNECTICUT
SECRETARY OF THE STATE
================================================================================
1. NAME OF CORPORATION DATE
Bishop Manufacturing of New England, Inc. May 1, 1989
2. The Certificate of Incorporation is A. AMENDED ONLY by the following
resolution
The name of the corporation is hereby changed to Bishop Manufacturing
Company of New England, Inc.
3. (Omit if 2A is checked)
(a) The above resolution merely restates and does not change the
provisions of the original Certificate of Incorporation as
supplemented and amended to date, except as follows: (Indicate
amendments made, if any. If none, so indicate.)
(b) Other than as indicated in Par. 3(a), there is no discrepancy
between the provisions of the original Certificate of
Incorporation as supplemented to date, and the provisions of this
Certificate Restating the Certificate of Incorporation.
4. The above resolution was adopted by the board of directors and by
shareholders.
5. Vote of shareholders:
(a) (Use if no shares are required to be voted as a class)
<TABLE>
<CAPTION>
NUMBER OF SHARES ENTITLED TO VOTE TOTAL VOTING POWER VOTE REQUIRED FOR ADOPTION VOTE FAVORING ADOPTION
<S> <C> <C> <C>
800 800 534 800
</TABLE>
(b) (if the shares of any class are entitled to vote as a class,
indicate the designation and number of outstanding shares of each
such class, the voting power thereof, and the vote of each such
class for the amendment resolution.)
We hereby declare under the penalties of false statement that the statements
made in the foregoing certificate are true.
<TABLE>
- -------------------------------------------------------------------------------------------------
<S> <C>
NAME OF PRESIDENT (Print or Type) NAME OF SECRETARY (Print or Type)
Howard S. Saffan Leslie R. Goldbloom
- -------------------------------------------------------------------------------------------------
SIGNED (President or Vice President) SIGNED (Secretary or Assistant Secretary)
/s/ Howard S. Saffan /s/ Leslie R. Goldbloom
- -------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 1
EXHIBIT 3.10
BY-LAWS
OF
BISHOP MANUFACTURING OF NEW ENGLAND, INC.
Adopted by the Incorporators, November 1, 1988
ARTICLE I
MANAGEMENT BY BOARD OF DIRECTORS
The Stock, property and affairs of this Corporation shall be under the
care and management of the Board of Directors, who shall be chosen annually at
the Annual Meeting of the Stockholders. Members of the Board need not be
Stockholders of the Corporation. If any corporation shall own Stock in this
Corporation it may, by action of its Board of Directors, specify certain of its
Directors and/or Executive Officers to be elected as Directors of this
Corporation.
The Board of Directors shall consist of not less than two (2), nor more
than eleven (11) persons. Provided, however, that in the event that there are
less than two (2) Shareholders the Board of Directors shall be composed of the
same number of Directors as there are Shareholders. A quorum shall consist of
a majority of the members of the Board of Directors. The Stockholders at a
special or regular Meeting of the Stockholders, shall have the right to fill
any vacancy by a fifty-one (51%) percent vote of all Stockholders. The Board
of Directors shall have the right to appoint additional Board members between
Shareholder Meetings subject to subsequent ratification by the Shareholders.
<PAGE> 2
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All Meetings of the Stockholders for the election of
Directors shall be held at such time and place as may be fixed from time to
time by the Board of Directors and stated in the Notice of the Meeting.
Meetings of Stockholders for any other purpose may be held at such time and
place, within or without the State of Connecticut, as shall be stated in the
Notice of the Meeting or in a duly executed Waiver of Notice thereof.
Section 2. Annual Meetings of the Stockholders, commencing with the
calendar year ending December 31, 1989 shall be held on the second (2nd)
Thursday of April in each year if not a legal holiday, and if a legal holiday,
then on the next secular day following, at 1:00 P.M., or at such other date and
time as shall be designated from time to time by the Board of Directors and
stated in the Notice of the Meeting, at which they shall elect by plurality
vote a Board of Directors, and transact such other business as may properly be
brought before the Meeting.
Section 3. Written Notice of the annual Meeting stating the place,
date and hour of the Meeting shall be given to each Stockholder entitled to
vote at such Meeting not less than five (5) nor more than thirty (30) days
before the date of the Meeting.
Section 4. The Officer who has charge of the Stock ledger of the
Corporation shall prepare and make, at least ten (10) days before every Meeting
of Stockholders, a complete list of the
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<PAGE> 3
Stockholders entitled to vote at the Meeting arranged in alphabetical order,
and showing the address of each Stockholder and the number of shares registered
in the name of each Stockholder. Such list shall be open to the examination of
any Stockholder, for any purpose germane to the Meeting, during ordinary
business hours, for a period of at least (10) days prior to the Meeting, either
at a place within the city where the Meeting is to be held. The list shall
also be produced and kept at the time and place of the Meeting during the whole
time thereof, and may be inspected by any Stockholder who is present.
Section 5. Special Meetings of the Stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the Certificate of
Incorporation, may be called by the President and shall be called by the
President or Secretary at the request in writing of a majority of the Board of
Directors, or at the request in writing of Stockholders owning a majority in
the amount of the entire capital stock of the Corporation issued and
outstanding and entitled to vote. Such request shall state the purpose or
purposes of the proposed Meeting.
Section 6. Written notice of a Special Meeting stating the place,
date and hour of the Meeting and the purpose or purposes for which the Meeting
is called, shall be given not less than five (5) nor more than fifty (50) days
before the date of the Meeting, to each Stockholder entitled to vote at such
Meeting.
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<PAGE> 4
Section 7. Business transacted at any Special Meeting of Stockholders
shall be limited to the purposes stated in the Notice.
Section 8. The holders of fifty-one (51%) percent of the stock issued
and outstanding and entitled to vote, present in person or represented by
proxy, shall constitute a quorum at all Meetings of the Stockholders for the
transaction of business except as otherwise provided by the statute or by the
Certificate of Incorporation. If, however, such quorum shall not be present or
represented at any Meeting of the Stockholders, the Stockholders entitled to
vote, present in person or represented by proxy, shall have power to adjourn
the Meeting from time to time, without notice other than announcement at the
Meeting, until a quorum shall be presented or represented. At such adjourned
Meeting at which a quorum shall be present or represented any business may be
transacted which might have been transacted at the Meeting as originally
notified. If the adjournment is for more than thirty (30) days, or if after
the adjournment a new record date is fixed for the adjourned Meeting, a Notice
of the adjourned Meeting shall be given to each Stockholder of record entitled
to vote at the Meeting.
Section 9. When a quorum is present at the Meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such Meeting,
unless the question is one (1) upon which by express provision of the statutes
or of the Certificate of
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<PAGE> 5
Incorporation, a different vote is required in which case such express
provision shall govern and control the decision of such question.
Section 10. Unless otherwise provided in the Certificate of
Incorporation, each Stockholder shall at every Meeting of the Stockholders be
entitled to one (1) vote in person or by proxy for each share of the capital
stock having voting power held by such Stockholder, but no proxy shall be voted
on after three (3) years from its date, unless the proxy provides for a longer
period. At all elections of the Directors of the Corporation, each
Stockholder having voting power shall be entitled to exercise the right of
cumulative voting as provided in the Certificate of Incorporation.
Section 11. Unless otherwise provided in the Certificate of
Incorporation, any action required to be taken at any Annual or Special Meeting
of Stockholders of the Corporation, or any action which may be taken at any
annual or Special Meeting of such Stockholders, may be taken without a Meeting,
without prior Notice and without a vote, if a consent in writing, setting forth
the action so taken, shall be signed by the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a Meeting at which all shares entitled to vote thereon
were present and voted. Prompt notice of the taking of the corporate action
without a Meeting by
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<PAGE> 6
less than unanimous written consent shall be given to those Stockholders who
have not consented in writing.
ARTICLE III
OFFICERS
The Officers of the Corporation shall be elected by the Board of
Directors, to hold office during the pleasure of the Board and shall consist of
a Chairman of the Board, President, Vice-President, Secretary, Treasurer, and
such other Officers as the Directors shall from time to time appoint. The
offices of President and Treasurer, or of Secretary and Treasurer or of Vice-
President and Assistant Treasurer, may be held by the same person.
ARTICLE IV
OFFICES
Section 1. The registered office of the Corporation shall be in the
City of Bridgeport, County of Fairfield and State of Connecticut.
Section 2. The Corporation may also have offices at such other place
as both within and without the State of Connecticut as the Board of Directors
may from time to time determine, or the business if the Corporation may
require.
ARTICLE V
DUTIES OF THE OFFICERS
The duties of the respective Officers of the Corporation shall be such
as are ordinarily performed by similar officers of similar corporations,
together with such other duties as shall be specially
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<PAGE> 7
imposed by the Board of Directors of the Corporation subject to the provisions
of these By-Laws. Generally, the duties shall be as follows:
Chairman of the Board
If there is a Chairman of the Board, the Chairman of the Board shall
preside at all Meetings of the Shareholders and Directors.
President
In the absence of a Chairman of the Board, the President shall preside
at all Meetings of the Board of Directors and Shareholders.
He shall present at each annual Meeting of the Stockholders and
Directors a report of the condition of the business of the Company.
He shall cause to be called Regular and Special Meetings of the
Stockholders and Directors in accordance with these By-Laws.
He shall appoint and remove, employ and discharge and fix the
compensation of all servants, agents, employees and clerks of the Corporation
subject to the approval of the Board of Directors.
The salaries and compensations in terms of employment of the duly
appointed Officers of the Corporation shall be approved and established by the
Board of Directors.
He shall assign and make all contracts and agreements in the name of the
Corporation.
He shall see that the books, reports, statements and Certificates
required by statutes are properly kept, made and filed according to law.
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<PAGE> 8
He shall assign all certificates of stock, notes, drafts and/or bills of
exchange, warrants or other orders for the payment of money duly drawn by the
Treasurer.
He shall enforce these By-Laws and perform all duties incident to the
position and office which are required by law.
Vice-President
During the absence and inability of the President to render and perform
his duties or exercise his powers, set forth in these By-Laws or in the acts
under which this Corporation is organized, the same shall be performed and
exercised by the Vice-President, (or in the event there is more than one Vice-
President, the Vice-Presidents in the order designated by the Directors or in
the absence of any designations, then in the order of their election), and when
so acting, he shall have all the powers and be subject to all the
responsibilities hereby given to or imposed upon such President.
Secretary
The Secretary shall keep the Minutes of the Meetings of the Board of
Directors and of the Stockholders in appropriate books.
He shall give and serve all notices of the Corporation.
He shall be custodian of the records and of the seal, and affix the
latter when required.
He shall keep the stock and transfer books in the manner prescribed by
law, so as to show at all times the amount of capital stock, the manner and the
time the same was paid in, the names of
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<PAGE> 9
the owners thereof, alphabetically arranged, their respective places of
residence, their post-office address, the number of shares owned by each, the
time at which each person became such owner, and the amount paid thereon, and
keep such stock and transfer books open daily during business hours at the
office of the Corporation, subject to the inspection of any Stockholder of the
Corporation, and permit such Stockholder to make extracts from said books to
the extent and as prescribed by law.
Committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock. Such committee shall have such name or names
as may be determined from time to time by resolution adopted by the Board of
Directors.
Section 9. Each committee shall keep regular Minutes of its Meetings
and report the same to the Board of Directors.
ARTICLE IX
CERTIFICATES
Subject to the provisions of the Statute Laws of the State of
Connecticut, transfers of shares shall be made only upon the books of the
Corporation, by the holder in person or by Attorney duly authorized by writing
attested by at least one (1) witness, and filed with the Secretary of the
Corporation, and shall be made only on the surrender of the Certificate or
Certificates of such stock then outstanding provided, however, that the Board
of Directors may authorize the issue of new Certificates in place of
Certificates alleged to be lost or destroyed, upon being furnished with
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<PAGE> 10
satisfactory indemnification and satisfactory evidence of the probability of
such loss or destruction. Should any of the Certificates of the Corporation be
subject to special restrictions as a result of any agreements between
Shareholders and the Corporation, said restrictions shall be noted on the
Certificates themselves.
ARTICLE X
FISCAL YEAR
The fiscal year of the Corporation shall begin on the 1st day of January
and end on the 31st day of December of each year.
ARTICLE XI
AMENDMENTS TO BY-LAWS
These By-Laws may be amended, altered or repealed at any legal Meeting
of the Stockholders, regular or special, only by a fifty-one (51%) percent vote
of all of the outstanding stock held by all of the Stockholders of the
Corporation.
ARTICLE XII
DIVIDENDS
WHEN DECLARED, the Board of Directors shall by vote declare dividends
from the surplus profits of the Corporation whenever, in their opinion, the
condition of the Corporation's affairs will render it expedient for such
dividends to be declared.
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<PAGE> 11
ARTICLE XIII
NOTICES
Whenever under the provisions of the statutes or of the Certificate of
Incorporation or of these By-Laws notice is required to be given to any
Director or Stockholder, it shall not be construed to mean personal notice, but
such notice may be given in writing by mail addressed to such Director or
Stockholder at his address as it appears on the records of the Corporation with
postage thereon prepaid, and such notice shall be deemed to be given at the
time when the same shall be deposited in the United States mail. Notice to
Directors may also be given by telegram. Whenever any notice is required to be
given under the provisions of the statutes or the Certificates of Incorporation
or of these By-Laws, a waiver thereof in writing signed by the person or
persons entitled to said notice, whether before or after the time stated
therein, shall be deemed equivalent thereto.
ARTICLE XIV
STOCK
Each Stockholder of the Company, whose stock has been paid for in full
whether in money, property or otherwise, shall be entitled to a Certificate or
Certificates showing the number of shares of stock outstanding on the books of
the Company in his name. The Certificates of stock shall be issued under the
seal of the Corporation, and in such form as the Board of Directors may direct
or approve. Each Certificate shall be signed jointly by the
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<PAGE> 12
President or Treasurer and Secretary of the Company, and in the event of the
inability of any of these Officers to act, the Board of Directors may designate
another person to act for the officer unable to act.
ARTICLE XV
LOST STOCK CERTIFICATE
The Board of Directors may direct a new Certificate or Certificates to
be issued in the place of any Certificate or Certificates theretofore issued by
the Corporation alleged to have been lost, stolen or destroyed upon the making
of an affidavit of that fact by the person claiming the Certificate of stock to
be lost, stolen or destroyed. When authorizing such issue of a new Certificate
or Certificates, the Board of Directors may, at its discretion and as a
condition precedent to the issuance thereof, require the owner of such lost,
stolen or destroyed Certificate or Certificates, or his legal representative,
to advertise the same in such manner as it shall require and/or to give the
Corporation a bond in such sum as it may direct as indemnity against claims
that may be made against the Corporation with respect to the Certificate
alleged to be lost, stolen or destroyed.
ARTICLE XVI
RESOLUTIONS BY CONSENT
When all members of the Board of Directors shall consent in writing to
the passage of a resolution, such written consent shall
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<PAGE> 13
have the same force and effect as if the resolutions had been passed by the
Board of Directors in Meeting assembled.
ARTICLE XVII
SIGNATURE
The President or Treasurer or the Secretary of the Corporation shall
sign all checks, drafts, notes, orders for payment of money, deeds, leases,
mortgages, agreements, and other obligations and instruments which the Board of
Directors may order to be executed, or which may be necessary or proper in
carrying on the business of the Corporation.
ARTICLE XVIII
PRE-EMPTIVE STOCK RIGHTS
Except as otherwise provided in the general Corporation Laws of the
State of Connecticut, there shall be no pre-emptive rights to acquire stock to
be newly issued in the Corporation by existing Shareholders.
ARTICLE XIX
CORPORATE SEAL
The Corporate Seal shall be in the following form:
The Seal shall be in the custody of the Secretary, who shall affix it to
all Certificates of Stock and to other instruments requiring the Seal of the
Company.
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<PAGE> 14
ARTICLE XX
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the Corporation,
subject to the provisions of the Certificate of Incorporation, if any, may be
declared by the Board of Directors at any regular or Special Meeting, pursuant
to Law. Dividends may be paid in cash, in property, or in shares of the
capital stock, subject to the provisions of the Certificate of Incorporation.
Section 2. Before payment of any dividend, there may be set aside out
of any funds of the Corporation available from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
Corporation, or for such other purpose as the Directors shall think conducive
to the interest of the Corporation, and the Directors may modify or abolish any
such reserve in the manner in which it was created.
ANNUAL STATEMENT
Section 3. The Board of Directors shall present at each Annual
Meeting, and at any Special Meeting of the Stockholders when called for by the
vote of the Stockholders, a full and clear statement of the business and
condition of the Corporation.
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<PAGE> 15
INDEMNIFICATION
Section 4. The Corporation shall indemnify its Officer, Directors,
Employees and Agents to the extent permitted by the General Statutes of
Connecticut.
Discussion then took place concerning the establishment of a place of
business of the corporation in Massachusetts. It was pointed out that
negotiations were under way with Nancor Realty Trust to lease certain premises
with an option to buy the building located at 184 Stone Street, Clinton,
Massachusetts containing approximately 40,000 square foot of space for a term
of five years and three months commencing in January 1, 1989 to establish a
manufacturing facility to serve the upper New England market at an initial
lease rate of $100,000 per year.
On motion duly made, seconded and carried, the President of the
corporation was authorized to enter into such a lease arrangement upon terms
and conditions as he deemed appropriate for the corporation to establish a
manufacturing business for the corporation in Clinton, Massachusetts and to
take such other steps as may be necessary or appropriate to set up a
manufacturing facility.
Discussion then took place concerning the 800 shares of stock that are
going to be issued to Bishop Manufacturing Company which will be the
Connecticut parent of Bishop Manufacturing of New England, Inc. The President
explained that Bishop Manufacturing Company was going to advance $50,000 in
cash to Bishop
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<PAGE> 16
Manufacturing of New England, Inc. of which $20,000 will be credited to a
capital stock account and $30,000 will be credited as a loan. In addition,
Bishop Manufacturing Company was going to transfer substantial machinery and
equipment as well as technical know how, training and set up information to the
new corporation as further consideration for said stock and the capital stock
cannot be set up on the books of the corporation or the corporate account in
such forms as a corporate accountant deem appropriate setting forth an
inscribed value of the capital account $200,000 of which $20,000 will be
attributed to the cash being paid and $180,000 will be attributed as paid in
capital for the value of the equipment, technology and know how being
transferred. Said technology and equipment being transferred solely in
exchange for capital stock in this corporation however being issued to Bishop
Manufacturing Co., Inc.
The Officers of the corporation were authorized to proceed with the
formation of the corporation and the setting up of the corporation for business
as soon as possible.
There being no further business before the meeting, on motion, meeting
adjourned.
ATTEST:
/s/ Leslie R. Goldbloom
-------------------------------------
Leslie R. Goldbloom
Secretary of the Meeting
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<PAGE> 1
EXHIBIT 3.11
ARTICLES OF INCORPORATION
OF
H-R WINDOW SUPPLY, INC.
ARTICLE ONE
The name of the Corporation is H-R WINDOW SUPPLY, INC.
ARTICLE TWO
The period of its duration is perpetual.
ARTICLE THREE
The purpose for which the Corporation is organized is the transaction of
any and all lawful business for which a corporation may be incorporated under
the Texas Business Corporation Act.
ARTICLE FOUR
The aggregate number of shares which the Corporation shall have
authority to issue is One Hundred (100). The shares shall have no par value.
ARTICLE FIVE
The Corporation will not commence business until it has received
consideration equal to or exceeding the value of $1,000.00, consisting of
money, labor done, or property actually received, for the issuance of its
shares.
ARTICLE SIX
The street address of its initial Registered Office, and the name of its
initial Registered Agent at this address is as follows:
Stephen L. Rosenthal
2100 East Union Bower Road
Irving, Texas 75061
<PAGE> 2
ARTICLE SEVEN
The number of initial Directors is one (1). The name and address of the
initial Director is:
Robert W. Wolf
418 Falling Leaves Drive
Duncanville, Texas 75116
ARTICLE EIGHT
This Corporation is a close corporation.
ARTICLE NINE
The name and address of the Incorporator is:
Marilyn S. Hershman
408 W. 17th Street, Suite 101
Austin, Texas 78701-1207
(512) 474-2002
IN WITNESS WHEREOF, I have hereunto set my hand this 12th day of June,
1991.
/s/ Marilyn S. Hershman
---------------------------------
Marilyn S. Hershman, Incorporator
<PAGE> 3
ASSUMED NAME CERTIFICATE FOR AN INCORPORATED
BUSINESS OR PROFESSION
NAME UNDER WHICH BUSINESS OR PROFESSIONAL SERVICES IS OR WILL BE CONDUCTED:
H-R WINDOW SUPPLY, INC.
2101-A UNION BOWER RD.
IRVING, TEXAS 75061
1. The name of the incorporated business or profession as stated in
its Articles of Incorporation is H-R WINDOW SUPPLY, INC.
2. The state, country, or other jurisdiction under the laws of which
it was incorporated is Texas, and the address of its registered office in that
jurisdiction is 2101-A East Union Bower Road, Irving, Texas 75061.
3. The period during which this assumed name will be used is ten
(10) years.
4. The corporation is a business corporation.
5. The address of the registered office is 2100 East Union Bower
Road, Irving, Texas 75061. The name of its registered agent at such address is
Stephen L. Rosenthal.
6. The County or counties where business or professional services
are being or are to be conducted or rendered under such assumed name are all
counties.
By: /s/ Robert W. Wolfe
--------------------------
Robert W. Wolf
Title: President
-----------------------
<PAGE> 4
THE STATE OF TEXAS *
*
COUNTY OF DALLAS *
BEFORE ME the undersigned authority, on this day personally appeared
Robert W. Wolf, President of H-R Window Supply, Inc. known to me to be the
person whose name is subscribed to the foregoing instrument and, under oath,
acknowledged to me that he signed the same for the purpose and consideration
therein expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this the 3rd day of July, 1991.
/s/ Vicki Sue Delloff
----------------------------------
Notary Public, State of Texas
Printed Name: Vicki Sue Delloff
----------------------
My Commission Expires: 5/24/93
--------------
<PAGE> 1
EXHIBIT 3.12
I N D E X
BYLAWS
OF
H-R WINDOW SUPPLY, INC.
<TABLE>
<CAPTION>
ARTICLE ONE
Page
<S> <C> <C>
OFFICES
1.01: Registered Office 1
1.02: Registered Agent 1
1.03: Principal Office 1
1.04: Other Offices 2
ARTICLE TWO
SHAREHOLDER'S MEETINGS
2.01: Place of Meetings 2
2.02: Time of Annual Meeting---
Business Transacted 2
2.03: Notice of Meetings 3
2.04: Call of Special Meeting 4
2.05: Quorum of Shareholders 5
2.06: Closing Transfer Books 6
2.07: Voting List 7
2.08: Votes Per Share 7
2.09: Voting by Voice and Ballot 8
2.10: Proxies 8
2.11: Waiver of Notice 8
2.12: Action Without Meeting 8
2.13: Appointment of
Inspectors of Election 9
2.14: Conduct of Meetings 10
ARTICLE THREE
DIRECTORS
3.01: Directors Defined 11
3.02: Powers 12
3.03: Number of Directors 12
3.04: Term of Office 12
3.05: Vacancies 12
3.06: Removal of Directors 13
3.07: Place of Meetings 13
3.08: Annual Meetings 14
3.09: Call of Special Meeting 15
3.10: Quorum 15
3.11: Majority Action 16
</TABLE>
(i)
<PAGE> 2
<TABLE>
<S> <C>
3.12: Action by Consent of Board
Without Meeting 16
3.13: Adjournment 17
3.14: Conduct of Meeting
3.15: Compensation 18
3.16: Indemnification of Directors
and Officers 18
3.17: Interested Directors 19
3.18: Executive Committee 19
3.19: Other Committees 20
ARTICLE FOUR
OFFICERS
4.01: Number and Titles 20
4.02: Election 21
4.03: Subordinate Officers 21
4.04: Removal and Resignation 21
4.05: Vacancies 22
4.06: Chairman of the Board 22
4.07: President 22
4.08: Vice President 24
4.09: Secretary 25
4.10: Assistant Secretary 27
4.11: Treasurer 28
4.12: Assistant Treasurer 30
4.13: Salaries 31
ARTICLE FIVE
EXECUTION OF INSTRUMENTS AND DEPOSIT OF FUNDS
5.01: Authority for Execution of
Instruments 31
5.02: Execution of Instruments 31
5.03: Bank Accounts and Deposits 32
ARTICLE SIX
ISSUANCE AND TRANSFER OF SHARES
6.01: Classes and Series of Shares 33
6.02: Certificates for Fully Paid
Shares 33
6.03: Consideration for Shares 34
6.04: Contents of Share Certificates 34
6.05: Signing certificates ---
Facsimile Signatures 36
6.06: Transfer of Lost or Destroyed
Shares 36
6.07: Transfer Agents and Registrars 37
6.08: Conditions of Transfer 37
</TABLE>
(ii)
<PAGE> 3
<TABLE>
<S> <C>
6.09: Reasonable Doubts as to
Right of Transfer 38
ARTICLE SEVEN
CORPORATE RECORDS, REPORTS, AND SEAL
7.01: Minutes of Corporate Meetings 39
7.02: Books of Account 39
7.03: Share Register 39
7.04: Fiscal Year 40
7.05: Corporate Seal 40
ARTICLE EIGHT
AMENDMENT OF BYLAWS
8.01 Adoption, Amendment, Repeal
of Bylaws by Directors 40
SIGNATURE AND ATTESTATION 40
</TABLE>
(iii)
<PAGE> 4
* * * *
BYLAWS
OF
H-R WINDOW SUPPLY,.INC.
a Texas corporation
ARTICLE ONE
OFFICES
Registered Office
1.01. The registered office of the Corporation is 2100 E. Union Bower
Road, Irving, Texas, 75061.
Registered Agent
1.02. The name of the registered agent of the Corporation at such
address is Stephen L. Rosenthal.
Principal Office
1.03. The principal office for the transaction of the business of this
Corporation is 2100 E. Union Bower Road, Irving, Texas, 75061.
The Board of Directors has full power and authority to change the
principal office from one location to another by noting the changed address and
the effective date below:
____________________ Dated: _____________, 19___
____________________ Dated: _____________, 19___
____________________ Dated: _____________, 19___
Other Offices
1.04. The Corporation may also have offices at such other places,
within or without the State of Texas, where the Corporation is qualified to do
business, as the Board of Directors may from
<PAGE> 5
time to time designate, or the business of the Corporation may require.
ARTICLE TWO
SHAREHOLDERS' MEETINGS
Place of Meetings
2.01. Meetings of shareholders shall be held at any place within or
without the State of Texas designated by the Board of Directors pursuant to
authority hereinafter granted to the Board, or by the written consent of all
persons entitled to vote thereat. In the absence of any such designation,
shareholders' meetings shall be held at the principal office of the
Corporation. Any meeting is valid wherever held if held by the written consent
of all the persons entitled to vote thereat, given either before or after the
meeting and filed with the Secretary of the Corporation.
Time of Annual Meeting---Business Transacted
2.02. The annual meeting of shareholders, commencing with the first
fiscal year of the Corporation, shall be held on the second (2nd) Tuesday of
the third (3rd) month following the last month in the fiscal year of the
Corporation and, if a legal holiday, then on the next secular day following,
between the hours of 7:00 o'clock A.M. and 8:00 o'clock P.M., at which time
they shall elect by plurality vote a Board of Directors and transact such other
business as may be properly brought before the meeting.
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<PAGE> 6
Notice of Meetings
2.03. (1) Notice of all meetings of shareholders shall be given in
writing to shareholders entitled to vote by the President or Secretary or by
the officer or person calling the meeting, or, in case of his neglect or
refusal, or if there is no person charged with the duty of giving notice, by
any Director or shareholder. The notice shall be given to each shareholder,
either personally or by prepaid mail, addressed to the shareholder at his
address appearing on the transfer books of the Corporation.
Time of Notice
(2) Notice of any meeting of shareholders shall be sent to
each shareholder entitled thereto not less than ten (10) nor more than fifty
(50) days before the meeting, except in the case of a meeting for the purpose
of approving a merger or consolidation agreement, in which case the notice must
be given not less than twenty (20) days prior to the date of the meeting.
Contents of Notice
(3) Notice of any meeting of shareholders shall specify the
place, date and hour of the meeting. The notice shall also specify the purpose
of the meeting if it is a special meeting, or if its purpose, or one of its
purposes, will be to consider a proposed amendment of the Articles of
Incorporation, to consider a proposed reduction of stated capital without
amendment, to consider a proposed merger or consolidation, to consider a
voluntary dissolution or the revocation of a voluntary dissolution by act of
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the Corporation, or to consider a proposed disposition of all, or substantially
all, of the assets of the Corporation outside of the ordinary course of
business.
Notice of Adjourned Meeting
(4) When a shareholders' meeting is adjourned for thirty (30)
days or more, notice of the adjourned meeting shall be given as in the case of
an original meeting. When a meeting is adjourned for less than thirty (30)
days, it is not necessary to give any notice of the time and place of the
adjourned meeting or of the business to be transacted thereat other than by
announcement at the meeting at which the adjournment is taken.
Call of Special Meeting
2.04. (1) Upon request in writing to the President, Vice President,
or Secretary, sent by registered mail or delivered to the officer in person, by
any persons entitled to call a meeting of shareholders, the officer forthwith
shall cause notice to be given to the shareholders entitled to vote that a
meeting will be held at a time, fixed by the officer, not less than ten (10)
days after the receipt of the request. If the notice is not given within seven
(7) days after the date of delivery, or the date of mailing of the request, the
persons calling the meeting may fix the time of meeting and give the notice in
the manner provided in these Bylaws. Nothing contained in this section shall
be construed as limiting, fixing, or affecting the time or date when a meeting
of
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shareholders called by action of the Board of Directors may be held.
Persons Entitled to Call Special Meetings
(2) Special meetings of the shareholders, for any purpose
whatsoever, may be called at any time by any of the following: (a) the
President; (b) the Board of Directors; (c) one or more shareholders holding not
less than one-tenth (1/10) of all the shares entitled to vote at I the meeting;
or (d) the Executive Committee.
Quorum of Shareholders
2.05. (1) The presence in person or by proxy of the persons entitled
to vote a majority of the voting shares at any meeting constitutes a quorum for
the transaction of business.
Adjournment for Lack or Loss of Quorum
(2) In the absence of a quorum or the withdrawal of enough
shareholders to leave less than a quorum, any meeting of shareholders may be
adjourned from time to time by the vote of a majority of the shares, the
holders of which are either present in person or represented by proxy thereat,
but no other business may be transacted.
Closing Transfer Books
2.06. (1) For the purpose of determining shareholders entitled to
notice of or to vote at any meeting of shareholders or any adjournment thereof,
or entitled to receive payment of any dividend, or in order to make a
determination of shareholders for
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any other proper purpose, the Board of Directors may provide that the share
transfer books shall be closed for a stated period not to exceed in any case,
fifty (50) days. If the transfer books shall be closed for the purpose of
determining shareholders entitled to notice of or to vote at a meeting of
shareholders, such books shall be closed for at least ten (10) days immediately
preceding such meeting.
Record Date for Determination of Shareholders
(2) In lieu of closing the share transfer books, the Board of
Directors may fix in advance a date as the record date for any such
determination of shareholders, such date in any case to be not more than fifty
(50) days and, in case of a meeting of shareholders, not less than ten (10)
days prior to the date on which the particular action, requiring such
determination of shareholders is to be taken.
Date of Notice or Resolution for Determination of Shareholders
(3) If the share transfer books are not closed and no record
date is fixed for the determination of shareholders entitled to notice
of or to vote at a meeting of shareholders, or shareholders entitled to receive
payment of a dividend, the date on which notice of the meeting is mailed or the
date on which the resolution of the Board of Directors declaring such dividend
is adopted, as the case may be, is the record date for such determination of
shareholders.
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Adjourned Meetings
(4) When any determination of shareholders entitled to vote at
any meeting of shareholders has been made as provided in this Paragraph, such
determination shall apply to any adjournment thereof except where the
determination has been made through closing of the transfer books and the
stated period of closing has expired, in which case the Board of Directors
shall make a new determination as herein before provided.
Voting List
2.07. At least ten (10) days before each meeting of shareholders, the
officer or agent having charge of the stock transfer books for shares of the
Corporation shall make a complete list of the shareholders entitled to vote at
such meeting or any adjournment thereof, arranged in alphabetical order, with
the address of and the number of shares held by each, which list, for a period
of ten (10) days prior to such meeting, shall be kept on file at the principal
office of the Corporation and shall be subject to inspection by any shareholder
at any time during usual business hours. Such list shall also be produced and
kept open at the time and place of the meeting and shall be prima facie
evidence as to who are the shareholders entitled to examine such list or
transfer books or to vote at any meeting of shareholders. However, failure to
prepare and to make available such list in the manner provided above shall
not affect the validity of any action taken at the meeting.
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Votes Per Share
2.08. Each outstanding share, regardless of class, shall be entitled to
one vote on each matter submitted to a vote at a meeting of shareholders,
except to the extent that the voting rights of shares of any class or classes
are limited by the Articles of Incorporation.
Voting By Voice and Ballot
2.09. Elections for Directors need not be by ballot unless a
shareholder demands election by ballot at the election and before the voting
begins.
Proxies
2.10. A shareholder may vote either in person or by proxy executed in
writing by the shareholder or by his duly authorized attorney in fact. No
proxy shall be valid after eleven (11) months from the date of its execution
unless otherwise provided in the proxy. Each proxy shall be revocable unless
expressly provided therein to be irrevocable, and in no event shall it remain
irrevocable for a period of more than eleven (11) months.
Waiver of Notice
2.11. Any notice required by law or these Bylaws may be waived by the
execution by the person entitled to the notice of a written waiver of such
notice, which may be signed before or after the time stated in the notice.
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Action Without Meeting
2.12. Any action which, under any provision of the Texas Business
Corporation Act, may be taken at a meeting of the shareholders, may be taken
without a meeting if authorized by a writing signed by all of the persons who
would be entitled to vote on such action at a meeting, and filed with the
Secretary of the Corporation. Any such signed consent, or a signed copy
thereof, shall be placed in the minute book of the Corporation.
Appointment of Inspectors of Election
2.13. (1) In advance of any meeting of shareholders, the Board of
Directors may appoint any persons, other than nominees for office, as
inspectors of election to act at such meeting or any adjournment thereof. If
inspectors of election are not so appointed, the chairman of any such meeting
may, and on the request of any shareholder or his proxy shall, appoint
inspectors of election at the meeting. The number of inspectors shall be
either one (1) or three (3). If appointed at a meeting on the request of one
or more shareholders of proxies, the majority of shares present shall determine
whether one or three inspectors are to be appointed. In case any person
appointed as inspector fails to appear or fails or refuses to act, the vacancy
may be filled by appointment by the Board of Directors in advance of the
meeting, or at the meeting by the person acting as chairman.
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Duties of Inspectors
(2) The inspectors of election shall determine the number of
shares outstanding and the voting power of each, the shares represented at the
meeting, the existence of a quorum, the authenticity, validity, and effect of
proxies, receive votes, ballots, or consents, hear and determine all challenges
and questions in any way arising in connection with the right to vote, count
and tabulate all votes or consents, determine the results, and do such acts as
may be proper to conduct the election or vote with fairness to all
shareholders. The inspectors of election shall perform their duties
impartially, in good faith, to the best of their ability and as expeditiously
as is practical.
Vote of Inspectors
(3) If there are three inspectors of election, the decision,
act, or certificate of a majority is effective in all respects as the decision,
act, or certificate of all.
Report of Inspectors
(4) On request of the chairman of the meeting or of any
shareholder or his proxy, the inspectors shall make a report in writing of any
challenge or question or matter determined by them and execute a certificate of
any fact found by them. Any report or certificate made by them is prima facie
evidence of the facts stated therein.
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Conduct of Meetings
2.14. At every meeting of the shareholders, the President, or in his
absence, the Vice President designated by the President, or, in the absence of
such designation, a chairman (who shall be one of the Vice Presidents, if any
is present) chosen by a majority in interest of the shareholders of the
Corporation present in person or by proxy and entitled to vote, shall act as
chairman. The Secretary of the corporation, or in his absence, an Assistant
Secretary, shall act as Secretary of all meetings of the shareholders. In the
absence at such meeting of the Secretary or Assistant Secretary, the chairman
may appoint another person to act as Secretary of the meeting.
ARTICLE THREE
DIRECTORS
Directors Defined
3.01. "Directors", when used in relation to any power or duty requiring
collective action, means, "Board of Directors".
Powers
3.02. (1) The business and affairs of the Corporation and all
corporate powers shall be exercised by or under authority of the Board of
Directors, subject to limitation imposed by the Texas Business Corporation Act,
the Articles of Incorporation, or these Bylaws as to action which requires
authorization or approval by the shareholders.
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Number of Directors
3.03. The number of Directors shall not be less than one (1) but no
more than nine (9). Directors need not be shareholders or residents of the
State of Texas. The number of Directors may be increased or decreased from
time to time by amendment to these Bylaws but no decrease shall have the effect
of shortening the term of any incumbent Director.
Term of Office
3.04. The Directors named in the Articles shall hold office until the
first annual meeting of shareholders and until their successors are elected and
qualified, either at an annual or a special meeting of shareholders.
Directors, other than those named in the Articles, shall hold office until the
next annual meeting and until their successors are elected and qualified.
Vacancies
3.05. (1) Vacancies in the Board of Directors shall exist in the
case of the happening of any of the following events: (a) the death,
resignation, or removal of any Director; (b) the authorized number of Directors
is increased; or (c) at any annual, regular, or special meeting of shareholders
at which any Director is elected, the shareholders fail to elect the full
authorized number of Directors to be voted for at that meeting.
Declaration of Vacancy
(2) The Board of Directors may declare vacant the office of a
Director in either of the following cases: (a) if he is
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adjudged incompetent by an order of Court, or finally convicted of a felony; or
(b) if within sixty (60) days after notice of his election, he does not accept
the office either in writing or by attending a meeting of the Board of
Directors.
Filling Vacancies by Directors
(3) Vacancies may be filled by a majority of the remaining
Directors, though less than a quorum, or by a sole remaining Director. Each
Director so elected shall hold office until his successor is elected at an
annual, regular, or special meeting of the shareholders.
Filling Vacancies by Shareholders ---
Reduction of Authorized Number of Directors
(4) The shareholders may elect a Director at any time to fill
any vacancy not filled by the Directors. If the Board of Directors accepts the
resignation of a Director tendered to take effect at a future time, the Board
or the shareholders may elect a successor to take office when the resignation
becomes effective. A reduction of the authorized number of Directors does not
remove any Director prior to the expiration of his term of office.
Removal of Directors
3.06. The entire Board of Directors or any individual Director may be
removed from office by a vote of shareholders holding a majority of the
outstanding shares entitled to vote at an election of Directors. If any or all
Directors are so removed, new Directors may be elected at the same meeting.
Whenever a class or
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series of shares is entitled to elect one or more Directors under authority
granted by the Articles, the provisions of this paragraph apply to the vote of
that class or series and not to the vote of the outstanding shares as a whole.
Place of Meetings
3.07. Regular meetings of the Board of Directors shall be held at any
place within or without the State of Texas which has been designated from time
to time by resolution of the Board or by written consent of all members of the
Board. In the absence of such designation, regular meetings shall be held at
the principal office of the Corporation. Special meetings of the Board may be
held either at a place so designated. or at the principal office. Any regular
or special meeting is valid, wherever held, if held on written consent of all
members of the Board given either before or after the meeting and filed with
the Secretary of the Corporation.
Annual Meetings
3.08. (1) The annual meetings of the Board of Directors shall be
held immediately after the adjournment of the annual meetings of the
shareholders or at such other time and place as shall from time to time be
determined by the Board.
Call of Annual Meetings
(2) The annual meetings of the Board of Directors of this
Corporation shall be called by the President, or, if he is absent or is unable
or refuses to act, by any Vice President or by any two (2) Directors.
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Notice of Annual Meetings
(3) Written Notice of the time and place of the annual meeting
of the Board of Directors shall be delivered personally to each Director, or
sent to each Director by mail or by other form of written communication at
least seven (7) days before the meeting. If the address of a Director is not
shown on the records and is not readily ascertainable, notice shall be
addressed to him at the city or place in which the meetings of the Directors
are regularly held. Notice of the time and place of holding an adjourned
meeting of a meeting need not be given to absent Directors if the time and
place are fixed at the meeting adjourned.
Validation of Meeting Defectively Called or Noticed
(4) The transactions of any meeting of the Board of Directors,
however called and noticed or wherever held,' are as valid as though had
at a meeting duly held after regular call and notice, if a quorum is present
and if, either before or after the meeting, each of the Directors not present
signs a waiver of notice, a consent to holding the meeting, or an approval of
the minutes thereof. All such waivers, consents, or approval shall be filed
with the corporate records or made a part of the minutes of the meeting.
Attendance by a Director at a meeting shall constitute a waiver of notice of
the meeting, unless the express purpose for such attendance is to present the
objection that the meeting is not lawfully called or convened.
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Call of Special Meeting
3.09. (1) Special meetings of the Board of Directors of this
Corporation shall be called by the President, or, if he is absent or is unable
or refuses to act, by any Vice President or by any two (2) Directors.
Notice of Special Meeting
(2) Written notice of the time, place, and purpose of special
meetings of the Board of Directors shall be delivered personally to each
Director, or sent to each Director by mail or by other form of written
communication, at least seven (7) days before the meeting. If the address of a
Director is not shown on the records and is not readily ascertainable, notice
shall be addressed to him at the city or place in which the meetings of the
Directors are regularly held.
Quorum
3.10. A majority of the authorized number of Directors constitutes a
quorum of the Board for the transaction of business.
Majority Action
3.11. Every act or decision done or made by a majority of the Directors
present at any meeting duly held at which a quorum is present is the act of the
Board of Directors, unless an act of a greater number is required by the
Articles of Incorporation or these Bylaws. Each Director who is present at a
meeting will be deemed to have assented to the action taken at such meeting
unless his dissent to the action is entered in the minutes of the meeting,
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or unless he shall file his written dissent thereto with the Secretary of the
meeting or shall forward such dissent by registered mail to the Secretary of
the Corporation immediately after such meeting.
Action by Consent of Board Without Meeting
3.12. Any action required or permitted to be taken by the Board of
Directors under any provision of the Texas Business Corporation Act may be
taken without a meeting, if all members of the Board shall individually or
collectively consent in writing to such action. Such written consent or
consents shall be filed with the minutes of the proceedings of the Board. Such
action by written consent shall have the same force and effect as a unanimous
vote of such Directors. Any certificate or other document filed under any
provision of the Texas Business Corporation Act which relates to action so
taken shall state that the action was taken by unanimous written consent of the
Board of Directors without a meeting and that these Bylaws authorize the
Directors to so act, and such statement shall be prima facie evidence of such
authority.
Adjournment
3.13. (1) In the absence of a quorum, a majority of the Directors
present may adjourn from time to time until the time fixed for the next regular
meeting of the Board.
Notice of Adjourned Meeting
(2) Notice of the time and place of holding a meeting of an
adjourned meeting need not be given to absent
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Directors if the time and place for such meeting are fixed at the meeting
adjourned.
Conduct of Meeting
3.14. At every meeting of the Board of Directors the Chairman of the
Board of Directors, if there shall be such an officer, and if not, the
President, or in his absence, the Vice President designated by him, or in the
absence of such designation, a chairman chosen by a majority of the Directors
present, shall preside. The Secretary of the Corporation shall act as
Secretary of the Board of Directors. In case the Secretary shall be absent
from any meeting, the chairman may appoint any person to act as Secretary of
the meeting.
Compensation
3.15. Directors shall receive such compensation for their services as
Directors as shall be determined from time to time by resolution of the Board.
Any Director may serve the Corporation in any other capacity as an officer,
agent, employee or otherwise and receive compensation therefor.
Indemnification of Directors and Officers
3.16. The Board of Directors shall authorize the Corporation to pay or
reimburse any present or former Director or officer of the Corporation any
costs or expenses actually and necessarily incurred by him in any action, suit,
or proceeding to which he is made a party by reason of his holding such
position, provided, however, that he shall not receive such indemnification
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if he be finally adjudicated therein to be liable for negligence or misconduct
in office. The indemnification herein provided shall also extend to good faith
expenditures incurred in anticipation of, or preparation for, threatened or
proposed litigation. The Board of Directors may, in proper cases, extend the
indemnification to cover the good faith settlement of any such action, suit, or
proceeding, whether formally instituted or not.
Interested Directors
3.17. Any contract or other transaction between the Corporation and any
of its Directors (or any corporation or firm in which any of its Directors is
directly or indirectly interested) shall be valid for all purposes
notwithstanding the presence of such Director at the meeting authorizing such
contract or transaction, or his participation in such meeting. The foregoing
shall, however, apply only if the interest of each such Director is known or
disclosed to the Board of Directors and it shall nevertheless authorize or
ratify such contract or transaction by a majority of the Directors present,
each such interested Director to be counted in determining whether a quorum is
present but not in calculating the majority necessary to carry such vote. This
section shall not be construed to invalidate any contract or transaction which
would be valid in the absence of this paragraph.
Executive Committee
3.18. The Board of Directors may at one time appoint two or more
Directors to serve and act as an Executive Committee. The
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Executive Committee so appointed shall have such power and authority to conduct
the business and affairs of the Corporation as is vested by law, the Articles
of Incorporation, and these Bylaws in the Board of Directors as a whole, except
that it may not take any action that is specifically required by statute to be
taken by the entire Board of Directors.
Other Committees
3.19. The Board of Directors, by an affirmative vote of a majority of
the members constituting the Board of Directors, may appoint other committees
which shall have and may exercise such powers as shall be conferred or
authorized by resolution of the Board. A majority of any such committee may
determine its action and fix the time and place of its meetings unless the
Board of Directors shall otherwise provide. The Board of Directors, by such
affirmative vote, shall have power at any time to change the powers and members
of any such committees, to fill vacancies, and to dispose of any such
committee.
ARTICLE FOUR
OFFICERS
Number and Titles
4.01. The officers of the Corporation shall be a President, a
Secretary, and a Treasurer. The Corporation may also have, at the discretion
of the Board of Directors, a Chairman of the Board, one or more Vice
Presidents, one or more Assistant Secretaries, one or more Assistant
Treasurers, and such other
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officers as may be appointed in accordance with the provisions of paragraph
4.03 of this Article.
Election
4.02. The officers of the Corporation, except such officers as may be
appointed in accordance with the provisions of Paragraph 4.03 or Paragraph 4.05
of this Article, shall be chosen annually by the Board of Directors, and each
shall hold his office until he shall resign or shall be removed or otherwise
disqualified to serve, or his successor shall be elected or qualified.
Subordinate Officers
4.03. The Board of Directors may appoint such other officers or agents
as the business of the Corporation may require, each of whom shall hold office
for such period, have such authority, and perform such duties as are provided
in these Bylaws or as the Board of Directors may from time to time determine.
The Board of Directors may delegate to any officer or committee the power to
appoint any such subordinate officers, committees or agents, to specify their
duties and to determine their compensation.
Removal and Resignation
4.04. Any officer may be removed, either with or without cause, by a
majority of the Directors at the time in office, at any regular or special
meeting of the Board, or, except in case of an officer chosen by the Board of
Directors, by any committee or officer upon whom such power of removal may be
conferred by the
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Board of Directors; provided, however, that such removal shall not be without
prejudice to the contract rights, if any, of the person removed. Any officer
may resign at any time by giving written notice to the Board of Directors
or to the President, or to the Secretary of the Corporation. Any such
resignation shall take effect at the date of the receipt of such notice or at
any later time specified therein; and, unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
Vacancies
4.05. If the office of the President, Vice President, Secretary,
Treasurer, Assistant Secretary (if any), or Assistant Treasurer (if any)
becomes vacant by reason of death, resignation, removal, or otherwise, the
Board of Directors shall elect a successor who shall hold office for the
unexpired term, and until his successor is elected.
Chairman of the Board
4.06. The Chairman of the Board, if there shall be such an officer,
shall, if present, preside at all meetings of the Board of Directors and
exercise and perform such other powers and duties as may from time to time be
assigned to him by the Board of Directors or prescribed by the Bylaws.
President
4.07. Subject to such supervisory powers, if any, as may be given by
the Board of Directors to the Chairman of the Board, if
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there be such an officer, the President shall be chief executive officer of the
Corporation and shall, subject to the control of the Board of Directors, have
general supervision, direction, and control of the business and officers of the
Corporation, and shall have the general powers and duties of management usually
vested in the office of President of a Corporation, and shall have such other
powers and duties as may be prescribed by the Board of Directors or these
Bylaws. Within this authority and in the course of his duties he shall:
Conduct Meetings
(1) Preside at all meetings of the shareholders and in the
absence of the Chairman of the Board, or, if there be none, at all meetings of
the Board of Directors, and shall be ex officio a member of all the standing
committees, including the Executive Committee, if any.
Sign Share Certificates
(2) Sign all certificates of stock of the Corporation in
conjunction with the Secretary or Assistant Secretary, unless otherwise ordered
by the Board of Directors.
Execute Instruments
(3) When authorized by the Board of Directors or required by
law, execute, in the name of the Corporation, deeds, conveyances, notices,
leases, checks, drafts, bills of exchange, warrants, promissory notes, bonds,
debentures, contracts, and other papers and instruments in writing and, unless
the Board of
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Directors shall order otherwise by resolution, make such contracts as the
ordinary conduct of the business of the Corporation may require.
Hire and Fire Employees
(4) Appointment and remove, employ and discharge, and
prescribe the duties and fix the compensation of all agents, employees, and
clerks of the Corporation other than the duly appointed officers, subject to
the approval of the Board of Directors, all of the officers, agents, and
employees of the Corporation.
Meetings of Other Corporations
(5) Unless otherwise directed by the Board of Directors,
attend in person or by substitute appointed by him or the Vice President and
Secretary or the Assistant Secretary, and act and vote on behalf of the
Corporation, at all meetings of the shareholders of any corporation in which
this Corporation holds stock.
Vice President
4.08. In the absence or disability of the President, the Vice
President, in order of their rank as fixed by the Board of Directors or, if not
ranked, the Vice President designated by the Board of Directors, shall perform
all the duties of the President, and when so acting shall have all the powers
of, and be subject to all the restrictions on, the President. The Vice
Presidents shall have such other powers and perform such other duties as from
time
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to time may be prescribed for them respectively by the Board of Directors or
these Bylaws.
Secretary
4.09. The Secretary shall:
Sign Share Certificates
(1) Sign, with the President or Vice President, certificates
for shares of the Corporation.
Attest Bylaws
(2) Attest and keep at the principal office of the Corporation
the original or a copy of its Bylaws as amended or otherwise altered to date.
Minutes of Meetings
(3) Keep at the principal office of the Corporation or such
other place as the Board of Directors may order, a book of minutes of all
meetings of its Directors and shareholders, Executive Committee, and other
committees, with the time and place of holding, whether regular or special,
and, if special, how authorized, the notice thereof given, the names of those
present at Director's meetings, the number of shares of members present or
represented at shareholders' meetings, and the proceedings thereof.
Sign or Attest Document and Affix Seal
(4) Sign or attest such documents as may be required by law or
the business of the Corporation, and to keep the corporate seal and affix it to
such instruments as may be necessary or proper.
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Notices
(5) See that all notices are duly given in accordance with the
provisions of these Bylaws or as required by law. In case of the absence or
disability of the Secretary, or his refusal or neglect to act, notice may be
given and served by an Assistant Secretary or by the President or Vice
President or by the Board of Directors.
Custodian of Records and Seal
(6) Be custodian of the records and of the seal of the
Corporation and see that it is engraved, lithographed, printed, stamped,
impressed upon or affixed to all certificates for shares prior to their
issuance and to all documents, the execution of which on behalf of the
Corporation under its seal is duly authorized in accordance with the provisions
of these Bylaws.
Share Register
(7) Keep at the principal office of the Corporation a share
register showing the name of the shareholders and their addresses; the number,
date of issue, and class of shares represented by each outstanding share
certificate; and the number and date of cancellation of each certificate
surrendered for cancellation.
Reports and Statements
(8) See that all books, reports, statements, certificates and
all other documents and records required by law are properly kept and filed.
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Exhibit Records
(9) Exhibit at all reasonable times to any Director on
application, or on written demand stating the purpose thereof of any person who
has been a shareholder of record for at least six (6) months immediately
preceding his demand or who is the holder of record of at least five percent
(5%) of all of the outstanding shares of the Corporation, upon application, the
Bylaws, the share register, and minutes of proceedings of the shareholders and
Directors of the Corporation.
Other Duties
(10) In general, perform all duties incident to the office of
Secretary, and such other duties as from time to time may be assigned to him by
the Board of Directors.
Absence of Secretary
(11) In case of the absence or disability of the Secretary or
his refusal or neglect to act, the Assistant Secretary, or if there be none,
the Treasurer, acting as Assistant Secretary, may perform all of the functions
of the Secretary. In the absence or inability to act, or refusal or neglect to
act of the Secretary, the Assistant Secretary and Treasurer, any person
thereunto authorized by the President or by the Board of Directors may perform
the functions of the Secretary.
Assistant Secretary
4.10. At the request of the Secretary, or in his absence or disability,
the Assistant Secretary, designated as set forth in
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preceding Subparagraph 4.09(11) of these Bylaws shall perform all the duties of
the Secretary, and when so acting, he shall have all powers of, and be subject
to all restrictions on, the Secretary. The Assistant Secretary shall perform
such other duties as from time to time may be assigned to him by the Board of
Directors, or the Secretary.
Treasurer
4.11. The Treasurer shall:
Funds -- Custody
(1) Have charge and custody of, and be responsible for, all
funds and securities of the Corporation, and deposit all such funds in the name
of the corporation in such banks, trust companies, or other depositories as
shall be selected by the Board of Directors.
Funds -- Receipt
(2) Receive, and give receipt for, monies due and payable to
the Corporation from any source whatever.
Funds --- Disbursements
(3) Disburse or cause to be disbursed, the funds of the
Corporation as may be directed by the Board of Directors, taking proper
vouchers for such disbursements.
Maintain Accounts
(4) Keep and maintain adequate and correct accounts of the
Corporation's properties and business transactions including account of its
assets, liabilities, receipts, disbursements, gains,
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losses, capital, surplus and shares. Any surplus, including earned surplus,
paid-in surplus and surplus arising from a reduction of stated capital, shall
be classified according to source and shown in a separate account.
Exhibit Records
(5) Exhibit at all reasonable times the books of account and
records to any Director on application, or to any person who has been a
shareholder of record for at least six (6) months immediately preceding his
demand or who is the holder of record of at least five percent (5%) of all the
outstanding shares of the Corporation, on written demand stating the purpose
thereof, during business hours at the office of the Corporation where such
books and records are kept.
Report to President and Directors
(6) Render to the President and Directors, whenever they
request it, an account of all his transactions as Treasurer and of the
financial condition of the corporation.
Financial Report to Shareholders
(7) Prepare, or cause to be prepared, and certify the
financial statements to be included in the annual report to shareholders and
statements of the affairs of the Corporation when requested by shareholders
holding at least ten percent (10%) of the number of outstanding shares of the
Corporation.
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Bond
(8) Give to the Corporation a bond, if required by the Board
of Directors or by the President, in a sum, and with one or more sureties, or a
surety company satisfactory to the Board, for the faithful performance of the
duties of his office and for the restoration to the Corporation, in case of his
death, resignation, retirement, or removal from office, of all books, papers,
vouchers, money, and other property of whatever kind in his possession or under
his control belonging to the Corporation.
(9) In general, perform all the duties incident to the office
of Treasurer and such other duties as from time to time may be assigned to him
by the Board of Directors.
Absence of Treasurer
(10) In case of the absence or disability of the Treasurer or
his refusal or neglect to act, the Assistant Treasurer or the Secretary acting
as Assistant Treasurer, may perform all of the functions of the Treasurer. In
the absence or inability to act, or refusal or neglect to act, of the
Treasurer, the Assistant Treasurer, the Secretary, or any person thereunto
authorized by the President or Vice President or by the Board of Directors may
perform the functions of the Treasurer.
Assistant Treasurer
4.12. The Assistant Treasurer, if required so to do by the Board of
Directors, shall give bond for the faithful discharge of his duties, in such
sum, and with such sureties as the Board of
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Directors shall require. At the request of the Treasurer, or in his absence or
disability, the Assistant Treasurer designated as set forth in preceding
Subparagraph 4.11(10) of these Bylaws shall perform all the duties of the
Treasurer, and when so acting, he shall have all the powers of, and be subject
to all the restrictions on, the Treasurer. He shall perform such other duties
as from time to time may be assigned to him by the Board of Directors or
Treasurer.
Salaries
4.13. The salaries of the officers shall be fixed from time to time by
the Board of Directors, and no officer shall be prevented from receiving such
salary by reason of the fact that he is also a Director of the Corporation.
ARTICLE FIVE
EXECUTION OF INSTRUMENTS AND DEPOSIT OF FUNDS
Authority for Execution of Instruments
5.01. The Board of Directors, except as otherwise provided in these
Bylaws, may authorize any officer or officers, agent or agents, to enter into
any contract or execute and deliver any instrument in the name of and on behalf
of the Corporation, and such authority may be general or confined to specific
instances; and, unless so authorized, no officer, agent, or employee shall have
any power or authority to bind the Corporation by any contract or engagement or
to pledge its credit or to render it liable pecuniarily for any purpose or in
any amount.
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<PAGE> 35
Execution of Instruments
5.02. Unless otherwise specifically determined by the Board of
Directors or otherwise required by law, formal contracts of the Corporation,
promissory notes, deeds of trust, mortgages and other evidences of indebtedness
of the Corporation, and other corporate instruments or documents, and
certificates of shares of stock owned by the Corporation, shall be executed,
signed or endorsed by the President or any Vice President and by the Secretary
or the Treasurer, or any Assistant Secretary or Assistant Treasurer, and may
have the corporate seal affixed hereto.
Bank Accounts and Deposits
5.03. (1) All funds of the Corporation shall be deposited from time
to time to the credit of the Corporation with such banks, trust companies, or
other depositories as the Board of Directors may select or as may be selected
by any officer or officers, agent or agents of the Corporation to whom such
power may be delegated from time to time by the Board of Directors.
Endorsement Without Countersignature
(2) Endorsements for deposit to the credit of the corporation
in any of its duly authorized depositories may be made without countersignature
by the President or any Vice President, or the Treasurer or any Assistant
Treasurer, or by any other officer or agent of the Corporation to whom the
Board of Directors, by resolution, shall have delegated such power, or by hand
stamped impression in the name of the Corporation.
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<PAGE> 36
Signing of Checks, Drafts, Etc.
(3) All checks, drafts, or other order of payment of money,
notes or other evidences of indebtedness, issued in the name of or payable to
the Corporation, shall be signed or endorsed by such person or persons and in
such manner as shall be determined from time to time by resolution of the Board
of Directors.
ARTICLE SIX
ISSUANCE AND TRANSFER OF SHARES
Classes and Series of Shares
6.01. The Corporation may issue one or more classes or series of
shares, or both, any of which classes or series may be with par value or
without par value and with full, limited or no voting rights, and with such
other preferences, rights, privileges, and restrictions as are stated or
authorized in the Articles of Incorporation. All shares of any one class shall
have the same voting rights, conversion, redemption, and other rights,
preferences, privileges, and restrictions, unless the class is divided into
series. If a class is divided into series, all the shares of any one series
shall have the same voting rights, conversion, redemption, and other rights,
preferences, privileges, and restrictions. There shall always be a class or
series of shares outstanding which has complete voting rights except as limited
or restricted by voting rights conferred on some other class or series of
outstanding shares.
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<PAGE> 37
Certificates for Fully Paid Shares
6.02. Neither shares nor certificates representing such shares may be
issued by the Corporation until the full amount of the consideration has been
paid. When such consideration has been paid to the Corporation, the shares
shall be deemed to have been issued and the certificate representing such
shares shall be issued to the shareholder.
Consideration for Shares
6.03. The consideration paid for the issuance of shares shall consist
of money paid, labor done, or property actually received; and neither
promissory notes nor the promises of future services shall constitute payment
or part payment for shares of the Corporation.
Contents of Share Certificates
6.04. (1) Certificates for shares shall be of such form and style,
printed or otherwise, as the Board of Directors may designate, and each
certificate shall state all of the following facts:
(a) That the Corporation is organized under the laws of the State of
Texas;
(b) The name of the person to whom issued;
(c) The number and class of shares and the designation of the series,
if any, which such certificate represents; and
(d) The par value of each share represented by such certificate, or a
statement that the shares are without par value.
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<PAGE> 38
Shares in Classes or series
(2) If the Corporation is authorized to issue shares of more
than one class, the certificate shall set forth, either on the face or back
of the certificate, a full or summary statement of all of the designations,
preferences, limitations, and relative rights of the shares of each class
authorized to issue any preferred or special class in series, the variations in
the relative rights and preferences of the shares of each such series so far as
the same have been fixed and determined and the relative rights and preferences
of subsequent series.
Restriction on Transfer
(3) Any restrictions imposed by the Corporation on the sale or
other disposition of its shares and on the transfer thereof must be copied at
length or in summary form of the fact, or so copied on the back and referred to
of the fact, of each certificate representing shares to which the restriction
applies.
Pre-Emptive Rights
(4) Any pre-emptive rights of a shareholder to acquire
unissued or treasury shares of the Corporation which are limited or denied by
the Articles of Incorporation must be set forth at length on the face or back
of the certificate representing shares subject thereto.
Incorporation by Reference
(5) In lieu of setting forth any provision at length or in
summary form on the face or back of the certificate,
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<PAGE> 39
the provision may be incorporated by reference on the face or back of the
certificate in the manner provided by Article 2.19 of the Texas Business
Corporation Act.
Signing Certificates --- Facsimile Signatures
6.05. All such certificates shall be signed by the President or Vice
President and the Secretary or an Assistant Secretary. The signatures of the
President or Vice President, Secretary or Assistant Secretary may be facsimiles
if the certificate is countersigned by a transfer agent or registered by a
registrar either of which is not the Corporation itself or an employee of the
Corporation. If the officer who has signed or whose facsimile signature has
been placed on the certificate has ceased to be such officer before the
certificate is issued, the certificate may be issued by the Corporation with
the same effect as if he were such officer at the date of its issuance.
Transfer of Lost or Destroyed Shares
6.06. (1) Where a share certificate has been lost, apparently
destroyed, or wrongfully taken and the owner fails to notify the Corporation of
that fact within a reasonable time after he has notice of it, and the
Corporation registers a transfer of the share represented by the certificate
before receiving such a notification, the owner is precluded from asserting
against the Corporation any claim for registering the transfer or any claim to
a new certificate.
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<PAGE> 40
Replacement of Lost or Destroyed Certificates
(2) Where the holder of a share certificate claims that the
certificate has been lost, destroyed, or wrongfully taken, the Corporation
shall issue a new certificate in place of the original certificate if the owner
so requests before the Corporation has notice that the share has been acquired
by a bona fide purchaser; and files with the Corporation a sufficient indemnity
bond; and satisfies any other reasonable requirements imposed by the Board of
Directors.
Transfer After Replacement
(3) If, after the issue of a new security as a replacement for
a lost, destroyed, or wrongfully taken certificate, bona fide purchaser of the
original certificate presents it for registration of transfer, the Corporation
must register the transfer unless registration would result in overissue. In
addition to any right on the indemnity bond, the Corporation may recover the
new security from the person to whom it was issued or any person taken under
him except a bona fide purchaser.
Transfer Agents and Registrars
6.07. The Board of Directors may appoint one or more transfer agents or
transfer clerks, and one or more registrars which shall be an incorporated bank
or trust company, either domestic or foreign, who shall be appointed at such
times and places as the requirements of the Corporation may necessitate and the
Board of Directors may designate.
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<PAGE> 41
Conditions of Transfer
6.08. A person in whose name shares of stock stand on the books of the
Corporation shall be deemed to be the owner thereof as regards the Corporation;
provided, that whenever any transfer of shares shall be made for collateral
security, and not absolutely, and written notice thereof shall be given to the
Secretary of the Corporation or its transfer agent, if any, such fact shall be
stated in the entry of the transfer.
Reasonable Doubts as to Right of Transfer
6.09. When a transfer of shares is requested and there is reasonable
doubt as to the right of the person seeking the transfer, the Corporation or
its transfer agent, before recording the transfer of the shares on its books or
issuing any certificate therefor, may require from the person seeking the
transfer reasonable proof of his right to the transfer. If there remains a
reasonable doubt of his right to the transfer, the Corporation may refuse a
transfer unless the person gives adequate security or a bond of indemnity
executed by a corporate surety or by two individual sureties satisfactory to
the Corporation as to form, amount, and responsibility of sureties. The bond
shall be conditioned to protect the Corporation, its officers, transfer agents,
and registrars, or any of them, against any loss, damage, expense, or other
liability to the owner of the shares by reason of the recordation of the
transfer or the issuance of a new certificate for shares.
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<PAGE> 42
ARTICLE SEVEN
CORPORATE RECORDS, REPORTS, AND SEAL
Minutes of Corporate Meetings
7.01. The Corporation shall keep at the principal office, or such other
place as the Board of Directors may order, a book of minutes of all meetings of
its Directors and of its shareholders or members, with the time and place of
holding, whether regular or special, and, if special, how authorized, the
notice thereof given, the names of those present at Directors' meetings, the
number of shares or members present or represented at shareholders' or members'
meetings, and the proceedings thereof.
Books of Account
7.02. The corporation shall keep and maintain adequate and correct
accounts of its properties and business transactions, including accounts of its
assets, liabilities, receipts, disbursements, gains, losses, capital, surplus,
and shares. Any surplus, including earned surplus, paid in surplus, and
surplus arising from a reduction of stated capital, shall be classified
according to source and shown in a separate account.
Share Register
7.03. The Corporation shall keep at the principal office or at the
office of the transfer agent, a share register, showing the names of the
shareholders and their addresses, the number and classes of shares held by each
the number and date of certificates issued for shares, and the number and date
of cancellation of every
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certificate surrendered for cancellation. The above specified information may
be kept by the Corporation on punchcards, magnetic tape, or other information
storage device related to electronic data processing equipment provided that
such card, tape, or other equipment is capable of reproducing the information
in clearly legible form for the purposes of inspecting.
Fiscal Year
7.04. The fiscal year of the Corporation shall be as determined by the
Board of Directors.
Corporate Seal
7.05. The Board of Directors may adopt, use and thereafter alter, the
corporate seal.
ARTICLE EIGHT
AMENDMENT OF BYLAWS
Adoption, Amendment, Repeal of Bylaws by Directors
8.01. Bylaws may be altered, amended, or repealed, and new Bylaws may
be adopted, by a majority vote of the Board of Directors.
SIGNATURE AND ATTESTATION
ADOPTED by unanimous written consent of the Board of Directors without a
meeting as of June 12, 1991, as authorized by Article 9.10B of the Texas
Business corporate.
/s/ Robert W. Wolf
-------------------------------
Robert W. Wolf
Secretary
[C0RPORATE SEAL]
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<PAGE> 1
EXHIBIT 4.1
================================================================================
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
Dated as of November 27, 1996
by and among
ATRIUM COMPANIES, INC.
and
THE SUBSIDIARY GUARANTORS,
named herein
and
BT SECURITIES CORPORATION
as Initial Purchaser
================================================================================
$100,000,000
10 1/2% SENIOR SUBORDINATED NOTES DUE 2006
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Exchange Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3. Shelf Registration . . . . . . . . . . . . . . . . . . . . . . . . . 10
4. Liquidated Damages . . . . . . . . . . . . . . . . . . . . . . . . . 12
5. Registration Procedures . . . . . . . . . . . . . . . . . . . . . . 14
6. Registration Expenses . . . . . . . . . . . . . . . . . . . . . . . 24
7. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . 25
8. Rules 144 and 144A . . . . . . . . . . . . . . . . . . . . . . . . . 30
9. Underwritten Registrations . . . . . . . . . . . . . . . . . . . . . 30
10. Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(a) No Inconsistent Agreements . . . . . . . . . . . . . . . . . 30
(b) Adjustments Affecting Registrable Notes . . . . . . . . . . 31
(c) Amendments and Waivers . . . . . . . . . . . . . . . . . . . 31
(d) Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(e) Successors and Assigns . . . . . . . . . . . . . . . . . . . 32
(f) Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 33
(g) Headings . . . . . . . . . . . . . . . . . . . . . . . . . . 33
(h) Governing Law . . . . . . . . . . . . . . . . . . . . . . . 33
(i) Severability . . . . . . . . . . . . . . . . . . . . . . . . 33
(j) Notes Held by the Issuers or their Affiliates . . . . . . . 33
(k) Third Party Beneficiaries . . . . . . . . . . . . . . . . . 33
</TABLE>
(i)
<PAGE> 3
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
This Exchange and Registration Rights Agreement (the
"Agreement") is dated as of November 27, 1996, by and among Atrium Companies,
Inc., a Delaware corporation (the "Company"), H-R Window Supply, Inc., a Texas
corporation, Vinyl Building Specialties of Connecticut, Inc., a Connecticut
corporation, Bishop Manufacturing Co. of New York, Inc., a Connecticut
corporation, Bishop Manufacturing Company, Incorporated, a Connecticut
corporation, and Bishop Manufacturing Company of New England, Inc., a
Connecticut corporation, each of which is a wholly-owned subsidiary of the
Company (collectively, the "Subsidiary Guarantors"), and BT Securities
Corporation (the "Initial Purchaser").
This Agreement is entered into in connection with the Purchase
Agreement, dated November 22, 1996, among the Company, the Subsidiary
Guarantors and the Initial Purchaser (the "Purchase Agreement"), which provides
for the sale by the Company to the Initial Purchaser of $100,000,000 aggregate
principal amount of the Company's 10 1/2% Senior Subordinated Notes due 2006
(the "Notes"), which Notes will be guaranteed by the Subsidiary Guarantors.
The Company and the Subsidiary Guarantors are collectively referred to herein
as the "Issuers." In order to induce the Initial Purchaser to enter into the
Purchase Agreement, the Issuers have agreed to provide the registration rights
set forth in this Agreement for the benefit of the Initial Purchaser and its
direct and indirect transferees. The execution and delivery of this Agreement
is a condition to the obligation of the Initial Purchaser to purchase the Notes
under the Purchase Agreement.
The parties hereby agree as follows:
1. Definitions
As used in this Agreement, the following terms shall have the
following meanings:
Advice: Has the meaning provided in the last paragraph of
Section 5 hereof.
Agreement: Has the meaning provided in the first introductory
paragraph hereto.
<PAGE> 4
Applicable Period: Has the meaning provided in Section 2(b)
hereof.
Closing Date: Has the meaning provided in the Purchase
Agreement.
Company: Has the meaning provided in the first introductory
paragraph hereto.
Effectiveness Date: The 135th day after the Issue Date.
Effectiveness Period: Has the meaning provided in Section
3(a) hereof.
Event Date: Has the meaning provided in Section 4(b) hereof.
Exchange Act: The Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC promulgated thereunder.
Exchange Notes: Has the meaning provided in Section 2(a)
hereof.
Exchange Offer: Has the meaning provided in Section 2(a)
hereof.
Exchange Offer Registration Statement: Has the meaning
provided in Section 2(a) hereof.
Filing Date: The 60th day after the Issue Date.
Holder: Any holder of a Registrable Note or Registrable
Notes.
Indemnified Person: Has the meaning provided in Section 7(c)
hereof.
Indemnifying Person: Has the meaning provided in Section 7(c)
hereof.
Indenture: The Indenture, dated as of November 27, 1996 among
the Company, the Subsidiary Guarantors and United States Trust Company of New
York, as trustee, pursuant to which the Notes are being issued, as amended or
supplemented from time to time in accordance with the terms thereof.
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<PAGE> 5
Initial Purchaser: Has the meaning provided in the first
introductory paragraph hereto.
Inspectors: Has the meaning provided in Section 5(o) hereof.
Issue Date: The date on which the original Notes were sold to
the Initial Purchaser pursuant to the Purchase Agreement.
Issuers: Has the meaning provided in the second introductory
paragraph hereto.
NASD: Has the meaning provided in Section 5(s) hereof.
Notes: Has the meaning provided in the second introductory
paragraph hereto.
Participant: Has the meaning provided in Section 7(a) hereof.
Participating Broker-Dealer: Has the meaning provided in
Section 2(b) hereof.
Person(s): An individual, trustee, corporation, partnership,
limited liability company, joint stock company, trust, unincorporated
association, union, business association, firm or other legal entity.
Private Exchange: Has the meaning provided in Section 2(b)
hereof.
Private Exchange Notes: Has the meaning provided in Section
2(b) hereof.
Prospectus: The prospectus included in any Registration
Statement (including, without limitation, any prospectus subject to completion
and a prospectus that includes any information previously omitted from a
prospectus filed as part of an effective registration statement in reliance
upon Rule 430A promulgated under the Securities Act), as amended or
supplemented by any prospectus supplement, and all other amendments and
supplements to the Prospectus, with respect to the terms of the offering of any
portion of the Registrable Notes covered by such Registration Statement
including post-effective amendments, and all material incorporated by reference
or deemed to be incorporated by reference in such Prospectus.
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<PAGE> 6
Purchase Agreement: Has the meaning provided in the second
introductory paragraph hereto.
Records: Has the meaning provided in Section 5(o) hereof.
Registrable Notes: Each Note upon original issuance of the
Notes and at all times subsequent thereto, each Exchange Note as to which
Section 2(d)(v) hereof is applicable upon original issuance and at all times
subsequent thereto and each Private Exchange Note upon original issuance
thereof and at all times subsequent thereto, until in the case of any such
Note, Exchange Note or Private Exchange Note, as the case may be, the earliest
to occur of (i) a Registration Statement (other than, with respect to any
Exchange Note as to which Section 2(d)(v) hereof is applicable, the Exchange
Offer Registration Statement) covering such Note, Exchange Note or Private
Exchange Note, as the case may be, has been declared effective by the SEC and
such Note (unless such Note was not tendered for exchange by the Holder
thereof), Exchange Note or Private Exchange Note, as the case may be, has been
disposed of in accordance with such effective Registration Statement, (ii) such
Note, Exchange Note or Private Exchange Note, as the case may be, is sold in
compliance with Rule 144, or (iii) such Note, Exchange Note or Private Exchange
Note, as the case may be, ceases to be outstanding for purposes of the
Indenture.
Registration Default: Has the meaning provided in Section 4(a)
hereof.
Registration Statement: Any registration statement of the
Company, including, but not limited to, the Exchange Offer Registration
Statement, that covers any of the Registrable Notes pursuant to the provisions
of this Agreement, including the Prospectus, amendments and supplements to such
registration statement, including post-effective amendments, all exhibits, and
all material incorporated by reference or deemed to be incorporated by
reference in such registration statement.
Rule 144: Rule 144 promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule (other than
Rule 144A) or regulation hereafter adopted by the SEC providing for offers and
sales of securities made in compliance therewith resulting in offers and sales
by subsequent holders that are not affiliates of an issuer of such securities
being free of
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<PAGE> 7
the registration and prospectus delivery requirements of the Securities Act.
Rule 144A: Rule 144A promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule (other than
Rule 144) or regulation hereafter adopted by the SEC.
Rule 415: Rule 415 promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC.
SEC: The Securities and Exchange Commission.
Securities Act: The Securities Act of 1933, as amended, and
the rules and regulations of the SEC promulgated thereunder.
Shelf Notice: Has the meaning provided in Section 2(c)
hereof.
Shelf Registration: Has the meaning provided in Section 3(a)
hereof.
Shelf Registration Statement: shall mean a "shelf"
registration statement of the Company and the Subsidiary Guarantors which
covers all of the Registrable Notes on an appropriate form under Rule 415, and
all amendments and supplements to such registration statement, including
post-effective amendments, in each case including the Prospectus contained
therein, all exhibits thereto and all material incorporated by reference
therein.
Subsidiary Guarantors: Has the meaning provided in the first
introductory paragraph hereto.
TIA: The Trust Indenture Act of 1939, as amended.
Transfer Restricted Notes: Has the meaning provided in
Section 4(a) hereof.
Trustee(s): The trustee under the Indenture and, if existent,
the trustee under any indenture governing the Exchange Notes and Private
Exchange Notes (if any).
Underwritten registration or underwritten offering: A
registration in which securities of one or more of the
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<PAGE> 8
Issuers are sold to an underwriter for reoffering to the public.
2. Exchange Offer
(a) Each of the Issuers agrees to file with the SEC under
the Securities Act no later than the Filing Date a registration statement on
Form S-1, Form S-4 or other appropriate form (the "Exchange Offer Registration
Statement") registering the Issuer's offer to exchange (the "Exchange Offer")
any and all of the Registrable Notes (other than the Private Exchange Notes, if
any) for a like aggregate principal amount of debt securities of the Company,
guaranteed, on the same basis as the Notes, by the Subsidiary Guarantors, which
are identical in all material respects to the Notes (the "Exchange Notes") (and
which are entitled to the benefits of the Indenture or a trust indenture which
is identical in all material respects to the Indenture (other than such changes
to the Indenture or any such identical trust indenture as are necessary to
comply with any requirements of the SEC to effect or maintain the qualification
thereof under the TIA) and which, in either case, has been qualified under the
TIA), except that the offering and sale by the Issuers of the Exchange Notes
(other than Private Exchange Notes, if any) shall have been registered pursuant
to an effective Registration Statement under the Securities Act and shall
contain no restrictive legend thereon. The Exchange Offer shall comply with
all applicable tender offer rules and regulations under the Exchange Act. The
Issuers agree to use their reasonable best efforts to (x) cause the Exchange
Offer Registration Statement to be declared effective under the Securities Act
on or before the Effectiveness Date; (y) keep the Exchange Offer open for at
least 30 days (or longer if required by applicable law) after the date that
notice of the Exchange Offer is mailed to the Holders; and (z) consummate the
Exchange Offer on or prior to the 165th day following the Issue Date. If after
such Exchange Offer Registration Statement is declared effective by the SEC,
the Exchange Offer or the issuance of the Exchange Notes thereunder is
interfered with by any stop order, injunction or other order or requirement of
the SEC or any other governmental agency or court, such Exchange Offer
Registration Statement shall be deemed not to have become effective for
purposes of this Agreement. Each Holder who participates in the Exchange Offer
will be required to represent that any Exchange Notes received by it will be
acquired in the ordinary course of its business, that at the time of the
consummation of the Exchange Offer such Holder will have no arrangement or
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<PAGE> 9
understanding with any Person to participate in the distribution of the
Exchange Notes in violation of the provisions of the Securities Act, and that
such Holder in not an "affiliate" of any of the Issuers within the meaning of
the Securities Act. Upon consummation of the Exchange Offer in accordance with
this Section 2, the Issuers shall have no further obligation to register
Registrable Notes (other than Private Exchange Notes and other than in respect
of any Exchange Notes as to which clause 2(d)(v) hereof applies) pursuant to
Section 3 hereof. No securities other than the Exchange Notes shall be
included in the Exchange Offer Registration Statement.
(b) The Issuers shall include within the Prospectus
contained in the Exchange Offer Registration Statement a section entitled "Plan
of Distribution," reasonably acceptable to the Initial Purchaser, which shall
contain a summary statement of the positions taken or policies made by the
Staff of the SEC with respect to the potential "underwriter" status of any
broker-dealer that is the beneficial owner (as defined in Rule 13d-3 under the
Exchange Act) of Exchange Notes received by such broker-dealer in the Exchange
Offer (a "Participating Broker-Dealer"), whether such positions or policies
have been publicly disseminated by the Staff of the SEC or such positions or
policies, in the judgment of the Initial Purchaser, represent the prevailing
views of the Staff of the SEC. Such "Plan of Distribution" section shall also
expressly permit the use of the Prospectus included in the Exchange Offer
Registration Statement by all Persons subject to the prospectus delivery
requirements of the Securities Act, including all Participating Broker-
Dealers, and include a statement describing the means by which Participating
Broker-Dealers may resell the Exchange Notes.
Each of the Issuers shall use its reasonable best efforts to
keep the Exchange Offer Registration Statement effective and to amend and
supplement the Prospectus contained therein, in order to permit such Prospectus
to be lawfully delivered by any Participating Broker-Dealer subject to the
prospectus delivery requirements of the Securities Act for such period of time
as is necessary to comply with applicable law in connection with any resale of
the Exchange Notes; provided, however, that such period shall not exceed 90
days after the consummation of the Exchange Offer (or such longer period if
extended pursuant to the last paragraph of Section 5 hereof) (the "Applicable
Period").
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<PAGE> 10
If, prior to consummation of the Exchange Offer, the Initial
Purchaser holds any Notes acquired by it and having the status of an unsold
allotment in the initial distribution, the Issuers shall, upon the request of
the Initial Purchaser, simultaneously with the delivery of the Exchange Notes
in the Exchange Offer issue and deliver to the Initial Purchaser in exchange
(the "Private Exchange") for such Notes held by the Initial Purchaser a like
principal amount of debt securities of the Company, guaranteed by the
Subsidiary Guarantors, that are identical in all material respects to the
Exchange Notes (the "Private Exchange Notes") (and which are issued pursuant to
the same Indenture as the Exchange Notes) except for the placement of a
restrictive legend on such Private Exchange Notes. The Private Exchange Notes
shall bear the same CUSIP number as the Exchange Notes.
Interest on the Exchange Notes and the Private Exchange Notes
will accrue from the last interest payment date on which interest was paid on
the Notes surrendered in exchange therefor or, if no interest has been paid on
the Notes, from the Issue Date.
In connection with the Exchange Offer, the Issuers shall:
(1) mail to each Holder a copy of the Prospectus forming
part of the Exchange Offer Registration Statement, together with an
appropriate letter of transmittal and related documents;
(2) utilize the services of a depositary for the Exchange
Offer with an address in the Borough of Manhattan, the City of New
York;
(3) permit Holders to withdraw tendered Notes at any time
prior to the close of business, New York time, on the last business
day on which the Exchange Offer shall remain open; and
(4) otherwise comply in all material respects with all
applicable laws, rules and regulations.
As soon as practicable after the close of the Exchange Offer
or the Private Exchange, as the case may be, the Issuers shall:
(1) accept for exchange all Notes tendered and not
validly withdrawn pursuant to the Exchange Offer or the Private
Exchange;
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(2) deliver to the Trustee for cancellation all Notes so
accepted for exchange; and
(3) cause the Trustee to authenticate and deliver
promptly to each Holder of Notes, Exchange Notes or Private Exchange
Notes, as the case may be, equal in principal amount to the Notes of
such Holder so accepted for exchange.
The Exchange Notes and the Private Exchange Notes shall be
issued under (i) the Indenture or (ii) an indenture identical in all material
respects to the Indenture, which in either event shall provide that (1) the
Exchange Notes shall not be subject to the transfer restrictions set forth in
the Indenture and (2) the Private Exchange Notes shall be subject to the
transfer restrictions set forth in the Indenture. The Indenture or such
indenture shall provide that the Exchange Notes, the Private Exchange Notes and
the Notes shall vote and consent together on all matters as one class and that
none of the Exchange Notes, the Private Exchange Notes or the Notes will have
the right to vote or consent as a separate class on any matter.
(c) Notwithstanding any other provisions hereof, the
Issuers shall ensure that (i) any Exchange Offer Registration Statement and any
amendment thereto and any Prospectus forming part thereof and any supplement
thereto complies in all material respects with the Securities Act and the rules
and regulations thereunder, (ii) any Exchange Offer Registration Statement and
any amendment thereto does not, when it becomes effective, contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading and
(iii) any Prospectus forming part of any Exchange Offer Registration Statement,
and any supplement to such Prospectus, does not include, as of the consummation
of the Exchange Offer, an untrue statement of a material fact or omit to state
a material fact necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading.
(d) If, (i) because of any change in law or in currently
prevailing interpretations of the Staff of the SEC, the Issuers determine that
they are not permitted to effect an Exchange Offer, (ii) the Exchange Offer is
not consummated within 165 days after the Issue Date, (iii) any holder of
Private Exchange Notes so requests at any time after the consummation of the
Private Exchange, (iv) the Holders of not less than a majority in aggregate
principal amount of the
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<PAGE> 12
Registrable Notes reasonably determine that the interests of the Holders would
be materially adversely affected by consummation of the Exchange Offer or (v)
in the case of any Holder that participates in the Exchange Offer, such Holder
does not receive Exchange Notes on the date of the exchange that may be sold
without restriction under state and federal securities laws (other than due
solely to the status of such Holder as an affiliate of any of the Issuers
within the meaning of the Securities Act), then the Issuers shall promptly
deliver to the Holders and the Trustee written notice thereof (the "Shelf
Notice") to the Trustee and, in the case of clauses (i), (ii) and (iv) above,
all Holders, in the case of clause (iii) above, the Holders of the Private
Exchange Notes and, in the case of clause (v) above, the affected Holder, and
shall file a Shelf Registration pursuant to Section 3 hereof.
3. Shelf Registration
If a Shelf Notice is delivered as contemplated by Section 2(d)
hereof, then:
(a) Shelf Registration. The Issuers shall as promptly as
reasonably practicable file with the SEC a Registration Statement for an
offering to be made on a continuous basis pursuant to Rule 415 covering all of
the Registrable Notes (the "Shelf Registration") provided, however, that no
holder of Notes or Exchange Notes (other than the Initial Purchaser) shall be
entitled to have Notes or Exchange Notes held by it covered by such Shelf
Registration Statement unless such holder agrees in writing to be bound by the
provisions of this Agreement applicable to such holder. If the Issuers shall
not have yet filed an Exchange Offer Registration Statement, each of the
Issuers shall use its reasonable best efforts to file with the SEC the Shelf
Registration on or prior to the Filing Date. The Shelf Registration shall be
on Form S-1 or another appropriate form permitting registration of such
Registrable Notes for resale by Holders in the manner or manners designated by
them (including, without limitation, one or more underwritten offerings). The
Issuers shall not permit any securities other than the Registrable Notes to be
included in the Shelf Registration.
Each of the Issuers shall use its reasonable best efforts to
cause the Shelf Registration to be declared effective under the Securities Act
on or prior to the Effectiveness Date and to keep the Shelf Registration
continuously effective under the Securities Act until the
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<PAGE> 13
date which is three years from the Issue Date, subject to extension pursuant to
the last paragraph of Section 5 hereof, or such shorter period ending when all
Registrable Notes covered by the Shelf Registration have been sold in the
manner set forth and as contemplated in the Shelf Registration (in either case,
the "Effectiveness Period").
(b) Withdrawal of Stop Orders. If the Shelf Registration
ceases to be effective for any reason at any time during the Effectiveness
Period, each of the Issuers shall use its reasonable best efforts to obtain the
prompt withdrawal of any order suspending the effectiveness thereof. Issuers
shall be deemed not to have used their reasonable best efforts to keep the
Shelf Registration Statement effective during the requisite period if any of
them voluntarily takes any action that would result in Holders of Notes or
Exchange Notes covered thereby not being able to offer and sell such Notes or
Exchange Notes during that period, unless such action is required by applicable
law; provided, however, that the foregoing shall not apply to actions taken by
the Issuers in good faith and for valid business reasons (not including
avoidance of their obligations hereunder), including, without limitation, the
acquisition or divestiture of assets, so long as the Issuers within 120 days
thereafter comply with the requirements of Section 5 hereof.
(c) Supplements and Amendments. The Issuers shall
promptly supplement and amend the Shelf Registration if required by the rules,
regulations or instructions applicable to the registration form used for such
Shelf Registration, if required by the Securities Act, or if reasonably
requested by the Holders of a majority in aggregate principal amount of the
Registrable Notes covered by such Registration Statement or by any underwriter
of such Registrable Notes.
4. Liquidated Damages. The parties hereto agree that the Holders of
Transfer Restricted Notes (as defined below) will suffer damages if the Issuers
fail to fulfill their obligations under Section 2 or Section 3, as applicable,
and that it would not be feasible to ascertain the extent of such damages.
Accordingly, if (i) the applicable Registration Statement is not filed with the
Commission on or prior to 60 days after the Issue Date, (ii) the Exchange
Offer Registration Statement or the Shelf Registration Statement, as the case
may be, is not declared effective within 135 days after the Issue Date (or in
the case of a Shelf Registration Statement required to be filed in response to
a change in law or the applicable interpretations of the SEC's Staff, if
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<PAGE> 14
later, within 45 days after publication of the change in law or interpretation),
(iii) the Exchange Offer is not consummated on or prior to 165 days after the
Issue Date, or (iv) the Shelf Registration Statement is filed and declared
effective within 135 days after the Issue Date (or in the case of a Shelf
Registration Statement required to be filed in response to a change in law or
the applicable interpretations of Commission's Staff, if later, within 45 days
after publication of the change in law or interpretation) but shall thereafter
cease to be effective (at any time that the Company is obligated to maintain
the effectiveness thereof) without being succeeded within 60 days by an
additional Registration Statement filed and declared effective (each such event
referred to in clauses (i) through (iv), a "Registration Default"), the Company
will be obligated to pay liquidated damages to each Holder of Transfer
Restricted Notes, during the period of one or more such Registration Defaults,
in an amount equal to $ 0.10 per week per $1,000 principal amount of the Notes
constituting Transfer Restricted Notes held by such Holder until the applicable
Registration Statement is filed or declared effective, the Exchange Offer is
consummated or the Shelf Registration Statement again becomes effective, as the
case may be. Following the cure of all Registration Defaults, the accrual of
liquidated damages will cease. "Transfer Restricted Notes" means each Note or
Exchange Note until (i) the date on which such Note has been exchanged for a
freely transferrable Exchange Note in the Exchange Offer, (ii) the date on
which such Note or Exchange Note has been effectively registered under the
Securities Act and disposed of in accordance with the Shelf Registration
Statement or (iii) the date on which such Note or Exchange Note is distributed
to the public pursuant to Rule 144 under the Securities Act or is salable
pursuant to Rule 144(k) under the Securities Act. Notwithstanding anything to
the contrary in this Section 4(a), the Company shall not be required to pay
liquidated damages to the holder of Transfer Restricted Notes if such holder:
(a) failed to comply with its obligations to make the representations in the
first paragraph of Section 2; or (b) failed to provide the information required
to be provided by it, if any, pursuant to the second to last paragraph of
Section 5.
The Issuers shall notify the Trustee and the paying agent
(which shall not be any of the Issuers for these purposes) under the Indenture
immediately upon the happening of each and every Registration Default. The
Issuers shall pay the liquidated damages due on the Transfer Restricted Notes
by depositing with the paying agent, in trust, for the
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<PAGE> 15
benefit of the Holders thereof, prior to 10:00 a.m., New York City time on the
next interest payment date specified by the Indenture, sums sufficient to pay
the liquidated damages then due. The liquidated damages due shall be payable
on each interest payment date specified by the Indenture to the record holder
entitled to receive the interest payment to be made on such date. Each
obligation to pay liquidated damages shall be deemed to accrue from and
including the applicable Registration Default.
The parties hereto agree that the liquidated damages provided
for in this Section 4 constitute a reasonable estimate of and are intended to
constitute the sole damages that will be suffered by holders of Transfer
Restricted Notes by reason of the failure of the Shelf Registration Statement
or the Exchange Offer Registration Statement, as the case may be, to be filed,
to be declared effective or to remain effective, or the Exchange Offer to be
consummated, as the case may be, to the extent required by this Agreement.
5. Registration Procedures
In connection with the filing of a Registration Statement
pursuant to Sections 2 or 3 hereof, the Issuers shall effect such
registration(s) to permit the sale of the securities covered thereby in
accordance with the intended method or methods of disposition thereof, and
pursuant thereto and in connection with any Registration Statement filed by the
Issuers hereunder, the Issuers shall:
(a) Prepare and file with the SEC prior to the Filing
Date a Registration Statement or Registration Statements as prescribed by
Sections 2 or 3 hereof, and use their reasonable best efforts to cause each
such Registration Statement to become effective and remain effective as
provided herein; provided, however, that, if (1) such filing is pursuant to
Section 3 hereof, or (2) a Prospectus contained in an Exchange Offer
Registration Statement filed pursuant to Section 2 hereof is required to be
delivered under the Securities Act by any Participating Broker-Dealer who seeks
to sell Exchange Notes during the Applicable Period, before filing any
Registration Statement or Prospectus or any amendments or supplements thereto,
the Issuers shall, if requested, furnish to and afford the Holders of the
Registrable Notes covered by such Registration Statement or each such
Participating Broker-Dealer, as the case may be, their counsel and the managing
underwriters, if
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<PAGE> 16
any, a reasonable opportunity to review copies of all such documents (including
copies of any documents to be incorporated by reference therein and all
exhibits thereto) proposed to be filed (in each case at least five business
days prior to such filing). The Issuers shall not file any Registration
Statement or Prospectus or any amendments or supplements thereto in respect of
which the Holders must be afforded an opportunity to review prior to the filing
of such document, if the Holders of a majority in aggregate principal amount of
the Registrable Notes covered by such Registration Statement, or any such
Participating Broker-Dealer, as the case may be, their counsel, or the managing
underwriters, if any, shall reasonably object.
(b) Prepare and file with the SEC such amendments and
post-effective amendments to each Shelf Registration Statement or Exchange
Offer Registration Statement, as the case may be, as may be necessary to keep
such Registration Statement continuously effective for the Effectiveness Period
or the Applicable Period or until consummation of the Exchange Offer, as the
case may be; cause the related Prospectus to be supplemented by any Prospectus
supplement required by applicable law, and as so supplemented to be filed
pursuant to Rule 424 (or any similar provisions then in force) promulgated
under the Securities Act; and comply with the provisions of the Securities Act
and the Exchange Act applicable to it with respect to the disposition of all
securities covered by such Registration Statement as so amended or in such
Prospectus as so supplemented and with respect to the subsequent resale of any
securities being sold by a Participating Broker-Dealer covered by any such
Prospectus; the Company shall be deemed not to have used its reasonable best
efforts to keep a Registration Statement effective during the Applicable Period
if it voluntarily takes any action that would result in selling Holders of the
Registrable Notes covered thereby or Participating Broker-Dealers seeking to
sell Exchange Notes not being able to sell such Registrable Notes or such
Exchange Notes during that period unless such action is required by applicable
law or unless such action is taken in good faith and for valid business reasons
(not including avoidance of its obligations hereunder), including without
limitation, the acquisition or divestiture of assets so long as the Company
complies with this Agreement, including without limitation, the provisions of
paragraph 5(k) hereof and the last paragraph of this Section 5.
(c) If (1) a Shelf Registration is filed pursuant to
Section 3 hereof, or (2) a Prospectus contained in an
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<PAGE> 17
Exchange Offer Registration Statement filed pursuant to Section 2 hereof is
required to be delivered under the Securities Act by any Participating
Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period,
notify the selling Holders of Registrable Notes, or each such Participating
Broker-Dealer, as the case may be, their counsel and the managing underwriters,
if any, promptly (but in any event within two business days), and confirm such
notice in writing, (i) when a Prospectus or any Prospectus supplement or
post-effective amendment has been filed, and, with respect to a Registration
Statement or any post-effective amendment, when the same has become effective
under the Securities Act (including in such notice a written statement that any
Holder may, upon request, obtain, at the sole expense of the Issuers, one
conformed copy of such Registration Statement or post-effective amendment
including financial statements and schedules, documents incorporated or deemed
to be incorporated by reference and exhibits), (ii) of the issuance by the SEC
of any stop order suspending the effectiveness of a Registration Statement or
of any order preventing or suspending the use of any preliminary prospectus or
the initiation of any proceedings for that purpose, (iii) if at any time when a
Prospectus is required by the Securities Act to be delivered in connection with
sales of the Registrable Notes or resales of Exchange Notes by Participating
Broker-Dealers the representations and warranties of the Issuers contained in
any agreement (including any underwriting agreement), contemplated by Section
5(n) hereof cease to be true and correct, (iv) of the receipt by the Issuers of
any notification with respect to the suspension of the qualification or
exemption from qualification of a Registration Statement or any of the
Registrable Notes or the Exchange Notes to be sold by any Participating
Broker-Dealer for offer or sale in any jurisdiction, or the initiation or
threatening of any proceeding for such purpose, (v) of the happening of any
event, the existence of any condition or any information becoming known that
makes any statement made in such Registration Statement or related Prospectus
or any document incorporated or deemed to be incorporated therein by reference
untrue in any material respect or that requires the making of any changes in or
amendments or supplements to such Registration Statement, Prospectus or
documents so that, in the case of the Registration Statement, it will not
contain any untrue statement of a material fact or omit to state any material
fact
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<PAGE> 18
required to be stated therein or necessary to make the statements therein not
misleading, and that in the case of the Prospectus, it will not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, and (vi) of the
determination by the Issuers that a post-effective amendment to a Registration
Statement would be appropriate.
(d) Use its reasonable best efforts to prevent the
issuance of any order suspending the effectiveness of a Registration Statement
or of any order preventing or suspending the use of a Prospectus or suspending
the qualification (or exemption from qualification) of any of the Registrable
Notes or the Exchange Notes for sale in any jurisdiction, and, if any such
order is issued, to use its reasonable best efforts to obtain the withdrawal of
any such order at the earliest possible moment.
(e) If a Shelf Registration is filed pursuant to Section
3 hereof and if requested by the managing underwriter or underwriters (if any),
or the Holders of a majority in aggregate principal amount of the Registrable
Notes being sold in connection with an underwritten offering, (i) promptly
incorporate in a prospectus supplement or post-effective amendment such
information as the managing underwriter or underwriters (if any), such Holders,
or counsel for any of them reasonably request to be included therein, (ii) make
all required filings of such prospectus supplement or such post-effective
amendment as soon as practicable after the Issuers have received notification
of the matters to be incorporated in such prospectus supplement or
post-effective amendment, and (iii) supplement or make amendments to such
Registration Statement.
(f) If (1) a Shelf Registration is filed pursuant to
Section 3 hereof, or (2) a Prospectus contained in an Exchange Offer
Registration Statement filed pursuant to Section 2 hereof is required to be
delivered under the Securities Act by any Participating Broker-Dealer who seeks
to sell Exchange Notes during the Applicable Period, furnish to each selling
Holder of Registrable Notes and to each such Participating Broker-Dealer who so
requests and to counsel and each managing underwriter, if any, at the sole
expense of the Issuers, one conformed copy of the Registration Statement or
Registration Statements and each post-effective amendment thereto, including
financial statements and schedules, and, if requested, all documents
incorporated or deemed to be incorporated therein by reference and all
exhibits.
(g) If (1) a Shelf Registration is filed pursuant to
Section 3 hereof, or (2) a Prospectus contained in an
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Exchange Offer Registration Statement filed pursuant to Section 2 hereof is
required to be delivered under the Securities Act by any Participating
Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period,
deliver to each selling Holder of Registrable Notes, or each such Participating
Broker-Dealer, as the case may be, their respective counsel, and the
underwriters, if any, at the sole expense of the Issuers, as many copies of the
Prospectus or Prospectuses (including each form of preliminary prospectus) and
each amendment or supplement thereto and any documents incorporated by
reference therein as such Persons may reasonably request; and, subject to the
last paragraph of this Section 5, each Issuer hereby consents to the use of
such Prospectus and each amendment or supplement thereto by each of the selling
Holders of Registrable Notes or each such Participating Broker-Dealer, as the
case-may be, and the underwriters or agents, if any, and dealers (if any), in
connection with the offering and sale of the Registrable Notes covered by, or
the sale by Participating Broker-Dealers of the Exchange Notes pursuant to,
such Prospectus and any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Notes or
any delivery of a Prospectus contained in the Exchange Offer Registration
Statement by any Participating Broker-Dealer who seeks to sell Exchange Notes
during the Applicable Period, to use its reasonable best efforts to register or
qualify such Registrable Notes (and to cooperate with selling Holders of
Registrable Notes or each such Participating Broker-Dealer, as the case may be,
the managing underwriter or underwriters, if any, and their respective counsel
in connection with the registration or qualification (or exemption from such
registration or qualification) of such Registrable Notes) for offer and sale
under the securities or Blue Sky laws of such jurisdictions within the United
States as any selling Holder, Participating Broker- Dealer, or the managing
underwriter or underwriters reasonably request in writing; provided, however,
that where Exchange Notes held by Participating Broker-Dealers or Registrable
Notes are offered other than through an underwritten offering, the Issuers
agree to cause their counsel to perform Blue Sky investigations and file
registrations and qualifications required to be filed pursuant to this Section
5(h); keep each such registration or qualification (or exemption therefrom)
effective during the period such Registration Statement is required to be kept
effective and do any and all other acts or things reasonably necessary or
advisable to enable the disposition in such jurisdictions of the Exchange Notes
held by Participating
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<PAGE> 20
Broker-Dealers or the Registrable Notes covered by the applicable Registration
Statement; provided, however, that none of the Issuers shall be required to (A)
qualify generally to do business in any jurisdiction where it is not then so
qualified, (B) take any action that would subject it to general service of
process in any such jurisdiction where it is not then so subject or (C) subject
itself to taxation in excess of a nominal dollar amount in any such
jurisdiction where it is not then so subject.
(i) If a Shelf Registration is filed pursuant to Section
3 hereof, cooperate with the selling Holders of Registrable Notes and the
managing underwriter or underwriters, if any, to facilitate the timely
preparation and delivery of certificates representing Registrable Notes to be
sold, which certificates shall not bear any restrictive legends and shall be in
a form eligible for deposit with The Depository Trust Company; and enable such
Registrable Notes to be in such denominations and registered in such names as
the managing underwriter or underwriters, if any, or Holders may reasonably
request.
(j) Use its reasonable best efforts to cause the
Registrable Notes covered by the Registration Statement to be registered with
or approved by such other governmental agencies or authorities as may be
necessary to enable the Holders thereof or the underwriter or underwriters, if
any, to dispose of such Registrable Notes, except as may be required solely as
a consequence of the nature of a selling Holder's business, in which case each
of the Issuers will cooperate in all reasonable respects with the filing of
such Registration Statement and the granting of such approvals.
(k) If (1) a Shelf Registration is filed pursuant to
Section 3 hereof, or (2) a Prospectus contained in an Exchange Offer
Registration Statement filed pursuant to Section 2 hereof is required to be
delivered under the Securities Act by any Participating Broker-Dealer who seeks
to sell Exchange Notes during the Applicable Period, upon the occurrence of any
event contemplated by paragraph 5(c)(v) or 5(c)(vi) hereof, as promptly as
practicable prepare and (subject to Section 5(a) hereof) file with the SEC, at
the sole expense of the Issuers, a supplement or post-effective amendment to
the Registration Statement or a supplement to the related Prospectus or any
document incorporated or deemed to be incorporated therein by reference, or
file any other required document so that, as thereafter delivered to the
purchasers of the Registrable Notes being sold thereunder or to the purchasers
of the Exchange Notes to whom such
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<PAGE> 21
Prospectus will be delivered by a Participating Broker-Dealer, any such
Prospectus will not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(l) Use its reasonable best efforts to cause the
Registrable Notes covered by a Registration Statement or the Exchange Notes, as
the case may be, to be rated with the appropriate rating agencies, if so
requested by the Holders of a majority in aggregate principal amount of
Registrable Notes covered by such Registration Statement or the Exchange Notes,
as the case may be, or the managing underwriter or underwriters, if any.
(m) Prior to the effective date of the first Registration
Statement relating to the Registrable Notes, (i) provide the Trustee with
certificates for the Registrable Notes or Exchange Notes, as the case may be,
in a form eligible for deposit with The Depositary Trust Company and (ii)
provide a CUSIP number for the Registrable Notes or Exchange Notes, as the case
may be.
(n) In connection with any underwritten offering of
Registrable Notes pursuant to a Shelf Registration, enter into an underwriting
agreement as is customary in underwritten offerings of debt securities similar
to the Notes and take all such other actions as are reasonably requested by the
managing underwriter or underwriters in order to facilitate the registration or
the disposition of such Registrable Notes and, in such connection, (i) make
such representations and warranties to, and covenants with, the underwriters
with respect to the business of the Issuers and their respective subsidiaries
and the Registration Statement, Prospectus and documents, if any, incorporated
or deemed to be incorporated by reference therein, in each case, as are
customarily made by Issuers to underwriters in underwritten offerings of debt
securities similar to the Notes, and confirm the same in writing if and when
requested; (ii) obtain the written opinion of counsel to the Issuers and
written updates thereof in form, scope and substance
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<PAGE> 22
reasonably satisfactory to the managing underwriter or underwriters, addressed
to the underwriters covering the matters customarily covered in opinions
requested in underwritten offerings of debt similar to the Notes and such other
matters as may be reasonably requested by the managing underwriter or
underwriters; (iii) obtain "cold comfort" letters and updates thereof in form,
scope and substance reasonably satisfactory to the managing underwriter or
underwriters from the independent certified public accountants of the Issuers
(and, if necessary, any other independent certified public accountants of any
subsidiary of any of the Issuers or of any business acquired by any of the
Issuers for which financial statements and financial data are, or are required
to be, included or incorporated by reference in the Registration Statement),
addressed to each of the underwriters, such letters to be in customary form and
covering matters of the type customarily covered in "cold comfort" letters in
connection with underwritten offerings of debt similar to the Notes and such
other matters as reasonably requested by the managing underwriter or
underwriters; and (iv) if an underwriting agreement is entered into, the same
shall contain indemnification provisions and procedures no less favorable than
those set forth in Section 7 hereof (or such other provisions and procedures
acceptable to Holders of a majority in aggregate principal amount of
Registrable Notes covered by such Registration Statement and the managing
underwriter or underwriters or agents) with respect to all parties to be
indemnified pursuant to said Section. The above shall be done at each closing
under such underwriting agreement, or as and to the extent required thereunder.
(o) If (1) a Shelf Registration is filed pursuant to
Section 3 hereof, or (2) a Prospectus contained in an Exchange Offer
Registration Statement filed pursuant to Section 2 hereof is required to be
delivered under the Securities Act by any Participating Broker-Dealer who seeks
to sell Exchange Notes during the Applicable Period, make available for
inspection by any selling Holder of such Registrable Notes being sold, or each
such Participating Broker-Dealer, as the case may be, any underwriter
participating in any such disposition of Registrable Notes, if any, and any
attorney, accountant or other agent retained by any such selling Holder or each
such Participating Broker-Dealer, as the case may be, or underwriter
(collectively, the "Inspectors"), at the offices where normally kept, during
reasonable business hours, all financial and other records, pertinent corporate
documents and instruments of the Issuers and their respective subsidiaries
(collectively, the "Records") as shall be reasonably necessary to enable them
to exercise any applicable due diligence responsibilities, and cause the
officers, directors and employees of the Issuers and their respective
subsidiaries to make available for inspection all information reasonably
requested by any such Inspector in connection with such Registration Statement.
Records which any of the Issuers determine, in good faith, to
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<PAGE> 23
be confidential and any Records which it notifies the Inspectors are
confidential shall not be disclosed by the Inspectors unless (i) the disclosure
of such Records is necessary to avoid or correct a misstatement or omission in
such Registration Statement, (ii) the release of such Records is ordered
pursuant to a subpoena or other order from a court of competent jurisdiction,
(iii) disclosure of such information is, in the opinion of counsel (a copy of
which shall be delivered to the Issuers) for any Inspector, necessary or
advisable in connection with any action, claim, suit or proceeding, directly or
indirectly, involving or potentially involving such Inspector and arising out
of, based upon, relating to, or involving this Agreement, or any transactions
contemplated hereby or arising hereunder, or (iv) the information in such
Records has been made generally available to the public. Each selling Holder
of such Registrable Securities and each such Participating Broker-Dealer will
be required to agree that information obtained by it as a result of such
inspections shall be deemed confidential and shall not be used by it as the
basis for any market transactions in the securities of the Issuers unless and
until such information is generally available to the public. Each selling
Holder of such Registrable Notes and each such Participating Broker-Dealer will
be required to further agree that it will, upon learning that disclosure of
such Records is sought in a court of competent jurisdiction, give notice to the
Issuers and allow the Issuers to undertake appropriate action to prevent
disclosure of the Records deemed confidential at the Issuers' sole expense.
(p) Provide an indenture trustee for the Registrable
Notes or the Exchange Notes, as the case may be, and cause the Indenture or the
trust indenture provided for in Section 2(a) hereof, as the case may be, to be
qualified under the TIA not later than the effective date of the Exchange Offer
or the first Registration Statement relating to the Registrable Notes; and in
connection therewith, cooperate with the trustee under any such indenture and
the Holders of the Registrable Notes, to effect such changes to such indenture
as may be required for such indenture to be so qualified in accordance with the
terms of the TIA; and execute, and use its reasonable best efforts to cause
such trustee to execute, all documents as may be required to effect such
changes, and all other forms and documents required to be filed with the SEC to
enable such indenture to be so qualified in a timely manner.
(q) Comply with all applicable rules and regulations of
the SEC and make generally available to its
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<PAGE> 24
securityholders earnings statements satisfying the provisions of Section 11(a)
of the Securities Act and Rule 158 thereunder (or any similar rule promulgated
under the Securities Act) no later than 45 days after the end of any 12- month
period (or 90 days after the end of any 12-month period if such period is a
fiscal year) (i) commencing at the end of any fiscal quarter in which
Registrable Notes are sold to underwriters in a firm commitment or best efforts
underwritten offering and (ii) if not sold to underwriters in such an offering,
commencing on the first day of the first fiscal quarter of the Company after
the effective date of a Registration Statement, which statements shall cover
said 12-month periods.
(r) If an Exchange Offer or a Private Exchange is to be
consummated, upon delivery of the Registrable Notes by Holders to the Issuers
(or to such other Person as directed by the Issuers) in exchange for the
Exchange Notes or the Private Exchange Notes, as the case may be, the Issuers
shall mark, or cause to be marked, on such Registrable Notes that such
Registrable Notes are being cancelled in exchange for the Exchange Notes or the
Private Exchange Notes, as the case may be; in no event shall such Registrable
Notes be marked as paid or otherwise satisfied.
(s) Cooperate with each seller of Registrable Notes
covered by any Registration Statement and each underwriter, if any,
participating in the disposition of such Registrable Notes and their respective
counsel in connection with any filings required to be made with the National
Association of Securities Dealers, Inc. (the "NASD").
(t) Use its best efforts to take all other steps
necessary or advisable to effect the registration of the Registrable Notes
covered by a Registration Statement contemplated hereby.
The Issuers may require each seller of Registrable Notes as to
which any Registration Statement is being effected to furnish to the Issuers
such information regarding such seller and the distribution of such Registrable
Notes as the Issuers may, from time to time, reasonably request. The Issuers
may exclude from such Registration Statement the Registrable Notes of any
seller who unreasonably fails to furnish such information within a reasonable
time after receiving such request. Each seller as to which any Shelf
Registration is being effected agrees to furnish promptly to the Issuers all
information required to be disclosed in order
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<PAGE> 25
to make the information previously furnished to the Issuers by such seller not
materially misleading.
Each Holder of Registrable Notes and each Participating
Broker-Dealer agrees by acquisition of such Registrable Notes or Exchange Notes
to be sold by such Participating Broker-Dealer, as the case may be, that, upon
actual receipt of any notice from the Issuers of the happening of any event of
the kind described in Section 5(c)(ii), 5(c)(iv), 5(c)(v), or 5(c)(vi) hereof,
such Holder will forthwith discontinue disposition of such Registrable Notes
covered by such Registration Statement or Prospectus or Exchange Notes to be
sold by such Holder or Participating Broker-Dealer, as the case may be, until
such Holder's or Participating Broker-Dealer's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 5(k) hereof, or
until it is advised in writing (the "Advice") by the Issuers that the use of
the applicable Prospectus may be resumed, and has received copies of any
amendments or supplements thereto. In the event the Issuers shall give any
such notice, each of the Effectiveness Period and the Applicable Period shall
be extended by the number of days during such periods from and including the
date of the giving of such notice to and including the date when each seller of
Registrable Notes covered by such Registration Statement or Exchange Notes to
be sold by such Participating Broker-Dealer, as the case may be, shall have
received (x) the copies of the supplemented or amended Prospectus contemplated
by Section 5(k) hereof or (y) the Advice.
6. Registration Expenses
(a) All fees and expenses incident to the performance of
or compliance with this Agreement by the Issuers shall be borne by the Issuers
whether or not the Exchange Offer or a Shelf Registration is filed or becomes
effective, including, without limitation, (i) all registration and filing fees
(including, without limitation, (A) fees with respect to filings required to be
made with the NASD in connection with an underwritten offering and (B) fees and
expenses of compliance with state securities or Blue Sky laws (including,
without limitation, reasonable fees and disbursements of one counsel in
connection with Blue Sky qualifications of the Registrable Notes or Exchange
Notes and determination of the eligibility of the Registrable Notes or Exchange
Notes for investment under the laws of such jurisdictions (x) where the holders
of Registrable Notes are located, in the case of the Exchange Notes, or (y) as
provided in Section 5(h) hereof, in the case of Registrable
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<PAGE> 26
Notes or Exchange Notes to be sold by a Participating Broker-Dealer during the
Applicable Period)), (ii) printing expenses, including, without limitation,
expenses of printing certificates for Registrable Notes or Exchange Notes in a
form eligible for deposit with The Depository Trust Company and of printing
Prospectuses if the printing of Prospectuses is requested by the managing
underwriter or underwriters, if any, by the Holders of a majority in aggregate
principal amount of the Registrable Notes included in any Registration
Statement or sold by any Participating Broker-Dealer, as the case may be, (iii)
messenger, telephone and delivery expenses, (iv) fees and disbursements of
counsel for the Issuers, (v) fees and disbursements of all independent
certified public accountants referred to in Section 5(n)(iii) hereof
(including, without limitation, the expenses of any special audit and "cold
comfort" letters required by or incident to such performance by or incident to
such performance), (vi) rating agency fees, if any, and any fees associated
with making the Registrable Notes or Exchange Notes eligible for trading
through The Depository Trust Company, (vii) Securities Act liability insurance,
if the Issuers desire such insurance, (viii) fees and expenses of all other
Persons retained by the Issuers, (ix) internal expenses of the Issuers
(including, without limitation, all salaries and expenses of officers and
employees of the Issuers performing legal or accounting duties), (x) the
expense of any annual audit, (ix) the fees and expenses incurred in connection
with the listing of the securities to be registered on any securities exchange
or any inter-dealer quotation system, if applicable, and (xii) the expenses
relating to printing, word processing and distributing all Registration
Statements, underwriting agreements, securities sales agreements, indentures
and any other documents necessary in order to comply with this Agreement.
(b) The Issuers, jointly and severally, shall (i)
reimburse the Holders of the Registrable Notes being registered in a Shelf
Registration for the reasonable fees and disbursements of not more than one
counsel (in addition to appropriate local counsel) chosen by the Holders of a
majority in aggregate principal amount of the Registrable Notes to be included
in such Registration Statement and (ii) reimburse out-of-pocket expenses (other
than legal expenses) of Holders of Registrable Notes incurred in connection
with the registration and sale of the Registrable Notes pursuant to a Shelf
Registration or in connection with the exchange of Registrable Notes pursuant
to the Exchange Offer. In addition, the Issuers, jointly and severally, shall
reimburse the Initial Purchaser for the reasonable fees and expenses of
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<PAGE> 27
one counsel in connection with the Exchange Offer and shall not be required to
pay any other legal expenses of the Initial Purchaser in connection therewith.
7. Indemnification. (a) Each of the Issuers, jointly
and severally, agrees to indemnify and hold harmless each Holder of Registrable
Notes offered pursuant to a Shelf Registration Statement and each Participating
Broker-Dealer selling Exchange Notes during the Applicable Period, the
affiliates, directors, officers, agents, representatives and employees of each
such Person or its affiliates, and each other Person, if any, who controls any
such Person or its affiliates within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act (each, a "Participant") from
and against any and all losses, claims, damages and liabilities (including,
without limitation, the reasonable legal fees and other expenses actually
incurred in connection with any suit, action or proceeding or any claim
asserted) caused by, arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained in any Registration
Statement pursuant to which the offering of such Registrable Notes or Exchange
Notes, as the case may be, is registered (or any amendment thereto) or related
Prospectus (or any amendments or supplements thereto) or any related
preliminary prospectus, or caused by, arising out of or based upon any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided, however,
that the Issuers will not be required to indemnify a Participant if (i) such
losses, claims, damages or liabilities are caused by any untrue statement or
omission or alleged untrue statement or omission made in reliance upon and in
conformity with information relating to any Participant furnished to the
Issuers in writing by or on behalf of such Participant expressly for use
therein or (ii) if such Participant sold to the person asserting the claim the
Registrable Notes or Exchange Notes which are the subject of such claim and
such untrue statement or omission or alleged untrue statement or omission was
contained or made in any preliminary prospectus and corrected in the Prospectus
or any amendment or supplement thereto and the Prospectus does not contain any
other untrue statement or omission or alleged untrue statement or omission of a
material fact that was the subject matter of the related proceeding and it is
established by the Issuers in the related proceeding that such Participant
failed to deliver or provide a copy of the Prospectus (as amended or
supplemented) to such Person with or prior to the confirmation of the sale of
such Registrable
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<PAGE> 28
Notes or Exchange Notes sold to such Person if required by applicable laws,
unless such failure to deliver or provide a copy of the Prospectus (as amended
or supplemented) was a result of noncompliance by the Issuers with Section 5 of
this Agreement.
(b) Each Participant agrees, severally and not jointly,
to indemnify and hold harmless the Issuers, their respective directors and
officers and each Person who controls the Issuers within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act to the same extent
as the foregoing indemnity from the Issuers to each Participant, but only (i)
with reference to information relating to such Participant furnished to the
Issuers in writing by or on behalf of such Participant expressly for use in any
Registration Statement or Prospectus, any amendment or supplement thereto, or
any preliminary prospectus or (ii) with respect to any untrue statement or
representation made by such Participant in writing to the Issuers. The
liability of any Participant under this paragraph shall in no event exceed the
proceeds received by such Participant from sales of Registrable Notes or
Exchange Notes giving rise to such obligations.
(c) If any suit, action, proceeding (including any
governmental or regulatory investigation), claim or demand shall be brought or
asserted against any Person in respect of which indemnity may be sought
pursuant to either of the two preceding paragraphs, such Person (the
"Indemnified Person") shall promptly notify the Person against whom such
indemnity may be sought (the "Indemnifying Person") in writing, and the
Indemnifying Person, upon request of the Indemnified Person, shall retain
counsel reasonably satisfactory to the Indemnified Person to represent the
Indemnified Person and any others the Indemnifying Person may reasonably
designate in such proceeding and shall pay the reasonable fees and expenses
actually incurred by such counsel related to such proceeding; provided,
however, that the failure to so notify the Indemnifying Person shall not
relieve it of any obligation or liability which it may have hereunder or
otherwise (unless and only to the extent that such failure directly results in
the loss or compromise of any material rights or defenses by the Indemnifying
Person and the Indemnifying Person was not otherwise aware of such action or
claim). In any such proceeding, any Indemnified Person shall have the right to
retain its own counsel, but the fees and expenses of such counsel shall be at
the expense of such Indemnified Person unless (i) the Indemnifying Person and
the Indemnified Person shall have mutually agreed in writing to
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<PAGE> 29
the contrary, (ii) the Indemnifying Person shall have failed within a
reasonable period of time to retain counsel reasonably satisfactory to the
Indemnified Person or (iii) the named parties in any such proceeding (including
any impleaded parties) include both the Indemnifying Person and the Indemnified
Person and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them. It
is understood that, unless there exists a conflict among Indemnified Persons,
the Indemnifying Person shall not, in connection with any one such proceeding
or separate but substantially similar related proceeding in the same
jurisdiction arising out of the same general allegations, be liable for the
fees and expenses of more than one separate firm (in addition to any local
counsel) for all Indemnified Persons, and that all such fees and expenses shall
be reimbursed promptly as they are incurred. Any such separate firm for the
Participants and such control Persons of Participants shall be designated in
writing by Participants who sold a majority in interest of Registrable Notes
and Exchange Notes sold by all such Participants and any such separate firm for
the Issuers, their directors, their officers and such control Persons of the
Issuers shall be designated in writing by the Issuers. The Indemnifying Person
shall not be liable for any settlement of any proceeding effected without its
prior written consent, but if settled with such consent or if there be a final
non-appealable judgment for the plaintiff for which the Indemnified Person is
entitled to indemnification pursuant to this Agreement, the Indemnifying Person
agrees to indemnify and hold harmless each Indemnified Person from and against
any loss or liability by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an Indemnified Person
shall have requested an Indemnifying Person to reimburse the Indemnified Person
for reasonable fees and expenses actually incurred by counsel as contemplated
by the third sentence of this paragraph, the Indemnifying Person agrees that it
shall be liable for any settlement of any proceeding effected without its
written consent if (i) such settlement is entered into more than 60 days after
receipt by such Indemnifying Person of the aforesaid request and (ii) such
Indemnifying Person shall not have reimbursed the Indemnified Person in
accordance with such request prior to the date of such settlement; provided,
however, that the Indemnifying Person shall not be liable for any settlement
effected without its consent pursuant to this sentence if the Indemnifying
Person is contesting, in good faith, the request for reimbursement. No
Indemnifying Person shall, without the prior written consent of the Indemnified
Person, effect any settlement or compromise of any pending or
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<PAGE> 30
threatened proceeding in respect of which any Indemnified Person is our could
have been a party, and indemnity could have been sought hereunder by such
Indemnified Person, unless such settlement (A) includes an unconditional
written release of such Indemnified Person, in form and substance reasonably
satisfactory to such Indemnified Person, from all liability on claims that are
the subject matter of such proceeding and (B) does not include any statement as
to an admission of fault, culpability or failure to act by or on behalf of any
Indemnified Person.
(d) If the indemnification provided for in Section 7(a)
and 7(b) hereof is for any reason unavailable to, or insufficient to hold
harmless, an Indemnified Person in respect of any losses, claims, damages or
liabilities referred to therein, than each Indemnifying Person under such
paragraphs, in lieu of indemnifying such Indemnified Person thereunder and in
order to provide for just and equitable contribution, shall contribute to the
amount paid or payable by such Indemnified Person as a result of such losses,
claims, damages or liabilities in such proportion as is appropriate to reflect
(i) the relative benefits received by the Indemnifying Person or Persons on the
one hand and the Indemnified Person or Persons on the other from the offering
of the Notes or (ii) if the allocation provided by the foregoing clause (i) is
not permitted by applicable law, not only such relative benefits but also the
relative fault of the Indemnifying Person or Persons on the one hand and the
Indemnified Person or Persons on the other in connection with the statements or
omissions or alleged statements or omissions that resulted in such losses,
claims, damages or liabilities (or actions in respect thereof). The relative
fault of the parties shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Issuers on the one hand or such Participant or such other
Indemnified Person, as the case may be, on the other, the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission, and any other equitable considerations appropriate
in the circumstances.
(e) The parties agree that it would not be just and
equitable if contribution pursuant to this Section 7 were determined by pro
rata allocation (even if the Participants were treated as one entity for such
purposes) or by any other method of allocation that does not take account of
the equitable considerations referred to in the immediately
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<PAGE> 31
preceding paragraph. The amount paid or payable by an Indemnified Person as a
result of the losses, claims, damages and liabilities referred to in the
immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any reasonable legal or other expenses actually
incurred by such Indemnified Person in connection with investigating or
defending any such action or claim. Notwithstanding the provisions of this
Section 7, in no event shall a Participant be required to contribute any amount
in excess of the amount by which proceeds received by such Participant from
sales of Registrable Notes or Exchange Notes, as the case may be, exceeds the
amount of any damages that such Participant has otherwise been required to pay
or has paid by reason of such untrue or alleged untrue statement or omission or
alleged omission. No Person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
(f) The indemnity and contribution agreements contained
in this Section 7 will be in addition to any liability which the Indemnifying
Persons may otherwise have to the Indemnified Persons referred to above.
8. Rules 144 and 144A. The Company covenants that it
will file the reports required to be filed by it under the Securities Act and
the Exchange Act and the rules and regulations adopted by the SEC thereunder in
a timely manner in accordance with the requirements of the Securities Act and
the Exchange Act and, if at any time the Company is not required to file such
reports, it will, upon the request of any Holder of Registrable Notes, make
publicly available annual reports and such information, documents and other
reports of the type specified in Sections 13 and 15(d) of the Exchange Act.
The Company further covenants for so long as any Registrable Notes remain
outstanding, to make available to any Holder or beneficial owner of Registrable
Notes in connection with any sale thereof and any prospective purchaser of such
Registrable Notes from such Holder or beneficial owner the information required
by Rule 144(d)(4) under the Securities Act in order to permit resales of such
Registrable Notes pursuant to Rule 144A.
9. Underwritten Registrations. If any of the
Registrable Notes covered by any Shelf Registration are to be sold in an
underwritten offering, the investment banker or investment bankers and manager
or managers that will manage the offering will be selected by the Holders of a
majority in
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<PAGE> 32
aggregate principal amount of such Registrable Notes included in such offering
and reasonably acceptable to the Issuers.
No Holder of Registrable Notes may participate in any
underwritten registration hereunder unless such Holder (a) agrees to sell such
Holder's Registrable Notes on the basis provided in any underwriting
arrangements approved by the Persons entitled hereunder to approve such
arrangements and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents required
under the terms of such underwriting arrangements.
10. Miscellaneous. (a) No Inconsistent Agreements. None
of the Issuers have entered, as of the date hereof, and none of the Issuers
shall, after the date of this Agreement, enter into any agreement with respect
to any of its securities that is inconsistent with the rights granted to the
Holders of Registrable Notes in this Agreement or otherwise conflicts with the
provisions hereof. None of the Issuers have entered and none of the Issuers
will enter into any agreement with respect to any of its securities which will
grant to any Person piggy-back registration rights with respect to a
Registration Statement.
(b) Adjustments Affecting Registrable Notes. None of the
Issuers shall, directly or indirectly, take any action with respect to the
Registrable Notes as a class that would adversely affect the ability of the
Holders of Registrable Notes to include such Registrable Notes in a
registration undertaken pursuant to this Agreement.
(c) Amendments and Waivers. The provisions of this
Agreement may not be amended, modified or supplemented, and waivers or consents
to departures from the provisions hereof may not be given, otherwise than with
the prior written consent of the Holders of not less than a majority in
aggregate principal amount of the then outstanding Registrable Notes.
Notwithstanding the foregoing, a waiver or consent to depart from the
provisions hereof with respect to a matter that relates exclusively to the
rights of Holders of Registrable Notes whose securities are being sold pursuant
to a Registration Statement and that does not directly or indirectly affect,
impair, limit or compromise the rights of other Holders of Registrable Notes
may be given by Holders of at least a majority in aggregate principal amount of
the Registrable Notes being sold by such Holders pursuant to such Registration
Statement; provided, however, that the provisions of this sentence may not be
amended, modified or
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<PAGE> 33
supplemented except in accordance with the provisions of the immediately
preceding sentence.
(d) Notices. All notices and other communications
(including without limitation any notices or other communi-cations to the
Trustee) provided for or permitted hereunder shall be made in writing by
hand-delivery, registered first-class mail, next-day air courier or facsimile:
1. if to a Holder of the Registrable Notes or
any Participating Broker-Dealer, at the most current address
of such Holder or Participating Broker-Dealer, as the case may
be, set forth on the records of the registrar under the
Indenture, with a copy in like manner to the Initial Purchaser
as follows:
BT Securities Corporation
Bankers Trust Plaza
130 Liberty Street
New York, New York 10006
Facsimile No: (212) 250-7200
Attention: Corporate Finance
Department
with a copy to:
White & Case
1155 Avenue of the Americas
New York, NY 10036
Facsimile No: (212) 354-8113
Attention: Eric L. Berg, Esq.
2. if to the Initial Purchaser, at the addresses
specified in Section 10(d)(1);
3. if to an Issuer, as follows:
Atrium Companies, Inc.
1341 West Mockingbird Land
Suite 1200W
Dallas, TX 75247
Facsimile No: (214) 634-4231
Attention: Chief Financial Officer
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<PAGE> 34
with a copy to:
Vinson & Elkins L.L.P.
3700 Trammell Crow Center
Dallas, TX 75201
Facsimile No.: (214) 999-7723
Attention: Michael D. Wortley
All such notices and communications shall be deemed to have
been duly given: when delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; one
business day after being timely delivered to a next-day air courier; and when
receipt is acknowledged by the addressee, if sent by facsimile.
Copies of all such notices, demands or other communications
shall be concurrently delivered by the Person giving the same to the Trustee at
the address and in the manner specified in such Indenture.
(e) Successors and Assigns. This Agreement shall inure
to the benefit of and be binding upon the successors and assigns of each of the
parties hereto; provided, however, that this Agreement shall not inure to the
benefit of or be binding upon a successor or assign of a Holder unless and to
the extent such successor or assign holds Registerable Notes.
(f) Counterparts. This Agreement may be executed in any
number of counterparts and by the parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
(g) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning thereof.
(h) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED
TO CONTRACTS MADE AND PERFORMED WHOLLY WITHIN THE STATE OF NEW YORK, WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO
SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION
OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.
(i) Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court
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<PAGE> 35
of competent jurisdiction to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set forth herein
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated, and the parties hereto shall use their best efforts to find and
employ an alternative means to achieve the same or substantially the same
result as that contemplated by such term, provision, covenant or restriction.
It is hereby stipulated and declared to be the intention of the parties that
they would have executed the remaining terms, provisions, covenants and
restrictions without including any of such that may be hereafter declared
invalid, illegal, void or unenforceable.
(j) Notes Held by the Issuers or their Affiliates.
Whenever the consent or approval of Holders of a specified percentage of
Registrable Notes is required hereunder, Registrable Notes held by the Issuers
or their affiliates (as such term is defined in Rule 405 under the Securities
Act) shall not be counted in determining whether such consent or approval was
given by the Holders of such required percentage.
(k) Third Party Beneficiaries. Holders of Registrable
Notes and Participating Broker-Dealers are intended third party beneficiaries
of this Agreement and this Agreement may be enforced by such Persons.
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<PAGE> 36
IN WITNESS WHEREOF, the parties have executed the Agreement as
of the date first written above.
Company:
ATRIUM COMPANIES, INC.
By: /s/ RANDALL S. FOJTASEK
--------------------------------------
Name: Randall S. Fojtasek
Title: President and Chief Executive
Officer
Subsidiary Guarantors:
H-R WINDOW SUPPLY, INC.
By: /s/ RANDALL S. FOJTASEK
--------------------------------------
Name: Randall S. Fojtasek
Title: Vice President
VINYL BUILDING SPECIALTIES OF
CONNECTICUT, INC.
By: /s/ RANDALL S. FOJTASEK
--------------------------------------
Name: Randall S. Fojtasek
Title: President
BISHOP MANUFACTURING CO. OF
NEW YORK, INC.
By: /s/ RANDALL S. FOJTASEK
--------------------------------------
Name: Randall S. Fojtasek
Title: President
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<PAGE> 37
BISHOP MANUFACTURING COMPANY,
INCORPORATED
By: /s/ RANDALL S. FOJTASEK
--------------------------------------
Name: Randall S. Fojtasek
Title: President
BISHOP MANUFACTURING CO. OF
NEW ENGLAND, INC.
By: /s/ RANDALL S. FOJTASEK
--------------------------------------
Name: Randall S. Fojtasek
Title: President
The foregoing Agreement is
hereby confirmed and accepted
as of the date first above
written:
BT SECURITIES CORPORATION
By: /s/ THOMAS P. PRIOR
--------------------------------
Name: Thomas P. Prior
Title: Managing Director
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<PAGE> 1
EXHIBIT 4.2
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ATRIUM COMPANIES, INC.
as Issuer,
H-R WINDOW SUPPLY, INC.
VINYL BUILDING SPECIALTIES OF CONNECTICUT, INC.
BISHOP MANUFACTURING CO. OF NEW YORK, INC.
BISHOP MANUFACTURING COMPANY, INCORPORATED
and
BISHOP MANUFACTURING CO. OF NEW ENGLAND, INC.
as Subsidiary Guarantors
and
UNITED STATES TRUST COMPANY OF NEW YORK
as Trustee
$100,000,000
10 1/2% SENIOR SUBORDINATED NOTES DUE 2006, SERIES A
10 1/2% SENIOR SUBORDINATED NOTES DUE 2006, SERIES B
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INDENTURE
Dated as of November 27, 1996
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CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA Indenture
Section Section
- ------- ---------
<S> <C>
310(a)(1) .............................. 7.10
(a)(2) .............................. 7.10
(a)(3) .............................. N.A.
(a)(4) .............................. N.A.
(b) .............................. 7.8; 7.10
(c) .............................. N.A.
311(a) .............................. 7.11
(b) .............................. 7.11
(c) .............................. N.A.
312(a) .............................. 2.5
(b) .............................. 12.3
(c) ............................. 12.3
313(a) .............................. 7.6
(b)(1) .............................. N.A.
(b)(2) .............................. 7.6
(c) .............................. 7.6
(d) .............................. 7.6
314(a) .............................. 4.2
4.10 .............................. 12.2
(b) .............................. N.A.
(c)(1) .............................. 12.4
(c)(2) .............................. 12.4
(c)(3) .............................. N.A.
(d) .............................. N.A.
(e) .............................. 12.5
(f) .............................. 4.9
315(a) .............................. 7.1
(b) .............................. 7.5; 12.2
(c) .............................. 7.1
(d) .............................. 7.1
(e) .............................. 6.11
316(a)(last sentence) .............................. 12.6
(a)(1)(A) .............................. 6.5
(a)(1)(B) .............................. 6.4
(a)(2) .............................. N.A.
</TABLE>
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<TABLE>
<S> <C>
(b) .............................. 6.7
317(a)(1) .............................. 6.8
(a)(2) .............................. 6.9
(b) .............................. 2.4
318(a) .............................. 12.1
N.A. means Not Applicable.
</TABLE>
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Note: This Cross-Reference Table shall not, for any purpose, be deemed to be
part of the Indenture.
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE I Definitions and Incorporation by Reference . 1
SECTION 1.1. Definitions . . . . . . . . . . . . . . . . 1
SECTION 1.2. Other Definitions . . . . . . . . . . . . . 25
SECTION 1.3. Incorporation by Reference of Trust
Indenture Act. . . . . . . . . . . . . . . 26
SECTION 1.4. Rules of Construction . . . . . . . . . . . 27
ARTICLE II The Securities . . . . . . . . . . . . . . . 27
SECTION 2.1. Form and Dating . . . . . . . . . . . . . . 27
SECTION 2.2. Execution and Authentication. . . . . . . . 28
SECTION 2.3. Registrar and Paying Agent. . . . . . . . . 29
SECTION 2.4. Paying Agent to Hold Money in Trust. . . . . 30
SECTION 2.5. Securityholder Lists. . . . . . . . . . . . 30
SECTION 2.6. Transfer and Exchange. . . . . . . . . . . . 30
SECTION 2.7. Replacement Securities. . . . . . . . . . . 31
SECTION 2.8. Outstanding Securities. . . . . . . . . . . 32
SECTION 2.9. Treasury Securities. . . . . . . . . . . . . 32
SECTION 2.10. Temporary Securities. . . . . . . . . . . . 32
SECTION 2.11. Cancellation. . . . . . . . . . . . . . . . 33
SECTION 2.12. Defaulted Interest. . . . . . . . . . . . . 33
SECTION 2.13. CUSIP Number . . . . . . . . . . . . . . . . 33
SECTION 2.14. Deposit of Moneys . . . . . . . . . . . . . 33
SECTION 2.15. Restrictive Legends . . . . . . . . . . . . 34
SECTION 2.16. Book-Entry Provisions for Global
Security . . . . . . . . . . . . . . . . . 36
SECTION 2.17. Special Transfer Provisions . . . . . . . . 37
SECTION 2.18. Persons Deemed Owners. . . . . . . . . . . . 39
SECTION 2.19. Record Date . . . . . . . . . . . . . . . . 39
ARTICLE III Redemption . . . . . . . . . . . . . . . . . 40
SECTION 3.1. Notices to Trustee . . . . . . . . . . . . . 40
SECTION 3.2. Selection of Securities To Be Redeemed . . . 40
SECTION 3.3. Notice of Redemption . . . . . . . . . . . . 40
SECTION 3.4. Effect of Notice of Redemption . . . . . . . 42
SECTION 3.5. Deposit of Redemption Price . . . . . . . . 42
SECTION 3.6. Securities Redeemed in Part . . . . . . . . 42
</TABLE>
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<TABLE>
<CAPTION>
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<S> <C> <C>
ARTICLE IV Covenants . . . . . . . . . . . . . . . . . 43
SECTION 4.1. Payment of Securities . . . . . . . . . . . 43
SECTION 4.2. SEC Reports . . . . . . . . . . . . . . . . 43
SECTION 4.3. Limitation on Indebtedness . . . . . . . . . 44
SECTION 4.4. Limitation on Restricted Payments . . . . . 45
SECTION 4.5. Limitation on Restrictions on
Distributions from Restricted
Subsidiaries . . . . . . . . . . . . . . . 49
SECTION 4.6. Limitation on Sales of Assets and
Subsidiary Stock . . . . . . . . . . . . . 50
SECTION 4.7. Limitation on Affiliate Transactions . . . . 53
SECTION 4.8. Change of Control . . . . . . . . . . . . . 54
SECTION 4.9. Limitation on Capital Stock of
Restricted Subsidiaries. . . . . . . . . . 56
SECTION 4.10. Limitation on Layering . . . . . . . . . . . 56
SECTION 4.11. Compliance Certificate . . . . . . . . . . . 56
SECTION 4.12. Further Instruments and Acts . . . . . . . . 57
SECTION 4.13. Use of Proceeds . . . . . . . . . . . . . . 57
SECTION 4.14. Maintenance of Office or Agency . . . . . . 57
SECTION 4.15. Taxes . . . . . . . . . . . . . . . . . . . 58
SECTION 4.16. Stay, Extension and Usury Laws . . . . . . . 58
SECTION 4.17. Corporate Existence . . . . . . . . . . . . 58
ARTICLE V Successor Company . . . . . . . . . . . . . 59
SECTION 5.1. When Company May Merge or Transfer
Assets . . . . . . . . . . . . . . . . . . 59
ARTICLE VI Defaults and Remedies . . . . . . . . . . . 60
SECTION 6.1. Events of Default . . . . . . . . . . . . . 60
SECTION 6.2. Acceleration . . . . . . . . . . . . . . . . 63
SECTION 6.3. Other Remedies . . . . . . . . . . . . . . . 63
SECTION 6.4. Waiver of Past Defaults . . . . . . . . . . 63
SECTION 6.5. Control by Majority . . . . . . . . . . . . 64
SECTION 6.6. Limitation on Suits . . . . . . . . . . . . 64
SECTION 6.7. Rights of Holders to Receive Payment . . . . 65
SECTION 6.8. Collection Suit by Trustee . . . . . . . . . 65
SECTION 6.9. Trustee May File Proofs of Claim . . . . . . 65
SECTION 6.10. Priorities . . . . . . . . . . . . . . . . . 65
SECTION 6.11. Undertaking for Costs . . . . . . . . . . . 66
</TABLE>
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<TABLE>
<CAPTION>
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<S> <C> <C>
ARTICLE VII Trustee . . . . . . . . . . . . . . . . . . 66
SECTION 7.1. Duties of Trustee . . . . . . . . . . . . . 66
SECTION 7.2. Rights of Trustee . . . . . . . . . . . . . 68
SECTION 7.3. Individual Rights of Trustee . . . . . . . . 69
SECTION 7.4. Trustee's Disclaimer . . . . . . . . . . . . 69
SECTION 7.5. Notice of Defaults . . . . . . . . . . . . . 69
SECTION 7.6. Reports by Trustee to Holders . . . . . . . 69
SECTION 7.7. Compensation and Indemnity . . . . . . . . . 70
SECTION 7.8. Replacement of Trustee . . . . . . . . . . . 70
SECTION 7.9. Successor Trustee by Merger . . . . . . . . 72
SECTION 7.10. Eligibility; Disqualification . . . . . . . 72
SECTION 7.11. Preferential Collection of Claims
Against Company . . . . . . . . . . . . . 72
ARTICLE VIII Discharge of Indenture; Defeasance . . . . . 72
SECTION 8.1. Discharge of Liability on Securities;
Defeasance . . . . . . . . . . . . . . . . . 72
SECTION 8.2. Conditions to Defeasance . . . . . . . . . . 74
SECTION 8.3. Application of Trust Money . . . . . . . . . 75
SECTION 8.4. Repayment to Company . . . . . . . . . . . . 76
SECTION 8.5. Indemnity for U.S. Government
Obligations . . . . . . . . . . . . . . . 76
SECTION 8.6. Reinstatement . . . . . . . . . . . . . . . 76
ARTICLE IX Amendments . . . . . . . . . . . . . . . . . 77
SECTION 9.1. Without Consent of Holders . . . . . . . . . 77
SECTION 9.2. With Consent of Holders . . . . . . . . . . 78
SECTION 9.3. Compliance with Trust Indenture Act . . . . 80
SECTION 9.4. Revocation and Effect of Consents and
Waivers . . . . . . . . . . . . . . . . . 80
SECTION 9.5. Notation on or Exchange of Securities . . . 81
SECTION 9.6. Trustee To Sign Amendments . . . . . . . . . 81
ARTICLE X Subordination . . . . . . . . . . . . . . . 81
SECTION 10.1. Agreement To Subordinate . . . . . . . . . . 81
SECTION 10.2. Liquidation, Dissolution, Bankruptcy . . . . 82
SECTION 10.3. Default on Senior Indebtedness or
Guarantor Senior Indebtedness . . . . . . 82
SECTION 10.4. Acceleration of Payment of Securities . . . 84
SECTION 10.5. When Distribution Must Be Paid Over . . . . 84
SECTION 10.6. Subrogation . . . . . . . . . . . . . . . . 84
</TABLE>
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<TABLE>
<CAPTION>
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<S> <C> <C>
SECTION 10.7. Relative Rights . . . . . . . . . . . . . . 84
SECTION 10.8. Subordination May Not Be Impaired by
Company or the Subsidiary Guarantors . . . 85
SECTION 10.9. Rights of Trustee and Paying Agent . . . . . 85
SECTION 10.10. Distribution or Notice to Representative . . 85
SECTION 10.11. Article X Not To Prevent Events of
Default or Limit Right To Accelerate . . . 86
SECTION 10.12. Trust Moneys Not Subordinated . . . . . . . 86
SECTION 10.13. Trustee Entitled To Rely . . . . . . . . . . 86
SECTION 10.14. Trustee To Effectuate Subordination . . . . 87
SECTION 10.15. Trustee Not Fiduciary for Holders of
Senior Indebtedness and Subsidiary
Guarantor Senior Indebtedness . . . . . . 87
SECTION 10.16. Reliance by Holders of Senior
Indebtedness and Guarantor Senior
Indebtedness on Subordination Provisions . 87
ARTICLE XI Subsidiary Guarantee . . . . . . . . . . . . 88
SECTION 11.1. Subsidiary Guarantee . . . . . . . . . . . . 88
SECTION 11.2. Limitation on Liability . . . . . . . . . . 91
SECTION 11.3. Successors and Assigns . . . . . . . . . . . 91
SECTION 11.4. No Waiver . . . . . . . . . . . . . . . . . 92
SECTION 11.5. Right of Contribution . . . . . . . . . . . 92
SECTION 11.6. No Subrogation . . . . . . . . . . . . . . . 92
SECTION 11.7. Additional Subsidiary Guarantors . . . . . . 93
SECTION 11.8. Execution and Delivery of Subsidiary
Guarantee . . . . . . . . . . . . . . . . 93
SECTION 11.9. Modification . . . . . . . . . . . . . . . . 93
SECTION 11.10. Waiver of Stay, Extension or Usury Laws . . 94
ARTICLE XII Miscellaneous . . . . . . . . . . . . . . . 94
SECTION 12.1. Trust Indenture Act Controls . . . . . . . . 94
SECTION 12.2. Notices . . . . . . . . . . . . . . . . . . 94
SECTION 12.3. Communication by Holders with other
Holders . . . . . . . . . . . . . . . . . 95
SECTION 12.4. Certificate and Opinion as to Conditions
Precedent . . . . . . . . . . . . . . . . 96
SECTION 12.5. Statements Required in Certificate or
Opinion . . . . . . . . . . . . . . . . . 96
SECTION 12.6. When Securities Disregarded . . . . . . . . 96
</TABLE>
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<TABLE>
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<S> <C> <C>
SECTION 12.7. Rules by Trustee, Paying Agent and
Registrar . . . . . . . . . . . . . . . . 97
SECTION 12.8. Legal Holidays . . . . . . . . . . . . . . . 97
SECTION 12.9. Governing Law . . . . . . . . . . . . . . . 97
SECTION 12.10. No Recourse Against Others . . . . . . . . . 97
SECTION 12.11. Successors . . . . . . . . . . . . . . . . . 97
SECTION 12.12. Multiple Originals . . . . . . . . . . . . . 97
SECTION 12.13. Variable Provisions . . . . . . . . . . . . 97
SECTION 12.14. Qualification of Indenture . . . . . . . . . 98
SECTION 12.15. Table of Contents; Headings . . . . . . . . 98
SECTION 12.16. Severability . . . . . . . . . . . . . . . . 98
</TABLE>
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<PAGE> 9
INDENTURE dated as of November 27, 1996, by and among Atrium Companies, Inc., a
Delaware corporation (as further defined below, the "Company"), each of H-R
Window Supply, Inc., a Texas corporation ("H-R"), Vinyl Building Specialties of
Connecticut, Inc., a Connecticut corporation ("VBS"), Bishop Manufacturing Co.
of New York, Inc., a Connecticut corporation ("BMC"), Bishop Manufacturing
Company, Incorporated, a Connecticut corporation ("BMI"), and Bishop
Manufacturing Company of New England, Inc., a Connecticut corporation ("BMNE"),
as Subsidiary Guarantors (as defined) of the Company's obligations hereunder,
and United States Trust Company of New York, a bank and trust company organized
under the New York Banking Law (the "Trustee").
The Company has duly authorized the creation and issuance of up
to $100,000,000 aggregate principal amount of 10 1/2% Senior Subordinated Notes
due 2006, Series A (the "Initial Securities") and $100,000,000 aggregate
principal amount of 10 1/2% Senior Subordinated Notes due 2006, Series B (the
"Exchange Securities,") and, to provide therefor, the Company and the
Subsidiary Guarantors have duly authorized the execution and delivery of this
Indenture. All things necessary to make the Securities (as defined herein),
when duly issued and executed by the Company, and authenticated and delivered
hereunder, the valid obligations of the Company and the Subsidiary Guarantors,
and to make this Indenture a valid and binding agreement of the Company and the
Subsidiary Guarantors, have been done.
The Company, the Subsidiary Guarantors and the Trustee agree as
follows for the benefit of each other and for the equal and ratable benefit of
the Holders of the Securities:
ARTICLE I
Definitions and Incorporation by Reference
SECTION 1.1. Definitions.
"Additional Assets" means (i) any property or assets (other than
Indebtedness and Capital Stock) in a Related Business; (ii) the Capital Stock
of a Person that becomes a Restricted Subsidiary as a result of the acquisition
of such Capital Stock by the Company or a Restricted Subsidiary of the Company;
(iii) Capital Stock constituting a minority interest in any Person that at such
time is a Restricted Subsidiary of the Company; or (iv) Permitted Investments
of the type and in the amounts described in clause (viii) of the definition
thereof; provided, however, that, in the case of clauses (ii) and (iii), such
Restricted Subsidiary is primarily engaged in a Related Business.
"Adjusted Net Assets" of a Subsidiary Guarantor at any date shall
mean the lesser of the amount by which (x) the fair value of the property of
such Subsidiary Guarantor exceeds the total
<PAGE> 10
2
amount of liabilities, including, without limitation, the probable liability of
such Subsidiary Guarantor with respect to its contingent liabilities (after
giving effect to all other fixed and contingent liabilities incurred or assumed
on such date), but excluding liabilities under the Subsidiary Guarantee, of
such Subsidiary Guarantor at such date and (y) the present fair salable value
of the assets of such Subsidiary Guarantor at such date exceeds the amount that
will be required to pay the probable liability of such Subsidiary Guarantor on
its debts (after giving effect to all other fixed and contingent liabilities
incurred or assumed on such date and after giving effect to any collection from
any Subsidiary by such Subsidiary Guarantor in respect of the obligations of
such Subsidiary under the Subsidiary Guarantee), excluding debt in respect of
the Subsidiary Guarantee, as they become absolute and matured.
"Affiliate" of any specified person means any other Person,
directly or indirectly, controlling or controlled by or under direct or
indirect common control with such specified Person. For the purposes of this
definition, "control" when used with respect to any Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Applicable Premium" means, with respect to a Security at any
Redemption Date, the greater of (i) 1.0% of the principal amount of such
Security and (ii) the excess of (A) the present value at such time of (1)
105.250% of the principal amount of such Security plus (2) all required
interest payments due on such Security through November 15, 2001, computed
using a discount rate equal to the Treasury Rate plus 100 basis points, over
(B) the principal amount of such Security.
"Asset Disposition" means any sale, lease, transfer, issuance or
other disposition (or series of related sales, leases, transfers, issuances or
dispositions that are part of a common plan) of shares of Capital Stock of (or
other equity interests in) a Restricted Subsidiary (other than directors'
qualifying shares), or of any other property or other assets (each referred to
for the purposes of this definition as a "disposition") by the Company or any
of its Restricted Subsidiaries (including any disposition by means of a merger,
consolidation or similar transaction) other than (i) a disposition by a
Restricted Subsidiary to the Company or by the Company or a Restricted
Subsidiary to a Wholly-Owned Subsidiary, (ii) a disposition of inventory in the
ordinary course of business, (iii) a disposition of obsolete or worn out
equipment or equipment that is no longer useful in the conduct of the business
of the Company and its Restricted Subsidiaries and that is disposed of in each
case in the ordinary course of business, (iv) dispositions of property for net
proceeds which, when taken collectively with the net proceeds of any other such
dispositions under this clause (iv) that were
<PAGE> 11
3
consummated since the beginning of the calendar year in which such disposition
is consummated, do not exceed $1 million, and (v) transactions permitted under
Section 5.1. Notwithstanding anything to the contrary contained above, a
Restricted Payment made in compliance with Section 4.4 shall not constitute an
Asset Disposition except for purposes of determination of the Consolidated
Coverage Ratio and the Leverage Ratio.
"Asset Swap" means the execution of a definitive agreement,
subject only to customary closing conditions that the Company in good faith
believes will be satisfied, for a substantially concurrent purchase and sale,
or exchange, of Productive Assets between the Company or any of its Restricted
Subsidiaries and another Person or group of affiliated Persons; provided,
however, that any amendment to or waiver of any closing condition that
individually or in the aggregate is material to the Asset Swap shall be deemed
to be a new Asset Swap.
"Attributable Indebtedness" in respect of a Sale/Leaseback
Transaction means, as at the time of determination, the present value
(discounted at the interest rate borne by the Securities, compounded annually)
of the total obligations of the lessee for rental payments during the remaining
term of the lease included in such Sale/Leaseback Transaction (including any
period for which such lease has been extended).
"Average Life" means, as of the date of determination, with
respect to any Indebtedness, the quotient obtained by dividing (i) the sum of
the products of the numbers of years (rounded upwards to the nearest month)
from the date of determination to the dates of each successive scheduled
principal payment of such Indebtedness or redemption multiplied by the amount
of such payment by (ii) the sum of all such payments.
"Board of Directors" means the Board of Directors of any Person
or any committee thereof duly authorized to act on behalf of such Board of
Directors.
"Board Resolution" means, with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such Person
to have been duly adopted by the Board of Directors of such Person and to be in
full force and effect on the date of such certification, and delivered to the
Trustee.
"Business Day" means each day which is not a Legal Holiday.
"Capitalized Lease Obligations" means an obligation that is
required to be classified and accounted for as a capitalized lease for
financial reporting purposes in accordance with GAAP, and the amount of
Indebtedness represented by such obligation shall be the capitalized amount of
<PAGE> 12
4
such obligation determined in accordance with GAAP, and the Stated Maturity
thereof shall be the date of the last payment of rent or any other amount due
under such lease prior to the first date such lease may be terminated without
penalty.
"Capital Stock" of any Person means any and all shares,
interests, rights to purchase, warrants, options, participations or other
equivalents of or interests in (however designated) equity of such Person,
including any Preferred Stock, but excluding any debt securities convertible
into such equity.
"Change of Control" means the occurrence of any of the following
events:
(i) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or substantially
all of the assets of the Company and its Subsidiaries to any Person or
group of related Persons for purposes of Section 13(d) of the Exchange
Act (a "Group") (whether or not otherwise in compliance with the
provisions of this Indenture), other than to Permitted Holders; or
(ii) a majority of the Board of Directors of Holding or the
Company (but not a committee thereof) shall consist of Persons who are
not Continuing Directors of Holding or the Company; or
(iii) the acquisition by any Person or Group (other than the
Permitted Holders) of the power, directly or indirectly, to vote or
direct the voting of securities having more than 50% of the ordinary
voting power for the election of directors of Holding or the Company or
of any direct or indirect holding company thereof.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means Atrium Companies, Inc., a Delaware corporation
and a wholly-owned subsidiary of Holding, until a successor replaces it and,
thereafter, means the successor.
"Commission" means the U.S. Securities and Exchange Commission or
its successor.
"Consolidated Cash Flow" for any period means the Consolidated
Net Income for such period, plus the following to the extent deducted in
calculating such Consolidated Net Income: (i) income tax expense, (ii)
Consolidated Interest Expense, (iii) depreciation expense, (iv) amortization
expense, (v) exchange or translation losses on foreign currencies, and (vi) all
other non-cash items reducing Consolidated Net Income (excluding any non-cash
item to the extent it
<PAGE> 13
5
represents an accrual of or reserve for cash disbursements for any subsequent
period prior to the Stated Maturity of the Securities) and less, to the extent
added in calculating Consolidated Net Income, (x) exchange or translation gains
on foreign currencies and (y) non-cash items (excluding such non-cash items to
the extent they represent an accrual for cash receipts reasonably expected to
be received prior to the Stated Maturity of the Securities), in each case for
such period. Notwithstanding the foregoing, the income tax expense,
depreciation expense and amortization expense of a Subsidiary of the Company
shall be included in Consolidated Cash Flow only to the extent (and in the same
proportion) that the net income of such Subsidiary was included in calculating
Consolidated Net Income.
"Consolidated Coverage Ratio" as of any date of determination
means the ratio of (i) the aggregate amount of Consolidated Cash Flow for the
period of the most recent four consecutive fiscal quarters ending prior to the
date of such determination and as to which financial statements are available
to (ii) Consolidated Interest Expense for such four fiscal quarters: provided,
however, that (1) if the Company or any of its Restricted Subsidiaries has
Incurred any Indebtedness since the beginning of such period through the date
of determination of the Consolidated Coverage Ratio that remains outstanding or
if the transaction giving rise to the need to calculate Consolidated Coverage
Ratio is an incurrence of Indebtedness, or both, Consolidated Cash Flow and
Consolidated Interest Expense for such period shall be calculated after giving
effect on a pro forma basis to (A) such Indebtedness as if such Indebtedness
had been Incurred on the first day of such period (provided, that if such
Indebtedness is Incurred under a revolving credit facility (or similar
arrangement or under any predecessor revolving credit or similar arrangement)
only that portion of such Indebtedness that constitutes the one year projected
average balance of such Indebtedness (as determined in good faith by senior
management of the Company) shall be deemed outstanding for purposes of this
calculation) and (B) the discharge of any other Indebtedness repaid,
repurchased, defeased or otherwise discharged with the proceeds of such new
Indebtedness as if such discharge had occurred on the first day of such period,
(2) if since the beginning of such period any Indebtedness of the Company or
any of its Restricted Subsidiaries has been repaid, repurchased, defeased or
otherwise discharged (other than Indebtedness under a revolving credit or
similar arrangement unless such revolving credit Indebtedness has been
permanently repaid and has not been replaced), Consolidated Interest Expense
for such period shall be calculated after giving pro forma effect thereto as if
such Indebtedness had been repaid, repurchased, defeased or otherwise
discharged on the first day of such period, (3) if since the beginning of such
period the Company or any of its Restricted Subsidiaries shall have made any
Asset Disposition or if the transaction giving rise to the need to calculate
the Consolidated Coverage Ratio is an Asset Disposition, Consolidated Cash Flow
for such period shall be reduced by an amount equal to the Consolidated Cash
Flow (if positive) attributable to the assets which are the subject of such
Asset Disposition for such period or increased by an amount equal to the
Consolidated Cash Flow (if negative) attributable thereto for such period, and
Consolidated
<PAGE> 14
6
Interest Expense for such period shall be (i) reduced by an amount equal to the
Consolidated Interest Expense attributable to any Indebtedness of the Company
or any of its Restricted Subsidiaries repaid, repurchased, defeased or
otherwise discharged with respect to the Company and its continuing Restricted
Subsidiaries in connection with such Asset Disposition for such period (or, if
the Capital Stock of any Restricted Subsidiary of the Company is sold, the
Consolidated Interest Expense for such period directly attributable to the
Indebtedness of such Restricted Subsidiary to the extent the Company and its
continuing Restricted Subsidiaries are no longer liable for such Indebtedness
after such sale) and (ii) increased by interest income attributable to the
assets which are the subject of such Asset Disposition for such period, (4) if
since the beginning of such period the Company or any of its Restricted
Subsidiaries (by merger or otherwise) shall have made an Investment in any
Restricted Subsidiary of the Company (or any Person which becomes a Restricted
Subsidiary of the Company as a result thereof) or an acquisition of assets
occurring in connection with a transaction causing a calculation to be made
hereunder which constitutes all or substantially all of an operating unit of a
business, Consolidated Cash Flow and Consolidated Interest Expense for such
period shall be calculated after giving pro forma effect thereto (including the
incurrence of any Indebtedness) as if such Investment or acquisition occurred
on the first day of such period and (5) if since the beginning of such period
any Person (that subsequently became a Restricted Subsidiary of the Company or
was merged with or into the Company or any Restricted Subsidiary of the Company
since the beginning of such period) shall have made any Asset Disposition,
Investment or acquisition of assets that would have required an adjustment
pursuant to clause (3) or (4) above if made by the Company or a Restricted
Subsidiary of the Company during such period, Consolidated Cash Flow and
Consolidated Interest Expense for such period shall be calculated after giving
pro forma effect thereto as if such Asset Disposition, Investment or
acquisition occurred on the first day of such period. For purposes of this
definition, whenever pro forma effect is to be given to an acquisition of
assets, the amount of income or earnings relating thereto and the amount of
Consolidated Interest Expense associated with any Indebtedness Incurred in
connection therewith, the pro forma calculations shall be determined in good
faith by a responsible financial or accounting officer of the Company. If any
Indebtedness bears a floating rate of interest and is being given pro forma
effect, the interest expense on such Indebtedness shall be calculated as if the
rate in effect on the date of determination had been the applicable rate for
the entire period (taking into account any Interest Rate Agreement applicable
to such Indebtedness if such Interest Rate Agreement has a remaining term in
excess of 12 months).
"Consolidated Interest Expense" means, for any period, the total
interest expense of the Company and its Restricted Subsidiaries, plus, to the
extent not included in such interest expense, (i) interest expense attributable
to capital leases, (ii) amortization of debt discount, (iii) capitalized
interest, (iv) non-cash interest expense, (v) commissions, discounts and other
fees and charges owed with respect to letters of credit and bankers' acceptance
financing, (vi) interest actually paid by the Company or any such Restricted
Subsidiary under any Guarantee of Indebtedness or other obligation
<PAGE> 15
7
of any other Person, (vii) net payments (whether positive or negative) pursuant
to Interest Rate Agreements, (viii) the cash contributions to any employee
stock ownership plan or similar trust to the extent such contributions are used
by such plan or trust to pay interest or fees to any Person (other than the
Company) in connection with Indebtedness Incurred by such plan or trust and
(ix) cash and Disqualified Stock dividends in respect of all Preferred Stock of
Subsidiaries and Disqualified Stock of the Company held by Persons other than
the Company or a Wholly Owned Subsidiary and less (a) to the extent included in
such interest expense, the amortization of capitalized debt issuance costs and
(b) interest income. Notwithstanding the foregoing, the Consolidated Interest
Expense with respect to any Restricted Subsidiary of the Company, that was not
a Wholly-Owned Subsidiary, shall be included only to the extent (and in the
same proportion) that the net income of such Restricted Subsidiary was included
in calculating Consolidated Net Income.
"Consolidated Net Income" means, for any period, the net income
(loss) of the Company and its consolidated Subsidiaries; provided, however,
that there shall not be included in such Consolidated Net Income: (i) any net
income (loss) of any person acquired by the Company or any of its Restricted
Subsidiaries in a pooling of interests transaction for any period prior to the
date of such acquisition, (ii) any net income of any Restricted Subsidiary of
the Company if such Restricted Subsidiary is subject to restrictions, directly
or indirectly, on the payment of dividends or the making of distributions by
such Restricted Subsidiary, directly or indirectly, to the Company (other than
restrictions in effect on the Issue Date with respect to a Restricted
Subsidiary of the Company and other than restrictions that are created or exist
in compliance with Section 4.5 hereof), (iii) any gain or loss realized upon
the sale or other disposition of any assets of the Company or its consolidated
Restricted Subsidiaries (including pursuant to any Sale/Leaseback Transaction)
which are not sold or otherwise disposed of in the ordinary course of business
and any gain or loss realized upon the sale or other disposition of any Capital
Stock of any Person, (iv) any extraordinary gain or loss, (v) the cumulative
effect of a change in accounting principles, (vi) non-cash restructuring
charges or writeoffs recorded within the one year period following the Issue
Date in an aggregate amount not to exceed $7.5 million, (vii) the net income of
any Person, other than a Restricted Subsidiary, except to the extent of the
lesser of (A) dividends or distributions paid to the Company or any of its
Restricted Subsidiaries by such Person and (B) the net income of such Person
(but in no event less than zero), and the net loss of such Person (other than
an Unrestricted Subsidiary) shall be included only to the extent of the
aggregate Investment of the Company or any of its Restricted Subsidiaries in
such Person and (viii) any non-cash expenses attributable to grants or
exercises of employee stock options. Notwithstanding the foregoing, (A)
Consolidated Net Income for any period shall be reduced by the aggregate amount
of dividends paid during such period pursuant to clause (v) of paragraph (b) of
Section 4.4 hereof and (B) for the purpose of Section 4.4 hereof only, there
shall be excluded from Consolidated Net Income any dividends, repayments of
loans or advances or other transfers of assets from Unrestricted Subsidiaries
to the Company or a Restricted Subsidiary
<PAGE> 16
8
to the extent such dividends, repayments or transfers increase the amount of
Restricted Payments permitted under such covenant pursuant to clause (a)(3)(E)
thereof.
"Consolidated Net Worth" means the total of the amounts shown on
the balance sheet of the Company and its consolidated Restricted Subsidiaries,
determined on a consolidated basis in accordance with GAAP, as of the end of
the most recent fiscal quarter of the Company ending prior to the taking of any
action for the purpose of which the determination is being made and for which
financial statements are available (but in no event ending more than 135 days
prior to the taking of such action), as (i) the par or stated value of all
outstanding Capital Stock of the Company plus (ii) paid in capital or capital
surplus relating to such Capital Stock plus (iii) any retained earnings or
earned surplus less (A) any accumulated deficit and (B) any amounts
attributable to Disqualified Stock.
"Continuing Director" means, as of the date of determination, any
Person who (i) was a member of the Board of Directors of such Person on the
date of the Indenture, (ii) was nominated for election or elected to the Board
of Directors of such Person with the affirmative vote of a majority of the
Continuing Directors who were members of such Board of Directors at the time of
such nomination or election, or (iii) is a representative of a Permitted
Holder.
"Corporate Trust Office of the Trustee" shall be at the address
of the Trustee specified in Section 12.2 or such other address as to which the
Trustee may give notice to the Company.
"Currency Agreement" means in respect of a Person any foreign
exchange contract, currency swap agreement or other similar agreement as to
which such Person is a party or a beneficiary.
"Default" means any event which is, or after notice or passage of
time or both would be, an Event of Default.
"Depositary" means The Depository Trust Company, its nominees and
their respective successors and assigns, or such other depository institution
hereinafter appointed by the Company.
"Designated Senior Indebtedness" means (i) all obligations under
the New Credit Facility in the case of the Company, (ii) any Guarantee by a
Subsidiary Guarantor of such obligations under the New Credit Facility in the
case of such Subsidiary Guarantor and (iii) any other Senior Indebtedness in
the case of the Company or Guarantor Senior Indebtedness in the case of such
Subsidiary Guarantor which, at the date of determination, has an aggregate
principal amount outstanding of, or under which, at the date of determination,
the holders thereof are committed to
<PAGE> 17
9
lend up to, at least $5 million and is specifically designated by the Company
or such Subsidiary Guarantor in the instrument evidencing or governing such
Senior Indebtedness or Guarantor Senior Indebtedness as "Designated Senior
Indebtedness" for purposes of this Indenture.
"Disqualified Stock" means, any Capital Stock which, by its terms
(or by the terms of any security into which it is convertible or for which it
is exchangeable) or upon the happening of any event other than an event which
would constitute a Change of Control (i) matures (excluding any maturity as the
result of an optional redemption by the issuer thereof) or is mandatorily
redeemable pursuant to a sinking fund obligation or otherwise or is redeemable
at the option of the holder thereof, in whole or in part, on or prior to the
final stated maturity of the Securities, (ii) is convertible into or
exchangeable (unless at the sole option of the issuer thereof) for (a) debt
securities or (b) any Capital Stock referred to in (i) above, in each case at
any time prior to the final stated maturity of the Securities.
"Equity Offering" means an offering for cash by Holding or the
Company of its common stock, or options, warrants or rights with respect to its
common stock.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended and the rules and regulations of the Commission promulgated thereunder.
"Exchange Securities" has the meaning set forth in the preamble
to this Indenture.
"Financial Advisory Agreement" means the Financial Advisory
Agreement between Hicks Muse Partners and the Company as in effect on the Issue
Date.
"GAAP" means generally accepted accounting principles in the
United States of America as in effect as of the date hereof, including those
set forth in the opinions and pronouncements of the Accounting Principles Board
of the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession. All ratios and computations based on GAAP contained in
this Indenture shall be computed in conformity with GAAP.
"Guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness of any other Person
and any obligation, direct or indirect, contingent or otherwise, of such Person
(i) to purchase or pay (or advance or supply funds for the purchase or payment
of) such Indebtedness of such other Person (whether arising by virtue of
partnership arrangements, or by agreement to keep-well, to purchase assets,
goods, securities or
<PAGE> 18
10
services, to take-or-pay, or to maintain financial statement conditions or
otherwise) or (ii) entered into for purposes of assuring in any other manner
the obligee of such Indebtedness of the payment thereof or to protect such
obligee against loss in respect thereof (in whole or in part); provided,
however, that the term "Guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning.
"Guarantor Senior Indebtedness" means, with respect to a
Subsidiary Guarantor, whether outstanding on the Issue Date or thereafter
issued, any Guarantee of the New Credit Facility by such Subsidiary Guarantor,
all other Guarantees by such Subsidiary Guarantor of Senior Indebtedness of the
Company and all Indebtedness of such Subsidiary Guarantor, including interest
and fees thereon, unless, in the instrument creating or evidencing the same or
pursuant to which the same is outstanding, it is provided that the obligations
of such Subsidiary Guarantor in respect of such Indebtedness are not superior
in right of payment to the obligations of such Subsidiary Guarantor under the
Subsidiary Guarantee; provided, however, that Guarantor Senior Indebtedness
shall not include (1) any obligations of such Subsidiary Guarantor to the
Company or any other Subsidiary of the Company, (2) any liability for Federal,
state, local or other taxes owed or owing by such Subsidiary Guarantor, (3) any
accounts payable or other liability to trade creditors arising in the ordinary
course of business (including Guarantees thereof or instruments evidencing such
liabilities) or (4) any Indebtedness, Guarantee or obligation of such
Subsidiary Guarantor that is expressly subordinate or junior in right of
payment to any other Indebtedness, Guarantee or obligation of such Subsidiary
Guarantor, including any Guarantor Senior Subordinated Indebtedness and
Guarantor Subordinated Obligations of such Subsidiary Guarantor.
"Guarantor Senior Subordinated Indebtedness" means, with respect
to a Subsidiary Guarantor, the obligations of such Subsidiary Guarantor under
the Subsidiary Guarantee and any other Indebtedness of such Subsidiary
Guarantor that specifically provides that such Indebtedness is to rank pari
passu in right of payment with the obligations of such Subsidiary Guarantor
under the Subsidiary Guarantee and is not subordinated by its terms in right of
payment to any Indebtedness or other obligation of such Subsidiary Guarantor
which is not Guarantor Senior Indebtedness of such Subsidiary Guarantor.
"Guarantor Subordinated Obligation" means, with respect to a
Subsidiary Guarantor, any Indebtedness of such Subsidiary Guarantor (whether
outstanding on the Issue Date or thereafter Incurred) which is subordinate or
junior in right of payment to the obligations of such Subsidiary Guarantor
under the Subsidiary Guarantee pursuant to a written agreement.
"Hicks Muse" means Hicks, Muse, Tate & Furst, Incorporated.
<PAGE> 19
11
"Hicks Muse Partners" means Hicks Muse Partners, an affiliate of
Hicks Muse.
"Holder" or "Securityholder" means the Person in whose name a
Security is registered on the Registrar's books.
"Holding" means Atrium Corporation, a Delaware corporation and
the owner of all the outstanding capital stock of the Company as of the date of
this Indenture.
"Incur" means issue, assume, Guarantee, incur or otherwise become
liable for; provided, however, that any Indebtedness or Capital Stock of a
Person existing at the time such person becomes a Restricted Subsidiary
(whether by merger, consolidation, acquisition or otherwise) shall be deemed to
be incurred by such Restricted Subsidiary at the time it becomes a Restricted
Subsidiary.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication), (i) the principal of and premium (if any)
in respect of indebtedness of such Person for borrowed money, (ii) the
principal of and premium (if any) in respect of obligations of such Person
evidenced by bonds, debentures, notes or other similar instruments, (iii) all
obligations of such Person in respect of letters of credit or other similar
instruments (including reimbursement obligations with respect thereto) (other
than obligations with respect to letters of credit securing obligations (other
than obligations described in clauses (i), (ii) and (v)) entered into in the
ordinary course of business of such Person to the extent that such letters of
credit are not drawn upon or, if and to the extent drawn upon, such drawing is
reimbursed no later than the third business day following receipt by such
Person of a demand for reimbursement following payment on the letter of
credit), (iv) all obligations of such Person to pay the deferred and unpaid
purchase price of property or services (except trade payables and accrued
expenses incurred in the ordinary course of business), which purchase price is
due more than six months after the date of placing such property in service or
taking delivery and title thereto or the completion of such services, (v) all
Capitalized Lease Obligations and all Attributable Indebtedness of such Person,
(vi) all Indebtedness of other Persons secured by a Lien on any asset of such
Person, whether or not such Indebtedness is assumed by such Person, (vii) all
Indebtedness of other Persons to the extent Guaranteed by such Person, (viii)
the amount of all obligations of such Person with respect to the redemption,
repayment or other repurchase of any Disqualified Stock or, with respect to any
Restricted Subsidiary of the Company, any Preferred Stock of such Restricted
Subsidiary to the extent such obligation arises on or before the Stated
Maturity of the Securities (but excluding, in each case, any accrued dividends)
and (ix) to the extent not otherwise included in this definition, obligations
under Currency Agreements and Interest Rate Agreements. The amount of
Indebtedness of any Person at any date shall be the outstanding principal
amount of all unconditional obligations as described above, as such amount
<PAGE> 20
12
would be reflected on a balance sheet prepared in accordance with GAAP, and the
maximum liability of such Person, upon the occurrence of the contingency giving
rise to the obligation, of any contingent obligations described above at such
date.
"Indenture" means this Indenture as amended or supplemented from
time to time.
"Interest Payment Date" means the stated maturity of an
installment of interest on the Securities.
"Interest Rate Agreement" means with respect to any Person any
interest rate protection agreement, interest rate future agreement, interest
rate option agreement, interest rate swap agreement, interest rate cap
agreement, interest rate collar agreement, interest rate hedge agreement or
other similar agreement or arrangement as to which such Person is party or a
beneficiary.
"Investment" in any Person means any direct or indirect advance,
loan (other than advances to customers in the ordinary course of business that
are recorded as accounts payable on the balance sheet of such Person) or other
extension of credit (including by way of Guarantee or similar arrangement, but
excluding any debt or extension of credit represented by a bank deposit other
than a time deposit) or capital contribution to (by means of any transfer of
cash or other property to others or any payment for property or services for
the account or use of others), or any purchase or acquisition of Capital Stock,
Indebtedness or other similar instruments issued by such Person. For purposes
of Section 4.4 hereof, (i) "Investment" shall include the portion
(proportionate to the Company's equity interest in a Restricted Subsidiary to
be designated as an Unrestricted Subsidiary) of the fair market value of the
net assets of such Restricted Subsidiary of the Company at the time that such
Restricted Subsidiary is designated an Unrestricted Subsidiary; provided,
however, that upon a redesignation of such Subsidiary as a Restricted
Subsidiary, the Company shall be deemed to continue to have a permanent
"Investment" in an Unrestricted Subsidiary in an amount (if positive) equal to
(x) the Company's "Investment" in such Subsidiary at the time of such
redesignation less (y) the portion (proportionate to the Company's equity
interest in such Subsidiary) of the fair market value of the net assets of such
Subsidiary at the time that such Subsidiary is so redesignated a Restricted
Subsidiary; and (ii) any property transferred to or from an Unrestricted
Subsidiary shall be valued at its fair market value at the time of such
transfer, in each case as determined in good faith by the Board of Directors
and evidenced by a resolution of the Board of Directors certified in an
Officers' Certificate to the Trustee.
"Initial Securities" has the meaning set forth in the preamble to
this Indenture.
"Issue Date" means the date on which the Initial Securities are
originally issued.
<PAGE> 21
13
"Legal Holiday" has the meaning ascribed in Section 12.8.
"Leverage Ratio" shall mean, as to any Person, the ratio of (i)
the sum of the aggregate outstanding amount of Indebtedness of such Person and
its Subsidiaries as of the date of calculation on a consolidated basis to (ii)
the Consolidated Cash Flow of such Person for the last four full fiscal
quarters (the "Four Quarter Period") ending on or prior to the date of
determination.
For purposes of this definition, the aggregate outstanding
principal amount of Indebtedness of the Person and its Subsidiaries for which
such calculation is made shall be determined on a pro forma basis as if the
Indebtedness giving rise to the need to perform such calculation had been
incurred and the proceeds therefrom had been applied, and all other
transactions in respect of which such Indebtedness is being incurred had
occurred, on the date the respective calculation is required. In addition to
the foregoing, for purposes of this definition, "Consolidated Cash Flow" shall
be calculated on a pro forma basis after giving effect to (i) the incurrence of
the Indebtedness of such Person and its Subsidiaries (and the application of
the proceeds therefrom) giving rise to the need to make such calculation and
any incurrence (and the application of the proceeds therefrom) or repayment of
other Indebtedness, other than the incurrence or repayment of Indebtedness
pursuant to working capital facilities, at any time subsequent to the beginning
of the Four Quarter Period and on or prior to the date of determination, as if
such incurrence (and the application of the proceeds thereof), or the
repayment, as the case may be, occurred on the first day of the Four Quarter
Period and (ii) any Asset Disposition at any time on or subsequent to the first
day of the Four Quarter Period and on or prior to the date of determination, as
if such Asset Disposition occurred on the first day of the Four Quarter Period.
Furthermore, in calculating "Consolidated Interest Expense" for purposes of the
calculation of "Consolidated Cash Flow," (i) interest on Indebtedness
determined on a fluctuating basis as of the date of determination (including
Indebtedness actually incurred on the date of the transaction giving rise to
the need to calculate the Leverage Ratio) and which will continue to be so
determined thereafter shall be deemed to have accrued at a fixed rate per annum
equal to the rate of interest on such Indebtedness as in effect on the date of
determination and (ii) notwithstanding (i) above, interest determined on a
fluctuating basis, to the extent such interest is covered by Interest Rate
Agreements, shall be deemed to accrue at the rate per annum resulting after
giving effect to the operation of such agreements so long as the respective
Interest Rate Agreement has a remaining term in excess of 12 months.
"Lien" means any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including any conditional sale or
other title retention agreement or lease in the nature thereof).
"Maturity Date" means November 15, 2006.
<PAGE> 22
14
"Monitoring and Oversight and Agreement" means the Monitoring and
Oversight Agreement between Hicks Muse Partners, Holding and the Company as in
effect on the Issue Date.
"Net Available Cash" from an Asset Disposition means cash
payments received (including any cash payments received by way of deferred
payment of principal pursuant to a note or installment receivable or otherwise,
but only as and when received, but excluding any other consideration received
in the form of assumption by the acquiring Person of Indebtedness or other
obligations relating to the properties or assets subject to such Asset
Disposition) therefrom, in each case net of (i) all legal, title and recording
tax expenses, commissions and other fees and expenses incurred, and all
Federal, state, foreign and local taxes required to be paid or accrued as a
liability under GAAP, as a consequence of such Asset Disposition, (ii) all
payments made on any Indebtedness which is secured by any assets subject to
such Asset Disposition, in accordance with the terms of any Lien upon such
assets, or which must by its terms, or in order to obtain a necessary consent
to such Asset Disposition, or by applicable law, be repaid out of the proceeds
from such Asset Disposition, (iii) all distributions and other payments
required to be made to any Person owning a beneficial interest in assets
subject to sale or minority interest holders in Subsidiaries orjoint ventures
as a result of such Asset Disposition, (iv) the deduction of appropriate
amounts to be provided by the seller as a reserve, in accordance with GAAP,
against any liabilities associated with the assets disposed of in such Asset
Disposition provided, however, that upon any reduction in such reserves (other
than to the extent resulting from payments of the respective reserved
liabilities), Net Available Cash shall be increased by the amount of such
reduction to reserves, and retained by the Company or any Restricted Subsidiary
of the Company after such Asset Disposition and (v) any portion of the purchase
price from an Asset Disposition placed in escrow (whether as a reserve for
adjustment of the purchase price, for satisfaction of indemnities in respect of
such Asset Disposition or otherwise in connection with such Asset Disposition);
provided, however, that upon the termination of such escrow, Net Available Cash
shall be increased by any portion of funds therein released to the Company or
any Restricted Subsidiary.
"Net Cash Proceeds" with respect to any issuance or sale of
Capital Stock, means the cash proceeds of such issuance or sale net of
attorneys' fees, accountants' fees, underwriters' or placement agents' fees,
discounts or commissions and brokerage, consultant and other fees actually
incurred in connection with such issuance or sale and net of taxes paid or
payable as a result of such issuance or sale.
"New Credit Facility" means the Credit Agreement, dated as of
November 27, 1996, among the Company, Holding, Bankers Trust Company, as agent,
and any other financial institutions from time to time party thereto, together
with the related documents thereto (including, without limitation, any
guarantee agreements and security documents), in each case as such agreements
may
<PAGE> 23
15
be amended (including any amendment and restatement thereof), supplemented or
otherwise modified from time to time, including any agreement extending the
maturity of, refinancing, replacing or otherwise restructuring (including by
way of adding Subsidiaries of the Company as additional borrowers or guarantors
thereunder) all or any portion of the Indebtedness under such agreement or any
successor or replacement agreement and whether by the same or any other agent,
lender or group of lenders.
"Non-Recourse Debt" means Indebtedness (i) as to which neither
the Company nor any Restricted Subsidiary (a) provides any guarantee or credit
support of any kind (including any undertaking, guarantee, indemnity, agreement
or instrument that would constitute Indebtedness) or (b) is directly or
indirectly liable (as a guarantor or otherwise) and (ii) no default with
respect to which (including any rights that the holders thereof may have to
take enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness of the
Company or any Restricted Subsidiary to declare a default under such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its stated maturity.
"Offering Memorandum" means the Offering Memorandum dated
November 22, 1996 relating to the Securities;
"Officer" means the Chairman of the Board, the President, any
Vice President, the Treasurer or the Secretary of Holding, the Company or a
Subsidiary Guarantor, as applicable.
"Officers' Certificate" means a certificate signed by two
Officers.
"Offshore Physical Securities" has the meaning provided in
Section 2.1.
"Opinion of Counsel" means a written opinion from legal counsel
who is reasonably acceptable to the Trustee and which complies, if applicable,
with Section 12.5. The counsel may be an employee of or counsel to the Company
or the Trustee.
"Permitted Holders" means Hicks Muse, or any of its Affiliates,
officers or directors.
"Permitted Indebtedness" means (i) Indebtedness of the Company
owing to and held by any Wholly-Owned Subsidiary or Indebtedness of a
Restricted Subsidiary owing to and held by the Company or any Wholly-Owned
Subsidiary; provided, however, that any subsequent issuance or transfer of any
Capital Stock or any other event which results in any such Wholly-Owned
Subsidiary ceasing to be a Wholly-Owned Subsidiary or any subsequent transfer
of any such Indebtedness (except to the Company or a Wholly-Owned Subsidiary)
shall be deemed, in each case,
<PAGE> 24
16
to constitute the Incurrence of such Indebtedness by the issuer thereof; (ii)
Indebtedness represented by (x) the Securities, (y) any Indebtedness (other
than the Indebtedness described in clauses (i), (ii) and (iv) of Section 4.3(b)
and other than Indebtedness Incurred pursuant to clause (i) above or clauses
(iv), (v) or (vi) below) outstanding on the Issue Date and (z) any Refinancing
Indebtedness Incurred in respect of any Indebtedness described in this clause
(ii) or Incurred pursuant to Section 4.3(a); (iii) (A) Indebtedness of a
Restricted Subsidiary Incurred and outstanding on the date on which such
Restricted Subsidiary was acquired by the Company (other than Indebtedness
Incurred as consideration in, or to provide all or any portion of the funds or
credit support utilized to consummate, the transaction or series of related
transactions pursuant to which such Restricted Subsidiary became a Subsidiary
or was otherwise acquired by the Company); provided, however, that at the time
such Restricted Subsidiary is acquired by the Company, the Company would have
been able to Incur $1.00 of additional Indebtedness pursuant to Section 4.3(a)
after giving effect to the Incurrence of such Indebtedness pursuant to this
clause (iii) and (B) Refinancing Indebtedness Incurred by a Restricted
Subsidiary in respect of Indebtedness Incurred by such Restricted Subsidiary
pursuant to this clause (iii); (iv) Indebtedness (A) in respect of performance
bonds, bankers' acceptances and surety or appeal bonds provided by the Company
or any of its Restricted Subsidiaries to their customers in the ordinary course
of their business, (B) in respect of performance bonds or similar obligations
of the Company or any of its Restricted Subsidiaries for or in connection with
pledges, deposits or payments made or given in the ordinary course of business
in connection with or to secure statutory, regulatory or similar obligations,
including obligations under health, safety or environmental obligations, (C)
arising from Guarantees to suppliers, lessors, licensees, contractors,
franchises or customers of obligations (other than Indebtedness) incurred in
the ordinary course of business and (D) under Currency Agreements and Interest
Rate Agreements; provided, however, that in the case of Currency Agreements and
Interest Rate Agreements, such Currency Agreements and Interest Rate Agreements
are entered into for bona fide hedging purposes of the Company or its
Restricted Subsidiaries (as determined in good faith by the Board of Directors
or senior management of the Company) and correspond in terms of notional
amount, duration, currencies and interest rates, as applicable, to Indebtedness
of the Company or its Restricted Subsidiaries Incurred without violation of the
Indenture or to business transactions of the Company or its Restricted
Subsidiaries on customary terms entered into in the ordinary course of
business; (v) Indebtedness arising from agreements providing for
indemnification, adjustment of purchase price or similar obligations, or from
Guarantees or letters of credit, surety bonds or performance bonds securing any
obligations of the Company or any of its Restricted Subsidiaries pursuant to
such agreements, in each case Incurred in connection with the disposition of
any business assets or Restricted Subsidiary of the Company (other than
Guarantees of Indebtedness or other obligations Incurred by any Person
acquiring all or any portion of such business assets or Restricted Subsidiary
of the Company for the purpose of financing such acquisition) in a principal
amount not to exceed the gross proceeds actually received by the Company or any
of its Restricted Subsidiaries in
<PAGE> 25
17
connection with such disposition; provided, however, that the principal amount
of any Indebtedness Incurred pursuant to this clause (v), when taken together
with all Indebtedness Incurred pursuant to this clause (v) and then
outstanding, shall not exceed $10 million; (vi) Indebtedness consisting of (A)
Guarantees by the Company or a Subsidiary Guarantor of Indebtedness Incurred by
a Wholly-Owned Subsidiary without violation of this Indenture and (B)
Guarantees by a Restricted Subsidiary of Senior Indebtedness Incurred by the
Company without violation of this Indenture (so long as such Restricted
Subsidiary could have Incurred such Indebtedness directly without violation of
this Indenture); and (vii) Indebtedness arising from the honoring by a bank or
other financial institution of a check, draft or similar instrument drawn
against insufficient funds in the ordinary course of business, provided that
such Indebtedness is extinguished within two Business Days of its incurrence.
"Permitted Investment" means an Investment by the Company or any
of its Restricted Subsidiaries in (i) a Wholly-Owned Subsidiary of the Company;
provided, however, that the primary business of such Wholly-Owned Subsidiary is
a Related Business; (ii) another Person if as a result of such Investment such
other Person becomes a Wholly-Owned Subsidiary of the Company or is merged or
consolidated with or into, or transfers or conveys all or substantially all its
assets to, the Company or a Wholly-Owned Subsidiary of the Company; provided,
however, that in each case such Person's primary business is a Related
Business; (iii) Temporary Cash Investments; (iv) receivables owing to the
Company or any of its Restricted Subsidiaries, created or acquired in the
ordinary course of business and payable or dischargeable in accordance with
customary trade terms; (v) payroll, travel and similar advances to cover
matters that are expected at the time of such advances ultimately to be treated
as expenses for accounting purposes and that are made in the ordinary course of
business; (vi) loans or advances to employees for purposes of purchasing the
Company's common stock in an aggregate amount outstanding at any one time not
to exceed $500,000 and other loans and advances to employees made in the
ordinary course of business consistent with past practices of the Company or
such Restricted Subsidiary; (vii) stock, obligations or securities received in
settlement of debts created in the ordinary course of business and owing to the
Company or any of its Restricted Subsidiaries or in satisfaction of judgments
or claims; (viii) a Person engaged in a Related Business or a loan or advance
to the Company the proceeds of which are used solely to make an Investment in a
Person engaged in a Related Business or a Guarantee by the Company of
Indebtedness of any Person in which such Investment has been made; provided,
however, that no Permitted Investments may be made pursuant to this clause
(viii) to the extent the amount thereof would, when taken together with all
other Permitted Investments made pursuant to this clause (viii), exceed $10
million in the aggregate (plus, to the extent not previously reinvested, any
return of capital realized on Permitted Investments made pursuant to this
clause (viii), or any release or other cancellation of any Guarantee
constituting such Permitted Investment); (ix) Persons to the extent such
Investment is received by the Company or any Restricted Subsidiary as
consideration for asset
<PAGE> 26
18
dispositions effected in compliance with Section 4.6; (x) prepayments and other
credits to suppliers made in the ordinary course of business consistent with
the past practices of the Company and its Restricted Subsidiaries; and (xi)
Investments in connection with pledges, deposits, payments or performance bonds
made or given in the ordinary course of business in connection with or to
secure statutory, regulatory or similar obligations, including obligations
under health, safety or environmental obligations.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization,
government or any agency or political subdivision hereof or any other entity.
"Physical Securities" has the meaning provided in Section 2.1.
"Preferred Stock", as applied to the Capital Stock of any
corporation, means Capital Stock of any class or classes (however designated)
which is preferred as to the payment of dividends, or as to the distribution of
assets upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
"Private Placement Legend" has the meaning provided in Section
2.15.
"Productive Assets" means assets of a kind used or usable by the
Company and its Restricted Subsidiaries in the Company's business or any
Related Business.
A "Public Market" exists at any time with respect to the common
stock of Holding or the Company if (a) the common stock of Holding or the
Company, as applicable, is then registered with the Commission pursuant to
Section 12(b) or 12(g) of the Exchange Act and traded either on a national
securities exchange or in the National Association of Securities Dealers
Automated Quotation System and (b) at least 15% of the total issued and
outstanding common stock of Holding or the Company, as applicable, has been
distributed prior to such time by means of an effective registration statement
under the Securities Act.
"QIB" means any "qualified institutional buyer" (as defined under
the Securities Act).
"Qualified Capital Stock" of any Person shall mean any Capital
Stock of such Person which is not Disqualified Stock.
"Record Date" means the record dates specified in the Securities,
whether or not a Legal Holiday.
<PAGE> 27
19
"Redemption Date" means the date specified by the Company in a
notice delivered pursuant to Section 3.3 as the date on which the Company has
elected to redeem all of the Securities pursuant to paragraph 5 of the
Securities after the occurrence of a Change of Control.
"Refinancing Indebtedness" means Indebtedness that refunds,
refinances, replaces, renews, repays or extends (including pursuant to any
defeasance or discharge mechanism) (collectively, "refinances," and
"refinanced" shall have a correlative meaning) any Indebtedness existing on the
date of the Indenture or Incurred in compliance with the Indenture (including
Indebtedness of the Company that refinances Indebtedness of any Restricted
Subsidiary and Indebtedness of any Restricted Subsidiary that refinances
Indebtedness of another Restricted Subsidiary) including Indebtedness that
refinances Refinancing Indebtedness, provided, however, that (i) the
Refinancing Indebtedness has a Stated Maturity no earlier than the earlier of
(A) the first anniversary of the Stated Maturity of the Securities and (B)
Stated Maturity of the Indebtedness being refinanced, (ii) the Refinancing
Indebtedness has an Average Life at the time such Refinancing Indebtedness is
Incurred that is equal to or greater than the lesser of (A) the Average Life of
the Securities and (B) the Average Life of the Indebtedness being refinanced,
and (iii) such Refinancing Indebtedness is Incurred in an aggregate principal
amount (or if issued with original issue discount, an aggregate issue price)
that is equal to (or 101% of, in the case of a refinancing of the Securities in
connection with a Change of Control) or less than the sum of the aggregate
principal amount (or if issued with original issue discount, the aggregate
accreted value) then outstanding of the Indebtedness being refinanced.
"Registration Rights Agreement" means the Exchange and
Registration Rights Agreement, dated November 27, 1996, among the Company, the
Subsidiary Guarantors, and BT Securities Corporation.
"Related Business" means any business which is the same as or
related, ancillary or complementary to any of the businesses of the Company and
its Restricted Subsidiaries on the date hereof, as reasonably determined by the
Company's Board of Directors.
"Representative" means any trustee, agent or representative (if
any) of an issue of Senior Indebtedness.
"Responsible Officer" when used with respect to the Trustee,
means any officer within the corporate trust department of the Trustee (or any
successor group of the Trustee) with direct responsibility for the
administration of this Indenture and also means, with respect to a particular
corporate trust matter, any other officer to whom such matter is referred
because of his knowledge of and familiarity with the particular subject.
<PAGE> 28
20
"Restricted Security" has the meaning assigned to such term in
Rule 144(a)(3) under the Securities Act.
"Restricted Subsidiary" means any Subsidiary of the Company other
than an Unrestricted Subsidiary.
"Sale/Leaseback Transaction" means an arrangement relating to
property now owned or hereafter acquired whereby the Company or a Restricted
Subsidiary transfers such property to a Person and the Company or a Subsidiary
leases it from such Person.
"Securities" means the Initial Securities and the Exchange
Securities treated as a single class of securities, as amended or supplemented
from time to time in accordance with the terms hereof, that are issued pursuant
to this Indenture.
"Securities Act" means the Securities Act of 1933, as amended and
the rules and regulations of the Commission promulgated thereunder.
"Secured Indebtedness" means any Indebtedness of the Company or a
Subsidiary Guarantor secured by a Lien.
"Senior Indebtedness" means whether outstanding on the Issue Date
or thereafter issued, all obligations under the New Credit Facility and all
other Indebtedness of the Company, including interest and fees thereon, unless,
in the instrument creating or evidencing the same or pursuant to which the same
is outstanding, it is provided that the obligations in respect of such
Indebtedness are not superior in right of payment to the Securities; provided,
however, that Senior Indebtedness will not include (1) any obligation of the
Company to any Subsidiary, (2) any liability for Federal, state, foreign, local
or other taxes owed or owing by the Company, (3) any accounts payable or other
liability to trade creditors arising in the ordinary course of business
(including Guarantees thereof or instruments evidencing such liabilities), or
(4) any Indebtedness, Guarantee or obligation of the Company that is expressly
subordinate or junior in right of payment to any other Indebtedness, Guarantee
or obligation of the Company, including any Senior Subordinated Indebtedness
and any Subordinated Obligations.
"Senior Subordinated Indebtedness" means the Securities and any
other Indebtedness of the Company that specifically provides that such
Indebtedness is to rank pari passu with the Securities in right of payment and
is not subordinated by its terms in right of payment to any Indebtedness or
other obligation of the Company which is not Senior Indebtedness.
<PAGE> 29
21
"Significant Subsidiary" means any Restricted Subsidiary that
would be a "Significant Subsidiary" of the Company within the meaning of Rule
1-02 under Regulation S-X promulgated by the Commission.
"Stated Maturity" means, with respect to any security, the date
specified in such security as the fixed date on which the payment of principal
of such security is due and payable, including pursuant to any mandatory
redemption provision.
"Subordinated Obligation" means any Indebtedness of the Company
(whether outstanding on the Issue Date or thereafter Incurred) which is
subordinate or junior in right of payment to the Securities pursuant to a
written agreement.
"Subsidiary" of any Person means any corporation, association,
partnership or other business entity of which more than 50% of the total voting
power of shares of Capital Stock or other interests (including partnership
interests) entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers or trustees thereof is at the time
owned or controlled, directly or indirectly, by (i) such Person, (ii) such
Person and one or more Subsidiaries of such Person or (iii) one or more
Subsidiaries of such Person. Unless otherwise specified herein, each reference
to a Subsidiary shall refer to a Subsidiary of the Company.
"Subsidiary Guarantee" means the Guarantee of the Securities by a
Subsidiary Guarantor as set forth in Article XI hereof.
"Subsidiary Guarantor" means each Subsidiary of the Company in
existence on the Issue Date and each Subsidiary (other than foreign
subsidiaries and Unrestricted Subsidiaries) created or acquired by the Company
after the Issue Date.
"Temporary Cash Investments" means any of the following: (i) any
Investment in direct obligations of the United States of America or any agency
thereof or obligations Guaranteed by the United States of America or any agency
thereof, (ii) Investments in time deposit accounts, certificates of deposit and
money market deposits maturing within 180 days of the date of acquisition
thereof issued by a bank or trust company which is organized under the laws of
the United States of America, any state thereof or any foreign country
recognized by the United States of America having capital surplus and undivided
profits aggregating in excess of $250 million (or the foreign currency
equivalent thereof) and whose long-term debt, or whose parent holding company's
long-term debt, is rated "A" (or such similar equivalent rating) or higher by
at least one nationally recognized statistical rating organization (as defined
in Rule 436 under the Securities Act), (iii) repurchase
<PAGE> 30
22
obligations with a term of not more than 30 days for underlying securities of
the types described in clause (i) above entered into with a bank meeting the
qualifications described in clause (ii) above, (iv) Investments in commercial
paper, maturing not more than 180 days after the date of acquisition, issued by
a corporation (other than an Affiliate of the Company) organized and in
existence under the laws of the United States of America or any foreign country
recognized by the United States of America with a rating at the time as of
which any investment therein is made of "P-1" (or higher) according to Moody's
Investors Service, Inc. or "A-1" (or higher) according to Standard and Poor's
Ratings Group, (v) Investments in securities with maturities of six months or
less from the date of acquisition issued or fully guaranteed by any state,
commonwealth or territory of the United States of America, or by any political
subdivision or taxing authority thereof, and rated at least "A" by Standard &
Poor's Ratings Group or "A" by Moody's Investors Service, Inc. and (vi)
Investments in mutual funds whose investment guidelines restrict such funds'
investments to those satisfying the provisions of clauses (i) through (v)
above.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections
77aaa-77bbbb) as in effect on the date of this Indenture; provided, however,
that, in the event the Trust Indenture Act of 1939 is amended after such date,
"TIA" means, to the extent required by any such amendment, the Trust Indenture
Act of 1939 as so amended.
"Treasury Rate" means the yield to maturity at the time of
computation of United States Treasury securities with a constant maturity (as
compiled and published in the most recent Federal Reserve Statistical Release
H.15 (519) which has become publicly available at least two business days prior
to the Redemption Date (or, if such Statistical Release is no longer published,
any publicly available source or similar market data)) most nearly equal to the
period from the Redemption Date to November 15, 2001; provided, however, that
if the period from the Redemption Date to November 15, 2001 is not equal to the
constant maturity of a United States Treasury security for which a weekly
average yield is given, the Treasury Rate shall be obtained by linear
interpolation (calculated to the nearest one-twelfth of a year) from the weekly
average yields of United States Treasury securities for which such yields are
given, except that if the period from the Redemption Date to November 15, 2001
is less than one year, the weekly average yield on actually traded United
States Treasury securities adjusted to a constant maturity of one year shall be
used.
"Trustee" means the party named as such in the preamble to this
Indenture until a successor replaces it in accordance with the provisions of
Article VII of this Indenture and, thereafter, means the successor.
"Trust Officer" means the Chairman of the Board, the President or
any other officer or assistant officer of the Trustee assigned by the Trustee
to administer its corporate trust matters.
<PAGE> 31
23
"Uniform Commercial Code" means the New York Uniform Commercial
Code as in effect from time to time.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company
that at the time of determination shall be designated an Unrestricted
Subsidiary by the Board of Directors in the manner provided below and (ii) any
Subsidiary of an Unrestricted Subsidiary. The Board of Directors may designate
any Subsidiary of the Company (including any newly acquired or newly formed
Subsidiary of the Company) to be an Unrestricted Subsidiary unless such
Subsidiary or any of its Subsidiaries owns any Capital Stock or Indebtedness
of, or owns or holds any Lien on any property of, the Company or any Restricted
Subsidiary of the Company that is not a Subsidiary of the Subsidiary to be so
designated; provided, however, that either (A) the Subsidiary to be so
designated has total consolidated total assets of $10,000 or less or (B) if
such Subsidiary has consolidated total assets greater than $10,000, then such
designation would be permitted under Section 4.4 hereof. The Board of
Directors may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary; provided, however, that immediately after giving effect to such
designation (x) the Company could Incur $1.00 of additional Indebtedness under
Section 4.3(a) hereof and (y) no Default shall have occurred and be continuing.
Any such designation by the Board of Directors shall be evidenced to the
Trustee by promptly filing with the Trustee a copy of the Board Resolution
giving effect to such designation and an Officers' Certificate certifying that
such designation complied with the foregoing provisions.
"U.S. Government Obligations" means direct obligations (or
certificates representing an ownership interest in such obligations) of the
United States of America (including any agency or instrumentality thereof) for
the payment of which the full faith and credit of the United States of America
is pledged and which are not callable or redeemable at the issuer's option.
"U.S. Physical Securities" has the meaning provided in Section
2.1.
"Voting Stock" of a corporation means all classes of Capital
Stock of such corporation then outstanding and normally entitled to vote in the
election of directors.
"Wholly-Owned Subsidiary" means a Restricted Subsidiary of the
Company, at least 99% of the Capital Stock of which (other than directors'
qualifying shares) is owned by the Company or another Wholly-Owned Subsidiary.
<PAGE> 32
24
SECTION 1.2. Other Definitions.
<TABLE>
<CAPTION>
Defined in
Term Section
---- ----------
<S> <C>
"Affiliate Transaction" . . . . . . . . . . . . . . . . . . . 4.7
"Agent Members" . . . . . . . . . . . . . . . . . . . . . . . 2.16
"Bankruptcy Law" . . . . . . . . . . . . . . . . . . . . . . . 6.1
"Blockage Notice" . . . . . . . . . . . . . . . . . . . . . . 10.3
"covenant defeasance option" . . . . . . . . . . . . . . . . . 8.1(b)
"Custodian" . . . . . . . . . . . . . . . . . . . . . . . . . 6.1
"Event of Default" . . . . . . . . . . . . . . . . . . . . . . 6.1
"Global Note" . . . . . . . . . . . . . . . . . . . . . . . . 2.1
"legal defeasance option" . . . . . . . . . . . . . . . . . . 8.1(b)
"Obligations . . . . . . . . . . . . . . . . . . . . . . . . . 11.1
"Offer" . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.6
"Offer Amount" . . . . . . . . . . . . . . . . . . . . . . . . 4.6(c)
"Offer Period" . . . . . . . . . . . . . . . . . . . . . . . . 4.6(c)
"pay the Securities" . . . . . . . . . . . . . . . . . . . . . 10.3
"Paying Agent" . . . . . . . . . . . . . . . . . . . . . . . . 2.3
"Payment Blockage Period" . . . . . . . . . . . . . . . . . . 10.3
"Purchase Date" . . . . . . . . . . . . . . . . . . . . . . . 4.6(c)
"Registrar" . . . . . . . . . . . . . . . . . . . . . . . . . 2.3
"Restricted Payment" . . . . . . . . . . . . . . . . . . . . . 4.4
"Rule 144A" . . . . . . . . . . . . . . . . . . . . . . . . . 2.1
"Successor Company" . . . . . . . . . . . . . . . . . . . . . 5.1
</TABLE>
SECTION 1.3. Incorporation by Reference of Trust Indenture
Act. This Indenture is subject to the mandatory provisions of the TIA which
are incorporated by reference in and made a part of this Indenture. The
following TIA terms used in this Indenture have the following meanings:
"indenture securities" means the Securities.
"indenture security holder" means a Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the
Trustee.
<PAGE> 33
25
"obligor" on the indenture securities means the Company, each
Subsidiary Guarantor and any other obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by
the TIA, defined by the TIA reference to another statute or defined under rules
promulgated by the Commission have the meanings assigned to them by such
definitions.
SECTION 1.4. Rules of Construction. Unless the context
otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) "including" means including without limitation;
(5) words in the singular include the plural and words in
the plural include the singular;
(6) references to Article and Section numbers refers to the
corresponding Articles and Sections of this Indenture unless otherwise
specified;
(7) unsecured Indebtedness shall not be deemed to be
subordinate or junior to Secured Indebtedness merely by virtue of its
nature as unsecured Indebtedness;
(8) the principal amount of any non-interest bearing or
other discount security at any date shall be the principal amount
thereof that would be shown on a balance sheet of the issuer dated
such date prepared in accordance with GAAP; and
(9) the principal amount of any Preferred Stock shall be (i)
the maximum liquidation preference of such Preferred Stock or (ii) the
maximum mandatory redemption or mandatory repurchase price with
respect to such Preferred Stock, whichever is greater.
<PAGE> 34
26
ARTICLE II
The Securities
SECTION 2.1. Form and Dating. The Initial Securities, the
notation thereon relating to the Guarantees and the Trustee's certificate of
authentication thereon shall be substantially in the form of Exhibit A hereto.
The Exchange Securities, the notation thereon relating to the Guarantees and
the Trustee's certificate of authentication thereon shall be substantially in
the form of Exhibit B hereto. The Securities may have notations, legends or
endorsements required by law, stock exchange rule or Depositary rule or usage.
The Company, the Subsidiary Guarantors and the Trustee shall approve the form
of the Securities and any notation, legend or endorsement on them. Each
Security shall be dated the date of its authentication.
The terms and provisions contained in the forms of the
Securities and the Guarantees, annexed hereto as Exhibits A and B, shall
constitute, and are hereby expressly made, a part of this Indenture and, to the
extent applicable, the Company, the Subsidiary Guarantors and the Trustee, by
their execution and delivery of this Indenture, expressly agree to such terms
and provisions and to be bound thereby.
Securities offered and sold in reliance on Rule 144A under the
Securities Act ("Rule 144A") shall be issued initially in the form of one or
more permanent global notes in registered form, in substantially the form set
forth in Exhibit A (the "Global Note"), deposited with the Trustee, as
custodian for the Depositary, duly executed by the Company and authenticated by
the Trustee as hereinafter provided. The aggregate principal amount of the
Global Note may from time to time be increased or decreased by adjustments made
on the records of the Trustee, as custodian for the Depositary, as hereinafter
provided.
Securities offered and sold in offshore transactions in
reliance on Regulation S shall be issued in the form of permanent certificated
Securities in registered form in substantially the form set forth in Exhibit A
(the "Offshore Physical Securities"). Securities offered and sold in reliance
on any other exemption from registration under the Securities Act other than as
described in the preceding paragraph shall be issued, and Securities offered
and sold in reliance on Rule 144A may be issued, in the form of permanent
certificated Securities in registered form, in substantially the form set forth
in Exhibit A (the "U.S. Physical Securities"). The Offshore Physical
Securities and the U.S. Physical Securities are sometimes collectively herein
referred to as the "Physical Securities."
<PAGE> 35
27
SECTION 2.2. Execution and Authentication. (a) Two Officers
of the Company (each of whom shall, in each case, have been duly authorized by
all requisite corporate actions) shall sign the Securities for the Company by
manual or facsimile signature. The Company's seal shall be reproduced on the
Securities. If an Officer whose signature is on a Security no longer holds
that office at the time the Security is authenticated, the Security shall
nevertheless be valid. Each Subsidiary Guarantor shall execute a Guarantee in
the manner set forth in Section 11.1.
(b) A Security shall not be valid until authenticated by the
manual signature of the Trustee. The signature of the Trustee shall be
conclusive evidence that the Security has been authenticated under this
Indenture.
(c) The Trustee shall authenticate (i) Initial Securities for
original issue in the aggregate principal amount not to exceed $100,000,000,
and (ii) Exchange Securities from time to time for issue only in exchange for a
like principal amount of Initial Securities, in each case upon receipt of a
written order of the Company.
(d) The Trustee may appoint an authenticating agent
acceptable to the Company to authenticate Securities. Unless limited by the
terms of such appointment, an authenticating agent may authenticate Securities
whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with the Company
or an Affiliate.
SECTION 2.3. Registrar and Paying Agent. (a) The Company
shall maintain an office or agency (which shall be located in the Borough of
Manhattan in the City of New York, State of New York) where (i) Securities may
be presented for registration of transfer or for exchange ("Registrar"), (ii)
Securities may be presented for payment ("Paying Agent") and (iii) notices and
demands to or upon the Company in respect of the Securities and this Indenture
may be served. The Registrar shall keep a register of the Securities and of
their transfer and exchange. The Company may appoint one or more co-registrars
and one or more additional paying agents. The term "Paying Agent" includes any
additional paying agent. The Company may change any Paying Agent, Registrar or
co-registrar without prior notice to any Securityholder. The Company shall
notify the Trustee and the Trustee shall notify the Securityholders of the name
and address of any Agent not a party to this Indenture. If the Company fails
to appoint or maintain another entity as Registrar or Paying Agent, the Trustee
shall act as such. The Company or any Subsidiary Guarantor may act as Paying
Agent, Registrar or co-registrar. The Company shall enter into an appropriate
agency agreement with any Agent not a party to this Indenture, which shall
incorporate the provisions of the TIA. The agreement shall implement the
provisions of this Indenture that relate to such Agent. The Company shall
notify the Trustee of the name and address of any such Agent. If the Company
fails
<PAGE> 36
28
to maintain a Registrar or Paying Agent, or fails to give the foregoing notice,
the Trustee shall act as such, and shall be entitled to appropriate
compensation in accordance with Section 7.7.
(b) The Company initially appoints the Trustee as Registrar,
Paying Agent, authenticating agent and agent for service of notices and demands
in connection with the Securities.
SECTION 2.4. Paying Agent to Hold Money in Trust. The
Company, the Subsidiary Guarantors or any other obligor on the Securities shall
require each Paying Agent other than the Trustee to agree in writing that the
Paying Agent shall hold in trust for the benefit of the Securityholders or the
Trustee all money held by the Paying Agent for the payment of principal of,
premium, if any, and interest on the Securities, and shall notify the Trustee
of any Default by the Company, any of the Subsidiary Guarantors or any other
obligor on the Securities in making any such payment. While any such Default
continues, the Trustee may require a Paying Agent to pay all money held by it
to the Trustee. The Company, the Subsidiary Guarantors or any other obligor on
the Securities at any time may require a Paying Agent to pay all money held by
it to the Trustee. Upon payment over to the Trustee, the Paying Agent (if
other than the Company) shall have no further liability for the money delivered
to the Trustee. If the Company, the Subsidiary Guarantors or any other obligor
on the Securities acts as Paying Agent, it shall segregate and hold in a
separate trust fund for the benefit of the Securityholders all money held by it
as Paying Agent.
SECTION 2.5. Securityholder Lists. The Trustee shall
preserve in as current a form as is reasonably practicable the most recent list
available to it of the names and addresses of Securityholders and shall
otherwise comply with TIA Section 312(a). If the Trustee is not the
Registrar, the Company, the Subsidiary Guarantors or any other obligor on the
Securities shall furnish to the Trustee at least seven Business Days before
each Interest Payment Date and at such other times as the Trustee may request
in writing a list in such form and as of such date as the Trustee may
reasonably require of the names and addresses of Securityholders, including the
aggregate principal amount of the Securities held by each thereof, and the
Company, the Subsidiary Guarantors or any other obligor on the Securities shall
otherwise comply with TIA Section 312(a).
SECTION 2.6. Transfer and Exchange. (a) Where Securities are
presented to the Registrar or a co-registrar with a request to register the
transfer thereof or exchange them for an equal principal amount of Securities
of other denominations, the Registrar shall register the transfer or make the
exchange if its requirements for such transactions are met; provided, that any
Security presented or surrendered for registration of transfer or exchange
shall be duly endorsed or accompanied by a written instruction of transfer in
form satisfactory to the Registrar and the Trustee duly executed by the
Securityholder thereof or his attorney duly authorized in writing. To permit
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registrations of transfer and exchanges, the Company shall issue and the
Trustee shall authenticate Securities at the Registrar's request.
(b) The Company and the Registrar shall not be required (i)
to issue, to register the transfer of or to exchange Securities during a period
beginning at the opening of business on a Business Day 15 days before the day
of any selection of Securities for redemption under Section 3.2 and ending at
the close of business on the day of selection, (ii) to register the transfer of
or exchange any Security so selected for redemption in whole or in part, except
the unredeemed portion of any Security being redeemed in part or (iii) to
register the transfer or exchange of a Security between the Record Date and the
next succeeding Interest Payment Date.
(c) No service charge shall be made for any registration of a
transfer or exchange (except as otherwise expressly permitted herein), but the
Company may require payment by the Securityholder of a sum sufficient to cover
any transfer tax or similar governmental charge payable in connection therewith
(other than such transfer tax or similar governmental charge payable upon
exchanges pursuant to Section 2.10, 3.6 or 9.5.
(d) Any Holder of the Global Note shall, by acceptance of
such Global Note, agree that transfers of beneficial interests in such Global
Note may be effected only through a book entry system maintained by the Holder
of such Global Note (or its agent), and that ownership of a beneficial interest
in the Global Note shall be required to be reflected in a book entry.
SECTION 2.7. Replacement Securities. (a) If any mutilated
Security is surrendered to the Trustee, or the Company and the Trustee receives
evidence to its satisfaction of the destruction, loss or theft of any Security,
the Company shall issue and the Trustee, upon receipt by it of the written
order of the Company signed by two Officers of the Company, shall authenticate
a replacement Security if the Trustee's requirements for replacements of
Securities are met. If required by the Trustee or the Company, an indemnity
bond must be supplied by the Holder that is sufficient in the judgment of the
Trustee and the Company to protect the Company, the Subsidiary Guarantors, the
Trustee, any Agent or any authenticating agent from any loss which any of them
may suffer if a Security is replaced. The Company and the Trustee may charge a
Securityholder for reasonable out-of-pocket expenses in replacing a Security.
(b) Every replacement Security is an additional obligation of
the Company and each of the Subsidiary Guarantors and shall be entitled to the
benefits of this Indenture.
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SECTION 2.8. Outstanding Securities. (a) The Securities
outstanding at any time are all the Securities authenticated by the Trustee
except for those cancelled by the Company or by the Trustee, those delivered to
the Trustee for cancellation and those described in this Section as not
outstanding.
(b) If a Security is replaced pursuant to Section 2.7, it
ceases to be outstanding unless and until the Trustee receives proof
satisfactory to it that the replaced Security is held by a bona fide purchaser.
(c) If the principal amount of any Security is considered
paid under Section 4.1, it ceases to be outstanding and interest on it ceases
to accrue.
(d) Subject to Section 2.9, a Security does not cease to be
outstanding because the Company or an Affiliate of the Company or a Subsidiary
Guarantor holds the Security.
SECTION 2.9. Treasury Securities. In determining whether the
Holders of the required principal amount of Securities have concurred in any
direction, waiver or consent, Securities owned by the Company, the Subsidiary
Guarantors, or any of their respective Affiliates shall be considered as though
not outstanding, except that for purposes of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
Securities which a Responsible Officer knows to be so owned shall be so
considered.
SECTION 2.10. Temporary Securities. Until definitive
Securities are ready for delivery, the Company may prepare and the Trustee
shall authenticate temporary Securities. Temporary Securities shall be
substantially in the form of definitive Securities but may have variations that
the Company, the Subsidiary Guarantors and the Trustee consider appropriate for
temporary Securities. Without unreasonable delay, the Company shall prepare
and the Trustee, upon receipt of the written order of the Company signed by two
Officers of the Company, shall authenticate definitive Securities in exchange
for temporary Securities. Until such exchange, temporary Securities shall be
entitled to the same rights, benefits and privileges under this Indenture as
definitive Securities.
SECTION 2.11. Cancellation. The Company at any time may
deliver Securities to the Trustee for cancellation. The Registrar and Paying
Agent shall forward to the Trustee any Securities surrendered to them for
registration of transfer, exchange or payment. The Trustee shall cancel all
Securities, if not already cancelled, surrendered for registration of transfer,
exchange, payment, replacement or cancellation and shall destroy cancelled
Securities (subject to the record retention requirement of the Exchange Act),
and deliver certification of their destruction to the
<PAGE> 39
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Company, unless by a written order, signed by two Officers of the Company, the
Company shall direct that cancelled Securities be returned to it. The Company
may not issue new Securities to replace Securities that it has redeemed or paid
or that have been delivered to the Trustee for cancellation.
SECTION 2.12. Defaulted Interest. If the Company defaults in
a payment of interest on the Securities, it shall pay the defaulted interest in
any lawful manner plus, to the extent lawful, interest payable on the defaulted
interest, to the Persons who are Securityholders on a subsequent special record
date, which date shall be at the earliest practicable date but in all events at
least five Business Days prior to the payment date, in each case at the rate
provided in the Securities and in Section 4.1. The Company shall, with the
consent of the Trustee, fix or cause to be fixed each such special record date
and payment date. At least 15 days before the special record date, the Company
(or the Trustee, in the name of and at the expense of the Company) shall mail
to Securityholders a notice that states the special record date, the related
payment date and the amount of such interest to be paid.
SECTION 2.13. CUSIP Number. The Company in issuing the
Securities may use a "CUSIP" number, and if so, the Trustee shall use the CUSIP
number in notices of redemption or exchange as a convenience to
Securityholders; provided, that no representation shall be deemed to be made by
the Trustee as to the correctness or accuracy of the CUSIP number printed in
the notice or on the Securities, and that reliance may be placed only on the
other identification numbers printed on the Securities. The Company shall
promptly notify the Trustee of any change in the CUSIP number.
SECTION 2.14. Deposit of Moneys. Prior to 11:00 a.m. New
York City time on each Interest Payment Date and Maturity Date, the Company
shall have deposited with the Paying Agent in immediately available funds money
sufficient to make cash payments, if any, due on such Interest Payment Date or
Maturity Date, as the case may be, in a timely manner which permits the Paying
Agent to remit payment to the Securityholders on such Interest Payment Date or
Maturity Date, as the case may be.
SECTION 2.15. Restrictive Legends. Each Global Note and
Physical Security that constitutes a Restricted Security shall bear the
following legend (the "Private Placement Legend") unless otherwise agreed by
the Company and the Securityholder thereof:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY,
MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED
<PAGE> 40
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STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS
SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE SECURITYHOLDER (1)
REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1),
(2), (3) or (7) UNDER THE SECURITIES ACT) (AN "ACCREDITED INVESTOR")
OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN
OFFSHORE TRANSACTION, (2) AGREES THAT IT WILL NOT WITHIN THREE YEARS
AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY RESELL OR OTHERWISE
TRANSFER THIS SECURITY EXCEPT (A) TO THE ISSUER OR ANY SUBSIDIARY
THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL
BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C)
INSIDE THE UNITED STATES TO AN ACCREDITED INVESTOR THAT, PRIOR TO SUCH
TRANSFER FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY A U.S.
BROKER-DEALER) TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON
TRANSFER OF THIS SECURITY (THE FORM OF WHICH LETTER CAN BE OBTAINED
FROM THE TRUSTEE OR REGISTRAR), (D) OUTSIDE THE UNITED STATES IN AN
OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 OF REGULATION S UNDER
THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION
PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (F)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS
SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS SECURITY WITHIN THREE
YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY, IF THE PROPOSED
TRANSFEREE IS AN ACCREDITED INVESTOR, THE SECURITYHOLDER MUST, PRIOR
TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE ISSUER SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM
MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE
PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE
TERMS "OFFSHORE
<PAGE> 41
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TRANSACTION" "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN
TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
Each Global Note shall also bear the following legend on the
face thereof:
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN
DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A
WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY, OR BY ANY SUCH
NOMINEE OF THE DEPOSITARY, OR BY THE DEPOSITARY OR NOMINEE OF SUCH
SUCCESSOR DEPOSITARY OR ANY SUCH NOMINEE, TO A SUCCESSOR DEPOSITARY OR
A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. TRANSFERS OF THIS GLOBAL
SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO
NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S
NOMINEE, AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET
FORTH IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO
THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE
& CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR
TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
SECTION 2.16. Book-Entry Provisions for Global Security. (a)
The Global Note initially shall (i) be registered in the name of the Depositary
or the nominee of such Depositary, (ii) be delivered to the Trustee as
custodian for such Depositary and (iii) bear legends as set forth in Section
2.15.
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Members of, or participants in, the Depositary ("Agent
Members") shall have no rights under this Indenture with respect to any Global
Note held on their behalf by the Depositary, or the Trustee as its custodian,
or under the Global Note, and the Depositary may be treated by the Company, the
Trustee and any agent of the Company or the Trustee as the absolute owner of
the Global Note for all purposes whatsoever. Notwithstanding the foregoing,
nothing herein shall prevent the Company, the Trustee or any agent of the
Company or the Trustee from giving effect to any written certification, proxy
or other authorization furnished by the Depositary or impair, as between the
Depositary and its Agent Members, the operation of customary practices
governing the exercise of the rights of a Holder of any Security.
(b) Transfers of the Global Note shall be limited to
transfers in whole, but not in part, to the Depositary, its successors or their
respective nominees. Interest of beneficial owners in the Global Note may be
transferred or exchanged for Physical Securities in accordance with the rules
and procedures of the Depositary and the provisions of Section 2.17. In
addition, Physical Securities shall be transferred to all beneficial owners in
exchange for their beneficial interests in the Global Note if (i) the
Depositary notifies the Company that it is unwilling or unable to continue as
Depositary for the Global Note and a successor depository is not appointed by
the Company within 90 days of such notice or (ii) an Event of Default has
occurred and is continuing and the Registrar has received a written request
from the Depositary to issue Physical Securities.
(c) In connection with any transfer or exchange of a portion
of the beneficial interest in the Global Note to beneficial owners pursuant to
paragraph (b) above, the Registrar shall (if one or more Physical Securities
are to be issued) reflect on its books and records the date and a decrease in
the principal amount of the beneficial interest in the Global Note to be
transferred, and the Company shall execute, and the Trustee shall authenticate
and deliver, one or more Physical Securities of like tenor and amount.
(d) In connection with the transfer of the entire Global
Note to beneficial owners pursuant to paragraph (b) above, the Global Note
shall be deemed to be surrendered to the Trustee for cancellation, and the
Company shall execute, and the Trustee shall authenticate and deliver, to each
beneficial owner identified by the Depositary in exchange for its beneficial
interest in the Global Note, an equal aggregate principal amount of Physical
Securities of authorized denominations.
(e) Any Physical Security constituting a Restricted Security
delivered in exchange for an interest in the Global Note pursuant to paragraph
(b) or (c) above shall, except as otherwise provided by paragraphs (a)(i)(x)
and (c) of Section 2.17, bear the legend regarding transfer restrictions
applicable to the Physical Securities set forth in Section 2.15.
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(f) The Holder of the Global Note may grant proxies and
otherwise authorize any Person, including Agent Members and Persons that may
hold interests through Agent Members, to take any action which a Securityholder
is entitled to take under this Indenture or the Securities.
SECTION 2.17. Special Transfer Provisions.
(a) Transfers to Non-QIB Institutional Accredited Investors
and Non-U.S. Persons. The following provisions shall apply with respect to the
registration of any proposed transfer of a Security constituting a Restricted
Security to any Institutional Accredited Investor which is not a QIB or to any
Non-U.S. Person:
(i) the Registrar shall register the transfer of any
Security constituting a Restricted Security, whether or not such
Security bears the Private Placement Legend, if (x) the requested
transfer is after November 27, 1999 or (y) (1) in the case of a
transfer to an Institutional Accredited Investor which is not a QIB
(excluding Non-U.S.Persons), the proposed transferee has delivered to
the Registrar a certificate substantially in the form of Exhibit C
hereto or (2) in the case of a transfer to a Non-U.S. Person, the
proposed transferor has delivered to the Registrar a certificate
substantially in the form of Exhibit D hereto; and
(ii) if the proposed transferor is an Agent Member holding a
beneficial interest in the Global Note, upon receipt by the Registrar
of (x) the certificate, if any, required by paragraph (i) above and
(y) instructions given in accordance with the Depositary's and the
Registrar's procedures, (a) the Registrar shall reflect on its books
and records the date and (if the transfer does not involve a transfer
of outstanding Physical Securities) a decrease in the principal amount
of the Global Note in an amount equal to the principal amount of the
beneficial interest in the Global Note to be transferred, and (b) the
Company shall execute and the Trustee shall authenticate and deliver
one or more Physical Securities of like tenor and amount.
(b) Transfers to QIBs. The following provisions shall apply
with respect to the registration of any proposed transfer of a Security
constituting a Restricted Security to a QIB (excluding transfers to Non-U.S.
Persons):
(i) the Registrar shall register the transfer if such
transfer is being made by a proposed transferor who has checked the
box provided for on the form of Security stating, or has otherwise
advised the Company and the Registrar in writing, that the sale has
been effected in compliance with the provisions of Rule 144A to a
transferee
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36
who has signed the certification provided for on the form of Security
stating, or has otherwise advised the Company and the Registrar in
writing, that it is purchasing the Security for its own account or an
account with respect to which it exercises sole investment discretion
and that any such account is a QIB within the meaning of Rule 144A,
and it is aware that the sale to it is being made in reliance on Rule
144A and acknowledges that it has received such information regarding
the Company as it has requested pursuant to Rule 144A or has
determined not to request such information and that it is aware that
the transferor is relying upon its foregoing representations in order
to claim the exemption from registration provided by Rule 144A; and
(ii) if the proposed transferee is an Agent Member and the
Securities to be transferred consist of Physical Securities which
after transfer are to be evidenced by an interest in the Global Note,
upon receipt by the Registrar of instructions given in accordance with
the Depositary's and the Registrar's procedures, the Registrar shall
reflect on its books and records the date and an increase in the
principal amount of the Global Note in an amount equal to principal
amount of the Physical Securities to be transferred, and the Trustee
shall cancel the Physical Securities so transferred.
(c) Private Placement Legend. Upon the registration of the
transfer, exchange or replacement of Securities not bearing the Private
Placement Legend, the Registrar shall deliver Securities that do not bear the
Private Placement Legend. Upon the registration of the transfer, exchange or
replacement of Securities bearing the Private Placement Legend, the Registrar
shall deliver only Securities that bear the Private Placement Legend unless (i)
the circumstance contemplated by paragraph (a)(i)(x) of this Section 2.17
exists or (ii) there is delivered to the Registrar an Opinion of Counsel
reasonably satisfactory to the Company and the Trustee to the effect that
neither such legend nor the related restrictions on transfer are required in
order to maintain compliance with the provisions of the Securities Act.
(d) General. By its acceptance of any Security bearing the
Private Placement Legend, each Holder of such a Security acknowledges the
restrictions on transfer of such Security set forth in this Indenture and in
the Private Placement Legend and agrees that it will transfer such Security
only as provided in this Indenture.
The Registrar shall retain for at least two years copies of
all letters, notices and other written communications received pursuant to
Section 2.16 hereof or this Section 2.17. The Company shall have the right to
inspect and make copies of all such letters, notices or other written
communications at any reasonable time upon the giving of reasonable written
notice to the Registrar.
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SECTION 2.18. Persons Deemed Owners. Prior to due
presentment of a Security for registration of transfer and subject to Section
2.12, the Company, the Trustee, any Paying Agent, any Registrar and any co-
registrar may deem and treat the Person in whose name any Security shall be
registered upon the register of Securities kept by the Registrar as the
absolute owner of such Security (whether or not such Security shall be overdue
and notwithstanding any notation of the ownership or other writing thereon made
by anyone other than the Company, any Registrar or any co-registrar) for the
purpose of receiving payments of principal of or interest on such Security and
for all other purposes; and none of the Company, the Trustee, any Paying Agent,
any Registrar or any co-registrar shall be affected by any notice to the
contrary.
SECTION 2.19. Record Date. The record date for purposes of
determining the identity of Securityholders entitled to vote or consent to any
action by vote or consent authorized or permitted under this Indenture shall be
the later of (i) 30 days prior to the first solicitation of such consent or
(ii) the date of the most recent list of Holders furnished to the Trustee, if
applicable, pursuant to Section 2.5.
ARTICLE III
Redemption
SECTION 3.1. Notices to Trustee. If the Company elects to
redeem Securities pursuant to paragraph 5 of the Securities, it shall notify
the Trustee in writing of the Redemption Date and the principal amount of
Securities to be redeemed.
The Company shall give each notice to the Trustee provided for
in this Section at least 50 days but no more than 60 days before the redemption
date unless the Trustee consents to a shorter period. Such notice shall be
accompanied by an Officers' Certificate from the Company to the effect that
such redemption will comply with the conditions herein. If fewer than all the
Securities are to be redeemed, the record date relating to such redemption
shall be selected by the Company and set forth in the related notice given to
the Trustee, which record date shall be not less than 15 days after the date of
such notice.
SECTION 3.2. Selection of Securities To Be Redeemed. If
fewer than all the Securities are to be redeemed, the Trustee shall select the
Securities to be redeemed pro rata or by lot or by a method that complies with
applicable legal and securities exchange requirements, if any, and that the
Trustee in its sole discretion considers fair and appropriate; provided,
however, that if a partial redemption is made with the proceeds of an Equity
Offering, selection of the Securities or
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portion thereof for redemption shall be made by the Trustee only on a pro rata
basis unless such method is otherwise prohibited. The Trustee shall make the
selection from outstanding Securities not previously called for redemption.
The Trustee may select for redemption portions of the principal of Securities
that have denominations larger than $1,000. Securities and portions of them
the Trustee selects shall be in amounts of $1,000 or a whole multiple of
$1,000. Provisions of this Indenture that apply to Securities called for
redemption also apply to portions of Securities called for redemption. The
Trustee shall notify the Company promptly of the Securities or portions of
Securities to be redeemed.
SECTION 3.3. Notice of Redemption. At least 30 days but not
more than 60 days before a date for redemption of Securities, the Company shall
mail a notice of redemption by first-class mail to each Holder of Securities to
be redeemed, at such Holder's registered address.
The notice shall identify the Securities to be redeemed and
shall state:
(1) the redemption date;
(2) the redemption price;
(3) the name and address of the Paying Agent;
(4) that Securities called for redemption must be
surrendered to the Paying Agent to collect the redemption price;
(5) if fewer than all the Securities are to be redeemed, the
identification of the particular Securities (or portion thereof) to be
redeemed, as well as the aggregate principal amount of Securities to
be redeemed and the aggregate principal amount of Securities to be
outstanding after such partial redemption;
(6) that, unless the Company defaults in making such
redemption payment or the Paying Agent is prohibited from making such
payment pursuant to the terms of this Indenture, interest on
Securities (or portion thereof) called for redemption ceases to accrue
on and after the redemption date;
(7) the CUSIP number, if any, printed on the Securities
being redeemed;
(8) that no representation is made as to the correctness or
accuracy of the CUSIP number, if any, listed in such notice or printed
on the Securities;
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(9) if any Security is being redeemed in part, the portion
of the principal amount of such Security to be redeemed and that,
after the redemption date upon surrender of such Security, a new
Security or Securities in principal amount equal to the unredeemed
portion shall be issued; and
(10) the paragraph of the Securities and/or Section of this
Indenture pursuant to which the Securities called for redemption are
being redeemed.
At the Company's request made in writing to the Trustee at
least 45 days (unless a shorter period is acceptable to the Trustee) prior to
the date fixed for redemption, the Trustee shall give the notice of redemption
in the name and the expense of the Company to each Holder whose Securities are
to be redeemed at the last address for such Holder then shown on the registry
books. In such event, the Company shall provide the Trustee with the
information required by this Section.
SECTION 3.4. Effect of Notice of Redemption. Once notice of
redemption is mailed, Securities called for redemption become due and payable
on the redemption date and at the redemption price stated in the notice. Upon
surrender to the Paying Agent, such Securities shall be paid at the redemption
price stated in the notice, plus accrued interest to the redemption date;
provided, that if the redemption date is after a regular Record Date and on or
prior to the Interest Payment Date, the accrued interest shall be payable to
the Securityholder of the redeemed Securities registered on the relevant Record
Date. Failure to give notice or any defect in the notice to any Holder shall
not affect the validity of the notice to any other Holder.
SECTION 3.5. Deposit of Redemption Price. (a) Prior to
11:00 a.m., New York City time, on the redemption date, the Company shall
deposit with the Trustee or with the Paying Agent money sufficient to pay the
redemption price of and accrued interest on all Securities to be redeemed on
that date. The Trustee or the Paying Agent shall promptly return to the
Company any money deposited with the Trustee or the Paying Agent by the Company
in excess of the amounts necessary to pay the redemption price of, and accrued
interest on, all Securities to be redeemed.
(b) Except as set forth in the last sentence of this
paragraph, on and after the redemption date, interest ceases to accrue on the
Securities or the portions of Securities called for redemption. If a Security
is redeemed on or after an interest Record Date but on or prior to the related
Interest Payment Date, then any accrued and unpaid interest shall be paid to
the Person in whose name such Security was registered at the close of business
on such record date. If any Security called for redemption shall not be so
paid upon surrender for redemption because of the failure of the Company to
comply with the preceding paragraph, interest shall be paid on the unpaid
principal, from the redemption date until such principal is paid and, to the
extent lawful, on any
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interest not paid on such unpaid principal, in each case at the rate provided
in the Securities and in Section 4.1.
SECTION 3.6. Securities Redeemed in Part. Upon surrender of
a Security that is redeemed in part, the Company shall execute and the Trustee
shall authenticate for and in the name of the Holder (at the Company's
expense), a new Security equal in a principal amount to the unredeemed portion
of the Security surrendered.
ARTICLE IV
Covenants
SECTION 4.1. Payment of Securities. The Company shall
promptly pay the principal of, premium, if any, and interest on the Securities
on the dates and in the manner provided in the Securities and in this
Indenture. Principal, premium, if any, and interest shall be considered paid
on the date due if on such date the Trustee or the Paying Agent holds in
accordance with this Indenture money sufficient to pay all principal and
interest then due and the Trustee or the Paying Agent, as the case may be, is
not prohibited from paying such money to the Securityholders on that date
pursuant to the terms of this Indenture.
The Company shall pay interest (including post-position
interest in any proceeding under any Bankruptcy Law) on overdue principal at
the rate specified therefor in the Securities, and it shall pay interest
(including post-position interest in any proceeding under any Bankruptcy Law)
on overdue installments of interest (without regard to any applicable grace
period) at the same rate to the extent lawful.
Notwithstanding anything to the contrary contained in this
Indenture, the Company may, to the extent it is required to do so by law,
deduct or withhold income or other similar taxes imposed by the United States
of America from principal or interest payments hereunder.
SECTION 4.2. SEC Reports. (a) The Company will file with
the Trustee and provide to the Holders of the Securities, within 15 days after
it files them with the Commission, copies of the quarterly and annual reports
and of the information, documents and other reports (or copies of such portions
of any of the foregoing as the Commission may by rules and regulations
prescribe) which the Company files with the Commission pursuant to Section 13
or 15(d) of the Exchange Act.
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(b) In the event that the Company is not required to file
such reports with the Commission pursuant to the Exchange Act, the Company will
nevertheless deliver such Exchange Act information to the holders of the
Securities within 15 days after it would have been required to file it with the
Commission. Upon qualification of this Indenture under the TIA, the Company
shall also comply with the other provisions of TIA Section 314(a).
(c) The Company and each of the Guarantors shall provide to
any Securityholder any information reasonably requested by such Securityholder
concerning the Company and the Guarantors (including financial statements)
necessary in order to permit such Securityholder to sell or transfer Securities
in compliance with Rule 144A under the Securities Act.
SECTION 4.3. Limitation on Indebtedness. (a) The Company
shall not, and shall not permit any of its Restricted Subsidiaries to, Incur
any Indebtedness; provided, however, that the Company and any of its Restricted
Subsidiaries may Incur Indebtedness if on the date thereof the Consolidated
Coverage Ratio would be greater than 2.00 : 1.00, if such Indebtedness is
Incurred on or prior to the second anniversary of the Issue Date, and 2.25 :
1.00, if such Indebtedness is Incurred thereafter.
(b) Notwithstanding Section 4.3(a), the Company and its
Restricted Subsidiaries may Incur the following Indebtedness: (i) Indebtedness
Incurred pursuant to (A) the New Credit Facility (including, without
limitation, any renewal, extension, refunding, restructuring, replacement or
refinancing thereof referred to in the definition thereof) or (B) any other
agreements or indentures governing Senior Indebtedness; provided, however, that
the aggregate principal amount of all Indebtedness Incurred pursuant to this
clause (i) does not exceed $20 million at any time outstanding, less the
aggregate principal amount thereof repaid with the net proceeds of Asset
Dispositions (to the extent, in the case of a repayment of revolving credit
Indebtedness, the commitment to advance the loans repaid has been terminated);
(ii) Indebtedness represented by Capitalized Lease Obligations, mortgage
financings or purchase money obligations, in each case Incurred for the purpose
of financing all or any part of the purchase price or cost of construction or
improvement of property used in a Related Business or Incurred to Refinance any
such purchase price or cost of construction or improvement, in each case
Incurred no later than 365 days after the date of such acquisition or the date
of completion of such construction or improvement; provided, however, that the
principal amount of any Indebtedness Incurred pursuant to this Section
4.3(b)(ii) shall not exceed $10 million at any time outstanding; (iii)
Permitted Indebtedness; and (iv) Indebtedness (other than Indebtedness
described in clauses (i) - (iii) above) in a principal amount which, when taken
together with the principal amount of all other Indebtedness Incurred pursuant
to this Section 4.3(b)(iv) and then outstanding, will not exceed $15 million
(it being understood that any Indebtedness Incurred under this clause (iv)
shall cease to be deemed Incurred or outstanding for purposes of this clause
<PAGE> 50
42
(iv) (but shall be deemed to be Incurred for purposes of Section 4.3(a) hereof)
from and after the first date on which the Company or its Restricted
Subsidiaries could have Incurred such Indebtedness under Section 4.3(a) without
reliance upon this clause (iv)).
(c) Neither the Company nor any Restricted Subsidiary shall
Incur any Indebtedness under Section 4.3(b) if the proceeds thereof are used,
directly or indirectly, to refinance any Subordinated Obligations of the
Company unless such Indebtedness shall be subordinated to the Securities to at
least the same extent as such Subordinated Obligations. No Restricted
Subsidiary shall Incur any Indebtedness under Section 4.3(b) hereof if the
proceeds thereof are used, directly or indirectly, to refinance any Guarantor
Subordinated Obligation of such Subsidiary Guarantor unless such Indebtedness
shall be subordinated to the obligations of such Subsidiary Guarantor under the
Subsidiary Guarantee to at least the same extent as such Guarantor Subordinated
Obligation.
(d) In addition, the Company shall not Incur any Secured
Indebtedness which is not Senior Indebtedness unless contemporaneously
therewith effective provision is made to secure the Securities equally and
ratably with such Secured Indebtedness for so long as such Secured Indebtedness
is secured by a Lien. No Subsidiary Guarantor shall Incur any Secured
Indebtedness which is not Guarantor Senior Indebtedness unless
contemporaneously therewith effective provision is made to secure such
Subsidiary Guarantor's obligations under the Subsidiary Guarantee equally and
ratably with such Secured Indebtedness for so long as such Secured Indebtedness
is secured by a Lien.
(e) The Company will not permit any Unrestricted Subsidiary
to incur any Indebtedness other than Non-Recourse Debt.
SECTION 4.4. Limitation on Restricted Payments. (a) The
Company shall not, and shall not permit any of its Restricted Subsidiaries,
directly or indirectly, to (i) declare or pay any dividend or make any
distribution on or in respect of its Capital Stock (including any payment in
connection with any merger or consolidation involving the Company or any of its
Restricted Subsidiaries) except (A) dividends or distributions payable in its
Capital Stock (other than Disqualified Stock) or in options, warrants or other
rights to purchase such Capital Stock, and (B) dividends or distributions
payable to the Company or a Restricted Subsidiary of the Company which holds
the equity interest in the paying Restricted Subsidiary (and if such Restricted
Subsidiary paying the dividend or making the distribution is not a Wholly-Owned
Subsidiary, to its other holders of Capital Stock on a pro rata basis), (ii)
purchase, redeem, retire or otherwise acquire for value any Capital Stock of
the Company held by Persons other than a Restricted Subsidiary of the Company
or any Capital Stock of a Restricted Subsidiary of the Company held by any
Affiliate of the Company, other than another Restricted Subsidiary (in either
case, other than in exchange for its
<PAGE> 51
43
Capital Stock (other than Disqualified Stock)), (iii) purchase, repurchase,
redeem, defease or otherwise acquire or retire for value, prior to scheduled
maturity, scheduled repayment or scheduled sinking fund payment, any
Subordinated Obligations (other than the purchase, repurchase or other
acquisition of Subordinated Obligations purchased in anticipation of satisfying
a sinking fund obligation, principal installment or final maturity, in each
case due within one year of the date of purchase, repurchase or acquisition) or
(iv) make any Investment (other than a Permitted Investment) in any Person (any
such dividend, distribution, purchase, redemption, repurchase, defeasance,
other acquisition, retirement or Investment as described in clauses (i) through
(iv) being referred to as a "Restricted Payment"), if at the time the Company
or such Restricted Subsidiary makes such Restricted Payment: (1) a Default
shall have occurred and be continuing (or would result therefrom); or (2) the
Company is not able to incur an additional $1.00 of Indebtedness pursuant to
Section 4.3(a); or (3) the aggregate amount of such Restricted Payment and all
other Restricted Payments declared or made subsequent to the Issue Date would
exceed the sum of: (A) 50% of the Consolidated Net Income accrued during the
period (treated as one accounting period) from the first day of the fiscal
quarter beginning on or after the Issue Date to the end of the most recent
fiscal quarter ending prior to the date of such Restricted Payment as to which
financial results are available (but in no event ending more than 135 days
prior to the date of such Restricted Payment) (or, in case such Consolidated
Net Income shall be a deficit, minus 100% of such deficit); (B) the aggregate
net proceeds received by the Company from the issue or sale of its Capital
Stock (other than Disqualified Stock) or other capital contributions subsequent
to the Issue Date (other than net proceeds received from an issuance or sale of
such Capital Stock to a Subsidiary of the Company or an employee stock
ownership plan or similar trust); provided, however, that the value of any non-
cash net proceeds shall be as determined by the Board of Directors in good
faith, except that in the event the value of any non-cash net proceeds shall be
$5 million or more, the value shall be as determined in writing by an
independent investment banking firm of nationally recognized standing; (C) the
aggregate Net Cash Proceeds received by the Company from the issue or sale of
its Capital Stock (other than Disqualified Stock) to an employee stock
ownership plan or similar trust subsequent to the Issue Date; provided,
however, that if such plan or trust Incurs any Indebtedness to or Guaranteed by
the Company or any of its Restricted Subsidiaries to finance the acquisition of
such Capital Stock, such aggregate amount shall be limited to such Net Cash
Proceeds less such Indebtedness Incurred or Guaranteed by the Company or any of
its Restricted Subsidiaries and any increase in the Consolidated Net Worth of
the Company resulting from principal repayments made by such plan or trust with
respect to Indebtedness Incurred by it to finance the purchase of such Capital
Stock; (D) the amount by which Indebtedness of the Company is reduced on the
Company's balance sheet upon the conversion or exchange (other than by a
Restricted Subsidiary of the Company) subsequent to the Issue Date of any
Indebtedness of the Company convertible or exchangeable for Capital Stock of
the Company (less the amount of any cash, or other property, distributed by the
Company upon such conversion or exchange); (E) the amount equal to the net
reduction in Investments (other than
<PAGE> 52
44
Permitted Investments) made after the Issue Date by the Company or any of its
Restricted Subsidiaries in any Person resulting from (i) repurchases or
redemptions of such Investments by such Person, proceeds realized upon the sale
of such Investment to an unaffiliated purchaser, and repayments of loans or
advances or other transfers of assets by such Person to the Company or any
Restricted Subsidiary of the Company or (ii) the redesignation of Unrestricted
Subsidiaries as Restricted Subsidiaries (valued in each case as provided in the
definition of "Investment") not to exceed, in the case of any Unrestricted
Subsidiary, the amount of Investments previously included in the calculation of
the amount of Restricted Payments; provided, however, that no amount shall be
included under this clause (E) of this Section 4.4(a) to the extent it is
already included in Consolidated Net Income; and (F) the aggregate Net Cash
Proceeds received by a Person in consideration for the issuance of such
Person's Capital Stock (other than Disqualified Stock) which are held by such
Person at the time such Person is merged with and into the Company in
accordance with Section 5.1 subsequent to the Issue Date; provided, however,
that concurrently with or immediately following such merger the Company uses an
amount equal to such Net Cash Proceeds to redeem or repurchase the Company's
Capital Stock.
(b) The provisions of Section 4.4(a) hereof shall not
prohibit: (i) any purchase or redemption of Capital Stock or Subordinated
Obligations of the Company made by exchange for, or out of the proceeds of the
substantially concurrent sale of, Capital Stock of the Company (other than
Disqualified Stock and other than Capital Stock issued or sold to a Subsidiary
or an employee stock ownership plan or similar trust); provided, however, that
(A) such purchase or redemption shall be excluded in the calculation of the
amount of Restricted Payments and (B) the Net Cash Proceeds from such sale
shall be excluded from clause (3) (B) of Section 4.4(a) hereof; (ii) any
purchase or redemption of Subordinated Obligations of the Company made by
exchange for, or out of the proceeds of the substantially concurrent sale of,
Subordinated Obligations of the Company; provided, however, that such purchase
or redemption shall be excluded in the calculation of the amount of Restricted
Payments; (iii) any purchase or redemption of Subordinated Obligations from Net
Available Cash to the extent permitted under Section 4.6 hereof; provided,
however, that such purchase or redemption shall be excluded in the calculation
of the amount of Restricted Payments; (iv) dividends paid within 60 days after
the date of declaration if at such date of declaration such dividend would have
complied with this provision; provided, however, that such dividend shall be
included in the calculation of the amount of Restricted Payments; (v) payments
by the Company to fund the payment by any direct or indirect holding company
thereof of audit, accounting, legal or other similar expenses, to pay franchise
or other similar taxes and to pay other corporate overhead expenses, so long as
such dividends are paid as and when needed by its respective direct or indirect
holding company and so long as the aggregate amount of payments pursuant to
this clause (v) does not exceed $500,000 in any calendar year; (vi) payments by
the Company to fund taxes of Holding for a given taxable year in an amount
equal to the sum of (A) the lesser of (x) the Company's
<PAGE> 53
45
"separate return liability" and (y) the portion of the tax liability of the
"affiliated group" (within the meaning of Section 1504(a)(1) of the Code) of
which the Company is a member in accordance with the method described in
Treasury Regulations Section 1.1552-1(a)(1) and (B) to the extent that the
Company files a combined or consolidated income tax return with Holding under
any state or local income tax law for a taxable year, payments by the Company
to Holding to fund such tax liability for such taxable year shall be provided
for in a manner as similar as possible to that provided for United States
federal income taxes in (A) of this clause (vi); provided that, for purposes of
this clause (vi), "separate return liability" for a given taxable year shall
mean the hypothetical United States federal income tax liability of the Company
determined as if the Company had filed its own U.S. federal income tax return
for such taxable year; (vii) payments of dividends on the Company's common
stock after an initial public offering of common stock of the Company or of
Holding in an annual amount not to exceed 6.0% of the gross proceeds (before
deducting underwriting discounts and commissions and other fees and expenses of
the offering) received by the Company (directly or as a common equity
contribution from Holding) from shares of common stock sold for the account of
the Company or of Holding, as the case may be (and not for the account of any
stockholder), in such initial public offering; (viii) payments by the Company
to repurchase, or to enable Holding to repurchase, Capital Stock or other
securities of Holding from members of management of Holding or the Company in
an aggregate amount not to exceed $2 million; (ix) payments to enable Holding
to redeem or repurchase stock purchase or similar rights granted by Holding
with respect to its Capital Stock in an aggregate amount not to exceed $1
million; (x) payments, not to exceed $200,000 in the aggregate, to enable
Holding to make cash payments to holders of its Capital Stock in lieu of the
issuance of fractional shares of its Capital Stock; (xi) payments made pursuant
to any merger, consolidation or sale of assets effected in accordance with
Section 5.1; provided, however, that no such payment may be made pursuant to
this clause (xi) unless, after giving effect to such transaction (and the
incurrence of any Indebtedness in connection therewith and the use of the
proceeds thereof), the Company would be able to Incur $1.00 of additional
Indebtedness in compliance with paragraph (a) under Section 4.3 and such that,
after Incurring that $1.00 of additional Indebtedness, the Leverage Ratio would
be less than 3.50 : 1.00; (xii) the redemption payments to be made by the
Company on the Issue Date in connection with the Transaction as described in
the Offering Memorandum; and (xiii) payments to the former Bishop stockholders
required pursuant to the Stock Purchase Agreement dated as of August 22, 1996
relating to the Company's acquisition of Bishop, which payments shall not
exceed $1,000,000 in the aggregate, provided, however, that in the case of
clauses (vii), (viii), (ix), (x) and (xi) no Default or Event of Default shall
have occurred or be continuing at the time of such payment or as a result
thereof.
(c) For purposes of determining compliance with the covenant
set forth in this Section 4.4, Restricted Payments may be made with cash or
non-cash assets, provided that any Restricted Payment made other than in cash
shall be valued at the fair market value (determined,
<PAGE> 54
46
subject to the additional requirements of the immediately succeeding proviso,
in good faith by the Company) of the assets so utilized in making such
Restricted Payment, provided, further, that (i) in the case of any Restricted
Payment made with capital stock or indebtedness, such Restricted Payment shall
be deemed to be made in an amount equal to the greater of the fair market value
thereof and the liquidation preference (if any) or principal amount of the
capital stock or indebtedness, as the case may be, so utilized, and (ii) in the
case of any Restricted Payment in an aggregate amount in excess of $5.0
million, a written opinion as to the fairness of the valuation thereof (as
determined by the Company) for purposes of determining compliance with the
covenant set forth in this Section 4.4 shall be issued by an independent
investment banking firm of national standing.
SECTION 4.5. Limitation on Restrictions on Distributions from
Restricted Subsidiaries. The Company shall not, and shall not permit any of
its Restricted Subsidiaries to, create or permit to exist or become effective
any consensual encumbrance or restriction on the ability of any such Restricted
Subsidiary to (i) pay dividends or make any other distributions on its Capital
Stock or pay any Indebtedness or other obligation owed to the Company, (ii)
make any loans or advances to the Company or (iii) transfer any of its property
or assets to the Company; except: (a) any encumbrance or restriction pursuant
to an agreement in effect at or entered into on the Issue Date, including the
New Credit Facility; (b) any encumbrance or restriction with respect to such a
Restricted Subsidiary pursuant to an agreement relating to any Indebtedness
issued by such Restricted Subsidiary on or prior to the date on which such
Restricted Subsidiary was acquired by the Company and outstanding on such date
(other than Indebtedness issued as consideration in, or to provide all or any
portion of the funds or credit support utilized to consummate, the transaction
or series of related transactions pursuant to which such Restricted Subsidiary
became a Restricted Subsidiary of the Company or was acquired by the Company);
(c) any encumbrance or restriction with respect to such a Restricted Subsidiary
pursuant to an agreement evidencing Indebtedness Incurred without violation of
the Indenture or effecting a refinancing of Indebtedness issued pursuant to an
agreement referred to in clauses (a) or (b) above or this clause (c) or
contained in any amendment to an agreement referred to in clauses (a) or (b) or
this clause (c); provided, however, that the encumbrances and restrictions with
respect to such Restricted Subsidiary contained in any of such agreement,
refinancing agreement or amendment, taken as a whole, are no less favorable to
the Holders in any material respect, as determined in good faith by the senior
management of the Company or Board of Directors of the Company, than
encumbrances and restrictions with respect to such Restricted Subsidiary
contained in agreements in effect at, or entered into on, the Issue Date; (d)
in the case of clause (iii) of this Section 4.5, any encumbrance or restriction
(A) that restricts in a customary manner the subletting, assignment or transfer
of any property or asset that is a lease, license, conveyance or contract or
similar property or asset, (B) by virtue of any transfer of, agreement to
transfer, option or right with respect to, or Lien on, any property or assets
of the Company or any Restricted Subsidiary not otherwise prohibited by the
Indenture, (C) that is included
<PAGE> 55
47
in a licensing agreement to the extent such restrictions limit the transfer of
the property subject to such licensing agreement or (D) arising or agreed to in
the ordinary course of business and that does not, individually or in the
aggregate, detract from the value of property or assets of the Company or any
of its Subsidiaries in any manner material to the Company or any such
Restricted Subsidiary; (e) in the case of clause (iii) of this Section 4.5,
restrictions contained in security agreements, mortgages or similar documents
securing Indebtedness of a Restricted Subsidiary to the extent such
restrictions restrict the transfer of the property subject to such security
agreements; (f) any restriction with respect to such a Restricted Subsidiary
imposed pursuant to an agreement entered into for the sale or disposition of
all or substantially all the Capital Stock or assets of such Restricted
Subsidiary pending the closing of such sale or disposition; and (g)
encumbrances or restrictions arising or existing by reason of applicable law.
SECTION 4.6. Limitation on Sales of Assets and Subsidiary
Stock. (a) The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, make any Asset Disposition unless (i) the Company or such
Restricted Subsidiary receives consideration at the time of such Asset
Disposition at least equal to the fair market value, as determined in good
faith by the Company's senior management or the Board of Directors (including
as to the value of all non-cash consideration), of the shares and assets
subject to such Asset Disposition, (ii) at least 75% of the consideration
thereof received by the Company or such Restricted Subsidiary is in the form of
cash or cash equivalents and (iii) an amount equal to 100% of the Net Available
Cash from such Asset Disposition is applied by the Company (or such Restricted
Subsidiary, as the case may be) (A) first, to the extent the Company or any
Restricted Subsidiary elects (or is required by the terms of any Senior
Indebtedness), to prepay, repay or purchase (x) Senior Indebtedness or (y)
Indebtedness (other than Preferred Stock) of a Wholly-Owned Subsidiary (in each
case other than Indebtedness owed to the Company) within 180 days from the
later of the date of such Asset Disposition or the receipt of such Net
Available Cash; (B) second, within one year from the receipt of such Net
Available Cash, to the extent of the balance of such Net Available Cash after
application in accordance with clause (A), at the Company's election either (x)
to the investment in or acquisition of Additional Assets or (y) to prepay,
repay or purchase (1) Senior Indebtedness or (2) Indebtedness (other than
Preferred Stock) of a Wholly-Owned Subsidiary (in each case other than
Indebtedness owed to the Company); (C) third, within 45 days after the later of
the application of Net Available Cash in accordance with clauses (A) and (B)
and the date that is one year from the receipt of such Net Available Cash, to
the extent of the balance of such Net Available Cash after application in
accordance with clauses (A) and (B), to make an offer to purchase Securities at
par plus accrued and unpaid interest, if any, thereon; and (D) fourth, to the
extent of the balance of such Net Available Cash after application in
accordance with clauses (A), (B) and (C), to (w) the investment in or
acquisition of Additional Assets, (x) the making of Temporary Cash Investments,
(y) the prepayment, repayment or purchase of Indebtedness of the Company (other
than Indebtedness owing to any Subsidiary of the Company)
<PAGE> 56
48
or Indebtedness of any Subsidiary (other than Indebtedness owed to the Company)
or (z) any other purpose otherwise permitted under the Indenture, in each case
within the later of 45 days after the application of Net Available Cash in
accordance with clauses (A), (B) and (C) or the date that is one year from the
receipt of such Net Available Cash; provided, however, that, in connection with
any prepayment, repayment or purchase of Indebtedness pursuant to clause (A),
(B), (C) or (D) above, the Company or such Restricted Subsidiary shall retire
such Indebtedness and shall cause the related loan commitment (if any) to be
permanently reduced in an amount equal to the principal amount so prepaid,
repaid or purchased. Notwithstanding the foregoing provisions, the Company and
its Restricted Subsidiaries shall not be required to apply any Net Available
Cash in accordance herewith except to the extent that the aggregate Net
Available Cash from all Asset Dispositions which are not applied in accordance
with this covenant at any time exceed $5 million. The Company shall not be
required to make an offer for Securities pursuant to this covenant if the Net
Available Cash available therefor (after application of the proceeds as
provided in clauses (A) and (B)) is less than $5 million for any particular
Asset Disposition (which lesser amounts shall be carried forward for purposes
of determining whether an offer is required with respect to the Net Available
Cash from any subsequent Asset Disposition).
For the purposes of this covenant, the following will be
deemed to be cash: (x) the assumption by the transferee of Senior Indebtedness
of the Company or Indebtedness of any Restricted Subsidiary of the Company and
the release of the Company or such Restricted Subsidiary from all liability on
such Senior Indebtedness or Indebtedness in connection with such Asset
Disposition (in which case the Company shall, without further action, be deemed
to have applied such assumed Indebtedness in accordance with clause (A) of the
preceding paragraph) and (y) securities received by the Company or any
Restricted Subsidiary of the Company from the transferee that are promptly
converted by the Company or such Restricted Subsidiary into cash.
Notwithstanding the foregoing, the Company and its Restricted
Subsidiaries will be permitted to consummate an Asset Swap if (i) at the time
of entering into such Asset Swap or immediately after giving effect to such
Asset Swap, no Default or Event of Default shall have occurred or be continuing
or would occur as a consequence thereof, (ii) in the event such Asset Swap
involves an aggregate amount in excess of $1 million, the terms of such Asset
Swap have been approved by a majority of the members of the Board of Directors
of the Company, and (iii) in the event such Asset Swap involves an aggregate
amount in excess of $5 million, the Company has received a written opinion from
an independent investment banking firm of nationally recognized standing that
such Asset Swap is fair to the Company or such Restricted Subsidiary, as the
case may be, from a financial point of view.
<PAGE> 57
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(b) In the event of an Asset Disposition that requires the
purchase of Securities pursuant to Section 4.6(a)(iii)(C), the Company will be
required to purchase Securities tendered pursuant to an offer (the "Offer") by
the Company for the Securities at a purchase price of 100% of their principal
amount plus accrued and unpaid interest, if any, to the purchase date in
accordance with the procedures (including prorating in the event of
oversubscription) set forth in Section 4.6(c). If the aggregate purchase price
of the Securities tendered pursuant to the offer is less than the Net Available
Cash allotted to the purchase of the Securities, the Company will apply the
remaining Net Available Cash in accordance with Section 4.6(a)(iii)(D) above.
(c) (1) Promptly, and in any event within 10 days after the
Company is required to make an Offer, the Company shall deliver to the Trustee
and send, by first-class mail to each Holder, a written notice stating that the
Holder may elect to have his Securities purchased by the Company either in
whole or in part (subject to prorating as hereinafter described in the event
the Offer is oversubscribed) in integral multiples of $1,000 of principal
amount, at the applicable purchase price. The notice shall specify a purchase
date not less than 30 days nor more than 60 days after the date of such notice
(the "Purchase Date").
(2) Not later than the date upon which such written notice
of an Offer is delivered to the Trustee and the Holders, the Company shall
deliver to the Trustee an Officers' Certificate setting forth (i) the amount of
the Offer (the "Offer Amount"), (ii) the allocation of the Net Available Cash
from the Asset Dispositions as a result of which such Offer is being made and
(iii) the compliance of such allocation with the provisions of Section 4.6(a).
Upon the expiration of the period (the "Offer Period") for which the Offer
remains open, the Company shall deliver to the Trustee for cancellation the
Securities or portions thereof which have been properly tendered to and are to
be accepted by the Company. The Trustee shall, on the Purchase Date, mail or
deliver payment to each tendering Holder in the amount of the purchase price of
the Securities tendered by such Holder to the extent such funds are available
to the Trustee.
(3) Holders electing to have a Security purchased will be
required to surrender the Security, with an appropriate form duly completed, to
the Company at the address specified in the notice prior to the expiration of
the Offer Period. Each Holder will be entitled to withdraw its election if the
Trustee or the Company receives, not later than one Business Day prior to the
expiration of the Offer Period, a telegram, telex, facsimile transmission or
letter from such Holder setting forth the name of such Holder, the principal
amount of the Security or Securities which were delivered for purchase by such
Holder and a statement that such Holder is withdrawing his election to have
such Security or Securities purchased. If at the expiration of the Offer
Period the aggregate principal amount of Securities surrendered by Holders
exceeds the Offer Amount, the Company shall select the Securities to be
purchased on a pro rata basis (with such adjustments as may be deemed
<PAGE> 58
50
appropriate by the Company so that only Securities in denominations of $1,000,
or integral multiples thereof, shall be purchased). Holders whose Securities
are purchased only in part will be issued new Securities equal in principal
amount to the unpurchased portion of the Securities surrendered.
(d) The Company will comply, to the extent applicable, with
the requirements of Section 14(e) of the Exchange Act and any other securities
laws or regulations in connection with the repurchase of Securities pursuant to
this Section 4.6. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section 4.6, the Company will
comply with the applicable securities laws and regulations and will not be
deemed to have breached its obligations under this Indenture by virtue thereof.
SECTION 4.7. Limitation on Affiliate Transactions. (a) The
Company will not, and will not permit any of its Restricted Subsidiaries to,
directly or indirectly, enter into or conduct any transaction or series of
related transactions (including the purchase, sale, lease or exchange of any
property or the rendering of any service) with or for the benefit of any
Affiliate of the Company other than a Wholly-Owned Subsidiary (an "Affiliate
Transaction") unless: (i) the terms of such Affiliate Transaction are no less
favorable to the Company or such Restricted Subsidiary, as the case may be,
than those that could be obtained at the time of such transaction in arm's-
length dealings with a Person who is not such an Affiliate; (ii) in the event
such Affiliate Transaction involves an aggregate amount in excess of $2.5
million, the terms of such transaction have been approved by a majority of the
members of the Board of Directors of the Company and by a majority of the
disinterested members of such Board, if any (and such majority or majorities,
as the case may be, determines that such Affiliate Transaction satisfies the
criteria in (i) above); and (iii) in the event such Affiliate Transaction
involves an aggregate amount in excess of $5 million, the Company has received
a written opinion from an independent investment banking firm of nationally
recognized standing that such Affiliate Transaction is fair to the Company or
such Restricted Subsidiary, as the case may be, from a financial point of view.
(b) The foregoing provisions of Section 4.7(a) shall not
apply to (i) any Restricted Payment permitted to be made pursuant to Section
4.4, (ii) any issuance of securities, or other payments, awards or grants in
cash, securities or otherwise pursuant to, or the funding of, employment
arrangements, or any stock options and stock ownership plans for the benefit of
employees, officers and directors, consultants and advisors approved by the
Board of Directors of the Company, (iii) loans or advances to employees in the
ordinary course of business of the Company or any of its Restricted
Subsidiaries, (iv) any transaction between Wholly-Owned Subsidiaries, (v)
indemnification agreements with, and the payment of fees and indemnities to,
directors, officers and employees of the Company and its Restricted
Subsidiaries, in each case in the ordinary course of business, (vi)
transactions pursuant to agreements as in existence on the Issue Date which are
(x)
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described in the Offering Memorandum or (y) otherwise, in the aggregate,
immaterial to the Company and its Restricted Subsidiaries taken as a whole,
(vii) any employment, non-competition or confidentiality agreements entered
into by the Company or any of its Restricted Subsidiaries with its employees in
the ordinary course of business, (viii) payments made in connection with the
Transaction, including fees to Hicks Muse, as described in the Offering
Memorandum, (ix) the issuance of Capital Stock of the Company (other than
Disqualified Stock) and (x) any obligations of the Company pursuant to the
Monitoring and Oversight Agreement and the Financial Advisory Agreement as in
effect on the Issue Date.
SECTION 4.8. Change of Control. (a) Upon the occurrence of
a Change of Control, each Holder shall have the right to require that the
Company repurchase all or any part of such Holder's Securities at a purchase
price in cash equal to 101% of the principal amount thereof plus accrued and
unpaid interest, if any, to the date of purchase (subject to the right of
Holders of record on the relevant Record Date to receive interest on the
relevant Interest Payment Date), such repurchase to be made in accordance with
Section 4.8(b) below.
(b) Within 30 days following any Change of Control, unless
the Company has mailed a redemption notice with respect to all the outstanding
Securities in connection with such Change of Control, the Company shall mail a
notice to each Holder with a copy to the Trustee stating:
(1) that a Change of Control has occurred and that such
Holder has the right to require the Company to purchase such Holder's
Securities at a purchase price in cash equal to 101% of the principal
amount thereof plus accrued and unpaid interest, if any, to the date
of purchase (subject to the right of Holders of record on a Record
Date to receive interest on the relevant Interest Payment Date);
(2) the repurchase date (which shall be no earlier than 30
days nor later than 60 days from the date such notice is mailed); and
(3) the procedures determined by the Company, consistent
with this Section, that a Holder must follow in order to have its
Securities purchased.
(c) Holders electing to have a Security purchased will be
required to surrender the Security, with an appropriate form duly completed, to
the Company at the address specified in the notice at least three Business Days
prior to the purchase date. Each Holder will be entitled to withdraw its
election if the Company receives, not later than one Business Day prior to the
purchase date, a telegram, telex, facsimile transmission or letter from such
Holder setting forth the name of
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such Holder, the principal amount of the Security or Securities which were
delivered for purchase by such Holder and a statement that such Holder is
withdrawing his election to have such Security or Securities purchased.
(d) On the purchase date, all Securities purchased by the
Company under this Section shall be delivered to the Trustee for cancellation,
and the Company shall pay the purchase price plus accrued and unpaid interest,
if any, to the Holders entitled thereto.
(e) The Company shall comply, to the extent applicable, with
the requirements of Section 14(e) of the Exchange Act and any other securities
laws or regulations in connection with the repurchase of Securities pursuant to
this Section 4.8. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section 4.8, the Company shall
comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations under this Indenture by virtue thereof.
SECTION 4.9. Limitation on Capital Stock of Restricted
Subsidiaries. The Company will not permit any of its Restricted Subsidiaries
to issue any Capital Stock (other than Preferred Stock) to any Person (other
than to the Company or a Wholly-Owned Subsidiary of the Company) or permit any
Person (other than the Company or a Wholly-Owned Subsidiary of the Company) to
own any Capital Stock (other than Preferred Stock) of a Restricted Subsidiary
of the Company, if in either case as a result thereof such Restricted
Subsidiary would no longer be a Restricted Subsidiary of the Company; provided,
however, that this Section 4.9 shall not prohibit (x) the Company or any of its
Restricted Subsidiaries from selling, leasing or otherwise disposing of all of
the Capital Stock of any Restricted Subsidiary or (y) the designation of a
Restricted Subsidiary as an Unrestricted Subsidiary in compliance with this
Indenture.
SECTION 4.10. Limitation on Layering. The Company shall not
incur any indebtedness if such indebtedness is subordinate or junior in ranking
in any respect to any Senior Indebtedness unless such indebtedness is Senior
Subordinated Indebtedness or is contractually subordinated in right of payment
to all Senior Subordinated Indebtedness (including the Securities). No
Subsidiary Guarantor shall incur any indebtedness if such indebtedness is
contractually subordinate or junior in ranking in any respect to any Guarantor
Senior Indebtedness of such Subsidiary Guarantor unless such indebtedness is
Guarantor Senior Subordinated Indebtedness of such Subsidiary Guarantor or is
contractually subordinated in right of payment to all Guarantor Senior
Subordinated Indebtedness of such Subsidiary Guarantor (including its Guarantee
of the Securities).
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SECTION 4.11. Compliance Certificate. (a) Each of the
Company and each Subsidiary Guarantor shall deliver to the Trustee within 45
days after the end of each fiscal quarter of the Company and 90 days after the
end of each fiscal year of the Company an Officers' Certificate stating that in
the course of the performance by the signers of their duties as Officers of the
Company or such Guarantor they would normally have knowledge of any Default or
Event of Default and whether or not the signers know of any Default or Event of
Default that occurred during such period. If they do, the certificate shall
describe the Default or Event of Default, its status and what action the
Company or such Subsidiary Guarantor is taking or proposes to take with respect
thereto. The Company and each Subsidiary Guarantor also shall comply with TIA
Section 314(a)(4).
(b) So long as not contrary to the then current
recommendations of the American Institute of Certified Public Accountants, the
year-end financial statements delivered pursuant to Section 4.2 above shall be
accompanied by a written statement of (x) the Company's independent public
accountants (who shall be a firm of established national reputation) that in
making the examination necessary for certification of such financial statements
nothing has come to their attention which would lead them to believe that the
Company has violated any provisions of Article 4, 5 or 6 of this Indenture
insofar as they relate to accounting matters or, if any such violation has
occurred, specifying the nature and period of existence thereof, it being
understood that such accountants shall not be liable directly or indirectly to
any Person for any failure to obtain knowledge of any such violation and (y) if
any Restricted Subsidiary's or Guarantor's financial statements are not
prepared on a consolidated basis with the Company's, such Restricted
Subsidiary's or Guarantor's independent public accountants (who shall be a firm
of established national reputation) that in making the examination necessary
for certification of such financial statements nothing has come to their
attention which would lead them to believe that any of the Restricted
Subsidiaries or Guarantors is in Default under this Indenture or, if any such
Default has occurred, specifying the nature and period of existence thereof, it
being understood that such accountants shall not be liable directly or
indirectly to any Person for any failure to obtain knowledge of any such
violation.
(c) The Company and each of the Guarantors shall, so long as
any of the Securities are outstanding, deliver to the Trustee, forthwith upon
any Officer becoming aware of any Default or Event of Default, an Officers'
Certificate specifying such Default, Event of Default and what action the
Company or such Guarantor, as the case may be, is taking or proposes to take
with respect thereto.
SECTION 4.12. Further Instruments and Acts. Upon request of
the Trustee, the Company will execute and deliver such further instruments and
do such further acts as may be reasonably necessary or proper to carry out more
effectively the purpose of this Indenture.
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SECTION 4.13. Use of Proceeds. The Company shall use the net
proceeds from the sale of the Securities to consummate, the transactions
contemplated in the sections of the Offering Memorandum entitled "Use of
Proceeds" and "The Transaction."
SECTION 4.14. Maintenance of Office or Agency. (a) The
Company shall maintain in the Borough of Manhattan, in the City of New York, an
office or agency (which may be an office of the Trustee or an affiliate of the
Trustee, Registrar or co-registrar) where Securities may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
the Company in respect of the Securities and this Indenture may be served. The
Company shall give prior written notice to the Trustee of the location, and any
change in the location, of such office or agency. If at any time the Company
shall fail to maintain any such required office or agency or shall fail to
furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the Corporate Trust Office of the
Trustee.
(b) The Company may also from time to time designate one or
more other offices or agencies where the Securities may be presented or
surrendered for any or all such purposes and may from time to time rescind such
designations; provided, however, that no such designation or rescission shall
in any manner relieve the Company of its obligation to maintain an office or
agency in the Borough of Manhattan, in the City of New York for such purposes.
The Company shall give prior written notice to the Trustee of any such
designation or rescission and of any change in the location of any such other
office or agency.
(c) The Company hereby designates the Corporate Trust Office
of the Trustee as one such office or agency of the Company in accordance with
Section 2.3.
SECTION 4.15. Taxes. The Company and each of the Subsidiary
Guarantors shall pay, and shall cause each of their respective Subsidiaries to
pay, prior to delinquency, all material taxes, assessments, and governmental
levies except as contested in good faith and by appropriate proceedings.
SECTION 4.16. Stay, Extension and Usury Laws. Each of the
Company and the Subsidiary Guarantors covenants (to the extent that it may
lawfully do so) that it shall not at any time insist upon, plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay,
extension or usury law wherever enacted, now or at any time hereafter in force,
that may affect the covenants or the performance of this Indenture (including,
but not limited to, the payment of the principal of or interest on the
Securities); and the Company and each Subsidiary Guarantor (to the extent that
they may lawfully do so) hereby expressly waive all benefit or advantage of any
such law, and covenant that they shall not, by resort to any such law, hinder,
delay or impede the execution of
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any power herein granted to the Trustee, but shall suffer and permit the
execution of every such power as though no such law has been enacted.
SECTION 4.17. Corporate Existence. Subject to Article V, the
Company shall do or cause to be done all things necessary to preserve and keep
in full force and effect its corporate existence, and the corporate,
partnership or other existence of each Subsidiary, in accordance with the
respective organizational documents (as the same may be amended from time to
time) of each Subsidiary and the rights (charter and statutory), licenses and
franchises of the Company and its Subsidiaries; provided, however, that the
Company shall not be required to preserve any such right, license or franchise,
or the corporate, partnership or other existence of any Subsidiary, if the
Board of Directors of the Company shall determine that the preservation thereof
is no longer desirable in the conduct of the business of the Company and its
Subsidiaries, taken as a whole, and that the loss thereof is not adverse in any
material respect to the Securityholders.
ARTICLE V
Successor Company
SECTION 5.1. When Company May Merge or Transfer Assets. The
Company shall not consolidate with or merge with or into, or convey, transfer
or lease all or substantially all its assets to, any Person, unless:
(i) the resulting, surviving or transferee Person (the
"Successor Company") shall be a corporation, partnership, trust or
limited liability company organized and existing under the laws of the
United States of America, any State thereof or the District of
Columbia and the Successor Company (if not the Company) shall
expressly assume, by an indenture supplemental hereto, executed and
delivered to the Trustee, in form satisfactory to the Trustee, all the
obligations of the Company under the Securities and this Indenture;
(ii) immediately after giving effect to such transaction (and
treating any Indebtedness which becomes an obligation of the Successor
Company or any Subsidiary of the Successor Company as a result of such
transaction as having been Incurred by the Successor Company or such
Restricted Subsidiary at the time of such transaction), no Default or
Event of Default shall have occurred and be continuing;
(iii) immediately after giving effect to such transaction, the
Successor Company would be able to incur an additional $1.00 of
Indebtedness pursuant to Section 4.3(a); and
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(iv) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that
such consolidation, merger, transfer or lease and such supplemental
indenture (if any) comply with this Indenture.
The Successor Company shall succeed to, and be substituted
for, and may exercise every right and power of, the Company under this
Indenture, but in the case of a lease of all or substantially all its assets,
the Company shall not be released from its obligation to pay the principal of
and interest on the Securities.
Notwithstanding clauses (ii) and (iii) of the first sentence
of this Section 5.1: (1) any Restricted Subsidiary of the Company may
consolidate with, merge into or transfer all or part of its properties and
assets to the Company; and (2) the Company may merge with an Affiliate
incorporated solely for the purpose of reincorporating the Company in another
jurisdiction to realize tax or other benefits.
ARTICLE VI
Defaults and Remedies
SECTION 6.1. Events of Default. An "Event of Default" occurs
if:
(1) the Company defaults in any payment of interest on any
Security when the same becomes due and payable, whether or not such
payment shall be prohibited by Article X, and such default continues
for a period of 30 days;
(2) the Company defaults in the payment of the principal of
any Security when the same becomes due and payable at its Stated
Maturity, upon optional redemption, upon required repurchase, upon
declaration or otherwise, whether or not such payment shall be
prohibited by Article X;
(3) the Company fails to comply with Section 5.1;
(4) the Company fails to comply with Section 4.2, 4.3, 4.4,
4.5, 4.6, 4.7, 4.8, 4.9 or 4.10 (in each case other than a failure to
repurchase Securities when required pursuant to Section 4.6 or 4.8
which failure shall constitute an Event of Default under Section
6.1(2)) and such failure continues for 30 days after the notice
specified below;
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(5) the Company or any Subsidiary Guarantor fails to comply
with any of its agreements in the Securities or this Indenture (other
than those referred to in (1), (2), (3) or (4) above) and such failure
continues for 60 days after the notice specified below;
(6) Indebtedness of the Company or any Restricted Subsidiary
is not paid within any applicable grace period after final maturity or
is accelerated by the holders thereof because of a default and the
total amount of such unpaid or accelerated Indebtedness exceeds $5.0
million or its foreign currency equivalent at the time and such
default shall not have been cured or such acceleration rescinded
within a 10 day period;
(7) the Company or a Significant Subsidiary pursuant to or
within the meaning of any Bankruptcy Law:
(A) commences a voluntary case;
(B) consents to the entry of an order for relief
against it in an involuntary case;
(C) consents to the appointment of a Custodian of it or
for any substantial part of its property;
(D) makes a general assignment for the benefit of its
creditors;
(E) consents to or acquiesces in the institution of a
bankruptcy or an insolvency proceeding against it, or
(F) takes any corporate action to authorize or effect
any of the foregoing;
or takes any comparable action under any foreign laws relating to
insolvency;
(8) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(A) is for relief against the Company or any
Significant Subsidiary in an involuntary case;
(B) appoints a Custodian of the Company or any
Significant Subsidiary or for any substantial part of the
property of the Company or any of its Significant
Subsidiaries; or
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(C) orders the winding up or liquidation of the Company
or any Significant Subsidiary;
or any similar relief is granted under any foreign laws and the order,
decree or relief remains unstayed and in effect for 60 days;
(9) any judgment or decree for the payment of money in
excess of $5 million or its foreign currency equivalent at the time
(to the extent not covered by insurance) is entered against the
Company or any Significant Subsidiary and such judgment or decree
remains undischarged or unstayed for a period of 60 days after such
judgment becomes final and non-appealable; or
(10) any Subsidiary Guarantee by a Significant Subsidiary
ceases to be in full force and effect (except as contemplated by the
terms of this Indenture) or any Subsidiary Guarantor that is a
Significant Subsidiary denies or disaffirms its obligations under this
Indenture or its Subsidiary Guarantee and such Default continues for
10 days.
The foregoing will constitute Events of Default whatever the
reason for any such Event of Default and whether it is voluntary or involuntary
or is effected by operation of law or pursuant to any judgment, decree or order
of any court or any order, rule or regulation of any administrative or
governmental body.
The term "Bankruptcy Law" means Title 11, United States Code,
or any similar Federal or state law for the relief of debtors. The term
"Custodian" means any receiver, trustee, assignee, liquidator, custodian or
similar official under any Bankruptcy Law.
Notwithstanding the foregoing, a Default under clause (4) or
(5) of this Section 6.1 will not constitute an Event of Default until the
Trustee or the Holders of at least 25% in principal amount of the outstanding
Securities notify the Company of the Default and the Company does not cure such
Default within the time specified in said clause (4) or (5) after receipt of
such notice. Such notice must specify the Default, demand that it be remedied
and state that such notice is a "Notice of Default."
The Company shall deliver to the Trustee, within 30 days after
the occurrence thereof, written notice in the form of an Officers' Certificate
of any Default or Event of Default under clauses (4), (5), (6), (9) or (10) of
this Section 6.1.
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SECTION 6.2. Acceleration. If an Event of Default (other
than an Event of Default specified in Section 6.1(7) or (8) with respect to the
Company) occurs and is continuing, the Trustee by notice to the Company, or the
Holders of at least 25% in outstanding principal amount of the Securities by
notice to the Company and the Trustee, may declare the principal of and accrued
and unpaid interest on all the Securities to be due and payable. Upon such a
declaration, such principal and interest shall be due and payable immediately.
If an Event of Default specified in Section 6.1(7) or (8) with respect to the
Company or a Significant Subsidiary occurs, the principal of and accrued and
unpaid interest on all the Securities shall ipso facto become and be
immediately due and payable without any declaration or other act on the part of
the Trustee or any Securityholders. The Holders of a majority in principal
amount of the Securities by notice to the Trustee may rescind an acceleration
and its consequences if the rescission would not conflict with any judgment or
decree and if all existing Events of Default have been cured or waived except
nonpayment of principal or interest that has become due solely because of
acceleration. No such rescission shall affect any subsequent Default or Event
of Default or impair any right consequent thereto.
SECTION 6.3. Other Remedies. If an Event of Default occurs
and is continuing, the Trustee and the Securityholders may pursue any available
remedy to collect the payment of principal of or interest on the Securities or
to enforce the performance of any provision of the Securities or this
Indenture.
The Trustee may maintain a proceeding even if it does not
possess any of the Securities or does not produce any of them in the
proceeding. A delay or omission by the Trustee or any Securityholder in
exercising any right or remedy accruing upon an Event of Default shall not
impair the right or remedy or constitute a waiver of or acquiescence in the
Event of Default. No remedy is exclusive of any other remedy. All available
remedies are cumulative.
SECTION 6.4. Waiver of Past Defaults. The Holders of a
majority in principal amount of the outstanding Securities by notice to the
Trustee may waive an existing Default or Event of Default and its consequences
except (i) a Default or Event of Default in the payment of the principal of,
premium, if any, or interest on a Security or (ii) a Default or Event of
Default in respect of a provision that under Section 9.2 cannot be amended
without the consent of each Securityholder affected. When a Default or Event
of Default is waived, it is deemed cured, but no such waiver shall extend to
any subsequent or other Default or Event of Default or impair any consequent
right.
SECTION 6.5. Control by Majority. The Holders of a majority
in principal amount of the Securities may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. However, the Trustee
may refuse to follow any direction that conflicts with law or this Indenture
or, subject to
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Section 7.1, that the Trustee determines is unduly prejudicial to the rights of
other Securityholders or would involve the Trustee in personal liability;
provided, however, that the Trustee may take any other action deemed proper by
the Trustee that is not inconsistent with such direction. Prior to taking any
action hereunder, the Trustee shall be entitled to indemnification satisfactory
to it in its sole discretion against all losses and expenses caused by taking
or not taking such action.
SECTION 6.6. Limitation on Suits. A Securityholder may not
pursue any remedy with respect to this Indenture or the Securities unless:
(1) the Holder gives to the Trustee written notice stating
that an Event of Default is continuing;
(2) the Holders of at least 25% in outstanding principal
amount of the Securities make a written request to the Trustee to
pursue the remedy;
(3) such Holder or Holders offer to the Trustee reasonable
security or indemnity against any loss, liability or expense;
(4) the Trustee does not comply with the request within 60
days after receipt of the request and the offer of security or
indemnity; and
(5) the Holders of a majority in outstanding principal
amount of the Securities do not give the Trustee a direction that, in
the opinion of the Trustee, is inconsistent with the request during
such 60-day period.
A Securityholder may not use this Indenture to prejudice the
rights of another Securityholder or to obtain a preference or priority over
another Securityholder.
SECTION 6.7. Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any Holder
to receive payment of principal of and interest on the Securities held by such
Holder, on or after the respective due dates expressed in the Securities, or to
bring suit for the enforcement of any such payment on or after such respective
dates, shall not be impaired or affected without the consent of such Holder.
SECTION 6.8. Collection Suit by Trustee. If an Event of
Default specified in Section 6.1(1) or (2) or an acceleration pursuant to
Section 6.2 occurs and is continuing, the Trustee may recover judgment in its
own name and as trustee of an express trust against the
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Company, the Subsidiary Guarantors or any other obligor of the Securities for
the whole amount then due and owing (together with interest on any unpaid
interest to the extent lawful) and the amounts provided for in Section 7.7.
SECTION 6.9. Trustee May File Proofs of Claim. The Trustee
may file such proofs of claim and other papers or documents as may be necessary
or advisable in order to have the claims of the Trustee and the Securityholders
allowed in any judicial proceedings relative to the Company, its Subsidiaries
or their respective creditors or properties and, unless prohibited by law or
applicable regulations, may vote on behalf of the Holders in any election of a
trustee in bankruptcy or other Person performing similar functions, and any
Custodian in any such judicial proceeding is hereby authorized by each Holder
to make payments to the Trustee and, in the event that the Trustee shall
consent to the making of such payments directly to the Holders, to pay to the
Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and its counsel, and any
other amounts due the Trustee under Section 7.7.
SECTION 6.10. Priorities. If the Trustee collects any money
or property pursuant to this Article VI, it shall pay out the money or property
in the following order:
FIRST: to the Trustee for amounts due under Section 7.7;
SECOND: to holders of Senior Indebtedness and Guarantor
Senior Indebtedness to the extent required by Article X;
THIRD: if the Securityholders are forced to proceed against
the Company directly without the Trustee, to the Securityholders for
their collection costs;
FOURTH: to Securityholders for amounts due and unpaid on the
Securities for principal and interest, ratably, without preference or
priority of any kind, according to the amounts due and payable on the
Securities for principal and interest, respectively; and
FIFTH: to the Company.
The Trustee may fix a record date and payment date for any
payment to Securityholders pursuant to this Section. At least 15 days before
such record date, the Company shall mail to each Securityholder and the Trustee
a notice that states the record date, the payment date and amount to be paid.
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SECTION 6.11. Undertaking for Costs. In any suit for the
enforcement of any right or remedy under this Indenture or in any suit against
the Trustee for any action taken or omitted by it as Trustee, a court in its
discretion may require the filing by any party litigant in the suit of an
undertaking to pay the costs of the suit, and the court in its discretion may
assess reasonable costs, including reasonable attorneys' fees, against any
party litigant in the suit, having due regard to the merits and good faith of
the claims or defenses made by the party litigant. This Section 6.11 does not
apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.7 or a
suit by Holders of more than 10% in outstanding principal amount of the
Securities.
ARTICLE VII
Trustee
SECTION 7.1. Duties of Trustee. (a) If a Default or an
Event of Default has occurred and is continuing, the Trustee shall exercise the
rights and powers vested in it by this Indenture and use the same degree of
care and skill in their exercise as a prudent Person would exercise or use
under the circumstances in the conduct of such Person's own affairs.
(b) Except during the continuance of a Default or an Event
of Default:
(1) the Trustee undertakes to perform such duties and only
such duties as are specifically set forth in this Indenture and no
implied covenants or obligations shall be read into this Indenture
against the Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements
of this Indenture. However, the Trustee shall examine the
certificates and opinions to determine whether or not they conform to
the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its
own negligent action, its own negligent failure to act or its own wilful
misconduct, except that:
(1) this paragraph does not limit the effect of paragraph
(b) of this Section;
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(2) the Trustee shall not be liable for any error of
judgment made in good faith by a Trust Officer unless it is proved
that the Trustee was negligent in ascertaining the pertinent facts;
and
(3) the Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 6.5.
(d) Every provision of this Indenture that in any way
relates to the Trustee is subject to paragraphs (a), (b) and (c) of this
Section.
(e) The Trustee shall not be liable for interest on any
money received by it except as the Trustee may agree in writing with the
Company.
(f) Money held in trust by the Trustee need not be
segregated from other funds except to the extent required by law.
(g) No provision of this Indenture shall require the Trustee
to expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if it shall have reasonable grounds to believe that repayment
of such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
(h) Every provision of this Indenture relating to the
conduct or affecting the liability of or affording protection to the Trustee
shall be subject to the provisions of this Section and to the provisions of the
TIA.
SECTION 7.2. Rights of Trustee. Subject to TIA Section
315(a) through (d):
(a) The Trustee may rely and shall be protected in acting or
refraining from acting on any document believed by it to be genuine and to have
been signed or presented by the proper person. The Trustee need not
investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel which shall conform
to Section 12.5. The Trustee shall not be liable for any action it takes or
omits to take in good faith in reliance on the Officers' Certificate or Opinion
of Counsel.
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(c) The Trustee may act through its attorneys and agents and
shall not be responsible for the misconduct or negligence of any agent
appointed with due care.
(d) The Trustee shall not be liable for any action it takes
or omits to take in good faith that it believes to be authorized or within its
rights or powers; provided, however, that the Trustee's conduct does not
constitute wilful misconduct or negligence.
(e) The Trustee may consult with counsel, and the advice or
opinion of counsel with respect to legal matters relating to this Indenture and
the Securities shall be full and complete authorization and protection from
liability in respect to any action taken, omitted or suffered by it hereunder
in good faith and in accordance with the advice or opinion of such counsel.
(f) The Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request or
direction of any of the Securityholders, unless such Securityholders shall have
offered to the Trustee security or indemnity reasonably satisfactory to the
Trustee against the losses, expenses and liabilities that might be incurred by
it in compliance with such request or direction.
(g) The Trustee shall not be liable with respect to any
action taken or omitted to be taken by it good faith in accordance with the
direction of the Securityholders of a majority in aggregate principal amount of
the Securities at the time outstanding relating to the time, method and place
of conducting any proceeding for any remedy available to the Trustee or
involving the exercise of any right, duty, trust or power conferred upon the
Trustee under the TIA or this Indenture.
SECTION 7.3. Individual Rights of Trustee. The Trustee, in
its individual or any other capacity, may become the owner or pledgee of
Securities and may make loans to, accept deposits from, perform services for
and otherwise deal with the Company, the Subsidiary Guarantors or their
Affiliates with the same rights it would have if it were not Trustee. Any
Paying Agent, Registrar, co-registrar or co-paying agent may do the same with
like rights. However, the Trustee must comply with Sections 7.10 and 7.11.
SECTION 7.4. Trustee's Disclaimer. The Trustee shall not be
responsible for and makes no representation as to the validity or adequacy of
this Indenture or the Securities, it shall not be accountable for the Company's
use of the proceeds from the Securities, and it shall not be responsible for
any statement of the Company in this Indenture or in any document issued in
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connection with the sale of the Securities or in the Securities other than the
Trustee's certificate of authentication.
SECTION 7.5. Notice of Defaults. If a Default or Event of
Default occurs and is continuing and if a Trust Officer has knowledge thereof,
the Trustee shall mail to each Securityholder in the manner and to the extent
provided in TIA Section 313(a) notice of the Default or Event of Default
within 90 days after it occurs, unless such Default or Event of Default has
been cured. Except in the case of a Default or Event of Default in payment of
principal, premium, if any, or interest on any Security (including payments
pursuant to the optional redemption or required repurchase provisions of such
Security, if any), the Trustee may withhold the notice if and so long as its
board of directors, the executive committee of its board of directors or a
committee of its Trust Officers in good faith determines that withholding the
notice is in the interests of Securityholders.
SECTION 7.6. Reports by Trustee to Holders. As promptly as
practicable and within 60 days after each May 15 beginning with the May 15
following the date of this Indenture, and in any event prior to July 15 in each
year, the Trustee shall mail to each Securityholder, if required by TIA Section
313(a) a brief report dated as of such May 15 that complies with TIA Section
313(a). The Trustee also shall comply with TIA Section 313(b), (c) and (d).
A copy of each report at the time of its mailing to
Securityholders shall be filed with the Commission if required by law and each
stock exchange (if any) on which the Securities are listed. The Company agrees
to notify promptly the Trustee whenever the Securities become listed on any
stock exchange and of any delisting thereof.
SECTION 7.7. Compensation and Indemnity. The Company shall
pay to the Trustee from time to time reasonable compensation for its services.
The Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the Trustee upon
request for all reasonable out-of-pocket expenses and advances incurred or made
by it, including but not limited to costs of collection, costs of preparing and
reviewing reports, certificates and other documents, costs of preparation and
mailing of notices to Securityholders and reasonable costs of counsel retained
by the Trustee in connection with the delivery of an Opinion of Counsel or
otherwise, in addition to the compensation for its services. Such expenses
shall include the reasonable compensation and expenses, disbursements and
advances of the Trustee's agents, counsel, accountants and experts. The
Company shall indemnify the Trustee for, and hold it harmless against, any and
all loss, liability or expense (including reasonable attorneys' fees) incurred
by it in connection with the administration of this trust and
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the performance of its duties hereunder and under the Securities, including the
costs and expenses of enforcing this Indenture and the Securities (including
this Section 7.7) and of defending itself against any claims or liabilities
(whether asserted by any Securityholder, the Company or otherwise) and of
complying with any process served upon it or any of its officers in connection
with the exercise or performance of any of its powers or duties under this
Indenture. The Trustee shall notify the Company promptly of any claim for
which it may seek indemnity. Failure by the Trustee to so notify the Company
shall not relieve the Company of its obligations hereunder. The Company shall
defend the claim and the Trustee may have separate counsel and the Company
shall pay the fees and expenses of such counsel. The Company need not
reimburse any expense or indemnify against any loss, liability or expense
incurred by the Trustee through the Trustee's own wilful misconduct, negligence
or bad faith.
To secure the Company's payment obligations in this Section
7.7, the Trustee shall have a lien prior to the Securities on all money or
property held or collected by the Trustee other than money or property held in
trust to pay principal of and interest on particular Securities. The Trustee's
right to receive payment of any amounts due under this Section 7.7 shall not be
subordinate to any other liability or indebtedness of the Company.
The Company's payment obligations pursuant to this Section
shall survive the discharge of this Indenture. When the Trustee incurs
expenses after the occurrence of a Default specified in Section 6.1(7) or (8)
with respect to the Company, the expenses are intended to constitute expenses
of administration under any Bankruptcy Law.
SECTION 7.8. Replacement of Trustee. The Trustee may resign
at any time by so notifying the Company. The Holders of a majority in
principal amount of the Securities may remove the Trustee by so notifying the
Trustee in writing and may appoint a successor Trustee. The Company shall
remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the
Trustee or its property; or
(4) the Trustee otherwise becomes incapable of acting.
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If the Trustee resigns or is removed by the Company or by the
Holders of a majority in principal amount of the Securities and such Holders do
not reasonably promptly appoint a successor Trustee, or if a vacancy exists in
the office of Trustee for any reason (the Trustee in such event being referred
to herein as the retiring Trustee), the Company shall promptly appoint a
successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Securityholders. The retiring Trustee shall promptly transfer
all property held by it as Trustee to the successor Trustee, subject to the
lien provided for in Section 7.7.
A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section 7.8.
If the Trustee fails to comply with Section 7.10, any
Securityholder may petition any court of competent jurisdiction for the removal
of the Trustee and the appointment of a successor Trustee.
Notwithstanding the replacement of the Trustee pursuant to
this Section, the Company's obligations under Section 7.7 shall continue for
the benefit of the retiring Trustee.
SECTION 7.9. Successor Trustee by Merger. If the Trustee
consolidates with, merges or converts into, or transfers all or substantially
all its corporate trust business or assets to, another corporation or banking
association, the resulting, surviving or transferee corporation without any
further act shall be the successor Trustee.
In case at the time such successor or successors by merger,
conversion or consolidation to the Trustee shall succeed to the trusts created
by this Indenture, any of the Securities shall have been authenticated but not
delivered, any such successor to the Trustee may adopt the certificate of
authentication of any predecessor trustee, and deliver such Securities so
authenticated; and in case at that time any of the Securities shall not have
been authenticated, any successor to the Trustee may authenticate such
Securities either in the name of any predecessor hereunder or in the name of
the successor to the Trustee; and in all such cases such certificates
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shall have the full force which it is anywhere in the Securities or in this
Indenture provided that the certificate of the Trustee shall have.
SECTION 7.10. Eligibility; Disqualification. The Indenture
shall at all times have a Trustee that satisfies the requirements of TIA
Section 310(a). The Trustee shall have a combined capital and surplus of at
least $100 million as set forth in its most recent published annual report of
condition. The Trustee shall comply with TIA Section 310(b); provided,
however, that there shall be excluded from the operation of TIA Section
310(b)(1) any indenture or indentures under which other securities or
certificates of interest or participation in other securities of the Company
are outstanding if the requirements for such exclusion set forth in TIA Section
310(b)(1) are met.
SECTION 7.11. Preferential Collection of Claims Against
Company. The Trustee shall comply with TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). A Trustee who has
resigned or been removed shall be subject to TIA Section 311(a) to the extent
indicated.
ARTICLE VIII
Discharge of Indenture; Defeasance
SECTION 8.1. Discharge of Liability on Securities;
Defeasance. (a) When (i) the Company delivers to the Trustee all outstanding
Securities (other than Securities replaced pursuant to Section 2.7) for
cancellation or (ii) all outstanding Securities have become due and payable,
whether at maturity or as a result of the mailing of a notice of redemption
pursuant to Article III hereof and the Company irrevocably deposits with the
Trustee funds sufficient to pay at maturity or upon redemption all outstanding
Securities (other than Securities replaced pursuant to Section 2.7), including
interest thereon to maturity or such redemption date, and if in either case the
Company pays all other sums payable hereunder by the Company, then this
Indenture shall, subject to Section 8.1(c), cease to be of further effect. The
Trustee shall acknowledge satisfaction and discharge of this Indenture on
demand of the Company (accompanied by an Officers' Certificate and an Opinion
of Counsel stating that all conditions precedent specified herein relating to
the satisfaction and discharge of this Indenture have been complied with) and
at the cost and expense of the Company.
(b) Subject to Sections 8.1(c), 8.2 and 8.6, the Company at
any time may terminate (i) all its obligations under the Securities and this
Indenture and all obligations of the Subsidiary Guarantors under the Subsidiary
Guarantees and this Indenture ("legal defeasance
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option") or (ii) its obligations under Sections 4.2(b), 4.3, 4.4, 4.5, 4.6,
4.7, 4.8, 4.9, 4.10, , 4.11, 4.13, 4.15, 4.16, 5.1(iii) and 5.1(iv) and the
operation of Sections 6.1(4), 6.1(5), 6.1(6), 6.1(7) (but only with respect to
a Significant Subsidiary), 6.1(8) (but only with respect to a Significant
Subsidiary), 6.1(9) and 6.1(10) ("covenant defeasance option"). The Company
may exercise its legal defeasance option notwithstanding its prior exercise of
its covenant defeasance option.
(c) If the Company exercises its legal defeasance option,
payment of the Securities may not be accelerated because of an Event of
Default. If the Company exercises its covenant defeasance option, payment of
the Securities may not be accelerated because of an Event of Default specified
in Sections 6.1(4), 6.1(5), 6.1(6), 6.1(7) (but only with respect to a
Significant Subsidiary), 6.1(8) (but only with respect to a Significant
Subsidiary), 6.1(9) and 6.1(10) or because of the failure of the Company to
comply with Section 5.1(iii) and Section 5.1(iv).
Upon satisfaction of the conditions set forth herein and upon
request of the Company, the Trustee shall acknowledge in writing the discharge
of those obligations that the Company terminates.
(d) Upon satisfaction of the conditions set forth herein and
upon request of the Company, the Trustee shall acknowledge in writing the
discharge of those obligations that the Company terminates.
(e) Notwithstanding the provisions of Sections 8.1(a) and
(b), the Company's obligations in Sections 2.3, 2.4, 2.5, 2.6, 2.7, 7.7, 7.8,
8.1(d), 8.4, 8.5 and 8.6 shall survive until the Securities have been paid in
full. Thereafter, the Company's obligations in Sections 7.7, 8.4 and 8.5 and
the obligations of the Subsidiary Guarantors under Article XI in respect
thereof shall survive.
SECTION 8.2. Conditions to Defeasance. The Company may
exercise its legal defeasance option or its covenant defeasance option only if:
(1) the Company irrevocably deposits in trust with the
Trustee money or U.S. Government Obligations in amounts (including
interest, but without consideration of any reinvestment of such
interest) and maturities sufficient, but in the case of the legal
defeasance option only, not more than such amounts, to pay and
discharge at their stated maturity (or such earlier redemption date as
the Company shall have specified to the Trustee) the principal of,
premium, if any, and interest on all outstanding Securities to
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maturity or redemption, as the case may be, and to pay all of the sums
payable by it hereunder; provided, that the Trustee shall have been
irrevocably instructed to apply such money or the proceeds of such
U.S. Government Obligations to the payment of said principal,
premium, if any, and interest with respect to the Securities;
(2) the Company delivers to the Trustee a certificate from a
nationally recognized firm of independent accountants expressing their
opinion that the payments of principal and interest when due and
without reinvestment on the deposited U.S. Government Obligations plus
any deposited money without investment will provide cash at such times
and in such amounts as will be sufficient to pay principal and
interest when due on all the Securities to maturity or redemption, as
the case may be;
(3) the Company shall have delivered to the Trustee an
Opinion of Counsel, subject to certain customary qualifications, to
the effect that (i) the funds so deposited will not be subject to any
rights of any other holders of Indebtedness of the Company, and (ii)
the funds so deposited will not be subject to avoidance under
applicable Bankruptcy Law;
(4) the deposit does not constitute a default under any
other agreement binding on the Company and is not prohibited by
Article X;
(5) the Company delivers to the Trustee an Opinion of
Counsel to the effect that the trust resulting from the deposit does
not constitute, or is qualified as, a regulated investment company
under the Investment Company Act of 1940;
(6) in the case of the legal defeasance option, the Company
shall have delivered to the Trustee an Opinion of Counsel stating that
(i) the Company has received from, or there has been published by, the
Internal Revenue Service a ruling, or (ii) since the date of this
Indenture there has been a change in the applicable Federal income tax
law, in either case to the effect that, and based thereon such Opinion
of Counsel shall confirm that, the Securityholders will not recognize
income, gain or loss for Federal income tax purposes as a result of
such defeasance and will be subject to Federal income tax on the same
amounts, in the same manner and at the same times as would have been
the case if such legal defeasance had not occurred;
(7) in the case of the legal defeasance option only, 123
days pass after the deposit is made and during the 123 day period no
Default specified in Section 6.1(7) or (8) with
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respect to the Company or any Subsidiary Guarantor occurs which is
continuing at the end of the period;
(8) in the case of the covenant defeasance option, the
Company shall have delivered to the Trustee an Opinion of Counsel to
the effect that the Securityholders will not recognize income, gain or
loss for Federal income tax purposes as a result of such covenant
defeasance and will be subject to Federal income tax on the same
amounts, in the same manner and at the same times as would have been
the case if such covenant defeasance had not occurred; and
(9) the Company delivers to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all
conditions precedent to the defeasance and discharge of the Securities
and this Indenture as contemplated by this Article VIII have been
complied with.
Before or after a deposit, the Company may make
arrangements satisfactory to the Trustee for the redemption of
Securities at a future date in accordance with Article III.
SECTION 8.3. Application of Trust Money. Subject to Section
8.6, the Trustee or Paying Agent shall hold in trust money or U.S. Government
Obligations deposited with it pursuant to this Article VIII. It shall apply
the deposited money and the money from U.S. Government Obligations through the
Paying Agent and in accordance with this Indenture and the Securities to the
payment of principal of and interest on the Securities. Money and securities
so held in trust are not subject to Article X.
SECTION 8.4. Repayment to Company. Subject to Sections 7.7,
8.1 and 8.2, the Trustee and the Paying Agent shall promptly turn over to the
Company upon request set forth in an Officers' Certificate any excess money or
securities held by them upon payment of all the obligations under this
Indenture and thereupon shall be relieved from all liability with respect to
such money.
Subject to any applicable abandoned property law, the Trustee
and the Paying Agent shall pay to the Company upon request any money held by
them for the payment of principal of or interest on the Securities that remains
unclaimed for two years; provided, however, that the Company shall have either
caused notice of such payment to be mailed to each Securityholder entitled
thereto no less than 30 days prior to such repayment or within such period
shall have published such notice in a financial newspaper of widespread
circulation published in the City of
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New York and, thereafter, Securityholders entitled to the money must look to
the Company for payment as general creditors and all liability of the Trustee
and such Paying Agent with respect to such money shall cease.
SECTION 8.5. Indemnity for U.S. Government Obligations. The
Company shall pay and shall indemnify the Trustee against any tax, fee or other
charge imposed on or assessed against deposited U.S. Government Obligations or
the principal and interest received on such U.S. Government Obligations.
SECTION 8.6. Reinstatement. If the Trustee or Paying Agent
is unable to apply any money or U.S. Government Obligations in accordance with
this Article VIII by reason of any legal proceeding or by reason of any order
or judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, the obligations of the Company and the
Subsidiary Guarantors under this Indenture and the Securities shall be revived
and reinstated as though no deposit had occurred pursuant to this Article VIII
until such time as the Trustee or Paying Agent is permitted to apply all such
money or U.S. Government Obligations in accordance with this Article VIII;
provided, however, that, if the Company has made any payment of interest on or
principal of any Securities because of the reinstatement of its obligations,
the Company shall be subrogated to the rights of the Holders of such Securities
to receive such payment from the money or U.S. Government Obligations held by
the Trustee or Paying Agent.
ARTICLE IX
Amendments
SECTION 9.1. Without Consent of Holders. (a) The Company
and the Trustee may amend this Indenture or the Securities without notice to or
consent of any Securityholder:
(1) to cure any ambiguity, omission, defect or
inconsistency; provided, that such amendment or supplement does not,
as evidenced by an Opinion of Counsel delivered to the Trustee,
adversely affect the rights of any Securityholder in any respect;
(2) to comply with Article V;
(3) to provide for uncertificated Securities in addition to
or in place of certificated Securities; provided, however, that the
uncertificated Securities are issued in registered
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form for purposes of Section 163(f) of the Code or in a manner such
that the uncertificated Securities are described in Section
163(f)(2)(B) of the Code;
(4) to make any change in Article X that would limit or
terminate the benefits available to any holder of Senior Indebtedness
or Guarantor Senior Indebtedness (or Representatives therefor) under
Article X;
(5) to add guarantees with respect to the Securities or to
secure the Securities;
(6) to add to the covenants of the Company for the benefit
of the Holders or to surrender any right or power herein conferred
upon the Company;
(7) to comply with any requirements of the SEC in connection
with qualifying this Indenture under the TIA;
(8) to make any change that does not adversely affect the
rights of any Securityholder;
(9) to provide for a replacement Trustee under Section 7.8
hereof; or
(10) to provide for the issuance of the Exchange Securities,
which will have terms substantially identical in all material respects
to the Initial Securities (except that the transfer restrictions
contained in the Initial Securities will be modified or eliminated, as
appropriate), and which will be treated, together with any outstanding
Initial Securities, as a single issue of securities;
provided, that the Company has delivered to the Trustee an Opinion of Counsel
stating that any such amendment or supplement complies with the provisions of
this Section 9.1.
(b) Upon the request of the Company and the Subsidiary
Guarantors accompanied by Board Resolutions of their respective Boards of
Directors authorizing the execution of any such supplemental indenture, and
upon receipt by the Trustee of the documents described in Section 9.6, the
Trustee shall join with the Company and the Subsidiary Guarantors in the
execution of any supplemental indenture authorized or permitted by the terms of
this Indenture and to make any further appropriate agreements and stipulations
which may be therein contained, but the Trustee shall not be obligated to enter
into such supplemental indenture which affects its own rights, duties or
immunities under this Indenture or otherwise.
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(c) An amendment under this Section may not make any change
that adversely affects the rights under Article X of any holder of Senior
Indebtedness or Guarantor Senior Indebtedness then outstanding unless the
holders of such Senior Indebtedness or Guarantor Senior Indebtedness (or any
group or representative thereof authorized to give a consent) consent to such
change.
(d) After an amendment under this Section becomes effective,
the Company shall mail to Securityholders a notice briefly describing such
amendment. The failure to give such notice to all Securityholders, or any
defect therein, shall not impair or affect the validity of an amendment under
this Section.
SECTION 9.2. With Consent of Holders. (a) The Company and
the Trustee may amend this Indenture or the Securities with the consent of the
Holders of at least a majority in outstanding principal amount of the
Securities (including consents obtained in connection with a tender offer or
exchange offer for the Securities) and any existing Default and its
consequences (including, without limitation, an acceleration of the Securities)
or compliance with any provision of this Indenture or the Securities may be
waived with the consent of the Holders of a majority in principal amount of the
then outstanding Securities (including consents obtained in connection with a
tender offer or exchange offer for the Securities). Furthermore, subject to
Sections 6.4 and 6.7, the Holders of a majority in aggregate principal amount
of the Securities then outstanding (including consents obtained in connection
with a tender offer or exchange offer for the Securities) may waive compliance
in a particular instance by the Company with any provision of this Indenture or
the Securities. However, without the consent of each Holder of a Security then
outstanding, an amendment may not:
(1) reduce the principal amount of Securities whose Holders
must consent to an amendment, supplement or waiver;
(2) reduce the rate of or extend the time for payment of
interest on any Security;
(3) reduce the principal of or extend the Stated Maturity of
any Security;
(4) reduce the premium payable upon the redemption or
repurchase of any Security or change the time at which any Security
may or shall be redeemed or repurchased in accordance with this
Indenture;
(5) make any Security payable in money other than that
stated in the Security;
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(6) modify or affect in any manner adverse to the Holders,
the terms and conditions of the obligation of the Company for the due
and punctual payment of the principal of or interest on Securities or
to institute suit for the enforcement of any payment on or with
respect to the Securities;
(7) waive a Default or Event of Default in the payment of
principal of, premium, if any, or interest on, or redemption payment
with respect to, any Security (excluding any principal or interest due
solely as a result of the occurrence of a Declaration); or
(8) make any change in Section 6.4 or 6.7 or the third
sentence of this Section.
(b) Upon the request of the Company and the Guarantors
accompanied by Board Resolutions of their respective Boards of Directors
authorizing the execution of any such supplemental indenture, and upon the
filing with the Trustee of evidence satisfactory to the Trustee of the consent
of the Securityholders as aforesaid, and upon receipt by the Trustee of the
documents described in Section 9.6, the Trustee shall join with the Company and
the Guarantors in the execution of such supplemental indenture unless such
supplemental indenture affects the Trustee's own rights, duties or immunities
under this Indenture or otherwise, in which case the Trustee may in its
discretion, but shall not be obligated to, enter into such supplemental
indenture.
(c) It shall not be necessary for the consent of the Holders
under this Section to approve the particular form of any proposed amendment,
but it shall be sufficient if such consent approves the substance thereof.
(d) An amendment under this Section may not make any change
that adversely affects the rights under Article X of any holder of Senior
Indebtedness then outstanding unless the holders of such Senior Indebtedness or
Guarantor Senior Indebtedness (or any group or representative thereof
authorized to give a consent) consent to such change.
(e) After an amendment under this Section becomes effective,
the Company shall mail to Securityholders a notice briefly describing such
amendment. The failure to give such notice to all Securityholders, or any
defect therein, shall not impair or affect the validity of an amendment under
this Section.
SECTION 9.3. Compliance with Trust Indenture Act. Every
amendment to this Indenture or the Securities shall comply with the TIA as then
in effect.
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SECTION 9.4. Revocation and Effect of Consents and Waivers.
A consent to an amendment or a waiver by a Holder of a Security shall bind the
Holder and every subsequent Holder of that Security or portion of the Security
that evidences the same debt as the consenting Holder's Security, even if
notation of the consent or waiver is not made on the Security. However, any
such Holder or subsequent Holder may revoke the consent or waiver as to such
Holder's Security or portion of the Security if the Trustee receives the notice
of revocation before the date the amendment or waiver becomes effective.
After an amendment or waiver becomes effective, it shall bind every
Securityholder.
The Company may, but shall not be obligated to, fix a record
date for the purpose of determining the Securityholders entitled to give their
consent or take any other action described above or required or permitted to be
taken pursuant to this Indenture. If a record date is fixed, then
notwithstanding the immediately preceding paragraph, those Persons who were
Securityholders at such record date (or their duly designated proxies), and
only those Persons, shall be entitled to give such consent or to revoke any
consent previously given or to take any such action, whether or not such
Persons continue to be Holders after such record date. No such consent shall
become valid or effective more than 120 days after such record date.
SECTION 9.5. Notation on or Exchange of Securities. If an
amendment changes the terms of a Security, the Trustee may require the Holder
of the Security to deliver it to the Trustee. The Trustee may place an
appropriate notation on the Security regarding the changed terms and return it
to the Holder. Alternatively, if the Company or the Trustee so determines, the
Company in exchange for the Security shall issue and the Trustee shall
authenticate a new Security that reflects the changed terms. Failure to make
the appropriate notation or to issue a new Security shall not affect the
validity of such amendment.
SECTION 9.6. Trustee To Sign Amendments. The Trustee shall
sign any amendment authorized pursuant to this Article IX if the amendment does
not adversely affect the rights, duties, liabilities or immunities of the
Trustee. If it does, the Trustee may, but need not sign it. In signing such
amendment the Trustee shall be entitled to receive indemnity reasonably
satisfactory to it and to receive, and (subject to Section 7.1) shall be fully
protected in relying upon, an Officers' Certificate and an Opinion of Counsel
stating that such amendment is authorized or permitted by this Indenture.
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ARTICLE X
Subordination
SECTION 10.1. Agreement To Subordinate. The Company and each
Subsidiary Guarantor agree, and each Securityholder by accepting a Security and
the related Subsidiary Guarantee agrees, that the Indebtedness evidenced by the
Securities and the related Subsidiary Guarantees is subordinated in right of
payment, to the extent and in the manner provided in this Article X, to the
prior payment of (i) all Senior Indebtedness in the case of the Securities and
(ii) all Guarantor Senior Indebtedness of each Subsidiary Guarantor in the case
of its obligations under its Subsidiary Guarantee and that the subordination is
for the benefit of and enforceable by the holders of Senior Indebtedness and
such Guarantor Senior Indebtedness. The Securities shall in all respects rank
pari passu with all other Senior Subordinated Indebtedness of the Company, the
related Subsidiary Guarantee of each Subsidiary Guarantor shall in all respects
rank pari passu with all Guarantor Senior Subordinated Indebtedness of such
Subsidiary Guarantor and only Indebtedness of the Company which is Senior
Indebtedness will rank senior to the Securities and only Indebtedness of such
Subsidiary Guarantor which is Guarantor Senior Indebtedness of such Subsidiary
Guarantor shall rank senior to the obligations of such Subsidiary Guarantor
under its Subsidiary Guarantee in accordance with the provisions set forth
herein. All provisions of this Article X shall be subject to Section 10.12.
SECTION 10.2. Liquidation, Dissolution, Bankruptcy. Upon any
payment or distribution of the assets of the Company or any Subsidiary
Guarantor to creditors upon a total or partial liquidation or a total or
partial dissolution of the Company or such Subsidiary Guarantor or in a
bankruptcy, reorganization, insolvency, receivership or similar proceeding
relating to the Company or such Subsidiary Guarantor or their respective
properties:
(1) holders of Senior Indebtedness in the case of the
Company or holders of Guarantor Senior Indebtedness of such Subsidiary
Guarantor in the case of such Subsidiary Guarantor shall be entitled
to receive payment in full of all Senior Indebtedness in the case of
the Company or all such Guarantor Senior Indebtedness in the case of
such Subsidiary Guarantor before Securityholders shall be entitled to
receive any payment of principal of or interest on or other amounts
with respect to the Securities from the Company or such Subsidiary
Guarantor, whether directly by the Company or pursuant to the
Subsidiary Guarantees; and
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(2) until the Senior Indebtedness in the case of the Company
or such Guarantor Senior Indebtedness in the case of such Subsidiary
Guarantor is paid in full, any payment or distribution to which
Securityholders would be entitled but for this Article X shall be made
to holders of Senior Indebtedness in the case of payments or
distributions made by the Company or the holders of such Guarantor
Senior Indebtedness in the case of payments or distributions made by
such Subsidiary Guarantor, in each case as their respective interests
may appear.
SECTION 10.3. Default on Senior Indebtedness or Guarantor
Senior Indebtedness. Neither the Company nor any Subsidiary Guarantor may pay
the principal of, premium (if any) or interest on the Securities or make any
deposit pursuant to Section 8.1 or repurchase, redeem or otherwise retire any
Securities, whether directly by the Company or by such Subsidiary Guarantor
under its Subsidiary Guarantee (collectively, "pay the Securities") if (i) any
Senior Indebtedness in the case of the Company or any Guarantor Senior
Indebtedness of such Subsidiary Guarantor in the case of such Subsidiary
Guarantor is not paid when due or (ii) any other default on Senior Indebtedness
in the case of the Company or such Guarantor Senior Indebtedness in the case of
such Subsidiary Guarantee occurs and the maturity of such Senior Indebtedness
in the case of the Company or such Guarantor Senior Indebtedness in the case of
such Subsidiary Guarantor is accelerated in accordance with its terms unless,
in either case, (x) the default has been cured or waived and any such
acceleration has been rescinded or (y) such Senior Indebtedness in the case of
the Company or such Guarantor Senior Indebtedness in the case of such
Subsidiary Guarantor has been paid in full; provided, however, that the Company
or such Subsidiary Guarantor may pay the Securities, whether directly or
pursuant to the Subsidiary Guarantee, without regard to the foregoing if the
Company or such Subsidiary Guarantor and the Trustee receive written notice
approving such payment from the Representative of the Senior Indebtedness in
the case of the Company or such Guarantor Senior Indebtedness in the case of
such Subsidiary Guarantor with respect to which either of the events set forth
in clause (i) or (ii) of this sentence has occurred or is continuing. During
the continuance of any default (other than a default described in clause (i) or
(ii) of the preceding sentence) with respect to any Designated Senior
Indebtedness pursuant to which the maturity thereof may be accelerated
immediately without further notice (except such notice as may be required to
effect such acceleration) or the expiration of any applicable grace periods,
neither the Company (in the case of Designated Senior Indebtedness of the
Company) nor any Subsidiary Guarantor (in the case of Designated Senior
Indebtedness of such Subsidiary Guarantor) may pay the Securities, either
directly or pursuant to the Subsidiary Guarantee (except (i) in Qualified
Capital Stock issued by the Company to pay interest on the Securities or issued
in exchange for the Securities, (ii) in securities substantially identical to
the Securities issued by the Company in payment of interest accrued thereon or
(iii) in securities issued by the Company
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(which may be guaranteed by one or more Subsidiary Guarantors) which are
subordinated to the Senior Indebtedness (and, to the extent guaranteed by one
or more Subsidiary Guarantors, to the Guarantor Senior Indebtedness) at least
to the same extent as the Securities and having an Average Life at least equal
to the remaining Average Life of the Securities) for a period (a "Payment
Blockage Period") commencing upon the receipt by the Trustee (with a copy to
the Company or such Subsidiary Guarantor) of written notice (a "Blockage
Notice") of such default from the Representative of the holders of such
Designated Senior Indebtedness specifying an election to effect a Payment
Blockage Period and ending 179 days thereafter (or earlier if such Payment
Blockage Period is terminated (i) by written notice to the Trustee and the
Company or such Subsidiary Guarantor from the Person or Persons who gave such
Blockage Notice, (ii) by repayment in full of such Designated Senior
Indebtedness or (iii) because the default giving rise to such Blockage Notice
is no longer continuing). Notwithstanding the provisions of the immediately
preceding sentence, but subject to the provisions of the first sentence of this
paragraph and the provisions of Section 10.2, the Company or such Subsidiary
Guarantor may resume payments on the Securities, either directly or pursuant to
the Subsidiary Guarantee, after the end of such Payment Blockage Period. Not
more than one Blockage Notice may be given in any consecutive 360-day period,
irrespective of the number of defaults with respect to Designated Senior
Indebtedness during such period.
SECTION 10.4. Acceleration of Payment of Securities. If
payment of the Securities is accelerated because of an Event of Default, the
Company or the Trustee shall promptly notify the Representative (if any) of any
issue of Designated Senior Indebtedness which is then outstanding; provided,
however, that the Company and the Trustee shall be obligated to notify such a
Representative only if such Representative has delivered or caused to be
delivered an address for the service of such a notice to the Company and the
Trustee (and the Company and the Trustee shall only be obligated to deliver the
notice to the address so specified). If a notice is required pursuant to the
immediate preceding sentence, neither the Company nor any Subsidiary Guarantor
may pay the Securities until five Business Days after the respective
Representative of the Designated Senior Indebtedness receives notice (at the
address specified in the preceding sentence) of such acceleration and,
thereafter, may pay the Securities only if the provisions of this Article X
otherwise permit payment at that time.
SECTION 10.5. When Distribution Must Be Paid Over. If a
distribution is made to Securityholders that because of this Article X should
not have been made to them, the Securityholders who receive the distribution
shall hold it in trust for holders of Senior Indebtedness and Guarantor Senior
Indebtedness and promptly pay it over to them as their respective interests may
appear.
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SECTION 10.6. Subrogation. After all Senior Indebtedness and
Guarantor Senior Indebtedness is paid in full in cash and until the Securities
are paid in full, Securityholders shall be subrogated to the rights of holders
of Senior Indebtedness and Guarantor Senior Indebtedness to receive
distributions applicable to Senior Indebtedness and Guarantor Senior
Indebtedness. A distribution made under this Article X to holders of Senior
Indebtedness or Guarantor Senior Indebtedness which otherwise would have been
made to Securityholders is not, as between the Company and Securityholders, a
payment by the Company of Senior Indebtedness or, as between a Subsidiary
Guarantor and Securityholders, a payment by such Subsidiary Guarantor of
Guarantor Senior Indebtedness.
SECTION 10.7. Relative Rights. This Article X defines the
relative rights of Securityholders and holders of Senior Indebtedness and
Guarantor Senior Indebtedness. Nothing in this Indenture shall:
(1) impair, as between the Company or the Subsidiary
Guarantors, as the case may be, and Securityholders, the obligation of
the Company or the Subsidiary Guarantors, as the case may be, which is
absolute and unconditional, to pay principal of and interest on the
Securities in accordance with their terms; or
(2) prevent the Trustee or any Securityholder from
exercising its available remedies upon a Default or Event of Default,
subject to the rights of holders of Senior Indebtedness and Guarantor
Senior Indebtedness to receive distributions otherwise payable to
Securityholders.
SECTION 10.8. Subordination May Not Be Impaired by Company or
the Subsidiary Guarantors. No right of any holder of Senior Indebtedness or
Guarantor Senior Indebtedness to enforce the subordination of the Indebtedness
evidenced by the Securities or the related Subsidiary Guarantee shall be
impaired by any act or failure to act by the Company or any Subsidiary
Guarantor or by the failure of any of them to comply with this Indenture.
SECTION 10.9. Rights of Trustee and Paying Agent.
Notwithstanding Section 10.3, the Trustee or Paying Agent may continue to make
payments on the Securities and shall not be charged with knowledge of the
existence of facts that would prohibit the making of any such payments unless,
not less than two Business Days prior to the date of such payment, a Trust
Officer of the Trustee receives notice satisfactory to it that payments may not
be made under this Article X. The Company, the Registrar or co-registrar, the
Paying Agent, a Representative or a holder of Senior Indebtedness or Guarantor
Senior Indebtedness may give the notice; provided,
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however, that, if an issue of Senior Indebtedness or Guarantor Senior
Indebtedness has a Representative, only the Representative may give the notice.
The Trustee in its individual or any other capacity may hold
Senior Indebtedness or Guarantor Senior Indebtedness with the same rights it
would have if it were not Trustee. The Registrar and co-registrar and the
Paying Agent may do the same with like rights. The Trustee shall be entitled
to all the rights set forth in this Article X with respect to any Senior
Indebtedness or Guarantor Senior Indebtedness which may at any time be held by
it, to the same extent as any other holder of Senior Indebtedness or Guarantor
Senior Indebtedness; and nothing in Article VII shall deprive the Trustee of
any of its rights as such holder. Nothing in this Article X shall apply to
claims of, or payments to, the Trustee under or pursuant to Section 7.7.
SECTION 10.10. Distribution or Notice to Representative.
Whenever a distribution is to be made or a notice given to holders of Senior
Indebtedness or Guarantor Senior Indebtedness, the distribution may be made and
the notice given to their Representative (if any).
SECTION 10.11. Article X Not To Prevent Events of Default or
Limit Right To Accelerate. The failure to make a payment in respect of the
Securities, whether directly or pursuant to the Subsidiary Guarantees, by
reason of any provision in this Article X shall not be construed as preventing
the occurrence of a Default or Event of Default. Nothing in this Article X
shall have any effect on the right of the Securityholders or the Trustee to
accelerate the maturity of the Securities or to make a claim for payment under
the Subsidiary Guarantees.
SECTION 10.12. Trust Moneys Not Subordinated.
Notwithstanding anything contained herein to the contrary, payments from money
or the proceeds of U.S. Government Obligations held in trust under Article VIII
by the Trustee for the payment of principal of and interest on the Securities
shall not be subordinated to the prior payment of any Senior Indebtedness or
Guarantor Senior Indebtedness or subject to the restrictions set forth in this
Article X, and none of the Securityholders shall be obligated to pay over any
such amount to the Company, any Subsidiary Guarantor, any holder of Senior
Indebtedness of the Company, any holder of Guarantor Senior Indebtedness or any
other creditor of the Company or any Subsidiary Guarantor.
SECTION 10.13. Trustee Entitled To Rely. Upon any payment or
distribution pursuant to this Article X, the Trustee and the Securityholders
shall be entitled to rely (i) upon any order or decree of a court of competent
jurisdiction in which any proceedings of the nature referred to in Section 10.2
are pending, (ii) upon a certificate of the liquidating trustee or agent or
other Person making such payment or distribution to the Trustee or to the
Securityholders or
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(iii) upon the Representatives for the holders of Senior Indebtedness or
Guarantor Senior Indebtedness for the purpose of ascertaining the Persons
entitled to participate in such payment or distribution, the holders of Senior
Indebtedness, Guarantor Senior Indebtedness and other Indebtedness of the
Company or the Subsidiary Guarantors, the amount thereof or payable thereon,
the amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article X. In the event that the Trustee determines, in
good faith, that evidence is required with respect to the right of any Person
as a holder of Senior Indebtedness or Guarantor Senior Indebtedness to
participate in any payment or distribution pursuant to this Article X, the
Trustee may request such Person to furnish evidence to the reasonable
satisfaction of the Trustee as to the amount of Senior Indebtedness or
Guarantor Senior Indebtedness held by such Person, the extent to which such
Person is entitled to participate in such payment or distribution and other
facts pertinent to the rights of such Person under this Article X, and, if such
evidence is not furnished, the Trustee may defer any payment to such Person
pending judicial determination as to the right of such Person to receive such
payment. The provisions of Sections 7.1 and 7.2 shall be applicable to all
actions or omissions of actions by the Trustee pursuant to this Article X.
SECTION 10.14. Trustee To Effectuate Subordination. Each
Securityholder by accepting a Security authorizes and directs the Trustee on
his behalf to take such action as may be necessary or appropriate to
acknowledge or effectuate the subordination between the Securityholders and the
holders of Senior Indebtedness and Guarantor Senior Indebtedness as provided in
this Article X and appoints the Trustee as attorney-in-fact for any and all
such purposes.
SECTION 10.15. Trustee Not Fiduciary for Holders of Senior
Indebtedness and Subsidiary Guarantor Senior Indebtedness. The Trustee shall
not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness
or Guarantor Senior Indebtedness and shall not be liable to any such holders if
it shall mistakenly pay over or distribute to Securityholders or the Company,
the Subsidiary Guarantors or any other Person, money or assets to which any
holders of Senior Indebtedness or Guarantor Senior Indebtedness shall be
entitled by virtue of this Article X or otherwise.
SECTION 10.16. Reliance by Holders of Senior Indebtedness and
Guarantor Senior Indebtedness on Subordination Provisions. Each Securityholder
by accepting a Security acknowledges and agrees that the foregoing
subordination provisions are, and are intended to be, an inducement and a
consideration to each holder of any Senior Indebtedness or Guarantor Senior
Indebtedness, whether such Senior Indebtedness or Guarantor Senior Indebtedness
was created or acquired before or after the issuance of the Securities, to
acquire and continue to hold, or to
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continue to hold, such Senior Indebtedness or Guarantor Senior Indebtedness and
such holder of Senior Indebtedness or Guarantor Senior Indebtedness shall be
deemed conclusively to have relied on such subordination provisions in
acquiring and continuing to hold, or in continuing to hold, such Senior
Indebtedness or Guarantor Senior Indebtedness.
ARTICLE XI
Subsidiary Guarantee
SECTION 11.1. Subsidiary Guarantee. Subject to the
subordination provisions contained in Article X, each Subsidiary Guarantor
hereby, jointly and severally, unconditionally and irrevocably, Guarantees, as
a primary obligor and not a surety, to each Holder and to the Trustee and its
successors and assigns (a) the due, full and punctual payment of principal of
and interest on the Securities when due, whether at maturity or interest
payment date, by acceleration, by redemption or otherwise (including amounts
that would become due but for the operation of the automatic stay under Section
362(a) of the Bankruptcy Code), and all other monetary obligations of the
Company under this Indenture (including obligations to the Trustee) and the
Securities; (b) the full and punctual payment of interest on the overdue
principal and interest, if any, on the Securities, to the extent lawful, and
(c) the full and punctual performance within applicable grace periods of all
other obligations of the Company under this Indenture and the Securities (all
the foregoing being hereinafter collectively called the "Obligations"). The
Subsidiary Guarantors further agree that the Obligations may be extended or
renewed, in whole or in part, without notice or further assent from the
Subsidiary Guarantors, and that the Subsidiary Guarantors will remain bound
under this Article XI notwithstanding any extension or renewal of any
Obligation.
The Subsidiary Guarantors waive presentation to, demand of,
payment from and protest to the Company of any of the Obligations and also
waive notice of protest for nonpayment. The Subsidiary Guarantors waive notice
of any default under the Securities or the Obligations. The obligations of the
Subsidiary Guarantors hereunder shall not be affected by (a) the failure of any
Holder or the Trustee to assert any claim or demand or to enforce any right or
remedy against the Company or any other Person under this Indenture, the
Securities or any other agreement or otherwise; (b) any extension or renewal of
any Obligation; (c) any rescission, waiver, amendment, modification or
supplement of any of the terms or provisions of this Indenture (other than this
Article XI), the Securities or any other agreement; (d) the release of any
security held by any Holder or the Trustee for the Obligations or any of them;
(e) the failure of any Holder or Trustee
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to exercise any right or remedy against any other guarantor of the Obligations;
or (f) any change in the ownership of the Company.
The Subsidiary Guarantors further agree that their Guarantees
herein constitute a guarantee of payment, performance and compliance when due
(and not a guarantee of collection) and waive any right to require that any
resort be had by any Holder or the Trustee to any security held for payment of
the Obligations.
The Guarantee of each Subsidiary Guarantor is, to the extent
and in the manner set forth in Article X, subordinated and subject in right of
payment to the prior payment in full of the principal of and premium, if any,
and interest on all Guarantor Senior Indebtedness of such Subsidiary Guarantor
and this Guarantee is made subject to such provisions of this Indenture.
Upon failure of payment when due of any Obligation for
whatever reason, each Subsidiary Guarantor will be obligated to pay the same
immediately. Each Subsidiary Guarantor hereby agrees that its obligations
hereunder shall be continuing, absolute and unconditional, irrespective of: the
recovery of any judgment against the Company or any Subsidiary Guarantor; any
extension, renewal, settlement, compromise, waiver or release in respect of any
obligation of the Company under this Indenture or any Security, by operation of
law or otherwise; any modification or amendment of or supplement to this
Indenture or any Security; any change in the corporate existence, structure or
ownership of the Company, or any insolvency, bankruptcy, reorganization or
other similar proceeding affecting the Company or its assets or any resulting
release or discharge of any obligation of the Company contained in this
Indenture or any Security; the existence of any claim, set-off or other rights
which any Subsidiary Guarantor may have at any time against the Company, the
Trustee, any Securityholder or any other Person, whether in connection herewith
or any unrelated transactions, by reason of the invalidity, illegality or
unenforceability of the Obligations or otherwise; provided, that nothing herein
shall prevent the assertion of any such claim by separate suit or compulsory
counterclaim; any invalidity or unenforceability relating to or against the
Company for any reason of this Indenture or any Security, or any provision of
applicable law or regulation purporting to prohibit the payment by the Company
of the principal, premium, if any, or interest on any Security or any other
Obligation; or any other act or omission to act or delay of any kind by the
Company, the Trustee, any Securityholder or any other Person or any other
circumstance whatsoever which might, but for the provisions of this paragraph,
constitute a legal or equitable discharge of the Subsidiary Guarantors'
obligations hereunder. Each Subsidiary Guarantor hereby waives diligence,
presentment, demand of payment, filing of claims with a court in the event of
insolvency or bankruptcy of the Company, any right to require a proceeding
first against the Company, protest,
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notice and all demand whatsoever and covenants that this Subsidiary Guarantee
will not be discharged except by the complete performance of the obligations
contained in the Securities, this Indenture and in this Article XI. Each
Subsidiary Guarantor's obligations hereunder shall remain in full force and
effect until the Indenture shall have terminated and the principal of and
interest on the Securities and all other Obligations shall have been paid in
full. If at any time any payment of the principal of or interest on any
Security or any other payment in respect of any Obligation is rescinded or must
be otherwise restored or returned upon the insolvency, bankruptcy or
reorganization of the Company or otherwise, each Subsidiary Guarantor's
obligations hereunder with respect to such payment shall be reinstated as
though such payment had been due but not made at such time, and this Article
XI, to the extent theretofore discharged, shall be reinstated in full force and
effect. Each Subsidiary Guarantor irrevocably waives any and all rights to
which it may be entitled, by operation of law or otherwise, upon making any
payment hereunder to be subrogated to the rights of the payee against the
Company with respect to such payment or otherwise to be reimbursed, indemnified
or exonerated by the Company in respect thereof.
The Subsidiary Guarantors further agree that their Guarantees
herein shall continue to be effective or be reinstated, as the case may be, if
at any time payment, or any part thereof, of any Obligation is rescinded or
must otherwise be restored by any Holder or the Trustee upon the bankruptcy or
reorganization of the Company or otherwise.
In furtherance of the foregoing and not in limitation of any
other right which any Holder or the Trustee has at law or in equity against the
Subsidiary Guarantors by virtue hereof, upon the failure of the Company to pay
any Obligation when and as the same shall become due, whether at maturity, by
acceleration, by redemption or otherwise, or to perform or comply with any
other Obligation, the Subsidiary Guarantors hereby promise to and will, upon
receipt of written demand by the Trustee, forthwith pay, or cause to be paid,
in cash, to the Holders or the Trustee an amount equal to the sum of (i) the
unpaid principal amount of such Obligations, (ii) accrued and unpaid interest
on such Obligations (but only to the extent not prohibited by law) and (iii)
all other monetary Obligations of the Company to the Holders and the Trustee.
The Subsidiary Guarantors agree that, as between the
Subsidiary Guarantors, on the one hand, and the Holders and the Trustee, on the
other hand, (x) the maturity of the Obligations guaranteed hereby may be
accelerated as provided in Article VI for the purposes of the Guarantee herein,
notwithstanding any stay, injunction or other prohibition preventing such
acceleration in respect of the Obligations guaranteed hereby, and (y) in the
event of any declaration of acceleration of such Obligations as provided in
Article VI, such Obligations
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(whether or not due and payable) shall forthwith become due and payable by the
Subsidiary Guarantors for the purposes of this Section.
The Subsidiary Guarantors also agree to pay any and all costs
and expenses (including reasonable attorneys' fees) incurred by the Trustee or
any Holder in enforcing any rights under this Section 11.1.
SECTION 11.2. Limitation on Liability. Any term or provision
of this Indenture to the contrary notwithstanding, the obligations of each
Subsidiary Guarantor are limited to the maximum amount as will, after giving
effect to all other contingent and fixed liabilities of such Subsidiary
Guarantor (including, without limitation, any guarantees under the New Credit
Facility) and after giving effect to any collections from or payments made by
or on behalf of any other Subsidiary Guarantor in respect of the obligations of
such other Subsidiary Guarantor under its Subsidiary Guarantee or pursuant to
its contribution obligations under this Indenture, result in the obligations of
such Subsidiary Guarantor under the Subsidiary Guarantee not constituting a
fraudulent transfer or conveyance for purposes of the Bankruptcy Law, Federal
and state fraudulent conveyance laws or other legal principles. To effectuate
the foregoing intention, the Securityholders and each Subsidiary Guarantor
hereby irrevocably agree that the obligations of such Subsidiary Guarantor
under the Subsidiary Guarantee shall be limited to the maximum amount as will,
after giving effect to all other contingent and fixed liabilities of such
Subsidiary Guarantor and after giving effect to any collections from or
payments made by or on behalf of any other Subsidiary Guarantor in respect of
the obligations of such other Subsidiary Guarantor under its Subsidiary
Guarantee or pursuant to Section 11.5 hereof, result in the obligations of such
Subsidiary Guarantor under the Subsidiary Guarantee not constituting such
fraudulent transfer or conveyance under federal or state law.
SECTION 11.3. Successors and Assigns. (a) This Article XI
shall be binding upon the Subsidiary Guarantors and their successors and
assigns and shall enure to the benefit of the successors and assigns of the
Trustee and the Holders and, in the event of any transfer or assignment of
rights by any Holder or the Trustee, the rights and privileges conferred upon
that party in this Indenture and in the Securities shall automatically extend
to and be vested in such transferee or assignee, all subject to the terms and
conditions of this Indenture.
(b) Nothing contained in this Article XI shall prevent any
consolidation or merger of a Subsidiary Guarantor with or into the Company or
another Subsidiary Guarantor or shall prevent any sale or conveyance of the
property of a Subsidiary Guarantor as an entirety or substantially as an
entirety, to the Company or another Subsidiary Guarantor.
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(c) Notwithstanding the foregoing, all obligations of a
Subsidiary Guarantor under this Article XI shall be automatically and
unconditionally released and discharged upon any sale, exchange or transfer to
any Person (whether or not an Affiliate of the Subsidiary Guarantor) which is
not the Company or a Subsidiary of the Company, of all or substantially all of
the assets of such Subsidiary Guarantor or all of the Capital Stock of such
Subsidiary Guarantor owned by the Company and its Subsidiaries; provided that
(i) such sale, exchange or transfer is in compliance with and not prohibited by
this Indenture and (ii) all obligations of such Subsidiary Guarantor in respect
of the New Credit Facility and under all of its Guarantees of, and in respect
of all Liens on its assets securing, Indebtedness of the Company are also
released and discharged upon such sale, exchange or transfer.
SECTION 11.4. No Waiver. Neither a failure nor a delay on
the part of either the Trustee or the Holders in exercising any right, power or
privilege under this Article XI shall operate as a waiver thereof, nor shall a
single or partial exercise thereof preclude any other or further exercise of
any right, power or privilege. The rights, remedies and benefits of the
Trustee and the Holders herein expressly specified are cumulative and not
exclusive of any other rights, remedies or benefits which either may have under
this Article XI at law, in equity, by statute or otherwise.
SECTION 11.5. Right of Contribution. In order to provide for
just and equitable contribution among the Subsidiary Guarantors, the Subsidiary
Guarantors agree, inter se, that in the event any payment or distribution is
made by any Subsidiary Guarantor (a "Funding Guarantor") under the Guarantee,
such Funding Guarantor shall be entitled to a contribution from all other
Guarantors in a pro rata amount based on the Adjusted Net Assets of each
Subsidiary Guarantor (including the Funding Guarantor) for all payments,
damages and expenses incurred by that Funding Guarantor in discharging the
Company's obligations with respect to the Securities or any other Subsidiary
Guarantor's obligations with respect to the Subsidiary Guarantee.
SECTION 11.6. No Subrogation. Notwithstanding any payment or
payments made by any of the Subsidiary Guarantors hereunder, no Subsidiary
Guarantor shall be entitled to be subrogated to any of the rights of the
Trustee or any Securityholder against the Company or any other Subsidiary
Guarantor or any collateral security or guarantee or right of offset held by
the Trustee or any Securityholder for the payment of the Obligations, nor shall
any Subsidiary Guarantor seek or be entitled to seek any contribution or
reimbursement from the Company or any other Subsidiary Guarantor in respect of
payments made by such Subsidiary Guarantor hereunder, until all amounts owing
to the Trustee and the Securityholders by the Company on account of the
Obligations are paid in full. If any amount shall be paid to any Subsidiary
Guarantor on account
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of such subrogation rights at any time when all of the Obligations shall not
have been paid in full, such amount shall be held by such Subsidiary Guarantor
in trust for the Trustee and the Securityholders, segregated from other funds
of such Subsidiary Guarantor, and shall, forthwith upon receipt by such
Subsidiary Guarantor, be turned over to the Trustee in the exact form received
by such Subsidiary Guarantor (duly indorsed by such Subsidiary Guarantor to the
Trustee, if required), to be applied against the Obligations.
SECTION 11.7. Additional Subsidiary Guarantors. Concurrently
with the creation or acquisition by the Company of any Subsidiary (other than a
foreign subsidiary and other than an Unrestricted Subsidiary), the Company,
such Subsidiary and the Trustee shall execute and deliver a supplement to this
Indenture providing that such Subsidiary will be a Subsidiary Guarantor
hereunder. Each such supplement shall be in a form reasonably satisfactory to
the Trustee.
SECTION 11.8. Execution and Delivery of Subsidiary Guarantee.
(a) To evidence each Subsidiary Guarantor's Subsidiary Guarantee set forth in
this Article XI each Subsidiary Guarantor hereby agrees that a notation of such
Subsidiary Guarantee shall be placed on each Security authenticated and
delivered by the Trustee.
(b) This Indenture shall be executed on behalf of each
Subsidiary Guarantor, and an Officer of each Subsidiary Guarantor shall sign
the notation of the Subsidiary Guarantee on the Securities by manual or
facsimile signature. If an Officer whose signature is on this Indenture or the
notation of Subsidiary Guarantee no longer holds that office at the time the
Trustee authenticates the Security on which the Subsidiary Guarantee is
endorsed, the Subsidiary Guarantee shall be valid nevertheless. Each
Subsidiary Guarantor hereby agrees that the Subsidiary Guarantee set forth in
Section 11.1 hereof shall remain in full force and effect notwithstanding any
failure to endorse on each Security a notation of the Subsidiary Guarantee.
(c) The delivery of any Security by the Trustee, after the
authentication thereof hereunder, shall constitute due delivery of the
Subsidiary Guarantee set forth in this Indenture on behalf of each Subsidiary
Guarantor.
SECTION 11.9. Modification. No modification, amendment or
waiver of any provision of this Article XI, nor the consent to any departure by
the Subsidiary Guarantors therefrom, shall in any event be effective unless the
same shall be in writing and signed by the Trustee, and then such waiver or
consent shall be effective only in the specific instance and for the purpose
for which given. No notice to or demand on the Subsidiary Guarantors in any
case
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shall entitle the Subsidiary Guarantors to any other or further notice or
demand in the same, similar or other circumstances.
SECTION 11.10. Waiver of Stay, Extension or Usury Laws. Each
Subsidiary Guarantor covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay or extension law or any usury law
or other law that would prohibit or forgive each such Subsidiary Guarantor from
performing its Subsidiary Guarantee as contemplated herein, wherever enacted,
now or at any time hereafter in force, or which may affect the covenants or the
performance of this Indenture; and (to the extent that it may lawfully do so)
each such Subsidiary Guarantor hereby expressly waives all benefit or advantage
of any such law, and covenants that it will not hinder, delay or impede the
execution of any power herein granted to the Trustee, but will suffer and
permit the execution of every such power as though no such law had been
enacted.
ARTICLE XII
Miscellaneous
SECTION 12.1. Trust Indenture Act Controls. If any provision
of this Indenture limits, qualifies or conflicts with another provision which
is required to be included in this Indenture by the TIA, the provision required
by the TIA shall control.
SECTION 12.2. Notices. Any notice or communication shall be
in writing and delivered in person or mailed by first-class mail addressed as
follows:
if to the Company of any of the Subsidiary Guarantors:
Atrium Companies, Inc.
1341 West Mockingbird Lane
Suite 1200W
Dallas, TX 75247
Attention: Chief Financial Officer
<PAGE> 98
90
if to the Trustee:
United States Trust Company of New York
114 West 47th Street
New York, New York 10036-1532
Attention: Corporate Trust Department
The Company, any of the Subsidiary Guarantors, or the Trustee
by notice to the other may designate additional or different addresses for
subsequent notices or communications.
Any notice or communication mailed to a Securityholder shall
be mailed to the Securityholder at the Securityholder's address as it appears
on the registration books of the Registrar and shall be sufficiently given if
so mailed within the time prescribed.
All notices and communications (other than those sent to
Securityholders) shall be deemed to have been duly given: at the time delivered
by hand, if personally delivered; five Business Days after being deposited in
the mail, postage prepaid, if mailed.
Any notice or communication to a Securityholder shall be
mailed by first class mail, postage prepaid, to its address shown on the
register kept by the Registrar. Any notice or communication shall also be so
mailed to any Person described in TIA Section 313(c), to the extent required
by the TIA. Failure to mail a notice or communication to a Securityholder or
any defect in it shall not affect its sufficiency with respect to other
Securityholders.
If a notice or communication is mailed to any Person in the
manner provided above within the time prescribed, it is duly given, whether or
not the addressee receives it.
If the Company mails a notice or communication to
Securityholders, it shall mail a copy to the Trustee and each Agent at the same
time.
SECTION 12.3. Communication by Holders with other Holders.
Securityholders may communicate pursuant to TIA Section 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar and anyone else shall have
the protection of TIA Section 312(c).
<PAGE> 99
91
SECTION 12.4. Certificate and Opinion as to Conditions
Precedent. Upon any request or application by the Company to the Trustee to
take or refrain from taking any action under this Indenture, the Company shall
furnish to the Trustee:
(1) an Officers' Certificate in form and substance
reasonably satisfactory to the Trustee (which shall include the
statements set forth in Section 12.5) stating that, in the opinion of
the signers, all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with; and
(2) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set
forth in Section 12.5) stating that, in the opinion of such counsel,
all such conditions precedent have been complied with.
SECTION 12.5. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a covenant or
condition provided for in this Indenture shall include:
(1) a statement that the individual making such certificate
or opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such individual, he
has made such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(4) a statement as to whether or not, in the opinion of such
individual, such covenant or condition has been complied with and such
other opinions as the Trustee may reasonably request.
SECTION 12.6. When Securities Disregarded. In determining
whether the Holders of the required principal amount of Securities have
concurred in any direction, waiver or consent, Securities owned by the Company
or by any Person directly or indirectly controlling or controlled by or under
direct or indirect common control with the Company shall be disregarded and
deemed not to be outstanding, except that, for the purpose of determining
whether the Trustee shall be protected in relying on any such direction, waiver
or consent, only Securities which the
<PAGE> 100
92
Trustee knows are so owned shall be so disregarded. Also, subject to the
foregoing, only Securities outstanding at the time shall be considered in any
such determination.
SECTION 12.7. Rules by Trustee, Paying Agent and Registrar.
The Trustee may make reasonable rules for action by or at a meeting of
Securityholders. The Registrar and the Paying Agent may make reasonable rules
for their functions.
SECTION 12.8. Legal Holidays. A "Legal Holiday" is a
Saturday, a Sunday or a day on which banking institutions are not required to
be open in the State of New York. If a payment date is a Legal Holiday,
payment shall be made on the next succeeding day that is not a Legal Holiday,
and no interest shall accrue for the intervening period. If a regular record
date is a Legal Holiday, the record date shall not be affected.
SECTION 12.9. Governing Law. This Indenture and the
Securities shall be governed by, and construed in accordance with, the laws of
the State of New York but without giving effect to applicable principles of
conflicts of law to the extent that the application of the laws of another
jurisdiction would be required thereby.
SECTION 12.10. No Recourse Against Others. A director,
officer, employee or stockholder, as such, of the Company shall not have any
liability for any obligations of the Company under the Securities or this
Indenture or for any claim based on, in respect of or by reason of such
obligations or their creation. By accepting a Security, each Securityholder
shall waive and release all such liability. The waiver and release shall be
part of the consideration for the issue of the Securities.
SECTION 12.11. Successors. All agreements of the Company and
the Subsidiary Guarantors in this Indenture and the Securities shall bind their
respective successors. All agreements of the Trustee in this Indenture shall
bind its successors.
SECTION 12.12. Multiple Originals. The parties may sign any
number of copies of this Indenture. Each signed copy shall be an original, but
all of them together represent the same agreement. One signed copy is enough
to prove this Indenture.
SECTION 12.13. Variable Provisions. The Company initially
appoints the Trustee as Paying Agent and Registrar and custodian with respect
to any Global Notes.
<PAGE> 101
93
SECTION 12.14. Qualification of Indenture. The Company shall
qualify this Indenture under the TIA in accordance with the terms and
conditions of the Registration Rights Agreement and shall pay all reasonable
costs and expenses (including attorneys' fees for the Company, the Trustee and
the Holders) incurred in connection therewith, including, but not limited to,
costs and expenses of qualification of the Indenture and the Securities and
printing this Indenture and the Securities. The Trustee shall be entitled to
receive from the Company any such Officers' Certificates, Opinions of Counsel
or other documentation as it may reasonably request in connection with any such
qualification of this Indenture under the TIA.
SECTION 12.15. Table of Contents; Headings. The table of
contents, cross-reference sheet and headings of the Articles and Sections of
this Indenture have been inserted for convenience of reference only, are not
intended to be considered a part hereof and shall not modify or restrict any of
the terms or provisions hereof.
SECTION 12.16. Severability. In case any provision in this
Indenture or in the Securities 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.
<PAGE> 102
94
IN WITNESS WHEREOF, the parties have caused this Indenture to
be duly executed as of the date first written above.
ATRIUM COMPANIES, INC.
By: /s/ RANDALL S. FOJTASEK
-----------------------------------
Name: Randall S. Fojtasek
Title: President and Chief
Executive Officer
H-R WINDOW SUPPLY, INC.
By: /s/ RANDALL S. FOJTASEK
-----------------------------------
Name: Randall S. Fojtasek
Title: Vice President
VINYL BUILDING SPECIALTIES OF
CONNECTICUT, INC.
By: /s/ RANDALL S. FOJTASEK
-----------------------------------
Name: Randall S. Fojtasek
Title: President
BISHOP MANUFACTURING CO. OF NEW YORK, INC.
By: /s/ RANDALL S. FOJTASEK
-----------------------------------
Name: Randall S. Fojtasek
Title: President
<PAGE> 103
95
BISHOP MANUFACTURING COMPANY, INCORPORATED
By: /s/ RANDALL S. FOJTASEK
-----------------------------------
Name: Randall S. Fojtasek
Title: President
BISHOP MANUFACTURING COMPANY OF
NEW ENGLAND, INC.
By: /s/ RANDALL S. FOJTASEK
-----------------------------------
Name: Randall S. Fojtasek
Title: President
UNITED STATES TRUST COMPANY OF
NEW YORK
as Trustee
By: /s/ LOUIS P. YOUNG
-----------------------------------
Name: Louis P. Young
Title: Vice President
<PAGE> 104
EXHIBIT A
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION
HEREOF, THE SECURITYHOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT)
OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE
501(a)(1), (2), (3) or (7) UNDER THE SECURITIES ACT) (AN "ACCREDITED
INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY
IN AN OFFSHORE TRANSACTION, (2) AGREES THAT IT WILL NOT WITHIN THREE
YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY RESELL OR OTHERWISE
TRANSFER THIS SECURITY EXCEPT (A) TO THE ISSUER OR ANY SUBSIDIARY
THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER
IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE
UNITED STATES TO AN ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER,
FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY A U.S. BROKER-DEALER) TO
THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND
AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS SECURITY
(THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE OR
REGISTRAR), (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (E)
<PAGE> 105
PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER
THE SECURITIES ACT (IF AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT
WILL DELIVER TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH
ANY TRANSFER OF THIS SECURITY WITHIN THREE YEARS AFTER THE ORIGINAL
ISSUANCE OF THIS SECURITY, IF THE PROPOSED TRANSFEREE IS AN ACCREDITED
INVESTOR, THE SECURITYHOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO
THE TRUSTEE AND THE ISSUER SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER
INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT
SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION,"
"UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY
REGULATION S UNDER THE SECURITIES ACT.
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN
DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE
BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY, OR BY ANY SUCH NOMINEE
OF THE DEPOSITARY, OR BY THE DEPOSITARY OR NOMINEE OF SUCH SUCCESSOR
DEPOSITARY OR ANY SUCH NOMINEE, TO A SUCCESSOR DEPOSITARY OR A NOMINEE
OF SUCH SUCCESSOR DEPOSITARY. TRANSFERS OF THIS GLOBAL SECURITY SHALL
BE LIMITED TO
<PAGE> 106
EXHIBIT A
Page 3
TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A
SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE, AND TRANSFERS OF PORTIONS
OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE
WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE
ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC
(AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS
IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.
<PAGE> 107
EXHIBIT A
Page 4
CUSIP No:
(Front of Security)
No. 1 $___________
ATRIUM COMPANIES, INC.
10 1/2% Senior Subordinated Note due 2006, Series A
ATRIUM COMPANIES, INC., a Delaware corporation, for value received, promises to
pay to Cede & Co., as nominee of the Depository Trust Company, or its
registered assigns, the principal sum of $100,000,000 on November 15, 2006.
Interest Payment Dates: May 15, and November 15, commencing May 15, 1997.
Record Dates: May 1 and November 1 (whether or not a Business Day).
Additional provisions of this Security are set forth on the other side of this
Security.
Dated:
ATRIUM COMPANIES, INC.
By:
-------------------------
Name:
Title:
By:
-------------------------
Name:
Title:
(SEAL)
(Trustee's Certificate of Authentication)
<PAGE> 108
EXHIBIT A
Page 5
This is one of the Securities referred
to in the within-mentioned Indenture
United States Trust Company of New York, as Trustee
By:
-------------------------------
Authorized Officer
<PAGE> 109
EXHIBIT A
Page 6
(Reverse of Security)
ATRIUM COMPANIES, INC.
10 1/2% SENIOR SUBORDINATED NOTE DUE 2006, SERIES A
Capitalized terms used herein have the meanings assigned to them
in the Indenture (as defined below) unless otherwise indicated.
1. Interest. Atrium Companies, Inc., a Delaware corporation
(the "Company"), promises to pay interest on the principal amount of this
Security at the rate and in the manner specified below. The Company shall pay,
in cash, interest on the principal amount of this Security at the rate per
annum of 10 1/2%. The Company will pay interest semiannually in arrears on May
15 and November 15 of each year (each an "Interest Payment Date"), commencing
May 15, 1997, or if any such day is not a Business Day on the next succeeding
Business Day. Interest will be computed on the basis of a 360-day year
consisting of twelve 30-day months. Interest shall accrue from the most recent
Interest Payment Date to which interest has been paid or, if no interest has
been paid, from the date of the original issuance of the Securities. To the
extent lawful, the Company shall pay interest on overdue principal at the rate
of 2% per annum in excess of the then applicable interest rate on the
Securities; it shall pay interest on overdue installments of interest (without
regard to any applicable grace periods) at the same rate to the extent lawful.
2. Method of Payment. The Company shall pay interest on the
Securities (except defaulted interest) to the Persons who are registered
Holders of Securities at the close of business on the Record Date immediately
preceding the Interest Payment Date, even if such Securities are cancelled
after such Record Date and on or before such Interest Payment Date.
Securityholders must surrender Securities to a Paying Agent to collect
principal payments. The Company shall pay principal, premium, if any, and
interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts ("U.S. Legal Tender"). However,
the Company may pay principal, premium, if any, and interest by its check
payable in such U.S. Legal Tender. The Company may deliver any such interest
payment to the Paying Agent or to a Securityholder at the Securityholder's
registered address.
3. Paying Agent and Registrar. Initially, the Trustee will act
as Paying Agent and Registrar. The Company may change any Paying Agent,
Registrar or
<PAGE> 110
EXHIBIT A
Page 7
co-registrar without prior notice to any Securityholder. The Company or any
Subsidiary Guarantor may act in any such capacity.
4. Indenture. The Company issued the Securities under an
Indenture, dated as of November 27, 1996 (the "Indenture"), among the Company,
the Subsidiary Guarantors and the Trustee. The terms of the Securities include
those stated in the Indenture and those made part of the Indenture by reference
to the TIA as in effect on the date the Indenture is qualified. The Securities
are subject to all such terms, and Securityholders are referred to the
Indenture and the TIA for a statement of such terms. The terms of the
Indenture shall govern any inconsistencies between the Indenture and the
Securities. The Securities are senior subordinated Obligations of the Company
limited to $100,000,000 in aggregate principal amount.
5. (a) Optional Redemption. Except as indicated in the next
succeeding paragraph, the Securities are not redeemable at the Company's option
prior to November 15, 2001. Thereafter, the Securities will be redeemable, at
the option of the Company, in whole or in part, at the redemption prices
(expressed as percentages of the principal amount of the Securities) if
redeemed during the 12-month period commencing on November 15 of the years set
forth below, plus accrued interest to the redemption date (subject to the right
of holders of record on the relevant Record Date to receive interest due on the
relevant Interest Payment Date):
<TABLE>
<CAPTION>
ANNUAL PERIOD BEGINNING REDEMPTION PRICE
----------------------- ----------------
<S> <C>
2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . 105.250%
2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . 103.500
2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . 101.750
2004 and thereafter . . . . . . . . . . . . . . . . . . . 100.000
</TABLE>
(b) Optional Redemption Upon Equity Offerings. In addition,
at any time and from time to time prior to November 15, 2000, the Company may,
at its option, redeem the Securities, in part, with net cash proceeds of one or
more Equity Offerings by the Company or Atrium Corporation ("Holding") (to the
extent, in the case of Holding, that net cash proceeds thereof are contributed
to the common or non-redeemable preferred equity capital of the Company) so
long as there is a Public Market at the time of such redemption, at a
redemption price equal to 110.500% of the principal amount thereof, plus
accrued and unpaid interest thereon, if any, to the date of redemption;
<PAGE> 111
EXHIBIT A
Page 8
provided, however, that after any such redemption the aggregate principal
amount of the Securities outstanding must equal at least $65 million. In order
to effect the foregoing redemption with the proceeds of any Equity Offering,
the Company shall make such redemption not more than 12 months after the
consummation of any such Equity Offering.
At any time on or prior to November 15, 2001, the Securities
may also be redeemed as a whole at the option of the Company upon the
occurrence of a Change of Control, upon not less than 30 nor more than 60 days'
prior notice (but in no event more than 90 days after the occurrence of such
Change of Control) mailed by first-class mail to each Holder's registered
address, at a redemption price equal to 100% of the principal amount thereof
plus the Applicable Premium as of, and accrued and unpaid interest, if any, to,
the date of redemption (the "Redemption Date") (subject to the right of holders
of record on the relevant Record Date to receive interest due on the relevant
Interest Payment Date).
"Applicable Premium" means, with respect to a Security at any
Redemption Date, the greater of (i) 1.0% of the principal amount of such
Security and (ii) the excess of (A) the present value at such time of (1) the
redemption price of such Security at November 15, 2001 (such redemption price
being described under 5(a) above) plus (2) all required interest payments due
on such Security through November 15, 2001, computed using a discount rate
equal to the Treasury Rate plus 100 basis points, over (B) the principal amount
of such Security.
"Treasury Rate" means the yield to maturity at the time of
computation of United States Treasury securities with a constant maturity (as
compiled and published in the most recent Federal Reserve Statistical Release
H.15 (519) which has become publicly available at least two business days prior
to the Redemption Date (or, if such Statistical Release is no longer published,
any publicly available source or similar market data)) most nearly equal to the
period from the Redemption Date to November 15, 2001; provided, however, that
if the period from the Redemption Date to November 15, 2001 is not equal to the
constant maturity of a United States Treasury security for which a weekly
average yield is given, the Treasury Rate shall be obtained by linear
interpolation (calculated to the nearest one-twelfth of a year) from the weekly
average yields of United States Treasury securities for which such yields are
given, except that if the period from the Redemption Date to November 15, 2001
is less than one year, the weekly average yield on actually traded United
States Treasury securities adjusted to a constant maturity of one year shall be
used.
<PAGE> 112
EXHIBIT A
Page 9
6. Mandatory Redemption. The Securities are not subject to
mandatory redemption or sinking fund payments.
7. Repurchase at Option of Securityholder. (a) If there is a
Change of Control, each Holder of Securities will have the right to require the
Company to repurchase all or any part of such Holder's Securities at a
repurchase price equal to 101% of the principal amount thereof, plus accrued
and unpaid interest, if any, to the date of repurchase (subject to the right of
Holders of record on the relevant Record Date to receive interest due on the
relevant Interest Payment Date). Within 30 days following any Change of
Control, unless the Company has mailed a redemption notice with respect to all
the outstanding Securities in connection with such Change of Control, the
Company will mail a notice to each Securityholder stating (i) that a Change of
Control has occurred and that such Securityholder has the right to require the
Company to repurchase all or any part of such Securityholder's Securities at a
repurchase price in cash equal to 101% of the principal amount thereof plus
accrued and unpaid interest, if any, to the date of repurchase (subject to the
right of Holders of record on the relevant Record Date to receive interest due
on the relevant Interest Payment Date); (ii) the repurchase date (which will be
no earlier then 30 days nor later than 60 days from the date such notice is
mailed); and (iii) the instructions, determined by the Company, consistent with
the Indenture, that a Securityholder must follow in order to have its
Securities repurchased. Securityholders that are subject to an offer to
repurchase may elect to have such Securities repurchased by completing the form
entitled "Option of Securityholder to Elect Purchase" appearing below.
(b) In the event of an Asset Disposition that requires the
purchase of Securities pursuant to the Indenture, the Company will be required
to purchase Securities tendered pursuant to an offer by the Company for the
Securities at a purchase price of 100% of their principal amount plus accrued
and unpaid interest, if any, to the date of repurchase in accordance with the
procedures (including prorating in the event of oversubscription) set forth in
the Indenture. If the aggregate purchase price of the Securities tendered
pursuant to the offer is less than the Net Available Cash allotted to the
purchase of the Securities, the Company will apply the remaining Net Available
Cash in accordance with the Indenture.
8. Notice of Redemption. Notice of redemption shall be
mailed at least 30 days but not more than 60 days before the redemption date by
first-class mail to each Holder whose Securities are to be redeemed at its
registered address. Securities may be redeemed in part but only in whole
multiples of $1,000, unless all of the Securities held
<PAGE> 113
EXHIBIT A
Page 10
by a Securityholder are to be redeemed. On and after the redemption date,
interest ceases to accrue on Securities or portions of them called for
redemption.
9. Subordination. The Securities are subordinated to Senior
Indebtedness, as defined in the Indenture. To the extent provided in the
Indenture, Senior Indebtedness must be paid before the Securities may be paid.
The Company agrees, and each Securityholder by accepting a Security agrees, to
the subordination provisions contained in the Indenture and authorizes the
Trustee to give them effect and appoints the Trustee as attorney-in-fact for
such purpose.
10. Registration Rights. Pursuant to the Registration Rights
Agreement, and subject to certain terms and conditions stated therein, the
Company will be obligated to consummate an Exchange Offer pursuant to which the
Holders of the Initial Securities shall have the right to exchange this
Security for Exchange Securities, which have been registered under the
Securities Act, in like principal amount and having terms identical in all
material respect to the Initial Security. In certain circumstances, and subject
to certain terms and conditions, Holders of the Initial Securities shall have
the right to receive liquidated damages if the Company shall have failed to
fulfill its obligations under the Registration Rights Agreement.
11. Denominations, Transfer, Exchange. The Securities are in
registered form without coupons in denominations of $1,000 and integral
multiples of $1,000. The transfer of Securities may be registered and
Securities may be exchanged as provided in the Indenture. The Registrar and
the Trustee may require a Securityholder among other things, to furnish
appropriate endorsements and transfer documents and to pay any taxes and fees
required by law or permitted by the Indenture. The Registrar need not exchange
or register the transfer of any Security or portion of a Security selected for
redemption. Also, it need not exchange or register the transfer of any
Securities during a period beginning at the opening of business on a Business
Day 15 days before the day of any selection of Securities to be redeemed and
ending at the close of business on the day of selection or during the period
between a Record Date and the corresponding Interest Payment Date.
12. Persons Deemed Owners. Prior to due presentment to the
Trustee for registration of the transfer of this Security, the Trustee, any
Agent and the Company may deem and treat the Person in whose name this Security
is registered as its absolute owner for the purpose of receiving payment of
principal of, premium, if any, and interest on this Security and for all other
purposes whatsoever, whether or not this Security is overdue,
<PAGE> 114
EXHIBIT A
Page 11
and neither the Trustee, any Agent nor the Company shall be affected by notice
to the contrary. The registered Securityholder shall be treated as its owner
for all purposes.
13. Amendments and Waivers. Subject to certain exceptions
provided in the Indenture, the Indenture or the Securities may be amended with
the consent of the Holders of a majority in principal amount of the then
outstanding Securities, and any existing Default or Event of Default (except a
payment default) may be waived with the consent of the Holders of a majority in
principal amount of the then outstanding Securities. Without the consent of
any Securityholder, the Indenture or the Securities may be amended to, among
other things, cure any ambiguity, defect or inconsistency, to comply with the
requirements of the Commission in order to effect or maintain qualification of
the Indenture under the TIA or to make any change that does not adversely
affect the rights of any Securityholder.
14. Defaults and Remedies. If an Event of Default occurs and
is continuing, the Trustee or the Holders of at least 25% in principal amount
of the then outstanding Securities may declare the unpaid principal of, and any
accrued and unpaid interest on, all the Securities to be due and payable
immediately; provided, that in the case of an Event of Default arising from
certain events of bankruptcy or insolvency with respect to the Company or any
Subsidiary Guarantor, all outstanding Securities shall become due and payable
immediately without further action or notice. Securityholders may not enforce
the Indenture or the Securities except as provided in the Indenture. The
Trustee may require indemnity satisfactory to it before it enforces the
Indenture or the Securities. Subject to certain limitations, Holders of a
majority in principal amount of the then outstanding Securities may direct the
Trustee in its exercise of any trust or power. The Trustee may withhold from
Securityholders notice of any continuing default (except a default in payment
of principal or interest) if it determines that withholding notice is in their
interests. The Company must furnish an annual compliance certificate to the
Trustee.
15. Trustee Dealings with the Company. The Trustee under the
Indenture, in its individual or any other capacity, may make loans to, accept
deposits from, and perform services for the Company, the Subsidiary Guarantors
or any Affiliate of the Company or the Subsidiary Guarantors, and may otherwise
deal with the Company, the Subsidiary Guarantors and their respective
Affiliates as if it were not Trustee.
16. Restrictive Covenants. The Indenture imposes certain
limitations on the ability of the Company and its Restricted Subsidiaries to,
among other things, incur
<PAGE> 115
EXHIBIT A
Page 12
additional Indebtedness, make payments in respect of its Capital Stock or
certain Indebtedness, enter into transactions with Affiliates, create dividend
or other payment restrictions affecting Subsidiaries, merge or consolidate with
any other Person or, sell, assign, transfer, lease, convey or otherwise dispose
of all or substantially all of its assets or adopt a plan of liquidation. Such
limitations are subject to a number of important qualifications and exceptions
provided for in the Indenture. The Company must annually report to the Trustee
on compliance with such limitations.
17. Authentication. This Security shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating
agent.
18. Guarantee. Each Subsidiary Guarantor has jointly and
severally irrevocably and unconditionally guaranteed, on a senior subordinated
basis, the payment of principal, premium, if any, and interest (including
interest on overdue principal and overdue interest, if lawful) on the
Securities; provided, however, each Subsidiary Guarantor that makes a payment
or distribution under a Guarantee shall be entitled to a contribution from each
other Subsidiary Guarantor in a pro rata amount based on the Adjusted Net
Assets of each Subsidiary Guarantor.
19. Defeasance. Subject to certain conditions provided for
in the Indenture, the Company at any time may terminate some or all of its
obligations under the Securities and the Indenture if the Company deposits with
the Trustee money or U.S. Government Obligations for the payment of principal,
premium (if any) and interest on the Securities to redemption or maturity, as
the case may be.
20. Governing Law. The Laws of the State of New York shall
govern this Security and the Indenture, without regard to principles of
conflict of laws.
21. Abbreviations. Customary abbreviations may be used in
the name of a Securityholder or an assignee, such as: TEN COM (= tenants in
common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with
right of survivorship and not as tenants in common), CUST (= Custodian), and
U/G/M/A (= Uniform Gifts to Minors Act).
22. CUSIP Numbers. Pursuant to a recommendation promulgated
by the Committee on Uniform Security Identification Procedures, the Company has
caused CUSIP numbers to be printed on the Securities and has directed the
Trustee to use CUSIP numbers in notices of redemption as a convenience to
Securityholders. No representation is made as to the accuracy of such numbers
either as printed on the Securities or as
<PAGE> 116
EXHIBIT A
Page 13
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company will furnish to any Securityholder upon written
request and without charge a copy of the Indenture. Request may be made to:
Atrium Companies, Inc.
1341 West Mockingbird Lane
Suite 1200W
Dallas, TX 75247
Attention: Chief Financial Officer
<PAGE> 117
EXHIBIT A
Page 14
FORM OF NOTATION ON SECURITY RELATING TO GUARANTEE
SENIOR SUBORDINATED GUARANTEE
The Subsidiary Guarantors (as defined in the Indenture (the
"Indenture") referred to in the Security upon which this notation is endorsed
and each hereinafter referred to as a "Guarantor," which term includes any
successor Person under the Indenture) (i) have jointly and severally
irrevocably and unconditionally guaranteed as a primary obligor and not a
surety (such guarantee by each Guarantor being referred to herein as the
"Guarantee"), (a) the due, full and punctual payment of the principal, premium,
if any, and interest on the Securities, whether at stated maturity or interest
payment date, by acceleration, call for redemption or otherwise, (b) the due
and punctual payment of interest on the overdue principal of and interest, if
any, on the Securities, to the extent lawful, (c) the due and punctual
performance of all other monetary Obligations of the Company under the
Indenture and the Securities to the Securityholders or the Trustee, all in
accordance with the terms set forth in Article XI of the Indenture and (d) in
case of any extension of time of payment or renewal of any Securities or any
such Obligations, the same will be promptly paid in full when due or performed
in accordance with the terms of the extension or renewal, whether at stated
maturity by acceleration or otherwise and (ii) have agreed to pay any and all
costs and expenses (including reasonable attorneys' fees) incurred by the
Trustee or any Securityholder in enforcing any rights under this Guarantee.
The Obligations of each Guarantor to the Securityholders of
Securities and to the Trustee pursuant to this Guarantee and the Indenture are
expressly set forth in Article XI of the Indenture and reference is hereby made
to such Indenture for the precise terms of this Guarantee. The Obligations of
each Guarantor to the Securityholders of Securities and to the trustee pursuant
to this Guarantee and the Indenture are subordinated to Guarantor Senior
Indebtedness, as defined in the Indenture.
No stockholder, officer, director or incorporator, as such,
past, present or future of any Guarantor shall have any liability under this
Guarantee by reason of his or its status as such stockholder, officer, director
or incorporator.
This is a continuing Guarantee and, except as otherwise expressly
provided for in Article XI of the Indenture, shall remain in full force and
effect and shall be binding upon the Guarantor and its successors and assigns
until full and final payment of all of the Company's Obligations under the
Securities and the Indenture and shall inure to the benefit of the successors
and assigns of the Trustee and the Securityholders and,
<PAGE> 118
EXHIBIT A
Page 15
in the event of any transfer or assignment of rights by any Securityholder or
the Trustee, the rights and privileges herein conferred upon that party shall
automatically extend to and be vested in such transferee or assignee, all
subject to the terms and conditions hereof. This is a Guarantee of payment and
not of collectibility.
This Guarantee shall not be valid or obligatory for any purpose
until the certificate of authentication on the Security upon which this
Guarantee is noted shall have been executed by the Trustee under the Indenture
by the manual signature of one of its authorized officers.
<PAGE> 119
EXHIBIT A
Page 16
THE TERMS OF ARTICLE XI OF THE INDENTURE ARE INCORPORATED
HEREIN BY REFERENCE.
Capitalized terms used herein have the same meanings given in
the Indenture unless otherwise indicated.
Subsidiary Guarantors:
H-R WINDOW SUPPLY, INC.
By:
---------------------------
Name:
Title:
VINYL BUILDING SPECIALTIES OF
CONNECTICUT, INC.
By:
----------------------------
Name:
Title:
BISHOP MANUFACTURING CO. OF
NEW YORK, INC.
By:
----------------------------
Name:
Title:
<PAGE> 120
EXHIBIT A
Page 17
BISHOP MANUFACTURING
COMPANY, INCORPORATED
By:
----------------------------
Name:
Title:
BISHOP MANUFACTURING COMPANY
OF NEW ENGLAND, INC.
By:
----------------------------
Name:
Title:
<PAGE> 121
EXHIBIT A
Page 18
ASSIGNMENT FORM
To assign this Security, fill in the form below: (I) or (we) assign
and transfer this Security to
- --------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint
--------------------------------------------------------
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him.
<PAGE> 122
EXHIBIT A
Page 19
Date:
--------------------
Your Signature:
-------------------------------
(Sign exactly as your name appears on the face
of this Security)
Signature Guarantee:
- --------------------------
(Signatures must be guaranteed by an "eligible guarantor institution" meeting
the requirements of the Registrar, which requirements will include membership
or participation in the Securities Transfer Agents Medallion Program ("STAMP")
or such other "signature guarantee program" as may be determined by the
Registrar in addition to, or in substitution for, STAMP, all in accordance with
the Securities Exchange Act of 1934, as amended.)
<PAGE> 123
EXHIBIT A
Page 20
In connection with any transfer of this Security occurring
prior to the date which is the earlier of (i) the date of the declaration by
the Commission of the effectiveness of a registration statement under the
Securities Act of 1933, as amended (the "Securities Act") covering resales of
this Security (which effectiveness shall not have been suspended or terminated
at the date of the transfer) and (ii) November 27, 1999, the undersigned
confirms that it has not utilized any general solicitation or general
advertising in connection with the transfer and that this Security is being
transferred:
<TABLE>
<CAPTION>
Check One
---------
<S> <C> <C>
(1) to the Company or a subsidiary thereof; or
---
(2) pursuant to and in compliance with Rule 144A under the
--- Securities Act; or
(3) to an institutional "accredited investor" (as defined
--- in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act) that has furnished to the Trustee a
signed letter containing certain representations and
agreements (the form of which letter can be obtained
from the Trustee); or
(4) outside the United States to a "foreign person" in
--- compliance with Rule 904 of Regulation S under the
Securities Act; or
(5) pursuant to the exemption from registration provided
--- by Rule 144 under the Securities Act; or
(6) pursuant to an effective registration statement under
--- the Securities Act; or
(7) pursuant to another available exemption from the
--- registration requirements of the Securities Act.
</TABLE>
Unless one of the boxes is checked, the Trustee will refuse to register any of
the Securities evidenced by this certificate in the name of any Person other
than the registered Securityholder thereof; provided that if box (3), (4), (5)
or (7) is checked, the Company or the Trustee may require, prior to registering
any such transfer of the Securities, in its sole discretion, such legal
opinions, certifications (including an investment letter in the
<PAGE> 124
EXHIBIT A
Page 21
case of box (3) or (4)) and other information as the Trustee or the Company has
reasonably requested to confirm that such transfer is being made pursuant to an
exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act. If none of the foregoing boxes is checked,
the Trustee or Registrar shall not be obligated to register this Security in
the name of any person other than the Securityholder hereof unless and until
the conditions to any such transfer of registration set forth herein and in
Section 2.17 of the Indenture shall have been satisfied.
Dated: Signed:
---------------------- -----------------------------------
(Sign exactly as name appears on
the other side of this Security)
Signature Guarantee:
-----------------------------------------------------
TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing
this Security for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account is a
"qualified institutional buyer" within the meaning of Rule 144A under the
Securities Act and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information regarding the
Company as the undersigned has requested pursuant to Rule 144A or has
determined not to request such information and that it is aware that the
transferor is relying upon the undersigned's foregoing representations in order
to claim the exemption from registration provided by Rule 144A.
Dated:
----------------------- ----------------------------------------
NOTICE: To be executed by an
executive officer
<PAGE> 125
EXHIBIT A
Page 22
OPTION OF SECURITYHOLDER TO ELECT PURCHASE
If you want to elect to have all or any part of this Security
purchased by the Company pursuant to Section 4.6 or Section 4.8 of the
Indenture check the appropriate box:
[ ] Section 4.6 [ ] Section 4.8
If you want to have only part of the Security purchased by the
Company pursuant to Section 4.6 or Section 4.8 of the Indenture, state the
amount you elect to have purchased:
$______________________
Date:_________________
Your Signature:
-------------------------------
(Sign exactly as your name appears on the face
of this Security)
Signature Guarantee:
- ----------------------------------
(Signatures must be guaranteed by an "eligible guarantor institution" meeting
the requirements of the Registrar, which requirements will include membership
or participation in the Securities Transfer Agents Medallion Program ("STAMP")
or such other "signature guarantee program" as may be determined by the
Registrar in addition to, or in substitution for, STAMP, all in accordance with
the Securities Exchange Act of 1934, as amended.)
<PAGE> 126
EXHIBIT B
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN
DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A
WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY, OR BY ANY SUCH
NOMINEE OF THE DEPOSITARY, OR BY THE DEPOSITARY OR NOMINEE OF SUCH
SUCCESSOR DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR
A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS CERTIFICATE IS
PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT
FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS
IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT
HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR
THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS
GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH
THE RESTRICTIONS SET FORTH IN SECTION 2.17 OF THE INDENTURE.
<PAGE> 127
EXHIBIT B
Page 2
CUSIP No:
(Front of Security)
No. 1 $
-----------
ATRIUM COMPANIES, INC.
10 1/2% Senior Subordinated Note due 2006, Series B
ATRIUM COMPANIES, INC., a Delaware corporation, for value received, promises to
pay to Cede & Co., as nominee of the Depository Trust Company, or its
registered assigns, the principal sum of $100,000,000 on November 15, 2006.
Interest Payment Dates: May 15 and November 15, commencing May 15, 1997.
Record Dates: May 1 and November 1 (whether or not a Business Day).
Additional provisions of this Security are set forth on the other side of this
Security.
Dated:
ATRIUM COMPANIES, INC.
By:
------------------------------------
Name:
Title:
By:
------------------------------------
Name:
Title:
(SEAL)
(Trustee's Certificate of Authentication)
<PAGE> 128
EXHIBIT B
Page 3
This is one of the Securities referred
to in the within-mentioned Indenture
United States Trust Company of New York, as Trustee
By:
--------------------------------
Authorized Officer
<PAGE> 129
EXHIBIT B
Page 4
(Reverse of Security)
ATRIUM COMPANIES, INC.
10 1/2% SENIOR SUBORDINATED NOTE DUE 2006, SERIES B
Capitalized terms used herein have the meanings assigned to
them in the Indenture (as defined below) unless otherwise indicated.
1. Interest. Atrium Companies, Inc., a Delaware corporation
(the "Company"), promises to pay interest on the principal amount of this
Security at the rate and in the manner specified below. The Company shall pay,
in cash, interest on the principal amount of this Security at the rate per
annum of 10-1/2%. The Company will pay interest semiannually in arrears on May
15 and November 15 of each year (each an "Interest Payment Date"), commencing
May 15, 1997, or if any such day is not a Business Day on the next succeeding
Business Day. Interest will be computed on the basis of a 360-day year
consisting of twelve 30-day months. Interest shall accrue from the most recent
Interest Payment Date to which interest has been paid or, if no interest has
been paid, from the date of the original issuance of the Securities. To the
extent lawful, the Company shall pay interest on overdue principal at the rate
of 2% per annum in excess of the then applicable interest rate on the
Securities; it shall pay interest on overdue installments of interest (without
regard to any applicable grace periods) at the same rate to the extent lawful.
2. Method of Payment. The Company shall pay interest on the
Securities (except defaulted interest) to the Persons who are registered
Securityholders at the close of business on the Record Date immediately
preceding the Interest Payment Date, even if such Securities are cancelled
after such Record Date and on or before such Interest Payment Date.
Securityholders must surrender Securities to a Paying Agent to collect
principal payments. The Company shall pay principal, premium, if any, and
interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts ("U.S. Legal Tender"). However,
the Company may pay principal and interest by its check payable in such U.S.
Legal Tender. The Company may deliver any such interest payment to the Paying
Agent or to a Securityholder at the Securityholder's registered address.
<PAGE> 130
EXHIBIT B
Page 5
3. Paying Agent and Registrar. Initially, the Trustee will
act as Paying Agent and Registrar. The Company may change any Paying Agent,
Registrar or co-registrar without prior notice to any Securityholder. The
Company, or any Subsidiary Guarantor may act in any such capacity.
4. Indenture. The Company issued the Securities under an
Indenture, dated as of November 27, 1996 (the "Indenture"), among the Company,
the Subsidiary Guarantors and the Trustee. The terms of the Securities include
those stated in the Indenture and those made part of the Indenture by reference
to the TIA as in effect on the date the Indenture is qualified. The Securities
are subject to all such terms, and Securityholders are referred to the
Indenture and the TIA for a statement of such terms. The terms of the
Indenture shall govern any inconsistencies between the Indenture and the
Securities. The Securities are senior subordinated Obligations of the Company
limited to $100,000,000 in aggregate principal amount.
5. (a) Optional Redemption. Except as indicated in the next
succeeding paragraph, the Securities are not redeemable at the Company's option
prior to November 15, 2001. Thereafter, the Securities will be redeemable, at
the option of the Company, in whole or in part, at the redemption prices
(expressed as percentages of the principal amount of the Securities) if
redeemed during the 12-month period commencing on November 15 of the years set
forth below, plus accrued interest to the redemption date (subject to the right
of holders of record on the relevant Record Date to receive interest on the
relevant Interest Payment Date):
<TABLE>
<CAPTION>
ANNUAL PERIOD BEGINNING REDEMPTION PRICE
----------------------- ----------------
<S> <C>
2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . 105.250%
2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . 103.500
2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . 101.750
2004 and thereafter . . . . . . . . . . . . . . . . . . . 100.000
</TABLE>
(b) Optional Redemption Upon Equity Offerings. In addition,
at any time and from time to time prior to November 15, 2000, the Company may,
at its option, redeem the Securities, in part, with net cash proceeds of one or
more Equity Offerings by the Company or Atrium Corporation ("Holding") (to the
extent, in the case of
<PAGE> 131
EXHIBIT B
Page 6
Holding, that net cash proceeds thereof are contributed to the common or non-
redeemable preferred equity capital of the Company) so long as there is a
Public Market at the time of such redemption, at a redemption price equal to
110.500% of the principal amount thereof, plus accrued and unpaid interest
thereon, if any, to the date of redemption; provided, however, that after any
such redemption the aggregate principal amount of the Securities outstanding
must equal at least $65 million. In order to effect the foregoing redemption
with the proceeds of any Equity Offering, the Company shall make such
redemption not more than 12 months after the consummation of any such Equity
Offering.
At any time on or prior to November 15, 2001, the Securities
may also be redeemed as a whole at the option of the Company upon the
occurrence of a Change of Control, upon not less than 30 nor more than 60 days'
prior notice (but in no event more than 90 days after the occurrence of such
Change of Control) mailed by first-class mail to each Holder's registered
address, at a redemption price equal to 100% of the principal amount thereof
plus the Applicable Premium as of, and accrued and unpaid interest, if any, to,
the date of redemption (the "Redemption Date") (subject to the right of holders
of record on the relevant Record Date to receive interest due on the relevant
Interest Payment Date).
"Applicable Premium" means, with respect to a Security at any
Redemption Date, the greater of (i) 1.0% of the principal amount of such
Security and (ii) the excess of (A) the present value at such time of (1) the
redemption price of such Security at November 15, 2001 (such redemption price
being described under 5(a) above) plus (2) all required interest payments due
on such Security through November 15, 2001, computed using a discount rate
equal to the Treasury Rate plus 100 basis points, over (B) the principal amount
of such Security.
"Treasury Rate" means the yield to maturity at the time of
computation of United States Treasury securities with a constant maturity (as
compiled and published in the most recent Federal Reserve Statistical Release
H.15 (519) which has become publicly available at least two business days prior
to the Redemption Date (or, if such Statistical Release is no longer published,
any publicly available source or similar market data)) most nearly equal to the
period from the Redemption Date to November 15, 2001; provided, however, that
if the period from the Redemption Date to November 15, 2001 is not equal to the
constant maturity of a United States Treasury security for which a weekly
average yield is given, the Treasury Rate shall be obtained by linear
interpolation (calculated to the nearest one-twelfth of a year) from the weekly
average yields of United
<PAGE> 132
EXHIBIT B
Page 7
States Treasury securities for which such yields are given, except that if the
period from the Redemption Date to November 15, 2001 is less than one year, the
weekly average yield on actually traded United States Treasury securities
adjusted to a constant maturity of one year shall be used.
6. Mandatory Redemption. The Securities are not subject to
mandatory redemption or sinking fund payments.
7. Repurchase at Option of Securityholder. (a) If there is a
Change of Control, each Holder of Securities will have the right to require the
Company to repurchase all or any part of such Holder's Securities at a
repurchase price equal to 101% of the principal amount thereof, plus accrued
and unpaid interest, if any, to the date of repurchase (subject to the right of
Holders of record on the relevant Record Date to receive interest due on the
relevant Interest Payment Date). Within 30 days following any Change of
Control, unless the Company has mailed a redemption notice with respect to all
the outstanding Securities in connection with such Change of Control, the
Company will mail a notice to each Securityholder stating (i) that a Change of
Control has occurred and that such Securityholder has the right to require the
Company to repurchase all or any part of such Securityholder's Securities at a
repurchase price in cash equal to 101% of the principal amount thereof plus
accrued and unpaid interest, if any, to the date of repurchase (subject to the
right of Holders of record on the relevant Record Date to receive interest due
on the relevant Interest Payment Date); (ii) the repurchase date (which will be
no earlier then 30 days nor later than 60 days from the date such notice is
mailed); and (iii) the instructions, determined by the Company, consistent with
the Indenture, that a Securityholder must follow in order to have its
Securities repurchased. Securityholders that are subject to an offer to
repurchase may elect to have such Securities repurchased by completing the form
entitled "Option of Securityholder to Elect Purchase" appearing below.
(b) In the event of an Asset Disposition that requires the
purchase of Securities pursuant to the Indenture, the Company will be required
to purchase Securities tendered pursuant to an offer by the Company for the
Securities at a purchase price of 100% of their principal amount plus accrued
and unpaid interest, if any, to the date of repurchase in accordance with the
procedures (including prorating in the event of oversubscription) set forth in
the Indenture. If the aggregate purchase price of the Securities tendered
pursuant to the offer is less than the Net Available Cash allotted to the
purchase of the Securities, the Company will apply the remaining Net Available
Cash in accordance with the Indenture.
<PAGE> 133
EXHIBIT B
Page 8
8. Notice of Redemption. Notice of redemption shall be
mailed at least 30 days but not more than 60 days before the redemption date by
first-class mail to each Holder whose Securities are to be redeemed at its
registered address. Securities may be redeemed in part but only in whole
multiples of $1,000, unless all of the Securities held by a Securityholder are
to be redeemed. On and after the redemption date, interest ceases to accrue on
Securities or portions of them called for redemption.
9. Subordination. The Securities are subordinated to Senior
Indebtedness, as defined in the Indenture. To the extent provided in the
Indenture, Senior Indebtedness must be paid before the Securities may be paid.
The Company agrees, and each Securityholder by accepting a Security agrees, to
the subordination provisions contained in the Indenture and authorizes the
Trustee to give them effect and appoints the Trustee as attorney-in-fact for
such purpose.
10. Denominations, Transfer, Exchange. The Securities are in
registered form without coupons in denominations of $1,000 and integral
multiples of $1,000. The transfer of Securities may be registered and
Securities may be exchanged as provided in the Indenture. The Registrar and
the Trustee may require a Securityholder among other things, to furnish
appropriate endorsements and transfer documents and to pay any taxes and fees
required by law or permitted by the Indenture. The Registrar need not exchange
or register the transfer of any Security or portion of a Security selected for
redemption. Also, it need not exchange or register the transfer of any
Securities during a period beginning on the opening of business on a Business
Day 15 days before the day of any selection of Securities to be redeemed and
ending on the close of business on the day of selection or during the period
between a Record Date and the corresponding Interest Payment Date.
11. Persons Deemed Owners. Prior to due presentment to the
Trustee for registration of the transfer of this Security, the Trustee, any
Agent and the Company may deem and treat the Person in whose name this Security
is registered as its absolute owner for the purpose of receiving payment of
principal of, premium, if any, and interest on this Security and for all other
purposes whatsoever, whether or not this Security is overdue, and neither the
Trustee, any Agent nor the Company shall be affected by notice to the contrary.
The registered Securityholder shall be treated as its owner for all purposes.
12. Amendments and Waivers. Subject to certain exceptions
provided in the Indenture, the Indenture or the Securities may be amended with
the consent of the Holders of a majority in principal amount of the then
outstanding Securities, and any
<PAGE> 134
EXHIBIT B
Page 9
existing default or Event of Default (except a payment default) may be waived
with the consent of the Holders of a majority in principal amount of the then
outstanding Securities. Without the consent of any Securityholder, the
Indenture or the Securities may be amended to, among other things, cure any
ambiguity, defect or inconsistency, to comply with the requirements of the
Commission in order to effect or maintain qualification of the Indenture under
the TIA Securityholders or to make any change that does not adversely affect
the rights of any Securityholder.
13. Defaults and Remedies. If an Event of Default occurs and
is continuing, the Trustee or the Holders of at least 25% in principal amount
of the then outstanding Securities may declare the unpaid principal of, and any
accrued and unpaid interest on, all the Securities to be due and payable
immediately; provided, that in the case of an Event of Default arising from
certain events of bankruptcy or insolvency with respect to the Company or any
Subsidiary Guarantor, all outstanding Securities shall become due and payable
immediately without further action or notice. Securityholders may not enforce
the Indenture or the Securities except as provided in the Indenture. The
Trustee may require indemnity satisfactory to it before it enforces the
Indenture or the Securities. Subject to certain limitations, Holders of a
majority in principal amount of the then outstanding Securities may direct the
Trustee in its exercise of any trust or power. The Trustee may withhold from
Securityholders notice of any continuing default (except a default in payment
of principal or interest) if it determines that withholding notice is in their
interests. The Company must furnish an annual compliance certificate to the
Trustee.
14. Trustee Dealings with the Company. The Trustee under the
Indenture, in its individual or any other capacity, may make loans to, accept
deposits from, and perform services for the Company, the Subsidiary Guarantors
or any Affiliate of the Company or the Subsidiary Guarantors, and may otherwise
deal with the Company, the Subsidiary Guarantors and their respective
Affiliates as if it were not Trustee.
15. Restrictive Covenants. The Indenture imposes certain
limitations on the ability of the Company and its Restricted Subsidiaries to,
among other things, incur additional Indebtedness, make payments in respect of
its Capital Stock or certain Indebtedness, enter into transactions with
Affiliates, create dividend or other payment restrictions affecting
Subsidiaries, merge or consolidate with any other Person or, sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
assets or adopt a plan of liquidation. Such limitations are subject to a
number of important
<PAGE> 135
EXHIBIT B
Page 10
qualifications and exceptions provided for in the Indenture. The Company must
annually report to the Trustee on compliance with such limitations.
16. Authentication. This Security shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating
agent.
17. Guarantee. Each Subsidiary Guarantor has jointly and
severally irrevocably and unconditionally guaranteed the payment of principal,
premium, if any, and interest (including interest on overdue principal and
overdue interest, if lawful) on the Securities; provided, however, each
Subsidiary Guarantor that makes a payment or distribution under a Guarantee
shall be entitled to a contribution from each other Subsidiary Guarantor in a
pro rata amount based on the Adjusted Net Assets of each Subsidiary Guarantor.
18. Defeasance. Subject to certain conditions provided for
in the Indenture, the Company at any time may terminate some or all of its
obligations under the Securities and the Indenture if the Company deposits with
the Trustee money or U.S. Government Obligations for the payment of principal,
premium (if any) and interest on the Securities to redemption or maturity, as
the case may be.
19. Governing Law. The Laws of the State of New York shall
govern this Security and the Indenture, without regard to principles of
conflict of laws.
20. Abbreviations. Customary abbreviations may be used in
the name of a Securityholder or an assignee, such as: TEN COM (= tenants in
common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with
right of survivorship and not as tenants in common), CUST (= Custodian), and
U/G/M/A (= Uniform Gifts to Minors Act).
21. CUSIP Numbers. Pursuant to a recommendation promulgated
by the Committee on Uniform Security Identification Procedures, the Company has
caused CUSIP numbers to be printed on the Securities and has directed the
Trustee to use CUSIP numbers in notices of redemption as a convenience to
Securityholders. No representation is made as to the accuracy of such numbers
either as printed on the Securities or as contained in any notice of redemption
and reliance may be placed only on the other identification numbers placed
thereon.
<PAGE> 136
EXHIBIT B
Page 11
The Company will furnish to any Securityholder upon written
request and without charge a copy of the Indenture. Request may be made to:
Atrium Companies, Inc.
1341 West Mockingbird Lane
Suite 1200W
Dallas, TX 75247
Attention: Chief Financial Officer
<PAGE> 137
EXHIBIT B
Page 12
FORM OF NOTATION ON SECURITY RELATING TO GUARANTEE
SENIOR SUBORDINATED GUARANTEE
The Subsidiary Guarantors (as defined in the Indenture (the
"Indenture") referred to in the Security upon which this notation is endorsed
and each hereinafter referred to as a "Guarantor," which term includes any
successor person under the Indenture) (i) have jointly and severally
irrevocably and unconditionally guaranteed as a primary obligor and not a
surety, (such guarantee by each Guarantor being referred to herein as the
"Guarantee") (a) the due, full and punctual payment of the principal, premium,
if any, and interest on the Securities, whether at stated maturity or interest
payment date, by acceleration, call for redemption or otherwise, (b) the due
and punctual payment of interest on the overdue principal of and interest, if
any, on the Securities, to the extent lawful, (c) the due and punctual
performance of all other monetary Obligations of the Company under the
Indenture and the Securities to the Securityholders or the Trustee, all in
accordance with the terms set forth in Article XI of the Indenture and (d) in
case of any extension of time of payment or renewal of any Securities or any
such Obligations, the same will be promptly paid in full when due or performed
in accordance with the terms of the extension or renewal, whether at stated
maturity by acceleration or otherwise and (ii) have agreed to pay any and all
costs and expenses (including reasonable attorneys' fees) incurred by the
Trustee or any Securityholder in enforcing any rights under this Guarantee.
The Obligations of each Guarantor to the Securityholders of
Securities and to the Trustee pursuant to this Guarantee and the Indenture are
expressly set forth in Article XI of the Indenture and reference is hereby made
to such Indenture for the precise terms of this Guarantee. The Obligations of
each Guarantor to the Securityholders of Securities and to the Trustee pursuant
to this Guarantee and the Indenture are subordinated to Guarantor Senior
Indebtedness as defined in the Indenture.
No stockholder, officer, director or incorporator, as such,
past, present or future of any Guarantor shall have any liability under this
Guarantee by reason of his or its status as such stockholder, officer, director
or incorporator.
This is a continuing Guarantee and, except as otherwise
expressly provided for in Article XI of the Indenture, shall remain in full
force and effect and shall be binding upon the Guarantor and its successors and
assigns until full and final payment of all of the Company's Obligations under
the Securities and the Indenture and shall inure to the benefit of the
successors and assigns of the Trustee and the Securityholders and, in the event
of any transfer or assignment of rights by any Securityholder or the Trustee,
the rights and privileges herein conferred upon that party shall automatically
extend to
<PAGE> 138
EXHIBIT B
Page 13
and be vested in such transferee or assignee, all subject to the terms and
conditions hereof. This is a Guarantee of payment and not of collectibility.
This Guarantee shall not be valid or obligatory for any
purpose until the certificate of authentication on the Security upon which this
Guarantee is noted shall have been executed by the Trustee under the Indenture
by the manual signature of one of its authorized officers.
<PAGE> 139
EXHIBIT B
Page 14
THE TERMS OF ARTICLE XI OF THE INDENTURE ARE INCORPORATED
HEREIN BY REFERENCE.
Capitalized terms used herein have the same meanings given in
the Indenture unless otherwise indicated.
Subsidiary Guarantors:
H-R WINDOW SUPPLY, INC.
By:
------------------------------
Name:
Title:
VINYL BUILDING SPECIALTIES OF
CONNECTICUT, INC.
By:
------------------------------
Name:
Title:
BISHOP MANUFACTURING CO. OF
NEW YORK, INC.
By:
------------------------------
Name:
Title:
<PAGE> 140
EXHIBIT B
Page 15
BISHOP MANUFACTURING
COMPANY, INCORPORATED
By:
-----------------------------
Name:
Title:
BISHOP MANUFACTURING COMPANY OF
NEW ENGLAND, INC.
By:
-----------------------------
Name:
Title:
<PAGE> 141
EXHIBIT B
Page 16
ASSIGNMENT FORM
To assign this Security, fill in the form below: (I) or (we) assign
and transfer this Security to
- --------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint
--------------------------------------------------------
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him.
<PAGE> 142
EXHIBIT B
Page 17
Date:
---------------
Your Signature:
---------------------------
(Sign exactly as your name appears on the face
of this Security)
Signature Guarantee:
- --------------------------
(Signatures must be guaranteed by an "eligible guarantor institution" meeting
the requirements of the Registrar, which requirements will include membership
or participation in the Securities Transfer Agents Medallion Program ("STAMP")
or such other "signature guarantee program" as may be determined by the
Registrar in addition to, or in substitution for, STAMP, all in accordance with
the Securities Exchange Act of 1934, as amended.)
<PAGE> 143
EXHIBIT B
Page 18
OPTION OF SECURITYHOLDER TO ELECT PURCHASE
If you want to elect to have all or any part of this Security
purchased by the Company pursuant to Section 4.6 or Section 4.8 of the
Indenture check the appropriate box:
[ ] Section 4.6 [ ] Section 4.8
If you want to have only part of the Security purchased by the
Company pursuant to Section 4.6 or Section 4.8 of the Indenture, state the
amount you elect to have purchased:
$
---------------------
Date:
-----------------
Your Signature:
---------------------------
(Sign exactly as your name appears on the face
of this Security)
Signature Guarantee:
- ----------------------
(Signatures must be guaranteed by an "eligible guarantor institution" meeting
the requirements of the Registrar, which requirements will include membership
or participation in the Securities Transfer Agents Medallion Program ("STAMP")
or such other "signature guarantee program" as may be determined by the
Registrar in addition to, or in substitution for, STAMP, all in accordance with
the Securities Exchange Act of 1934, as amended.)
<PAGE> 144
EXHIBIT C
Form of Certificate To Be
Delivered in Connection with
Transfers to Non-QIB Accredited Investors
United States Trust Company of New York
114 West 47th Street
New York, New York 10036-1532
Attention: Corporate Trust Department
Re: Atrium Companies, Inc.
10-1/2% Senior Subordinated Notes due 2006
Ladies and Gentlemen:
In connection with our proposed purchase of 10-1/2% Senior
Subordinated Notes due 2006 (the "Securities") of Atrium Companies, Inc. (the
"Company"), we confirm that:
1. We have received a copy of the Offering Memorandum (the
"Offering Memorandum"), dated November 22, 1996 relating to the Securities and
such other information as we deem necessary in order to make our investment
decision. We acknowledge that we have read and agreed to the matters stated on
pages A-1 and A-2 of the Offering Memorandum and in the section entitled
"Transfer Restrictions" of the Offering Memorandum including the restrictions
on duplication and circulation of the Offering Memorandum.
2. We understand that any subsequent transfer of the
Securities is subject to certain restrictions and conditions set forth in the
Indenture relating to the Securities (as described in the Offering Memorandum)
and the undersigned agrees to be bound by, and not to resell, pledge or
otherwise transfer the Securities except in compliance with, such restrictions
and conditions and the Securities Act of 1933, as amended (the "Securities
Act").
<PAGE> 145
EXHIBIT C
Page 2
3. We understand that the offer and sale of the Securities
have not been registered under the Securities Act, and that the Securities may
not be offered or sold except as permitted in the following sentence. We
agree, on our own behalf and on behalf of any accounts for which we are acting
as hereinafter stated, that if we should sell or otherwise transfer any
Securities prior to the date which is three years after the original issuance
of the Securities, we will do so only (i) to the Company or any of its
subsidiaries, (ii) inside the United States in accordance with Rule 144A under
the Securities Act to a "qualified institutional buyer" (as defined in Rule
144A under the Securities Act), (iii) inside the United States to an
institutional "accredited investor" (as defined below) that, prior to such
transfer, furnishes (or has furnished on its behalf by a U.S. broker-dealer) to
the Trustee (as defined in the Indenture relating to the Securities), a signed
letter containing certain representations and agreements relating to the
restrictions on transfer of the Securities, (iv) outside the United States in
accordance with Rule 904 of Regulation S under the Securities Act, (v) pursuant
to the exemption from registration provided by Rule 144 under the Securities
Act (if available), or (vi) pursuant to an effective registration statement
under the Securities Act, and we further agree to provide to any person
purchasing any of the Securities from us a notice advising such purchaser that
resales of the Securities are restricted as stated herein.
4. We are not acquiring the Securities for or on behalf of,
and will not transfer the Securities to, any pension or welfare plan (as
defined in Section 3 of the Employee Retirement Income Security Act of 1974),
except as permitted in the section entitled "Transfer Restrictions" of the
Offering Memorandum.
5. We understand that, on any proposed resale of any
Securities, we will be required to furnish to the Trustee and the Company such
certification, legal opinions and other information as the Trustee and the
Company may reasonably require to confirm that the proposed sale complies with
the foregoing restrictions. We further understand that the Securities
purchased by us will bear a legend to the foregoing effect.
6. We are an institutional "accredited investor" (as defined
in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act)
and have such knowledge and experience in financial and business matters as to
be capable of evaluating the merits and risks of our investment in the
Securities, and we and any accounts for which we are acting are each able to
bear the economic risk of our or their investment, as the case may be.
<PAGE> 146
7. We are acquiring the Securities purchased by us for our
account or for one or more accounts (each of which is an institutional
"accredited investor") as to each of which we exercise sole investment
discretion.
You and the Company are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceeding or official inquiry
with respect to the matters covered hereby.
Very truly yours,
By:
-------------------------
Name:
<PAGE> 147
EXHIBIT D
Form of Certificate To Be Delivered
in Connection with Transfers
Pursuant to Regulation S
---------------, ----
United States Trust Company of New York
114 West 47th Street
New York, New York 10036-1532
Attention: Corporate Trust Department
Re: Atrium Companies, Inc.
(the "Company") 10 1/2% Senior Subordinated
Notes due 2006 (the "Securities")
Ladies and Gentlemen:
In connection with our proposed sale of $_____________
aggregate principal amount of the Securities, we confirm that such sale has
been effected pursuant to and in accordance with Regulation S under the U.S.
Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, we
represent that:
(1) the offer of the Securities was not made to a Person in
the United States;
(2) either (a) at the time the buy offer was originated, the
transferee was outside the United States or we and any person acting
on our behalf reasonably believed that the transferee was outside the
United States, or (b) the transaction was executed in, on or through
the facilities of a designated off-shore securities
<PAGE> 148
EXHIBIT D
Page 2
market and neither we nor any person acting on our behalf knows that
the transaction has been pre-arranged with a buyer in the United
States;
(3) no directed selling efforts have been made in the United
States in contravention of the requirements of Rule 903(b) or Rule
904(b) of Regulation S, as applicable;
(4) the transaction is not part of a plan or scheme to evade
the registration requirements of the Securities Act; and
(5) we have advised the transferee of the transfer
restrictions applicable to the Securities.
You and the Company are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby. Terms used in this certificate
have the meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:
-------------------------------
Authorized Signature
<PAGE> 1
EXHIBIT 10.1
FINANCIAL ADVISORY AGREEMENT
THIS FINANCIAL ADVISORY AGREEMENT (this "Agreement") is made and
entered into as of November 27, 1996 among Atrium Corporation, a Delaware
corporation, ("Holdings"), Atrium Companies, Inc., a Delaware corporation, (the
"Company"), and Hicks, Muse & Co. Partners, L.P., a Texas limited partnership
(together with its successors, "HMCo").
WHEREAS, certain affiliates of HMCo are simultaneously with the
execution of this Agreement, purchasing 32,000,000 shares of the common stock
of Holdings (the "Acquisition") and as a result of the Acquisition, the debt
and equity financing thereof and certain other transactions related thereto
(collectively with the Acquisition, the "Transaction") such affiliates will own
82% of the outstanding shares of common stock of Holdings;
WHEREAS, Holdings and the Company have requested that HMCo render, and
HMCo has rendered, financial advisory services to Holdings and the Company in
connection with the negotiation of the Transaction; and
WHEREAS, Holdings and the Company have requested that HMCo render
financial advisory, investment banking and other similar services to them with
respect to any future proposals for a tender offer, acquisition, sale, merger,
exchange offer, recapitalization, restructuring or other similar transaction
directly involving the Company or any of its subsidiaries and any other person
or entity (collectively, "Add-on Transactions");
NOW, THEREFORE, in consideration of the services rendered and to be
rendered by HMCo to Holdings and the Company, and to evidence the obligations
of Holdings and the Company to HMCo and the mutual covenants herein contained,
Holdings and the Company hereby jointly and severally agree with HMCo as
follows:
1. Retention.
(a) Holdings and the Company hereby acknowledge that they
have retained HMCo, and HMCo acknowledges that it has acted, as financial
advisor to Holdings and the Company in connection with the Transaction.
(b) Each of Holdings and the Company acknowledges that it
has retained HMCo as its exclusive financial advisor in connection with any
Add-on Transactions that may be consummated during the term of this Agreement,
and that Holdings and the Company will not retain any other person or entity to
provide such services in connection with any such Add-on Transaction without
the prior written consent of HMCo. HMCO agrees that it shall provide such
financial advisory, investment banking and other similar services in connection
with any such Add-on Transaction as may be requested from time to time by the
board of directors of Holdings.
<PAGE> 2
2. Term. The term of this Agreement shall continue until the
earlier to occur of (i) the tenth anniversary of the date hereof or (ii) the
date on which HMCo's affiliates cease to own beneficially, directly or
indirectly, any securities of Holdings, the Company or their successors.
3. Compensation.
(a) As compensation for HMCo's services as financial
advisor to Holdings and the Company in connection with the Transaction, the
Company hereby irrevocably agrees to pay, and Holdings hereby agrees to cause
the Company to pay, to HMCo a cash fee of $2,000,000 to be paid at the closing
of the Transaction, which will occur substantially simultaneously with the
execution of this Agreement. The parties hereto agree that the compensation
due pursuant to this Section 3(a) shall be allocated among the segments of the
financing for the Transaction in proportion to the dollar amount of each such
segment.
(b) As compensation for HMCo's financial advisory,
investment banking and other similar services rendered in connection with any
Add-on Transaction pursuant to Section 1(b) hereof, Holdings and the Company
shall, and Holdings shall cause the Company to, pay to HMCo, at the closing of
any such Add-on Transaction, a cash fee in the amount of 1.5% of the
Transaction Value of such Add-on Transaction. As used herein, the term
"Transaction Value" means the total value of the Add-on Transaction, including,
without limitation, the aggregate amount of the funds required to complete the
Add-on Transaction (excluding any fees payable pursuant to this Section 3(b))
including the amount of any indebtedness, preferred stock or similar items
assumed (or remaining outstanding).
4. Reimbursement of Expenses. In addition to the compensation to
be paid pursuant to Section 3 hereof, Holdings and the Company agree to, and
Holdings shall cause the Company to, reimburse HMCo, promptly following demand
therefor, together with invoices or reasonably detailed descriptions thereof,
for all reasonable disbursements and out-of-pocket expenses (including fees and
disbursements of counsel) incurred by HMCo (i) as financial advisor to Holdings
and the Company in connection with the Transaction or (ii) in connection with
the performance by it of the services contemplated by Section 1(b) hereof.
5. Indemnification. Holdings and the Company jointly and
severally shall indemnify and hold harmless each of HMCo, its affiliates and
their respective directors, officers, controlling persons (within the meaning
of Section 15 of the Securities Act of 1933 or Section 20(a) of the Securities
Exchange Act of 1934), if any, agents and employees (HMCo, its affiliates, and
such other specified persons being collectively referred to as "Indemnified
Persons" and individually as an "Indemnified Person") from and against any and
all claims, liabilities, losses, damages and expenses incurred by any
Indemnified Person (including those arising out of an Indemnified Person's
negligence and fees and disbursements of the respective Indemnified Person's
counsel) which (A) are related to or arise out of (i) actions taken or omitted
to be taken (including any untrue statements made or any statements omitted to
be made) by Holdings and/or the Company or (ii) actions taken or omitted to be
taken by an Indemnified Person with Holdings' or the Company's consent or in
conformity with Holdings' or the Company's instructions or Holdings' or the
Company's actions or omissions or (B) are otherwise related to or arise out of
HMCo's engagement, and will reimburse each Indemnified Person for all costs and
expenses, including fees of any Indemnified Person's
-2-
<PAGE> 3
counsel, as they are incurred, in connection with investigating, preparing for,
defending, or appealing any action, formal or informal claim, investigation,
inquiry or other proceeding, whether or not in connection with pending or
threatened litigation, caused by or arising out of or in connection with HMCo's
acting pursuant to the engagement, whether or not any Indemnified Person is
named as a party thereto and whether or not any liability results therefrom.
Neither Holdings nor the Company will, however, be responsible for any claims,
liabilities, losses, damages or expenses pursuant to clause (B) of the
preceding sentence that have resulted primarily from HMCo's bad faith, gross
negligence or willful misconduct. Holdings and the Company also agree that
neither HMCo nor any other Indemnified Person shall have any liability to
Holdings or the Company for or in connection with such engagement except for
any such liability for claims, liabilities, losses, damages, or expenses
incurred by Holdings and/or the Company that have resulted primarily from
HMCo's bad faith, gross negligence or willful misconduct. Holdings and the
Company further agree that neither of them will, without the prior written
consent of HMCo, settle or compromise or consent to the entry of any judgment
in any pending or threatened claim, action, suit or proceeding in respect of
which indemnification may be sought hereunder (whether or not any Indemnified
Person is an actual or potential party to such claim, action, suit or
proceeding) unless such settlement, compromise or consent includes an
unconditional release of HMCo and each other Indemnified Person hereunder from
all liability arising out of such claim, action, suit or proceeding. HOLDINGS
AND THE COMPANY EACH HEREBY ACKNOWLEDGE THAT THE FOREGOING INDEMNITY SHALL BE
APPLICABLE TO ALL CLAIMS, LIABILITIES, LOSSES, DAMAGES OR EXPENSES THAT HAVE
RESULTED FROM OR ARE ALLEGED TO HAVE RESULTED FROM THE ACTIVE OR PASSIVE OR THE
SOLE, JOINT OR CONCURRENT ORDINARY NEGLIGENCE OF HMCO OR ANY OTHER INDEMNIFIED
PERSON.
The foregoing right to indemnity shall be in addition to any rights
that HMCo and/or any other Indemnified Person may have at common law or
otherwise and shall remain in full force and effect following the completion or
any termination of the engagement. Holdings and the Company hereby consent to
personal jurisdiction and to service and venue in any court in which any claim
which is subject to this Agreement is brought against HMCo or any other
Indemnified Person.
It is understood that, in connection with HMCo's engagement, HMCo may
also be engaged to act for Holdings and/or the Company in one or more
additional capacities, and that the terms of this engagement or any such
additional engagements may be embodied in one or more separate written
agreements. This indemnification shall apply to the engagement specified in
the first paragraph hereof as well as to any such additional engagement(s)
(whether written or oral) and any modification of said engagement or such
additional engagement(s) and shall remain in full force and effect following
the completion or termination of said engagement or such additional
engagements.
Holdings and the Company further understand and agree that if HMCo is
asked to furnish Holdings and/or the Company a financial opinion letter or act
for Holdings and/or the Company in any other formal capacity, such further
action may be subject to a separate agreement containing provisions and terms
to be mutually agreed upon.
6. Confidential Information. In connection with the performance
of the services hereunder, HMCo agrees not to divulge any confidential
information, secret processes or trade secrets disclosed by Holdings or the
Company to it solely in its capacity as a financial advisor, unless Holdings
and the Company consent to the divulging thereof or such information, secret
processes
-3-
<PAGE> 4
or trade secrets are publicly available or otherwise available to HMCo without
restriction or breach of any confidentiality agreement or unless required by
any governmental authority or in response to any valid legal process.
7. Governing Law. This Agreement shall be construed,
interpreted, and enforced in accordance with the laws of the State of Texas,
excluding any choice-of-law provisions thereof.
8. Assignment. This Agreement and all provisions contained
herein shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and assigns; provided, however, neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned (other than with respect to the rights and obligations of HMCo, which
may be assigned to any one or more of its principals or affiliates) by any of
the parties without the prior written consent of the other parties.
9. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument, and the signature of any
party to any counterpart shall be deemed a signature to, and may be appended
to, any other counterpart.
10. Other Understandings. All discussions, understandings and
agreements heretofore made between any of the parties hereto with respect to
the subject matter hereof are merged in this Agreement, which alone fully and
completely expresses the Agreement of the parties hereto.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY BLANK]
-4-
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
HICKS, MUSE & CO. PARTNERS, L.P.
By: HM PARTNERS INC.,
its General Partner
By: /s/ MICHAEL D. SALIM
------------------------
Michael D. Salim
Chief Financial Officer
ATRIUM CORPORATION
By: /s/ RANDALL S. FOJTASEK
------------------------
Randall S. Fojtasek
President
ATRIUM COMPANIES, INC.
By: /s/ RANDALL S. FOJTASEK
------------------------
Randall S. Fojtasek
President
[SIGNATURE PAGE TO FINANCIAL ADVISORY AGREEMENT]
S-1
<PAGE> 1
EXHIBIT 10.2
STOCKHOLDERS AGREEMENT
THIS STOCKHOLDERS AGREEMENT (this "Stockholders Agreement") dated as
of November 27, 1996, is entered into by and among Atrium Corporation, a
Delaware corporation (the "Company"), the securityholders listed on the
signature pages hereof (collectively, the "Holders"), and Hicks, Muse, Tate &
Furst Incorporated, a Texas corporation (including its successors and assigns,
"HMTF").
In consideration of the premises, mutual covenants and agreements
hereinafter contained and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto agree
as follows:
ARTICLE 1
DEFINITIONS
Section 1.1 Definitions.
"Accredited Investor" means an "Accredited Investor," as defined in
Regulation D, or any successor rule then in effect.
"Accredited Offeree" shall have the meaning set forth in Section 6.1
hereof.
"Additional Securities" means any shares of Preferred Stock, Common
Stock or Common Stock Equivalents to be issued or sold in a Preemptive Rights
Transaction.
"Advice" shall have the meaning provided in Section 3.5 hereof.
"Affiliate" means, with respect to any Person, any Person who,
directly or indirectly, controls, is controlled by or is under common control
with that Person.
"Authorization Date" shall have the meaning set forth in Section 5.3.1
hereof.
"Business Day" means a day that is not a Legal Holiday.
"Common Stock" means shares of the Common Stock, $0.01 par value per
share, of the Company, and any capital stock into which such Common Stock
thereafter may be changed.
"Common Stock Equivalents" means, without duplication with any other
Common Stock or Common Stock Equivalents, any rights, warrants (including,
without limitation, the Fojtasek Warrant), options, convertible securities or
indebtedness, exchangeable securities or indebtedness, or other rights,
exercisable for or convertible or exchangeable into, directly or indirectly,
Common Stock of the Company or securities convertible or exchangeable into
Common Stock of the Company, whether at the time of issuance or upon the
passage of time or the occurrence of some future event.
<PAGE> 2
"Company" shall have the meaning set forth in the introductory
paragraph hereof.
"Co-Seller" shall have the meaning set forth in Section 4.1 hereof.
"Demand Holder" shall have the meaning set forth in Section 3.1.5
hereof.
"Demand Registration" shall have the meaning set forth in Section
3.1.1 hereof.
"Demand Request" shall have the meaning set forth in Section 3.1.1
hereof.
"Designee" means any of the Fojtasek Designee, the Heritage Designee
and the HMC Group Designees.
"Election Notice" shall have the meaning set forth in Section 5.3.1
hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated by the SEC thereunder.
"Excluded Registration" means a registration under the Securities Act
of (i) securities issued in an exchange offer or solely to the Company's
existing securityholders, (ii) securities registered on Form S-8 or any similar
successor form, (iii) securities registered to effect the acquisition of, or
combination with, another Person, and (iv) securities registered pursuant to
the Exhange and Registration Rights Agreement dated as of the date hereof among
Atrium Companies, Inc., all of its subsidiaries and BT Securities Corporation.
"Fojtasek" means Randall S. Fojtasek.
"Fojtasek Designee" shall have the meaning set forth in Section 2.1.1.
"Fojtasek Group" means Joe Fojtasek, Randall S. Fojtasek, Russell S.
Fojtasek and Howard S. Saffan and such individuals' Permitted Transferees.
"Fojtasek Ownership Threshold" means a number of shares of Common
Stock equal to 25% of the sum of (i) the aggregate number of shares of Common
Stock held by the members of the Fojtasek Group as of the date of this
Agreement, plus (ii) the aggregate number of shares of Common Stock issuable
upon the exercise, exchange or conversion of the Common Stock Equivalents held
by the members of the Fojtasek Group as of the date of this Agreement; as such
sum may be adjusted from time to time to account for the effects of stock
splits, stock combinations, stock dividends or similar adjustments to the
Company's Common Stock.
"Fojtasek Warrant" means the Warrant to acquire up to 2,195,222 shares
of Common Stock issued by the Company to Fojtasek as of the date hereof.
"Fully-Diluted Common Stock" means, at any time, the then outstanding
Common Stock of the Company plus (without duplication) all shares of Common
Stock issuable, whether at such time
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or upon the passage of time or the occurrence of future events, upon the
exercise, conversion, or exchange of all then outstanding Common Stock
Equivalents.
"Group" means any of the Fojtasek Group, the Heritage Group or the HMC
Group.
"HMC Group" means HMTF and its Affiliates and its and their respective
officers, directors and employees (and members of their respective families and
trusts for the primary benefit of such family members).
"HMC Group Designee" shall have the meaning set forth in Section 2.1.1
hereof.
"HMTF" shall have the meaning set forth in the introductory paragraph
hereof.
"Heritage" means Heritage Fund I, L.P.
"Heritage Group" means Heritage and its Affiliates.
"Heritage Designee" shall have the meaning set forth in Section 2.1.1.
"Holder" means (i) a securityholder listed on the signature page
hereof and (ii) any direct or indirect transferee of any such Holder who shall
become a party to this Stockholders Agreement.
"Inspectors" shall have the meaning provided in Section 3.4 hereof.
"Legal Holiday" shall have the meaning provided in Section 8.2 hereof.
"Material Adverse Effect" shall have the meaning provided in Section
3.1.4 hereof.
"NASD" shall have the meaning provided in Section 3.4 hereof.
"NASDAQ" shall have the meaning provided in Section 3.4 hereof.
"Non-HMC Group Holder" means each Holder other than holders who are
members of the HMC Group.
"Offer Notice" shall have the meaning set forth in Section 6.1 hereof.
"Offered Securities" shall have the meaning provided in Section 5.3
hereof.
"Participation Offer" shall have the meaning provided in Section 4.2
hereof.
"Permitted Transfer" shall mean a Transfer of a Security by any Holder
to an Affiliate of such Holder or to a member of such Holder's immediate
family; provided, that such Affiliate or family member shall agree in writing
to take and hold such Security subject to the provisions and upon the
conditions specified in this Stockholders Agreement.
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"Person" or "person" means any individual, corporation, limited
liability company, partnership, joint venture, association, joint-stock
company, trust, unincorporated organization or government or other agency or
political subdivision thereof.
"Preemptive Rights Offer" shall have the meaning set forth in Section
6.1 hereof.
"Preemptive Rights Transaction" means either (i) an issuance or sale
by the Company of any shares of Common Stock or Common Stock Equivalents, or
(ii) a sale for cash by the Company of any shares of Preferred Stock to any
Holder or any Affiliate of a Holder.
"Preferred Stock" shall mean any class or series of the Company's
preferred stock, par value $0.01 per share, which is not a Common Stock
Equivalent.
"Qualified IPO" means a firm commitment underwritten public offering
of Common Stock pursuant to a registration statement under the Securities Act
where both (i) the proceeds to the Company (prior to deducting any
underwriters' discounts and commissions) exceed $10 million, and (ii) upon
consummation of such offering, the Common Stock is listed on the New York Stock
Exchange or authorized to be quoted or listed on the NASDAQ National Market.
"Records" shall have the meaning provided in Section 3.4 hereof.
"Registrable Shares" means at any time the Common Stock of the Company
then owned by the HMC Group, the Heritage Group, the Fojtasek Group or the
Holders, whether owned on the date hereof or acquired hereafter; provided,
however, that Registrable Shares shall not include any shares (i) the sale of
which has been registered pursuant to the Securities Act and which shares have
been sold pursuant to such registration, or (ii) which have been sold to the
public pursuant to Rule 144 or 144A of the SEC under the Securities Act.
"Registration Expenses" shall have the meaning provided in Section 3.6
hereof.
"Regulation D" means Regulation D promulgated under the Securities Act
by the SEC.
"Requesting Holders" shall mean the Holders requesting a Demand
Registration, or on whose behalf a Demand Registration is requested, and shall
include parties deemed "Requesting Holders" pursuant to Section 3.1.5 hereto.
"Required Filing Date" shall have the meaning provided in
Section 3.1.1(c) hereof.
"Required Holders" means, at any time, Holders who then own
beneficially (a) more than 50% of the aggregate number of Registrable Shares
held by the Fojtasek Group, or (b) more than 50% of the aggregate number of
Registrable Securities held by the Heritage Group, or (c) more than 50% of the
aggregate number of Registrable Securities held by the HMC Group.
"SEC" means the Securities and Exchange Commission.
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"Securities" means the Common Stock.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated by the SEC thereunder.
"Seller Affiliates" shall have the meaning provided in Section 3.7
hereof.
"Significant Sale" shall have the meaning provided in Section 4.1
hereof.
"Stockholders Agreement" means this Stockholders Agreement, as such
from time to time may be amended.
"Subsidiary" of any Person means (i) a corporation a majority of whose
outstanding shares of capital stock or other equity interests with voting
power, under ordinary circumstances, to elect directors, is at the time,
directly or indirectly, owned by such Person, by one or more subsidiaries of
such Person or by such Person and one or more subsidiaries of such Person, and
(ii) any other Person (other than a corporation) in which such Person, a
subsidiary of such Person or such Person and one or more subsidiaries of such
Person, directly or indirectly, at the date of determination thereof, has (x)
at least a majority ownership interest or (y) the power to elect or direct the
election of the directors or other governing body of such Person.
"Suspension Notice" shall have the meaning provided in Section 3.5
hereof.
"Transfer" means any disposition of any Security or any interest
therein that would constitute a "sale" thereof within the meaning of the
Securities Act.
"Transfer Notice" shall have the meaning provided in Section 5.3
hereof.
Section 1.2 Rules of Construction. Unless the context otherwise
requires
(1) a term has the meaning assigned to it;
(2) "or" is not exclusive;
(3) words in the singular include the plural, and words
in the plural include the singular;
(4) provisions apply to successive events and
transactions; and
(5) "herein," "thereof" and other words of similar import
refer to this Agreement as a whole and not to any particular Article,
Section or other subdivision.
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ARTICLE 2
MANAGEMENT OF THE COMPANY AND CERTAIN ACTIVITIES
Section 2.1 Board of Directors.
2.1.1 Board Representation. HMTF, the Company and each Holder shall
take all actions within their respective power, including, but not limited to,
the voting of Common Stock, required to cause the Board of Directors of the
Company to at all times consist of at least 5 directors to be designated as
follows:
(i) one member (the "Fojtasek Designee") shall be a
designee of Holders of 50% or more of the Registrable Shares then
owned by the Fojtasek Group (excluding the Registrable Shares owned by
Howard S. Saffan and his Permitted Transferees) as long as the
Fojtasek Group (excluding Howard S. Saffan and his Permitted
Transferees) owns beneficially more than the Fojtasek Ownership
Threshold; provided that, if the Fojtasek Group (excluding Howard S.
Saffan and his Permitted Transferees) owns beneficially less than the
Fojtasek Ownership Threshold, then such director shall be designated
by the HMC Group;
(ii) one member (the "Heritage Designee") shall be a
designee of the Holders of 50% or more of the Registrable Shares then
owned by Heritage Group as long as the Heritage Group owns
beneficially more than 3.965 percent of the Fully-Diluted Common
Stock; provided that, if the Heritage Group owns beneficially 3.965
percent or less of the Fully-Diluted Common Stock, then such director
shall be designated by the HMC Group; and
(iii) all other members shall be designees of the HMC Group
(each, an "HMC Group Designee").
Each Holder shall vote his or its shares of Common Stock at any regular or
special meeting of stockholders of the Company or in any written consent
executed in lieu of such a meeting of stockholders and shall take all other
actions necessary to give effect to the agreements contained in this Agreement
(including without limitation the election of persons designated by any Group
to be elected as directors as described in the preceding sentence) and to
ensure that the certificate of incorporation and bylaws as in effect
immediately following the date hereof do not, at any time thereafter, conflict
in any respect with the provisions of this Agreement. In order to effectuate
the provisions of this Section 2, each Holder hereby agrees that when any
action or vote is required to be taken by such Holder pursuant to this
Agreement, such Holder shall use his or its best efforts to call, or cause the
appropriate officers and directors of the Company to call, a special or annual
meeting of stockholders of the Company, as the case may be, or execute or cause
to be executed a consent in writing in lieu of any such meetings pursuant to
Section 228(a) of the General Corporation Law of the State of Delaware.
2.1.2 Vacancies. If, prior to his election to the Board of
Directors of the Company pursuant to Section 2.1.1 hereof, any Designee shall
be unable or unwilling to serve as a director of the
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Company, the Group which designated such Designee shall be entitled to nominate
a replacement who shall then be a Designee of such Group for purposes of this
Section 2. If, following an election to the Board of Directors of the Company
pursuant to Section 2.1.1 hereof, any Designee shall resign or be removed or be
unable to serve for any reason prior to the expiration of his term as a
director of the Company, the Group which designated such Designee shall, within
30 days of such event, notify the Board of Directors of the Company in writing
of a replacement Designee, and either (i) the Holders shall vote their shares
of Common Stock, at any regular or special meeting called for the purpose of
filling positions on the Board of Directors of the Company or in any written
consent executed in lieu of such a meeting of stockholders, and shall take all
such other actions necessary to ensure the election to the Board of Directors
of the Company of such replacement Designee to fill the unexpired term of the
Designee originally designated by such Group, or (ii) the Board of Directors
shall elect such replacement Designee to fill the unexpired term of the
Designee originally designated by such Group. If any Group requests that its
Designee (or one or more of its Designees) be removed as a Director (with or
without cause) by written notice thereof to the Company, then the Company shall
take all actions necessary to effect, and each of the Holders shall vote all
its or his capital stock in favor of, such removal upon such request.
2.1.3 Termination of Rights. The right of any Group to designate
directors under Section 2.1.1, and the obligation of the Holders to vote their
shares as provided herein, shall terminate pursuant to the terms of Section
2.1.1 or upon the first to occur of (i) the termination or expiration of this
Stockholders Agreement, (ii) such time as such Group elects in writing to
terminate its rights under this Article 2, or (iii) such time as the HMC Group
ceases to own any shares of Common Stock.
2.1.4 Costs and Expenses. The Company will pay all reasonable
out-of-pocket expenses incurred by any Designee in connection with such
Designee's participation in meetings of the Board of Directors (and committees
thereof) of the Company and the Boards of Directors (and committees thereof) of
the Subsidiaries of the Company.
Section 2.2 Voting of Capital Stock. Except as otherwise
provided in Section 2.1, to the extent any Holder owns shares of any class or
series of capital stock of the Company or any Subsidiary of the Company which
it may vote on any particular matter which comes before such corporation's
stockholders, as a class or series separate from the common stock of such
corporation ordinarily entitled to vote for the election of directors, such
Holder shall vote all such shares on such matter in such separate class or
series vote as holders of a majority of the outstanding shares of common stock
of such corporation vote thereon; provided, however, that such Holder may
nevertheless vote such shares as a separate class or series without regard to
the provisions of this Section 2.2 in respect of (a) amendments to the
certificate of incorporation of such corporation, or the certificate of
designation which created such class or series, which change the provisions
thereof expressly applicable to such separate class or series, and (b) any
matter as to which such class or series is expressly entitled to vote as a
separate class or series pursuant to such corporation's certificate of
incorporation or the certificate of designation which created such class or
series; provided further, however, that any statement in such certificate of
incorporation or certificate of designation that such class or series may vote
as a separate class or series "as required by law" or
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similar language shall not permit such class or series to be voted without
regard to the provisions of this Section 2.2.
Section 2.3 Other Activities of the Holders; Fiduciary Duties.
It is understood and accepted that the Holders and their Affiliates have
interests in other business ventures which may be in conflict with the
activities of the Company and its Subsidiaries and that, subject to applicable
law, nothing in this Stockholders Agreement shall limit the current or future
business activities of the Holders whether or not such activities are
competitive with those of the Company and its Subsidiaries. Nothing in this
Agreement, express or implied, shall relieve any officer or director of the
Company or any of its Subsidiaries, or any Holder, of any fiduciary or other
duties or obligations they may have to the Company's stockholders.
Section 2.4 Information. The Company shall provide to Heritage
(so long as the Heritage Group has the right to designate a director under
Section 2.1.1) and to Fojtasek (so long as the Fojtasek Group owns beneficially
more than the Fojtasek Ownership Threshold), as the case may be, copies of (i)
all financial statements and other information which the Company and/or its
Subsidiaries are required to deliver from time to time to their respective
senior lenders, and (ii) all information provided to the other members of the
Company's Board of Directors.
ARTICLE 3
REGISTRATION RIGHTS
Section 3.1 Demand Registration.
3.1.1 Request for Registration.
(a) At any time and from time to time, HMTF, on behalf of
the HMC Group, may request the Company, in writing (a "Demand Request"), to
effect the registration under the Securities Act (a "Demand Registration") of
all or part of the HMC Group's Registrable Shares; provided that such offering
shall be either (i) a Qualified IPO, or (ii) at any time beginning 270 days
after consummation of a Qualified IPO and the Registrable Shares proposed to be
sold by the Requesting Holders represent, in the aggregate, more than 4% of the
Fully-Diluted Common Stock or have an aggregate gross offering price of at
least $5,000,000.
(b) At any time beginning 270 days after the consummation
of a Qualified IPO, either of Fojtasek, on behalf of the Fojtasek Group, or
Heritage, on behalf of the Heritage Group, may make one Demand Request for a
Demand Registration of all or a part of the Registrable Securities held by the
Fojtasek Group and the Heritage Group; provided that the Registrable Securities
proposed to be sold by the Requesting Holders represent, in the aggregate, more
than 4% of the Fully-Diluted Common Stock or have an aggregate gross offering
price of at least $5,000,000.
(c) Each Demand Request shall specify the number of
Registrable Shares proposed to be sold. Subject to Section 3.1.6, the Company
shall file the Demand Registration
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within 90 days after receiving a Demand Request (the "Required Filing Date")
and shall use all commercially reasonable efforts to cause the same to be
declared effective by the SEC as promptly as practicable after such filing;
provided, that the Company need effect only three Demand Registrations
requested by HMTF on behalf of the HMC Group pursuant to paragraph (a) above,
and only one Demand Registration requested by Heritage and/or Fojtasek on
behalf of the Heritage Group and/or the Fojtasek Group, respectively, pursuant
to paragraph (b) above; provided, further, that if any Registrable Shares
requested to be registered by HMTF, Fojtasek or Heritage, as the case may be,
pursuant to a Demand Request under this Section 3.1 are excluded from a
registration pursuant to Section 3.1.4 below, HMTF, on behalf of the HMC Group,
Fojtasek, on behalf of the Fojtasek Group, and Heritage, on behalf of the
Heritage Group, shall have the right, with respect to each such exclusion, to
one additional Demand Registration under this Section 3.1 with respect to such
excluded Registrable Shares.
3.1.2 Effective Registration and Expenses. A registration will not
count as a Demand Registration until it has become effective (unless the
Requesting Holders withdraw all their Registrable Shares and the Company has
performed its obligations hereunder in all material respects, in which case
such demand will count as a Demand Registration unless the Requesting Holders
pay all Registration Expenses, as hereinafter defined, in connection with such
withdrawn registration); provided, that if, after it has become effective, an
offering of Registrable Shares pursuant to a registration is interfered with by
any stop order, injunction, or other order or requirement of the SEC or other
governmental agency or court, such registration will be deemed not to have been
effected and will not count as a Demand Registration.
3.1.3 Selection of Underwriters. The offering of Registrable Shares
pursuant to a Demand Registration shall be in the form of a "firm commitment"
underwritten offering. The Requesting Holders of a majority of the Registrable
Shares to be registered in a Demand Registration shall select the investment
banking firm or firms to manage the underwritten offering; provided that such
selection shall be subject to the consent of the Company, which consent shall
not be unreasonably withheld.
3.1.4 Priority on Demand Registrations. No securities to be sold
for the account of any Person (including the Company) other than a Requesting
Holder shall be included in a Demand Registration unless the managing
underwriter or underwriters shall advise the Company or the Requesting Holders
in writing that the inclusion of such securities will not materially and
adversely affect the price or success of the offering (a "Material Adverse
Effect"). Furthermore, in the event the managing underwriter or underwriters
shall advise the Company or the Requesting Holders that even after exclusion of
all securities of other Persons pursuant to the immediately preceding sentence,
the amount of Registrable Shares proposed to be included in such Demand
Registration by Requesting Holders is sufficiently large to cause a Material
Adverse Effect, the Registrable Shares of the Requesting Holders to be included
in such Demand Registration shall equal the number of shares which the Company
is so advised can be sold in such offering without a Material Adverse Effect
and such shares shall be allocated pro rata among the Requesting Holders on the
basis of the number of Registrable Shares requested to be included in such
registration by each such Requesting Holder.
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3.1.5 Rights of Nonrequesting Holders. If the Company shall
receive, within a period of 30 days, a Demand Request from more than one person
who has the right to require the Company to effect a Demand Registration (each,
a "Demand Holder"), all such requesting Persons shall be considered "Requesting
Holders" for purposes of this Section 3.1; provided, that if the first request
received by the Company is from Fojtasek and/or Heritage pursuant to Section
3.1.1(b), then only the members of the Fojtasek Group and the Heritage Group
requesting registration shall be considered "Requesting Holders" and that no
other Person who has tendered a request shall be deemed to have requested a
Demand Registration with respect to such Person's Registrable Securities for
purposes of this Agreement. Upon receipt of any Demand Request from any Demand
Holder, the Company shall promptly (but in any event within 10 days) give
written notice of such proposed Demand Registration to all other Demand
Holders.
3.1.6 Deferral of Filing. The Company may defer the filing (but not
the preparation) of a registration statement required by Section 3.1 until a
date not later than 180 days after the Required Filing Date (or, if longer, 180
days after the effective date of the registration statement contemplated by
clause (ii) below) if (i) at the time the Company receives the Demand Request,
the Company or any of its Subsidiaries are engaged in confidential negotiations
or other confidential business activities, disclosure of which would be
required in such registration statement (but would not be required if such
registration statement were not filed), and the Board of Directors of the
Company determines in good faith that such disclosure would be materially
detrimental to the Company and its stockholders or would have a material
adverse effect on any such confidential negotiations or other confidential
business activities, or (ii) prior to receiving the Demand Request, the Board
of Directors had determined to effect a registered underwritten public offering
of the Company's securities for the Company's account and the Company had taken
substantial steps (including, but not limited to, selecting a managing
underwriter for such offering) and is proceeding with reasonable diligence to
effect such offering. A deferral of the filing of a registration statement
pursuant to this Section 3.1.6 shall be lifted, and the requested registration
statement shall be filed forthwith, if, in the case of a deferral pursuant to
clause (i) of the preceding sentence, the negotiations or other activities are
disclosed or terminated, or, in the case of a deferral pursuant to clause (ii)
of the preceding sentence, the proposed registration for the Company's account
is abandoned. In order to defer the filing of a registration statement
pursuant to this Section 3.1.6, the Company shall promptly (but in any event
within 10 days), upon determining to seek such deferral, deliver to each
Requesting Holder a certificate signed by an executive officer of the Company
stating that the Company is deferring such filing pursuant to this Section
3.1.6 and a general statement of the reason for such deferral and an
approximation of the anticipated delay. Within 20 days after receiving such
certificate, the holders of a majority of the Registrable Shares held by the
Requesting Holders and for which registration was previously requested may
withdraw such Demand Request by giving notice to the Company; if withdrawn, the
Demand Request shall be deemed not to have been made for all purposes of this
Agreement. The Company may defer the filing of a particular registration
statement pursuant to this Section 3.1.6 only once.
Section 3.2 Piggyback Registrations.
3.2.1 Right to Piggyback. Each time the Company proposes to
register any of its equity securities (other than pursuant to an Excluded
Registration) under the Securities Act for sale to the
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public (whether for the account of the Company or the account of any
securityholder of the Company) and the form of registration statement to be
used permits the registration of Registrable Shares, the Company shall give
prompt written notice to each Holder of Registrable Shares (which notice shall
be given not less than 30 days prior to the effective date of the Company's
registration statement), which notice shall offer each such Holder the
opportunity to include any or all of its or his Registrable Shares in such
registration statement, subject to the limitations contained in Section 3.2.2
hereof. Each Holder who desires to have its or his Registrable Shares included
in such registration statement shall so advise the Company in writing (stating
the number of shares desired to be registered) within 20 days after the date of
such notice from the Company. Any Holder shall have the right to withdraw such
Holder's request for inclusion of such Holder's Registrable Shares in any
registration statement pursuant to this Section 3.2.1 by giving written notice
to the Company of such withdrawal. Subject to Section 3.2.2 below, the Company
shall include in such registration statement all such Registrable Shares so
requested to be included therein; provided, however, that the Company may at
any time withdraw or cease proceeding with any such registration if it shall at
the same time withdraw or cease proceeding with the registration of all other
equity securities originally proposed to be registered.
3.2.2 Priority on Registrations. If the Registrable Shares
requested to be included in the registration statement by any Holder differ
from the type of securities proposed to be registered by the Company and the
managing underwriter advises the Company that due to such differences the
inclusion of such Registrable Shares would cause a Material Adverse Effect,
then (i) the number of such Holder's or Holders' Registrable Shares to be
included in the registration statement shall be reduced to an amount which, in
the judgment of the managing underwriter, would eliminate such Material Adverse
Effect or (ii) if no such reduction would, in the judgment of the managing
underwriter, eliminate such Material Adverse Effect, then the Company shall
have the right to exclude all such Registrable Shares from such registration
statement provided no other securities of such type are included and offered
for the account of any other Person in such registration statement. Any
partial reduction in number of Registrable Shares to be included in the
registration statement pursuant to clause (i) of the immediately preceding
sentence shall be effected pro rata based on the ratio which the number of such
Holder's requested shares bears to the total number of shares requested to be
included in such registration statement by all Persons who have requested that
their shares be included in such registration statement. If the Registrable
Shares requested to be included in the registration statement are of the same
type as the securities being registered by the Company and the managing
underwriter advises the Company that the inclusion of such Registrable Shares
would cause a Material Adverse Effect, the Company will be obligated to include
in such registration statement, as to each Holder, only a portion of the shares
that such Holder has requested be registered equal to the ratio which such
Holder's requested shares bears to the total number of shares requested to be
included in such registration statement by all Persons who have requested that
their shares be included in such registration statement (other than (i) the
Company, if such registration has been initiated by the Company for securities
to be offered by the Company and (ii) Persons exercising their right to cause a
Demand Registration). It is acknowledged by the Holders, that pursuant to the
foregoing provision, the securities to be included in such registration shall
be allocated (x) first, to the Company, if such registration has been initiated
by the Company for securities to be offered by the Company, (y) second, to
securities offered by Persons exercising their right to cause a Demand
Registration, if such registration is a Demand Registration and (z) third, to
the Holders and all other
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persons requesting securities to be included therein in accordance with the
above described ratio. If as a result of the provisions of this Section 3.2.2
any Holder shall not be entitled to include all Registrable Securities in a
registration that such Holder has requested to be so included, such Holder may
withdraw such Holder's request to include Registrable Shares in such
registration statement. No Person may participate in any registration
statement hereunder unless such Person (x) agrees to sell such person's
Registrable Shares on the basis provided in any underwriting arrangements
approved by the Company and (y) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements, and other documents
reasonably required under the terms of such underwriting arrangements;
provided, however, that no such Person shall be required to make any
representations or warranties in connection with any such registration other
than representations and warranties as to (i) such Person's ownership of his or
its Registrable Shares to be sold or transferred free and clear of all liens,
claims, and encumbrances, (ii) such Person's power and authority to effect such
transfer, and (iii) such matters pertaining to compliance with securities laws
as may be reasonably requested; provided further, however, that the obligation
of such Person to indemnify pursuant to any such underwriting arrangements
shall be several, not joint and several, among such Persons selling Registrable
Shares, and the liability of each such Person will be in proportion to, and
provided further that such liability will be limited to, the net amount
received by such Person from the sale of his or its Registrable Shares pursuant
to such registration.
3.3 Holdback Agreement. Unless the managing underwriter otherwise
agrees, each of the Holders and the Company agree, in connection with any
underwritten registration, to use its reasonable efforts to cause its
Affiliates to agree, not to effect any public sale or private offer or
distribution of any Common Stock or Common Stock Equivalents during the ten
Business Days prior to the effectiveness under the Securities Act of any
underwritten registration and during such time period after the effectiveness
under the Securities Act of any underwritten registration (not to exceed 180
days) (except, if applicable, as part of such underwritten registration) as the
Company and the managing underwriter may agree.
3.4 Registration Procedures. Whenever any Holder has requested
that any Registrable Shares be registered pursuant to this Stockholders
Agreement, the Company will use its commercially reasonable efforts to effect
the registration and the sale of such Registrable Shares in accordance with the
intended method of disposition thereof, and pursuant thereto the Company will
as expeditiously as possible:
(i) prepare and file with the SEC a registration
statement on any appropriate form under the Securities Act with
respect to such Registrable Shares and use its commercially reasonable
efforts to cause such registration statement to become effective;
(ii) prepare and file with the SEC such amendments,
post-effective amendments, and supplements to such registration
statement and the prospectus used in connection therewith as may be
necessary to keep such registration statement effective for a period
of not less than 180 days (or such lesser period as is necessary for
the underwriters in an underwritten offering to sell unsold
allotments) and comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such
registration
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<PAGE> 13
statement during such period in accordance with the intended methods
of disposition by the sellers thereof set forth in such registration
statement;
(iii) furnish to each seller of Registrable Shares and the
underwriters of the securities being registered such number of copies
of such registration statement, each amendment and supplement thereto,
the prospectus included in such registration statement (including each
preliminary prospectus), any documents incorporated by reference
therein and such other documents as such seller or underwriters may
reasonably request in order to facilitate the disposition of the
Registrable Shares owned by such seller or the sale of such securities
by such underwriters (it being understood that, subject to Section 3.5
and the requirements of the Securities Act and applicable State
securities laws, the Company consents to the use of the prospectus and
any amendment or supplement thereto by each seller and the
underwriters in connection with the offering and sale of the
Registrable Shares covered by the registration statement of which such
prospectus, amendment or supplement is a part);
(iv) use its commercially reasonable efforts to register
or qualify such Registrable Shares under such other securities or blue
sky laws of such jurisdictions as the managing underwriter reasonably
requests; use its commercially reasonable efforts to keep each such
registration or qualification (or exemption therefrom) effective
during the period in which such registration statement is required to
be kept effective; and do any and all other acts and things which may
be reasonably necessary or advisable to enable each seller to
consummate the disposition of the Registrable Shares owned by such
seller in such jurisdictions (provided, however, that the Company will
not be required to (A) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but
for this subparagraph or (B) consent to general service of process in
any such jurisdiction);
(v) promptly notify each seller and each underwriter and
(if requested by any such Person) confirm such notice in writing (A)
when a prospectus or any prospectus supplement or post-effective
amendment has been filed and, with respect to a registration statement
or any post-effective amendment, when the same has become effective,
(B) of the issuance by any state securities or other regulatory
authority of any order suspending the qualification or exemption from
qualification of any of the Registrable Shares under state securities
or "blue sky" laws or the initiation of any proceedings for that
purpose, and (C) of the happening of any event which makes any
statement made in a registration statement or related prospectus
untrue or which requires the making of any changes in such
registration statement, prospectus or documents so that they will not
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading, and, as promptly as practicable
thereafter, prepare and file with the SEC and furnish a supplement or
amendment to such prospectus so that, as thereafter deliverable to the
purchasers of such Registrable Shares, such prospectus will not
contain any untrue statement of a material fact or omit a material
fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
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<PAGE> 14
(vi) make generally available to the Company's
securityholders an earnings statement satisfying the provisions of
Section 11(a) of the Securities Act no later than 30 days after the
end of the 12-month period beginning with the first day of the
Company's first fiscal quarter commencing after the effective date of
a registration statement, which earnings statement shall cover said
12-month period, and which requirement will be deemed to be satisfied
if the Company timely files complete and accurate information on Forms
10-Q, 10-K and 8-K under the Exchange Act and otherwise complies with
Rule 158 under the Securities Act;
(vii) if requested by the managing underwriter or any
seller, promptly incorporate in a prospectus supplement or
post-effective amendment such information as the managing underwriter
or any seller reasonably requests to be included therein, including,
without limitation, with respect to the Registrable Shares being sold
by such seller, the purchase price being paid therefor by the
underwriters and with respect to any other terms of the underwritten
offering of the Registrable Shares to be sold in such offering, and
promptly make all required filings of such prospectus supplement or
post-effective amendment;
(viii) as promptly as practicable after filing with the SEC
of any document which is incorporated by reference into a registration
statement (in the form in which it was incorporated), deliver a copy
of each such document to each seller;
(ix) cooperate with the sellers and the managing
underwriter to facilitate the timely preparation and delivery of
certificates (which shall not bear any restrictive legends unless
required under applicable law) representing securities sold under any
registration statement, and enable such securities to be in such
denominations and registered in such names as the managing underwriter
or such sellers may request and keep available and make available to
the Company's transfer agent prior to the effectiveness of such
registration statement a supply of such certificates;
(x) promptly make available for inspection by any seller,
any underwriter participating in any disposition pursuant to any
registration statement, and any attorney, accountant or other agent or
representative retained by any such seller or underwriter
(collectively, the "Inspectors"), all financial and other records,
pertinent corporate documents and properties of the Company
(collectively, the "Records"), as shall be reasonably necessary to
enable them to exercise their due diligence responsibility, and cause
the Company's officers, directors and employees to supply all
information requested by any such Inspector in connection with such
registration statement; provided, that, unless the disclosure of such
Records is necessary to avoid or correct a misstatement or omission in
the registration statement or the release of such Records is ordered
pursuant to a subpoena or other order from a court of competent
jurisdiction, the Company shall not be required to provide any
information under this subparagraph (x) if (A) the Company believes,
after consultation with counsel for the Company, that to do so would
cause the Company to forfeit an attorney-client privilege that was
applicable to such information or (B) if either (1) the Company has
requested and been granted from the SEC confidential treatment of such
information contained in any filing with the SEC or documents provided
supplementally or otherwise or
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<PAGE> 15
(2) the Company reasonably determines in good faith that such Records
are confidential and so notifies the Inspectors in writing unless
prior to furnishing any such information with respect to (A) or (B)
such Holder of Registrable Securities requesting such information
agrees to enter into a confidentiality agreement in customary form and
subject to customary exceptions; and provided, further that each
Holder of Registrable Securities agrees that it will, upon learning
that disclosure of such Records is sought in a court of competent
jurisdiction, give notice to the Company and allow the Company, at its
expense, to undertake appropriate action and to prevent disclosure of
the Records deemed confidential;
(xi) furnish to each seller and underwriter a signed
counterpart of (A) an opinion or opinions of counsel to the Company,
and (B) a comfort letter or comfort letters from the Company's
independent public accountants, each in customary form and covering
such matters of the type customarily covered by opinions or comfort
letters, as the case may be, as the sellers or managing underwriter
reasonably requests;
(xii) cause the Registrable Shares included in any
registration statement to be (A) listed on each securities exchange,
if any, on which similar securities issued by the Company are then
listed, or (B) authorized to be quoted and/or listed (to the extent
applicable) on the National Association of Securities Dealers, Inc.
Automated Quotation System or the NASDAQ National Market System if the
Registrable Shares so qualify;
(xiii) provide a CUSIP number for the Registrable Shares
included in any registration statement not later than the effective
date of such registration statement;
(xiv) cooperate with each seller and each underwriter
participating in the disposition of such Registrable Shares and their
respective counsel in connection with any filings required to be made
with the National Association of Securities Dealers, Inc. ("NASD");
(xv) during the period when the prospectus is required to
be delivered under the Securities Act, promptly file all documents
required to be filed with the SEC pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act;
(xvi) notify each seller of Registrable Shares promptly of
any request by the SEC for the amending or supplementing of such
registration statement or prospectus or for additional information;
(xvii) prepare and file with the SEC promptly any amendments
or supplements to such registration statement or prospectus which, in
the opinion of counsel for the Company or the managing underwriter, is
required in connection with the distribution of the Registrable
Shares;
(xviii) enter into such agreements (including underwriting
agreements in the managing underwriter's customary form) as are
customary in connection with an underwritten registration; and
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<PAGE> 16
(xix) advise each seller of such Registrable Shares,
promptly after it shall receive notice or obtain knowledge thereof, of
the issuance of any stop order by the SEC suspending the effectiveness
of such registration statement or the initiation or threatening of any
proceeding for such purpose and promptly use its best efforts to
prevent the issuance of any stop order or to obtain its withdrawal at
the earliest possible moment if such stop order should be issued.
3.5 Suspension of Dispositions. Each Holder agrees by acquisition
of any Registrable Shares that, upon receipt of any notice (a "Suspension
Notice") from the Company of the happening of any event of the kind described
in Section 3.4(v)(C), such Holder will forthwith discontinue disposition of
Registrable Shares until such Holder's receipt of the copies of the
supplemented or amended prospectus, or until it is advised in writing (the
"Advice") by the Company that the use of the prospectus may be resumed, and has
received copies of any additional or supplemental filings which are
incorporated by reference in the prospectus, and, if so directed by the
Company, such Holder will deliver to the Company all copies, other than
permanent file copies then in such Holder's possession, of the prospectus
covering such Registrable Shares current at the time of receipt of such notice.
In the event the Company shall give any such notice, the time period regarding
the effectiveness of registration statements set forth in Section 3.4(ii)
hereof shall be extended by the number of days during the period from and
including the date of the giving of the Suspension Notice to and including the
date when each seller of Registrable Shares covered by such registration
statement shall have received the copies of the supplemented or amended
prospectus or the Advice. The Company shall use its commercially reasonable
efforts and take such actions as are reasonably necessary to render the Advice
as promptly as practicable.
3.6 Registration Expenses. All expenses incident to the Company's
performance of or compliance with this Article 3 including, without limitation,
all registration and filing fees, all fees and expenses associated with filings
required to be made with the NASD (including, if applicable, the fees and
expenses of any "qualified independent underwriter" as such term is defined in
Schedule E of the By-Laws of the NASD, and of its counsel), as may be required
by the rules and regulations of the NASD, fees and expenses of compliance with
securities or "blue sky" laws (including reasonable fees and disbursements of
counsel in connection with "blue sky" qualifications of the Registrable
Shares), rating agency fees, printing expenses (including expenses of printing
certificates for the Registrable Shares in a form eligible for deposit with
Depository Trust Company and of printing prospectuses if the printing of
prospectuses is requested by a holder of Registrable Shares), messenger and
delivery expenses, the Company's internal expenses (including without
limitation all salaries and expenses of its officers and employees performing
legal or accounting duties), the fees and expenses incurred in connection with
any listing of the Registrable Shares, fees and expenses of counsel for the
Company and its independent certified public accountants (including the
expenses of any special audit or "cold comfort" letters required by or incident
to such performance), securities acts liability insurance (if the Company
elects to obtain such insurance), the fees and expenses of any special experts
retained by the Company in connection with such registration, and the fees and
expenses of other persons retained by the Company and reasonable fees and
expenses of one firm of counsel for the sellers (which shall be selected by the
holders of a majority of the Registrable Shares being included in any
particular registration statement) (all such expenses being herein called
"Registration Expenses") will be borne by the Company whether or not any
registration statement
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<PAGE> 17
becomes effective; provided that, except as expressly provided above, in no
event shall Registration Expenses include any underwriting discounts,
commissions, or fees attributable to the sale of the Registrable Shares or to
any counsel, accountants or other persons retained or employed by the Holders.
3.7 Indemnification.
3.7.1 The Company agrees to indemnify and reimburse, to the fullest
extent permitted by law, each seller of Registrable Shares, and each of its
employees, advisors, agents, representatives, partners, officers and directors
and each Person who controls such seller (within the meaning of the Securities
Act or the Exchange Act) and any agent or investment advisor thereof
(collectively, the "Seller Affiliates") (A) against any and all losses, claims,
damages, liabilities and expenses, joint or several (including, without
limitation, attorneys' fees and disbursements except as limited by Section
3.7.3) based upon, arising out of, related to or resulting from any untrue or
alleged untrue statement of a material fact contained in any registration
statement, prospectus or preliminary prospectus or any amendment thereof or
supplement thereto, or any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein not
misleading, (B) against any and all loss, liability, claim, damage, and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation or investigation or proceeding by any governmental
agency or body, commenced or threatened, or of any claim whatsoever based upon,
arising out of, related to or resulting from any such untrue statement or
omission or alleged untrue statement or omission, and (C) against any and all
costs and expenses (including reasonable fees and disbursements of counsel) as
may be reasonably incurred in investigating, preparing, or defending against
any litigation, or investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon, arising out
of, related to or resulting from any such untrue statement or omission or
alleged untrue statement or omission, to the extent that any such expense or
cost is not paid under subparagraph (A) or (B) above; except insofar as the
same are made in reliance upon and in strict conformity with information
furnished in writing to the Company by such seller or any Seller Affiliate for
use therein or arise from such seller's or any Seller Affiliate's failure to
deliver a copy of the registration statement or prospectus or any amendments or
supplements thereto after the Company has furnished such seller or Seller
Affiliate with a sufficient number of copies of the same. The reimbursements
required by this Section 3.7.1 will be made by periodic payments during the
course of the investigation or defense, as and when bills are received or
expenses incurred.
3.7.2 In connection with any registration statement in which a
seller of Registrable Shares is participating, each such seller will furnish to
the Company in writing such information and affidavits as the Company
reasonably requests for use in connection with any such registration statement
or prospectus and, to the fullest extent permitted by law, each such seller
will indemnify the Company and its directors and officers and each Person who
controls the Company (within the meaning of the Securities Act or the Exchange
Act) against any and all losses, claims, damages, liabilities and expenses
(including, without limitation, reasonable attorneys' fees and disbursements
except as limited by Section 3.7.3) resulting from any untrue statement or
alleged untrue statement of a material fact contained in the registration
statement, prospectus, or any preliminary prospectus or any amendment thereof
or supplement thereto or any omission or alleged omission of a material
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<PAGE> 18
fact required to be stated therein or necessary to make the statements therein
not misleading, but only to the extent that such untrue statement or alleged
untrue statement or omission or alleged omission is contained in any
information or affidavit so furnished in writing by such seller or any of its
Seller Affiliates specifically for inclusion in the registration statement;
provided that the obligation to indemnify will be several, not joint and
several, among such sellers of Registrable Shares, and the liability of each
such seller of Registrable Shares will be in proportion to, and provided
further that such liability will be limited to, the net amount received by such
seller from the sale of Registrable Shares pursuant to such registration
statement; provided, however, that such seller of Registrable Shares shall not
be liable in any such case to the extent that prior to the filing of any such
registration statement or prospectus or amendment thereof or supplement
thereto, such seller has furnished in writing to the Company information
expressly for use in such registration statement or prospectus or any amendment
thereof or supplement thereto which corrected or made not misleading
information previously furnished to the Company.
3.7.3 Any Person entitled to indemnification hereunder will (A) give
prompt written notice to the indemnifying party of any claim with respect to
which it seeks indemnification (provided that the failure to give such notice
shall not limit the rights of such Person) and (B) unless in such indemnified
party's reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist with respect to such claim, permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party; provided, however, that any person
entitled to indemnification hereunder shall have the right to employ separate
counsel and to participate in the defense of such claim, but the fees and
expenses of such counsel shall be at the expense of such person unless (i) the
employment of separate counsel shall have been authorized in writing by any
such indemnifying party, (ii) the indemnifying party shall not have employed
counsel reasonably satisfactory to the indemnified party to have charge of such
third-party action, (iii) the indemnified party shall have reasonably concluded
that there may be defenses available to such indemnified party that are
different from or additional to those available to the indemnifying party, or
(iv) the indemnified party's counsel shall have advised the indemnified party
in writing, with a copy to the indemnifying party, that there is a conflict of
interest that could make it inappropriate under applicable standards of
professional conduct to have common counsel. If such defense is not assumed by
the indemnifying party as permitted hereunder, the indemnifying party will not
be subject to any liability for any settlement made by the indemnified party
without its consent (but such consent will not be unreasonably withheld). If
such defense is assumed by the indemnifying party pursuant to the provisions
hereof, such indemnifying party shall not settle or otherwise compromise the
applicable claim unless (1) the terms of such settlement or compromise include
a full and unconditional release of the indemnified party or (2) the
indemnified party otherwise consents in writing. An indemnifying party who is
not entitled to, or elects not to, assume the defense of a claim will not be
obligated to pay the fees and expenses of more than one counsel for all parties
indemnified by such indemnifying party with respect to such claim, unless in
the reasonable judgment of any indemnified party, a conflict of interest may
exist between such indemnified party and any other of such indemnified parties
with respect to such claim, in which event the indemnifying party shall be
obligated to pay the reasonable fees and disbursements of such additional
counsel or counsels.
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<PAGE> 19
3.7.4 Each party hereto agrees that, if for any reason the
indemnification provisions contemplated by Section 3.7.1 or Section 3.7.2 are
unavailable to or insufficient to hold harmless an indemnified party in respect
of any losses, claims, damages, liabilities or expenses (or actions in respect
thereof) referred to therein, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of such
losses, claims, damages, liabilities or expenses (or actions in respect
thereof) in such proportion as is appropriate to reflect the relative fault of
the indemnifying party and the indemnified party in connection with the actions
which resulted in the losses, claims, damages, liabilities or expenses as well
as any other relevant equitable considerations. The relative fault of such
indemnifying party and indemnified party shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact relates
to information supplied by such indemnifying party or indemnified party, and
the parties relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. The parties hereto agree
that it would not be just and equitable if contribution pursuant to this
Section 3.7.4 were determined by pro rata allocation (even if the Holders or
any underwriters or all of them were treated as one entity for such purpose) or
by any other method of allocation which does not take account of the equitable
considerations referred to in this Section 3.7.4. The amount paid or payable by
an indemnified party as a result of the losses, claims, damages, liabilities,
or expenses (or actions in respect thereof) referred to above shall be deemed
to include any legal or other fees or expenses reasonably incurred by such
indemnified party in connection with investigating or, except as provided in
Section 3.7.3, defending any such action or claim. Notwithstanding the
provisions of this Section 3.7.4, no Holder shall be required to contribute an
amount greater than the dollar amount by which the net amount received by such
Holder with respect to the sale of any Registrable Shares exceeds the amount of
damages which such Holder has otherwise been required to pay by reason of such
statement or omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled
to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Holders' obligations in this Section 3.7.4 to
contribute shall be several in proportion to the amount of Registrable Shares
registered by them and not joint.
If indemnification is available under this Section 3.7, the
indemnifying parties shall indemnify each indemnified party to the full extent
provided in Section 3.7.1 and Section 3.7.2 without regard to the relative
fault of said indemnifying party or indemnified party or any other equitable
consideration provided for in this Section 3.7.4.
3.7.5 The indemnification and contribution provided for under this
Stockholders Agreement will remain in full force and effect regardless of any
investigation made by or on behalf of the indemnified party or any officer,
director, or controlling Person of such indemnified party and will survive the
transfer of securities.
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<PAGE> 20
ARTICLE 4
TRANSFERS OF SECURITIES
Section 4.1 Drag Along Rights.
4.1.1 Applicability. In connection with any Transfer by members of
the HMC Group of shares of Common Stock representing more than 50% of the
shares of Common Stock then held by the HMC Group (a "Significant Sale"), the
HMC Group shall have the right to require each non-selling Holder (each, a
"Co-Seller") to Transfer a portion of its Common Stock which represents the
same percentage of the Fully-Diluted Common Stock held by such Co-Seller as the
shares being disposed of by the HMC Group represent of the Fully-Diluted Common
Stock held by the HMC Group. (For example, if the HMC Group is selling 50% of
their Fully-Diluted Common Stock position, each Co-Seller shall be required to
sell 50% of its Fully-Diluted Common Stock position.) All Common Stock
Transferred by Holders pursuant to this Section 4.1 shall be sold at the same
price and otherwise treated identically with the Common Stock being sold by the
HMC Group in all respects; provided, that the Co-Seller shall not be required
to make any representations or warranties in connection with such Transfer
other than representations and warranties as to (i) such Co-Seller's ownership
of his or its Common Stock to be Transferred free and clear of all liens,
claims and encumbrances, (ii) such Co-Seller's power and authority to effect
such Transfer, and (iii) such matters pertaining to compliance with securities
laws as the transferee may reasonably require except that the transferee may
not require that each Transferring Co-Seller be an Accredited Investor.
4.1.2 Notice of Significant Sale. HMTF, on behalf of the HMC Group,
shall give each Co-Seller at least 30 days' prior written notice of any
Significant Sale as to which the HMC Group intends to exercise its rights under
Section 4.1. If the HMC Group elects to exercise its rights under Section 4.1,
the Co-Sellers shall take such actions as may be reasonably required and
otherwise cooperate in good faith with the HMC Group in connection with
consummating the Significant Sale (including, without limitation, the voting of
any Common Stock or other voting capital stock of the Company to approve such
Significant Sale). At the closing of such Significant Sale, each Co-Seller
shall deliver certificates for all shares of Common Stock to be sold by such
Co-Seller, duly endorsed for transfer, with the signature guaranteed, to the
purchaser against payment of the appropriate purchase price.
Section 4.2 Tag Along Rights.
4.2.1 Applicability. In connection with any sale (other than a
Permitted Transfer) by members of the HMC Group of any shares of Common Stock
(and, if such sale is a Significant Sale, the HMC Group does not elect to
exercise its rights under Section 4.1 hereof), at least 30 days prior to the
closing of such sale, HMTF shall cause the HMC Group to make an offer (the
"Participation Offer") to each Co-Seller to include in the proposed sale a
portion of its Common Stock which represents the same percentage of such
Co-Seller's Fully Diluted Common Stock as the shares being sold by the HMC
Group represent of the HMC Group's Fully-Diluted Common Stock; provided that,
if the consideration to be received by the HMC Group includes any securities,
only Co-Sellers who
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<PAGE> 21
have certified to the reasonable satisfaction of HMTF that they are Accredited
Investors shall be entitled to participate in such transfer, unless the
transferee consents otherwise.
4.2.2 Terms of Participation Offer. The Participation Offer shall
describe the terms and conditions of the proposed sale and shall be conditioned
upon (i) the consummation of the transactions contemplated in the Participation
Offer with the transferee named therein, and (ii) each Co-Seller's execution
and delivery of all agreements and other documents as the members of the HMC
Group are required to execute and deliver in connection with such sale
(provided that the Co-Seller shall not be required to make any representations
or warranties in connection with such sale other than representations and
warranties as to (A) such Co-Seller's ownership of his Common Stock to be sold
or transferred free and clear of all liens, claims, and encumbrances, (B) such
Co-Seller's power and authority to effect such sale and (C) such matters
pertaining to compliance with securities laws as the transferee may reasonably
require). If any Co- Seller shall accept the Participation Offer, HMTF shall
cause the HMC Group to reduce, to the extent necessary, the number of shares of
Common Stock it otherwise would have sold in the proposed sale so as to permit
those Co-Sellers who have accepted the Participation Offer to sell the number
of shares of Common Stock that they are entitled to sell under this Section
4.2, and HMTF shall cause the HMC Group to transfer and such Co-Sellers shall
transfer the number of shares Common Stock specified in the Participation Offer
to the proposed transferee in accordance with the terms of such transfer as set
forth in the Participation Offer.
Section 4.3 Certain Events Not Deemed Transfers. In no event
shall any exchange, reclassification, or other conversion of shares into any
cash, securities or other property pursuant to a merger or consolidation of the
Company or any Subsidiary with, or any sale or transfer by the Company or any
Subsidiary of all or substantially all of its assets to, any Person constitute
a Significant Sale of shares of Common Stock by the HMC Group for purposes of
Section 4.1 or a sale of such shares for purposes of Section 4.2. In addition,
Sections 4.1 and 4.2 hereof shall not apply to any transfer, sale, or
disposition of shares of Common Stock solely among members of the HMC Group.
Section 4.4 Transfer and Exchange. When Securities are presented
to the Company with a request to register the transfer of such Securities or to
exchange such Securities for Securities of other authorized denominations, the
Company shall register the transfer or make the exchange as requested if the
requirements of this Stockholders Agreement for such transaction are met;
provided, however, that the Securities surrendered for transfer or exchange
shall be duly endorsed or accompanied by a written instrument of transfer in
form satisfactory to the Company, duly executed by the Holder thereof or its
attorney and duly authorized in writing. No service charge shall be made for
any registration of transfer or exchange, but the Company may require payment
of a sum sufficient to cover any transfer tax or similar governmental charge
payable in connection therewith.
Section 4.5 Replacement Securities. If a mutilated Security is
surrendered to the Company or if the Holder of a Security claims and submits an
affidavit or other evidence, satisfactory to the Company, to the effect that
the Security has been lost, destroyed or wrongfully taken, the Company shall
issue a replacement Security if the Company's requirements are met. If
required by the Company, such Securityholder must provide an indemnity bond, or
other form of
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<PAGE> 22
indemnity, sufficient in the judgment of the Company to protect the Company
against any loss which may be suffered. The Company may charge such
Securityholder for its reasonable out-of-pocket expenses in replacing a
Security which has been mutilated, lost, destroyed or wrongfully taken.
ARTICLE 5
LIMITATION ON TRANSFERS
Section 5.1 Restrictions on Transfer. The Securities shall not
be Transferred or otherwise conveyed, assigned or hypothecated before
satisfaction of (i) the conditions specified in this Section 5.1 and Sections
5.2 through 5.3, which conditions are intended to ensure compliance with the
provisions of the Securities Act with respect to the Transfer of any Security
and (ii) if applicable, Article 4 hereof. Any purported Transfer in violation
of this Article 5 and/or, if applicable, Article 4 hereof shall be void ab
initio and of no force or effect. Other than Transfers subject to Article IV
hereof (it being understood that transactions pursuant to such Article are not
subject to Section 5.3) and other than Transfers to the public pursuant to an
effective registration statement or sales to the public pursuant to Rule 144
under the Securities Act otherwise permitted hereunder, each Holder will cause
any proposed transferee of any Security or any interest therein held by it to
agree in writing to take and hold such securities subject to the provisions and
upon the conditions specified in this Stockholders Agreement. Each Holder
shall not Transfer, convey, assign or hypothecate any Securities to any
Affiliate of such Holder or any member of such Holder's immediate family unless
such Holder shall have and retain all voting rights with respect to such
Securities.
Section 5.2 Restrictive Legends.
5.2.1 Securities Act Legend. Except as otherwise provided in
Section 5.4 hereof, each Security held by a Holder, and each Security issued to
any subsequent transferee of such Security, shall be stamped or otherwise
imprinted with a legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR PURSUANT TO THE
SECURITIES OR "BLUE SKY" LAWS OF ANY STATE. SUCH SECURITIES MAY NOT BE
OFFERED, SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE ASSIGNED, EXCEPT
PURSUANT TO (i) A REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES WHICH
IS EFFECTIVE UNDER SUCH ACT, (ii) RULE 144 UNDER SUCH ACT, OR (iii) ANY OTHER
EXEMPTION FROM REGISTRATION UNDER SUCH ACT.
5.2.2 Other Legends. Each Security issued to each Holder or a
subsequent transferee shall include a legend in substantially the following
form:
THIS SECURITY IS SUBJECT TO RESTRICTIONS ON TRANSFER, VOTING AND OTHER
TERMS AND CONDITIONS SET FORTH IN THE STOCKHOLDERS AGREEMENT DATED AS OF
NOVEMBER 27, 1996, A COPY OF WHICH MAY BE OBTAINED FROM ATRIUM CORPORATION AT
ITS PRINCIPAL EXECUTIVE OFFICES.
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<PAGE> 23
Section 5.3 Right of First Refusal.
5.3.1 Right of First Refusal. Prior to any Transfer or attempted
Transfer by any Non-HMC Group Holder of any Securities or Common Stock
Equivalents (the "Offered Securities") other than a Permitted Transfer or a
Transfer pursuant to a registration under the Securities Act, the Non-HMC Group
Holder of such Offered Securities shall give prior written notice (a "Transfer
Notice") to HMTF of such Non-HMC Group Holder's intention to effect such
Transfer, describing the terms and conditions of the proposed Transfer,
including the identity of the prospective transferee(s), the number of shares
of Offered Securities such Non-HMC Group Holder desires to sell and the
purchase price. After receipt of the Transfer Notice, HMTF (or as provided in
Section 5.3.3, an assignee of HMTF who is a member of the HMC Group) shall have
the option for 15 days from the date of receipt of the Transfer Notice to elect
to purchase all, but not less than all, of the Offered Securities upon the same
terms and conditions as those set forth in the Transfer Notice by delivering a
written notice (the "Election Notice") of such election to such Non-HMC Group
Holder within such 15-day period. The Non-HMC Group Holder shall not
consummate such Transfer until the earlier to occur of the lapse of the 15-day
period or the date on which HMTF notifies such Non-HMC Group Holder in writing
that it will not exercise its rights under this Section 5.3 (the "Authorization
Date"). If HMTF has not elected to purchase all of the Offered Securities or
has failed to make a timely election, such Non-HMC Group Holder may Transfer
all, but not less than all, of the Offered Securities to the prospective
transferee(s) thereof specified in the Transfer Notice, at a price and on terms
no more favorable to such prospective transferee(s) than as specified in the
Transfer Notice, during the 30-day period immediately following the
Authorization Date; provided that, if required by the Company, such Non-HMC
Group Holder shall either (i) provide to the Company an opinion reasonably
satisfactory to the Company (or supply such other evidence reasonably
satisfactory to the Company) that the proposed Transfer may be effected without
registration under the Securities Act, or (ii) certify to the Company that the
Non-HMC Group Holder reasonably believes that each proposed transferee is a
"qualified institutional buyer" and that such Non-HMC Group Holder has taken
reasonable steps to make each proposed transferee aware that such Holder may
rely on Rule 144A under the Securities Act in effecting such Transfer. Each
Security issued upon such Transfer shall bear the restrictive legend set forth
in Section 5.2, unless in the reasonable judgment of counsel for the Company
such legend is not required in order to ensure compliance with the Securities
Act. If the Offered Securities are not so transferred within such 30-day
period, such Offered Securities must be reoffered to HMTF in accordance with
the provisions of this Section 5.3 if such Non-HMC Group Holder still desires
to transfer the Offered Securities.
5.3.2 Closing. If HMTF exercises the right to purchase the Offered
Securities by timely delivery of the Election Notice, unless otherwise agreed
by the Non-HMC Group Holder of the Offered Securities and HMTF, the closing of
such purchase will take place at the offices of the Company in Dallas, Texas on
the fifth Business Day after the date of the Election Notice. At the closing,
HMTF will pay the purchase price set forth in the Transfer Notice in cash (by
certified or cashier's check) solely upon such Holder's delivery to HMTF of
valid certificates or agreements evidencing all of the Offered Securities then
being purchased pursuant to the Election Notice. Certificates or agreements
representing the Offered Securities will be duly endorsed (with signature
guaranteed) for transfer to HMTF. By delivery of such certificates or
agreements to HMTF, such Non-HMC Group Holder will be deemed to represent and
warrant to HMTF that the transferred
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<PAGE> 24
Offered Securities are owned by such Non-HMC Group Holder free and clear of all
liens, adverse claims and other encumbrances other than as provided in this
Stockholders Agreement. The Non-HMC Group Holder will promptly perform,
whether before or after any such closing, such additional acts (including
without limitation executing and delivering additional documents) as are
reasonably required by either such party to effect more fully the transactions
contemplated by this Section 5.3.
5.3.3 Assignment. The rights of HMTF under this Section 5.3 may be
assigned or transferred in whole or in part by HMTF, without any consent or
other action on the part of any other party hereto, to any one or more members
of the HMC Group.
Section 5.4 Termination of Certain Restrictions. Notwithstanding
the foregoing provisions of this Section 5, the restrictions imposed by Section
5.3.1 upon the transferability of the Securities and the legend requirements of
Section 5.2.1 shall terminate as to any Security (i) when and so long as such
Security shall have been effectively registered under the Securities Act and
disposed of pursuant thereto or disposed of pursuant to the provisions of Rule
144 or (ii) when the Company shall have received an opinion of counsel
reasonably satisfactory to it that such Security may be transferred without
registration thereof under the Securities Act and that such legend may be
removed. Whenever the restrictions imposed by Section 5.2 shall terminate as
to any Security, the Holder thereof shall be entitled to receive from the
Company, at the Company's expense, a new Security not bearing the restrictive
legend set forth in Section 5.2.
ARTICLE 6
PREEMPTIVE RIGHTS
Section 6.1 Preemptive Rights.
6.1.1 Rights to Participate in Future Sales. In case the Company or
any Affiliated Successor (as hereinafter defined) proposes to issue or sell any
Additional Securities in a Preemptive Rights Transaction, the Company shall, no
later than twenty days prior to the consummation of such Preemptive Rights
Transaction, give notice in writing (the "Offer Notice") to each Holder of such
Preemptive Rights Transaction. The Offer Notice shall describe the proposed
Preemptive Rights Transaction, identify the proposed purchaser, and contain an
offer (the "Preemptive Rights Offer") to sell to each Holder who certifies (to
the reasonable satisfaction of the Company) that such Holder is an Accredited
Investor (an "Accredited Offeree"), at the same price and for the same
consideration to be paid by the proposed purchaser, all or part of such
Accredited Offeree's pro rata portion of the Additional Securities (which shall
be the percentage ownership of the Fully-Diluted Common Stock held by such
Holder, excluding, for the purposes of such calculation, any shares of Common
Stock issuable upon exercise of any Common Stock Equivalents granted pursuant
to any employee, officer or director benefit plan or arrangement). As used
herein, the term "Affiliated Successor" means a successor entity to the Company
(whether by merger, consolidation, reorganization or otherwise) in which the
HMC Group owns at least the same percentage of the Fully-Diluted Common Stock
of such entity (giving effect to the merger, consolidation, reorganization or
other transaction) as the HMC Group owns of the Fully-Diluted Common Stock of
the Company. If any such Holder fails
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<PAGE> 25
to accept the Preemptive Rights Offer by written notice to the Company within
fifteen days after its receipt of the Offer Notice, the Company or such
Affiliated Successor may proceed with the proposed issue or sale of the
Additional Securities, free of any right on the part of such Holder under this
Section 6.1.1 in respect thereof.
6.1.2 Exceptions to Preemptive Rights. This Section 6.1 shall not
apply to (i) issuances or sales of Common Stock or Common Stock Equivalents to
employees, officers, and/or directors of the Company and/or any of its
Subsidiaries pursuant to employee benefit or similar plans or arrangements of
the Company and/or its Subsidiaries, (ii) issuances or sales of Common Stock or
Common Stock Equivalents upon exercise of any Common Stock Equivalent which,
when issued, was subject to or exempt from the preemptive rights under this
Section 6.1, (iii) securities distributed or set aside ratably to all holders
of Common Stock and Common Stock Equivalents (or any class or series thereof)
on a per share equivalent basis, or (iv) issuances or sales of Common Stock or
Common Stock Equivalents pursuant to a registered underwritten public offering,
a merger of the Company or a subsidiary of the Company into or with another
entity or an acquisition by the Company or a subsidiary of the Company or
another business or corporation. In the event of any issuances or sales of
Common Stock or Common Stock Equivalents as a unit with any other security of
the Company or its Subsidiaries, the preemptive rights under this Section shall
be applicable to the entire unit rather than only the Common Stock or Common
Stock Equivalent included in the unit.
ARTICLE 7
TERMINATION
The provisions of this Agreement shall terminate immediately prior to
the tenth anniversary of the date of this Stockholders Agreement; provided,
however, that Sections 4.1 and 4.2 and Articles 5 (other than Sections 5.2 and
5.4), 6 and 7 of this Agreement shall terminate immediately prior to the
consummation (prior to the expiration of such 10-year period) of a Qualified
IPO.
ARTICLE 8
MISCELLANEOUS
Section 8.1 Notices. Any notices or other communications
required or permitted hereunder shall be in writing, and shall be sufficiently
given if made by hand delivery, by telex, by telecopier or registered or
certified mail, postage prepaid, return receipt requested, addressed as follows
(or at such other address as may be substituted by notice given as herein
provided):
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If to the Company, to
Atrium Corporation
1341 West Mockingbird Lane, Suite 1200W
Dallas, Texas 75247
Attn: Randall S. Fojtasek
Facsimile: (214) 634-4231
If to HMTF, to
HMTF Acquisition Corp.
200 Crescent Court, Suite 1600
Dallas, Texas 75201
Attn: Lawrence D. Stuart, Jr.
Facsimile: (214) 740-7313
with a copy to
Vinson & Elkins L.L.P.
3700 Trammell Crow Center
2001 Ross Avenue
Dallas, Texas 75201
Attn: Michael D. Wortley
Facsimile: (214) 220-7716
If to any Holder, at its address listed on the signature pages hereof.
Any notice or communication hereunder shall be deemed to have been
given or made as of the date so delivered if personally delivered; when
answered back, if telexed; when receipt is acknowledged, if telecopied; and
five calendar days after mailing if sent by registered or certified mail
(except that a notice of change of address shall not be deemed to have been
given until actually received by the addressee).
Failure to mail a notice or communication to a Holder or any defect in
it shall not affect its sufficiency with respect to other Holders. If a notice
or communication is mailed in the manner provided above, it is duly given,
whether or not the addressee receives it.
Section 8.2 Legal Holidays. A "Legal Holiday" used with respect
to a particular place of payment is a Saturday, a Sunday or a day on which
banking institutions at such place are not required to be open. If a payment
date is a Legal Holiday at such place, payment may be made at such place on the
next succeeding day that is not a Legal Holiday, and no interest on the amount
of such payment shall accrue for the intervening period.
Section 8.3 Governing Law; Jurisdiction. THIS STOCKHOLDERS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
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<PAGE> 27
THE STATE OF DELAWARE, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
Section 8.4 Successors and Assigns. Whether or not an express
assignment has been made pursuant to the provisions of this Stockholders
Agreement, provisions of this Stockholders Agreement that are for the Holders'
benefit as the holders of any Securities are also for the benefit of, and
enforceable by, all subsequent holders of Securities, except as otherwise
expressly provided herein. This Stockholders Agreement shall be binding upon
the Company, each Holder, and their respective successors and assigns.
Section 8.5 Duplicate Originals. All parties may sign any number
of copies of this Stockholders Agreement. Each signed copy shall be an
original, but all of them together shall represent the same agreement.
Section 8.6 Severability. In case any provision in this
Stockholders Agreement shall be held invalid, illegal or unenforceable in any
respect for any reason, the validity, legality and enforceability of any such
provision in every other respect and the remaining provisions shall not in any
way be affected or impaired thereby.
Section 8.7 No Waivers; Amendments.
8.7.1 No failure or delay on the part of the Company or any Holder
in exercising any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power or
remedy preclude any other or further exercise thereof or the exercise of any
other right, power or remedy. The remedies provided for herein are cumulative
and are not exclusive of any remedies that may be available to the Company or
any Holder at law or in equity or otherwise.
8.7.2 Any provision of this Stockholders Agreement may be amended or
waived if, but only if, such amendment or waiver is in writing and is signed by
the Company and the Required Holders; provided that no such amendment or waiver
shall, (i) unless signed by all of the Holders, amend the provisions of Section
2.1, (ii) unless signed by all of the Holders affected, (A) amend the
provisions of this Section 8.7.2 or (B) change the number of Holders which
shall be required for the Holders or any of them to take any action under this
Section 8.7.2 or any other provision of this Stockholders Agreement, and (iii)
unless signed by a majority of the Holders who are not members of the HMC
Group, amend Section 4.1, Section 4.2 or Articles 5 or 6, or grant a waiver
thereunder, so as to (A) impose additional obligations on Holders who are not
members of the HMC Group that are not imposed on Holders who are members of the
HMC Group or (B) adversely affect the rights granted to the Holders who are not
members of the HMC Group where such amendment or waiver does not apply to the
same extent to the rights granted thereunder to the Holders who are members of
the HMC Group.
Section 8.8 Third Parties. Each member of the HMC Group is an
intended third party beneficiary of this Stockholders Agreement.
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<PAGE> 28
IN WITNESS WHEREOF, the parties hereto have caused this Stockholders
Agreement to be duly executed, all as of the date first written above.
THE COMPANY:
ATRIUM CORPORATION
By: /s/ RANDALL S. FOJTASEK
------------------------------------
Randall S. Fojtasek
President
HOLDERS:
HERITAGE FUND I, L.P.
By: HF Partners I, L.P., its general
partner
By: /s/ MICHEL REICHERT
------------------------------------
Name: Michel Reichert
----------------------------------
Title: General Partner
---------------------------------
Address: Heritage Fund I, L.P.
30 Rowes Wharf, Suite 300
Boston, MA 02110
/s/ JOE FOTJASEK
----------------------------------------
Joe Fotjasek
4005 Cochran Chapel Road
Dallas, TX 75209
/s/ RANDALL S. FOJTASEK
----------------------------------------
Randall S. Fotjasek
3801 Maplewood Avenue
Dallas, TX 75205
[SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT]
S-1
<PAGE> 29
/s/ RUSSELL S. FOJTASEK
----------------------------------------
Russell S. Fojtasek
2853 Thomas Avenue
Dallas, TX 75204
/s/ HOWARD S. SAFFAN
----------------------------------------
Howard S. Saffan
85 Beachside Avenue
Westport, CT 06880
HICKS, MUSE, TATE & FURST
EQUITY FUND III, L.P.
By: HM3/GP Partners, L.P.,
its General Partner
By: Hicks, Muse GP Partners III, L.P.,
its General Partner
By: Hicks Muse Fund III Incorporated,
its General Partner
By: /s/ JEFFRY S. FRONTERHOUSE
------------------------------------
Jeffry S. Fronterhouse
Vice President
[SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT]
S-2
<PAGE> 30
HM3 COINVESTORS, L.P.,
By: Hicks, Muse GP Partners III, L.P.,
its General Partner
By: Hicks, Muse Fund III Incorporated,
its General Partner
By: /s/ JEFFRY S. FRONTERHOUSE
------------------------------------
Jeffry S. Fronterhouse
Vice President
HMTF:
HICKS, MUSE, TATE & FURST
INCORPORATED
By: /s/ JEFFRY S. FRONTERHOUSE
------------------------------------
Jeffry S. Fronterhouse
Vice President
[SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT]
S-3
<PAGE> 1
EXHIBIT 10.3
INDEMNIFICATION AGREEMENT
This INDEMNIFICATION AGREEMENT (the "Agreement") is made and entered
into as of this 27th day of November, 1996, by and between Atrium Corporation,
a Delaware corporation (including any successors thereto, the "Company"), and
Randall S. Fojtasek ("Indemnitee").
RECITALS:
A. Competent and experienced persons are reluctant to serve or to
continue to serve corporations as directors, officers or in other capacities
unless they are provided with adequate protection through insurance or
indemnification (or both) against claims and actions against them arising out
of their service to and activities on behalf of those corporations.
B. The current uncertainties relating to the availability of
adequate insurance for directors and officers have increased the difficulty for
corporations to attract and retain competent and experienced persons.
C. The Board of Directors of the Company (the "Board") has
determined that the continuation of present trends in litigation will make it
more difficult to attract and retain competent and experienced persons, that
this situation is detrimental to the best interests of the Company's
stockholders, and that the Company should act to assure its directors and
officers that there will be increased certainty of adequate protection in the
future.
D. It is reasonable, prudent and necessary for the Company to
obligate itself contractually to indemnify its directors and officers to the
fullest extent permitted by applicable law in order to induce them to serve or
continue to serve the Company.
E. Indemnitee is willing to serve and continue to serve the
Company on the condition that he be indemnified to the fullest extent permitted
by law.
F. Concurrently with the execution of this Agreement, Indemnitee
is agreeing to serve or to continue to serve as a director or officer of the
Company.
AGREEMENTS:
NOW, THEREFORE, in consideration of the foregoing premises,
Indemnitee's agreement to serve or continue to serve as a director or officer
of the Company, and the covenants contained in this Agreement, the Company and
Indemnitee hereby covenant and agree as follows:
<PAGE> 2
1. Certain Definitions:
For purposes of this Agreement:
(a) Affiliate: shall mean any Person that directly, or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with the Person specified.
(b) Change of Control: shall mean the occurrence of any
of the following events:
(i) The acquisition after the date of this
Agreement by any individual, entity, or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) (a "Person") of beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of 50% or more of either (x) the
then outstanding shares of common stock of the Company (the "Outstanding
Company Common Stock") or (y) the combined voting power of the then outstanding
voting securities of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities"); provided, however,
that for purposes of this paragraph (i), the following acquisitions shall not
constitute a Change of Control: (A) any acquisition directly from the Company
or any Subsidiary thereof, (B) any acquisition by the Company or any Subsidiary
thereof, (C) any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any Subsidiary of the Company, (D)
any acquisition by one or more members of the HMC Group, or (E) any acquisition
by any entity or its security holders pursuant to a transaction which complies
with clauses (A), (B), and (C) of paragraph (iii) below; or
(ii) Individuals who, as of the date of this
Agreement, constitute the Board (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided, however, that any
individual becoming a director subsequent to the date of this Agreement (A) who
is a member of the HMC Group, or (B) whose election, or nomination for election
by the Company's stockholders, was approved by a vote of at least a majority of
the directors then comprising the Incumbent Board, shall be considered as
though such individual were a member of the Incumbent Board, but excluding, for
this purpose, any such individual whose initial assumption of office occurs as
a result of an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the Board; or
(iii) Consummation of a reorganization, merger, or
consolidation or sale or other disposition of all or substantially all of the
assets of the Company or an acquisition of assets of another entity (a
"Business Combination"), other than a Business Combination with one or more
members of the HMC Group, in each case, unless, immediately following such
Business Combination, (A) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities immediately
prior to such Business Combination beneficially own, directly or indirectly,
more than 50% of, respectively, the then outstanding shares of common stock or
other equity interests and the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of directors (or
similar governing body), as the case may be, of the
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<PAGE> 3
entity resulting from such Business Combination (including, without limitation,
an entity which as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or through one or
more Subsidiaries) in proportions not materially different from their
ownership, immediately prior to such Business Combination, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities, as the case may
be, (B) no Person (excluding any entity resulting from such Business
Combination or any employee benefit plan (or related trust) of the Company or
such entity resulting from such Business Combination or any Subsidiary of
either of them) beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of the entity
resulting from such Business Combination or the combined voting power of the
then outstanding voting securities of such entity except to the extent that
such ownership existed prior to the Business Combination, and (C) at least a
majority of the members of the board of directors (or similar governing body)
of the entity resulting from such Business Combination were members of the
Incumbent Board at the time of the execution of the initial agreement, or of
the action of the Board, providing for such Business Combination; or
(iv) Approval by the stockholders of the Company
of a complete liquidation or dissolution of the Company.
(c) Claim: shall mean any threatened, pending, or
completed action, suit or proceeding (including, without limitation, securities
laws actions, suits and proceedings and also any cross claim or counterclaim in
any action, suit or proceeding), whether civil, criminal, arbitral,
administrative or investigative in nature, or any inquiry or investigation
(including discovery), whether conducted by the Company or any other Person,
that Indemnitee in good faith believes might lead to the institution of any
action, suit or proceeding.
(d) Expenses: shall mean all costs, expenses (including
attorneys' and expert witnesses' fees), and obligations paid or incurred in
connection with investigating, defending (including affirmative defenses and
counterclaims), being a witness in, or participating in (including on appeal),
or preparing to defend, be a witness in, or participate in, any Claim relating
to any Indemnifiable Event.
(e) Indemnifiable Event: shall mean any actual or
alleged act, omission, statement, misstatement, event or occurrence related to
the fact that Indemnitee is or was a director, officer, agent or fiduciary of
the Company, or is or was serving at the request of the Company as a director,
officer, trustee, agent or fiduciary of another corporation, partnership, joint
venture, employee benefit plan, trust, or other enterprise, or by reason of any
actual or alleged thing done or not done by Indemnitee in any such capacity.
For purposes of this Agreement, the Company agrees that Indemnitee's service on
behalf of or with respect to any Subsidiary or employee benefits plan of the
Company or any Subsidiary of the Company shall be deemed to be at the request
of the Company.
(f) Indemnifiable Liabilities: shall mean all Expenses
and all other liabilities, damages (including, without limitation, punitive,
exemplary, and the multiplied portion of any damages), judgments, payments,
fines, penalties, amounts paid in settlement, and awards paid or incurred that
arise out of, or in any way relate to, any Indemnifiable Event.
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<PAGE> 4
(g) Potential Change of Control: shall be deemed to have
occurred if (i) the Company enters into an agreement, the consummation of which
would result in the occurrence of a Change of Control; (ii) any Person
(including the Company) publicly announces an intention to take or to consider
taking actions that, if consummated, would constitute a Change of Control; or
(iii) the Board adopts a resolution to the effect that, for purposes of this
Agreement, a Potential Change of Control has occurred.
(h) Reviewing Party: shall mean (i) a member or members
of the Board who are not parties to the particular Claim for which Indemnitee
is seeking indemnification or (ii) if a Change of Control has occurred and
Indemnitee so requests, or if the members of the Board so elect, or if all of
the members of the Board are parties to such Claim, Special Counsel.
(i) Special Counsel: shall mean special, independent
legal counsel selected by Indemnitee and approved by the Company (which
approval shall not be unreasonably withheld), and who has not otherwise
performed material services for the Company or for Indemnitee within the last
three years (other than as Special Counsel under this Agreement or similar
agreements).
(j) Subsidiary: shall mean, with respect to any Person,
any corporation or other entity of which a majority of the voting power of the
voting equity securities or equity interest is owned, directly or indirectly,
by that Person.
2. Indemnification and Expense Advancement.
(a) The Company shall indemnify Indemnitee and hold
Indemnitee harmless to the fullest extent permitted by law, as soon as
practicable but in any event no later than 30 days after written demand is
presented to the Company, from and against any and all Indemnifiable
Liabilities. Notwithstanding the foregoing, the obligations of the Company
under Section 2(a) shall be subject to the condition that the Reviewing Party
shall not have determined (in a written opinion, in any case in which Special
Counsel is involved) that Indemnitee is not permitted to be indemnified under
applicable law. Nothing contained in this Agreement shall require any
determination under this Section 2(a) to be made by the Reviewing Party prior
to the disposition or conclusion of the Claim against the Indemnitee.
(b) If so requested by Indemnitee, the Company shall
advance to Indemnitee all reasonable Expenses incurred by Indemnitee to the
fullest extent permitted by law (or, if applicable, reimburse Indemnitee for
any and all reasonable Expenses incurred by Indemnitee and previously paid by
Indemnitee) within ten business days after such request (an "Expense Advance").
The Company shall be obligated from time to time at the request of Indemnitee
to make or pay an Expense Advance in advance of the final disposition or
conclusion of any Claim. In connection with any request for an Expense Advance,
if requested by the Company, Indemnitee or Indemnitee's counsel shall submit an
affidavit stating that the Expenses to which the Expense Advances relate are
reasonable. Any dispute as to the reasonableness of any Expense shall not delay
an Expense Advance by the Company. If, when, and to the extent that the
Reviewing Party determines that (i) Indemnitee would not be permitted to be
indemnified with respect to a Claim under applicable law or (ii) the amount of
the Expense Advance was not reasonable, the Company shall be entitled to be
reimbursed by Indemnitee and Indemnitee hereby agrees to reimburse the Company
without interest (which
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<PAGE> 5
agreement shall be an unsecured obligation of Indemnitee) for (x) all related
Expense Advances theretofore made or paid by the Company in the event that it
is determined that indemnification would not be permitted or (y) the excessive
portion of any Expense Advances in the event that it is determined that such
Expenses Advances were unreasonable, in either case, if and to the extent such
reimbursement is required by applicable law; provided, however, that if
Indemnitee has commenced legal proceedings in a court of competent jurisdiction
to secure a determination that Indemnitee could be indemnified under applicable
law, or that the Expense Advances were reasonable, any determination made by
the Reviewing Party that Indemnitee would not be permitted to be indemnified
under applicable law or that the Expense Advances were unreasonable shall not
be binding, and the Company shall be obligated to continue to make Expense
Advances, until a final judicial determination is made with respect thereto (as
to which all rights of appeal therefrom have been exhausted or lapsed), which
determination shall be conclusive and binding. If there has been a Change of
Control, the Reviewing Party shall be Special Counsel, if Indemnitee so
requests. If there has been no determination by the Reviewing Party or if the
Reviewing Party determines that Indemnitee substantively is not permitted to be
indemnified in whole or part under applicable law or that any Expense Advances
were unreasonable, Indemnitee shall have the right to commence litigation in
any court in the states of Texas, New York or Delaware having subject matter
jurisdiction thereof and in which venue is proper seeking an initial
determination by the court or challenging any such determination by the
Reviewing Party or any aspect thereof, and the Company hereby consents to
service of process and to appear in any such proceeding. Any determination by
the Reviewing Party otherwise shall be conclusive and binding on the Company
and Indemnitee.
(c) Nothing in this Agreement, however, shall require the
Company to indemnify Indemnitee with respect to any Claim initiated by
Indemnitee, other than a Claim solely seeking enforcement of the Company's
indemnification obligations to Indemnitee or a Claim authorized by the Board.
3. Change of Control. The Company agrees that, if there is a
Potential Change of Control or a Change of Control and if Indemnitee requests
in writing that Special Counsel be the Reviewing Party, then Special Counsel
shall be the Reviewing Party. In such a case, the Company agrees not to
request or seek reimbursement from Indemnitee of any indemnification payment or
Expense Advances unless Special Counsel has rendered its written opinion to the
Company and Indemnitee that the Company was not or is not permitted under
applicable law to indemnify Indemnitee or that such Expense Advances were
unreasonable. However, if Indemnitee has commenced legal proceedings in a
court of competent jurisdiction to secure a determination that Indemnitee could
be indemnified under applicable law or that the Expense Advances were
reasonable, any determination made by Special Counsel that Indemnitee would not
be permitted to be indemnified under applicable law or that the Expense
Advances were unreasonable shall not be binding, and the Company shall be
obligated to continue to make Expense Advances, until a final judicial
determination is made with respect thereto (as to which all rights of appeal
therefore have been exhausted or lapsed), which determination shall be
conclusive and binding. The Company agrees to pay the reasonable fees of
Special Counsel and to indemnify Special Counsel against any and all expenses
(including attorneys' fees), claims, liabilities, and damages arising out of or
relating to this Agreement or Special Counsel's engagement pursuant hereto.
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<PAGE> 6
4. Establishment of Trust. In the event of a Potential Change of
Control or a Change of Control, the Company shall, upon written request by
Indemnitee, create a trust for the benefit of Indemnitee (the "Trust") and from
time to time upon written request of Indemnitee shall fund the Trust in an
amount equal to all Indemnifiable Liabilities reasonably anticipated at the
time to be incurred in connection with any Claim. The amount to be deposited in
the Trust pursuant to the foregoing funding obligation shall be determined by
the Reviewing Party. The terms of the Trust shall provide that, upon a Change
of Control, (i) the Trust shall not be revoked or the principal thereof
invaded, without the written consent of Indemnitee; (ii) the trustee of the
Trust shall advance, within ten business days of a request by Indemnitee, any
and all reasonable Expenses to Indemnitee (and Indemnitee hereby agrees to
reimburse the Trust under the circumstances in which Indemnitee would be
required to reimburse the Company for Expense Advances under this Agreement),
any required determination concerning the reasonableness of the Expenses to be
made by the Reviewing Party, (iii) the Trust shall continue to be funded by the
Company in accordance with the funding obligation set forth above; (iv) the
trustee of the Trust shall promptly pay to Indemnitee all amounts for which
Indemnitee shall be entitled to indemnification pursuant to this Agreement; and
(v) all unexpended funds in the Trust shall revert to the Company upon a final
determination by the Reviewing Party or a court of competent jurisdiction, as
the case may be, that Indemnitee has been fully indemnified under the terms of
this Agreement. The trustee of the Trust shall be chosen by Indemnitee, and
shall be an institution that is not affiliated with Indemnitee. Nothing in
this Section 4 shall relieve the Company of any of its obligations under this
Agreement.
5. Indemnification for Additional Expenses. The Company shall
indemnify Indemnitee against any and all costs and expenses (including
attorneys' and expert witnesses' fees) and, if requested by Indemnitee, shall
(within two business days of that request) advance those costs and expenses to
Indemnitee that are incurred by Indemnitee if Indemnitee, whether by formal
proceedings or through demand and negotiation without formal proceedings: (a)
seeks to enforce Indemnitee's rights under this Agreement, (b) seeks to enforce
Indemnitee's rights to expense advancement or indemnification under any other
agreement or provision of the Company's Certificate of Incorporation (the
"Certificate of Incorporation") or Bylaws (the "Bylaws") now or hereafter in
effect relating to Claims for Indemnifiable Events, or (c) seeks recovery under
any directors' and officers' liability insurance policies maintained by the
Company, in each case regardless of whether Indemnitee ultimately prevails;
provided that a court of competent jurisdiction has not found Indemnitee's
claim for indemnification or expense advancements under the foregoing clauses
(a), (b) or (c) to be frivolous, presented for an improper purpose, without
evidentiary support, or otherwise sanctionable under Federal Rule of Civil
Procedure No. 11 or an analogous rule or law, and provided further, that if a
court makes such a finding, Indemnitee shall reimburse the Company for all
amounts previously advanced to Indemnitee pursuant to this Section 5. Subject
to the provisos contained in the preceding sentence, to the fullest extent
permitted by law, the Company waives any and all rights that it may have to
recover its costs and expenses from Indemnitee.
6. Partial Indemnity. If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some, but not
all, of Indemnitee's Indemnifiable Liabilities, the Company shall indemnify
Indemnitee for the portion thereof to which Indemnitee is entitled.
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<PAGE> 7
7. Contribution.
(a) Contribution Payment. To the extent the
indemnification provided for under any provision of this Agreement is
determined (in the manner hereinabove provided) not to be permitted under
applicable law, the Company, in lieu of indemnifying Indemnitee, shall, to the
extent permitted by law, contribute to the amount of any and all Indemnifiable
Liabilities incurred or paid by Indemnitee for which such indemnification is
not permitted. The amount the Company contributes shall be in such proportion
as is appropriate to reflect the relative fault of Indemnitee, on the one hand,
and of the Company and any and all other parties (including officers and
directors of the Company other than Indemnitee) who may be at fault
(collectively, including the Company, the "Third Parties"), on the other hand.
(b) Relative Fault. The relative fault of the Third
Parties and the Indemnitee shall be determined (i) by reference to the relative
fault of Indemnitee as determined by the court or other governmental agency or
(ii) to the extent such court or other governmental agency does not apportion
relative fault, by the Reviewing Party after giving effect to, among other
things, the relative intent, knowledge, access to information, and opportunity
to prevent or correct the relevant events, of each party, and other relevant
equitable considerations. The Company and Indemnitee agree that it would not be
just and equitable if contribution were determined by pro rata allocation or by
any other method of allocation that does take account of the equitable
considerations referred to in this Section 7(b).
8. Burden of Proof. In connection with any determination by the
Reviewing Party or otherwise as to whether Indemnitee is entitled to be
indemnified under any provision of this Agreement or to receive contribution
pursuant to Section 7 of this Agreement, to the extent permitted by law the
burden of proof shall be on the Company to establish that Indemnitee is not so
entitled.
9. No Presumption. For purposes of this Agreement, the
termination of any Claim by judgment, order, settlement (whether with or
without court approval), or conviction, or upon a plea of nolo contendere, or
its equivalent, or an entry of an order of probation prior to judgment shall
not create a presumption (other than any presumption arising as a matter of law
that the parties may not contractually agree to disregard) that Indemnitee did
not meet any particular standard of conduct or have any particular belief or
that a court has determined that indemnification is not permitted by applicable
law.
10. Non-exclusivity. The rights of Indemnitee hereunder shall be
in addition to any other rights Indemnitee may have under the Bylaws or
Certificate of Incorporation or the Delaware General Corporation Law or
otherwise. To the extent that a change in the Delaware General Corporation Law
(whether by statute or judicial decision) permits greater indemnification by
agreement than would be afforded currently under this Agreement, it is the
intent of the parties hereto that Indemnitee shall enjoy by this Agreement the
greater benefits so afforded by that change. Indemnitee's rights under this
Agreement shall not be diminished by any amendment to the Certificate of
Incorporation or Bylaws, or of any other agreement or instrument to which
Indemnitee is not a party, and shall not diminish any other rights that
Indemnitee now or in the future has against the Company.
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<PAGE> 8
11. Liability Insurance. Except as otherwise agreed to by the
Company and Indemnitee in a written agreement, to the extent the Company
maintains an insurance policy or policies providing directors' and officers'
liability insurance, Indemnitee shall be covered by that policy or those
policies, in accordance with its or their terms, to the maximum extent of the
coverage available for any Company director or officer.
12. Period of Limitations. No action, lawsuit, or proceeding may
be brought against Indemnitee or Indemnitee's spouse, heirs, executors, or
personal or legal representatives, nor may any cause of action be asserted in
any such action, lawsuit or proceeding, by or on behalf of the Company, after
the expiration of two years after the statute of limitations commences with
respect to Indemnitee's act or omission that gave rise to the action, lawsuit,
proceeding or cause of action; provided, however, that, if any shorter period
of limitations is otherwise applicable to any such action, lawsuit, proceeding
or cause of action, the shorter period shall govern.
13. Amendments. No supplement, modification or amendment of this
Agreement shall be binding unless executed in writing by both of the parties
hereto. No waiver of any provision of this Agreement shall be effective unless
in a writing signed by the party granting the waiver. No waiver of any of the
provisions of this Agreement shall be deemed or shall constitute a waiver of
any other provisions hereof (whether or not similar) nor shall that waiver
constitute a continuing waiver.
14. Other Sources. Indemnitee shall not be required to exercise
any rights that Indemnitee may have against any other Person (for example,
under an insurance policy) before Indemnitee enforces his rights under this
Agreement. However, to the extent the Company actually indemnifies Indemnitee
or advances him Expenses, the Company shall be subrogated to the rights of
Indemnitee and shall be entitled to enforce any such rights which Indemnitee
may have against third parties. Indemnitee shall assist the Company in
enforcing those rights if it pays his costs and expenses of doing so. If
Indemnitee is actually indemnified or advanced Expenses by any third party,
then, for so long as Indemnitee is not required to disgorge the amounts so
received, to that extent the Company shall be relieved of its obligation to
indemnify Indemnitee or advance Indemnitee Expenses.
15. Binding Effect. This Agreement shall be binding upon and
inure to the benefit of and be enforceable by the parties hereto and their
respective successors, assigns (including any direct or indirect successor by
merger or consolidation), spouses, heirs and personal and legal
representatives. This Agreement shall continue in effect regardless of whether
Indemnitee continues to serve as an officer or director of the Company or
another enterprise at the Company's request.
16. Severability. If any provision of this Agreement is held to
be illegal, invalid, or unenforceable under present or future laws effective
during the term hereof, that provision shall be fully severable; this Agreement
shall be construed and enforced as if that illegal, invalid, or unenforceable
provision had never comprised a part hereof; and the remaining provisions shall
remain in full force and effect and shall not be affected by the illegal,
invalid or unenforceable provision or by its severance from this Agreement.
Furthermore, in lieu of that illegal, invalid, or unenforceable provision,
there shall be added automatically as a part of this Agreement a provision as
similar in terms to the illegal, invalid, or unenforceable provision as may be
possible and be legal, valid, and enforceable.
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<PAGE> 9
17. Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Delaware
applicable to contracts made and to be performed in that state without giving
effect to the principles of conflicts of laws.
18. Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
19. Notices. Whenever this Agreement requires or permits notice
to be given by one party to the other, such notice must be in writing to be
effective and shall be deemed delivered and received by the party to whom it is
sent upon actual receipt (by any means) of such notice. Receipt of a notice by
the Secretary of the Company shall be deemed receipt of such notice by the
Company.
20. Complete Agreement. This Agreement constitutes the complete
understanding and agreement among the parties with respect to the subject
matter hereof and supersedes all prior agreements and understandings between
the parties with respect to the subject matter hereof, other than any
indemnification rights that Indemnitee may enjoy under the Certificate of
Incorporation, the Bylaws or the Delaware General Corporation Law.
21. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but in making proof
hereof it shall not be necessary to produce or account for more than one such
counterpart.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY BLANK]
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<PAGE> 10
EXECUTED as of the date first written above.
ATRIUM CORPORATION
By: /s/ LOUIS W. SIMI, JR.
---------------------------
Louis W. Simi, Jr.
Executive Vice President
INDEMNITEE
/s/ RANDALL S. FOJTASEK
---------------------------
Randall S. Fojtasek
[SIGNATURE PAGE FOR FOJTASEK INDEMNIFICATION AGREEMENT]
S-1
<PAGE> 11
SCHEDULE
The following persons have entered into an indemnification agreement in
substantially the same form as, and with no material differences from, the
indemnification agreement of Randall S. Fojtasek filed herewith:
Mark Biersmith Michael J. Levitt
Randall S. Fojtasek C. Dean Metropoulos
Russell S. Fojtasek John R. Muse
Arthur G. Frost Howard Saffan
Horace Hicks Louis W. Simi, Jr.
Stephen M. Humphrey Michel Reichert
<PAGE> 1
EXHIBIT 10.5
MONITORING AND OVERSIGHT AGREEMENT
THIS MONITORING AND OVERSIGHT AGREEMENT (the "Agreement") is made and
entered into effective as of November 27, 1996, among Atrium Corporation, a
Delaware corporation ("Holdings"), Atrium Companies, Inc., a Delaware
corporation (the "Company"), and Hicks, Muse & Co. Partners, L.P., a Texas
limited partnership (together with its successors, "HMCo").
1. Retention. Holdings and the Company hereby acknowledge that
they have retained HMCo, and HMCo acknowledges that, subject to reasonable
advance notice in order to accommodate scheduling, HMCo will provide financial
oversight and monitoring services to Holdings and the Company as requested by
the board of directors of Holdings during the term of this Agreement.
2. Term. The term of this Agreement shall continue until the
earlier of (i) the tenth anniversary of the date hereof, or (ii) the date on
which Hicks, Muse, Tate & Furst Equity Fund III, L.P. and its affiliates cease
to own beneficially, directly or indirectly, any securities of Holdings or its
successors.
3. Compensation.
(a) As compensation for HMCo's services to Holdings and
the Company under this Agreement, Holdings and the Company hereby irrevocably
agree to pay to HMCo, and Holdings agrees to cause the Company to pay, an
annual fee (the "Monitoring Fee") of $320,000 (the "Base Fee"), subject to
adjustment pursuant to paragraphs (b) and (c) below and prorated on a daily
basis for any partial calendar year during the term of this Agreement. The
Monitoring Fee shall be payable in equal quarterly installments on each January
1, April 1, July 1 and October 1 during the term of this Agreement (each a
"Payment Date"), beginning with the first Payment Date following the date
hereof. All payments shall be made by wire transfer of immediately available
funds to the account described on Exhibit A hereto (or such other account as
HMCo may hereafter designate in writing).
(b) On January 1 of each calendar year during the term of
this Agreement, the Monitoring Fee shall be adjusted to an annual amount equal
to (i) the budgeted consolidated annual net sales of the Company and its
subsidiaries for the then-current fiscal year, multiplied by (ii) 0.2% (the
"Percentage"); provided, however, that in no event shall the annual Monitoring
Fee be less than the Base Fee.
(c) On each occasion that the Company or any of its
subsidiaries shall acquire another entity or business during the term of this
Agreement, the annual Monitoring Fee for the calendar year in which such
acquisition occurs shall be adjusted prospectively (i.e., for periods
subsequent to such acquisition until the next adjustment pursuant to clause (b)
above), as of the closing of such acquisition, to an annual amount equal to (i)
the proforma combined budgeted consolidated annual net sales of the Company and
its subsidiaries for the entire then-current fiscal year of the Company
(including the sales of the acquired entity or business for such entire fiscal
year,
<PAGE> 2
on a pro forma basis), multiplied by (ii) the Percentage; provided, however,
that in no event shall the annual Monitoring Fee be less than the Base Fee.
(d) All past due payments in respect of the Monitoring
Fee shall bear interest at the lesser of the highest rate of interest which may
be charged under applicable law or the prime commercial lending rate per annum
of Chemical Bank, N.A. or its successors (which rate is a reference rate and is
not necessarily its lowest or best rate of interest actually charged to any
customer) (the "Prime Rate") as in effect from time to time, plus five percent
(5%), from the due date of such payment to and including the date on which
payment is made to HMCo in full, including such interest accrued thereon.
4. Reimbursement of Expenses. In addition to the compensation to
be paid pursuant to Section 3 hereof, Holdings and the Company agree to pay or
reimburse HMCo for all "Reimbursable Expenses", which shall consist of (i) all
reasonable disbursement and out-of-pocket expenses (including without
limitation, costs of travel, postage, deliveries, communications, etc.)
incurred by HMCo or its affiliates for the account of Holdings or the Company
or in connection with the performance by HMCo of the services contemplated by
Section 1 hereof and (ii) Holdings' Pro Rata Share of Allocable Expenditures as
defined in Exhibit B hereto. Promptly (but not more than 10 days) after
request by or notice from HMCo, Holdings and the Company shall, and Holdings
shall cause the Company to, pay HMCo, by wire transfer of immediately available
funds to the account described on Exhibit A hereto (or such other account as
HMCo may hereafter designate in writing), the Reimbursable Expenses for which
HMCo has provided Holdings and the Company invoices or reasonably detailed
descriptions. All past due payments in respect of the Reimbursable Expenses
shall bear interest at the lesser of the highest rate of interest which may be
charged under applicable law or the Prime Rate plus 5% from the Payment Date to
and including the date on which such Reimbursable Expenses plus accrued
interest thereon are fully paid to HMCo.
5. Indemnification. Holdings and the Company jointly and
severally shall indemnify and hold harmless each of HMCo, its affiliates, and
their respective directors, officers, controlling persons (within the meaning
of Section 15 of the Securities Act of 1933 or Section 20(a) of the Securities
Exchange Act of 1934), if any, agents and employees (HMCo, its affiliates, and
such other specified persons being collectively referred to as "Indemnified
Persons", and individually as an "Indemnified Person") from and against any and
all claims, liabilities, losses, damages and expenses incurred by any
Indemnified Person (including those arising out of an Indemnified Person's
negligence and fees and disbursements of the respective Indemnified Person's
counsel) which (A) are related to or arise out of (i) actions taken or omitted
to be taken (including any untrue statements made or any statements omitted to
be made) by Holdings and/or the Company or (ii) actions taken or omitted to be
taken by an Indemnified Person with Holdings' or the Company's consent or in
conformity with Holdings' or the Company's instructions or Holdings' or the
Company's actions or omissions or (B) are otherwise related to or arise out of
HMCo's engagement, and will reimburse each Indemnified Person for all costs and
expenses, including fees and disbursements of any Indemnified Person's counsel,
as they are incurred, in connection with investigating, preparing for,
defending, or appealing any action, formal or informal claim, investigation,
inquiry or other proceeding, whether or not in connection with pending or
threatened litigation, caused by or arising out of or in connection with HMCo's
acting pursuant to HMCo's engagement, whether or not any Indemnified Person is
named as a party thereto and whether or not any liability results therefrom.
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<PAGE> 3
Neither Holdings nor the Company will, however, be responsible for any claims,
liabilities, losses, damages or expenses pursuant to clause (B) of the
preceding sentence that have resulted primarily from HMCo's bad faith, gross
negligence or willful misconduct. Holdings and the Company also agree that
neither HMCo nor any other Indemnified Person shall have any liability to
Holdings or the Company for or in connection with such engagement except for
any such liability for claims, liabilities, losses, damages or expenses
incurred by Holdings and/or the Company that have resulted primarily from
HMCo's bad faith, gross negligence or willful misconduct. Holdings and the
Company further agree that neither of them will, without the prior written
consent of HMCo, settle or compromise or consent to the entry of any judgment
in any pending or threatened claim, action, suit or proceeding in respect of
which indemnification may be sought hereunder (whether or not any Indemnified
Person is an actual or potential party to such claim, action, suit or
proceeding) unless such settlement, compromise or consent includes an
unconditional release of HMCo and each other Indemnified Person hereunder from
all liability arising out of such claim, action, suit or proceeding. HOLDINGS
AND THE COMPANY HEREBY ACKNOWLEDGE THAT THE FOREGOING INDEMNITY SHALL BE
APPLICABLE TO ANY CLAIMS, LIABILITIES, LOSSES, DAMAGES OR EXPENSES THAT HAVE
RESULTED FROM OR ARE ALLEGED TO HAVE RESULTED FROM THE ACTIVE OR PASSIVE OR THE
SOLE, JOINT OR CONCURRENT ORDINARY NEGLIGENCE OF HMCO OR ANY OTHER INDEMNIFIED
PERSON.
The foregoing right to indemnity shall be in addition to any rights
that HMCo and/or any other Indemnified Person may have at common law or
otherwise and shall remain in full force and effect following the completion or
any termination of the engagement. Holdings and the Company hereby consent to
personal jurisdiction and to service and venue in any court in which any claim
which is subject to this Agreement is brought against HMCo or any other
Indemnified Person.
It is understood that, in connection with HMCo's engagement, HMCo may
also be engaged to act for Holdings and/or the Company in one or more
additional capacities, and that the terms of this engagement or any such
additional engagement(s) may be embodied in one or more separate written
agreements. This indemnification shall apply to the engagement specified in
the first paragraph hereof as well as to any such additional engagement(s)
(whether written or oral) and any modification of said engagement or such
additional engagement(s) and shall remain in full force and effect following
the completion or termination of said engagement or such additional
engagements.
Holdings and the Company further understand and agree that if HMCo is
asked to furnish Holdings and/or the Company a financial opinion letter or act
for Holdings and/or the Company in any other formal capacity, such further
action may be subject to a separate agreement containing provisions and terms
to be mutually agreed upon.
6. Confidential Information. In connection with the performance
of the services hereunder, HMCo agrees not to divulge any confidential
information, secret processes or trade secrets disclosed by Holdings or the
Company to it solely in its capacity as a financial advisor, unless Holdings
and the Company consent to the divulging thereof or such information, secret
processes or trade secrets are publicly available or otherwise available to
HMCo without restriction or breach of any confidentiality agreement or unless
required by any governmental authority or in response to any valid legal
process.
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<PAGE> 4
7. Governing Law. This Agreement shall be construed, interpreted
and enforced in accordance with the laws of the State of Texas, excluding any
choice-of-law provisions thereof.
8. Assignment. This Agreement and all provisions contained
herein shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and assigns; provided, however, neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned (other than with respect to the rights and obligations of HMCo, which
may be assigned to any one or more of its principals or affiliates) by any of
the parties without the prior written consent of the other parties.
9. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument, and the signature of any
party to any counterpart shall be deemed a signature to, and may be appended
to, any other counterpart.
10. Other Understandings. All discussions, understandings and
agreements heretofore made between any of the parties hereto with respect to
the subject matter hereof are merged in this Agreement, which alone fully and
completely expresses the Agreement of the parties hereto. All calculations of
the Monitoring Fee and Reimbursable Expenses shall be made by HMCo and, in the
absence of mathematical error, shall be final and conclusive.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY BLANK]
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<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date and year first above written.
HICKS, MUSE & CO. PARTNERS, L.P.
By: HM PARTNERS INC.,
its General Partner
By: /s/ MICHAEL D. SALIM
-----------------------
Michael D. Salim
Chief Financial Officer
ATRIUM CORPORATION
By: /s/ RANDALL S. FOJTASEK
--------------------------------
Randall S. Fojtasek
President
ATRIUM COMPANIES, INC.
By: /s/ RANDALL S. FOJTASEK
--------------------------------
Randall S. Fojtasek
President
[SIGNATURE PAGE FOR MONITORING AND OVERSIGHT AGREEMENT]
S-1
<PAGE> 6
EXHIBIT A
[Wire Transfer Instructions]
Texas Commerce Bank
ABA #: 113000609
Account #: 08805113824
Credit: Hicks, Muse & Co. Partners
Reference: Payment of [Monitoring Fees or Expenses]
by Atrium Corporation
A-1
<PAGE> 7
EXHIBIT B
PRO RATA SHARE OF ALLOCABLE EXPENDITURES AND RELATED DEFINITIONS
Pro Rata Share of Allocable Expenditures shall equal the product
obtained by multiplying (i) the sum of all Allocable Expenditures that have not
previously been paid or reimbursed to HMCo by Holdings or the Company and other
Participating Acquired Companies, by (ii) a fraction, the numerator of which
shall equal the total amount of Invested Capital (as from time to time
outstanding) that any Fund has invested in Holdings' or the Company's
securities or instruments and the denominator of which shall equal the total
amount of Invested Capital (as from time to time outstanding) that any Fund has
invested in the securities or instruments of any and all Participating Acquired
Companies.
The capitalized terms used in the foregoing definitions have the
meanings set forth below:
Allocable Expenditures shall mean all variable, fixed, and other
costs, expenses, expenditures, charges, or obligations (including without
limitation letters of credit, deposits, etc.) that are related to assets
utilized, services provided, or programs administered by HMCo or its affiliates
in connection with the performance by HMCo of financial oversight and
monitoring services on behalf of Holdings and/or the Company and other
Participating Acquired Companies, including without limitation corporate
airplanes, charitable contributions, retainers for lobbyists and other
professionals, and premiums and finance charges for director and officer
insurance maintained for representatives of HMCo or its affiliates.
Fund shall mean any one or more of the equity funds now or hereafter
sponsored by Hicks, Muse, Tate & Furst Incorporated or its successors,
including any LP Investment Entity (as defined in the limited partnership
agreement for any such equity fund) formed under or with respect to any such
equity fund.
Invested Capital shall mean the total amount of partner capital that a
Fund from time to time invests in the purchase of securities or instruments of
a Participating Acquired Company, less the total cash distributions that
constitute a return of such partner capital with proceeds from the disposition
of all or any part of such securities or instruments. For each period for
which the Pro Rata Share of Allocable Expenditures is being made, the
applicable Invested Capital shall equal the amount outstanding as of the end of
the respective period.
Participating Acquired Companyshall mean any partnership, corporation,
trust, limited liability company, or other entity that is, for the period for
which the Pro Rata Share of Allocable Expenditures is being determined, a party
to a monitoring agreement or similar contract with HMCo or its affiliates and
is, as of the end of such period, designated by HMCo to bear a portion of such
allocable expenditures. HMCo may, in its sole and absolute discretion,
determine not to designate an entity as a Participating Acquired Company with
respect to such period. HMCo may make such determination of non-designation
for no reason or for any reason, including without limitation the respective
entity's bankruptcy or other temporary or permanent inability to pay fees or
expenses to HMCo or its affiliates.
B-1
<PAGE> 1
EXHIBIT 10.6
ATRIUM INDEMNIFICATION ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Agreement") dated November 27, 1996 is
among Hicks, Muse, Tate & Furst Equity Fund III, L.P., a Delaware limited
partnership (the "Buyer"), Atrium Corporation, a Delaware corporation (the
"Company"), Randall S. Fojtasek (the "Atrium Indemnitor Representative"),
Heritage Fund I, L.P., a Delaware limited partnership ("Heritage"), and
Citibank N.A., a national banking association with its headquarters in New York
City, New York (the "Escrow Agent").
RECITALS
A. Pursuant to the Stock Purchase Agreement dated as of November
7, 1996 (the "Purchase Agreement"), by and among HMTF Acquisition Corp. (whose
interests under the Purchase Agreement have been assigned to Buyer and HM3
Coinvestors, L.P.), the Company and the Selling Securityholders named therein
(including the Atrium Indemnitors (as defined in the Purchase Agreement)), the
Company will issue and sell to Buyer and HM3 Coinvestors, L.P., and Buyer and
HM3 Coinvestors, L.P. shall purchase from the Company, 32,000,000 shares of the
Company's Common Stock, par value $0.01 per share ("Common Stock"), upon the
terms and conditions set forth in the Purchase Agreement. Unless otherwise
defined herein, capitalized terms used herein shall have the meanings assigned
to them in the Purchase Agreement.
B. It is a condition precedent to the consummation of the
Purchase that the Buyer, the Company, the Atrium Indemnitor Representative, on
behalf of the Atrium Indemnitors, Heritage and the Escrow Agent execute and
deliver this Agreement.
AGREEMENTS
NOW, THEREFORE, in consideration of the recitals and of the respective
agreements and covenants set forth herein and in the Purchase Agreement, and
other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto, intending to be legally bound, hereby agree
as follows:
Section 1. Establishment of Atrium Escrow Account. At the
Closing (as defined in the Purchase Agreement), the Company will, and the
Atrium Indemnitor Representative and Heritage hereby instruct the Company to,
deliver to the Escrow Agent $2,000,000 in cash (the "Escrow Property") by wire
transfer of immediately available funds to an account designated by the Escrow
Agent as the "Atrium Escrow Account." The Escrow Property shall be held,
administered and disposed of by the Escrow Agent in accordance with the terms
and conditions hereinafter set forth.
<PAGE> 2
Section 2. Investment of Proceeds of Escrow Property.
(a) The Escrow Agent shall from time to time invest and
reinvest the Escrow Property, if any, in the Pacific Horizon Treasury Only
Fund, or in such other of the following investments as Buyer and the Atrium
Indemnitor Representative may from time to time elect by joint notice in
writing ("Permitted Investments") from each of the following persons to the
Escrow Agent: Lawrence D. Stuart, Jr, on behalf of Buyer, and the Atrium
Indemnitor Representative.
(i) Any U.S. Government or U.S. Government Agency
security;
(ii) Any commercial paper rated A1/P1 or better;
(iii) Any certificate of deposit or time deposit in
any bank with a long-term debt rating of A or
better from Moody's or Standard & Poor's;
(iv) The Citibank Insured Money Market Deposit
Account; or
(v) The following institutional money market
funds:
(1) Dreyfuss Treasury Cash Management
Fund
(2) Provident T-Fund Dollar Account
(3) Federated Treasury Obligations Fund
(4) AIM Treasury Portfolio
(b) Any interest or other income received on such
investment and reinvestment of the Escrow Property shall be set aside and
distributed as provided in Section 2(d).
(c) The Escrow Agent will act upon investment
instructions the day that such instructions are received, provided the requests
are communicated within a sufficient amount of time to allow the Escrow Agent
to make the specified investment. Instructions received after an applicable
investment cutoff deadline will be treated as being received by the Escrow
Agent on the next business day, and the Escrow Agent shall not be liable for
any loss arising directly or indirectly, in whole or in part, from the
inability to invest Escrow Property on the day the instructions are received.
The Escrow Agent shall not be liable for any loss incurred by the actions of
third parties or by any loss arising by error, failure or delay in making of an
investment or reinvestment, unless such error, failure or delay results from
the Escrow Agent's gross negligence or willful misconduct, and the Escrow Agent
shall not be liable for any loss of principal or income in connection
therewith. As and when the Escrow Property or any portion thereof is to be
released under this Agreement, the Escrow Agent shall cause the Escrow Property
to be converted into cash, and the Escrow Agent shall not be liable for any
loss of principal or income in connection therewith. None of the parties
hereto shall be liable for any loss of principal or income due to the choice of
Permitted Investments in which the Escrow Property is invested or the choice of
Permitted Investments converted into cash pursuant to this Section 2(c).
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<PAGE> 3
(d) Except as otherwise provided herein, all interest,
dividends and other income earned on the Escrow Property shall be distributed
upon the termination of this Agreement pursuant to Section 16 in accordance
with joint written instructions received by the Escrow Agent and signed by each
of Buyer, the Atrium Indemnitor Representative and Heritage. Subject to the
provisions of Section 2(e) below, the Escrow Agent shall distribute to the
Company, on a quarterly basis as of the last day of March, June, September and
December, upon written demand of the Company, an amount equal to the product of
the Effective Tax Rate (as defined below) times the taxable interest, dividends
and other income earned on the Escrow Property for the quarter. For purposes
of determining taxable interest, dividends and other income, the Escrow Agent
shall provide an itemized report of all interest, dividends and other income
earned on the Escrow Property for the quarter to the Buyer, the Company,
Heritage and the Atrium Indemnitor Representative at the close of business of
the last day of the end of each such quarter, and the Company shall provide a
summary to the Escrow Agent of all such income that is taxable. As used in
this Agreement, the "Effective Tax Rate" shall mean the actual effective
combined federal, state and local income tax rate applicable to the Company as
reasonably computed and provided to the Escrow Agent by the Company.
(e) For tax purposes, the Escrow Property shall be deemed
property of the Company and all interest, dividends and other income earned on
the Escrow Property shall be the income of the Company. The Company and the
Atrium Indemnitors shall file Tax Returns and the Escrow Agent shall file a
Form 1099 consistent with such treatment. In the event that the Internal
Revenue Service or any other governmental authority successfully claims that
the interest, dividends and other income earned on the Escrow Property is
taxable to the Atrium Indemnitor Representative or any of the other Atrium
Indemnitors for a taxable period, the Company shall promptly pay to the Atrium
Indemnitor Representative or such Atrium Indemnitor all amounts paid by the
Escrow Agent to the Company pursuant to Section 2(d) for such taxable period,
plus interest on such amounts at the rate specified by section 6621(a)(2) of
the Code and corresponding provisions of applicable state and local laws to the
extent such interest has been received by or credited to the Company, and the
Company shall thereafter no longer have any right to receive payments under
Section 2(d).
Section 3. Release of the Escrow Property to Indemnitees. The
Escrow Agent shall disburse to the Buyer (for its own account or for the
account of any Indemnitee, as defined in Section 8) such portion of the Escrow
Property as instructed pursuant to this Section 3, which amount Buyer agrees to
use, or to deliver to such Indemnitee to use, to pay the Buyer Indemnified
Costs (as defined in the Purchase Agreement) for which the Indemnitee is
entitled to reimbursement pursuant to Article X of the Purchase Agreement.
Payment shall be made not more than three business days after: (a) the
delivery to the Escrow Agent of joint written instructions signed by the Buyer,
Heritage and the Atrium Indemnitor Representative specifying an amount to be
paid to an Indemnitee or (b) the delivery to the Escrow Agent, Heritage and the
Atrium Indemnitor Representative of a copy of a Final Determination (as defined
below) establishing the Indemnitee's right to reimbursement under this
Agreement with respect to such Buyer Indemnified Costs. A "Final
Determination" shall mean a final non-appealable judgment of a court of
competent jurisdiction, accompanied by an
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<PAGE> 4
opinion of counsel for the presenting party reasonably satisfactory to the
Escrow Agent to the effect that such judgment is a Final Determination.
Section 4. No Distribution of Expenses. Neither the Atrium
Indemnitor Representative, nor Heritage, nor the Buyer nor the Company shall be
entitled to reimbursement out of the Escrow Property for any costs and expenses
incurred by them in connection with exercising their rights or performing their
duties under this Agreement.
Section 5. Segregation of the Fund. (a) Notwithstanding any
other provision of this Agreement to the contrary, from and after such time as
the Escrow Agent shall receive notification that the aggregate amount of Buyer
Indemnified Costs (as defined in the Purchase Agreement) with respect to all
Claims (as defined in Section 8) asserted by the Indemnitees exceeds the
Minimum Loss (as defined in the Purchase Agreement), the Escrow Agent shall
segregate from the Atrium Escrow Account and transfer into a separate account
maintained by the Escrow Agent for the benefit of the Company, the Buyer and
the Atrium Indemnitors (the "Pending Claim Account") the portion of the Escrow
Property that may be necessary to satisfy in full all Pending Claims (as
defined below) in excess of the Minimum Loss, and shall hold such portion in
accordance with this Section 5. "Pending Claims" shall mean unresolved Claims
that are the subject of Claim Notices delivered under Section 8(d).
(b) Any portion of the Escrow Property segregated under
Section 5(a) shall continue to be segregated by the Escrow Agent until the
Escrow Agent is directed to release such Escrow Property by (i) written
instructions signed by the Buyer, Heritage and the Atrium Indemnitor
Representative instructing the Escrow Agent how to pay all or any portion of
such segregated Escrow Property or (ii) a copy of a Final Determination
establishing the Indemnitee's, Heritage's or the Atrium Indemnitor
Representative's right to reimbursement under Section 8. The Escrow Agent shall
be entitled to rely conclusively on the written advice of counsel to the Buyer,
Heritage or the Atrium Indemnitor Representative, as the case may be, that the
judgment delivered to the Escrow Agent pursuant to this Section 5(b) is a Final
Determination. Notwithstanding the foregoing, if there is no Escrow Property
remaining except the Escrow Property held in the Pending Claims Account, the
Escrow Agent is authorized and directed to release from the Pending Claims
Account any amount that is at the time necessary to make a payment required
under Section 2.
Section 6. Distribution of Escrow Property to Atrium
Indemnitors. Not later than the second business day after May 27, 1998 (the
"Expiration Date"), the Escrow Agent shall distribute from the Escrow Property,
to the extent sufficient therefor, the Escrow Remainder in accordance with
joint written instructions received by the Escrow Agent and signed by each of
Buyer, the Atrium Indemnitor Representative and Heritage. For purposes hereof,
the "Escrow Remainder" shall mean an amount equal to $2,000,000 (plus accrued
and undistributed earnings on the Escrow Property) minus the sum of (a) the
total amount of Escrow Property that is then being segregated with respect to
Pending Claims under Section 5 plus (b) the amount of any Escrow Property that
was previously paid by the Escrow Agent to an Indemnitee to reimburse Buyer
Indemnified Costs with respect to
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<PAGE> 5
Claims, plus (c) the distributions made pursuant to Section 2(d) prior to the
Expiration Date. Any amounts segregated with respect to Pending Claims shall
be released as provided in Section 5(b).
Section 7. Taxpayer Identification Numbers. The parties
acknowledge that payment of any interest earned on the Escrow Property invested
in this escrow, or the distribution of any other amounts under this escrow,
will be subject to backup withholding penalties unless a properly completed
Internal Revenue Service Form W-8 or W-9 certification is submitted to the
Escrow Agent by the party entitled to receive such payment. Any Form W-8 or
W-9 certification shall be submitted to the Escrow Agent on or before the date
hereof.
Section 8. Claims Against the Escrow Property. From and after
the Closing, but subject to the conditions and limitations set forth in this
Agreement and the Purchase Agreement, the Buyer Indemnified Parties (as defined
in the Purchase Agreement) and their respective successors and assigns
(collectively, the "Indemnitees") shall be entitled to reimbursement out of the
Escrow Property for any and all Buyer Indemnified Costs as provided in Article
X of the Purchase Agreement (collectively, the "Claims").
(a) Claims against the Escrow Property may be made by the
Buyer, on its own behalf or on behalf of any other Buyer Indemnified Party, for
indemnification of any Buyer Indemnified Cost. No person other than Buyer
shall be permitted to make a claim on behalf of the Indemnitees against the
Escrow Property for Buyer Indemnified Costs under this Section 8 unless Buyer
provides written notice to Escrow Agent and the other parties hereto that Buyer
has authorized another Indemnitee to make such claims.
(b) Buyer shall promptly notify Heritage, the Atrium
Indemnitor Representative and the Escrow Agent in writing (a "Claim Notice") of
any sums which Buyer claims are subject to indemnification. Failure of Buyer
to exercise promptness in such notification shall not amount to a waiver of
such Claim unless the resulting delay materially prejudices the position of the
Atrium Indemnitors with respect to such Claim. Such Claim Notice shall consist
of a description of the Claim and specify each Buyer Indemnified Party and the
amount (which may be estimated) of the Claim in United States dollars.
(c) Heritage and/or the Atrium Indemnitor Representative
may contest the Claims specified in the Claim Notice (or any portion thereof)
by giving Escrow Agent and Buyer written notice of such contest within ten days
after receipt by Heritage or the Atrium Indemnitor Representative, as the case
may be, of the Claim Notice from Buyer, which notice of contest shall include a
statement of the grounds of such contest and shall state the amount of any such
Claim by Buyer that Heritage or the Atrium Indemnitor Representative, as the
case may be, does not dispute.
(d) Payment of any Claim for indemnification (or portion
thereof) to which the Escrow Property is subject shall become due and payable
as follows:
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<PAGE> 6
(i) If, at 5:00 p.m.( Dallas, Texas time), on the
fifteenth business day after receipt by the Escrow Agent of a Claim Notice, the
Escrow Agent has not received written notice from either Heritage or the Atrium
Indemnitor Representative that either Heritage or the Atrium Indemnitor
Representative contests the Claim (or portion thereof) pursuant to Section 8(c)
above, the Claim (or the uncontested portion thereof) shall be paid by the
Escrow Agent to Buyer as promptly as practicable;
(ii) If either Heritage or the Atrium Indemnitor
Representative contests the Claims (or portion thereof) pursuant to Section
8(c) within fifteen business days after receipt by the Escrow Agent of a Claim
Notice and the Claim (or portion thereof) is thereafter settled by written
agreement of each of Heritage, the Atrium Indemnitor Representative and Buyer,
the amount provided in such written agreement shall, upon receipt by the Escrow
Agent of a copy of such written agreement, be promptly paid by the Escrow Agent
pursuant to the terms of such written agreement; and
(iii) If either Heritage or the Atrium Indemnitor
Representative contests the Claim (or portion thereof) pursuant to Section 8(c)
hereof within fifteen business days after receipt by the Escrow Agent of a
Claim Notice and a Final Determination is thereafter entered with respect to
such Claim (or portion thereof), such amount of the Final Determination shall
be promptly paid by the Escrow Agent pursuant to the terms of such Final
Determination.
Section 9. Expiration of Indemnification Claims. Any claim for
reimbursement from the Atrium Escrow Account that is not asserted in writing by
Buyer or any Indemnitee in a writing received by the Atrium Indemnitor
Representative and the Escrow Agent prior to 5:00 p.m. (Dallas, Texas time) on
the Expiration Date may not be asserted or pursued and shall be irrevocably
waived, and neither Buyer nor any Indemnitee shall be entitled to make any
claim for reimbursement with respect thereto.
Section 10. Appointment of Atrium Indemnitor Representative.
Randall S. Fojtasek has been appointed, pursuant to the Purchase Agreement, as
the agent and representative of each of the Atrium Indemnitors other than
Heritage.
Section 11. Language Concerning the Escrow Agent. To induce the
Escrow Agent to act hereunder, it is further agreed by Buyer, the Company,
Heritage and the Atrium Indemnitor Representative that:
(a) The Escrow Agent shall not be under any duty to give
the Escrow Property held by it hereunder any greater degree of care than it
gives its own similar property and shall not be required to invest any Escrow
Property held hereunder except as directed in this Agreement. Uninvested
Escrow Property held hereunder shall not earn or accrue interest.
(b) This Agreement expressly sets forth all the duties of
the Escrow Agent with respect to any and all matters pertinent hereto. No
implied duties or obligations shall be read into
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<PAGE> 7
this agreement against the Escrow Agent. The Escrow Agent shall not be bound
by the provisions of any agreement among the other parties hereto except this
Agreement.
(c) The Escrow Agent shall not be liable, except for its
own gross negligence or willful misconduct and, except with respect to claims
based upon such gross negligence or willful misconduct that are successfully
asserted against the Escrow Agent, Buyer, the Company, Heritage and the Atrium
Indemnitor Representative shall jointly and severally indemnify and hold
harmless the Escrow Agent (and any successor Escrow Agent) from and against any
and all losses, liabilities, claims, actions, damages and expenses, including
reasonable attorneys' fees and disbursements, arising out of and in connection
with this Agreement. Without limiting the foregoing, the Escrow Agent shall in
no event be liable in connection with its investment or reinvestment of any
cash held by it hereunder in good faith, in accordance with the terms hereof,
including without limitation, any liability for any delays (not resulting from
its gross negligence or willful misconduct) in the investment or reinvestment
of the Escrow Property or any loss of interest incident to any such delays.
This Section 11(c) shall survive notwithstanding any termination of this
Agreement or the resignation of the Escrow Agent.
(d) The Escrow Agent shall be entitled to rely upon any
order, judgment, certification, demand, notice, instrument or other writing
delivered to it hereunder without being required to determine the authenticity
or the correctness of any fact stated therein or the propriety or validity or
the service thereof. The Escrow Agent may act in reliance upon any instrument
or signature believed by it to be genuine and may assume that any person
purporting to give receipt or advice or make any statement or execute any
document in connection with the provisions hereof has been duly authorized to
do so.
(e) The Escrow Agent may act pursuant to the advice of
counsel with respect to any matter relating to this Agreement and shall not be
liable for any action taken or omitted in accordance with such advice.
(f) The Escrow Agent does not have any interest in the
Escrow Property deposited hereunder but is serving as escrow holder only and
having only possession thereof. The Company and the Atrium Indemnitors shall
on a 50%/50% basis pay or reimburse the Escrow Agent upon request for any
transfer taxes or other taxes relating to the Escrow Property incurred in
connection herewith and shall indemnify and hold harmless the Escrow Agent from
any amounts that it is obligated to pay in the way of such taxes. Any payments
of income from the Escrow Property shall be subject to withholding regulations
then in force with respect to United States taxes. It is understood that the
Escrow Agent shall be responsible for income reporting only with respect to
income earned on investment of the Escrow Property and is not responsible for
any other reporting. This Section 11(f) shall survive notwithstanding any
termination of this Agreement or the resignation of the Escrow Agent.
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<PAGE> 8
(g) The Escrow Agent makes no representation as to the
validity, value, genuineness or the collectability of any security or other
document or instrument held by or delivered to it.
(h) The Escrow Agent shall not be called upon to advise
any party as to the wisdom in selling or retaining or taking or refraining from
any action with respect to any securities or other property deposited
hereunder.
(i) The Escrow Agent (and any successor Escrow Agent) may
at any time resign as such by delivering the Escrow Property to any successor
Escrow Agent jointly designated by the other parties hereto in writing or to
any court of competent jurisdiction, whereupon the Escrow Agent shall be
discharged of and from any and all further obligations arising in connection
with this Agreement. The resignation of the Escrow Agent will take effect on
the earlier of (i) the appointment of a successor (including a court of
competent jurisdiction) or (ii) the day which is 30 days after the date of
delivery of its written notice of resignation to the other parties hereto. If
at that time the Escrow Agent has not received a designation of a successor
Escrow Agent, the Escrow Agent's sole responsibility after that time shall be
to safekeep the Escrow Property until receipt of a designation of successor
Escrow Agent or a joint written disposition instruction by the other parties
hereto or a Final Determination.
(j) The Escrow Agent shall have no responsibility for the
contents of any writing of the arbitrators or any third party contemplated
herein as a means to resolve disputes and may rely without any liability upon
the contents thereof.
(k) In the event of any disagreement between the Buyer or
any Buyer Indemnified Party and Heritage and/or the Atrium Indemnitor
Representative resulting in adverse claims or demands being made in connection
with the Escrow Property, or in the event that the Escrow Agent in good faith
is in doubt as to what action it should take hereunder, the Escrow Agent shall
be entitled to retain the Escrow Property until the Escrow Agent shall have
received (i) a Final Determination directing delivery of the Escrow Property or
(ii) a written agreement executed by each of the Buyer, Heritage and the Atrium
Indemnitor Representative directing delivery of the Escrow Property, in which
event the Escrow Agent shall disburse the Escrow Property in accordance with
such Final Determination or agreement. The Escrow Agent shall act on such Final
Determination or agreement without further question.
(l) The compensation of the Escrow Agent (as payment in
full) for the services to be rendered by the Escrow Agent hereunder shall be
the amount of $4,000 at the time of execution of this Agreement and $3,000
annually thereafter to be paid by the Company and the Atrium Indemnitors on a
50%/50% basis, together with reimbursement for all reasonable expenses,
disbursements and advances incurred or made by the Escrow Agent in performance
of its duties hereunder (including reasonable fees, expenses and disbursements
of its counsel). All fees and expenses of the Escrow Agent hereunder, other
than initial fee paid upon the execution hereof, shall, if not paid by the
Company and the Atrium Indemnitors as required in the immediately preceding
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<PAGE> 9
sentence, be paid first out of interest, dividends, and other income earned on
the Escrow Property, if any, and then, to the extent of any shortfall, by the
Company and the Atrium Indemnitors on a 50%/50% basis. Any fees or expenses of
the Escrow Agent or its counsel which are not paid as provided for herein may
be taken from any property held by the Escrow Agent hereunder. It is
understood that the Escrow Agent's fees may be adjusted from time to time to
conform to its then current guidelines.
(m) The Buyer, the Company, Heritage and the Atrium
Indemnitor Representative hereby irrevocably submit to the jurisdiction of any
New York State or federal court sitting in the Borough of Manhattan in New York
City in any action or proceeding arising out of or relating to this Agreement,
and the parties hereby irrevocably agree that all claims in respect of such
action or proceeding shall be heard and determined in such a New York State or
federal court. The other parties hereby consent to and grant to any such court
jurisdiction over the persons of such parties and over the subject matter of
any such dispute and agree that delivery or mailing of any process or other
papers in the manner provided herein above, or in such other manner as may be
permitted by law, shall be valid and sufficient service thereof.
(n) This Agreement shall be binding upon and inure solely
to the benefit of the parties hereto and their respective successors and
assigns, heirs, administrators and representatives and shall not be enforceable
by or inure to the benefit of any third party, except as provided in Section
11(i) with respect to a resignation by the Escrow Agent. No party may assign
any of its rights or obligations under this Agreement without the written
consent of the other parties. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH AND GOVERNED BY THE INTERNAL LAW OF THE STATE OF NEW YORK (WITHOUT
REFERENCE TO ITS RULE AS TO CONFLICTS OF LAW).
(o) This Agreement may only be modified by a writing
signed by all of the parties hereto, and no waiver hereunder shall be effective
unless in a writing signed by the party to be charged.
(p) The other parties hereto authorize the Escrow Agent,
for any securities held hereunder, to use the services of any United States
central securities depository it deems appropriate, including, but not limited
to, the Depositary Trust Company and the Federal Reserve Book Entry System.
Section 12. Notices. All notices, requests, consents or other
communications required or permitted under this Agreement shall be in writing
and shall be deemed to have been duly given or delivered by any party (a) when
received by such party if delivered by hand, (b) upon confirmation when
delivered by telecopy (any communication delivered by telecopy shall be
followed promptly with an original thereof), (c) within one day after being
sent by recognized overnight delivery service, or (d) within three business
days after being mailed by first-class mail, postage prepaid, and in each case
addressed as follows:
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(i) if to the Buyer, the Company or to any other
Indemnitee:
Lawrence D. Stuart, Jr.
Hicks, Muse, Tate & Furst Equity Fund III, L.P.
200 Crescent Court, Suite 1600
Dallas, Texas 75201
Telecopy No.: (214) 740-7313
with copies to:
Michael D. Wortley
Vinson & Elkins L.L.P.
3700 Trammell Crow Center
2001 Ross Avenue
Dallas, Texas 75201
Telecopy No.: (214) 220-7716
(ii) if to the Atrium Indemnitor Representative, to:
Randall S. Fojtasek
Atrium Corporation
1341 West Mockingbird Lane
Suite 1200W
Dallas, Texas 75247
Telecopy No.: (214) 634-4231
with a copy to
O. Haynes Morris, Jr.
Adair, Morris & Osborn, P.C.
835 One Main Place
1801 Main Street
Dallas, Texas 75202
Telecopy No.: (214) 761-0658
(iii) if to Heritage, to:
T. Brook Parker
Heritage Partners, Inc.
30 Rowes Wharf, Suite 300
Boston, Massachusetts 02110
Telecopy No.: (617) 439-0689
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with a copy to
Robert M. Wolf
Bingham, Dana & Gould LLP
150 Federal Street
Boston, Massachusetts 02110-1726
Telecopy No.: (617) 951-8736
(iv) if to the Escrow Agent, to:
Citibank N.A.
Corporate Trust/Escrow Administration
120 Wall Street, 13th Floor
New York, NY 10043
Telephone No.: (212) 412-6257
Telecopy No.: (212) 480-1614
Telex Numbers:
Foreign - 420392 FNC UI
Domestic - 127001 Citibank NYKB
Reference in Telex "Citiswitch -
NYCTA"
Federal Reserve Fund Transfers:
Citibank, N.A.
111 Wall Street
New York, NY 10043
For credit to A/C 36855852
Escrow Administration Concentration
Account
for further credit(enter Account
Number assigned)
Attn: Jeff Zeiler
ABA Number: 0210-0008-9
Any party by written notice to the other parties pursuant to this Section 12
may change the address or the persons to whom notices or copies thereof shall
be directed.
Section 13. Waivers. Any waiver by any party hereto of any
breach of or failure to comply with any provision of this Agreement by any
other party hereto shall be in writing and shall not be construed as, or
constitute, a continuing waiver of such provision, or a waiver of any other
breach of, or failure to comply with, any other provision of this Agreement.
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Section 14. Construction. The headings in this Agreement are
solely for convenience of reference and shall not be given any effect in the
construction or interpretation of this Agreement. Unless otherwise stated,
references to Sections and Exhibits are references to Sections and Exhibits of
this Agreement.
Section 15. Third Parties. Nothing expressed or implied in this
Agreement is intended, or shall be construed, to confer upon or give any person
or entity other than Buyer, the Company, the Indemnitees, the Atrium Indemnitor
Representative, the Atrium Indemnitors and the Escrow Agent any rights or
remedies under, or by reason of, this Agreement.
Section 16. Termination. This Agreement shall terminate at the
time of the final distribution by the Escrow Agent of all Escrow Property in
accordance with the provisions of this Agreement.
Section 17. 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 constitute a single instrument.
Section 18. Waiver of Offset Rights. The Escrow Agent hereby
waives any and all rights to offset that it may have against the Escrow
Property including, without limitation, claims arising as a result of any
claims, amounts, liabilities, costs, expenses, damages, or other losses
(collectively "Escrow Agent Claims") that the Escrow Agent may be otherwise
entitled to collect from any party to this Agreement or any Atrium Indemnitor,
other than Escrow Agent Claims arising under this Agreement.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their duly authorized officers as of the day and year first
above written.
THE COMPANY:
ATRIUM CORPORATION
By: /s/ RANDALL S. FOJTASEK
-----------------------------------
Randall S. Fojtasek
President
ATRIUM INDEMNITOR REPRESENTATIVE:
on behalf of the Atrium Indemnitors other
than Heritage Fund I, L.P.
By: /s/ RANDALL S. FOJTASEK
-----------------------------------
Randall S. Fojtasek
HERITAGE FUND I, L.P.
By: HF Partners I, L.P., its general partner
By: /s/ MICHEL REICHERT
-------------------------------------
Name: Michel Reichert
-------------------------------------
Title: General Partner
-------------------------------------
[SIGNATURE PAGE TO ATRIUM INDEMNIFICATION ESCROW AGREEMENT]
S-1
<PAGE> 14
BUYER:
HICKS, MUSE, TATE & FURST EQUITY FUND
III, L.P.
By: HM3/GP Partners, L.P.,
its General Partner
By: Hicks, Muse GP Partners III, L.P.
its General Partner
By: Hicks, Muse Fund III Incorporated,
its General Partner
By: /s/ JEFFRY S. FRONTERHOUSE
-----------------------------------
Jeffry S. Fronterhouse
Vice President
Agreed and Accepted:
Date:
CITIBANK, N.A.
ESCROW AGENT
By: /s/ ROBERT A. MASSIMILLO
------------------------
Name: ROBERT A. MASSIMILLO
------------------------
Title: Senior Trust Officer
------------------------
[SIGNATURE PAGE TO ATRIUM INDEMIFICATION ESCROW AGREEMENT]
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<PAGE> 1
EXHIBIT 10.7
BISHOP INDEMNIFICATION ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Agreement") dated November 27, 1996 is
among Hicks, Muse, Tate & Furst Equity Fund III, L.P., a Delaware limited
partnership (the "Buyer"), Atrium Corporation, a Delaware corporation (the
"Company"), Atrium Companies, Inc., a Delaware corporation ("Fojtasek"), Howard
S. Saffan in his capacities as Bishop Indemnitor Representative under the
Purchase Agreement (hereinafter defined), Seller Representative under the
Bishop Purchase Agreement (hereinafter defined) and Bishop Holder
Representative under the Bishop Exchange Agreement (hereinafter defined) and
the Buy-Sell Agreement (hereinafter defined) (the "Bishop Indemnitor
Representative"), and Citibank N.A., a national banking association with its
headquarters in New York City, New York (the "Escrow Agent").
RECITALS
A. Pursuant to the Stock Purchase Agreement dated as of November
7, 1996 (the "Purchase Agreement"), by and among HMTF Acquisition Corp (whose
interests under the Purchase Agreement have been assigned to Buyer and HM3
Coinvestors, L.P.), the Company and the Selling Securityholders named therein
(including Howard S. Saffan, Leslie Goldbloom and Kevin Schumacher
(collectively, the "Bishop Indemnitors")), the Company has agreed to issue and
sell to Buyer and HM3 Coinvestors, L.P., and Buyer and HM3 Coinvestors, L.P.
have agreed to purchase from the Company (the "Purchase"), 32,000,000 shares of
the Company's Common Stock, par value $0.01 per share ("Common Stock"), upon
the terms and conditions set forth in the Purchase Agreement. Unless otherwise
defined herein, capitalized terms used herein shall have the meanings assigned
to them in the Purchase Agreement.
B. Pursuant to the Purchase Agreement, the Bishop Indemnitors
have agreed to indemnify and hold the Buyer Indemnified Parties (as defined in
the Purchase Agreement) harmless from and with respect to certain Buyer
Indemnified Costs (as defined in the Purchase Agreement).
C. Fojtasek is the surviving corporation of a merger of Fojtasek
Companies, Inc., a Texas corporation, with and into FCI Holding Corp., a
Delaware corporation.
D. Pursuant to (i) the Stock Purchase Agreement dated as of
August 22, 1996 (the "Bishop Purchase Agreement") by and among Fojtasek (as
successor by merger to Fojtasek Companies, Inc.) and the Bishop Indemnitors,
and (ii) the Securities Exchange Agreement (the "Bishop Exchange Agreement,"
and collectively with the Bishop Purchase Agreement, the "Bishop Agreements")
dated as of August 22, 1996 by and among the Company, Fojtasek (as successor by
merger to Fojtasek Companies, Inc.), the Bishop Indemnitors and the FCI Holders
(as defined in the Bishop Exchange Agreement), the Bishop Indemnitors have
agreed to indemnify and hold Atrium, Fojtasek, the FCI Holders and each of the
Companies (as defined in the Bishop Purchase Agreement) (collectively, the
"Bishop Indemnitees") harmless from and with respect to certain Losses (as
defined in Section 13.1 of the Bishop Purchase Agreement and Section 11.1 of
the Bishop Exchange Agreement, and, collectively with the Buyer Indemnified
Costs, the "Costs").
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E. In order to secure the indemnification obligations of the
Bishop Indemnitors to the Bishop Indemnitees under the Bishop Agreements, the
Company, Fojtasek (as successor by merger to Fojtasek Companies, Inc.), the
Bishop Indemnitors and Bingham, Dana & Gould LLP entered into the Buy-Sell
Agreement dated as of September 30, 1996 (the "Buy-Sell Agreement"), pursuant
to which certain shares of capital stock owned by the Bishop Indemnitors were
delivered to Bingham, Dana & Gould LLP and held by Bingham, Dana & Gould LLP
pursuant to the terms thereof. The Company, Fojtasek, the Bishop Indemnitors
and Bingham, Dana & Gould LLP have entered into the Amendment to Buy-Sell
Agreement made the date hereof (the "Buy-Sell Amendment"), pursuant to which
such parties have agreed, among other things, that $3,000,000 which would
otherwise be received by the Bishop Indemnitors pursuant to the Purchase
Agreement shall be delivered to the Escrow Agent to be held, administered and
disposed of in accordance with the terms and conditions set forth in this
Agreement.
F. It is a condition precedent to the consummation of the
Purchase that the Buyer, the Company, Fojtasek, the Bishop Indemnitor
Representative, on behalf of the Bishop Indemnitors, and the Escrow Agent
execute and deliver this Agreement.
AGREEMENTS
NOW, THEREFORE, in consideration of the recitals and of the respective
agreements and covenants set forth herein and in the Purchase Agreement, and
other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto, intending to be legally bound, hereby agree
as follows:
Section 1. Establishment of Atrium Escrow Account. At the
Closing (as defined in the Purchase Agreement), the Company will, and the
Bishop Indemnitor Representative hereby instructs the Company to, deliver to
the Escrow Agent $3,000,000 in cash (the "Escrow Property") by wire transfer of
immediately available funds to an account designated by the Escrow Agent as the
"Bishop Escrow Account." The Escrow Property shall be held, administered and
disposed of by the Escrow Agent in accordance with the terms and conditions
hereinafter set forth.
Section 2. Investment of Proceeds of Escrow Property.
(a) The Escrow Agent shall from time to time invest and
reinvest the Escrow Property, if any, in the Pacific Horizon Treasury Only
Fund, or in such other of the following investments as the Buyer and the Bishop
Indemnitor Representative may from time to time elect by joint notice in
writing ("Permitted Investments") from each of the following persons to the
Escrow Agent: Lawrence D. Stuart, Jr., on behalf of the Buyer, and the Bishop
Indemnitor Representative.
(i) Any U.S. Government or U.S. Government Agency
security;
(ii) Any commercial paper rated A1/P1 or better;
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(iii) Any certificate of deposit or time deposit in
any bank with a long-term debt rating of A or
better from Moody's or Standard & Poor's;
(iv) The Citibank Insured Money Market Deposit
Account; or
(v) The following institutional money market
funds:
(1) Dreyfuss Treasury Cash Management
Fund
(2) Provident T-Fund Dollar Account
(3) Federated Treasury Obligations Fund
(4) AIM Treasury Portfolio
(b) Any interest or other income received on such
investment and reinvestment of the Escrow Property shall be set aside and
distributed as provided in Section 2(d).
(c) The Escrow Agent will act upon investment
instructions the day that such instructions are received, provided the requests
are communicated within a sufficient amount of time to allow the Escrow Agent
to make the specified investment. Instructions received after an applicable
investment cutoff deadline will be treated as being received by the Escrow
Agent on the next business day, and the Escrow Agent shall not be liable for
any loss arising directly or indirectly, in whole or in part, from the
inability to invest Escrow Property on the day the instructions are received.
The Escrow Agent shall not be liable for any loss incurred by the actions of
third parties or by any loss arising by error, failure or delay in making of
an investment or reinvestment, unless such error, failure or delay results from
the Escrow Agent's gross negligence or willful misconduct, and the Escrow Agent
shall not be liable for any loss of principal or income in connection
therewith. As and when the Escrow Property or any portion thereof is to be
released under this Agreement, the Escrow Agent shall cause the Escrow Property
to be converted into cash, and the Escrow Agent shall not be liable for any
loss of principal or income in connection therewith. None of the parties
hereto shall be liable for any loss of principal or income due to the choice of
Permitted Investments in which the Escrow Property is invested or the choice of
Permitted Investments converted into cash pursuant to this Section 2(c).
(d) Except as otherwise provided herein, all interest,
dividends and other income earned on the Escrow Property shall be distributed
upon the termination of this Agreement pursuant to Section 16 in accordance
with the joint written instructions received by the Escrow Agent and signed by
each of the Bishop Indemnitor and Buyer. Subject to the provisions of Section
2(e) below, the Escrow Agent shall distribute to the Company, on a quarterly
basis as of the last day of March, June, September and December, upon written
demand of the Company, an amount equal to the product of the Effective Tax Rate
(as defined below) times the taxable interest, dividends and other income
earned on the Escrow Property for the quarter. For purposes of determining
taxable interest, dividends and other income, the Escrow Agent shall provide an
itemized report of all interest, dividends and other income earned on the
Escrow Property for the quarter to the Buyer, the Company and the Bishop
Indemnitor Representative at the close of business of the last day of the end
of each such quarter, and the Company shall provide a summary to the Escrow
Agent of all such income that is taxable. As used in this Agreement, the
"Effective Tax Rate" shall mean the actual effective
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combined federal, state and local income tax rate applicable to the Company as
reasonably computed and provided to the Escrow Agent by the Company.
(e) For tax purposes, the Escrow Property shall be deemed
property of the Company and all interest, dividends and other income earned on
the Escrow Property shall be the income of the Company. The Company and the
Bishop Indemnitors shall file Tax Returns and the Escrow Agent shall file a
Form 1099 consistent with such treatment. In the event that the Internal
Revenue Service or any other governmental authority successfully claims that
the interest, dividends and other income earned on the Escrow Property is
taxable to the Bishop Indemnitor Representative or any of the Bishop
Indemnitors for a taxable period, the Company shall promptly pay to the Bishop
Indemnitor Representative or such Bishop Indemnitor all amounts paid by the
Escrow Agent to the Company pursuant to Section 2(d) for such taxable period,
plus interest on such amounts at the rate specified by section 6621(a)(2) of
the Code and corresponding provisions of applicable state and local laws to the
extent such interest has been received by or credited to the Company, and the
Company shall thereafter no longer have any right to receive payments under
Section 2(d).
Section 3. Release of the Escrow Property to Indemnitees. The
Escrow Agent shall disburse to the Buyer (for its own account or for the
account of any Indemnitee, as defined in Section 8) such portion of the Escrow
Property as instructed pursuant to this Section 3, which amount Buyer agrees to
use, or to deliver to such Indemnitee to use, to pay the Costs for which the
Indemnitee is entitled to be indemnified pursuant to Article X of the Purchase
Agreement, Section 13 of the Bishop Purchase Agreement or Section 11 of the
Bishop Exchange Agreement, as the case may be. Payment shall be made not more
than three business days after: (a) the delivery to the Escrow Agent of joint
written instructions signed by the Buyer and the Bishop Indemnitor
Representative specifying an amount to be paid to an Indemnitee or (b) the
delivery to the Escrow Agent and the Bishop Indemnitor Representative of a copy
of a Final Determination (as defined below) establishing the Indemnitee's right
to reimbursement with respect to such Costs. A "Final Determination" shall
mean a final non-appealable judgment of a court of competent jurisdiction,
accompanied by an opinion of counsel for the presenting party reasonably
satisfactory to the Escrow Agent to the effect that such judgment is a Final
Determination.
Section 4. No Distribution of Expenses. Neither the Bishop
Indemnitor Representative, Buyer nor the Company shall be entitled to
reimbursement out of the Escrow Property for any costs and expenses incurred by
them in connection with exercising their rights or performing their duties
under this Agreement.
Section 5. Segregation of the Fund. (a) (i) Notwithstanding any
other provision of this Agreement to the contrary, from and after such time as
the Escrow Agent shall receive notification that the aggregate amount of Buyer
Indemnified Costs (as defined in the Purchase Agreement) with respect to all
Buyer Claims (as defined in Section 8) asserted by the Indemnitees exceeds the
Minimum Loss (as defined in the Purchase Agreement), the Escrow Agent shall
segregate from the Bishop
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Escrow Account and transfer into a separate account maintained by the Escrow
Agent for the benefit of the Company, the Buyer and the Bishop Indemnitors (the
"Buyer Pending Claims Account") the portion of the Escrow Property that may be
necessary to satisfy in full all Buyer Pending Claims (as defined below) in
excess of the Minimum Loss, and shall hold such portion in accordance with this
Section 5; provided, that the Escrow Agent shall segregate from the Bishop
Escrow Account and transfer to the Buyer Pending Claims Account any portion of
the Escrow Property which an Indemnitee asserts in a written notice is
necessary to satisfy any Unlimited Claim, regardless of whether such amount
exceeds the Minimum Loss. "Buyer Pending Claims" shall mean unresolved Buyer
Claims that are the subject of Claim Notices delivered under Section 8(d).
(ii) Notwithstanding any other provision of this Agreement
to the contrary, from and after such time as the Escrow Agent shall
receive notification that the aggregate amount of Losses (as defined
in Section 13.1 of the Bishop Purchase Agreement and Section 11.1 of
the Bishop Exchange Agreement) with respect to all Fojtasek Claims (as
defined in Section 8) asserted by the Indemnitees exceeds the
limitations as to amount set forth in (x) Section 13.5(a) of the
Bishop Purchase Agreement, or (y) Section 11.6(b) of the Bishop
Exchange Agreement, as the case may be, the Escrow Agent shall
segregate from the Bishop Escrow Account and transfer into a separate
account maintained by the Escrow Agent for the benefit of the Company
and the Fojtasek Indemnitees (the "Fojtasek Pending Claims Account",
and collectively with the Buyer Pending Claims Account, the "Pending
Claims Accounts") the portion of the Escrow Property that may be
necessary to satisfy in full all Fojtasek Pending Claims (as defined
below) in excess of such limitations, and shall hold such portion in
accordance with this Section 5; provided, that the Escrow Agent shall
segregate from the Bishop Escrow Account and transfer to the Fojtasek
Pending Claims Account any portion of the Escrow Property which an
Indemnitee asserts in a written notice to the Escrow Agent are
necessary to satisfy any Bishop Agreements Unlimited Claim or Cash Tax
Claim, regardless of whether such amount exceeds the limitations as to
amount described in this sentence. "Fojtasek Pending Claims" shall
mean unresolved Fojtasek Claims that are the subject of Claim Notices
delivered under Section 8(d). "Buyer Pending Claims" and "Fojtasek
Pending Claims" are some times collectively referred to as "Pending
Claims."
(b) Any portion of the Escrow Property segregated under
Section 5(a) shall continue to be segregated by the Escrow Agent until the
Escrow Agent is directed to release such Escrow Property by (i) written
instructions signed by the Buyer and the Bishop Indemnitor Representative
instructing the Escrow Agent how to pay all or any portion of such segregated
Escrow Property or (ii) a copy of a Final Determination establishing the
Indemnitee's or the Bishop Indemnitor Representative's right to reimbursement
under Section 8. The Escrow Agent shall be entitled to rely conclusively on the
written advice of counsel to the Buyer or the Bishop Indemnitor Representative,
as the case may be, that the judgment delivered to the Escrow Agent pursuant to
this Section 5(b) is a Final Determination. Notwithstanding the foregoing, if
there is no Escrow Property remaining except the Escrow Property held in the
Pending Claims Accounts, the Escrow Agent is authorized and directed to release
from the Pending Claims Accounts any amount that is at the time necessary to
make a payment required under Section 2.
Section 6. Distribution of Escrow Property to Bishop
Indemnitors. Not later than the second business day after March 30, 1998 (the
"Expiration Date"), the Escrow Agent shall distribute from the Escrow Property,
to the extent sufficient therefor, the Escrow Remainder in accordance with
joint written instructions received by the Escrow Agent and signed by Buyer and
the Bishop Indemnitor Representative. For purposes hereof, the "Escrow
Remainder" shall mean an amount equal to $3,000,000 (plus accrued and
undistributed earnings on the Escrow Property) minus the sum
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of (a) the total amount of Escrow Property that is then being segregated with
respect to Pending Claims under Section 5 plus (b) the amount of any Escrow
Property that was previously paid by the Escrow Agent to an Indemnitee with
respect to Buyer Claims, plus (c) the amount of any Escrow Property that was
previously paid by the Escrow Agent to an Indemnitee with respect to Fojtasek
Claims, plus (d) the distributions prior to termination of this Agreement made
pursuant to Section 2(d). Any amounts segregated with respect to Pending
Claims shall be released as provided in Section 5(b).
Section 7. Taxpayer Identification Numbers. The parties
acknowledge that payment of any interest earned on the Escrow Property invested
in this escrow, or the distribution of any other amounts under this escrow,
will be subject to backup withholding penalties unless a properly completed
Internal Revenue Service Form W-8 or W-9 certification is submitted to the
Escrow Agent by the party entitled to receive such payment. Any Form W-8 or
W-9 certification shall be submitted to the Escrow Agent on or before the date
hereof.
Section 8. Claims Against the Escrow Property. From and after
the Closing, but subject to the conditions and limitations set forth in this
Agreement, the Purchase Agreement and the Bishop Agreements, the Buyer
Indemnified Parties, with respect to the Buyer Indemnified Costs, the Bishop
Indemnitees, with respect to Losses, and their respective successors and
assigns (collectively, the "Indemnitees") shall be entitled to reimbursement
out of the Escrow Property for any and all (i) Buyer Indemnified Costs, as
provided in Article X of the Purchase Agreement (each, a "Buyer Claim") and
(ii) Losses as provided in Section 13 of the Bishop Purchase Agreement and
Section 11 of the Bishop Exchange Agreement (each, a "Fojtasek Claim," and
collectively with the Buyer Claims, the "Claims").
(a) Claims against the Escrow Property may be made by the
Buyer, on its own behalf or on behalf of any other Indemnitee, for payment with
respect to any Buyer Indemnified Costs or Losses, as the case may be. No
person other than Buyer shall be permitted to make a claim on behalf of the
Indemnitees against the Escrow Property for Buyer Indemnified Costs or Losses
under this Section 8 unless Buyer provides written notice to Escrow Agent and
the other parties hereto that Buyer has authorized another Indemnitee to make
such claims.
(b) Buyer shall promptly notify the Bishop Indemnitor
Representative and the Escrow Agent in writing (a "Claim Notice") of any sums
which Buyer claims are subject to reimbursement out of the Escrow Property.
Failure of Buyer to exercise promptness in such notification shall not amount
to a waiver of such Claim unless the resulting delay materially prejudices the
position of the Bishop Indemnitors with respect to such Claim. Such Claim
Notice shall consist of a description of the Claim and specify each Indemnitee
and the amount (which may be estimated) of the Claim in United States dollars.
(c) The Bishop Indemnitor Representative may contest the
Claims specified in the Claim Notice (or any portion thereof) by giving Escrow
Agent and Buyer written notice of such contest within ten days after receipt by
the Bishop Indemnitor Representative of the Claim Notice from Buyer, which
notice of contest shall include a statement of the grounds of such contest and
shall state the amount of any such Claim by Buyer that the Bishop Indemnitor
Representative does not dispute.
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(d) Payment of any Claim for reimbursement to which the
Escrow Property is subject shall become due and payable as follows:
(i) If, at 5:00 p.m.( Dallas, Texas time), on the
fifteenth business day after receipt by the Escrow Agent of a Claim Notice, the
Escrow Agent has not received written notice from the Bishop Indemnitor
Representative that the Bishop Indemnitor Representative contests the Claim (or
portion thereof) pursuant to Section 8(c) above, the Claim (or the uncontested
portion thereof) shall be paid by the Escrow Agent to the Indemnitee named in
the Claim Notice;
(ii) If the Bishop Indemnitor Representative
contests the Claim (or portion thereof) pursuant to Section 8(c) within fifteen
business days after receipt by the Escrow Agent of a Claim Notice and the Claim
(or portion thereof) is thereafter settled by written agreement of the Bishop
Indemnitor Representative and Buyer, the amount provided in such written
agreement shall, upon receipt by the Escrow Agent of a copy of such written
agreement, be promptly paid by the Escrow Agent pursuant to the terms of such
written agreement; and
(iii) If the Bishop Indemnitor Representative
contests the Claim (or portion thereof) pursuant to Section 8(c) hereof within
fifteen business days after receipt by the Escrow Agent of a Claim Notice and a
Final Determination is thereafter entered with respect to such Claim (or
portion thereof), such amount of the Final Determination shall be promptly paid
by the Escrow Agent pursuant to the terms of such Final Determination.
(e) Notwithstanding any other provision in this
Agreement, the Bishop Indemnitors shall be liable to the Buyer Indemnified
Parties and the Bishop Indemnitees for no more than $3,000,000 in the aggregate
for Buyer Indemnified Costs and Losses under the Bishop Agreements, except for
(x) Buyer Indemnified Costs arising from Unlimited Claims; and (y) Losses
arising from Bishop Agreements Unlimited Claims and Cash Tax Claims.
Section 9. Expiration of Claim for Reimbursement from Bishop
Escrow Account. Any claim for reimbursement from the Bishop Escrow Account
that is not asserted in writing by Buyer or any Indemnitee in a writing which
is received by the Bishop Indemnitor Representative and the Escrow Agent prior
to 5:00 p.m. (Dallas, Texas time) on the Expiration Date may not be asserted or
pursued and shall be irrevocably waived, and neither Buyer nor any Indemnitee
shall be entitled to make any claim for reimbursement with respect thereto.
Section 10. Appointment of Bishop Indemnitor Representative.
Howard S. Saffan has been appointed, pursuant to the Purchase Agreement and the
Bishop Agreements, as the agent and representative of the Bishop Indemnitors.
Section 11. Language Concerning the Escrow Agent. To induce the
Escrow Agent to act hereunder, it is further agreed by Buyer, the Company,
Fojtasek and the Bishop Indemnitor Representative that:
(a) The Escrow Agent shall not be under any duty to give
the Escrow Property held by it hereunder any greater degree of care than it
gives its own similar property and shall not
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be required to invest any Escrow Property held hereunder except as directed in
this Agreement. Uninvested Escrow Property held hereunder shall not earn or
accrue interest.
(b) This Agreement expressly sets forth all the duties of
the Escrow Agent with respect to any and all matters pertinent hereto. No
implied duties or obligations shall be read into this agreement against the
Escrow Agent. The Escrow Agent shall not be bound by the provisions of any
agreement among the other parties hereto except this Agreement.
(c) The Escrow Agent shall not be liable, except for its
own gross negligence or willful misconduct and, except with respect to claims
based upon such gross negligence or willful misconduct that are successfully
asserted against the Escrow Agent, Buyer, the Company and the Bishop Indemnitor
Representative shall jointly and severally indemnify and hold harmless the
Escrow Agent (and any successor Escrow Agent) from and against any and all
losses, liabilities, claims, actions, damages and expenses, including
reasonable attorneys' fees and disbursements, arising out of and in connection
with this Agreement. Without limiting the foregoing, the Escrow Agent shall in
no event be liable in connection with its investment or reinvestment of any
cash held by it hereunder in good faith, in accordance with the terms hereof,
including without limitation, any liability for any delays (not resulting from
its gross negligence or willful misconduct) in the investment or reinvestment
of the Escrow Property or any loss of interest incident to any such delays.
This Section 11(c) shall survive notwithstanding any termination of this
Agreement or the resignation of the Escrow Agent.
(d) The Escrow Agent shall be entitled to rely upon any
order, judgment, certification, demand, notice, instrument or other writing
delivered to it hereunder without being required to determine the authenticity
or the correctness of any fact stated therein or the propriety or validity or
the service thereof. The Escrow Agent may act in reliance upon any instrument
or signature believed by it to be genuine and may assume that any person
purporting to give receipt or advice or make any statement or execute any
document in connection with the provisions hereof has been duly authorized to
do so.
(e) The Escrow Agent may act pursuant to the advice of
counsel with respect to any matter relating to this Agreement and shall not be
liable for any action taken or omitted in accordance with such advice.
(f) The Escrow Agent does not have any interest in the
Escrow Property deposited hereunder but is serving as escrow holder only and
having only possession thereof. The Company and the Bishop Indemnitors shall
on a 50%/50% basis pay or reimburse the Escrow Agent upon request for any
transfer taxes or other taxes relating to the Escrow Property incurred in
connection herewith and shall indemnify and hold harmless the Escrow Agent from
any amounts that it is obligated to pay in the way of such taxes. Any payments
of income from the Escrow Property shall be subject to withholding regulations
then in force with respect to United States taxes. It is understood that the
Escrow Agent shall be responsible for income reporting only with respect to
income earned on investment of the Escrow Property and is not responsible for
any other reporting. This Section 11(f) shall survive notwithstanding any
termination of this Agreement or the resignation of the Escrow Agent.
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(g) The Escrow Agent makes no representation as to the
validity, value, genuineness or the collectability of any security or other
document or instrument held by or delivered to it.
(h) The Escrow Agent shall not be called upon to advise
any party as to the wisdom in selling or retaining or taking or refraining from
any action with respect to any securities or other property deposited
hereunder.
(i) The Escrow Agent (and any successor Escrow Agent) may
at any time resign as such by delivering the Escrow Property to any successor
Escrow Agent jointly designated by the other parties hereto in writing or to
any court of competent jurisdiction, whereupon the Escrow Agent shall be
discharged of and from any and all further obligations arising in connection
with this Agreement. The resignation of the Escrow Agent will take effect on
the earlier of (i) the appointment of a successor (including a court of
competent jurisdiction) or (ii) the day which is 30 days after the date of
delivery of its written notice of resignation to the other parties hereto. If
at that time the Escrow Agent has not received a designation of a successor
Escrow Agent, the Escrow Agent's sole responsibility after that time shall be
to safekeep the Escrow Property until receipt of a designation of successor
Escrow Agent or a joint written disposition instruction by the other parties
hereto or a Final Determination.
(j) The Escrow Agent shall have no responsibility for the
contents of any writing of the arbitrators or any third party contemplated
herein as a means to resolve disputes and may rely without any liability upon
the contents thereof.
(k) In the event of any disagreement between the Buyer or
any other Indemnitee and the Bishop Indemnitor Representative resulting in
adverse claims or demands being made in connection with the Escrow Property, or
in the event that the Escrow Agent in good faith is in doubt as to what action
it should take hereunder, the Escrow Agent shall be entitled to retain the
Escrow Property until the Escrow Agent shall have received (i) a Final
Determination directing delivery of the Escrow Property or (ii) a written
agreement executed by the Buyer and the Bishop Indemnitor Representative
directing delivery of the Escrow Property, in which event the Escrow Agent
shall disburse the Escrow Property in accordance with such Final Determination
or agreement. The Escrow Agent shall act on such Final Determination or
agreement without further question.
(l) The compensation of the Escrow Agent (as payment in
full) for the services to be rendered by the Escrow Agent hereunder shall be
the amount of $4,000 at the time of execution of this Agreement and $3,000
annually thereafter to be paid by the Company and the Bishop Indemnitors on a
50%/50% basis, together with reimbursement for all reasonable and documented
expenses, disbursements and advances incurred or made by the Escrow Agent in
performance of its duties hereunder (including reasonable fees, expenses and
disbursements of its counsel). All fees and expenses of the Escrow Agent
hereunder, other than initial fee paid upon the execution hereof, shall, if not
otherwise paid in accordance with the immediately preceding sentence, be paid
first out of interest, dividends, and other income earned on the Escrow
Property, if any, and then, to the extent of any shortfall, by the Company and
the Bishop Indemnitors on a 50%/50% basis. Any fees or expenses of the Escrow
Agent or its counsel which are not paid as provided for herein may be taken
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from any property held by the Escrow Agent hereunder. It is understood that
the Escrow Agent's fees may be adjusted from time to time to conform to its
then current guidelines.
(m) The Buyer, the Company, Fojtasek and the Bishop
Indemnitor Representative hereby irrevocably submit to the jurisdiction of any
New York State or federal court sitting in the Borough of Manhattan in New York
City in any action or proceeding arising out of or relating to this Agreement,
and the parties hereby irrevocably agree that all claims in respect of such
action or proceeding shall be heard and determined in such a New York State or
federal court. The other parties hereby consent to and grant to any such court
jurisdiction over the persons of such parties and over the subject matter of
any such dispute and agree that delivery or mailing of any process or other
papers in the manner provided herein above, or in such other manner as may be
permitted by law, shall be valid and sufficient service thereof.
(n) This Agreement shall be binding upon and inure solely
to the benefit of the parties hereto and their respective successors and
assigns, heirs, administrators and representatives and shall not be enforceable
by or inure to the benefit of any third party, except as provided in Section
11(i) with respect to a resignation by the Escrow Agent. No party may assign
any of its rights or obligations under this Agreement without the written
consent of the other parties. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH AND GOVERNED BY THE INTERNAL LAW OF THE STATE OF NEW YORK (WITHOUT
REFERENCE TO ITS RULE AS TO CONFLICTS OF LAW).
(o) This Agreement may only be modified by a writing
signed by all of the parties hereto, and no waiver hereunder shall be effective
unless in a writing signed by the party to be charged.
(p) The other parties hereto authorize the Escrow Agent,
for any securities held hereunder, to use the services of any United States
central securities depository it deems appropriate, including, but not limited
to, the Depositary Trust Company and the Federal Reserve Book Entry System.
Section 12. Notices. All notices, requests, consents or other
communications required or permitted under this Agreement shall be in writing
and shall be deemed to have been duly given or delivered by any party (a) when
received by such party if delivered by hand, (b) upon confirmation when
delivered by telecopy (any communication delivered by telecopy shall be
followed promptly with an original thereof), (c) within one day after being
sent by recognized overnight delivery service, or (d) within three business
days after being mailed by first-class mail, postage prepaid, and in each case
addressed as follows:
(i) if to the Buyer, the Company, Fojtasek or to any
other Indemnitee:
Lawrence D. Stuart, Jr.
Hicks, Muse, Tate & Furst Equity Fund III, L.P.
200 Crescent Court, Suite 1600
Dallas, Texas 75201
Facsimile: (214) 740-7313
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<PAGE> 11
with copies to:
Randall S. Fojtasek
Atrium Corporation
1341 West Mockingbird Lane, Suite 1200W
Dallas, Texas 75247
and
Michael D. Wortley
Vinson & Elkins L.L.P.
3700 Trammell Crow Center
2001 Ross Avenue
Dallas, Texas 75201
Facsimile: (214) 220-7716
(ii) if to the Bishop Indemnitor Representative, to:
Howard S. Saffan
85 Beachside Avenue
Westport, Connecticut 06880
with copies to
John R. Fallon, Jr., Esq.
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
125 West 55th Street
New York, New York 10019
Facsimile: (212) 424-8500
and to
Robert M. Wolf, Esq.
Bingham, Dana & Gould LLP
150 Federal Street
Boston, Massachusetts 02110
Facsimile: (617) 951-8736
(iii) if to the Escrow Agent, to:
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<PAGE> 12
Citibank N.A.
Corporate Trust/Escrow Administration
120 Wall Street, 13th Floor
New York, NY 10043
Telephone Number - (212) 412-6257
Fax Number - (212) 480-1614
Telex Numbers:
Foreign - 420392 FNC UI
Domestic - 127001 Citibank NYKB
Reference in Telex "Citiswitch - NYCTA"
Federal Reserve Fund Transfers:
Citibank, N.A.
111 Wall Street
New York, NY 10043
For credit to A/C 36855852
Escrow Administration Concentration Account
for further credit(enter Account Number assigned)
Attn: Jeff Zeiler
ABA Number: 0210-0008-9
Any party by written notice to the other parties pursuant to this Section 12
may change the address or the persons to whom notices or copies thereof shall
be directed.
Section 13. Waivers. Any waiver by any party hereto of any
breach of or failure to comply with any provision of this Agreement by any
other party hereto shall be in writing and shall not be construed as, or
constitute, a continuing waiver of such provision, or a waiver of any other
breach of, or failure to comply with, any other provision of this Agreement.
Section 14. Construction. The headings in this Agreement are
solely for convenience of reference and shall not be given any effect in the
construction or interpretation of this Agreement. Unless otherwise stated,
references to Sections and Exhibits are references to Sections and Exhibits of
this Agreement.
Section 15. Third Parties. Nothing expressed or implied in this
Agreement is intended, or shall be construed, to confer upon or give any person
or entity other than Buyer, the Company, the Indemnitees, the Bishop Indemnitor
Representative, the Bishop Indemnitors and the Escrow Agent any rights or
remedies under, or by reason of, this Agreement.
Section 16. Termination. This Agreement shall terminate at the
time of the final distribution by the Escrow Agent of all Escrow Property in
accordance with the provisions of this Agreement.
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<PAGE> 13
Section 17. 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 constitute a single instrument.
Section 18. Waiver of Offset Rights. The Escrow Agent hereby
waives any and all rights to offset that it may have against the Escrow
Property including, without limitation, claims arising as a result of any
claims, amounts, liabilities, costs, expenses, damages, or other losses
(collectively "Escrow Agent Claims") that the Escrow Agent may be otherwise
entitled to collect from any party to this Agreement or any Bishop Indemnitor,
other than Escrow Agent Claims arising under this Agreement.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY BLANK]
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<PAGE> 14
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their duly authorized officers as of the day and year first
above written.
BUYER:
HICKS, MUSE, TATE & FURST EQUITY FUND
III, L.P.
By: HM3/GP Partners, L.P.,
its General Partner
By: Hicks, Muse GP Partners III,
L.P.
its General Partner
By: Hicks, Muse Fund III
Incorporated,
its General Partner
By: /s/ JEFFRY S. FRONTERHOUSE
-------------------------------------
Jeffry S. Fronterhouse
Vice President
THE COMPANY:
ATRIUM CORPORATION
By: /s/ RANDALL S. FOJTASEK
-------------------------------------
Randall S. Fojtasek
President
FOJTASEK:
ATRIUM COMPANIES, INC.
By: /s/ RANDALL S. FOJTASEK
-------------------------------------
Randall S. Fojtasek
President
[SIGNATURE PAGE TO BISHOP
INDEMNIFICATION ESCROW AGREEMENT]
S-1
<PAGE> 15
BISHOP INDEMNITOR REPRESENTATIVE:
on behalf of the Bishop Indemnitors
By: /s/ HOWARD S. SAFFAN
-------------------------------------
Howard S. Saffan
AGREED AND ACCEPTED:
Date:
CITIBANK, N.A.
ESCROW AGENT
By: /s/ ROBERT A. MASSIMILLO
-------------------------
Name: Robert A. Massimillo
-----------------------
Title: Senior Trust Officer
----------------------
[SIGNATURE PAGE TO BISHOP
INDEMNIFICATION ESCROW AGREEMENT]
S-2
<PAGE> 1
EXHIBIT 10.8
ATRIUM CORPORATION
1996 STOCK PURCHASE PLAN
--------
PART I
PURPOSES; DEFINITIONS; RESERVATION OF SHARES;
AND PARTICIPATION IN PLAN
ARTICLE I
PURPOSES
1.1 Purposes of Plan. The purpose of this Atrium Corporation 1996
Stock Purchase Plan the (the "Plan") is to afford the persons (the "Key
Employees") set forth on Schedule I hereto, all of whom are employees of Atrium
Corporation (the "Company"), and/or the Subsidiaries of the Company, who are
expected to contribute materially to the success of the Company and its
Subsidiaries an opportunity to acquire a proprietary interest in the Company,
and thus to retain such persons and create in such persons an increased
interest in and a greater concern for the welfare of the Company and its
Subsidiaries.
ARTICLE II
DEFINITIONS
2.1 Certain terms used herein shall have the meaning stated below,
subject to the provisions of Section 7.1.
"Board" or "Board of Directors" means the Board of Directors of the
Company.
"Buy-Sell Agreement" shall mean a Buy-Sell Agreement between the
Company and a Key Employee in the form of Exhibit A hereto.
"Committee" has the meaning set forth in Section 7.1 hereto.
"Common Stock" means the Common Stock, par value $.01 per share, of
the Company, after giving effect to the conversion of the Company's Class A
Voting Common Stock, Class B Non-Voting Common Stock and Class C Voting Common
Stock into Common Stock upon the filing of the Charter Amendment (as such term
is defined in the Stock Purchase Agreement dated as of November 1, 1996 by and
among the Company, HMTF Acquisition Corp. and certain Securityholders named
therein).
"Company" has the meaning set forth in Section 1.1 hereto.
<PAGE> 2
"Exercise Price" has the meaning set forth in Section 5.1 hereto.
"Key Employee" has the meaning set forth in Section 1.1 hereto.
"Plan" has the meaning set forth in Section 1.1 hereto.
"Securities Act" means The Securities Act of 1933, as amended.
"Stock Purchase Right" means an award of a right to purchase a share
of Common Stock at the Exercise Price which is granted by the Company to a Key
Employee pursuant to Section 5.1 hereof.
"Subsidiary" means, with respect to any person, any other person of
which such first person owns or has the power to vote, directly or indirectly,
securities representing a majority of the votes ordinarily entitled to be cast
for the election of directors or other governing persons.
ARTICLE III
SHARES AVAILABLE
3.1 Shares Available Under Plan. Subject to the adjustments
provided in Section 9.2, the maximum number of shares of Common Stock in
respect of which Stock Purchase Rights may be granted for all purposes under
the Plan shall be 500,000 shares. If, for any reason, any shares as to which
Stock Purchase Rights have been granted cease to be subject to purchase
hereunder, including the expiration of such Stock Purchase Right, the
termination of such Stock Purchase Right, or the forfeiture of such Stock
Purchase Right, such shares shall thereafter not be available for grants under
the Plan. Stock Purchase Rights granted under the Plan may be fulfilled in
accordance with the terms of the Plan with (i) authorized and unissued shares
of Common Stock, (ii) issued shares of such Common Stock held in the Company's
treasury, or (iii) issued shares of Common Stock reacquired by the Company, in
each situation as the Board of Directors or the Committee may determine from
time to time.
ARTICLE IV
PARTICIPATION IN PLAN
4.1 Eligibility to Receive Stock Purchase Rights. Stock Purchase
Rights under the Plan may be granted only to Key Employees.
4.2 Effect on Employment. Nothing contained in the Plan or any
agreement related hereto or referred to herein shall affect, or be construed as
affecting, the terms of employment of any Key Employee except to the extent
specifically provided herein or therein. Nothing contained in the Plan or any
agreement related hereto or referred to herein shall impose, or be construed as
imposing, an obligation on (i) the Company or any of its Subsidiaries to
continue the employment of any Key
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<PAGE> 3
Employee, and (ii) any Key Employee to remain in the employ of the Company or
any of its Subsidiaries.
PART II
STOCK PURCHASE RIGHTS
ARTICLE V
STOCK PURCHASE RIGHTS
5.1 Grant of Stock Purchase Rights.
(a) Award Rights. The Committee shall determine the
number of shares of Common Stock covered by each Stock Purchase Right granted
to each Key Employee and shall then cause to be granted to such Key Employee a
Stock Purchase Right exercisable for such shares.
(b) Term of Rights. Every Stock Purchase Right granted
hereunder shall be valid for a period of no less than 30 days after the date of
grant and may be valid for such longer period as the Committee may determine.
(c) Exercise Price. The purchase price per share of
Common Stock under each Stock Purchase Right shall be $1.00 per share (the
"Exercise Price").
(d) Form of Instrument. Each award of a Stock Purchase
Right shall be made pursuant to an instrument prescribed in form by the
Committee. Such instrument shall specify the number of shares covered by such
Stock Purchase Right, the Exercise Price, the term of such grant and the
restrictions set forth in Article VI.
5.2 Exercise of Stock Purchase Right. The price per share of
Common Stock with respect to each exercise of a Stock Purchase Right shall be
payable at the time of such exercise. Such price shall be payable in cash by a
cashier's or bank certified check or by any other means acceptable to the
Committee. Stock certificates evidencing any shares of Common Stock will be
issued and delivered to the person entitled thereto upon payment of the
Exercise Price.
5.3 Rights of Key Employee Prior to Exercise. A Key Employee
shall not have any rights as a stockholder with respect to any share of Common
Stock issuable upon exercise of a Stock Purchase Right unless and until such
Key Employee shall have become the holder of record of such share by exercise
of such Stock Purchase Right.
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<PAGE> 4
ARTICLE VI
RESTRICTIONS APPLICABLE TO STOCK PURCHASE RIGHTS
6.1 Restrictions. Each Stock Purchase Right granted under the
Plan shall contain the following terms, conditions and restrictions and such
additional terms, conditions and restrictions as may be determined by the
Committee:
(a) No Stock Purchase Right granted under the Plan may be
assigned, transferred, sold, pledged, hypothecated or otherwise disposed of by
a Key Employee, and any Stock Purchase Right granted to such Key Employee shall
be exercisable only by such Key Employee.
(b) No shares of Common Stock will be issued upon
exercise of any Stock Purchase Right unless such Key Employee shall, at the
time of such exercise, execute and deliver to the Company a Buy-Sell Agreement.
(c) Each Stock Purchase Right shall terminate by its
terms and without any further action or obligation of the Company if, prior to
exercise, the Key Employee's employment with the Company or any Subsidiary
shall terminate for any reason.
PART III
ADMINISTRATION, AMENDMENT AND TERMINATION
OF PLAN; MISCELLANEOUS
ARTICLE VII
ADMINISTRATION OF PLAN
7.1 The Committee. The Plan shall be administered by the
Committee, or any successor thereto, of the Board of Directors, or by any other
committee appointed by the Board of Directors to administer the Plan (the
"Committee"); provided, the entire Board of Directors may act as the Committee
if it chooses to do so. The number of individuals that shall constitute the
Committee shall be determined from time to time by a majority of all the
members of the Board of Directors, and, unless that majority of the Board of
Directors determines otherwise, shall be no less than two individuals. The
Chairman of the Board shall be a member of the Committee at all times. A
majority of the Committee shall constitute a quorum (or if the Committee
consists of only two members, then both members shall constitute a quorum), and
the acts of a majority of the members present at any meeting at which a quorum
is present, or acts approved in writing by all members of the Committee, shall
be the acts of the Committee.
The members of the Committee shall serve at the pleasure of the Board,
which shall have the power, at any time and from time to time, to remove
members from or add members to the Committee. Removal from the Committee may
be with or without cause. Any individual serving as a member of the Committee
shall have the right to resign from membership in the Committee by
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<PAGE> 5
written notice to the Board of Directors, The Board of Directors, and not the
remaining members of the Committee, shall have the power and authority to fill
vacancies on the Committee, however caused.
7.2 Authority of Committee. The Committee shall have full and
final authority to (i) prescribe, amend, modify and rescind rules and
regulations relating to the Plan, (ii) make all determinations permitted or
deemed necessary, appropriate or advisable for the administration of the Plan,
interpret any Plan or Stock Purchase Right provision, perform all other acts,
exercise all other powers and establish any other procedures determined by the
Committee to be necessary, appropriate or advisable in administering the Plan
or for the conduct of the Committee's business. Any act of the Committee,
including interpretations of the provisions of the Plan or any Stock Purchase
Right and determinations under the Plan or any Stock Purchase Right shall be
final, conclusive and binding on all parties. The Committee may delegate to
one or more of its members, or to one or more agents, such administrative
duties as it may deem advisable, and the Committee or any person to whom it has
delegated duties as aforesaid may employ one or more persons to render advice
with respect to any responsibility the Committee or such person may have under
the Plan. The Committee may employ attorneys, consultants, accountants, or
other persons and the Committee, the Company and its officers and directors
shall be entitled to rely upon the advice, opinions or valuations of any such
persons. No member or agent of the Committee shall be personally liable for
any action, determination or interpretation made in good faith with respect to
the Plan and all members and agents of the Committee shall be fully protected
by the Company in respect to the Plan and all members and agents of the
Committee shall be fully protected by the Company in respect of any such
action, determination or interpretation.
ARTICLE VIII
AMENDMENT OF PLAN
8.1 Amendment of Plan. The Board of Directors shall have the
right to amend, modify, suspend or terminate the Plan at any time; provided,
that no amendment shall be made which shall increase the total number of shares
of Common Stock which may be issued and sold pursuant to Stock Purchase Rights
granted under the Plan. Except as otherwise provided above, no amendment,
modification, suspension or termination of the Plan shall alter or impair any
Stock Purchase Rights previously granted under the Plan, without the consent of
the holder thereof.
ARTICLE IX
MISCELLANEOUS PROVISIONs
9.1 Compliance with Securities Laws. The Company shall not in any
event be obligated to file any registration statement under the Securities Act
or any applicable state securities law to permit exercise of any Stock Purchase
Right or to issue any Common Stock in violation of the Securities Act or any
applicable state securities law. Each grantee shall, if requested by the
Committee and as a condition to his right to exercise any Stock Purchase Right,
deliver to the
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<PAGE> 6
Company an agreement or certificate containing such representations, warranties
and covenants as the Company may deem necessary or appropriate to ensure that
the issuance of shares of Common Stock pursuant to such exercise is not
required to be registered under the Securities Act or any applicable state
securities law.
Certificates for shares of Common Stock, when issued, may have
substantially the following legend, or statements of other applicable
restrictions, endorsed thereon, and may not be immediately transferable:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY STATE SECURITIES LAWS. THE SHARES MAY NOT BE OFFERED FOR
SALE, SOLD, PLEDGED, TRANSFERRED OR OTHERWISE DISPOSED OF
UNTIL THE HOLDER HEREOF PROVIDES EVIDENCE SATISFACTORY TO THE
ISSUER (WHICH, IN THE DISCRETION OF THE ISSUER, MAY INCLUDE AN
OPINION OF COUNSEL SATISFACTORY TO THE ISSUER) THAT SUCH
OFFER, SALE, PLEDGE, TRANSFER OR OTHER DISPOSITION WILL NOT
VIOLATE APPLICABLE FEDERAL OR STATE SECURITIES LAWS.
This legend shall not be required for shares of Common Stock issued
pursuant to an effective registration statement under the Securities Act and in
accordance with applicable state securities laws.
9.2 Adjustment of Shares. Unless otherwise expressly provided in
a particular Stock Purchase Right, in the event that, by reason of any merger,
consolidation, combination, liquidation, reorganization, recapitalization,
stock dividend, stock split, split-up, split-off, spin-off, combination of
shares, exchange of shares or other like change in capital structure of the
Company (collectively, a "Reorganization"), the Common Stock is substituted,
combined or changed into any cash, property, or other securities, or the shares
of Common Stock are changed into a greater or lesser number of shares of Common
Stock, the number and/or kind of shares and/or interests subject to a Stock
Purchase Right and the per share price or value thereof shall be appropriately
adjusted by the Committee to give appropriate effect to such Reorganization,
such that the Stock Purchase Right shall thereafter be exercisable for such
securities, cash, and/or other property as would have been received in respect
of the Common Stock subject to the Stock Purchase Right had the Stock Purchase
Right been exercised in full immediately prior to such event. Any fractional
shares or interests resulting from such adjustment shall be eliminated.
In the event the Company is not the surviving entity of a
Reorganization and, following such Reorganization, any grantee will hold a
Stock Purchase Right issued pursuant to the Plan which has not been exercised,
canceled, or terminated in connection therewith, the Company shall cause such
Stock Purchase Right to be assumed (or canceled and a replacement Stock
Purchase Right of equivalent value issued) by the surviving entity.
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<PAGE> 7
9.3 Use of Proceeds. The proceeds from the sale of Common Stock
pursuant to Stock Purchase Rights granted under the Plan shall constitute
general funds of the Company and may be used for such corporate purposes as the
Company may determine.
9.4 Costs and Expenses. The costs and expenses of administering
the Plan shall be borne by the Company and shall not be charged against any
Stock Purchase Right nor to any Key Employee.
9.5 Other Incentive Plans. The adoption of the Plan does not
preclude the adoption by appropriate means of any other incentive plan for
employees.
9.6 Effective Date. The Plan shall become effective on November
7, 1996, the date on which it was approved by the Board of Directors and the
stockholders of the Company.
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<PAGE> 8
SCHEDULE I
KEY EMPLOYEES
Mike Hillmeyer
Dow Pointer
Jeff Hull
John Crain
James Wright
Edwin Beachly
James Gresham
Richard Kettle
Thomas Bowen
<PAGE> 1
EXHIBIT 10.9
ATRIUM CORPORATION
1996 STOCK OPTION PLAN
1. Purpose.
Atrium Corporation, a Delaware corporation (herein, together with its
successors, referred to as the "Company"), by means of this 1996 Stock Option
Plan (the "Plan"), desires to afford certain individuals and key employees of
the Company and any parent corporation or subsidiary corporation thereof now
existing or hereafter formed or acquired (such parent and subsidiary
corporations sometimes referred to herein as "Related Entities") who are
responsible for the continued growth of the Company an opportunity to acquire a
proprietary interest in the Company, and thus to create in such persons an
increased interest in and a greater concern for the welfare of the Company and
any Related Entities. As used in the Plan, the terms "parent corporation" and
"subsidiary corporation" shall mean, respectively, a corporation within the
definition of such terms contained in Sections 424(e) and 424(f), respectively,
of the Internal Revenue Code of 1986, as amended (the "Code").
The stock options described in Sections 6 and 7 (the "Options"), and
the shares of Common Stock (as hereinafter defined) acquired pursuant to the
exercise of such Options are a matter of separate inducement and are not in
lieu of any salary or other compensation for services.
2. Administration.
The Plan shall be administered by the Option Committee, or any
successor thereto, of the Board of Directors of the Company (the "Board of
Directors"), or by any other committee appointed by the Board of Directors to
administer this Plan (the "Committee"); provided, the entire Board of Directors
may act as the Committee if it chooses to do so. The number of individuals
that shall constitute the Committee shall be determined from time to time by a
majority of all the members of the Board of Directors, and, unless that
majority of the Board of Directors determines otherwise, shall be no less than
two individuals; provided, however, that if the members of the Board of
Directors and the Company's executive officers are subject to Rule 16b-3 (or
any successor rule) under the Exchange Act (or any successor law) the Committee
shall be composed of either (a) the entire Board of Directors or (B) persons
who are "Non-Employee Directors" under Rule 16b-3. A majority of the Committee
shall constitute a quorum (or if the Committee consists of only two members,
then both members shall constitute a quorum), and subject to the provisions of
Section 5, the acts of a majority of the members present at any meeting at
which a quorum is present, or acts approved in writing by all members of the
Committee, shall be the acts of the Committee.
The members of the Committee shall serve at the pleasure of the Board
of Directors, which shall have the power, at any time and from time to time, to
remove members from or add members to the Committee. Removal from the
Committee may be with or without cause. Any individual serving as a member of
the Committee shall have the right to resign from membership in the
1
<PAGE> 2
Committee by written notice to the Board of Directors. The Board of Directors,
and not the remaining members of the Committee, shall have the power and
authority to fill vacancies on the Committee, however caused. The Board of
Directors shall promptly fill any vacancy that causes the number of members of
the Committee to be below two or, if the Company has a class of equity
securities registered pursuant to Section 12 of the Exchange Act, any other
number that Rule 16b-3 may require from time to time.
3. Shares Available.
Subject to the adjustments provided in Section 10, the maximum
aggregate number of shares of Common Stock, par value $0.01 per share, of the
Company ("Common Stock") in respect of which Options may be granted for all
purposes under the Plan shall be 3,500,000 shares. If, for any reason, any
shares as to which Options have been granted cease to be subject to purchase
thereunder, including the expiration of such Option, the termination of such
Option prior to exercise, or the forfeiture of such Option, such shares shall
thereafter be available for grants under the Plan. Options granted under the
Plan may be fulfilled in accordance with the terms of the Plan with (i)
authorized and unissued shares of the Common Stock, (ii) issued shares of such
Common Stock held in the Company's treasury, or (iii) issued shares of Common
Stock reacquired by the Company in each situation as the Board of Directors or
the Committee may determine from time to time.
4. Eligibility and Bases of Participation.
Grants of Incentive Options (as hereinafter defined) and Non-Qualified
Options (as hereinafter defined) may be made under the Plan, subject to and in
accordance with Section 6, to Key Employees. As used herein, the term "Key
Employee" shall mean any employee of the Company or any Related Entity,
including officers and directors of the Company or any Related Entity who are
also employees of the Company or any Related Entity, who is regularly employed
on a salaried basis and who is so employed on the date of such grant, whom the
Committee identifies as having a direct and significant effect on the
performance of the Company or any Related Entity.
Grants of Non-Qualified Options may be made, subject to and in
accordance with Section 7, to any Eligible Non- Employee. As used herein, the
term "Eligible Non-Employee" shall mean any person or entity of any nature
whatsoever, specifically including an individual, a firm, a company, a
corporation, a partnership, a trust, or other entity (collectively, a
"Person"), that the Committee designates as eligible for a grant of Options
pursuant to this Plan because such Person performs bona fide consulting,
advisory, or other services for the Company or any Related Entity (other than
services in connection with the offer or sale of securities in a
capital-raising transaction) and the Board of Directors or the Committee
determines that the Person has a direct and significant effect on the financial
development of the Company or any Related Entity.
The adoption of this Plan shall not be deemed to give any Person a
right to be granted any Options.
2
<PAGE> 3
Notwithstanding any other provision of this Plan to the contrary, with
respect to the grant of any Options to any Key Employee or Eligible
Non-Employee, the Committee shall first determine the number of shares in
respect of which Options are to be granted to such Key Employee or Eligible
Non-Employee and shall then cause to be granted to such Key Employee or
Eligible Non-Employee an Option exercisable for such shares. The exercise
price per share of Common Stock under each Option shall be fixed by the
Committee at the time of grant of the Option and shall equal at least 100% of
the Fair Market Value of a share of Common Stock on the date of grant.
5. Authority of Committee.
Subject to and not inconsistent with the express provisions of the
Plan, the Code and, if applicable, Rule 16b- 3, the Committee shall have
plenary authority to:
a. determine the Key Employees and Eligible Non-Employees to whom
Options shall be granted, the time when such Options shall be
granted, the number of shares covered by such Options, the
purchase price or exercise price under each such Option, the
period(s) during which such Options shall be exercisable
(whether in whole or in part, including whether such Options
shall become immediately exercisable upon the consummation of
a "Sale of the Company" or a "Qualifying Public Offering"),
the restrictions to be applicable to Options and all other
terms and provisions thereof (which need not be identical);
b. require, if determined necessary or appropriate by the
Committee in order to comply with Rule 16b-3, as a condition
to the granting of any Option, that the Person receiving such
Option agree not to sell or otherwise dispose of such Option,
any Common Stock acquired pursuant to such Option, or any
other "derivative security" (as defined by Rule 16a-l(c) under
the Exchange Act) for a period of six months following the
later of the date of the grant of such Option or (ii) the date
when the exercise price of such Option is fixed if such
exercise price is not fixed at the date of grant of such
Option, or for such other period as the Committee may
determine;
c. provide an arrangement through registered broker-dealers
whereby temporary financing may be made available to an
optionee by the broker-dealer, under the rules and regulations
of the Board of Governors of the Federal Reserve, for the
purpose of assisting the optionee in the exercise of an
Option, such authority to include the payment by the Company
of the commissions of the broker-dealer;
d. provide the establishment of procedures for an optionee (i) to
have withheld from the total number of shares of Common Stock
to be acquired upon the exercise of an Option that number of
shares having a Fair Market Value which, together with such
cash as shall be paid in respect of fractional shares, shall
equal the aggregate exercise price under such Option for the
number of shares then being acquired (including the shares to
be so withheld), and (ii) to exercise a portion of an Option
by delivering that
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<PAGE> 4
number of shares of Common Stock already owned by such
optionee having an aggregate Fair Market Value which shall
equal the partial Option exercise price and to deliver the
shares thus acquired by such optionee in payment of shares to
be received pursuant to the exercise of additional portions of
such Option, the effect of which shall be that such optionee
can in sequence utilize such newly acquired shares in payment
of the exercise price of the entire Option, together with such
cash as shall be paid in respect of fractional shares;
e. provide (in accordance with Section 13 or otherwise) the
establishment of a procedure whereby a number of shares of
Common Stock or other securities may be withheld from the
total number of shares of Common Stock or other securities to
be issued upon exercise of an Option to meet the obligation of
withholding for income, social security and other taxes
incurred by an optionee upon such exercise or required to be
withheld by the Company or a Related Entity in connection with
such exercise;
f. prescribe, amend, modify and rescind rules and regulations
relating to the Plan; and
g. make all determinations permitted or deemed necessary,
appropriate or advisable for the administration of the Plan,
interpret any Plan or Option provision, perform all other
acts, exercise all other powers, and establish any other
procedures determined by the Committee to be necessary,
appropriate, or advisable in administering the Plan or for the
conduct of the Committee's business. Any act of the
Committee, including interpretations of the provisions of the
Plan or any Option and determinations under the Plan or any
Option shall be final, conclusive and binding on all parties.
The Committee may delegate to one or more of its members, or to one or
more agents, such administrative duties as it may deem advisable, and the
Committee or any Person to whom it has delegated duties as aforesaid may employ
one or more Persons to render advice with respect to any responsibility the
Committee or such Person may have under the Plan. The Committee may employ
attorneys, consultants, accountants, or other Persons and the Committee, the
Company, and its officers and directors shall be entitled to rely upon the
advice, opinions, or valuations of any such Persons. No member or agent of the
Committee shall be personally liable for any action, determination or
interpretation made in good faith with respect to the Plan and all members and
agents of the Committee shall be fully protected by the Company in respect of
any such action, determination or interpretation.
6. Stock Options for Key Employees.
Subject to the express provisions of this Plan, the Committee shall
have the authority to grant incentive stock options pursuant to Section 422 of
the Code ("Incentive Options"), to grant non-qualified stock options (options
which do not qualify under Section 422 of the Code) ("Non-Qualified Options"),
and to grant both types of Options to Key Employees. No Incentive Option shall
be granted pursuant to this Plan after the earlier of ten years from the date
of adoption of the
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<PAGE> 5
Plan or ten years from the date of approval of the Plan by the stockholders of
the Company. Notwithstanding anything in this Plan to the contrary, Incentive
Options may be granted only to Key Employees. The terms and conditions of the
Options granted under this Section 6 shall be determined from time to time by
the Committee; provided, however, that the Options granted under this Section 6
shall be subject to all terms and provisions of the Plan (other than Section
7), including the following:
a. Option Exercise Price. Subject to Section 4, the Committee
shall establish the Option exercise price at the time any
Option is granted at such amount as the Committee shall
determine; provided, that in the case of an Incentive Option
granted to a person who, at the time such Incentive Option is
granted, owns shares of the Company or any Related Entity
which possess more than 10% of the total combined voting power
of all classes of shares of the Company or of any Related
Entity, the option exercise price shall not be less than 110%
of the Fair Market Value per share of Common Stock at the date
the Option is granted. The Option exercise price shall be
subject to adjustment in accordance with the provisions of
Section 10 of the Plan.
b. Payment. The price per share of Common Stock with respect to
each Option exercise shall be payable at the time of such
exercise. Such price shall be payable in cash or by any other
means acceptable to the Committee, including delivery to the
Company of shares of Common Stock owned by the optionee or by
the delivery or withholding of shares pursuant to a procedure
created pursuant to Section 5.d. of the Plan. Shares
delivered to or withheld by the Company in payment of the
Option exercise price shall be valued at the Fair Market Value
of the Common Stock on the day preceding the date of the
exercise of the Option.
c. Continuation of Employment. Each Incentive Option shall
require the optionee to remain in the continuous employ of the
Company or any Related Entity from the date of grant of the
Incentive Option until no more than three months prior to the
date of exercise of the Incentive Option.
d. Exercisability of Stock Option. Subject to Section 8, each
Option shall be exercisable in one or more installments as the
Committee may determine at the time of the grant. No Option
by its terms shall be exercisable after the expiration of ten
years from the date of grant of the Option, unless, as to any
Non-Qualified Option, otherwise expressly provided in such
Option; provided, however, that no Incentive Option granted to
a person who, at the time such Option is granted, owns stock
of the Company, or any Related Entity, possessing more than
10% of the total combined voting power of all classes of stock
of the Company, or any Related Entity, shall be exercisable
after the expiration of five years from the date such Option
is granted.
e. Death. If any optionee's employment with the Company or a
Related Entity terminates due to the death of such optionee,
the estate of such optionee, or a Person
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<PAGE> 6
who acquired the right to exercise such Option by bequest or
inheritance or by reason of the death of the optionee, shall
have the right to exercise such Option in accordance with its
terms at any time and from time to time within 180 days after
the date of death unless a longer period is expressly provided
in such Option or a shorter period is established by the
Committee pursuant to Section 8 (but in no event after the
expiration date of such Option).
f. Disability. If the employment of any optionee terminates
because of his Disability (as defined in Section 18), such
optionee or his legal representative shall have the right to
exercise the Option in accordance with its terms at any time
and from time to time within 180 days after the date of such
termination unless a longer period is expressly provided in
such Option or a shorter period is established by the
Committee pursuant to Section 8 (but not after the expiration
date of the Option); provided, however, that in the case of an
Incentive Option, the optionee or his legal representative
shall in any event be required to exercise the Incentive
Option within one year after termination of the optionee's
employment due to his Disability.
g. Termination for Cause; Voluntary Termination. Unless an
optionee's Option expressly provides otherwise, such optionee
shall immediately forfeit all rights under his Option, except
as to the shares of stock already purchased thereunder, if the
employment of such optionee with the Company or a Related
Entity is terminated by the Company or any Related Entity for
Good Cause (as defined below) or if such optionee voluntarily
terminates employment without the consent of the Company or
any Related Entity. The determination that there exists Good
Cause for termination shall be made by the Committee (unless
otherwise agreed to in writing by the Company and the
optionee).
h. Other Termination of Employment. If the employment of an
optionee with the Company or a Related Entity terminates for
any reason other than those specified in subsections 6(e), (f)
or (g) above, such optionee shall have the right to exercise
his Option in accordance with its terms, within 30 days after
the date of such termination, unless a longer period is
expressly provided in such Option or a shorter period is
established by the Committee pursuant to Section 8 (but not
after the expiration date of the Option); provided, that no
Incentive Option shall be exercisable more than three months
after such termination.
i. Maximum Exercise. The aggregate Fair Market Value of stock
(determined at the time of the grant of the Option) with
respect to which Incentive Options are exercisable for the
first time by an optionee during any calendar year under all
plans of the Company and any Related Entity shall not exceed
$100,000.
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<PAGE> 7
7. Stock Option Grants to Eligible Non-Employees.
Subject to the express provisions of this Plan, the Committee shall
have the authority to grant Non-Qualified Options to Eligible Non-Employees.
The terms and conditions of the Options granted under this Section 7 shall be
determined from time to time by the Committee; provided, however, that the
Options granted under this Section 7 shall be subject to all terms and
provisions of the Plan (other than Section 6), including the following:
a. Option Exercise Price. Subject to Section 4, the Committee
shall establish the Option exercise price at the time any
Non-Qualified Option is granted at such amount as the
Committee shall determine. The Option exercise price shall be
subject to adjustment in accordance with the provisions of
Section 10 of the Plan.
b. Payment. The price per share of Common Stock with respect to
each Option exercise shall be payable at the time of such
exercise. Such price shall be payable in cash or by any other
means acceptable to the Committee, including delivery to the
Company of shares of Common Stock owned by the optionee or by
the delivery or withholding of shares pursuant to a procedure
created pursuant to Section 5.d. of the Plan. Shares
delivered to or withheld by the Company in payment of the
Option exercise price shall be valued at the Fair Market Value
of the Common Stock on the day preceding the date of the
exercise of the Option.
c. Exercisability of Stock Option. Subject to Section 8, each
Option shall be exercisable in one or more installments as the
Committee may determine at the time of the grant. No Option
shall be exercisable after the expiration of ten years from
the date of grant of the Option, unless otherwise expressly
provided in such Option.
d. Death. If the retention by the Company or any Related Entity
of the services of any Eligible Non- Employee terminates
because of his death, the estate of such optionee, or a Person
who acquired the right to exercise such Option by bequest or
inheritance or by reason of the death of the optionee, shall
have the right to exercise such Option in accordance with its
terms, at any time and from time to time within 180 days after
the date of death unless a longer period is expressly provided
in such Option or a shorter period is established by the
Committee pursuant to Section 8 (but in no event after the
expiration date of such Option).
e. Disability. If the retention by the Company or any Related
Entity of the services of any Eligible Non- Employee
terminates because of his Disability, such optionee or his
legal representative shall have the right to exercise the
Option in accordance with its terms at any time and from time
to time within 180 days after the date of the optionee's
termination unless a longer period is expressly provided in
such Option or a shorter period is established by the
Committee pursuant to Section 8 (but not after the expiration
of the Option).
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<PAGE> 8
f. Termination for Cause; Voluntary Termination. If the
retention by the Company or any Related Entity of the services
of any Eligible Non-Employee is terminated (i) for Good Cause,
(ii) as a result of removal of the optionee from office as a
director of the Company or of any Related Entity for cause by
action of the stockholders of the Company or such Related
Entity in accordance with the by-laws of the Company or such
Related Entity, as applicable, and the corporate law of the
jurisdiction of incorporation of the Company or such Related
Entity, or (iii) as a result of the voluntarily termination by
optionee of optionee's service without the consent of the
Company or any Related Entity, then such optionee shall
immediately forfeit his rights under his Option except as to
the shares of stock already purchased. The determination that
there exists Good Cause for termination shall be made by the
Committee (unless otherwise agreed to in writing by the
Company and the optionee).
g. Other Termination of Relationship. If the retention by the
Company or any Related Entity of the services of any Eligible
Non-Employee terminates for any reason other than those
specified in subsections 7(d), (e) or (f) above, such optionee
shall have the right to exercise his or its Option in
accordance with its terms within 30 days after the date of
such termination, unless a longer period is expressly provided
in such Option or a shorter period is established by the
Committee pursuant to Section 8 (but not after the expiration
date of the Option).
h. Ineligibility for Other Grants. Any Eligible Non-Employee who
receives an Option pursuant to this Section 7 shall be
ineligible to receive any Options under any other Section of
the Plan.
8. Change of Control; Sale of the Company.
If (i) a Change of Control or a Sale of the Company shall occur, (ii)
the Company shall enter into an agreement providing for a Change of Control or
a Sale of the Company, or (iii) any member of the HMC Group shall enter into an
agreement providing for a Sale of the Company, then the Committee may declare
any or all Options outstanding under the Plan to be exercisable in full at such
time or times as the Committee shall determine, notwithstanding the express
provisions of such Options. Each Option accelerated by the Committee pursuant
to the preceding sentence shall terminate, notwithstanding any express
provision thereof or any other provision of the Plan, on such date (not later
than the stated exercise date) as the Committee shall determine; provided,
however, that such termination shall not occur prior to the date on which the
Option becomes fully exercisable pursuant to such acceleration.
9. Purchase Option.
a. Except as otherwise expressly provided in any specific Option,
if (i) any optionee's employment (or, in the case of any
Option granted under Section 7, the optionee's relationship)
with the Company or a Related Entity terminates for any reason
at any
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<PAGE> 9
time or (ii) a Change of Control occurs, the Company (and/or
its designees) shall have the option (the "Purchase Option")
to purchase, and if the option is exercised, the optionee (or
the optionee's executor or the administrator of the optionee's
estate, in the event of the optionee's death, or the
optionee's legal representative in the event of the optionee's
incapacity) (hereinafter, collectively with such optionee, the
"Grantor") shall sell to the Company and/or its assignee(s),
all or any portion (at the Company's option) of the shares of
Common Stock and/or Options held by the Grantor (such shares
of Common Stock and Options collectively being referred to as
the "Purchasable Shares"), subject to the Company's compliance
with the conditions hereinafter set forth.
b. The Company shall give notice in writing to the Grantor of the
exercise of the Purchase Option within one year from the date
of the termination of the optionee's employment or engagement
or such Change of Control. Such notice shall state the number
of Purchasable Shares to be purchased and the determination of
the Board of Directors of the Fair Market Value per share of
such Purchasable Shares. The Company's Purchase Option shall
lapse if not exercised by the Company within the time period
specified above in accordance with the provisions hereof,
except as otherwise provided in paragraph "e" below.
c. The purchase price to be paid for the Purchasable Shares
purchased pursuant to the Purchase Option shall be, in the
case of any Common Stock, the Fair Market Value per share as
of the date of the notice of exercise of the Purchase Option
times the number of shares being purchased, and in the case of
any Option, the Fair Market Value per share times the number
of vested shares subject to such Option which are being
purchased, less the applicable per share Option exercise
price. The Company shall pay such purchase price by the
tender of a check in the amount of the purchase price to be
paid for the Purchasable Shares or by the delivery of a
promissory note as provided in paragraph "e" below. The
closing of such purchase shall take place at the Company's
principal executive offices within ten days after the purchase
price has been determined. At such closing, the Grantor shall
deliver or shall cause to be delivered to the purchasers the
certificates or instruments evidencing the Purchasable Shares
being purchased, duly endorsed (or accompanied by duly
executed stock powers) and otherwise in good form for
delivery, against payment of the purchase price by check of
the purchasers. In the event that, notwithstanding the
foregoing, the Grantor shall have failed to obtain the release
of any pledge or other encumbrance on any Purchasable Shares
by or upon the scheduled closing date (at the option of the
purchasers), the closing shall nevertheless occur on such
scheduled closing date, with the cash purchase price being
reduced to the extent of all unpaid indebtedness for which
such Purchasable Shares are then pledged or encumbered. Upon
tender by the Company of a check in the amount of the purchase
price for the Purchasable Shares or a promissory note as
provided in paragraph "e" below, (i) the shares of Common
Stock comprising a portion of the Purchasable Shares, or the
portion thereof so
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<PAGE> 10
purchased, shall no longer be deemed to be outstanding, and
(ii) the Options comprising a portion of the Purchasable
Shares, or the portion thereof so purchased,shall no longer be
deemed to be outstanding and all of the Grantor's rights with
respect to such Purchasable Shares shall terminate, with the
exception of the right of the Grantor to receive the purchase
price in exchange therefore pursuant to this paragraph "c".
d. To assure the enforceability of the Company's rights under
this Section 9, each certificate or instrument representing
Common Stock or an Option held by him or it shall bear a
conspicuous legend in substantially the following form:
THE SHARES (REPRESENTED BY THIS CERTIFICATE] [ISSUABLE
PURSUANT TO THIS AGREEMENT] ARE SUBJECT TO AN OPTION TO
REPURCHASE PROVIDED UNDER THE PROVISIONS OF THE COMPANY'S 1996
STOCK OPTION PLAN AND A STOCK OPTION AGREEMENT ENTERED INTO
PURSUANT THERETO. A COPY OF SUCH OPTION PLAN AND OPTION
AGREEMENT ARE AVAILABLE UPON WRITTEN REQUEST TO THE COMPANY AT
ITS PRINCIPAL EXECUTIVE OFFICES.
e. Notwithstanding any provision to the contrary in paragraph "c"
above, in the event that any payment by the Company of any
portion of the purchase price (or any remaining portion
thereof) for any portion of the Purchasable Shares that the
Company is obligated to purchase is, at the time such payment
would otherwise be due hereunder, prohibited by the terms of
any of the Company's or any of its Subsidiaries' financing
arrangements with their lenders or any other contracts to
which the Company or any of its Subsidiaries is bound, the
Company shall be entitled to complete the exercise of the
Purchase Option by tendering to the Grantor (a) a check for
that portion of the purchase price the payment of which is
not so prohibited, and (b) a promissory note for the balance
of the purchase price. Each such promissory note shall (i)
bear interest at the Imputed Rate, (ii) provide for the
payment of the principle evidenced thereby in annual
installments commencing one (1) year after such termination in
such amounts as are satisfactory to the Company's and its
Subsidiaries' lenders, and (ii) be subordinated to the
Company's and its Subsidiaries' indebtedness to its lenders on
terms satisfactory to such lenders.
f. If, after giving effect to the provisions of paragraph "e"
above, the Company is prohibited by law from purchasing any
Purchasable Shares which it is obligated or has elected to
repurchase hereunder due to any existing or prospective
impairment of its capital, the closing of such purchase shall
be delayed until the first date on which the Company has
sufficient capital to lawfully repurchase such Purchasable
Shares (the "Delayed Closing Date"). In the event of any such
delay, the Company will be obligated to pay, on the Delayed
Closing Date, interest on the purchase price for such
Purchasable Shares, at the Imputed Rate from the date on which
the closing
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<PAGE> 11
of the purchase of such Purchasable Shares was originally
scheduled to occur to the Delayed Closing Date.
The Company's rights under this Section 9 shall terminate upon the
consummation of a Qualifying Public Offering.
10. Adjustment of Shares.
Unless otherwise expressly provided in a particular Option, in the
event that, by reason of any merger, consolidation, combination, liquidation,
reorganization, recapitalization, stock dividend, stock split, split-up, split-
off, spin-off, combination of shares, exchange of shares or other like change
in capital structure of the Company (collectively, a "Reorganization"), the
Common Stock is substituted, combined, or changed into any cash, property, or
other securities, or the shares of Common Stock are changed into a greater or
lesser number of shares of Common Stock, the number and/or kind of shares
and/or interests subject to an Option and the per share price or value thereof
shall be appropriately adjusted by the Committee to give appropriate effect to
such Reorganization, such that the Option shall thereafter be exercisable for
such securities, cash, and/or other property as would have been received in
respect of the Common Stock subject to the Option had the Option been exercised
in full immediately prior to such event. Any fractional shares or interests
resulting from such adjustment shall be eliminated. Notwithstanding the
foregoing, (i) each such adjustment with respect to an Incentive Option shall
comply with the rules of Section 424(a) of the Code, and (ii) in no event shall
any adjustment be made which would render any Incentive Option granted
hereunder other than an "incentive stock option" for purposes of Section 422 of
the Code.
In the event the Company is not the surviving entity of a
Reorganization and, following such Reorganization, any optionee will hold
Options issued pursuant to this Plan which have not been exercised, cancelled,
or terminated in connection therewith, the Company shall cause such Options to
be assumed (or cancelled and replacement Options of equivalent value issued) by
the surviving entity or a Related Entity.
11. Assignment or Transfer.
a. Except as otherwise expressly provided in any Nonqualified
Option, no Option granted under the Plan or any rights or
interests therein shall be assignable or transferable by an
optionee except by will or the laws of descent and
distribution, and during the lifetime of an optionee, Options
granted to him or her hereunder shall be exercisable only by
the optionee or, in the event that a legal representative has
been appointed in connection with the Disability of an
optionee, such legal representative.
b. At least ninety (90) days prior to selling, pledging,
hypothecating, transferring or otherwise disposing
("Transfer") of any interest in Common Stock issued upon
exercise of an Option, the optionee proposing such Transfer
shall deliver a written notice (the "Sale Notice") to the
Company. The Sale Notice will disclose in
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<PAGE> 12
reasonable detail the identity of the prospective
transferee(s) and the terms and conditions of the proposed
transfer. Such optionee (and such optionee's transferees)
shall not consummate any such Transfer until ninety (90) days
after the Sale Notice has been delivered to the Company,
unless the Company has notified such optionee in writing that
it will not exercise its rights under this Section 11.b. (The
date of the first to occur of such events is referred to
herein as the "Authorization Date"). The Company or its
designee may elect to purchase all (but not less than all) of
the shares of Common Stock to be Transferred upon the same
terms and conditions as those set forth in the Sale Notice
("Right of First Refusal") by delivering a written notice of
such election to such optionee within thirty (30) days after
the receipt of the Sale Notice by the Company (the "Election
Notice"). If the Company has not elected to purchase all of
the shares of Common Stock specified in the Sale Notice, such
optionee may Transfer the shares of Common Stock to the
prospective transferee(s) as specified in the Sale Notice, at
a price and on terms no more favorable to the transferee(s)
thereof than specified in the Sale Notice, during the 90-day
period immediately following the Authorization Date and in the
event of any such Transfer of shares the provisions of the
Plan (including, without limitation, the provisions of this
Section 11) shall no longer apply to the shares thus
transferred. Any Option Shares not so transferred within such
90-day period must be reoffered to the Company in accordance
with the provisions of this Section 11.b. The Right of First
Refusal will not apply with respect to Transfers of such
shares of Common Stock (i) by will or pursuant to applicable
laws of descent and distribution or (ii) among the optionee's
family group; provided that the restrictions contained in this
Section 11.b. will continue to be applicable to the shares of
Common Stock after any such Transfer and provided further that
the transferees of such shares of Common Stock have agreed in
writing to be bound by the terms and provisions of this Plan
and the applicable Option Agreement as each may be amended
from time to time. In addition, upon any transfer to a member
of the optionee's family group, the optionee shall be required
to give notice to the Company and as a condition to such
Transfer to a member of the optionee's family group, the
optionee will maintain all voting control over all of the
shares of Common Stock. The optionee's, "family group" means
the optionee's spouse and lineal descendants (whether natural
or adopted) and any trust solely for the benefit of the
optionee and/or the optionee's spouse and/or lineal
descendants. In addition, with the prior approval of the
Committee, notwithstanding the provisions of this Section
11.b., an optionee may pledge such shares of Common Stock
creating a security interest therein; provided, that the
pledgee agrees in writing to be bound, and that such shares of
Common Stock remain bound, by the terms and provisions of this
Plan and the applicable Option Agreement, as each may be
amended from time to time. The rights and obligations
pursuant to this Section 11.b. hereof will terminate upon the
consummation of a Qualified Public Offering.
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<PAGE> 13
To assure the enforceability of the Company's rights
under this Section 11.b., each certificate or instrument
representing Common Stock or an Option held by him or it shall
bear a conspicuous legend in substantially the following form:
THE SHARES [REPRESENTED BY THIS CERTIFICATE] [ISSUABLE
PURSUANT TO THIS AGREEMENT] ARE SUBJECT TO A RIGHT OF FIRST
REFUSAL PROVIDED UNDER THE COMPANY'S 1996 STOCK OPTION PLAN
AND A STOCK OPTION AGREEMENT ENTERED INTO PURSUANT THERETO. A
COPY OF SUCH OPTION PLAN AND OPTION AGREEMENT ARE AVAILABLE
UPON WRITTEN REQUEST TO THE COMPANY AT ITS PRINCIPAL EXECUTIVE
OFFICES.
12. Compliance with Securities Laws.
The Company shall not in any event be obligated to file any
registration statement under the Securities Act or any applicable state
securities law to permit exercise of any option or to issue any Common Stock in
violation of the Securities Act or any applicable state securities law. Each
optionee (or, in the event of his death or, in the event a legal representative
has been appointed in connection with his Disability, the Person exercising the
Option) shall, as a condition to his right to exercise any Option, deliver to
the Company an agreement or certificate containing such representations,
warranties and covenants as the Company may deem necessary or appropriate to
ensure that the issuance of shares of Common Stock pursuant to such exercise is
not required to be registered under the Securities Act or any applicable state
securities law.
Certificates for shares of Common Stock, when issued, may have
substantially the following legend, or statements of other applicable
restrictions, endorsed thereon, and may not be immediately transferable:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY STATE SECURITIES LAWS. THE SHARES MAY NOT BE OFFERED FOR
SALE, SOLD, PLEDGED, TRANSFERRED OR OTHERWISE DISPOSED OF
UNTIL THE HOLDER HEREOF PROVIDES EVIDENCE SATISFACTORY TO THE
ISSUER (WHICH, IN THE DISCRETION OF THE ISSUER, MAY INCLUDE AN
OPINION OF COUNSEL SATISFACTORY TO THE ISSUER) THAT SUCH
OFFER, SALE, PLEDGE, TRANSFER OR OTHER DISPOSITION WILL NOT
VIOLATE APPLICABLE FEDERAL OR STATE LAWS.
This legend shall not be required for shares of Common Stock issued
pursuant to an effective registration statement under the Securities Act and in
accordance with applicable state securities laws.
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<PAGE> 14
13. Withholding Taxes.
By acceptance of the Option, the optionee will be deemed to (i) agree
to reimburse the Company or Related Entity by which the optionee is employed
for any federal, state, or local taxes required by any government to be
withheld or otherwise deducted by such corporation in respect of the optionee's
exercise of all or a portion of the Option; (ii) authorize the Company or any
Related Entity by which the optionee is employed to withhold from any cash
compensation paid to the optionee or in the optionee's behalf, an amount
sufficient to discharge any federal, state, and local taxes imposed on the
Company, or the Related Entity by which the optionee is employed, and which
otherwise has not been reimbursed by the optionee, in respect of the optionee's
exercise of all or a portion of the Option; and (iii) agree that the Company
may, in its discretion, hold the stock certificate to which the optionee is
entitled upon exercise of the Option as security for the payment of the
aforementioned withholding tax liability, until cash sufficient to pay that
liability has been accumulated, and may, in its discretion, effect such
withholding by retaining shares issuable upon the exercise of the Option having
a Fair Market Value on the date of exercise which is equal to the amount to be
withheld.
14. Costs and Expenses.
The costs and expenses of administering the Plan shall be borne by the
Company and shall not be charged against any Option nor to any employee
receiving an Option.
15. Funding of Plan.
The Plan shall be unfunded. The Company shall not be required to make
any segregation of assets to assure the payment of any Option under the Plan.
16. Other Incentive Plans.
The adoption of the Plan does not preclude the adoption by appropriate
means of any other incentive plan for employees.
17. Effect on Employment.
Nothing contained in the Plan or any agreement related hereto or
referred to herein shall affect, or be construed as affecting, the terms of
employment of any Key Employee except to the extent specifically provided
herein or therein. Nothing contained in the Plan or any agreement related
hereto or referred to herein shall impose, or be construed as imposing, an
obligation on (i) the Company or any Related Entity to continue the employment
of any Key Employee, and (ii) any Key Employee to remain in the employ of the
Company or any Related Entity.
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<PAGE> 15
18. Definitions.
In addition to the terms specifically defined elsewhere in the Plan,
as used in the Plan, the following terms shall have the respective meanings
indicated:
a. "Affiliate" shall mean, as to any Person, a Person that
directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control
with, such Person.
b. "Authorization Date" shall have the meaning set forth in
Section 11.b. hereof.
c. "Board of Directors" shall have the meaning set forth in
Section 2 hereof.
d. "Change of Control" shall mean the first to occur of the
following events: (i) any sale, lease, exchange, or other
transfer (in one transaction or series of related
transactions) of all or substantially all of the assets of the
Company (including, the capital stock or assets of its
operating subsidiaries) to any Person or group of related
Persons for purposes of Section 13(d) of the Exchange Act (a
"Group"), other than one or more members of the HMC Group,
(ii) a majority of the Board of Directors of the Company shall
consist of Persons who are not Continuing Directors; or (iii)
the acquisition by any Person or Group (other than one or more
members of the HMC Group), together with their associates and
Affiliates, of the power, directly or indirectly, to vote or
direct the voting of securities having more than 50% of the
ordinary voting power for the election of directors of the
Company.
e. "Code" shall have the meaning set forth in Section 1 hereof.
f. "Committee" shall have the meaning set forth in Section 2
hereof.
g. "Common Stock" shall have the meaning set forth in Section 3
hereof.
h. "Company" shall have the meaning set forth in Section 1
hereof.
i. "Continuing Director" shall mean, as of the date of
determination, any Person who (i) was a member of the Board of
Directors of the Company on the date of adoption of this Plan,
(ii) was nominated for election or elected to the Board of
Directors of the Company with the affirmative vote of a
majority of the Continuing Directors who were members of such
Board of Directors at the time of such nomination or election,
or (iii) is a member of the HMC Group.
j. "Designated Date" means the first date on which each of the
following conditions shall have been met: (i) the Company
shall have consummated a Qualifying Public Offering and (ii)
the Company shall have ceased to be an Equity Fund Company.
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k. "Disability" shall mean permanent disability as defined under
the appropriate provisions of the long- term disability plan
maintained for the benefit of employees of the Company or any
Related Entity who are regularly employed on a salaried basis
unless another meaning shall be agreed to in writing by the
Committee and theoptionee; provided, however, that in the case
of an Incentive Option "disability" shall have the meaning
specified in Section 22(e)(3) of the Code.
l. "Election Notice" shall have the meaning set forth in Section
11.b. hereof.
m. "Eligible Non-Employee" shall have the meaning set forth in
Section 4 hereof.
n. "Equity Fund Company" means any Person in which one or more
Equity Fund Investment Vehicles own(s), directly or
indirectly, more than 10% of the fully-diluted common stock or
has an unrecovered investment of $1,000,000 or more, and each
Subsidiary thereof.
o. "Equity Fund Investment Vehicle" means HMTF/CH Holdings, L.P.,
Hicks, Muse, Tate & Furst Equity Fund II, L.P., Hicks, Muse,
Tate & Furst Equity Fund III, L.P., or any other similar
investment entity formed by Hicks, Muse, Tate & Furst
Incorporated.
p. "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
q. "Fair Market Value", shall, as it relates to the Common Stock,
mean the average of the high and low prices of such Common
Stock as reported on the principal national securities
exchange on which the shares of Common Stock are then listed
on the date specified herein, or if there were no sales on
such date, on the next preceding day on which there were
sales, or if such Common Stock is not listed on a national
securities exchange, the last reported bid price in the
over-the-counter market, or if such shares are not traded in
the over-the-counter market, the per share cash price for
which all of the outstanding Common Stock could be sold to a
willing purchaser in an arms length transaction (without
regard to minority discount, absence of liquidity or transfer
restrictions imposed by any applicable law or agreement) at
the date of the event giving rise to a need for a
determination. Except as may be otherwise expressly provided
in a particular Option, Fair Market Value shall be determined
in good faith by the Committee.
r. "Good Cause", with respect to any Key Employee, shall mean
(unless another definition is agreed to in writing by the
Company and the optionee) termination by action of the Board
of Directors because of: (A) the optionee's conviction of, or
plea of nolo contendere to, a felony or a crime involving
moral turpitude; (B) the optionee's personal dishonesty,
incompetence, willful misconduct, willful violation of any
law, rule or regulation (other than minor traffic violations
or similar offenses)
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<PAGE> 17
or breach of fiduciary duty which involves personal profit;
(C) the optionee's commission of material mismanagement in the
conduct of his duties as assigned to him by the Board of
Directors or the optionee's supervising officer or officers of
the Company or any Related Entity; (D) the optionee's willful
failure to execute or comply with the policies of the Company
or any Related Entity or his stated duties as established by
the Board of Directors or the optionee's supervising officer
or officers of the Company or any Related Entity, or the
optionee's intentional failure to perform the optionee's
stated duties; or (E) substance abuse or addiction on the part
of the optionee. "Good Cause", with respect to any Eligible
Non-Employee, shall mean (unless another definition is agreed
to in writing by the Company and the optionee) termination by
action of the Board of Directors because of: (A) the
optionee's conviction of, or plea of nolo contendere to, a
felony or a crime involving moral turpitude; (B) the
optionee's personal dishonesty, incompetence, willful
misconduct, willful violation of any law, rule or regulation
(other than minor traffic violations or similar offenses) or
breach of fiduciary duty which involves personal profit; (C)
the optionee's commission of material mismanagement in
providing services to the Company or any Related Entity; (D)
the optionee's willful failure to comply with the policies of
the Company in providing services to the Company or any
Related Entity, or the optionee's intentional failure to
perform the services for which the optionee has been engaged;
(E) substance abuse or addiction on the part of the optionee;
or (F) the optionee's willfully making any material
misrepresentation or willfully omitting to disclose any
material fact to the board of directors of the Company or any
Related Entity with respect to the business of the Company or
any Related Entity. Notwithstanding the foregoing, in the
case of any optionee who, subsequent to the effective date of
the Plan, enters into an employment agreement with the Company
or any Related Entity that contains a definition of "Good
Cause" (or any similar definition), then during the term of
such employment agreement the definition contained in such
employment agreement shall be the applicable definition of
"Good Cause" under the Plan as to such optionee if such
employment agreement expressly so provides.
s. "Grantor" has the meaning set forth in Section 9 hereof.
t. "Hicks Muse Company" shall mean any Person in which the HMC
Group beneficially owns more than 25% of the fully-diluted
common stock or has an unrecovered investment of $1,000,000 or
more, and each Subsidiary thereof.
u. "HMC Group" shall mean Hicks, Muse, Tate & Furst Incorporated,
its Affiliates and their respective employees, officers, and
directors (and members of their respective families and trusts
for the primary benefit of such family members).
v. "Imputed Rate" shall mean the lowest per annum rate necessary
to avoid the imputation of interest under the Internal Revenue
Code of 1986, as amended.
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w. "Incentive Options" shall have the meaning set forth in
Section 6 hereof.
x. The term "included" when used herein shall mean "including,
but not limited to".
y. "Key Employee" shall have the meaning set forth in Section 4
hereof.
z. "Marketable Securities" shall mean securities (i) of a class
or series listed or traded on the New York Stock Exchange,
American Stock Exchange, or NASDAQ National Market and (ii)
which, as a matter of law, shall at the time of acquisition be
(or which at the date of acquisition are legally committed to
become within six months after the date of acquisition) freely
saleable in unlimited quantities by the HMC Group to the
public, either pursuant to an effective registration statement
under the Securities Act as amended (including a current
prospectus which is available for delivery) or without the
necessity of such registration.
aa. "Non-Qualified Options" shall have the meaning set forth in
Section 6 hereof.
aa. "Options" shall have the meaning set forth in Section 1
hereof.
ab. "Person" shall have the meaning set forth in Section 4 hereof,
ac. "Plan" shall have the meaning set forth in Section 1 hereof.
ad. "Purchasable Shares" shall have the meaning set forth in
Section 9 hereof.
ae. "Purchase Option" shall have the meaning set forth in Section
9 hereof.
af. "Qualifying Public Offering" shall mean a firm commitment
underwritten public offering of Common Stock for cash where
the shares of Common Stock registered under the Securities Act
are listed on a national securities exchange or traded on the
NASDAQ National Market; provided, however, that such a public
offering shall not constitute a "Qualifying Public Offering"
unless the aggregate proceeds to the Company (prior to
deducting any underwriters' discounts and commissions) from
such offering and any similar prior public offerings exceed
$10 million..
ag. "Related Entities" shall have the meaning set forth in Section
1 hereof.
ah. "Reorganization" shall have the meaning set forth in Section
10 hereof.
ai. "Right of First Refusal" shall have the meaning set forth in
Section 11.b. hereof.
aj. "Rule 16b-3" shall mean Rule 16b-3 as amended, or other
applicable rules, under Section 16(b) of the Exchange Act.
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<PAGE> 19
ak. "Sale of the Company" shall mean the first to occur of (i) any
sale, lease, exchange, or other transfer (in one transaction
or series of related transactions) of all or substantially all
of the assets of the Company to any Person or group of related
Persons for purposes of Section 13(d) of the Exchange Act,
other than one or more members of the HMC Group (a "Clause 1
Event"), (ii) the Company's ceasing to be a Hicks Muse Company
in a transaction or series of related transactions initiated
or agreed to by the HMC Group (other than the distribution by
one or more Equity Fund Investment Vehicles, following a
Qualifying Public Offering, of equity securities of the
Company to the investors in such Equity Fund Investment
Vehicle(s)) (a "Clause 2 Event"), or (iii) the consummation of
a transaction or series of related transactions initiated or
agreed to by the HMC Group pursuant to which the HMC Group
receives, in respect of its shares of Common Stock, cash
and/or Marketable Securities which have an aggregate value
equal to at least 75% of the total value of all Common Stock
owned by the HMC Group immediately prior to such transaction,
as determined by the Board of Directors in good faith (a
"Clause 3 Event"); provided, however, that the occurrence of a
Clause 1 Event, a Clause 2 Event or a Clause 3 Event on any
date after the Designated Date shall not constitute a "Sale of
the Company".
al. "Sale Notice" shall have the meaning set forth in Section 11.b
hereof.
am. "Securities Act" shall mean the Securities Act of 1933, as
amended.
an. "Subsidiary" shall mean, with respect to any Person, any other
Person of which such first Person owns or has the power to
vote, directly or indirectly, securities representing a
majority of the votes ordinarily entitled to be cast for the
election of directors or other governing Persons.
ao. "Transfer" shall have the meaning set forth in Section 11.b.
hereof.
19. Amendment of Plan.
The Board of Directors shall have the right to amend, modify, suspend
or terminate the Plan at any time; provided, that no amendment shall be made
which shall increase the total number of shares of the Common Stock which may
be issued and sold pursuant to Options granted under the Plan or decrease the
minimum Option exercise price in the case of an Incentive Option, or modify the
provisions of the Plan relating to eligibility with respect to Incentive
Options unless such amendment is made by or with the approval of the
stockholders. The Board of Directors shall have the right to amend the Plan
and the Options outstanding thereunder, without the consent or joinder of any
optionee or other Person, in such manner as may be determined necessary or
appropriate by the Board of Directors in order to cause the Plan and the
Options outstanding thereunder (i) to qualify as "incentive stock options"
within the meaning of Section 422 of the Code, (ii) to comply with Rule 16b-3
(or any successor rule) under the Exchange Act (or any successor law) and the
regulations (including any temporary regulations) promulgated thereunder, or
(iii) to comply with
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<PAGE> 20
Section 162(m) of the Code (or any successor section) and the regulations
(including any temporary regulations) promulgated thereunder. Except as
provided above, no amendment, modification, suspension or termination of the
Plan shall alter or impair any Options previously granted under the Plan,
without the consent of the holder thereof.
20. Effective Date.
The Plan shall become effective on the date of consummation of the
transactions contemplated in the Stock Purchase Agreement dated November 7,
1996, by and among the Company, HMTF Acquisition Corp. and the Selling
Securityholders named therein. The Plan was approved by the Board of Directors
of the Company and the stockholders of the Company on November 7, 1996.
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<PAGE> 21
THE SHARES ISSUABLE PURSUANT TO THIS AGREEMENT ARE SUBJECT TO AN
OPTION TO REPURCHASE AND A RIGHT OF FIRST REFUSAL PROVIDED UNDER THE
PROVISIONS OF THE COMPANY'S 1996 STOCK OPTION PLAN AND THIS AGREEMENT
ENTERED INTO PURSUANT THERETO. A COPY OF SUCH PLAN IS AVAILABLE UPON
WRITTEN REQUEST TO THE COMPANY AT ITS PRINCIPAL EXECUTIVE OFFICES.
EXHIBIT I
TO
ATRIUM CORPORATION
1996 STOCK OPTION PLAN
FORM OF INCENTIVE STOCK OPTION AGREEMENT
[DATE]
[NAME OF OPTIONEE]
[ADDRESS OF OPTIONEE]
Re: Grant of Stock Option
Dear [Name]:
The Board of Directors of Atrium Corporation (the "Company") has
adopted the Company's 1996 Stock Option Plan (the "Plan") for certain
individuals, directors and key employees of the Company and its Related
Entities. A copy of the Plan is being furnished to you concurrently with the
execution of this Option Agreement and shall be deemed a part of this Option
Agreement as if fully set forth herein. Unless the context otherwise requires,
all terms defined in the Plan shall have the same meaning when used herein.
1. The Grant.
Subject to the conditions set forth below, the Company hereby grants
to you, effective as of ____________________, 199__ (the "Grant Date"), as a
matter of separate inducement and not in lieu of any salary or other
compensation for your services, the right and option to purchase (the
"Option"), in accordance with the terms and conditions set forth herein and in
the Plan, an aggregate of ____________ shares of Common Stock of the Company
(the "Option Shares"), at the Exercise Price (as hereinafter defined). As used
herein, the term "Exercise Price" shall mean a price equal to $__________ per
share [THE FAIR MARKET VALUE PER SHARE AT THE TIME OF GRANT, UNLESS THE
OPTIONEE OWNS STOCK OF THE COMPANY, OR ANY RELATED ENTITY, POSSESSING MORE THAN
TEN PERCENT (10%) OF THE TOTAL COMBINED VOTING POWER OF ALL CLASSES OF STOCK OF
THE COMPANY OR ANY RELATED ENTITY, IN WHICH CASE IT SHALL EQUAL 110% OF THE
FAIR MARKET VALUE PER SHARE AT THE TIME OF GRANT], subject to the adjustments
and limitations set forth herein and in the Plan. The Option granted hereunder
is intended to constitute an Incentive Option within the meaning of the Plan;
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<PAGE> 22
however, you should consult with your tax advisor concerning the proper
reporting of any federal or state tax liability that may arise as a result of
the grant or exercise of the Option.
2. Exercise.
(a) For purposes of this Option Agreement, the Option
Shares shall be deemed "Nonvested Shares" unless and until they have become
"Vested Shares." The Option Shares shall become "Vested Shares" in five equal,
consecutive annual installments, commencing on the first anniversary of the
Vesting Date, provided that vesting shall cease upon your ceasing to be an
employee of the Company or a Related Entity as expressly provided in Section 3
hereof. The Vesting Date shall be ____________________ [THE DATE OF THE GRANT
OF THE OPTION].
(b) Subject to the relevant provisions and limitations
contained herein and in the Plan, you may exercise the Option to purchase all
or a portion of the applicable number of Vested Shares at any time prior to the
termination of the Option pursuant to this Option Agreement. In no event shall
you be entitled to exercise the Option for any Nonvested Shares or for a
fraction of a Vested Share.
(c) The unexercised portion of the Option, if any, will
automatically, and without notice, terminate and become null and void upon the
expiration of ten (10) years from the Grant Date; provided, however, if on the
Grant Date you own stock of the Company, or any Related Entity, possessing more
than ten percent (10%) of the total combined voting power of all classes of
stock of the Company or any Related Entity, such Option shall become null and
void upon the expiration of five (5) years from the Grant Date.
(d) Any exercise by you of the Option shall be in writing
addressed to the Secretary of the Company at its principal place of business (a
copy of the form of exercise to be used will be available upon written request
to the Secretary), and shall be accompanied by a certified or bank check
payable to the order of the Company in the full amount of the Exercise Price of
the shares so purchased, or in such other manner as described in the Plan and
approved by the Committee.
3. Termination of Employment.
Upon the termination of your employment with the Company and any
Related Entity, you may, until the earlier of (x) 30 days from the date of such
termination or (y) the expiration of the Option in accordance with its terms,
exercise the Option with respect to all or any part of the Vested Shares which
you were entitled to purchase immediately prior to such termination and,
thereafter, the Option shall, to the extent not previously exercised,
automatically terminate and become null and void, provided that:
(a) in the case of termination of your employment with
the Company or any Related Entity due to death, your estate (or any Person who
acquired the right to exercise such Option by bequest or inheritance or
otherwise by reason of your death) may, until the earlier of (x) the 180th day
after the date of death or (y) the expiration of the Option in accordance with
its terms,
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exercise the Option with respect to all or any part of the Vested Shares which
you were entitled to purchase immediately prior to the time of your death;
(b) in the case of termination of your employment with
the Company or any Related Entity due to Disability, you or your legal
representative may, until the earlier of (x) the 180th day after the date your
employment was terminated or (y) the expiration of the Option in accordance
with its terms, exercise the Option with respect to all or any part of the
Vested Shares which you were entitled to purchase immediately prior to the time
of such termination; and
(c) in the case of termination of your employment with
the Company or any Related Entity (i) for Good Cause (as determined by the
Committee in its sole judgment in accordance with the Plan and this Agreement)
or (ii) as a result of the voluntary termination by you of your employment
without the consent of the Company or any Related Entity, then you shall
immediately forfeit your rights under the Option except as to those Option
Shares already purchased.
4. Transferability.
Except as provided in Section 7 hereof, the Option and any rights or
interests therein are not assignable or transferable by you except by will or
the laws of descent and distribution, and during your lifetime, the Option
shall be exercisable only by you or, in the event that a legal representative
has been appointed in connection with your Disability, such legal
representative. Any Option Shares received upon exercise of this Option are
subject to the Company's Right of First Refusal (as defined in the Plan).
To assure the enforceability of the Company's rights under this
Section 4 in regard to the Right of First Refusal, each certificate or
instrument representing Common Stock or an Option held by you shall bear a
conspicuous legend in substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A RIGHT OF
FIRST REFUSAL PROVIDED UNDER THE PROVISIONS OF THE COMPANY'S 1996
STOCK OPTION PLAN AND A STOCK OPTION AGREEMENT ENTERED INTO PURSUANT
THERETO. A COPY OF SUCH OPTION PLAN AND OPTION AGREEMENT ARE
AVAILABLE UPON WRITTEN REQUEST TO THE COMPANY AT ITS PRINCIPAL
EXECUTIVE OFFICES.
5. Registration.
The Company shall not in any event be obligated to file any
registration statement under the Securities Act or any applicable state
securities laws to permit exercise of the Option or to issue any Common Stock
in violation of the Securities Act or any applicable state securities laws.
You (or in the event of your death or, in the event a legal representative has
been appointed in connection with your Disability, the Person exercising the
Option) shall, as a condition to your right to exercise the Option, deliver to
the Company an agreement or certificate containing such representations,
warranties and covenants as the Company may deem necessary or appropriate to
ensure that the issuance of the Option Shares pursuant to such exercise is not
required to be registered under the Securities Act or any applicable state
securities laws.
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<PAGE> 24
Certificates for Option Shares, when issued, shall have substantially
the following legend, or statements of other applicable restrictions, endorsed
thereon, and may not be immediately transferable:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY STATE SECURITIES LAWS. THE SHARES MAY NOT BE OFFERED
FOR SALE, SOLD, PLEDGED, TRANSFERRED OR OTHERWISE DISPOSED OF
UNTIL THE HOLDER HEREOF PROVIDES EVIDENCE SATISFACTORY TO THE
ISSUER (WHICH, IN THE DISCRETION OF THE ISSUER, MAY INCLUDE AN
OPINION OF COUNSEL SATISFACTORY TO THE ISSUER) THAT SUCH
OFFER, SALE, PLEDGE, TRANSFER OR OTHER DISPOSITION WILL NOT
VIOLATE APPLICABLE FEDERAL OR STATE LAWS.
The foregoing legend may not be required for Option Shares
issued pursuant to an effective registration statement under the Securities Act
and in accordance with applicable state securities laws.
6. Withholding Taxes.
By acceptance hereof, you hereby (i) agree to reimburse the
Company or any Related Entity by which you are employed for any federal, state
or local taxes required by any government to be withheld or otherwise deducted
by such corporation in respect of your exercise of all or a portion of the
Option; (ii) authorize the Company or any Related Entity by which you are
employed to withhold from any cash compensation paid to you, or on your behalf,
an amount sufficient to discharge any federal, state and local taxes imposed on
the Company, or the Related Entity by which you are employed, and which
otherwise has not been reimbursed by you, in respect of your exercise of all or
a portion of the Option; and (iii) agree that the Company may, in its
discretion, hold the stock certificate to which you are entitled upon exercise
of the Option as security for the payment of the aforementioned withholding tax
liability, until cash sufficient to pay that liability has been accumulated,
and may, in its discretion, effect such withholding by retaining shares
issuable upon the exercise of the Option having a Fair Market Value on the date
of exercise which is equal to the amount to be withheld.
7. Purchase Option.
(a) If (i) your employment with the Company or a Related
Entity terminates for any reason at any time or (ii) a Change of Control
occurs, the Company (and/or its designees) shall have the option (the "Purchase
Option") to purchase, and if the option is exercised, you (or your executor or
the administrator of your estate or the Person who acquired the right to
exercise the Option by bequest or inheritance in the event of your death, or
your legal representative in the event of your incapacity (hereinafter,
collectively with such optionee, the "Grantor")) shall sell to the Company
and/or its assignee(s), all or any portion (at the Company's option) of the
Option Shares and/or the Option held by the Grantor (such Option Shares and
Option collectively being referred to as the "Purchasable Shares"), subject to
the Company's compliance with the conditions hereinafter set forth.
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<PAGE> 25
(b) The Company shall give notice in writing to the
Grantor of the exercise of the Purchase Option within one (1) year from the
date of the termination of your employment or engagement or such Change of
Control. Such notice shall state the number of Purchasable Shares to be
purchased and the determination of the Board of Directors of the Fair Market
Value per share of such Purchasable Shares. The Company's Purchase Option
shall lapse if not exercised by the Company within the time period specified
above in accordance with the provisions hereof, except as otherwise provided in
paragraph "e" below.
(c) The purchase price to be paid for the Purchasable
Shares purchased pursuant to the Purchase Option shall be, in the case of any
Option Shares, the Fair Market Value per share times the number of shares being
purchased, and in the case of the Option, the Fair Market Value per share times
the number of Vested Shares subject to such Option which are being purchased,
less the applicable per share Option exercise price. The Company shall pay
such purchase price by the tender of a check in the amount of the purchase
price to be paid for the Purchasable Shares or by the delivery of a promissory
note as provided in paragraph "e" below. The closing of such purchase shall
take place at the Company's principal executive offices within ten days after
the purchase price has been determined. At such closing, the Grantor shall
deliver or shall cause to be delivered to the purchasers the certificates or
instruments evidencing the Purchasable Shares being purchased, duly endorsed
(or accompanied by duly executed stock powers) and otherwise in good form for
delivery, against payment of the purchase price by check of the purchasers. In
the event that, notwithstanding the foregoing, the Grantor shall have failed to
obtain the release of any pledge or other encumbrance on any Purchasable Shares
by or upon the scheduled closing date (at the option of the purchasers), the
closing shall nevertheless occur on such scheduled closing date, with the cash
purchase price being reduced to the extent of all unpaid indebtedness for which
such Purchasable Shares are then pledged or encumbered. Upon tender by the
Company of a check in the amount of the purchase price for the Purchasable
Shares or a promissory note as provided in paragraph "e" below, (i) the shares
of Common Stock comprising a portion of the Purchasable Shares, or the portion
thereof so purchased, shall no longer be deemed to be outstanding, and (ii) the
Options comprising a portion of the Purchasable Shares, or the portion thereof
so purchased, shall no longer be deemed to be outstanding and all of the
Grantor's rights with respect to such Purchasable Shares shall terminate, with
the exception of the right of the Grantor to receive the purchase price in
exchange therefore pursuant to this paragraph "c".
(d) To assure the enforceability of the Company's rights
under this Section 7, each certificate or instrument representing Option Shares
subject to this Option Agreement shall bear a conspicuous legend in
substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AN
OPTION TO REPURCHASE PROVIDED UNDER THE PROVISIONS OF THE
COMPANY'S 1996 STOCK OPTION PLAN AND A STOCK OPTION AGREEMENT
ENTERED INTO PURSUANT THERETO. A COPY OF SUCH OPTION PLAN AND
OPTION AGREEMENT ARE AVAILABLE UPON WRITTEN REQUEST TO THE
COMPANY AT ITS PRINCIPAL EXECUTIVE OFFICES.
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(e) Notwithstanding any provision to the contrary in paragraph "c"
above, in the event that any payment by the Company of any portion of the
purchase price (or any remaining portion thereof) for any portion of the
Purchasable Shares that the Company is obligated to purchase is, at the time
such payment would otherwise be due hereunder, prohibited by the terms of any
of the Company's or any of its Subsidiaries' financing arrangements with their
lenders or any other contracts to which the Company or any of its Subsidiaries
is bound, the Company shall be entitled to complete the exercise of the
Purchase Option by tendering to the Grantor (a) a check for that portion of the
purchase price the payment of which is not so prohibited, and (b) a promissory
note for the balance of the purchase price. Each such promissory note shall
(i) bear interest at the Imputed Rate, (ii) provide for the payment of the
principle evidenced thereby in annual installments commencing one (1) year
after such termination in such amounts as are satisfactory to the Company's and
its Subsidiaries' lenders, and (ii) be subordinated to the Company's and its
Subsidiaries' indebtedness to its lenders on terms satisfactory to such
lenders.
(f) If, after giving effect to the provisions of paragraph "e"
above, the Company is prohibited by law from purchasing any Purchasable Shares
which it is obligated or has elected to repurchase hereunder due to any
existing or prospective impairment of its capital, the closing of such purchase
shall be delayed until the first date on which the Company has sufficient
capital to lawfully repurchase such Purchasable Shares (the "Delayed Closing
Date"). In the event of any such delay, the Company will be obligated to pay,
on the Delayed Closing Date, interest on the purchase price for such
Purchasable Shares, at the Imputed Rate from the date on which the closing of
the purchase of such Purchasable Shares was originally scheduled to occur to
the Delayed Closing Date.
The Company's rights under this Section 7 shall terminate upon
the consummation of a Qualifying Public Offering (as defined in the Plan).
8. Consent to Approved Sale.
If the Board and the holders of a majority of the Common Stock then
outstanding approve the Sale of the Company to an independent third party (the
"Approved Sale"), you shall consent to and raise no objections against the
Approved Sale, and if the Approved Sale is structured as a sale of capital
stock, you shall agree to sell all of your Option Shares and rights to acquire
Option Shares on the terms and conditions approved by the Board of Directors
and the holders of a majority of the Common Stock then outstanding. You shall
take all necessary and desirable actions in connection with the consummation of
the Approved Sale. For purposes of this Section 10, an "independent third
party" is any person who does not own in excess of 5% of the Common Stock on a
fully-diluted basis, who is not controlling, controlled by or under common
control with any such 5% owner of the Common Stock and who is not the spouse,
ancestor, descendant (by birth or adoption) or descendent of a grandparent of
any such 5% owner of the Common Stock. If the Company or the holders of the
Company's securities enter into any negotiation or transaction for which Rule
506 (or any similar rule then in effect) promulgated pursuant to the Securities
Act may be available with respect to such negotiation or transaction (including
a merger, consolidation or other reorganization), you shall, at the request of
the Company, appoint a purchaser representative (as such term is defined in
Rule 501 promulgated pursuant to the Securities Act) reasonably acceptable to
the Company. If you appoint the purchaser representative designated by the
Company, the Company will pay the fees of such purchaser representative, but if
you decline to appoint the purchaser representative designated by the
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<PAGE> 27
Company you shall appoint another purchaser representative (reasonably
acceptable to the Company), and you shall be responsible for the fees of the
purchaser representative so appointed.
9. Adjustments.
In the event that, by reason of any merger, consolidation,
combination, liquidation, reorganization, recapitalization, stock dividend,
stock split, split-up, split-off, spin-off, combination of shares, exchange of
shares or other like change in capital structure of the Company (collectively,
a "Reorganization"), the Common Stock is substituted, combined or changed into
any cash, property or other securities, or the shares of Common Stock are
changed into a greater or lesser number of shares of Common Stock, the number
and/or kind of shares and/or interests subject to an Option and the per share
price or value thereof shall be appropriately adjusted by the Committee to give
appropriate effect to such Reorganization, such that the Option shall
thereafter be exercisable for such securities, cash and/or other property as
would have been received in respect of the Option Shares subject to the Option
had the Option been exercised in full immediately prior to such event. Any
fractional shares or interests resulting from such adjustment shall be
eliminated. Notwithstanding the foregoing, (i) each such adjustment shall
comply with the rules of Section 424(a) of the Code, and (ii) in no event shall
any adjustment be made which would render the Option not to be an "incentive
stock option" for purposes of Section 422 of the Code.
10. Miscellaneous.
(a) This Option Agreement is subject to all the terms,
conditions, limitations and restrictions contained in the Plan. In the event
of any conflict or inconsistency between the terms hereof and the terms of the
Plan, the terms of the Plan shall be controlling.
(b) This Option Agreement is not a contract of employment
and the terms of your employment shall not be affected by, or construed to be
affected by, this Option Agreement, except to the extent specifically provided
herein. Nothing herein shall impose, or be construed as imposing, any
obligation (i) on the part of the Company or any Related Entity to continue
your employment, or (ii) on your part to remain in the employ of the Company or
any Related Entity.
(c) This Option Agreement may be amended as provided in
Section 19 of the Plan.
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<PAGE> 28
Please indicate your acceptance of all the terms and conditions of the
Option and the Plan by signing and returning a copy of this Option Agreement.
Very truly yours,
ATRIUM CORPORATION
By:
----------------------------------
Title:
-------------------------------
ACCEPTED:
- ---------------------------------
Signature of Optionee
- ---------------------------------
Name of Optionee (Please Print)
Date:
----------------------
8
<PAGE> 29
THE SHARES ISSUABLE PURSUANT TO THIS AGREEMENT ARE SUBJECT TO AN
OPTION TO REPURCHASE AND A RIGHT OF FIRST REFUSAL PROVIDED UNDER THE
PROVISIONS OF THE COMPANY'S 1996 STOCK OPTION PLAN AND THIS AGREEMENT
ENTERED INTO PURSUANT THERETO. A COPY OF SUCH PLAN IS AVAILABLE UPON
WRITTEN REQUEST TO THE COMPANY AT ITS PRINCIPAL EXECUTIVE OFFICES.
EXHIBIT II
TO
ATRIUM CORPORATION
1996 STOCK OPTION PLAN
FORM OF
NON-QUALIFIED STOCK OPTION AGREEMENT
FOR KEY EMPLOYEES
[DATE]
[NAME OF OPTIONEE]
[ADDRESS OF OPTIONEE]
Re: Grant of Stock Option
Dear [Name]:
The Board of Directors Atrium Corporation (the "Company") has adopted
the Company's 1996 Stock Option Plan (the "Plan") for certain individuals,
directors and key employees of the Company and its Related Entities. A copy of
the Plan is being furnished to you concurrently with the execution of this
Option Agreement and shall be deemed a part of this Option Agreement as if
fully set forth herein. Unless the context otherwise requires, all terms
defined in the Plan shall have the same meaning when used herein.
1. The Grant.
Subject to the conditions set forth below, the Company hereby grants
to you, effective as of _____________, ____ ("Grant Date"), as a matter of
separate inducement and not in lieu of any salary or other compensation for
your services, the right and option to purchase (the "Option"), in accordance
with the terms and conditions set forth herein and in the Plan, an aggregate of
____________ shares of Common Stock of the Company (the "Option Shares"), at
the Exercise Price (as hereinafter defined). As used herein, the term
"Exercise Price" shall mean a price equal to $____________ per share, subject
to the adjustments and limitations set forth herein and in the Plan. The
Option granted hereunder is intended to constitute a Non-Qualified Option
within the meaning
1
<PAGE> 30
of the Plan; however, you should consult with your tax advisor concerning the
proper reporting of any federal or state tax liability that may arise as a
result of the grant or exercise of the Option.
2. Exercise.
(a) For purposes of this Option Agreement, the Option
Shares shall be deemed "Nonvested Shares" unless and until they have become
"Vested Shares." The Option Shares shall become "Vested Shares" in five equal,
consecutive annual installments, commencing on the first anniversary of the
Vesting Date, provided that vesting shall cease upon your ceasing to be an
employee of the Company or a Related Entity as expressly provided in Section 3
hereof. The Vesting Date shall be ____________________ [THE DATE OF THE GRANT
OF THE OPTION].
(b) Subject to the relevant provisions and limitations
contained herein and in the Plan, you may exercise the Option to purchase all
or a portion of the applicable number of Vested Shares at any time prior to the
termination of the Option pursuant to this Option Agreement. In no event shall
you be entitled to exercise the Option for any Nonvested Shares or for a
fraction of a Vested Share.
(c) The unexercised portion of the Option, if any, will
automatically, and without notice, terminate and become null and void upon the
expiration of ten (10) years from the Grant Date.
(d) Any exercise by you of the Option shall be in writing
addressed to the Secretary of the Company at its principal place of business (a
copy of the form of exercise to be used will be available upon written request
to the Secretary), and shall be accompanied by a certified or bank check
payable to the order of the Company in the full amount of the Exercise Price of
the shares so purchased, or in such other manner as described in the Plan and
approved by the Committee.
3. Termination of Employment.
Upon the termination of your employment with the Company or any
Related Entity, you may, until the earlier of (x) 30 days from the date of such
termination or (y) the expiration of the Option in accordance with its terms,
exercise the Option with respect to all or any part of the Vested Shares which
you were entitled to purchase immediately prior to such termination and,
thereafter, the Option shall, to the extent not previously exercised,
automatically terminate and become null and void, provided that:
(a) in the case of termination of your employment with
the Company or any Related Entity due to death, your
estate (or any Person who acquired the right to
exercise such Option by bequest or inheritance or
otherwise by reason of your death) may, until the
earlier of (x) the 180th day after the date of death
or (y) the expiration of the Option in accordance
with its terms, exercise the Option with respect to
all or any part of the Vested Shares which you were
entitled to purchase immediately prior to the time of
your death;
2
<PAGE> 31
(b) in the case of termination of your employment with
the Company or any Related Entity due to Disability,
you or your legal representative may, until the
earlier of (x) the 180th day after the date your
employment was terminated or (y) the expiration of
the Option in accordance with its terms, exercise the
Option with respect to all or any part of the Vested
Shares which you were entitled to purchase
immediately prior to the time of such termination;
and
(c) in the case of termination of your employment with
the Company or any Related Entity (i) for Good Cause
(as determined by the Committee in its sole judgment
in accordance with the Plan and this Agreement) or
(ii) as a result of the voluntary termination by you
of your employment without the consent of the Company
or any Related Entity, then you shall immediately
forfeit your rights under the Option except as to
those Option Shares already purchased.
4. Transferability.
Except as provided in Section 7 hereof, the Option and any
rights or interests therein are not assignable or transferable by you except by
will or the laws of descent and distribution, and during your lifetime, the
Option shall be exercisable only by you or, in the event that a legal
representative has been appointed in connection with your Disability, such
legal representative. Any Option Shares received upon exercise of this Option
are subject to the Company's Right of First Refusal (as defined in the Plan).
To assure the enforceability of the Company's rights under this
Section 4 in regard to the Right of First Refusal, each certificate or
instrument representing Common Stock or an Option held by you shall bear a
conspicuous legend in substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A RIGHT OF
FIRST REFUSAL PROVIDED UNDER THE PROVISIONS OF THE COMPANY'S 1996
STOCK OPTION PLAN AND A STOCK OPTION AGREEMENT ENTERED INTO PURSUANT
THERETO. A COPY OF SUCH OPTION PLAN AND OPTION AGREEMENT ARE
AVAILABLE UPON WRITTEN REQUEST TO THE COMPANY AT ITS PRINCIPAL
EXECUTIVE OFFICES.
5. Registration.
The Company shall not in any event be obligated to file any
registration statement under the Securities Act or any applicable state
securities laws to permit exercise of the Option or to issue any Common Stock
in violation of the Securities Act or any applicable state securities laws.
You (or in the event of your death or, in the event a legal representative has
been appointed in connection with your Disability, the Person exercising the
Option) shall, as a condition to your right to exercise the Option, deliver to
the Company an agreement or certificate containing such representations,
warranties and covenants as the Company may deem necessary or appropriate to
3
<PAGE> 32
ensure that the issuance of the Option Shares pursuant to such exercise is not
required to be registered under the Securities Act or any applicable state
securities laws.
Certificates for Option Shares, when issued, shall have
substantially the following legend, or statements of other applicable
restrictions, endorsed thereon, and may not be immediately transferable:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY STATE SECURITIES LAWS. THE SHARES MAY NOT BE OFFERED
FOR SALE, SOLD, PLEDGED, TRANSFERRED OR OTHERWISE DISPOSED OF
UNTIL THE HOLDER HEREOF PROVIDES EVIDENCE SATISFACTORY TO THE
ISSUER (WHICH, IN THE DISCRETION OF THE ISSUER, MAY INCLUDE AN
OPINION OF COUNSEL SATISFACTORY TO THE ISSUER) THAT SUCH
OFFER, SALE, PLEDGE, TRANSFER OR OTHER DISPOSITION WILL NOT
VIOLATE APPLICABLE FEDERAL OR STATE LAWS.
The foregoing legend may not be required for Option Shares
issued pursuant to an effective registration statement under the Securities Act
and in accordance with applicable state securities laws.
6. Withholding Taxes.
By acceptance hereof, you hereby (i) agree to reimburse the
Company or any Related Entity by which you are employed for any federal, state
or local taxes required by any government to be withheld or otherwise deducted
by such corporation in respect of your exercise of all or a portion of the
Option; (ii) authorize the Company or any Related Entity by which you are
employed to withhold from any cash compensation paid to you, or on your behalf,
an amount sufficient to discharge any federal, state and local taxes imposed on
the Company, or the Related Entity by which you are employed, and which
otherwise has not been reimbursed by you, in respect of your exercise of all or
a portion of the Option; and (iii) agree that the Company may, in its
discretion, hold the stock certificate to which you are entitled upon exercise
of the Option as security for the payment of the aforementioned withholding tax
liability, until cash sufficient to pay that liability has been accumulated,
and may, in its discretion, effect such withholding by retaining shares
issuable upon the exercise of the Option having a Fair Market Value on the date
of exercise which is equal to the amount to be withheld.
7. Purchase Option.
(a) If (i) your employment with the Company or a Related
Entity terminates for any reason at any time or (ii) a Change of Control
occurs, the Company (and/or its designees) shall have the option (the "Purchase
Option") to purchase, and if the option is exercised, you (or your executor or
the administrator of your estate or the Person who acquired the right to
exercise the Option by bequest or inheritance in the event of your death, or
your legal representative in the event of your incapacity (hereinafter,
collectively with such optionee, the "Grantor")) shall sell to the Company
and/or its assignee(s), all or any portion (at the Company's option) of the
Option Shares
4
<PAGE> 33
and/or the Option held by the Grantor (such Option Shares and Option
collectively being referred to as the "Purchasable Shares"), subject to the
Company's compliance with the conditions hereinafter set forth.
(b) The Company shall give notice in writing to the
Grantor of the exercise of the Purchase Option within one (1) year from the
date of the termination of your employment or engagement or such Change of
Control. Such notice shall state the number of Purchasable Shares to be
purchased and the determination of the Board of Directors of the Fair Market
Value per share of such Purchasable Shares. The Company's Purchase Option
shall lapse if not exercised by the Company within the time period specified
above in accordance with the provisions hereof, except as otherwise provided in
paragraph "e" below.
(c) The purchase price to be paid for the Purchasable
Shares purchased pursuant to the Purchase Option shall be, in the case of any
Option Shares, the Fair Market Value per share times the number of shares being
purchased, and in the case of the Option, the Fair Market Value per share times
the number of Vested Shares subject to such Option which are being purchased,
less the applicable per share Exercise Price. The Company shall pay such
purchase price by the tender of a check in the amount of the purchase price to
be paid for the Purchasable Shares or by the delivery of a promissory note as
provided in paragraph "e" below. The closing of such purchase shall take place
at the Company's principal executive offices within ten days after the purchase
price has been determined. At such closing, the Grantor shall deliver or shall
cause to be delivered to the purchasers the certificates or instruments
evidencing the Purchasable Shares being purchased, duly endorsed (or
accompanied by duly executed stock powers) and otherwise in good form for
delivery, against payment of the purchase price by check of the purchasers. In
the event that, notwithstanding the foregoing, the Grantor shall have failed to
obtain the release of any pledge or other encumbrance on any Purchasable Shares
by or upon the scheduled closing date (at the option of the purchasers), the
closing shall nevertheless occur on such scheduled closing date, with the cash
purchase price being reduced to the extent of all unpaid indebtedness for which
such Purchasable Shares are then pledged or encumbered. Upon tender by the
Company of a check in the amount of the purchase price for the Purchasable
Shares or a promissory note as provided in paragraph "e" below, (i) the shares
of Common Stock comprising a portion of the Purchasable Shares, or the portion
thereof so purchased, shall no longer be deemed to be outstanding, and (ii) the
Options comprising a portion of the Purchasable Shares, or the portion thereof
so purchased, shall no longer be deemed to be outstanding and all of the
Grantor's rights with respect to such Purchasable Shares shall terminate, with
the exception of the right of the Grantor to receive the purchase price in
exchange therefore pursuant to this paragraph "c".
(d) To assure the enforceability of the Company's rights
under this Section 7, each certificate or instrument representing Option Shares
subject to this Option Agreement shall bear a conspicuous legend in
substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AN
OPTION TO REPURCHASE PROVIDED UNDER THE PROVISIONS OF THE
COMPANY'S 1996 STOCK OPTION PLAN AND A STOCK OPTION AGREEMENT
ENTERED INTO PURSUANT THERETO. A COPY OF SUCH OPTION PLAN AND
OPTION AGREEMENT ARE AVAILABLE UPON
5
<PAGE> 34
WRITTEN REQUEST TO THE COMPANY AT ITS PRINCIPAL EXECUTIVE
OFFICES.
(e) Notwithstanding any provision to the contrary in paragraph "c"
above, in the event that any payment by the Company of any portion of the
purchase price (or any remaining portion thereof) for any portion of the
Purchasable Shares that the Company is obligated to purchase is, at the time
such payment would otherwise be due hereunder, prohibited by the terms of any
of the Company's or any of its Subsidiaries' financing arrangements with their
lenders or any other contracts to which the Company or any of its Subsidiaries
is bound, the Company shall be entitled to complete the exercise of the
Purchase Option by tendering to the Grantor (a) a check for that portion of the
purchase price the payment of which is not so prohibited, and (b) a promissory
note for the balance of the purchase price. Each such promissory note shall
(i) bear interest at the Imputed Rate, (ii) provide for the payment of the
principle evidenced thereby in annual installments commencing one (1) year
after such termination in such amounts as are satisfactory to the Company's and
its Subsidiaries' lenders, and (ii) be subordinated to the Company's and its
Subsidiaries' indebtedness to its lenders on terms satisfactory to such
lenders.
(f) If, after giving effect to the provisions of paragraph "e"
above, the Company is prohibited by law from purchasing any Purchasable Shares
which it is obligated or has elected to repurchase hereunder due to any
existing or prospective impairment of its capital, the closing of such purchase
shall be delayed until the first date on which the Company has sufficient
capital to lawfully repurchase such Purchasable Shares (the "Delayed Closing
Date"). In the event of any such delay, the Company will be obligated to pay,
on the Delayed Closing Date, interest on the purchase price for such
Purchasable Shares, at the Imputed Rate from the date on which the closing of
the purchase of such Purchasable Shares was originally scheduled to occur to
the Delayed Closing Date.
The Company's rights under this Section 7 shall terminate upon
the consummation of a Qualifying Public Offering
8. Consent to Approved Sale.
If the Board and the holders of a majority of the Common Stock
then outstanding approve the Sale of the Company to an independent third party
(the "Approved Sale"), you shall consent to and raise no objections against the
Approved Sale, and if the Approved Sale is structured as a sale of capital
stock, you shall agree to sell all of your Option Shares and rights to acquire
Option Shares on the terms and conditions approved by the Board of Directors
and the holders of a majority of the Common Stock then outstanding. You shall
take all necessary and desirable actions in connection with the consummation of
the Approved Sale. For purposes of this Section 10, an "independent third
party" is any person who does not own in excess of 5% of the Common Stock on a
fully-diluted basis, who is not controlling, controlled by or under common
control with any such 5% owner of the Common Stock and who is not the spouse,
ancestor, descendant (by birth or adoption) or descendent of a grandparent of
any such 5% owner of the Common Stock. If the Company or the holders of the
Company's securities enter into any negotiation or transaction for which Rule
506 (or any similar rule then in effect) promulgated pursuant to the Securities
Act may be available with respect to such negotiation or transaction (including
a merger, consolidation or other reorganization), you shall, at the request of
the Company, appoint a purchaser representative
6
<PAGE> 35
(as such term is defined in Rule 501 promulgated pursuant to the Securities
Act) reasonably acceptable to the Company. If you appoint the purchaser
representative designated by the Company, the Company will pay the fees of such
purchaser representative, but if you decline to appoint the purchaser
representative designated by the Company you shall appoint another purchaser
representative (reasonably acceptable to the Company), and you shall be
responsible for the fees of the purchaser representative so appointed.
9. Adjustments.
In the event that, by reason of any merger, consolidation,
combination, liquidation, reorganization, recapitalization, stock dividend,
stock split, split-up, split-off, spin-off, combination of shares, exchange of
shares or other like change in capital structure of the Company (collectively,
a "Reorganization"), the Common Stock is substituted, combined or changed into
any cash, property or other securities, or the shares of Common Stock are
changed into a greater or lesser number of shares of Common Stock, the number
and/or kind of shares and/or interests subject to an Option and the per share
price or value thereof shall be appropriately adjusted by the Committee to give
appropriate effect to such Reorganization, such that the Option shall
thereafter be exercisable for such securities, cash and/or other property as
would have been received in respect of the Option Shares subject to the Option
had the Option been exercised in full immediately prior to such event. Any
fractional shares or interests resulting from such adjustment shall be
eliminated.
10. Miscellaneous.
(a) This Option Agreement is subject to all the terms,
conditions, limitations and restrictions contained in the Plan. In the event
of any conflict or inconsistency between the terms hereof and the terms of the
Plan, the terms of the Plan shall be controlling.
(b) This Option Agreement is not a contract of employment
and the terms of your employment shall not be affected by, or construed to be
affected by, this Option Agreement, except to the extent specifically provided
herein. Nothing herein shall impose, or be construed as imposing, any
obligation (i) on the part of the Company or any Related Entity to continue
your employment, or (ii) on your part to remain in the employ of the Company or
any Related Entity.
(c) This Option Agreement may be amended as provided in
Section 19 of the Plan.
7
<PAGE> 36
Please indicate your acceptance of all the terms and conditions of the
Option and the Plan by signing and returning a copy of this Option Agreement.
Very truly yours,
ATRIUM CORPORATION
By:
----------------------------------
Title:
-------------------------------
ACCEPTED:
- ----------------------------------
Signature of Optionee
- ----------------------------------
Name of Optionee (Please Print)
Date:
----------------------
8
<PAGE> 1
EXHIBIT 10.10
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT (the "Agreement") is made and
entered into as of November 7, 1996, by and between Atrium Corporation, a
Delaware corporation (hereinafter, together with its successors, referred to as
the "Company"), Randall S. Fojtasek (hereinafter referred to as the
"Executive") and, for the limited purposes set forth in Section 22 hereof,
Fojtasek Companies, Inc., a Texas corporation ("Sub").
RECITALS:
A. HMTF Acquisition Corp., a Delaware corporation (the "Buyer"),
the Company and the Selling Securityholders named therein have entered into a
Stock Purchase Agreement dated as of the date hereof (the "Purchase
Agreement"), pursuant to which the Company will issue and sell to Buyer, and
Buyer shall purchase from the Company, certain shares of the Company's common
stock, par value $0.01 per share ("Common Stock").
B. Fojtasek/Heritage Acquisition Company, a Delaware corporation,
and the Executive entered into an Employment and Non-Competition Agreement
dated as of July 3, 1995 (the "Original Employment Agreement").
C. Fojtasek/Heritage Acquisition Company has been merged with and
into Sub.
D. The Board of Directors of the Company (the "Board") has
determined that it is in the best interests of the Company and its stockholders
to employ the Executive on the terms and conditions set forth herein.
AGREEMENTS
NOW, THEREFORE, in consideration of the respective agreements and
covenants set forth herein and other good and valuable consideration, the
receipt of which is hereby acknowledged, the parties hereto, intending to be
legally bound, hereby agree as follows:
1. Definitions.
(a) Accrued Obligations means the sum of (i) the
Executive's Annual Base Salary (as hereinafter defined) earned or accrued
through the Date of Termination (as hereinafter defined) to the extent not
theretofore paid, (ii) reimbursement for any and all monies advanced by
Executive in connection with the Executive's employment for reasonable and
necessary expenses incurred by the Executive through the Date of Termination,
and (iii) any unpaid accrued vacation pay.
(b) Act means the Securities Exchange Act of 1934, as
amended.
<PAGE> 2
(c) Cause means (i) a breach by the Executive of the
Executive's obligations under Section 3 (other than as a result of physical or
mental incapacity) which constitutes a continued material nonperformance by the
Executive of his obligations and duties thereunder, as determined by the Board
in good faith, and which is not cured within 30 days after receipt of written
notice from the Company specifying such breach, (ii) commission by the
Executive of an act of fraud upon, or willful misconduct toward, the Company,
as reasonably determined by a majority of the disinterested members of the
Board after a hearing by the Board following ten days' notice to the Executive
of such hearing, (iii) the illegal use by the Executive of any drugs, (iv) a
material breach by the Executive of Section 7, Section 9 or Section 10, (v) the
conviction of the Executive of any felony or any crime involving moral
turpitude (or a plea of nolo contendere thereto); and (vi) the failure of the
Executive to carry out, or comply with, in any material respect any legal
directive of the Board consistent with the terms of this Agreement, which is
not cured within 30 days after receipt of written notice from the Company
specifying such failure. The Company may suspend the Executive's title and
authority pending the hearing provided for in clause (ii) above, and such
suspension shall not constitute "Good Reason", as defined below.
(d) Disability means the Executive's inability to perform
his duties and obligations hereunder for a period of 180 consecutive days due
to mental or physical incapacity as determined by a physician selected by the
Company or its insurers and reasonably acceptable to the Executive.
(e) Good Reason means (i) without the Executive's written
consent, any reduction, approved by the Board, in the amount of the Executive's
annual salary or any adverse change, approved by the Board, in the manner in
which the Executive's opportunity for an annual bonus is determined, (ii) any
material reduction, approved by the Board without the Executive's written
consent, in the aggregate value of the Executive's benefits under Section 4
hereof (other than annual salary or bonus) as in effect from time to time
(unless such reduction is pursuant to a general change in benefits applicable
to all similarly situated employees of the Company), (iii) any material breach
by the Company of this Agreement (other than a breach caused solely by the
Executive), or (iv) any significant reduction, approved by the Board without
the Executive's written consent, in the Executive's title, duties or
responsibilities. Notwithstanding the above, the occurrence of any of the
events described above will not constitute Good Reason unless the Executive
gives the Company written notice that such event constitutes Good Reason, and
the Company thereafter fails to cure the event within 30 days after receipt of
such notice.
(f) Initial Investment means the 32,000,000 shares of
Common Stock to be held by Buyer immediately following the closing of the
transactions contemplated in the Purchase Agreement.
(g) Initial Investment Amount means $32,000,000 to be
paid by Buyer to the Company in connection with its Initial Investment.
(h) Person means any "person", within the meaning of
Sections 13(d) and 14(d) of the Act, including a "group" as therein defined.
2
<PAGE> 3
(i) Subsidiary means, with respect to any Person, any
other Person of which such first Person owns or has the power to vote, directly
or indirectly, securities representing a majority of the votes ordinarily
entitled to be cast for the election of directors or other governing Persons.
(j) Target IRR means an internal rate of return of at
least 8%, as determined in good faith by the Board and calculated in accordance
with generally accepted financial practice, on the Initial Investment Amount
determined commencing as of the date of closing of the transactions
contemplated in the Purchase Agreement.
(k) Triggering Event means a date upon which the Target
IRR is achieved.
2. Term of Employment. Subject to the terms and provisions of
this Agreement, the Company hereby agrees to employ the Executive, and the
Executive hereby agrees to be employed by the Company, for a period (the
"Employment Period") commencing on the date that the transactions contemplated
in the Purchase Agreement are consummated (the "Effective Date") and ending on
the third anniversary of the Effective Date.
3. Position and Duties.
(a) During the term of the Executive's employment, the
Executive shall serve as President and Chief Executive Officer of the Company
and, in so doing, shall report to the Board. Subject to and in accordance with
the authority and direction of the Board, the Executive shall have supervision
and control over, and responsibility for, such management and operational
functions of the Company currently assigned to such position, and shall have
such other powers and duties (including holding officer positions with one or
more Subsidiaries of the Company) as may from time to time be prescribed by the
Board, so long as such powers and duties are reasonable and customary for the
President and Chief Executive Officer of an enterprise comparable to the
Company.
(b) During the term of the Executive's employment, and
excluding any periods of vacation and sick leave to which the Executive is
entitled, the Executive agrees to devote full business time to the business and
affairs of the Company and to use the Executive's best efforts to perform
faithfully, effectively and efficiently such responsibilities. During the term
of Executive's employment it shall not be a violation of this Agreement for the
Executive to (A) serve on corporate, civic or charitable boards or committees,
(B) deliver lectures or fulfill speaking engagements and (C) manage personal
and family investments, so long as such activities do not significantly
interfere with the performance of the Executive's responsibilities as an
employee of the Company in accordance with this Agreement.
4. Compensation. During the Employment Period, the Executive
shall be compensated by the Company or one or more of the Company's
Subsidiaries as follows:
(a) The Executive shall receive an annual base salary
("Annual Base Salary"), which shall be paid in accordance with the customary
payroll practices of the Company, in an amount equal to $350,000. The Board, in
its discretion, may at any time increase the amount of the
3
<PAGE> 4
Annual Base Salary to such greater amount as it may determine appropriate, and
the term "Annual Base Salary," as used in this Agreement, shall refer to Annual
Base Salary as it may be so increased.
(b) In addition to Annual Base Salary, the Executive
shall be eligible to receive an annual performance bonus in such amount, if any
(which amount shall not exceed $150,000), as shall be determined appropriate by
the Board pursuant to the applicable annual performance bonus plan as may be
adopted by the Board from time to time.
(c) The Executive shall be entitled to participate in all
incentive, savings and retirement plans, practices, policies and programs
applicable generally to other executives of the Company ("Investment Plans").
(d) The Executive and/or the Executive's family, as the
case may be, shall be eligible for participation in and shall receive all
benefits under welfare benefit plans, practices, policies and programs
("Welfare Plans") provided by the Company (including, without limitation,
medical, prescription, dental, disability, salary continuance, employee life,
group life, accidental death and travel accident insurance plans and programs)
to the extent applicable generally to other executives of the Company.
(e) The Executive shall be entitled to receive (in
addition to the benefits described above) such perquisites and fringe benefits
appertaining to his position in accordance with any practices as may be
established by the Board from time to time.
(f) The Executive shall be entitled to receive prompt
reimbursement for all reasonable employment expenses incurred by the Executive
in accordance with the policies, practices and procedures of the Company
established by the Board from time to time.
(g) The Executive shall be entitled to paid holidays in
accordance with the plans, policies, programs and practices of the Company for
its executive officers.
(h) The Executive shall be entitled to four (4) weeks
paid vacation each calendar year. Any vacation shall be taken at the reasonable
and mutual convenience of the Company and the Executive. Accrued vacation not
taken in any calendar year will not be carried forward or used in any
subsequent calendar year.
(i) The Executive shall be entitled to receive
reimbursement for the documented expenses incurred by him in connection with
purchasing, leasing or otherwise procuring the use of an automobile, in an
amount not to exceed $1,000 per month, plus reasonable and documented expenses
for the use of a car telephone, fuel, oil and maintenance and repairs for such
automobile.
(j) The Executive shall be entitled to receive
reimbursement for reasonable expenses incurred by him in connection with
obtaining comprehensive insurance coverage for the automobile described in
paragraph 4(i) above, which amount shall be in addition to the $1,000 per
month mentioned in paragraph 4(i) above.
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(k) The Executive shall be entitled to an expense
allowance of $1,000 per month, to be used for any purpose that the Executive
deems appropriate.
(l) On the Effective Date, the Company will grant to the
Executive a warrant (the "Executive Warrant") exercisable for 2,195,222 shares
of Common Stock. The Executive Warrant will entitle the Executive to purchase
from the Company (i) at the A Warrant Exercise Price (hereinafter defined),
1,333,333 shares of Common Stock, and (ii), at the B Warrant Exercise Price
(hereinafter defined), 861,889 shares of Common Stock. For purposes of this
Agreement, the "A Warrant Price" shall be an amount equal to $0.01 per share
and the "B Warrant Price" shall be an amount equal to $1.00 per share. The A
Warrant Price and the B Warrant Price shall be subject to adjustments to reflect
stock splits, reverse stock splits, stock dividends, combinations and
reclassifications; provided, that no such adjustment shall reduce either of
such exercise prices to an amount below $0.01 per share of Common Stock. The
Executive's right to exercise the A Warrant will be entirely vested on the
Effective Date. The Executive's right to exercise the B Warrant will vest with
respect to 1/1095 of the shares of Common Stock subject to the B Warrant on
each day following the Effective Date, such that all of the shares of Common
Stock issuable upon exercise of the B Warrant shall be vested on the third
anniversary of the Effective Date; provided that in no event may the B Warrant
be exercised prior to the Triggering Event. Subject to the provisions set forth
in Section 5 of this Agreement, the Executive Warrant shall be exercisable
until 5:00 p.m., Dallas, Texas time, on the tenth anniversary of the Effective
Date, at which time it shall expire. The Executive Warrant shall be in the form
attached as Exhibit A hereto.
5. Termination of Employment.
(a) Any termination by the Company for Cause or without
Cause, or by the Executive for Good Reason or without Good Reason, shall be
communicated by means of a Notice of Termination to the other party hereto. For
purposes of this Agreement, a "Notice of Termination" means a written notice
which specifies the effective date of the termination (which date shall not be
more than 15 days after the giving of such notice). The failure by the
Executive or the Company to set forth in the Notice of Termination any fact or
circumstance which contributes to a showing of Good Reason or Cause shall not
waive any right of the Executive or the Company hereunder or preclude the
Executive or the Company from asserting such fact or circumstances in enforcing
the Executive's or the Company's rights hereunder.
(b) "Date of Termination" means (A) if the Executive's
employment is terminated by the Company for Cause or without Cause (including
because of Disability), or by the Executive for Good Reason or without Good
Reason, the date of receipt of the Notice of Termination or any later date
specified therein, as the case may be; provided, that if the Executive's
employment is terminated by the Company for Cause, such date shall not be
deemed to occur prior to the expiration of any applicable notice or cure period
contemplated in Section I (c), if any, (B) if the Executive's employment is
terminated by reason of death, the date of death of the Executive, and (C) if
the Executive's employment is not renewed upon expiration of the Employment
Period for any reason, the last day of the Employment Period.
(c) If the Executive's employment is terminated by the
Company other than for either Cause or Disability or the Executive shall
terminate his employment for Good Reason, and
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<PAGE> 6
the termination of the Executive's employment in any case is not due to his
death or retirement, as his exclusive right and remedy in respect of such
termination:
(i) the Company shall pay to the Executive (A) in
a lump sum in cash within ten days after the Date of Termination the
Accrued Obligations (other than any severance under any Company
severance policy generally applicable to the Company's salaried
employees), and any amount arising from Executive's participation in,
or benefits under, any Investment Plans ("Accrued Investments"), which
amounts shall be payable in accordance with the terms and conditions
of such Investment Plans, (B) in regular installments in accordance
with the customary payroll practices of the Company, the Executive's
then current Annual Base Salary for a period which ends on the later
to occur of (1) the last day of the Employment Period, or (2) the date
which is 18 months from the Date of Termination, (C) in regular
installments in accordance with the customary payroll practices of the
Company, the amounts contemplated in paragraphs 4(i) and 4(k), for a
period which ends on the later to occur of (1) the last day of the
Employment Period, or (2) the date which is 18 months from the Date of
Termination, and (D) an annual bonus in an amount equal to $50,000 for
each year in the remainder of the Employment Period, to be paid in
accordance with the Company's customary payroll practices at the times
that the Executive would have been eligible to receive an annual
performance bonus had his employment not been terminated.
(ii) Notwithstanding the terms or conditions of
the Executive Warrant or any stock option, stock appreciation right or
similar agreements between the Company and the Executive, the
Executive shall vest, as of the Date of Termination, in all rights
under such agreements (i.e., the Executive Warrant and any other stock
options that would otherwise vest after the Date of Termination) and
thereafter shall be permitted to exercise any and all such vested
rights until the expiration of the Executive Warrant or such other
stock option, stock appreciation right or similar agreement, as the
case may be, pursuant to its terms.
(iii) The Executive shall continue to be covered at
the expense of the Company by the same or equivalent medical, dental
and life insurance coverages as in effect for the Executive
immediately prior to the Date of Termination, until the earlier of (A)
the expiration of the Employment Period or (B) the date the Executive
has commenced new employment and has thereby become eligible for
comparable medical benefits.
(d) If the Executive's employment is terminated by reason
of the Executive's death during the Employment Period, the Company shall pay to
his legal representatives (i) in a lump sum in cash within thirty days after
the Date of Termination the Accrued Obligations; (ii) in regular installments
in accordance with the Customary Payroll practices of the Company, the
Executive's then current Annual Base Salary through the end of the Employment
Period; and (iii) the Accrued Investments, which amounts shall be payable in
accordance with the terms and conditions of the Investment Plans. Further,
notwithstanding the terms or conditions of the Executive Warrant or any other
stock option, stock appreciation right or similar agreements between the
Company and the Executive, the Executive shall vest, as of the Date of
Termination, in all rights under such agreements (i.e., the Executive Warrant
and any other stock options that would otherwise vest after the Date of
Termination) and thereafter his legal representatives shall be permitted to
exercise any
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<PAGE> 7
and all such vested rights until the expiration of the Executive Warrant or
such other stock option, stock appreciation right or similar agreement pursuant
to its terms. If the Executive's employment is terminated by reason of the
Executive's death, then except as provided in this paragraph, the Company shall
have no further payment obligations to the Executive or his legal
representatives under this Agreement.
(e) If the Executive's employment is terminated by reason
of the Executive's Disability (or retirement pursuant to the Company's
Board-approved retirement plan, "Retirement") during the Employment Period, the
Company shall pay to the Executive (i) in regular installments in accordance
with the customary payroll practices of the Company, the Executive's then
current Annual Base Salary through the end of the Employment Period; (ii) in a
lump sum in cash within thirty days of the Date of Termination the Accrued
Obligations and (iii) the Accrued Investments, which amounts shall be payable
in accordance with the terms and conditions of the Investment Plans. Further,
notwithstanding the terms or conditions of the Executive Warrant or any other
stock option, stock appreciation right or similar agreements between the
Company and the Executive, the Executive shall vest, as of the Date of
Termination, in all rights under such agreements (i.e., the Executive Warrant
and any other stock options that would otherwise vest after the Date of
Termination) and thereafter shall be permitted to exercise any and all such
vested rights until the expiration of the Executive Warrant or such other stock
option, stock appreciation right or similar agreement pursuant to its terms.
(f) If the Executive's employment shall be terminated by
the Company for Cause or by the Executive without Good Reason (other than
because of death, Disability or Retirement) during the Employment Period, the
Company shall have no further payment obligations to the Executive other than
for payment of Accrued Obligations and Accrued Investments to the Date of
Termination. Further, notwithstanding the terms or conditions of the Executive
Warrant or any other stock option, stock appreciation right or similar
agreements between the Company and the Executive, the Executive shall cease to
vest, as of the Date of Termination, in all rights under such agreements (i.e.,
the Executive Warrant and any other stock options that would otherwise vest
after the Date of Termination) and, to the extent the Executive's vested rights
under the Executive Warrant or such other stock option, stock appreciation
right or similar agreement have not been exercised prior to the Date of
Termination, the Executive shall forfeit his rights to exercise any and all
such rights on and as of the Date of Termination; provided, that the Executive
shall be permitted to exercise any or all of that portion of the B Warrant
which is vested on the Date of Termination until the fifth day following the
date that the Board delivers to the Executive a written notice of a
determination that a Triggering Event has occurred; provided, further, that if
the Board delivers to the Executive a written notice of a determination that a
Triggering Event had not occurred as of the Date of Termination, the Executive
shall have forfeited, and shall be deemed to have forfeited, his rights to
exercise any or all of the B Warrant on and as of the Date of Termination.
6. Full Settlement Mitigation. In no event shall the Executive be
obligated to seek other employment or take any other action by way of
mitigation of the amounts payable to the Executive under any of the provisions
of this Agreement and such amounts shall not be reduced whether or not the
Executive obtains other employment (except as otherwise provided in Section
5(c)(iii)(B)). Neither the Executive nor the Company shall be liable to the
other party for any damages in addition to the amounts payable under Section 5
arising out of the termination of the Executive's employment
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<PAGE> 8
prior to the end of the Employment Period; provided, however, that the Company
shall be entitled to seek damages for any breach of Sections 7, 8, 9 or 10 or
criminal misconduct.
7. Confidential Information.
(a) The Executive acknowledges that the Company and its
affiliates have trade, business and financial secrets and other confidential
and proprietary information (collectively, the "Confidential Information").
Confidential Information shall not include (i) information that is generally
known to other persons or entities who can obtain economic value from its
disclosure or use and (ii) information required to be disclosed by the
Executive pursuant to a subpoena or court order, or pursuant to a requirement
of a governmental agency or law of the United States of America or a state
thereof or any governmental or political subdivision thereof; provided,
however, that the Executive shall take all reasonable steps to prohibit
disclosure pursuant to subsection (ii) above.
(b) During and following the Executive's employment by
the Company, the Executive shall hold in confidence and not directly or
indirectly disclose or use or copy or make lists of any confidential
information or proprietary data of the Company, or its Subsidiaries except to
the extent authorized in writing by the Board or required by any court or
administrative agency, other than to an employee of the Company, or its
Subsidiaries or a Person to whom disclosure is reasonably necessary or
appropriate in connection with the performance by the Executive of duties as an
executive of the Company.
(c) The Executive further agrees not to use any
Confidential Information for the benefit of any person or entity other than the
Company.
8. Surrender of Materials Upon Termination. All records, files,
documents and materials, or copies thereof, relating to the Company's and its
respective Subsidiaries' business which the Executive shall prepare, or use, or
come into contact with, shall be and remain the sole property of the Company or
its Subsidiaries, as the case may be, and shall be promptly returned by the
Executive to the owner upon termination of the Executive's employment with the
Company.
9. Non-Competition. As used in this Section 9, "Company" shall
include the Company and any of its Subsidiaries.
(a) The term of Non-Competition (herein so called) shall
be for a term beginning on the date hereof and continuing until the later of
(i) the expiration of the Employment Period or (ii) if applicable, the date
which is eighteen months after the Date of Termination.
(b) During the term of Non-Competition, the Executive
will not (other than for the benefit of the Company pursuant to this Agreement)
directly or indirectly, individually or as an officer, director, employee,
shareholder, equity owner, consultant, contractor, partner, joint venturer,
agent, equity owner or in any capacity whatsoever, (i) engage in the business
of manufacturing, marketing or distributing aluminum, wood or vinyl windows or
doors or in any other business activity that the Company is conducting on the
Date of Termination or has notified the Executive that it proposes to conduct
in the United States (a "Competing Business"), (ii) hire, attempt to hire, or
contact or solicit with respect to hiring any employee of the Company, or (iii)
divert or take away
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<PAGE> 9
any customers or suppliers of the Company. Notwithstanding the foregoing, the
Company agrees that the Executive may own less than five percent of the
outstanding voting securities of any publicly traded company that is a
Competing Business so long as the Executive does not otherwise participate in
such Competing Business in any way prohibited by the preceding clause.
(c) During the term of Non-Competition, the Executive
will not use the Executive's access to, knowledge of, or application of
Confidential Information to perform any duty for any Competing Business; it
being understood and agreed to that this Section 9(c) shall be in addition to
and not be construed as a limitation upon the covenants in Section 9(b) hereof.
(d) The Executive acknowledges that the geographic
boundaries, scope of prohibited activities, and time duration of the preceding
paragraphs are reasonable in nature and are no broader than are necessary to
maintain the confidentiality and the goodwill of the Company's proprietary
information, plans and services and to protect the other legitimate business
interests of the Company.
(e) If any court determines that any portion of this
Section 9 is invalid or unenforceable, the remainder of this Section 9 shall
not thereby be affected and shall be given full effect without regard to the
invalid provisions. If any court construes any of the provisions of this
Section 9, or any part thereof, to be unreasonable because of the duration or
scope of such provision, such court shall have the power to reduce the duration
or scope of such provision and to enforce such provision as so reduced.
10. Inventions; Assignment. All rights to discoveries,
inventions, improvements and innovations (including all data and records
pertaining thereto) related to the Executive's business, whether or not
patentable, copyrightable, registrable as a trademark, or reduced to writing,
that the Executive may discover, invent or originate during the Employment
Period, and for a period of twelve (12) months thereafter, either alone or with
others and whether or not during working hours or by the use of the facilities
of the Company or any of the Company's Subsidiaries ("Inventions"), shall be
the exclusive property of the Company and/or such Subsidiary. The Executive
shall promptly disclose all Inventions to the Company, shall execute at the
request of the Company any assignments or other documents the Company may deem
necessary to protect or perfect its rights therein, and shall assist the
Company, at the Company's expense, in obtaining, defending and enforcing the
Company's rights therein. The Executive hereby appoints the Company as his
attorney-in-fact to execute on his behalf any assignments or other documents
deemed necessary by the Company to protect or perfect its rights to any
Inventions.
11. Successors. The Company may assign its rights under this
Agreement to any successor to all or substantially all the assets of the
Company, by merger or otherwise, and may assign or encumber this Agreement and
its rights hereunder as security for indebtedness of the Company and its
Subsidiaries. The rights of Executive under this Agreement may not be assigned
or encumbered by the Executive, voluntarily or involuntarily, during his
lifetime, and any such purported assignment shall be void. However, all rights
of the Executive under this Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives, estates,
executors, administrators, heirs and beneficiaries. All amounts payable to the
Executive hereunder
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<PAGE> 10
shall be paid, in the event of the Executive's death, to the Executive's
estate, heirs and representatives.
12. Enforcement. The provisions of this Agreement shall be
regarded as divisible, and if any of said provisions or any part thereof are
declared invalid or unenforceable by a court of competent jurisdiction, the
validity and enforceability of the remainder of such provisions or parts hereof
and the applicability thereof shall not be affected thereby.
13. Amendment. This Agreement may not be amended or modified at
any time except by a written instrument approved by the Board and executed by
the Company and the Executive.
14. Withholding. The Company shall be entitled to withhold from
amounts to be paid to the Executive hereunder any federal, state, local, or
foreign withholding or other taxes or charges which it is from time to time
required to withhold. The Company shall be entitled to rely on an opinion of
counsel if any question as to the amount or requirement of any such withholding
shall arise.
15. Effect of Agreement on Other Benefits. The existence of this
Agreement shall not prohibit or restrict the Executive's entitlement to full
participation in the executive compensation, employee benefit and other plans
or programs in which executives of the Company are eligible to participate.
16. Governing Law. This Agreement and the rights and obligations
hereunder shall be governed by and construed in accordance with the laws of the
State of Delaware, without regard to principles of conflicts of law of Delaware
or any other jurisdiction.
17. Miscellaneous.
(a) The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect. Whenever the terms
"hereof", "hereby", "herein", or words of similar import are used in this
Agreement they shall be construed as referring to this Agreement in its
entirety rather than to a particular section or provision, unless the context
specifically indicates to the contrary. Any reference to a particular "Section"
or "paragraph" shall be construed as referring to the indicated section or
paragraph of this Agreement unless the context indicates to the contrary. The
use of the term "including" herein shall be construed as meaning "including
without limitation." This Agreement may not be amended or modified otherwise
than by a written agreement executed by the parties hereto or their respective
successors and legal representatives.
(b) All notices and other communications hereunder shall
be in writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
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If to the Executive: Randall S. Fojtasek
3801 Maplewood Avenue
Dallas, Texas 75205
If to the Company: Atrium Corporation
1341 West Mockingbird Lane, Suite 1200W
Dallas, Texas 75247
Attention: Randall S. Fojtasek
Telecopier Number: (214) 634-4231
with a copy to:
Hicks, Muse, Tate & Furst Incorporated
200 Crescent Court, Suite 1600
Dallas, Texas 75201
Attention: Lawrence D. Stuart, Jr.
Managing Director & Principal
Telecopier Number: (212) 740-7313
with a copy to:
Michael D. Wortley
Vinson & Elkins L.L.P.
3700 Trammell Crow Center
2001 Ross Avenue
Dallas, Texas 75201-2975
Telecopier Number: (214) 220-7716
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
18. No Waiver. The Executive's or the Company's failure to insist
upon strict compliance with any provision of this Agreement or the failure to
assert any right the Executive or the Company may have hereunder, including,
without limitation, the right of the Executive to terminate employment for Good
Reason, shall not be deemed to be a waiver of such provision or right or any
other provision or right of this Agreement. No waiver by either party at any
time of any breach by the other party of, or compliance with, any condition or
provision of this Agreement to be performed by the other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at any time.
19. Headings. The headings herein contained are for reference only
and shall not affect the meaning or interpretation of any provision of this
Agreement.
20. Complete Agreement. The provisions of this Agreement
constitute the complete understanding and agreement between the parties with
respect to the subject matter hereof. This Agreement may be executed in two or
more counterparts.
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21. Arbitration. In the event any dispute or controversy arises
under this Agreement and is not resolved by mutual written agreement between
the Executive and the Company within 30 days after notice of the dispute is
first given, then, upon the written request of the Executive or the Company,
such dispute or controversy shall be submitted to arbitration to be conducted
in accordance with the rules of the American Arbitration Association; provided,
that the Company shall be entitled to seek injunctive and/or other equitable
relief for a breach of any provision of Section 7, 8, 9 or 10, as to which the
Company may seek and obtain relief from a court of competent jurisdiction. Any
arbitrator's award or finding or any judgment or verdict thereon will be final,
binding and unappealable, except to the extent that judicial review is
permitted by law. All parties agree that venue for arbitration will be in
Dallas, Texas, and that any arbitration commenced in any other venue will be
transferred to Dallas, Texas, upon the written request of any party to this
Agreement. All arbitrations will have three individuals acting as arbitrators:
one arbitrator will be selected by the Executive, one arbitrator will be
selected by the Company, and the two arbitrators so selected will select a
third arbitrator. Any arbitrator selected by a party will not be affiliated,
associated or related to the party selecting that arbitrator in any matter
whatsoever. Unless otherwise provided in the arbitrator's award, each party
shall pay for its own costs and attorney's fees, if any.
22. Effectiveness of Agreement. The Company, Sub and the Executive
agree that if the Purchase Agreement is terminated in accordance with its
terms, this Agreement shall terminate and the parties hereto shall have no
further obligations to any other party hereunder; provided, that the Original
Employment Agreement shall remain in full force and effect in accordance with
its terms. The Company, Sub and the Executive agree that if the transactions
contemplated in the Purchase Agreement are consummated, the Original Employment
Agreement shall terminate and the parties thereto shall have no further
obligations to the other thereunder. Each provision of this Agreement shall,
unless otherwise expressly stated by its own terms, survive termination of the
Executive's employment hereunder.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY BLANK]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first written above.
EXECUTIVE
/s/ RANDALL S. FOJTASEK
------------------------------------------------
Randall S. Fojtasek
ATRIUM CORPORATION
By: /s/ LOUIS W. SIMI, JR.
--------------------------------------------
Louis W. Simi, Jr.
Executive Vice President
FOJTASEK COMPANIES, INC.,
for the limited purposes set forth in Section 22
By: /s/ LOUIS W. SIMI, JR.
--------------------------------------------
Louis W. Simi, Jr.
Executive Vice President
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EXHIBIT A
TO EMPLOYMENT AGREEMENT
THIS WARRANT AND THE SHARES OF COMMON STOCK PURCHASABLE HEREUNDER HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE
SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION AND MAY NOT BE SOLD, OFFERED
FOR SALE OR OTHERWISE TRANSFERRED UNLESS REGISTERED OR QUALIFIED UNDER SAID ACT
AND APPLICABLE STATE SECURITIES LAWS OR UNLESS THE COMPANY RECEIVES AN OPINION
OF COUNSEL IN FORM AND SCOPE REASONABLY SATISFACTORY TO THE COMPANY THAT
REGISTRATION, QUALIFICATION OR OTHER SUCH ACTIONS ARE NOT REQUIRED UNDER ANY
SUCH LAWS. THE OFFERING OF THIS SECURITY HAS NOT BEEN REVIEWED OR APPROVED BY
ANY STATE'S SECURITIES ADMINISTRATOR. THIS WARRANT AND THE SHARES OF COMMON
STOCK PURCHASABLE HEREUNDER ARE ALSO SUBJECT TO A STOCKHOLDERS AGREEMENT, DATED
AS OF [CLOSING DATE], 1996, BY AND AMONG THE COMPANY AND THE OTHER PARTIES
LISTED THEREIN, COPIES OF WHICH ARE ON FILE WITH THE COMPANY AND WILL BE
FURNISHED UPON WRITTEN REQUEST AND WITHOUT CHARGE. THIS WARRANT IS ALSO
SUBJECT TO AN EXECUTIVE EMPLOYMENT AGREEMENT DATED AS OF NOVEMBER 7, 1996 BY
AND BETWEEN THE COMPANY AND RANDALL S. FOJTASEK, A COPY OF WHICH IS ON FILE
WITH THE COMPANY AND WILL BE FURNISHED UPON WRITTEN REQUEST AND WITHOUT CHARGE
TO THE REGISTERED HOLDER OF THIS WARRANT.
Dated: [CLOSING DATE], 1996
WARRANT
To Purchase 2,195,222 Shares of Common Stock
ATRIUM CORPORATION
EXPIRING [CLOSING DATE], 2006.
THIS IS TO CERTIFY THAT, for value received, Randall S. Fojtasek, or
registered assigns as a holder of this Warrant (the "Holder") is entitled to
purchase from Atrium Corporation, a Delaware corporation (the "Company"), at
any time or from time to time prior to 5:00 p.m., Dallas, Texas time, [CLOSING
DATE], 2006 at the place where the Warrant Agency (as hereinafter defined) is
located, (i) at the A Exercise Price (as hereinafter defined) 1,333,333 shares
of common stock, par value $.01 per share (the "Common Stock"), of the Company
(the "A Warrant"), and (ii) at the B Exercise Price (as hereinafter defined) a
number of shares of Common Stock equal to the product obtained when 861,889 is
multiplied by a fraction, the numerator of which is the number of days prior to
[CLOSING DATE], 1999 which have elapsed after (and excluding) the date hereof
and the
A-1
<PAGE> 15
denominator of which is 1095 (the "B Warrant", and, collectively with the A
Warrant, the "Warrant"), all subject to adjustment and upon the terms and
conditions as hereinafter provided; provided, however, in no event may the B
Warrant be exercised by the Holder prior to the occurrence of a Triggering
Event (as hereinafter defined). The Holder shall designate at the time of
exercise whether the Holder is exercising an A Warrant or a B Warrant and the
number of shares of Common Stock to be purchased respectively thereunder.
Certain terms used in this Warrant are defined in Article V.
ARTICLE I
EXERCISE OF WARRANTS
1.1 Method of Exercise. To exercise this Warrant in whole or in
part, the Holder shall deliver to the Company, at the Warrant Agency, (a) this
Warrant, (b) a written notice, in substantially the form of the Subscription
Notice attached hereto as Annex A, of such Holder's election to exercise this
Warrant, which notice shall specify (i) whether the Holder is exercising an A
Warrant and/or a B Warrant, (ii) the number of shares of Common Stock to be
purchased under an A Warrant and/or a B Warrant, as applicable, (iii) the
denominations of the share certificate or certificates desired, (iv) the name
or names in which such certificate or certificates are to the registered, and
(v) with respect to the exercise of a B Warrant, that Holder requests the Board
of Directors to determine whether a Triggering Event has occurred, (c) if the
Common Stock to be received upon the exercise of this Warrant has not been
registered under the Securities Act, a written certification in substantially
the form of the Certification attached hereto as Annex B, and (d) payment of
the Exercise Price with respect to such shares. Such payment may be made, at
the option of the Holder, by cash, money order, certified or bank cashier's
check or wire transfer.
If the Holder delivers to the Company a written notice of exercise of
any vested portion of the B Warrant as contemplated in the first paragraph of
this Section 1.1, the Company's Board of Directors (the "Board") shall, within
thirty (30) days of the date such notice of exercise is received by the
Company, deliver to Holder a written notice stating whether a Triggering Event
had occurred as of the date the written exercise notice is received by the
Company. If Holder disagrees with such determination, Holder and the Board
shall proceed diligently and in good faith to agree on whether a Triggering
Event had occurred as of the date the written exercise notice was received by
the Company. If such an agreement has not been reached within fifteen (15)
days from the date the written notice of determination was delivered by the
Board to the Executive, the determination of whether a Triggering Event had
occurred as of the date the written exercise notice was received by the Company
shall be made by a "Big Six" accounting firm selected by the Company, and
reasonably acceptable to Holder, within forty-five (45) days from the date
written notice was delivered by the Board to the Executive that no Triggering
Event had occurred. If such Big Six accounting firm determines that a
Triggering Event had occurred as of the date the exercise notice was received,
the fees and expenses of such accounting firm incurred in making such
determination shall be paid by the Company. If such Big Six accounting firm
determines that a Triggering Event had not occurred as of the date the exercise
notice was received, the fees and expenses of such accounting firm shall
A-2
<PAGE> 16
be paid by Holder. In no event shall the Holder be entitled to deliver a
notice of exercise for all or any portion of the B Warrant more than twice in
any twelve month period which begins on [CLOSING DATE] of any year prior to
2006.
With respect to the exercise of the A Warrant, the Company shall, as
promptly as practicable and in any event within five Business Days after
receipt of such written notice of exercise, execute and deliver or cause to be
executed and delivered, in accordance with such notice, a certificate or
certificates representing the aggregate number of shares of Common Stock
specified in said notice. With respect to the exercise of the B Warrant, the
Company shall, as promptly as practicable, and in any event within five
Business Days after the final determination that a Triggering Event had
occurred as contemplated in the second paragraph of this Section 1.1, execute
and deliver or cause to be executed and delivered, in accordance with such
notice, a certificate or certificates representing the aggregate number of
shares of Common Stock specified in said notice. The share certificate or
certificates so delivered shall be in such denominations as may be specified in
such notice or, if such notice shall not specify denominations, shall be in the
amount of the number of shares of Common Stock for which the Warrant is being
exercised, and shall be issued in the name of the Holder or such other name or
names as shall be designated in such notice. Such certificate or certificates
shall be deemed to have been issued, and such Holder or any other Person so
designated to be named therein shall be deemed for all purposes to have become
a holder of record of such shares, as of the date the aforementioned notice is
received by the Company. If this Warrant shall have been exercised only in
part, the Company shall, at the time of delivery of the certificate or
certificates, deliver to the Holder a new Warrant evidencing the rights to
purchase the remaining shares of Common Stock which may be purchased under the
A Warrant and/or the B Warrant, as applicable, which new Warrant shall in all
other respects be identical with this Warrant, or, at the request of the
Holder, appropriate notation may be made on this Warrant which shall then be
returned to the Holder. The Company shall pay all expenses, taxes (if any) and
other charges payable in connection with the preparation, issuance and delivery
of share certificates and a new Warrant, except that, if share certificates or
a new Warrant shall be registered in a name or names other than the name of the
Holder, funds sufficient to pay all transfer taxes payable as a result of such
transfer shall be paid by the Holder at the time of delivery of the
aforementioned notice of exercise or promptly upon receipt of a written request
of the Company for payment.
1.2 Shares To Be Fully Paid and Nonassessable. All shares of
Common Stock issued upon the exercise of this Warrant shall be validly issued,
fully paid and nonassessable and free from all preemptive rights of any
stockholder, and from all taxes.
1.3 No Fractional Shares To Be Issued. The Company shall not be
required to issue fractions of shares of Common Stock upon exercise of this
Warrant. If any fraction of a share would, but for this Section, be issuable
upon any exercise of this Warrant, in lieu of such fractional share the Company
shall pay to the Holder, in cash, an amount equal to such fraction of the Fair
Market Value per share of Common Stock of the Company on the Business Day
immediately prior to the date of such exercise.
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<PAGE> 17
1.4 Share Legend. Each certificate for shares of Common Stock
issued upon exercise of this Warrant, unless at the time of exercise such
shares are registered under the Securities Act, shall bear the following
legend:
"This security has not been registered under the Securities Act of
1933, as amended, or under the securities laws of any state or other
jurisdiction and may not be sold, offered for sale or otherwise
transferred unless registered or qualified under said Act and
applicable state securities laws or unless the Company receives an
opinion of counsel in form and scope reasonably satisfactory to the
Company that registration, qualification or other such actions are
not required under any such laws. The offering of this security has
not been reviewed or approved by any state securities administrator.
This security is subject to a Stockholders Agreement, dated as of
[CLOSING DATE], 1996, between the Company and the other parties
listed therein, copies of which are on file with the Company and will
be furnished upon written request and without charge."
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon
completion of a public distribution pursuant to a registration statement under
the Securities Act) shall also bear such legend unless, in the opinion of
counsel selected by the holder of such certificate and reasonably acceptable to
the Company, the securities represented thereby are no longer subject to
restrictions on resale under the Securities Act.
1.5 Reservation; Authorization. The Company has reserved and will
keep available for issuance upon exercise of this Warrant the total number of
shares of Common Stock deliverable upon exercise of this Warrant from time to
time outstanding. The issuance of such shares has been duly and validly
authorized and, when issued and sold in accordance with this Warrant, such
shares will be duly and validly issued, fully paid and nonassessable.
ARTICLE II
WARRANT AGENCY; TRANSFER, EXCHANGE
AND REPLACEMENT OF WARRANTS
2.1 Warrant Agency. At any time after a public offering of
Common Stock registered under the Securities Act, the Company may promptly
appoint and thereafter maintain, at its own expense, an agency in New York, New
York, which agency may be the Company's then existing transfer agent (the
"Warrant Agency"), for certain purposes specified herein, and shall give prompt
notice of such appointment (and appointment of any successor Warrant Agency) to
the Holder. Until an independent Warrant Agency is so appointed, the Company
shall perform the obligations of the Warrant Agency provided herein at its
address as specified on the signature page hereto or such other address as the
Company shall specify by notice to the Holder.
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<PAGE> 18
2.2 Ownership of Warrant. The Company may deem and treat the
Person in whose name this Warrant is registered as the Holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by any
Person other than the Warrant Agency) for all purposes and shall not be
affected by any notice to the contrary, until presentation of this Warrant for
registration of transfer as provided in this Article II.
2.3 Transfer of Warrant. Holder may not sell, assign, transfer,
pledge or otherwise dispose of ("Transfer") all or any portion of this Warrant,
either voluntarily or involuntarily or by operation of law, other than by will
or the laws of descent and distribution; provided, that Holder may Transfer all
or any portion of the Warrant to Holder's Personal Representative, so long as
such Personal Representative agrees to be bound by the provisions hereof.
2.4 Division of Warrant. This Warrant may be divided upon
surrender hereof to the Warrant Agency, together with a written notice
specifying the names and denominations in which the new Warrants are to be
issued, signed by the Holder. Subject to compliance with Section 2.3 as to any
Transfer which may be involved in the division, the Company shall execute and
deliver new Warrants in exchange for the Warrant or Warrants to be divided in
accordance with such notice.
2.5 Loss, Theft, Destruction or Mutilation of Warrants. Upon
receipt of evidence satisfactory to the Company of the loss, theft, destruction
or mutilation of this Warrant and, in the case of any such loss, theft or
destruction, upon receipt of indemnity or security reasonably satisfactory to
the Company, or, in the case of any such mutilation, upon surrender and
cancellation of such Warrant, the Company will make and deliver, in lieu of
such lost, stolen, destroyed or mutilated Warrant, a new Warrant of like tenor
and representing the right to purchase the same aggregate number of shares of
Common Stock as provided for in such lost, stolen, destroyed or mutilated
Warrant.
2.6 Expenses of Delivery of Warrants. The Company shall pay all
expenses, taxes (other than transfer taxes) and other charges payable in
connection with the preparation, issuance and delivery of this Warrant and the
Common Stock issuable hereunder.
ARTICLE III
CERTAIN RIGHTS
3.1 Stockholders Agreement. This Warrant and the Common Stock
issuable upon exercise of this Warrant are subject to a Stockholders Agreement
dated as of [CLOSING DATE], 1996, by and among the Company and the other
parties listed therein (the "Stockholders Agreement"). The Company shall keep
a copy of the Stockholders Agreement, and any amendments thereto, at the
Warrant Agency and shall furnish copies thereof to the Holder upon request.
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<PAGE> 19
3.2 Notice of Fair Market Value. Upon each determination of Fair
Market Value hereunder (other than a determination relating solely to setting
the value of fractional shares), the Company shall promptly give notice thereof
to the Holder.
ARTICLE IV
ANTIDILUTION PROVISIONS
4.1 Adjustments Generally. The Exercise Price and the number of
shares of Common Stock (or other securities or property) issuable upon exercise
of this warrant shall be subject to adjustment from time to time upon the
occurrence of certain events, as provided in this Article IV.
4.2 Common Stock Reorganization. If the Company shall after the
date of issuance of this Warrant subdivide its outstanding shares of Common
Stock into a greater number of shares or consolidate its outstanding shares of
Common Stock into a smaller number of shares (any such event being called a
"Common Stock Reorganization"), then (a) the A Exercise Price and the B
Exercise Price shall each be adjusted, effective immediately after the record
date at which the holders of shares of Common Stock are determined for purposes
of such Common Stock Reorganization, to a price determined by multiplying the
applicable Exercise Price in effect immediately prior to such record date by a
fraction, the numerator of which shall be the number of shares of Common Stock
outstanding on such record date before giving effect to such Common Stock
Reorganization and the denominator of which shall be the number of shares of
Common Stock outstanding after giving effect to such Common Stock
Reorganization, and (b) the number of shares of Common Stock subject to
purchase upon exercise of the A Warrant and the B Warrant shall each be
adjusted, effective at such time, to a number determined by multiplying the
number of shares of Common Stock subject to purchase immediately before such
Common Stock Reorganization by a fraction, the numerator of which shall be the
number of shares outstanding after giving effect to such Common Stock
Reorganization and the denominator of which shall be the number of shares of
Common Stock outstanding immediately before such Common Stock Reorganization.
4.3 Capital Reorganization. If after the date of issuance of this
Warrant there shall be any consolidation or merger to which the Company is a
party, other than a consolidation or a merger in which the Company is a
continuing corporation and which does not result in any reclassification of, or
change (other than a Common Stock Reorganization or a change in par value) in,
outstanding shares of Common Stock, or any sale or conveyance of the property
of the Company as an entirety or substantially as an entirety (any such event
being called a "Capital Reorganization"), then, effective upon the effective
date of such Capital Reorganization, the Holder shall have the right to
purchase, upon exercise of this Warrant, the kind and amount of shares of stock
and other securities and property (including cash) which the Holder would have
owned or have been entitled to receive after such Capital Reorganization if
this Warrant had been exercised as permitted herein immediately prior to such
Capital Reorganization. As a condition to effecting any Capital
Reorganization, the Company or the successor or surviving corporation, as the
case may be, shall execute and deliver to the Holder an agreement as to the
Holder's rights in accordance with this Section 4.2, providing for
A-6
<PAGE> 20
subsequent adjustments as nearly equivalent as may be practicable to the
adjustments provided for in this Article IV. The provisions of this Section
4.2 shall similarly apply to successive Capital Reorganizations.
4.4 Certain Other Events. If any event occurs after the date of
issuance of this Warrant as to which the foregoing provisions of this Article
IV are not strictly applicable or, if strictly applicable, would not, in the
good faith judgment of the Board of Directors of the Company (the "Board"),
fairly protect the purchase rights of the Holder in accordance with the
essential intent and principles of such provisions, then the Board shall make
such adjustments in the application of such provisions, in accordance with such
essential intent and principles, as shall be reasonably necessary, in the good
faith opinion of the Board, to protect such purchase rights as aforesaid.
4.5 Adjustment Rules.
(a) Any adjustments pursuant to this Article IV shall be made
successively whenever an event referred to herein shall occur.
(b) If the Company shall set a record date to determine the
holders of shares of Common Stock for purposes of a Common Stock Reorganization
or Capital Reorganization, and shall legally abandon such action prior to
effecting such action, then no adjustment shall be made pursuant to this
Article IV in respect of such action.
(c) No adjustment in the amount of shares purchasable upon
exercise of this Warrant or in either of the Exercise Prices shall be made
hereunder unless such adjustment increases or decreases such amount or price by
one percent or more, but any such lesser adjustment shall be carried forward
and shall be made at the time and together with the next subsequent adjustment
which together with any adjustments so carried forward shall serve to adjust
such amount or price by one percent or more.
(d) No adjustment in the Exercise Price shall be made hereunder if
such adjustment would reduce the exercise price to an amount below par value of
the Common Stock, which par value shall initially be $.01 per share of Common
Stock.
4.6 Notice of Adjustment. The Company shall give the Holder
reasonable notice of the record date or effective date, as the case may be, of
any action which requires or might require an adjustment or readjustment
pursuant to this Article IV. Such notice shall describe such event in
reasonable detail and specify the record date or effective date, as the case
may be, and, if determinable, the required adjustment and the computation
thereof. If the required adjustment is not determinable at the time of such
notice, the Company shall give reasonable notice to the Holder of such
adjustment and computation promptly after such adjustment becomes determinable.
A-7
<PAGE> 21
ARTICLE V
DEFINITIONS
The following terms, as used in this Warrant, have the following
respective meanings:
"A Exercise Price" means for a particular exercise of the A Warrant, a
per share price of $0.01, as such per share price may be adjusted from time to
time pursuant to Article IV hereof.
"B Exercise Price" means for a particular exercise of the B Warrant, a
per share price of $1.00, as such per share price may be adjusted from time to
time pursuant to Article IV hereof.
"Business Day" shall mean (a) if any class of Common Stock is listed
or admitted to trading on a national securities exchange, a day on which the
principal national securities exchange on which such class of Common Stock is
listed or admitted to trading is open for business or (b) if no class of Common
Stock is so listed or admitted to trading, a day on which the New York Stock
Exchange is open for business.
"Capital Reorganization" shall have the meaning set forth in Section
4.3.
"Closing Price" with respect to any security on any day means (a) if
such security is listed or admitted for trading on a national securities
exchange, the reported last sales price regular way or, if no such reported
sale occurs on such day, the average of the closing bid and asked prices
regular way on such day, in each case as reported in the principal consolidated
transaction reporting system with respect to securities listed on the principal
national securities exchange on which such class of security is listed or
admitted to trading, or (b) if such security is not listed or admitted to
trading on any national securities exchange, the last quoted sales price, or,
if not so quoted, the average of the high bid and low asked prices in the
over-the-counter market on such day as reported by NASDAQ or any comparable
system then in use or, if not so reported, as reported by any New York Stock
Exchange member firm reasonably selected by the Company for such purpose.
"Common Stock" shall have the meaning set forth in the first paragraph
of this Warrant.
"Common Stock Reorganization" shall have the meaning set forth in
Section 4.2.
"Company" shall have the meaning set forth in the first paragraph of
this Warrant.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and any similar or successor federal statute, and the rules and regulations of
the Securities and Exchange Commission (or its successor) thereunder, all as
the same shall be in effect at the time.
"Exercise Price" shall mean the A Exercise Price and/or the B Exercise
Price, as applicable.
A-8
<PAGE> 22
"Fair Market Value" means the fair market value of the business or
property in question, as determined in good faith by the Board, provided,
however, that the Fair Market Value of any security for which a Closing Price
is available shall be the Market Price of such security.
"Holder" shall have the meaning set forth in the first paragraph of
this Warrant. The term Holders shall refer to all Holders of Warrants.
"Initial Investment" means the 32,000,000 shares of Common Stock held
by Buyer immediately following the closing of the transactions contemplated in
the Purchase Agreement.
"Initial Investment Amount" means $32,000,000 paid by Buyer to the
Company in exchange for its Initial Investment.
"Market Price", with respect to any security on any day means the
average of the daily Closing Prices of a share or unit of such security for the
20 consecutive Business Days ending on the most recent Business Day for which a
Closing Price is available; provided, however, that in the event that, in the
case of Common Stock, the Market Price is determined during a period following
the announcement by the Company of any subdivision, combination or
reclassification of Common Stock or the record date for such subdivision,
combination or reclassification, then, and in each such case, the Market Price
shall be appropriately adjusted to reflect the current market price per share
equivalent of Common Stock.
"NASD" means The National Association of Securities Dealers, Inc.
"NASDAQ" means The National Association of Securities Dealers, Inc.
Automated Quotation System.
"Person" means an individual, corporation, limited liability company,
partnership, limited partnership, syndicate, person (including, without
limitation, a "person" as defined in Section 13(d)(3) of the Exchange Act),
trust, association or other legal entity or government, political subdivision,
agency or instrumentality of a government.
"Personal Representative" means, with respect to any individual, any
executor, administrator, trustee, guardian or other legal representative of
such individual.
"Purchase Agreement" shall mean that certain Stock Purchase Agreement
dated November 1, 1996 by and among HMTF Acquisition Corp., a Delaware
corporation ("Buyer"), the Company and the Selling Securityholders named
therein.
"Securities Act" shall mean the Securities Act of 1933, as amended,
and any similar or successor federal statute, and the rules and regulations of
the Securities and Exchange Commission (or its successor) thereunder, all as
the same shall be in effect at the time.
A-9
<PAGE> 23
"Stockholders Agreement" shall have the meaning set forth in Section
3.1.
"Target IRR" means an internal rate of return of at least 8%, as
determined in good faith by the Board and calculated in accordance with
generally accepted financial practice, on the Initial Investment Amount
determined commencing as of the date of this Warrant.
"Triggering Event" means a date upon which the Target IRR is achieved.
"Warrant Agency" shall have the meaning set forth in Section 2.1.
"Warrant" shall have the meaning set forth in the first paragraph of
this Warrant. The term "Warrants" shall also refer to the Warrants resulting
in any subdivision of this Warrant.
ARTICLE VI
MISCELLANEOUS
6.1 Notices. All notices, requests, consents and other
communications provided for herein shall be in writing and shall be effective
upon delivery in person, faxed or telecopied, or mailed by certified or
registered mail, return receipt requested, postage pre-paid, to the addresses
specified on the signature pages hereto or, in any case, at such other address
or addresses as shall have been furnished in writing to the Company (in the
case of a Holder) or to the Holder (in the case of the Company) in accordance
with the provisions of this paragraph.
6.2 Waivers; Amendments. No failure or delay of the Holder in
exercising any power or right hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the Holder are cumulative and not
exclusive of any rights or remedies which it would otherwise have. The
provisions of this Warrant may be amended, modified or waived with (and only
with) the written consent of the Company and Holders who collectively hold
Warrants to purchase a majority of the Common Stock subject to purchase upon
exercise of such Warrants at the time outstanding.
Any such amendment, modification or waiver effected pursuant to this
Section 6.2 shall be binding upon the Holders, upon each future Holder thereof
and upon the Company. In the event of any such amendment, modification or
waiver the Company shall give prompt notice thereof to all Holders and, if
appropriate, notation thereof shall be made on all Warrants thereafter
surrendered for registration of transfer or exchange.
No notice or demand on the Company in any case shall entitle the
Company to any other or further notice or demand in similar or other
circumstances.
A-10
<PAGE> 24
6.3 Governing Law. This Warrant shall be construed in accordance
with and governed by the laws of the State of Delaware.
6.4 Severability. In case any one or more of the provisions
contained in this Warrant shall be invalid, illegal or unenforceable in any
respect, the validity, legality or enforceability of the remaining provisions
contained herein and therein shall not in any way be affected or impaired
thereby. The parties shall endeavor in good faith negotiations to replace the
invalid, illegal or unenforceable provisions with valid provisions the economic
effect of which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.
6.5 Section Headings. The sections headings used herein are for
convenience of reference only, are not part of this Warrant and are not to
affect the construction of or be taken into consideration in interpreting this
Warrant.
6.6 No Rights as Stockholder. This Warrant shall not entitle the
Holder to any rights as a stockholder of the Company.
A-11
<PAGE> 25
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
in its corporate name by one of its officers thereunto duly authorized, all as
of the day and year first above written.
ATRIUM CORPORATION
Address: By:
-------------------------
1341 West Mockingbird Lane Name:
Suite 1200W Title:
Dallas, Texas 75247
Attn: General Counsel
ACCEPTED AND AGREED TO:
- --------------------------------------
Name: Randall S. Fojtasek
Address: 3801 Maplewood Avenue
Dallas, TX 75205
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<PAGE> 26
ANNEX A
SUBSCRIPTION NOTICE
(To be executed upon exercise of Warrant)
TO ATRIUM CORPORATION:
The undersigned hereby irrevocably elects to exercise the attached
Warrant, and to purchase thereunder, in exercise of the [ ] A Warrant, _____
shares of Common Stock, and/or in exercise of the [ ] B Warrant, ______ shares
of Common Stock in exchange for payment of an Exercise Price in an aggregate
amount equal to $____________. With respect to the exercise of the B Warrant,
if applicable, the undersigned hereby requests that the Board of Directors
determine whether a Triggering Event has occurred.
Please issue a certificate or certificates for such shares of Common
Stock in the following name or names and denominations:
If said number of shares shall not be all the shares issuable upon
exercise of the attached Warrant, a new Warrant is to be issued in the name of
the undersigned for the balance remaining of such shares less any fraction of a
share paid in cash.
Dated: 19
-------------, ---
------------------------------------
Note: The above signature should
correspond exactly with the
name on the face of the
attached Warrant or with the
name of the assignee appearing
in the assignment form below.
A-13
<PAGE> 27
ANNEX B
CERTIFICATION
The undersigned hereby certifies to Atrium Corporation that he, she or
it is:
a. an "accredited investor" as that term is defined in
Regulation D promulgated pursuant to the Securities
Act or any successor regulation, as such provisions
may be in effect on the date hereof, and is an
"accredited investor" pursuant to Section of such
provision; and
b. is knowledgeable, sophisticated and experienced in
business and financial matters and in securities
similar to the Common Stock; is aware of the
limitation on the transfer of the Common Stock
imposed by applicable securities laws and any
limitations on transfer imposed by contracts with the
Company or others; and has had access to, or been
furnished with, all information about the Common
Stock and the Company deemed necessary to conclude
that he, she or it has the ability to bear the
economic risk of the investment in the Common Stock
and to afford the complete loss of such investment.
IN WITNESS WHEREOF, the undersigned has executed this CERTIFICATION
this _____ day of ________________, 199___.
For Individuals: For Entities:
- -------------- ------------------------------------
Signature Printed Name of Entity
By:
- -------------- ------------------------------------
Printed Name Name:
---------------------
Title:
---------------------
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<PAGE> 1
EXHIBIT 10.11
EMPLOYMENT AND NON-COMPETITION AGREEMENT
This EMPLOYMENT AND NON-COMPETITION AGREEMENT (this "Agreement"), dated
as of September 30, 1996, is between Atrium Corporation, a Delaware corporation
(the "Employer"), and Howard S. Saffan (the "Employee").
WHEREAS, the Employer is the parent corporation of Vinyl Building
Specialties of Connecticut, Inc.; Bishop Manufacturing Co., Inc., Bishop
Manufacturing Company of New England, Inc. and Bishop Manufacturing Co. of New
York, Inc., each a Connecticut corporation (collectively, the "Bishop
Companies", and singly a "Bishop Company"); and
WHEREAS, the Employer wishes to employ the Employee as an executive
officer of the Bishop Companies, and the Employee wishes to work as an
executive officer of the Bishop Companies, on the terms set forth below.
NOW, THEREFORE, it is hereby agreed as follows:
Section 1. EMPLOYMENT. The Employer hereby employs the Employee, and
the Employee hereby accepts employment, with effect from July 1, 1996, upon the
terms and subject to the conditions hereinafter set forth.
Section 2. DUTIES. The Employee shall be employed as the General
Manager of each of the Bishop Companies or in such other executive capacity as
the Employer may from time to time designate. In such capacity, the Employee
shall have the executive responsibilities and duties assigned by the Employer's
Board of Directors (the "Board"). The Employee agrees to devote his full time
and best efforts to the performance of his duties to the Employer and to the
Bishop Companies.
Section 3. TERM. The initial term of employment of the Employee
hereunder shall commence on July 1, 1996 (the "Commencement Date") and shall
continue until the third anniversary of the Commencement Date, (the "Initial
Term"), unless earlier terminated pursuant to Section 7, and shall be renewed
automatically for additional one (1) year terms (each an "Additional Term")
unless either party delivers written notice to the other party of an intent not
to renew ninety (90) days prior to the expiration of the Initial Term, or the
then current Additional Term, as the case may be.
Section 4. COMPENSATION AND BENEFITS. Until the termination of the
Employee's employment hereunder, in consideration for the services of the
Employee hereunder, the Employer shall compensate the Employee as follows:
(a) Base Salary. The Employer shall pay the Employee fixed
compensation equal to $150,000 per annum (the "Base Salary") during
<PAGE> 2
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the term of the Employee's employment hereunder. The Base Salary shall accrue
and be payable in accordance with the payroll practices of Employer for
executives in effect from time to time during the term hereof. All such
payments shall be subject to deduction and withholding authorized or required
by applicable law. The Base Salary may be increased from time to time in the
sole discretion of the Board and the Base Salary, as so increased, shall
thereafter become the Base Salary payable hereunder.
(b) Vacation. The Employee shall be entitled to four (4) weeks
vacation in any period of twelve (12) consecutive calendar months. Any
vacation shall be taken at the reasonable and mutual convenience of the Bishop
Companies and the Employee. Accrued vacation not taken in any calendar year
will not be carried forward or used in any subsequent calendar year.
(c) Insurance; Other Benefits. Accident, disability, life and health
insurance for the Employee shall be provided by the Employer under group
accident, disability, life and health insurance plans maintained by the
Employer for its full-time, salaried employees as such employment benefits may
be modified from time to time by the Employer for all full-time, salaried
employees. The amount and extent of such coverage shall be subject to the
discretion of the Board.
(d) Bishop Incentive Bonus. The Employer shall pay the Employee an
incentive bonus (the "Incentive Bonus") during the term of the Employee's
employment hereunder equal to two percent (2%) of the "Bishop Pre-Tax Profit"
(as defined below). All such payments shall be subject to deduction and
withholding authorized or required by applicable law.
For purposes of this Agreement, "Bishop Pre-Tax Profit" shall mean, for the
period beginning on the Commencement Date to the last day of the Bishop
Companies' then-current fiscal year and for each successive fiscal year
thereafter (each such period, an "Incentive Period"), the gross income of the
Bishop Companies for such period, excluding capital gains, less the Bishop
Companies' expenses, deductions and credits directly attributable for such
period to such operations, including, but not limited to, a management fee of
two percent (2%) of gross sales of the Bishop Companies and management expenses
reasonably allocated to the Bishop Companies. In computing the Bishop Pre-Tax
Profit, no deduction shall be taken or allowance made for: (a) federal or
state income taxes; (b) the Incentive Bonus or (c) any interest expense not
directly attributable to the operations of the Bishop Companies. The Bishop
Pre-Tax Profit for any applicable period shall be determined in accordance with
generally accepted accounting principles, consistent with the Bishop Companies'
financial statements for the year ended December 31, 1996, by the certified
public accountants regularly engaged by the Employer (the "Accountants") and
their determination shall be final and conclusive on the parties hereto.
Except as otherwise specifically provided herein, the Incentive Bonus shall
be paid to the Employee on or before April 10th of the fiscal year immediately
following the one for which
<PAGE> 3
-3-
the calculation is made (the "Bonus Payment Date"). In the event that the
Incentive Bonus is not determined by the Accountants on or before the Bonus
Payment Date, the Employer shall prepare an estimate thereof and shall pay to
the Employee the amount of such estimate on the Bonus Payment Date. Such
payment shall be accompanied by a copy of the calculation on which the estimate
of the Incentive Bonus is based. If for any reason the Incentive Bonus as
determined by the Accountants or the estimate thereof as determined by the
Employer, as applicable, shall be recalculated for the applicable period and
result in an amount exceeding the payment made to the Employee on the Bonus
Payment Date, the Employer shall pay to the Employee (a) such excess, plus (b)
interest for the period in question in an amount equal to the product of such
excess multiplied by The First National Bank of Boston's base rate of interest
plus 2%.
(e) Car Allowance. The Employer recognizes the Employee's need for an
automobile for business purposes. The Employer shall provide the Employee with
a new automobile, including all related maintenance, repairs, insurance and
other costs. The cost to the Employer of the new automobile shall not exceed
$35,000 (plus all sales taxes attributable to such $35,000 purchase). The
automobile purchased by the Employer pursuant to this Section 4(e) shall be for
the Employee's use and not ownership and shall remain an asset of the Employer.
<PAGE> 4
-4-
Section 5. SIGNING BONUS. In addition to, and not in limitation of,
Section 4, as further consideration for the Employee entering into this
Agreement and agreeing to be bound by the terms and provisions hereof, the
Employer shall pay to the Employee, in three (3) equal installments, a $150,000
signing bonus (the "Signing Bonus"). The first $50,000 of the Signing Bonus
shall be due and payable on the Commencement Date, and $50,000 of the Signing
Bonus shall be due and payable on each of the first and second anniversaries of
the Commencement Date.
Section 6. EXPENSES. The Employer shall reimburse the Employee for
all reasonable expenses of types authorized by the Employer and incurred by the
Employee in the performance of his duties hereunder. The Employee shall comply
with such budget limitations and approval and reporting requirements with
respect to expenses as the Employer may establish from time to time.
Section 7. TERMINATION. The Employee's employment hereunder shall
commence on the Commencement Date and continue until the expiration of the
Initial Term, and any extension of such term pursuant to Section 3, except that
the employment of the Employee hereunder shall earlier terminate:
(a) By the Employer for Cause (as defined below) immediately upon
written notice to the Employee. In such event, the Employee shall be paid only
the Base Salary pro rata to the date of such termination notice, less all
amounts required to be withheld or deducted therefrom and all amounts owed or
due by Employee to Employer. Upon termination of the Employee's employment for
Cause, the Employee shall forfeit all of his rights to all payments of both the
Incentive Bonus and the Signing Bonus otherwise due to him or to which he may
be entitled.
(b) By the Employee upon thirty (30) days written notice to the
Employer. In such event, if the Employee has not breached any provision of
this Agreement, the Employer shall pay the Employee the Base Salary, as has
been earned to the date of such termination, less all amounts required to be
withheld or deducted therefrom and all amounts owed or due by Employee to
Employer. Any such termination of employment by the Employee, and the payment
by the Employer of Base Salary pursuant to this Section 7(b), shall be without
prejudice to any rights of Employer under this Agreement. Upon termination by
the Employee of his employment hereunder, the Employee shall forfeit all of his
rights to all payments of both the Incentive Bonus and the Signing Bonus
otherwise due to him or to which he may be entitled.
<PAGE> 5
-5-
(c) By the Employer other than for Cause, and other than as set forth
in Section 7(d) below, upon ninety (90) days written notice to the Employee.
In such event, the Employer shall continue to pay the Employee an amount equal
to (i) the sum of (A) Base Salary for a period (x) if the Employee's employment
is terminated during the Initial Term, to the third anniversary of the
Commencement Date or (y) if the Employee's employment is terminated during any
subsequent Additional Term, to the last day of the twelfth month after
commencement of such Additional Term, plus (B) the Incentive Bonus pro-rated
from the first day of the then-current Incentive Period to the date of such
termination, plus (C) if the Employee, prior to such termination, had elected
to be covered under the Employer's health plan, the cost of such coverage on
the same basis as prior to the Employee's termination for a period of twelve
(12) months thereafter, less (ii) all amounts required to be withheld or
deducted therefrom and all amounts owed or due by Employee to Employer. The
Incentive Bonus to be paid pursuant to this Section 7(c) shall be paid by the
Employer within one-hundred twenty (120) days following the date of the
Employee's termination.
(d) Immediately upon the death of the Employee, or, at the option of
the Employer, upon the disability of the Employee with thirty (30) days written
notice to the Employee. In such event, the Employer shall pay to the estate of
Employee, or to the Employee as the case may be, an amount equal to (i) the sum
of (A) the Base Salary which would otherwise be payable to the Employee through
the end of the month in which his death or disability occurs, plus (B) the
Incentive Bonus pro-rated from the first day of the then-current Incentive
Period to the date of the Employee's death or disability, less (ii) all amounts
required to be withheld or deducted therefrom and all amounts owed or due by
Employee to Employer. The Incentive Bonus to be paid pursuant to this Section
7(d) shall be paid by the Employer within one-hundred twenty (120) days
following the date of the Employee's death or disability. For purposes of this
Section 7(d), the Employee shall be deemed disabled if an independent medical
doctor selected by the Employer's health or disability insurer certifies that
the Employee has for one hundred twenty (120) days, consecutive or non-
consecutive, in any twelve (12) month period been disabled in a manner which
seriously interferes with his ability to perform his responsibilities under
this Agreement. Any refusal by the Employee to submit to a medical examination
for the purpose of certifying disability under this Section 7(d) shall be
deemed to constitute conclusive evidence of the Employee's disability.
(e) In the event that this Agreement or the Employee's employment
hereunder is terminated, the Employee shall not be obligated to mitigate his
damages nor the amount of any payment due and owing to him hereunder by seeking
other employment or otherwise.
(f) For purposes of this Agreement, "Cause" shall mean:
(i) the Employee shall have committed an act of fraud,
embezzlement, misappropriation or breach of fiduciary duty against the
Employer or any of the Bishop Companies, including, but not limited to, the
offer, payment, solicitation or acceptance of any
<PAGE> 6
-6-
unlawful bribe or kickback with respect to the Employer's or any of the
Bishop Companies' business; or
(ii) the Employee shall have been convicted by a court of
competent jurisdiction of, or pleaded guilty or nolo contendere to, any
felony or any crime involving moral turpitude; or
(iii) the Employee shall have been chronically absent from work
(excluding vacations, illnesses or leaves of absence approved by the
Employer); or
(iv) the Employee shall have refused, after explicit written
notice, to obey any lawful resolution of or direction by the Employer's
Board of Directors or the Board of Directors of any of the Bishop Companies
which is consistent with his duties hereunder; or
(v) the Employee shall have engaged in the unlawful use
(including being under the influence) or possession of illegal drugs on the
Employer's or any of the Bishop Companies premises.
Section 8. INVENTIONS; ASSIGNMENT. All rights to discoveries,
inventions, improvements and innovations (including all data and records
pertaining thereto) related to the Employer's or any of the Bishop Companies'
business, whether or not patentable, copyrightable, registrable as a trademark,
or reduced to writing, that the Employee may discover, invent or originate
during the term of his employment hereunder, and for a period of twelve (12)
months thereafter, either alone or with others and whether or not during
working hours or by the use of the facilities of the Employer or any of the
Bishop Companies ("Inventions"), shall be the exclusive property of the
Employer or the respective Bishop Company, as the case may be. The Employee
shall promptly disclose all Inventions to the Employer, shall execute at the
request of the Employer any assignments or other documents the Employer may
deem necessary to protect or perfect its rights therein, and shall assist the
Employer, at the Employer's expense, in obtaining, defending and enforcing the
Employer's rights therein. The Employee hereby appoints the Employer as his
attorney-in-fact to execute on his behalf any assignments or other documents
deemed necessary by the Employer to protect or perfect its rights to any
Inventions.
Section 9. CONFIDENTIAL INFORMATION. The Employee recognizes and
acknowledges that certain assets of the Employer and the Bishop Companies,
including without limitation information regarding customers, pricing policies,
methods of operation, proprietary computer programs, sales, products, profits,
costs, markets, key personnel, formulae, product applications, technical
processes, and trade secrets (hereinafter called "Confidential Information")
are valuable, special, and unique assets of the Employer, the Bishop Companies
and their respective affiliates. The Employee shall not, during or after his
term of employment, disclose any or any part of the Confidential Information to
any person, firm, corporation, association, or any other entity for any reason
or purpose whatsoever, directly or indirectly, except as may be required by law
or pursuant to his employment
<PAGE> 7
-7-
hereunder, unless and until such Confidential Information becomes publicly
available other than as a consequence of the breach by the Employee of his
confidentiality obligations hereunder. In the event of the termination of his
employment, whether voluntary or involuntary and whether by the Employer or the
Employee, the Employee shall deliver to the Employer all documents and data
pertaining to the Confidential Information and shall not take with him any
documents or data of any kind or any reproductions (in whole or in part) or
extracts of any items relating to the Confidential Information.
Section 10. NON-COMPETITION. During the term of the Employee's
employment hereunder and until one (1) year after termination of the Employee's
employment hereunder, the Employee will not (a) in any region in which the
Employer or any of its subsidiaries (including, without limitation, any of the
Bishop Companies) operate, engage, directly or indirectly, alone or as a
shareholder (other than as a holder of less than five percent (5%) of the
common stock of any publicly traded corporation), partner, officer, director,
employee or consultant of any other business organization that is engaged or
becomes engaged in the business of manufacturing or distributing aluminum, wood
or vinyl windows or doors or in any other business activity that the Employer
or any of the Bishop Companies is conducting at the time of the Employee's
termination or has notified the Employee that it proposes to conduct (the
"Designated Industry"), (b) divert to any competitor of the Employer in the
Designated Industry any customer of the Employer or of any of the Bishop
Companies, or (c) solicit or encourage any officer, employee or consultant of
the Employer or of any of the Bishop Companies to leave its employ for
employment by or with any competitor of the Employer or of any of the Bishop
Companies in the Designated Industry. If at any time the provisions of this
Section 10 shall be determined to be invalid or unenforceable, by reason of
being vague or as to area, duration or scope of activity, this Section 10 shall
be considered divisible and shall become and be immediately amended to only
such area, duration and scope of activity as shall be determined to be
reasonable and enforceable by the court or other body having jurisdiction over
the matter; and the Employee agrees that this Section 10 as so amended shall be
valid and binding as though any invalid or unenforceable provision had not been
included herein.
Section 11. GENERAL.
(a) Key-Man Insurance. At any time during the term of this Agreement,
the Employer shall have the right to insure the life of the Employee for the
Employer's sole benefit, and to determine the amount of insurance and the type
of policy. The Employee shall cooperate with the Employer
<PAGE> 8
-8-
in taking out such insurance by submitting to physical examination, by
supplying all information required by the insurance company, and by executing
all necessary documents. The Employee shall incur no financial obligation by
executing any required document, and shall have no interest in any such policy.
(b) Survival. The Employee acknowledges that the Employer would not
enter into this Agreement, employ him or divulge to him any proprietary
information without the Employee agreeing to the covenants and agreements
contained in Sections 8, 9 and 10 hereof. The continuation of the employment
of the Employee pursuant to the terms hereof is not a condition to the survival
of the covenants and provisions contained in Sections 8, 9 and 10. All
obligations and duties of the Employee and all rights of the Employer as set
forth in said sections shall survive the termination or expiration of this
Agreement.
(c) Notices. All notices and other communications hereunder shall be
in writing or by written telecommunication, and shall be deemed to have been
duly given if delivered personally or if mailed by certified mail, return
receipt requested, postage prepaid or sent by written telecommunication or
telecopy, to the relevant address set forth below, or to such other address as
the recipient of such notice or communication shall have specified to the
other party hereto in accordance with this Section 11(c):
If to the Employer, to:
Randall S. Fojtasek
Fojtasek Companies, Inc.
2100 E. Union Bower Road
Irving, Texas 75061
With copies to:
T. Brook Parker
Heritage Partners, Inc.
30 Rowes Wharf, Suite 300
Boston, Massachusetts 02110
and:
<PAGE> 9
-9-
Robert M. Wolf, Esq.
Bingham, Dana & Gould LLP
150 Federal Street
Boston, Massachusetts 02110
If to the Employee, to:
Howard S. Saffan
85 Beachside Avenue
Westpo rt, Connecticut 06880
With a copy to:
John R. Fallon, Jr., Esq.
Hunton & Williams
200 Park Avenue
New York, New York 10166
(d) Equitable Remedies. Each of the parties hereto acknowledges and
agrees that upon any breach by the Employee of his obligations under Sections
8, 9 and 10 hereof, the Employer will have no adequate remedy at law, and
accordingly will be entitled to specific performance and other appropriate
injunctive and equitable relief.
(e) Severability. If any provision of this Agreement is or becomes
invalid, illegal or unenforceable in any respect under any law, the validity,
legality and enforceability of the remaining provisions hereof shall not in any
way be affected or impaired.
(f) Waivers. No delay or omission by either party hereto in
exercising any right, power or privilege hereunder shall impair such right,
power or privilege, nor shall any single or partial exercise of any such right,
power or privilege preclude any further exercise thereof or the exercise of any
other right, power or privilege.
(g) Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(h) Assigns. This Agreement shall be binding upon and inure to the
benefit of the heirs and successors of each of the parties hereto.
<PAGE> 10
-10-
(i) Entire Agreement. This Agreement contains the entire
understanding of the parties, supersedes all prior agreements and
understandings relating to the subject matter hereof and shall not be amended
except by a written instrument hereafter signed by each of the parties hereto.
(j) Governing Law. This Agreement and the performance hereof shall be
construed and governed in accordance with the laws of the State of Delaware.
<PAGE> 11
-11-
IN WITNESS WHEREOF, and intending to be legally bound hereby, the parties
hereto have caused this Agreement to be duly executed as of the date and year
first above written.
ATRIUM CORPORATION
By: /s/ T. Brook Parker
-----------------------------
Title: Vice President and
Assistant Secretary
/s/ Howard S. Saffan
--------------------------------
Howard S. Saffan
<PAGE> 1
EXHIBIT 10.12
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made as of January 1,
1995 (the "Effective Date"), by and between FOJTASEK COMPANIES, INC., a Texas
corporation (the "Employer"), and HORACE HICKS, an individual residing in
Denton County, Texas (the "Employee"). In consideration of the covenants and
agreements herein contained, Employer and Employee agree as follows:
1. Term. Subject to the terms and conditions set forth in this
Agreement, Employer hereby employs Employee, and Employee hereby accepts such
employment from Employer, for a period commencing on the Effective Date, and
unless earlier terminated or extended in accordance with the provisions of this
Agreement, expiring on December 31, 1997.
2. Extent of Services. During the term of this Agreement,
Employee shall devote substantially all of his business time, attention and
effort to the business of Employer in order to discharge his duties in a manner
consistent with such reasonable policies and guidelines as may be established
by Employer from time to time. Employee shall not, during the term of this
Agreement, be engaged in any other business or pursuit for pecuniary advantage;
provided, however, that the foregoing shall not be construed as preventing
Employee from investing personal assets in such form or manner as will not
require any significant services on Employee's part and will not violate any
provision of this Agreement.
3. Duties. Employee shall be employed for the term of this
Agreement as the General Manager of H-R Windows, a division of Employer, and in
such capacity shall perform the normal duties and exercise the normal authority
presently associated with such position, subject to the general direction,
approval and control of the Board of Directors of Employer (the "Board").
Employee shall perform his duties faithfully, competently, and to the best of
his ability. A substantial change in the duties or authority of Employee
without the prior consent of Employee shall constitute a material breach of
this Agreement by Employer.
4. Cash Compensation.
(a) Salary. Subject to the other terms and
conditions of this Agreement and as partial compensation for
the performance of his services hereunder, Employer shall pay
Employee fixed compensation at an initial annual rate of One
Hundred Thousand and No/100 Dollars ($100,000) during the term
of Employee's employment under this Agreement (such payment is
referred to herein as "Salary"). Salary shall accrue and be
payable in accordance with the normal payroll practices of
Employer
<PAGE> 2
for executives in effect from time to time during the term
hereof. All such payments shall be subject to deduction and
withholding authorized or required by applicable law. The
Salary shall be reviewed by the Board in December of each
fiscal year and may be increased, at the sole discretion of
the Board, effective on the first day of the immediately
following fiscal year of Employer. Any increase in Salary
shall then become the Salary payable under this Agreement.
(b) Incentive Bonus. Subject to the other terms
and conditions of this Agreement and as further compensation
for the performance of his services hereunder, Employer shall
pay Employee an incentive bonus for the term of Employee's
employment under this Agreement (such payment is referred to
herein as the "Incentive Bonus"). The Incentive Bonus shall be
equal to Three Percent (3%) of the "Division's Pre-Tax Profit"
(as defined hereinbelow). All such payments shall be subject
to deduction and withholding authorized or required by
applicable law.
For purposes of this Agreement, "Division's Pre-Tax Profit" shall
mean, for any applicable period, the gross income of the H-R Window Division of
Employer, other than capital gains, less the Division's expenses, deductions
and credits directly attributable to such operations, including, but not
limited to a management fee of 2% of gross sales of the Division, and
management expenses reasonably allocated to such Division. In computing the
Division's Pre-Tax Profit, no deduction shall be taken or allowance made for:
(i) federal or state income taxes; (ii) this Incentive Bonus, or (iii) any
interest expense not directly attributable to the operations of such Division.
The Division's Pre-Tax Profit for any applicable period shall be determined in
accordance with generally accepted accounting principles as heretofore applied
by the certified public accountants regularly engaged by Employer and except to
the extent that it may be contrary to any specific provision of this Agreement,
their determination of the Division's Pre-Tax Profit shall be final and
conclusive on the parties hereto.
Except as otherwise specifically provided herein,the Incentive Bonus
shall be paid to the Employee on or before the later of: (i) April 10th of the
fiscal year immediately following the one for which the calculation is made, or
(ii) ten (10) days following the receipt of the calculation of the Division's
Pre-Tax Profit for the applicable period from the certified public accountants
engaged by Employer; provided, however, that in any event the Incentive Bonus
shall be paid on or before June 1st of the fiscal year immediately following
the year for which the calculation of the Incentive Bonus is made. Payment of
the Incentive Bonus shall be accompanied by a copy of the calculation on which
the Incentive Bonus is based.
In the event that the Incentive Bonus is not paid on or before April
10th as provided in the preceding paragraph, the Employer shall prepare an
estimate of Employee's Incentive Bonus. On or before April 10th of the fiscal
year immediately following the year for which the estimate of the Incentive
Bonus is made, Employer shall pay to Employee seventy-five percent (75%) of the
EMPLOYMENT AGREEMENT PAGE 2
<PAGE> 3
Employer's estimate of the Employee's Incentive Bonus. Such payment shall be
accompanied by a copy of the calculation on which the estimate of the Incentive
Bonus is based. The balance, if any, of the Incentive Bonus shall be paid as
required in this paragraph 4(b).
5. Health and Disability Insurance. Employer shall provide
Employee with such health and disability insurance as is generally made
available from time to time to Employer's executive officers.
6. Expenses.
(a) Reimbursement. Employer shall reimburse
Employee for all items of travel, entertainment, and
miscellaneous expense, including, but not limited to, car
telephone expense, incurred in carrying out his duties under
this Agreement. Reimbursement shall only be made against an
itemized list of such expenditures signed by the Employee in
such form as required by the Employer.
(b) Automobile. The Employer recognizes the
Employee's need for an automobile for business purposes.
Employer shall provide the Employee with an automobile,
including all related maintenance, repairs, insurance and
other costs. At Employee's request, a new automobile shall be
purchased for the Employee's use when the automobile that the
Employer is presently providing to Employee has either: (i)
been in service for three years, or (ii) exceeded 75,000
miles. Employer's cost for a new automobile for Employee shall
not exceed Twenty Five Thousand and No/100 Dollars
($25,000.00).
(c) Hunting Lease. The Employer recognizes the
Employee's need for a hunting lease for business purposes.
Employer shall contribute up to Five Thousand and No/100
Dollars ($5,000) during each year of the term of this
Agreement toward the cost of a hunting lease utilized by
Employee in part for Employer's business purposes.
7. Key-Man Insurance. At any time during the term of this
Agreement, the Employer shall have the right to insure the life of the Employee
for the Employer's sole benefit, and to determine the amount of insurance and
the type of policy. The Employee shall cooperate with the Employer in taking
out such insurance by submitting to physical examination, by supplying all
information required by the insurance company, and by executing all necessary
documents. The Employee shall incur no financial obligation by executing any
required document, and shall have no interest in any such policy.
8. Confidentiality. Employee acknowledges that he is being
employed by Employer in a capacity in which he will receive or contribute to
information not generally known, and proprietary
EMPLOYMENT AGREEMENT PAGE 3
<PAGE> 4
to Employer about Employer's business, services and products (collectively,
"Confidential Information"). Employee hereby acknowledges and agrees that all
Confidential Information concerning the business or affairs of Employer which
Employee may acquire in connection with or as a result of his association with
Employer shall be and was received in strict confidence and shall be used only
for the purpose of performing his duties pursuant to this Agreement and that no
such Confidential Information shall be otherwise used or disclosed by Employee
so long as the Employee is employed by the Employer without the prior written
consent of Employer. Upon termination of Employee's employment hereunder, all
Confidential Information and other documents, records, notebooks, customer
lists, mailing lists, business proposals, contracts, agreements and other
repositories containing information concerning Employer or the business of
Employer (including all copies thereof) in Employee's possession, whether
prepared by Employee or others, shall remain with or be returned to Employer.
9. Noncompetition. Employer and Employee acknowledge that it
would be difficult to maintain the confidentiality of Confidential Information
if Employee were to be associated with a competitor of Employer. Accordingly,
Employee covenants and agrees that, for so long as Employer pays Salary to
Employee and for a period of one year thereafter, provided that Employer has
not materially breached this Agreement, he will not, within the United States
of America, Mexico and Canada, directly or indirectly, compete with Employer by
engaging in a business which is substantially similar to the business of
Employer; PROVIDED, HOWEVER, that if Employee completes the full term of this
Agreement, and Employer and Employee do not agree on mutually acceptable terms
for the continuation of Employee's employment by Employer, if Employee has not
materially breached this Agreement, then the provisions of this paragraph 9
shall not apply and Employee shall not be restricted from engaging in
competition with Employer thereafter. For the purposes of this Section 9, the
following terms shall have the meanings indicated below:
(a) The term "compete" shall include with respect
to the business of Employer, without limitation, engaging in
or attempting to engage in the manufacture or distribution of
windows and doors and all related products, either alone or
with any individual, partnership, corporation, cooperative or
association.
(b) The words "directly or indirectly" as they
modify the word "compete" shall mean: (i) acting as an agent,
representative, consultant, officer, director or employee of
any entity or enterprise which is competing (as defined in
this Section 9) with the business of Employer; (ii)
participating in any such competing entity or enterprise as an
owner, partner, limited partner, joint venturer, creditor or
shareholder (except as a shareholder holding less than a five
percent (5%) interest in a corporation whose shares are
publicly traded); or (iii) communicating to any such competing
entity or enterprise any competitive non-public information
concerning any past, present or identified prospective client
or customer of, or supplier to, Employer.
EMPLOYMENT AGREEMENT PAGE 4
<PAGE> 5
(c) With the objective of obtaining the
successful implementation of the foregoing restrictive
covenant, Employer and Employee agree that in the event such
restrictive covenant should fail for lack of reasonableness,
such covenant and the obligations contained therein shall be
enforced to a reasonable extent.
10. Injunctive Relief. In the event of a breach or threatened
breach by Employee of any of the provisions of Sections 8 and 9 hereof,
Employer shall be entitled to specific performance, injunctive relief or such
other legal and/or equitable remedies as may be appropriate. Nothing contained
herein shall be construed as prohibiting Employer from pursuing any other
remedies available to it for such breach or threatened breach of any of the
terms and provisions of this Agreement, nor limiting its right to the recovery
of damages from Employee or any other person or entity for the breach or
violation of any provision of this Agreement, whether such remedy be at law or
in equity.
11. Termination.
(a) Upon written notice, the Employer may
immediately terminate Employee's employment for Cause (as
defined hereinbelow). In such event, Employee shall be paid
only Salary pro rata to the date of such termination notice
(less all amounts required to be withheld or deducted
therefrom and all amounts owed or due by Employee to
Employer), and Employee shall forfeit all rights to any unpaid
Incentive Bonus otherwise due to him or to which he may be
entitled.
(b) In the event that Employee terminates his
employment with Employer prior to the expiration of the term
set forth in Section 1 for any reason other than a material
breach of this Agreement by Employer, and Employee has not
materially breached any provision of this Agreement, Employee
shall be paid Salary as has been earned to the date of
termination, together with the Incentive Bonus, pro-rated from
the first day of Employer's then-current fiscal year to the
date of Employee's termination, such Incentive Bonus to be
paid within one-hundred twenty (120) days following the date
of Employee's termination (less all amounts required to be
withheld or deducted therefrom and all amounts owed or due by
Employee to Employer). Any such termination of employment by
Employee, and the payment of Salary and Incentive Bonus
pursuant to this Section 11(b) shall be without prejudice to
any rights of Employer under this Agreement.
(c) In the event that Employer terminates
Employee other than for Cause, Employee shall continue to be
paid Salary for a period of twelve (12) months, together with
the Incentive Bonus, pro-rated from the first day of
Employer's then-current fiscal year to the date of such
termination, such Incentive Bonus to be paid within
one-hundred twenty (120) days following the date of Employee's
termination
EMPLOYMENT AGREEMENT PAGE 5
<PAGE> 6
(less all amounts required to be withheld or deducted
therefrom and all amounts owed or due by Employee to
Employer), and (ii) if Employee elects to be covered under
Employer's health plan, to pay Employee's cost of such
coverage (on the same basis as prior to Employee's
termination) for a period of twelve (12) months following
Employee's termination.
(d) If Employee dies during the term hereof, this
Agreement shall terminate, and Employer shall pay to the
estate of Employee the Salary which would otherwise be payable
to Employee up to the end of the month in which his death
occurs (less all amounts required to be withheld or deducted
therefrom and all amounts owed or due by Employee to
Employer), together with the Incentive Bonus pro-rated from
the first day of Employer's then-current fiscal year to the
date of Employee's death, such Incentive bonus to be paid
within one-hundred twenty (120) days following the date of
Employee's death (less all amounts required to be withheld or
deducted therefrom and all amounts owed or due by Employee to
Employer).
(e) In the event that this Agreement or the
employment of Employee is terminated, Employee shall not be
obligated to mitigate his damages nor the amount of any
payment provided for him in this Agreement by seeking other
employment or otherwise, nor shall the Employer be entitled to
a credit against any damages or other amounts owed to Employee
on account of any earnings of Employee from other employment.
(f) For the purposes of this Agreement, "Cause"
shall mean:
(i) that Employee shall have committed
an intentional material act of fraud or embezzlement
against Employer in connection with his duties or in
the course of his employment with Employer;
(ii) that Employee shall have committed
an intentional act of wrongful material damage to
property of the Employer;
(iii) that Employee shall have committed
an intentional wrongful disclosure of material
secrets possessed by, or material Confidential
Information of the Employer;
(iv) Employee shall intentionally fail to
perform his duties faithfully, competently, and to
the best of his ability in accordance with Section 3
hereinabove (other than due to the physical or mental
disability of Employee); or,
EMPLOYMENT AGREEMENT PAGE 6
<PAGE> 7
(v) any intentional and material breach
of this Agreement by Employee.
For the purposes of this Agreement, no act, or failure to act, on the
part of Employee shall be deemed "intentional" unless done, or omitted to be
done, by Employee not in good faith and without reasonable belief that his
action or omission was in the best interest of Employer.
12. Disability. Notwithstanding anything in this Agreement to the
contrary, Employer may terminate this Agreement if, during the term of the
Agreement, Employee becomes disabled. For purposes of this Agreement, Employee
shall be deemed to have become disabled if, because of ill health, physical or
mental disability, or any other reason beyond his control, Employee shall have
been unable to unwilling or shall have failed to perform his duties under this
Agreement, as determined in good faith by the Board of Directors of Employer,
for a period of one hundred twenty (120) days in any 12-month period. Until
such determination, Employee shall be entitled to receive Salary and Incentive
Bonus (if any) under this Agreement unless this Agreement is otherwise
terminated pursuant to its terms. In the event Employer terminates this
Agreement due to the disability of Employee, Employee shall be paid Salary
pro-rata to the date of such termination, together with the Incentive Bonus,
pro-rated from the first day of Employer's then-current fiscal year to the date
of such termination, such Incentive Bonus to be paid within one hundred twenty
(120) days following the date of termination (less all amounts required to be
withheld or deducted therefrom and all amounts owed or due by Employee to
Employer).
13. Change in Control. This Agreement may be assigned by the
Employer in the event of a "Change in Control" as defined hereinbelow;
provided, however, that the assignee shall assume in writing all of the
Employer's obligations under this Agreement, in which event the Employer shall
be released of all further liability and obligations hereunder. Following a
"Change in Control", if the Employee is terminated by an assignee of Employer
for any reason other than for "Cause" , as defined hereinabove, Employee shall
be paid the following for the remaining term of this Agreement: (i) his then
current Salary, and (ii) the Incentive Bonus based on an average of the
Division's Pre-Tax Profit for the three preceding fiscal years of Employer. For
purposes of this Agreement, "Change in Control" shall mean any of the
following: (i) the sale or exchange of more than fifty percent (50%) of the
issued and outstanding voting stock of Employer to any person or entity not
related to or affiliated with the current shareholders of Employer; (ii) a sale
of substantially all of the assets of Employer to a person or entity not
related to or affiliated with the current shareholders of Employer; or, (iii)
the sale of the assets of the H-R Window division of Employer to a person or
entity not related to or affiliated with the current shareholders of Employer.
14. Change of Location. At the commencement of this Agreement, the
Employee shall perform his duties at the offices of the H-R Window division of
Employer located at 959 Profit Drive, Dallas, Dallas County, Texas. Any change
in place of performance of duties outside of Dallas County, Texas without the
prior consent of Employee shall constitute a material breach of this Agreement
by Employer.
EMPLOYMENT AGREEMENT PAGE 7
<PAGE> 8
15. Vacation. During the term of this Agreement, Employee shall be
entitled to an annual vacation leave of two weeks at full pay. The time for
such vacation shall be selected by the Employee and approved by the Employer,
and it must be taken in each calendar year or it is forfeited. Employee shall
not be entitled to vacation pay in lieu of vacation.
16. Severability. Subject to Section 9(c) hereof, in the event
that any provision contained herein shall be held to be invalid, illegal or
unenforceable for any reason, such invalidity, illegality or unenforceability
shall not affect any other provision hereof, and this Agreement shall be
construed as if such invalid, illegal or unenforceable provision had never been
contained herein.
17. Waiver. No delay or omission by either party hereto in
exercising any right or power hereunder shall impair such right or power or be
construed as a waiver thereof. A waiver by either of the parties hereto of any
of the covenants to be performed by the other or any breach thereof shall not
be construed to be a waiver of any succeeding breach thereof or of any other
covenant herein contained. All remedies provided for in this Agreement shall be
cumulative and in addition to and not in lieu of any other remedies available
to either party at law, in equity or otherwise.
18. Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto with respect to the subject matter hereof,
and there are no representations, understandings or agreements relative hereto
which are not fully expressed herein, all prior agreements with respect to the
subject matter hereof being expressly superseded hereby. No change, waiver or
discharge hereof shall be valid unless in writing and signed by the party
against which such change, waiver or discharge is sought to be enforced.
19. Applicable Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas (without giving
effect to principles of conflicts of law).
20. Multiple Counterparts. This Agreement may be executed in
multiple identical counterparts, each of which shall be deemed an original, and
all of which taken together shall constitute but one and the same instrument.
In making proof of this Agreement, it shall not be necessary to produce or
account for more than one counterpart executed by the party sought to be
charged with performance hereunder.
21. Headings and Pronouns. The subject headings of the sections
contained herein are inserted for convenience only and shall not be considered
in interpreting any term or provision hereof. All pronouns and any variations
thereof shall be deemed to refer to the masculine, feminine, neuter, singular
or plural as the identity of the entities or persons referred to any require.
22. Survival. Employee understands and agrees that his covenants
and agreements contained in Sections 8 and 9 hereof are the essence of this
Agreement and without the agreement of Employee to such covenants, Employer
would not employ him and divulge to him its proprietary information developed
at great cost to it. The continuation of the employment of the Employee
pursuant to the terms hereof is not a condition to the survival of the
covenants and provisions
EMPLOYMENT AGREEMENT PAGE 8
<PAGE> 9
contained in such sections. Unless this Agreement has been terminated due to a
material breach of this Agreement by Employer, all obligations and duties of
Employee and, subject to the specific terms of each obligation contained
herein, all rights of Employer as set forth in said sections, shall survive the
termination or expiration of this Agreement.
24. Attorney's Fees. If any civil action, whether at law or in
equity, is necessary to enforce or interpret any of the terms of this
Agreement, the prevailing party shall be entitled to reasonable attorney's
fees, court costs and other reasonable expenses of litigation, in addition to
any other relief to which such party may be entitled.
25. Notice. For the purposes of this Agreement, notices and all
other communications provided for in the Agreement shall be in writing and
shall be deemed to have been duly given when personally delivered, telecopied
with telephonic confirmation (with original copy sent by first class mail,
postage prepaid, or delivered by hand, messenger or overnight courier) or on
the third day after being mailed by United States certified mail, return
receipt requested, postage prepaid, addressed as follows:
If to Employee:
1068 Greenwood Lane
Lewisville, Texas 75069
With copy to:
Martin Lowy, Esq.
Suite 950, The Centrum
3102 Oak Lawn
Dallas, Texas 75219
If to Employer:
9001 Ambassador Row
Dallas, Texas 75247
Attention: Randall Fojtasek
or to such other address as any party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
EMPLOYMENT AGREEMENT PAGE 9
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement this 3rd day of April, 1995, to be effective as of the
Effective Date.
EMPLOYER:
FOJTASEK COMPANIES, INC.
By: /s/ RANDALL S. FOJTASEK
---------------------------------------
Name: RANDALL S. FOJTASEK
Title: President and Chief Executive
Officer
EMPLOYEE:
/s/ HORACE HICKS
-------------------------------------------
HORACE HICKS
EMPLOYMENT AGREEMENT PAGE 10
<PAGE> 1
EXHIBIT 10.13
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made as of January 1,
1995 (the "Effective Date"), by and between FOJTASEK COMPANIES, INC., a Texas
corporation (the "Employer"), and LOUIS W. SIMI, JR., an individual residing in
Tarrant County, Texas (the "Employee"). In consideration of the covenants and
agreements herein contained, Employer and Employee agree as follows:
1. Term. Subject to the terms and conditions set forth in this
Agreement, including the right of Employer to terminate employment under
Section 11 for certain reasons, Employer hereby employs Employee, and Employee
hereby accepts such employment from Employer, for a period commencing on the
Effective Date, and unless earlier terminated or extended in accordance with
the provisions of this Agreement, expiring on December 31, 1997.
2. Extent of Services. During the term of this Agreement,
Employee shall devote substantially all of his business time, attention and
effort to the business of Employer in order to discharge his duties in a manner
consistent with any and all policies and guidelines as may be established by
Employer from time to time. Employee shall not, during the term of this
Agreement, be engaged in any other business or pursuit for pecuniary advantage;
provided, however, that the foregoing shall not be construed as preventing
Employee from investing personal assets in such form or manner as will not
require any significant services on Employee's part and will not violate any
provision of this Agreement.
3. Duties. Employee shall be employed for the term of this
Agreement as the Executive Vice President of Employer and General Manager of
Skotty Aluminum Products Company, a division of Employer, and in such capacity
shall perform the normal duties associated with such positions, subject to the
general direction, approval and control of the Board of Directors of Employer
(the "Board"). Employee shall perform his duties faithfully, competently, and
to the best of his ability. A substantial change in the duties of Employee
shall require the consent of Employee.
4. Cash Compensation.
(a) Salary. Subject to the other terms and
conditions of this Agreement and as compensation for the
performance of his services hereunder, Employer shall pay
Employee fixed compensation at an initial annual rate of One
Hundred Twenty-Five Thousand and No/100 Dollars ($125,000)
during the term of Employee's employment under this Agreement
(such payment is referred to herein as "Salary"). Salary shall
accrue and be payable in accordance with the payroll practices
of Employer for executives in effect from time to time during
the term hereof. All such payments shall be subject to
deduction and withholding authorized or required by applicable
law. The Salary shall be reviewed by the Board in December of
each
<PAGE> 2
fiscal year and may be increased, at the sole discretion of
the Board, effective on the first day of the immediately
following fiscal year of Employer. Any increase in Salary
shall then become the Salary payable under this Agreement.
(b) Incentive Bonus. Subject to the other terms
and conditions of this Agreement and as further compensation
for the performance of his services hereunder, Employer shall
pay Employee an incentive bonus during the term of Employee's
employment under this Agreement (such payment is referred to
herein as the "Incentive Bonus"). The Incentive Bonus shall be
equal to Three Percent (3%) of the "Division's Pre-Tax Profit"
(as defined hereinbelow). All such payments shall be subject
to deduction and withholding authorized or required by
applicable law.
For purposes of this Agreement, "Division's Pre-Tax Profit" shall
mean, for any applicable period, the gross income of the Skotty Aluminum
Products Company Division of Employer, other than capital gains, less the
Division's expenses, deductions and credits directly attributable to such
operations, including, but not limited to a management fee of 2% of gross sales
of the Division, and management expenses reasonably allocated to such Division.
For purposes of this Agreement, the Skotty Aluminum Products Company Division
of Employer shall be deemed to include the distribution operations of Employer
of such Division's products located in Arizona and Nevada (known as
Skotty-Arizona and Champagne Industries respectively). In computing the
Division's Pre-Tax Profit, no deduction shall be taken or allowance made for:
(i) federal or state income taxes; (ii) this Incentive Bonus, or (iii) any
interest expense not directly attributable to the operations of such Division.
The Division's Pre-Tax Profit for any applicable period shall be determined in
accordance with generally accepted accounting principles by the certified
public accountants regularly engaged by Employer and their determination shall
be final and conclusive on the parties hereto.
Except as otherwise specifically provided herein,the Incentive Bonus
shall be paid to the Employee on or before the later of: (i) April 10th of the
fiscal year immediately following the one for which the calculation is made, or
(ii) ten (10) days following the receipt of the calculation of the Division's
Pre-Tax Profit for the applicable period from the certified public accountants
engaged by Employer; provided, however, that in any event the Incentive Bonus
shall be paid on or before June 1st of the fiscal year immediately following
the year for which the calculation of the Incentive Bonus is made. Payment of
the Incentive Bonus shall be accompanied by a copy of the calculation on which
the Incentive Bonus is based.
In the event that the Incentive Bonus is not paid on or before April
10th as provided in the preceding paragraph, the Employer shall prepare an
estimate of Employee's Incentive Bonus. On or before April 10th of the fiscal
year immediately following the year for which the estimate of the Incentive
Bonus is made, Employer shall pay to Employee seventy-five percent (75%) of the
Employer's estimate of the Employee's Incentive Bonus. Such payment shall be
accompanied by a
<PAGE> 3
copy of the calculation on which the estimate of the Incentive Bonus is based.
The balance, if any, of the Incentive Bonus shall be paid as required in this
paragraph 4(b).
5. Health and Disability Insurance. Employer shall provide
Employee with such health and disability insurance as is generally made
available from time to time to Employer's executive officers. In addition, if
health coverage is available, Employer shall provide health coverage under its
plan to Gay Ellis Simi. In the event that Gay Ellis Simi does not qualify for
coverage under the health insurance plan of Employer, then Employer shall pay
to Employee, as additional compensation, the cost for coverage of Gay Ellis
Simi as if she did qualify for coverage under Employer's health plan.
6. Expenses.
(a) Reimbursement. Employer shall reimburse
Employee for all items of travel, entertainment, and
miscellaneous expense, including, but not limited to, car
telephone expense, incurred in carrying out his duties under
this Agreement. Reimbursement shall only be made against an
itemized list of such expenditures signed by the Employee in
such form as required by the Employer.
(b) Automobile. The Employer recognizes the
Employee's need for an automobile for business purposes.
Employer shall provide the Employee with an automobile,
including all related maintenance, repairs, insurance and
other costs. At Employee's request, a new automobile shall be
purchased for the Employee's use when the automobile that the
Employer is presently providing to Employee has either: (i)
been in service for three years, or (ii) exceeded 75,000
miles. Employer's cost for a new automobile for Employee shall
not exceed Twenty-Five Thousand and No/100 Dollars
($25,000.00).
(c) Payment of Certain Expenses by Employer. Employer
hereby agrees to pay certain expenses incurred by Employee
(including, but not limited to, Employee's American Express
credit card statements, country club statements, and gasoline
credit card statements) which have been approved in writing by
Employer. To the extent that Employee does not furnish an
itemized list of such expenditures (in such form as required
by Employer for reimbusement of expenses incurred in carrying
out his duties hereunder), then such amount not itemized
during any fiscal year of Employer shall be set-off against
Employee's Incentive Bonus, if any. In the event Employee does
not earn an Incentive Bonus for any applicable period in an
amount in excess of non-itemized expenditures, then such
non-itemized expenditures in excess of the Incentive Bonus
shall be treated as additional compensation of Employee.
Payments by Employer pursuant to this Section 6(c) shall not
exceed Twenty-Five Thousand and No/100 Dollars ($25,000.00)
during any fiscal year of Employer.
<PAGE> 4
7. Key-Man Insurance. At any time during the term of this
Agreement, the Employer shall have the right to insure the life of the Employee
for the Employer's sole benefit, and to determine the amount of insurance and
the type of policy. The Employee shall cooperate with the Employer in taking
out such insurance by submitting to physical examination, by supplying all
information required by the insurance company, and by executing all necessary
documents. The Employee shall incur no financial obligation by executing any
required document, and shall have no interest in any such policy.
8. Confidentiality. Employee acknowledges that he is being
employed by Employer in a capacity in which he will receive or contribute to
information not generally known, and proprietary to Employer about Employer's
business, services and products (collectively, "Confidential Information").
Employee hereby acknowledges and agrees that all Confidential Information
concerning the business or affairs of Employer which Employee may acquire in
connection with or as a result of his association with Employer shall be and
was received in strict confidence and shall be used only for the purpose of
performing his duties pursuant to this Agreement and that no such Confidential
Information shall be otherwise used or disclosed by Employee during or after
the term of this Agreement without the prior written consent of Employer. Upon
termination of Employee's employment hereunder, all Confidential Information
and other documents, records, notebooks, customer lists, mailing lists,
business proposals, contracts, agreements and other repositories containing
information concerning Employer or the business of Employer (including all
copies thereof) in Employee's possession, whether prepared by Employee or
others, shall remain with or be returned to Employer.
9. Noncompetition. Employer and Employee acknowledge that it
would be difficult to maintain the confidentiality of Confidential Information
if Employee were to be associated with a competitor of Employer. Accordingly,
Employee covenants and agrees that, for so long as Employer pays Salary to
Employee and for a period of one year thereafter, he will not, within the
United States of America, Mexico and Canada, directly or indirectly, compete
with Employer by engaging in a business which is substantially similar to the
business of Employer. For the purposes of this Section 9, the following terms
shall have the meanings indicated below:
(a) The term "compete" shall include with respect
to the business of Employer, without limitation, engaging in
or attempting to engage in the manufacture or distribution of
windows and doors and all related products, either alone or
with any individual, partnership, corporation, cooperative or
association.
(b) The words "directly or indirectly" as they
modify the word "compete" shall mean: (i) acting as an agent,
representative, consultant, officer, director or employee of
any entity or enterprise which is competing (as defined in
this Section 9) with the business of Employer; (ii)
participating in any such competing entity or enterprise as an
owner, partner, limited partner, joint venturer, creditor or
shareholder (except as a shareholder holding less than a five
percent (5%) interest in a
<PAGE> 5
corporation whose shares are actively traded on a regional or
national securities exchange or in the over-the-counter
market); or (iii) communicating to any such competing entity
or enterprise any competitive non-public information
concerning any past, present or identified prospective client
or customer of, or supplier to, Employer.
(c) With the objective of obtaining the
successful implementation of the foregoing restrictive
covenant, Employer and Employee agree that in the event such
restrictive covenant should fail for lack of reasonableness,
such covenant and the obligations contained therein shall be
enforced to a reasonable extent.
10. Injunctive Relief. In the event of a breach or threatened
breach by Employee of any of the provisions of Sections 8 and 9 hereof,
Employer shall be entitled to specific performance, injunctive relief or such
other legal and/or equitable remedies as may be appropriate. Nothing contained
herein shall be construed as prohibiting Employer from pursuing any other
remedies available to it for such breach or threatened breach of any of the
terms and provisions of this Agreement, nor limiting its right to the recovery
of damages from Employee or any other person or entity for the breach or
violation of any provision of this Agreement, whether such remedy be at law or
in equity. The parties hereto agree that, in the event any court issues a
temporary restraining order, preliminary, temporary or permanent injunction
pursuant to Employee's application therefore to Sections 8 or 9 hereof, a bond
of $1,000 shall be sufficient and adequate security for Employer's liability
for wrongful injunction.
11. Termination.
(a) Upon written notice, the Employer may
immediately terminate Employee's employment for Cause (as
defined hereinbelow). In such event, Employee shall be paid
only Salary pro rata to the date of such termination notice
(less all amounts required to be withheld or deducted
therefrom and all amounts owed or due by Employee to
Employer), and Employee shall forfeit all rights to the
Incentive Bonus otherwise due to him or to which he may be
entitled.
(b) In the event that Employee terminates his
employment with Employer prior to the expiration of the term
set forth in Section 1 and Employee has not breached any
provision of this Agreement, Employee shall be paid Salary as
has been earned to the date of termination, together with the
Incentive Bonus, pro-rated from the first day of Employer's
then-current fiscal year to the date of Employee's
termination, such Incentive Bonus to be paid within
one-hundred twenty (120) days following the date of Employee's
termination (less all amounts required to be withheld or
deducted therefrom and all amounts owed or due by Employee to
<PAGE> 6
Employer). Any such termination of employment by Employee, and
the payment of Salary and Incentive Bonus pursuant to this
Section 11(b) shall be without prejudice to any rights of
Employer under this Agreement.
(c) In the event that Employer terminates
Employee other than for Cause, Employee shall continue to be
paid Salary for a period of twelve (12) months, together with
the Incentive Bonus, pro-rated from the first day of
Employer's then-current fiscal year to the date of such
termination, such Incentive Bonus to be paid within
one-hundred twenty (120) days following the date of Employee's
termination (less all amounts required to be withheld or
deducted therefrom and all amounts owed or due by Employee to
Employer), and (ii) if Employee elects to be covered under
Employer's health plan, to pay Employee's cost of such
coverage (on the same basis as prior to Employee's
termination) for a period of twelve (12) months following
Employee's termination.
(d) If Employee dies during the term hereof, this
Agreement shall terminate, and Employer shall pay to the
estate of Employee the Salary which would otherwise be payable
to Employee up to the end of the month in which his death
occurs (less all amounts required to be withheld or deducted
therefrom and all amounts owed or due by Employee to
Employer), together with the Incentive Bonus pro-rated from
the first day of Employer's then-current fiscal year to the
date of Employee's death, such Incentive bonus to be paid
within one-hundred twenty (120) days following the date of
Employee's death (less all amounts required to be withheld or
deducted therefrom and all amounts owed or due by Employee to
Employer).
(e) In the event that this Agreement or the
employment of Employee is terminated, Employee shall not be
obligated to mitigate his damages nor the amount of any
payment provided for him in this Agreement by seeking other
employment or otherwise.
(f) For the purposes of this Agreement, "Cause"
shall mean:
(i) that Employee shall have committed
an intentional material act of fraud or embezzlement
against Employer in connection with his duties or in
the course of his employment with Employer;
(ii) that Employee shall have committed
an intentional act of wrongful material damage to
property of the Employer;
(iii) that Employee shall have committed
an intentional wrongful disclosure of material
secrets possessed by, or material Confidential
Information of the Employer;
<PAGE> 7
(iv) Employee shall intentionally fail to
perform his duties faithfully, competently, and to
the best of his ability in accordance with Section 3
hereinabove (other than due to the physical or mental
disability of Employee); or,
(v) any intentional breach of this
Agreement by Employee.
For the purposes of this Agreement, no act, or failure to act, on the
part of Employee shall be deemed "intentional" unless done, or omitted to be
done, by Employee not in good faith and without reasonable belief that his
action or omission was in the best interest of Employer.
12. Disability. Notwithstanding anything in this Agreement to the
contrary, Employer may terminate this Agreement if, during the term of the
Agreement, Employee becomes disabled. For purposes of this Agreement, Employee
shall be deemed to have become disabled if, because of ill health, physical or
mental disability, or any other reason beyond his control, Employee shall have
been unable to unwilling or shall have failed to perform his duties under this
Agreement, as determined in good faith by the Board of Directors of Employer,
for a period of one hundred twenty (120) days in any 12-month period. Until
such determination, Employee shall be entitled to receive Salary and Incentive
Bonus (if any) under this Agreement unless this Agreement is otherwise
terminated pursuant to its terms. In the event Employer terminates this
Agreement due to the disability of Employee, Employee shall be paid Salary
pro-rata to the date of such termination, together with the Incentive Bonus,
pro-rated from the first day of Employer's then-current fiscal year to the date
of such termination, such Incentive Bonus to be paid within one hundred twenty
(120) days following the date of termination (less all amounts required to be
withheld or deducted therefrom and all amounts owed or due by Employee to
Employer).
13. Change in Control. This Agreement may be assigned by the
Employer in the event of a "Change in Control" as defined hereinbelow;
provided, however, that the assignee shall assume in writing all of the
Employer's obligations under this Agreement, in which event the Employer shall
be released of all further liability and obligations hereunder. Following a
"Change in Control", if the Employee is terminated by an assignee of Employer
for any reason other than for "Cause" ,as defined hereinabove, Employee shall
be paid the following for the remaining term of this Agreement: (i) his then
current Salary, and (ii) the Incentive Bonus based on an average of the
Division's Pre-Tax Profit for the three preceding fiscal years of Employer. For
purposes of this Agreement, "Change in Control" shall mean any of the
following: (i) the sale or exchange of more than fifty percent (50%) of the
issued and outstanding voting stock of Employer to any person or entity not
related to or affiliated with the current shareholders of Employer; (ii) a sale
of substantially all of the assets of Employer to a person or entity not
related to or affiliated with the current shareholders of Employer; or, (iii)
the sale of the assets of the Skotty Aluminum Products Company division of
Employer to a person or entity not related to or affiliated with the current
shareholders of Employer.
14. Change of Location. At the commencement of this Agreement, the
Employee shall perform his duties at the offices of the Skotty Aluminum
Products Company division of Employer located
<PAGE> 8
at 2101 East Union Bower Road, Irving, Dallas County, Texas. Any change in
place of performance of duties outside of Dallas County, Texas shall require
the consent of Employee.
15. Vacation. During the term of this Agreement, Employee shall be
entitled to an annual vacation leave of four weeks at full pay. The time for
such vacation shall be selected by the Employee and approved by the Employer,
and it must be taken in each calendar year or it is forfeited. Employee shall
not be entitled to vacation pay in lieu of vacation.
16. Severability. Subject to Section 9 hereof, in the event that
any provision contained herein shall be held to be invalid, illegal or
unenforceable for any reason, such invalidity, illegality or unenforceability
shall not affect any other provision hereof, and this Agreement shall be
construed as if such invalid, illegal or unenforceable provision had never been
contained herein.
17. Waiver. No delay or omission by either party hereto in
exercising any right or power hereunder shall impair such right or power or be
construed as a waiver thereof. A waiver by either of the parties hereto of any
of the covenants to be performed by the other or any breach thereof shall not
be construed to be a waiver of any succeeding breach thereof or of any other
covenant herein contained. All remedies provided for in this Agreement shall be
cumulative and in addition to and not in lieu of any other remedies available
to either party at law, in equity or otherwise.
18. Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto with respect to the subject matter hereof,
and there are no representations, understandings or agreements relative hereto
which are not fully expressed herein, all prior agreements with respect to the
subject matter hereof being expressly superseded hereby. No change, waiver or
discharge hereof shall be valid unless in writing and signed by the party
against which such change, waiver or discharge is sought to be enforced.
19. Applicable Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas (without giving
effect to principles of conflicts of law).
20. Multiple Counterparts. This Agreement may be executed in
multiple identical counterparts, each of which shall be deemed an original, and
all of which taken together shall constitute but one and the same instrument.
In making proof of this Agreement, it shall not be necessary to produce or
account for more than one counterpart executed by the party sought to be
charged with performance hereunder.
21. Headings and Pronouns. The subject headings of the sections
contained herein are inserted for convenience only and shall not be considered
in interpreting any term or provision hereof. All pronouns and any variations
thereof shall be deemed to refer to the masculine, feminine, neuter, singular
or plural as the identity of the entities or persons referred to any require.
22. Binding Arbitration.
<PAGE> 9
(a) Election. In the event of a contested claim
or other matter in dispute under this Agreement, either of the
parties may, by notice to the other party (a "Demand to
Arbitrate"), elect that the matter shall be settled by
arbitration in accordance with the Commercial Arbitration
Rules of the American Arbitration Association ("AAA") by three
(3) arbitrators, which shall administer the arbitration. The
costs and expenses of any such arbitration shall be borne by
the parties as determined by the arbitrators. Any such
election to arbitrate shall be binding on all parties to this
Agreement.
(b) Arbitrators. Employer shall appoint one
arbitrator, and Employee shall appoint one arbitrator. If
either party fails to appoint an arbitrator within thirty (30)
days from the date a Demand to Arbitrate was given, AAA shall
make the appointment of the arbitrator. The two (2)
arbitrators thus appointed shall appoint the third arbitrator.
if such two (2) arbitrators fail to appoint the third
arbitrator within sixty (60) days from the date a Demand to
Arbitrate was given, AAA shall make the appointment of the
third arbitrator. Should any of the arbitrators so appointed
die, resign, refuse or become unable to act before a decision
is given, the vacancy shall be filled by the method set forth
in this sub-paragraph (b) for the original appointment. The
place of arbitration shall be Dallas, Texas.
(c) Binding Effect. The award and all decisions
of the arbitrators shall be final and binding upon the parties
and there shall be no appeal therefrom to any court except as
expressly permitted by the law of the place of arbitration.
Judgment upon the award rendered by the arbitrators may be
entered in any court having jurisdiction thereof. In the event
of any conflict between the rules of the arbitral authority
and this Section 22, the provisions of this Section 22 shall
govern.
23. Survival. Employee understands and agrees that his covenants
and agreements contained in Sections 8 and 9 hereof are the essence of this
Agreement and without the agreement of Employee to such covenants, Employer
would not employ him and divulge to him its proprietary information developed
at great cost to it. The continuation of the employment of the Employee
pursuant to the terms hereof is not a condition to the survival of the
covenants and provisions contained in such sections. All obligations and duties
of Employee and, subject to the specific terms of each obligation contained
herein, all rights of Employer as set forth in said sections, shall survive the
termination or expiration of this Agreement.
24. Attorney's Fees. If any civil action, whether at law or in
equity, is necessary to enforce or interpret any of the terms of this
Agreement, the prevailing party shall be entitled to reasonable attorney's
fees, court costs and other reasonable expenses of litigation, in addition to
any other relief to which such party may be entitled.
<PAGE> 10
25. Notice. For the purposes of this Agreement, notices and all
other communications provided for in the Agreement shall be in writing and
shall be deemed to have been duly given when personally delivered, telecopied
with telephonic confirmation (with original copy sent by first class mail,
postage prepaid, or delivered by hand, messenger or overnight courier) or on
the third day after being mailed by United States certified mail, return
receipt requested, postage prepaid, addressed as follows:
If to Employee:
Louis W. Simi, Jr.
2901 Hickory Hill
Colleyville, Texas 76034
If to Employer:
9001 Ambassador Row
Dallas, Texas 75247
Attention: Randall Fojtasek
or to such other address as any party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
<PAGE> 11
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement this 17th day of March, 1995, to be effective as of the
Effective Date.
EMPLOYER:
FOJTASEK COMPANIES, INC.
By: /s/ RANDALL S. FOJTASEK
-----------------------------------------
Name: Randall S. Fojtasek
---------------------------------------
Title: President and Chief Executive Officer
EMPLOYEE:
/s/ LOUIS W. SIMI, JR.
------------------------------------
LOUIS W. SIMI, JR.
<PAGE> 1
EXHIBIT 10.14
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made as of January 1,
1997 (the "Effective Date"), by and between FOJTASEK COMPANIES, INC., a Texas
corporation,(the "Employer"), and GEORGE FROST, an individual residing in
Collin County, Texas (the "Employee"). In consideration of the covenants and
agreements herein contained, Employer and Employee agree as follows:
1. Term. Subject to the terms and conditions set forth in this
Agreement, including the right of Employer to terminate employment under
Section 11 for certain reasons, Employer hereby employs Employee, and Employee
hereby accepts such employment from Employer, for a period commencing on the
Effective Date, and unless earlier terminated or extended in accordance with
the provisions of this Agreement, expiring on December 31, 1997.
2. Extent of Services. During the term of this Agreement,
Employee shall devote substantially all of his business time, attention and
effort to the business of Employer in order to discharge his duties in a manner
consistent with any and all policies and guidelines as may be established by
Employer from time to time. Employee shall not, during the term of this
Agreement, be engaged in any other business or pursuit for pecuniary advantage;
provided, however, that the foregoing shall not be construed as preventing
Employee from investing personal assets in such form or manner as will not
require any significant services on Employee's part and will not violate any
provision of this Agreement.
3. Duties. Employee shall be employed for the term of this
Agreement as the General Manager of Extruders, a division of Employer, and in
such capacity shall perform the normal duties associated with such position,
subject to the general direction, approval and control of the Board of
Directors of Employer (the "Board"). Employee shall perform his duties
faithfully, competently, and to the best of his ability. A substantial change
in the duties of Employer shall require the consent of Employee.
4. Cash Compensation.
(a) Salary. Subject to the other terms and conditions
of this Agreement and as compensation for the performance of his
services hereunder, Employer shall pay Employee fixed compensation at
an initial annual rate of One Hundred Thousand and No/100 Dollars
($100,000) during the term of Employee's employment under this
Agreement (such payment is referred to herein as "Salary"). Salary
shall accrue and be payable in accordance with the payroll practices
of Employer for executives in effect from time to time during the term
hereof.
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<PAGE> 2
All such payments shall be subject to deduction and withholding
authorized or required by applicable law. The Salary shall be
reviewed by the Board in December of each fiscal year and may be
increased, at the sole discretion of the Board, effective on the first
day of the immediately following fiscal year of Employer. Any
increase in Salary shall then become the Salary payable under this
Agreement.
(b) Incentive Bonus. Subject to the other terms and
conditions of this Agreement and as further compensation for the
performance of his services hereunder, Employer shall pay Employee an
incentive bonus during the term of Employee's employment under this
Agreement (such payment is referred to herein as the "Incentive
Bonus"). The Incentive Bonus shall be equal to Three Percent (3%) of
the "Division's Pre-Tax Profit" (as defined hereinbelow). All such
payments shall be subject to deduction and withholding authorized or
required by applicable law.
For purposes of this Agreement, "Division's Pre-Tax Profit" shall
mean, for any applicable period, the gross income of the Extruders Division of
Employer, other than capital gains, less the Division's expenses, deductions
and credits directly attributable to such operations, including, but not
limited to a management fee of 2% of gross sales of the Division, and
management expenses reasonably allocated to such Division. In computing the
Division's Pre-Tax Profit, no deduction shall be taken or allowance made for:
(i) federal or state income taxes; (ii) this Incentive Bonus, or (iii) any
interest expense not directly attributable to the operations of such Division.
The Division's Pre-Tax Profit for any applicable period shall be determined in
accordance with generally accepted accounting principles by that certified
public accountants regularly engaged by Employer and their determination shall
be final and conclusive on the parties hereto.
Except as otherwise specifically provided herein, the Incentive Bonus
shall be paid to the Employee on or before the later of: (i) April l0th of the
fiscal year immediately following the one for which the calculation is made, or
(ii) ten (10) days following the receipt of that calculation of the Division's
Pre-Tax Profit for the applicable period from the certified public accountants
engaged by Employer; provided, however, that in any event the Incentive Bonus
shall be paid an or before June 1st of the fiscal year immediately following
the year for which the calculation of the Incentive Bonus is made. Payment of
the Incentive Bonus shall be accompanied by a copy of the calculation on which
the Incentive Bonus is based.
In the event that the Incentive Bonus is not paid on or before April
10th as provided in the preceding paragraph, the Employer
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<PAGE> 3
shall prepare an estimate of Employee's Incentive Bonus. On or before April
10th of the fiscal year immediately following the year for which the estimate
of the Incentive Bonus is made, Employer shall pay to Employee seventy-five
percent (75%) of the Employer's estimate of the Employee's Incentive Bonus.
Such payment shall be accompanied by a copy of the calculation on which the
estimate of the Incentive Bonus is based. The balance, if any, of the
Incentive Bonus shall be paid as required in this paragraph 4(b).
5. Health and Disability Insurance. Employer shall provide
Employee with such health and disability insurance as is generally made
available from time to time to Employer's executive officers.
6. Expenses.
(a) Reimbursement. Employer shall reimburse Employee for
all items of travel, entertainment, and miscellaneous expense,
including, but not limited to, car telephone expense, incurred in
carrying out his duties under this Agreement. Reimbursement shall
only be made against an itemized list of such expenditures signed by
the Employee in such form as required by the Employer.
(b) Automobile. The Employer recognizes the Employee's
need for an automobile for business purposes. Employer shall provide
the Employee with an automobile, including all related maintenance
repairs, insurance and other costs. At Employee's request, a new
automobile shall be purchased for the Employee's use when the
automobile that the Employer is presently providing to Employee has
either: (i) been in service for three years, or (ii) exceeded 75,000
miles. Employer's cost for a new automobile for Employee shall not
exceed Twenty Five Thousand and No/100 Dollars ($25,000.00).
7. Key-Man Insurance. At any time during the term of this
Agreement, the Employer shall have the right to insure the life of the Employee
for the Employer's sole benefit, and to determine the amount of insurance and
the type of policy. The Employee shall cooperate with the Employer in taking
out such insurance by submitting to physical examination, by supplying all
information required by the insurance company, and by executing all necessary
documents. The Employee shall incur no financial obligation by executing any
required document, and shall have no interest in any such policy.
8. Confidentiality. Employee acknowledges that he is being
employed by Employer in a capacity in which he will receive or contribute to
information not generally known, and proprietary to Employer about Employer's
business, services and products (collectively, "Confidential Information").
Employee hereby
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<PAGE> 4
acknowledges and agrees that all Confidential Information concerning the
business or affairs of Employer which Employee may acquire in connection with
or as a result of his association with Employer shall be and was received in
strict confidence and shall be used only for the purpose of performing his
duties pursuant to this Agreement and that no such Confidential Information
shall be otherwise used or disclosed by Employee during or after the term of
this Agreement without the prior written consent of Employer. Upon termination
of Employee's employment hereunder, all Confidential Information and other
documents, records, notebooks, customer lists, mailing lists, business
proposals, contracts, agreements and other repositories containing information
concerning Employer or the business of Employer (including all copies thereof)
in Employee's possession, whether prepared by Employee or others, shall remain
with or be returned to Employer.
9. Noncompetition. Employer and Employee acknowledge that it
would be difficult to maintain the confidentiality of Confidential Information
if Employee were to be associated with a competitor of Employer. Accordingly,
Employee covenants and agrees that, for so long as Employer pays Salary to
Employee and for a period of one year thereafter, he will not, within the
United States of America, Mexico and Canada, directly or indirectly, compete
with Employer by engaging in a business which in substantially similar to the
business of Employer. For the purposes of this Section 9, the following terms
shall have the meanings indicated below:
(a) The term "compete" shall include with respect to the
business of Employer, without limitation, engaging in or attempting to
engage in the manufacture or distribution of windows and doors and all
related products, either alone or with any individual, partnership,
corporation, cooperative or association.
(b) The words "directly or indirectly" as they modify
the word "compete" shall mean: (i) acting as an agent, representative,
consultant, officer, director or employee of any entity or enterprise
which is competing (as defined in this Section 9) with the business of
Employer; (ii) participating in any such competing entity or
enterprise as an owner, partner, limited partner, joint venturer,
creditor or shareholder (except as a shareholder holding less than a
five percent (5%) interest in a corporation whose shares are actively
traded on a regional or national securities exchange or in the
over-the-counter market); or (iii) communicating to any such competing
entity or enterprise any competitive non-public information concerning
any past, present or identified prospective client or customer of, or
supplier to, Employer.
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<PAGE> 5
(c) With the objective of obtaining the successful
implementation of the foregoing restrictive covenant, Employer and
Employee agree that in the event such restrictive covenant should fail
for lack of reasonableness, such covenant and the obligations
contained therein shall be enforced to a reasonable extent.
10. Injunctive Relief. In the event of a breach or threatened
breach by Employee of any of the provisions of Sections 8 and 9 hereof,
Employer shall be entitled to specific performance, injunctive relief or such
other legal and/or equitable remedies as may be appropriate. Nothing contained
herein shall be construed as prohibiting Employer from pursuing any other
remedies available to it for such breach or threatened breach of any of the
terms and provisions of this Agreement, nor limiting its right to the recovery
of damages from Employee or any other person or entity for the breach or
violation of any provision of this Agreement, whether such remedy be at law or
in equity. The parties hereto agree that, in the event any court issues a
temporary restraining order, preliminary, temporary or permanent injunction
pursuant to Employee's application therefore to Sections 8 or 9 hereof, a bond
of $1,000 shall be sufficient and adequate security for Employer's liability
for wrongful injunction.
11. Termination.
(a) Upon written notice, the Employer may immediately
terminate Employee's employment for Cause (as defined hereinbelow).
In such event, Employee shall be paid only Salary pro rata to the date
of such termination notice (less all amounts required to be withheld
or deducted therefrom and all amounts owed or due by Employee to
Employer), and Employee shall forfeit all rights to the Incentive
Bonus otherwise due to him or to which he may be entitled.
(b) In the event that Employee terminates his employment
with Employer prior to the expiration of the term set forth in Section
1 and Employee has not breached any provision of this Agreement,
Employee shall be paid Salary as has been earned to the date of
termination, together with the Incentive Bonus, pro- rated from the
first day of Employer's then-current fiscal year to the date of
Employee's termination, such Incentive Bonus to be paid within
one-hundred twenty (120) days following the date of Employee's
termination (less all amounts required to be withheld or deducted
therefrom and all amounts owed or due by Employer to Employer). Any
such termination of employment by Employee, and the payment of Salary
and Incentive Bonus pursuant to this Section 11(b) shall be without
prejudice to any rights of Employer under this Agreement.
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<PAGE> 6
(c) In the event that Employer terminates Employee other
than for Cause, Employee shall continue to be paid Salary for a period
of twelve (12) months, together with the Incentive Bonus, pro-rated
from the first day of Employer's then-current fiscal year to the date
of such termination, such Incentive Bonus to be paid within one
hundred twenty (120) days following the date of Employee's termination
(less all amounts required to be withheld or deducted therefrom and
all amounts owed or due by Employee to Employer), and (ii) if Employee
elects to be covered under Employer's health plan, to pay Employee's
cost of such coverage (on the same basis as prior to Employee's
termination) for a period of twelve (12) months following Employee's
termination.
(d) If Employee dies during the term hereof, this
Agreement shall terminate, and Employer shall pay to the estate of
Employee the Salary which would otherwise be payable to Employee up to
the and of the month in which his death occurs (less all amounts
required to be withheld or deducted therefrom and all amounts owed or
due by Employee to Employer), together with the Incentive Bonus
pro-rated from the first day of Employer's then current fiscal year to
the date of Employee's death, such Incentive Bonus to be paid within
one-hundred twenty (120) days following the date of Employee's death
(less all amounts required to be withheld or deducted therefrom and
all amounts owed or due by Employee to Employer).
(e) In the event that this Agreement or the employment
of Employee is terminated, Employee shall not be obligated to mitigate
his damages nor the amount of any payment provided for him in this
Agreement by seeking other employment or otherwise.
(f) For the purposes of this Agreement, "Cause" shall
mean:
(i) that Employee shall have committed an
intentional material act of fraud or embezzlement against
Employer in connection with his duties or in the course of his
employment with Employer;
(ii) that Employee shall have committed an
intentional act of wrongful material damage to property of the
Employer;
(iii) that Employee shall have committed an
intentional wrongful disclosure of material secrets
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<PAGE> 7
possessed by, or material Confidential Information of the
Employer;
(iv) Employee shall intentionally fail to perform his
duties faithfully, competently, and to the best of his ability
in accordance with Section 3 hereinabove (other than due to
the physical or mental disability of Employee); or,
(v) any intentional breach of this Agreement by
Employee.
For the purposes of this Agreement, no act, or failure to act, on the
part of Employee shall be deemed "intentional" unless done, or omitted to be
done, by Employee not in good faith and without reasonable belief that his
action or omission was in the bast interest of Employer.
12. Disability. Notwithstanding anything in this Agreement to the
contrary, Employer may terminate this Agreement if, during the term of the
Agreement, Employee becomes disabled. For purposes of this Agreement, Employee
shall be deemed to have become disabled if, because of ill health, physical or
mental disability, or any other reason beyond his control, Employee shall have
been unable to unwilling or shall have failed to perform his duties under this
Agreement, as determined in good faith by the Board of Directors of Employer,
for a period of one hundred twenty (120) days in any 12-month period. Until
such determination, Employee shall be entitled to receive Salary and Incentive
Bonus (if any) under this Agreement unless this Agreement is otherwise
terminated pursuant to its terms. In the event Employer terminates this
Agreement due to the disability of Employee, Employee shall be paid Salary
pro-rata to the date of such termination, together with the Incentive Bonus,
pro-rated from the first day of Employer's then-current fiscal year to the date
of such termination, such Incentive Bonus to be paid within one hundred twenty
(120) days following the date of termination (less all amounts required to be
withheld or deducted therefrom and all amounts owed or due by Employee to
Employer).
13. Change in Control. This Agreement may be assigned by the
Employer in the event of a "Change in Control" as defined hereinbelow;
provided, however, that the assignee shall assume in writing all of the
Employer's obligations under this Agreement, in which event the Employer shall
be released of all further liability and obligations hereunder. Following a
"Change in Control", if the Employee is terminated by an assignee of Employer
for any reason other than for "Cause", as defined hereinabove, Employee shall
be paid the following for the remaining term of this Agreement: (i) his then
current Salary, and (ii) the Incentive Bonus based on an average of the
Division's Pre-Tax Profit for the three preceding
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fiscal years of Employer. For purposes of this Agreement, "Change in Control"
shall mean any of the following: (i) the sale or exchange of more than fifty
percent (50%) of the issued and outstanding voting stock of Employer to any
person or entity not related to or affiliated with the current shareholders of
Employer; (ii) a sale of substantially all of the assets of Employer to a
person or entity not related to or affiliated with the current shareholders of
Employer; or, (iii) the sale of the assets of the Extruders division of
Employer to a person or entity not related to or affiliated with the current
shareholders of Employer.
14. Change of Location. At the commencement of this Agreement,
the Employee shall perform his duties at the offices of the Extruders division
of Employer located at 404 Highway 78, Wylie, Collin County, Texas. Any change
in place of performance of duties outside of Collin or Dallas County, Texas
shall require the consent of Employee.
15. Vacation. During the term of this Agreement, Employee shall
be entitled to an annual vacation leave of four weeks at full pay. The time
for such vacation shall be selected by the Employee and approved by the
Employer, and it must be taken in each calendar year or it is forfeited.
Employee shall not be entitled to vacation pay in lieu of vacation.
16. Severability. Subject to Section 9 hereof, in the event that
any provision contained herein shall be held to be invalid, illegal or
unenforceable for any reason, such invalidity, illegality or unenforceability
shall not affect any other provision hereof, and this Agreement shall be
construed as if such invalid, illegal or unenforceable provision had never been
contained herein.
17. Waiver. No delay or omission by either party hereto in
exercising any right or power hereunder shall impair such right or power or be
construed as a waiver thereof. A waiver by either of the parties hereto of any
of the covenants to be performed by the other or any breach thereof shall not
be construed to be a waiver of any succeeding breach thereof or of any other
covenant herein contained. All remedies provided for in this Agreement shall
be cumulative and in addition to and not in lieu of any other remedies
available to either party at law, in equity or otherwise.
18. Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto with respect to the subject matter hereof,
and there are no representations, understandings or agreements relative hereto
which are not fully expressed herein, all prior agreements with respect to the
subject matter hereof being expressly superseded hereby. No change, waiver or
discharge hereof shall be valid unless in writing and signed by the party
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against which such change, waiver or discharge is sought to be enforced.
19. Applicable Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas (without giving
effect to principles of conflicts of law).
20. Multiple Counterparts. This Agreement may be executed in
multiple identical counterparts, each of which shall be deemed an original, and
all of which taken together shall constitute but one and the same instrument.
In making proof of this Agreement, it shall not be necessary to produce or
account for more than one counterpart executed by the party sought to be
charged with performance hereunder.
21. Headings and Pronouns. The subject headings of the sections
contained herein are inserted for convenience only and shall not be considered
in interpreting any term or provision hereof. All pronouns and any variations
thereof shall be deemed to refer to the masculine, feminine, neuter, singular
or plural as the identity of the entities or persons referred to any require.
22. Binding Arbitration.
(a) Election. In the event of a contested claim or other
matter in dispute under this Agreement, either of the parties may, by
notice to the other party (a "Demand to Arbitrate"), elect that the
matter shall be settled by arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association
("AAA") by three (3) arbitrators, which shall administer the
arbitration. The costs and expenses of any such arbitration shall be
borne by the parties as determined by the arbitrators. Any such
election to arbitrate shall be binding on all parties to this
Agreement.
(b) Arbitrators. Employer shall appoint one arbitrator,
and Employee shall appoint one arbitrator. If either party fails to
appoint an arbitrator within thirty (30) days from the date a Demand
to Arbitrate was given, AAA shall make the appointment of the
arbitrator. The two (2) arbitrators thus appointed shall appoint the
third arbitrator. if such two (2) arbitrators fail to appoint the
third arbitrator within sixty (60) days from the date a Demand to
Arbitrate was given, AAA shall make the appointment of the third
arbitrator. Should any of the arbitrators so appointed die, resign,
refuse or become unable to act before a decision is given, the vacancy
shall be filled by the method set forth in this sub-paragraph (b) for
the original appointment. The Place of arbitration shall be Dallas,
Texas.
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(c) Binding Effect. The award and all decisions of the
arbitrators shall be final and binding upon the parties and there
shall be no appeal therefrom to any court except as expressly
permitted by the law of the place of arbitration. Judgment upon the
award rendered by the arbitrators may be entered in any court having
jurisdiction thereof. In the event of any conflict between the rules
of the arbitral authority and this Section 22, the provisions of this
Section 22 shall govern.
23. Survival. Employee understands and agrees that his covenants
and agreements contained in sections a and 9 hereof are the essence of this
Agreement and without the agreement of Employee to such covenants, Employer
would not employ him and divulge to hi. its proprietary information developed
at great cost to it. The continuation of the Employment of the Employee.
pursuant to the terms hereof is not a condition to the survival of the
covenants and provisions contained in such sections. All obligations and
duties of Employee and, subject to the specific terms of each obligation
contained herein, all rights of Employer as set forth in said sections, shall
survive the termination or expiration of this Agreement.
24. Attorney's Fees. If any civil action, whether at law or in
equity is necessary to enforce or interpret any of the terms of this Agreement,
the prevailing party shall be entitled to reasonable attorney's fees, court
costs and other reasonable expenses of litigation, in addition to any other
relief to which such party may be entitled.
25. Notice. For the purposes of this Agreement, notices and all
other communications provided for in the Agreement shall be in writing and
shall be deemed to have been duly given when personally delivered, telecopied
with telephonic confirmation (with original copy sent by first class mail,
postage prepaid, or delivered by hand, messenger or overnight courier) or on
the third day after being mailed by United states certified mail, return
receipt requested, postage prepaid, addressed as follows:
If to Employee:
P.O.Box 1034
Wylie, Texas 75098
If to Employer:
9001 Ambassador Row
Dallas, Texas 75247
Attention: Randall Fojtasek
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or to such other address as any party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement this 20th day of March, 1995, to be effective as of the
Effective Date.
EMPLOYER:
FOJTASEK COMPANIES, INC.
By: /s/ Randall S. Fojtasek
-----------------------
Name: Randall S. Fojtasek
---------------------
Title: President and CEO
--------------------
EMPLOYEE:
/s/ George Frost
--------------------------
GEORGE FROST
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<PAGE> 1
EXHIBIT 10.16
NON-COMPETITION AGREEMENT
This NON-COMPETITION AGREEMENT (this "Agreement"), made as of this 3rd
day of July, 1995 by and among Randall Fojtasek (the "Seller") and
Fojtasek/Heritage Acquisition Company, a Delaware corporation (the "Company"),
WHEREAS, the Company and the Seller are parties to a Stock Purchase
Agreement, dated as of July 3rd, 1995 (the "Stock Purchase Agreement"),
pursuant to which the Company will purchase all of the outstanding capital
stock (the "Stock") of Fojtasek Companies, Inc., a Texas corporation
("Fojtasek");
WHEREAS, the Seller is a principal stockholder of Fojtasek, has been an
adviser to Fojtasek, has been involved in key management decisions concerning
Fojtasek and has been given access to confidential and proprietary information
relating to Fojtasek's business; and
WHEREAS, the Company seeks to protect its investment in the business and
goodwill of Fojtasek, and is not willing to purchase the Stock unless the
Seller agrees to be bound by the non-competition provisions contained in this
Agreement.
NOW, THEREFORE, for good and valuable consideration, receipt of which is
hereby acknowledged, the parties agree as follows:
Section 1. NON-COMPETITION. The Seller acknowledges that the
covenants and agreements in this Section 1 are a condition precedent to both
the Company's obligation to purchase the Stock from the Seller and the Seller's
obligation to sell the Stock to the Company under the Stock Purchase Agreement,
and that the Company would not purchase and the Seller would not sell the
Stock, but for the Seller's agreements herein. The Seller and the Company
acknowledge that the Company will sell products to customers located in markets
throughout the world and that engagement by the Seller in the Designated
Industry (as hereinafter defined) anywhere in the world could cause the Company
irreparable damage. For a period of five (5) years after the date hereof (the
"Restricted Period"), the Seller will not (a) engage in the Designated Industry
anywhere in North America, directly or indirectly, alone or as a shareholder,
partner, officer, director, employee or consultant of any other business
organization, (b) divert to any competitor of the Company in the Designated
Industry any customer of the Company, or (c) solicit or encourage any officer,
employee or consultant of the Company to leave its employ for employment by or
with the Seller or any competitor of the Company. The foregoing restriction
shall not prevent the Seller from owning five percent (5%) or less of the
equity securities of any publicly traded company. For purposes of this Section
1, the term "Designated Industry" shall mean the business of manufacturing or
distributing aluminum, wood, or vinyl windows or doors. If at any time the
provisions of this Section 1 shall be determined to be invalid or
unenforceable, by reason of being vague or unreasonable as to area, duration or
scope of activity, this Section 1 shall be considered divisible and shall
become and be immediately amended to only such area, duration and scope of
activity as shall be determined to be reasonable and enforceable by the court
or other body having jurisdiction over the matter; and the Seller agrees that
this Section 1 as so amended shall be valid and binding as though any invalid
or unenforceable provision had not been included herein.
<PAGE> 2
-2-
Section 2. CONFIDENTIAL INFORMATION. The Seller recognizes and
acknowledges that certain of the assets of Fojtasek, including without
limitation information regarding customers, pricing policies, methods of
operation, proprietary computer programs, sales, products, profits, costs,
markets, key personnel, formulae, product applications, technical processes,
and trade secrets (hereinafter called "Confidential Information") are valuable,
special, and unique assets of Fojtasek. During the Restricted Period, the
Seller shall not disclose any or any part of the Confidential Information to
any person, firm, corporation, association, or any other entity for any reason
or purpose whatsoever, directly or indirectly, except as required by law,
unless and until such Confidential Information becomes publicly known or
available other than as a consequence of the breach by the Seller of his
confidentiality obligations hereunder.
Section 3. NON-COMPETITION FEE. In consideration of the Seller's
non-competition and other agreements set forth in this Agreement, the Company
agrees to pay to the Seller a fee of $2,000,000 at the Closing under the Stock
Purchase Agreement.
Section 4. NOTICES. All notices, demands and other communications
hereunder shall be in writing or by written telecommunication, and shall be
deemed to have been duly given if delivered personally or if mailed by
certified mail, return receipt requested, postage prepaid, or if sent by
overnight courier, or sent by written telecommunication, as follows:
If to the Company, to:
Fojtasek/Heritage Acquisition Company
c/o Heritage Partners, Inc.
30 Rowes Wharf, Suite 300
Boston, Massachusetts 02110
Attention: T. Brook Parker
With a copy sent contemporaneously to:
Robert M. Wolf, Esq.
Bingham, Dana & Gould
150 Federal Street
Boston, Massachusetts 02110
If to the Seller, to:
Randall Fojtasek
3801 Maplewood
Dallas, Texas 75205
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With a copy sent contemporaneously to:
O. Haynes Morris, Jr., Esq.
Adair, Morris & Osborn
1201 Main Street, Suite 835
Dallas, Texas 75202-3982
Any such notice shall be effective (a) if delivered personally, when
received, (b) if sent by overnight courier, when received, (c) if mailed, three
(3) days after being mailed as described above, and (d) if sent by written
telecommunication, when dispatched.
Section 5. CONSENT TO SERVICE OF PROCESS. Each party hereto agrees
that service of process upon it in any suit, action or proceeding shall be
deemed in every respect effective service of process upon it if given in the
manner set forth in Section 4.
Section 6. REMEDIES. The Seller acknowledges and agrees that the
Company's remedy at law for a breach or threatened breach of any of the
provisions of this Agreement would be inadequate and, in recognition of this
fact, in the even of a breach or threatened breach by the Seller of any of the
provisions of this Agreement it is agreed that, in addition to its remedy at
law, the Company shall be entitled, without posting any bond, to equitable
relief in the form of specific performance, temporary restraining order,
temporary or permanent injunction or any other equitable remedy which may then
be available; provided that nothing in this Section 6 shall restrict the Seller
from opposing any such action. Nothing herein contained shall be construed as
prohibiting the Company from pursuing any other remedies available to it for
such breach or threatened breach. For purposes of this Section 6, "threatened
breach" shall mean any indication, verbal or otherwise, of the Seller's
intention to breach, or of the Seller's impending breach of, any of the
provisions of this Agreement.
Section 7. SEVERABILITY. If any provision of this Agreement is or
becomes invalid, illegal or unenforceable in any respect under any law, the
validity, legality and enforceability of the remaining provisions hereof shall
not in any way be affected or impaired.
Section 8. WAIVERS. No delay or omission by either party hereto in
exercising any right, power or privilege hereunder shall impair such right,
power or privilege, nor shall any single or partial exercise of any such right,
power or privilege preclude any further exercise thereof or the exercise of any
other right, power or privilege.
Section 9. COUNTERPARTS. This Agreement may be executed in several
identical counterparts, each of which when executed and delivered by the
parties hereto shall be an original, but all of which together shall constitute
a single instrument. In making proof of this Agreement, it shall not be
necessary to produce or account for more than one such counterpart.
Section 10. ASSIGNMENT; RIGHTS OF PARTIES. The rights and obligations
of the parties hereto shall inure to the benefit of, and shall be binding upon,
the successors and assigns of each of them. The Seller acknowledges that upon
completion of the purchase by the Company of all of the capital stock of
Fojtasek pursuant to the Stock Purchase Agreement, the Company will merge with
and into
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Fojtasek and Fojtasek will thereupon succeed to the rights of the Company
hereunder and shall thereafter be entitled to enforce the provisions hereof as
if it were the Company.
Section 11. ENTIRE AGREEMENT. This Agreement embodies the entire
agreement between the Company and the Seller, and, except as otherwise
expressly provided herein, this Agreement shall not be affected by reference to
any other document.
Section 12. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS WITHOUT REFERENCE
TO PRINCIPLES OF CONFLICTS OF LAW.
<PAGE> 1
EXHIBIT 10.17
Atrium
LEASE AGREEMENT
THIS LEASE AGREEMENT (the "Lease") is made and entered into by and
between FOJTASEK INDUSTRIAL PROPERTIES, LTD., A TEXAS LIMITED PARTNERSHIP
("Landlord"), and FOJTASEK COMPANIES, INC., A TEXAS CORPORATION ("Tenant").
WITNESSETH:
In consideration of Tenant's obligation to pay rent, and of the other
terms, covenants, and conditions contained herein, Landlord hereby demises and
leases to Tenant, and Tenant hereby takes from Landlord the Premises, described
herein, TO HAVE AND TO HOLD all and singular, said Premises and improvements,
together with the rights, privileges, and appurtenances thereto, belonging unto
said Tenant for the term described herein.
ARTICLE I. PREMISES.
A. THE PREMISES. The leased premises ("Premises") are the real
property, together with all improvements now existing or hereafter constructed
thereon, which is located in Dallas County, Texas and described on EXHIBIT "A",
attached hereto and incorporated herein by reference.
B. CONDITION OF PROPERTY; REQUIRED CONSTRUCTION. Tenant accepts
the condition of the Premises in "AS IS" condition, subject to the
representations and warranties of Landlord contained in EXHIBIT "B" attached
hereto and incorporated herein. Except for the representations and warranties
of Landlord contained in Exhibit "B" attached hereto, Tenant acknowledges that
neither Landlord, nor any agent or representative of Landlord, has made any
representation or warranty with respect to the suitability of the Premises for
the use intended by Tenant, and that Tenant has entered into this Lease based
solely upon its own investigation and inspection of the Premises.
C. ACCEPTANCE OF PREMISES. Possession of the Premises by Tenant
shall be deemed acceptance thereof by Tenant.
ARTICLE II. TERM OF LEASE.
A. COMMENCEMENT DATE AND LEASE TERM. The Commencement Date shall
be as provided for on EXHIBIT "C-1", attached hereto and incorporated herein.
The term of the Lease ("Lease Term") shall begin on the Commencement Date and
shall continue for the number of years provided for in EXHIBIT "C-1", provided
that if said Commencement Date shall not occur on
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the first day of the calendar month, then the last day of the Lease Term shall
be calculated from the first day of the calendar month next following the
Commencement Date.
B. SURRENDER. Promptly on the expiration of the term of this
Lease or earlier termination of this Lease, Tenant shall peaceably and quietly
leave, surrender, and yield to Landlord the Premises, broom-clean and in the
same condition that the Premises were in on the Commencement Date, reasonable
wear and tear and casualties provided for in Article IX herein excepted.
Further, Tenant shall surrender all keys to the Premises at the place then
fixed for the payment of rent.
C. HOLDING OVER. In the event Tenant remains in possession of
the Premises after the termination of this Lease without having executed a new
lease, Tenant shall be deemed to be a month-to-month Tenant whose rental rate
shall be the last rental rate provided for herein plus fifty percent (50%) of
such amount, and otherwise subject to all terms, covenants, and conditions of
this Lease insofar as the same are applicable to a month-to-month tenancy.
ARTICLE III. RENT.
A. ACCRUAL. Rent shall accrue hereunder from the Commencement
Date.
B. RENT. Tenant promises and agrees to pay to Landlord at the
office of Landlord, designated herein, or any other location designated by
Landlord in writing, Rent for the Premises, as set forth in EXHIBIT "C-2",
attached hereto and incorporated herein. Rent shall be paid in advance in
monthly installments on the first day of each month without prior demand,
deduction, counterclaim, or set-off, in lawful money of the United States of
America.
C. ADDITIONAL RENT. Tenant promises and agrees to pay, at the
office of Landlord designated herein, or any other location designated by
Landlord in writing, Additional Rent, as provided herein, including but not
limited to (1) taxes, as provided for in Article IV, and (2) insurance, as
provided for in Article V.
D. PAST DUE RENT AND OTHER CHARGES. Tenant acknowledges that the
late payment of any Rent or Additional Rent will cause Landlord to incur
certain costs and expenses not contemplated under this Lease, the exact amount
of which would be extremely difficult or impracticable to determine. Such
costs and expenses will include, without limitation, administrative and
collection costs, processing and accounting expenses, and other costs and
expenses necessary and incidental thereto. Therefore, if Landlord has not
received a Rent or Additional Rent payment from Tenant within ten (10) days of
its due date, Tenant shall immediately pay to Landlord a late charge equal to
five percent (5%) of such past due amount. Such late charge shall be due and
payable on the sixth day of such month. Landlord and Tenant agree that this
late charge represents a reasonable estimate of such costs and expenses and
will fairly compensate Landlord for the losses it will incur as a result of
Tenant's late payment. The interest and the late charge provided for herein
LEASE AGREEMENT PAGE 2
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shall be cumulative with and not in substitution for any rights or remedies
which may be available to Landlord pursuant to this Lease or applicable law.
E. NET RENT. It is the intent of this Lease that all Rent and
Additional Rent shall be paid to Landlord on an "absolute net" basis at all
times during the term of the Lease, and that, except for Landlord's maintenance
obligations as set forth in Article VIII.A., all expenses for taxes,
assessments, insurance, repair, maintenance, and operation of the Premises, and
all other obligations of every kind and nature whatsoever relating to the use
and operation of the Premises arising or becoming due during or with respect to
the term of the Lease shall be paid or discharged by Tenant in addition to Rent
and Additional Rent.
F. PAYMENT UPON EXECUTION OF LEASE. Tenant, contemporaneously
with the execution of this Lease, has paid Landlord an amount equal to the sum
of the first month's Rent, the receipt of which is hereby acknowledged. The
first month's rent shall be applied by Landlord to the payment of Rent due
hereunder. Rent and all other rent and charges for any period during the term
hereof which is for less than one full calendar month shall be prorated based
upon the actual number of days of the calendar month involved.
ARTICLE IV. PROPERTY TAXES.
A. Payment of Taxes. Throughout the term of this Lease, Tenant
shall pay monthly as Additional Rent, one-twelfth (1/12th) of the general real
estate taxes, assessments, and governmental charges levied, assessed, or
imposed against or becoming due and payable in connection with the Premises, as
herein defined. Landlord may pay such taxes on behalf of Tenant, and if
Landlord so elects, Tenant shall immediately reimburse Landlord upon demand.
Landlord may adjust the monthly estimated sum at the end of each calendar
quarter on the basis of Landlord's experience and reasonably anticipated costs.
Within sixty (60) days following the end of each calendar year, or at
Landlord's option, each tax year, Landlord shall furnish Tenant with a
statement covering the year just expired showing the total taxes payable by
Tenant for such year and the payments made by Tenant with respect to such year.
If the taxes payable by Tenant for such year exceed Tenant's payments so made,
Tenant shall pay Landlord the deficiency within ten (10) days after receipt of
such statement. Should Tenant's payments during such year exceed the sums
payable for such expenses, Tenant shall be entitled to offset the excess
against payments next thereafter to become due Landlord with respect to taxes.
If the Premises is not taxed as a separate tract of land, then Tenant shall be
obligated to pay that amount of the taxes owed which the square footage of the
building situated on the Premises bears to the total square footage contained
in the tax assessment.
B. Betterment Assessments. Any assessments levied or imposed
against the Premises as a consequence of a public improvement made or
constructed by a governmental entity after the Commencement Date may, at
Tenant's election, be paid in installments if permitted by such governmental
entity. Tenant shall be responsible for, and obligated to pay, only the
installment amounts which are due during the term of this Lease.
LEASE AGREEMENT PAGE 3
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C. Taxes Excluded. Nothing herein contained shall be deemed to
require, or shall be construed to require, Tenant to pay any income, estate,
gift, inheritance, succession, or transfer taxes, and any tax on rents.
D. Contesting Taxes and Assessments. Landlord agrees to deliver to
Tenant within thirty (30) days after Landlord receives same, copies of any and
all notices of or concerning real property taxes, assessments, and surcharges
that are due or will become due. If, after receiving a copy of any notice,
Tenant reasonably believes that the taxes, assessments, or surcharges may or
should be decreased, then within thirty (30) days after receipt of such notice
from Landlord (i) if Tenant produces evidence supporting Tenant's reasonable
belief that such taxes, assessments, or surcharges may or should be decreased,
Tenant may contest such taxes, assessments, or surcharges, at its sole cost and
expense; or (ii) regardless of whether or not Tenant can produce any such
evidence, Tenant shall have the privilege, before delinquency occurs, and at
its sole cost and expense, of protesting, contesting, objecting to, or opposing
the legality of amount of such taxes, assessments, and surcharges. In the
event of any such contest, Tenant may, to the extent provided by law, defer
payment of any such tax as long as the legality or the amount thereof is being
reasonably and duly contested; provided, however, that if at any time payment
of the whole or any part thereof shall become necessary in order to prevent the
enforcement or foreclosure of a lien for the nonpayment of such taxes, Landlord
shall be entitled to pay such amount in order to prevent such enforcement or
foreclosure. Any such contest, whether before or after payment, may be made in
the name of Landlord or Tenant, or both, as Tenant may determine, but if such
contest is made by Tenant in the name of Landlord, then Landlord shall be
notified thereof at least ten (10) days prior to the commencement of the
proceeding and Landlord shall cooperate, reasonably, in such contest, but any
expenses incurred by Landlord as a consequence of such cooperation shall be
reimbursed to Landlord by Tenant, and shall be payable as Additional Rent.
ARTICLE V. INSURANCE, INDEMNITY, AND LIABILITY.
A. INDEMNIFICATION. Tenant shall indemnify and hold Landlord
harmless from and against any and all claims, liabilities, losses, damages,
causes of action, and expenses (including court costs and reasonable attorneys'
fees) arising from (1) Tenant's occupation of the Premises, use of the
Premises, conduct of its business, or any other activity permitted or suffered
by the Tenant in and about the Premises, (2) any default, breach, violation, or
nonperformance of this Lease or any of its terms, covenants, and conditions,
and (3) any act, omission, or negligence of Tenant, or any officer, agent,
employee, guest, customer, subtenant, assignee, or invitee of Tenant, including
any act, omission, or negligence resulting in injury or death. In connection
with the foregoing, Tenant upon notice from Landlord shall defend any claim at
Tenant's expense by counsel reasonably satisfactory to Landlord. Tenant, as a
material part of the consideration to Landlord, hereby assumes all risk of
damage to property or injury to persons in, upon, or about the Premises, from
any cause
LEASE AGREEMENT PAGE 4
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other than Landlord's gross negligence or willful misconduct; and Tenant shall
indemnify and hold Landlord harmless from and against any penalty, damage, or
charge incurred or imposed by reason of any violation of law, statute,
ordinance, or governmental rule, regulation or requirement now or hereafter in
force, by Tenant, or any officer, agent, employee, guest, customer, subtenant,
assignee, or invitee of Tenant.
B. INSURANCE. (I) LIABILITY. Tenant shall procure and maintain
throughout the Lease Term a policy or policies of insurance, at Tenant's sole
cost and expense, insuring Landlord as well as Tenant, from all claims,
demands, or actions arising out of Tenant's use and occupancy of the Premises,
containing bodily injury and property damage combined single-limit coverage of
not less than $2,000,000.00 per each occurrence. Landlord shall procure and
maintain throughout the Lease Term a policy or policies of liability insurance
at Landlord's cost and expense, containing terms and amounts as determined
reasonable in Landlord's discretion. (II) PROPERTY. Landlord shall maintain
property insurance covering the Premises for one hundred percent (100%) of full
replacement cost (inclusive of all alterations and improvements therein, but
exclusive of the cost of excavations, foundations, and footings), from time to
time during the Lease Term, providing protection against perils included within
the standard Texas form of fire and extended-coverage insurance policy,
together with such other risks and amounts as Landlord may from time to time
reasonably determine. The cost for such property insurance shall be paid by
Tenant throughout the term of this Lease on a monthly basis, and as Additional
Rent, in an amount equal to one-twelfth (1/12th) of the cost of such insurance.
Landlord may adjust the monthly estimated sum at the end of each year on the
basis of Landlord's experience and reasonably anticipated costs. Within sixty
(60) days following the end of each insurance policy's annual anniversary date,
Landlord shall furnish Tenant with a statement covering the policy period just
expired showing the total premium payable by Tenant for such period and the
payments made by Tenant with respect to such year. If the premiums payable by
Tenant for such period exceed Tenant's payments so made, Tenant shall pay
Landlord the deficiency within ten (10) days after receipt of such statement.
Should Tenant's payments during such period exceed the sums payable for such
premiums, Tenant shall be entitled to offset the excess against payments next
thereafter to become due Landlord with respect to insurance. If the policy or
policies include more than the Premises, then Tenant shall be obligated to pay
that amount of the premium which the square footage contained in the building
located on the Premises bears to the entire premises covered by such insurance
policy or policies.
All required insurance shall be carried with companies reasonably
satisfactory to Landlord, and each party shall obtain a written obligation on
the part of each insurance company to notify Landlord and Tenant at least
thirty (30) days prior to cancellation of such insurance. All such policies or
duly executed certificates of insurance shall be delivered to Landlord and
Tenant prior to the Commencement Date, and renewals of said insurance shall be
delivered to Landlord and Tenant at least thirty (30) days prior to the
expiration of the respective policy terms. If either Landlord or Tenant, as
applicable, fails to timely maintain and provide to the other evidence of such
insurance as required herein, the other party may obtain such insurance and the
cost for such insurance shall become Additional Rent and be due and payable to
Landlord immediately, upon
LEASE AGREEMENT PAGE 5
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demand, if owed by Tenant, or, the cost for such insurance obtained by Tenant
shall be due and payable by Landlord to Tenant immediately, upon demand.
C. LANDLORD NOT LIABLE. Neither Landlord nor its agents shall be
liable for any loss or damage to persons or property resulting from fire,
explosion, falling plaster, steam, gas, electricity, rain, or water from any
source or any other cause whatsoever, unless caused by or due to the gross
negligence or willful misconduct of Landlord, its agents, servants, or
employees. Landlord or its agents shall not be liable for interference with
the light or air, or for any latent defect in the Premises, and any
interference with air or light shall not affect this Lease or cause any
abatement of Rent.
ARTICLE VI. UTILITIES.
Tenant shall be responsible for all costs and expenses for the use and
connection of all utility services for the Premises, including, but not limited
to, the payment of any and all utility deposits. Tenant shall promptly pay
all charges for electricity, water, gas, telephone service, and all other
utilities furnished to the Premises. Landlord shall not be liable in any way
for the utility service to the Premises and any interruption in service shall
have no effect on this Lease or Tenant's obligation to pay, as provided for
herein. Therefore, any interruption in utility service shall not constitute
either a constructive or actual eviction, or a basis for any abatement of Rent,
except that, if any such interruption substantially and materially impairs
Tenant's ability to conduct its usual business activities, continues for a
period of five (5) consecutive 8:00 a.m. to 5:00 p.m. business days, and is
caused by Landlord's negligence or misconduct, then, beginning with the sixth
(6th) business day and continuing until such interruption shall be reduced to
the extent that Tenant's ability to conduct its usual business activities is no
longer substantially and materially impaired, Tenant shall be entitled to a
reasonable reduction of Rent.
ARTICLE VII. TENANT'S USE OF PREMISES.
A. PERMITTED USE. The Premises may be used and occupied only for the
purpose or purposes described on EXHIBIT "D", attached hereto and incorporated
herein. Tenant may not change the use of the Premises without Landlord's prior
written consent, which consent shall not be unreasonably withheld.
B. PERMITS AND LICENSES. Tenant shall obtain at its sole cost and
expense all permits and licenses required for the transaction of its business
in the Premises. Tenant shall not violate any applicable law, ordinance, or
governmental regulation now in force or which may hereafter be in force
pertaining to the transaction of its business on the Premises.
C. PROHIBITED USES. Tenant shall keep the Premises free from
waste or nuisance at all times, and Tenant shall not, without Landlord's prior
written consent, or as provided in Paragraph D below in connection with the
making of alterations or additions:
LEASE AGREEMENT PAGE 6
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1. Damage or deface the walls, ceilings, floors, or any other
part of the Premises; or
2. Permit any injury, overloading, or other harm to any part of
the Premises or any equipment or fixtures which are attached thereto or used
therein, including but not limited to placing any unreasonably heavy loads upon
any floor of the Premises.
D. ALTERATIONS AND ADDITIONS. Tenant shall not, without
Landlord's prior written consent, which consent shall not be unreasonably
withheld, delayed, or conditioned by Landlord, make any alterations or
additions to the Premises; provided, however, that Tenant may make
non-structural alterations to the interior of the building or buildings
included in the Premises. Any alterations or additions, including any fixtures
or equipment which is made or installed to the interior or exterior of the
Premises by Tenant, shall, upon the termination of this Lease for whatever
reason, become the property of Landlord and be surrendered with the Premises,
unless Landlord requests their removal, in which event Tenant, at Tenant's
expense, shall remove the same and restore the Premises to their original
condition, normal wear and tear excepted. Upon prior written request from
Tenant, Landlord will inform Tenant if any alteration or addition to be
subsequently made to, or installed in, the Premises by Tenant will be required
by Landlord to be removed upon termination of this Lease. Notwithstanding the
foregoing, Tenant may install equipment and trade fixtures, and may remove same
upon termination of this Lease, at Tenant's expense, provided the Premises are
restored to their original condition, normal wear and tear excepted, and
provided further that Tenant shall not then be in default of any provision of
this Lease.
ARTICLE VIII. MAINTENANCE AND REPAIR.
A. MAINTENANCE BY LANDLORD. Landlord shall make, at its sole
cost and expense, all necessary repairs, maintenance, or replacements (the
necessity of replacements to be determined by Landlord in its sole discretion)
to the exterior and structural portions of the Premises, including, without
limitation, the roof and roof supports, flashings, gutters, downspouts,
footings, foundations, structural supports, columns, exterior walls, bearing
walls, and floor slabs, so as to keep the Premises in as good condition as it
was in on the Commencement Date, reasonable wear and tear excepted (but in no
event shall the condition of the Premises be such that Tenant is unable to
operate its business within reasonable and acceptable limits in accordance with
the permitted use); provided, however, that Landlord shall not be required to
make any repairs occasioned by the act, omission, or negligence of Tenant, its
agents, invitees, contractors, or employees. In the event that the Premises
should become in need of repairs required to be made by Landlord, Tenant shall
give immediate written notice of the needed repairs to Landlord. Landlord
shall make repairs within thirty (30) days after delivery of such written
notice from Tenant, unless such repairs are not capable of being completed
within thirty (30) days, in which case, Landlord shall use reasonable, diligent
efforts to complete such repairs as promptly as possible after the expiration
of thirty (30) days. Landlord shall be responsible only for the cost of
repairs required above, and not for any consequential or other damages
resulting therefrom.
LEASE AGREEMENT PAGE 7
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B. MAINTENANCE BY TENANT. Tenant shall keep the Premises,
including all windows, signs, and sidewalks, service ways, loading areas
adjacent to the Premises, landscaping and irrigation systems (if any), and all
paved surfaces and parking lots (including striping of the parking lot and
preventing potholes and other surface inadequacies based on the intended
purpose of such paved surfaces and parking lots) in good, clean, rubbish-free
condition, free from waste and nuisance at all times, reasonable wear and tear
and damage by casualty excepted. Tenant shall, subject to Landlord's
maintenance responsibilities provided for above, make all needed repairs,
including without being limited to, maintenance of all direct utility
connections and replacement of any cracked or broken windows or other glass.
Tenant shall, at Tenant's expense, keep in good working condition the heating,
ventilating, and air conditioning systems, the sprinkler system, if any, and
the water heater, maintaining, repairing, and replacing such items as may be
necessary from time to time, reasonable wear and tear and damage by casualty
excepted. Tenant shall comply at its sole cost and expense with all
governmental laws, ordinances, and regulations which must be complied with by
reason of the nature of the use of the Premises by Tenant, except that Tenant
shall not be obligated to make any structural changes or alterations to the
Premises in order to comply therewith unless made necessary by the negligent
act or omission of Tenant, in which event Tenant shall comply at its expense in
accordance with plans and specifications approved by Landlord. If any repairs
or replacements required to be made by Tenant hereunder are not made within
fifteen (15) days after written notice delivered to Tenant by Landlord,
Landlord may, at its option, make such repairs or replacements without
liability to Tenant for any loss or damage which may result to its stock or
business by reason of such repairs or replacements, and Tenant shall pay to
Landlord upon demand as additional rental hereunder the cost of such repairs
and replacements, plus interest at a rate equal to the lower of eight percent
(8%) per annum, or the maximum rate permitted by the usury laws of the State of
Texas, from the date of payment by Landlord until Landlord is repaid by Tenant.
C. GARBAGE AND TRASH DISPOSAL. Tenant shall be responsible, at
its sole cost and expense, for making the provision for garbage disposal from
the Premises.
ARTICLE IX. CASUALTY.
Tenant shall give immediate written notice to Landlord of any damage
caused to the Premises by fire or other casualty. If the Premises is damaged
by a fire, explosion, or other casualty (an "Occurrence"), the damage shall
promptly be repaired by Landlord subject to this Section, and only to the
extent as is necessary to place the Premises in the same condition as when
possession was initially delivered to Tenant, and to the extent of insurance
proceeds made available to Landlord specifically for such repair. Should
insurance proceeds made available to Landlord specifically for such repair be
insufficient for such repair, and Landlord elects not to rebuild or restore the
Premises, Landlord shall so advise Tenant in writing within forty-five (45)
days after the Occurrence, and Tenant may, at its option, and within thirty
(30) days after its being advised of Landlord's decision not to rebuild or
restore, provide Landlord with at least forty-five (45) days prior written
notice of its election to terminate this Lease. If such damage occurs and (i)
Landlord is not required to repair as provided above, or (ii) the Premises
shall be damaged to the extent of seventy-five percent (75%)
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or more of the cost of replacement, Landlord may repair or rebuild the
Premises or the building, or terminate this Lease upon notice of such election
in writing to Tenant within forty-five (45) days after the Occurrence. If the
Occurrence renders forty percent (40%) or less of the Premises untenantable and
Tenant does not utilize the portion rendered untenantable, a proportionate
abatement of the Rent and Additional Rent shall be allowed from the Occurrence
date until the date Landlord completes its work, said proportion to be computed
on the basis of the relation which the gross square footage of the untenantable
space bears to the floor area of the Premises (but not including any portion of
the Premises outside of the building improvements). If more than forty percent
(40%) of the Premises is rendered untenantable, and Tenant does not utilize the
entire Premises for any purpose, then until Landlord restores it to the
condition it was in on the Commencement Date, Rent and Additional Rent shall
abate. If any Occurrence precludes twenty-five percent (25%) or more of the
Premises' use by Tenant and less than twelve (12) months remain on the then
current term, notwithstanding any of the other provisions of this Section,
Landlord shall have no obligation to repair or rebuild unless Tenant, within
thirty (30) days of the Occurrence, irrevocably exercises its next option, if
any, to extend this Lease. If no such option exists and less than twelve (12)
months remain in the term, Landlord shall have no obligation to restore or
rebuild. If Landlord shall fail to commence to repair or restore the Premises
in the manner specified in this Article within forty-five (45) days after the
Occurrence, and proceed to complete such repairs and restoration with
reasonable due diligence, subject to any delays enumerated in Article XV.C.
hereof, and subject to the provisions of Article XI.E., then, in such event,
Tenant may give Landlord ten (10) days prior written notice of its election
either to (i) terminate this Lease, or (ii) rebuild the Premises itself on
behalf of Landlord. If the Tenant shall so rebuild the Premises, then Tenant
shall have the right to the insurance proceeds payable with respect to the
Occurrence. Notwithstanding anything to the contrary contained in this Lease,
under no circumstances whatsoever shall Landlord's obligation to rebuild,
restore, or repair the Premises exceed insurance proceeds made available to
Landlord.
ARTICLE X. CONDEMNATION.
A. TERMINATION OPTION. In the event that all or any portion of
the buildings on the Premises, or in excess of twenty-five percent (25%) of the
parking area of the Premises, should be appropriated or taken by any public or
quasi-public authority under the power of eminent domain, this Lease may be
terminated by either Landlord or Tenant by the delivery of thirty (30) days'
prior written notice of their election, said notice being delivered within
thirty (30) days of Tenant's and Landlord's receipt of notice of such proposed
taking or acquisition; the termination shall be effective as of the date title
vests pursuant to such taking or acquisition, and all rentals shall be paid up
to that date.
B. LEASE OBLIGATION AFTER CONDEMNATION. In the event that all or
any portion of the Premises should be appropriated or taken by any public or
quasi-public authority under the power of eminent domain, and this Lease is not
terminated by Landlord or Tenant, the Rent payable hereunder during the
unexpired portion of this Lease shall be reduced by multiplying the
LEASE AGREEMENT PAGE 9
<PAGE> 10
total rental by a fraction the numerator of which is the Square Foot Area of
the Premises (but not including any portion of the Premises outside of the
building improvements) after condemnation and the denominator of which is the
Square Foot Area of the Premises (but not including any portion of the Premises
outside of the building improvements) prior to condemnation. Landlord shall
repair any structural damage to the Premises caused by the appropriation or
taking.
C. VOLUNTARY CONVEYANCE IN LIEU OF CONDEMNATION. In the event
that any authority having the power of eminent domain requests that Landlord
convey to such authority all or any portion of the Premises, Landlord shall
have the right to make a voluntary conveyance to such authority of all or any
portion of the Premises whether or not proceedings have been filed by such
authority; and in the event of any such voluntary conveyance, it shall
nevertheless be deemed for the purpose of interpreting this Lease that there
has been a taking under the power of eminent domain.
D. CONDEMNATION AWARDS. In the event of such an appropriation or
taking, whether whole or partial, all awards of compensation shall belong to
Landlord, and Tenant expressly waives any claim or right to any such award,
except that Tenant shall be allowed to recover from such authority, but not
from any portion of any award to Landlord, at Tenant's own cost and expense,
the unamortized cost of Tenant's leasehold improvements and trade fixtures.
ARTICLE XI. DEFAULT AND REMEDIES FOR DEFAULT.
A. EVENTS OF DEFAULT AND REMEDIES FOR DEFAULT. The following
shall be deemed to be events of default by Tenant under this Lease:
1. Tenant shall fail to pay when due any installment of
Rent or Additional Rent due to Landlord pursuant to this Lease;
2. Tenant shall fail to pay when due, or within five (5)
days of receipt of written notice from Landlord, any payment required
pursuant to this Lease, other than the payment of Rent or Additional
Rent;
3. Tenant shall fail to comply with any term, covenant,
or condition of this Lease, other than the payment of Rent, and shall
fail to cure such event of default within fifteen (15) days after
written notice by Landlord. Notwithstanding the foregoing, if the
default described in the notice from Landlord is of such a nature that
it is incapable of being cured within fifteen (15) days following
receipt of written notice from Landlord, then Tenant shall be in
default if Tenant fails to use reasonable, diligent efforts to cure
such default until such default is cured;
LEASE AGREEMENT PAGE 10
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4. Tenant shall be the subject of a petition under Title
11 of the United States Code, as amended, or under any state
bankruptcy laws, whether voluntary or involuntary, or be adjudged
bankrupt or insolvent under and of such laws;
5. Tenant shall have a receiver or trustee appointed for
all or substantially all of the assets of Tenant; or Tenant shall make
a transfer in fraud of creditors or shall make an assignment for the
benefit of creditors; or
6. Tenant shall do or permit to be done any act which
results in a lien being filed against the Premises, and does not
discharge of record or bond against said lien within thirty (30) days
after the date of filing thereof.
B. REMEDIES. Upon the occurrence of an event of default, and in
addition to all other remedies now or hereinafter provided herein or by law:
1. Landlord may, at its option, enter upon and take
possession of the Premises without any previous notice of intention to
reenter, and may remove all persons and property from the Premises and
may take full and exclusive possession of the Premises. Landlord may
secure, lock up, cut off utility service to, and attempt to relet the
Premises, all without any of such actions being deemed a trespass or
an election on Landlord's part to terminate the Lease. If, however,
any such default on Tenant's part should be fully corrected and cured
before Landlord exercises an option to terminate the Lease, and before
Landlord has relet the Premises, then the Premises shall be returned
to Tenant, and Tenant may continue in possession hereunder. Tenant
expressly waives any and all damages by reason of reentry by Landlord
under this Lease.
2. In the event that Landlord elects to reenter the
Premises without terminating the Lease, then Tenant shall be liable
for and shall pay to Landlord at Landlord's mailing address in Dallas
County, Texas, all Rent and other indebtedness accrued to that date.
Landlord shall be entitled to collect from Tenant Rent and Additional
Rent due hereunder monthly as it becomes due for the remainder of the
Term, diminished by any net sums thereafter received by Landlord
through reletting the Premises during said period (after deducting all
expenses incurred by landlord to relet the Premises). In no event
shall Tenant be entitled to any excess of any Rent obtained by
reletting over and above the Rent herein reserved. Actions to collect
amounts due by Tenant as provided in this Paragraph may be brought
from time to time, on one or more occasion, without the necessity of
Landlord's waiting until expiration of the Lease Term.
3. Notwithstanding any prior election not to terminate,
Landlord may at any time, including subsequent to a reentry as above
provided, elect to terminate this Lease on account of such default.
Upon termination of this Lease, Tenant shall be liable for and shall
pay to Landlord the sum of all Rent and other indebtedness accrued to
the date of such
LEASE AGREEMENT PAGE 11
<PAGE> 12
termination, plus, as agreed and liquidated damages, an amount equal
to the Rent and other charges for the remaining portion of the Lease
Term (had such term not been terminated by Landlord prior to
expiration of the Lease Term), less the then fair rental value of the
Premises for said period, both discounted to their present value based
upon an interest rate of six percent (6%) per annum.
4. Upon the occurrence of an event of default, Tenant
shall also be liable for and shall pay to Landlord, at Landlord's
mailing address in Dallas County, Texas, in addition to any sum
provided to be paid above: broker's fees incurred by Landlord in
connection with reletting the whole or any part of the Premises; the
costs of removing and storing Tenant's or other occupant's property;
the cost of repairing, altering, remodeling, renovating, or otherwise
putting the Premises into condition acceptable to a new tenant or
tenants; and all reasonable expenses incurred by Landlord in enforcing
Landlord's remedies, including reasonable attorney's fees.
C. DEFAULT UNDER ANOTHER LEASE WITH LANDLORD. A DEFAULT BY
TENANT UNDER ANOTHER LEASE WITH LANDLORD FOR THE LEASE OF SPACE NOT INCLUDED IN
THIS LEASE SHALL, AT LANDLORD'S OPTION, CONSTITUTE AN EVENT OF DEFAULT UNDER
THIS LEASE.
D. DEFAULT BY LANDLORD. Landlord shall not be in default unless
Landlord fails to perform obligations required of Landlord within a reasonable
time, but in no event later than thirty (30) days after receipt of written
notice by Tenant to Landlord, specifying wherein Landlord has failed to perform
such obligation; provided, however, that if the nature of Landlord's obligation
is such that more than thirty (30) days are required for performance, then
Landlord shall not be in default if Landlord commences performance within such
thirty (30) day period and thereafter diligently prosecutes completion of same.
In any event, if Landlord is in default hereunder, and as a consequence Tenant
recovers a money judgment against Landlord, so long as Landlord owns the
Premises, such judgment shall be satisfied only out of the proceeds of sale
received on execution of the judgment and levy against the right, title, and
interest of Landlord in the Premises, and out of rent or other income from such
real property receivable by Landlord or out of the Landlord's right, title, and
interest in the Premises. Neither Landlord, nor any agent, officer, director,
or employee of Landlord shall be personally liable for any portion of such a
judgment.
ARTICLE XII. TRANSFERS AND LIENS.
A. FINANCING SUBORDINATION. This Lease and the rights of Tenant
hereunder are subject and subordinate to any first lien mortgage or deed of
trust, together with all renewals, modifications, consolidations, replacements,
and extensions thereof, which may now or hereafter encumber the Premises on
which it is located, provided the holder of any such mortgage or deed of trust
executes and delivers to tenant an agreement in a form suitable for recording
pursuant to which the holder agrees that it will recognize this Lease and will
not disturb Tenant's possession of the
LEASE AGREEMENT PAGE 12
<PAGE> 13
Premises in the event of foreclosure or deed-in-lieu of foreclosure of such
mortgage or deed of trust so long as Tenant is not then in default under this
Lease. Tenant agrees to execute such further documents as may be necessary for
subordinating this Lease to any mortgage, deed of trust, as the case may be,
and further agrees to execute any other document of attornment required by
Landlord's mortgagee. Tenant irrevocably appoints Landlord as Tenant's
attorney-in-fact to execute and deliver in the name of Tenant any such
instrument or instruments in the event that Tenant fails to so deliver said
instrument or instruments within ten (10) days after written demand from
Landlord. Tenant agrees that it shall not undertake any act which will cause a
lien to be filed against the subject property, and Tenant acknowledges that it
has no power to encumber or cloud Landlord's title. Tenant further agrees that
if, because of any act or omission of Tenant, any mechanic's lien or other
lien, charge, or order for the payment of money shall be filed against Tenant
or any portion of the Premises, or upon the right, title, and interest of
Tenant created by this Lease, Tenant shall, at its own cost and expense, cause
the same to be discharged of record or bonded within fifteen (15) days after
written notice by Landlord to Tenant of the filing thereof; and Tenant hereby
agrees to indemnify and hold Landlord harmless against and from all costs,
liabilities, suits, penalties, claims, and demands therefrom.
B. ASSIGNMENT AND SUBLETTING. Tenant may assign this Lease or
sublet the Premises only with the prior written consent of Landlord. Tenant
acknowledges that this Lease is personal to Tenant for the use specified
herein, and that Landlord may withhold its consent arbitrarily and for any
reason whatsoever, and may further condition any consent on an increase in Rent
or any other changes in the terms, covenants, or conditions hereof. The
consent by Landlord to any transfer, assignment, or subletting shall not be
deemed to be a waiver on the part of Landlord of its rights regarding any
future transfers, assignments, or sublettings. If Landlord consents to an
assignment or subletting, that consent shall not be effective unless and until
Landlord approves in writing the executed assignment or sublease agreement,
which agreement shall provide for the Landlord's consent to any amendment, and
for the assignee or sublessee to assume all of the obligations and liabilities
of Tenant under this Lease, without relieving Tenant of its obligations under
this Lease, unless otherwise agreed to in writing by Landlord. In the event of
any assignment or subletting, even with the consent of Landlord, Tenant shall
pay to Landlord, in addition to all payments otherwise required under this
Lease, the amount of any payments payable by any assignee or subtenant under
its agreement with Tenant which is in excess of that provided for in this
Lease. Notwithstanding the foregoing, Tenant shall have the right, without
Landlord's prior written consent, to assign this Lease, or to sublet the whole
or any part of the Premises, to any corporation which, at the time, the Tenant
shall be a parent or subsidiary, or to any subsidiary of a corporation of
which, at the time, Tenant shall be a parent or a subsidiary. In addition,
Tenant shall have the right, without Landlord's prior written consent, to
assign this Lease to any person or entity acquiring all or substantially all of
the Tenant's assets by purchase, merger, consolidation or otherwise. Tenant
shall have the right, without Landlord's consent, to pledge its interest in
this Lease to The First National Bank of Boston, its successors and assigns, as
collateral for any obligation owed to it by Tenant.
LEASE AGREEMENT PAGE 13
<PAGE> 14
C. TRANSFER OF LANDLORD'S INTEREST. In the event of any sale of
the Premises or transfer of Landlord's interest hereunder, Landlord shall be
and is hereby entirely freed and relieved from any and all liability which may
arise under any of the terms, covenants, and conditions contained herein after
the consummation of such sale or transfer. Landlord shall have no liability or
responsibility for any act, occurrence, or omission occurring after the
consummation of such sale or transfer. Thereafter, Tenant shall look solely to
the purchaser to carry out any and all of the terms, covenants, and conditions
obligating Landlord under this Lease, said purchaser being deemed without
further agreement between the parties to have assumed said obligations by
virtue of the sale or transfer. Landlord may, at any time during the term of
this Lease, with notice to Tenant, assign or pledge, or both, its interest in
this Lease as collateral for any indebtedness owed by it.
D. ESTOPPEL. Within ten (10) days following a request by
Landlord, Tenant shall deliver to Landlord an estoppel certificate requested by
Landlord, properly acknowledged, which shall certify to Landlord, any
purchaser, lender, or other person specified by Landlord, all reasonable
information required by Landlord, including whether or not this Lease is
unmodified and in full force and effect, whether or not Tenant contends that
Landlord is in default under this Lease in any respect, whether or not there
are then existing setoffs or defenses against the enforcement of any right or
remedy of Landlord, or any duty or obligation of Tenant, the amount of deposits
held by Landlord, the date to which Rent and other charges have been paid, and
stating that Tenant has no right or interest in the Premises, other than as a
Tenant under this Lease. Similarly, within ten (10) days following a request
by Tenant, Landlord shall deliver to Tenant an estoppel certificate requested
by Tenant, properly acknowledged, which shall certify to Tenant or any person
specified by Tenant, all reasonable information requested by Tenant.
ARTICLE XIII. ACCESS TO PREMISES.
Landlord shall have the right to enter upon the Premises at all
reasonable hours, after giving at least two (2) hours advance notice, for the
purpose of inspecting them, making repairs to the Premises, or curing any
default of Tenant hereunder that Landlord elects to cure. Notwithstanding the
foregoing, Landlord shall not be required to provide any advance notice in an
emergency situation. Landlord shall not be liable to Tenant for any expense,
loss, or damage from any such entry. Tenant shall permit Landlord, during the
sixty (60) day period preceding the expiration of this Lease, to place usual or
ordinary "For Lease" signs in clearly visible locations within the Premises and
to enter upon the Premises during normal business hours to exhibit same to
prospective tenants.
ARTICLE XIV. HAZARDOUS SUBSTANCES; AMERICANS WITH DISABILITIES
ACT.
A. HAZARDOUS SUBSTANCES. The term "Hazardous Substances", as
used in this Lease shall mean pollutants, contaminants, toxins, or hazardous
wastes, or other substances, the use and/or the removal of which is restricted,
prohibited, or penalized by an "Environmental Law".
LEASE AGREEMENT PAGE 14
<PAGE> 15
Environmental Law, as used in this Lease, shall mean any federal, state, or
local, statute, law, ordinance, rule, regulation, or judicial or administrative
order or decision including, but not limited to, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as same may be
amended from time to time. Tenant hereby agrees that (i) no activity will be
conducted on the Premises that will produce any Hazardous Substance(s), except
for such activities that are part of the ordinary course of Tenant's business
activities ("Permitted Activities"), provided Tenant agrees to conduct all
Permitted Activities in accordance with applicable Environmental Laws; (ii) the
Premises will not be used in any manner for the storage of any Hazardous
Substances, except for the storage of such materials that are used in the
ordinary course of Tenant's business ("Permitted Materials"), provided Tenant
will store the Permitted Materials in accordance with applicable Environmental
Laws; (iii) no portion of the Premises will be used as a landfill or a dump;
(iv) Tenant will not install any underground tanks of any type in, under, or
near the Premises, (v) Tenant will not permit any Hazardous Substances to be
brought onto the Premises except for the Permitted Materials and, if so brought
thereon by Tenant, its agents or employees, the same immediately shall be
removed with proper disposal and all required clean-up procedures shall be
diligently undertaken pursuant to all Environmental Laws. Landlord or
Landlord's representative, upon notice and during normal business hours, shall
have the right, but not the obligation, to enter the Premises for the purpose
of inspecting the storage, use, and disposal of Permitted Materials or other
Hazardous Substances and to ensure compliance with all Environmental Laws.
Should it be determined, in Landlord's sole opinion, that any Permitted
Material is being improperly stored, used, or disposed of, or that the
Premises, or any portion thereof, is being used in violation of any
Environmental Law, then Landlord shall provide written notice to Tenant of such
matter. Upon receipt of notice, Tenant agrees that it will use all due
diligence, at Tenant's sole cost and expense, to cure such violation. Landlord
shall have the right to perform such work at the Premises if Tenant shall not
complete such remediation within a reasonable time period. The reasonableness
of the time period for the cure shall be determined by Landlord's environmental
consultant or engineer. In the event Tenant shall not complete such
remediation within a reasonable period, as determined above, Landlord shall
have the right to perform such work and Tenant, upon written notice from
Landlord, shall reimburse Landlord for any and all costs associated with said
work.
Tenant hereby indemnifies and holds Landlord harmless from all claims,
demands, actions, liabilities, costs, expenses, damages, and obligations of any
nature arising from or as a result of (a) any breach by Tenant of its
obligation of this paragraph on or after the Commencement Date, (b) from any
violation of any applicable Environmental Law on or at the Premises caused by
any act of Tenant, its invitees, customers, vendors, employees, agents, or
representatives occurring on or after the Commencement Date, and (c) from any
liability incurred under any applicable Environmental Law arising out of any
activity of Tenant or condition caused by any act of Tenant at or on the
Premises in each case occurring on or after the Commencement Date. The
foregoing indemnification and the responsibilities of Tenant shall survive the
termination or expiration of this lease.
B. AMERICANS WITH DISABILITIES ACT OF 1990. During the term of
this Lease, and notwithstanding anything contained in this Lease to the
contrary, Tenant shall be
LEASE AGREEMENT PAGE 15
<PAGE> 16
responsible for, and shall bear all costs and expenses associated with, any and
all alterations to the Premises which may be required by Title I of the
Americans with Disabilities Act of 1990, as subsequently amended or revised
(the "ADA"), for the accommodation of disabled individuals who may be employed
from time to time by Tenant, or any disabled customers, clients, guests,
invitees, or sublessees. Additionally, Tenant shall indemnify and hold
Landlord harmless from and against any and all liability incurred arising from
Tenant's failure to maintain the Premises in compliance with Title I of the
ADA, including the cost of making any alterations, renovations, or
accommodations required by Title I of the ADA, or any government enforcement
agency, or any courts, any and all fines, civil penalties, and damages awarded
against Landlord resulting from a violation or violations of Title I of the
ADA, and all reasonable legal expenses and court costs incurred in defending
claims made under the ADA, including, without limitation, reasonable
consultants', attorneys' and paralegals' fees, expenses, and court costs.
Landlord shall be responsible for, and shall bear all costs and expenses
associated with, compliance with Title III of the ADA, except that,
NOTWITHSTANDING ANYTHING CONTAINED IN THIS PARAGRAPH B. TO THE CONTRARY, Tenant
shall be responsible for, and shall bear all costs and expenses associated
with, compliance with the ADA, regardless of whether it is Title I or Title
III, for: (i) any activities on the Premises after the Commencement Date; (ii)
any alterations, additions, or renovations, to the Premises made by, or on
behalf of, Tenant; and, (iii) any change in the use of the Premises after the
Commencement Date.
ARTICLE XV. INTERPRETATION, NOTICES, AND MISCELLANEOUS.
A. CHOICE OF LAW. This Lease shall be governed by the laws of
the State of Texas.
B. SUCCESSORS AND ASSIGNS. The terms, covenants, and conditions
contained in this Lease shall apply to, inure to the benefit of, and be binding
upon the parties hereto, and their respective successors-in-interest (subject
to any restrictions on transfers contained in Article XII) and legal
representatives, except as otherwise herein expressly provided.
C. FORCE MAJEURE. In the event that Landlord is delayed,
hindered, or prevented from performing any action required herein, Landlord
shall not be liable or responsible if the delay is due to strike, riot, act of
God, shortage of labor or materials, war, governmental laws, regulations, or
other restrictions or any other causes of any kind which are beyond the
reasonable control of Landlord, and the period for the performance of such act
shall be extended for a period equivalent to the period of such delay.
D. PARTIAL INVALIDITY. Any provision of this Lease which shall
prove to be illegal, invalid, or unenforceable under present or future laws
shall in no way affect, impair, or invalidate any other provision hereof, and
this Lease shall be interpreted as if it had been entered into without such an
illegal, invalid, or unenforceable provision.
LEASE AGREEMENT PAGE 16
<PAGE> 17
E. WAIVER. The waiver by Landlord of any remedy for the breach
of term, covenant, or condition shall not be deemed to be a waiver of any
subsequent breach of the same or any other term, covenant, or condition
contained herein. The subsequent acceptance of Rent hereunder by Landlord
shall not be deemed to be a waiver of any preceding default by Tenant of any
term, covenant, or condition of this Lease, other than failure of the Tenant to
provide the particular Rent payments so accepted, regardless of Landlord's
knowledge of such preceding default at the time of acceptance of such Rent.
F. MERGER OF ESTATES. The voluntary or other surrender of this
Lease by Tenant or a mutual cancellation of this agreement shall not cause a
merger, and shall, at Landlord's option, terminate all or any existing sublease
or subtenancies, or, at Landlord's option, may operate as an assignment to
Landlord of Tenant's interest in any or all subleases or subtenancies.
G. LIABILITY. Notwithstanding anything to the contrary contained
herein, no personal liability of any kind or character whatsoever shall now, or
at any time hereafter, attach to Landlord's partners under any of the terms,
covenants, and conditions contained in this Lease for the payment of any amount
payable under this Lease or for the performance of any obligation under this
Lease.
H. CONSTRUCTION. Whenever in this Lease a singular number is
used, the same shall include the plural, and the neutered gender shall include
the feminine and masculine genders. The captions used in this Lease are for
convenience only, do not constitute a part of the Lease, and shall have no
effect upon the construction or interpretation of any term, covenant, or
condition herein.
I. NOTICES. All notices or requests provided for in this Lease
must be in writing and must be given by depositing the same in the United
States mail, addressed to the party to be notified, postage prepaid, and
registered or certified with return receipt requested, or by express courier
service, or by personal delivery. Notices by mail shall be deemed received
upon mailing in accordance with the foregoing requirement. Notices shall be
sent to the address designated in this Lease or at any other address specified
in writing by the parties hereto. In the event that more than one party is
acting as either Landlord or Tenant under this Lease, the parties shall agree
upon a common location for the receipt of notices, and any notice sent to said
designated location shall bind each party acting as either Landlord or Tenant
as if each party acting in said capacity had received such notice.
J. ENTIRE AGREEMENT. This Lease, together with the exhibits
described below which are attached hereto and incorporated herein for all
purposes, set forth all agreements between Landlord and Tenant relative to the
Premises. All prior negotiations and agreements are merged herein, and no
subsequent agreement relative to the subject matter hereof or modification of
this Lease shall be binding unless reduced to a writing signed by both parties
hereto.
LEASE AGREEMENT PAGE 17
<PAGE> 18
K. QUIET ENJOYMENT. Landlord hereby covenants that Tenant shall
peaceably and quietly have, hold, and enjoy the Premises for the full term
hereby granted, including any extension thereof, free from molestation,
eviction, or disturbance by Landlord or by any other person claiming through
Landlord, provided Tenant is not in default of the Lease and that Landlord has
good right to make this Lease.
L. NOTICE OF LEASE. At any time following the execution of this
Lease, Landlord and Tenant agree to execute a short form Notice of Lease in
form suitable for recording, in the form attached hereto as Exhibit "E".
The following exhibits have been attached to and incorporated into this Lease:
EXHIBIT "A" - Description of the Premises
EXHIBIT "B" - Condition of the Premises
EXHIBIT "C-1" - Lease Term
EXHIBIT "C-2" - Rent
EXHIBIT "D" - Permitted Use
EXHIBIT "E" - Notice of Lease
Executed by Landlord the 3rd day of July, 1995.
LANDLORD: MAILING ADDRESS:
Fojtasek Industrial Properties, 3801 Maplewood Ave.
Ltd., a Texas Limited Dallas, TX 75205
Partnership
By: Fojtasek Industrial Properties
Management, Inc., a Texas corporation,
general partner
By: /s/ JOE FOJTASEK
------------------------------------
Joe Fojtasek
President
LEASE AGREEMENT PAGE 18
<PAGE> 19
Executed by Tenant the _______ day of ___________, 1995.
TENANT: MAILING ADDRESS:
Fojtasek Companies, Inc. P.O. Box 226957
a Texas corporation Dallas, TX 75222
By:_________________________
Randall S. Fojtasek
President
LEASE AGREEMENT PAGE 19
<PAGE> 20
EXHIBIT "A"
LEASE PLAN
<PAGE> 21
EXHIBIT "B"
CONDITION OF PREMISES
LANDLORD MAKES ONLY THE FOLLOWING REPRESENTATIONS AND WARRANTIES
CONCERNING THE CONDITION OF THE PREMISES. EXCEPT AS SET FORTH BELOW ON THIS
EXHIBIT "B", LANDLORD DOES NOT MAKE ANY OTHER REPRESENTATIONS, WARRANTIES, OR
COVENANTS, EXPRESS OF IMPLIED, OF ANY KIND OR NATURE CONCERNING THE PREMISES,
INCLUDING ANY WARRANTY OF HABITABILITY OR SUITABILITY FOR A PARTICULAR PURPOSE,
ALL OF WHICH ARE HEREBY DISCLAIMED. SUBJECT TO THE FOLLOWING REPRESENTATIONS
AND WARRANTIES BY LANDLORD, TENANT ACCEPTS THE PREMISES IN ITS AS IS, WHERE IS,
WITH ALL FAULTS, CONDITION, AND TENANT HEREBY EXPRESSLY ACKNOWLEDGES AND AGREES
THAT TENANT HAS, OR WILL HAVE PRIOR TO THE COMMENCEMENT DATE, THOROUGHLY
INSPECTED AND EXAMINED THE PREMISES TO THE EXTENT DEEMED NECESSARY BY TENANT IN
ORDER TO ENABLE TENANT TO EVALUATE THE PREMISES AND ITS SUITABILITY FOR
TENANT'S PURPOSES.
1. The Premises is in good condition and repair and is adequate
and sufficient for Tenant to carry on its business as is presently being
conducted on the Premises by Fojtasek Companies, Inc.
2. There are no material defects in the Premises, as to title or
condition, which have not been otherwise disclosed in writing by Landlord to
Tenant.
3. Landlord has not received any notice that either the whole or
any portion of the Premises is to be condemned, requisitioned, or otherwise
taken by any public authority.
4. Landlord does not have any knowledge of any public
improvements that may result in special assessments against or which otherwise
affect the Premises.
5. Landlord has good and indefeasible title to the Premises.
Ambassador Row
Dallas Co.
<PAGE> 22
EXHIBIT "A"
BEING a tract of land in the JAMES McLAUGHLIN SURVEY, ABSTRACT NO. 845, and
being all of City of Dallas Block 2-E/7940, REVISED BROOK HOLLOW INDUSTRIAL
DISTRICT NUMBER ONE, an addition to the City of Dallas, Dallas County, Texas,
according to the Map thereof recorded in Volume 28, Page 235 of the Map Records
of Dallas County, Texas, and being more particularly described as follows:
BEGINNING at the point of intersection of the Southwest right-of-way line of
Ambassador Row (70' wide) with the Northwest right-of-way line of Profit Drive
(60' wide), said beginning point being evidenced by a 1/2" iron rod found for
corner;
THENCE North 51 degrees 51' West, along the Southwest right-of-way line of
Ambassador Row, 1,200.00 feet to a 5/8" iron rod set for corner in the
Southeast right-of-way line of the M.K. & T. Railroad right-of-way (40' wide);
THENCE South 38 degrees 09' West, along the Southeast right-of-way line of
said railroad, 571.20 feet to the point of curvature of a circular curve to the
left having a central angle of 90 degrees 00', and a radius of 300.00 feet,
said point of curvature being evidenced by a cross cut in concrete pavement,
found;
THENCE, continuing along the Southeast right-of-way line of said railroad, in a
Southerly and Easterly direction, around said curve, an arc distance of 471.24
feet to its point of tangency being evidenced by a cross cut in concrete
pavement, found;
THENCE, South 51 degrees 51' East, along the Northeast right-of-way line of
said railroad, 900.00 feet to a point for corner in the Northwest right-of-way
line of Profit Drive, said point being evidenced by a 1/2" iron rod found for
corner;
THENCE, North 38 degrees 09' East, along the Northwest right-of-way line of
Profit Drive, 871.20 feet to the POINT OF BEGINNING AND CONTAINING 23.556 acres
of land, more or less.
<PAGE> 23
EXHIBIT "C-1"
LEASE TERM
A. COMMENCEMENT DATE. The Commencement Date of this Lease shall
be ________ ___, 1995.
B. TERM. The term of this Lease begins on the Commencement Date
and continues for a period of thirty-six (36) months thereafter, unless
terminated pursuant to the terms, covenants, and conditions of this Lease,
prior thereto.
C. EARLY TERMINATION. Provided Tenant is not then in default
under the terms of this Lease, Tenant may, at any time after the Commencement
Date, without penalty, give written notice to Landlord of Tenant's election to
terminate this Lease after the expiration of at least one hundred eighty (180)
days from the date of such notice.
D. RENEWAL OPTION. Tenant (but not any assignee or subtenant of
Tenant, even if Landlord's consent is obtained as required in the Lease), is
granted the option to extend the term of this Lease for two extended terms of
sixty (60) months each, provided (a) Tenant is not in default at the time of
exercise of the option, and (b) Tenant gives written notice of its exercise of
the option at least two hundred ten (210) days prior to the expiration of the
original term, or the first extended term, of the Lease, as applicable.
Landlord shall, within fifteen (15) days of its receipt of Tenant's notice,
notify Tenant in writing of its opinion concerning the proposed renewal rate,
which shall be the fair market rental value described in the immediately
succeeding paragraph, and the Tenant shall, within thirty (30) days of its
receipt of Landlord's notice of the renewal rate, during which time Landlord
and Tenant shall confer and attempt to reach an agreement regarding the
reasonableness of the proposed renewal rate, notify Landlord in writing of its
acceptance or rejection of the proposed rental rate. If Landlord and Tenant
are unable to mutually agree on the renewal rate within such thirty (30) day
period, then the renewal options described in this paragraph shall
automatically terminate without further notice.
Each such extension term shall be upon the same terms, conditions, and
rentals, except (i) Tenant shall have no further right of renewal after the
last extension term prescribed above, and (ii) the Rent amount shall be
increased to fair market rental value of the Premises at the time Tenant
exercises its election. Fair market rental value of the Premises for each
extension term will be determined by the parties, in their reasonable
discretion and upon their combined good faith efforts, considering the rental
market for comparable land and improvements in substantially the same
condition, in comparable locations, used for similar purposes, and under terms
similar to those set forth in this Lease.
<PAGE> 24
EXHIBIT "C-2"
RENT
A. RENT. This provision designates the Rent for each year of the
Lease Term. Each year shall begin on the Commencement Date or on the
anniversary thereof for purposes of determining the applicable rental rate.
<TABLE>
<CAPTION>
Year Annual Rent Monthly Rent
---- ----------- ------------
<S> <C> <C>
1 $253,372.00 $21,114.33
2 $337,830.00 $28,152.50
3 $506,745.00 $42,228.75
</TABLE>
<PAGE> 25
EXHIBIT "D"
PERMITTED USE
Manufacturing, office, research and development, warehouse, distribution, and
related uses.
<PAGE> 26
Atrium lease
Insert XV.M.
This Lease shall be subject to the ingress and egress rights of Ruan
Leasing Company with respect to the private road along the northwest portion of
the Premises, pursuant to the terms of that certain Lease Agreement dated March
1, 1988, by and between Ruan Leasing Company, as tenant, and Fojtasek
Companies, Inc., as landlord (its interest therein having been assigned to
Landlord).
<PAGE> 27
Atrium
EXHIBIT "E"
MEMORANDUM OF LEASE
This is a Memorandum of Lease by and between FOJTASEK INDUSTRIAL
PROPERTIES, LTD., a Texas limited partnership, (hereinafter referred to as
"Landlord") and FOJTASEK COMPANIES, INC., a Texas corporation (hereinafter
referred to as "Tenant") upon the following terms:
1. Date of Lease: __________ ___, 1995
2. Description of Property: That portion of the property
cross-hatched on Exhibit "A", attached hereto and incorporated
herein by reference, and being a part of the real property
more fully described on Exhibit "A-1", attached hereto and
incorporated herein by reference, commonly known as 9001
Ambassador Row, Dallas, Dallas County, Texas
3. Date of Commencement: ________ ___, 1995
4. Term: Three (3) years
5. Renewal Option(s): Two (2), 5-year options
The purpose of this Memorandum of Lease is to give record notice of
the lease and of the rights created thereby, all of which are hereby confirmed.
IN WITNESS WHEREOF the parties have executed this Memorandum of Lease
as of the dates set forth in their respective acknowledgments.
LANDLORD:
Fojtasek Industrial Properties,
Ltd., a Texas limited
partnership
By: Fojtasek Industrial Properties
Management, Inc., a Texas corporation,
its general partner
By:__________________________
Joe Fojtasek
President
Page 1 of 2
<PAGE> 28
Executed by Tenant the _______ day of ___________, 1995.
TENANT:
Fojtasek Companies, Inc.
a Texas corporation
By:_________________________
Randall S. Fojtasek
President
THE STATE OF TEXAS )
)
COUNTY OF DALLAS )
This instrument was acknowledged before me on the ___ day of
___________, 1995, by Joe Fojtasek, President of Fojtasek Industrial Properties
Management, Inc., a Texas corporation, general partner of Fojtasek Industrial
Properties, Ltd., a Texas limited partnership, on behalf of said corporation.
______________________________
NOTARY PUBLIC, STATE OF TEXAS
Printed Name:_________________
My Commission Expires:________
THE STATE OF TEXAS )
)
COUNTY OF DALLAS )
This instrument was acknowledged before me on the ___ day of
__________, 1995, by Randall S. Fojtasek, President of Fojtasek Companies,
Inc., a Texas corporation, on behalf of said corporation.
______________________________
NOTARY PUBLIC, STATE OF TEXAS
Printed Name:_________________
My Commission Expires:________
Page 2 of 2
<PAGE> 29
AMENDMENT OF LEASE AGREEMENT
This Amendment of Lease Agreement (the "Amendment") is made and entered
into this 13th day of February, 1996, by and between Fojtasek Industrial
Properties, Ltd., a Texas limited partnership (the "Landlord") and Fojtasek
Companies, Inc., a Texas corporation (the "Tenant").
WITNESSETH:
WHEREAS, Landlord and Tenant have entered into a Lease Agreement (the
"Atrium Lease") for the Premises located in Dallas County, Texas and described
on Exhibit "A" attached hereto and made a part hereof for all purposes; and,
WHEREAS, Landlord and Tenant have agreed to certain modifications to
the Atrium Lease;
NOW, THEREFORE, in consideration of the premises, and the mutual
benefit of Landlord and Tenant, Landlord and Tenant hereby agree to amend the
Atrium Lease as follows:
1. The chart of Annual and Monthly Rents set forth on Exhibit "C-2"
shall be amended to read as follows:
"Year Annual Rent Monthly Rent
----- ----------- ------------
1 $253,372.00 $21,114.33
2 $253,372.00 $21,114.33
3 $506,745.00 $42,228.75"
2. Except as provided herein, all terms of the Atrium Lease shall
remain in full force and effect.
Fojtasek Industrial Properties, Ltd.
By: Fojtasek Industrial Properties
Management, Inc., general
partner
By: /s/ JOE FOJTASEK
-----------------------------
Joe Fojtasek, President
Fojtasek Companies, Inc.
By: /s/ RANDALL FOJTASEK
----------------------------
Title: President & CEO
-------------------------
Exhibit A is a map of the location.
<PAGE> 1
EXHIBIT 10.18
H-R
LEASE AGREEMENT
THIS LEASE AGREEMENT (the "Lease") is made and entered into by and
between FOJTASEK INDUSTRIAL PROPERTIES, LTD., A TEXAS LIMITED PARTNERSHIP
("Landlord"), and FOJTASEK COMPANIES, INC., A TEXAS CORPORATION ("Tenant").
WITNESSETH:
In consideration of Tenant's obligation to pay rent, and of the other
terms, covenants, and conditions contained herein, Landlord hereby demises and
leases to Tenant, and Tenant hereby takes from Landlord the Premises, described
herein, TO HAVE AND TO HOLD all and singular, said Premises and improvements,
together with the rights, privileges, and appurtenances thereto, belonging unto
said Tenant for the term described herein.
ARTICLE I. PREMISES.
A. THE PREMISES. The leased premises ("Premises") are the real
property, together with all improvements now existing or hereafter constructed
thereon, which is located in Dallas County, Texas and described on EXHIBIT "A",
attached hereto and incorporated herein by reference.
B. CONDITION OF PROPERTY; REQUIRED CONSTRUCTION. Tenant accepts the
condition of the Premises in "AS IS" condition, subject to the representations
and warranties of Landlord contained in EXHIBIT "B" attached hereto and
incorporated herein. Except for the representations and warranties of Landlord
contained in EXHIBIT "B" attached hereto, Tenant acknowledges that neither
Landlord, nor any agent or representative of Landlord, has made any
representation or warranty with respect to the suitability of the Premises for
the use intended by Tenant, and that Tenant has entered into this Lease based
solely upon its own investigation and inspection of the Premises.
C. ACCEPTANCE OF PREMISES. Possession of the Premises by Tenant
shall be deemed acceptance thereof by Tenant.
ARTICLE II. TERM OF LEASE.
A. COMMENCEMENT DATE AND LEASE TERM. The Commencement Date shall be
as provided for on EXHIBIT "C-1", attached hereto and incorporated herein. The
term of the Lease ("Lease Term") shall begin on the Commencement Date and shall
continue for the number of years provided for in EXHIBIT "C-1", provided that
if said Commencement Date shall not occur on
<PAGE> 2
the first day of the calendar month, then the last day of the Lease Term shall
be calculated from the first day of the calendar month next following the
Commencement Date.
B. SURRENDER. Promptly on the expiration of the term of this Lease
or earlier termination of this Lease, Tenant shall peaceably and quietly leave,
surrender, and yield to Landlord the Premises, broom-clean and in the same
condition that the Premises were in on the Commencement Date, reasonable wear
and tear and casualties provided for in Article IX herein excepted. Further,
Tenant shall surrender all keys to the Premises at the place then fixed for the
payment of rent.
C. HOLDING OVER. In the event Tenant remains in possession of the
Premises after the termination of this Lease without having executed a new
lease, Tenant shall be deemed to be a month-to-month Tenant whose rental rate
shall be the last rental rate provided for herein plus fifty percent (50%) of
such amount, and otherwise subject to all terms, covenants, and conditions of
this Lease insofar as the same are applicable to a month-to-month tenancy.
ARTICLE III. RENT.
A. ACCRUAL. Rent shall accrue hereunder from the Commencement Date.
B. RENT. Tenant promises and agrees to pay to Landlord at the
office of Landlord, designated herein, or any other location designated by
Landlord in writing, Rent for the Premises, as set forth in EXHIBIT "C-2",
attached hereto and incorporated herein. Rent shall be paid in advance in
monthly installments on the first day of each month without prior demand,
deduction, counterclaim, or set-off, in lawful money of the United States of
America.
C. ADDITIONAL RENT. Tenant promises and agrees to pay, at the
office of Landlord designated herein, or any other location designated by
Landlord in writing, Additional Rent, as provided herein, including but not
limited to (1) taxes, as provided for in Article IV, and (2) insurance, as
provided for in Article V.
D. PAST DUE RENT AND OTHER CHARGES. Tenant acknowledges that the
late payment of any Rent or Additional Rent will cause Landlord to incur
certain costs and expenses not contemplated under this Lease, the exact amount
of which would be extremely difficult or impracticable to determine. Such
costs and expenses will include, without limitation, administrative and
collection costs, processing and accounting expenses, and other costs and
expenses necessary and incidental thereto. Therefore, if Landlord has not
received a Rent or Additional Rent payment from Tenant within ten (10) days of
its due date, Tenant shall immediately pay to Landlord a late charge equal to
five percent (5%) of such past due amount. Such late charge shall be due and
payable on the sixth day of such month. Landlord and Tenant agree that this
late charge represents a reasonable estimate of such costs and expenses and
will fairly compensate Landlord for the losses it will incur as a result of
Tenant's late payment. The interest and the late charge provided for herein
LEASE AGREEMENT PAGE 2
<PAGE> 3
shall be cumulative with and not in substitution for any rights or remedies
which may be available to Landlord pursuant to this Lease or applicable law.
E. NET RENT. It is the intent of this Lease that all Rent and
Additional Rent shall be paid to Landlord on an "absolute net" basis at all
times during the term of the Lease, and that, except for Landlord's maintenance
obligations as set forth in Article VIII.A., all expenses for taxes,
assessments, insurance, repair, maintenance, and operation of the Premises, and
all other obligations of every kind and nature whatsoever relating to the use
and operation of the Premises arising or becoming due during or with respect to
the term of the Lease shall be paid or discharged by Tenant in addition to Rent
and Additional Rent.
F. PAYMENT UPON EXECUTION OF LEASE. Tenant, contemporaneously with
the execution of this Lease, has paid Landlord an amount equal to the sum of
the first month's and last month's Rent, the receipt of which is hereby
acknowledged. An amount equal to the first month's rent shall be applied by
Landlord to the payment of Rent due hereunder, and the balance shall constitute
a Default Deposit to secure the faithful performance by Tenant of all the
terms, covenants, and conditions of this Lease. Rent and all other rent and
charges for any period during the term hereof which is for less than one full
calendar month shall be prorated based upon the actual number of days of the
calendar month involved.
ARTICLE IV. PROPERTY TAXES.
A. Payment of Taxes. Throughout the term of this Lease, Tenant
shall pay monthly as Additional Rent, one-twelfth (1/12th) of the general real
estate taxes, assessments, and governmental charges levied, assessed, or
imposed against or becoming due and payable in connection with the Premises, as
herein defined. Landlord may pay such taxes on behalf of Tenant, and if
Landlord so elects, Tenant shall immediately reimburse Landlord upon demand.
Landlord may adjust the monthly estimated sum at the end of each calendar
quarter on the basis of Landlord's experience and reasonably anticipated costs.
Within sixty (60) days following the end of each calendar year, or at
Landlord's option, each tax year, Landlord shall furnish Tenant with a
statement covering the year just expired showing the total taxes payable by
Tenant for such year and the payments made by Tenant with respect to such year.
If the taxes payable by Tenant for such year exceed Tenant's payments so made,
Tenant shall pay Landlord the deficiency within ten (10) days after receipt of
such statement. Should Tenant's payments during such year exceed the sums
payable for such expenses, Tenant shall be entitled to offset the excess
against payments next thereafter to become due Landlord with respect to taxes.
If the Premises is not taxed as a separate tract of land, then Tenant shall be
obligated to pay that amount of the taxes owed which the square footage of the
building situated on the Premises bears to the total square footage contained
in the tax assessment.
B. Betterment Assessments. Any assessments levied or imposed
against the Premises as a consequence of a public improvement made or
constructed by a governmental entity after the Commencement Date may, at
Tenant's election, be paid in installments if permitted by such
LEASE AGREEMENT PAGE 3
<PAGE> 4
governmental entity. Tenant shall be responsible for, and obligated to pay,
only the installment amounts which are due during the term of this Lease.
C. Taxes Excluded. Nothing herein contained shall be deemed to
require, or shall be construed to require, Tenant to pay any income, estate,
gift, inheritance, succession, or transfer taxes, and any tax on rents.
D. Contesting Taxes and Assessments. Landlord agrees to deliver to
Tenant within thirty (30) days after Landlord receives same, copies of any and
all notices of or concerning real property taxes, assessments, and surcharges
that are due or will become due. If, after receiving a copy of any notice,
Tenant reasonably believes that the taxes, assessments, or surcharges may or
should be decreased, then within thirty (30) days after receipt of such notice
from Landlord (i) if Tenant produces evidence supporting Tenant's reasonable
belief that such taxes, assessments, or surcharges may or should be decreased,
Tenant may contest such taxes, assessments, or surcharges, at its sole cost and
expense; or (ii) regardless of whether or not Tenant can produce any such
evidence, Tenant shall have the privilege, before delinquency occurs, and at
its sole cost and expense, of protesting, contesting, objecting to, or opposing
the legality of amount of such taxes, assessments, and surcharges. In the
event of any such contest, Tenant may, to the extent provided by law, defer
payment of any such tax as long as the legality or the amount thereof is being
reasonably and duly contested; provided, however, that if at any time payment
of the whole or any part thereof shall become necessary in order to prevent the
enforcement or foreclosure of a lien for the nonpayment of such taxes, Landlord
shall be entitled to pay such amount in order to prevent such enforcement or
foreclosure. Any such contest, whether before or after payment, may be made in
the name of Landlord or Tenant, or both, as Tenant may determine, but if such
contest is made by Tenant in the name of Landlord, then Landlord shall be
notified thereof at least ten (10) days prior to the commencement of the
proceeding and Landlord shall cooperate, reasonably, in such contest, but any
expenses incurred by Landlord as a consequence of such cooperation shall be
reimbursed to Landlord by Tenant, and shall be payable as Additional Rent.
ARTICLE V. INSURANCE, INDEMNITY, AND LIABILITY.
A. INDEMNIFICATION. Tenant shall indemnify and hold Landlord
harmless from and against any and all claims, liabilities, losses, damages,
causes of action, and expenses (including court costs and reasonable attorneys'
fees) arising from (1) Tenant's occupation of the Premises, use of the
Premises, conduct of its business, or any other activity permitted or suffered
by the Tenant in and about the Premises, (2) any default, breach, violation, or
nonperformance of this Lease or any of its terms, covenants, and conditions,
and (3) any act, omission, or negligence of Tenant, or any officer, agent,
employee, guest, customer, subtenant, assignee, or invitee of Tenant, including
any act, omission, or negligence resulting in injury or death. In connection
with the foregoing, Tenant upon notice from Landlord shall defend any claim at
Tenant's expense by counsel reasonably satisfactory to Landlord. Tenant, as a
material part of the consideration to Landlord, hereby assumes all risk of
damage to property or injury to persons in, upon, or about the Premises, from
any cause
LEASE AGREEMENT PAGE 4
<PAGE> 5
other than Landlord's gross negligence or willful misconduct; and Tenant shall
indemnify and hold Landlord harmless from and against any penalty, damage, or
charge incurred or imposed by reason of any violation of law, statute,
ordinance, or governmental rule, regulation or requirement now or hereafter in
force, by Tenant, or any officer, agent, employee, guest, customer, subtenant,
assignee, or invitee of Tenant.
B. INSURANCE. (I) LIABILITY. Tenant shall procure and maintain
throughout the Lease Term a policy or policies of insurance, at Tenant's sole
cost and expense, insuring Landlord as well as Tenant, from all claims,
demands, or actions arising out of Tenant's use and occupancy of the Premises,
containing bodily injury and property damage combined single-limit coverage of
not less than $2,000,000.00 per each occurrence. Landlord shall procure and
maintain throughout the Lease Term a policy or policies of liability insurance
at Landlord's cost and expense, containing terms and amounts as determined
reasonable in Landlord's discretion. (II) PROPERTY. Landlord shall maintain
property insurance covering the Premises for one hundred percent (100%) of full
replacement cost (inclusive of all alterations and improvements therein, but
exclusive of the cost of excavations, foundations, and footings), from time to
time during the Lease Term, providing protection against perils included within
the standard Texas form of fire and extended-coverage insurance policy,
together with such other risks and amounts as Landlord may from time to time
reasonably determine. The cost for such property insurance shall be paid by
Tenant throughout the term of this Lease on a monthly basis, and as Additional
Rent, in an amount equal to one-twelfth (1/12th) of the cost of such insurance.
Landlord may adjust the monthly estimated sum at the end of each year on the
basis of Landlord's experience and reasonably anticipated costs. Within sixty
(60) days following the end of each insurance policy's annual anniversary date,
Landlord shall furnish Tenant with a statement covering the policy period just
expired showing the total premium payable by Tenant for such period and the
payments made by Tenant with respect to such year. If the premiums payable by
Tenant for such period exceed Tenant's payments so made, Tenant shall pay
Landlord the deficiency within ten (10) days after receipt of such statement.
Should Tenant's payments during such period exceed the sums payable for such
premiums, Tenant shall be entitled to offset the excess against payments next
thereafter to become due Landlord with respect to insurance. If the policy or
policies include more than the Premises, then Tenant shall be obligated to pay
that amount of the premium which the square footage contained in the building
located on the Premises bears to the entire premises covered by such insurance
policy or policies.
All required insurance shall be carried with companies reasonably
satisfactory to Landlord, and each party shall obtain a written obligation on
the part of each insurance company to notify Landlord and Tenant at least
thirty (30) days prior to cancellation of such insurance. All such policies or
duly executed certificates of insurance shall be delivered to Landlord and
Tenant prior to the Commencement Date, and renewals of said insurance shall be
delivered to Landlord and Tenant at least thirty (30) days prior to the
expiration of the respective policy terms. If either Landlord or Tenant, as
applicable, fails to timely maintain and provide to the other evidence of such
insurance as required herein, the other party may obtain such insurance and the
cost for such insurance shall become Additional Rent and be due and payable to
Landlord immediately, upon
LEASE AGREEMENT PAGE 5
<PAGE> 6
demand, if owed by Tenant, or, the cost for such insurance obtained by Tenant
shall be due and payable by Landlord to Tenant immediately, upon demand.
C. LANDLORD NOT LIABLE. Neither Landlord nor its agents shall be
liable for any loss or damage to persons or property resulting from fire,
explosion, falling plaster, steam, gas, electricity, rain, or water from any
source or any other cause whatsoever, unless caused by or due to the gross
negligence or willful misconduct of Landlord, its agents, servants, or
employees. Landlord or its agents shall not be liable for interference with
the light or air, or for any latent defect in the Premises, and any
interference with air or light shall not affect this Lease or cause any
abatement of Rent.
ARTICLE VI. UTILITIES.
Tenant shall be responsible for all costs and expenses for the use and
connection of all utility services for the Premises, including, but not limited
to, the payment of any and all utility deposits. Tenant shall promptly pay
all charges for electricity, water, gas, telephone service, and all other
utilities furnished to the Premises. Landlord shall not be liable in any way
for the utility service to the Premises and any interruption in service shall
have no effect on this Lease or Tenant's obligation to pay, as provided for
herein. Therefore, any interruption in utility service shall not constitute
either a constructive or actual eviction, or a basis for any abatement of Rent,
except that, if any such interruption substantially and materially impairs
Tenant's ability to conduct its usual business activities, continues for a
period of five (5) consecutive 8:00 a.m. to 5:00 p.m. business days, and is
caused by Landlord's negligence or misconduct, then, beginning with the sixth
(6th) business day and continuing until such interruption shall be reduced to
the extent that Tenant's ability to conduct its usual business activities is no
longer substantially and materially impaired, Tenant shall be entitled to a
reasonable reduction of Rent.
ARTICLE VII. TENANT'S USE OF PREMISES.
A. PERMITTED USE. The Premises may be used and occupied only for the
purpose or purposes described on EXHIBIT "D", attached hereto and incorporated
herein. Tenant may not change the use of the Premises without Landlord's prior
written consent, which consent shall not be unreasonably withheld.
B. PERMITS AND LICENSES. Tenant shall obtain at its sole cost and
expense all permits and licenses required for the transaction of its business
in the Premises. Tenant shall not violate any applicable law, ordinance, or
governmental regulation now in force or which may hereafter be in force
pertaining to the transaction of its business on the Premises.
C. PROHIBITED USES. Tenant shall keep the Premises free from waste
or nuisance at all times, and Tenant shall not, without Landlord's prior
written consent, or as provided in Paragraph D below in connection with the
making of alterations or additions:
LEASE AGREEMENT PAGE 6
<PAGE> 7
1. Damage or deface the walls, ceilings, floors, or any other part
of the Premises; or
2. Permit any injury, overloading, or other harm to any part of the
Premises or any equipment or fixtures which are attached thereto or used
therein, including but not limited to placing any unreasonably heavy loads upon
any floor of the Premises.
D. ALTERATIONS AND ADDITIONS. Tenant shall not, without Landlord's
prior written consent, which consent shall not be unreasonably withheld,
delayed, or conditioned, by Landlord, make any alterations or additions to the
Premises; provided, however, that Tenant may make non-structural alterations to
the interior of the building or buildings included in the Premises. Any
alterations or additions, including any fixtures or equipment which is made or
installed to the interior or exterior of the Premises by Tenant, shall, upon
the termination of this Lease for whatever reason, become the property of
Landlord and be surrendered with the Premises, unless Landlord requests their
removal, in which event Tenant, at Tenant's expense, shall remove the same and
restore the Premises to their original condition, normal wear and tear
excepted. Upon prior written request from Tenant, Landlord will inform Tenant
if any alteration or addition to be subsequently made to, or installed in, the
Premises by Tenant will be required by Landlord to be removed upon termination
of this Lease. Notwithstanding the foregoing, Tenant may install equipment and
trade fixtures, and may remove same upon termination of this Lease, at Tenant's
expense, provided the Premises are restored to their original condition, normal
wear and tear excepted, and provided further that Tenant shall not then be in
default of any provision of this Lease.
ARTICLE VIII. MAINTENANCE AND REPAIR.
A. MAINTENANCE BY LANDLORD. Landlord shall make, at its sole cost
and expense, all necessary repairs, maintenance, or replacements (the
necessity of replacements to be determined by Landlord in its sole discretion)
to the exterior and structural portions of the Premises, including, without
limitation, the roof and roof supports, flashings, gutters, downspouts,
footings, foundations, structural supports, columns, exterior walls, bearing
walls, and floor slabs, so as to keep the Premises in as good condition as it
was in on the Commencement Date, reasonable wear and tear excepted (but in no
event shall the condition of the Premises be such that Tenant is unable to
operate its business within reasonable and acceptable limits in accordance with
the permitted use); provided, however, that Landlord shall not be required to
make any repairs occasioned by the act, omission, or negligence of Tenant, its
agents, invitees, contractors, or employees. In the event that the Premises
should become in need of repairs required to be made by Landlord, Tenant shall
give immediate written notice of the needed repairs to Landlord. Landlord
shall make repairs within thirty (30) days after delivery of such written
notice from Tenant, unless such repairs are not capable of being completed
within thirty (30) days, in which case, Landlord shall use reasonable, diligent
efforts to complete such repairs as promptly as possible after the expiration
of thirty (30) days. Landlord shall be responsible only for the cost of
repairs required above, and not for any consequential or other damages
resulting therefrom.
LEASE AGREEMENT PAGE 7
<PAGE> 8
B. MAINTENANCE BY TENANT. Tenant shall keep the Premises, including
all windows, signs, and sidewalks, service ways, loading areas adjacent to the
Premises, landscaping and irrigation systems (if any), and all paved surfaces
and parking lots (including striping of the parking lot and preventing potholes
and other surface inadequacies based on the intended purpose of such paved
surfaces and parking lots) in good, clean, rubbish-free condition, free from
waste and nuisance at all times, reasonable wear and tear and damage by
casualty excepted. Tenant shall, subject to Landlord's maintenance
responsibilities provided for above, make all needed repairs, including without
being limited to, maintenance of all direct utility connections and replacement
of any cracked or broken windows or other glass. Tenant shall, at Tenant's
expense, keep in good working condition the heating, ventilating, and air
conditioning systems, the sprinkler system, if any, and the water heater,
maintaining, repairing, and replacing such items as may be necessary from time
to time, reasonable wear and tear and damage by casualty excepted. Tenant
shall comply at its sole cost and expense with all governmental laws,
ordinances, and regulations which must be complied with by reason of the nature
of the use of the Premises by Tenant, except that Tenant shall not be obligated
to make any structural changes or alterations to the Premises in order to
comply therewith unless made necessary by the negligent act or omission of
Tenant, in which event Tenant shall comply at its expense in accordance with
plans and specifications approved by Landlord. If any repairs or replacements
required to be made by Tenant hereunder are not made within fifteen (15) days
after written notice delivered to Tenant by Landlord, Landlord may, at its
option, make such repairs or replacements without liability to Tenant for any
loss or damage which may result to its stock or business by reason of such
repairs or replacements, and Tenant shall pay to Landlord upon demand as
additional rental hereunder the cost of such repairs and replacements, plus
interest at a rate equal to the lower of eight percent (8%) per annum, or the
maximum rate permitted by the usury laws of the State of Texas, from the date
of payment by Landlord until Landlord is repaid by Tenant.
C. GARBAGE AND TRASH DISPOSAL. Tenant shall be responsible, at its
sole cost and expense, for making the provision for garbage disposal from the
Premises.
ARTICLE IX. CASUALTY.
Tenant shall give immediate written notice to Landlord of any damage
caused to the Premises by fire or other casualty. If the Premises is damaged
by a fire, explosion, or other casualty (an "Occurrence"), the damage shall
promptly be repaired by Landlord subject to this Section, and only to the
extent as is necessary to place the Premises in the same condition as when
possession was initially delivered to Tenant, and to the extent of insurance
proceeds made available to Landlord specifically for such repair. Should
insurance proceeds made available to Landlord specifically for such repair be
insufficient for such repair, and Landlord elects not to rebuild or restore the
Premises, Landlord shall so advise Tenant in writing within forty-five (45)
days after the Occurrence, and Tenant may, at its option, and within thirty
(30) days after its being advised of Landlord's decision not to rebuild or
restore, provide Landlord with at least forty-five (45) days prior written
notice of its election to terminate this Lease. If such damage occurs and (i)
Landlord is not required to repair as provided above, or (ii) the Premises
shall be damaged to the extent of seventy-five percent (75%)
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or more of the cost of replacement, Landlord may repair or rebuild the
Premises or the building, or terminate this Lease upon notice of such election
in writing to Tenant within forty-five (45) days after the Occurrence. If the
Occurrence renders forty percent (40%) or less of the Premises untenantable and
Tenant does not utilize the portion rendered untenantable, a proportionate
abatement of the Rent and Additional Rent shall be allowed from the Occurrence
date until the date Landlord completes its work, said proportion to be computed
on the basis of the relation which the gross square footage of the untenantable
space bears to the floor area of the Premises (but not including any portion of
the Premises outside of the building improvements). If more than forty percent
(40%) of the Premises is rendered untenantable, and Tenant does not utilize the
entire Premises for any purpose, then until Landlord restores it to the
condition it was in on the Commencement Date, Rent and Additional Rent shall
abate. If any Occurrence precludes twenty-five percent (25%) or more of the
Premises' use by Tenant and less than twelve (12) months remain on the then
current term, notwithstanding any of the other provisions of this Section,
Landlord shall have no obligation to repair or rebuild unless Tenant, within
thirty (30) days of the Occurrence, irrevocably exercises its next option, if
any, to extend this Lease. If no such option exists and less than twelve (12)
months remain in the term, Landlord shall have no obligation to restore or
rebuild. If Landlord shall fail to commence to repair or restore the Premises
in the manner specified in this Article within forty-five (45) days after the
Occurrence, and proceed to complete such repairs and restoration with
reasonable due diligence, subject to any delays enumerated in Article XV.C.
hereof, and subject to the provisions of Article XI.E., then, in such event,
Tenant may give Landlord ten (10) days prior written notice of its election
either to (i) terminate this Lease, or (ii) rebuild the Premises itself on
behalf of Landlord. If the Tenant shall so rebuild the Premises, then Tenant
shall have the right to the insurance proceeds payable with respect to the
Occurrence. Notwithstanding anything to the contrary contained in this Lease,
under no circumstances whatsoever shall Landlord's obligation to rebuild,
restore, or repair the Premises exceed insurance proceeds made available to
Landlord.
ARTICLE X. CONDEMNATION.
A. TERMINATION OPTION. In the event that all or any portion of the
buildings on the Premises, or in excess of twenty-five percent (25%) of the
parking area of the Premises, should be appropriated or taken by any public or
quasi-public authority under the power of eminent domain, this Lease may be
terminated by either Landlord or Tenant by the delivery of thirty (30) days'
prior written notice of their election, said notice being delivered within
thirty (30) days of Tenant's and Landlord's receipt of notice of such proposed
taking or acquisition; the termination shall be effective as of the date title
vests pursuant to such taking or acquisition, and all rentals shall be paid up
to that date.
B. LEASE OBLIGATION AFTER CONDEMNATION. In the event that all or
any portion of the Premises should be appropriated or taken by any public or
quasi-public authority under the power of eminent domain, and this Lease is not
terminated by Landlord or Tenant, the Rent payable hereunder during the
unexpired portion of this Lease shall be reduced by multiplying the
LEASE AGREEMENT PAGE 9
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total rental by a fraction the numerator of which is the Square Foot Area of
the Premises (but not including any portion of the Premises outside of the
building improvements) after condemnation and the denominator of which is the
Square Foot Area of the Premises (but not including any portion of the Premises
outside of the building improvements) prior to condemnation. Landlord shall
repair any structural damage to the Premises caused by the appropriation or
taking.
C. VOLUNTARY CONVEYANCE IN LIEU OF CONDEMNATION. In the event that
any authority having the power of eminent domain requests that Landlord convey
to such authority all or any portion of the Premises, Landlord shall have the
right to make a voluntary conveyance to such authority of all or any portion of
the Premises whether or not proceedings have been filed by such authority; and
in the event of any such voluntary conveyance, it shall nevertheless be deemed
for the purpose of interpreting this Lease that there has been a taking under
the power of eminent domain.
D. CONDEMNATION AWARDS. In the event of such an appropriation or
taking, whether whole or partial, all awards of compensation shall belong to
Landlord, and Tenant expressly waives any claim or right to any such award,
except that Tenant shall be allowed to recover from such authority, but not
from any portion of any award to Landlord, at Tenant's own cost and expense,
the unamortized cost of Tenant's leasehold improvements and trade fixtures.
ARTICLE XI. DEFAULT AND REMEDIES FOR DEFAULT.
A. EVENTS OF DEFAULT AND REMEDIES FOR DEFAULT. The following shall
be deemed to be events of default by Tenant under this Lease:
1. Tenant shall fail to pay when due any installment of Rent
or Additional Rent due to Landlord pursuant to this Lease;
2. Tenant shall fail to pay when due, or within five (5) days
of receipt of written notice from Landlord, any payment required
pursuant to this Lease, other than the payment of Rent or Additional
Rent;
3. Tenant shall fail to comply with any term, covenant, or
condition of this Lease, other than the payment of Rent, and shall fail
to cure such event of default within fifteen (15) days after written
notice by Landlord. Notwithstanding the foregoing, if the default
described in the notice from Landlord is of such a nature that it is
incapable of being cured within fifteen (15) days following receipt of
written notice from Landlord, then Tenant shall be in default if Tenant
fails to use reasonable, diligent efforts to cure such default until
such default is cured;
LEASE AGREEMENT PAGE 10
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4. Tenant shall be the subject of a petition under Title 11
of the United States Code, as amended, or under any state bankruptcy
laws, whether voluntary or involuntary, or be adjudged bankrupt or
insolvent under and of such laws;
5. Tenant shall have a receiver or trustee appointed for all
or substantially all of the assets of Tenant; or Tenant shall make a
transfer in fraud of creditors or shall make an assignment for the
benefit of creditors; or
6. Tenant shall do or permit to be done any act which results
in a lien being filed against the Premises, and does not discharge of
record or bond against said lien within thirty (30) days after the date
of filing thereof.
B. REMEDIES. Upon the occurrence of an event of default, and in
addition to all other remedies now or hereinafter provided herein or by law:
1. Landlord may, at its option, enter upon and take
possession of the Premises without any previous notice of intention to
reenter, and may remove all persons and property from the Premises and
may take full and exclusive possession of the Premises. Landlord may
secure, lock up, cut off utility service to, and attempt to relet the
Premises, all without any of such actions being deemed a trespass or an
election on Landlord's part to terminate the Lease. If, however, any
such default on Tenant's part should be fully corrected and cured before
Landlord exercises an option to terminate the Lease, and before Landlord
has relet the Premises, then the Premises shall be returned to Tenant,
and Tenant may continue in possession hereunder. Tenant expressly
waives any and all damages by reason of reentry by Landlord under this
Lease.
2. In the event that Landlord elects to reenter the Premises
without terminating the Lease, then Tenant shall be liable for and shall
pay to Landlord at Landlord's mailing address in Dallas County, Texas,
all Rent and other indebtedness accrued to that date. Landlord shall be
entitled to collect from Tenant Rent and Additional Rent due hereunder
monthly as it becomes due for the remainder of the Term, diminished by
any net sums thereafter received by Landlord through reletting the
Premises during said period (after deducting all expenses incurred by
landlord to relet the Premises). In no event shall Tenant be entitled
to any excess of any Rent obtained by reletting over and above the Rent
herein reserved. Actions to collect amounts due by Tenant as provided
in this Paragraph may be brought from time to time, on one or more
occasion, without the necessity of Landlord's waiting until expiration
of the Lease Term.
3. Notwithstanding any prior election not to terminate,
Landlord may at any time, including subsequent to a reentry as above
provided, elect to terminate this Lease on account of such default.
Upon termination of this Lease, Tenant shall be liable for and shall pay
to Landlord the sum of all Rent and other indebtedness accrued to the
date of such
LEASE AGREEMENT PAGE 11
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termination, plus, as agreed and liquidated damages, an amount equal to
the Rent and other charges for the remaining portion of the Lease Term
(had such term not been terminated by Landlord prior to expiration of
the Lease Term), less the then fair rental value of the Premises for
said period, both discounted to their present value based upon an
interest rate of six percent (6%) per annum.
4. Upon the occurrence of an event of default, Tenant shall
also be liable for and shall pay to Landlord, at Landlord's mailing
address in Dallas County, Texas, in addition to any sum provided to be
paid above: broker's fees incurred by Landlord in connection with
reletting the whole or any part of the Premises; the costs of removing
and storing Tenant's or other occupant's property; the cost of
repairing, altering, remodeling, renovating, or otherwise putting the
Premises into condition acceptable to a new tenant or tenants; and all
reasonable expenses incurred by Landlord in enforcing Landlord's
remedies, including reasonable attorney's fees.
C. DEFAULT DEPOSIT. If Tenant shall fail to pay the Rent provided
for herein promptly when due, the Default Deposit provided for in Article III
may, at Landlord's option, be applied to any Rent due and unpaid, or other
amounts payable to Landlord by Tenant, and if Tenant violates any of the other
terms, covenants, or conditions of this Lease, the Default Deposit may be
applied to any damages suffered by Landlord as a result of Tenant's default, to
the extent of the amount of the damages suffered. Should any of the Default
Deposit be used to pay Rent due for any reason, and if this Lease is kept in
full force and effect at Landlord's option, Tenant shall reimburse Landlord the
amount of said depletion within ten (10) days after notice to Tenant by
Landlord of such depletion. Nothing contained in this Paragraph shall in any
way diminish or be construed as waiving any of Landlord's other remedies as
provided herein or by law or equity. Should Tenant comply with all of the
terms, covenants, and conditions of this Lease and promptly pay the Rent and
all other sums payable by Tenant to Landlord hereunder when due, the Default
Deposit shall be returned in full to Tenant at the end of the Lease Term, or
upon the earlier termination of this Lease.
D. DEFAULT UNDER ANOTHER LEASE WITH LANDLORD. A DEFAULT BY TENANT
UNDER ANOTHER LEASE WITH LANDLORD FOR THE LEASE OF SPACE NOT INCLUDED IN THIS
LEASE SHALL, AT LANDLORD'S OPTION, CONSTITUTE AN EVENT OF DEFAULT UNDER THIS
LEASE.
E. DEFAULT BY LANDLORD. Landlord shall not be in default unless
Landlord fails to perform obligations required of Landlord within a reasonable
time, but in no event later than thirty (30) days after receipt of written
notice by Tenant to Landlord, specifying wherein Landlord has failed to perform
such obligation; provided, however, that if the nature of Landlord's obligation
is such that more than thirty (30) days are required for performance, then
Landlord shall not be in default if Landlord commences performance within such
thirty (30) day period and thereafter diligently prosecutes completion of same.
In any event, if Landlord is in default hereunder, and as a consequence Tenant
recovers a money judgment against Landlord, so long as Landlord owns the
LEASE AGREEMENT PAGE 12
<PAGE> 13
Premises such judgment shall be satisfied only out of the proceeds of sale
received on execution of the judgment and levy against the right, title, and
interest of Landlord in the Premises, and out of rent or other income from such
real property receivable by Landlord or out of the Landlord's right, title, and
interest in the Premises. Neither Landlord, nor any agent, officer, director,
or employee of Landlord shall be personally liable for any portion of such a
judgment.
ARTICLE XII. TRANSFERS AND LIENS.
A. FINANCING SUBORDINATION. This Lease and the rights of Tenant
hereunder are subject and subordinate to any first lien mortgage or deed of
trust, together with all renewals, modifications, consolidations, replacements,
and extensions thereof, which may now or hereafter encumber the Premises on
which it is located, provided the holder of any such mortgage or deed of trust
executes and delivers to tenant an agreement in a form suitable for recording
pursuant to which the holder agrees that it will recognize this Lease and will
not disturb Tenant's possession of the Premises in the event of foreclosure or
deed-in-lieu of foreclosure of such mortgage or deed of trust so long as Tenant
is not then in default under this Lease. Tenant agrees to execute such further
documents as may be necessary for subordinating this Lease to any mortgage,
deed of trust, as the case may be, and further agrees to execute any other
document of attornment required by Landlord's mortgagee. Tenant irrevocably
appoints Landlord as Tenant's attorney-in-fact to execute and deliver in the
name of Tenant any such instrument or instruments in the event that Tenant
fails to so deliver said instrument or instruments within ten (10) days after
written demand from Landlord. Tenant agrees that it shall not undertake any
act which will cause a lien to be filed against the subject property, and
Tenant acknowledges that it has no power to encumber or cloud Landlord's title.
Tenant further agrees that if, because of any act or omission of Tenant, any
mechanic's lien or other lien, charge, or order for the payment of money shall
be filed against Tenant or any portion of the Premises, or upon the right,
title, and interest of Tenant created by this Lease, Tenant shall, at its own
cost and expense, cause the same to be discharged of record or bonded within
fifteen (15) days after written notice by Landlord to Tenant of the filing
thereof; and Tenant hereby agrees to indemnify and hold Landlord harmless
against and from all costs, liabilities, suits, penalties, claims, and demands
therefrom.
B. ASSIGNMENT AND SUBLETTING. Tenant may assign this Lease or
sublet the Premises only with the prior written consent of Landlord. Tenant
acknowledges that this Lease is personal to Tenant for the use specified
herein, and that Landlord may withhold its consent arbitrarily and for any
reason whatsoever, and may further condition any consent on an increase in Rent
or any other changes in the terms, covenants, or conditions hereof. The
consent by Landlord to any transfer, assignment, or subletting shall not be
deemed to be a waiver on the part of Landlord of its rights regarding any
future transfers, assignments, or sublettings. If Landlord consents to an
assignment or subletting, that consent shall not be effective unless and until
Landlord approves in writing the executed assignment or sublease agreement,
which agreement shall provide for the Landlord's consent to any amendment, and
for the assignee or sublessee to assume all of the obligations and liabilities
of Tenant under this Lease, without relieving Tenant of its obligations under
this Lease,
LEASE AGREEMENT PAGE 13
<PAGE> 14
unless otherwise agreed to in writing by Landlord. In the event of any
assignment or subletting, even with the consent of Landlord, Tenant shall pay
to Landlord, in addition to all payments otherwise required under this Lease,
the amount of any payments payable by any assignee or subtenant under its
agreement with Tenant which is in excess of that provided for in this Lease.
Notwithstanding the foregoing, Tenant shall have the right, without Landlord's
prior written consent, to assign this Lease, or to sublet the whole or any part
of the Premises, to any corporation which, at the time, the Tenant shall be a
parent or subsidiary, or to any subsidiary of a corporation of which, at the
time, Tenant shall be a parent or a subsidiary. In addition, Tenant shall have
the right, without Landlord's prior written consent, to assign this Lease to
any person or entity acquiring all or substantially all of the Tenant's assets
by purchase, merger, consolidation or otherwise. Tenant shall have the right,
without Landlord's consent, to pledge its interest in this Lease to The First
National Bank of Boston, its successors and assigns, as collateral for any
obligation owed to it by Tenant.
C. TRANSFER OF LANDLORD'S INTEREST. In the event of any sale of the
Premises or transfer of Landlord's interest hereunder, Landlord shall be and is
hereby entirely freed and relieved from any and all liability which may arise
under any of the terms, covenants, and conditions contained herein after the
consummation of such sale or transfer. Landlord shall have no liability or
responsibility for any act, occurrence, or omission occurring after the
consummation of such sale or transfer. Thereafter, Tenant shall look solely to
the purchaser to carry out any and all of the terms, covenants, and conditions
obligating Landlord under this Lease, said purchaser being deemed without
further agreement between the parties to have assumed said obligations by
virtue of the sale or transfer. The Default Deposit, provided for herein, and
any other asset or security provided by Tenant to Landlord may be assigned and
transferred by Landlord to such successor-in-interest of Landlord and Landlord
shall thereby be discharged of any further obligation relating thereto.
Landlord may, at any time during the term of this Lease, with notice to Tenant,
assign or pledge, or both, its interest in this Lease as collateral for any
indebtedness owed by it.
D. ESTOPPEL. Within ten (10) days following a request by Landlord,
Tenant shall deliver to Landlord an estoppel certificate requested by Landlord,
properly acknowledged, which shall certify to Landlord, any purchaser, lender,
or other person specified by Landlord, all reasonable information required by
Landlord, including whether or not this Lease is unmodified and in full force
and effect, whether or not Tenant contends that Landlord is in default under
this Lease in any respect, whether or not there are then existing setoffs or
defenses against the enforcement of any right or remedy of Landlord, or any
duty or obligation of Tenant, the amount of deposits held by Landlord, the date
to which Rent and other charges have been paid, and stating that Tenant has no
right or interest in the Premises, other than as a Tenant under this Lease.
Similarly, within ten (10) days following a request by Tenant, Landlord shall
deliver to Tenant an estoppel certificate requested by Tenant, properly
acknowledged, which shall certify to Tenant or any person specified by Tenant,
all reasonable information requested by Tenant.
LEASE AGREEMENT PAGE 14
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ARTICLE XIII. ACCESS TO PREMISES.
Landlord shall have the right to enter upon the Premises at all
reasonable hours, after giving at least two (2) hours advance notice, for the
purpose of inspecting them, making repairs to the Premises, or curing any
default of Tenant hereunder that Landlord elects to cure. Notwithstanding the
foregoing, Landlord shall not be required to provide any advance notice in an
emergency situation. Landlord shall not be liable to Tenant for any expense,
loss, or damage from any such entry. Tenant shall permit Landlord, during the
sixty (60) day period preceding the expiration of this Lease, to place usual or
ordinary "For Lease" signs in clearly visible locations within the Premises and
to enter upon the Premises during normal business hours to exhibit same to
prospective tenants.
ARTICLE XIV. HAZARDOUS SUBSTANCES; AMERICANS WITH DISABILITIES ACT.
A. HAZARDOUS SUBSTANCES. The term "Hazardous Substances", as used
in this Lease shall mean pollutants, contaminants, toxins, or hazardous wastes,
or other substances, the use and/or the removal of which is restricted,
prohibited, or penalized by an "Environmental Law". Environmental Law, as used
in this Lease, shall mean any federal, state, or local, statute, law,
ordinance, rule, regulation, or judicial or administrative order or decision
including, but not limited to, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as same may be amended from time to
time. Tenant hereby agrees that (i) no activity will be conducted on the
Premises that will produce any Hazardous Substance(s), except for such
activities that are part of the ordinary course of Tenant's business activities
("Permitted Activities"), provided Tenant agrees to conduct all Permitted
Activities in accordance with applicable Environmental Laws; (ii) the Premises
will not be used in any manner for the storage of any Hazardous Substances,
except for the storage of such materials that are used in the ordinary course
of Tenant's business ("Permitted Materials"), provided Tenant will store the
Permitted Materials in accordance with applicable Environmental Laws; (iii) no
portion of the Premises will be used as a landfill or a dump; (iv) Tenant will
not install any underground tanks of any type in, under, or near the Premises,
(v) Tenant will not permit any Hazardous Substances to be brought onto the
Premises except for the Permitted Materials and, if so brought thereon by
Tenant, its agents or employees, the same immediately shall be removed with
proper disposal and all required clean-up procedures shall be diligently
undertaken pursuant to all Environmental Laws. Landlord or Landlord's
representative, upon notice and during normal business hours, shall have the
right, but not the obligation, to enter the Premises for the purpose of
inspecting the storage, use, and disposal of Permitted Materials or other
Hazardous Substances and to ensure compliance with all Environmental Laws.
Should it be determined, in Landlord's sole opinion, that any Permitted
Material is being improperly stored, used, or disposed of, or that the
Premises, or any portion thereof, is being used in violation of any
Environmental Law, then Landlord shall provide written notice to Tenant of such
matter. Upon receipt of notice, Tenant agrees that it will use all due
diligence, at Tenant's sole cost and expense, to cure such violation. Landlord
shall have the right to perform such work at the Premises if Tenant shall not
complete such remediation within a reasonable time period. The reasonableness
of the time period for the cure shall be determined by Landlord's environmental
consultant or engineer. In the event Tenant shall not complete such
remediation within a reasonable period, as determined above, Landlord shall
have the
LEASE AGREEMENT PAGE 15
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right to perform such work and Tenant, upon written notice from Landlord, shall
reimburse Landlord for any and all costs associated with said work.
Tenant hereby indemnifies and holds Landlord harmless from all claims,
demands, actions, liabilities, costs, expenses, damages, and obligations of any
nature arising from or as a result of (a) any breach by Tenant of its
obligation of this paragraph on or after the Commencement Date, (b) from any
violation of any applicable Environmental Law on or at the Premises caused by
any act of Tenant, its invitees, customers, vendors, employees, agents, or
representatives occurring on or after the Commencement Date, and (c) from any
liability incurred under any applicable Environmental Law arising out of any
activity of Tenant or condition caused by any act of Tenant at or on the
Premises in each case occurring on or after the Commencement Date. The
foregoing indemnification and the responsibilities of Tenant shall survive the
termination or expiration of this lease.
B. AMERICANS WITH DISABILITIES ACT OF 1990. During the term of this
Lease, and notwithstanding anything contained in this Lease to the contrary,
Tenant shall be responsible for, and shall bear all costs and expenses
associated with, any and all alterations to the Premises which may be required
by Title I of the Americans with Disabilities Act of 1990, as subsequently
amended or revised (the "ADA"), for the accommodation of disabled individuals
who may be employed from time to time by Tenant, or any disabled customers,
clients, guests, invitees, or sublessees. Additionally, Tenant shall indemnify
and hold Landlord harmless from and against any and all liability incurred
arising from Tenant's failure to maintain the Premises in compliance with Title
I of the ADA, including the cost of making any alterations, renovations, or
accommodations required by Title I of the ADA, or any government enforcement
agency, or any courts, any and all fines, civil penalties, and damages awarded
against Landlord resulting from a violation or violations of Title I of the
ADA, and all reasonable legal expenses and court costs incurred in defending
claims made under the ADA, including, without limitation, reasonable
consultants', attorneys' and paralegals' fees, expenses, and court costs.
Landlord shall be responsible for, and shall bear all costs and expenses
associated with, compliance with Title III of the ADA, except that,
NOTWITHSTANDING ANYTHING CONTAINED IN THIS PARAGRAPH B. TO THE CONTRARY, Tenant
shall be responsible for, and shall bear all costs and expenses associated
with, compliance with the ADA, regardless of whether it is Title I or Title
III, for: (i) any activities on the Premises after the Commencement Date; (ii)
any alterations, additions, or renovations, to the Premises made by, or on
behalf of, Tenant; and, (iii) any change in the use of the Premises after the
Commencement Date.
LEASE AGREEMENT PAGE 16
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ARTICLE XV. INTERPRETATION, NOTICES, AND MISCELLANEOUS.
A. CHOICE OF LAW. This Lease shall be governed by the laws of the
State of Texas.
B. SUCCESSORS AND ASSIGNS. The terms, covenants, and conditions
contained in this Lease shall apply to, inure to the benefit of, and be binding
upon the parties hereto, and their respective successors-in-interest (subject
to any restrictions on transfers contained in Article XII) and legal
representatives, except as otherwise herein expressly provided.
C. FORCE MAJEURE. In the event that Landlord is delayed, hindered,
or prevented from performing any action required herein, Landlord shall not be
liable or responsible if the delay is due to strike, riot, act of God, shortage
of labor or materials, war, governmental laws, regulations, or other
restrictions or any other causes of any kind which are beyond the reasonable
control of Landlord, and the period for the performance of such act shall be
extended for a period equivalent to the period of such delay.
D. PARTIAL INVALIDITY. Any provision of this Lease which shall
prove to be illegal, invalid, or unenforceable under present or future laws
shall in no way affect, impair, or invalidate any other provision hereof, and
this Lease shall be interpreted as if it had been entered into without such an
illegal, invalid, or unenforceable provision.
E. WAIVER. The waiver by Landlord of any remedy for the breach of
term, covenant, or condition shall not be deemed to be a waiver of any
subsequent breach of the same or any other term, covenant, or condition
contained herein. The subsequent acceptance of Rent hereunder by Landlord
shall not be deemed to be a waiver of any preceding default by Tenant of any
term, covenant, or condition of this Lease, other than failure of the Tenant to
provide the particular Rent payments so accepted, regardless of Landlord's
knowledge of such preceding default at the time of acceptance of such Rent.
F. MERGER OF ESTATES. The voluntary or other surrender of this
Lease by Tenant or a mutual cancellation of this agreement shall not cause a
merger, and shall, at Landlord's option, terminate all or any existing sublease
or subtenancies, or, at Landlord's option, may operate as an assignment to
Landlord of Tenant's interest in any or all subleases or subtenancies.
G. LIABILITY. Notwithstanding anything to the contrary contained
herein, no personal liability of any kind or character whatsoever shall now, or
at any time hereafter, attach to Landlord's partners under any of the terms,
covenants, and conditions contained in this Lease for the payment of any amount
payable under this Lease or for the performance of any obligation under this
Lease.
H. CONSTRUCTION. Whenever in this Lease a singular number is used,
the same shall include the plural, and the neutered gender shall include the
feminine and masculine genders. The captions used in this Lease are for
convenience only, do not constitute a part of the Lease, and
LEASE AGREEMENT PAGE 17
<PAGE> 18
shall have no effect upon the construction or interpretation of any term,
covenant, or condition herein.
I. NOTICES. All notices or requests provided for in this Lease must
be in writing and must be given by depositing the same in the United States
mail, addressed to the party to be notified, postage prepaid, and registered or
certified with return receipt requested, or by express courier service, or by
personal delivery. Notices by mail shall be deemed received upon mailing in
accordance with the foregoing requirement. Notices shall be sent to the
address designated in this Lease or at any other address specified in writing
by the parties hereto. In the event that more than one party is acting as
either Landlord or Tenant under this Lease, the parties shall agree upon a
common location for the receipt of notices, and any notice sent to said
designated location shall bind each party acting as either Landlord or Tenant
as if each party acting in said capacity had received such notice.
J. ENTIRE AGREEMENT. This Lease, together with the exhibits
described below which are attached hereto and incorporated herein for all
purposes, set forth all agreements between Landlord and Tenant relative to the
Premises. All prior negotiations and agreements are merged herein, and no
subsequent agreement relative to the subject matter hereof or modification of
this Lease shall be binding unless reduced to a writing signed by both parties
hereto.
K. QUIET ENJOYMENT. Landlord hereby covenants that Tenant shall
peaceably and quietly have, hold, and enjoy the Premises for the full term
hereby granted, including any extension thereof, free from molestation,
eviction, or disturbance by Landlord or by any other person claiming through
Landlord, provided Tenant is not in default of the Lease and that Landlord has
good right to make this Lease.
L. NOTICE OF LEASE. At any time following the execution of this
Lease, Landlord and Tenant agree to execute a short form Notice of Lease in
form suitable for recording, in the form attached hereto as Exhibit "E".
The following exhibits have been attached to and incorporated into this Lease:
EXHIBIT "A" - Description of the Premises
EXHIBIT "B" - Condition of the Premises
EXHIBIT "C-1" - Lease Term
EXHIBIT "C-2" - Rent
EXHIBIT "D" - Permitted Use
EXHIBIT "E" - Notice of Lease
LEASE AGREEMENT PAGE 18
<PAGE> 19
Executed by Landlord the 3rd day of July, 1995.
LANDLORD: MAILING ADDRESS:
Fojtasek Industrial Properties, 3801 Maplewood Ave.
Ltd., a Texas Limited Dallas, TX 75205
Partnership
By: Fojtasek Industrial Properties
Management, Inc., a Texas corporation,
general partner
By: /s/ JOE FOJTASEK
--------------------------------
Joe Fojtasek
President
Executed by Tenant the 3rd day of July, 1995.
TENANT: MAILING ADDRESS:
Fojtasek Companies, Inc. P.O. Box 226957
a Texas corporation Dallas, TX 75222
By: /s/ RANDALL S. FOJTASEK
-----------------------------
Randall S. Fojtasek
President
LEASE AGREEMENT PAGE 19
<PAGE> 20
EXHIBIT "A"
LEASE PLAN
<PAGE> 21
Ambassador Row
Dallas Co.
EXHIBIT "A"
BEING a tract of land in the JAMES McLAUGHLIN SURVEY, ABSTRACT NO. 845, and
being all of City of Dallas Block 2-E/7940, REVISED BROOK HOLLOW INDUSTRIAL
DISTRICT NUMBER ONE, an addition to the City of Dallas, Dallas County, Texas,
according to the Map thereof recorded in Volume 28, Page 235 of the Map Records
of Dallas County, Texas, and being more particularly described as follows:
BEGINNING at the point of intersection of the Southwest right-of-way line of
Ambassador Row (70' wide) with the Northwest right-of-way line of Profit Drive
(60' wide), said beginning point being evidenced by a 1/2" iron rod found for
corner;
THENCE North 51 degrees 51' West, along the Southwest right-of-way line of
Ambassador Row, 1,200.00 feet to a 5/8" iron rod set for corner in the
Southeast right-of-way line of the M.K. & T. Railroad right-of-way (40' wide);
THENCE South 38 degrees 09' West, along the Southeast right-of-way line of
said railroad, 571.20 feet to the point of curvature of a circular curve to the
left having a central angle of 90 degrees 00', and a radius of 300.00 feet,
said point of curvature being evidenced by a cross cut in concrete pavement,
found;
THENCE, continuing along the Southeast right-of-way line of said railroad, in a
Southerly and Easterly direction, around said curve, an arc distance of 471.24
feet to its point of tangency being evidenced by a cross cut in concrete
pavement, found;
THENCE, South 51 degrees 51' East, along the Northeast right-of-way line of
said railroad, 900.00 feet to a point for corner in the Northwest right-of-way
line of Profit Drive, said point being evidenced by a 1/2" iron rod found for
corner;
THENCE, North 38 degrees 09' East, along the Northwest right-of-way line of
Profit Drive, 871.20 feet to the POINT OF BEGINNING AND CONTAINING 23.556 acres
of land, more or less.
<PAGE> 22
EXHIBIT "B"
CONDITION OF PREMISES
LANDLORD MAKES ONLY THE FOLLOWING REPRESENTATIONS AND WARRANTIES
CONCERNING THE CONDITION OF THE PREMISES. EXCEPT AS SET FORTH BELOW ON THIS
EXHIBIT "B", LANDLORD DOES NOT MAKE ANY OTHER REPRESENTATIONS, WARRANTIES, OR
COVENANTS, EXPRESS OF IMPLIED, OF ANY KIND OR NATURE CONCERNING THE PREMISES,
INCLUDING ANY WARRANTY OF HABITABILITY OR SUITABILITY FOR A PARTICULAR PURPOSE,
ALL OF WHICH ARE HEREBY DISCLAIMED. SUBJECT TO THE FOLLOWING REPRESENTATIONS
AND WARRANTIES BY LANDLORD, TENANT ACCEPTS THE PREMISES IN ITS AS IS, WHERE IS,
WITH ALL FAULTS, CONDITION, AND TENANT HEREBY EXPRESSLY ACKNOWLEDGES AND AGREES
THAT TENANT HAS, OR WILL HAVE PRIOR TO THE COMMENCEMENT DATE, THOROUGHLY
INSPECTED AND EXAMINED THE PREMISES TO THE EXTENT DEEMED NECESSARY BY TENANT IN
ORDER TO ENABLE TENANT TO EVALUATE THE PREMISES AND ITS SUITABILITY FOR
TENANT'S PURPOSES.
1. The Premises is in good condition and repair and is adequate and
sufficient for Tenant to carry on its business as is presently being conducted
on the Premises by Fojtasek Companies, Inc.
2. There are no material defects in the Premises, as to title or
condition, which have not been otherwise disclosed in writing by Landlord to
Tenant.
3. Landlord has not received any notice that either the whole or any
portion of the Premises is to be condemned, requisitioned, or otherwise taken
by any public authority.
4. Landlord does not have any knowledge of any public improvements
that may result in special assessments against or which otherwise affect the
Premises.
5. Landlord has good and indefeasible title to the Premises.
<PAGE> 23
EXHIBIT "C-1"
LEASE TERM
A. COMMENCEMENT DATE. The Commencement Date of this Lease shall be
________ ___, 1995.
B. TERM. The term of this Lease begins on the Commencement Date
and continues for a period of one hundred twenty (120) months thereafter,
unless terminated pursuant to the terms, covenants, and conditions of this
Lease, prior thereto.
C. RENEWAL OPTION. Tenant (but not any assignee or subtenant of
Tenant, even if Landlord's consent is obtained as required in the Lease), is
granted the option to extend the term of this Lease for two extended terms of
sixty (60) months each, provided (a) Tenant is not in default at the time of
exercise of the option, and (b) Tenant gives written notice of its exercise of
the option at least two hundred ten (210) days prior to the expiration of the
original term, or the first extended term, of the Lease, as applicable.
Landlord shall, within fifteen (15) days of its receipt of Tenant's notice,
notify Tenant in writing of its opinion concerning the proposed renewal rate,
which shall be the fair market rental value described in the immediately
succeeding paragraph, and the Tenant shall, within thirty (30) days of its
receipt of Landlord's notice of the renewal rate, during which time Landlord
and Tenant shall confer and attempt to reach an agreement regarding the
reasonableness of the proposed renewal rate, notify Landlord in writing of its
acceptance or rejection of the proposed rental rate. If Landlord and Tenant
are unable to mutually agree on the renewal rate within such thirty (30) day
period, then the renewal options described in this paragraph shall
automatically terminate without further notice.
Each such extension term shall be upon the same terms, conditions, and
rentals, except (i) Tenant shall have no further right of renewal after the
last extension term prescribed above, and (ii) the Rent amount shall be
increased to fair market rental value of the Premises at the time Tenant
exercises its election. Fair market rental value of the Premises for each
extension term will be determined by the parties, in their reasonable
discretion and upon their combined good faith efforts, considering the rental
market for comparable land and improvements in substantially the same
condition, in comparable locations, used for similar purposes, and under terms
similar to those set forth in this Lease.
<PAGE> 24
EXHIBIT "C-2"
RENT
A. RENT. This provision designates the Rent for each year of the Lease
Term. Each year shall begin on the Commencement Date or on the anniversary
thereof for purposes of determining the applicable rental rate.
<TABLE>
<CAPTION>
Year Annual Rate Monthly Rate
---- ----------- ------------
<S> <C> <C>
1-3 $373,080.00 $ 31,090.00
4-6 $419,715.00 $ 34,976.25
7-10 $466,350.00 $ 38,862.50
</TABLE>
<PAGE> 25
EXHIBIT "D"
PERMITTED USE
Manufacturing, office, research and development, warehouse, distribution, and
related uses.
<PAGE> 26
H-R
EXHIBIT "E"
MEMORANDUM OF LEASE
This is a Memorandum of Lease by and between FOJTASEK INDUSTRIAL
PROPERTIES, LTD., a Texas limited partnership, (hereinafter referred to as
"Landlord") and FOJTASEK COMPANIES, INC., a Texas corporation (hereinafter
referred to as "Tenant") upon the following terms:
1. Date of Lease: _________ ___, 1995
2. Description of Property: That portion of the property cross-
hatched on Exhibit "A", attached hereto and incorporated herein
by reference, and being a part of the real property more fully
described on Exhibit "A-1", attached hereto and incorporated
herein by reference, commonly known as 9001 Ambassador Row,
Dallas, Dallas County, Texas
3. Date of Commencement: ________ ___, 1995
4. Term: Ten (10) years
5. Renewal Option(s): Two (2), 5-year options
The purpose of this Memorandum of Lease is to give record notice of the
lease and of the rights created thereby, all of which are hereby confirmed.
IN WITNESS WHEREOF the parties have executed this Memorandum of Lease as
of the dates set forth in their respective acknowledgments.
LANDLORD:
Fojtasek Industrial Properties,
Ltd., a Texas limited
partnership
By: Fojtasek Industrial Properties
Management, Inc., a Texas corporation,
its general partner
By:__________________________
Joe Fojtasek
President
Page 1 of 2
<PAGE> 27
Executed by Tenant the _______ day of ___________, 1995.
TENANT:
Fojtasek Companies, Inc.
a Texas corporation
By:_________________________
Randall S. Fojtasek
President
THE STATE OF TEXAS )
)
COUNTY OF DALLAS )
This instrument was acknowledged before me on the ___ day of __________,
1995, by Joe Fojtasek, President of Fojtasek Industrial Properties Management,
Inc., a Texas corporation, general partner of Fojtasek Industrial Properties,
Ltd., a Texas limited partnership, on behalf of said corporation.
------------------------------
NOTARY PUBLIC, STATE OF TEXAS
Printed Name:
-----------------
My Commission Expires:
--------
THE STATE OF TEXAS )
)
COUNTY OF DALLAS )
This instrument was acknowledged before me on the ___ day of _________,
1995, by Randall S. Fojtasek, President of Fojtasek Companies, Inc., a Texas
corporation, on behalf of said corporation.
------------------------------
NOTARY PUBLIC, STATE OF TEXAS
Printed Name:
-----------------
My Commission Expires:
--------
Page 2 of 2
<PAGE> 28
H-R lease
Insert XV.M.
To the extent the parking facilities for the contiguous premises
currently owned by Landlord and occupied by The Atrium Door & Window Company, a
division of Fojtasek Companies, Inc. ("Atrium") are not required for Tenant to
comply with minimum parking code requirements, the parking area cross-hatched
on Exhibit "F" attached hereto shall be made available to Atrium, Landlord, or
the then current tenant(s) or occupant(s) of such contiguous premises for its
use and enjoyment.
<PAGE> 1
EXHIBIT 12.1
ATRIUM COMPANIES, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
Pro Forma
-----------------------------------------
Nine Months Twelve Months
Year Ended December 31, Year Ended Ended Ended
---------------------------------------------------- December 31, September 30, September 30,
1991 1992 1993 1994 1995 1995 1996 1996
------- ------- ------- ------- ------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FIXED CHARGES:
Interest expense ...............$ 681 $ 512 $ 377 $ 355 $ 2,612 $11,246 $ 8,434 $11,246
Implicit interest in rent ...... 1,166 334 367 500 1,038 1,110 679 1,004
Amortization of deferred finance
charges .................... 0 0 0 0 138 138 207 276
Total Fixed Charges ........ 1,847 846 744 855 3,788 12,494 9,320 12,526
Earnings before provision for income
taxes ...................... 470 8,452 10,246 9,795 3,393 (998) 8,364 10,968
Fixed charges ...................... 1,847 846 744 855 3,788 12,494 9,320 12,526
------- ------- ------- ------- ------- ------- ------- -------
EARNINGS, AS DEFINED ....... 2,317 9,298 10,990 10,650 7,181 11,496 17,684 23,494
Ratio of earnings to fixed
charges ........................ 1.3x 11.0x 14.8x 12.5x 1.9x -- 1.9x 1.9x
Deficiency of earnings to fixed
charges ........................ (998)
</TABLE>
<PAGE> 1
Exhibit 16.1
Arthur
Andersen
Arthur Andersen LLP
Suite 5600
901 Main Street
Dallas, TX 75202-3799
214 741 8300
January 21, 1997
Securities and Exchange Commission
450 Fifth Street, NW
Washington, D.C. 20549
Dear Sirs:
We have read the Change in Accountant paragraph included in the Form S-4
filed on Registration Statement Number 333-______ dated January 21, 1997, of
Atrium Companies, Inc. filed with the Securities and Exchange Commission and
are in agreement with the statements contained therein.
ARTHUR ANDERSEN LLP
<PAGE> 1
EXHIBIT 21.1
Subsidiaries of the Company
<TABLE>
<CAPTION>
NAME JURISDICTION OF INCORPORATION
---- -----------------------------
<S> <C>
H-R Window Supply, Inc. Texas
Vinyl Building Specialties of Connecticut, Inc. Connecticut
Bishop Manufacturing Co. of New York, Inc. Connecticut
Bishop Manufacturing Company, Incorporated Connecticut
Bishop Manufacturing Company of New England, Inc. Connecticut
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-4 of
our report dated January 17,1997, on our audits of the consolidated financial
statements of Atrium Companies, Inc. We also consent to the reference to our
firm under the caption "Experts."
COOPERS & LYBRAND L.L.P.
Dallas, Texas
January 17, 1997
<PAGE> 1
Exhibit 23.2
January 17, 1997
As independent public accountants, we hereby consent to the use of our report
and to all references to our Firm included in or made a part of this
registration statement.
ARTHUR ANDERSEN LLP
<PAGE> 1
EXHIBIT 25.1
FORM T-1
========================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(B)(2) ____
----------------------------------------
UNITED STATES TRUST COMPANY OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-3818954
(Jurisdiction of incorporation (I.R.S. employer
if not a U.S. national bank) identification No.)
114 West 47th Street 10036-1532
New York, NY (Zip Code)
(Address of principal
executive offices)
----------------------------------------
Atrium Companies, Inc.
(Exact name of obligor as specified in its charter)
Delaware 75-2642488
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
9001 Ambassador Row
Dallas, TX 75247
(Address of principal executive offices) (Zip Code)
----------------------------------------
10-1/2% Senior Subordinated Notes
Due 2006, Series B
(Title of the indenture securities)
==============================================
<PAGE> 2
-2-
GENERAL
1. GENERAL INFORMATION
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
Federal Reserve Bank of New York (2nd District), New York, New York
(Board of Governors of the Federal Reserve System)
Federal Deposit Insurance Corporation, Washington, D.C.
New York State Banking Department, Albany, New York
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
2. AFFILIATIONS WITH THE OBLIGOR
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None
3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and 15:
Atrium Companies, Inc. currently is not in default under any of its
outstanding securities for which United States Trust Company of New York is
Trustee. Accordingly, responses to Items 3, 4, 5, 6, 7, 8, 9, 10, 11, 12,
13, 14 and 15 of Form T-1 are not required under General Instruction B.
16. LIST OF EXHIBITS
T-1.1 -- Organization Certificate, as amended, issued by the State of New
York Banking Department to transact business as a Trust Company,
is incorporated by reference to Exhibit T-1.1 to Form T-1 filed
on September 15, 1995 with the Commission pursuant to the Trust
Indenture Act of 1939, as amended by the Trust Indenture Reform
Act of 1990 (Registration No. 33-97056).
T-1.2 -- Included in Exhibit T-1.1.
T-1.3 -- Included in Exhibit T-1.1.
<PAGE> 3
-3-
16. LIST OF EXHIBITS
(cont'd)
T-1.4 -- The By-Laws of United States Trust Company of New York, as
amended, is incorporated by reference to Exhibit T-1.4 to Form
T-1 filed on September 15, 1995 with the Commission pursuant to
the Trust Indenture Act of 1939, as amended by the Trust
Indenture Reform Act of 1990 (Registration No. 33-97056).
T-1.6 -- The consent of the trustee required by Section 321(b) of the
Trust Indenture Act of 1939, as amended by the Trust Indenture
Reform Act of 1990.
T-1.7 -- A copy of the latest report of condition of the trustee pursuant
to law or the requirements of its supervising or examining
authority.
NOTE
As of January 17, 1997, the trustee had 2,999,020 shares of Common Stock
outstanding, all of which are owned by its parent company, U.S. Trust
Corporation. The term "trustee" in Item 2, refers to each of United States
Trust Company of New York and its parent company, U. S. Trust Corporation.
In answering Item 2 in this statement of eligibility as to matters peculiarly
within the knowledge of the obligor or its directors, the trustee has relied
upon information furnished to it by the obligor and will rely on information to
be furnished by the obligor and the trustee disclaims responsibility for the
accuracy or completeness of such information.
__________________
Pursuant to the requirements of the Trust Indenture Act of 1939, the trustee,
United States Trust Company of New York, a corporation organized and existing
under the laws of the State of New York, has duly caused this statement of
eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of New York, and State of New York, on the 17th day
of January, 1997.
UNITED STATES TRUST COMPANY
OF NEW YORK, Trustee
By: /s/ MARGARET CIESMELEWSKI
--------------------------
Margaret Ciesmelewski
Assistant Vice President
<PAGE> 4
EXHIBIT T-1.6
The consent of the trustee required by Section 321(b) of the Act.
United States Trust Company of New York
114 West 47th Street
New York, NY 10036
September 1, 1995
Securities and Exchange Commission
450 5th Street, N.W.
Washington, DC 20549
Gentlemen:
Pursuant to the provisions of Section 321(b) of the Trust Indenture Act of
1939, as amended by the Trust Indenture Reform Act of 1990, and subject to the
limitations set forth therein, United States Trust Company of New York ("U.S.
Trust") hereby consents that reports of examinations of U.S. Trust by Federal,
State, Territorial or District authorities may be furnished by such authorities
to the Securities and Exchange Commission upon request therefor.
Very truly yours,
UNITED STATES TRUST COMPANY
OF NEW YORK
---------------------------------
By: S/Gerard F. Ganey
Senior Vice President
<PAGE> 5
EXHIBIT T-1.7
UNITED STATES TRUST COMPANY OF NEW YORK
CONSOLIDATED STATEMENT OF CONDITION
SEPTEMBER 30, 1996
(IN THOUSANDS)
<TABLE>
<S> <C>
ASSETS
Cash and Due from Banks $ 38,257
Short-Term Investments 82,377
Securities, Available for Sale 861,975
Loans 1,404,930
Less: Allowance for Credit Losses 13,048
Net Loans 1,391,882
Premises and Equipment 60,012
Other Assets 133,673
TOTAL ASSETS $ 2,568,176
===========
LIABILITIES
Deposits:
Non-Interest Bearing $ 466,849
Interest Bearing 1,433,894
Total Deposits 1,900,743
Short-Term Credit Facilities 369,045
Accounts Payable and Accrued Liabilities 143,604
TOTAL LIABILITIES $ 2,413,392
===========
STOCKHOLDER'S EQUITY
Common Stock 14,995
Capital Surplus 42,394
Retained Earnings 98,402
Unrealized Gains (Losses) on Securities
Available for Sale, Net of Taxes (1,007)
TOTAL STOCKHOLDER'S EQUITY 154,784
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $ 2,568,176
===========
</TABLE>
I, Richard E. Brinkmann, Senior Vice President & Comptroller of the named bank
do hereby declare that this Statement of Condition has been prepared in
conformance with the instructions issued by the appropriate regulatory
authority and is true to the best of my knowledge and belief.
Richard E. Brinkman, SVP & Controller
October 24, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001029336
<NAME> Atrium Companies, Inc.
<S> <C> <C>
<PERIOD-TYPE> 9-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-START> JAN-01-1996 JAN-01-1995
<PERIOD-END> SEP-30-1996 DEC-31-1995
<CASH> 336,476 85,250
<SECURITIES> 0 0
<RECEIVABLES> 24,085,649 18,000,020
<ALLOWANCES> 1,334,822 1,154,723
<INVENTORY> 15,572,350 13,953,284
<CURRENT-ASSETS> 40,434,979 33,094,445
<PP&E> 20,593,087 15,964,546
<DEPRECIATION> 7,322,642 4,917,364
<TOTAL-ASSETS> 71,603,493 48,569,133
<CURRENT-LIABILITIES> 21,132,464 16,834,849
<BONDS> 56,168,736 49,000,000
0 0
0 0
<COMMON> 1 1
<OTHER-SE> (1,945,914) (14,543,923)
<TOTAL-LIABILITY-AND-EQUITY> 71,603,493 48,569,133
<SALES> 113,046,234 135,477,856
<TOTAL-REVENUES> 113,046,234 135,477,856
<CGS> 73,882,122 93,974,912
<TOTAL-COSTS> 73,882,122 93,974,912
<OTHER-EXPENSES> 71,404 (1,441,600)
<LOSS-PROVISION> (74,892) 486,166
<INTEREST-EXPENSE> 2,793,469 2,614,772
<INCOME-PRETAX> 11,233,755 3,392,821
<INCOME-TAX> 4,018,115 1,543,762
<INCOME-CONTINUING> 7,215,640 1,849,059
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 7,215,640 1,849,059
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
