<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 25, 1997
REGISTRATION NO. 33-26991
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC.
AMCRAFT BUILDING PRODUCTS CO., INC.
MULE-HIDE PRODUCTS CO., INC.
(EXACT NAMES OF REGISTRANTS AS SPECIFIED IN THEIR RESPECTIVE CHARTERS)
DELAWARE 5033 39-1413708
5033
DELAWARE 39-1701778
TEXAS 5033 62-1277211
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NUMBER)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
ONE ABC PARKWAY
BELOIT, WISCONSIN 53511
TELEPHONE: (608) 362-7777
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANTS' PRINCIPAL EXECUTIVE OFFICES)
----------------
COPY TO:
KENDRA STORY CARTER W. EMERSON, P.C.
KIRKLAND & ELLIS
AMERICAN BUILDERS &
200 EAST RANDOLPH, SUITE 5700
CONTRACTORS SUPPLY CO., INC.
ONE ABC PARKWAY CHICAGO, ILLINOIS 60601
BELOIT, WISCONSIN 53511 TELEPHONE: (312) 861-2000
TELEPHONE: (608) 362-7777
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
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. [_]
----------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(A), MAY DETERMINE.
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- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED JUNE 25, 1997
PROSPECTUS
AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC.
AMCRAFT BUILDING PRODUCTS CO., INC.
MULE-HIDE PRODUCTS CO., INC.
OFFER TO EXCHANGE ITS 10 5/8% SERIES B SENIOR SUBORDINATED NOTES DUE 2007
FOR ANY AND ALL OF ITS OUTSTANDING 10 5/8% SENIOR SUBORDINATED NOTES DUE 2007
The Exchange Offer will expire at 5:00 p.m., New York City time, on
, 1997, unless extended.
American Builders & Contractors Supply Co., Inc., a Delaware corporation (the
"Company"), hereby offers (the "Exchange Offer"), upon the terms and conditions
set forth in this Prospectus (the "Prospectus") and the accompanying Letter of
Transmittal (the "Letter of Transmittal"), to exchange $1,000 principal amount
of its 10 5/8% Series B Senior Subordinated Notes due 2007 (the "New Notes"),
which will have been registered under the Securities Act of 1933, as amended
(the "Securities Act"), pursuant to a Registration Statement of which this
prospectus is a part, for each $1,000 principal amount of its outstanding 10
5/8% Senior Subordinated Notes due 2007 (the "Old Notes"), of which
$100,000,000 principal amount is outstanding. The New Notes and the Old Notes
are each sometimes referred to herein as the "Notes." The form and terms of the
New Notes are the same as the form and terms of the Old Notes (which they
replace) except that the New Notes will bear a Series B designation and will
have been registered under the Securities Act and, therefore, will not bear
legends restricting their transfer and will no longer be entitled to certain
rights under the Registration Agreement (as defined below), including certain
provisions thereof relating to an increase in the interest rate which were
included in the terms of the Old Notes. The New Notes evidence the same debt as
the Old Notes (which they replace) and will be issued under and be entitled to
the benefits of the Indenture dated as of May 7, 1997 (the "Indenture") between
the Company, Mule-Hide Products Co., Inc., a Texas corporation ("Mule-Hide"),
Amcraft Building Products Co., Inc., a Delaware corporation ("Amcraft"), and
Norwest Bank Minnesota, National Association, as trustee, governing the Notes.
The New Notes will be general unsecured obligations of the Company and will
be subordinated in right of payment to all existing and future Senior Debt (as
defined) of the Company. The New Notes will be jointly and severally
guaranteed, subject only to limitations based on fraudulent conveyance
considerations, on a senior subordinated basis by the Company's existing and
future wholly-owned subsidiaries (the "Subsidiary Guarantors" or the
"Guarantors"). The Guarantees (as defined) will be general unsecured
obligations of the Guarantors and will be subordinated in right of payment to
all existing and future Guarantor Senior Debt (as defined). As of March 31,
1997, on a pro forma basis after giving effect to the Offering (as defined
below) and the application of the net proceeds therefrom, the Company and its
subsidiaries would have had approximately $57.1 million of Senior Debt
(including outstanding guarantees and letters of credit).
On or after May 15, 2002, the Company may redeem the Notes, in whole or in
part, at the redemption prices set forth herein, plus accrued and unpaid
interest thereon and Liquidated Damages (as defined), if any, to the date of
redemption. Notwithstanding the foregoing, any time on or before May 15, 2000,
the Company may redeem up to 35% of the original aggregate principal amount of
the Notes with the net cash proceeds of an initial public offering of its
common stock at a redemption price equal to 110 5/8% of the principal amount
thereof, plus accrued and unpaid interest thereon and Liquidated Damages, if
any, to the redemption date; provided that at least 65% of the original
aggregate principal amount of the Notes remains outstanding immediately after
such redemption. See "Description of the Notes--Optional Redemption." Upon a
Change of Control (as defined herein), the Company will be required to make an
offer to repurchase all outstanding Notes at 101% of the principal amount
thereof plus accrued and unpaid interest thereon and Liquidated Damages, if
any, to the date of repurchase. See "Description of the Notes--Repurchase at
the Option of Holders--Change of Control."
The Company will accept for exchange any and all Old Notes validly tendered
and not withdrawn prior to 5:00 p.m., New York City time, on , 1997,
unless extended by the Company in its sole discretion (the "Expiration Date").
Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m. on the
Expiration Date. The Exchange Offer is subject to certain customary conditions.
The Old Notes were sold by the Company on May 7, 1997 to the Initial Purchasers
(as defined) in a transaction not registered under the Securities Act in
reliance upon an exemption under the Securities Act (the "Offering"). The
Initial Purchasers subsequently placed the Old Notes with qualified
institutional buyers in reliance upon Rule 144A under the Securities Act and
with a limited number of institutional accredited investors that agreed to
comply with certain transfer restrictions and other conditions. Accordingly,
the Old Notes may not be reoffered, resold or otherwise
(Cover continued on following page)
-----------
SEE "RISK FACTORS" BEGINNING ON PAGE 10 FOR A DESCRIPTION OF CERTAIN RISKS TO
BE CONSIDERED BY HOLDERS WHO TENDER THEIR OLD NOTES IN THE EXCHANGE OFFER.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
The date of this Prospectus is , 1997
<PAGE>
transferred in the United States unless registered under the Securities Act or
unless an applicable exemption from the registration requirements of the
Securities Act is available. The New Notes are being offered hereunder in
order to satisfy the obligations of the Company under the Registration Rights
Agreement entered into by the Company in connection with the Offering. See
"The Exchange Offer."
Based on no-action letters issued by the staff of the Securities and
Exchange Commission (the "Commission") to third parties, the Company believes
the New Notes issued pursuant to the Exchange Offer may be offered for resale,
resold and otherwise transferred by any holder 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 New
Notes are acquired in the ordinary course of such holder's business and such
holder has no arrangement or understanding with any person to participate in
the distribution of such New Notes. See "The Exchange Offer--Purpose and
Effect of the Exchange Offer" and "The Exchange Offer--Resale of the New
Notes." Each broker-dealer (a "Participating Broker-Dealer") that receives New
Notes for its own account pursuant to the Exchange Offer must acknowledge that
it will deliver a prospectus in connection with any resale of such New Notes.
The Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a participating Broker-Dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act. This Prospectus,
as it may be amended or supplemented from time to time, may be used by a
Participating Broker-Dealer as a result of market-making activities or other
trading activities. The Company has agreed that, for a period of one year
after the Expiration Date, it will make this Prospectus available to any
Participating Broker-Dealer for use in connection with any such resale;
provided, however, that the Company and the Subsidiary Guarantors will have no
obligation to amend or supplement this Prospectus unless the Company has
received written notice from a Participating Broker-Dealer of their prospectus
delivery requirements under the Securities Act within fifteen business days
following consummation of the Exchange Offer. See "Plan of Distribution."
Holders of Old Notes not tendered and accepted in the Exchange Offer will
continue to hold such Old Notes and will be entitled to all the rights and
benefits and will be subject to the limitations applicable thereto under the
Indenture and the Registration Rights Agreement and with respect to transfer
under the Securities Act. If any holder of the Old Notes (other than any such
holder which is an "affiliate" of the Company within the meaning of Rule 405
under the Securities Act) is not eligible under applicable securities laws to
participate in the Exchange Offer, and such holder has satisfied certain
conditions relating to the provision of information to the Company for use
therein, the Company has agreed to register the Old Notes on a shelf
registration statement (the "Shelf Registration Statement") and use its best
efforts to cause it to be declared effective by the Commission as promptly as
practical on or after the consummation of the Exchange Offer. The Company has
agreed to maintain the effectiveness of the Shelf Registration Statement for,
under certain circumstances, a maximum of two years, to cover resales of the
Old Notes held by any such holders. Other than as set forth above, holders of
Old Notes who do not tender in the Exchange Offer will not have any continuing
rights under the Registration Rights Agreement. The Company will pay all the
expenses incurred by it incident to the Exchange Offer. See "The Exchange
Offer."
There has not previously been any public market for the Old Notes or the New
Notes. The Company does not intend to list the New Notes on any securities
exchange or to seek approval for quotation through any automated quotation
system. There can be no assurance that an active market for the New Notes will
develop. See "Risk Factors--Absence of a Public Market Could Adversely Affect
the Value of New Notes." Moreover, to the extent that Old Notes are tendered
and accepted in the Exchange Offer, the trading market for untendered and
tendered but unaccepted Old Notes could be adversely affected.
The New Notes will be available initially only in book-entry form. The
Company expects that the New Notes issued pursuant to this Exchange Offer will
be issued in the form of a Global Certificate (as defined), which will be
deposited with, or on behalf of, The Depository Trust Company (the
"Depositary") registered in its name or in the name of Cede & Co., its
nominee. Beneficial interests in the Global Certificate representing the New
Notes will be shown on, and transfers thereof to qualified institutional
buyers will be effected through, records maintained by the Depositary and its
participants. After the initial issuance of the Global Certificate, New Notes
in certified form will be issued in exchange for the Global Certificate only
on the terms set forth in the Indenture. See "Description of Notes--Book-
Entry; Delivery and Form."
ii
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-4 (the "Exchange Offer Registration Statement," which term shall encompass
all amendments, exhibits, annexes and schedules thereto) pursuant to the
Securities Act, and the rules and regulations promulgated thereunder, covering
the New Notes being offered hereby. This Prospectus does not contain all the
information set forth in the Exchange Offer Registration Statement. For
further information with respect to the Company and the Exchange Offer,
reference is made to the Exchange Offer Registration Statement. Statements
made in this Prospectus as to the contents of any contract, agreement or other
document referred to are not necessarily complete. With respect to each such
contract, agreement or other document filed as an exhibit to the Exchange
Offer Registration Statement, reference is made to the exhibit for a more
complete description of the document or matter involved, and each such
statement shall be deemed qualified in its entirely by such reference. The
Exchange Offer Registration Statement, including the exhibits thereto, can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, at
the Regional Offices of the commission at 75 Park Place, New York, New York
10007 and at Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such materials can be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The Commission also maintains a
Web site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the
Commission. The address of such site is http://www.sec.gov.
As a result of the filing of the Exchange Offer Registration Statement with
the Commission, the Company and the Guarantors will become subject to the
informational requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and in accordance therewith will be required to file
periodic reports and other information with the Commission. The obligation of
the Company and the Guarantors to file periodic reports and other information
with the Commission will be suspended if the New Notes are held of record by
fewer than 300 holders as of the beginning of any fiscal year of the Company
or the Guarantors other than the fiscal year in which the Exchange Offer
Registration Statement is declared effective. The Company will nevertheless be
required to continue to file reports with the Commission if the New Notes are
listed on a national securities exchange. The Indenture provides that, whether
or not required by the rules and regulations of the Commission, so long as any
Notes are outstanding and commencing with information relating to the fiscal
quarter ended June 30, 1997, the Company will furnish to the Holders of Notes
(i) all quarterly and annual financial information that would be required to
be contained in a filing with the Commission on Forms 10-Q and 10-K if the
Company were required to file such Forms, including a "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and, with
respect to the annual information only, a report thereon by the Company's
certified independent accountants and (ii) all current reports that would be
required to be filed with the Commission on Form 8-K if the Company were
required to file such reports, in each case, within the time periods specified
in the Commission's rules and regulations. In addition, commencing after the
consummation of the Exchange Offer, whether or not required by the rules and
regulations of the Commission, the Company will file a copy of all such
information and reports with the Commission for public availability (unless
the Commission will not accept such a filing) within the time periods
specified in the Commission's rules and regulations, and make such information
available to securities analysts and prospective investors upon their
reasonable request. In addition, each of the Company and the Guarantors has
agreed that, for so long as any Notes remain outstanding, it will furnish to
the Holders and to securities analysts and prospective investors, upon their
request, the information required to be delivered pursuant to Rule 144A(d)(4)
under the Securities Act.
iii
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, appearing
elsewhere in this Prospectus. Unless the context otherwise requires, all
references herein to "ABC" or the "Company" refer to American Builders &
Contractors Supply Co., Inc. and its subsidiaries (including Mule-Hide Products
Co., Inc. ("Mule-Hide") and Amcraft Building Products Co., Inc. ("Amcraft")).
The Company's sole stockholder previously owned all of the capital stock of
Mule-Hide and Amcraft, which supply certain roofing and siding products to the
Company, and all of the capital stock of Hendricks Real Estate Properties, Inc.
("HREP"), which owned the Company's headquarters building. On or about May 1,
1997, all of the capital stock of Mule-Hide and Amcraft was contributed to the
Company and HREP merged with and into the Company (the "Combining
Transactions"). The financial statements set forth herein are presented on a
combined basis and include the results of operations of Mule-Hide, Amcraft and
HREP for all periods presented. Unless otherwise stated, all other information
contained herein assumes the completion of the Combining Transactions. See
"Recent Transactions."
THE COMPANY
ABC is the largest wholesale distributor of roofing products and one of the
largest wholesale distributors of vinyl siding materials in the United States,
operating 161 distribution centers located in 37 states as of March 31, 1997.
ABC provides its customers with access to what it believes to be the largest
selection of roofing and vinyl siding materials in the industry and with a
knowledgeable staff capable of providing product specific information, as well
as credit services and marketing support. For the year ended December 31, 1996,
the Company generated $30.2 million of EBITDA (as defined herein) from net
sales of $789.1 million. See note (5) of "--Summary Combined Historical
Financial Data."
The products distributed by the Company consist exclusively of roofing and
siding materials, windows and related tools and accessories for residential
and, to a lesser extent, commercial applications. The Company markets these
products on a wholesale basis primarily to small and medium-sized roofing and
siding contractors that are involved in the replacement segment of the
construction industry. ABC also distributes products to builders and
subcontractors involved in new construction projects. According to the National
Roofing Contractors Association, approximately 77.0% of the 1996 U.S. roofing
market consisted of replacement or remodeling projects, and the Company
believes that replacement and remodeling purchases represent a greater
proportion of its revenue than that of the industry as a whole. The Company
believes that its focus on roofing and vinyl siding products and in-depth
knowledge of such products, combined with its long-term approach to customer
relationships, allow it to distinguish itself from mass-merchandiser building
supply companies. At the same time, the Company believes that its size and
market share allow it to negotiate volume discounts and other favorable terms
with manufacturers and maintain a broader product selection than smaller local
and regional building supply distributors.
While ABC operates nationwide, the wholesale roofing and siding distribution
channel is characterized by a large number of small local and regional
participants. As a result of their small size, many of these distributors lack
the purchasing power of a larger entity, the resources to offer multiple brands
and broad product lines or the inventory control and credit management systems
necessary to operate efficiently in multiple branches. The Company believes
that the competitive environment faced by small distributors has prompted the
trend toward industry consolidation and that such consolidation offers
significant opportunities for ABC.
ABC was founded in 1982 by its President and Chief Executive Officer, Kenneth
A. Hendricks, who, as the owner of a successful roofing business, saw a market
for the Company's services. Since its inception, ABC has experienced
significant growth. The Company's net sales and EBITDA have increased from
$368.3 million and $13.1 million, respectively, for the year ended December 31,
1992, to $789.1 million and $30.2 million, respectively, for the year ended
December 31, 1996, representing compound annual growth rates of 21.0% and
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<PAGE>
23.2%, respectively. See note (5) of "--Summary Combined Historical Financial
Data." In addition, comparable distribution center sales have grown at an
average annual rate of 14.4% over the same period. The Company is managed by a
team of experienced roofing and siding distribution professionals, including
its seven regional managers, who have an average of 20 years of experience in
the exterior building products supply industry.
BUSINESS STRATEGY
The Company's business objective is to strengthen its position as the largest
wholesale distributor of roofing products and one of the largest wholesale
distributors of vinyl siding materials in the United States. To support this
objective, the Company has adopted a business strategy that includes the
following key components:
. Offer a Broad Product Selection and Superior Customer Service: ABC
offers what it believes to be the largest selection of roofing and vinyl
siding products in the industry. The Company believes that it offers
more grades, styles and colors of roofing and vinyl siding products in
stock at multiple price points than its competitors. ABC provides its
customers with prompt product delivery as well as product specific
information, manufacturer-sponsored training, credit services and
marketing support. By providing high quality products, support services
and credit programs, ABC effectively distinguishes itself from smaller
distributors and mass-merchandisers. The Company believes its broad
roofing and vinyl siding product offerings and superior customer service
enhance its customers' ability to compete in their markets and to grow
their businesses, thereby creating customer loyalty and enhancing ABC's
growth potential.
. Expand Distribution Center Product Mix: The Company currently operates
distribution centers in 37 states, and has a market presence in 44 of
the 50 most populous metropolitan areas in the United States. Although
the Company has developed a national network of distribution centers,
not all of its locations offer the complete ABC product line. The
Company has recently increased its focus on vinyl siding and window
products, but currently distributes vinyl siding and windows in only
61.0% and 39.0%, respectively, of its distribution centers. By offering
its full product line in all of its locations, the Company believes it
can achieve considerable sales and EBITDA growth.
. Leverage Economies of Scale: The Company's size allows it to obtain
volume discounts and other favorable terms on many of its primary
products and maintain a broader selection within its product categories
than most other distributors and mass-merchandisers. The Company's size
and geographic dispersion also enable it to shift resources among its
distribution centers to offset the effects of regional product shortages
or to quickly meet market demand. By leveraging its geographic coverage
and economies of scale, the Company is able to set its prices
competitively while maintaining favorable operating results.
. Pursue Selective Acquisitions: Since January 1, 1992, the Company has
completed 24 acquisitions, acquiring 34 local distribution centers (net
of consolidations). The Company has historically selected acquisition
candidates based, in part, on the opportunity to improve their operating
results. The Company seeks to leverage its purchasing power, broad
product selection and management expertise to improve the financial
performance of its acquired distribution centers while maintaining the
acquired customer bases. Recently, the Company has considered acquiring
larger distributors with better operating results than its prior
acquisition candidates. On May 19, 1997, the Company acquired Viking (as
defined herein), a regional building supply distributor with 12
locations in the northeastern United States. See "Recent Transactions--
The Viking Acquisition." The Company believes that the ongoing
consolidation in the building materials distribution industry will
continue to provide suitable acquisition candidates in the future.
. Utilize Performance Related Incentives: The Company maintains incentive
programs designed to reward its employees for achieving positive
operating results. Each of the Company's non-union employees has the
opportunity to earn a substantial bonus based on the profitability of
such employee's
2
<PAGE>
individual operating unit. These incentive programs encourage the
Company's distribution center managers to make independent, local
market-driven decisions regarding product mix and daily operations. The
Company believes its incentive programs have contributed significantly
to its profitability and have helped it to achieve an average annual
growth rate of comparable distribution center sales of 14.4% over the
past five fiscal years.
---------------
The Company was originally incorporated in Texas in 1982 and was
reincorporated in Delaware in 1997. Its principal executive offices are
located at One ABC Parkway, Beloit, Wisconsin 53511 and its telephone number
is (608) 362-7777.
THE OFFERING
OLD NOTES.............. The Old Notes were sold by the Company on May 7, 1997
to the Initial Purchasers pursuant to a Purchase
Agreement dated May 2, 1997 (the "Purchase
Agreement"). The Initial Purchasers subsequently
resold the Old Notes to qualified institutional
buyers pursuant to Rule 144A under the Securities Act
and to a limited number of institutional accredited
investors that agreed to comply with certain transfer
restrictions and other conditions.
REGISTRATION RIGHTS Pursuant to the Purchase Agreement, the Company and
AGREEMENT............. the Initial Purchasers entered into a Registration
Rights Agreement dated as of May 7, 1997 (the
"Registration Rights Agreement"), which grants the
holder of the Old Notes certain exchange and
registration rights. The Exchange Offer is intended
to satisfy such exchange rights which terminate upon
the consummation of the Exchange Offer.
THE EXCHANGE OFFER
SECURITIES OFFERED..... $100,000,000 aggregate principal amount of 10 5/8
Series B Senior Subordinated Notes due 2007 of the
Company.
THE EXCHANGE OFFER..... $1,000 principal amount of the New Notes in exchange
for each $1,000 principal amount of Old Notes. As of
the date hereof, $100,000,000 aggregate principal
amount of Old Notes are outstanding. The Company will
issue the New Notes to holders on or promptly after
the Expiration Date.
Based on an interpretation by the staff of the
Commission set forth in no-action letters issued to
third parties, the Company believes that New Notes
issued pursuant to the Exchange Offer in exchange for
Old Notes may be offered for resale, resold and
otherwise transferred by any holder thereof (other
than any such holder 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 such New Notes are
acquired in the ordinary course of such holder's
business and that such holder does not intend to
participate and has no arrangement or understanding
with any person to participate in the distribution of
such New Notes.
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<PAGE>
Each Participating Broker-Dealer that receives New
Notes for its own account pursuant to the Exchange
Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New
Notes. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a
Participating Broker-Dealer will not be deemed to
admit that it is an "underwriter" within the meaning
of the Securities Act. This Prospectus, as it may be
amended or supplemented from time to time, may be
used by a Participating Broker-Dealer as a result of
market-making activities or other trading activities.
The Company has agreed that, for a period of one year
after the Expiration Date, it will make this
Prospectus available to any Participating Broker-
Dealer for use in connection with any such resale;
provided, however, that the Company and the
Subsidiary Guarantors will have no obligation to
amend or supplement this Prospectus unless the
Company has received written notice from a
Participating Broker-Dealer of their prospectus
delivery requirements under the Securities Act within
fifteen business days following consummation of the
Exchange Offer. See "Plan of Distribution."
Any holder who tenders in the Exchange Offer with the
intention to participate, or for the purpose of
participating, in a distribution of the New Notes
could not rely on the position of the staff of the
Commission enunciated in no-action letters and, in
the absence of an exemption therefrom, must comply
with the registration and prospectus delivery
requirements of the Securities Act for which the
holder is not indemnified by the Company.
EXPIRATION DATE......... 5:00 p.m., New York City time, on , 1997
unless the Exchange Offer is extended, in which case
the term "Expiration Date" means the latest date and
time to which the Exchange Offer is extended.
ACCRUED INTEREST ON THE
NEW NOTES AND THE OLD
NOTES..................
Each New Note will bear interest from its issuance
date. Holders of Old Notes that are accepted for
exchange will receive, in cash, accrued interest
thereon to, but not including, the issuance date of
the New Note. Such interest will be paid with the
first interest payment on the New Notes. Interest on
the Old Notes accepted for exchange will cease to
accrue upon issuance of the New Notes.
CONDITIONS TO THE
EXCHANGE OFFER.........
The Exchange Offer is subject to certain customary
conditions, 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
accompanying Letter of Transmittal, or a facsimile
thereof, in accordance with the instructions
contained herein and therein, and mail or otherwise
deliver such Letter of Transmittal, or such
facsimile, together with the Old Notes and any other
required documentation to the Exchange Agent (as
defined) at the address set forth herein. By
executing the Letter of Transmittal, each holder will
represent to the Company that, among other things,
the New Notes acquired pursuant to the Exchange Offer
are being obtained in the ordinary course
4
<PAGE>
of business of the person receiving such New Notes,
whether or not such person is the holder, that
neither the holder nor any such other person has any
arrangement or understanding with any person to
participate in the distribution of such New Notes and
that neither the holder nor any such other person is
an "affiliate," as defined under Rule 405 of the
Securities Act, of the Company. See "The Exchange
Offer--Purpose and Effect of the Exchange Offer" and
"--Procedures for Tendering."
UNTENDERED OLD NOTES.... Following the consummation of the Exchange Offer,
holders of Old Notes eligible to participate but who
do not tender their Old Notes will not have any
further exchange rights and such Old Notes will
continue to be subject to certain restrictions on
transfer. Accordingly, the liquidity of the market
for such Old Notes could be adversely affected.
CONSEQUENCES OF FAILURE
TO EXCHANGE............
The Old Notes that are not exchanged pursuant to the
Exchange Offer will remain restricted securities.
Accordingly, such Old Notes may be resold only (i) to
the Company, (ii) pursuant to Rule 144A or Rule 144
under the Securities Act or pursuant to some other
exemption under the Securities Act, (iii) outside the
United States to a foreign person pursuant to the
requirements of Rule 904 under the Securities Act.
See "The Exchange Offer--Consequences of Failure to
Exchange."
SHELF REGISTRATION
STATEMENT.............. If any holder of the Old Notes (other than any such
holder which is an "affiliate" of the Company within
the meaning of Rule 405 under the Securities Act) is
not eligible under applicable securities laws to
participate in the Exchange Offer, and such holder
has satisfied certain conditions relating to the
provision of information to the Company for use
therein, the Company has agreed to register the Old
Notes on a shelf registration statement (the "Shelf
Registration Statement") and use its best efforts to
cause it to be declared effective by the Commission
as promptly as practical on or after the consummation
of the Exchange Offer. The Company has agreed to
maintain the effectiveness of the Shelf Registration
Statement for, under certain circumstances, a maximum
of two years, to cover resales of the Old Notes held
by any such holders. Other than as set forth above,
holders of Old Notes who do not tender in the
Exchange Offer will not have any continuing rights
under the Registration Rights Agreement.
SPECIAL PROCEDURES FOR
BENEFICIAL OWNERS......
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 such registered holder promptly
and instruct such registered holder to tender on such
beneficial owner's behalf, such owner must, prior to
completing and executing the Letter of Transmittal
and delivering its Old Notes, either make appropriate
arrangements to register ownership of the Old Notes
in such owner's name or obtain a properly completed
bond power from the registered holder. The transfer
of registered ownership may take considerable time.
GUARANTEED DELIVERY
PROCEDURES.............
Holders of Old Notes who wish to tender their Old
Notes and whose Old Notes are not immediately
available or who cannot deliver their Old
5
<PAGE>
Notes, the Letter of Transmittal or any other
documents required by the Letter of Transmittal to
the Exchange Agent (or comply with the procedures for
book-entry transfer) prior to the Expiration Date
must tender their Old Notes according to the
guaranteed delivery procedures set forth in "The
Exchange Offer--Guaranteed Delivery Procedures."
WITHDRAWAL RIGHTS....... Tenders may be withdrawn at any time prior to 5:00
p.m., New York City time, on the Expiration Date.
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
of the Exchange Offer."
USE OF PROCEEDS......... There will be no cash proceeds to the Company from
the exchange pursuant to the Exchange Offer.
EXCHANGE AGENT.......... Norwest Bank Minnesota, National Association
THE NEW NOTES
GENERAL................. The form and terms of the New Notes are the same as
the form and terms of the Old Notes (which they
replace) except that (i) the New Notes bear a Series
B designation, (ii) the New Notes have been
registered under the Securities Act and, therefore,
will not bear legends restricting the transfer
thereof, and (iii) the holders of New Notes will not
be entitled to certain rights under the Registration
Rights Agreement, including the provisions providing
for an increase in the interest rate on the Old Notes
in certain circumstances relating to the timing of
the Exchange Offer, which rights will terminate when
the Exchange Offer is consummated. See "The Exchange
Offer--Purpose and Effect of the Exchange Offer." The
New Notes will evidence the same debt as the Notes
and will be entitled to the benefits of the
Indenture. See "Description of Notes."
SECURITIES OFFERED...... $100,000,000 in aggregate principal amount of 10 5/8%
Series B Senior Subordinated Notes due 2007 of the
Company.
MATURITY DATE........... May 15, 2007.
INTEREST PAYMENT DATES.. May 15 and November 15 of each year, commencing
November 15, 1997.
OPTIONAL REDEMPTION..... On or after May 15, 2002, the Company may redeem the
Notes, in whole or in part, at the redemption prices
set forth herein, plus accrued and unpaid interest
thereon and Liquidated Damages, if any, to the date
of redemption. Notwithstanding the foregoing, any
time on or before May 15, 2000, the Company may
redeem up to 35% of the original aggregate principal
amount of the Notes with the net cash proceeds of an
initial public offering of its common stock at a
redemption price equal to 110 5/8% of the principal
amount thereof, plus accrued and unpaid interest
thereon and Liquidated Damages, if any, to the
redemption date; provided that at least 65% of the
original aggregate principal amount of the Notes
remains outstanding immediately after such
redemption. See "Description of the Notes--Optional
Redemption."
6
<PAGE>
MANDATORY REDEMPTION.... None.
RANKING.................
The Notes will be general unsecured obligations of
the Company, subordinated in right of payment to all
existing and future Senior Debt, which will include
borrowings under the Credit Agreement. As of March
31, 1997, on a pro forma basis after giving effect to
the Offering and application of the net proceeds
therefrom, the Company and its subsidiaries would
have had approximately $57.1 million of outstanding
Senior Debt (including outstanding guarantees and
letters of credit). The indenture pursuant to which
the New Notes will be issued (the "Indenture")
permits the Company and its subsidiaries to incur
additional indebtedness, including additional Senior
Debt, subject to certain limitations. See
"Description of the Notes--Subordination."
GUARANTEES..............
The New Notes will be jointly and severally
guaranteed, limited only by laws relating to
fraudulent conveyance, by each of the existing and
future subsidiaries of the Company. Such subsidiary
guarantees will be subordinated to all Senior Debt of
the Guarantors. As of March 31, 1997, the Company's
subsidiaries had approximately $1.8 million of Senior
Debt outstanding. See "Description of the Notes--
Subsidiary Guarantees."
CHANGE OF CONTROL....... Upon a Change of Control (as defined herein), the
Company will be required to make an offer to
repurchase all outstanding Notes at 101.0% of the
principal amount thereof plus accrued and unpaid
interest thereon and Liquidated Damages, if any, to
the date of repurchase. See "Description of the
Notes--Repurchase at the Option of Holders--Change of
Control."
COVENANTS............... The Indenture will restrict, among other things, the
ability of the Company and its subsidiaries to incur
additional indebtedness and issue preferred stock,
enter into sale and leaseback transactions, incur
liens to secure pari passu or subordinated
indebtedness, pay dividends or make certain other
restricted payments, apply net proceeds from certain
asset sales, enter into certain transactions with
affiliates, incur indebtedness that is subordinate in
right of payment to any Senior Debt and senior in
right of payment to the Notes (or any guarantee
thereof), merge or consolidate with any other person,
sell stock of subsidiaries, enter into new lines of
business or sell, assign, transfer, lease, convey or
otherwise dispose of substantially all of the assets
of the Company. See "Description of the Notes--
Certain Covenants."
RISK FACTORS
See "Risk Factors" for a discussion of certain factors that should be
considered in connection with an investment in the Notes.
7
<PAGE>
SUMMARY COMBINED HISTORICAL FINANCIAL DATA
The following table presents summary combined historical financial
information of the Company, Mule-Hide, Amcraft and HREP for each of the five
years in the period ended December 31, 1996. The combined historical financial
information for the years ended December 31, 1992, 1993, 1994, 1995 and 1996
has been derived from the combined financial statements of the Company, Mule-
Hide, Amcraft and HREP for such periods, which have been audited by Ernst &
Young LLP. The summary combined historical financial information for the three
months ended March 31, 1996 and 1997 has been derived from combined financial
statements of the Company, Mule-Hide, Amcraft and HREP which have not been
audited but which in the opinion of management have been prepared on the same
basis as the audited combined financial statements included herein and reflect
all adjustments (consisting of normal and recurring adjustments), which are,
in the opinion of management, necessary for a fair statement of the results of
operations for the interim periods presented. The summary combined historical
financial information should be read in conjunction with, and is qualified in
its entirety by reference to, the information set forth under the caption
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the audited combined financial statements of the Company,
Mule-Hide, Amcraft and HREP as of December 31, 1995 and 1996, and for each of
the three years in the period ended December 31, 1996, and the notes thereto,
which appear elsewhere in this Prospectus. The results of operations at and
for the three months ended March 31, 1997 are not indicative of results for
the full year.
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------------------------ ------------------
1992 1993 1994 1995 1996 1996 1997
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales............... $368,271 $446,384 $513,766 $638,821 $789,103 $128,704 $162,772
Cost of sales........... 287,912 350,987 403,032 501,027 615,627 100,695 126,789
-------- -------- -------- -------- -------- -------- --------
Gross profit............ 80,359 95,397 110,734 137,794 173,476 28,009 35,983
Operating expenses:
Distribution centers.. 64,380 75,249 90,481 110,859 140,300 29,106 36,656
General and
administrative....... 6,412 9,547 7,981 10,476 12,016 2,897 3,566
-------- -------- -------- -------- -------- -------- --------
Total operating
expenses........... 70,792 84,796 98,462 121,335 152,316 32,003 40,222
-------- -------- -------- -------- -------- -------- --------
Operating income (loss). 9,567 10,601 12,272 16,459 21,160 (3,994) (4,239)
OTHER INCOME (EXPENSE):
Interest income....... 380 378 554 653 689 136 165
Interest expense...... (3,872) (4,522) (6,020) (9,745) (11,146) (2,572) (2,898)
-------- -------- -------- -------- -------- -------- --------
Total other income
(expense).......... (3,492) (4,144) (5,466) (9,092) (10,457) (2,436) (2,733)
-------- -------- -------- -------- -------- -------- --------
Income (loss) from
continuing operations
before provision for
income taxes........... 6,075 6,457 6,806 7,367 10,703 (6,430) (6,972)
Provision for income
taxes (1).............. 124 236 260 338 329 52 32
-------- -------- -------- -------- -------- -------- --------
Income (loss) from
continuing operations.. 5,951 6,221 6,546 7,029 10,374 (6,482) (7,004)
Discontinued operations
(2).................... (598) (2,981) -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Net income (loss) ...... $ 5,353 $ 3,240 $ 6,546 $ 7,029 $ 10,374 $ (6,482) $ (7,004)
======== ======== ======== ======== ======== ======== ========
Ratio of earnings to
fixed charges (3)...... 2.0x 1.9x 1.8x 1.6x 1.7x .8x .1x
OTHER DATA:
Number of distribution
centers (at period
end)................... 95 98 109 126 157 135 161
Comparable distribution
center sales growth
(4).................... 13.3% 18.7% 11.1% 17.3% 11.5% 8.7% 16.8%
Depreciation and
amortization........... $ 3,574 $ 4,261 $ 5,194 $ 6,808 $ 9,079 $ 2,066 $ 2,486
Capital expenditures.... $ 6,026 $ 7,077 $ 13,830 $ 19,922 $ 14,697 $ 3,512 $ 4,368
EBITDA (deficit) (5).... $ 13,141 $ 14,862 $ 17,466 $ 23,267 $ 30,239 $ (1,928) $ (1,753)
EBITDA margin........... 3.6% 3.3% 3.4% 3.6% 3.8% NM NM
Ratio of EBITDA to net
interest expense....... 3.8x 3.6x 3.2x 2.6x 2.9x NM NM
Pro forma net cash
interest expense (6)... $ 14,132
Ratio of EBITDA to pro
forma net cash interest
expense................ 2.1x
Net cash provided by
(used in):
Operating activities.. $ 5,460 $ (3,517) $ (1,210) $ (6,282) $ 4,756 $ 2,099 $ 6,793
Financing activities.. 2,251 11,052 17,181 32,317 21,825 4,788 (3,828)
Investing activities.. (7,563) (7,319) (15,366) (25,048) (26,694) (9,361) (4,677)
</TABLE>
NM--Not Meaningful
8
<PAGE>
<TABLE>
<CAPTION>
MARCH 31, 1997
-----------------------
ACTUAL AS ADJUSTED(8)
-------- --------------
<S> <C> <C>
BALANCE SHEET DATA (7):
Working capital......................................... $ 99,137 $ 99,137
Total assets............................................ 295,958 292,981
Long-term debt, less current portion.................... 137,233 144,256
Stockholder's equity (9)................................ 24,899 13,299
</TABLE>
- --------
(1) Consists of certain state and local income taxes. As subchapter S
corporations under the Internal Revenue Code of 1986, as amended (the
"Code"), ABC, Mule-Hide, Amcraft and HREP have not been subject to U.S.
federal income taxes or most state income taxes. Instead, such taxes have
been paid by Mr. Hendricks. The Company has in the past made periodic
distributions to Mr. Hendricks in respect of such tax liabilities. From and
after the date of the Indenture, such distributions will be made in
accordance with the terms of the Tax Allocation Agreement (as defined
herein). See "Certain Transactions."
(2) In 1993, Amcraft made a decision to discontinue its manufacturing
operations, which primarily produced vinyl windows. The results of
operations of Amcraft's manufacturing segment have been classified as
discontinued operations for the years ended December 31, 1992 and 1993.
(3) For purposes of calculating this ratio, "earnings" represents earnings
(loss) from continuing operations before income taxes plus fixed charges.
"Fixed charges" consists of interest expense, amortization of debt issuance
costs and the portion of rent on operating leases considered to represent
interest expense (approximated at one-third of rent expense).
(4) "Comparable distribution center sales growth" is defined as the percentage
change in distribution center sales as compared to sales for the same
distribution centers in the prior year. For purposes of this calculation,
only distribution centers that were open and operated by ABC for at least
one year as of the beginning of the applicable period are included.
(5) "EBITDA" is defined as operating income plus depreciation and amortization.
EBITDA is not a measure of performance under generally accepted accounting
principles ("GAAP"). Management believes that EBITDA, as presented,
represents a useful measure of assessing the performance of the Company's
ongoing operating activities because the Credit Agreement uses EBITDA as a
measure of compliance with one of its financial covenants, because the
Company utilizes EBITDA in evaluating acquisition candidates and because
EBITDA reflects the earnings trends of the Company without the impact of
the amortization of goodwill acquired in connection with the Company's
acquisitions or the interest expense relating to the financing of such
acquisitions. The Company understands that, while EBITDA is frequently used
by securities analysts in the evaluation of companies, EBITDA, as used
herein, is not necessarily comparable to other similarly titled captions of
other companies due to potential inconsistencies in the method of
calculation. EBITDA is not intended as an alternative to cash flow from
operating activities as a measure of liquidity, an alternative to net
income as an indicator of the Company's operating performance or an
alternative to any other measure of performance in conformity with
generally accepted accounting principles.
(6) Consists of interest of $10.625 million relating to the Notes, $1.27
million relating to average outstanding borrowings under the Credit
Agreement of $17.9 million, and $2.30 million relating to other borrowings,
less $0.06 million in interest income, all after giving effect to the
Offering and the use of the net proceeds (determined as of December 31,
1996 balances) therefrom as described under "Use of Proceeds," as if such
transactions were consummated on January 1, 1996. The figure excludes $0.35
million of non-cash interest expense associated with debt financing costs.
(7) The Company's business is highly seasonal. As a result, the Company's
borrowings under the Credit Agreement fluctuate significantly over the
course of the year. In 1996, the minimum and maximum amount of borrowings
outstanding under the Credit Agreement at any one time were $86.5 million
(in January) and $131.9 million (in June). The average borrowings
outstanding in 1996 were $109.5 million. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Seasonality."
(8) Reflects the results, on a pro forma basis, of the Offering and the use of
the net proceeds therefrom as described under "Use of Proceeds" as if such
events occurred at March 31, 1997.
(9) As adjusted, reflects payment of the Distribution (as defined herein) as if
it had occurred on March 31, 1997. See "Use of Proceeds." As adjusted, also
reflects the payment of a dividend to the Company's sole stockholder in
respect of 1996 federal and state income taxes of approximately $1.6
million made in April 1997 as if such payment had occurred on March 31,
1997.
9
<PAGE>
RISK FACTORS
This Prospectus contains certain forward-looking statements. Such forward-
looking statements are based on the beliefs of the Company's management as
well as on assumptions made by and information currently available to the
Company at the time such statements were made. When used in this Prospectus
the words "anticipate," "believe," "estimate," "expect," "intend" and similar
expressions, as they relate to the Company, are intended to identify such
forward-looking statements. While the Company believes these statements are
reasonable, prospective investors should be aware that actual results could
differ materially from those projected by such forward-looking statements as a
result of the risk factors set forth below or other factors. Prospective
investors should consider carefully the following factors, as well as the
other information and data included in this Prospectus, before tendering Old
Notes in exchange for New Notes. The Company cautions the reader, however,
that this list of factors may not be exhaustive and that these or other
factors could have an adverse effect on the Company's ability to service its
indebtedness, including principal and interest payments on the Notes.
SUBSTANTIAL LEVERAGE
The Company has incurred significant debt in connection with its expansion
through acquisitions. As of March 31, 1997, after giving pro forma effect to
the Offering and the application of the net proceeds therefrom, the Company
would have had outstanding Indebtedness (as defined herein) of approximately
$157.1 million (of which $100.0 million would have consisted of the Notes) and
stockholder's equity of approximately $13.3 million. For the year ended
December 31, 1996, after giving pro forma effect to the Offering and the
application of the net proceeds therefrom, the Company's ratio of earnings to
fixed charges would have been 1.4 to 1.
The Company's ability to make scheduled principal payments in respect of, or
to pay the interest or Liquidated Damages, if any, on, or to refinance, any of
its indebtedness (including the Notes) will depend on its future performance,
which, to a certain extent, is subject to general economic, financial,
competitive and other factors beyond its control. Based upon the Company's
current level of operations and anticipated growth, management believes that
cash flow from operations, together with available borrowings under the
Company's senior credit agreement (the "Credit Agreement"), will be adequate
to meet the Company's anticipated future requirements for working capital,
capital expenditures, scheduled lease payments and scheduled payments of
interest on its indebtedness, including the Notes, for the foreseeable future.
The Company may, however, need to refinance all or a portion of the principal
of the Notes at or prior to maturity. There can be no assurance that the
Company's business will generate sufficient cash flow from operations, that
anticipated growth will occur or that future borrowings will be available
under the Credit Agreement or otherwise in an amount sufficient to enable the
Company to service its indebtedness, including the Notes, or make anticipated
capital expenditures and lease payments. In addition, there can be no
assurance that the Company will be able to effect any such refinancing on
commercially reasonable terms or at all. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources."
The degree to which the Company will be leveraged following the Exchange
Offer could have important consequences to holders of the Notes, including,
but not limited to, the following: (i) a substantial portion of the Company's
cash flow from operations will be dedicated to debt service and will not be
available for other purposes; (ii) the Company's ability to obtain additional
financing in the future could be limited; and (iii) the Indenture and the
Credit Agreement contain financial and restrictive covenants that limit the
ability of the Company to, among other things, borrow additional funds.
Failure by the Company to comply with such covenants could result in an event
of default which, if not cured or waived, could have a material adverse effect
on the Company. In addition, the degree to which the Company is leveraged
could prevent it from repurchasing all Notes tendered to it upon the
occurrence of a Change of Control. See "Description of the Notes--Repurchase
at the Option of Holders--Change of Control" and "Description of the Credit
Agreement."
10
<PAGE>
SUBORDINATION OF THE NOTES AND THE GUARANTEES
The Notes and the Guarantees are unsecured and subordinated to the prior
right of payment of all existing and future Senior Debt of the Company and the
Guarantors, including obligations under the Credit Agreement. The indebtedness
under the Credit Agreement will also become due prior to the time the
principal obligations under the Notes become due. Subject to certain
limitations, the Indenture permits the Company and the Guarantors to incur
additional Senior Debt. The Guarantees are joint and several obligations of
the Guarantors, limited only by laws relating to fraudulent conveyance. As of
March 31, 1997, the Company and the Guarantors had $55.3 million and $1.8
million, respectively, of Senior Debt outstanding, after giving pro forma
effect to the Offering and the application of the net proceeds therefrom as
described under "Use of Proceeds", including guarantees and letters of credit
outstanding. Under the terms of the Indenture the Company and the Guarantors
may incur an unlimited amount of Permitted Indebtedness (as defined) and
additional Indebtedness, subject to meeting its Fixed Charge Coverage Ratio
(as defined herein) of 2.0 to 1. See "Description of the Notes--Certain
Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock." Under
certain circumstances, the subordination provisions contained in the Indenture
prohibit the Company and the Guarantors from making distributions to the
holders of the Notes. In addition, in the event of a liquidation or
insolvency, the assets of the Company and the Guarantors will be available to
pay obligations on the Notes only after all Senior Debt of the Company and the
Guarantors has been paid in full, and there may not be sufficient assets
remaining to pay amounts due on any or all of the Notes then outstanding. In
addition, substantially all of the assets of the Company and the Guarantors
will or may in the future be pledged to secure other indebtedness of the
Company and the Guarantors. Certain affiliates of the Initial Purchasers are
lenders under the Credit Agreement and as such received a substantial portion
of the net proceeds of this Offering. See "Use of Proceeds," "Description of
the Credit Agreement" and "Description of the Notes--Subordination."
RESTRICTIONS IMPOSED BY THE CREDIT AGREEMENT AND THE INDENTURE
The agreements governing the outstanding indebtedness of the Company impose
certain operating and financial restrictions on the Company. The Credit
Agreement require the Company to maintain specified financial ratios and
tests, among other obligations, including a maximum funded debt to EBITDA
ratio (currently 6.60 to 1), a minimum tangible net worth test ($85 million at
December 31, 1997 and $75 million each year end thereafter) and a minimum
fixed charge coverage ratio (currently 1.45 to 1), each as defined in the
Credit Agreement. Net worth as defined in the Credit Agreement includes the
principal outstanding under the Notes. In addition, the Credit Agreement
restrict, among other things, the Company's ability to (i) declare dividends
or redeem or repurchase capital stock; (ii) prepay, redeem or repurchase debt
(including the Notes); (iii) incur liens and engage in sale-leaseback
transactions; (iv) make loans and investments; (v) issue more debt; (vi) amend
or otherwise alter debt and other material agreements; (vii) make capital
expenditures; (viii) engage in mergers, acquisitions and asset sales; and (ix)
enter into transactions with affiliates. A failure to comply with the
restrictions contained in the Credit Agreement could lead to an event of
default thereunder which could result in an acceleration of such indebtedness.
Such an acceleration would constitute an event of default under the Indenture
relating to the Notes. In addition, the Indenture restricts, among other
things, the Company's ability to (i) incur additional indebtedness; (ii) pay
dividends and make distributions; (iii) issue stock of subsidiaries; (iv) make
certain investments; (v) repurchase stock; (vi) create liens; (vii) enter into
transactions with affiliates; (viii) enter into sale-leaseback transactions;
(ix) merge or consolidate the Company; and (x) transfer and sell assets. A
failure to comply with the restrictions in the Indenture could result in an
event of default under the Indenture. See "Description of the Credit
Agreement" and "Description of the Notes--Certain Covenants."
The Credit Agreement contains more extensive and restrictive covenants and
restrictions than the Indenture, as described above. The Company's ability to
comply with these covenants and restrictions can be affected by events beyond
its control, and there can be no assurance that the Company will be able to do
so. In addition, such covenants and restrictions significantly limit the
Company's operating and financial flexibility. There can be no assurance that
such covenants will not adversely affect the Company's ability to finance its
future operations or capital needs or to engage in other business activities
which may be in the interests of the Company. The Credit Agreement also
restricts the Company's ability to prepay other indebtedness (including
11
<PAGE>
the Notes). Upon the occurrence of an event of default under the Credit
Agreement, the lenders thereunder could elect to declare all amounts
outstanding under the Credit Agreement, including accrued interest or other
obligations, to be immediately due and payable or proceed against the
collateral granted to them to secure that indebtedness. If any Senior Debt
were to be accelerated, there can be no assurance that the assets of the
Company would be sufficient to repay in full that indebtedness and the other
indebtedness of the Company, including the Notes. See "Description of the
Credit Agreement."
REPURCHASE OF NOTES UPON A CHANGE OF CONTROL
In the event of a Change of Control, the Company will be required to make an
offer to repurchase the Notes for cash at 101.0% of the principal amount
thereof, plus accrued and unpaid interest thereon and Liquidated Damages, if
any, to the repurchase date. Certain events involving a Change of Control may
result in an event of default under the Credit Agreement or other indebtedness
of the Company that may be incurred in the future. Moreover, the exercise by
the holders of the Notes of their right to require the Company to repurchase
the Notes could cause an event of default under the Credit Agreement and may
cause a default under such other indebtedness, even if the Change of Control
does not. The Company's obligations under this provision of the Indenture
could delay, deter or prevent a sale of the Company which might otherwise be
advantageous to holders of Notes. There can be no assurance that the Company
will have the financial resources necessary to repurchase the Notes upon a
Change of Control. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources" and
"Description of the Notes--Repurchase at the Option of Holders--Change of
Control." In addition, there can be no assurance that the Company will not, in
the future, enter into transactions, including acquisitions, refinancings or
other recapitalizations or highly leveraged transactions, that would not
constitute a Change of Control, but that could increase the amount of
Indebtedness outstanding at such time or otherwise affect the Company's
capital structure or credit ratings or otherwise adversely affect holders of
Notes.
FRAUDULENT CONVEYANCE
Various fraudulent conveyance laws enacted for the protection of creditors
may apply to the Guarantors' issuance of the Guarantees. To the extent that a
court were to find that (x) a Guarantee was incurred by a Guarantor with
actual intent to hinder, delay or defraud any present or future creditor or
(y) such Guarantor did not receive fair consideration or reasonably equivalent
value for issuing its Guarantee and such Guarantor (i) was insolvent, (ii) was
rendered insolvent by reason of the issuance of such Guarantee, (iii) was
engaged or about to engage in a business or transaction for which the
remaining assets of such Guarantor constituted unreasonably small capital to
carry on its business or (iv) intended to incur, or believed that it would
incur, debts beyond its ability to pay such debts as they matured, the court
could avoid or subordinate such Guarantee in favor of the Guarantor's
creditors. Among other things, a legal challenge of a Guarantee on fraudulent
conveyance grounds may focus on the benefits, if any, realized by the
Guarantor as a result of the issuance by the Company of the Notes. To the
extent any Guarantees were avoided as a fraudulent conveyance or held
unenforceable for any other reason, the claims of holders of the Notes in
respect of such Guarantor would be adversely affected and such holders would,
to such extent, be creditors solely of the Company and any Guarantor whose
Guarantee was not avoided or held unenforceable. To the extent the claims of
the holders of the Notes against the issuer of an invalid Guarantee were
subordinated, they would be subject to the prior payment of all liabilities of
such 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 the Notes relating to any voided portions of any of the Guarantees.
The measure of insolvency for purposes of the foregoing considerations will
vary depending upon the law applied in any such proceeding. Under one measure,
a Guarantor may be considered insolvent if the sum of its debts, including
contingent liabilities, is greater than the fair marketable value of all of
its assets at a fair valuation. Under another measure, a Guarantor may be
considered insolvent if the present fair marketable value of its assets is
less than the amount that would be required to pay its probable liability on
its existing debts, including contingent liabilities, as they become absolute
and mature.
12
<PAGE>
Based upon financial and other information, the Company believes that the
Guarantees are being incurred for proper purposes and in good faith and that
each Guarantor is solvent and will continue to be solvent after issuing its
Guarantee, will have sufficient capital for carrying on its business after
such issuance and will be able to pay its debts as they mature. There can be
no assurance, however, that a court passing on such standards would agree with
the Company.
GROWTH BY ACQUISITION
The Company's growth strategy is based, in part, upon the acquisition of
other roofing and siding products distributors. The Company continually seeks
acquisition candidates in selected markets and from time to time engages in
exploratory discussions with suitable candidates. There can be no assurance,
however, that the Company will be able to continue to identify and acquire
appropriate businesses, obtain financing for such acquisitions on satisfactory
terms or successfully integrate the businesses acquired. The process of
integrating acquired businesses into the Company's operations may result in
unforeseen difficulties and may require a disproportionate amount of resources
and management's attention. Furthermore, there can be no assurance that
competition for acquisition candidates will not escalate, thereby increasing
the costs of making acquisitions.
COMPETITION
The roofing and siding products distribution industry is highly competitive
and fragmented. The Company competes with many local, regional and national
distributors, product manufacturers that engage in direct sales and, to a
lesser extent, mass merchandisers. The Company's competition varies by product
line, customer classification and geographic market. Certain of the companies
that compete with the Company have substantially greater financial and other
resources than those of the Company. See "Business--Competition."
SUPPLY AND PRICE OF PRODUCTS
The Company distributes building products manufactured by a number of major
vendors. GAF Corporation ("GAF") is the Company's largest supplier, with
purchases of GAF roofing products accounting for approximately 14.3% of the
Company's total product purchases in 1996. No other supplier accounted for
more than 10.0% of the Company's total product purchases in 1996. Although
alternative sources of supply exist, there can be no assurance that the
termination of the Company's relationship with GAF would not have a short-term
adverse effect on the Company's operations. See "Business--Purchasing."
Supply shortages occur at times as a result of unanticipated demand or
production difficulties. In such cases, building materials suppliers often
allocate products among distributors. Future supply shortages may occur from
time to time and may have a short-term adverse effect on the Company's results
of operations.
The Company has negotiated what management believes to be favorable pricing
terms from many of its suppliers. Should the Company be unable to renew its
arrangements with such suppliers or should such suppliers materially reduce or
cease to offer volume and other discounts, the Company's results of operations
could be materially adversely affected.
SEASONALITY; CYCLICALITY
Because of cold weather conditions in many of the markets in which the
Company does business and the seasonal nature of the roofing and siding
business generally, the Company's revenues vary substantially throughout the
year, with its lowest revenues typically occurring in the months of December
through February. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Seasonality."
The building materials industry is cyclical and is affected by changes in
general and local economic conditions, such as housing starts, interest rates,
availability of financing, employment levels and consumer confidence. A
downturn in the economy in one or more markets served by the Company could
have a material adverse effect on the Company's sales, especially its sales to
new construction subcontractors.
13
<PAGE>
DEPENDENCE ON KEY PERSONNEL
The Company is dependent on the continued services of its senior management
team, including its founder, President and Chief Executive Officer, Mr.
Hendricks. Although the Company believes it could replace such key employees
in a timely fashion should the need arise, the loss of such key personnel
could have a material adverse effect on the Company. See "Management--
Directors, Executive Officers and Key Employees."
CONTROLLING STOCKHOLDER
All of the Company's capital stock is held by its founder, President and
Chief Executive Officer. Circumstances may occur in which the interests of the
sole stockholder of the Company, could be in conflict with the interests of
the holders of the Notes. For example, such stockholder may have an interest
in pursuing acquisitions, divestitures or other transactions that, in his
judgment, could enhance his equity investment, even though such transactions
might involve risks to the holders of the Notes. See "Security Ownership of
Certain Beneficial Owners and Management" and "Certain Transactions."
ABSENCE OF A PUBLIC MARKET COULD ADVERSELY AFFECT THE VALUE OF NOTES
Prior to the Exchange Offer, there has not been any public market for the
Notes. The Old Notes have not been registered under the Securities Act and are
subject to restrictions on transferability to the extent that they are not
exchanged for New Notes by holders who are entitled to participate in this
Exchange Offer. The holders of Old Notes (other than any such holder that is
an "affiliate" of the company within the meaning of Rule 405 under the
Securities Act) who are not eligible to participate in the Exchange Offer are
entitled to certain registration rights, and the Company is required to file a
Shelf Registration Statement with respect to such Old Notes. However, to the
extent that Old Notes are tendered and accepted in the Exchange Offer, the
trading market for the remaining untendered Old Notes could be adversely
affected. The New Notes will constitute a new issue of securities with no
established trading market. The Company does not intend to list the New Notes
on any national securities exchange or to seek the admission thereof to
trading in the National Association of Securities Dealers Automated Quotation
System. The Initial Purchasers have advised the Company that they currently
intend to make a market in the New Notes, but they are not obligated to do so
and may discontinue such market making at any time. In addition, such market
making activity will be subject to the limits imposed by the Securities Act
and the Exchange Act and may be limited during the Exchange Offer and the
pendency of the Shelf Registration Statements. Accordingly, no assurance can
be given that an active public or other market will develop for the New Notes
or as to the liquidity of the trading market for the New Notes. If a trading
market does not develop or is not maintained, holders of the New Notes may
experience difficulty in reselling the New Notes or may be unable to sell them
at all. If a market for the New Notes develops, any such market may be
discontinued at any time.
If a public trading market develops for 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. Depending on prevailing interest rates, the market for
similar securities and other factors, including the financial condition of the
Company, the New Notes may trade at a discount from their principal amount.
FAILURE TO FOLLOW EXCHANGE OFFER PROCEDURES COULD ADVERSELY AFFECT HOLDERS
Issuance of the New Notes in exchange for the Old Notes pursuant to the
Exchange Offer will be made only after a timely receipt by the Company of such
Old Notes, a properly completed and duly executed Letter of Transmittal and
all other required documents. Therefore, holders of the Old Notes desiring to
tender such Old Notes in exchange for New Notes should allow sufficient time
to ensure timely delivery. The Company is under no duty to give notification
of defects or irregularities with respect to the tenders of Old Notes for
exchange. Old Notes that are not tendered or are tendered but not accepted
will, following the consummation of the Exchange Offer, continue to be subject
to the existing restrictions upon transfer thereof and, upon consummation of
the
14
<PAGE>
Exchange Offer, certain registration rights under the Registration Rights
Agreement will terminate. In addition, any holder of Old Notes who tenders in
the Exchange Offer for the purpose of participating in a distribution of the
New Notes may be deemed to have received restricted securities and, if so,
will be required to comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transactions.
Each Participating Broker-Dealer that receives New Notes for its own account
in exchange for Old Notes, where such Old Notes were acquired by such
Participating 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. The Company has agreed that, for
a period of one year after the Expiration Date, it will make this Prospectus
available to any Participating Broker-Dealer for use in connection with any
such resale; provided, however, that the Company and the Subsidiary Guarantors
will have no obligation to amend or supplement this Prospectus unless the
Company has received written notice from a Participating Broker-Dealer of
their prospectus delivery requirements under the Securities Act within fifteen
business days following consummation of the Exchange Offer. See "Plan of
Distribution." To the extent that Old Notes are tendered and accepted in the
Exchange Offer, the trading market for untendered and tendered but unaccepted
Old Notes could be adversely affected. See "The Exchange Offer."
15
<PAGE>
RECENT TRANSACTIONS
The Combining Transactions. The Company's sole stockholder previously owned
all of the capital stock of Mule-Hide and Amcraft, which supply certain
roofing and vinyl siding products to the Company, and HREP, which owned the
Company's headquarters building. For the year ended December 31, 1996, Mule-
Hide, Amcraft and HREP reported aggregate net sales of $40.7 million
(including $35.0 million of sales to ABC) and net income of $1.2 million. On
or about May 1, 1997, all of the capital stock of Mule-Hide and Amcraft was
contributed to the Company and HREP merged with and into the Company. Mule-
Hide and Amcraft now operate as wholly-owned subsidiaries of the Company. The
Combining Transactions were accounted for as a combination of entities under
common control (similar to a pooling of interests), wherein all prior periods
were restated to combine the historical financial statements of Mule-Hide,
Amcraft and HREP with those of the Company. The financial statements set forth
herein are presented on a combined basis and include the results of operations
of Mule-Hide, Amcraft and HREP for all periods presented.
The Viking Acquisition. On May 19, 1997, the Company acquired certain assets
and assumed a portion of the liabilities of Viking Building Products, Inc. and
certain assets of Viking Aluminum Products, Inc. ("VAP") (such acquired assets
and assumed liabilities, collectively, "Viking"). The purchase price for the
acquisition of Viking (the "Viking Acquisition") was $25.8 million, which is
net of approximately $3.9 million of assumed liabilities. The purchase price
was paid with a combination of cash and a $3.0 million seller note payable
over two years. Viking was a regional distributor of residential roofing,
siding and window products with 12 distribution centers located in the
northeastern portion of the United States and reported pre-tax income of $1.4
million on net sales of $84.1 million for its fiscal year ended February 28,
1997. In connection with the Viking Acquisition, the Company entered into a
purchase agreement with VAP pursuant to which the Company agreed to purchase a
minimum of $98.2 million of VAP products over the next five years.
USE OF PROCEEDS
This Exchange Offer is intended to satisfy certain of the Company's
obligations under the Purchase Agreement and the Registration Rights
Agreement. The Company will not receive any cash proceeds from the issuance of
the New Notes offered hereby. In consideration for issuing the New Notes
contemplated in this Prospectus, the Company will receive Old Notes in like
principal amount, the form and terms of which are the same as the forms and
terms of the New Notes (which they replace), except as otherwise described
herein. The Old Notes surrendered in exchange for New Notes will be retired
and canceled and cannot be reissued. Accordingly, issuance of the New Notes
will not result in any increase or decrease in the indebtedness of the
Company. As such, no effect has been given to the Exchange Offer in the pro
forma statements or capitalization tables.
The proceeds to the Company of the Offering were approximately $96.5 million
after deducting estimated expenses and commissions. The Company used
approximately $86.5 million of the net proceeds to repay indebtedness
outstanding under the Credit Agreement and $10.0 million to make a
distribution (the "Distribution") to the Company's sole stockholder. The
stockholder used approximately $8.3 million of the proceeds from the
Distribution to repay certain real estate related indebtedness owed to the
Company as described below; the Company, in turn, used the proceeds from such
repayment to further repay indebtedness under the Credit Agreement. After such
repayment, the net reduction in amounts outstanding under the Credit Agreement
was $94.8 million.
In connection with certain of the Company's acquisitions, Mr. Hendricks or
his affiliates have purchased the real estate of the acquired business, which
the Company has then leased from Mr. Hendricks or his affiliates. In addition,
certain of the distribution centers opened by the Company are located in
facilities purchased by and
16
<PAGE>
leased from him or his affiliates. As of December 31, 1996, the Company leased
67 of its distribution centers from Mr. Hendricks or his affiliates. These
real estate purchases have historically been financed with a combination of
bank financing and equity, and a portion of the equity has sometimes been
funded by Mr. Hendricks with borrowings from the Company. The aggregate amount
of such borrowings outstanding as of April 30, 1997 was approximately $8.3
million, which Mr. Hendricks repaid in its entirety with a portion of the
proceeds of the Distribution. The Company and Mr. Hendricks currently intend
to continue to acquire properties for the Company's occupancy using such
method of financing. The Indenture and the Credit Agreement each permit the
Company to lend additional amounts to Mr. Hendricks in connection with such
transactions in the future. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations," "Certain Transactions" and
"Description of the Notes--Certain Covenants--Restricted Payments."
Contemporaneously with the completion of the Offering, the Company amended
the Credit Agreement to, among other things, extend the maturity thereof and
reduce the interest rate thereunder. The Credit Agreement, as amended, matures
on June 30, 2000 and bears interest at a rate equal to, at the Company's
option, LIBOR plus 1.25% or its lenders' prime rate in effect from time to
time. See "Description of the Credit Agreement." As of March 31, 1997, the
interest rate on borrowings under the Credit Agreement (without giving effect
to the amendment) was approximately 7.6% and there was approximately $116.1
million of indebtedness outstanding under the Credit Agreement. NationsBank of
Texas, N.A., an affiliate of NationsBanc Capital Markets, Inc., and American
National Bank and Trust Company of Chicago, an affiliate of First Chicago
Capital Markets, Inc., are lenders and agents under the Credit Agreement and
received a substantial portion of the proceeds from the Offering. See "Plan of
Distribution."
17
<PAGE>
CAPITALIZATION
The following table sets forth the combined capitalization of the Company,
Mule-Hide, Amcraft and HREP as of March 31, 1997 (i) on an actual basis and
(ii) as adjusted to give pro forma effect to the Offering and the application
of the net proceeds therefrom as described under "Use of Proceeds" and the
payment of a dividend in respect of 1996 federal and state income taxes to the
Company's sole stockholder in April 1997 as if such payment had occurred on
March 31, 1997. The information in this table should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and the financial statements and accompanying notes thereto
appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1997
--------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
Total debt:
Credit Agreement(1)(2)(3).......................... $116,108 $ 23,131
Notes.............................................. -- 100,000
Other(4)........................................... 29,633 29,633
-------- --------
Total debt(5).................................... 145,741 152,764
-------- --------
Stockholder's equity(6).............................. 24,899 13,299
-------- --------
Total capitalization................................. $170,640 $166,063
======== ========
</TABLE>
- --------
(1) Contemporaneously with the completion of the Offering, the Company amended
the Credit Agreement to, among other things, extend the maturity thereof
and reduce the interest rate thereunder. See "Use of Proceeds" and
"Description of the Credit Agreement." The Credit Agreement, as amended,
continues to provide for borrowings in the maximum principal amount of
$200.0 million based upon the Company's eligible inventory and eligible
accounts receivable. See "Description of the Credit Agreement."
(2) The Company's business is highly seasonal. As a result, the Company's
borrowings under the Credit Agreement fluctuate significantly over the
course of the year. In 1996, the minimum and maximum amount of borrowings
outstanding under the Credit Agreement at any one time were $86.5 million
(in January) and $131.9 million (in June). The average borrowings
outstanding in 1996 were $109.5 million. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Seasonality."
(3) As adjusted, reflects the repayment of $93.0 million of indebtedness under
the Credit Agreement with the net proceeds of the Offering and the
repayment of indebtedness owed to the Company by the Company's sole
stockholder of $6.5 million (which represents the actual principal amount
plus accrued interest thereon of indebtedness owed by Mr. Hendricks to the
Company as of March 31, 1997). From March 31, 1997, until the Offering was
closed, Mr. Hendricks borrowed an additional $1.8 million from the
Company. Mr. Hendricks repaid all such amounts with a portion of the
Distribution. The actual amount of such repayment by Mr. Hendricks as of
the closing of this Offering was approximately $8.3 million, which
increased the amount of repayment of indebtedness under the Credit
Agreement to $94.8 million. See "Use of Proceeds" and "Certain
Transactions."
(4) Consists of mortgages, equipment and vehicle financings and notes issued
to sellers in connection with the Company's acquisitions. Includes current
maturities of $8.5 million.
(5) Does not include $4.3 million of obligations under guarantees and letters
of credit with respect to debt of the Company's sole stockholder and his
affiliates.
(6) As adjusted, reflects payment of the Distribution as if it had occurred on
March 31, 1997. See "Use of Proceeds." As adjusted also reflects the
payment of a dividend to the Company's sole stockholder in respect of 1996
federal and state income taxes of approximately $1.6 million made in April
1997 as if such payment had occurred on March 31, 1997.
18
<PAGE>
SELECTED COMBINED HISTORICAL FINANCIAL DATA
The following table presents selected combined historical financial
information of the Company, Mule-Hide, Amcraft and HREP for each of the five
years in the period ended December 31, 1996. The combined historical financial
information for the years ended December 31, 1992, 1993, 1994, 1995 and 1996
has been derived from the combined financial statements of the Company, Mule-
Hide, Amcraft and HREP for such periods, which have been audited by Ernst &
Young LLP. The summary combined historical financial information for the three
months ended March 31, 1996 and 1997 have been derived from combined financial
statements of the Company, Mule-Hide, Amcraft and HREP which have not been
audited but which in the opinion of management have been prepared on the same
basis as the audited combined financial statements included herein and reflect
all adjustments (consisting of normal and recurring adjustments) which are, in
the opinion of management, necessary for a fair statement of the results of
operations for the interim periods presented. The selected combined historical
financial information should be read in conjunction with, and is qualified in
its entirety by reference to, the information set forth under the caption
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the audited combined financial statements of the Company, Mule-
Hide, Amcraft and HREP as of December 31, 1995 and 1996, and for each of the
three years in the period ended December 31, 1996, and the notes thereto, which
appear elsewhere in this Prospectus. The results of operations for the three
months ended March 31, 1997 are not indicative of results for the full year.
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------------------------ -------------------
1992 1993 1994 1995 1996 1996 1997
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales .............. $368,271 $446,384 $513,766 $638,821 $789,103 $128,704 $162,772
Cost of sales........... 287,912 350,987 403,032 501,027 615,627 100,695 126,789
-------- -------- -------- -------- -------- -------- --------
Gross profit............ 80,359 95,397 110,734 137,794 173,476 28,009 35,983
Operating expenses:
Distribution centers... 64,380 75,249 90,481 110,859 140,300 29,106 36,656
General and
administrative........ 6,412 9,547 7,981 10,476 12,016 2,897 3,566
-------- -------- -------- -------- -------- -------- --------
Total operating
expenses............ 70,792 84,796 98,462 121,335 152,316 32,003 40,222
-------- -------- -------- -------- -------- -------- --------
Operating income (loss). 9,567 10,601 12,272 16,459 21,160 (3,994) (4,239)
Other income (expense):
Interest income........ 380 378 554 653 689 136 165
Interest expense....... (3,872) (4,522) (6,020) (9,745) (11,146) (2,572) (2,898)
-------- -------- -------- -------- -------- -------- --------
Total other income
(expense)........... (3,492) (4,144) (5,466) (9,092) (10,457) (2,436) (2,733)
-------- -------- -------- -------- -------- -------- --------
Income (loss) from
continuing operations
before provision for
income taxes........... 6,075 6,457 6,806 7,367 10,703 (6,430) (6,972)
Provision for income
taxes(1)............... 124 236 260 338 329 52 32
-------- -------- -------- -------- -------- -------- --------
Income (loss) from
continuing operations.. 5,951 6,221 6,546 7,029 10,374 (6,482) (7,004)
Discontinued
operations(2).......... (598) (2,981) -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Net income (loss)....... $ 5,353 $ 3,240 $ 6,546 $ 7,029 $ 10,374 $ (6,482) $ (7,004)
======== ======== ======== ======== ======== ======== ========
Ratio of earnings to
fixed charges(3)....... 2.0x 1.9x 1.8x 1.6x 1.7x (.9)x (.8)x
Pro forma ratio of
earnings to fixed
charges(3)............. 1.4x (.7)x
OTHER DATA:
Number of distribution
centers (as period
end)................... 95 98 109 126 157 135 161
Comparable distribution
center sales growth(4). 13.3% 18.7% 11.1% 17.3% 11.5% 8.7% 16.8%
Depreciation and
amortization........... $ 3,574 $ 4,261 $ 5,194 $ 6,808 $ 9,079 $ 2,066 $ 2,486
Capital expenditures.... $ 6,026 $ 7,077 $ 13,830 $ 19,922 $ 14,697 $ 3,512 $ 4,368
EBITDA (deficit)(5)..... $ 13,141 $ 14,862 $ 17,466 $ 23,267 $ 30,239 $ (1,928) $ (1,753)
EBITDA margin........... 3.6% 3.3% 3.4% 3.6% 3.8% NM NM
Ratio of EBITDA to net
interest expense....... 3.8x 3.6x 3.2x 2.6x 2.9x NM NM
Pro forma net cash
interest expense(6).... $ 14,132
Ratio of EBITDA to pro
forma net cash interest
expense................ 2.1x
Net cash provided by
(used in):
Operating activities... $ 5,460 $ (3,517) $ (1,210) $ (6,282) $ 4,756 $ 2,099 $ 6,793
Financing activities... 2,251 11,052 17,181 32,317 21,825 4,788 (3,828)
Investing activities... (7,563) (7,319) (15,366) (25,048) (26,694) (9,361) (4,677)
BALANCE SHEET DATA (AT
PERIOD END)(7):
Working capital......... $ 40,230 $ 51,358 $ 66,512 $ 90,179 $111,989 $ 84,928 $ 99,137
Total assets............ 113,294 130,305 158,095 205,316 251,948 240,405 295,958
Long-term debt, less
current portion........ 50,277 62,040 80,799 113,397 139,664 118,526 137,233
Stockholder's equity(8). 16,323 18,165 22,027 25,524 31,960 19,013 24,899
</TABLE>
NM--Not Meaningful
19
<PAGE>
- --------
(1) Consists of certain state and local income taxes. As subchapter S
corporations under the Code, ABC, Mule-Hide, Amcraft and HREP have not
been subject to U.S. federal income taxes or most state income taxes.
Instead, such taxes have been paid by Mr. Hendricks. The Company has in
the past made periodic distributions to Mr. Hendricks in respect of such
tax liabilities. From and after the date of the Indenture, such
distributions will be made in accordance with the terms of the Tax
Allocation Agreement (as defined herein). See "Certain Transactions."
(2) In 1993, Amcraft made a decision to discontinue its manufacturing
operations, which primarily produced vinyl windows. The results of
operations of Amcraft's manufacturing segment have been classified as
discontinued operations for the years ended December 31, 1992 and 1993.
(3) For purposes of calculating this ratio, "earnings" represents earnings
(loss) from continuing operations before income taxes plus fixed charges.
"Fixed charges" consists of interest expense, amortization of debt
issuance costs and the portion of rent on operating leases considered to
represent interest expense (approximated at one-third of rent expense).
(4) "Comparable distribution center sales growth" is defined as the percentage
change in distribution center sales as compared to sales for the same
distribution centers in the prior year. For purposes of this calculation,
only distribution centers that were open and operated by ABC for at least
one year as of the beginning of the applicable period are included.
(5) "EBITDA" is defined as operating income plus depreciation and
amortization. EBITDA is not a measure of performance under GAAP.
Management believes that EBITDA, as presented, represents a useful measure
of assessing the performance of the Company's ongoing operating activities
because the Credit Agreement uses EBITDA as a measure of compliance with
one of its financial covenants, because the Company utilizes EBITDA in
evaluating acquisition candidates and because EBITDA reflects the earnings
trends of the Company without the impact of the amortization of goodwill
acquired in connection with the Company's acquisitions or the interest
expense relating to the financing of such acquisitions. The Company
understands that, while EBITDA is frequently used by securities analysts
in the evaluation of companies, EBITDA, as used herein, is not necessarily
comparable to other similarly titled captions of other companies due to
potential inconsistencies in the method of calculation. EBITDA is not
intended as an alternative to cash flow from operating activities as a
measure of liquidity, an alternative to net income as an indicator of the
Company's operating performance or an alternative to any other measure of
performance in conformity with generally accepted accounting principles.
(6) Consists of interest of $10.625 million relating to the Notes, $1.27
million relating to average outstanding borrowings under the Credit
Agreement of $17.9 million, and $2.30 million relating to other
borrowings, less $0.06 million in interest income, all after giving effect
to the Offering and the use of the net proceeds (determined as of December
31, 1996 balances) therefrom as described under "Use of Proceeds," as if
such transactions were consummated on January 1, 1996. The figure excludes
$0.35 million of non-cash interest expense associated with debt financing
costs.
(7) The Company's business is highly seasonal. As a result, the Company's
borrowings under the Credit Agreement fluctuate significantly over the
course of the year. In 1996, the minimum and maximum amount of borrowings
outstanding under the Credit Agreement at any one time were $86.5 million
(in January) and $131.9 million (in June). The average borrowings
outstanding in 1996 were $109.5 million. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Seasonality."
(8) As adjusted, reflects payment of the Distribution as if it had occurred on
March 31, 1997. See "Use of Proceeds." As adjusted also reflects the
payment of a dividend to the Company's sole stockholder in respect of 1996
federal and state income taxes of approximately $1.6 million made in April
1997 as if such payment had occurred on March 31, 1997.
20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
The Company. ABC is the largest wholesale distributor of roofing products
and one of the largest wholesale distributors of vinyl siding materials in the
United States, operating 161 distribution centers located in 37 states as of
March 31, 1997. Since January 1, 1992, the Company has opened 33 distribution
centers and acquired an additional 34 distribution centers (net of
consolidations) in connection with its acquisition program. For the year ended
December 31, 1996, the Company generated $30.2 million of EBITDA from net
sales of $789.1 million. See note (5) to "Selected Combined Historical
Financial Data."
Recent/Proposed Acquisitions. The Company completed 13 acquisitions in the
year ended December 31, 1996, which resulted in the addition of 17
distribution centers (net of consolidations). The results of operations
reported herein do not include the results of operations of such acquired
businesses from January 1, 1996 to the various dates of their acquisitions.
The Company completed the Viking Acquisition on May 19, 1997. The purchase
price in the Viking Acquisition was $25.8 million, which is net of
approximately $3.9 million of assumed liabilities. The purchase price was paid
with a combination of cash and a $3.0 million seller note payable over two
years. Viking was a regional distributor of roofing, siding and window
products with 12 distribution centers located in the northeastern portion of
the United States and reported pre-tax income of $1.4 million on net sales of
$84.1 million for its fiscal year ended February 28, 1997. In connection with
the Viking Acquisition, the Company entered into a purchase agreement with VAP
pursuant to which the Company agreed to purchase a minimum of $98.2 million of
VAP products for sale in the Company's distribution centers over the next five
years.
Effects of Acquisitions. The Company has historically selected acquisition
candidates based, in part, on the opportunity to improve their operating
results. The Company seeks to leverage its purchasing power, broad product
selection and management expertise to improve the financial performance of its
acquired distribution centers while maintaining the acquired customer bases.
Results of operations reported herein for each period only include results of
operations for acquired businesses from their respective dates of acquisition.
Full year operating results, therefore, could differ materially from that
presented. In addition, there has typically been a period following each
acquisition in which the acquired business does not perform at the same level
as the Company's existing distribution centers. As a result of the Company's
ongoing acquisition program, its results of operations have historically
reflected, and are likely to continue to reflect, the periodic inclusion of
under-performing businesses.
The Company has accounted for its acquisitions, using the purchase method of
accounting. As a result, these acquisitions have affected and will
prospectively affect the Company's results of operations in certain
significant respects. The aggregate acquisition costs are allocated to the
tangible and intangible assets acquired and liabilities assumed by the Company
based upon their respective fair values as of the acquisition date. The cost
of such assets are then amortized according to the classes of assets acquired
and the useful lives thereof. The Company has begun to acquire larger
distributors with better operating results, necessitating payment of purchase
prices in excess of the fair value of net assets acquired resulting in
goodwill, which is amortized over a period of 25 years. Similar future
acquisitions may result in additional amortization expense. In addition, due
to the effects of the increased borrowing to finance future acquisitions, the
Company's interest expense may increase in future periods.
Provision for Income Taxes. ABC, Mule-Hide, Amcraft and HREP have been
operated as subchapter S corporations under the Code. As a result, these
entities do not incur federal and state income taxes (except with respect to
certain states) and, accordingly, no discussion of income taxes is included in
"--Results of Operations" below. Federal and state income taxes (except with
respect to certain states) on the income of such corporations are incurred and
paid directly by Mr. Hendricks. Such corporations have historically made
periodic
21
<PAGE>
distributions to Mr. Hendricks in respect of such tax liabilities. In
connection with the Offering, the Company entered into the Tax Allocation
Agreement with Mr. Hendricks pursuant to which he will receive distributions
from the Company with respect to taxes associated with the Company's income.
See "Certain Transactions."
RESULTS OF OPERATIONS
The following table summarizes the Company's historical results of
operations as a percentage of net sales for each of the three years ended
December 31, 1996:
<TABLE>
<CAPTION>
THREE
MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------- -------------
1994 1995 1996 1996 1997
------- ------- ------- ----- -----
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Net sales...................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales.................. 78.4 78.4 78.0 78.2 77.9
------- ------- ------- ----- -----
Gross profit................... 21.6 21.6 22.0 21.8 22.1
Operating expenses:
Distribution centers......... 17.6 17.4 17.8 22.6 22.5
General and administrative... 1.6 1.6 1.5 2.3 2.2
------- ------- ------- ----- -----
Total operating expense.... 19.2 19.0 19.3 24.9 24.7
------- ------- ------- ----- -----
Operating income (loss)........ 2.4% 2.6% 2.7% (3.1%) (2.6%)
======= ======= ======= ===== =====
</TABLE>
COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 1997 TO THE THREE MONTHS ENDED
MARCH 31, 1996
The Company's results of operations are affected by the seasonal nature of
the roofing and siding business with the quarter ended March 31 typically
resulting in a loss. See "Seasonality."
Net sales for the three months ended March 31, 1997 increased by $34.1
million, or 26.5%, to $162.8 million from $128.7 million for the three months
ended March 31, 1996. Components of the change in net sales are as follows:
<TABLE>
<CAPTION>
%
DISTRIBUTION CENTERS 1996 1997 INCREASE INCREASE
- -------------------- ------ ------ -------- --------
(IN MILLIONS)
<S> <C> <C> <C> <C>
In operation prior to January 1, 1994........... $112.4 $128.7 $16.3 14.5%
Acquired in 1994................................ 2.2 2.2 -- --
Opened by the Company in 1994................... 4.8 6.2 1.4 29.2
Acquired in 1995................................ 3.9 6.4 2.5 64.1
Opened by the Company in 1995................... 3.2 4.2 1.0 31.3
Acquired in 1996................................ 1.4 9.8 8.4 600.0
Opened by the Company in 1996................... .8 4.4 3.6 450.0
Opened by the Company in 1997................... -- .9 .9 --
------ ------ ----- -----
Total....................................... $128.7 $162.8 $34.1 26.5%
====== ====== ===== =====
</TABLE>
Increases in comparable distribution center sales are principally due to
increases in volumes as opposed to price increases. Such volume increases are
in part due to introduction of new products such as commercial roofing and
siding into certain distribution centers.
Cost of sales for the three months ended March 31, 1997 increased by $26.1
million, or 25.9%, to $126.8 million from $100.7 million for the three months
ended March 31, 1996, primarily as a result of costs associated with increased
sales. Cost of sales decreased as a percentage of net sales over the same
period to 77.9% in 1997 from 78.2% in 1996, primarily due to increased sales
of higher margin products such as vinyl siding and windows.
22
<PAGE>
Distribution center operating income (loss), which consists of net sales
less cost of sales and operating expenses for the distribution centers, is a
key measure that the Company uses to evaluate individual distribution center
performance. Distribution center operating income increased by $0.4 million to
a loss of $0.7 million in 1997 from a loss of $1.1 million in 1996, primarily
due to better weather conditions in early 1997. Components of distribution
center operating income (loss) and the change therein are as follows:
<TABLE>
<CAPTION>
DISTRIBUTION CENTERS 1996 1997 CHANGE
- -------------------- ----- ----- ------
(IN MILLIONS)
<S> <C> <C> <C>
In operation prior to January 1, 1994...................... $ 0.3 $ 0.9 0.6
Acquired in 1994........................................... (0.3) (0.3) --
Opened by the Company in 1994.............................. (0.3) (0.3) --
Acquired in 1995........................................... (0.3) (0.2) 0.1
Opened by the Company in 1995.............................. (0.2) (0.2) --
Acquired in 1996........................................... (0.1) (0.2) (0.1)
Opened by the Company in 1996.............................. (0.2) (0.4) (0.2)
Opened by the Company in 1997.............................. -- -- --
Acquired in 1997........................................... -- -- --
----- ----- ----
Total.................................................. $(1.1) $(0.7) 0.4
===== ===== ====
</TABLE>
General and administrative expenses increased $0.7 million to $3.6 million
in 1997 from $2.9 million in 1996 while decreasing as a percentage of net
sales to 2.2% in 1997 compared to 2.3% in 1996.
Interest expense for the three months ended March 31, 1997 increased by $0.3
million, or 12.7%, to $2.9 million from $2.6 million for the three months
ended March 31, 1996, as a result of greater borrowings associated with
increased working capital needs due to the Company's growth, partially offset
by a decrease in the interest rate on such borrowings.
COMPARISON OF THE YEAR ENDED DECEMBER 31, 1996 TO THE YEAR ENDED DECEMBER 31,
1995
Net sales for the year ended December 31, 1996 increased by $150.3 million,
or 23.5%, to $789.1 million from $638.8 million for the year ended December
31, 1995. Components of the change in net sales are as follows:
<TABLE>
<CAPTION>
%
DISTRIBUTION CENTERS 1995 1996 INCREASE INCREASE
- -------------------- ------ ------ -------- --------
(IN MILLIONS)
<S> <C> <C> <C> <C>
In operation prior to January 1, 1994........... $587.2 $649.5 $ 62.3 10.6%
Acquired in 1994................................ 13.1 16.0 2.9 22.1
Opened by the Company in 1994................... 23.4 30.0 6.6 28.2
Acquired in 1995................................ 9.0 31.8 22.8 253.3
Opened by the Company in 1995................... 6.1 18.1 12.0 196.7
Acquired in 1996................................ -- 33.1 33.1 --
Opened by the Company in 1996................... -- 10.6 10.6 --
------ ------ ------ -----
Total......................................... $638.8 $789.1 $150.3 23.5%
====== ====== ====== =====
</TABLE>
Increases in comparable distribution center sales were principally due to
increases in volume as opposed to price increases. Such volume increases were,
in part, due to the introduction of new products, such as commercial roofing
and siding, into certain distribution centers.
Cost of sales for the year ended December 31, 1996 increased by $114.6
million, or 22.9%, to $615.6 million from $501.0 million for the year ended
December 31, 1995, primarily as a result of costs associated with
23
<PAGE>
increased sales. Cost of sales decreased as a percentage of net sales over the
same period to 78.0% in 1996 from 78.4% in 1995, primarily due to increased
sales of higher margin products such as vinyl siding and windows.
Distribution center operating income, which consists of net sales less cost
of sales and operating expenses for the distribution centers, is a key measure
that the Company uses to evaluate individual distribution center performance.
Distribution center operating income increased $6.3 million to $33.2 million
in 1996 from $26.9 million in 1995. Components of distribution center
operating income (loss) and the change therein are as follows:
<TABLE>
<CAPTION>
DISTRIBUTION CENTERS 1995 1996 CHANGE
- -------------------- ----- ----- ------
(IN MILLIONS)
<S> <C> <C> <C>
In operation prior to January 1, 1994...................... $29.2 $33.6 $4.4
Acquired in 1994........................................... 0.0 0.1 0.1
Opened by the Company in 1994.............................. (0.9) 0.2 1.1
Acquired in 1995........................................... (0.7) 0.8 1.5
Opened by the Company in 1995.............................. (0.7) (0.3) 0.4
Acquired in 1996........................................... -- 0.1 0.1
Opened by the Company in 1996.............................. -- (1.3) (1.3)
----- ----- ----
Total.................................................... $26.9 $33.2 $6.3
===== ===== ====
</TABLE>
The tables set forth above illustrate that the Company's commitment to
growth has a significant impact on operating income. Although distribution
centers in operation prior to January 1, 1994 accounted for only 82.3% of net
sales in 1996, such distribution centers accounted for 101.2% of distribution
center operating income.
General and administrative expenses increased $1.5 million to $12.0 million
in 1996 from $10.5 million in 1995 while decreasing as a percentage of net
sales to 1.5% in 1996 compared to 1.6% in 1995. Major components of the
increased expenses were salaries and benefits and a full year of depreciation
on the Company's new headquarters building as compared to a partial year of
depreciation in 1995.
Interest expense for the year ended December 31, 1996 increased by $1.4
million, or 14.4%, to $11.1 million from $9.7 million for the year ended
December 31, 1995, as a result of greater borrowings associated with increased
working capital needs due to the Company's growth, partially offset by a
decrease in the interest rate on such borrowings.
COMPARISON OF THE YEAR ENDED DECEMBER 31, 1995 TO THE YEAR ENDED DECEMBER 31,
1994
Net sales for the year ended December 31, 1995 increased by $125.0 million,
or 24.3%, to $638.8 million from $513.8 million for the year ended December
31, 1994. Components of the change in net sales are as follows:
<TABLE>
<CAPTION>
DISTRIBUTION CENTERS 1994 1995 INCREASE % INCREASE
-------------------- ------ ------ -------- ----------
(IN MILLIONS)
<S> <C> <C> <C> <C>
In operation prior to January 1, 1994......... $500.5 $587.2 $ 86.7 17.3%
Acquired in 1994.............................. 2.9 13.1 10.2 351.7
Opened by the Company in 1994................. 10.4 23.4 13.0 125.0
Acquired in 1995.............................. -- 9.0 9.0 --
Opened by the Company in 1995................. -- 6.1 6.1 --
------ ------ ------ -----
Total....................................... $513.8 $638.8 $125.0 24.3%
====== ====== ====== =====
</TABLE>
Cost of sales for the year ended December 31, 1995 increased by $98.0
million, or 24.3%, to $501.0 million from $403.0 million for the year ended
December 31, 1994, primarily as a result of costs associated with increased
sales. Cost of sales remained constant as a percentage of net sales over the
same period at 78.4%.
24
<PAGE>
Distribution center operating income increased $6.7 million to $26.9 million
in 1995 from $20.2 million in 1994. Components of distribution center
operating income (loss) and the change therein are as follows:
<TABLE>
<CAPTION>
DISTRIBUTION CENTERS 1994 1995 CHANGE
-------------------- ----- ----- ------
(IN MILLIONS)
<S> <C> <C> <C>
In operation prior to January 1, 1994...................... $21.4 $29.2 $7.8
Acquired in 1994........................................... (0.1) 0.0 0.1
Opened by the Company in 1994.............................. (1.1) (0.9) 0.2
Acquired in 1995........................................... -- (0.7) (0.7)
Opened by the Company in 1995.............................. -- (0.7) (0.7)
----- ----- ----
Total.................................................... $20.2 $26.9 $6.7
===== ===== ====
</TABLE>
Increases in comparable distribution center sales were principally due to
increases in volume as opposed to price increases. Such volume increases were,
in part, due to the introduction of new products, such as commercial roofing
and siding, into certain distribution centers.
Distribution centers in operation prior to January 1, 1994 accounted for
91.9% of net sales and 108.6% of distribution center operating income for
1995.
General and administrative expenses increased $2.5 million to $10.5 million
in 1995 from $8.0 million in 1994 and remained constant at 1.6% of net sales.
Major components of the increased expenses were salaries and benefits and
increased depreciation on the new headquarters facility which opened in mid-
1995.
Interest expense for the year ended December 31, 1995 increased by $3.7
million, or 61.7%, to $9.7 million from $6.0 million for the year ended
December 31, 1994, primarily as a result of greater borrowings associated with
increased working capital needs due to the Company's growth, as well as
increased interest rates.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows from Operating Activities. Net cash provided by operations was
$2.1 million and $6.8 million for the three months ended March 31, 1996 and
1997, respectively. The increase was due primarily to changes in working
capital caused by the timing of payments received or made for trade
receivables and payables and inventories. Net cash provided by (used in)
operations was $4.8 million for the year ended December 31, 1996 compared to
$(6.3) million for the year ended December 31, 1995. The increase in 1996
occurred primarily as a result of increased earnings of $3.3 million,
increased depreciation and amortization of $2.3 million and the effect of
changes in operating assets and liabilities aggregating $5.1 million. Net cash
used in operations was $(1.2) million for the year ended December 31, 1994
compared to $(6.3) million for the year ended December 31, 1995. The change
from 1994 to 1995 occurred primarily as a result of the effect of operating
assets and liabilities aggregating $(7.5) million offset by increased net
income of $0.5 million and increased depreciation and amortization of $1.6
million.
Cash Flows from Investing Activities. Net cash (used in) investing
activities was $(9.4) million and $(4.7) million for the three months ended
March 31, 1996 and 1997, respectively. The smaller use of cash was due mainly
to fewer acquisitions in the first quarter of 1997 as compared to 1996. Net
cash provided by (used in) investing activities was $(15.4) million, $(25.0)
million and $(26.7) million for the years ended December 31, 1994, 1995 and
1996, respectively. The Company's investing activities consist primarily of
capital expenditures and, to a lesser extent, costs associated with the
acquisition of building products distributors. Capital expenditures were $13.8
million, $19.9 million and $14.7 million in the fiscal years ended December
31, 1994, 1995 and 1996, respectively. Capital expenditures in 1994 and 1995
included $3.5 million and $3.5 million, respectively, of costs associated with
purchasing and improving the Company's corporate headquarters building.
Cash Flows from Financing Activities. Net cash provided by (used in)
financing activities was $4.8 million and $(3.8) million for the three months
ended March 31, 1996 and 1997, respectively. The greater use of cash in the
first quarter of 1997 as compared to 1996 was due to fewer borrowings on the
line of credit, payments on other notes payable, and net advances to the sole
stockholder. Net cash provided by financing activities was $17.2
25
<PAGE>
million, $32.3 million and $21.8 million for the years ended December 31,
1994, 1995 and 1996, respectively. The Company's financing activities consist
primarily of the borrowings incurred in connection with the growth of its
existing distribution centers as well as acquisition of building products
distributors and, to a lesser extent, distributions to the Company's sole
stockholder in respect of tax liabilities related to the Company.
Liquidity. The Company's principal sources of funds following the Offering
are anticipated to be cash flows from operating activities and borrowings
under the Credit Agreement. The Company believes that these funds will provide
the Company with sufficient liquidity and capital resources for the Company to
meet its financial obligations, including the payment of principal and
interest on the Notes, as well as to provide funds for the Company's working
capital, capital expenditures and other needs for the foreseeable future. No
assurance can be given, however, that this will be the case. The Company's
future operating performance and ability to service or refinance the Notes and
to repay, extend or refinance the Credit Agreement will be subject to future
economic conditions and to financial, business and other factors, many of
which are beyond the Company's control. See "Risk Factors--Substantial
Leverage."
In connection with certain of the Company's acquisitions, the Company's sole
stockholder or his affiliates have purchased the real estate of the acquired
businesses, which the Company has then leased from Mr. Hendricks or his
affiliates. In addition, certain of the distribution centers opened by the
Company are located in facilities purchased by and leased from Mr. Hendricks
or his affiliates. As of December 31, 1996, the Company leased 67 of its
distribution centers from Mr. Hendricks or his affiliates. These real estate
purchases have historically been financed with a combination of bank financing
and equity, and a portion of the equity has sometimes been funded by Mr.
Hendricks with borrowings from the Company. Interest is charged on such loans
at a rate comparable to the rate the Company pays on its bank borrowings. The
maximum amount of such borrowings at any time during the three years ended
December 31, 1996, occurred in October 1994 and aggregated $7.3 million. The
aggregate amount of such borrowings outstanding as of April 30, 1997 was
approximately $8.3 million, which Mr. Hendricks repaid in its entirety with a
portion of the proceeds of the Distribution. The Company and Mr. Hendricks
currently intend to continue to acquire properties for the Company's occupancy
using such method of financing. The Indenture and the Credit Agreement each
permit the Company to lend additional amounts to Mr. Hendricks in connection
with such transactions in the future. See "Use of Proceeds," "Certain
Transactions" and "Description of the Notes--Certain Covenants--Restricted
Payments."
In the event of a Change of Control, the Company will be required to make an
offer for cash to repurchase the Notes at 101.0% of the principal amount
thereof, plus accrued and unpaid interest thereon and Liquidated Damages, if
any, to the repurchase date. Certain events involving a Change of Control may
result in an event of default under the Credit Agreement or other indebtedness
of the Company that may be incurred in the future. Moreover, the exercise by
the holders of the Notes of their right to require the Company to repurchase
the Notes may cause an event of default under the Credit Agreement or such
other indebtedness, even if the Change of Control does not. There can be no
assurance that the Company will have the financial resources necessary to
repurchase the Notes upon a Change of Control. See "Risk Factors--Change of
Control" and "Description of the Notes--Repurchase at the Option of Holders--
Change of Control."
SEASONALITY
Because of cold weather conditions in many of the markets in which the
Company does business and the seasonal nature of the roofing and siding
business generally, the Company's revenues vary substantially throughout the
year, with its lowest revenues typically occurring in the months of December
through February.
26
<PAGE>
The following table sets forth selected quarterly combined financial
information. This information is derived from unaudited combined financial
statements of the Company and includes, in the opinion of management, all
normal and recurring adjustments that management considers necessary for a
fair statement of the results for such periods. The operating results for any
quarter are not necessarily indicative of results for any future period.
<TABLE>
<CAPTION>
QUARTER ENDED
-------------------------------------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31,
1995 1995 1995 1995 1996 1996 1996 1996 1997
--------- -------- ------------- ------------ --------- -------- ------------- ------------ ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT
DATA:
Net Sales......... $109,770 $169,913 $188,489 $170,649 $128,704 $212,959 $240,327 $207,113 $162,772
Costs of sales.... 86,079 133,202 148,508 133,238 100,695 166,845 187,432 160,655 126,789
-------- -------- -------- -------- -------- -------- -------- -------- --------
Gross profit...... 23,691 36,711 39,981 37,411 28,009 46,114 52,895 446,458 35,983
OPERATING
EXPENSES:
Distribution
centers.......... 23,299 27,775 30,271 29,514 29,106 35,780 38,647 36,767 36,656
General and
administrative... 2,230 3,023 2,301 2,922 2,897 3,586 2,819 2,714 3,566
-------- -------- -------- -------- -------- -------- -------- -------- --------
Total operating
expenses........ 25,529 30,798 32,572 32,436 32,003 39,366 41,466 39,481 40,222
-------- -------- -------- -------- -------- -------- -------- -------- --------
Operating income
(loss)........... $ (1,838) $ 5,913 $ 7,409 $ 4,975 $ (3,994) $ 6,748 $ 11,429 $ 6,977 $ (4,239)
======== ======== ======== ======== ======== ======== ======== ======== ========
OTHER DATA:
Inventory......... $ 99,283 $ 96,446 $ 82,249 $ 79,297 $112,961 $112,459 $114,644 $ 95,778 $137,147
Amounts
receivable....... 56,785 80,734 87,804 73,133 73,146 102,171 109,388 92,360 93,075
Accounts payable.. 89,563 86,614 88,290 49,739 88,912 109,273 112,339 57,700 109,658
Long-term debt,
less current
portion.......... 78,959 109,442 97,031 113,394 118,526 132,583 129,912 139,664 137,233
</TABLE>
INFLATION
The Company believes that inflation did not have a material impact on its
results of operations for the three years ended December 31, 1996 or the three
months ended March 31, 1997.
27
<PAGE>
BUSINESS
OVERVIEW
ABC is the largest wholesale distributor of roofing products and one of the
largest wholesale distributors of vinyl siding materials in the United States,
operating 161 distribution centers located in 37 states as of March 31, 1997.
ABC provides its customers with access to what it believes to be the largest
selection of roofing and vinyl siding materials in the industry and with a
knowledgeable staff capable of providing product specific information, as well
as credit services and marketing support. For the year ended December 31,
1996, the Company generated $30.2 million of EBITDA from net sales of $789.1
million. See Note (5) to "Selected Combined Historical Financial Data."
The products distributed by the Company consist exclusively of roofing and
siding materials, windows and related tools and accessories for residential
and, to a lesser extent, commercial applications. The Company markets these
products on a wholesale basis primarily to small and medium-sized roofing and
siding contractors that are involved in the replacement segment of the
construction industry. ABC also distributes products to builders and
subcontractors involved in new construction projects. According to the
National Roofing Contractors Association, approximately 77.0% of the 1996 U.S.
roofing market consisted of replacement or remodeling projects, and the
Company believes that replacement and remodeling purchases represent a greater
proportion of its revenue than that of the industry as a whole. The Company
believes that its focus on roofing and vinyl siding products and in-depth
knowledge of such products, combined with its long-term approach to customer
relationships, allow it to distinguish itself from mass-merchandiser building
supply companies. At the same time, the Company believes that its size and
market share allow it to negotiate volume discounts and other favorable terms
with manufacturers and maintain a broader product selection than smaller local
and regional building supply distributors.
ABC was founded in 1982 by its President and Chief Executive Officer,
Kenneth A. Hendricks, who, as the owner of a successful roofing business, saw
a market for the Company's services. Since its inception, ABC has experienced
significant growth. The Company's net sales and EBITDA have increased from
$368.3 million and $13.1 million, respectively, for the year ended December
31, 1992 to $789.1 million and $30.2 million, respectively, for the year ended
December 31, 1996, representing compound annual growth rates of 21.0% and
23.2%, respectively. See Note (5) to "Selected Combined Historical Financial
Data."In addition, comparable distribution center sales have grown at an
average annual rate of 14.4% over the same period. The Company is managed by a
team of experienced roofing and siding distribution professionals, including
its seven regional managers, who have an average of 20 years of experience in
the exterior building products supply industry.
BUSINESS STRATEGY
The Company's business objective is to strengthen its position as the
largest wholesale distributor of roofing and vinyl siding products in the
United States. To support this objective, the Company has adopted a business
strategy that includes the following key components:
. Offer a Broad Product Selection and Superior Customer Service: ABC
offers what it believes to be the largest selection of roofing and vinyl
siding products in the industry. The Company believes that it offers
more grades, styles and colors of roofing and vinyl siding products in
stock at multiple price points than its competitors. ABC provides its
customers with prompt product delivery as well as product specific
information, manufacturer-sponsored training, credit services and
marketing support. By providing high quality products, support services
and credit programs, ABC effectively distinguishes itself from smaller
distributors and mass-merchandisers. The Company believes its broad
roofing and vinyl siding product offerings and superior customer service
enhance its customers' ability to compete in their markets and to grow
their businesses, thereby creating customer loyalty and enhancing ABC's
growth potential.
. Expand Distribution Center Product Mix: The Company currently operates
distribution centers in 37 states, and has a market presence in 44 of
the 50 most populous metropolitan areas in the United States. Although
the Company has developed a national network of distribution centers,
not all of its locations
28
<PAGE>
offer the complete ABC product line. The Company has recently increased
its focus on vinyl siding and window products, but currently distributes
vinyl siding and windows in only 61.0% and 39.0%, respectively, of its
distribution centers. By offering its full product line in all of its
locations, the Company believes it can achieve considerable sales and
EBITDA growth.
. Leverage Economies of Scale: The Company's size allows it to obtain
volume discounts and other favorable terms on many of its primary
products and maintain a broader selection within its product categories
than most other distributors and mass-merchandisers. The Company's size
and geographic dispersion also enable it to shift resources among its
distribution centers to offset the effects of regional product shortages
or to quickly meet market demand. By leveraging its geographic coverage
and economies of scale, the Company is able to set its prices
competitively while maintaining favorable operating results.
. Pursue Selective Acquisitions: Since January 1, 1992, the Company has
completed 24 acquisitions, acquiring 34 local distribution centers (net
of consolidations). The Company has historically selected acquisition
candidates based, in part, on the opportunity to improve their operating
results. The Company seeks to leverage its purchasing power, broad
product selection and management expertise to improve the financial
performance of its acquired distribution centers while maintaining the
acquired customer bases. Recently, the Company has considered acquiring
larger distributors with better operating results than its prior
acquisition candidates. On May 19, 1997, the Company acquired Viking, a
regional building supply distributor with 12 locations in the
northeastern United States. See "Recent Transactions--The Viking
Acquisition." The Company believes that the ongoing consolidation in the
building materials distribution industry will continue to provide
suitable acquisition candidates in the future.
. Utilize Performance Related Incentives: The Company maintains incentive
programs designed to reward its employees for achieving positive
operating results. Each of the Company's non-union employees has the
opportunity to earn a substantial bonus based on the profitability of
such employee's individual operating unit. These targeted incentive
programs encourage the Company's distribution center managers to make
independent, local market-driven decisions regarding product mix and
daily operations. The Company believes its incentive programs have
contributed significantly to its profitability and have helped it to
achieve an average annual growth rate of comparable distribution center
sales of 14.4% over the past five years.
INDUSTRY OVERVIEW
The roofing and vinyl siding products industry contains three primary
distribution channels: manufacturers' direct sales; mass merchandisers, such as
Home Depot; and wholesale distributors, such as the Company. Mass merchandisers
primarily sell products to homeowners and small contractors, tend to stock
items across a multitude of building supply categories and stock a relatively
narrow selection of non-premium grade roofing and siding products. Roofing and
siding manufacturers sell a small percentage of products to a limited number of
large national contractors. Typically, manufacturers do not sell products
directly to retail customers or small contractors. Since 1983, the Company has
purchased all or a significant portion of the wholesale distribution capacities
of the following roofing and siding manufacturers: GAF (13 facilities),
Nichols-Homeshield (7 facilities), GS Roofing Products Company, Inc. (13
facilities) and Owens-Corning Fiberglass Corporation (6 facilities).
While ABC operates nationwide, the wholesale roofing and siding distribution
channel is characterized by a large number of small local and regional
participants. As a result of their small size, many of these distributors lack
the purchasing power of a larger entity, the resources to offer multiple brands
and broad product lines or the inventory control and credit management systems
necessary to operate efficiently in multiple branches. The Company believes
that the competitive environment faced by small distributors has prompted the
trend toward industry consolidation and that such consolidation offers
significant opportunities for ABC.
29
<PAGE>
PRODUCTS
The products distributed by the Company consist primarily of roofing
products (both residential and commercial), siding products, windows, and
related tools, equipment and accessories. ABC provides its customers with what
it believes to be the largest selection of roofing and vinyl siding materials
in the industry. The Company believes that it offers more grades, styles and
colors of roofing and vinyl siding materials in stock at multiple price points
than its competitors. For example, the Company carries shingles from 12
manufacturers, in 5 different grades, over 170 different styles and over 400
different colors. The products that the Company distributes can be classified
in the following four categories:
Residential roofing products and accessories. The Company distributes a
broad selection of shingles, felt, roof tile, wood shakes, flashings, vents
and other roofing products to residential roofing contractors. Principal
brands of residential roofing products include GAF(R), GS(R), CertainTeed(R),
Globe(R), Elk(R) and Owens-Corning(R). The Company generated $267.7 million,
$318.3 million and $391.8 million of revenue from the sale of residential
roofing products and accessories in the years ended December 31, 1994, 1995
and 1996, respectively.
Commercial roofing products and accessories. The Company distributes a broad
selection of modified bitumen, EPDM, hypalon, other rolled roofing, felts,
coatings, asphalt, flashings, vents, fasteners, roof insulation and other
roofing products to commercial roofing contractors. Principal brands of
commercial roofing products include GAF(R), GS(R), US Intec, Celotex(R),
Firestone(R), Versico, Trumbull Asphalt, Atlas(R), Schuller International and
Mule-Hide(R). Mule-Hide primarily sells its private label roofing systems
through ABC's distribution centers. In addition, Mule-Hide sells its products
directly to commercial roofing contractors and other distributors in markets
not serviced by ABC. The Company generated $141.3 million, $181.5 million and
$214.2 million of revenue from the sale of commercial roofing products and
accessories in the years ended December 31, 1994, 1995 and 1996, respectively.
Siding products and accessories. The Company distributes a broad selection
of siding products to siding contractors. The Company's siding products
consist primarily of vinyl siding, soffits and accessories and, to a lesser
extent, aluminum and wood siding. Principal vinyl siding brands include
Alcoa(R), Wolverine(R) and Amcraft(R). The Company generated $57.9 million,
$70.6 million and $90.5 million of revenue from the sale of siding products
and accessories in the years ended December 31, 1994, 1995 and 1996,
respectively.
Windows and accessories. The Company distributes a broad selection of window
products and accessories to residential window installers, including vinyl,
wood and aluminum window frames and single, double and triple glazed windows.
Principal window brands include CertainTeed(R), Simonton Windows(R) and
Weather-Shield(R). In addition, the Company has begun distributing window
products made by VAP. The Company generated $21.3 million, $35.4 million and
$53.6 million of revenue from the sale of window products and accessories in
the years ended December 31, 1994, 1995 and 1996, respectively.
Other building products and accessories. The Company distributes a variety
of roofing and siding products to complement its primary product lines. Such
products include gutters, sheet metal, roofing and siding equipment, tools and
other related accessories. Most of these products are featured in the
Company's catalog. The Company generated $25.6 million, $33.0 million and
$39.0 million of revenue from the sale of these products in the years ended
December 31, 1994, 1995 and 1996, respectively.
The following table sets forth certain information regarding the Company's
net sales by product for year ended December 31, 1994, 1995 and 1996:
<TABLE>
<CAPTION>
% GROWTH OVER
% OF TOTAL NET SALES PRIOR YEAR
---------------------- --------------
PRODUCT CATEGORIES 1994 1995 1996 1995 1996
- ------------------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Residential roofing..................... 52.1% 49.8% 49.7% 18.9% 23.1%
Commercial roofing...................... 27.5 28.4 27.1 28.6 18.0
Siding.................................. 11.3 11.1 11.5 21.8 28.1
Windows................................. 4.1 5.5 6.8 66.3 51.3
Other................................... 5.0 5.2 4.9 28.7 18.3
------ ------ ------ ------ ------
Total for all categories.............. 100.0% 100.0% 100.0% 24.3% 23.5%
====== ====== ====== ====== ======
</TABLE>
30
<PAGE>
TARGET MARKET
The Company distributes roofing, siding, windows and related products on a
wholesale basis primarily to small and medium-sized roofing and siding
contractors that are involved in the replacement segment of the construction
industry. ABC also distributes products to builders and subcontractors
involved in new construction projects. According to the National Roofing
Contractors Association, approximately 77.0% of the 1996 U.S. roofing market
consisted of replacement or remodeling projects, and the Company believes that
replacement and remodeling purchases represent a greater proportion of its
revenue than that of the industry as a whole. By focusing on the replacement
and remodeling sector of the industry, the Company believes it is able to
distribute its products to the largest segment of the roofing and siding
market and to reduce the impact of the cyclical nature of the new construction
segment on its operations.
ABC offers what it believes to be the largest selection of roofing and vinyl
siding products in the industry. The Company believes that it offers more
grades, styles and colors of roofing and vinyl siding products in stock at
multiple price points than its competitors. ABC provides its customers with
prompt product delivery as well as product specific information, manufacturer-
sponsored training, credit services and marketing support. By providing high
quality products, support services and credit programs, ABC effectively
distinguishes itself from smaller distributors and mass-merchandisers. The
Company believes its broad roofing and vinyl siding product offerings and
superior customer service enhance its customers' ability to compete in their
markets and assist in growing their businesses, thereby creating customer
loyalty and enhancing ABC's growth potential.
The Company provides a number of services designed to enhance customer
relationships. Such services include: flexible delivery schedules (including
roof top deliveries in some markets), customer training, in-store seminars
conducted by product manufacturers and a variety of marketing programs
tailored to meet specific customer needs. For example, the Company maintains a
warranty eligibility certification program in which customers receive
professional training in the proper application of Mule-Hide products. The
Company also maintains a toll-free telephone service providing product support
for a variety of the Company's products. ABC also provides its customers with
support in marketing their services to the ultimate consumer, including
providing construction site signs, business cards, banners, product brochures,
truck lettering and other promotional materials to its customers for a nominal
fee. In addition, American Patriot Insurance Agency, Inc., an affiliate of the
Company, offers insurance programs designed for roofing and siding contractors
that the Company believes result in savings on such contractors' insurance
premiums, which typically comprise a significant portion of such contractors'
business expenses. The Company believes these services have contributed to its
development of a large and diverse customer base of over 109,000 roofing and
siding contractors.
CREDIT POLICY
The Company believes its credit policies are a key element in its customers'
success and represent a significant competitive advantage over distributors
who do not offer such services. The Company offers standard as well as job
specific credit terms. The Company believes its credit policy is a
determinative factor in many of its customers' purchasing decisions. During
1996, the Company provided credit to over 34,000 customers.
The Company's credit program is managed by its Corporate Credit Manager, who
has over 30 years of experience in managing credit risks. The Company
establishes and maintains overall credit policy and terms at the corporate
level. Regional credit managers provide training and support for distribution
center managers and credit managers and approve credit lines beyond
distribution center managers' authority limits. Distribution center managers
and credit managers receive extensive training in the Company's credit
policies and practices and are generally responsible for overseeing the
extension of credit and the collection of past due accounts. All credit
decisions outside of ABC's standard practices are made by ABC's Corporate
Credit Manager. The Company's central credit function assists distribution
centers with major accounts and past due account collections. The Company
obtains lien rights and security interests where appropriate. Management keeps
credit lines reasonable with respect to customer needs and financial resources
and maintains a low tolerance for exceeding credit limits or terms. The
Company's bad debt expense has averaged 0.5% of sales over the past five
years, a level which the Company believes is significantly lower than the
industry average.
31
<PAGE>
PURCHASING
ABC purchases its products directly from a wide variety of manufacturers,
including GAF, GS Roofing Products Company, Inc., Elk Corporation of America,
Owens-Corning Fiberglass Corporation, Schuller International, Inc. and
Aluminum Company of America. Payment, discount and volume purchase programs
are negotiated directly by the Company with its major suppliers, with a
significant portion of the Company's purchases made from suppliers offering
these programs. The Company believes it is the largest or a significant
customer to many of its primary suppliers, and, as a result, is able to
negotiate volume discounts and other favorable terms. At 14.3% of the
Company's 1996 product purchases, GAF was the only supplier which represented
more than 10.0% of the Company's total purchases. The Company typically
purchases its products from manufacturers pursuant to individual purchase
orders, and does not generally enter into long-term contracts for the purchase
of products. However, in connection with the Viking Acquisition, the Company
entered into a purchase agreement with VAP pursuant to which the Company
agreed to purchase a minimum of $98.2 million of VAP products for sale in the
Company's distribution centers over the next five years.
Regional and local managers are responsible for inventory selection and
ordering on terms negotiated centrally, which allows the Company to remain
responsive to local market demands. Distribution center managers are also
responsible for inventory management. From time to time the Company also
negotiates large block purchases of roofing, vinyl siding and other products
to capture additional purchasing economies.
SALES AND MARKETING
As of December 31, 1996, the Company employed over 380 field sales
representatives. Each distribution center has at least two sales
representatives who are responsible for promoting ABC products and services in
their respective markets. The sales representatives report to the distribution
center manager and are supported by customer service representatives. A
substantial portion of each representative's pay is derived from sales
commissions. In addition, the Company employs a number of regional product
managers and sales managers who educate the Company's sales personnel and
customers regarding the technical specifications and marketability of certain
products.
The Company utilizes a variety of marketing techniques to increase its
overall sales and stimulate specific product line sales increases. For
example, the Company makes sample packages available to its customers to aid
in their sales efforts to the end-consumer. The Company also sponsors
incentive programs and educational seminars for its customers, providing
travel or other incentives for achieving certain purchase levels and
opportunities for its customers to increase their knowledge and expertise in
roofing and vinyl siding materials and techniques. The Company also is an
active participant in a variety of trade associations and advertises in trade
journals and other targeted forms of media.
DISTRIBUTION CENTER OPERATIONS
As of March 31, 1997, the Company operates 161 local distribution centers
located in 37 states, and has a market presence in 44 of the 50 most populous
metropolitan areas in the United States. Since January 1, 1992, the Company
has opened 33 distribution centers and acquired an additional 34 distribution
centers (net of consolidations) in connection with its selective acquisition
program. A typical distribution center is comprised of showroom space, office
space, warehouse and receiving space, secure outdoor holding space and a
loading dock. ABC's distribution centers range in size from approximately
15,000 to approximately 110,000 square feet, with a typical size of
approximately 40,000 square feet.
The Company's distribution center showrooms are unique in the industry. The
Company's showrooms feature tools and equipment from the Company's catalog and
allow its customers to view or handle the Company's products, to compare
different types of products and to discuss the products with the Company's
knowledgeable sales representatives.
32
<PAGE>
ABC's national distribution center network is the backbone of its service
strategy. By operating local distribution centers, supported by manufacturer
direct shipments, ABC is able to fill customer orders in a timely and
efficient manner. Furthermore, ABC maintains a minimum of two delivery trucks
at each location to provide for prompt job site or roof top delivery.
Each location is managed by a distribution center manager who oversees the
center's employees, including a credit manager, various sales personnel,
customer service representatives and delivery and warehouse personnel. The
Company allows each distribution center manager to alter the product mix of a
given center to meet local market demands and to stock regional products (such
as roof tile in the Florida, Texas and California markets). Distribution
center employees' bonus levels are largely driven by location profitability.
The Company believes its incentive programs have contributed significantly to
its growth and have helped it to achieve an average annual growth rate of
comparable distribution center sales of 14.4% over the past five years.
The following table sets forth the Company's growth in terms of distribution
centers in each of the past three years:
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Distribution centers on January 1............................. 98 109 126
Distribution centers acquired................................. 7 14 22
Distribution centers opened................................... 7 7 14
Acquired distribution centers consolidated.................... (3) (4) (5)
--- --- ---
Distribution centers on December 31........................... 109 126 157
=== === ===
</TABLE>
CATALOG OPERATIONS
The Company publishes a full-color 150+ page catalog annually which
illustrates the equipment and accessories offered by the Company to complement
its primary roofing, siding and window lines. Smaller catalogs are published
quarterly. Each catalog issue is mailed directly to approximately 70,000 of
ABC's customers and to each of ABC's distribution centers. In 1996, catalog
purchases by customers through distribution centers totaled $27.8 million and
direct sales to customers totaled $1.8 million.
COMPETITION
The roofing and siding products distribution industry is highly competitive
and fragmented. The Company competes directly with a large number of local and
regional building products distributors and, in certain markets and product
categories, with two national distributors, Cameron Ashley Building Products
and Allied Building Products. The Company also competes to a lesser extent
with mass-merchandisers, such as Home Depot, and with direct sales from
building products manufacturers. The Company believes that its customers are
not typically inclined to purchase products from mass-merchandisers who lack
the broad roofing and vinyl siding product lines offered by ABC, including
most premium products, and are not typically large enough to be able to
purchase their products directly from manufacturers. In addition, a number of
manufacturers have eliminated or downsized their distribution operations. For
example, since 1983, the Company has purchased all or a significant portion of
the wholesale distribution capacities of the following roofing and siding
manufacturers: GAF (13 facilities), Nichols-Homeshield (7 facilities), GS
Roofing Products Company, Inc. (13 facilities) and Owens-Corning Fiberglass
Corporation (6 facilities).
The Company believes that its customers generally select building products
distributors on the basis of product availability, customer service and
relationships, delivery responsiveness and credit availability, and that it
competes effectively on each of these bases. The Company believes that its
focused product selection and in-depth product knowledge, combined with its
long-term approach to customer relationships, result in competitive advantages
over mass-merchandisers. At the same time, the Company believes that its size
and market share allow it to negotiate volume discounts and other favorable
terms with manufacturers and maintain a broader product selection than smaller
local and regional building supply distributors.
33
<PAGE>
PROPERTIES
The Company operates its corporate headquarters out of a 118,000 square foot
facility (of which approximately 60,000 square feet are dedicated to the
Company's catalog operations) located in Beloit, Wisconsin. The following
table sets forth certain information regarding the Company's distribution
centers as of March 31, 1997:
<TABLE>
<CAPTION>
TOTAL NUMBER OF
REGION LOCATIONS
------ ---------------
<S> <C>
Lake Central(1).......... 20
Mid-Atlantic(2).......... 16
Midwest(3)............... 28
Northeast(4)............. 5
Rocky Mountain(5)........ 17
Southeast(6)............. 28
Southwest(7)............. 28
Western(8)............... 19
---
161
===
</TABLE>
- --------
(1) Indiana, Kentucky, Michigan and Ohio.
(2) Maryland, a portion of New Jersey, Pennsylvania and Virginia.
(3) Illinois, Iowa, a portion of Missouri, Minnesota and Wisconsin.
(4) Connecticut, Delaware, a portion of New Jersey and New York.
(5) Arizona, Colorado, a portion of Kansas, a portion of Missouri, Nebraska,
Nevada, New Mexico and Utah.
(6) Alabama, Florida, Georgia, North Carolina, South Carolina and Tennessee.
(7) Arkansas, a portion of Kansas, Louisiana, Oklahoma and Texas.
(8) California, Hawaii, Oregon and Washington.
The Company leases 67 of its facilities from the Company's sole stockholder
and certain of his affiliates. See "Certain Transactions." The Company owns
directly seven of its facilities (including its corporate headquarters
building) and leases the remainder from third parties. The Company believes
that its facilities are suitable and adequate to support its current
operations.
ENVIRONMENTAL MATTERS
A number of roofing materials are considered environmentally hazardous. The
Company typically handles and stores a variety of these materials at its
distribution center locations. The Company maintains appropriate environmental
compliance programs at each of its distribution centers and has never been the
subject of any material enforcement action by any governmental agency.
Many of the Company's distribution centers are located in areas of current
or former industrial activity, where environmental contamination may have
occurred. Under various federal, state and local environmental laws,
ordinances and regulations, a current or previous owner or operator of real
estate may be required to investigate and remediate releases or threatened
releases of hazardous or toxic substances or petroleum products located at
such property, and may be held liable for property damage and for
investigation and remediation costs in connection with the contamination.
The Company does not believe there are any material environmental
liabilities at any of its distribution center locations. Nevertheless, there
can be no assurance that the Company's knowledge is complete with regard to
all material environmental liabilities and it could subsequently discover
potential environmental liabilities arising from its sites or from neighboring
facilities.
34
<PAGE>
EMPLOYEES
As of March 31, 1997, the Company employed 2,339 full-time and 63 part-time
employees, of whom 24 were members of a union. The Company's collective
bargaining agreements with its union expire on various dates, from June 1997
through September 1999. The Company believes that its relations with its
employees are good.
LEGAL PROCEEDINGS
The Company is a party to various litigation matters incidental to the
conduct of its business. The Company does not believe that the outcome of any
of the matters in which it is currently involved will have a material adverse
effect on its financial condition or results of operations.
35
<PAGE>
MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES
The following table sets forth certain information with respect to (i) each
member of the Company's Board of Directors (the "Board"), (ii) each executive
officer of the Company and (iii) certain key employees of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Kenneth A. Hendricks....... 55 President, Chief Executive Officer and Director
Diane Hendricks............ 50 Executive Vice President, Secretary and Director
Kendra Story............... 37 Chief Financial Officer, Treasurer and Director
Gil Aleman................. 53 Director
Kent Nelson................ 52 Director
Jeffrey Stentz............. 37 Director of Acquisitions
Robert Bartels............. 48 Director of Purchasing
Ellen Baker................ 44 General Manager of Amcraft
Duane Blakely.............. 59 Corporate Credit Manager
Kenneth Dobkin............. 51 Lake Central Regional Manager
Phillip Gentry............. 48 Southeast Regional Manager
Kimberlee Hendricks........ 35 President of Mule-Hide
Ronald Hritz............... 51 Western Regional Manager
Jerry Juszak............... 48 Mid-Atlantic Regional Manager
Kathleen Murray............ 34 Director of Management Information Systems
John Simonelli............. 43 Rocky Mountain Regional Manager
Frank Sperl................ 46 Northeast Regional Manager
John Yonkin................ 40 Southwest Regional Manager
</TABLE>
Kenneth A. Hendricks has served as President, Chief Executive Officer and a
director of the Company since its inception in June 1982. Mr. Hendricks is
also President of Amcraft and Chairman of the Board of Mule-Hide. Prior to
1982, Mr. Hendricks was the owner and operator of a number of successful
exterior building contracting businesses and real estate businesses. Mr.
Hendricks is a member of the board of directors of Blackhawk Bancorp, Inc.
Diane Hendricks has served as Executive Vice President, Secretary and a
director of the Company since its inception. Ms. Hendricks is also President
of American Patriot Insurance Agency, Inc. Ms. Hendricks is primarily
responsible for overseeing insurance, personnel matters, bonus programs,
profit sharing and legal matters for the Company.
Kendra Story has served as the Chief Financial Officer, Treasurer and a
director of the Company since its inception. Ms. Story is primarily
responsible for overseeing finance, accounting, internal audit and inventory
management for the Company.
Gil Aleman has served as a director of the Company since 1997. Mr. Aleman is
recently retired from Jim Walter Corporation, where he served as President of
its Celotex roofing division from 1985 to 1997. Prior to 1985, Mr. Aleman
served as President of Jim Walter Window Components, a division of Jim Walter
Corporation.
Kent Nelson has served as a director of the Company since 1997. Mr. Nelson
has been Managing Director and a member of the Executive Committee of Aon Risk
Services, Inc., an insurance company, since 1989, and is an adjunct professor
at the Management Graduate School of Business of Northern Illinois University.
Robert Bartels has served as the Company's Director of Purchasing since
1996. From 1992 to 1996, Mr. Bartels served as national marketing and sales
director for Globe Industries Incorporated and IKO Industries, Inc., each of
which is a manufacturer of roofing materials. From 1971 to 1992, Mr. Bartels
was employed by
36
<PAGE>
The Celotex Corporation, a manufacturer of roofing and siding products, in a
variety of positions with increasing responsibility, most recently as vice
president of sales.
Jeffrey Stentz has served as the Company's Director of Acquisitions since
1995. From 1993 to 1995, Mr. Stentz served as chief financial officer of PDQ
Food Stores, Inc., a privately owned convenience food store chain. Prior to
that time, Mr. Stentz was a senior lending officer at Valley Bank and a credit
analyst at NBD Bank and at First Interstate Bancorp.
Ellen Baker has served as the General Manager of Amcraft since 1995. From
1975 to 1995, Ms. Baker was employed by Wickes Lumber Company in a variety of
positions with increasing responsibility, including as director of sales and
marketing.
Duane Blakely has served as the Company's Corporate Credit Manager since
1986. Mr. Blakely is responsible for the Company's credit policies and
practices.
Kenneth Dobkin has served as the Company's Lake Central Regional Manager
since 1995. From 1975 to 1995, Mr. Dobkin was employed by Wickes Lumber in a
variety of positions with increasing responsibility, including as regional
manager.
Phillip Gentry has served the Company as Southeast Regional Manager since
1997. Prior to that time, Mr. Gentry served the Company as a distribution
center manager since 1988, and as an assistant distribution center manager
from 1984 to 1988.
Kimberlee Hendricks is the President of Mule-Hide and has been with the
Company in a variety of positions with increasing responsibility since 1984.
Ronald Hritz has served the Company in variety of positions with increasing
responsibility since 1984, most recently as Western Regional Manager. Prior to
that time, Mr. Hritz was employed in a variety of positions with increasing
responsibility by Bird & Sons Rain Gutter, a roofing and siding manufacturer.
Jerry Juszak has been with the Company since 1992, initially as the manager
of its catalog operations and most recently as Mid-Atlantic Regional Manager.
From 1981 to 1992, Mr. Juszak was employed by Servistar Corporation, a
hardware and building materials company, in a variety of positions with
increasing responsibility, including as Vice President of Marketing and
Advertising.
Kathleen Murray has served as the Company's Director of Management
Information Systems since 1985. Ms. Murray is responsible for the
implementation and operation of the Company's information systems.
John Simonelli has served as the Company's Rocky Mountain Regional Manager
since 1997. Prior to that time, Mr. Simonelli served the Company as a
distribution center manager since 1988.
Frank Sperl has served as the Company's Northeast Regional Manager since
1996. From 1968 to 1996, Mr. Sperl served in a variety of positions with
increasing responsibility in the roofing industry, most recently as president
of New York Building Products, a wholesale building products distributor.
John Yonkin has served the Company in variety of positions with increasing
responsibility since 1985, most recently as Southwest Regional Manager. Prior
to that time, Mr. Yonkin was employed in a variety of positions with
increasing responsibility by GS Roofing Products Company, Inc., a distributor
of exterior building products. Mr. Yonkin joined the Company at the time of
the acquisition by the Company of GS Roofing Products Company, Inc.'s
distribution operations.
Kenneth and Diane Hendricks are husband and wife. Kendra Story, Kathleen
Murray and Kimberlee Hendricks are daughters of Mr. Hendricks.
37
<PAGE>
EXECUTIVE COMPENSATION
The compensation of executive officers of the Company is determined by the
Board. The following Summary Compensation Table includes individual
compensation information for the Chief Executive Officer and each of the four
other most highly compensated executive officers of the Company in the year
ended December 31, 1996 for services rendered in all capacities to the Company
and its subsidiaries during the year ended December 31, 1996.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION ALL OTHER
-------------------- COMPENSATION
NAME AND PRINCIPAL POSITION ANNUAL BONUS (1)
- --------------------------- ---------- --------- ------------
<S> <C> <C> <C>
Kenneth A. Hendricks........................ $ 751,000 $ -- $3,880
President, Chief Executive Officer and
Director
Diane Hendricks............................. 125,000 75,000 3,583
Executive Vice President, Secretary and
Director
Kendra Story................................ 119,000 50,000 4,204
Treasurer, Chief Financial Officer and
Director
Robert Bartels (2).......................... 77,885 -- 1,400
Director of Purchasing
Jeffrey Stentz.............................. 90,000 25,000 2,100
Director of Acquisitions
</TABLE>
- --------
(1) Consists of estimated amounts paid by the Company for automobiles and for
matching payments under the Company's 401(k) Profit Sharing Plan,
respectively, as follows: Mr. Hendricks--$2,100 and $1,780; Ms.
Hendricks--$2,100 and $1,483; Ms. Story--$2,100 and $2,104; Mr. Bartels--
$1,400 and $0; and Mr. Stentz--$2,100 and $0.
(2) Mr. Bartels joined the Company in May 1996. His annual base salary as of
December 31, 1996 was $125,000.
For a description of the employment agreement entered into between Mr.
Hendricks and the Company in connection with the Offering, see "Certain
Transactions."
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
All of the Company's capital stock is owned beneficially and of record by
the Company's founder, President and Chief Executive Officer. There are no
outstanding options or other rights to purchase any shares of the Company's
capital stock.
38
<PAGE>
CERTAIN TRANSACTIONS
ABC transacts business with a number of entities, including Corporate
Contractors, Inc. ("CCI"), Gordon Metals Co., Inc. ("Gordon"), ABC Express,
Inc. ("Express"), Water Tower Industrial Properties ("Water Tower"), Hendricks
Commercial Properties ("HCP"), Hendricks Carolina Properties, L.L.C.
("Carolina"), Patriot, Ltd. ("Patriot") and American Patriot Insurance Agency,
Inc. ("APIA") (collectively, the "Related Entities"), which are owned by ABC's
sole stockholder and his spouse. CCI performs construction work such as
interior renovations and additions at ABC locations. Gordon provides metal
roofing materials to the Company on a purchase order basis. Express provides
transportation services for the Company. The Company leases properties from
Water Tower, Carolina and HCP. The Company believes that the transactions
between ABC and the Related Entities have generally been conducted on an arm's-
length basis.
In connection with certain of the Company's acquisitions, the Company's sole
stockholder or his affiliates have purchased the real estate of the acquired
business, which the Company has then leased from Mr. Hendricks or his
affiliates. In addition, certain of the distribution centers opened by the
Company are located in facilities purchased by and leased from Mr. Hendricks or
his affiliates. These real estate purchases have historically been financed
with a combination of debt financing and equity, and a portion of the equity
has sometimes been funded by Mr. Hendricks with borrowings from ABC. The
aggregate amount of such borrowings from ABC outstanding as of March 31, 1997
was $6.5 million and as of April 30, 1997 was approximately $8.3 million, which
Mr. Hendricks repaid in its entirety with a portion of the proceeds of the
Distribution. The Company and Mr. Hendricks currently intend to continue to
acquire properties for the Company's occupancy using such method of financing.
The Indenture and the Credit Agreement each permit the Company to lend
additional amounts to Mr. Hendricks in connection with such transactions in the
future. Interest is charged on such loans at a rate comparable to the rate the
Company pays on its bank borrowings. The maximum amount of such borrowings at
any time during the three years ended December 31, 1996, occurred in October
1994 and aggregated $7.3 million. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital Resources"
and "Description of the Notes--Certain Covenants--Restricted Payments."
As described above, as of December 31, 1996, the Company leased 67 facilities
from Mr. Hendricks or his affiliates. For the year ended December 31, 1996, the
Company paid $6.2 million in lease payments to Mr. Hendricks or his affiliates
in respect of such properties. In connection with the Offering, the Company
entered into a series of amended leases with lease terms of at least ten years
for such properties (such leases, the "Related Party Leases"). Annual payments
due under such leases are based on the prevailing market rates in the areas in
which such properties are located, adjusted annually to reflect changes in the
consumer price index.
As of December 31, 1994, 1995, 1996 and March 31, 1997, the Company had
obligations outstanding under guarantees and other credit support in respect of
debt of Mr. Hendricks and his affiliates in the amounts of $2.3 million, $2.7
million, $3.9 million and $4.3 million, respectively. A portion of such credit
support related to certain indebtedness of the Company which was retained by
Mr. Hendricks in connection with the sale by him of certain properties to the
Company pursuant to which Mr. Hendricks remained as primary obligor under the
mortgages relating thereto and the Company became secondarily liable as the
owner of the subject properties. The maximum amount of such guarantees and
other credit support at any time during the three years ended December 31, 1996
occurred in July 1996 and aggregated $4.0 million. Through March 31, 1997, the
maximum was $4.3 million.
Patriot, an insurance company owned by Mr. Hendricks and his spouse, provides
certain insurance coverage to the Company, which is subsequently reinsured in
part by third party insurance carriers. APIA serves as a broker with respect to
insurance facilities for the Company and the Related Entities. The Company paid
Patriot $5.4 million, $5.2 million and $6.0 million in 1994, 1995 and 1996,
respectively, for reported and unreported claim liabilities (as determined by
an unrelated third-party claims adjusting service) that are not the subject of
reinsurance, as well as costs of reinsurance premiums and other related costs.
In connection with the Offering, the Company entered into an employment
agreement (the "Employment Agreement") with Mr. Hendricks which provides for an
annual salary of $1.0 million, subject to annual
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increases, if approved by a majority of ABC's disinterested directors, of up
to 20.0% of his salary in the preceding year. The Employment Agreement is for
a term of three years, renewable annually thereafter upon the mutual agreement
of the Company and Mr. Hendricks.
In connection with the Offering, the Company also entered into the Tax
Allocation Agreement with Mr. Hendricks pursuant to which he will receive
distributions from each of ABC, Mule-Hide and Amcraft with respect to taxes
payable by Mr. Hendricks associated with the operations of each entity.
Payments to Mr. Hendricks under the Tax Allocation Agreement are permitted by
the Indenture and the Credit Agreement.
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DESCRIPTION OF THE CREDIT AGREEMENT
In connection with the Offering, the Company amended the Credit Agreement
to, among other things, extend the maturity thereof and reduce the interest
rate thereunder. See "Use of Proceeds." The following description sets forth
certain terms and covenants contained in the Credit Agreement, as so amended:
Use of Proceeds. The Credit Agreement is available to finance working
capital requirements and general corporate purposes of the Company, including
additional acquisitions.
Principal Amount. The Credit Agreement provides for revolving credit
borrowings in a maximum aggregate principal amount of $200.0 million, subject
to borrowing base eligibility, of which $10.0 million is available for
issuances of letters of credit. Borrowing base eligibility is based on 85.0%
of the Company's eligible receivables and up to 65.0% of its eligible
inventory. On a pro forma basis, after giving effect to the Offering and the
application of the net proceeds therefrom, as of March 31, 1997, the Company
and its subsidiaries would have had outstanding borrowings under the Credit
Agreement of $23.1 million and additional availability of $127.7 million.
Maturity; Interest; Fees. The Credit Agreement has an initial maturity date
of June 30, 2000, subject to subsequent one-year extensions upon the mutual
consent of the parties, and is secured by a first priority lien on
substantially all of the properties and assets of the Company and its
subsidiaries, now owned or acquired later. At the Company's option, the
interest rate per annum applicable to the Credit Agreement will be a
fluctuating rate of interest measured by reference either to LIBOR plus 1.25%
or the published prime rate of the Agent Bank (the "ABR"). The Company has
agreed to pay certain fees with respect to the Credit Agreement including: (i)
agent fees and (ii) commitment fees of 0.25% per annum on up to $25.0 million
of the unused availability under the Credit Agreement.
Covenants. The Credit Agreement contains covenants restricting the ability
of the Company to, among other things: (i) declare dividends or redeem or
repurchase capital stock; (ii) prepay, redeem or repurchase debt; (iii) incur
liens; (iv) make loans and investments; (v) issue more debt; (vi) amend or
otherwise alter debt and other material agreements; (vii) make capital
expenditures; (viii) engage in mergers, acquisitions and asset sales and (ix)
enter into transactions with affiliates. The Company has also made certain
customary indemnifications of the Lenders and their agents and is required to
comply with financial covenants including: (i) a maximum funded debt to EBITDA
ratio (currently 6.60 to 1); (ii) a minimum tangible net worth test ($85
million at December 31, 1997 and $75 million at each year ended thereafter);
and (iii) a minimum fixed charge coverage ratio (currently 1.45 to 1). Net
worth as defined in the Credit Agreement includes the principal outstanding
under the Notes. The Credit Agreement also contains certain customary
affirmative covenants.
Events of Default. Events of default under the Credit Agreement include: (i)
the Company's failure to pay principal or interest when due; (ii) the
Company's material breach of any covenant, representation or warranty
contained in the loan documents; (iii) customary cross-default provisions
relating to a breach by the Company or any of its subsidiaries of any material
agreement, document or instrument that continues beyond any applicable cure
period or that permits the acceleration of indebtedness for borrowed money in
excess of $200,000; (iv) events of bankruptcy, insolvency or dissolution of
the Company or its subsidiaries; (v) the levy of certain judgments against the
Company, its subsidiaries, or their assets; (vi) certain adverse events under
ERISA plans of the Company or its subsidiaries; (vii) the actual or asserted
invalidity of security documents or guarantees of the Company or its
subsidiaries; and (viii) a change of control of the Company.
NationsBank of Texas, N.A., an affiliate of NationsBanc Capital Markets,
Inc., and American National Bank and Trust Company of Chicago, an affiliate of
First Chicago Capital Markets, Inc., are lenders and agents under the Credit
Agreement, for which they receive customary fees. See "Plan of Distribution."
As lenders under the Credit Agreement, these affiliates of the Initial
Purchasers received a substantial portion of the proceeds of the Offering. See
"Use of Proceeds."
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THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Old Notes were originally sold by the Company on May 7, 1997 to the
Initial Purchasers pursuant to the Purchase Agreement. The Initial Purchasers
subsequently resold the Old Notes to qualified institutional buyers in
reliance on Rule 144A under the Securities Act and to a limited number of
institutional accredited investors that agreed to comply with certain transfer
restrictions and other conditions. As a condition to the Purchase Agreement,
the Company entered into the Registration Rights Agreement pursuant to which
the Company has agreed, for the benefit of the holders of the Old Notes, at
the Company's cost, to use its best efforts to (i) file the Exchange Offer
Registration Statement within 45 days after the date of the original issue of
the Old Notes with the Commission with respect to the Exchange Offer for the
New Notes, (ii) use its best efforts to cause the Exchange Offer Registration
Statement to be declared effective under the Securities Act within 120 days
after the date of original issuance of the Old Notes and (iii) use its best
efforts to consummate the Exchange Offer within 150 days after the Issue Date.
Upon the Exchange Offer Registration Statement being declared effective, the
Company will offer the New Notes in exchange for surrender of the Old Notes.
The Company will keep the Exchange Offer open for not less than 20 business
days (or longer if required by applicable law) after the date on which notice
of the Exchange Offer is mailed to the holders of the Old Notes. For each Old
Note surrendered to the Company pursuant to the Exchange Offer, the holder of
such Old Note will receive an New Note having a principal amount equal to that
of the surrendered Old Note. Interest on each New Note will accrue from the
last interest payment date on which interest was paid on the Old Note
surrendered in exchange therefor or, if no interest has been paid on such Old
Note, from the date of its original issue.
Under existing interpretations of the staff of the Commission contained in
several no-action letters to third parties, the New Notes would in general be
freely tradeable after the Exchange Offer without further registration under
the Securities Act. However, any purchaser of Old Notes who is an "affiliate"
of the Company or who intends to participate in the Exchange Offer for the
purpose of distributing the New Notes (i) will not be able to rely on the
interpretation of the staff of the Commission, (ii) will not be able to tender
its Old Notes in the Exchange Offer and (iii) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any sale or transfer of the Old Notes, unless such sale or
transfer is made pursuant to an exemption from such requirements.
Each holder of the Old Notes (other than certain specified holders) who
wishes to exchange the Old Notes for New Notes in the Exchange Offer will be
required to represent in the Letter of Transmittal that (i) it is not an
affiliate of the Company, (ii) the New Notes to be received by it were
acquired in the ordinary course of its business and (iii) at the time of
commencement of the Exchange Offer, it has no arrangement with any person to
participate in the distribution (within the meaning of the Securities Act) of
the New Notes. In addition, in connection with any resales of New Notes, any
Participating Broker-Dealer who acquired the Old Notes for its own account as
a result of market-making or other trading activities must deliver a
prospectus meeting the requirements of the Securities Act. The Commission has
taken the position that Participating Broker-Dealers may fulfill their
prospectus delivery requirements with respect to the New Notes (other than a
resale of an unsold allotment from the original sale of the Old Notes) with
the prospectus contained in the Exchange Offer Registration Statement. Under
the Registration Rights Agreement, the Company is required to allow
Participating Broker-Dealers and other persons, if any, subject to similar
prospectus delivery requirements to use the prospectus contained in the
Exchange Offer Registration Statement in connection with the resale of such
New Notes. The Company has agreed that, for a period of one year after the
Expiration Date, it will make this Prospectus available to any Participating
Broker-Dealer for use in connection with any such resale; provided, however,
that the Company and the Subsidiary Guarantors will have no obligation to
amend or supplement this Prospectus unless the Company has received written
notice from a Participating Broker-Dealer of their prospectus delivery
requirements under the Securities Act within fifteen business days following
consummation of the Exchange Offer.
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In the event that applicable interpretations of the staff of the Commission
do not permit the Company and the Guarantors to effect the Exchange Offer, or,
under certain circumstances, if the Initial Purchasers shall so request, each
of the Company and the Guarantors, jointly and severally, will at their cost,
(a) as promptly as practicable, file a shelf registration statement covering
resales of the Old Notes (a "Shelf Registration Statement"), (b) use its best
efforts to cause such Shelf Registration Statement to be declared effective
under the Securities Act and (c) use its best efforts to keep effective such
Shelf Registration Statement until the earlier of two years after the Issue
Date and such time as all of the applicable Old Notes have been sold
thereunder. The Company will, in the event of the filing of a Shelf
Registration Statement, provide to each holder of the Old Notes copies of the
prospectus which is a part of such Shelf Registration Statement, notify each
such holder when such Shelf Registration Statement has become effective and
take certain other actions as are required to permit unrestricted resales of
the Old Notes. A holder that sells its Old Notes pursuant to a Shelf
Registration Statement generally will be required to be named as a selling
security holder in the related prospectus and to deliver a prospectus to
purchasers, will be subject to certain of the civil liability provisions under
the Securities Act in connection with such sales and will be bound by the
provisions of the Registration Rights Agreement which are applicable to such
holder (including certain indemnification obligations). Other than as set
forth above, holders of Old Notes who do not tender in the Exchange Offer will
not have any continuing rights under the Registration Agreement.
If (a) the Company fails to file any of the Registration Statements required
by the Registration Rights Agreement on or before the date specified for such
filing, (b) any of such Registration Statements is not declared effective by
the Commission on or prior to the date specified for such effectiveness (the
"Effectiveness Target Date"), (c) the Company fails to consummate the Exchange
Offer within 30 business days of the Effectiveness Target Date with respect to
the Exchange Offer Registration Statement, or (d) the Shelf Registration
Statement or the Exchange Offer Registration Statement is declared effective
but thereafter ceases to be effective or usable in connection with resales of
Transfer Restricted Securities during the periods specified in the
Registration Rights Agreement (each such event referred to in clauses (a)
through (d) above a "Registration Default"), then the Company will pay
Liquidated Damages to each Holder of Notes, with respect to the first 90-day
period immediately following the occurrence of the first Registration Default,
in an amount equal to $.05 per week per $1,000 principal amount of Notes held
by such Holder. The amount of the Liquidated Damages will increase by an
additional $.05 per week per $1,000 principal amount of Notes with respect to
each subsequent 90-day period until all Registration Defaults have been cured,
up to a maximum amount of Liquidated Damages of $.50 per week per $1,000
principal amount of Notes. Following the cure of all Registration Defaults,
the accrual of Liquidated Damages will cease.
This summary of certain provisions of the Registration Rights Agreement does
not purport to be complete and is subject to, and is qualified in its entirety
by, all the provisions of the Registration Rights Agreement, a copy of which
is available upon request to the Company.
Following the consummation of the Exchange Offer, holders of the Old Notes
who were eligible to participate in the Exchange Offer but who did not tender
their Old Notes will not have any further registration rights and such Old
Notes will continue to be subject to certain restrictions on transfer.
Accordingly, the liquidity of the market for such Old Notes could be adversely
affected.
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.
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The form and terms of the New Notes are the same as the form and terms of
the Old Notes except that (i) the New Notes bear a Series B designation and a
different CUSIP Number from the Old Notes, (ii) the New Notes have been
registered under the Securities Act and hence will not bear legends
restricting the transfer thereof and (iii) the holders of the New Notes will
not be entitled to certain rights under the Registration Rights Agreement,
including the provisions providing for an increase in the interest rate on the
Old Notes in certain circumstances relating to the timing of the Exchange
Offer, all of which rights will terminate when the Exchange Offer is
terminated. The New Notes will evidence the same debt as the Old Notes and
will be entitled to the benefits of the Indenture.
As of the date of this Prospectus, $100,000,000 aggregate principal amount
of Old Notes were outstanding. The Company has fixed the close of business on
, 1997 as the record date for the Exchange Offer for purposes of
determining the persons to whom this Prospectus and the Letter of Transmittal
will be mailed initially.
Holders of Old Notes do not have any appraisal or dissenters' rights under
the Delaware General Corporation Law 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 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, the 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 transfer taxes in certain circumstances, in connection
with die Exchange Offer. See "--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 and will mail to the
registered holders an announcement thereof, each 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 to terminate the
Exchange Offer if any of the conditions set forth below under "--Conditions"
shall not have been satisfied prior to the Expiration Date, by giving oral or
written notice of such delay, extension or termination to the Exchange Agent
or (ii) to amend the terms of the Exchange Offer in any manner. Any such delay
in acceptance, extension, termination or amendment will be followed as
promptly as practicable by oral or written notice thereof to the registered
holders.
INTEREST ON THE NEW NOTES
The New Notes will bear interest from their date of issuance. Holders of Old
Notes that are accepted for exchange will receive, in cash, accrued interest
thereon to, but not including, the date of issuance of the New Notes. Such
interest will be paid with the first interest payment on the New Notes on
November 15, 1997. Interest on the Old Notes accepted for exchange will cease
to accrue upon issuance of the New Notes.
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Interest on the New Notes is payable semi-annually on each May 15 and
November 15, commencing on November 15, 1997.
PROCEDURES FOR TENDERING
Only a holder of Old Notes may tender such Old Notes in the Exchange Offer.
For a holder to validly tender Old Notes pursuant to the Exchange Offer, a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof), with any required signature guarantee, or (in the case of a book-
entry transfer) an Agent's Message (as defined below) in lieu of the Letter of
Transmittal, and any other required documents, must be received by the
Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date.
The tender of Old Notes via Agent's Message will not constitute notice to the
Company of a holder's status as a Participating Broker-Dealer. Participating
Broker-Dealers desiring to provide such notice must still do so in writing
within fifteen business days following the consummation of the Exchange Offer.
See "--Resale of the New Notes." To be tendered effectively, the Old Notes,
the Letter of Transmittal (or Agent's Message) and other required documents
must be completed and received by the Exchange Agent at the address set forth
below under "Exchange Agent" prior to 5:00 p.m., New York City time, on the
Expiration Date. Delivery of the Old Notes may be made by book entry transfer
in accordance with the procedures described below. Confirmation of such book-
entry transfer must be received by the Exchange Agent prior to the Expiration
Date. The term "Agent's Message" means a message, transmitted by the Book-
Entry Transfer Facility (as defined below) to and received by the Exchange
Agent and forming a part of a book-entry confirmation, which states that the
Book-Entry Transfer Facility has received an express acknowledgment from the
tendering participant, which acknowledgment states that such participant has
received and agrees to be bound by the terms of the Letter of Transmittal and
that the Company may enforce the terms of the Letter of Transmittal against
such participant.
By executing the Letter of Transmittal or delivering an Agent's Message,
each holder will make to the Company the representations set forth above in
the third paragraph under the heading "--Purpose and Effect of the Exchange
Offer."
The tender by a holder and the acceptance thereof by the Company will
constitute agreement between such 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 SOLE
RISK OF THE HOLDER. AS AN ALTERNATIVE TO DELIVERY BY MAIL, HOLDERS MAY WISH TO
CONSIDER OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE
EXPIRATION DATE. 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 THE ABOVE 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 such
registered holder to tender on such beneficial owner's behalf. See
"Instruction to Registered Holder and/or Book-Entry Transfer Facility
Participant from Owner" included with the Letter of Transmittal.
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 below)
unless the Old Notes tendered pursuant thereto are tendered (i) by a
registered holder who has not completed the box entitled "Special Registration
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal
or (ii) for the account of an Eligible Institution. In the event that
signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, are required to be guaranteed, such guarantee must be by a member firm
of the Medallion System (an "Eligible Institution").
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If the Letter of Transmittal is signed by a person other than the registered
holder of any Old Notes listed therein, such Old Notes must be endorsed or
accompanied by a properly completed bond power, signed by such registered
holder as such registered holder's name appears on such Old Notes with the
signature thereon guaranteed by an Eligible Institution.
If the Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, offices 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.
The Company understands that the Exchange Agent will make a request promptly
after the date of this Prospectus to establish accounts with respect to the
Old Notes at the book-entry transfer facility, The Depository Trust Company
(the "Book-Entry Transfer Facility"), for the purpose of facilitating the
Exchange Offer, and subject to the establishment thereof, any financial
institution that is a participant in the Book-Entry Transfer Facility's system
may make book-entry delivery of Old Notes by causing such Book-Entry Transfer
Facility to transfer such Old Notes into the Exchange Agents account with
respect to the Old Notes in accordance with the Book-Entry Transfer Facility's
procedures for such transfer. Although delivery of the Old Notes may be
effected through book-entry transfer into the Exchange Agents account at the
Book-Entry Transfer Facility, an appropriate Letter of Transmittal properly
completed and duly executed with any required signature guarantee or Agent's
Message and all other required documents must in each case be transmitted to
and received or confirmed by the Exchange Agent at its address set forth below
on or prior to the Expiration Date, or, if the guaranteed delivery procedures
described below are complied with, within the time period provided under such
procedures. Delivery of documents to the Book-Entry Transfer Facility does not
constitute delivery to the Exchange Agent.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Old Notes 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 in its sole
discretion 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 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.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available, (ii) who cannot deliver their Old Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent or (iii) who
cannot complete the procedures for book-entry transfer, prior to the
Expiration Date, may effect a tender if:
(a) the tender is made through an Eligible Institution;
(b) prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder, the certificate number(s)
of such Old Notes and the principal amount of Old Notes tendered stating
that the tender is being made thereby and guaranteeing that, within five
New York Stock Exchange trading days after the Expiration Date, the Letter
of Transmittal
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(or facsimile thereof) together with the certificate(s) representing the
Old Notes (or a confirmation of book-entry transfer of such Old Notes into
the Exchange Agents account at the Book-Entry Transfer Facility), and any
other documents required by the Letter of Transmittal will be deposited by
the Eligible Institution with the Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal (of
facsimile thereof), as well as the certificate(s) representing all tendered
Old Notes in proper form for transfer (or a confirmation of book-entry
transfer of such Old Notes into the Exchange Agents account at the Book-
Entry Transfer Facility), and all other documents required by the Letter of
Transmittal are received by the Exchange Agent upon five New York Stock
Exchange trading days after the Expiration Date.
Upon request to the Exchange Agent a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Old Notes according to the guaranteed
delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the Expiration Date.
To withdraw a tender of Old Notes in the Exchange Offer, a telegram, telex,
letter or facsimile 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(s) and principal amount of such Old Notes, or, in the case
of Old Notes transferred by book-entry transfer, the name and number of the
account at the Book-Entry Transfer Facility to be credited), (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,
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 purposes of
the Exchange Offer and no New Notes will be issued with respect thereto unless
the Old Notes so withdrawn are validly retendered. Any Old Notes which have
been tendered but which are not accepted for exchange 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 above under "--Procedures for Tendering" at any time prior to the
Expiration Date.
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 or amend the Exchange Offer as provided herein prior to the
Expiration Date, if:
(a) any action or proceeding is instituted or threatened in any court or
by or before any governmental agency with respect to the Exchange Offer
which, in the reasonable judgment of the Company, 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 any of its subsidiaries; or
(b) any law, statute, rule, regulation or interpretation by the staff of
the Commission is proposed, adopted or enacted, which, in the reasonable
judgment of the Company, might materially impair the ability of the Company
to proceed with the Exchange Offer or materially impair the contemplated
benefits of the Exchange Offer to the Company; or
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(c) any governmental approval has not been obtained, which approval the
Company shall, in its reasonable discretion, deem necessary for the
consummation of the Exchange Offer as contemplated hereby.
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, (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 of Tenders") or (iii) waive such unsatisfied
conditions with respect to the Exchange Offer and accept all properly tendered
Old Notes which have not been withdrawn.
EXCHANGE AGENT
Norwest Bank Minnesota, National Association has been appointed as Exchange
Agent for the Exchange Offer. Questions and requests for assistance, requests
for additional copies of this Prospectus or of the Letter of Transmittal and
requests for Notice of Guaranteed Delivery should be directed to the Exchange
Agent addressed as follows:
Norwest Bank Minnesota, National Association
Corporate Trust Services, 12th Floor
608 Second Avenue South, North Star East
Minneapolis, Minnesota 55402
Telecopier No.: (612) 667-9825
Attention: Kurt Schwegman
DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A
VALID DELIVERY.
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telecopy, telephone or in person by officers and
regular employees of the Company and its affiliates.
The Company has not retained any dealer-manager 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.
ACCOUNTING TREATMENT
The New Notes will be recorded at the same carrying value as the Old Notes,
which is face value, as reflected in the Company's accounting records on the
date of exchange. Accordingly, no gain or loss for accounting purposes will be
recognized by the Company. The expenses of the Exchange Offer will be expensed
over the term of the New Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
The Old Notes that are not exchanged for New Notes pursuant to the Exchange
Offer will remain restricted securities. Accordingly, such Old Notes may be
resold only (i) to the Company (upon redemption thereof or otherwise), (ii) so
long as the Old Notes are eligible for resale pursuant to Rule 144A, to a
person inside the
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United States whom the seller reasonably believes is a qualified institutional
buyer within the meaning of Rule 144A under the Securities Act in a
transaction meeting the requirements of Rule 144A, in accordance with Rule 144
under the Securities Act, or pursuant to another exemption from the
registration requirements of the Securities Act (and based upon an opinion of
counsel reasonably acceptable to the Company), (iii) outside the United States
to a foreign person in a transaction meeting the requirements of Rule 904
under the Securities Act, or (iv) pursuant to an effective registration
statement under the Securities Act in each case in accordance with any
applicable securities laws of any state of the United States.
RESALE OF THE NEW NOTES
With respect to resales of New Notes, based on interpretations by the staff
of the Commission set forth in no-action letters issued to third parties, the
Company believes that a holder or other person who receives New Notes, whether
or not such person is the holder (other than a person that is an "affiliate"
of the Company within the meaning of Rule 405 under the Securities Act) who
receives New Notes in exchange for Old Notes in the ordinary course of
business and who is not participating, does not intend to participate, and has
no arrangement or understanding with any person to participate, in the
distribution of the New Notes, will be allowed to resell the New Notes to the
public without further registration under the Securities Act and without
delivering to the purchasers of the New Notes a prospectus that satisfies the
requirements of Section 10 of the Securities Act. However, if any holder
acquires New Notes in the Exchange Offer for the purpose of distributing or
participating in a distribution of the New Notes, such holder cannot rely on
the position of the staff of the Commission enunciated in such no-action
letters or any similar interpretive letters, and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction, unless an exemption from registration
is otherwise available. Further, each Participating Broker-Dealer that
receives New Notes for its own account in exchange for Old Notes, where such
Old Notes were acquired by such Participating 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. The
Company has agreed that, for a period of one year after the Expiration Date,
it will make this Prospectus available to any Participating Broker-Dealer for
use in connection with any such resale; provided, however, that the Company
and the Subsidiary Guarantors will have no obligation to amend or supplement
this Prospectus unless the Company has received written notice from a
Participating Broker-Dealer of their prospectus delivery requirements under
the Securities Act within fifteen business days following consummation of the
Exchange Offer.
As contemplated by these no-action letters and the Registration Rights
Agreement, each holder accepting the Exchange Offer is required to represent
to the Company in the Letter of Transmittal that (i) the New Notes are to be
acquired by the holder or the person receiving such New Notes, whether or not
such person is the holder, in the ordinary course of business, (ii) the holder
or any such other person (other than a broker-dealer referred to in the next
sentence) is not engaging and does not intend to engage, in the distribution
of the New Notes, (iii) the holder or any such other person has no arrangement
or understanding with any person to participate in the distribution of the New
Notes, (iv) neither the holder nor any such other person is an "affiliate" of
the Company within the meaning of Rule 405 under the Securities Act, and (v)
the holder or any such other person acknowledges that if such holder or other
person participates in the Exchange Offer for the purpose of distributing the
New Notes it must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale of the New
Notes and cannot rely on those no-action letters. As indicated above, each
Participating Broker-Dealer that receives a New Note for its own account in
exchange for Old Notes must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. For a description of the
procedures for such resales by Participating Broker-Dealers, see "Plan of
Distribution."
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DESCRIPTION OF THE NOTES
GENERAL
The Old Notes were issued, and the New Notes will be issued, pursuant to an
indenture (the "Indenture") between the Company and Norwest Bank Minnesota,
National Association, as trustee (the "Trustee"). The terms of the Notes
include those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act of 1939, as amended (the "Trust Indenture
Act"). The Notes are subject to all such terms, and Holders of Notes are
referred to the Indenture and the Trust Indenture Act for a statement thereof.
The following summary of the material provisions of the Indenture does not
purport to be complete, and is qualified in its entirety by reference to the
Indenture, including the definitions therein of certain terms used below.
Copies of the proposed form of Indenture and Registration Rights Agreement are
available as set forth under the caption "--Additional Information." The
definitions of certain terms used in the following summary are set forth below
under the caption "--Certain Definitions." For purposes of this summary, the
term "Company" refers only to American Builders & Contractors Supply Co., Inc.
and not to any of its Subsidiaries.
The New Notes will be general unsecured obligations of the Company and will
be subordinated in right of payment to all current and future Senior Debt of
the Company. The New Notes will be guaranteed by all of the Company's current
and future subsidiaries. Such subsidiary guarantees will be subordinated to
all Senior Debt of the Guarantors. As of March 31, 1997, on a pro forma basis
giving effect to the Offering and the application of the net proceeds
therefrom as described under "Use of Proceeds," the Company and its
Subsidiaries would have had Senior Debt of approximately $57.1 million
(including guarantees and letters of credit) and would have had additional
liabilities (consisting of trade payables and accrued liabilities) of
approximately $125.3 million. The Indenture permits the incurrence of
additional Senior Debt in the future, subject to certain limitations in the
Indenture. See "--Subordination" and "--Certain Covenants--Incurrence of
Additional Indebtedness and Issuance of Preferred Stock."
The form and terms of the New Notes are the same as the form and terms of
the Notes (which they replace) except that (i) the New Notes bear a Series B
designation, (ii) the New Notes have been registered under the Securities Act
and, therefore, will not bear legends restricting the transfer thereof, and
(iii) the holders of New Notes will not be entitled to certain rights under
the Registration Rights Agreement, including the provisions providing for an
increase in the interest rate on the Notes in certain circumstances relating
to the timing of the Exchange Offer, which rights will terminate when the
Exchange Offer is consummated.
PRINCIPAL, MATURITY AND INTEREST
The Notes were initially issued in an aggregate principal amount of $100.0
million and will mature on May 15, 2007. The Indenture provides for the
issuance of up to $50.0 million in aggregate principal amount of additional
Notes having identical terms and conditions to the Notes offered hereby (the
"Additional Notes"), subject to compliance with the covenants contained in the
Indenture. Any Additional Notes issued in the future would be part of the same
issue as the Notes offered hereby for purposes of the Indenture and would vote
on all matters with the Notes offered hereby. For purposes of this summary,
references to the Notes do not include any Additional Notes. Interest on the
Notes accrues at the rate of 10% per annum and is payable semi-annually in
arrears on May 15 and November 15 of each year, commencing on November 15,
1997, to Holders of record on the immediately preceding May 1 and November 1.
Interest on the Notes accrues from the most recent date to which interest has
been paid or, if no interest has been paid, from the date of original
issuance. Interest is computed on the basis of a 360-day year comprised of
twelve 30-day months. Principal, premium, if any, interest and Liquidated
Damages, if any, on the Notes is payable at the office or agency of the
Company maintained for such purpose within the City and State of New York or,
at the option of the Company, payment of interest and Liquidated Damages may
be made by check mailed to the Holders of the Notes at their respective
addresses set forth in the register of Holders of Notes; provided that all
payments of principal, premium, interest and Liquidated Damages with respect
to Notes the Holders of which have given wire transfer instructions to the
Company is required to be made by wire transfer of immediately available funds
to the accounts specified by the Holders thereof. Until otherwise designated
by the Company, the Company's office or agency in New York is the office of
the Trustee maintained for such purpose. The Notes were initially issued in
denominations of $1,000 and integral multiples thereof.
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SUBORDINATION
The payment of principal of, premium, if any, interest and Liquidated
Damages, if any, on the Notes is subordinated in right of payment, as set
forth in the Indenture, to the prior payment in full of all Senior Debt,
whether outstanding on the date of the Indenture or thereafter incurred.
Upon any distribution to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property, an
assignment for the benefit of creditors or any marshalling of the Company's
assets and liabilities, the holders of Senior Debt are entitled to receive
payment in full of all Obligations due in respect of such Senior Debt
(including interest after the commencement of any such proceeding at the rate
specified in the applicable Senior Debt) before the Holders of Notes will be
entitled to receive any payment with respect to the Notes, and until all
Obligations with respect to Senior Debt are paid in full, any distribution to
which the Holders of Notes would be entitled will be made to the holders of
Senior Debt (except that Holders of Notes may receive Permitted Junior
Securities and payments made from the trust described under the caption "--
Legal Defeasance and Covenant Defeasance").
The Company also may not make any payment upon or in respect of the Notes
(except in Permitted Junior Securities or from the trust described under the
caption "--Legal Defeasance and Covenant Defeasance") if (i) a default in the
payment of the principal of, premium, if any, or interest on Designated Senior
Debt occurs and is continuing beyond any applicable period of grace or (ii)
any other default occurs and is continuing with respect to Designated Senior
Debt that permits holders of the Designated Senior Debt as to which such
default relates to accelerate its maturity and the Trustee receives a notice
of such default (a "Payment Blockage Notice") from the Company or the holders
of any Designated Senior Debt. Payments on the Notes may and shall be resumed
(a) in the case of a payment default, upon the date on which such default is
cured or waived and (b) in the case of a nonpayment default, on the earlier of
the date on which such nonpayment default is cured or waived or 179 days after
the date on which the applicable Payment Blockage Notice is received, unless
the maturity of any Designated Senior Debt has been accelerated. No new period
of payment blockage may be commenced unless and until (i) 360 days have
elapsed since the effectiveness of the immediately prior Payment Blockage
Notice and (ii) all scheduled payments of principal, premium, if any, and
interest and Liquidated Damages, if any, on the Notes that have come due have
been paid in full in cash. No nonpayment default that existed or was
continuing on the date of delivery of any Payment Blockage Notice to the
Trustee shall be, or be made, the basis for a subsequent Payment Blockage
Notice.
The Indenture further requires that the Company promptly notify holders of
Senior Debt if maturity of the Notes is accelerated because of an Event of
Default.
As a result of the subordination provisions described above, in the event of
a liquidation or insolvency, Holders of Notes may recover less ratably than
creditors of the Company who are holders of Senior Debt. On a pro forma basis,
after giving effect to the Offering and the application of the net proceeds
therefrom, the principal amount of Senior Debt outstanding at December 31,
1996 would have been approximately $60.4 million. The Indenture limits,
subject to certain financial tests, the amount of additional Indebtedness,
including Senior Debt, that the Company and its Subsidiaries can incur. See
"--Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred
Stock."
SUBSIDIARY GUARANTEES
The Company's payment obligations under the Notes are jointly and severally
guaranteed (the "Subsidiary Guarantees") by the Guarantors. The Subsidiary
Guarantee of each Guarantor is subordinated to the prior payment in full of
all Senior Debt of such Guarantor, which would include approximately $1.8
million of Senior Debt outstanding as of March 31, 1997, and the amounts for
which the Guarantors are liable under the guarantees issued from time to time
with respect to Senior Debt. The obligations of each Guarantor under its
Subsidiary Guarantee is limited only by laws relating to fraudulent
conveyance. See "Risk Factors--Fraudulent Conveyance."
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<PAGE>
The Indenture provides that no Guarantor may consolidate with or merge with
or into (whether or not such Guarantor is the surviving Person) another
corporation, Person or entity unless (i) subject to the provisions of the
following paragraph, the Person formed by or surviving any such consolidation
or merger (if other than such Guarantor) assumes all the obligations of such
Guarantor pursuant to a supplemental indenture in form and substance
reasonably satisfactory to the Trustee, (ii) except in the case of a merger of
a Guarantor with or into the Company or another Subsidiary of the Company,
immediately after giving effect to such transaction, no Default or Event of
Default exists, (iii) except in the case of a merger of a Guarantor with or
into the Company or another Subsidiary of the Company, such Guarantor, or any
Person formed by or surviving any such consolidation or merger, would have
Consolidated Net Worth (immediately after giving effect to such transaction),
equal to or greater than the Consolidated Net Worth of such Guarantor
immediately preceding the transaction and (iv) except in the case of a merger
of a Guarantor with or into the Company or another Subsidiary of the Company,
the Company would be permitted by virtue of the Company's pro forma Fixed
Charge Coverage Ratio, immediately after giving effect to such transaction, to
incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge
Coverage Ratio test set forth in the covenant described under the caption "--
Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred
Stock."
The Indenture provides that in the event of a sale or other disposition of
all of the assets of any Guarantor, by way of merger, consolidation or
otherwise, or a sale or other disposition of all of the capital stock of any
Guarantor, then such Guarantor (in the event of a sale or other disposition,
by way of such a merger, consolidation or otherwise, of all of the capital
stock of such Guarantor) or the corporation acquiring the property (in the
event of a sale or other disposition of all of the assets of such Guarantor)
will be released and relieved of any obligations under its Subsidiary
Guarantee; provided that the Net Proceeds of such sale or other disposition
are applied in accordance with the applicable provisions of the Indenture. See
"--Repurchase at the Option of Holders--Asset Sales."
OPTIONAL REDEMPTION
The Notes are not redeemable at the Company's option prior to May 15, 2002.
Thereafter, the Notes will be subject to redemption at any time at the option
of the Company, in whole or in part, upon not less than 30 nor more than 60
days' notice, at the redemption prices (expressed as percentages of principal
amount) set forth below plus accrued and unpaid interest thereon and
Liquidated Damages, if any, to the applicable redemption date, if redeemed
during the twelve-month period beginning on May 15 of the years indicated
below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2002.......................... 105.3125%
2003.......................... 103.5416%
2004.......................... 101.7708%
2007 and thereafter........... 100.0000%
</TABLE>
Notwithstanding the foregoing, during the first 36 months after the date of
this Offering Memorandum, the Company may on any one or more occasions redeem
up to an aggregate of 35% of the original aggregate principal amount of Notes
at a redemption price of 110 5/8% of the principal amount thereof, plus
accrued and unpaid interest thereon and Liquidated Damages, if any, to the
redemption date, with the net cash proceeds of an initial public offering of
common stock of the Company; provided that at least 65% of the aggregate
principal amount of Notes originally issued remain outstanding immediately
after the occurrence of such redemption; and provided, further, that such
redemption shall occur within 60 days of the date of the closing of such
initial public offering.
SELECTION AND NOTICE
If less than all of the Notes are to be redeemed at any time, selection of
Notes for redemption will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which
the Notes are listed, or, if the Notes are not so listed, on a pro rata basis,
by lot or by such method as the Trustee
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shall deem fair and appropriate; provided that no Notes of $1,000 or less
shall be redeemed in part. Notices of redemption shall be mailed by first
class mail at least 30 but not more than 60 days before the redemption date to
each Holder of Notes to be redeemed at its registered address. Notices of
redemption may not be conditional. If any Note is to be redeemed in part only,
the notice of redemption that relates to 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. Notes called for
redemption become due on the date fixed for redemption. On and after the
redemption date, interest ceases to accrue on Notes or portions of them called
for redemption.
MANDATORY REDEMPTION
Except as set forth below under the caption "--Repurchase at the Option of
Holders," the Company is not required to make mandatory redemption or sinking
fund payments with respect to the Notes.
REPURCHASE AT THE OPTION OF HOLDERS
Change of Control
Upon the occurrence of a Change of Control, each Holder of Notes will have
the right to require the Company to repurchase all or any part (equal to
$1,000 or an integral multiple thereof) of such Holder's Notes pursuant to the
offer described below (the "Change of Control Offer") at an offer price in
cash equal to 101% of the aggregate principal amount thereof plus accrued and
unpaid interest thereon and Liquidated Damages, if any, to the date of
purchase (the "Change of Control Payment"). Within ten days following any
Change of Control, the Company will be required to mail a notice to each
Holder describing the transaction or transactions that constitute the Change
of Control and offering to repurchase Notes on the date specified in such
notice, which date shall be no earlier than 30 days and no later than 60 days
from the date such notice is mailed (the "Change of Control Payment Date"),
pursuant to the procedures required by the Indenture and described in such
notice. The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of the Notes as a result of a Change of Control.
On the Change of Control Payment Date, the Company will, to the extent
lawful, (1) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer, (2) deposit with the Paying Agent an
amount equal to the Change of Control Payment in respect of all Notes or
portions thereof so tendered and (3) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating
the aggregate principal amount of Notes or portions thereof being purchased by
the Company. The Paying Agent will promptly mail to each Holder of Notes so
tendered the Change of Control Payment for such Notes, and the Trustee will
promptly authenticate and mail (or cause to be transferred by book entry) to
each Holder a new Note equal in principal amount to any unpurchased portion of
the Notes surrendered, if any; provided that each such new Note will be in a
principal amount of $1,000 or an integral multiple thereof. The Company will
publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
The Change of Control provisions described above will be applicable whether
or not any other provisions of the Indenture are applicable. Except as
described above with respect to a Change of Control, the Indenture does not
contain provisions that permit the Holders of the Notes to require that the
Company repurchase or redeem the Notes in the event of a takeover,
recapitalization or similar transaction.
The Company will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set
forth in the Indenture applicable to a Change of Control Offer made by the
Company and purchases all Notes validly tendered and not withdrawn under such
Change of Control Offer.
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The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of the Company and its Subsidiaries taken as a whole. Although
there is a developing body of case law interpreting the phrase "substantially
all," there is no precise established definition of the phrase under
applicable law. Accordingly, the ability of a Holder of Notes to require the
Company to repurchase such Notes as a result of a sale, lease, transfer,
conveyance or other disposition of less than all of the assets of the Company
and its Subsidiaries taken as a whole to another Person or group may be
uncertain.
Asset Sales
The Indenture provides that the Company will not, and will not permit any of
its Subsidiaries to, consummate an Asset Sale unless (i) the Company (or the
Subsidiary, as the case may be) receives consideration at the time of such
Asset Sale at least equal to the fair market value (evidenced by a resolution
of the Board of Directors set forth in an Officers' Certificate delivered to
the Trustee) of the assets or Equity Interests issued or sold or otherwise
disposed of and (ii) at least 80.0% of the consideration therefor received by
the Company or such Subsidiary is in the form of cash; provided that the
amount of (x) any liabilities (as shown on the Company's or such Subsidiary's
most recent balance sheet) of the Company or any Subsidiary (other than
contingent liabilities and liabilities that are by their terms subordinated to
the Notes or any guarantee thereof) that are assumed by the transferee of any
such assets pursuant to a customary novation agreement that releases the
Company or such Subsidiary from further liability and (y) any securities,
notes or other obligations received by the Company or any such Subsidiary from
such transferee that are converted by the Company or such Subsidiary into cash
(to the extent of the cash received) within five business days of the receipt
thereof, shall be deemed to be cash for purposes of this provision.
Within 360 days after the receipt of any Net Proceeds from an Asset Sale,
the Company or its applicable Subsidiary may apply such Net Proceeds, at such
person's option, (a) to reduce Senior Debt, or (b) to the acquisition of a
controlling interest in another business, the making of a capital expenditure
or the acquisition of other long-term assets, in each case, in the same or a
similar line of business as the Company and its Subsidiaries were engaged in
on the date of the Indenture. Pending the final application of any such Net
Proceeds, the Company may temporarily reduce Senior Debt or otherwise invest
such Net Proceeds in any manner that is not prohibited by the Indenture. Any
Net Proceeds from Asset Sales that are not applied or invested as provided in
the first sentence of this paragraph and within the time period specified
therein will be deemed to constitute "Excess Proceeds." When the aggregate
amount of Excess Proceeds has exceeded $5.0 million, the Company will be
required to make an offer to all Holders of Notes (an "Asset Sale Offer") to
purchase the maximum principal amount of Notes that may be purchased out of
the Excess Proceeds, at an offer price in cash in an amount equal to 100.0% of
the principal amount thereof plus accrued and unpaid interest thereon and
Liquidated Damages, if any, to the date of purchase, in accordance with the
procedures set forth in the Indenture. To the extent that the aggregate amount
of Notes tendered pursuant to an Asset Sale Offer is less than the Excess
Proceeds, the Company may use any remaining Excess Proceeds for general
corporate purposes. If the aggregate principal amount of Notes surrendered by
Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall
select the Notes to be purchased on a pro rata basis. Upon completion of such
Asset Sale Offer, the amount of Excess Proceeds shall be reset at zero.
The Credit Agreement restricts the Company's ability to purchase Notes and
provides that certain change of control events with respect to the Company
would constitute a default under the Credit Agreement. Any future credit
agreements or other agreements relating to Senior Debt to which the Company
becomes a party may contain similar restrictions and provisions. In the event
a Change of Control Offer or an Asset Sale Offer is required by the Indenture
to be made at a time when the Company is prohibited by the Credit Agreement or
another senior debt agreement from purchasing Notes, the Company could seek
the consent of its lenders to the purchase of Notes or could attempt to
refinance the borrowings that contain such prohibition. If the Company does
not obtain such a consent or repay such borrowings, the Company will remain
prohibited from purchasing Notes. In such case, the Company's failure to
purchase tendered Notes would constitute an Event of Default under the
Indenture which would, in turn, constitute a default under the Credit
Agreement. In such circumstances, the subordination provisions in the
Indenture would likely restrict payments to the Holders of Notes.
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CERTAIN COVENANTS
Restricted Payments
The Indenture provides that the Company will not, and will not permit any of
its Subsidiaries to, directly or indirectly: (i) declare or pay any dividend
or make any other payment or distribution on account of the Company's or any
of its Subsidiaries' Equity Interests (including, without limitation, any
payment in connection with any merger or consolidation involving the Company)
or to the direct or indirect holders of the Company's or any of its
Subsidiaries' Equity Interests in their capacity as such (other than dividends
or distributions payable in Equity Interests (other than Disqualified Stock)
of the Company); (ii) purchase, redeem or otherwise acquire or retire for
value (including, without limitation, in connection with any merger or
consolidation involving the Company) any Equity Interests of the Company or
any direct or indirect parent of the Company or other Affiliate of the Company
that is not a Subsidiary of the Company (other than any such Equity Interests
owned by the Company or any Wholly Owned Subsidiary of the Company); (iii)
make any payment on or with respect to, or purchase, redeem, defease or
otherwise acquire or retire for value, any Indebtedness that is subordinated
to the Notes, except a payment of interest or principal at Stated Maturity; or
(iv) make any Restricted Investment (all such payments and other actions set
forth in clauses (i) through (iv) above being collectively referred to as
"Restricted Payments"), unless, at the time of and after giving effect to such
Restricted Payment:
(a) no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof;
(b) the Company would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made
at the beginning of the applicable four-quarter period, have been permitted
to incur at least $1.00 of additional Indebtedness pursuant to the Fixed
Charge Coverage Ratio test set forth in the first paragraph of the covenant
described under the caption "--Incurrence of Indebtedness and Issuance of
Preferred Stock"; and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Subsidiaries after
the date of the Indenture (excluding Restricted Payments permitted by
clauses (ii), (iii), (iv) and (vi) of the next succeeding paragraph), is
less than the sum of (i) 50.0% of the Consolidated Net Income of the
Company for the period (taken as one accounting period) from the beginning
of the first fiscal quarter commencing after the date of the Indenture to
the end of the Company's most recently ended fiscal quarter for which
internal financial statements are available at the time of such Restricted
Payment (or, if such Consolidated Net Income for such period is a deficit,
less 100.0% of such deficit), plus (ii) 100.0% of the aggregate net cash
proceeds received by the Company from the issue or sale since the date of
the Indenture of Equity Interests of the Company (other than Disqualified
Stock) or of Disqualified Stock or debt securities of the Company that have
been converted into such Equity Interests (other than Equity Interests (or
Disqualified Stock or convertible debt securities) sold to a Subsidiary of
the Company and other than Disqualified Stock or convertible debt
securities that have been converted into Disqualified Stock), plus (iii) to
the extent that any Restricted Investment that was made after the date of
the Indenture is sold for cash or otherwise liquidated or repaid for cash
or is sold for non-cash consideration and such non-cash consideration is
subsequently sold for cash, the lesser of (A) the cash return of capital
with respect to such Restricted Investment (less the cost of disposition,
if any) and (B) the initial amount of such Restricted Investment.
The foregoing provisions do not prohibit: (i) the payment of any dividend
within 60 days after the date of declaration thereof, if at said date of
declaration such payment would have complied with the provisions of the
Indenture; (ii) the redemption, repurchase, retirement, defeasance or other
acquisition of any subordinated Indebtedness or Equity Interests of the
Company in exchange for, or out of the net cash proceeds of the substantially
concurrent sale (other than to a Subsidiary of the Company) of, other Equity
Interests of the Company (other than any Disqualified Stock); provided that
the amount of any such net cash proceeds that are utilized for any such
redemption, repurchase, retirement, defeasance or other acquisition shall be
excluded from clause (c) (ii) of the preceding paragraph; (iii) the
defeasance, redemption, repurchase or other acquisition of subordinated
Indebtedness with the net cash proceeds from an incurrence of Permitted
Refinancing Indebtedness;
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(iv) the payment of any dividend by a Subsidiary of the Company to the holders
of its common Equity Interests on a pro rata basis; (v) the repurchase,
redemption or other acquisition or retirement for value of any Equity
Interests of the Company or any Subsidiary of the Company held by any member
of the Company's (or any of its Subsidiaries') management pursuant to any
management equity subscription agreement or stock option agreement; provided
that the aggregate price paid for all such repurchased, redeemed, acquired or
retired Equity Interests shall not exceed $250,000 in any twelve-month period
and no Default or Event of Default shall have occurred and be continuing
immediately after such transaction; (vi) payments by the Company or any
Subsidiary of the Company, directly or indirectly, to the Company's current or
future stockholder or stockholders to satisfy tax obligations in accordance
with the Tax Allocation Agreement as in effect on the date of the Indenture
("Tax Distributions"); and (vii) so long as no Default or Event of Default
shall have occurred and be continuing, other Restricted Payments in an
aggregate amount not to exceed $5.0 million since the date of the Indenture.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued by the Company or such
Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair
market value of any non-cash Restricted Payment shall be determined by the
Board of Directors, whose resolution with respect thereto shall be delivered
to the Trustee, such determination to be based upon an opinion or appraisal
issued by an accounting, appraisal or investment banking firm of national
standing if such fair market value exceeds $5.0 million. Not later than the
date of making any Restricted Payment, the Company shall deliver to the
Trustee an Officers' Certificate stating that such Restricted Payment is
permitted and setting forth the basis upon which the calculations required by
the covenant described under this caption were computed, together with a copy
of any fairness opinion or appraisal required by the Indenture.
Incurrence of Indebtedness and Issuance of Preferred Stock
The Indenture provides that the Company will not, and will not permit any of
its Subsidiaries to, directly or indirectly, create, incur, issue, assume,
guarantee or otherwise become directly or indirectly liable, contingently or
otherwise, with respect to (collectively, "incur") any Indebtedness (including
Acquired Debt) and that the Company will not issue any Disqualified Stock and
will not permit any of its Subsidiaries to issue any shares of preferred
stock; provided, however, that the Company or any of the Guarantors may incur
Indebtedness (including Acquired Debt), the Company may issue shares of
Disqualified Stock and the Company's Subsidiaries may issue shares of
preferred stock if the Fixed Charge Coverage Ratio for the Company's most
recently ended four full fiscal quarters for which internal financial
statements are available immediately preceding the date on which such
additional Indebtedness is incurred or such Disqualified Stock or Subsidiary
preferred stock is issued would have been at least 2.0 to 1, determined on a
pro forma basis (including a pro forma application of the net proceeds
therefrom), as if the additional Indebtedness had been incurred, or the
Disqualified Stock or Subsidiary preferred stock had been issued, as the case
may be, at the beginning of such four-quarter period.
The provisions of the first paragraph of this covenant do not apply to the
incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt"):
(i) the incurrence by the Company of Indebtedness under Credit Facilities
and the Guarantee thereof by the Guarantors; provided that the aggregate
principal amount of all Indebtedness (with letters of credit being deemed
to have a principal amount equal to the maximum potential liability of the
Company and its Subsidiaries thereunder) outstanding under all Credit
Facilities after giving effect to such incurrence, including all Permitted
Refinancing Indebtedness incurred to refund, refinance or replace any
Indebtedness incurred pursuant to this clause (i), does not exceed an
amount equal to the greater of (x) $200.0 million less the aggregate amount
of all Net Proceeds of Asset Sales that have been applied since the date of
the Indenture to repay Indebtedness pursuant to the covenant described
above under the caption "--Asset Sales" and (y) the Borrowing Base;
(ii) the incurrence by the Company and its Subsidiaries of the Existing
Indebtedness;
(iii) the incurrence by the Company and its Subsidiaries of Indebtedness
represented by the Notes and the Subsidiary Guarantees;
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(iv) the incurrence by the Company or any of its Subsidiaries of
additional Indebtedness represented by Capital 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, plant or equipment used in the
business of the Company or such Subsidiary, in an aggregate principal
amount at any one time outstanding under this clause (iv), including all
Permitted Refinancing Indebtedness incurred to refund, refinance or replace
any Indebtedness incurred pursuant to this clause (iv), not to exceed $5.0
million;
(v) the incurrence by the Company or any of its Subsidiaries of Permitted
Refinancing Indebtedness in exchange for, or the net proceeds of which are
used to refund, refinance or replace Indebtedness (other than intercompany
Indebtedness) that was permitted by the Indenture to be incurred;
(vi) the incurrence by the Company or any of its Subsidiaries of
intercompany Indebtedness between or among the Company and any of its
Wholly Owned Subsidiaries; provided, however, that (i) if the Company is
the obligor on such Indebtedness, such Indebtedness is expressly
subordinated to the prior payment in full in cash of all Obligations with
respect to the Notes and (ii)(A) any subsequent issuance or transfer of
Equity Interests that results in any such Indebtedness being held by a
Person other than the Company or a Wholly Owned Subsidiary and (B) any sale
or other transfer of any such Indebtedness to a Person that is not either
the Company or a Wholly Owned Subsidiary shall be deemed, in each case, to
constitute an incurrence of such Indebtedness by the Company or such
Subsidiary, as the case may be, that was not permitted by this clause (vi);
(vii) the incurrence by the Company of Hedging Obligations that are
incurred for the purpose of hedging interest rate risk with respect to
Indebtedness that is permitted by the terms of the Indenture to be
incurred;
(viii) the Guarantee by the Company or any of the Guarantors of
Indebtedness of the Company or a Subsidiary of the Company that was
permitted to be incurred by another provision of this covenant;
(ix) extensions, renewals or replacements of the Existing Guarantees on
terms that are no less favorable to the Holders of Notes than those
existing on the date of the Indenture;
(x) the incurrence by the Company or any of its Subsidiaries of
additional Indebtedness in an aggregate principal amount (or accredit
value, as applicable) at any time outstanding under this clause (x),
including all Permitted Refinancing Indebtedness incurred to refund,
refinance or replace any Indebtedness incurred pursuant to this clause (x),
not to exceed $5.0 million;
(xi) the incurrence by the Company or any of its Subsidiaries of
Indebtedness incurred in respect of performance, surety and similar bonds
provided by the Company or any of its Subsidiaries in the ordinary course
of business; and
(xii) the incurrence by the Company or any of its Subsidiaries of
Indebtedness in respect of letters of credit relating to workers'
compensation claims and self-insurance or similar requirements in the
ordinary course of business.
For purposes of determining compliance with this covenant, in the event that
an item of Indebtedness meets the criteria of more than one of the categories
of Permitted Debt described in clauses (i) through (xii) above or is entitled
to be incurred pursuant to the first paragraph of this covenant, the Company
shall, in its sole discretion, classify or reclassify such item of
Indebtedness in any manner that complies with this covenant, and at any given
time such item of Indebtedness will be treated as having been incurred
pursuant to only one of such clauses or pursuant to the first paragraph
hereof. Accrual of interest, the accretion of accredit value and the payment
of interest in the form of additional Indebtedness will not be deemed to be an
incurrence of Indebtedness for purposes of this covenant. The Company shall
not be deemed to be in breach of this covenant solely as the result of
fluctuations in currency exchange rates.
Sale and Leaseback Transactions
The Indenture provides that the Company will not, and will not permit any of
its Subsidiaries to, enter into any sale and leaseback transaction; provided
that the Company may enter into a sale and leaseback transaction if
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(i) the Company could have (a) incurred Indebtedness in an amount equal to the
Attributable Debt relating to such sale and leaseback transaction pursuant to
the Fixed Charge Coverage Ratio test set forth in the first paragraph of the
covenant described under the caption "--Incurrence of Additional Indebtedness
and Issuance of Preferred Stock" and (b) incurred a Lien to secure such
Indebtedness pursuant to the covenant described under the caption "--Liens,"
(ii) the gross cash proceeds of such sale and leaseback transaction are at
least equal to the fair market value (as determined in good faith by the Board
of Directors and set forth in an Officers' Certificate delivered to the
Trustee) of the property that is the subject of such sale and leaseback
transaction and (iii) the transfer of assets in such sale and leaseback
transaction is permitted by, and the Company applies the proceeds of such
transaction in compliance with, the covenant described under the caption "--
Repurchase at the Option of Holders--Asset Sales."
Liens
The Indenture provides that the Company will not, and will not permit any of
its Subsidiaries to, directly or indirectly, create, incur, assume or suffer
to exist any Lien securing Indebtedness on any asset now owned or hereafter
acquired, or any income or profits therefrom, or assign or convey any right to
receive income therefrom, except Permitted Liens.
Dividend and Other Payment Restrictions Affecting Subsidiaries
The Indenture provides that the Company will not, and will not permit any of
its Subsidiaries to, directly or indirectly, create or otherwise cause or
suffer to exist or become effective any encumbrance or restriction on the
ability of any Subsidiary to (i)(a) pay dividends or make any other
distributions to the Company or any of its Subsidiaries (1) on its Capital
Stock or (2) with respect to any other interest or participation in, or
measured by, its profits or (b) pay any indebtedness owed to the Company or
any of its Subsidiaries, (ii) make loans or advances to the Company or any of
its Subsidiaries or (iii) transfer any of its properties or assets to the
Company or any of its Subsidiaries, except for such encumbrances or
restrictions existing under or by reason of (a) the Indenture and the Notes,
(b) applicable law, (c) any instrument governing Indebtedness or Capital Stock
of a Person acquired by the Company or any of its Subsidiaries or any
instrument governing Indebtedness secured by assets acquired by the Company or
any of its Subsidiaries, in each case, as in effect at the time of such
acquisition (except to the extent such Indebtedness was incurred in connection
with or in contemplation of such acquisition), which encumbrance or
restriction is not applicable to any Person, or the properties or assets of
any Person, other than the Person, or the property or assets of the Person, or
the property or asset so acquired, provided that, in the case of Indebtedness,
such Indebtedness was permitted by the terms of the Indenture to be incurred,
(d) customary non-assignment provisions in leases entered into in the ordinary
course of business and consistent with past practices, (e) purchase money
obligations for property acquired in the ordinary course of business that
impose restrictions of the nature described in clause (iii) above on the
property so acquired, (f) Permitted Refinancing Indebtedness, provided that
the restrictions contained in the agreements governing such Permitted
Refinancing Indebtedness are no more restrictive than those contained in the
agreements governing the Indebtedness being refinanced or (g) customary non-
assignment provisions in documents entered into by a Subsidiary of the Company
in connection with a receivables or equipment financing that impose
restrictions of the nature described in clause (iii) above on the property
securing such financings. The Indenture does not limit the Company's ability
to make payments to Mr. Hendricks pursuant to the Tax Allocation Agreement.
Merger, Consolidation, or Sale of Assets
The Indenture provides that the Company may not consolidate or merge with or
into (whether or not the Company is the surviving corporation), or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially
all of its properties or assets in one or more related transactions, to
another corporation, Person or entity unless (i) the Company is the surviving
corporation or the entity or the Person formed by or surviving any such
consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation organized or existing under the laws of the United
States, any state thereof or the District of Columbia, (ii) the entity or
Person formed by or surviving any such consolidation or merger (if other than
the Company) or the entity or Person to which such sale, assignment, transfer,
lease, conveyance or other disposition shall have been made assumes all the
obligations of
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the Company under the Notes and the Indenture pursuant to a supplemental
indenture in a form reasonably satisfactory to the Trustee, (iii) immediately
after such transaction no Default or Event of Default exists and (iv) except
in the case of a merger of the Company with or into a Wholly Owned Subsidiary
of the Company, the Company or the entity or Person formed by or surviving any
such consolidation or merger (if other than the Company), or to which such
sale, assignment, transfer, lease, conveyance or other disposition shall have
been made (A) will have Consolidated Net Worth immediately after the
transaction equal to or greater than the Consolidated Net Worth of the Company
immediately preceding the transaction and (B) will, at the time of such
transaction and after giving pro forma effect thereto as if such transaction
had occurred at the beginning of the applicable four-quarter period, be
permitted to incur at least $1.00 of additional Indebtedness pursuant to the
Fixed Charge Coverage Ratio test set forth in the first paragraph of the
covenant described under the caption "--Incurrence of Indebtedness and
Issuance of Preferred Stock."
Transactions with Affiliates
The Indenture provides that the Company will not, and will not permit any of
its Subsidiaries to, make any payment to, or sell, lease, transfer or
otherwise dispose of any of its properties or assets to, or purchase any
property or assets from, or enter into or make or amend any transaction,
contract, agreement, understanding, loan, advance or guarantee with, or for
the benefit of, any Affiliate (each of the foregoing, an "Affiliate
Transaction"), unless (i) such Affiliate Transaction is on terms that are no
less favorable to the Company or the relevant Subsidiary than those that would
have been obtained in a comparable transaction by the Company or such
Subsidiary with an unrelated Person and (ii) the Company delivers to the
Trustee (a) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of $1.0
million, a resolution of the Board of Directors set forth in an Officers'
Certificate certifying that such Affiliate Transaction complies with clause
(i) above and that such Affiliate Transaction has been approved by a majority
of the disinterested members of the Board of Directors and (b) with respect to
any Affiliate Transaction or series of related Affiliate Transactions
involving aggregate consideration in excess of $5.0 million, an opinion as to
the fairness to the Holders of such Affiliate Transaction from a financial
point of view issued by an accounting, appraisal or investment banking firm of
national standing; provided that the following shall not be deemed to be
Affiliate Transactions: (1) the Related Party Leases as in effect on the date
of the Indenture or as amended (as long as an amended Related Party Lease is
on terms no less favorable to the Holders of the Notes than those existing on
the date of the Indenture) and any transactions pursuant thereto, (2) the
Employment Agreement as in effect on the date of the Indenture or as amended
(as long as the amended Employment Agreement is on terms no less favorable to
the Holders of the Notes than those existing on the date of the Indenture) and
any transactions pursuant thereto, (3) any other employment arrangement
entered into by the Company or any of its Subsidiaries with anyone other than
the Company's President and Chief Executive Officer in the ordinary course of
business that provides for aggregate annual compensation in an amount less
than or equal to $250,000 and any transactions pursuant thereto, (4)
transactions between or among the Company and/or its Wholly-Owned
Subsidiaries, (5) Restricted Payments that are permitted by the provisions of
the Indenture described above under the caption "--Restricted Payments"
including payments to Mr. Hendricks pursuant to the Tax Allocation Agreement,
(6) the Distribution (as defined under the caption "Use of Proceeds"), (7)
Permitted Real Estate Loans, (8) transfers of receivables or equipment to a
Subsidiary of the Company for the sole purpose of effecting a receivables or
equipment financing for the benefit of the Company and (9) extensions,
renewals or replacements of the Existing Guarantees on terms that are no less
favorable to the Holders of the Notes than those existing on the date of the
Indenture. For purposes of determining whether any particular transaction or
series of related transactions with an Affiliate relating to purchases or
placements of insurance exceeds the $1.0 million or $5.0 million thresholds
set forth in the first sentence of this covenant, the gross amounts paid to
the Affiliate shall be calculated net of any amounts paid by such Affiliate to
third parties (including claimants, legal and claims management services,
insurers or reinsurers) on behalf of the Company or one of its Subsidiaries.
LIMITATION ON ISSUANCES AND SALES OF CAPITAL STOCK OF WHOLLY OWNED
SUBSIDIARIES
The Indenture provides that the Company (i) will not, and will not permit
any Wholly Owned Subsidiary of the Company to, transfer, convey, sell, lease
or otherwise dispose of any Capital Stock of any Wholly Owned
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Subsidiary of the Company to any Person (other than the Company or a Wholly
Owned Subsidiary of the Company), unless (a) such transfer, conveyance, sale,
lease or other disposition is of all the Capital Stock of such Wholly Owned
Subsidiary and (b) the cash Net Proceeds from such transfer, conveyance, sale,
lease or other disposition are applied in accordance with the covenant
described under the caption "--Repurchase at the Option of Holders--Asset
Sales" and (ii) will not permit any Wholly Owned Subsidiary of the Company to
issue any of its Equity Interests (other than, if necessary, shares of its
Capital Stock constituting directors' qualifying shares) to any Person other
than to the Company or a Wholly Owned Subsidiary of the Company.
Business Activities
The Company will not, and will not permit any of its Subsidiaries to, engage
in any business other than Permitted Businesses, except to such extent as
would not be material to the Company and its Subsidiaries taken as a whole.
No Senior Subordinated Debt
The Indenture provides that (i) the Company will not incur, create, issue,
assume, guarantee or otherwise become liable for any Indebtedness that is
subordinate or junior in right of payment to any Senior Debt and senior in any
respect in right of payment to the Notes and (ii) no Guarantor will incur,
create, assume, guarantee or otherwise become liable for any Indebtedness of
such Guarantor that is subordinate or junior in right of payment to any
Indebtedness of such Guarantor and senior in right of payment to the Guarantee
of such Guarantor.
Additional Subsidiary Guarantees
The Indenture provides that if the Company or any of its Subsidiaries shall
acquire or create another Subsidiary after the date of the Indenture, then
such newly acquired or created Subsidiary shall execute a Subsidiary Guarantee
and deliver an opinion of counsel, in accordance with the terms of the
Indenture.
Payments for Consent
The Indenture provides that neither the Company nor any of its Subsidiaries
will, directly or indirectly, pay or cause to be paid any consideration,
whether by way of interest, fee or otherwise, to any Holder of any Notes for
or as an inducement to any consent, waiver or amendment of any of the terms or
provisions of the Indenture or the Notes unless such consideration is offered
to be paid or is paid to all Holders of the Notes that consent, waive or agree
to amend in the time frame set forth in the solicitation documents relating to
such consent, waiver or agreement.
Reports
The Indenture provides that, whether or not required by the rules and
regulations of the Commission, so long as any Notes are outstanding and
commencing with information relating to the fiscal quarter ended June 30,
1997, the Company will furnish to the Holders of Notes (i) all quarterly and
annual financial information that would be required to be contained in a
filing with the Commission on Forms 10-Q and 10-K if the Company were required
to file such Forms, including a "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and, with respect to the annual
information only, a report thereon by the Company's certified independent
accountants and (ii) all current reports that would be required to be filed
with the Commission on Form 8-K if the Company were required to file such
reports, in each case, within the time periods specified in the Commission's
rules and regulations. In addition, commencing after the consummation of the
Exchange Offer, whether or not required by the rules and regulations of the
Commission, the Company will file
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a copy of all such information and reports with the Commission for public
availability (unless the Commission will not accept such a filing) within the
time periods specified in the Commission's rules and regulations, and make
such information available to securities analysts and prospective investors
upon their reasonable request. In addition, each of the Company and the
Guarantors has agreed that, for so long as any Notes remain outstanding, it
will furnish to the Holders and to securities analysts and prospective
investors, upon their request, the information required to be delivered
pursuant to Rule 144A(d)(4) under the Securities Act.
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default: (i) default for 30 days in the payment when due of interest on, or
Liquidated Damages with respect to, the Notes (whether or not prohibited by
the subordination provisions of the Indenture); (ii) default in payment when
due of the principal of or premium, if any, on the Notes (whether or not
prohibited by the subordination provisions of the Indenture); (iii) failure by
the Company to comply with the provisions described under the captions "--
Repurchase at the Option of Holders--Change of Control," "--Repurchase at the
Option of Holders--Asset Sales," "--Certain Covenants--Restricted Payments" or
"--Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred
Stock"; (iv) failure by the Company for 60 days after notice to comply with
any of its other agreements in the Indenture or the Notes; (v) default under
any mortgage, indenture or instrument under which there may be issued or by
which there may be secured or evidenced any Indebtedness for money borrowed by
the Company or any of its Subsidiaries (or the payment of which is guaranteed
by the Company or any of its Subsidiaries), whether such Indebtedness or
guarantee now exists, or is created after the date of the Indenture, which
default (a) is caused by a failure to pay principal of or premium, if any, or
interest on such Indebtedness prior to the expiration of the grace period
provided in such Indebtedness on the date of such default (a "Payment
Default") or (b) results in the acceleration of such Indebtedness prior to its
express maturity and, in each case, the principal amount of any such
Indebtedness, together with the principal amount of any other such
Indebtedness under which there has been a Payment Default or the maturity of
which has been so accelerated, aggregates $5.0 million or more; (vi) failure
by the Company or any of its Subsidiaries to pay final judgments aggregating
in excess of $5.0 million, which judgments are not paid, discharged or stayed
for a period of 60 days; (vii) certain events of bankruptcy or insolvency with
respect to the Company or any of its Subsidiaries; and (viii) except as
permitted by the Indenture, any Subsidiary Guarantee shall be held in any
judicial proceeding to be unenforceable or invalid or shall cease for any
reason to be in full force and effect or any Guarantor, or any Person acting
on behalf of any Guarantor, shall deny or disaffirm its obligations under its
Subsidiary Guarantee.
If any Event of Default occurs and is continuing, the Trustee or the Holders
of at least 25.0% in principal amount of the then outstanding Notes may
declare all of the Notes to be due and payable immediately. Notwithstanding
the foregoing, in the case of an Event of Default arising from certain events
of bankruptcy or insolvency with respect to the Company, any Significant
Subsidiary or any group of Subsidiaries that, taken together, would constitute
a Significant Subsidiary, all outstanding Notes will become due and payable
without further action or notice. A Holder of a Note may pursue a remedy with
respect to the Indenture only if (i) the Holder of a Note gives the Trustee
written notice of a continuing Event of Default; (ii) the Holders of at least
25% in principal amount of the then outstanding Notes make a written request
to the Trustee to pursue the remedy; (iii) such Holder or Holders offer to,
and if requested, provide to the Trustee indemnity satisfactory to the Trustee
against any loss, liability or expense; (iv) the Trustee does not comply with
the request within 60 days after receipt of the request and the offer, and if
requested, the provision of indemnity; and (v) during such 60-day period the
Holders of a majority in principal amount of the then outstanding Notes do not
give the Trustee a direction inconsistent with such request. Otherwise, the
Trustee is solely responsible for the enforcement against the Company and the
Guarantors of the terms of the Indenture. Subject to certain limitations,
Holders of a majority in principal amount of the then outstanding Notes may
direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Holders of the Notes notice of any continuing Default or Event
of Default (except a Default or Event of Default relating to the payment of
principal or interest) if it determines that withholding notice is in their
interest.
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In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the Company would have
had to pay if the Company then had elected to redeem the Notes pursuant to the
optional redemption provisions of the Indenture, an equivalent premium shall
also become and be immediately due and payable to the extent permitted by law
upon the acceleration of the Notes. If an Event of Default occurs prior to May
15, 2002, by reason of any willful action (or inaction) taken (or not taken)
by or on behalf of the Company with the intention of avoiding the prohibition
on redemption of the Notes prior to May 15, 2002, then the premium specified
in the Indenture shall also become immediately due and payable to the extent
permitted by law upon the acceleration of the Notes.
The Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of
the Notes waive any existing Default or Event of Default and its consequences
under the Indenture except a continuing Default or Event of Default in the
payment of interest on, or the principal of, the Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default to deliver to the Trustee a
statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of the Company,
as such, shall have any liability for any obligations of the Company under the
Notes, the Indenture or for any claim based on, in respect of, or by reason
of, such obligations or their creation. Each Holder of Notes by accepting a
Note waives and releases all such liability. The waiver and release are part
of the consideration for issuance of the Notes. Such waiver may not be
effective to waive liabilities under the federal securities laws and it is the
view of the Commission that such a waiver is against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding Notes ("Legal
Defeasance") except for (i) the rights of Holders of outstanding Notes to
receive payments in respect of the principal of, premium, if any, and interest
and Liquidated Damages, if any, on such Notes when such payments are due from
the trust referred to below, (ii) the Company's obligations with respect to
the Notes concerning issuing temporary Notes, registration of Notes,
mutilated, destroyed, lost or stolen Notes and the maintenance of an office or
agency for payment and money for security payments held in trust, (iii) the
rights, powers, trusts, duties and immunities of the Trustee, and the
Company's obligations in connection therewith and (iv) the Legal Defeasance
provisions of the Indenture. In addition, the Company may, at its option and
at any time, elect to have the obligations of the Company released with
respect to certain covenants that are described in the Indenture ("Covenant
Defeasance") and thereafter any omission to comply with such obligations shall
not constitute a Default or Event of Default with respect to the Notes. In the
event Covenant Defeasance occurs, certain events (not including non-payment,
bankruptcy, receivership, rehabilitation and insolvency events) described
under the caption "--Events of Default" will no longer constitute an Event of
Default with respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit
of the Holders of the Notes, cash in U.S. dollars, non-callable Government
Securities, or a combination thereof, in such amounts as will be sufficient,
in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, premium, if any, interest and Liquidated
Damages, if any, on the outstanding Notes on the stated maturity or on the
applicable redemption date, as the case may be, and the Company must specify
whether the Notes are being defeased to maturity or to a particular redemption
date; (ii) in the case of Legal Defeasance, the Company must have delivered to
the
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Trustee an opinion of counsel in the United States reasonably acceptable to
the Trustee confirming that (A) the Company has received from, or there has
been published by, the Internal Revenue Service a ruling or (B) since the date
of the Indenture, there has been a change in the applicable federal income tax
law, in either case to the effect that, and based thereon such opinion of
counsel shall confirm that, the Holders of the outstanding Notes will not
recognize income, gain or loss for federal income tax purposes as a result of
such Legal Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case
if such Legal Defeasance had not occurred; (iii) in the case of Covenant
Defeasance, the Company must have delivered to the Trustee an opinion of
counsel in the United States reasonably acceptable to the Trustee confirming
that the Holders of the outstanding Notes will not recognize income, gain or
loss for federal income tax purposes as a result of such Covenant Defeasance
and will be subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such Covenant
Defeasance had not occurred; (iv) no Default or Event of Default can have
occurred and be continuing on the date of such deposit (other than a Default
or Event of Default resulting from the borrowing of funds to be applied to
such deposit) or, insofar as Events of Default from bankruptcy or insolvency
events are concerned, at any time in the period ending on the 91st day after
the date of deposit; (v) such Legal Defeasance or Covenant Defeasance will not
result in a breach or violation of, or constitute a default under any material
agreement or instrument (other than the Indenture) to which the Company or any
of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound; (vi) the Company must have delivered to the Trustee an
opinion of counsel to the effect that after the 91st day following the
deposit, the trust funds will not be subject to the effect of any applicable
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally; (vii) the Company must deliver to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the
intent of preferring the Holders of Notes over the other creditors of the
Company with the intent of defeating, hindering, delaying or defrauding
creditors of the Company or others; and (viii) the Company must deliver to the
Trustee an Officers' Certificate and an opinion of counsel, each stating that
all conditions precedent provided for relating to the Legal Defeasance or the
Covenant Defeasance have been complied with.
TRANSFER AND EXCHANGE
A Holder may transfer or New Notes in accordance with the Indenture. The
Registrar and the Trustee may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and the Company may require a
Holder to pay any taxes and fees required by law or permitted by the
Indenture. The Company will not be required to transfer or exchange any Note
selected for redemption. Also, the Company will not be required to transfer or
exchange any Note for a period of 15 days before a selection of Notes to be
redeemed.
The registered Holder of a Note is treated as the owner of such Note for all
purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Indenture or
the Notes may be amended or supplemented with the consent of the Holders of at
least a majority in principal amount of the Notes then outstanding (including,
without limitation, consents obtained in connection with a purchase of, or
tender offer or exchange offer for, Notes), and any existing default or
compliance with any provision of the Indenture or the Notes may be waived with
the consent of the Holders of a majority in principal amount of the Notes then
outstanding (including, without limitation, consents obtained in connection
with a tender offer or exchange offer for Notes).
Without the consent of each Holder affected, an amendment, supplement or
waiver may not (with respect to any Notes held by a non-consenting Holder):
(i) reduce the principal amount of Notes whose Holders must consent to an
amendment, supplement or waiver, (ii) reduce the principal of or change the
fixed maturity of any Note or alter the provisions with respect to the
redemption of the Notes (other than provisions relating to the covenants
described above under the caption "--Repurchase at the Option of Holders"),
(iii) reduce the rate of
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or change the time for payment of interest on any Note, (iv) waive a Default
or Event of Default in the payment of principal of or premium, if any, or
interest on the Notes (except a rescission of acceleration of the Notes by the
Holders of at least a majority in aggregate principal amount of the Notes and
a waiver of the payment default that resulted from such acceleration), (v)
make any Note payable in money other than that stated in the Notes, (vi) make
any change in the provisions of the Indenture relating to waivers of past
Defaults or Events of Default or the rights of Holders of Notes to receive
payments of principal of or premium, if any, or interest on the Notes, (vii)
waive a redemption payment with respect to any Note (other than a payment
required by one of the covenants described above under the caption "--
Repurchase at the Option of Holders") or (viii) make any change in the
foregoing amendment and waiver provisions. In addition, any amendment to the
provisions of the Indenture which relate to subordination will require the
consent of the Holders of at least 75.0% in aggregate principal amount of the
Notes then outstanding if such amendment would adversely affect the rights of
Holders of Notes.
Notwithstanding the foregoing, without the consent of any Holder of Notes,
the Company and the Trustee may amend or supplement the Indenture or the Notes
to cure any ambiguity, defect or inconsistency, to provide for uncertificated
Notes in addition to or in place of certificated Notes, to provide for the
assumption of the Company's obligations to Holders of Notes in the case of a
merger or consolidation, to make any change that would provide any additional
rights or benefits to the Holders of Notes or that does not adversely affect
the legal rights under the Indenture of any such Holder, or to comply with
requirements of the Commission in order to effect or maintain the
qualification of the Indenture under the Trust Indenture Act.
CONCERNING THE TRUSTEE
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 as security or otherwise. The Trustee is permitted to engage in
other transactions; however, if it acquires any conflicting interest it must
eliminate such conflict within 90 days, apply to the Commission for permission
to continue, or resign.
The Holders of a majority in principal amount of the then outstanding Notes
have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
occurs (which is not 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 Holder of Notes unless such Holder offers to the Trustee
security and indemnity satisfactory to the Trustee against any loss, liability
or expense.
ADDITIONAL INFORMATION
Anyone who receives this Offering Memorandum may obtain a copy of the
Indenture and Registration Rights Agreement without charge by writing to
American Builders & Contractors Supply Co., Inc., One ABC Parkway, Beloit, WI
53511, Attention: Kendra A. Story.
BOOK-ENTRY, DELIVERY AND FORM
Except as set forth in the next paragraph, the Notes to be resold as set
forth herein were initially issued in the form of one Global Note (the "Global
Note"). The Global Note was deposited on the date of the closing of the sale
of the Notes offered hereby (the "Closing Date") with, or on behalf of, The
Depository Trust Company (the "Depositary") and registered in the name of Cede
& Co., as nominee of the Depositary (such nominee being referred to herein as
the "Global Note Holder").
Notes that are issued as described below under the caption "--Certificated
Securities" will be issued in the form of registered definitive certificates
(the "Certificated Securities"). Upon the transfer of Certificated Securities,
such Certificated Securities may, unless the Global Note has previously been
exchanged for Certificated Securities, be exchanged for an interest in the
Global Note representing the principal amount of Notes being transferred.
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The Depositary is a limited-purpose trust company that was created to hold
securities for its participating organizations (collectively, the
"Participants" or the "Depositary's Participants") and to facilitate the
clearance and settlement of transactions in such securities between
Participants through electronic book-entry changes in accounts of its
Participants. The Depositary's Participants include securities brokers and
dealers (including the Initial Purchasers), banks and trust companies,
clearing corporations and certain other organizations. Access to the
Depositary's system is also available to other entities such as banks,
brokers, dealers and trust companies (collectively, the "Indirect
Participants" or the "Depositary's Indirect Participants") that clear through
or maintain a custodial relationship with a Participant, either directly or
indirectly. Persons who are not Participants may beneficially own securities
held by or on behalf of the Depositary only through the Depositary's
Participants or the Depositary's Indirect Participants.
Pursuant to procedures established by the Depositary (i) upon deposit of the
Global Note, the Depositary credited the accounts of Participants designated
by the Initial Purchasers with portions of the principal amount of the Global
Note and (ii) ownership of the Notes evidenced by the Global Note were shown
on, and the transfer of ownership thereof was effected through, records
maintained by the Depositary (with respect to the interests of the
Depositary's Participants), the Depositary's Participants and the Depositary's
Indirect Participants. Prospective purchasers are advised that the laws of
some states require that certain persons take physical delivery in definitive
form of securities that they own. Consequently, the ability to transfer Notes
evidenced by the Global Note is limited to such extent. For certain other
restrictions on the transferability of the Notes, see "Notice to Investors."
So long as the Global Note Holder is the registered owner of any Notes, the
Global Note Holder is considered to be the sole Holder under the Indenture of
any Notes evidenced by the Global Note. Beneficial owners of Notes evidenced
by the Global Note are not considered to be the owners or Holders thereof
under the Indenture for any purpose, including with respect to the giving of
any directions, instructions or approvals to the Trustee thereunder. Neither
the Company nor the Trustee have any responsibility or liability for any
aspect of the records of the Depositary or for maintaining, supervising or
reviewing any records of the Depositary relating to the Notes.
Payments in respect of the principal of, premium, if any, interest and
Liquidated Damages, if any, on any Notes registered in the name of the Global
Note Holder on the applicable record date are payable by the Trustee to or at
the direction of the Global Note Holder in its capacity as the registered
Holder under the Indenture. Under the terms of the Indenture, the Company and
the Trustee may treat the persons in whose names Notes, including the Global
Note, are registered as the owners thereof for the purpose of receiving such
payments. 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 Notes. The Company believes, however, that it is currently the
policy of the Depositary to immediately credit the accounts of the relevant
Participants with such payments, in amounts proportionate to their respective
holdings of beneficial interests in the relevant security as shown on the
records of the Depositary. Payments by the Depositary's Participants and the
Depositary's Indirect Participants to the beneficial owners of Notes are
governed by standing instructions and customary practice and are the
responsibility of the Depositary's Participants or the Depositary's Indirect
Participants.
Certificated Securities
Subject to certain conditions, any person having a beneficial interest in
the Global Note may, upon request to the Trustee, exchange such beneficial
interest for Notes in the form of Certificated Securities. Upon any such
issuance, the Trustee is required to register such Certificated Securities in
the name of, and cause the same to be delivered to, such person or persons (or
any nominee thereof). All such certificated Notes would be subject to the
legend requirements described herein under "Notice to Investors." In addition,
if (i) the Company notifies the Trustee in writing that the Depositary is no
longer willing or able to act as a depositary and the Company is unable to
locate a qualified successor within 90 days or (ii) the Company, at its
option, notifies the Trustee in writing that it elects to cause the issuance
of Notes in the form of Certificated Securities under the Indenture, then,
upon surrender by the Global Note Holder of its Global Note, Notes in such
form will be issued to each person that the Global Note Holder and the
Depositary identify as being the beneficial owner of the related Notes.
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Neither the Company nor the Trustee will be liable for any delay by the
Global Note Holder or the Depositary in identifying the beneficial owners of
Notes and the Company and the Trustee may conclusively rely on, and will be
protected in relying on, instructions from the Global Note Holder or the
Depositary for all purposes.
Same Day Settlement and Payment
The Indenture requires that payments in respect of the Notes represented by
the Global Note (including principal, premium, if any, interest and Liquidated
Damages, if any) be made by wire transfer of immediately available funds to
the accounts specified by the Global Note Holder. With respect to Certificated
Securities, the Company will make all payments of principal, premium, if any,
interest and Liquidated Damages, if any, by wire transfer of immediately
available funds to the accounts specified by the Holders thereof or, if no
such account is specified, by mailing a check to each such Holder's registered
address. The Company expects that secondary trading in the Certificated
Securities will also be settled in immediately available funds.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as
any other capitalized terms used herein for which no definition is provided.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person,
including, without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled
by" and "under common control with"), as used with respect to any Person,
shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of such Person, whether
through the ownership of voting securities, by agreement or otherwise;
provided that beneficial ownership of 10% or more of the voting securities of
a Person shall be deemed to be control.
"Amcraft" means Amcraft Building Products Co., Inc.
"Asset Sale" means (i) the sale, lease, conveyance or other disposition of
any assets or rights (including, without limitation, by way of a sale and
leaseback) other than sales of inventory in the ordinary course of business
consistent with past practices (provided that the sale, lease, conveyance or
other disposition of all or substantially all of the assets of the Company and
its Subsidiaries taken as a whole will be governed by the provisions of the
Indenture described under the caption "--Repurchase at the Option of Holders--
Change of Control" and/or the provisions described under the caption "--
Certain Covenants--Merger, Consolidation, or Sale of Assets" and not by the
provisions of the Asset Sale covenant) and (ii) the issue or sale by the
Company or any of its Subsidiaries of Equity Interests of any of the Company's
Subsidiaries, in the case of either clause (i) or (ii), whether in a single
transaction or a series of related transactions (a) that have a fair market
value in excess of $500,000 or (b) for net proceeds in excess of $500,000.
Notwithstanding the foregoing, the following items will not be deemed to be
Asset Sales: (i) a transfer of assets by the Company to a Wholly Owned
Subsidiary or by a Wholly Owned Subsidiary to the Company or to another Wholly
Owned Subsidiary, (ii) an issuance of Equity Interests by a Wholly Owned
Subsidiary to the Company or to another Wholly Owned Subsidiary, (iii) a
Restricted Payment that is permitted by the covenant described under the
caption "--Certain Covenants--Restricted Payments" and (iv) the sale of up to
$5.0 million of real estate since the date of the Indenture.
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"Attributable Debt" in respect of a sale and leaseback transaction means, at
the time of determination, the present value (discounted at the rate of
interest implicit in such transaction, determined in accordance with GAAP) of
the obligation of the lessee for net rental payments during the remaining term
of the lease included in such sale and leaseback transaction (including any
period for which such lease has been extended or may, at the option of the
lessor, be extended).
"Borrowing Base" means, as of any date, an amount equal to the sum of (a)
85.0% of the face amount of all accounts receivable owned by the Company and
its Subsidiaries as of such date that are not more than 90 days past due and
(b) 65.0% of the book value of all inventory owned by the Company and its
Subsidiaries as of such date, all calculated on a consolidated basis and in
accordance with GAAP. To the extent that information is not available as to
the amount of accounts receivable or inventory or trade payables as of a
specific date, the Company may utilize the most recent available information
for purposes of calculating the Borrowing Base.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that
would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or limited) and
(iv) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of,
the issuing Person.
"Cash Equivalents" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof having maturities of not more than six
months from the date of acquisition, (iii) certificates of deposit and
eurodollar time deposits with maturities of six months or less from the date
of acquisition, bankers' acceptances with maturities not exceeding six months
and overnight bank deposits, in each case with any domestic commercial bank
having capital and surplus in excess of $500.0 million and a Keefe Bank Watch
Rating of "B" or better, (iv) repurchase obligations with a term of not more
than seven days for underlying securities of the types described in clauses
(ii) and (iii) above entered into with any financial institution meeting the
qualifications specified in clause (iii) above, and (v) commercial paper
having the highest rating obtainable from Moody's Investors Service, Inc. or
Standard & Poor's Corporation and in each case maturing within six months
after the date of acquisition.
"Change of Control" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all
or substantially all of the assets of the Company and its Subsidiaries taken
as a whole to any "person" (as such term is used in Section 13(d)(3) of the
Exchange Act) other than the Principals or their Related Parties, (ii) the
adoption of a plan relating to the liquidation or dissolution of the Company,
(iii) the consummation of any transaction (including, without limitation, any
merger or consolidation) the result of which is that any "person" (as defined
above), other than the Principals and their Related Parties, becomes the
"beneficial owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under
the Exchange Act, except that a person shall be deemed to have "beneficial
ownership" of all securities that such person has the right to acquire,
whether such right is currently exercisable or is exercisable only upon the
occurrence of a subsequent condition), directly or indirectly, of more than
the Specified Percentage of the Voting Stock of the Company (measured by
voting power rather than number of shares), (iv) the first day on which a
majority of the members of the Board of Directors of the Company are not
Continuing Directors or (v) any transaction the result of which is (x) if such
transaction occurs prior to the first sale of common equity of the Company
pursuant to a registration statement under the Securities Act that results in
at least 25.0% of the then outstanding common equity of the Company being sold
to the public, that the Principals and their Related Parties beneficially own,
directly or indirectly, less than 51.0% of the Voting Stock of the Company
(measured by voting power rather than number of shares) beneficially owned by
the Principals, directly or indirectly, on the date of the Indenture, and (y)
if such transaction occurs thereafter, that any "person" (as defined above)
(other than the Principals and their Related Parties) owns, directly or
indirectly,
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more of the Voting Stock of the Company (measured by voting power rather than
number of shares) than the Principals and their Related Parties. For purposes
of this definition, any transfer of an equity interest of an entity that was
formed for the purpose of acquiring Voting Stock of the Company will be deemed
to be a transfer of such portion of such Voting Stock as corresponds to the
portion of the equity of such entity that has been so transferred.
"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus (i) an amount
equal to any extraordinary loss plus any net loss realized in connection with
an Asset Sale (to the extent such losses were deducted in computing such
Consolidated Net Income), plus (ii) provision for taxes based on income or
profits of such Person and its Subsidiaries for such period (to the extent
that such provision for taxes was included in computing such Consolidated Net
Income), plus (iii) consolidated interest expense of such Person and its
Subsidiaries for such period, whether paid or accrued and whether or not
capitalized (including, without limitation, amortization of debt issuance
costs and original discount, non-cash interest payments, the interest
component of any deferred payment obligations, the interest component of all
payments associated with Capital Lease Obligations, imputed interest with
respect to Attributable Debt, commissions, discounts and other fees and
charges incurred in respect of letter of credit or bankers' acceptance
financings, and net payments (if any) pursuant to Hedging Obligations) (to the
extent that any such expense was deducted in computing such Consolidated Net
Income), plus (iv) depreciation, amortization (including amortization of
goodwill and other intangibles but excluding amortization of prepaid cash
expenses that were paid in a prior period) and other non-cash expenses
(excluding any such non-cash expense to the extent that it represents an
accrual of or reserve for cash expenses in any future period or amortization
of a prepaid cash expense that was paid in a prior period) of such Person and
its Subsidiaries for such period (to the extent that such depreciation,
amortization and other non-cash expenses were deducted in computing such
Consolidated Net Income), plus (v) one-third of the Consolidated Lease Expense
of such Person for such period (to the extent that such Consolidated Lease
Expense was deducted in computing such Consolidated Net Income), minus (vi)
non-cash items increasing such Consolidated Net Income for such period, in
each case, on a consolidated basis and determined in accordance with GAAP.
Notwithstanding the foregoing, the provision for taxes on the income or
profits of, and the depreciation, amortization and other non-cash expenses of,
a Subsidiary of the referent Person shall be added to Consolidated Net Income
to compute Consolidated Cash Flow only to the extent that a corresponding
amount would be permitted at the date of determination to be dividended to the
Company by such Subsidiary without prior governmental approval (that has not
been obtained), and without direct or indirect restriction pursuant to the
terms of its charter and all agreements, instruments, judgments, decrees,
orders, statutes, rules and governmental regulations applicable to that
Subsidiary or its stockholders.
"Consolidated Lease Expense" means, with respect to any Person for any
period, the aggregate rental obligations of such Person and its consolidated
Subsidiaries for operating leases determined on a consolidated basis in
accordance with GAAP payable in respect of such period under leases of real
and/or personal property (net of income from subleases thereof, but including
taxes, insurance, maintenance and similar expenses that the lessee is
obligated to pay under the terms of such leases), whether or not such
obligations are reflected as liabilities or commitments on a consolidated
balance sheet of such Person and its Subsidiaries or in the notes thereto.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Subsidiaries for such
period, on a consolidated basis, determined in accordance with GAAP and
reduced by the amount of Tax Distributions that would be permitted since the
date of the Indenture (whether or not such Tax Distributions have actually
been distributed); provided that (i) the Net Income (but not loss) of any
Person that is not a Subsidiary or that is accounted for by the equity method
of accounting shall be included only to the extent of the amount of dividends
or distributions paid in cash to the referent Person or a Wholly Owned
Subsidiary thereof, (ii) the Net Income of any Subsidiary shall be excluded to
the extent that the declaration or payment of dividends or similar
distributions by that Subsidiary of that Net Income is not at the date of
determination permitted without any prior governmental approval (that has not
been obtained) or, directly or indirectly, by operation of the terms of its
charter or any agreement, instrument,
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judgment, decree, order, statute, rule or governmental regulation applicable
to that Subsidiary or its stockholders, (iii) the Net Income of any Person
acquired in a pooling of interests transaction for any period prior to the
date of such acquisition shall be excluded and (iv) the cumulative effect of a
change in accounting principles shall be excluded.
"Consolidated Net Worth" means, with respect to any Person as of any date,
the sum of (i) the consolidated equity of the common stockholders of such
Person and its consolidated Subsidiaries as of such date plus (ii) the
respective amounts reported on such Person's balance sheet as of such date
with respect to any series of preferred stock (other than Disqualified Stock)
that by its terms is not entitled to the payment of dividends unless such
dividends may be declared and paid only out of net earnings in respect of the
year of such declaration and payment, but only to the extent of any cash
received by such Person upon issuance of such preferred stock, less (x) all
write-ups (other than write-ups resulting from foreign currency translations
and write-ups of tangible assets of a going concern business made within 12
months after the acquisition of such business) subsequent to the date of the
Indenture in the book value of any asset owned by such Person or a
consolidated Subsidiary of such Person and (y) all investments as of such date
in unconsolidated Subsidiaries and in Persons that are not Subsidiaries
(except, in each case, Permitted Investments), all of the foregoing determined
in accordance with GAAP.
"Continuing Directors" means, as of any date of determination, any member of
the Board of Directors of the Company who (i) was a member of such Board of
Directors on the date of the Indenture or (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election.
"Credit Agreement" means that certain Credit Agreement, dated as of July 1,
1993, by and among the Company, NationsBank of Texas, N.A. and American
National Bank and Trust Company of Chicago, providing for up to $200.0 million
of revolving credit borrowings, including any related notes, guarantees,
collateral documents, instruments and agreements executed in connection
therewith, and in each case as amended, modified, renewed, refunded, replaced
or refinanced from time to time.
"Credit Facilities" means, with respect to the Company or any of its
Subsidiaries, one or more debt facilities (including, without limitation, the
Credit Agreement) or commercial paper facilities with banks or other
institutional lenders providing for revolving credit loans, term loans,
receivables financing (including through the sale of receivables to such
lenders or to special purpose entities formed to borrow from such lenders
against such receivables) or letters of credit, in each case, as amended,
restated, modified, renewed, refunded, replaced or refinanced in whole or in
part from time to time. Indebtedness under Credit Facilities outstanding on
the date on which Notes are first issued and authenticated under the Indenture
shall be deemed to have been incurred on such date in reliance on the
exception provided by clause (i) of the definition of Permitted Debt.
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"Designated Senior Debt" means (i) any Indebtedness outstanding under the
Credit Agreement and (ii) any other series of Senior Debt permitted under the
Indenture the aggregate principal amount of which is $15.0 million or more and
that has been designated by the Company as "Designated Senior Debt."
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable at the option of the holder thereof), or upon the happening of
any event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or redeemable at the option of the Holder thereof, in
whole or in part, on or prior to the date that is 91 days after the date on
which the Notes mature.
"Employment Agreement" means the Employment Agreement dated as of May 1,
1997, between Kenneth A. Hendricks and American Builders & Contractors Supply
Co., Inc.
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"Existing Guarantees" means the obligations of the Company outstanding under
guarantees and letters of credit in respect of certain outstanding
Indebtedness of its Affiliates in an aggregate principal amount of up to $4.3
million.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Existing Indebtedness" means up to $32.0 million in aggregate principal
amount of Indebtedness of the Company and its Subsidiaries (other than
Indebtedness under the Credit Agreement) in existence on the date of the
Indenture, until such amounts are repaid.
"Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person for such period. In the event that the
Company or any of its Subsidiaries incurs, assumes, Guarantees or redeems any
Indebtedness (other than revolving credit borrowings) or issues or redeems
preferred stock subsequent to the commencement of the period for which the
Fixed Charge Coverage Ratio is being calculated but prior to the date on which
the event for which the calculation of the Fixed Charge Coverage Ratio is made
(the "Calculation Date"), then the Fixed Charge Coverage Ratio shall be
calculated giving pro forma effect to such incurrence, assumption, Guarantee
or redemption of Indebtedness, or such issuance or redemption of preferred
stock, as if the same had occurred at the beginning of the applicable four-
quarter reference period. In addition, for purposes of making the computation
referred to above, (i) acquisitions that have been made by the Company or any
of its Subsidiaries, including through mergers or consolidations and including
any related financing transactions, during the four-quarter reference period
or subsequent to such reference period and on or prior to the Calculation Date
shall be deemed to have occurred on the first day of the four-quarter
reference period, and Consolidated Cash Flow for such reference period shall
be calculated without giving effect to clause (iii) of the proviso set forth
in the definition of Consolidated Net Income, (ii) the Consolidated Cash Flow
attributable to discontinued operations, as determined in accordance with
GAAP, and operations or businesses disposed of prior to the Calculation Date,
shall be excluded and (iii) the Fixed Charges attributable to discontinued
operations, as determined in accordance with GAAP, and operations or
businesses disposed of prior to the Calculation Date, shall be excluded, but
only to the extent that the obligations giving rise to such Fixed Charges will
not be obligations of the referent Person or any of its Subsidiaries following
the Calculation Date.
"Fixed Charges" means, with respect to any Person for any period, the sum,
without duplication, of (i) the consolidated interest expense of such Person
and its Subsidiaries for such period, whether paid or accrued (including,
without limitation, amortization of debt issuance costs and original issue
discount, non-cash interest payments, the interest component of any deferred
payment obligations, the interest component of all payments associated with
Capital Lease Obligations, imputed interest with respect to Attributable Debt,
commissions, discounts and other fees and charges incurred in respect of
letter of credit or bankers' acceptance financings, and net payments (if any)
pursuant to Hedging Obligations), (ii) the consolidated interest of such
Person and its Subsidiaries that was capitalized during such period, (iii) any
interest expense on Indebtedness of another Person that is Guaranteed by such
Person or one of its Subsidiaries or secured by a Lien on assets of such
Person or one of its Subsidiaries (whether or not such Guarantee or Lien is
called upon), (iv) one-third of the Consolidated Lease Expense of such Person
for such period and (v) the product of (a) all dividend payments, whether or
not in cash, on any series of preferred stock of such Person or any of its
Subsidiaries, other than dividend payments on Equity Interests payable solely
in Equity Interests of the Company (other than Disqualified Stock), times (b)
a fraction, the numerator of which is one and the denominator of which is one
minus the then current combined federal, state and local statutory tax rate of
such Person, expressed as a decimal, in each case, on a consolidated basis and
in accordance with GAAP.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect from time to time.
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"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof), of all or any part of any Indebtedness.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates.
"Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced
by bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of
the purchase price of any property or representing any Hedging Obligations,
except any such balance that constitutes an accrued expense or trade payable,
if and to the extent any of the foregoing indebtedness (other than letters of
credit and Hedging Obligations) would appear as a liability upon a balance
sheet of such Person prepared in accordance with GAAP, as well as all
indebtedness of others secured by a Lien on any asset of such Person (whether
or not such indebtedness is assumed by such Person) and, to the extent not
otherwise included, the Guarantee by such Person of any indebtedness of any
other Person. The amount of any Indebtedness outstanding as of any date shall
be (i) the accreted value thereof, in the case of any Indebtedness that does
not require current payments of interest or (ii) the principal amount thereof,
together with any interest thereon that is more than 30 days past due, in the
case of any other Indebtedness.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If the Company or any Subsidiary of the Company sells or otherwise disposes of
any Equity Interests of any direct or indirect Subsidiary of the Company such
that, after giving effect to any such sale or disposition, such Person is no
longer a Subsidiary of the Company, the Company shall be deemed to have made
an Investment on the date of any such sale or disposition equal to the fair
market value of the Equity Interests of such Subsidiary not sold or disposed
of in an amount determined as provided in the final paragraph of the covenant
described under the caption "--Certain Covenants--Restricted Payments."
"Lien" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law (including
any conditional sale or other title retention agreement, any lease in the
nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement
under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction).
"Mule-Hide" means Mule-Hide Products Co., Inc.
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but
not loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or (b)
the disposition of any securities by such Person or any of its Subsidiaries or
the extinguishment of any Indebtedness of such Person or any of its
Subsidiaries and (ii) any extraordinary or nonrecurring gain (but not loss),
together with any related provision for taxes on such extraordinary or
nonrecurring gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by the Company or
any of its Subsidiaries in respect of any Asset Sale (including, without
limitation, any cash received upon the sale or other disposition of
71
<PAGE>
any non-cash consideration received in any Asset Sale), net of the direct
costs relating to such Asset Sale (including, without limitation, legal,
accounting and investment banking fees, and sales commissions) and any
relocation expenses incurred as a result thereof, taxes paid or payable as a
result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements), and any reserve for adjustment
in respect of the sale price of such asset or assets established in accordance
with GAAP.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Permitted Businesses" means any business conducted by the Company or any of
its Subsidiaries as of the date of the Indenture, any other business related
to the distribution or manufacture of commercial or residential building
products, or any business reasonably related to the foregoing.
"Permitted Investments" means (a) any Investment in the Company or in a
Subsidiary of the Company, (b) any Investment in Cash Equivalents, (c) any
Investment by the Company or any Subsidiary of the Company in a Person, if as
a result of such Investment (i) such Person becomes a Subsidiary of the
Company or (ii) such Person is merged, consolidated or amalgamated with or
into, or transfers or conveys substantially all of its assets to, or is
liquidated into, the Company or a Subsidiary of the Company, (d) any
Restricted Investment made as a result of the receipt of non-cash
consideration from an Asset Sale that was made pursuant to and in compliance
with the covenant described above under the caption "--Repurchase at the
Option of Holders--Asset Sales," (e) any acquisition of assets to the extent
such assets are acquired solely in exchange for the issuance of Equity
Interests (other than Disqualified Stock) of the Company, (f) Permitted Real
Estate Loans, (g) extensions or renewals of the Existing Guarantees on terms
that are no less favorable to the Holders of Notes than those existing on the
date of the Indenture, and (h) other Investments in any Person having an
aggregate fair market value (measured on the date each such Investment was
made and without giving effect to subsequent changes in value), when taken
together with all other Investments made pursuant to this clause (h) that are
at the time outstanding, not to exceed $1.0 million.
"Permitted Junior Securities" means Equity Interests in the Company or debt
securities that are subordinated to all Senior Debt (and any debt securities
issued in exchange for Senior Debt) to substantially the same extent as, or to
a greater extent than, the Notes are subordinated to Senior Debt pursuant to
the Indenture.
"Permitted Liens" means (i) Liens on assets of the Company or any of its
Subsidiaries securing Senior Debt that was permitted by the terms of the
Indenture to be incurred, (ii) Liens in favor of the Company, (iii) Liens on
property of a Person existing at the time such Person is merged into or
consolidated with the Company or any Subsidiary of the Company, provided that
such Liens were in existence prior to the contemplation of such merger or
consolidation and do not extend to any assets other than those of the Person
merged into or consolidated with the Company, (iv) Liens on property existing
at the time of acquisition thereof by the Company or any Subsidiary of the
Company, provided that such Liens were in existence prior to the contemplation
of such acquisition, (v) Liens to secure the performance of statutory
obligations, surety or appeal bonds, performance bonds or other obligations of
a like nature incurred in the ordinary course of business, (vi) Liens to
secure Indebtedness (including Capital Lease Obligations) permitted to be
incurred pursuant to clause (iv) of the second paragraph of the covenant
described under the caption "--Certain Covenants--Incurrence of Indebtedness
and Issuance of Preferred Stock," covering only the assets acquired with such
Indebtedness, (vii) Liens existing on the date of the Indenture, (viii) Liens
for taxes, assessments or governmental charges or claims that are not yet
delinquent or that are being contested in good faith by appropriate
proceedings promptly instituted and diligently concluded, provided that any
reserve or other appropriate provision as shall be required in conformity with
GAAP shall have been made therefor, (ix) liens relating to trade payables of
the Company or its Subsidiaries and (x) Liens incurred in the ordinary course
of business of the Company or any Subsidiary of the Company with respect to
obligations that do not exceed $5.0 million at any one time outstanding and
that (a) are not incurred in connection with the borrowing of money or the
obtaining of advances or credit (other than trade credit in the ordinary
course of business) and (b) do not in the aggregate materially detract from
the value of the property or materially impair the use thereof in the
operation of business by the Company or such Subsidiary.
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<PAGE>
"Permitted Real Estate Loan" means a loan from the Company or any of its
Subsidiaries to an Affiliate of the Company (i) the proceeds of which are used
by such Affiliate to finance the purchase or improvement of real estate which
is or will, upon such purchase or improvement, be leased to the Company or one
of its Subsidiaries on terms comparable to those that would occur in an arm's-
length transaction, (ii) that is evidenced by a note, payable upon the demand
of the Company or such Subsidiary, (iii) the interest on which is payable in
cash semi-annually at an interest rate at least equal to the prime rate of
NationsBank of Texas, N.A., announced from time to time, (iv) with full
recourse to such Affiliate, its assets and its properties, and (v) the
aggregate principal amount of which at any one time outstanding (when taken
together with all other Permitted Real Estate Loans) does not exceed the
greater of (x) $10.0 million and (y) $10.0 million plus 10.0% of the
Consolidated Net Income of the Company for the period (taken as one accounting
period) from the beginning of the first quarter commencing after the date of
the Indenture and ending on the last day of the most recently ended fiscal
quarter.
"Permitted Refinancing Indebtedness" means any Indebtedness of the Company
or any of its Subsidiaries issued in exchange for, or the net proceeds of
which are used to extend, refinance, renew, replace, defease or refund other
Indebtedness of the Company or any of its Subsidiaries; provided that: (i) the
principal amount (or accredit value, if applicable) of such Permitted
Refinancing Indebtedness does not exceed the principal amount of (or accredit
value, if applicable), plus accrued interest on, the Indebtedness so extended,
refinanced, renewed, replaced, defeased or refunded (plus the amount of
reasonable expenses incurred in connection therewith); (ii) such Permitted
Refinancing Indebtedness has a final maturity date later than the final
maturity date of, and has a Weighted Average Life to Maturity equal to or
greater than the Weighted Average Life to Maturity of, the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded; (iii) if the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded is subordinated in right of payment to the Notes, such Permitted
Refinancing Indebtedness has a final maturity date later than the final
maturity date of, and is subordinated in right of payment to, the Notes on
terms at least as favorable to the Holders of Notes as those contained in the
documentation governing the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; and (iv) such Indebtedness is incurred either
by the Company or by the Subsidiary who is the obligor on the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded.
"Principals" means Kenneth A. Hendricks, Diane Hendricks, any lineal
descendant of either of them and the spouse of Kenneth A. Hendricks (if other
than Diane Hendricks).
"Related Party" with respect to any Principal means any trust, corporation,
partnership or other entity, the beneficiaries, stockholders, partners, owners
or Persons beneficially holding a majority and controlling interest of which
consist of such Principal and/or one or more other Principals.
"Related Party Leases" means the leases identified as such under the caption
"Certain Transactions."
"Restricted Investment" means any Investment other than a Permitted
Investment.
"Senior Debt" means (i) all Indebtedness of the Company or any of its
Subsidiaries outstanding under Credit Facilities and all Hedging Obligations
with respect thereto, (ii) any other Indebtedness permitted to be incurred by
the Company or any of its Subsidiaries under the terms of the Indenture,
unless the instrument under which such Indebtedness is incurred expressly
provides that it is on a parity with or subordinated in right of payment to
the Notes or any Guarantor's Subsidiary Guarantee of the Notes and (iii) all
Obligations with respect to the foregoing. Notwithstanding anything to the
contrary in the foregoing, Senior Debt does not include (w) any liability for
federal, state, local or other taxes owed or owing by the Company or any of
its Subsidiaries, (x) any Indebtedness of the Company or any of its
Subsidiaries to any Subsidiary or other Affiliate of the Company, (y) any
trade payables or (z) any Indebtedness that is incurred in violation of the
Indenture (other than Indebtedness under the Credit Agreement that is incurred
on the basis of a representation by the Company to the applicable lenders that
it is permitted to incur such Indebtedness under the Indenture).
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Act, as such Regulation is in effect on the date hereof.
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"Specified Percentage" means at any time at which the Principals and their
Related Parties collectively own more than 50.0% of the Voting Stock of the
Company (measured by voting power rather than number of shares), 50.0% and at
any time thereafter, 35%.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations
to repay, redeem or repurchase any such interest or principal prior to the
date originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total
voting power of shares of Capital Stock entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers
or trustees thereof is at the time owned or controlled, directly or
indirectly, by such Person or one or more of the other Subsidiaries of that
Person (or a combination thereof) and (ii) any partnership (a) the sole
general partner or the managing general partner of which is such Person or a
Subsidiary of such Person or (b) the only general partners of which are such
Person or of one or more Subsidiaries of such Person (or any combination
thereof). With respect to the Company, the term "Subsidiary" shall include,
but not be limited to, Mule-Hide and Amcraft.
"Tax Allocation Agreement" means the Tax Allocation Agreement dated as of
May 1, 1997, among the Company, Mule-Hide, Amcraft and Kenneth A. Hendricks.
"Tax Distributions" has the meaning set forth in the covenant described
under the caption "--Certain Covenants--Restricted Payments."
"Voting Stock" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (ii) the then outstanding
principal amount of such Indebtedness.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such Person
all of the outstanding Capital Stock or other ownership interests of which
(other than directors' qualifying shares) shall at the time be owned, directly
or indirectly, by such Person or by one or more Wholly Owned Subsidiaries of
such Person.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion is based upon current provisions of the Internal
Revenue Code of 1986, as amended, applicable Treasury regulations, judicial
authority and administrative rulings and practice. There can be no assurance
that the Internal Revenue Service (the "Service") will not take a contrary
view, and no ruling from the Service has been or will be sought. Legislative,
judicial or administrative changes or interpretations may be forthcoming that
could alter or modify the statements and conditions set forth herein. Any such
changes or interpretations may or may not be retroactive and could affect the
tax consequences to holders. Certain holders (including insurance companies,
tax-exempt organizations, financial institutions, broker-dealers, foreign
corporations and persons who are not citizens or residents of the United
States) may be subject to special rules not discussed below. The Company
recommends that each holder consult such holder's own tax advisor as to the
particular tax consequences of exchanging such holder's Notes for New Notes,
including the applicability and effect of any state, local or foreign tax
laws.
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The exchange of the Notes for New Notes pursuant to the Exchange Offer will
not be treated as an "exchange" for federal income tax purposes because the
New Notes should not be considered to differ materially in kind or extent from
the Notes. Rather, the New Notes received by a holder will be treated as a
continuation of the Notes in the hands of such holder. As a result there will
be no federal income tax consequences to holders exchanging Notes for New
Notes pursuant to the Exchange Offer. If, however, the exchange of Notes for
New Notes were treated as an "exchange" for federal income tax purposes, such
exchange should constitute a recapitalization for federal income tax purposes.
Holders exchanging Notes for New Notes pursuant to such recapitalization
should not recognize any gain or loss upon the exchange.
PLAN OF DISTRIBUTION
Each Participating Broker-Dealer that receives New Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Notes. This Prospectus,
as it may be amended or supplemented from time to time, may be used by a
Participating Broker-Dealer in connection with resales of New Notes received
in exchange for Notes where such Notes were acquired as a result of market-
making activities or other trading activities. The Company has agreed that,
for a period of one year after the Expiration Date, it will make this
Prospectus available to any Participating Broker-Dealer for use in connection
with any such resale; provided, however, that the Company and the Subsidiary
Guarantors will have no obligation to amend or supplement this Prospectus
unless the Company has received written notice from a Participating Broker-
Dealer of their prospectus delivery requirements under the Securities Act
within fifteen business days following consummation of the Exchange Offer. In
addition, until , 1997, all dealers effecting transactions in
the New Notes may be required to deliver a prospectus.
The Company will not receive any proceeds from any sales of the New Notes by
Participating Broker-Dealers. New Notes received by Participating 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 purchaser or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such Participating Broker-Dealer and/or the purchasers of
any such New Notes. Any Participating Broker-Dealer that resells the 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
Participating Broker-Dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period of one year after the Expiration Date the Company will promptly
send additional copies of this Prospectus and any amendment or supplement to
this Prospectus to any Participating Broker-Dealer that requests such
documents in the Letter of Transmittal.
LEGAL MATTERS
Certain legal matters in connection with the Exchange Offer will be passed
upon for the Company by Kirkland & Ellis, Chicago, Illinois (a partnership
which includes professional corporations).
EXPERTS
The combined financial statements of the Company as of December 31, 1995 and
1996 and for each of the three years in the period ended December 31, 1996
appearing in this Prospectus and Registration Statement have been audited by
Ernst & Young LLP, independent auditors, as stated in their report thereon
appearing elsewhere herein, and are included in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
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AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC. AND CERTAIN AFFILIATES
INDEX TO COMBINED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Ernst & Young LLP, Independent Auditors......................... F-2
Combined Balance Sheets as of December 31, 1995 and 1996.................. F-3
Combined Statements of Income and Retained Earnings for the years ended
December 31, 1994, 1995 and 1996......................................... F-4
Combined Statements of Cash Flows for the years ended December 31, 1994,
1995 and 1996............................................................ F-5
Notes to Combined Financial Statements.................................... F-6
Condensed Combined Balance Sheets (Unaudited) as of December 31, 1996 and
March 31, 1997........................................................... F-12
Condensed Combined Statements of Operations and Retained Earnings
(Unaudited) for the three months ended March 31, 1996 and 1997........... F-13
Condensed Combined Statements of Cash Flows (Unaudited) for the three
months ended March 31, 1996 and 1997..................................... F-14
Notes to Condensed Combined Financial Statements (Unaudited).............. F-15
</TABLE>
F-1
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors
American Builders & Contractors Supply Co., Inc. and Certain Affiliates
We have audited the accompanying combined balance sheets of American
Builders & Contractors Supply Co., Inc., Mule-Hide Products Co., Inc., Amcraft
Building Products Co., Inc., and Hendricks Real Estate Properties, Inc.
(collectively, the Company) as of December 31, 1995 and 1996, and the related
combined statements of income and retained earnings and cash flows for each of
the three years in the period ended December 31, 1996. 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 combined financial statements referred to above present
fairly, in all material respects, the combined financial position of the
Company at December 31, 1995 and 1996, and the combined results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting
principles.
Ernst & Young LLP
Milwaukee, Wisconsin
March 21, 1997, except as to Note 12,
the date of which is May 7, 1997
F-2
<PAGE>
AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC. AND CERTAIN AFFILIATES
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
ASSETS 1995 1996
------ ------------ ------------
<S> <C> <C>
Current assets:
Cash............................................... $ 2,742,560 $ 2,630,337
Accounts receivable, less allowance for doubtful
accounts of $3,904,000--1995 and $4,325,000--1996. 73,132,506 92,360,063
Inventories........................................ 79,296,857 95,778,586
Prepaid expenses and other......................... 1,401,916 1,544,128
------------ ------------
Total current assets............................. 156,573,839 192,313,114
Property and equipment, net (Note 4)................. 43,175,637 49,944,290
Net receivable from sole stockholder (Note 6)........ 3,971,801 5,149,185
Intangible assets, net of accumulated amortization of
$166,014--1995 and $433,198--1996................... 1,029,760 3,311,146
Security deposits.................................... 547,514 1,117,855
Other assets......................................... 17,580 112,723
------------ ------------
$205,316,131 $251,948,313
============ ============
<CAPTION>
LIABILITIES AND STOCKHOLDER'S EQUITY
------------------------------------
<S> <C> <C>
Current Liabilities:
Accounts payable................................... $ 49,739,317 $ 57,700,357
Accrued liabilities................................ 11,329,607 14,104,151
Current portion of long-term debt (Note 3)......... 5,325,782 8,519,814
------------ ------------
Total current liabilities........................ 66,394,706 80,324,322
Long-term debt (Note 3).............................. 113,397,201 139,663,817
Commitments and contingent liabilities (Notes 5, 6
and 7)
Stockholder's equity:
Common stock (Note 9).............................. 109,001 109,001
Additional paid-in capital......................... 1,215,053 1,215,053
Retained earnings.................................. 24,200,170 30,636,120
------------ ------------
Total stockholder's equity....................... 25,524,224 31,960,174
------------ ------------
$205,316,131 $251,948,313
============ ============
</TABLE>
See accompanying notes.
F-3
<PAGE>
AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC. AND CERTAIN AFFILIATES
COMBINED STATEMENTS OF INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
1994 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
Net sales............................ $513,766,337 $638,821,047 $789,102,559
Cost of sales........................ 403,031,776 501,026,597 615,626,559
------------ ------------ ------------
Gross profit......................... 110,734,561 137,794,450 173,476,000
Operating expenses:
Distribution centers (Note 5)...... 90,481,269 110,859,487 140,299,777
General and administrative......... 7,980,835 10,475,757 12,016,139
------------ ------------ ------------
98,462,104 121,335,244 152,315,916
------------ ------------ ------------
Operating income..................... 12,272,457 16,459,206 21,160,084
Other income (expense):
Interest income.................... 554,255 652,978 689,205
Interest expense................... (6,020,714) (9,745,252) (11,146,057)
------------ ------------ ------------
(5,466,459) (9,092,274) (10,456,852)
------------ ------------ ------------
Income before provision for income
taxes............................... 6,805,998 7,366,932 10,703,232
Provision for income taxes........... 260,181 338,386 329,509
Net income........................... 6,545,817 7,028,546 10,373,723
Retained earnings at beginning of
year................................ 16,840,699 20,702,521 24,200,170
Distributions to sole stockholder.... (2,683,995) (3,530,897) (3,937,773)
------------ ------------ ------------
Retained earnings at end of year... $ 20,702,521 $ 24,200,170 $ 30,636,120
============ ============ ============
</TABLE>
See accompanying notes.
F-4
<PAGE>
AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC. AND CERTAIN AFFILIATES
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Operating activities
Net income........................... $ 6,545,817 $ 7,028,546 $10,373,723
Adjustments to reconcile net income to
cash provided by (used in) operating
activities:
Depreciation......................... 5,110,982 6,639,351 8,750,803
Amortization......................... 82,765 168,745 328,614
Provision for doubtful accounts...... 2,647,326 3,164,991 3,603,631
Loss on disposal of property and
equipment........................... 296,285 103,428 17,412
Change in operating assets and
liabilities:
Accounts receivable................ (8,770,617) (19,061,181) (18,328,728)
Inventories........................ (11,318,137) (13,033,846) (9,832,405)
Prepaid expenses and other......... (756,380) (101,276) (142,212)
Security deposits.................. 2,435 (77,921) (570,341)
Other assets....................... 131,978 (143,021) (179,614)
Accounts payable................... 5,721,049 6,929,014 7,961,040
Accrued liabilities................ (903,505) 2,101,027 2,774,544
----------- ----------- -----------
Cash provided by (used in)
operating activities............ (1,210,002) (6,282,143) 4,756,467
Investing activities
Additions to property and equipment.. (13,830,265) (19,922,034) (14,697,361)
Proceeds from disposal of property
and equipment....................... 702,301 445,121 688,209
Acquisition of businesses............ (2,238,045) (5,571,511) (12,684,977)
----------- ----------- -----------
Cash used in investing
activities...................... (15,366,009) (25,048,424) (26,694,129)
Financing activities
Net borrowings under line of credit.. 16,038,040 23,524,699 23,381,086
Proceeds from long-term debt......... 5,817,993 14,983,005 9,734,539
Payments on long-term debt........... (2,745,451) (4,147,483) (6,175,029)
Net change in receivable from/payable
to sole stockholder................. 990,347 1,487,500 (1,177,384)
Distributions paid to sole
stockholder......................... (2,683,995) (3,530,897) (3,937,773)
Deferred financing costs............. (235,695) -- --
----------- ----------- -----------
Cash provided by financing
activities...................... 17,181,239 32,316,824 21,825,439
----------- ----------- -----------
Net increase (decrease) in cash........ 605,228 986,257 (112,223)
Cash at beginning of year........ 1,151,075 1,756,303 2,742,560
----------- ----------- -----------
Cash at end of year.............. $ 1,756,303 $ 2,742,560 $ 2,630,337
=========== =========== ===========
Supplemental disclosures of cash flow
information are as follows:
Cash paid for interest............... $ 5,894,415 $ 9,355,205 $10,982,497
Cash paid for income taxes........... 233,053 344,151 345,459
</TABLE>
See accompanying notes.
F-5
<PAGE>
AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC. AND CERTAIN AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
The accompanying combined financial statements include the accounts of
American Builders & Contractors Supply Co., Inc. (ABC) and certain companies
affiliated by common ownership (all of which are wholly-owned by ABC's sole
stockholder), Mule-Hide Products Co., Inc. (Mule-Hide), Amcraft Building
Products Co., Inc. (Amcraft), and Hendricks Real Estate Properties, Inc.
(HREP) (collectively, the Company). A legal reorganization is planned for the
near future whereby Mule-Hide and Amcraft will become wholly-owned
subsidiaries of ABC and HREP will be merged into ABC (see Note 12). Such
reorganization will be accounted for as a combination of entities under common
control, which is similar to a pooling of interests.
The Company is primarily engaged in the sale of roofing and siding products
throughout the United States. There were 109, 126 and 157 distribution center
locations at December 31, 1994, 1995 and 1996, respectively.
Inventories
Inventories, which consist primarily of purchased roofing and siding
products, are stated at the lower of cost (average cost basis) or market.
Property and Equipment
Property and equipment additions (including leasehold improvements) are
capitalized at cost. Depreciation on these assets is calculated using the
straight-line method over the estimated useful lives of the related assets or,
in the case of leasehold improvements, the life of the lease, if shorter.
Estimated useful lives are as follows (in years):
<TABLE>
<S> <C>
Buildings and improvements.............. 39 years
Warehouse equipment..................... 5-7 years
Vehicles................................ 5-10 years
Office furniture and equipment.......... 3-7 years
Leasehold improvements.................. 5 years or life of lease, if less
</TABLE>
Intangibles
Intangibles consist primarily of goodwill recorded in acquisitions of
businesses, which is amortized over 25 years using the straight-line method.
Advertising
Advertising costs are expensed in the period incurred. Total advertising
expense was $2,296,782, $2,481,540 and $3,311,658 for 1994, 1995 and 1996,
respectively.
Income Taxes
ABC and the combined affiliates have elected to be treated as Subchapter S
Corporations for federal and state income tax purposes. As a result, the
Company's sole stockholder includes the taxable income of ABC and the combined
affiliates in his personal income tax returns. Accordingly, with the exception
of the amounts described in the following paragraph, the accompanying
financial statements include no provision or liability for income taxes.
Certain states impose a corporate state tax on earnings of a Subchapter S
Corporation. Provisions of $260,181, $338,386 and $329,509 have been made for
such income taxes for the years ended December 31, 1994, 1995 and 1996,
respectively.
F-6
<PAGE>
AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC. AND CERTAIN AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Net income differs from income currently taxable to the Company's
stockholder due to certain items which are reported differently for financial
reporting purposes than for income tax purposes; principally inventory costs
capitalized, bad debts and depreciation.
Revenue Recognition
The Company recognizes revenue upon delivery of product to the customer,
which typically occurs at the Company's distribution center locations.
Late Payment Charges
Late payment charges are recorded in connection with past due receivable
balances and are reflected as a reduction to the expenses incurred in
collecting those accounts, all within distribution center operating expenses.
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 amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
2. BUSINESS ACQUISITIONS
Business acquisitions have been accounted for using the purchase method and
operations are reflected from the dates of acquisition forward.
During the year ended December 31, 1994, six locations were acquired by ABC.
The assets of one of the locations were merged into an existing branch. The
total purchase price of approximately $2,238,000 included inventory, accounts
receivable and fixed assets.
During the year ended December 31, 1995, ABC acquired the inventory,
accounts receivable and fixed assets of eleven locations for a total purchase
price of approximately $5,905,000. In connection with these transactions, ABC
recorded $550,000 in goodwill.
In 1996, ABC acquired the inventory, accounts receivable and fixed assets of
seventeen locations for a total purchase price of approximately $15,205,000.
In connection with these transactions, the Company recorded $2,510,000 in
goodwill.
A summary of the purchase allocation for the acquisitions is as follows:
<TABLE>
<CAPTION>
1994 1995 1996
---------- ---------- -----------
<S> <C> <C> <C>
Fixed assets.......................... 656,181 573,744 1,527,716
Inventories........................... 1,194,851 3,743,218 6,649,324
Accounts receivable................... 325,613 1,031,452 4,502,460
Other................................. 61,400 6,097 15,529
Goodwill.............................. -- 550,000 2,510,000
---------- ---------- -----------
2,238,045 5,904,511 15,205,029
Less seller notes..................... -- (333,000) (2,520,052)
---------- ---------- -----------
Net effect on cash.................... $2,238,045 $5,571,511 $12,684,977
========== ========== ===========
</TABLE>
Due to the relative insignificance of the acquisitions, pro forma financial
information has not been included.
F-7
<PAGE>
AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC. AND CERTAIN AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
3. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1995 1996
------------ ------------
<S> <C> <C>
Notes payable to banks under Revolver--ABC..... $ 93,099,023 $116,480,109
Installment loans on vehicles and equipment--
ABC........................................... 18,015,109 22,574,795
Mortgage notes payable on real estate--HREP.... 5,969,804 5,900,477
Other notes payable............................ 1,639,047 3,228,250
------------ ------------
118,722,983 148,183,631
Less current maturities........................ 5,325,782 8,519,814
------------ ------------
$113,397,201 $139,663,817
============ ============
</TABLE>
As of December 31, 1996, ABC has a financing agreement with a group of banks
(Revolver) which expires on June 30, 1998, under which ABC may borrow, on a
revolving credit basis, up to a maximum of $200,000,000 based on a percentage
of eligible accounts receivable and eligible inventory. Interest on the
Revolver at December 31, 1996 was largely based on LIBOR (5.5%) plus 2%. The
weighted average interest rate on all borrowings outstanding under the
Revolver at December 31, 1996 was 7.6%.
The agreement contains various covenants, including provisions that place
restrictions on ABC's ability to merge or sell its business, sell assets, make
investments other than in the ordinary course of business, repurchase stock,
or pay dividends. Additional provisions require ABC to maintain specified
tangible net worth and cash flow amounts and require that ABC's current sole
stockholder continue to own at least 51% of the Company's stock. The agreement
also includes a prepayment fee.
The mortgage notes payable of HREP relate to ABC's corporate offices, and
are due in monthly principal and interest installments of approximately
$50,000 through April 2002, with a final maturity date of May 31, 2002.
Interest on the mortgage notes is computed at 8.75% through October 31, 1997,
with variable interest thereafter based on an average yield of one-year U.S.
Treasury securities plus 3.5%.
The Company has various other financing agreements with maturity dates
ranging from 1998 through 2002, and interest rates ranging from 7.22% to
9.25%. Substantially all of the Company's assets are collateral for Company
indebtedness.
Future maturities of long-term debt as of December 31, 1996, are as follows:
<TABLE>
<CAPTION>
AMOUNT
------------
<S> <C>
Year Ending December 31,
1997....................................................... $ 8,519,814
1998....................................................... 122,915,869
1999....................................................... 5,112,061
2000....................................................... 3,807,934
2001....................................................... 2,654,473
Thereafter................................................. 5,173,480
------------
$148,183,631
============
</TABLE>
F-8
<PAGE>
AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC. AND CERTAIN AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
4. PROPERTY AND EQUIPMENT
Property and equipment is comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31
-----------------------
1995 1996
----------- -----------
<S> <C> <C>
Land............................................. $ 1,750,673 $ 1,915,519
Buildings and improvements....................... 10,889,390 10,889,390
Warehouse equipment.............................. 5,871,936 7,045,874
Vehicles......................................... 31,133,740 39,914,661
Office furniture and equipment................... 6,968,585 8,482,177
Leasehold improvements........................... 8,116,295 10,696,340
----------- -----------
64,730,619 78,943,961
Less accumulated depreciation.................... 21,554,982 28,999,671
----------- -----------
$43,175,637 $49,944,290
=========== ===========
</TABLE>
5. LEASE COMMITMENTS
ABC conducts the majority of its operations in leased facilities under
operating leases expiring at various dates through 2005. Generally, the leases
provide that ABC pay all insurance, maintenance, and other costs and expenses
associated with use of the buildings. Some of the leases also require ABC to
pay real estate taxes.
As of December 31, 1996, the real estate for 67 of the distribution centers
was owned by a related party. The total rent expense for these related-party
leases was $3,476,000, $4,629,000 and $6,249,000 for the years ended December
31, 1994, 1995 and 1996, respectively.
Rent expense under all leases totaled $8,365,000, $9,838,000 and $12,592,000
for the years ended December 31, 1994, 1995 and 1996, respectively. Future
minimum rental payments required as of December 31, 1996, under leases with an
original term of more than one year are as follows:
<TABLE>
<CAPTION>
AMOUNT
-----------
<S> <C>
Year ending December 31,
1997....................................................... $11,150,754
1998....................................................... 9,762,045
1999....................................................... 6,383,791
2000....................................................... 4,839,162
2001....................................................... 1,202,913
Thereafter................................................. 1,698,276
-----------
Future minimum payments required........................... $35,036,941
===========
</TABLE>
6. RELATED-PARTY TRANSACTIONS
The Company is related to certain other affiliates by common ownership and
management. Transactions and balances with these entities are as follows for
the reporting periods:
<TABLE>
<CAPTION>
DECEMBER 31
--------------------------------
1994 1995 1996
---------- ---------- ----------
<S> <C> <C> <C>
Accounts receivable..................... $ 311,698 $ 281,809 $ 288,024
Security deposits....................... 259,899 374,044 374,044
Accounts payable........................ 2,620 4,974 11,340
Sales................................. 126,211 172,830 65,969
Purchases............................. 26,929 65,759 556,390
Rent expense--buildings............... 3,476,387 4,629,109 6,248,942
</TABLE>
F-9
<PAGE>
AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC. AND CERTAIN AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
The Company has the following receivables from, and payables to, its sole
stockholder:
<TABLE>
<CAPTION>
DECEMBER 31
------------------------
1995 1996
----------- -----------
<S> <C> <C>
Receivables..................................... $ 7,400,358 $ 7,304,164
Payables........................................ (3,428,557) (2,154,979)
----------- -----------
$ 3,971,801 $ 5,149,185
=========== ===========
</TABLE>
Interest on the receivables and payables is charged/incurred at a rate
comparable to the interest rate ABC pays on its Revolver and was as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------------
1994 1995 1996
-------- --------- ---------
<S> <C> <C> <C>
Interest income........................... $544,835 $ 628,908 $ 627,751
Interest expense.......................... (64,002) (207,823) (239,397)
-------- --------- ---------
$480,833 $ 421,085 $ 388,354
======== ========= =========
</TABLE>
At December 31, 1995 and 1996, the Company had guaranteed debt of the sole
stockholder in the amounts of $2,199,000 and $3,616,000, respectively. Certain
assets owned by the Company are utilized as collateral as part of an overall
guaranty of this debt by the Company. The Company also had outstanding letters
of credit of $500,000 and $300,000 at December 31, 1995 and 1996,
respectively, with respect to debt of the sole stockholder and his affiliates.
An insurance company, owned by the sole stockholder, provides property and
casualty insurance, including workers compensation insurance, to the Company.
The Company paid the insurance company for reported and unreported claim
liabilities, as determined by an unrelated third-party claims adjusting
service, amounting to $5,414,000, $5,175,000 and $6,008,000 in 1994, 1995 and
1996, respectively.
7. LITIGATION
The Company is involved in various legal matters arising in the normal
course of business. In the opinion of management and legal counsel, the amount
of losses that may be sustained, if any, would not have a material effect on
the financial position of the Company.
8. EMPLOYEE BENEFIT PLAN
The Company sponsors a 401(k) plan covering substantially all employees. The
Company may make elective contributions. Discretionary contributions of
$561,000, $614,000 and $716,000 were made for 1994, 1995 and 1996,
respectively.
F-10
<PAGE>
AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC. AND CERTAIN AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
9. COMMON STOCK
Common stock at December 31, 1994, 1995 and 1996 is as follows:
<TABLE>
<C> <S>
ABC....... No par value; 10,000 shares authorized, 147.04 shares issued
and outstanding
Mule-Hide. No par value; 10,000 shares authorized, 100 shares issued and
outstanding
Amcraft... $.01 par value; 100,000 shares authorized, 100 shares issued
and outstanding.
HREP...... $.01 par value; 9,000 shares authorized, 1,000 shares issued
and outstanding
</TABLE>
10. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of the Company's financial instruments, which consist of
cash, accounts receivable, accounts payable and borrowings, approximates their
fair value at both December 31, 1995 and 1996.
Substantially all of the Company's accounts receivable are due from
contractors located throughout the United States. Credit is extended based on
an evaluation of the customer's financial condition and projects, where
applicable. Credit losses are provided for in the financial statements and
have consistently been within management's expectations.
11. SUMMARIZED COMBINED FINANCIAL INFORMATION ABOUT CERTAIN AFFILIATES
The following is summarized combined financial information for Mule-Hide and
Amcraft, which will become wholly-owned subsidiaries of ABC subsequent to the
legal reorganization referred to in Note 1. The amounts are before
combination-level elimination entries (sales eliminated totaled $21,311,643 in
1994, $27,034,490 in 1995 and $33,922,487 in 1996). Both subsidiaries will
fully, unconditionally, jointly, and severally guarantee certain debt to be
issued by ABC (see Note 12). Separate financial statements of the guarantors
are not presented because, in the opinion of management, such financial
statements are not material to investors.
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1995 1996
----------- ----------
<S> <C> <C>
Current assets................................... $ 5,065,900 $5,254,409
Noncurrent assets................................ 1,209,122 1,340,694
Current liabilities.............................. (6,214,805) (6,471,068)
Noncurrent liabilities........................... (1,908,950) (653,148)
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Net sales............................. $26,660,546 $31,888,122 $39,455,458
Gross profiit......................... 3,874,554 5,483,012 6,784,164
Net income............................ 537,965 772,841 1,577,620
</TABLE>
12. SUBSEQUENT EVENT
On May 7, 1997, ABC issued $100,000,000 principal amount of 10 5/8% Senior
Subordinated Notes due 2007, for which it received net proceeds of
approximately $96,500,000 after deducting expenses and commissions. Net
proceeds of $10,000,000 were distributed to the Company's sole stockholder,
who simultaneously repaid to the Company approximately $8,300,000 of net
borrowings. The remainder of the net proceeds combined with the repayment of
the net stockholder advances approximated $94,800,000 and was used to repay
indebtedness outstanding under the Revolver. In addition, the legal
reorganization referred to in Note 1 was completed on May 1, 1997.
F-11
<PAGE>
AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC.
AND CERTAIN AFFILIATES
CONDENSED COMBINED BALANCE SHEET (UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
STOCKHOLDER'S
EQUITY AT
DECEMBER 31, MARCH 31, MARCH 31,
ASSETS 1996 1997 1997 (NOTE 3)
------ ------------ ------------ -------------
<S> <C> <C> <C>
Current assets:
Cash.................................. $ 2,630,000 $ 918,000
Accounts receivable................... 92,360,000 93,075,000
Inventories........................... 95,779,000 137,147,000
Prepaid expenses and other............ 1,544,000 1,823,000
------------ ------------
Total current assets................ 192,313,000 232,963,000
Property and equipment, net............. 49,944,000 51,871,000
Net receivable from sole stockholder.... 5,149,000 6,477,000
Intangible assets, net.................. 3,311,000 3,231,000
Security deposits....................... 1,118,000 1,190,000
Other assets............................ 113,000 226,000
------------ ------------
$251,948,000 $295,958,000
============ ============
<CAPTION>
LIABILITIES AND STOCKHOLDER'S EQUITY
------------------------------------
<S> <C> <C> <C>
Current Liabilities:
Accounts payable...................... $ 57,700,000 $109,658,000
Accrued liabilities................... 14,104,000 15,660,000
Current portion of long-term debt..... 8,520,000 8,508,000
------------ ------------
Total current liabilities........... 80,324,000 133,826,000
Long-term debt.......................... 139,664,000 137,233,000
Contingent liabilities (Note 2)
Stockholder's equity:
Common stock.......................... 109,000 109,000 109,000
Additional paid-in capital............ 1,215,000 1,215,000 1,215,000
Retained earnings..................... 30,636,000 23,575,000 11,975,000
------------ ------------ -----------
Total stockholder's equity.......... 31,960,000 24,899,000 $13,299,000
------------ ------------ ===========
$251,948,000 $295,958,000
============ ============
</TABLE>
See notes to condensed combined financial statements.
F-12
<PAGE>
AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC.
AND CERTAIN AFFILIATES
CONDENSED COMBINED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH
31
--------------------------
1996 1997
------------ ------------
<S> <C> <C>
Net sales........................................... $128,704,000 $162,772,000
Cost of sales....................................... 100,695,000 126,789,000
------------ ------------
Gross profit........................................ 28,009,000 35,983,000
Operating expenses:
Distribution centers.............................. 29,106,000 36,656,000
General and administrative........................ 2,897,000 3,566,000
------------ ------------
32,003,000 40,222,000
------------ ------------
Operating loss...................................... (3,994,000) (4,239,000)
Other income (expense):
Interest income................................... 136,000 165,000
Interest expense.................................. (2,572,000) (2,898,000)
------------ ------------
(2,436,000) (2,733,000)
------------ ------------
Loss before provision for income taxes.............. (6,430,000) (6,972,000)
Provision for income taxes.......................... 52,000 32,000
------------ ------------
Net loss............................................ (6,482,000) (7,004,000)
Retained earnings at beginning of period............ 24,200,000 30,636,000
Distributions to sole stockholder................... (30,000) (57,000)
------------ ------------
Retained earnings at end of period.................. $ 17,688,000 $ 23,575,000
============ ============
</TABLE>
See notes to condensed combined financial statements.
F-13
<PAGE>
AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC.
AND CERTAIN AFFILIATES
CONDENSED COMBINED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH
31
--------------------------
1996 1997
------------ ------------
<S> <C> <C>
Operating activities
Net loss.......................................... $ (6,482,000) $ (7,004,000)
Adjustments to reconcile net loss to cash provided
by operating activities:
Depreciation.................................... 1,972,000 2,406,000
Amortization.................................... 94,000 80,000
Provision for doubtful accounts................. 615,000 967,000
(Gain) loss on disposal of property and
equipment...................................... (9,000) 30,000
Change in operating assets and liabilities:
Accounts receivable........................... 1,293,000 (1,576,000)
Inventories................................... (30,793,000) (41,150,000)
Prepaid expenses and other.................... (20,000) (289,000)
Security deposits............................. (188,000) (72,000)
Other assets.................................. (201,000) (113,000)
Accounts payable.............................. 34,256,000 51,958,000
Accrued liabilities........................... 1,562,000 1,556,000
------------ ------------
Cash provided by operating activities....... 2,099,000 6,793,000
Investing activities
Additions to property and equipment............. (3,512,000) (4,368,000)
Proceeds from disposal of property and
equipment...................................... 73,000 86,000
Acquisitions of businesses...................... (5,922,000) (395,000)
------------ ------------
Cash used in investing activities........... (9,361,000) (4,677,000)
Financing activities
Net borrowings (payments) under line of credit.... 4,526,000 (372,000)
Proceeds from notes payable....................... 1,185,000 85,000
Payments on notes payable......................... (1,263,000) (2,156,000)
Net change in receivable from sole stockholder.... 370,000 (1,328,000)
Distributions paid to sole stockholder............ (30,000) (57,000)
------------ ------------
Cash used in financing activities........... 4,788,000 (3,828,000)
------------ ------------
Net decrease in cash.............................. (2,474,000) (1,712,000)
Cash at beginning of period................. 2,743,000 2,630,000
------------ ------------
Cash at end of period....................... $ 269,000 $ 918,000
============ ============
</TABLE>
See notes to condensed combined financial statements.
F-14
<PAGE>
AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC.
AND CERTAIN AFFILIATES
NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 1997
1. BASIS OF PRESENTATION
The accompanying unaudited condensed combined financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and Article 10 of Regulation S-X. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting only of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three month period ended March 31, 1997 are not
indicative of the results that may be expected for the year ending December
31, 1997. For further information, refer to the December 31, 1996 combined
financial statements and footnotes thereto included elsewhere in this
registration statement.
2. CONTINGENT LIABILITIES
At December 31, 1996 and March 31, 1997, the Company had guaranteed debt of
the sole stockholder in the amounts of $3,616,000 and $3,600,219,
respectively. Certain assets owned by the Company are utilized as collateral
as part of an overall guaranty of this debt by the Company. The Company also
had outstanding letters of credit of $300,000 and $711,000 at December 31,
1996 and March 31, 1997, respectively, with respect to debt of the Company's
sole stockholder and his affiliates.
3. PRO FORMA STOCKHOLDER'S EQUITY
Pro forma stockholder's equity reflects the payment of a $10,000,000
distribution from the proceeds of the May offering (see Note 4), and the April
1997 payment of a dividend to the Company's sole stockholder in respect of
1996 federal and state income taxes of approximately $1,600,000, as if both
such transactions had occurred on March 31, 1997.
4. SUBSEQUENT EVENTS
In April 1997, ABC made a distribution of approximately $1,600,000 to the
sole stockholder relating to 1996 federal and state income taxes.
On May 1, 1997, all of the capital stock of Mule-Hide Products Co., Inc.
(Mule-Hide) and Amcraft Building Products Co., Inc. (Amcraft), companies
previously wholly-owned by the sole stockholder, was contributed to the
Company. Thereafter, Mule-Hide and Amcraft will operate as wholly-owned
subsidiaries of the Company. In addition, Hendricks Real Estate Properties,
Inc (HREP), whose capital stock was also wholly-owned by the sole stockholder,
merged with and into the Company.
On May 7, 1997, American Builders and Contractors Supply Co., Inc. (ABC)
issued $100,000,000 principal amount of 10 5/8% Senior Subordinated Notes due
2007, for which it received net proceeds of approximately $96,500,000 after
deducting expenses and commissions. Net proceeds of $10,000,000 were
distributed to ABC's sole stockholder, who simultaneously repaid to the
Company approximately $8,300,000 of net borrowings. The remainder of the net
proceeds combined with the repayment of the net stockholder advances
approximated $94,800,000 and was used to repay indebtedness outstanding under
the Revolver.
F-15
<PAGE>
On May 19, 1997, ABC acquired certain assets and assumed a portion of the
liabilities of Viking Products, Inc. and certain assets of Viking Aluminum
Products, Inc. (collectively Viking). The purchase price was paid with a
combination of cash and a $3,000,000 seller note payable over two years.
Viking was a regional distributor of residential roofing, siding and window
products with 12 distribution centers located in the Northeastern portion of
the United States. An estimated allocation of the purchase price of Viking is
as follows:
<TABLE>
<S> <C>
Accounts receivable.......................................... $ 8,534,000
Inventories.................................................. 11,314,000
Property and equipment....................................... 2,439,000
Goodwill and other intangible assets......................... 7,200,000
Other assets................................................. 263,000
Liabilities assumed.......................................... (3,928,000)
-----------
Cost of purchase............................................. $25,822,000
===========
</TABLE>
The Viking acquisition was accounted for as a purchase; accordingly, the
results of operations of Viking will be included with those of ABC from the
date of acquisition. Unaudited pro forma financial information is not
presented because the Viking acquisition does not have a material impact on
ABC's results of operations.
F-16
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON, OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE SECURITIES OFFERED
HEREBY IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION
THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
THE DATE HEREOF.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information..................................................... iii
Prospectus Summary........................................................ 1
Risk Factors.............................................................. 10
Recent Transactions....................................................... 16
Use of Proceeds........................................................... 16
Capitalization............................................................ 18
Selected Combined Historical Financial Data............................... 19
Management's Discussion And Analysis of Financial Condition and Results of
Operations............................................................... 21
Business.................................................................. 28
Management................................................................ 36
Security Ownership of Certain Beneficial Owners and Management............ 38
Certain Transactions...................................................... 39
Description of The Credit Agreement....................................... 41
The Exchange Offer........................................................ 42
Description of the Notes.................................................. 50
Certain Federal Income Tax Consequences................................... 74
Plan of Distribution...................................................... 75
Legal Matters............................................................. 75
Experts................................................................... 75
Index to Combined Financial Statements.................................... F-1
</TABLE>
UNTIL , 1996 (90 DAYS AFTER THE COMMENCEMENT OF THE EXCHANGE OF-
FER), ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER
OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PRO-
SPECTUS. THIS DELIVERY REQUIREMENT 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.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
$100,000,000
AMERICAN
BUILDERS & CONTRACTORS
SUPPLY CO., INC.
AMCRAFT BUILDING PRODUCTS CO., INC.
MULE-HIDE PRODUCTS CO., INC.
OFFER TO EXCHANGE ITS
10 5/8% SERIES B
SENIOR SUBORDINATED NOTES
DUE 2007 FOR ITS OUTSTANDING
10 5/8% SENIOR SUBORDINATED NOTES
DUE 2007
---------------
PROSPECTUS
---------------
, 1997
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company is incorporated under the laws of the State of Delaware. Section
145 of the General Corporation Law of the State of Delaware, inter alia,
("Section 145") provides that a Delaware corporation may indemnify any persons
who were, are or are threatened to be made, parties to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of
such corporation), by reason of the fact that such person is or was an
officer, director, employee or agent of such corporation, or is or was serving
at the request of such corporation as a director, officer employee or agent of
another corporation or enterprise. The indemnity may include expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such
action, suit or proceeding, provided such person acted in good faith and in a
manner he reasonably believed to be in or not opposed to the corporation's
best interests and, with respect to any criminal action or proceeding, had no
reasonable cause to believe that his conduct was illegal. A Delaware
corporation may indemnify any persons who are, were or are threatened to be
made, a party to any threatened, pending or completed action or suit by or in
the right of the corporation by reasons of the fact that such person was a
director, officer, employee or agent of such corporation, or is or was serving
at the request of such corporation as a director, officer, employee or agent
of another corporation or enterprise. The indemnity may include expenses
(including attorneys' fees) actually and reasonably incurred by such person in
connection with the defense or settlement of such action or suit, provided
such person acted in good faith and in a manner he reasonably believed to be
in or not opposed to the corporation's best interests, provided that no
indemnification is permitted without judicial approval if the officer,
director, employee or agent is adjudged to be liable to the corporation. Where
an officer, director, employee or agent is successful on the merits or
otherwise in the defense of any action referred to above, the corporation must
indemnify him against the expenses which such officer or director has actually
and reasonably incurred.
The Company's Certificate of Incorporation provides that, to the fullest
extent permitted by the General Corporation Law of the State of Delaware as
the same exists or may hereafter be amended, a director of the Company shall
not be liable to the Company or its stockholders for monetary damages for a
breach of fiduciary duty as a director.
Article V of the By-laws of the Company ("Article V") provides, among other
things, that each person who was or is made a party or is threatened to be
made a party to or is involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of the fact that
he or a person of whom he is the legal representative, is or was a director or
officer, of the corporation or is or was serving at the request of the Company
as a director, officer, employee, fiduciary, or agent of another corporation
or of a partnership, joint venture, trust or other enterprise, including
service with respect to employee benefit plans, whether the basis of such
proceeding is alleged action in an official capacity as a director, officer,
employee, fiduciary or agent or in any other capacity while serving as a
director, officer, employee, fiduciary or agent, shall be indemnified and held
harmless by the Company to the fullest extent which it is empowered to do so
by the General Corporation Law of the State of Delaware, 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 Company to provide broader
indemnification rights than said law' permitted the corporation to provide
prior to such amendment) against all expense, liability and loss (including
attorneys' fees actually and reasonably incurred by such person in connection
with such proceeding and such indemnification shall inure to the benefit of
his or her heirs, executors and administrators; provided, however, that, the
Company shall indemnify any such person seeking indemnification in connection
with a proceeding initiated by such person only if such proceeding was
authorized by the board of directors of the Company.
Article V also provides that persons who are not covered by the foregoing
provisions of Article V and who are or were employees or agents of the
Company, or who are or were serving at the request of the Company as employees
or agents of another corporation, partnership, joint venture, trust or other
enterprise, may be indemnified to the extent authorized at any time or from
time to time by the board of directors.
II-1
<PAGE>
Section 145 further authorizes a corporation to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation
or enterprise, against any liability asserted against him and incurred by him
in any such capacity, arising out of his status as such, whether or not the
corporation would otherwise have the power to indemnify him under Section 145.
Article V further provides that the Company may purchase and maintain
insurance on its own behalf and on behalf of any person who is or was a
director, officer, employee, fiduciary, or agent of the Company or was serving
at the request of the Company as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against him or her and incurred by him or her
in any such capacity, whether or not the Company would have the power to
indemnify such person against such liability under Article V.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS.
<TABLE>
<C> <S>
3.1 Certificate of Incorporation of the Company.
3.2 By-laws of the Company.
3.3 Articles of Incorporation of Mule-Hide.
3.4 By-laws of Mule-Hide.
3.5 Certificate of Incorporation of Amcraft.
3.6 By-laws of Amcraft.
4.1 Indenture dated as of May 6, 1997 between the Company, Mule-Hide and
Amcraft and Norwest Bank Minnesota, National Association, as trustee
(including form of New Note and Senior Subordinated Guarantees).
4.2 Purchase Agreement dated as of May 2, 1997 between the Company,
Mule-Hide and Amcraft and NationsBanc Capital Markets, Inc. and
First Chicago Capital Markets, Inc.+
4.3 Registration Rights Agreement dated as of May 6, 1997 between the
Company, Mule-Hide and Amcraft and NationsBanc Capital Markets, Inc.
and First Chicago Capital Markets, Inc.
5.1 Opinion and consent of Kirkland & Ellis.
10.1 Asset Purchase Agreement, dated as of April 12, 1997, by and between
Viking Aluminum Products, Inc. and the Company.+
10.2 Asset Purchase Agreement, dated as of April 12, 1997, by and between
Viking Building Products, Inc. and the Company.+
10.3 Employment Agreement, dated as of May 1, 1997, between the Company
and Kenneth A. Hendricks.
10.4 Tax Allocation Agreement, dated as of May 1, 1997, among the
Company, Mule-Hide and Amcraft and Kenneth A. Hendricks.
10.5 Form of lease agreement between the Company and Hendricks Real
Estate Properties and schedule of lease terms for all properties
leased pursuant thereto.
10.6 Amended and Restated Loan and Security Agreement among American
National Bank and Trust Company of Chicago, NationsBank of Texas,
N.A., Bankamerica Business Credit, Inc. and the Company, as amended
to date (the "Credit Agreement").
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S>
10.7 Amended and Restated Patent, Trademark and License Mortgage by the
Company in favor of NationsBank of Texas, N.A., as agent for the
lenders under the Credit Agreement, as amended.
10.8 Amended and Restated Limited Guaranty Agreement by Kenneth A.
Hendricks, dated as of February 8, 1996, in favor of NationsBank of
Texas, N.A., individually or as agent for the lenders under the
Credit Agreement.
10.9 Continuing Guarantee Agreement, dated July 20, 1996, between Mule-
Hide and Heritage Bank, N.A., for the benefit of Kenneth A.
Hendricks.
10.10 Guaranty, dated December 22, 1992, between the Company and Transohio
Savings Bank, for the benefit of Kenneth A. Hendricks.
10.11 Guaranty, dated December 22, 1996, between the Company and MetLife
Capital Corporation, for the benefit of Kenneth A. Hendricks.
12.1 Statement of Computation of Ratios.
21.1 Subsidiaries of the Company, Mule-Hide and Amcraft**
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2 Consent of Kirkland & Ellis (included in Exhibit 5.1).
24.1 Powers of Attorney (included in signature page).**
25.1 Statement of Eligibility of Trustee on Form T-1.
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
99.3 Form of Tender Instructions.
</TABLE>
- --------
*To be filed by amendment.
**Previously filed.
+The Company agrees to furnish supplementally to the Commission a copy of any
omitted schedule to such agreement upon the request of the Commission in
accordance with Item 601(b)(2) of Regulation S-K.
(b) Financial Statement Schedule.
Report of Ernst & Young LLP, Independent Auditors, on Schedule
Schedule II--Valuation and Qualifying Accounts (for each of the three
years in the period ended December 31, 1996)
Note: All other financial statement schedules have been omitted because
the required information is not present or is not present in
amounts sufficient to require submission of the schedules, or
because the information required is included in the combined
financial statements and notes thereto.
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;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
II-3
<PAGE>
therein, and the offering of such securities at the time shall be deemed to
be the initial bonafide 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; and
(4) The undersigned registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use
of a prospectus which is a part of this registration statement, by any
person or party who is deemed to be an underwriter within the meaning of
Rule 145(c), the issuer undertakes that such reoffering prospectus will
contain the information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters, in
addition to the information called for by the other items of the applicable
form.
(5) The registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to
meet the requirements of Section 10(a)(3) of the Act and is used in
connection with an offering of securities subject to Rule 415, will be
filed as a part of an amendment to the registration statement and will not
be used until such amendment is effective, and that, for purposes of
determining any liability under the Securities Act of 1933, each such post-
effective amendment shall be deemed to be a new registration statement
relating to the 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
of 1933 (the "Securities Act") may be permitted to directors, officers and
controlling persons of the registrant pursuant to the provisions described
under Item 20 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.
For purposes of determining any liability under the Securities Act of 1933,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
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
the registration statement when it became effective.
II-4
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AMERICAN
BUILDERS & CONTRACTORS SUPPLY CO., INC. HAS DULY CAUSED THIS AMENDMENT NO. 1
TO REGISTRATION STATEMENT ON FORM S-4 TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF BELOIT, STATE OF
WISCONSIN, ON JUNE 25, 1997.
American Builders & Contractors
Supply Co., Inc.
*
By:__________________________________
Kenneth A. Hendricks
President and Chief Executive
Officer
* * * *
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 1 TO REGISTRATION STATEMENT ON FORM S-4 HAS BEEN SIGNED ON JUNE 25, 1997
BY THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED:
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
--------- --------
<S> <C>
* President and Chief Executive Officer,
___________________________________________ Director (principal executive officer)
Kenneth A. Hendricks
* Chief Financial Officer and Treasurer
___________________________________________ (principal financial and accounting
Kendra A. Story officer) and Director
* Executive Vice President, Secretary and
___________________________________________ Director
Diane M. Hendricks
* Director
___________________________________________
Gil Aleman
* Director
___________________________________________
Kent A. Nelson
* The undersigned, by signing her name hereto, does sign and execute this
Amendment No. 1 pursuant to the Power of Attorney executed by the above-
named officers and directors of the Registrant and previously filed with the
Securities and Exchange Commission on behalf of such officers and directors.
/s/ Kendra Story Attorney-in-Fact
___________________________________________
Kendra Story
</TABLE>
II-5
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AMERICAN
BUILDERS & CONTRACTORS SUPPLY CO., INC. HAS DULY CAUSED THIS AMENDMENT NO. 1
TO REGISTRATION STATEMENT ON FORM S-4 TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF BELOIT, STATE OF
WISCONSIN, ON JUNE 25, 1997.
Mule-Hide Products Co., Inc.
*
By:__________________________________
Kenneth A. Hendricks
President and Chief Executive
Officer
* * * *
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 1 TO REGISTRATION STATEMENT ON FORM S-4 HAS BEEN SIGNED ON JUNE 25, 1997
BY THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED:
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
--------- --------
<S> <C>
* Chief Executive Officer, Director
___________________________________________ (principal executive officer)
Kenneth A. Hendricks
* Chief Financial Officer, Director
___________________________________________ (principal financial and accounting
Kendra A. Story officer
* Director
___________________________________________
Diane M. Hendricks
* The undersigned, by signing her name hereto, does sign and execute this
Amendment No. 1 pursuant to the Power of Attorney executed by the above-
named officers and directors of the Registrant and previously filed with the
Securities and Exchange Commission on behalf of such officers and directors.
/s/ Kendra Story Attorney-in-Fact
___________________________________________
Kendra Story
</TABLE>
II-6
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, MULE-HIDE
PRODUCTS CO., INC. HAS DULY CAUSED THIS AMENDMENT NO. 1 TO REGISTRATION
STATEMENT ON FORM S-4 TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO
DULY AUTHORIZED, IN THE CITY OF BELOIT, STATE OF WISCONSIN, ON JUNE 25, 1997.
Amcraft Building Products Co., Inc.
*
By: _________________________________
Kenneth A. Hendricks
Chief Executive Officer
* * * *
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 1 TO REGISTRATION STATEMENT ON FORM S-4 HAS BEEN SIGNED ON JUNE 25, 1997
BY THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED:
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
--------- --------
<S> <C>
* Chief Executive Officer, Director
___________________________________________ (principal executive officer)
Kenneth A. Hendricks
* Chief Financial Officer, Director
___________________________________________ (principal financial and accounting
Kendra A. Story officer
* Director
___________________________________________
Diane M. Hendricks
* The undersigned, by signing her name hereto, does sign and execute this
Amendment No. 1 pursuant to the Power of Attorney executed by the above-
named officers and directors of the Registrant and previously filed with the
Securities and Exchange Commission on behalf of such officers and directors.
/s/ Kendra Story Attorney-in-Fact
___________________________________________
Kendra Story
</TABLE>
II-7
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS, ON SCHEDULE
We have audited the combined financial statements of American Builders &
Contractors Supply Co., Inc., Mule-Hide Products Co., Inc., Amcraft Building
Products Co., Inc. and Hendricks Real Estate Properties, Inc. (collectively,
the "Company") as of December 31, 1995 and 1996, and for each of the three
years in the period ended December 31, 1996, and have issued our report
thereon dated March 21, 1997, except as to Note 12, the date of which is May
7, 1997, included elsewhere in this Registration Statement. Our audits also
included the financial statement schedule listed at Item 21(b) of this
Registration Statement. That schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
Ernst & Young LLP
Milwaukee, Wisconsin
March 21, 1997
II-8
<PAGE>
SCHEDULE II
AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC.
AND CERTAIN AFFILIATES
COMBINED VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
<TABLE>
<CAPTION>
BALANCE AT ADDITIONS BALANCE AT
BEGINNING CHARGED TO END OF
DESCRIPTION OF YEAR EXPENSE DEDUCTIONS (1) YEAR
- ----------- ---------- ---------- -------------- ----------
<S> <C> <C> <C> <C>
Accounts Receivables--
Allowance for doubtful
accounts:
1994........................ $2,833,000 $2,647,000 $2,087,000 $3,393,000
1995........................ 3,393,000 3,165,000 2,654,000 3,904,000
1996........................ 3,904,000 3,604,000 3,183,000 4,325,000
</TABLE>
- --------
(1) Consist of charge-offs, net of recoveries
II-9
<PAGE>
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC.
ARTICLE ONE
The name of the corporation is American Builders & Contractors Supply Co.,
Inc.
ARTICLE TWO
The address of the corporation's registered office in the State of
Delaware is 1013 Centre Road, in the City of Wilmington, County of New Castle,
19805. The name of its registered agent at such address is Corporation Service
Company.
ARTICLE THREE
The nature of the business or purposes to be conducted or promoted 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.
ARTICLE FOUR
The total number of shares of stock which the corporation has
authority to issue is one thousand (1,000) shares of Common Stock, par value one
cent ($0.01) per share.
ARTICLE FIVE
The name and mailing address of the sole incorporator are as follows:
NAME MAILING ADDRESS
- ----------------------------------- -------------------------------------------
Thaddine G. Gomez 200 East Randolph Drive
Suite 5700
Chicago, Illinois 60601
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ARTICLE SIX
The corporation is to have perpetual existence.
ARTICLE SEVEN
In furtherance and not in limitation of the powers conferred by
statute, the board of directors of the corporation is expressly authorized to
make, alter or repeal the bylaws of the corporation.
ARTICLE EIGHT
Meetings of stockholders may be held within or without the State of
Delaware, as the by-laws of the corporation may provide. The books of the
corporation may be kept outside the State of Delaware at such place or places as
may be designated from time to time by the board of directors or in the by-laws
of the corporation. Election of directors need not be by written ballot unless
the by-laws of the corporation so provide.
ARTICLE NINE
To the fullest extent permitted by the General Corporation Law of the
State of Delaware as the same exists or may hereafter be amended, a director of
this corporation shall not be liable to the corporation or its stockholders for
monetary damages for a breach of fiduciary duty as a director. Any repeal or
modification of this ARTICLE NINE shall not adversely affect any right or
protection of a director of the corporation existing at the time of such repeal
or modification.
ARTICLE TEN
The corporation expressly elects not to be governed by (S)203 of the
General Corporation Law of the State of Delaware.
ARTICLE ELEVEN
The corporation reserves the right to amend, alter, change or repeal
any provision contained in this certificate of incorporation in the manner now
or hereafter prescribed herein and by the laws of the State of Delaware, and all
rights conferred upon stockholders herein are granted subject to this
reservation.
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I, 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, do make this certificate, hereby declaring and
certifying that this is my act and deed and the facts stated herein are true,
and accordingly have hereunto set my hand an the ____ day of May, 1997.
---------------------------------------
Thaddine G. Gomez
Sole Incorporator
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CERTIFICATE OF MERGER
OF
AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC.
(a Texas corporation)
WITH AND INTO
AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC,
(a Delaware corporation)
**************
In accordance with (S)252 of the
General Corporation Law of the
State of Delaware
**************
American Builders & Contractors Supply Co., Inc., a corporation duly
organized and existing under and by virtue of the laws of the State of Delaware
(the "Corporation"), desiring to merge American Builders & Contractors Supply
Co., Inc., a Texas corporation, with and into itself, pursuant to the provisions
of (S)252 of the General Corporation Law of the State of Delaware, DOES HEREBY
CERTIFY as follows:
FIRST: The name and state of incorporation of each constituent
corporation of the merger (the "Merger") are as follows:
NAME STATE OF INCORPORATION
American Builders & Contractors Supply Delaware
Co., Inc.
American Builders & Contractors Supply Texas
Co., Inc.
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SECOND: An Agreement and Plan of Merger (the "Merger Agreement") has
been approved, adopted, certified, executed and acknowledged by each constituent
corporation, in accordance with the requirements of (S)252 of the General
Corporation Law of the State of Delaware. Builders & Contractors Supply Co.,
Inc. (the "Surviving Corporation"). The Certificate of Incorporation of the
Corporation as in effect at the effective time of the Merger shall be the
Certificate of incorporation of the Surviving Corporation.
FOURTH. Anything herein or elsewhere to the contrary notwithstanding,
the Merger Agreement may be amended or terminated and abandoned by the Boards of
Directors of the constituent corporations at any time prior to the date of
filing the Certificate of Merger with the Secretary of State of the State of
Delaware.
FIFTH: An executed copy of the Merger Agreement is on file at the
principal place of business of the Surviving Corporation and a copy of the
Merger Agreement will be furnished by the Surviving Corporation, upon request
and without cost, to any stockholder of any constituent corporation.
SIXTH. The authorized stock of American Builders & Contractors Supply
Co., Inc., the Texas company is 10,000 shares of common stock without par value.
SEVENTH: The Merger shall be effective immediately upon filing.
**********************
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EXHIBIT
IN WITNESS WHEREOF, the undersigned, for the purpose of effectuating
the Merger of the constituent corporations, pursuant to the General Corporation
Law of the State of Delaware, under penalties of perjury does hereby declare and
certify that this is the act and deed of the Corporation and the facts stated
herein are true and accordingly has hereunto signed this Certificate of Merger
this _____ day of May, 1997.
American Builders & Contractors Supply Co., Inc.,
a Delaware corporation
-------------------------------------------------
Diane M. Hendricks
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EXHIBIT 3.2
BY-LAWS
OF
AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC.
A Delaware corporation
ARTICLE I
OFFICES
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Section 1. Registered Office. The registered office of the
corporation in the State of Delaware shall be located at 1013 Centre Road,
Wilmington, Delaware, County of New Castle 19805. The name of the corporation's
registered agent at such address shall be Corporation Service Company. The
registered office and/or registered agent of the corporation may be changed from
time to time by action of the board of directors.
Section 2. Other Offices. 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.
ARTICLE II
MEETINGS OF STOCKHOLDERS
------------------------
Section 1. Place and Time of Meetings. An annual meeting of the
stockholders shall be held each year within one hundred twenty (120) days after
the close of the immediately preceding fiscal year of the corporation for the
purpose of electing directors and conducting such other proper business as may
come before the meeting. The date, time and place of the annual meeting shall
be determined by the president of the corporation; provided, that if the
president does not act, the board of directors shall determine the date, time
and place of such meeting.
Section 2. Special Meetings. Special meetings of stockholders may be
called for any purpose and may be held at such time and place, within or without
the State of Delaware, as shall be stated in a notice of meeting or in a duly
executed waiver of notice thereof. Such meetings may be called at any time by
the board of directors or the president and shall be called by the president
upon the written request of holders of shares entitled to cast not less than a
majority of the votes at the meeting, such written request shall state the
purpose or purposes of the meeting and shall be delivered to the president.
Section 3. Place of Meetings. The board of directors may designate
any place, either within or without the State of Delaware, as the place of
meeting for any annual meeting or for any
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special meeting called by the board of directors. If no designation is made, or
if a special meeting be otherwise called, the place of meeting shall be the
principal executive office of the corporation.
Section 4. Notice. Whenever stockholders are required or permitted
to take action at a meeting, written or printed notice stating the place, date,
time, and, in the case of special meetings, the purpose or purposes, of such
meeting, shall be given to each stockholder entitled to vote at such meeting not
less than ten (10) nor more than sixty (60) days before the date of the meeting.
All such notices shall be delivered, either personally or by mail, by or at the
direction of the board of directors, the president or the secretary, and if
mailed, such notice shall be deemed to be delivered when deposited in the United
States mail, postage prepaid, addressed to the stockholder at his, her or its
address as the same appears on the records of the corporation. Attendance of a
person at a meeting shall constitute a waiver of notice of such meeting, except
when the person attends 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 5. Stockholders List. The officer having charge of the stock
ledger of the corporation shall make, at least ten (10) days before every
meeting of the stockholders, a complete list of the stockholders entitled to
vote at such meeting arranged in alphabetical order, 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
ten (10) days prior to the meeting, 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.
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 6. Quorum. The holders of a majority of the outstanding
shares of capital stock, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders, except as otherwise
provided by statute or by the certificate of incorporation. If a quorum is not
present, the holders of a majority of the shares present in person or
represented by proxy at the meeting, and entitled to vote at the meeting, may
adjourn the meeting to another time and/or place.
Section 7. Adjourned Meetings. When a meeting is adjourned to
another time and place, notice need not be given of the adjourned meeting if the
time and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the corporation may transact any business which
might have been transacted at the original meeting. 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 8. Vote Required. When a quorum is present, the affirmative
vote of the majority of shares present in person or represented by proxy at the
meeting and entitled to vote on the subject matter shall be the act of the
stockholders, unless the question is one upon which by
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express provisions of an applicable law 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.
Section 9. Voting Rights. Except as otherwise provided by the
General Corporation Law of the State of Delaware or by the certificate of
incorporation of the corporation or any amendments thereto and subject to
Section 3 of Article VI hereof, every stockholder shall at every meeting of the
stockholders be entitled to one (1) vote in person or by proxy for each share of
common stock held by such stockholder.
Section 10. Proxies. Each stockholder entitled to vote at a meeting
of stockholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another person or persons to act for him or her
by proxy, but no such proxy shall be voted or acted upon after three (3) years
from its date, unless the proxy provides for a longer period. A duly executed
proxy shall be irrevocable if it states that it is irrevocable and if, and only
as long as, it is coupled with an interest sufficient in law to support an
irrevocable power. A proxy may be made irrevocable regardless of whether the
interest with which it is coupled is an interest in the stock itself or an
interest in the corporation generally. Any proxy is suspended when the person
executing the proxy is present at a meeting of stockholders and elects to vote,
except that when such proxy is coupled with an interest and the fact of the
interest appears on the face of the proxy, the agent named in the proxy shall
have all voting and other rights referred to in the proxy, notwithstanding the
presence of the person executing the proxy. At each meeting of the
stockholders, and before any voting commences, all proxies filed at or before
the meeting shall be submitted to and examined by the secretary or a person
designated by the secretary, and no shares may be represented or voted under a
proxy that has been found to be invalid or irregular.
Section 11. Action by Written Consent. 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 or
consents in writing, setting forth the action so taken and bearing the dates of
signature of the stockholders who signed the consent or consents, 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, or the corporation's principal place of business, or an
officer or agent of the corporation having custody of the book or books in which
proceedings of meetings of the stockholders are recorded. Delivery made to the
corporation's registered office shall be by hand or by certified or registered
mail, return receipt requested provided, however, that no consent or consents
delivered by certified or registered mail shall be deemed delivered until such
consent or consents are actually received at the registered office. All consents
properly delivered in accordance with this section shall be deemed to be
recorded when so delivered. No written consent shall be effective to take the
corporate action referred to therein unless, within sixty (60) days of the
earliest dated consent delivered to the corporation as required by this section,
written consents signed by the holders of a sufficient number of shares to take
such appropriate action are so recorded. Prompt notice of the taking of the
corporate action without a
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meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing. Any action taken pursuant to
such written consent or consents of the stockholders shall have the same force
and effect as if taken by the stockholders at a meeting thereof.
ARTICLE III
DIRECTORS
---------
Section 1. General Powers. The business and affairs of the
corporation shall be managed by or under the direction of the board of
directors.
Section 2. Number, Election and Term of Office. The number of
directors which shall constitute the board shall be five (5). Thereafter, the
number of directors shall be established from time to time by resolution of the
board. The 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 in
the election of directors. The directors shall be elected in this manner at the
annual meeting of the stockholders, except as provided in Section 4 of this
Article III. Each director elected shall hold office until a successor is duly
elected and qualified or until his or her earlier death, resignation or removal
as hereinafter provided.
Section 3. Removal and Resignation. Any director or the entire board
of directors may be removed at any time, with or without cause, by the holders
of a majority of the shares then entitled to vote at an election of directors.
Whenever the holders of any class or series are entitled to elect one or more
directors by the provisions of the corporation's certificate of incorporation,
the provisions of this section shall apply, in respect to the removal without
cause of a director or directors so elected, to the vote of the holders of the
outstanding shares of that class or series and not to the vote of the
outstanding shares as a whole. Any director may resign at any time upon written
notice to the corporation.
Section 4. Vacancies. Vacancies and newly created directorships
resulting from any increase in the authorized number of directors may be filled
by a majority of the directors then in office, though less than a quorum, or by
a sole remaining director. Each director so chosen shall hold office until a
successor is duly elected and qualified or until his or her earlier death,
resignation or removal as herein provided.
Section 5. Annual Meetings. The annual meeting of each newly elected
board of directors shall be held without other notice than this by-law
immediately after, and at the same place as, the annual meeting of stockholders.
Section 6. Other Meetings and Notice. Regular meetings, other than
the annual meeting, 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 resolution of
the board. Special meetings of the board of directors may be
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called by or at the request of the president on at least twenty-four (24) hours
notice to each director, either personally, by telephone, by mail, or by
telegraph.
Section 7. Quorum, Required Vote and Adjournment. A majority of the
total number of directors shall constitute a quorum for the transaction of
business. The vote of a majority of directors present at a meeting at which a
quorum is present shall be the act of the board of directors. If a quorum shall
not be present at any meeting of the board of directors, the directors present
thereat may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
Section 8. Committees. The board of directors may, by resolution
passed by a majority of the whole board, designate one or more committees, each
committee to consist of one or more of the directors of the corporation, which
to the extent provided in such resolution or these by-laws shall have and may
exercise the powers of the board of directors in the management and affairs of
the corporation except as otherwise limited by law. The board of directors may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. 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. Each committee
shall keep regular minutes of its meetings and report the same to the board of
directors when required.
Section 9. Committee Rules. Each committee of the board of directors
may fix its own rules of procedure and shall hold its meetings as provided by
such rules, except as may otherwise be provided by a resolution of the board of
directors designating such committee. Unless otherwise provided in such a
resolution, the presence of at least a majority of the members of the committee
shall be necessary to constitute a quorum. In the event that a member and that
member's alternate, if alternates are designated by the board of directors as
provided in Section 8 of this Article III, of such committee is or are absent or
disqualified, the member or members thereof present at any meeting and not
disqualified from voting, whether or not such member or members constitute a
quorum, may unanimously appoint another member of the board of directors to act
at the meeting in place of any such absent or disqualified member.
Section 10. Communications Equipment. Members of the board of
directors or any committee thereof may participate in and act at any meeting of
such board or committee through the use of a conference telephone or other
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in the meeting pursuant to this
section shall constitute presence in person at the meeting.
Section 11. Waiver of Notice and Presumption of Assent. Any member
of the board of directors or any committee thereof who is present at a meeting
shall be conclusively presumed to have waived notice of such meeting except when
such member attends 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. Such member shall be conclusively presumed to have assented
to any action taken unless his or her dissent shall be entered in the minutes of
the meeting or unless his or her
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written dissent to such action shall be filed with the person acting as the
secretary of the meeting before the adjournment thereof or shall be forwarded by
registered mail to the secretary of the corporation immediately after the
adjournment of the meeting. Such right to dissent shall not apply to any member
who voted in favor of such action.
Section 12. Action by Written Consent. Unless otherwise restricted
by the certificate of incorporation, 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 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 or committee.
ARTICLE IV
OFFICERS
--------
Section 1. Number. The officers of the corporation shall be elected
by the board of directors and shall consist of a president, chief executive
officer, chief financial officer, one or more vice-presidents, secretary, a
treasurer, and such other officers and assistant officers as may be deemed
necessary or desirable by the board of directors. Any number of offices may be
held by the same person. In its discretion, the board of directors may choose
not to fill any office for any period as it may deem advisable, except that the
offices of president and secretary shall be filled as expeditiously as possible.
Section 2. Election and Term of Office. The officers of the
corporation shall be elected annually by the board of directors at its first
meeting held after each annual meeting of stockholders or as soon thereafter as
conveniently may be. The president shall be elected annually by the board of
directors at the first meeting of the board of directors held after each annual
meeting of stockholders or as soon thereafter as conveniently may be. The
president shall appoint other officers to serve for such terms as he or she
deems desirable. Vacancies may be filled or new offices created and filled at
any meeting of the board of directors. Each officer shall hold office until a
successor is duly elected and qualified or until his or her earlier death,
resignation or removal as hereinafter provided.
Section 3. Removal. Any officer or agent elected by the board of
directors may be removed by the board of directors whenever in its judgment the
best interests of the corporation would be served thereby, but such removal
shall be without prejudice to the contract rights, if any, of the person so
removed.
Section 4. Vacancies. Any vacancy occurring in any office because of
death, resignation, removal, disqualification or otherwise, may be filled by the
board of directors for the unexpired portion of the term by the board of
directors then in office.
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Section 5. Compensation. Compensation of all officers shall be fixed
by the board of directors, and no officer shall be prevented from receiving such
compensation by virtue of his or her also being a director of the corporation.
Section 6. The President and Chief Executive Officer. The president
shall be the chief executive officer of the corporation; shall preside at all
meetings of the stockholders and board of directors at which he is present;
subject to the powers of the board of directors, shall have general charge of
the business, affairs and property of the corporation, and control over its
officers, agents and employees; and shall see that all orders and resolutions of
the board of directors are carried into effect. The president shall execute
bonds, mortgages and other contracts requiring a seal, under the seal of the
corporation, except where required or permitted by law to be otherwise signed
and executed and except where the signing and execution thereof shall be
expressly delegated by the board of directors to some other officer or agent of
the corporation. The president shall have such other powers and perform such
other duties as may be prescribed by the board of directors or as may be
provided in these by-laws.
Section 7. Chief Financial Officer. The chief financial officer of
the corporation shall, under the direction of the chief executive officer, be
responsible for all financial and accounting matters and for the direction of
the offices of treasurer and controller. The chief financial officer shall have
such other powers and perform such other duties as may be prescribed by the
chairman of the board, the chief executive officer or the board of directors or
as may be provided in these by-laws.
Section 8. Vice-presidents. The vice-president, or if there shall be
more than one, the vice-presidents in the order determined by the board of
directors or by the president, shall, in the absence or disability of the
president, act with all of the powers and be subject to all the restrictions of
the president. The vice-presidents shall also perform such other duties and
have such other powers as the board of directors, the president or these bylaws
may, from time to time, prescribe.
Section 9. The Secretary and Assistant Secretaries. The secretary
shall attend all meetings of the board of directors, all meetings of the
committees thereof and all meetings of the stockholders and record all the
proceedings of the meetings in a book or books to be kept for that purpose.
Under the president's supervision, the secretary shall give, or cause to be
given, all notices required to be given by these by-laws or by law; shall have
such powers and perform such duties as the board of Directors, the president or
these bylaws may, from time to time, prescribe; and shall have custody of the
corporate seal of the corporation. The secretary, or an assistant secretary,
shall have authority to affix the corporate seal to any instrument requiring it
and when so affixed, it may be attested by his signature or by the signature of
such assistant secretary. The board of directors may give general authority to
any other officer to affix the seal of the corporation and to attest the
affixing by his signature. The assistant secretary, or if there be more than
one, the assistant secretaries in the order determined by the board of
directors, shall, in the absence or disability of the secretary, perform the
duties and exercise the powers of the secretary and shall perform such other
duties and have such other powers as the board of directors, the president, or
secretary may, from time to time, prescribe.
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Section 10. The Treasurer and Assistant Treasurer. The treasurer
shall have the custody of the corporate funds and securities; shall keep full
and accurate accounts of receipts and disbursements in books belonging to the
corporation; shall deposit all monies and other valuable effects in the name and
to the credit of the corporation as may be ordered by the board of directors,
shall cause the funds of the corporation to be disbursed when such disbursements
have been duly authorized, taking proper vouchers for such disbursements; and
shall render to the president and the board of directors, at its regular meeting
or when the board of directors so requires, an account of the corporation; shall
have such powers and perform such duties as the board of directors, the
president or these by-laws may, from time to time, prescribe. If required by
the board of directors, the treasurer shall give the corporation a bond (which
shall be rendered every six (6) years) in such sums and with such surety or
sureties as shall be satisfactory to the board of directors for the faithful
performance of the duties of the office of treasurer and for the restoration to
the corporation, in case of death, resignation, retirement, or removal from
office, of all books, papers, vouchers, money, and other property of whatever
kind in the possession or under the control of the treasurer belonging to the
corporation. The assistant treasurer, or if there shall be more than one, the
assistant treasurers in the order determined by the board of directors, shall in
the absence or disability of the treasurer, perform the duties and exercise the
powers of the treasurer. The assistant treasurers shall perform such other
duties and have such other powers as the board of directors, the president or
treasurer may, from time to time, prescribe.
Section 11. Other Officers, Assistant Officers and Agents. Officers,
assistant officers and agents, if any, other than those whose duties are
provided for in these by-laws, shall have such authority and perform such duties
as may from time to time be prescribed by resolution of the board of directors.
Section 12. Absence or Disability of Officers. In the case of the
absence or disability of any officer of the corporation and of any person hereby
authorized to act in such officer's place during such officer's absence or
disability, the board of directors may by resolution delegate the powers and
duties of such officer to any other officer or to any director, or to any other
person whom it may select.
ARTICLE V
INDEMNIFICATION OF OFFICERS, DIRECTORS AND OTHERS
-------------------------------------------------
Section 1. Nature of Indemnity. Each person who was or is made a
party or is threatened to be made a party to or is involved in any action, suit
or proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he, or a person of whom
he is the legal representative, is or was a director or officer, of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee, fiduciary, or agent of another corporation or of a
partnership, joint venture, trust or other enterprise, shall be indemnified and
held harmless by the corporation to the fullest extent which it is empowered to
do so unless prohibited from doing so by the General Corporation Law of the
State of Delaware, as the same
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exists or may hereafter be amended (but, in the case of any such amendment, only
to the extent that such amendment permits the corporation lo provide broader
indemnification rights than said law permitted the corporation to provide prior
to such amendment) against all expense, liability and loss (including attorneys'
fees actually and reasonably incurred by such person in connection with such
proceeding) and such indemnification shall inure to the benefit of his heirs,
executors and administrators, provided, however, that, except as provided in
Section 2 hereof, the corporation shall indemnify any such person seeking
indemnification in connection with a proceeding initiated by such person only if
such proceeding was authorized by the board of directors of the corporation.
The right to indemnification conferred in this Article V shall be a contract
right and, subject to Sections 2 and 5 hereof, shall include the right to be
paid by the corporation the expenses incurred in defending any such proceeding
in advance of its final disposition. The corporation may, by action of its
board of directors, provide indemnification to employees and agents of the
corporation with the same scope and effect as the foregoing indemnification of
directors and officers.
Section 2. Procedure for Indemnification of Directors and Officers.
Any indemnification of a director or officer of the corporation under Section 1
of this Article V or advance of expenses under Section 5 of this Article V shall
be made promptly, and in any event within thirty (30) days, upon the written
request of the director or officer. If a determination by the corporation that
the director or officer is entitled to indemnification pursuant to this Article
V is required, and the corporation fails to respond within sixty (60) days to a
written request for indemnity, the corporation shall be deemed to have approved
the request. If the corporation denies a written request for indemnification or
advancing of expenses, in whole or in part, or if payment in full pursuant to
such request is not made within thirty (30) days, the right to indemnification
or advances as granted by this Article V shall be enforceable by the director or
officer in any court of competent jurisdiction. Such person's costs and
expenses incurred in connection with successfully establishing his right to
indemnification, in whole or in part, in any such action shall also be
indemnified by the corporation. It shall be a defense to any such action (other
than an action brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where the required undertaking,
if any, has been tendered to the corporation) that the claimant has not met the
standards of conduct which make it permissible under the General Corporation Law
of the State of Delaware for the corporation to indemnify the claimant for the
amount claimed, but the burden of such defense shall be on the corporation.
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 action that indemnification of the claimant is
proper in the circumstances because he has met the applicable standard of
conduct set forth in the General Corporation Law of the State of Delaware, nor
an actual determination by the corporation (including its board of directors,
independent legal counsel, or its stockholders) that the claimant has not met
such applicable standard of conduct, shall be a defense to the action or create
a presumption that the claimant has not met the applicable standard of conduct.
Section 3. Article Not Exclusive. The rights to indemnification and
the payment of expenses incurred in defending a proceeding in advance of its
final disposition conferred in this Article V shall not be exclusive of any
other right which any person may have or hereafter acquire
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<PAGE>
under any statute, provision of the certificate of incorporation, by-law,
agreement, vote of stockholders or disinterested directors or otherwise.
Section 4. Insurance. The corporation may purchase and maintain
insurance on its own behalf and on behalf of any person who is or was a
director, officer, employee, fiduciary, or agent of the corporation or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him or her and incurred by him
or her in any such capacity, whether or not the corporation would have the power
to indemnify such person against such liability under this Article V.
Section 5. Expenses. Expenses incurred by any person described in
Section 1 of this Article V in defending a proceeding shall be paid by the
corporation in advance of such proceeding's final disposition unless otherwise
determined by the board of directors in the specific case upon receipt of an
undertaking by or on behalf of the director or officer to repay such amount if
it shall ultimately be determined that he or she is not entitled to be
indemnified by the corporation. Such expenses incurred by other employees and
agents may be so paid upon such terms and conditions, if any, as the board of
directors deems appropriate.
Section 6. Employees and Agents. Persons who are not covered by the
foregoing provisions of this Article V and who are or were employees or agents
of the corporation, or who are or were serving at the request of the corporation
as employees or agents of another corporation, partnership, joint venture, trust
or other enterprise, may be indemnified to the extent authorized at any time or
from time to time by the board of directors.
Section 7. Contract Rights. The provisions of this Article V shall
be deemed to be a contract right between the corporation and each director or
officer who serves in any such capacity at any time while this Article V and the
relevant provisions of the General Corporation Law of the State of Delaware or
other applicable law are in effect, and any repeal or modification of this
Article V or any such law shall not affect any rights or obligations then
existing with respect to any state of facts or proceeding then existing.
Section 8. Merger or Consolidation. For purposes of this Article V,
references to "the corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, and employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under this Article V
with respect to the resulting or surviving corporation as he or she would have
with respect to such constituent corporation if its separate existence had
continued.
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<PAGE>
ARTICLE VI
CERTIFICATES OF STOCK
---------------------
Section 1. Form. Every holder of stock in the corporation shall be
entitled to have a certificate, signed by, or in the name of the corporation by
the president or a vice-president and the secretary or an assistant secretary of
the corporation, certifying the number of shares of a specific class or series
owned by such holder in the corporation. If such a certificate is countersigned
(1) by a transfer agent or an assistant transfer agent other than the
corporation or its employee or (2) by a registrar, other than the corporation or
its employee, the signature of any such president, vice-president, secretary, or
assistant secretary may be facsimiles. In case any officer or officers who have
signed, or whose facsimile signature or signatures 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 have been delivered by the corporation, such
certificate or certificates may nevertheless be issued and delivered as though
the person or persons who signed such certificate or certificates or whose
facsimile signature or signatures have been used thereon had not ceased to be
such officer or officers of the corporation. All certificates for shares shall
be consecutively numbered or otherwise identified. The name of the person to
whom the shares represented thereby are issued, with the number of shares and
date of issue, shall be entered on the books of the corporation. Shares of
stock of the corporation shall only be transferred on the books of the
corporation by the holder of record thereof or by such holder's attorney duly
authorized in writing, upon surrender to the corporation of the certificate or
certificates for such shares endorsed by the appropriate person or persons, with
such evidence of the authenticity of such endorsement, transfer, authorization,
and other matters as the corporation may reasonably require, and accompanied by
all necessary stock transfer stamps. In that event, it shall be the duty of the
corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate or certificates, and record the transaction on its books.
The board of directors may appoint a bank or trust company organized under the
laws of the United States or any state thereof to act as its transfer agent or
registrar, or both in connection with the transfer of any class or series of
securities of the corporation.
Section 2. Lost Certificates. The board of directors may direct a
new certificate or certificates to be issued in place of any certificate or
certificates previously 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, in 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 or her legal representative, to give the corporation a bond
sufficient to indemnify the corporation against any claim that may be made
against the corporation on account of the loss, theft or destruction of any such
certificate or the issuance of such new certificate.
Section 3. Fixing a Record Date for Stockholder Meetings. In order
that the corporation may determine the stockholders entitled to notice of or to
vote at any meeting of stockholders or any adjournment thereof, the board of
directors may fix a record date, which record date shall not precede
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<PAGE>
the date upon which the resolution flying the record date is adopted by the
board of directors, and which record shall not be more than sixty (60) nor less
than ten (10) days before the date of meeting. If no 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 the close of business
on the next day 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. A determination of stockholders of record entitled to notice
of or to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the board of directors may fix a new record
date for the adjourned meeting.
Section 4. Fixing a Record Date for Action by Written Consent. In
order that the corporation may determine the stockholders entitled to consent to
corporate action in writing without a meeting, the board of directors may fix a
record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the board of directors, and
which date shall not be more than ten (10) days after the date upon which the
resolution fixing the record date is adopted by the board of directors. If no
record date has been fixed by the board of directors, the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting, when no prior action by the board of directors is required by
statute, shall be the first date on which a signed written consent setting forth
the action taken or proposed to be taken is delivered to the corporation by
delivery to its registered office in the State of Delaware, its principal place
of business, or 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. If no record date has been fixed by
the board of directors and prior action by the board of directors is required by
statute, the record date for determining stockholders entitled to consent to
corporate action in writing without a meeting shall be at the close of business
on the day on which the board of directors adopts the resolution taking such
prior action.
Section 5. Fixing a Record Date for Other Purposes. In order that
the corporation may determine the stockholders entitled to receive payment of
any dividend or other distribution or allotment or any rights or the
stockholders entitled to exercise any rights in respect of any change,
conversion or exchange of stock, or for the purposes of any other lawful action,
the board of directors may fix a record date, which record date shall not
precede the date upon which the resolution fixing the record date is adopted,
and which record date shall be not more than sixty (60) days prior to such
action. If no record date is fixed, the record date for determining
stockholders for any such purpose shall be at the close of business on the day
on which the board of directors adopts the resolution relating thereto.
Section 6. Registered Stockholders. Prior to the surrender to the
corporation of the certificate or certificates for a share or shares of stock
with a request to record the transfer of such share or shares, the corporation
may treat the registered owner as the person entitled to receive dividends, to
vote, to receive notifications, and otherwise to exercise all the rights and
powers of an owner. The corporation shall not be bound to recognize any
equitable or other claim to or interest
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<PAGE>
in such share or shares on the part of any other person, whether or not it shall
have express or other notice thereof.
Section 7. Subscriptions for Stock. Unless otherwise provided for in
the subscription agreement, subscriptions for shares shall be paid in full at
such time, or in such installments and at such times, as shall be determined by
the board of directors. Any call made by the board of directors for payment on
subscriptions shall be uniform as to all shares of the same class or as to all
shares of the same series. In case of default in the payment of any installment
or call when such payment is due, the corporation may proceed to collect the
amount due in the same manner as any debt due the corporation.
ARTICLE VII
GENERAL PROVISIONS
------------------
Section 1. 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 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 any other purpose
and the directors may modify or abolish any such reserve in the manner in which
it was created.
Section 2. Checks, Drafts or Orders. All checks, drafts, or other
orders for the payment of money by or to the corporation and all notes and other
evidences of indebtedness issued in the name of the corporation shall be signed
by such officer or officers, agent or agents of the corporation, and in such
manner, as shall be determined by resolution of the board of directors or a duly
authorized committee thereof.
Section 3. Contracts. The board of directors may authorize any
officer or officers, or any agent or agents, of the corporation to enter into
any contract or to 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.
Section 4. Loans. The corporation may lend money to, or guarantee
any obligation of, or otherwise assist any officer or other employee of the
corporation or of its subsidiary, including any officer or employee who is a
director of the corporation or its subsidiary, whenever, in the judgment of the
directors, such loan, guaranty or assistance may reasonably be expected to
benefit the corporation. The loan, guaranty or other assistance may be with or
without interest, and may be unsecured, or secured in such manner as the board
of directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing in this section contained shall be
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<PAGE>
deemed to deny, limit or restrict the powers of guaranty or warranty of the
corporation at common law or under any statute.
Section 5. Fiscal Year. The fiscal year of
the corporation shall be fixed by resolution of the board of directors.
Section 6. Corporate Seal. The boa rd of directors shall provide a
corporate seal which shall be in the form of a circle and shall have inscribed
thereon the name of the corporation and the words "Corporate Seal, Delaware".
The seal may be used by causing it or a facsimile thereof to be impressed or
affixed or reproduced or otherwise.
Section 7. Voting Securities Owned By Corporation. Voting securities
in any other corporation held by the corporation shall be voted by the
president, unless the board of directors specifically confers authority to vote
with respect thereto, which authority may be general or confined to specific
instances, upon some other person or officer. Any person authorized to vote
securities shall have the power to appoint proxies, with general power of
substitution.
Section 8. Inspection of Books and Records. Any stockholder of
record, in person or by attorney or other agent, shall, upon written demand
under oath stating the purpose thereof, have the right during the usual hours
for business to inspect for any proper purpose the corporation's stock ledger, a
list of its stockholders, and its other books and records, and to make copies or
extracts therefrom. A proper purpose shall mean any purpose reasonably related
to such person's interest as a stockholder. In every instance where an attorney
or other agent shall be the person who seeks the right to inspection, the demand
under oath shall be accompanied by a power of attorney or such other writing
which authorizes the attorney or other agent to so act on behalf of the
stockholder. The demand under oath shall be directed to the corporation at its
registered office in the State of Delaware or at its principal place of
business.
Section 9. Section Headings. Section headings in these by-laws are
for convenience of reference only and shall not be given any substantive effect
in limiting or otherwise construing any provision herein.
Section 10. Inconsistent Provisions. In the event that any provision
of these by-laws is or becomes inconsistent with any provision of the
certificate of incorporation, the General Corporation Law of the State of
Delaware or any other applicable law, the provision of these by-laws shall not
be given any effect to the extent of such inconsistency but shall otherwise be
given full force and effect.
ARTICLE VIII
AMENDMENTS
----------
These by-laws may be amended, altered, or repealed and new by-laws
adopted at any meeting of the board of directors by a majority vote. The fact
that the power to adopt, amend, alter, or repeal
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<PAGE>
the by-laws has been conferred upon the board of directors shall not divest the
stockholders of the same powers.
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<PAGE>
EXHIBIT 3.3
ARTICLES OF INCORPORATION
OF
MULE-HIDE PRODUCTS CO., INC.
Pursuant to Article 3.02 of the Texas Business Corporation Act, the
undersigned does hereby adopt the following Articles of Incorporation for such
corporation:
ARTICLE I
The name of the corporation is Mule-Hide Products Co., Inc.
ARTICLE II
The period of its duration is perpetual.
ARTICLE III
The purpose or purposes for which the corporation is organized are: To
engage in the transaction of any or all lawful business for which corporations
may be incorporated under the Texas Business Corporation Act.
ARTICLE IV
The aggregate number of shares which the corporation shall have
authority to issue is Ten Thousand (10,000) without par value.
ARTICLE V
The corporation will not commence business until it has received for the
issuance of its shares consideration of the value of One Thousand ($1,000.00)
Dollars, consisting of money, labor done or property actually received, which
sum is not less than One Thousand ($1,000.00) Dollars.
<PAGE>
ARTICLE VI
The post-office address of its initial registered office is 1601 Elm
Street, Dallas, Texas 75201, and the name of its initial registered agent at
such address is C T Corporation System.
ARTICLE VII
The number of directors constituting the initial board of directors is
two (2), and the names and addresses of the persons who are to serve as
directors until the first annual meeting of the shareholders or until their
successors are elected and qualified are:
Richard L. Schutt 1112 Westgate
Oak Park, IL 60301
Brent A. Fox 1112 Westgate
Oak Park, IL 60301
ARTICLE VIII
No shareholder of the Corporation shall have any preemptive right of
subscription to any shares of an class of the Corporation, whether now or
hereafter authorized, or to any obligations convertible into shares of the
Corporation, issues or sold, nor any right of subscription to any thereof other
than such right, if any, and at such price as the Board of Directors, in its
discretion from time to time may determine, pursuant to the authority hereby
conferred by the Articles of Incorporation, and the Board of Directors may issue
shares without offering such issue either in whole or in part to the
shareholders of the Corporation.
ARTICLE IX
The name and address of the incorporation is:
Richard L. Schutt
1112 Westgate
Oak Park, IL 60301
IN WITNESS WHEREOF, I have hereunto set my hand this ____ day of December,
1985.
----------------------------------------------
Richard L. Schutt
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<PAGE>
STATE OF WISCONSIN )
) ss.
COUNTY OF ROCK )
I, _________________, a notary public, do hereby certify that on this
____ day of December, 1985, personally appeared before me, Richard L. Schutt,
who being by me first duly sworn; declared that he is the person who signed the
foregoing document as incorporator, and that the statements therein contained
are true.
--------------------------------------
Notary Public, State of Wisconsin
My commission:
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<PAGE>
CONSENT FOR USE OF
SIMILAR NAME
To Whom It May Concern:
Mule-Hide Mfg. Co., Inc., a Texas corporation, does not object and
gives its consent to Mule-Hide Products Co., Inc.'s use of the name "Mule-Hide
Products CO., Inc."
MULE-HIDE MFG. CO., INC.
Date:____________ By:________________________________
Kenneth A. Hendricks, President
<PAGE>
To the Secretary of State
of the State of Texas
C T Corporation System, as the registered agent for the domestic and
foreign corporations named on the attached list submits the following statement
for the purpose of changing the registered office for such corporations, in the
State of Texas:
1. The name of the corporation is See attached list
-----------------
2. The post office address of its present registered office is: c/o C T
CORPORATION SYSTEM, 1601 ELM STREET, DALLAS, TEXAS 75201
3. The post office address to which its registered office is to be changed is:
c/o C T CORPORATION SYSTEM, 350 N. ST. PAUL STREET, DALLAS, TEXAS 75201
4. The name of its present registered agent is: C T CORPORATION SYSTEM
5. The name of its successor registered agent is: C T CORPORATION SYSTEM
6. The post office address of its registered office and the post office
address of the business office of its registered agent, as changed, will be
identical.
7. Notice of this change of address has been given in writing to each
corporation named on the attached list 10 days prior to the date of filing
of this certificate.
Dated: ______________, 1990.
C T CORPORATION SYSTEM
By:
---------------------------------
Its Vice President
<PAGE>
EXHIBIT 3.4
BY-LAWS
OF
MULE-HIDE PRODUCTS CO., INC.
(a Texas corporation)
INTRODUCTION
0.01 Date of annual shareholders' meeting (see Section 2.01):
March 15 at 10:00 a.m.
0.02 Required notice of shareholders' meeting (see Section 2.04):
Ten days
0.03 Authorized number of directors (see Section 3.01):
Two
0.04 Required notice of directors' meeting (see Section 3.05):
Forty-eight hours
0.05 Authorized number of Vice-Presidents (see Section 4.01):
One
0.06 Restrictions upon transfer of shares (see Section 6.05):
None. Future restrictions may be imposed by
Agreement among the Shareholders and the corporation.
0.07 Fiscal Year (see Section 9.01):
January 1 through December 31
<PAGE>
ARTICLE I.
OFFICE
------
1.01 Principal and Business Offices. The Corporation may have such
principal and other business offices, either within or without the State of
Texas,, as the Board of Directors may designate or as the business of the
Corporation may require from time to time.
1.02 Registered Office. The registered office of the Corporation
required by the Texas Business Corporation Act to be maintained in the State of
Texas may be, but need not be, identical with the principal office in the State
of Texas, and the address of the registered office may be changed from time to
time by the Board of Directors. The business office of the registered agent of
the Corporation shall be identical to such registered office.
ARTICLE II.
SHAREHOLDERS
------------
2.01 Annual Meeting. The annual meeting of the shareholders shall be
held in each year at the date and hour set forth in Section 0.01, or at such
other date and hour within thirty (30) days before or after said date as may be
fixed by or under the authority of the Board of Directors, for the purpose of
electing directors and for transaction of such other business as may come before
the meeting. If the day fixed for the annual meeting shall be a legal holiday
in the State of Texas, such meeting shall be held on the next succeeding
business day. if the election of directors shall not be held on the day
designated herein, or fixed as herein provided, for any annual meeting of the
shareholders, or any adjournment thereof, the Board of Directors shall cause the
election to be held at a special meeting of the shareholders as soon thereafter
as conveniently may be.
2.02 Special Meeting. Special meetings of the shareholders, for any
purpose or purposes, unless otherwise prescribed by statute, may be called by
the President or the Board of Directors or by the person designated in the
written request of the holders of not less than one-tenth (1/10) of all shares
of the corporation entitled to vote at the meeting.
2.03 Place of Meeting. The Board of Directors may designate any
place, either within or without the State of Texas as the place of meeting for
any annual meeting or for any special meeting called by the Board of Directors.
A waiver of notice signed by all shareholders entitled to vote at a meeting may
designate any place, either within or without the State of Texas, as the place
for the holding of such meeting. If no designation is made, or if a special
meeting be otherwise called, the place of meeting shall be the principal
business office of the Corporation in the State of Texas or such other suitable
place in the county of such principal office as may be designated by the person
calling such meeting, but any meeting may be adjourned to reconvene at any place
designated by vote of a majority of the shares represented at such meeting.
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<PAGE>
2.04 Notice of Meeting. Written notice stating the place, day and
hour of the meeting, and in case of a special meeting, the purpose or purposes
for which the meeting is called, shall be delivered not less than the number of
days set forth in Section 0.02 (unless a longer period is required by law or the
Articles of Incorporation) nor more than fifty (50) days before the date of the
meeting, either personally or by mail, by or at the direction of the President,
or the Secretary, or other officer or person calling the meeting, to each
shareholder of record entitled to vote at such meeting. If mailed, such notice
shall be deemed to be delivered when deposited in the United States mail,
addressed to the stockholder at his address as it appears on the stock record
books of the Corporation, with postage thereon prepaid.
2.05 Closing of Transfer Books or Fixing of Record Date. For the
purpose of determining shareholders entitled to notice of or to vote at any
meeting of shareholders or any adjournment thereof, or shareholders entitled to
receive payment of any dividend, or in order to make a determination of
shareholders for any other proper purpose, the Board of Directors may provide
that the stock transfer books shall be closed for a stated period but not to
exceed, in any case, fifty (50) days. If the stock 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. In lieu of closing the stock
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 not to be
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. If the stock 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 close of business on the date on
which notice of the meeting is mailed or on the date on which the resolution of
the Board of Directors declaring such dividend is adopted, as the case may be,
shall be the record date for such determination of shareholders. When a
determination of shareholders has been made as provided in this section, such
determination of shareholders shall be applied to any adjournment thereof except
where the determination has been made through the closing of the stock transfer
books and the stated period of closing has expired.
2.06 Voting Lists. The officer or agent having charge of the stock
transfer books for shares of the Corporation shall, before each meeting of
shareholders, make a complete list of the shareholders entitled to vote at such
meeting, or any adjournment thereof, with the address of and the number of
shares held by each, which list shall be produced and kept open at the time and
place of the meeting and shall be subject to the inspection of any shareholder
during the whole time of the meeting. The original stock transfer books 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. Failure to
comply with the requirements of this section shall not affect the validity of
any action taken at such meeting.
2.07 Quorum. Except as otherwise provided in the Articles of
Incorporation, a majority of the shares entitled to vote, represented in person
or by proxy, shall constitute a quorum at a meeting of shareholders. If a
quorum is present, the affirmative vote of the majority of the shares
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<PAGE>
represented at the meeting and entitled to vote on the subject matter shall be
the act of the shareholders unless the vote of a greater number or voting by
classes is required by law or the Articles of Incorporation. Though less than a
quorum of the outstanding shares are represented at a meeting, a majority of the
shares so represented may adjourn the meeting from time to time without further
notice. 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.
2.08 Conduct of Meetings. The president, and in his absence, a vice-
president in the order provided under Section 4.06, and in their absence, any
person chosen by the shareholders present, shall call the meeting of the
shareholders to order and shall act as chairman of the meeting, and the
secretary of the Corporation shall act as secretary of all meetings of the
shareholders, but, in the absence of the secretary, the presiding officer may
appoint any other person to act as secretary of the meeting.
2.09 Proxies. At all meetings of shareholders, a shareholder
entitled to vote may vote in person or by proxy appointed in writing by the
shareholder or by his duly authorized attorney in fact. Such proxy shall be
filed with the Secretary of the Corporation before or at the time of the
meeting. Unless otherwise provided in the proxy, a proxy may be revoked at any
time before it is voted, either by written notice filed with the Secretary of
the acting secretary of the meeting or by oral notice given by the shareholder
to the presiding officer during the meeting. The presence of a shareholder who
has filed his proxy shall not of itself constitute a revocation. No proxy shall
be valid after eleven (11) months from the date of its execution, unless
otherwise provided in the proxy. The Board of Directors shall have the power
and authority to make rules establishing presumptions as to the validity and
sufficiency of proxies.
2.10 Voting of Shares. Each outstanding share shall be entitled to
one vote upon each matter submitted to a vote at a meeting of the shareholders,
except to the extent that the voting rights of the shares of any class or
classes are enlarged, limited or denied by the Articles of Incorporation.
2.11 Voting of Shares by Certain Holders.
(a) Other Corporations. Shares standing in the name of another
corporation may be voted either in person or by proxy, by the president of
such corporation or any other officer appointed by such president. A proxy
executed by any principal officer of such other corporation or assistant
thereto shall be conclusive evidence of the signer's authority to act, in
the absence of express notice to this corporation, given in writing to the
Secretary of this corporation, of the designation of some other person by
the board of directors or the by-laws of such other corporation.
(b) Legal Representatives and Fiduciaries. Shares held by an
administrator, executor, guardian, conservator, trustee in bankruptcy,
receiver, or assignee for creditors may be voted by him, either in person
or by proxy, without a transfer of such shares into his name, provided that
there is filed with the Secretary before or at the time of meeting proper
evidence of his incumbency and the number of shares held. Shares standing
in the name of a fiduciary
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<PAGE>
may be voted by him, either in person or by proxy. A proxy executed by a
fiduciary shall be conclusive evidence of the signer's authority to act, in
the absence of express notice to this corporation, given in writing to the
Secretary of this Corporation, that such manner of voting is expressly
prohibited or otherwise directed by the document creating the fiduciary
relationship.
(c) Pledges. A shareholder whose shares are pledged shall be entitled
to vote such shares until the shares have been transferred into the name of
the pledgee, and thereafter the pledgee shall be entitled to vote the
shares so transferred.
(d) Treasury Stock and Subsidiaries. Neither treasury shares, nor
shares held by another corporation if a majority of the shares entitled to
vote for the election of directors of such other corporation, shall be
voted at any meeting or counted in determining the total number of
outstanding shares entitled to vote, but shares of its own issue held by
this Corporation in a fiduciary capacity, or held by such other corporation
in a fiduciary capacity, may be voted and shall be counted in determining
the total number of outstanding shares entitled to vote.
(e) Minors. Shares held by a minor may be voted by such minor in
person or by proxy and no such vote shall be subject to disaffirmance or
avoidance, unless prior to such vote the Secretary of the Corporation has
received written notice or has actual knowledge that such shareholder is a
minor.
(f) Incompetents and Spendthrifts. Shares held by an incompetent or
spendthrift may be voted by such incompetent or spendthrift in person or by
proxy and no such vote shall be subject to disaffirmance or avoidance,
unless prior to such vote the Secretary of the Corporation has actual
knowledge that such shareholder has been adjudicated an incompetent or
spendthrift or actual knowledge of filing of judicial proceedings for
appointment of a guardian.
(g) Joint Tenants. Shares registered in the names of two or more
individuals who are earned in the registration as joint tenants may be
voted in person or by proxy signed by any one or more of such individuals
if either (i) no other such individual or his legal representative is
present and claims the right to participate in the voting of such shares or
prior to the vote filed with the Secretary of the Corporation a contrary
written voting authorization or direction or written denial of authority of
the individual present or signing the proxy proposed to be voted, or (ii)
all such other individuals are deceased and the Secretary of the
Corporation has no actual knowledge that the survivor has been adjudicated
not to be the successor to the interests of those deceased.
2.12 Waiver of Notice by Shareholders. Whenever any notice whatever
is required to be given to any shareholder of the Corporation under the Articles
of Incorporation or by-laws or any provision of law, a waiver thereof in
writing, signed at any time, whether before or after the time of the meeting, by
the shareholder entitled to such notice, shall be deemed equivalent to the
giving of
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such notice; provided that such waiver in respect to any matter of which notice
is required under any provision of the Texas Business Corporation Act, shall
contain the same information as would have been required to be included in such
notice, except the time and place of meeting.
2.13 Unanimous Consent without Meeting. Any action required or
permitted by the Articles of Incorporation or by-laws or any provision of law to
be taken at a meeting of the shareholders, may be taken without a meeting if a
consent in writing, setting forth the action so taken, shall be signed by all of
the shareholders entitled to vote with respect to the subject matter thereof.
ARTICLE III.
BOARD OF DIRECTORS
------------------
3.01 General Powers and Number. The business and affairs of the
Corporation shall be managed by its Board of Directors. The number of directors
of the Corporation shall be as set forth in Section 0.03.
3.02 Tenure and Qualifications. Each director shall hold office
until the next annual meeting of shareholders and until his successor has been
elected, or until his prior death, resignation, or removal. A director may be
removed from office by affirmative vote of the majority of the outstanding
shares entitled to vote for the election of such director, taken at a meeting of
shareholders called for that purpose. A director may resign at any time by
filing his written resignation with the Secretary of the Corporation. Directors
need not be residents of the State of Texas or shareholders of the Corporation.
3.03 Regular Meetings. A regular meeting of the Board of Directors
shall be held without other notice than this by-law immediately after the annual
meeting of the shareholders, and each adjourned session thereof. The place of
such regular meeting shall be the same as the place of the meeting of
shareholders which precedes it, or such other suitable place as may be announced
at such meeting of shareholders. The Board of Directors may provide, by
resolution, the time and place, either within or without the State of Texas, for
the holding of additional regular meetings without other notice than such
resolution.
3.04 Special Meetings. Special meetings of the Board of Directors
may be called by or at the request of the President, Secretary or any two
directors. The President or Secretary calling any special meeting of the Board
of Directors may fix any place, either within or without the State of Texas, as
the place for holding any special meeting of the Board of Directors called by
them, and if no other place is fixed, the place of meeting shall be the
principal business office of the Corporation in the State of Texas.
3.05 Notice; Waiver. Notice of each meeting of the Board of
Directors (unless otherwise provided in or pursuant to Section 3.03) shall be
given by written notice delivered personally or mailed or given by telegram to
each director at his business address or at such other address as such
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director shall have designated in writing filed with the Secretary, in each case
not less than that number of hours prior thereto set forth in Section 0.04. If
mailed, such notice shall be deemed to be delivered when deposited in the United
States mail so addressed, with postage prepaid. If notice is given by telegram,
such notice shall be deemed to be delivered when the telegram is delivered to
the telegraph company. Whenever any notice whatever is required to be given to
any director of the Corporation under the Articles of Incorporation or by-laws
or any provision of law, a waiver thereof in writing, signed at any time,
whether before or after the time of meeting, by the director entitled to such
notice, shall be deemed equivalent to the giving of such notice. The attendance
of a director at a meeting shall constitute a waiver of notice of such meeting,
except where a director attends a meeting and objects to the transaction of any
business at such meeting because the meeting is not lawfully called or convened.
Neither the business to be transacted at, nor the purpose of, any regular or
special meeting of the Board of Directors need be specified in the notice or
waiver of notice of such meeting.
3.06 Quorum. Except as otherwise provided by law or by the Articles
of Incorporation or these by-laws, a majority of the number of directors set
forth in Section 0.03 shall constitute a quorum for the transaction of business
at any meeting of the Board of Directors, but a majority of the directors
present (though less than such quorum) may adjourn the meeting from time to time
without further notice.
3.07 Manner of Acting. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors, unless the act of a greater number is required by law or by these
by-laws.
3.08 Conduct of Meetings. The President, and in his absence, a Vice-
President in the order provided under Section 4.06, and in their absence, any
director chosen by the directors present, shall call meetings of the Board of
Directors to order and shall act as chairman of the meeting. The Secretary of
the Corporation shall act as secretary of all meetings of the Board of
Directors, but in the absence of the Secretary, the presiding officer may
appoint any Assistant Secretary or any director or other person present to act
as secretary of the meeting.
3.09 Vacancies. Any vacancy occurring in the Board of Directors,
including a vacancy created by an increase in the number of directors, may be
filled until the next succeeding annual election by the affirmative vote of a
majority of the directors then in office, though less than a quorum of the Board
of Directors; provided, that in case of a vacancy created by the removal of a
director by vote of the shareholders, the shareholders shall have the right to
fill such vacancy at the same meeting or any adjournment thereof.
3.10 Compensation. The Board of Directors, by affirmative vote of a
majority of the directors then in office, and regardless of any personal
interest of any of its members, may establish reasonable compensation for all
directors for services to the Corporation as directors, officers or otherwise,
or may delegate such authority to an appropriate committee. The Board of
Directors shall also have authority to provide for or to delegate authority to
an appropriate committee to provide for reasonable pensions, disability or death
benefits, and other benefits or payments, to directors,
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offices and employees and to their estates, families, dependents or
beneficiaries on account of prior services rendered by such directors, officers
and employees of the Corporation.
3.11 Presumption of Assent. A director of the Corporation who is
present at a meeting of the Board of Directors or a committee thereof of which
he is a member at which action on any corporate matter is taken shall be
presumed to have assented to the action taken unless his dissent shall be
entered in the minutes of the meeting or unless he shall file his written
dissent to such action with the person acting as the secretary of the meeting
before the adjournment thereof or shall forward such dissent by registered mail
to the Secretary of the Corporation immediately after the adjournment of the
meeting. Such right to dissent shall not apply to a director who voted in favor
of such action.
3.12 Committees. The Board of Directors by resolution adopted by the
affirmative vote of a majority of the number of directors set forth in Section
0.03 may designate one or more committees, each committee to consist of three or
more directors elected by the Board of Directors, which to the extent provided
in said resolution as initially adopted, and as thereafter supplemented or
amended by further resolution adopted by a like vote, shall have and may
exercise, when the Board of Directors is not in session, the business and
affairs of the Corporation, except action in respect to dividends to
shareholders, election of the principal officers or the filling of vacancies in
the Board of Directors or committees created pursuant to this section. The
Board of Directors may elect one or more of its members as alternate members of
any such committee who may take the place of any absent member or members at any
meeting of such committee, upon request by the President or upon request by the
chairman of such meeting. Each such committee shall make its own rules
governing the conduct of its activities and shall make such reports of its
activities to the Board of Directors as the Board of Directors may request.
3.13 Unanimous Consent without Meeting. Any action required or
permitted by the Articles of Incorporation or by-laws or any provision of law to
be taken by the Board of Directors at a meeting or by resolution may be taken
without a meeting if a consent in writing, setting forth the action so taken,
shall be signed by all the directors then in office.
ARTICLE IV.
OFFICERS
--------
4.01 Number. The principal officers of the Corporation shall be a
President, the number of Vice-Presidents set forth in Section 0.05, a Secretary,
and a Treasurer, each of whom shall be elected by the Board of Directors. Any
two or more offices except President and Secretary may be held by the same
person.
4.02 Election and Term of Office. The officers of the Corporation
shall be elected annually by the Board of Directors at the first annual meeting
of the Board of Director held after each annual meeting of the shareholders. If
the election of officers is not held at such meeting, such election shall
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be held as soon thereafter as conveniently may be. Each officer shall hold
office until his successor has been duly elected or until his prior death,
resignation, or removal.
4.03 Removal. Any officer or agent may be removed by the Board of
Directors whenever in its judgment the best interests of the Corporation will be
served thereby, but such removal shall not be without prejudice to the contract
rights, if any, of the person so removed. Election or appointment shall not of
itself create contract rights.
4.04 Vacancies. A vacancy in any principal office because of death,
resignation, removal, disqualification or otherwise shall be filled by the
Board of Directors for the unexpired portion of the term.
4.05. President. The President shall be the principal executive
officer of the Corporation and, subject to the control of the Board of
Directors, shall in general supervise and control all of the business and
affairs of the Corporation. He shall, when present, preside at all meetings of
the share holders and of the Board of Directors. He shall have authority,
subject to such rules as may be prescribed by the Board of Directors, to appoint
such agents and employees of the Corporation as he shall deem necessary, to
prescribe their powers, duties and compensation, and to delegate authority to
sign, execute and acknowledge, on behalf of the Corporation, all deeds,
mortgages, bonds, stock certificates, contracts, leases, reports, and all other
documents or instruments necessary or proper to be executed in the course of the
Corporation's regular business, or which shall be authorized by resolution of
the Board of Directors; and, except as otherwise provided by law or the Board of
Directors, he may authorize the Vice-President or other officer or agent of the
Corporation to sign, execute and acknowledge such documents or instruments in
his place and stead. In general, he shall perform all duties incident to the
office of President and have such other duties and exercise such other authority
as may be prescribed by the Board of Directors from time to time.
4.06 The Vice-Presidents. In the absence of the President or in the
event of his death, inability, or refusal to act, or in the event for any reason
it shall be impractical for the President to act personally, the Vice-President
(or in the event there is more than one Vice-President, the Vice-Presidents, in
the order designated by the Board of Directors, or in the absence of any
designation, then in the order of their election) shall perform the duties of
the President, and when so acting, shall have all the powers of and be subject
to all the restrictions upon the President. Any Vice-President may sign, with
the Secretary of Assistant Secretary, certificates for shares of the
Corporation, and shall perform such other duties and have such authority as from
time to time may be delegated or assigned to him by the President or by the
Board of Directors. The execution of any instrument on behalf of the
Corporation by any Vice-Presidents shall be conclusive evidence, as to third
parties, of his authority to act in the stead of the President.
4.07 The Secretary. The Secretary shall: (a) keep the minutes of
the meetings of the shareholders and of the Board of Directors in one or more
books provided for that purpose; (b) see that all notices are duly given in
accordance with the provisions of these by-laws or as required by law; (c) be
custodian of the Corporate records and of the seal of the Corporation (if any)
and see that the seal of the Corporation (if any) is affixed to all documents,
the execution of which, on behalf of
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the Corporation under its seal, is duly authorized (d) keep or arrange for the
keeping of a register of the post office address of each shareholder which shall
be furnished to the secretary by such shareholder; (e) sign with the President,
or a Vice-President, certificates for shares of the Corporation, the issuance of
which shall have been authorized by general resolution of the Board of
Directors; (f) have general charge of the stock transfer books of the
Corporation; and (g) in general perform all duties incident to the office of
Secretary and may have such other duties and exercise such other authority as
may be prescribed by the Board of Directors from time to time or as may be
delegated or assigned to him by the President from time to time.
4.08 The Treasurer. The treasurer shall: (a) have charge and
custody of and be responsible for all funds and securities of the Corporation;
(b) receive and give receipts for monies due and payable to the Corporation from
any source whatsoever, and deposit all such monies in the name of the
Corporation in such banks, trust companies, or other depositories as shall be
selected in accordance with all duties incident to the office of and have such
other duties and exercise such other authority as may be prescribed by the Board
of Directors from time to time or as may be delegated or assigned to him by the
President from time to time. If required by the Board of Directors, the
treasurer shall give a bond for the faithful discharge of his duties in such sum
and with such surety or sureties as the Board of Directors shall determine.
4.09 Assistant Secretaries and Assistant Treasurers. There shall be
such number of Assistant Secretaries and Assistant Treasurers as the Board of
Directors may from time to time authorize. The Assistant Secretary may sign
with the President or a Vice-President certificates for shares of the
Corporation, the issuance of which have been authorized by a resolution of the
Board of Directors. If required by the Board of Directors, the Assistant
Treasurers shall give bonds for the faithful discharge of their duties in such
sums and with such sureties as the Board of Directors shall determine. The
Assistant Secretaries and Assistant Treasurers, in general, shall perform such
duties and have such authority as shall from time to time be delegated or
assigned to them by the Secretary or the Treasurer, respectively, or by the
President or the Board of Directors.
4.10 Other Assistants and Acting Officers. The Board of Directors
shall have the power to appoint any person to act as assistant to any officer,
or as agent for the Corporation in his stead, or to perform the duties of such
officer whenever for any reason it is impracticable for such officer to act
personally, and such assistant or acting officer or other agent so appointed by
the Board of Directors shall have the power to perform all the duties of the
office to which he is so appointed to be assistant, or as to which he is so
appointed to act, except as such power may be otherwise defined or restricted by
the Board of Directors.
4.11 Salaries. The salaries of the principal officers shall be fixed
from time to time by the Board of Directors or a duly authorized committee
thereof, and no officer shall be prevented from receiving such salary by reason
of the fact that he is also a director of the Corporation.
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ARTICLE V.
CONTRACTS, LOANS, CHECKS AND DEPOSITS; SPECIAL CORPORATE ACTS
5.01 Contracts. The Board of Directors and shareholders may jointly
authorize any officer or officers, agent or agents, to enter into any contract
or execute or deliver any instrument in the name of and on behalf of the
Corporation, and such authorization may be general or confined to specific
instances. In the absence of other designation, all warranties, deeds,
mortgages and instruments of assignment or pledge and any other contracts or
instruments made by the Corporation in the ordinary course of business shall be
executed in the name of the Corporation by any two (2) officers. When so
executed no other party to such instrument or any third party shall be required
to make any inquiry into the authority of the signing officer or officers. No
warranties, deeds, mortgages, and instruments of assignment or pledge and any
other contracts or instruments by the Corporation not in the ordinary course of
business shall be made unless authorized by or under the authority of a
resolution of the shareholders and the Board of Directors. Such authorization
may be general or confined to specific instances.
5.02 Loans. No indebtedness for borrowed money shall be contracted
on behalf of the Corporation, and no evidences of such indebtedness shall be
issued in its name unless authorized by or under the authority of a resolution
of the shareholders and the Board of Directors. Such authorization may be
general or confined to specific instances.
5.03 Checks, Drafts, etc. All checks, drafts or other orders for the
payment of money, notes or other evidences of indebtedness issued in the name of
the Corporation, shall be signed by such officer or officers, agent or agents of
the Corporation and in such manner as shall from time to time be determined by
or under the authority of a resolution of the Board of Directors.
5.04 Deposits. All funds of the Corporation not otherwise employed
shall be deposited from time to time to the credit of the Corporation in such
banks, trust companies or other depositories as may be selected by or under the
authority of a resolution of the Board of Directors.
5.05 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 at any meeting of security holders of such other
corporation by the President of this Corporation if he is present, or in his
absence, by any Vice-President of this Corporation who is present, and (b)
whenever, in the judgment of the President, or in his absence, of any Vice-
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 or a Vice-President of
Corporation, without necessity of any authorization by the Board Directors,
affixation of corporate seal (if any) or countersignature or attestation by
another officer. 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
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corporation and owned by this Corporation the same as such shares or other
securities might be voted by this Corporation.
ARTICLE VI.
CERTIFICATES FOR SHARES AND THEIR TRANSFER
6.01 Certificates for Shares. Certificates representing shares of
the Corporation shall be in such form, consistent with law, as shall be
determined by the Board of Directors. Such certificates shall be signed by the
President or a Vice-President and by the Secretary or an Assistant Secretary.
All certificates for shares shall be consecutively numbered or otherwise
identified. The name and address of the person to whom the shares presented
thereby are issued, with the number of shares and the date of issue, shall be
entered on the stock transfer books of the Corporation. All certificates
surrendered to the Corporation for transfer shall be cancelled and no new
certificate shall be issued until the former certificate for a like number of
shares has been surrendered and cancelled, except as provided in Section 6.06.
6.02 Facsimile Signatures and Seal. The seal of the Corporation (if
any) on any certificates for shares may be a facsimilie. The signatures of the
President or Vice-President and the Secretary or Assistant Secretary upon a
certificate may be facsimilies if the certificate is countersigned by a transfer
agent, or registered by a registrar, other than the Corporation itself or an
employee of the Corporation.
6.03 Signature by Former Officers. In case any officer, who has
signed or whose facsimilie signature has been placed upon any certificates for
shares, shall have ceased to be such officer before such certificate is issued,
it may be issued by the Corporation with the same effect as if he were such
officer at the date of its issue.
6.04 Transfer of Shares. Prior to due presentment of a certificate
for shares for registration of transfer, the Corporation may treat the
registered owner of such shares as the person exclusively entitled to vote, to
receive notifications, and otherwise to exercise all the rights and powers of an
owner. Where a certificate for shares is presented to the Corporation with a
request to register for transfer, the Corporation shall not be liable to the
owner or any other person suffering loss as a result of such registration of
transfer if (a) there were on or with the certificate the necessary
endorsements, and (b) the Corporation had no duty to inquire into adverse claims
or has discharged any such duty. The Corporation may require reasonable
assurance that said endorsements are genuine and may be prescribed under the
authority of the Board of Directors.
6.05 Restrictions on Transfer. The face or reverse side of each
certificate representing shares shall bear a conspicuous notation on any
restriction imposed by the Corporation upon the transfer of such shares.
Restrictions on transfer applicable to all of the shares of the Corporation
shall be set forth in Section 0.06.
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6.06 Lost, Destroyed or Stolen Certificates. Where the owner claims
that his certificate for shares has been lost, destroyed or wrongfully taken, a
new certificate shall be issued in place thereof if the owner (a) so requests
before the Corporation has notice that such shares have been acquired by a bona
fide purchaser; (b) files with the Corporation a sufficient indemnity bond; and
(c) satisfies such other reasonable requirements as the Board of Directors may
prescribe.
6.07 Consideration for Shares. The shares of the Corporation may be
issued for such consideration as shall be fixed from time to time by the Board
of Directors, provided that any shares having a par value (if any) shall not be
issued for a consideration less than par value thereof. The consideration to be
paid for shares may be paid in whole or in part, in money, in other property,
tangible or intangible, or in labor or services actually performed for the
Corporation. When payment of the consideration for which shares are to be
issued shall have been received by the Corporation, such shares shall be deemed
to be fully paid and nonassessable by the Corporation. No certificate shall be
issued for any share until such share is fully paid.
6.08 Stock Regulations. The Board of Directors shall have the power
and authority to make all such further rules and regulations not inconsistent
with the statutes of the State of Texas as it may deem expedient concerning the
issue, transfer and registration of certificates representing shares in the
Corporation.
ARTICLE VII.
SEAL
----
7.01 The Corporation shall have NO corporate seal.
ARTICLE VIII.
AMENDMENTS
----------
8.01 By Shareholders. These by-laws may be altered, amended or
repealed and new by-laws may be adopted by the majority of the shares present or
represented at any annual or special meeting of the shareholders at which a
quorum is in attendance.
8.02 By Directors. These by-laws may also be altered, amended or
repealed and new by-laws may be adopted by the Board of Directors by affirmative
vote of a majority of the number of directors present at any meeting at which a
quorum is in attendance. No by-laws adopted by the shareholders shall be
amended or repealed by the Board of Directors if the by-law so adopted so
provides.
8.03 Implied Amendments. Any action taken or authorized by the
shareholders or by the Board of Directors, which would be inconsistent with the
by-laws then in effect but is taken or
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authorized by affirmative vote not less than the number of shares or the number
of directors required to amend the by-laws so that the by-laws would be
consistent with such action, shall be given the same effect as though the by-
laws had been temporarily amended or suspended so far, but only so far, as is
necessary to permit the specific action so taken or authorized.
ARTICLE IX.
FISCAL YEAR
-----------
9.01 The fiscal year of the Corporation shall be as set forth in Section
0.07.
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Exhibit 3.5
CERTIFICATE OF INCORPORATION
OF
AMCRAFT BUILDING PRODUCTS CO., INC.
UNDER
THE DELAWARE GENERAL CORPORATION LAW
FIRST. The name of the corporation is
AmCraft Building Products Co., Inc.
SECOND. The period of duration of the
Corporation shall be perpetual, unless hereinafter lawfully dissolved.
THIRD. The address of the Corporation's registered office in the
State of Delaware is 1209 Orange Street in the City of Wilmington, County of New
Castle. The name of its registered agent at such address is The Corporation
Trust Company.
FOURTH. 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.
FIFTH. The total number of shares of stock which the Corporation
shall have authority to issue is One Hundred Thousand (100,000) shares of common
stock of the par value of one cent ($0.01) per share, all of the same class.
SIXTH. (1) The name and mailing address of the
incorporator is:
James R. Hinson, Jr.
Leo and Associates
200 Randolph Avenue, Suite 200
Huntsville, Alabama 35801
(2) The powers of the incorporator are to terminate upon the filing of
this Certificate of Incorporation. The names and mailing addresses of the
persons who are each to serve as a directors until the first annual meeting of
stockholders or until his respective successor has been elected and qualified
are:
Errett E. Elmer 601 Henry Avenue
Beloit, Wisconsin 53511
SEVENTH. Election of directors need not be by written ballot.
EIGHTH. The Board of Directors is authorized to adopt, amend, or
repeal By-Laws of the Corporation except as and to the extent provided in the
By-Laws.
<PAGE>
NINTH. Any person who was or is a party or is threatened to be made a
party to any threatened, pending, or completed action, suit, or proceeding,
whether civil, criminal, administrative, or investigative (whether or not by or
in the right of the Corporation) by reason of the fact that he is or was a
director, officer, incorporator, employee, partner, trustee, or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, incorporator, employee, or agent of another corporation,
partnership, joint venture, trust, or other enterprise (including an employee
benefit plan), shall be entitled to be indemnified by the Corporation to the
full extent then permitted by law against expenses (including attorneys' fees),
judgments, fines (including excise taxes assessed on a person with respect to an
employee benefit plan), and amounts paid in settlement incurred by him in
connection with such action, suit, or proceeding. Such right of indemnification
shall inure whether or not the claim asserted is based on matters which antedate
the adoption of this Article NINTH. Such right of indemnification shall
continue as to a person who has ceased to be a director, officer, incorporator,
employee, or agent and shall inure to the benefit of the heirs and personal
representatives of such a person. The indemnification provided by this Article
NINTH shall not be deemed exclusive of any other rights which may be provided
now or in the future under any provision currently in effect or hereafter
adopted of the by-laws, by any agreement, by vote of stockholders, by resolution
of disinterested directors, by provision of law, or otherwise.
TENTH. No director of the Corporation shall be liable to the
Corporation or any of its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (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 the Delaware General
Corporation Law, or (iv) for any transaction from which the director derived an
improper personal benefit.
ELEVENTH. Whenever a compromise or arrangement is proposed between
this Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this Corporation under the provisions of Section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this Corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this Corporation, as the case may be,
and also on this Corporation.
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IN WITNESS WHEREOF, I have made, signed, and
sealed this Certificate of Incorporation this 15th day of May, 1991.
----------------------------------------
James R. Hinson, Jr., Incorporator
STATE OF ALABAMA )
COUNTY OF MADISON )
I, ___________________, a notary public do hereby certify that on this
15th day of May, 1991, personally appeared before me, James R. Hinson, Jr., who
being by me first duly sworn, declared that he is the person who signed the
foregoing document as Incorporator and that the statements therein contained are
true.
----------------------------------------
Notary Public, State of Alabama
My commission expires:
-3-
<PAGE>
ARTICLES OF AMENDMENT
OF
AMCRAFT BUILDING PRODUCTS CO., INC.
ARTICLE I
Article Ninth of the original Articles of Incorporation provides as
follows:
Any person who was or is a party or is threatened to be made a party to any
threatened, pending, or completed action, suit, or proceeding, whether civil,
criminal, administrative, or investigative (whether or not by or in the right of
the Corporation) by reason of the fact that he is or was a director, officer,
incorporator, employee, partner, trustee, or agent of the corporation, or is or
was serving at the request of the Corporation as a director, officer,
incorporator, employee, or agent of another corporation, partnership, joint
venture, trust, or other enterprise (including an employee benefit plan), shall
be entitled to be indemnified by the Corporation to the full extent then
permitted by law against expenses (including attorneys' fees), judgments, fines
(including excise taxes assessed on a person with respect to an employee benefit
plan), and amounts paid in settlement incurred by him in connection with such
action, suit, or proceeding. Such right of indemnification shall inure whether
or not the claim asserted is based on matters which antedate the adoption of
this Article NINTH. Such right of indemnification shall continue as to a person
who has ceased to be a director, officer, incorporator, employee, or agent and
shall inure to the benefit of the heirs and personal representatives of such a
person. The indemnification provided by this Article NINTH shall not be deemed
exclusive of any other rights which may be provided now or in the future under
any provision currently in effect or hereafter adopted of the bylaws, by any
agreement, by vote of stockholders, by resolution of disinterested directors, by
provision of law, or otherwise.
ARTICLE II
The following amendment to the original Articles of Incorporation was
adopted on January 24, 1994.
Article Ninth of the original Articles of Incorporation is revoked and
deleted and the following is adopted in its place:
Any person who was or is a party or is threatened to be made a party to any
threatened, pending, or completed action, suit, or proceeding, whether civil,
criminal, administrative, or investigative (whether or not by or in the right of
the Corporation) by reason of the fact that he is or was a director, officer,
incorporator, employee, partner, trustee, or agent of the Corporation, or is or
was serving at the request of the corporation as a director, officer,
incorporator, employee, or agent of another corporation, partnership, joint
venture, trust, or other enterprise (including an employee benefit plan), shall
not be entitled to be indemnified by the Corporation against expenses (including
attorneys' fees), judgments, fines (including excise taxes assessed on a person
with respect to an employee benefit plan), and amounts paid in settlement
incurred, by him in connection with such
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<PAGE>
action, suit, or proceeding except to the extent then required and mandated by
law. To the maximum extent permitted by law, this revocation of the right of
indemnification originally contained in the Articles of Incorporation shall
apply whether or not the claim asserted is based on matters which antedate the
adoption of this Articles of Amendment. Such revocation of the right of
indemnification shall also apply as to any person who has ceased to be a
director, officer, incorporator, employee, or agent and shall apply to the heirs
and personal representatives of such person.
ARTICLE III
The number of shares of the Corporation outstanding and entitled to vote at
the time of such adoption was 100.
ARTICLE IV
The holder of all shares outstanding and entitled to vote have signed a
consent in writing and adopting such Amendment.
----------------------------------------
Kenneth A. Hendricks, President
and Sole Shareholder
----------------------------------------
Diane M. Hendricks, Secretary
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<PAGE>
STATE OF WISCONSIN )
)
COUNTY OF ROCK )
Before me, the undersigned, personally appeared Kenneth A. Hendricks, as
President of AmCraft Building Products Co., Inc., who is known to me and who,
having read the contents of the foregoing Articles of Amendment, swore that the
statements contained therein are true and correct to the best of his knowledge.
Sworn to and subscribed before me this the _____ day of ______________,
1994.
---------------------------------------
Notary Public
My Commission Expires:
(SEAL)
STATE OF WISCONSIN )
)
COUNTY OF ROCK )
Before me, the undersigned, personally appeared Diane M. Hendricks, as
Secretary of AmCraft Building Products Co., Inc., who is known to me and who,
having read the contents of the foregoing Articles of Amendment, swore that the
statements contained therein are true and correct to the best of her knowledge.
Sworn to and subscribed before me this the _____ day of _______________,
1994.
----------------------------------------
Notary Public
My Commission Expires:
(SEAL)
-6-
<PAGE>
EXHIBIT 3.6
BY-LAWS
OF
AMCRAFT BUILDING PRODUCTS CO., INC.
ARTICLE I.
OFFICES
-------
1.01 Principal and Business Offices. The corporation may have such
principal and other business offices, either within or without the State of
Delaware, as the Board of Directors may designate or as the business of the
corporation may require from time to time.
1.02 Registered Office. The registered office of the corporation
required by the Delaware Business Corporation Act to be maintained in the State
of Delaware may be, but need not be, identical with the principal office in the
State of Delaware, and the address of the registered office may be changed from
time to time by the Board of Directors.
ARTICLE II.
SHAREHOLDERS
------------
2.01 Annual Meeting. The annual meeting of the shareholders shall be
held in each year on January 15 of each year beginning with the year 1992 at the
hour of 1:30 p.m., or at such other date and hour within thirty days before or
after said date as may be fixed by or under the authority of the Board of
Directors, for the purpose of electing directors and for the transaction of such
other business as may come before the meeting. If the day fixed for the annual
meeting shall be a legal holiday in the State of Delaware, such meeting shall be
held on the next succeeding business day. If the election of directors shall
not be held on the day designated herein, or fixed as herein provided, for any
annual meeting of the shareholders, or at any adjournment thereof, the Board of
Directors shall cause the election to be held at a special meeting of the
shareholders as soon thereafter as conveniently may be.
2.02 Special Meeting. Special meetings of the shareholders, for any
purpose or purposes, unless otherwise prescribed by statute, may be called by
the President or the Board of Directors or by the person designated in a written
request of holders of not less than one-tenth of all shares of the corporation
entitled to vote at the meeting.
2.03 Place of Meeting. The Board of Directors may designate any
place, either within or without the State of Delaware, as the place of meeting
for any annual meeting or for any special meeting called by the Board of
Directors. A waiver of notice signed by all shareholders entitled to vote at a
meeting may designate any place, either within or without the State of Delaware,
as the place for the holding of such meeting. If no designation is made, or a
special meeting is otherwise
<PAGE>
called, the place of meeting shall be the principal business office of the
corporation or such other suitable place in the county of such principal office
as may be designated by the person calling such meeting, but any meeting may be
adjourned to reconvene at any place designated by vote of a majority of the
shares represented at such meeting.
2.04 Notice of Meeting. Written notice stating the place, date, and
hour of the meeting and, in case of a special meeting, the purpose or purposes
for which the meeting is called, shall be delivered not less than ten (10) days
before the date of the meeting (unless a longer period is required by law or the
articles of incorporation) nor more than fifty days before the date of the
meeting, either personally or by mail, by or at the direction of the president,
or the secretary, or other officer or persons calling the meeting, to each
shareholder of record entitled to vote at such meeting. if mailed, such notice
shall be deemed to be delivered when deposited in the United States mail,
addressed to the shareholder at his address as it appears on the stock record
books of the corporation, with postage prepaid.
2.05 Closing of Transfer Books or Fixing of Record Date. For the
purpose of determining shareholders entitled to notice of or to vote at any
meeting of shareholders or any adjournment thereof, or shareholders entitled to
receive payment of any dividend, or in order to make a determination of
shareholders for any other proper purpose, the Board of Directors may provide
that the stock transfer books shall be closed for a stated period but not to
exceed, in any case, fifty days. If the stock transfer books shall be closed for
the purpose of deter-mining shareholders entitled to notice of or to vote at a
meeting of shareholders, such books shall be closed for at least ten days
immediately preceding such meeting. In lieu of closing the stock 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 days and, in case of a meeting of shareholders, not less than ten
days prior to the date on which the particular action requiring such
determination of shareholders is to be taken. If the stock 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 close of business on the date on
which notice of the meeting is mailed or on the date on which the resolution of
the Board of Directors declaring such dividend is adopted, as the case may be,
shall be the record date for such determination of shareholders. When a
determination of shareholders entitled to vote at any meeting of shareholders
has been made as provided in this section, such determination shall be applied
to any adjournment thereof except where the determination has been made through
the closing of the stock transfer books and the stated period of closing has
expired.
2.06 Voting Lists. The officer or agent having charge of the stock
transfer books for shares of the corporation shall, before each meeting of
shareholders, make a complete list of the shareholders entitled to vote at such
meeting, or any adjournment thereof, with the address of and the number of
shares held by each, which list shall be produced and kept open at the time and
place of the meeting and shall be subject to the inspection of any shareholder
during the whole time of the meeting. The original stock transfer books 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. Failure to
comply with the requirements of this section shall not affect the validity of
any action taken at such meeting.
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<PAGE>
2.07 Quorum. Except as otherwise provided in the articles of
incorporation, a majority of the shares entitled to vote, represented in person
or by proxy, shall constitute a quorum at a meeting of shareholders. If a
quorum is present, the affirmative vote of the majority of the shares
represented at the meeting and entitled to vote on the subject matter shall be
the act of the shareholders unless the vote of a greater number or voting by
classes is required by law or the articles of incorporation. Though less than a
quorum of the outstanding shares are represented at a meeting, a majority of the
shares so represented may adjourn the meeting from time to time without further
notice. 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.
2.08 Conduct of Meetings. The President, and in his absence, a Vice-
President in the order provided under Section 4.06, and in their absence, any
person chosen by the shareholders present, shall call the meeting of the
shareholders to order and shall act as chairman of the meeting, and the
secretary of the corporation shall act as secretary of all meetings of the
shareholders, but, in the absence of the secretary, the presiding officer may
appoint any other person to act as secretary of the meeting.
2.09 Proxies. At all meetings of shareholders, a shareholder
entitled to vote may vote in person or by his proxy appointed in writing by the
shareholder or by his duly authorized attorney in fact. Such proxy shall be
filed with the Secretary of the corporation before or at the time of the
meeting. Unless otherwise provided in the proxy, a proxy may be revoked at any
time before it is voted, either by written notice filed with the Secretary or
the acting secretary of the meeting or by oral notice given by the shareholder
to the presiding officer during the meeting. The presence of a shareholder who
has filed his proxy shall not of itself constitute a revocation. No proxy shall
be valid after eleven months from the date of its execution, unless otherwise
provided in the proxy. The Board of Directors shall have the power and
authority to make rules establishing presumptions as to the validity and
sufficiency of proxies.
2.10 Voting of Shares. Each outstanding share shall be entitled to
one vote upon each matter submitted to a vote at a meeting of shareholders,
except to the extent that the voting rights of the shares of any class or
classes are enlarged, limited or denied by the articles of incorporation.
2.11 Voting of Shares by Certain Holders.
a. Other Corporations. Shares standing in the name of another
corporation may be voted either in person or by proxy, by the president of
such corporation or any other officer appointed by such president. A proxy
executed by any principal officer of such other corporation or assistant
thereto shall be conclusive evidence of the signer's authority to act, in
the absence of express notice to this corporation, given in writing to the
Secretary of this corporation, of the designation of some other person by
the board of directors or the bylaws of such other corporation.
b. Legal Representatives and Fiduciaries. Shares held by an
administrator, executor, guardian, conservator, trustee in bankruptcy,
receiver, or assignee for creditors may
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<PAGE>
be voted by him, either in person or by proxy, without a transfer of such
shares into his name, provided that there is filed with the Secretary
before or at the time or meeting proper evidence of his incumbency and the
number of shares held. Shares standing in the name of a fiduciary may be
voted by him, either in person or by proxy. A proxy executed by a fiduciary
shall be conclusive evidence of the signer's authority to act, in the
absence of express notice to this corporation, given in writing to the
Secretary of this corporation, that such manner of voting is expressly
prohibited or otherwise directed by the document creating the fiduciary
relationship.
c. Pledges. A shareholder whose shares are pledged shall be entitled
to vote such shares until the shares have been transferred into the name of
the pledgee, and thereafter the pledgee shall be entitled to vote the
shares so transferred.
d. Treasury Stock and Subsidiaries. Neither treasury shares, nor
shares held by another corporation if a majority of the shares entitled to
vote for the election of directors of such other corporation is held by
this corporation, shall be voted at any meeting or counted in determining
the total number of outstanding shares entitled to vote, but shares of its
own issue held by this corporation in a fiduciary capacity, or held by such
other corporation in a fiduciary capacity, may be voted and shall be
counted in determining the total number of outstanding shares entitled to
vote.
e. Minors. Shares held by a minor may be voted by such minor in
person or by proxy and no such vote shall he subject to disaffirmance or
avoidance, unless prior to such vote the Secretary of the corporation has
received written notice or has actual knowledge that such shareholder is a
minor.
f. Incompetents and Spendthrifts. Shares held by an incompetent or
spendthrift may be voted by such incompetent or spendthrift in person or by
proxy and no such vote shall be subject to disaffirmance or avoidance,
unless prior to such vote the Secretary of the corporation has actual
knowledge that such shareholder has been adjudicated an incompetent or
spendthrift or actual knowledge of filing of judicial proceedings for
appointment of a guardian.
g. Joint Tenants. Shares registered in the names of two or more
individuals who are named in the registration as joint tenants may be voted
in person or by proxy signed by any one or more of such individuals if
either (i) no other such individual or his legal representative is present
and claims the right to participate in the voting of such shares or prior
to the vote filed with the Secretary of the corporation a contrary written
voting authorization or direction or written denial of authority of the
individual present or signing the proxy proposed to be voted, or (ii) all
such other individuals are deceased and the Secretary of the corporation
has no actual knowledge that the survivor has been adjudicated not to be
the successor to the interests of those deceased.
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<PAGE>
2.12 Waiver of Notice by Shareholders. Whenever any notice whatever
is required to be given to any shareholder of the corporation under the articles
of incorporation or by-laws or any provision of law, a waiver thereof in
writing, signed at any time, whether before or after the time of meeting, by the
shareholder entitled to such notice, shall be deemed equivalent to the giving of
such notice; provided that such waiver in respect to any matter of which notice
is required under any provision of the Delaware Business Corporation Act, shall
contain the same information as would have been required to be included in such
notice, except the time and place of meeting.
2.13 Unanimous Consent Without Meeting. Any action required or
permitted by the articles of incorporation or by-laws or any provision of law to
be taken at a meeting of the shareholders, may be taken without a meeting if a
consent in writing, setting forth the action so taken, shall be signed by all of
the shareholders entitled to vote with respect to the subject matter thereof.
ARTICLE III.
BOARD OF DIRECTORS
------------------
3.01 General Powers and Number. The business and affairs of the
corporation shall be managed by its Board of Directors. The number of directors
of the corporation shall be at least one (1). The number of directors
constituting the initial Board of Directors may be increased or decreased from
time to time by action of the shareholders, either at an annual meeting or at a
special meeting of shareholders called for that purpose, but no decrease shall
have the effect of shortening the term of any incumbent director.
3.02 Tenure and Qualifications. Each director shall hold office
until the next annual meeting of shareholders and until his successor has been
elected, or until his prior death, resignation, or removal. A director may be
removed from office by affirmative vote of a majority of the outstanding shares
entitled to vote for the election of such director, taken at a meeting of
shareholders called for that purpose. A director may resign at any time by
filing his written resignation with the Secretary of the corporation. Directors
need not be residents of the State of Delaware or shareholders of the
corporation.
3.03 Regular Meetings. A regular meeting of the Board of Directors
shall be held without other notice than this by-law immediately after the annual
meeting of the shareholders, and each adjourned session thereof. The place of
such regular meeting shall be the same as the place of the meeting of
shareholders which precedes it, or such other suitable place as may be announced
at such meeting of shareholders. The Board of Directors may provide, by
resolution, the time and place, either within or without the State of Delaware,
for the holding of additional regular meetings without other notice than such
resolution.
3.04 Special Meetings. Special meetings of the Board of Directors
may be called by or at the request of the President, Secretary, or any two
directors. The President or Secretary calling any special meeting of the Board
of Directors may fix any place, either within or without the State of
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<PAGE>
Delaware, as the place for holding any special meeting of the Board of Directors
called by them, and if no other place is fixed, the place of meeting shall be
the principal business office of the corporation.
3.05 Notice; Waiver. Notice of each meeting of the Board of
Directors (unless otherwise provided in or pursuant to Section 3.03) shall be
given by written notice delivered personally or mailed or given by telegram to
each director at his business address or at such other address as such director
shall have designated in writing filed with the Secretary, in each case not less
than forty-eight (48) hours previously thereto. If mailed, such notice shall be
deemed to be delivered when deposited in the United States mail so addressed,
with postage prepaid. If notice is given by telegram, such notice shall be
deemed to be delivered when the telegram is delivered to the telegraph company,
Whenever any notice whatever is required to be given to any director of the
corporation under the articles of incorporation or bylaws or any provision of
law, a waiver thereof in writing, signed at any time, whether before or after
the time of meeting, by the director entitled to such notice, shall be deemed
equivalent to the giving of such notice. The attendance of a director at a
meeting shall constitute a waiver of notice of such meeting, except where a
director attends a meeting and objects to the transaction of any business at
such meeting because the meeting is not lawfully called or convened. Neither
the business to be transacted at, nor the purpose of, any regular or special
meeting of the Board of Directors need be specified in the notice or waiver of
notice of such meeting.
3.06 Quorum. Except as otherwise provided by law or by the articles
of incorporation or these by-laws, a majority of the number of directors shall
constitute a quorum for the transaction of business at any meeting of the Board
of Directors, but a majority of the directors present (though less than such
quorum) may adjourn the meeting from time to time without further notice.
3.07 Manner of Acting. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors, unless the act of a greater number is required by law or by these
bylaws.
3.08 Conduct of Meetings. The President, and in his absence, a Vice-
President in the order provided under Section 4.06, and in their absence, any
director chosen by the directors present, shall call meetings of the Board of
Directors to order and shall act as chairman of the meeting. The Secretary of
the corporation shall act as secretary of all meetings of the Board of
Directors, but in the absence of the Secretary, the presiding officer may
appoint any Assistant Secretary or any director or other person present to act
as secretary of the meeting.
3.09 Vacancies. Any vacancy occurring in the Board of Directors,
including a vacancy created by an increase in the number of directors, may be
filled until the next succeeding annual election by the affirmative vote of a
majority of the directors then in office, though less than a quorum of the Board
of Directors; provided, that in case of a vacancy created by the removal of a
director by vote of the shareholders, the shareholders shall have the right to
fill such vacancy at the same meeting or any adjournment thereof.
3.10 Compensation. The Board of Directors, by affirmative vote of a
majority of the directors then in office, and regardless of any personal
interest of any of its members, may establish
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<PAGE>
reasonable compensation for all directors for services to the corporation as
directors, officers or otherwise, or may delegate such authority to an
appropriate committee. The Board of Directors shall also have authority to
provide for or to delegate authority to an appropriate committee to provide for
reasonable pensions, disability or death benefits, and other benefits or
payments, to directors, officers and employees and to their estates., families,
dependents or beneficiaries on account of prior services rendered by such
directors, officers and employees to the corporation.
3.11 Presumption of Assent. A director of the corporation who is
present at a meeting of the Board of Directors or a committee thereof of which
he is a member at which action on any corporate matter is taken shall be
presumed to have assented to the action taken unless his dissent shall be
entered in the minutes of the meeting or unless he shall file his written
dissent to such action with the person acting as the secretary of the meeting
before the adjournment thereof or shall forward such dissent by registered mail
to the Secretary of the corporation immediately after the adjournment of the
meeting. Such right to dissent shall not apply to a director who voted in favor
of such action.
3.12 Committees. The Board of Directors by resolution adopted by the
affirmative vote of a majority of the number of directors may designate one or
more committees, each committee to consist of three or more directors elected by
the Board of Directors, which to the extent provided in said resolution as
initially adopted, and as thereafter supplemented or amended by further
resolution adopted by a like vote, shall have and may exercise, when the Board
of Directors is not in session, the powers of the Board of Directors in the
management of the business and affairs of the corporation, except action in
respect to dividends to shareholders, election of the principal officers or the
filling of vacancies in the Board of Directors or committees created pursuant to
this section. The Board of Directors may elect one or more of its members as
alternate members of any such committee who may take the place of any absent
member or members at any meeting of such committee, upon request by the
President or upon request by the chairman of such meeting. Each such committee
shall make its own rules governing the conduct of its activities and shall make
such reports of its activities to the Board of Directors as the Board of
Directors may request.
3.13 Unanimous Consent Without Meeting. Any action required or
permitted by the articles of incorporation or bylaws or any provision of law to
be taken by the Board of Directors at a meeting or by resolution may be taken
without a meeting if a consent in writing, setting forth the action so taken,
shall be signed by all the directors then in office.
ARTICLE IV.
OFFICERS
--------
4.01 Number. The principal officers of the corporation shall be a
President, one or more Vice-Presidents, a Secretary, and a Treasurer, and such
other officers and assistant officers as may be deemed necessary, each of whom
shall be elected by the Board of Directors. Any two or more offices may be held
by the same person unless prohibited by law. officers need not be directors of
the Corporation.
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<PAGE>
4.02 Election and Term of Office. The officers of the corporation
shall be elected annually by the Board of Directors at the first meeting of the
Board of Directors held after each annual meeting of the shareholders. If the
election of officers is not held at such meeting, such election shall be held as
soon thereafter as conveniently may be. Each officer shall hold office until
his successor has been duly elected or until his prior death, resignation, or
removal.
4.03 Removal. Any officer or agent may be removed by the Board of
Directors whenever in its judgment the best interests of the corporation will be
served thereby, but such removal shall be without prejudice to the contract
rights, if any, of the person so removed. Election or appointment shall not of
itself create contract rights.
4.04 Vacancies. A vacancy in any principal office because of death,
resignation, removal, disqualification or otherwise shall be filled by the Board
of Directors for the unexpired portion of the term.
4.05 President. The President shall be the principal executive
officer of the corporation and, subject to the control of the Board of
Directors, shall in general supervise and control all of the business and
affairs of the corporation. He shall, when present, preside at all meetings of
the shareholders and of the Board of Directors. He shall have authority,
subject to such rule as may be prescribed by the Board of Directors, to appoint
such agents and employees of the corporation as he shall deem necessary, to
prescribe their powers, duties and compensation, and to delegate authority to
them. Such agents and employees shall have authority to sign, execute and
acknowledge, on behalf of the corporation, all deeds, mortgages, bonds, stock
certificates, contracts, leases, reports and all other documents or instruments
necessary or proper to be executed in the course of the corporation's regular
business, or which shall be authorized by resolution of the Board of Directors;
and, except as otherwise provided by law or the Board of Directors, he may
authorize the president or any vice-president or other officer or agent of the
corporation to sign, execute and acknowledge such documents or instruments in
his place and stead. In general he shall perform all duties incident to the
office of chairman of the board and have such other duties and exercise such
other authority as may be prescribed by the Board of Directors from time to
time.
4.06 The Vice Presidents. In the absence of the president or in the
event of his death, inability, or refusal to act, or in the event for any reason
it shall be impracticable for the president to act personally, the vice-
president (or in the event there is more than one vice-president, the executive
vice president, or in the absence of an executive vice-president, the vice-
presidents, in the order designated by the Board of Directors, or in the absence
of any designation, then in the order of their election) shall perform the
duties of the president, and when so acting, shall have all the powers of and be
subject to all the restrictions upon the president. Any vice-president may
sign, with the secretary or assistant secretary, certificates for shares of the
corporation, and shall perform such other duties and have such authority as from
time to time may be delegated or assigned to him by the chairman of the board or
by the Board of Directors. The execution of any instrument on behalf of the
corporation by any vice-presidents shall be conclusive evidence, as to third
parties, of his authority to act in the stead of the president.
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<PAGE>
4.07 The Secretary. The Secretary shall: (a) keep the minutes of the
meetings of the shareholders and of the Board of Directors in one or more books
provided for that purpose; (b) see that all notices are duly given in accordance
with the provisions of these by-laws or as required by law; (c) be custodian of
the corporate records and of the seal of the corporation if the corporation has
a seal, and see that the seal of the corporation is affixed to all documents,
the execution of which, on behalf of the corporation under its seal, is duly
authorized; (d) keep or arrange for the keeping of a register of the post office
address of each shareholder which shall be furnished to the secretary by such
shareholder; (e) sign with the president, or a vice-president, certificates for
shares of the corporation, the issuance of which shall have been authorized by
resolution of the Board of Director so (f) have general charge of the stock
transfer books of the corporation; and (g) in general perform all duties
incident to the office of secretary and have such other duties and exercise such
other authority as may be prescribed by the Board of Directors from time to time
or as may be delegated or assigned to him by the chairman of the board or
president from time to time.
4.08 The Treasurer. The treasurer shall: (a) have charge and
custody of and be responsible for all funds and securities of the corporation;
(b) receive and give receipts for monies due and payable to the corporation from
any source whatsoever, and deposit all such monies in the name of the
corporation in such banks, trust companies, or other depositories as shall be
selected in accordance with the provisions of Section 5.04; and (c) in general
perform all duties incident to the office of treasurer and have such other
duties and exercise such other authority as may be prescribed by the Board of
Directors from time to time or as may be delegated or assigned to him by the
chairman of the board or the president from time to time. If required by the
Board of Directors, the treasurer shall give a bond for the faithful discharge
of his duties in such sum and with such surety or sureties as the Board of
Directors shall determine.
4.09 Assistant Secretaries and Assistant Treasurers. There shall be
such a number of assistant secretaries and assistant treasurers as the Board of
Directors may from time to time authorize. The assistant secretaries may sign
with the president or a vice-president certificates for shares of the
corporation, the issuance of which have been authorized by a resolution of the
Board of Directors. If required by the Board of Directors, the assistant
treasurers shall give bonds for the faithful discharge of their duties in such
sums and with such sureties as the Board of Directors shall determine. The
assistant secretaries and assistant treasurers, in general, shall perform such
duties and have such authority as shall from time to time be delegated or
assigned to them by the secretary or the treasurer, respectively, or by the
chairman of the board or by the president or the Board of Directors.
4.10 Other Assistants and Acting Officers. The Board of Directors
shall have the power to appoint any person to act as assistant to any officer,
or as agent for the corporation in his stead, or to perform the duties of such
officer whenever for any reason it is impracticable for such officer to act
personally, and such assistant or acting officer or other agent so appointed by
the Board of Directors shall have the power to perform all the duties of the
office to which he is so appointed to be assistant, or as to which he is so
appointed to act, except as such power may be otherwise defined or restricted by
the Board of Directors.
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4.11 Salaries. The salaries of the principal officers shall be fixed
from time to time by the Board of Directors or by a duly authorized committee
thereof, 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 V.
CONTRACTS, LOANS, CHECKS AND DEPOSITS; SPECIAL CORPORATE ACTS
5.01 Contracts. The Board of Directors may authorize any officer or
officers, agent or agents, to enter into any contract or execute or deliver any
instrument in the name of and on behalf of the corporation, and such
authorization may be general or confined to specific instances. In the absence
of other designation, all deeds, mortgages, and instruments of assignment or
pledge and any other contracts or instruments made by the corporation shall be
executed in the name of the corporation by the president or a vice-president and
by the secretary, an assistant secretary, the treasurer or an assistant
treasurer; the secretary or an assistant secretary, when so required, shall
affix the corporate seal thereto. when so executed, no other party to such
instrument or any third party shall be required to make any inquiry into the
authority of the signing officer or officers.
5.02 Loans. No indebtedness for borrowed money shall be contracted
on behalf of the corporation, and no evidences of such indebtedness shall be
issued in its name unless authorized by or under the authority of a resolution
of the Board of Directors. Such authorization may be general or confined to
specific instances.
5.03 Checks, Drafts, etc. All checks, drafts or other orders for the
payment of money, notes or other evidences of indebtedness issued in the name of
the corporation, shall be signed by such officer or officers, agent or agents of
the corporation and in such manner as shall from time to time be determined by
or under the authority of a resolution of the Board of Directors.
5.04 Deposits. All funds of the corporation not otherwise employed
shall be deposited from time to time to the credit of the corporation in such
banks, trust companies or other depositories as may he selected by or under the
authority of a resolution of the Board of Directors.
5.05 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 at any meeting of security holders of such other
corporation by the President of this corporation, if he is present, or in his
absence, by the president of this corporation if he is present, or in his
absence, by any vice-president of this corporation who is present, and (b)
whenever, in the judgment of the president, or, in his absence, of any vice-
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 or a vice-president of
this corporation, without necessity of any authorization by the Board of
Directors, affixation of corporate seal or counter-signature or attestation by
another officer. Any
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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 VI.
CERTIFICATES FOR SHARES AND THEIR TRANSFER
------------------------------------------
6.01 Certificates for Shares. Certificates representing shares of
the corporation shall be in such form, consistent with law, as shall be
determined by the Board of Directors. Such certificates shall be signed by the
president or a vice-president and by the secretary or an assistant secretary.
All certificates for shares shall be consecutively numbered or otherwise
identified. The name and address of the person to whom the shares represented
thereby are issued, with the number of shares and the date of issue, shall be
entered on the stock transfer books of the corporation. All certificates
surrendered to the corporation for transfer shall be cancelled and no new
certificates shall be issued until the former certificate for a like number of
shares has been surrendered and cancelled, except as provided in Section 6.06.
6.02 Facsimile Signatures and Seal. The seal of the corporation on
any certificates for shares may be a facsimile. The signatures of the president
or vice-president and the secretary or assistant secretary upon a certificate
may be facsimiles if the certificate is countersigned by a transfer agent, or
registered by a registrar, other than the corporation itself or an employee of
the corporation.
6.03 Signature by Former Officers. In case any officer, who has
signed or whose facsimile signature has been placed upon any certificate for
shares, shall have ceased to be such officer before such certificate is issued,
it may be issued by the corporation with the same effect as if he were such
officer at the date of its issue.
6.04 Transfer of Shares. Prior to due presentment of a certificate
for shares for registration of transfer, the corporation may treat the
registered owner of such shares as the person exclusively entitled to vote, to
receive notifications, and otherwise to exercise all the rights and powers of an
owner. Where a certificate for shares is presented to the corporation with a
request to register for transfer, the corporation shall not be liable to the
owner or any other person suffering loss as a result of such registration of
transfer if (a) there were on or with the certificate the necessary
endorsements, and (b) the corporation had no duty to inquire into adverse claims
or has discharged any such duty. The corporation may require reasonable
assurance that said endorsements are genuine and effective and in compliance
with such other regulations as may be prescribed under the authority of the
Board of Directors.
6.05 Restrictions on Transfer. The face or reverse side of each
certificate representing shares shall bear a conspicuous notation of any
restriction imposed by the corporation upon the transfer of such shares.
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6.06 Lost, Destroyed or Stolen Certificates. Where the owner claims
that his certificate for shares has been lost, destroyed or wrongfully taken, a
new certificate shall be issued in place thereof if the owner (a) so requests
before the corporation has notice that such shares have been acquired by a bona
fide purchaser, (b) files with the corporation a sufficient indemnity bond, and
(c) satisfies such other reasonable requirements as the Board of Directors may
prescribe.
6.07 Consideration for Shares. The shares of the corporation may be
issued for such consideration as shall be fixed from time to time by the Board
of Directors, provided that any shares having a par value shall not be issued
for a consideration less than par value thereof. The consideration to be paid
for shares nay be paid in whole or in part in money, in other property, tangible
or intangible, or in labor or services actually performed for the corporation.
When payment of the consideration for which shares are to be issued shall have
been received by the corporation, such shares shall be deemed to be fully paid
and nonassessable by the corporation, No certificate shall be issued for any
share until such share is fully paid.
6.08 Stock Regulations. The Board of Directors shall have the power
and authority to make all such further rules and regulations not inconsistent
with the statutes of the State of Delaware as it may deem expedient concerning
the issue, transfer and registration of certificates representing shares of the
corporation.
ARTICLE VII.
SEAL
----
7.01 The Board of Directors, in its sole discretion,, may provide a
corporate seal. If a corporate seal is provided by the Board of Directors, the
seal shall be circular in form and shall have inscribed thereon the name of the
Corporation and the state of incorporation and the words "Corporate Seal".
ARTICLE VIII.
AMENDMENTS
----------
8.01 By Shareholders. These by-laws may be altered, amended or
repealed and new by-laws may be adopted by the majority of the shares present or
represented at any annual or special meeting of the shareholders at which a
quorum is in attendance.
8.02 By Directors. These by-laws may also be altered, amended or
repealed and new by-laws may be adopted by the Board of Directors by affirmative
vote of a majority of the number of directors present at any meeting at which a
quorum is in attendance. No by-laws adopted by the shareholders shall be
amended or repealed by the Board of Directors if the by-law so adopted so
provides.
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8.03 Implied Amendments. Any action taken or authorized by the
shareholders or by the Board of Directors, which would be inconsistent with the
by-laws then in effect but is taken or authorized by affirmative vote of not
less than the number of shares or the number of directors required to amend the
bylaws so that the by-laws would be consistent with such action, shall be given
the same effect as though the by-laws had been temporarily amended or suspended
so far, but only so far, as is necessary to permit the specific action so taken
or authorized.
ARTICLE IX.
FISCAL YEAR
-----------
9.01 The fiscal year of the corporation shall be directed by the Board
of Directors from time to time.
ARTICLE X.
INDEMNIFICATION
---------------
10.01 Action Against Party Because of Corporate Position. The
corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending, or completed claim, action, suit, or
proceeding, whether civil, criminal, administrative, or investigative (other
than an action by or in the right of the corporation) by reason of the fact that
he is or was a director, officer, employee, or agent of the corporation, or is
or was serving at the request of the corporation as a director, partner,
officer, employee, or agent of another corporation, partnership, joint venture,
trust, or other enterprise, against expenses (including attorneys' fees),
judgments, fines, and amounts paid in settlement actually and reasonably
incurred by him in connection with such claim, action, suit, or proceeding if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation, and with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
unlawful. The termination of any claim, action, suit, or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contenders or
its equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he reasonably believed to be in or
not opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his conduct
was unlawful.
10.02 Action by or in the Right of Corporation. The corporation
shall indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending, or completed claim, action, or suit by or in
the right of the corporation to procure a judgment in its favor by reason of the
fact that he is or was a director, officer, employee, or agent of the
corporation, or is or was serving at the request of the corporation as a
director, partner, officer, employee, or agent of another corporation,
partnership, joint venture, trust, or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such
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claim, action, or suit if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the corporation and
except that no indemnification shall be made in respect of any claim, issue, or
matter as to which such person shall have been adjudged to be liable for
negligence or misconduct in the performance of his duty to the corporation
unless and only to the extent that the Court of Equity or the court in which
such claim, action, or suit was brought shall determine upon application that,
despite the adjudication of liability but in view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Equity or such other court shall deem proper.
10.03 Reimbursement if Successful. To the extent that a director,
officer, employee, or agent of the corporation has been successful on the merits
or otherwise in defense of any claim, action, suit or proceeding referred to in
Paragraphs 10.01 and 10.02, or in defense of any claims, issue, or matter
therein, he shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection therewith, notwithstanding
that he has not been successful (on the merits or otherwise) on any other claim,
issue, or matter in any such claim, action, suit or proceeding.
10.04 Authorization. Any indemnification under Paragraphs 10.01 and
10.02 (unless ordered by a court) shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification of the
director, officer, employee, or agent is proper in the circumstances because he
has met the applicable standard of conduct set forth in Paragraphs 10.01 and
10.02. Such determination shall be made (a) by the board of directors by a
majority vote of a quorum consisting of directors who were not parties to such
action, suit, or proceeding, or (b) if such a quorum is not obtainable, or, even
if obtainable, a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, or (c) by the stockholders.
10.05 Advanced Reimbursement. Expenses incurred in defending a civil
or criminal action, suit, or proceeding may be paid by the corporation in
advance of the final disposition of such action, suit, or proceeding as
authorized by the Board of Directors in the specific case upon receipt of an
undertaking by or on behalf of the director, officer, employee, or agent to
repay such amount unless it shall ultimately be determined that he is entitled
to be indemnified by the corporation as authorized in this Article.
10.06 Indemnification Not Exclusive. The indemnification provided by
this Article shall not be deemed exclusive of any other rights to which these
indemnified may be entitled under any statute, rule of law, provision of
certificate of incorporation, bylaw, agreement, vote of stockholders or
disinterested directors, or otherwise, both as to action in his official
capacity and as to action in another capacity, while holding such office, and
shall continue as to a person who has ceased to be a director, officer,
employee, or agent and shall inure to the benefit of the heirs, executors, and
administrators of such a person. Where such other provision provides broader
rights of indemnification than these bylaws, said other provision shall control.
10.07 Insurance. The corporation shall have power to purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee, or agent of the corporation, or is
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or was serving at the request of the corporation as a director, partner,
officer, employee, or agent of another corporation, partnership, joint venture,
trust, or other enterprise against any liability asserted against him and
incurred by him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liability under the provisions of this Article.
10.08 Invalidly. The invalidity or unenforceability of any provision
hereof shall not in any way affect the remaining portions hereof, which shall
continue in full force and effect.
Approved at the Organizational Meeting of the Board of Directors of
AmCraft Building Products Co., Inc. held in Beloit, Wisconsin at 2:00 p.m. on
the 24th day of May, 1991 and by Kenneth A. Hendricks, sale shareholder of
AmCraft Building Products, Co., Inc. by written consent, the 24th day of May,
1991.
----------------------------------------
Kenneth A. Hendricks
Chairman of Organization Meeting,
President and Sole Shareholder
of AmCraft Building Products Co., Inc.
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<PAGE>
EXHIBIT 4.1
EXECUTION COPY
================================================================================
AMERICAN BUILDERS & CONTRACTORS
SUPPLY CO., INC.
Issuer
________________
AMCRAFT BUILDING PRODUCTS CO., INC.
MULE-HIDE PRODUCTS CO., INC.
Guarantors
________________
SERIES A AND SERIES B
10 5/8% SENIOR SUBORDINATED NOTES DUE 2007
________________
INDENTURE
Dated as of May 7, 1997
________________
Norwest Bank Minnesota,
National Association
Trustee
________________
================================================================================
<PAGE>
Table of Contents
-----------------
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
1 DEFINITIONS AND INCORPORATION BY REFERENCE........................... 1
1.01 DEFINITIONS.................................................... 1
1.02 OTHER DEFINITIONS.............................................. 15
1.03 INCORPORATION BY PREFERENCE OF TRUST INDENTURE ACT............. 16
1.04 RULES OF CONSTRUCTION.......................................... 16
2 THE NOTES............................................................ 17
2.01 FORM AND DATING................................................ 17
2.02 EXECUTION AND AUTHENTICATION................................... 17
2.03 REGISTRAR AND PAYING AGENT..................................... 18
2.04 PAYING AGENT TO HOLD MONEY IN TRUST............................ 18
2.05 HOLDER LISTS................................................... 18
2.06 TRANSFER AND EXCHANGE.......................................... 19
2.07 REPLACEMENT NOTES.............................................. 24
2.08 OUTSTANDING NOTES.............................................. 25
2.09 TREASURY NOTES................................................. 25
2.10 TEMPORARY NOTES................................................ 25
2.11 CANCELLATION................................................... 26
2.12 DEFAULTED INTEREST............................................. 26
3 REDEMPTION AND PREPAYMENT............................................ 26
3.01 NOTICES TO TRUSTEE............................................. 26
3.02 SELECTION OF NOTES TO BE REDEEMED.............................. 26
3.03 NOTICE OF REDEMPTION........................................... 27
3.04 EFFECT OF NOTICE OF REDEMPTION................................. 28
3.05 DEPOSIT OF REDEMPTION PRICE.................................... 28
3.06 NOTICES REDEEMED IN PART....................................... 28
3.07 OPTIONAL REDEMPTION............................................ 28
3.08 MANDATORY REDEMPTION........................................... 29
3.09 OFFER TO PURCHASE BY APPLICATION OF EXCESS PROCEEDS............ 29
4 COVENANTS............................................................ 31
4.01 PAYMENT OF NOTES............................................... 31
4.02 MAINTENANCE OF OFFICE OR AGENCY................................ 31
4.03 REPORTS........................................................ 32
4.04 COMPLIANCE CERTIFICATE......................................... 33
4.05 TAXES.......................................................... 33
4.06 STAY, EXTENSION AND USURY LAWS................................. 33
4.07 RESTRICTED PAYMENTS............................................ 34
</TABLE>
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<TABLE>
<CAPTION>
<C> <S> <C>
4.08 DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING
SUBSIDIARIES.................................................. 36
4.09 INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED
STOCK......................................................... 36
4.10 ASSET SALES.................................................... 38
4.11 TRANSACTIONS WITH AFFILIATES................................... 39
4.12 LIENS.......................................................... 40
4.13 ADDITIONAL SUBSIDIARY GUARANTEES............................... 40
4.14 CORPORATE EXISTENCE............................................ 40
4.15 OFFER TO REPURCHASE UPON CHANGE OF CONTROL..................... 41
4.16 LIMITATION ON LAYERING......................................... 42
4.17 SALE AND LEASEBACK TRANSACTIONS................................ 42
4.18 LIMITATION ON ISSUANCES AND SALES OF
CAPITAL STOCK OF WHOLLY OWNED SUBSIDIARIES.................... 42
4.19 BUSINESS ACTIVITIES............................................ 42
4.20 PAYMENTS FOR CONSENT........................................... 43
5 SUCCESSORS........................................................... 43
5.01 MERGER, CONSOLIDATION, OR SALE OF ASSETS....................... 43
5.02 SUCCESSOR CORPORATION SUBSTITUTED.............................. 43
6 DEFAULTS AND REMEDIES................................................ 44
6.01 EVENTS OF DEFAULT.............................................. 44
6.02 ACCELERATION................................................... 46
6.03 OTHER REMEDIES................................................. 46
6.04 WAIVER OF PAST DEFAULTS........................................ 47
6.05 CONTROL BY MAJORITY............................................ 47
6.06 LIMITATION ON SUITS............................................ 47
6.07 RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT.................. 48
6.08 COLLECTION SUIT BY TRUSTEE..................................... 48
6.09 TRUSTEE MAY FILE PROOFS OF CLAIM............................... 48
6.10 PRIORITIES..................................................... 49
6.11 UNDERTAKING FOR COSTS.......................................... 49
7 TRUSTEE.............................................................. 49
7.01 DUTIES OF TRUSTEE.............................................. 49
7.02 RIGHTS OF TRUSTEE.............................................. 51
7.03 INDIVIDUAL RIGHTS OF TRUSTEE................................... 51
7.04 TRUSTEE'S DISCLAIMER........................................... 51
7.05 NOTICE OF DEFAULTS............................................. 52
7.06 REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES..................... 52
7.07 COMPENSATION AND INDEMNITY..................................... 52
7.08 REPLACEMENT OF TRUSTEE......................................... 53
7.09 SUCCESSOR TRUSTEE BY MERGER, ETC............................... 54
</TABLE>
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<TABLE>
<CAPTION>
<C> <S> <C>
7.10 ELIGIBILITY; DISQUALIFICATION................................. 54
7.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY............. 54
8 LEGAL DEFEASANCE AND COVENANT DEFEASANCE............................ 55
8.01 OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT
DEFEASANCE................................................... 55
8.02 LEGAL DEFEASANCE AND DISCHARGE................................ 55
8.03 COVENANT DEFEASANCE........................................... 55
8.04 CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.................... 56
8.05 DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE
HELD IN TRUST; OTHER MISCELLANEOUS PROVISIONS................ 57
8.06 REPAYMENT To COMPANY.......................................... 58
8.07 REINSTATEMENT................................................. 58
9 AMENDMENT, SUPPLEMENT AND WAIVER..................................... 59
9.01 WITHOUT CONSENT OF HOLDERS OF NOTES........................... 59
9.02 WITH CONSENT OF HOLDERS OF NOTES.............................. 59
9.03 COMPLIANCE WITH TRUST INDENTURE ACT........................... 61
9.04 REVOCATION AND EFFECT OF CONSENTS............................. 61
9.05 NOTATION ON OR EXCHANGE OF.................................... 61
9.06 TRUSTEE TO SIGN AMENDMENT, ETC................................ 62
10 SUBORDINATION........................................................ 62
10.01 AGREEMENT TO SUBORDINATE...................................... 62
10.02 LIQUIDATION; DISSOLUTION; BANKRUPTCY.......................... 62
10.03 DEFAULT ON DESIGNATED SENIOR DEBT............................. 63
10.04 ACCELERATION OF NOTES......................................... 63
10.05 WHEN DISTRIBUTION MUST BE PAID OVER........................... 64
10.06 NOTICE BY COMPANY............................................. 64
10.07 SUBROGATION................................................... 64
10.08 RELATIVE RIGHTS............................................... 64
10.09 SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY.................. 65
10.10 DISTRIBUTION OR NOTICE TO REPRESENTATIVE...................... 65
10.11 RIGHTS OF TRUSTEE AND PAYING AGENT............................ 65
10.12 AUTHORIZATION TO EFFECT SUBORDINATION......................... 66
10.13 AMENDMENTS.................................................... 66
11 SUBSIDIARY GUARANTEES................................................ 66
11.01 SUBSIDIARY GUARANTEES......................................... 66
11.02 EXECUTION AND DELIVERY OF SUBSIDIARY GUARANTEE................ 67
11.03 GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN TERMS............ 68
11.04 RELEASES FOLLOWING SALE OF ASSETS............................. 69
11.05 "TRUSTEE" TO INCLUDE PAYING AGENT............................. 69
11.06 SUBORDINATION OF SUBSIDIARY GUARANTEE......................... 69
</TABLE>
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<TABLE>
<CAPTION>
<C> <S> <C>
12 MISCELLANEOUS........................................................ 70
12.01 TRUST INDENTURE ACT CONTROLS.................................. 70
12.02 NOTICES....................................................... 70
12.03 COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS
OF NOTES..................................................... 71
12.04 CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT............ 71
12.05 STATEMENTS REQUIRED IN CERTIFICATE OR OPINION................. 71
12.06 RULES BY TRUSTEE AND AGENTS................................... 72
12.07 NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES
AND STOCKHOLDERS............................................. 72
12.08 GOVERNING LAW................................................. 72
12.09 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS................. 72
12.10 SUCCESSORS.................................................... 73
12.11 SEVERABILITY.................................................. 73
12.12 COUNTERPART ORIGINALS......................................... 73
12.13 TABLE OF CONTENTS, HEADINGS, ETC.............................. 73
</TABLE>
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INDENTURE dated as of May 7, 1997 among American Builders & Contractors
Supply Co., Inc., a Delaware corporation (the "Company"), Amcraft Building
Products Co., Inc., a Delaware corporation ("Amcraft"), Mule-Hide Products Co.,
Inc., a Texas corporation (together with Amcraft, the "Guarantors"), and Norwest
Bank Minnesota, National Association, as trustee (the "Trustee").
The Company and the Trustee agree as follows for the benefit of each other
and for the equal and ratable benefit of the Holders of the 10 5/8% Series A
Senior Subordinated Notes due 2007 (the "Series A Notes") and the 10% Series B
Senior Subordinated Notes due 2007 (the "Series B Notes" and, together with the
Series A Notes, the "Notes"):
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01 DEFINITIONS.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"Additional Notes" means up to $50.0 million aggregate principal amount of
Notes (other than the Initial Notes) issued under this Indenture as part of the
same Series As the Initial Notes.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Amcraft" means Amcraft Building Products Co., Inc, a Delaware corporation.
"Asset Sale" means (i) the sale, lease, conveyance or other disposition of
any assets or rights (including, without limitation, by way of a sale and
leaseback) other than sales of inventory in the ordinary course of business
consistent with past practices (provided that the sale, lease, conveyance or
other disposition of all or substantially all of the assets of the Company and
its Subsidiaries taken
<PAGE>
as a whole will be governed by the provisions of Section 4.15 hereof and/or the
provisions of Section 5.01 hereof and (ii) the issue or sale by the Company or
any of its Subsidiaries of Equity Interests of any of the Company's
Subsidiaries, in the case of either clause (i) or (ii), whether in a single
transaction or a series of related transactions (a) that have a fair market
value in excess of $500,000 or (b) for net proceeds in excess of $500,000.
Notwithstanding the foregoing, the following items will not be deemed to be
Asset Sales: (i) a transfer of assets by the Company to a Wholly Owned
Subsidiary or by a Wholly Owned Subsidiary to the Company or to another Wholly
Owned Subsidiary, (ii) an issuance of Equity Interests by a Wholly Owned
Subsidiary to the Company or to another Wholly Owned Subsidiary, (iii) a
Restricted Payment that is permitted by Section 4.07 hereof and (iv) the sale of
up to $5.0 million of real estate since the date hereof.
"Attributable Debt" in respect of a sale and leaseback transaction means,
at the time of determination, the present value (discounted at the rate of
interest implicit in such transaction, determined in accordance with GAAP) of
the obligation of the lessee for net rental payments during the remaining term
of the lease included in such sale and leaseback transaction (including any
period for which such lease has been extended or may, at the option of the
lessor, be extended).
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal or state
law for the relief of debtors.
"Board of Directors" means, with respect to any Person, the Board of
Directors of such Person, or any authorized committee of such Board of
Directors.
"Borrowing Base" means, as of any date, an amount equal to the sum of (a)
85.0% of the face amount of all accounts receivable owned by the Company and its
Subsidiaries as of such date that are not more than 90 days past due and (b)
65.0% of the book value of all inventory owned by the Company and its
Subsidiaries as of such date, all calculated on a consolidated basis and in
accordance with GAAP. To the extent that information is not available as to the
amount of accounts receivable or inventory or trade payables as of a specific
date, the Company may utilize the most recent available information for purposes
of calculating the Borrowing Base.
"Business Day" means any day other than a Legal Holiday.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or limited) and
(iv) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of, the
issuing Person.
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"Cash Equivalents" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof having maturities of not more than six
months from the date of acquisition, (iii) certificates of deposit and
eurodollar time deposits with maturities of six months or less from the date of
acquisition, bankers' acceptances with maturities not exceeding six months and
overnight bank deposits, in each case with any domestic commercial bank having
capital and surplus in excess of $500.0 million and a Keefe Bank Watch Rating of
"B" or better, (iv) repurchase obligations with a term of not more than seven
days for underlying securities of the types described in clauses (ii) and (iii)
above entered into with any financial institution meeting the qualifications
specified in clause (iii) above, and (v) commercial paper having the highest
rating obtainable from Moody's Investors Service, Inc. or Standard & Poor's
Corporation and in each case maturing within six months after the date of
acquisition.
"Change of Control" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Subsidiaries taken as a
whole to any "person" (as such term is used in Section 13(d)(3) of the Exchange
Act) other than the Principals or their Related Parties, (ii) the adoption of a
plan relating to the liquidation or dissolution of the Company, (iii) the
consummation of any transaction (including, without limitation, any merger or
consolidation) the result of which is that any "person" (as defined above),
other than the Principals and their Related Parties, becomes the "beneficial
owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange
Act, except that a person shall be deemed to have "beneficial ownership" of all
securities that such person has the right to acquire, whether such right is
currently exercisable or is exercisable only upon the occurrence of a subsequent
condition), directly or indirectly, of more than the Specified Percentage of the
Voting Stock of the Company (measured by voting power rather than number of
shares), (iv) the first day on which a majority of the members of the Board of
Directors of the Company are not Continuing Directors or (v) any transaction the
result of which is (x) if such transaction occurs prior to the first sale of
common equity of the Company pursuant to a registration statement under the
Securities Act that results in at least 25.0% of the then outstanding common
equity of the Company being sold to the public, that the Principals and their
Related Parties beneficially own, directly or indirectly, less than 51.0% of the
Voting Stock of the Company (measured by voting power rather than number of
shares) beneficially owned by the Principals, directly or indirectly, on the
date hereof, and (y) if such transaction occurs thereafter, that any "person"
(as defined above) (other than the Principals and their Related Parties) owns,
directly or indirectly, more of the Voting Stock of the Company (measured by
voting power rather than number of shares) than the Principals and their Related
Parties. For purposes of this definition, any transfer of an equity interest of
an entity that was formed for the purpose of acquiring Voting Stock of the
Company will be deemed to be a transfer of such portion of such Voting Stock as
corresponds to the portion of the equity of such entity that has been so
transferred.
"Company" means American Builders & Contractors Supply Co., Inc., a
Delaware corporation.
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"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus (i) an amount
equal to any extraordinary loss plus any net loss realized in connection with an
Asset Sale (to the extent such losses were deducted in computing such
Consolidated Net Income), plus (ii) provision for taxes based on income or
profits of such Person and its Subsidiaries for such period (to the extent that
such provision for taxes was included in computing such Consolidated Net
Income), plus (iii) consolidated interest expense of such Person and its
Subsidiaries for such period, whether paid or accrued and whether or not
capitalized (including, without limitation, amortization of debt issuance costs
and original issue discount, non-cash interest payments, the interest component
of any deferred payment obligations, the interest component of all payments
associated with Capital Lease Obligations, imputed interest with respect to
Attributable Debt, commissions, discounts and other fees and charges incurred in
respect of letter of credit or bankers' acceptance financings, and net payments
(if any) pursuant to Hedging Obligations) (to the extent that any such expense
was deducted in computing such Consolidated Net Income), plus (iv) depreciation,
amortization (including amortization of goodwill and other intangibles but
excluding amortization of prepaid cash expenses that were paid in a prior
period) and other non-cash expenses (excluding any such non-cash expense to the
extent that it represents an accrual of or reserve for cash expenses in any
future period or amortization of a prepaid cash expense that was paid in a prior
period) of such Person and its Subsidiaries for such period (to the extent that
such depreciation, amortization and other non-cash expenses were deducted in
computing such Consolidated Net Income), plus (v) one-third of the Consolidated
Lease Expense of such Person for such period (to the extent that such
Consolidated Lease Expense was deducted in computing such Consolidated Net
Income), minus (vi) non-cash items increasing such Consolidated Net Income for
such period, in each case, on a consolidated basis and determined in accordance
with GAAP. Notwithstanding the foregoing, the provision for taxes on the income
or profits of, and the depreciation, amortization and other non-cash expenses
of, a Subsidiary of the referent Person shall be added to Consolidated Net
Income to compute Consolidated Cash Flow only to the extent that a corresponding
amount would be permitted at the date of determination to be dividended to the
Company by such Subsidiary without prior governmental approval (that has not
been obtained), and without direct or indirect restriction pursuant to the terms
of its charter and all agreements, instruments, judgments, decrees, orders,
statutes, rules and governmental regulations applicable to that Subsidiary or
its stockholders.
"Consolidated Lease Expense" means, with respect to any Person for any
period, the aggregate rental obligations of such Person and its consolidated
Subsidiaries for operating leases determined on a consolidated basis in
accordance with GAAP payable in respect of such period under leases of real
and/or personal property (net of income from subleases thereof, but including
taxes, insurance, maintenance and similar expenses that the lessee is obligated
to pay under the terms of such leases), whether or not such obligations are
reflected as liabilities or commitments on a consolidated balance sheet of such
Person and its Subsidiaries or in the notes thereto.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Subsidiaries for such
period, on a consolidated basis, determined in accordance with GAAP and reduced
by the amount of Tax Distributions that would be permitted since the date hereof
(whether or not such Tax Distributions have actually been
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distributed); provided that (i) the Net Income (but not loss) of any Person that
is not a Subsidiary or that is accounted for by the equity method of accounting
shall be included only to the extent of the amount of dividends or distributions
paid in cash to the referent Person or a Wholly Owned Subsidiary thereof, (ii)
the Net Income of any Subsidiary shall be excluded to the extent that the
declaration or payment of dividends or similar distributions by that Subsidiary
of that Net Income is not at the date of determination permitted without any
prior governmental approval (that has not been obtained) or, directly or
indirectly, by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to that Subsidiary or its stockholders, (iii) the Net Income of any
Person acquired in a pooling of interests transaction for any period prior to
the date of such acquisition shall be excluded and (iv) the cumulative effect of
a change in accounting principles shall be excluded.
"Consolidated Net Worth" means, with respect to any Person as of any date,
the sum of (i) the consolidated equity of the common stockholders of such Person
and its consolidated Subsidiaries as of such date plus (ii) the respective
amounts reported on such Person's balance sheet as of such date with respect to
any series of preferred stock (other than Disqualified Stock) that by its terms
is not entitled to the payment of dividends unless such dividends may be
declared and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash received by such
Person upon issuance of such preferred stock, less (x) all write-ups (other than
write-ups resulting from foreign currency translations and write-ups of tangible
assets of a going concern business made within 12 months after the acquisition
of such business) subsequent to the date hereof in the book value of any asset
owned by such Person or a consolidated Subsidiary of such Person and (y) all
investments as of such date in unconsolidated Subsidiaries and in Persons that
are not Subsidiaries (except, in each case, Permitted Investments), all of the
foregoing determined in accordance with GAAP.
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of the Company who (i) was a member of such Board of
Directors on the date hereof or (ii) was nominated for election or elected to
such Board of Directors with the approval of a majority of the Continuing
Directors who were members of such Board at the time of such nomination or
election.
"Corporate Trust Office of the Trustee" shall be at the address of the
Trustee specified in Section 12.02 hereof or such other address as to which the
Trustee may give notice to the Company.
"Credit Agreement" means that certain Amended and Restated Loan and
Security Agreement, dated as of July 1, 1993, by and among the Company,
NationsBank of Texas, N.A., as Agent and American National Bank and Trust
Company of Chicago, as Co-Agent, and the lenders from time to time a party
thereto providing for up to $200.0 million of revolving credit borrowings,
including any related notes, guarantees, collateral documents, instruments and
agreements executed in connection therewith, and in each case as amended,
modified, renewed, refunded, replaced or refinanced from time to time.
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"Credit Facilities" means, with respect to the Company or any of its
Subsidiaries, one or more debt facilities (including, without limitation, the
Credit Agreement) or commercial paper facilities with banks or other
institutional lenders providing for revolving credit loans, term loans,
receivables financing (including through the sale of receivables to such lenders
or to special purpose entities formed to borrow from such lenders against such
receivables) or letters of credit, in each case, as amended, restated, modified,
renewed, refunded, replaced or refinanced in whole or in part from time to time.
Indebtedness under Credit Facilities outstanding on the date on which Notes are
first issued and authenticated under this Indenture shall be deemed to have been
incurred on such date in reliance on the exception provided by clause (i) of the
definition of Permitted Debt.
"Custodian" means any receiver, trustee, assignee, liquidator, sequester or
similar official under any Bankruptcy Law.
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"Definitive Notes" means Notes that are in the form of the Notes attached
hereto as Exhibit A, that do not include the information called for by footnotes
1 and 3 thereof.
"Depositary" means, with respect to the Notes issuable or issued in whole
or in part in global form, the Person specified in Section 2.03 hereof as the
Depositary with respect to the Notes, until a successor shall have been
appointed and become such pursuant to the applicable provision of this
Indenture, and, thereafter, "Depositary" shall mean or include such successor.
"Designated Senior Debt" means (i) any Indebtedness outstanding under the
Credit Agreement and (ii) any other series of Senior Debt permitted under this
Indenture the aggregate principal amount of which is $15.0 million or more and
that has been designated by the Company as "Designated Senior Debt."
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable at the option of the holder thereof), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or redeemable at the option of the Holder thereof, in
whole or in part, on or prior to the date that is 91 days after the date on
which the Notes mature.
"Employment Agreement" means the Employment Agreement dated as of May 1,
1997, between Kenneth A. Hendricks and the Company.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Offer" means the offer that may be made by the Company pursuant
to the Registration Rights Agreement to exchange Series B Notes for Series A
Notes.
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"Existing Guarantees" means the obligations of the Company outstanding
under guarantees and letters of credit in respect of certain outstanding
Indebtedness of its Affiliates in an aggregate principal amount of up to $4.3
million.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Existing Indebtedness" means up to $32.0 million in aggregate principal
amount of Indebtedness of the Company and its Subsidiaries (other than
Indebtedness under the Credit Agreement) in existence on the date hereof, until
such amounts are repaid.
"Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person for such period. In the event that the
Company or any of its Subsidiaries incurs, assumes, Guarantees or redeems any
Indebtedness (other than revolving credit borrowings) or issues or redeems
preferred stock subsequent to the commencement of the period for which the Fixed
Charge Coverage Ratio is being calculated but prior to the date on which the
event for which the calculation of the Fixed Charge Coverage Ratio is made (the
"Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated
giving pro forma effect to such incurrence, assumption, Guarantee or redemption
of Indebtedness, or such issuance or redemption of preferred stock, as if the
same had occurred at the beginning of the applicable four-quarter reference
period. In addition, for purposes of making the computation referred to above,
(i) acquisitions that have been made by the Company or any of its Subsidiaries,
including through mergers or consolidations and including any related financing
transactions, during the four-quarter reference period or subsequent to such
reference period and on or prior to the Calculation Date shall be deemed to have
occurred on the first day of the four-quarter reference period, and Consolidated
Cash Flow for such reference period shall be calculated without giving effect to
clause (iii) of the proviso set forth in the definition of Consolidated Net
Income, (ii) the Consolidated Cash Flow attributable to discontinued operations,
as determined in accordance with GAAP, and operations or businesses disposed of
prior to the Calculation Date, shall be excluded and (iii) the Fixed Charges
attributable to discontinued operations, as determined in accordance with GAAP,
and operations or businesses disposed of prior to the Calculation Date, shall be
excluded, but only to the extent that the obligations giving rise to such Fixed
Charges will not be obligations of the referent Person or any of its
Subsidiaries following the Calculation Date.
"Fixed Charges" means, with respect to any Person for any period, the sum,
without duplication, of (i) the consolidated interest expense of such Person and
its Subsidiaries for such period, whether paid or accrued (including, without
limitation, amortization of debt issuance costs and original issue discount,
non-cash interest payments, the interest component of any deferred payment
obligations, the interest component of all payments associated with Capital
Lease Obligations, imputed interest with respect to Attributable Debt,
commissions, discounts and other fees and charges incurred in respect of letter
of credit or bankers' acceptance financings, and net payments (if any) pursuant
to Hedging Obligations), (ii) the consolidated interest of such Person and its
Subsidiaries that was capitalized during such period, (iii) any interest expense
on Indebtedness
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of another Person that is Guaranteed by such Person or one of its Subsidiaries
or secured by a Lien on assets of such Person or one of its Subsidiaries
(whether or not such Guarantee or Lien is called upon), (iv) one-third of the
Consolidated Lease Expense of such Person for such period and (v) the product of
(a) all dividend payments, whether or not in cash, on any series of preferred
stock of such Person or any of its Subsidiaries, other than dividend payments on
Equity Interests payable solely in Equity Interests of the Company (other than
Disqualified Stock), times (b) a fraction, the numerator of which is one and the
denominator of which is one minus the then current combined federal, state and
local statutory tax rate of such Person, expressed as a decimal, in each case,
on a consolidated basis and in accordance with GAAP.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect from time to time.
"Global Note" means a Note that contains the paragraph referred to in
footnote I and the additional schedule referred to in footnote 3 to the form of
the Note attached hereto as Exhibit A.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which guarantee
or obligations the full faith and credit of the United States is pledged.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof), of all or any part of any Indebtedness.
"Guarantor" means (i) each of the Company's Subsidiaries which becomes a
guarantor of the Notes pursuant to Article 11 and (ii) each of the Company's
Subsidiaries executing a supplemental indenture in which such Subsidiary agrees
to be bound by the terms of this indenture; provided that any Person
constituting a Guarantor as described above shall cease to constitute a
Guarantor when its respective Subsidiary Guarantee is released in accordance
with the terms hereof.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates.
"Holder" means a Person in whose name a Note is registered.
"Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's
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acceptances or representing Capital Lease Obligations or the balance deferred
and unpaid of the purchase price of any property or representing any Hedging
Obligations, except any such balance that constitutes an accrued expense or
trade payable, if and to the extent any of the foregoing indebtedness (other
than letters of credit and Hedging Obligations) would appear as a liability upon
a balance sheet of such Person prepared in accordance with GAAP, as well as all
indebtedness of others secured by a Lien on any asset of such Person (whether or
not such indebtedness is assumed by such Person) and, to the extent not
otherwise included, the Guarantee by such Person of any Indebtedness of any
other Person. The amount of any Indebtedness outstanding as of any date shall
be (i) the accreted value thereof, in the case of any Indebtedness that does not
require current payments of interest or (ii) the principal amount thereof,
together with any interest thereon that is more than 30 days past due, in the
case of any other Indebtedness.
"Indenture" means this Indenture, as amended or supplemented from time to
time.
"Initial Notes" means $100,000,000 aggregate principal amount of Notes
issued pursuant to this Indenture.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If the Company or any Subsidiary of the Company sells or otherwise disposes of
any Equity Interests of any direct or indirect Subsidiary of the Company such
that, after giving effect to any such sale or disposition, such Person is no
longer a Subsidiary of the Company, the Company shall be deemed to have made an
Investment on the date of any such sale or disposition equal to the fair market
value of the Equity Interests of such Subsidiary not sold or disposed of in an
amount determined as provided in the final paragraph of Section 4.07 hereof.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday at a place of payment, payment may be made at that place on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue
for the intervening period.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
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"Liquidated Damages" means all liquidated damages then owing pursuant to
Section 5 of the Registration Rights Agreement.
"Mule-Hide" means Mule-Hide Products Co., Inc., a Texas corporation.
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or (b) the
disposition of any securities by such Person or any of its Subsidiaries or the
extinguishment of any Indebtedness of such Person or any of its Subsidiaries and
(ii) any extraordinary or nonrecurring gain (but not loss), together with any
related provision for taxes on such extraordinary or nonrecurring gain (but not
loss).
"Net Proceeds" means the aggregate cash proceeds received by the Company or
any of its Subsidiaries in respect of any Asset Sale (including, without
limitation, any cash received upon the sale or other disposition of any non-cash
consideration received in any Asset Sale), net of the direct costs relating to
such Asset Sale (including, without limitation, legal, accounting and investment
banking fees, and sales commissions) and any relocation expenses incurred as a
result thereof, taxes paid or payable as a result thereof (after taking into
account any available tax credits or deductions and any tax sharing
arrangements), and any reserve for adjustment in respect of the sale price of
such asset or assets established in accordance with GAAP.
"Note Custodian" means the Trustee, as custodian with respect to the Notes
in global form, or any successor entity thereto.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Offering" means the Offering of the Notes by the Company.
"Officer" means, with respect to any Person, the Chairman of the Board, the
Chief Executive Officer, the President, the Chief Operating Officer, the Chief
Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the
Secretary or any Vice-President of such Person.
"Officers' Certificate" means a certificate signed on behalf of the Company
by two Officers of the Company, one of whom must be the principal executive
officer, the principal financial officer, the treasurer or the principal
accounting officer of the Company, that meets the requirements of Section 12.05
hereof.
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"Opinion of Counsel" means an opinion from legal -counsel who is reasonably
acceptable to the Trustee, that meets the requirements of Section 12.05 hereof.
The counsel may be an employee of or counsel to the Company or the Trustee.
"Permitted Businesses" means any business conducted by the Company or any
of its Subsidiaries as of the date hereof, any other business related to the
distribution or manufacture of commercial or residential building products, or
any business reasonably related to the foregoing.
"Permitted Investments" means (a) any Investment in the Company or in a
Subsidiary of the Company, (b) any Investment in Cash Equivalents, (c) any
Investment by the Company or any Subsidiary of the Company in a Person, if as a
result of such Investment (i) such Person becomes a Subsidiary of the Company or
(ii) such Person is merged, consolidated or amalgamated with or into, or
transfers or conveys substantially all of its assets to, or is liquidated into,
the Company or a Subsidiary of the Company, (d) any Restricted Investment made
as a result of the receipt of non-cash consideration from an Asset Sale that was
made pursuant to and in compliance with Section 4.10 hereof, (e) any acquisition
of assets to the extent such assets are acquired solely in exchange for the
issuance of Equity Interests (other than Disqualified Stock) of the Company, (f)
Permitted Real Estate Loans, (g) extensions or renewals of the Existing
Guarantees on terms that are no less favorable to the Holders of Notes than
those existing on the date hereof, and (h) other Investments in any Person
having an aggregate fair market value (measured on the date each such Investment
was made and without giving effect to subsequent changes in value), when taken
together with all other Investments made pursuant to this clause (h) that are at
the time outstanding, not to exceed $1.0 million.
"Permitted Junior Securities" means Equity Interests in the Company or debt
securities that are subordinated to all Senior Debt (and any debt securities
issued in exchange for Senior Debt) to substantially the same extent as, or to a
greater extent than, the Notes are subordinated to Senior Debt pursuant to this
Indenture.
"Permitted Liens" means (i) Liens on assets of the Company or any of its
Subsidiaries securing Senior Debt that was permitted by the terms hereof to be
incurred, (ii) Liens in favor of the Company, (iii) Liens on property of a
Person existing at the time such Person is merged into or consolidated with the
Company or any Subsidiary of the Company, provided that such Liens were in
existence prior to the contemplation of such merger or consolidation and do not
extend to any assets other than those of the Person merged into or consolidated
with the Company, (iv) Liens on property existing at the time of acquisition
thereof by the Company or any Subsidiary of the Company, provided that such
Liens were in existence prior to the contemplation of such acquisition, (v)
Liens to secure the performance of statutory obligations, surety or appeal
bonds, performance bonds or other obligations of a like nature incurred in the
ordinary course of business, (vi) Liens to secure Indebtedness (including
Capital Lease Obligations) permitted to be incurred pursuant to clause (iv) of
the second paragraph of Section 4.09 hereof, covering only the assets acquired
with such Indebtedness, (vii) Liens existing on the date hereof, (viii) Liens
for taxes, assessments or governmental charges or claims that are not yet
delinquent or that are being contested in good faith by appropriate proceedings
promptly instituted and diligently concluded, provided that any reserve
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or other appropriate provision as shall be required in conformity with GAAP
shall have been made therefor, (ix) liens relating to trade payables of the
Company or its Subsidiaries and (x) Liens incurred in the ordinary course of
business of the Company or any Subsidiary of the Company with respect to
obligations that do not exceed $5.0 million at any one time outstanding and that
(a) are not incurred in connection with the borrowing of money or the obtaining
of advances or credit (other than trade credit in the ordinary course of
business) and (b) do not in the aggregate materially detract from the value of
the property or materially impair the use thereof in the operation of business
by the Company or such Subsidiary.
"Permitted Real Estate Loan" means a loan from the Company or any of its
Subsidiaries to an Affiliate of the Company (i) the proceeds of which are used
by such Affiliate to finance the purchase or improvement of real estate which is
or will, upon such purchase or improvement, be leased to the Company or one of
its Subsidiaries on terms comparable to those that would occur in an arm's-
length transaction, (ii) that is evidenced by a note, payable upon the demand of
the Company or such Subsidiary, (iii) the interest on which is payable in cash
semi-annually at an interest rate at least equal to the prime rate of
NationsBank of Texas, N.A., announced from time to time, (iv) with full recourse
to such Affiliate, its assets and its properties, and (v) the aggregate
principal amount of which at any one time outstanding (when taken together with
all other Permitted Real Estate Loans) does not exceed the greater of (x) $10.0
million and (y) $10.0 million plus 10.0% of the Consolidated Net Income of the
Company for the period (taken as one accounting period) from the beginning of
the first fiscal quarter commencing after the date hereof and ending on the last
day of the most recently ended fiscal quarter.
"Permitted Refinancing Indebtedness" means any Indebtedness of the Company
or any of its Subsidiaries issued in exchange for, or the net proceeds of which
are used to extend, refinance, renew, replace, defease or refund other
Indebtedness of the Company or any of its Subsidiaries; provided that: (i) the
principal amount (or accreted value, if applicable) of such Permitted
Refinancing Indebtedness does not exceed the principal amount of (or accreted
value, if applicable), plus accrued interest on, the Indebtedness so extended,
refinanced, renewed, replaced, defeased or refunded (plus the amount of
reasonable expenses incurred in connection therewith); (ii) such Permitted
Refinancing Indebtedness has a final maturity date later than the final maturity
date of, and has a Weighted Average Life to Maturity equal to or greater than
the Weighted Average Life to Maturity of, the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; (iii) if the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded is
subordinated in right of payment to the Notes, such Permitted Refinancing
Indebtedness has a final maturity date later than the final maturity date of,
and is subordinated in right of payment to, the Notes on terms at least as
favorable to the Holders of Notes as those contained in the documentation
governing the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; and (iv) such Indebtedness is incurred either by the
Company or by the Subsidiary who is the obligor on the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or agency or political subdivision
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thereof (including any subdivision or ongoing business of any such entity or
substantially all of the assets of any such entity, subdivision or business).
"Principals" means Kenneth A. Hendricks, Diane Hendricks, any lineal
descendant of either of them and the spouse of Kenneth A. Hendricks (if other
than Diane Hendricks).
"Registration Rights Agreement" means the Registration Rights Agreement,
dated as of May 7, 1997, by and among the Company and the other parties named on
the signature pages thereof, as such agreement may be amended, modified or
supplemented from time to time.
"Related Party" with respect to any Principal means any trust, corporation,
partnership or other entity, the beneficiaries, stockholders, partners, owners
or Persons beneficially holding a majority and controlling interest of which
consist of such Principal and/or one or more other Principals.
"Related Party Leases" means the leases delivered to the Trustee within 30
days of the date hereof in accordance with the terms of the letter agreement
(and form of lease attached thereto) attached hereto as Exhibit C.
"Representative" means the indenture trustee or other trustee, agent or
representative for any Senior Debt.
by any of the above designated officers 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.
"Restricted Investment" means any Investment other than a Permitted
Investment.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Debt" means (i) all Indebtedness of the Company or any of its
Subsidiaries outstanding under Credit Facilities and all Hedging Obligations
with respect thereto, (ii) any other Indebtedness permitted to be incurred by
the Company or any of its Subsidiaries under the terms hereof, unless the
instrument under which such Indebtedness is incurred expressly provides that it
is on a parity with or subordinated in right of payment to the Notes or any
Guarantor's Subsidiary Guarantee of the Notes and (iii) all Obligations with
respect to the foregoing. Notwithstanding anything to the contrary in the
foregoing, Senior Debt will not include (w) any liability for federal, state,
local or other taxes owed or owing by the Company or any of its Subsidiaries,
(x) any Indebtedness of the Company or any of its Subsidiaries to any Subsidiary
or other Affiliate of the Company, (y) any trade payables or (z) any
Indebtedness that is incurred in violation of this Indenture (other than
Indebtedness under the Credit Agreement that is incurred on the basis of a
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representation by the Company to the applicable lenders that it is permitted to
incur such Indebtedness under the Indenture).
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Act, as such Regulation is in effect on the date hereof
"Specified Percentage" means at any time at which the Principals and their
Related Parties collectively own more than 50.0% of the Voting Stock of the
Company (measured by voting power rather than number of shares), 50.0% and, at
any time thereafter, 35.0%.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof). With respect to the
Company, the term "Subsidiary" shall include, but not be limited to, Mule-Hide
and Amcraft.
"Subsidiary Guarantee" means, individually and collectively, the guarantees
given by the Guarantors pursuant to Article 11 hereof, including a notation in
the Securities substantially in the form included in Exhibit A.
"Tax Allocation Agreement" means the Tax Allocation Agreement dated as of
May 1, 1997, among the Company, Mule-Hide, Amcraft and Kenneth A. Hendricks.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. (S)(S) 77aaa-77bbbb)
as in effect on the date on which this Indenture is qualified under the TIA.
"Transfer Restricted Securities" means securities that bear or are required
to bear the legend set forth in Section 2.06 hereof
"Trustee" means the party named as such above until a successor replaces it
in accordance with the applicable provisions of this Indenture and thereafter
means the successor serving hereunder.
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"Voting Stock" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such Person
all of the outstanding Capital Stock or other ownership interests of which
(other than directors' qualifying shares) shall at the time be owned, directly
or indirectly, by such Person or by one or more Wholly Owned Subsidiaries of
such Person.
SECTION 1.02 OTHER DEFINITIONS
<TABLE>
<CAPTION>
Defined
in
Term Section
----------------------------------- -------
<S> <C>
"Affiliate Transaction"............ 4.11
"Asset Sale"....................... 4.10
"Asset Sale Offer"................. 3.09
"Change of Control Offer".......... 4.15
"Change of Control Payment"........ 4.15
"Change of Control Payment Date"... 4.15
"Covenant Defeasance".............. 8.03
"Event of Default"................. 6.01
"Excess Proceeds".................. 4.10
"incur"............................ 4.09
"Legal Defeasance"................. 8.02
"Offer Amount"..................... 3.09
"Offer Period"..................... 3.09
"Paying Agent"..................... 2.03
"Payment Default".................. 2.03
"Permitted Debt"................... 4.09
"Purchase Date".................... 3.09
"Registrar"........................ 2.03
"Restricted Payments".............. 4.07
"Tax Distributions"................ 4.07
</TABLE>
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SECTION 1.03 INCORPORATION BY PREFERENCE OF TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the TIA, the
provision is 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 Notes and the Subsidiary Guaranties;
"indenture security Holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee;
"obligor" on the Notes means the Company and any successor obligor upon the
Notes or any Guarantor.
All other terms used in this Indenture that are defined by the TIA, defined
by TIA reference to another statute or defined by SEC rule under the TIA have
the meanings so assigned to them.
SECTION 1.04 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) words in the singular include the plural, and in the plural include
the singular;
(5) provisions apply to successive events and transactions; and
(6) references to sections of or rules under the Securities Act shall be
deemed to include substitute, replacement or successor sections or rules adopted
by the SEC from time to time.
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ARTICLE 2
THE NOTES
SECTION 2.01 FORM AND DATING.
The Notes and the Trustee's certificate of authentication shall be
substantially in the form included in Exhibit A hereto. The Subsidiary
Guarantees shall be substantially in the form of Exhibit A, the terms of which
are incorporated in and made part of this Indenture. The Notes may have
notations, legends or endorsements required by law, stock exchange rule or
usage. Each Note shall be dated the date of its authentication. The Notes shall
be in denominations of $1,000 and integral multiples thereof.
The terms and provisions contained in the Notes shall constitute, and are
hereby expressly made, a part of this Indenture and the Company and the Trustee,
by their execution and delivery of this Indenture, expressly agree to such terms
and provisions and to be bound thereby.
Notes issued in global form shall be substantially in the form of Exhibit A
attached hereto (including the text referred to in footnotes 1 and 3 thereto).
Notes issued in definitive form shall be substantially in the form of Exhibit A
attached hereto (but without including the text referred to in footnotes 1 and 3
thereto). Each Global Note shall represent such of the outstanding Notes as
shall be specified therein and each shall provide that it shall represent the
aggregate amount of outstanding Notes from time to time endorsed thereon and
that the aggregate amount of outstanding Notes represented thereby may from time
to time be reduced or increased, as appropriate, to reflect exchanges and
redemptions. Any endorsement of a Global Note to reflect the amount of any
increase or decrease in the amount of outstanding Notes represented thereby
shall be made by the Trustee or the Note Custodian, at the direction of the
Trustee, in accordance with instructions given by the Holder thereof as required
by Section 2.06 hereof.
SECTION 2.02 EXECUTION AND AUTHENTICATION
Two Officers shall sign the Notes for the Company by manual or facsimile
signature.
If an Officer whose signature is on a Note no longer holds that office at
the time a Note is authenticated, the Note shall nevertheless be valid.
A Note shall not be valid until authenticated by the manual signature of
the Trustee. The signature shall be conclusive evidence that the Note has been
authenticated under this Indenture.
The Trustee shall, upon a written order of the Company signed by two
Officers, authenticate Notes for original issue up to the aggregate principal
amount stated in paragraph 4 of the Notes. The aggregate principal amount of
Notes outstanding at any time may not exceed such amount except as provided in
Section 2.07 hereof.
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The Trustee may appoint an authenticating agent acceptable to the Company
to authenticate Notes. An authenticating agent may authenticate Notes 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 of the Company.
SECTION 2.03 REGISTRAR AND PAYING AGENT.
The Company shall maintain an office or agency where Notes may be presented
for registration of transfer or for exchange ("Registrar") and an office or
agency where Notes may be presented for payment ("Paying Agent"). The Registrar
shall keep a register of the Notes and of their transfer and exchange. The
Company may appoint one or more co-registrars and one or more additional paying
agents. The term "Registrar" includes any co-registrar and the term "Paying
Agent" includes any additional paying agent. The Company may change any Paying
Agent or Registrar without notice to any Holder. The Company shall notify the
Trustee in writing 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 of
its Subsidiaries may act as Paying Agent or Registrar.
The Company initially appoints The Depository Trust Company ("DTC") to act
as Depositary with respect to the Global Notes.
The Company initially appoints the Trustee to act as the Registrar and
Paying Agent and to act as Note Custodian with respect to the Global Notes.
SECTION 2.04 PAYING AGENT TO HOLD MONEY IN TRUST.
The Company shall require each Paying Agent other than the Trustee to agree
in writing that the Paying Agent will hold in trust for the benefit of Holders
or the Trustee all money held by the Paying Agent for the payment of principal,
premium or Liquidated Damages, if any, or interest on the Notes, and will notify
the Trustee of any default by the Company or any Guarantor 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 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 or a
Subsidiary) shall have no further liability for the money. If the Company or a
Subsidiary acts as Paying Agent, it shall segregate and hold in a separate trust
fund for the benefit of the Holders all money held by it as Paying Agent. Upon
any bankruptcy or reorganization proceedings relating to the Company or a
Guarantor, the Trustee shall serve as Paying Agent for the Notes.
SECTION 2.05 HOLDER 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
all Holders and shall otherwise comply with TIA
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(S) 312(a). If the Trustee is not the Registrar, the Company 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 the Holders of Notes and the Company and the Guarantors shall
otherwise comply with TIA (S) 312(a).
SECTION 2.06 TRANSFER AND EXCHANGE
(a) Transfer and Exchange of Definitive Notes. When Definitive Notes are
presented by a Holder to the Registrar with a request
(x) to register the transfer of the Definitive Notes or
(y) to exchange such Definitive Notes for an equal principal amount of
Definitive Notes of other authorized denominations,
the Registrar shall register the transfer or make the exchange as requested if
its requirements for such transactions are met; provided, however, that the
Definitive Notes presented or surrendered for register of transfer or exchange:
(i) shall be duly endorsed or accompanied by a written instruction of
transfer in form satisfactory to the Registrar duly executed by such Holder
or by his attorney, duly authorized in writing; and
(ii) in the case of a Definitive Note that is a Transfer Restricted
Security, such request shall be accompanied by the following additional
information and documents, as applicable:
(A) if such Transfer Restricted Security is being delivered to
the Registrar by a Holder for registration in the name of such Holder,
without transfer, a certification to that effect from such Holder (in
substantially the form of Exhibit B hereto); or
(B) if such Transfer Restricted Security is being transferred to
a "qualified institutional buyer" (as defined in Rule 144A under the
Securities Act) in accordance with Rule 144A under the Securities Act
or pursuant to an exemption from registration in accordance with Rule
144 or Rule 904 under the Securities Act or pursuant to an effective
registration statement under the Securities Act, a certification to
that effect from such Holder (in substantially the form of Exhibit B
hereto); or
(C) if such Transfer Restricted Security is being transferred in
reliance on another exemption from the registration requirements of
the Securities Act, a certification to that effect from such Holder
(in substantially the form of Exhibit B hereto) and an Opinion of
Counsel from such Holder or the transferee reasonably
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acceptable to the Company and to the Registrar to the effect that such
transfer is in compliance with the Securities Act.
(b) Transfer of a Definitive Note for a Beneficial Interest in a Global
Note. A Definitive Note may not be exchanged for a beneficial interest in a
Global Note except upon satisfaction of the requirements set forth below. Upon
receipt by the Trustee of a Definitive Note, duly endorsed or accompanied by
appropriate instruments of transfer, in form satisfactory to the Trustee,
together with
(i) if such Definitive Note is a Transfer Restricted Security, a
certification from the Holder thereof (in substantially the form of Exhibit B
hereto) to the effect that such Definitive Note is being transferred by such
Holder to a "qualified institutional buyer" (as defined in Rule 144A under the
Securities Act) in accordance with Rule 144A under the Securities Act and
(ii) whether or not such Definitive Note is a Transfer Restricted
Security, written instructions from the Holder thereof directing the Trustee to
make, or to direct the Note Custodian to make, an endorsement on the Global Note
to reflect an increase in the aggregate principal amount of the Notes
represented by the Global Note,
the Trustee shall cancel such Definitive Note in accordance with Section 2.11
hereof and cause, or direct the Note Custodian to cause, in accordance with the
standing instructions and procedures existing between the Depositary and the
Note Custodian, the aggregate principal amount of Notes represented by the
Global Note to be increased accordingly. If no Global Notes are then
outstanding, the Company shall issue and, upon receipt of an authentication
order in accordance with Section 2.02 hereof, the Trustee shall authenticate a
new Global Note in the appropriate principal amount.
(c) Transfer and Exchange of Global Notes. The transfer and exchange
of Global Notes or beneficial interests therein shall be effected through the
Depositary, in accordance with this Indenture and the procedures of the
Depositary therefor, which shall include restrictions on transfer comparable to
those set forth herein to the extent required by the Securities Act.
(d) Transfer of a Beneficial Interest in a Global Note for a Definitive
Note.
(i) Any Person having a beneficial interest in a Global Note may upon
request exchange such beneficial interest for a Definitive Note. Upon receipt
by the Trustee of written instructions or such other form of instructions as is
customary for the Depositary, from the Depositary or its nominee on behalf of
any Person having a beneficial interest in a Global Note, and, in the case of a
Transfer Restricted Security, the following additional information and documents
(all of which may be submitted by facsimile)
(A) if such beneficial interest is being transferred to the
Person designated by the Depositary as being the beneficial owner, a
certification to that effect from such Person (in substantially the form of
Exhibit B hereto) or
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(B) if such beneficial interest is being transferred to a
"qualified institutional buyer" (as defined in Rule 144A under the
Securities Act) in accordance with Rule 144A under the Securities Act
or pursuant to an exemption from registration in accordance with Rule
144 or Rule 904 under the Securities Act or pursuant to an effective
registration statement under the Securities Act, a certification to
that effect from the transferor (in substantially the form of Exhibit
B hereto) or
(C) if such beneficial interest is being transferred in reliance
on another exemption from the registration requirements of the
Securities Act, a certification to that effect from the transferor (in
substantially the form of Exhibit B hereto) and an Opinion of Counsel
from the transferee or transferor reasonably acceptable to the Company
and to the Registrar to the effect that such transfer is in compliance
with the Securities Act,
the Trustee or the Note Custodian, at the direction of the Trustee, shall,
in accordance with the standing instructions and procedures existing
between the Depositary and the Note Custodian, cause the aggregate
principal amount of Global Notes to be reduced accordingly and, following
such reduction, the Company shall execute and, upon receipt of an
authentication order in accordance with Section 2.02 hereof, the Trustee
shall authenticate and deliver to the transferee, a Definitive Note in the
appropriate principal amount.
(ii) Definitive Notes issued in exchange for a beneficial interest in
a Global Note pursuant to this Section 2.06(d) shall be registered in such
names and in such authorized denominations as the Depositary, pursuant to
instructions from its direct or indirect participants or otherwise, shall
instruct the Trustee. The Trustee shall deliver such Definitive Notes to
the Persons in whose names such Notes are so registered.
(e) Restrictions on Transfer and Exchange of Global Notes. Notwithstanding
any other provision of this Indenture (other than the provisions set forth in
subsection (f) of this Section 2.06), a Global Note may not be transferred as a
whole except by the Depositary to a nominee of the Depositary or by a nominee of
the Depositary to the Depositary or another nominee of the Depositary or by the
Depositary or any such nominee to a successor Depositary or a nominee of such
successor Depositary.
(f) Authentication of Definitive Notes in Absence of Depositary. If at any
time
(i) the Depositary for the Notes notifies the Company that the
Depositary is unwilling or unable to continue as Depositary for the Global
Notes and a successor Depositary for the Global Notes is not appointed by
the Company within 90 days after delivery of such notice or
(ii) the Company, in its sole discretion, notifies the Trustee in
writing that it elects to cause the issuance of Definitive Notes under this
Indenture,
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then the Company shall execute, and the Trustee shall, upon receipt of an
authentication order in accordance with Section 2.02 hereof, authenticate and
deliver, Definitive Notes in an aggregate principal amount equal to the
principal amount of the Global Notes in exchange for such Global Notes.
(g) Legends.
(i) Except as permitted by the following paragraphs (ii) and (iii),
each Note certificate evidencing Global Notes and Definitive Notes (and all
Notes issued in "change therefor or substitution thereof) shall bear
legends in substantially the following form:
"THE NOTE (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE NOTE
EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THE NOTE EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER
MAY BE RELYING ON THE EXEMPTION PROVIDED BY RULE 144A UNDER THE SECURITIES
ACT. THE HOLDER OF THE NOTE EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE
COMPANY THAT (A) SUCH NOTE MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED,
ONLY (1) (a) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (c) OUTSIDE
THE UNITED STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT OR (d) IN ACCORDANCE WITH
ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
(AND BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO REQUESTS), (2) TO
THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN
EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE
OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE
HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY
PURCHASER OF THE NOTE EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH
IN (1) ABOVE."
(ii) Upon any sale or transfer of a Transfer Restricted Security
(including any Transfer Restricted Security represented by a Global Note)
pursuant to Rule 144 under the Securities Act or pursuant to an effective
registration statement under the Securities Act:
(A) in the case of any Transfer Restricted Security that is a
Definitive Note, the Registrar shall permit the Holder thereof to
exchange such Transfer
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Restricted Security for a Definitive Note that does not bear the
legend set forth in (i) above and rescind any restriction on the
transfer of such Transfer Restricted Security; and
(B) in the case of any Transfer Restricted Security represented
by a Global Note, such Transfer Restricted Security shall not be
required to bear the legend set forth in (i) above, but shall continue
to be subject to the provisions of Section 2.06(c) hereof; provided,
however, that with respect to any request for an exchange of a
Transfer Restricted Security that is represented by a Global Note for
a Definitive Note that does not bear the legend set forth in (i)
above, which request is made in reliance upon Rule 144, the Holder
thereof shall certify in writing to the Registrar that such request is
being made pursuant to Rule 144 (such certification to be
substantially in the form of Exhibit B hereto).
(iii) Notwithstanding the foregoing, upon consummation of the Exchange
Offer, the Company shall issue and, upon receipt of an authentication order
in accordance with Section 2.02 hereof, the Trustee shall authenticate,
Series B Notes in exchange for Series A Notes accepted for exchange in the
Exchange Offer, which Series B Notes shall not bear the legend set forth in
(i) above, and the Registrar shall rescind any restriction on the transfer
of such Notes, in each case unless the Holder of such Series A Notes is
either (A) a broker-dealer, (B) a Person participating in the distribution
of the Series A Notes or (C) a Person who is an affiliate (as defined in
Rule 144A) of the Company.
(h) Cancellation and/or Adjustment of Global Notes. At such time as all
beneficial interests in Global Notes have been exchanged for Definitive Notes,
redeemed, repurchased or canceled, all Global Notes shall be returned to or
retained and canceled by the Trustee in accordance with Section 2.11 hereof. At
any time prior to such cancellation, if any beneficial interest in a Global Note
is exchanged for Definitive Notes, redeemed, repurchased or canceled, the
principal amount of Notes represented by such Global Note shall be reduced
accordingly and an endorsement shall be made on such Global Note, by the Trustee
or the Notes Custodian, at the direction of the Trustee, to reflect such
reduction.
(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the Company
shall execute and the Trustee shall authenticate Definitive Notes and
Global Notes at the Registrar's request.
(ii) No service charge shall be made to a Holder for any registration
of transfer or exchange, but the Company may require payment of a sum
sufficient to cover any transfer tax or similar governmental charge payable
in connection therewith (other than any such transfer taxes or similar
governmental charge payable upon exchange or transfer pursuant to Sections
3.07, 4.10, 4.15 and 9.05 hereto).
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(iii) The Registrar shall not be required to register the transfer of
or exchange any Note selected for redemption in whole or in part, except
the unredeemed portion of any Note being redeemed in part.
(iv) All Definitive Notes and Global Notes issued upon any
registration of transfer or exchange of Definitive Notes or Global Notes
shall be the valid obligations of the Company, evidencing the same debt,
and entitled to the same benefits under this Indenture, as the Definitive
Notes or Global Notes surrendered upon such registration of transfer or
exchange.
(v) The Company shall not be required:
(A) to issue, to register the transfer of or to exchange Notes
during a period beginning at the opening of business 15 days before
the day of any selection of Notes for redemption under Section 3.02
hereof and ending at the close of business on the day of selection; or
(B) to register the transfer of or to exchange any Note so
selected for redemption in whole or in part, except the unredeemed
portion of any Note being redeemed in part; or
(C) to register the transfer of or to exchange a Note between a
record date and the next succeeding interest payment date.
(vi) Prior to due presentment for the registration of a transfer of
any Note, the Trustee, any Agent and the Company may deem and treat the
Person in whose name any Note is registered as the absolute owner of such
Note for the purpose of receiving payment of principal of and interest on
such Note, and neither the Trustee, any Agent nor the Company shall be
affected by notice to the contrary.
(vii) The Trustee shall authenticate Definitive Notes and Global Notes
in accordance with the provisions of Section 2.02 hereof.
SECTION 2.07 REPLACEMENT NOTES.
If any mutilated Note is surrendered to the Trustee, or the Company and the
Trustee receives evidence to its satisfaction of the destruction, loss or theft
of any Note, the Company shall issue and the Trustee, upon the written order of
the Company signed by two Officers of the Company, shall authenticate a
replacement Note if the Trustee's requirements 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 Trustee, any Agent and any authenticating agent from any loss that
any of them may suffer if a Note is replaced. The Company may charge for its
expenses in replacing a Note.
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Every replacement Note is an additional obligation of the Company and shall
be entitled to all of the benefits of this Indenture equally and proportionately
with all other Notes duly issued hereunder.
SECTION 2.08 OUTSTANDING NOTES.
The Notes outstanding at any time are all the Notes authenticated by the
Trustee except for those canceled by it, those delivered to it for cancellation,
those reductions in the interest in a Global Note effected by the Trustee in
accordance with the provisions hereof, and those described in this Section as
not outstanding. Except as set forth in Section 2.09 hereof, a Note does not
cease to be outstanding because the Company or an Affiliate of the Company holds
the Note.
If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser.
If the principal amount of any Note is considered paid under Section 4.01
hereof, it ceases to be outstanding and interest on it ceases to accrue.
If the Paying Agent (other than the Company, a Subsidiary or an Affiliate
of any thereof) holds, on a redemption date or maturity date, money sufficient
to pay Notes payable on that date, then on and after that date such Notes shall
be deemed to be no longer outstanding and shall cease to accrue interest.
SECTION 2.09 TREASURY NOTES.
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver or consent, Notes owned by the
Company, any Guarantor or by any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company, shall
be considered as though not outstanding, except that for the purposes of
determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Notes that a Trustee knows are so owned shall
be so disregarded.
SECTION 2.10 TEMPORARY NOTES.
Until definitive Notes are ready for delivery, the Company may prepare and
the Trustee shall authenticate temporary Notes upon a written order of the
Company signed by two Officers of the Company. Temporary Notes shall be
substantially in the form of definitive Notes but may have variations that the
Company considers appropriate for temporary Notes and as shall be reasonably
acceptable to the Trustee. Without unreasonable delay, the Company shall prepare
and the Trustee shall authenticate definitive Notes in exchange for temporary
Notes.
Holders of temporary Notes shall be entitled to all of the benefits of this
Indenture.
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SECTION 2.11 CANCELLATION.
The Company at any time may deliver Notes to the Trustee for cancellation.
The Registrar and Paying Agent shall forward to the Trustee any Notes
surrendered to them for registration of transfer, exchange or payment. The
Trustee and no one else shall cancel all Notes surrendered for registration of
transfer, exchange, payment, replacement or cancellation and shall destroy
canceled Notes (subject to the record retention requirement of the Exchange
Act). Certification of the destruction of all canceled Notes shall be delivered
to the Company. The Company may not issue new Notes to replace Notes that it has
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 Notes, 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 Holders on a
subsequent special record date, in each case at the rate provided in the Notes
and in Section 4.01 hereof. The Company shall notify the Trustee in writing of
the amount of defaulted interest proposed to be paid on each Note and the date
of the proposed payment. The Company shall fix or cause to be fixed each such
special record date and payment date, provided that no such special record date
shall be less than 10 days prior to the related payment date for such defaulted
interest. At least 15 days before the special record date, the Company (or, upon
the written request of the Company, the Trustee in the name and at the expense
of the Company) shall mail or cause to be mailed to Holders a notice that states
the special record date, the related payment date and the amount of such
interest to be paid.
ARTICLE 3
REDEMPTION AND PREPAYMENT
SECTION 3.01 NOTICES TO TRUSTEE.
If the Company elects to redeem Notes pursuant to the optional redemption
provisions of Section 3.07 hereof, it shall furnish to the Trustee, at least 30
days but not more than 60 days before a redemption date, an Officers'
Certificate setting forth (i) the clause of this Indenture pursuant to which the
redemption shall occur, (ii) the redemption date, (iii) the principal amount of
Notes to be redeemed and (iv) the redemption price.
SECTION 3.02 SELECTION OF NOTES TO BE REDEEMED.
If less than all of the Notes are to be redeemed at any time, the Trustee
shall select the Notes to be redeemed among the Holders of the Notes in
compliance with the requirements of the principal national securities exchange,
if any, on which the Notes are listed or, if the Notes are not so listed, on a
pro rata basis, by lot or in accordance with any other method the Trustee
considers fair and
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appropriate. In the event of partial redemption by lot, the particular Notes to
be redeemed shall be selected, unless otherwise provided herein, not less than
30 nor more than 60 days prior to the redemption date by the Trustee from the
outstanding Notes not previously called for redemption.
The Trustee shall promptly notify the Company in writing of the Notes
selected for redemption and, in the case of any Note selected for partial
redemption, the principal amount thereof to be redeemed. Notes and portions of
Notes selected shall be in amounts of $1,000 or whole multiples of $1,000;
except that if all of the Notes of a Holder are to be redeemed, the entire
outstanding amount of Notes held by such Holder, even if not a multiple of
$1,000, shall be redeemed. Except as provided in the preceding sentence,
provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption.
SECTION 3.03 NOTICE OF REDEMPTION.
Subject to the provisions of Section 3.09 hereof, at least 30 days but not
more than 60 days before a redemption date, the Company shall mail or cause to
be mailed, by first class mail a notice of redemption to each Holder whose Notes
are to be redeemed at its registered address.
The notice shall identify the Notes to be redeemed and shall state:
(a) the redemption date;
(b) the redemption price;
(c) if any Note is being redeemed in part, the portion of the principal
amount of such Note to be redeemed and that, after the redemption date upon
surrender of such Note, a new Note or Notes in principal amount equal to the
unredeemed portion shall be issued upon cancellation of the original Note;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to the Paying
Agent to collect the redemption price;
(f) that, unless the Company defaults in making such redemption payment,
interest on Notes called for redemption ceases to accrue on and after the
redemption date;
(g) the paragraph of the Notes and/or Section of this Indenture pursuant
to which the Notes called for redemption are being redeemed; and
(h) 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 Notes.
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At the Company's request, the Trustee shall give the notice of redemption
in the Company's name and at its expense; provided, however, that the Company
shall have delivered to the Trustee, at least 45 days prior to the redemption
date, an Officers' Certificate requesting that the Trustee give such notice and
setting forth the information to be stated in such notice as provided in the
preceding paragraph.
SECTION 3.04 EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with Section 3.03 hereof,
Notes called for redemption become irrevocably due and payable on the redemption
date at the redemption price. A notice of redemption may not be conditional.
SECTION 3.05 DEPOSIT OF REDEMPTION PRICE.
One Business Day prior to 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 Notes 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
Notes to be redeemed.
If the Company complies with the provisions of the preceding paragraph, on
and after the redemption date, interest shall cease to accrue on the Notes or
the portions of Notes called for redemption. If a Note 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 Note was registered at the close of business on such record date. If any
Note 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 interest not paid on
such unpaid principal, in each case at the rate provided in the Notes and in
Section 4.01 hereof.
SECTION 3.06 NOTICES REDEEMED IN PART.
Upon surrender of a Note that is redeemed in part, the Company shall issue
and, upon the Company's written request, the Trustee shall authenticate for the
Holder at the expense of the Company a new Note equal in principal amount to the
unredeemed portion of the Note surrendered.
SECTION 3.07 OPTIONAL REDEMPTION.
(a) The Company shall not have the option to redeem the Notes pursuant to
this Section 3.07 prior to May 15, 2002. Thereafter, the Company shall have the
option to redeem the Notes, in whole or in part, at the redemption prices
(expressed as percentages of principal amount) set forth below plus accrued and
unpaid interest and Liquidated Damages thereon, if any, to the
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applicable redemption date, if redeemed during the 12 month period beginning on
May 15 of the years indicated below:
<TABLE>
<CAPTION>
Year Percentage
--------------------- ----------
<S> <C>
2002................. 105.3125%
2003................. 103.5416%
2004................. 101.7708%
2005 and thereafter.. 100.0000%
</TABLE>
(b) Notwithstanding the foregoing, the Company may prior to May 15, 2002 on
any one or more occasions redeem up to an aggregate of 35% of the original
aggregate principal amount of Notes at a redemption price of 110.625% of the
principal amount thereof, plus accrued and unpaid interest thereon and
Liquidated Damages, if any, to the redemption date, with the net cash proceeds
of an initial public offering of common stock of the Company; provided that at
least 65% of the aggregate principal amount of Notes originally issued remain
outstanding immediately after the occurrence of such redemption, and provided,
further, that such redemption shall occur within 60 days of the date of the
closing of such initial public offering.
(c) Any redemption pursuant to this Section 3.07 shall be made pursuant to
the provisions of Section 3.01 through 3.06 hereof.
SECTION 3.08 MANDATORY REDEMPTION.
Except as set forth under Sections 4.10 and 4.15 hereof, the Company shall
not be required to make mandatory redemption or sinking fund payments with
respect to the Notes.
SECTION 3.09 OFFER TO PURCHASE BY APPLICATION OF EXCESS PROCEEDS.
In the event that, pursuant to Section 4.10 hereof, the Company shall be
required to commence an offer to all Holders to purchase Notes (an "Asset Sale
Offer"), it shall follow the procedures specified below.
The Asset Sale Offer shall remain open for a period of 20 Business Days
following its commencement and no longer, except to the extent that a longer
period is required by applicable law (the "Offer Period"). No later than five
Business Days after the termination of the Offer Period (the "Purchase Date"),
the Company shall purchase the principal amount of Notes required to be
purchased pursuant to Section 4.10 hereof (the "Offer Amount") or, if less than
the Offer Amount has been tendered, all Notes tendered in response to the Asset
Sale Offer. Payment for any Notes so purchased shall be made in the same manner
as interest payments are made.
If the Purchase Date is on or after an interest record date and on or
before the related interest payment date, any accrued and unpaid interest shall
be paid to the Person in whose name a Note is
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registered at the close of business on such record date, and no additional
interest shall be payable to Holders who tender Notes pursuant to the Asset Sale
Offer.
Upon the commencement of an Asset Sale Offer, the Company shall send, by
first class mail, a notice to the Trustee and each of the Holders. The notice
shall contain all instructions and materials necessary to enable such Holders to
tender Notes pursuant to the Asset Sale Offer. The Asset Sale Offer shall be
made to all Holders. The notice, which shall govern the terms of the Asset Sale
Offer, shall state:
(a) that the Asset Sale Offer is being made pursuant to this Section 3.09
and Section 4.10 hereof and the length of time the Asset Sale Offer shall remain
open;
(b) the Offer Amount, the purchase price and the Purchase Date;
(c) that any Note not tendered or accepted for payment shall continue to
accrue interest;
(d) that, unless the Company defaults in making such payment, any Note
accepted for payment pursuant to the Asset Sale Offer shall cease to accrue
interest after the Purchase Date;
(e) that Holders electing to have a Note purchased pursuant to an Asset
Sale Offer may only elect to have all of such Note purchased and may not elect
to have only a portion of such Note purchased;
(f) that Holders electing to have a Note purchased pursuant to any Asset
Sale Offer shall be required to surrender the Note, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Note completed, or
transfer by book-entry transfer, to the Company, a depositary, if appointed by
the Company, or a Paying Agent at the address specified in the notice at least
three days before the Purchase Date;
(g) that Holders shall be entitled to withdraw their election if the
Company, the depositary or the Paying Agent, as the case may be, receives, not
later than the expiration of the Offer Period, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of the Note the Holder delivered for purchase and a statement that such
Holder is withdrawing his election to have such Note purchased;
(h) that, if the aggregate principal amount of Notes surrendered by Holders
exceeds the Offer Amount, the Company shall select the Notes to be purchased on
a pro rata basis (with such adjustments as may be deemed appropriate by the
Company so that only Notes in denominations of $1,000, or integral multiples
thereof, shall be purchased); and
(i) that Holders whose Notes were purchased only in part shall be issued
new Notes equal in principal amount to the unpurchased portion of the Notes
surrendered (or transferred by book-entry transfer).
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On or before the Purchase Date, the Company shall, to the extent lawful,
accept for payment, on a pro rata basis to the extent necessary, the Offer
Amount of Notes or portions thereof tendered pursuant to the Asset Sale Offer,
or if less than the Offer Amount has been tendered, all Notes tendered, and
shall deliver to the Trustee an Officers' Certificate stating that such Notes or
portions thereof were accepted for payment by the Company in accordance with the
terms of this Section 3.09. The Company, the Depositary or the Paying Agent, as
the case may be, shall promptly (but in any case not later than five days after
the Purchase Date) mail or deliver to each tendering Holder an amount equal to
the purchase price of the Notes tendered by such Holder and accepted by the
Company for purchase, and the Company shall promptly issue a new Note, and the
Trustee, upon written request from the Company shall authenticate and mail or
deliver such new Note to such Holder, in a principal amount equal to any
unpurchased portion of the Note surrendered. Any Note not so accepted shall be
promptly mailed or delivered by the Company to the Holder thereof. The Company
shall publicly announce the results of the Asset Sale Offer on the Purchase
Date.
Other than as specifically provided in this Section 3.09, any purchase
pursuant to this Section 3.09 shall be made pursuant to the provisions of
Sections 3.01 through 3.06 hereof.
ARTICLE 4
COVENANTS
SECTION 4.01 PAYMENT OF NOTES.
The Company shall pay or cause to be paid the principal of, premium, if
any, and interest on the Notes on the dates and in the manner provided in the
Notes. Principal, premium, if any, and interest shall be considered paid on the
date due if the Paying Agent, if other than the Company or a Subsidiary thereof,
holds as of 10:00 a.m. Eastern Time on the due date money deposited by the
Company in immediately available funds and designated for and sufficient to pay
all principal, premium, if any, and interest then due. The Company shall pay all
Liquidated Damages, if any, in the same manner on the dates and in the amounts
set forth in the Registration Rights Agreement.
The Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal at the rate equal to
1% per annum in excess of the then applicable interest rate on the Notes to the
extent lawful; it shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue installments of interest and
Liquidated Damages (without regard to any applicable grace period) at the same
rate to the extent lawful.
SECTION 4.02 MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain in the Borough of Manhattan, 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 Notes may be surrendered for
registration of transfer or for exchange and where
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notices and demands to or upon the Company in respect of the Notes and this
Indenture may be served. The Company shall give prompt 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.
The Company may also from time to time designate one or more other offices
or agencies where the Notes 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,
the City of New York for such purposes. The Company shall give prompt 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.
The Company hereby designates the Corporate Trust Office of the Trustee as
one such office or agency of the Company in accordance with Section 2.03.
SECTION 4.03 REPORTS.
(a) Whether or not required by the rules and regulations of the SEC, so
long as any Notes are outstanding and commencing with information relating to
the fiscal quarter ended June 30, 1997, the Company shall furnish to the Trustee
and to all Holders (i) all quarterly and annual financial information that would
be required to be contained in a filing with the SEC on Forms 10-Q and 10-K if
the Company were required to file such forms, including a "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and,
with respect to the annual information only, a report thereon by the Company's
certified independent accountants and (ii) all current reports that would be
required to be filed with the SEC on Form 8-K if the Company were required to
file such reports, in each case, within the time periods specified in the SEC's
rules and regulations. In addition, commencing after the consummation of the
Exchange Offer, whether or not required by the rules and regulations of the SEC,
the Company shall file a copy of all such information and reports with the SEC
for public availability (unless the SEC will not accept such a filing) within
the time periods specified in the SEC's rule and regulations, and shall promptly
make such information available to securities analysts and prospective investors
upon their reasonable request. The Company and the Guarantors shall at all times
comply with TIA (S) 314(a).
(b) For so long as any Transfer Restricted Securities remain outstanding,
the Company and the Guarantors shall furnish to all Holders, securities analysts
and prospective purchasers of the Notes designated by the Holders of Transfer
Restricted Securities, promptly upon their request, the information required to
be delivered pursuant to Rule 144A(d)(4) under the Securities Act.
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SECTION 4.04 COMPLIANCE CERTIFICATE.
(a) The Company shall deliver to the Trustee, within 90 days after the
end of each fiscal year, an Officers' Certificate stating that a review of the
activities of the Company and its Subsidiaries during the preceding fiscal year
has been made under the supervision of the signing Officers with a view to
determining whether the Company has kept, observed, performed and fulfilled its
obligations under this Indenture and further stating, as to each such Officer
signing such certificate, that to the best of his or her knowledge the Company
has kept, observed, performed and fulfilled each and every covenant contained in
this Indenture and is not in default in the performance or observance of any of
the terms, provisions and conditions of this Indenture (or, if a Default or
Event of Default shall have occurred, describing all such Defaults or Events of
Default of which he or she may have knowledge and what action the Company is
taking or proposes to take with respect thereto) and that to the best of his or
her knowledge no event has occurred and remains in existence by reason of which
payments on account of the principal of or interest, if any, on the Notes is
prohibited or if such event has occurred, a description of the event and what
action the Company is taking or proposes to take with respect thereto.
(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 4.03(a) above shall be accompanied by a
written statement of 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 that would lead them to believe that the Company has violated
any provisions of Article 4 or Article 5 hereof 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.
(c) The Company shall, so long as any of the Notes 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 or Event
of Default and what action the Company is taking or proposes to take with
respect thereto.
SECTION 4.05 TAXES.
The Company shall pay, and shall cause each of its Subsidiaries to
pay, prior to delinquency, all material taxes, assessments, and governmental
levies except such as are contested in good faith and by appropriate proceedings
or where the failure to effect such payment is not adverse in any material
respect to the Holders of the Notes.
SECTION 4.06 STAY, EXTENSION AND USURY LAWS.
The Company and each Guarantor 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
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force, that may affect the covenants or the performance of this Indenture; and
the Company and each Guarantor (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and covenants that it
shall not, by resort to any such law, hinder, delay or impede the execution of
any power herein granted to the Trustee, but shall suffer and permit the
execution of every such power as though no such law has been enacted.
SECTION 4.07 RESTRICTED PAYMENTS.
The Company shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly: (i) declare or pay any dividend or make any other
payment or distribution on account of the Equity Interests of the Company or any
of its Subsidiaries (including, without limitation, any payment in connection
with any merger or consolidation involving the Company) or to the direct or
indirect holders of the Equity Interests of the Company or any of its
Subsidiaries in their capacity as such (other than dividends or distributions
payable in Equity Interests (other than Disqualified Stock) of the Company);
(ii) purchase, redeem or otherwise acquire or retire for value any Equity
Interests of the Company or any direct or indirect parent of the Company or
other Affiliate of the Company that is not a Subsidiary of the Company, (other
than any such Equity Interests owned by the Company or any Wholly Owned
Subsidiary of the Company); (iii) make any payment on or with respect to, or
purchase, redeem, defease or otherwise acquire or retire for value any
Indebtedness that is subordinated to the Notes, except a payment of interest or
principal at Stated Maturity or (iv) make any Restricted Investment (all such
payments and other actions set forth in clauses (i) through (iv) above being
collectively referred to as "Restricted Payments"), unless, at the time of and
after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof;
(b) the Company would, at the time of such Restricted Payment and
after giving pro forma effect thereto as if such Restricted Payment had been
made at the beginning of the applicable four-quarter period, have been permitted
to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge
Coverage Ratio test set forth in the first paragraph of Section 4.09 of this
Indenture; and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Subsidiaries after the
date of this Indenture (excluding Restricted Payments permitted by clauses (ii),
(iii), (iv) and (vi) of the next succeeding paragraph), is less than the sum of
(i) 50% of the Consolidated Net Income of the Company for the period (taken as
one accounting period) commencing July 1, 1997 to the end of the Company's most
recently ended fiscal quarter for which internal financial statements are
available at the time of such Restricted Payment (or, if such Consolidated Net
Income for such period is a deficit, less 100% of such deficit), plus (ii) 100%
of the aggregate net cash proceeds received by the Company from the issue or
sale since the date of this Indenture of Equity Interests of the Company (other
than Disqualified Stock) or of Disqualified Stock or of debt securities of the
Company that have been converted into such Equity Interests (other than Equity
Interests (or Disqualified Stock or convertible debt securities)
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sold to a Subsidiary of the Company and other than Disqualified Stock or debt
securities that have been converted into Disqualified Stock), plus (iii) to the
extent that any Restricted Investment that was made after the date of this
Indenture is sold for cash or otherwise liquidated or repaid for cash or is sold
for non-cash consideration and such non-cash consideration is subsequently sold
for cash, the lesser of (A) the cash return of capital with respect to such
Restricted Investment (less the cost of disposition, if any) and (B) the initial
amount of such Restricted Investment.
The foregoing provisions shall not prohibit: (i) the payment of any
dividend within 60 days after the date of declaration thereof, if at said date
of declaration such payment would have complied with the provisions of this
Indenture; (ii) the redemption, repurchase, retirement, defeasance or other
acquisition of any subordinated Indebtedness or Equity Interests of the Company
in exchange for, or out of the net cash proceeds of the substantially concurrent
sale (other than to a Subsidiary of the Company) of, other Equity Interests of
the Company (other than any Disqualified Stock); provided that the amount of any
such net cash proceeds that are utilized for any such redemption, repurchase,
retirement, defeasance or other acquisition shall be excluded from clause
(c)(ii) of the preceding paragraph; (iii) the defeasance, redemption, repurchase
or other acquisition of subordinated Indebtedness with the net cash proceeds
from an incurrence of Permitted Refinancing Indebtedness; (iv) the payment of
any dividend by a Subsidiary of the Company to the holders of its common Equity
Interests on a pro rata basis; (v) the repurchase, redemption or other
acquisition or retirement for value of any Equity Interests of the Company or
any Subsidiary of the Company held by any member of the Company's (or any of its
Subsidiaries') management pursuant to any management equity subscription
agreement or stock option agreement; provided that the aggregate price paid for
all such repurchased, redeemed, acquired or retired Equity Interests shall not
exceed $250,000 in any twelve-month period and no Default or Event of Default
shall have occurred and be continuing immediately after such transaction; (vi)
payments by the Company or any Subsidiary of the Company, directly or
indirectly, to the Company's stockholder to satisfy tax obligations in
accordance with the Tax Allocation Agreement as in effect on the date hereof
("Tax Distributions"); and (vii) so long as no Default or Event of Default shall
have occurred and be continuing, other Restricted Payments in an aggregate
amount not to exceed $5.0 million since the date hereof.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued by the Company or such Subsidiary, as the
case may be, pursuant to the Restricted Payment. The fair market value of any
non-cash Restricted Payment shall be determined by the Board of Directors, whose
resolution with respect thereto shall be delivered to the Trustee, such
determination to be based upon an opinion or appraisal issued by an accounting,
appraisal or investment banking firm of national standing if such fair market
value exceeds $5.0 million. Not later than the date of making any Restricted
Payment, the Company shall deliver to the Trustee an Officers' Certificate
stating that such Restricted Payment is permitted and setting forth the basis
upon which the calculations required by this Section 4.07 were computed,
together with a copy of any fairness opinion or appraisal required hereby.
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SECTION 4.08 DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES.
The Company shall not and shall not permit any of its Subsidiaries to,
directly or indirectly, create or otherwise cause or suffer to exist or become
effective any encumbrance or restriction on the ability of any Subsidiary to
(i)(a) pay dividends or make any other distributions to the Company or any of
its Subsidiaries (1) on its Capital Stock or (2) with respect to any other
interest or participation in, or measured by, its profits or (b) pay any
indebtedness owed to the Company or any of its Subsidiaries, (ii) make loans or
advances to the Company or any of its Subsidiaries or (iii) transfer any of its
properties or assets to the Company or any of its Subsidiaries, except for such
encumbrances or restrictions existing under or by reason of (a) this Indenture
and the Notes, (b) applicable law, (c) any instrument governing Indebtedness or
Capital Stock of a Person acquired by the Company or any of its Subsidiaries or
any instrument governing Indebtedness secured by assets acquired by the Company
or any of its Subsidiaries, in each case, as in effect at the time of such
acquisition (except to the extent such Indebtedness was incurred in connection
with or in contemplation of such acquisition), which encumbrance or restriction
is not applicable to any Person, or the properties or assets of any Person,
other than the Person, or the property or assets of the Person, or the property
or asset so acquired, provided that, in the case of Indebtedness, such
Indebtedness was permitted by the terms of this Indenture to be incurred, (d)
customary non-assignment provisions in leases entered into in the ordinary
course of business and consistent with past practices, (e) purchase money
obligations for property acquired in the ordinary course of business that impose
restrictions of the nature described in clause (iii) above on the property so
acquired, (f) Permitted Refinancing Indebtedness, provided that the restrictions
contained in the agreements governing such Permitted Refinancing Indebtedness
are no more restrictive than those contained in the agreements governing the
Indebtedness being refinanced or (g) customary non-assignment provisions in
documents entered into by a Subsidiary of the Company in connection with a
receivables or equipment financing that impose restrictions of the nature
described in clause (iii) above on the property securing such financings.
SECTION 4.09 INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK.
The Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create, incur, issue, assume, guarantee or otherwise
become directly or indirectly liable, contingently or otherwise, with respect to
(collectively, "incur") any Indebtedness (including Acquired Debt), and the
Company shall not issue any Disqualified Stock and shall not permit any of its
Subsidiaries to issue any shares of preferred stock; provided, however, that the
Company or any of the Guarantors may incur Indebtedness (including Acquired
Debt), the Company may issue shares of Disqualified Stock and the Company's
Subsidiaries may issue shares of preferred stock if the Fixed Charge Coverage
Ratio for the Company's most recently ended four full fiscal quarters for which
internal financial statements are available immediately preceding the date on
which such additional Indebtedness is incurred or such Disqualified Stock or
Subsidiary preferred stock is issued would have been at least 2.0 to 1,
determined on a pro forma basis (including a pro forma application of the net
proceeds therefrom), as if the additional Indebtedness had been incurred, or the
Disqualified
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Stock or Subsidiary preferred stock had been issued, as the case may be, at the
beginning of such four-quarter period.
The foregoing provisions shall not apply to the following (which,
collectively, shall constitute "Permitted Debt"):
(i) the incurrence by the Company of Indebtedness under Credit
Facilities and the Guarantee thereof by the Guarantors; provided that the
aggregate principal amount of all Indebtedness (with letters of credit being
deemed to have a principal amount equal to the maximum potential liability of
the Company and its Subsidiaries thereunder) outstanding under all Credit
Facilities after giving effect to such incurrence, including all Permitted
Refinancing Indebtedness incurred to refund, refinance or replace any
Indebtedness incurred pursuant to this clause (i), does not exceed an amount
equal to the greater of (x) $200.0 million less the aggregate amount of all Net
Proceeds of Asset Sales that have been applied since the date of this Indenture
to repay Indebtedness pursuant to Section 4.10 hereof and (y) the Borrowing
Base;
(ii) the incurrence by the Company and its Subsidiaries of the
Existing Indebtedness;
(iii) the incurrence by the Company and its Subsidiaries of
Indebtedness represented by the Notes and the Subsidiary Guarantees;
(iv) the incurrence by the Company or any of its Subsidiaries of
additional Indebtedness represented by Capital 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, plant or equipment used in the business of the Company
or such Subsidiary, in an aggregate principal amount at any one time outstanding
under this clause (iv), including all Permitted Refinancing Indebtedness
incurred to refund, refinance or replace any Indebtedness incurred pursuant to
this clause (iv), not to exceed $5.0 million;
(v) the incurrence by the Company or any of its Subsidiaries of
Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which
are used to refund, refinance or replace Indebtedness (other than intercompany
Indebtedness) that was permitted by this Indenture to be incurred;
(vi) the incurrence by the Company or any of its Subsidiaries of
intercompany Indebtedness between or among the Company and any of its Wholly
Owned Subsidiaries; provided, however, that (i) if the Company is the obligor on
such Indebtedness, such Indebtedness is expressly subordinated to the prior
payment in full in cash of all Obligations with respect to the Notes and (ii)(A)
any subsequent issuance or transfer of Equity Interests that results in any such
Indebtedness being held by a Person other than the Company or a Wholly Owned
Subsidiary and (B) any sale or other transfer of any such Indebtedness to a
Person that is not either the Company or a Wholly Owned Subsidiary shall be
deemed, in each case, to constitute an incurrence of such Indebtedness by the
Company or such Subsidiary, as the case may be, that was not permitted by this
clause (vi);
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(vii) the incurrence by the Company of Hedging Obligations that are
incurred for the purpose of hedging interest rate risk with respect to
Indebtedness that is permitted by the terms of this Indenture to be incurred;
(viii) the Guarantee by the Company or any of the Guarantors of
Indebtedness of the Company or a Subsidiary of the Company that was permitted to
be incurred by another provision of this covenant;
(ix) extensions, renewals or replacements of the Existing Guarantees
on terms that are no less favorable to the Holders of Notes than those existing
on the date of this Indenture;
(x) the incurrence by the Company or any of its Subsidiaries of
additional Indebtedness in an aggregate principal amount (or accreted value, as
applicable) at any time outstanding under this clause (x), including all
Permitted Refinancing Indebtedness incurred to refund, refinance or replace any
Indebtedness incurred pursuant to this clause (x), not to exceed $5.0 million;
(xi) the incurrence by the Company or any of its Subsidiaries of
Indebtedness incurred in respect of performance, surety and similar bonds
provided by the Company or any of its Subsidiaries in the ordinary course of
business; and
(xii) the incurrence by the Company or any of its Subsidiaries of
Indebtedness in respect of letters of credit relating to workers' compensation
claims and self-insurance or similar requirements in the ordinary course of
business.
For purposes of determining compliance with this Section 4.09, in the event
that an item of Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (i) through (xii) above or is
entitled to be incurred pursuant to the first paragraph of this Section 4.09,
the Company shall, in its sole discretion, classify or reclassify such item of
Indebtedness in any manner that complies with this Section 4.09, and at any
given time such item of Indebtedness shall be treated as having been incurred
pursuant to only one of such clauses or pursuant to the first paragraph of this
Section 4.09. Accrual of interest, the accretion of accreted value and the
payment of interest in the form of additional Indebtedness shall not be deemed
to be an incurrence of Indebtedness for purposes of this Section 4.09. The
Company shall not be deemed to be in breach of this Section 4.09 solely as the
result of fluctuations in currency exchange rates.
SECTION 4.10 ASSET SALES.
(a) The Company shall not, and shall not permit any of its Subsidiaries
to, consummate an Asset Sale unless (i) the Company (or the Subsidiary, as the
case may be) receives consideration at the time of such Asset Sale at least
equal to the fair market value (evidenced by a resolution of the Board of
Directors set forth in an Officers' Certificate delivered to the Trustee) of the
assets or Equity Interests issued or sold or otherwise disposed of and (ii) at
least 80.0% of the consideration therefor received by the Company or such
Subsidiary is in the form of cash; provided that the amount of
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(x) any liabilities (as shown on the Company's or such Subsidiary's most recent
balance sheet) of the Company or any Subsidiary (other than contingent
liabilities and liabilities that are by their terms subordinated to the Notes or
any guarantee thereof) that are assumed by the transferee of any such assets
pursuant to a customary novation agreement that releases the Company or such
Subsidiary from further liability and (y) any securities, notes or other
obligations received by the Company or any such Subsidiary from such transferee
that are converted by the Company or such Subsidiary into cash (to the extent of
the cash received) within five business days of the receipt thereof, shall be
deemed to be cash for purposes of this provision.
(b) Within 360 days after the receipt of any Net Proceeds from an Asset
Sale, the Company or its applicable Subsidiary may apply such Net Proceeds, at
such person's option, (i) to reduce Senior Debt, or (ii) to the acquisition of a
controlling interest in another business, the making of a capital expenditure or
the acquisition of other long-term assets, in each case, in the same or a
similar line of business as the Company and its Subsidiaries were engaged in on
the date hereof. Pending the final application of any such Net Proceeds, the
Company may temporarily reduce Senior Debt or otherwise invest such Net Proceeds
in any manner that is not prohibited by this Indenture. Any Net Proceeds from
Asset Sales that are not applied or invested as provided in the first sentence
of this paragraph and within the time period specified herein shall be deemed to
constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds has
exceeded $5.0 million, the Company shall. be required to make an Asset Sale
Offer to purchase the maximum principal amount of Notes that may be purchased
out of the Excess Proceeds, at an offer price in cash in an amount equal to
100.0% of the principal amount thereof plus accrued and unpaid interest thereon
and Liquidated Damages, if any, to the date of purchase, in accordance with the
procedures set forth in this Indenture. To the extent that the aggregate amount
of Notes tendered pursuant to an Asset Sale Offer is less than the Excess
Proceeds, the Company may use any remaining Excess Proceeds for general
corporate purposes. If the aggregate principal amount of Notes surrendered by
Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select
the Notes to be purchased on a pro rata basis. Upon completion of such Asset
Sale Offer, the amount of Excess Proceeds shall be reset at zero.
SECTION 4.11 TRANSACTIONS WITH AFFILIATES.
The Company shall not, and shall not permit any of its Subsidiaries to,
make any payment to, or sell, lease, transfer or otherwise dispose of any of its
properties or assets to, or purchase any property or assets from, or enter into
or make or amend any transaction, contract, agreement, understanding, loan,
advance or guarantee with, or for the benefit of, any Affiliate (each of the
foregoing, an "Affiliate Transaction"), unless (i) such Affiliate Transaction is
on terms that are no less favorable to the Company or the relevant Subsidiary
than those that would have been obtained in a comparable transaction by the
Company or such Subsidiary with an unrelated Person and (ii) the Company
delivers to the Trustee (a) with respect to any Affiliate Transaction or series
of related Affiliate Transactions involving aggregate consideration in excess of
$1.0 million, a resolution of the Board of Directors set forth in an Officers'
Certificate certify that such Affiliate Transaction complies with clause (i)
above and that such Affiliate Transaction has been approved by a majority of the
disinterested members of the Board of Directors and (b) with respect to any
Affiliate
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Transaction or series of related Affiliate Transactions involving aggregate
consideration in excess of $5.0 million, an opinion as to the fairness to the
Holders of such Affiliate Transaction from a financial point of view issued by
an accounting, appraisal or investment banking firm of national standing;
provided that the following shall not be deemed to be Affiliate Transactions:
(1) the Related Party Leases as in effect on the date hereof or as amended (as
long as an amended Related Party Lease is on terms no less favorable to the
Holders of the Notes than those existing on the date hereof) and any
transactions pursuant thereto, (2) the Employment Agreement as in effect on the
date hereof or as amended (as long as an amended Employment Agreement is on
terms no less favorable to the Holders of the Notes than those existing on the
date hereto and any transactions pursuant thereto, (3) any other employment
arrangement entered into by the Company or any of its Subsidiaries with anyone
other than the Company's President and Chief Executive Officer in the ordinary
course of business that provides for aggregate annual compensation in an amount
less than or equal to $250,000 and any transactions pursuant thereto, (4)
transactions between or among the Company and/or its Wholly-Owned Subsidiaries,
(5) Restricted Payments that are permitted by Section 4.07 hereof, (6) the
$10,000,000 distribution (the "Distribution") to the Company's sole stockholder
on the date hereof, (7) Permitted Real Estate Loans, (8) transfers of
receivables or equipment to a Subsidiary of the Company for the sole purpose of
effecting a receivables or equipment financing for the benefit of the Company
and (9) extensions, renewals or replacements of the Existing Guarantees on terms
that are no less favorable to the Holders of the Notes than those existing on
the date hereof. For purposes of determining whether any particular transaction
or series of related transactions with an Affiliate relating to purchases or
placements of insurance exceeds the $1.0 million or $5.0 million thresholds set
forth in the first sentence of this Section 4.11, the gross amounts paid to the
Affiliate shall be calculated net of any amounts paid by such Affiliate to third
parties (including claimants, legal and claims management services, insurers or
reinsurers) on behalf of the Company or one of its Subsidiaries.
SECTION 4.12 LIENS.
The Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create, incur, assume or suffer to exist any Lien
securing Indebtedness on any asset now owned or hereafter acquired, or any
income or profits therefrom or assign or convey any right to receive income
therefrom, except Permitted Liens.
SECTION 4.13 ADDITIONAL SUBSIDIARY GUARANTEES.
If the Company or any of its Subsidiaries shall acquire or create another
Subsidiary after the date hereof, then such newly acquired or created Subsidiary
shall execute a Subsidiary Guarantee and deliver an Opinion of Counsel, in
accordance with the terms hereof.
SECTION 4.14 CORPORATE EXISTENCE.
Subject to Article 5 hereof, the Company shall do or cause to be done all
things necessary to preserve and keep in full force and effect (i) its corporate
existence, and the corporate, partnership or other existence of each of its
Subsidiaries, in accordance with the respective organizational
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documents (as the same may be amended from time to time) of the Company or any
such Subsidiary and (ii) 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 of its Subsidiaries, if
the Board of Directors 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 Holders of the Notes.
SECTION 4.15 OFFER TO REPURCHASE UPON CHANGE OF CONTROL.
(a) Upon the occurrence of a Change of Control, each Holder of Notes shall
have the right to require the Company to repurchase all or any part (equal to
$1,000 or an integral multiple thereof) of such Holder's Notes pursuant to the
offer described below (the "Change of Control Offer") at an offer price in cash
equal to 101% of the aggregate principal amount thereof plus accrued and unpaid
interest thereon and Liquidated Damages, if any, to the date of purchase (the
"Change of Control Payment"). Within ten days following any Change of Control,
the Company shall mail a notice to each Holder describing the transaction or
transactions that constitute the Change of Control and offering to repurchase
Notes on the date specified in such notice, which date shall be no earlier than
30 days and no later than 60 days from the date such notice is mailed (the
"Change of Control Payment Date"), pursuant to the procedures required by this
Indenture and described in such notice. The Company shall comply with the
requirements of Rule 14e-1 under the Exchange Act and any other securities laws
and regulations thereunder to the extent such laws and regulations are
applicable in connection with the repurchase of the Notes as a result of a
Change of Control.
(b) On the Change of Control Payment Date, the Company shall, to the
extent lawful, (1) accept for payment all Notes or portions thereof properly
tendered pursuant to the Change of Control Offer, (2) deposit with the Paying
Agent an amount equal to the Change of Control Payment in respect of all Notes
or portions thereof so tendered and (3) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating the
aggregate principal amount of Notes or portions thereof being purchased by the
Company. The Paying Agent shall promptly mail to each Holder of Notes so
tendered the Change of Control Payment for such Notes, and the Trustee shall
promptly authenticate and mail (or cause to be transferred by book entry) to
each Holder a new Note equal in principal amount to any unpurchased portion of
the Notes surrendered, if any; provided that each such new Note shall be in a
principal amount of $1,000 or an integral multiple thereof. The Company shall
publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
The Change of Control provisions described above shall be applicable
whether or not any other provisions of this Indenture are applicable. The
Company shall not be required to make a Change of Control Offer upon a Change of
Control if a third party makes the Change of Control Offer in the manner, at the
times and otherwise in compliance with this requirements set forth in this
Indenture applicable to a Change of Control Offer made by the Company and
purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
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SECTION 4.16 LIMITATION ON LAYERING.
Notwithstanding the provisions of Section 4.09 hereof, (i) the Company
shall not incur create, issue, assume, guarantee or otherwise become liable for
any Indebtedness that is subordinate or junior in right of payment to any Senior
Debt and senior in any respect in right of payment to the Notes and (ii) no
Guarantor will incur, create, assume, guarantee or otherwise become liable for
any Indebtedness of such Guarantor that is subordinate or junior in right of
payment to any Indebtedness of such Guarantor and senior in right of payment to
the Guarantee of such Guarantor.
SECTION 4.17 SALE AND LEASEBACK TRANSACTIONS.
The Company shall not, and shall not permit any of its Subsidiaries to,
enter into any sale and leaseback transaction; provided that the Company may
enter into a sale and leaseback transaction if (i) the Company could have (a)
incurred Indebtedness in an amount equal to the Attributable Debt relating to
such sale and leaseback transaction pursuant to the Fixed Charge Coverage Ratio
test set forth in the first paragraph of Section 4.09 hereof and (b) incurred a
Lien to secure such Indebtedness pursuant to Section 4.12, (ii) the gross cash
proceeds of such sale and leaseback transaction are at least equal to the fair
market value (as determined in good faith by the Board of Directors or a
committee of the Board of Directors having at least one independent director and
set forth in an Officers' Certificate delivered to the Trustee) of the property
that is the subject of such sale and leaseback transaction and (iii) the
transfer of assets in such sale and leaseback transaction is permitted by, and
the Company applies the proceeds of such transaction in compliance with Section
4.10.
SECTION 4.18 LIMITATION ON ISSUANCES AND SALES OF CAPITAL STOCK OF WHOLLY
OWNED SUBSIDIARIES.
The Company (i) shall not, and shall not permit any Wholly Owned Subsidiary
of the Company to, transfer, convey, sell, lease or otherwise dispose of any
Capital Stock of any Wholly Owned Subsidiary of the Company to any Person (other
than the Company or a Wholly Owned Subsidiary of the Company), unless (a) such
transfer, conveyance, sale, lease or other disposition is of all the Capital
Stock of such Wholly Owned Subsidiary and (b) the cash Net Proceeds from such
transfer, conveyance, sale, lease or other disposition are applied in accordance
with Section 4.10 and (ii) will not permit any Wholly Owned Subsidiary of the
Company to issue any of its Equity Interests (other than, if necessary, shares
of its Capital Stock constituting directors' qualifying shares) to any Person
other than to the Company or a Wholly Owned Subsidiary of the Company.
SECTION 4.19 BUSINESS ACTIVITIES.
The Company shall not, and shall not permit any of its Subsidiaries to,
engage in any business other than Permitted Businesses, except to such extent as
would not be material to the Company and its Subsidiaries taken as a whole.
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SECTION 4.20 PAYMENTS FOR CONSENT.
Neither the Company nor any of its Subsidiaries shall, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any Holder of any Notes for or as an inducement
to any consent, waiver or amendment of any of the terms or provisions of this
Indenture or the Notes unless such consideration is offered to be paid or is
paid to all Holders of the Notes that consent, waive or agree to amend in the
time frame set forth in the solicitation documents relating to such consent,
waiver or agreement.
ARTICLE 5
SUCCESSORS
SECTION 5.01 MERGER, CONSOLIDATION, OR SALE OF ASSETS.
The Company may not consolidate or merge with or into (whether or not the
Company is the surviving corporation), or sell, assign, transfer, lease, convey
or otherwise dispose of all or substantially all of its properties or assets in
one or more related transactions, to another corporation, Person or entity
unless (i) the Company is the surviving corporation or the entity or the Person
formed by or surviving any such consolidation or merger (if other than the
Company) or to which such sale, assignment, transfer, lease, conveyance or other
disposition shall have been made is a corporation organized or existing under
the laws of the United States, any state thereof or the District of Columbia;
(ii) the entity or Person formed by or surviving any such consolidation or
merger (if other than the Company) or the entity or Person to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made assumes all the obligations of the Company under the Notes and this
Indenture pursuant to a supplemental indenture in a form reasonably satisfactory
to the Trustee; (iii) immediately after such transaction no Default or Event of
Default exists; and (iv) except in the case of a merger of the Company with or
into a Wholly Owned Subsidiary of the Company, the Company or the entity or
Person formed by or surviving any such consolidation or merger (if other than
the Company), or to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made (A) will have Consolidated Net Worth
immediately after the transaction equal to or greater than the Consolidated Net
Worth of the Company immediately preceding the transaction and (B) will, at the
time of such transaction and after giving pro forma effect thereto as if such
transaction had occurred at the beginning of the applicable four-quarter period,
be permitted to incur at least $1.00 of additional Indebtedness pursuant to the
Fixed Charge Coverage Ratio test set forth in the first paragraph of Section
4.09 hereof.
SECTION 5.02 SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation or merger, or any sale, assignment, transfer, lease,
conveyance or other disposition of all or substantially all of the assets of the
Company in accordance with Section 5.01 hereof, the successor corporation formed
by such consolidation or into or with which
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the Company is merged or to which such sale, assignment, transfer, lease,
conveyance or other disposition is made shall succeed to, and be substituted for
(so that from and after the date of such consolidation, merger, sale, lease,
conveyance or other disposition, the provisions of this Indenture referring to
the "Company" shall refer instead to the successor corporation and not to the
Company, other than for purposes of calculating Consolidated Net Income in
connection with Section 4.07), and may exercise every right and power of the
Company under this Indenture with the same effect as if such successor Person
had been named as the Company herein; provided, however, that the predecessor
Company shall not be relieved from the obligation to pay the principal of and
interest on the Notes except in the case of a sale of all of the Company's
assets that meets the requirements of Section 5.01 hereof.
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01 EVENTS OF DEFAULT.
Each of the following constitutes an "Event of Default":
(a) default for 30 days in the payment when due of interest on, or
Liquidated Damages with respect to, the Notes (whether or not prohibited by the
subordination provisions of this Indenture);
(b) default in payment when due of the principal of or premium, if any, on
the Notes (whether or not prohibited by the subordination provisions of this
Indenture);
(c) failure by the Company to comply with the provisions described under
Sections 4.07, 4.09, 4.10, or 4.15 hereof;
(d) failure by the Company for 60 days after notice to comply with any of
its other agreements in this Indenture or the Notes;
(e) default under any mortgage, indenture or instrument under which there
may be issued or by which there may be secured or evidenced any Indebtedness for
money borrowed by the Company or any of its Subsidiaries (or the payment of
which is guaranteed by the Company or any of its Subsidiaries) whether such
Indebtedness or guarantee now exists, or is created after the date of this
Indenture, which default (i) is caused by a failure to pay principal of or
premium, if any, or interest on such Indebtedness prior to the expiration of the
grace period provided in such Indebtedness on the date of such default (a
"Payment Default") or (ii) results in the acceleration of such Indebtedness
prior to its express maturity and, in each case, the principal amount of any
such Indebtedness, together with the principal amount of any other such
Indebtedness under which there has been a Payment Default or the maturity of
which has been so accelerated, aggregates $5.0 million or more;
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(f) a final judgment or final judgments for the payment of money are
entered by a court or courts of competent jurisdiction against the Company or
any of its Subsidiaries and such judgment or judgments remain undischarged for a
period (during which execution shall not be effectively stayed) of 60 days,
provided that the aggregate of all such undischarged judgments exceeds $5
million;
(g) the Company or any of its Significant Subsidiaries or any group of
Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary
pursuant to or within the meaning of Bankruptcy Law:
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief against it in an
involuntary case,
(iii) consents to the appointment of a Custodian of it or for all or
substantially all of its property,
(iv) makes a general assignment for the benefit of its creditors, or
(v) generally is not paying its debts as they become due;
(h) a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that:
(i) is for relief against the Company or any of its Significant
Subsidiaries or any group of Subsidiaries that, taken as a whole, would
constitute a Significant Subsidiary in an involuntary case,
(ii) appoints a Custodian of the Company or any of its Significant
Subsidiaries or any group of Subsidiaries that, taken as a whole, would
constitute a Significant Subsidiary or for all or substantially all of the
property of the Company or any of its Significant Subsidiaries or any group of
Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary,
or
(iii) orders the liquidation of the Company or any of its Significant
Subsidiaries or any group of Subsidiaries that, taken as a whole, would
constitute a Significant Subsidiary and the order or decree remains unstayed and
in effect for 60 consecutive days; or
(iv) the Subsidiary Guarantee of any Guarantor is held in judicial
proceedings to be unenforceable or invalid or ceases for any reason to be in
full force and effect (other than in accordance with the terms of this
Indenture) or any Guarantor or any Person acting on behalf of any Guarantor
denies or disaffirms such Guarantor's obligations under its Subsidiary Guarantee
(other than by reason of a release of such Guarantor from its Subsidiary
Guarantee in accordance with the terms of this Indenture).
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SECTION 6.02 ACCELERATION.
If any Event of Default (other than an Event of Default specified in clause
(g) or (h) of Section 6.01 hereof with respect to the Company, any Significant
Subsidiary or any group of Significant Subsidiaries that, taken as a whole,
would constitute a Significant Subsidiary) occurs and is continuing, the Trustee
or the Holders of at least 25% in principal amount of the then outstanding Notes
may declare all the Notes to be due and payable immediately. Upon any such
declaration, the Notes shall become due and payable immediately. Notwithstanding
the foregoing, if an Event of Default specified in clause (g) or (h) of Section
6.01 hereof occurs with respect to the Company, any of its Significant
Subsidiaries or any group of Subsidiaries that, taken as a whole, would
constitute a Significant Subsidiary, all outstanding Notes shall be due and
payable immediately without further action or notice. The Holders of a majority
in aggregate principal amount of the then outstanding Notes by written notice to
the Trustee may on behalf of all of the Holders rescind an acceleration and its
consequences if the rescission would not conflict with any judgment or decree
and if all existing Events of Default (except nonpayment of principal, interest
or premium that has become due solely because of the acceleration) have been
cured or waived.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the Company would have had
to pay if the Company then had elected to redeem the Notes pursuant to the
optional redemption provisions of this Indenture, an equivalent premium shall
also become and be immediately due and payable to the extent permitted by law
upon the acceleration of the Notes. If an Event of Default occurs prior to May
15, 2002, by reason of any willful action (or inaction) taken (or not taken) by
or on behalf of the Company with the intention of avoiding the prohibition on
redemption of the Notes prior to May 15, 2002, upon the acceleration of the
Notes an additional premium shall also become and be immediately due and payable
in an amount, for each of the years beginning on May 15 of years set forth
below, as set forth below:
<TABLE>
<CAPTION>
Year Percentage
-------------------
<S> <C>
1997 110.6250%
1998 109.5625%
1999 108.5000%
2000 107.4375%
2001 106.3750%
</TABLE>
SECTION 6.03 OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may pursue any
available remedy to collect the payment of principal, premium, if any, and
interest on the Notes or to enforce the performance of any provision of the
Notes or this Indenture.
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The Trustee may maintain a proceeding even if it does not possess any of
the Notes or does not produce any of them in the proceeding. A delay or omission
by the Trustee or any Holder of a Note 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. All remedies are
cumulative to the extent permitted by law.
SECTION 6.04 WAIVER OF PAST DEFAULTS.
The Holders of not less than a majority in aggregate principal amount of
the Notes then outstanding by notice to the Trustee may on behalf of the Holders
of all of the Notes waive any existing Default or Event of Default and its
consequences under this Indenture except a continuing Default or Event of
Default in the payment of interest on, or the principal of, the Notes (including
in connection with an offer to purchase); provided, however, that the Holders of
a majority in aggregate principal amount of the then outstanding Notes may
rescind an acceleration and its consequences, including any related payment
default that resulted from such acceleration. Upon any such waiver, such Default
shall cease to exist, and any Event of Default arising therefrom shall be deemed
to have been cured for every purpose of this Indenture; but no such waiver shall
extend to any subsequent or other Default or impair any right consequent
thereon.
SECTION 6.05 CONTROL BY MAJORITY.
Holders of a majority in principal amount of the then outstanding Notes may
direct the time, method and place of conducting any proceeding for exercising
any remedy available to the Trustee or exercising any trust or power conferred
on it. However, the Trustee may refuse to follow any direction that conflicts
with law or this Indenture that the Trustee determines may be unduly prejudicial
to the rights of other Holders of Notes or that may involve the Trustee in
personal liability.
SECTION 6.06 LIMITATION ON SUITS.
A Holder of a Note may pursue a remedy with respect to this Indenture or
the Notes only if:
(a) the Holder of a Note gives the Trustee written notice of a continuing
Event of Default;
(b) the Holders of at least 25% in principal amount of the then outstanding
Notes make a written request to the Trustee to pursue the remedy;
(c) such Holder of a Note or Holders of Notes offer and, if requested,
provide to the Trustee indemnity satisfactory to the Trustee against any loss,
liability or expense;
(d) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer and, if requested, the provision of
indemnity; and
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(e) during such 60-day period the Holders of a majority in principal amount
of the then outstanding Notes do not give the Trustee a direction inconsistent
with the request.
A Holder of a Note may not use this Indenture to prejudice the rights of another
Holder of a Note or to obtain a preference or priority over another Holder of a
Note.
SECTION 6.07 RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Note to receive payment of principal, premium and Liquidated
Damages, if any, and interest on the Note, on or after the respective due dates
expressed in the Note (including in connection with an offer to purchase), or to
bring suit for the enforcement of any such payment on or after such respective
dates, shall not be impaired or affected without the consent of such Holder.
SECTION 6.08 COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 6.01(a) or (b) occurs and is
continuing, the Trustee is authorized to recover judgment in its own name and as
trustee of an express trust against the Company or any Guarantor for the whole
amount of principal of, premium and Liquidated Damages, if any, and interest
remaining unpaid on the Notes and interest on overdue principal and, to the
extent lawful, interest and such further amount as shall be sufficient to cover
the costs and expenses of collection, including the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel.
SECTION 6.09 TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee is authorized to file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders of the Notes allowed in any judicial proceedings relative to the Company
(or any other obligor upon the Notes), its creditors or its property and shall
be entitled and empowered to collect, receive and distribute any money or other
property payable or deliverable on any such claims and any custodian in any such
judicial proceeding is hereby authorized by each Holder to make such 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 to
it for the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.07 hereof. To the extent that the payment of any such compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, and
any other amounts due the Trustee under Section 7.07 hereof out of the estate in
any such proceeding, shall be denied for any reason, payment of the same shall
be secured by a Lien on, and shall be paid out of, any and all distributions,
dividends, money, securities and other properties that the Holders may be
entitled to receive in such proceeding whether in liquidation or under any plan
of reorganization or arrangement or otherwise. Nothing herein contained shall be
deemed to authorize the Trustee to authorize or consent to or accept or adopt on
behalf of any Holder
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any plan of reorganization, arrangement, adjustment or composition affecting the
Notes or the rights of any Holder, or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.
SECTION 6.10 PRIORITIES.
If the Trustee collects any money pursuant to this Article, it shall pay
out the money in the following order (subject to the provisions of Article 10):
First: to the Trustee, its agents and attorneys for amounts due under
Section 7.07 hereof, including payment of all compensation, expense and
liabilities incurred, and all advances made, by the Trustee and the costs and
expenses of collection;
Second: to Holders of Notes for amounts due and unpaid on the Notes for
principal, premium and Liquidated Damages, if any, and interest, ratably,
without preference or priority of any kind, according to the amounts due and
payable on the Notes for principal, premium and Liquidated Damages, if any, and
interest, respectively; and
Third: to the Company or to such party as a court of competent jurisdiction
shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders of Notes pursuant to this Section 6.10.
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 a
Trustee, a court in its discretion may require the filing by any party litigant
in the suit of an undertaking to pay the costs of the suit, and the court in its
discretion may assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in the suit, having due regard to the merits and good
faith of the claims or defenses made by the party litigant. This Section does
not apply to a suit by the Trustee, a suit by a Holder of a Note pursuant to
Section 6.07 hereof, or a suit by Holders of more than 10% in principal amount
of the then outstanding Notes.
ARTICLE 7
TRUSTEE
SECTION 7.01 DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in
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its exercise, as a prudent man would exercise or use under the circumstances in
the conduct of his own affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by the
express provisions of this Indenture and the Trustee need perform only
those duties that are specifically set forth in this Indenture and no
others, and no implied covenants or obligations shall be read into this
Indenture against the Trustee; and
(ii) 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 liabilities for its own negligent
action, its own negligent failure to act, or its own willful misconduct, except
that:
(i) this paragraph does not limit the effect of paragraph (b) of
this Section;
(ii) the Trustee shall not be liable for any error of judgment made
in good faith by a Responsible Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05 hereof.
(d) Whether or not therein expressly so provided, 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) No provision Of this Indenture shall require the Trustee to expend or
risk its own funds or incur any liability. The Trustee shall be under no
obligation to exercise any of its rights and powers under this Indenture at the
request of any Holders, unless such Holder shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or
expense.
(f) 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. Money held in
trust by the Trustee need not be segregated from other funds except to the
extent required by law.
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SECTION 7.02 RIGHTS OF TRUSTEE.
(a) The Trustee may conclusively rely upon any document reasonably 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 or both. The Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance on
such Officers' Certificate or Opinion of Counsel. The Trustee may consult with
counsel, and the written advice of such counsel or any Opinion of Counsel shall
be full and complete authorization and protection from liability in respect of
any action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon.
(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 the rights or
powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any demand,
request, direction or notice from the Company or Guarantor shall be sufficient
if signed by an Officer of the Company or such Guarantor.
(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 Holders unless such Holders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities that might be
incurred by it in compliance with such request or direction.
SECTION 7.03 INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the owner or
pledgee of Notes and may otherwise deal with the Company or any Affiliate of the
Company with the same rights it would have if it were not Trustee. However, in
the event that the Trustee acquires any conflicting interest it must eliminate
such conflict within 90 days, apply to the SEC for permission to continue as
trustee or resign. Any Agent may do the same with like rights and duties. The
Trustee is also subject to Sections 7.10 and 7.11 hereof.
SECTION 7.04 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 Notes, it shall not be
accountable for the Company's use of the proceeds from the Notes or any money
paid to the Company or upon the Company's direction under any provision of this
Indenture, it shall not be responsible for the use or application of any money
received by any Paying Agent other than the Trustee, and it shall not be
responsible for any statement
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or recital herein or any statement in the Notes or any other document in
connection with the sale of the Notes or pursuant to this Indenture other than
its certificate of authentication.
SECTION 7.05 NOTICE OF DEFAULTS.
If a Default or Event of Default occurs and is continuing and if it is
known to the Trustee, the Trustee shall mail to Holders of Notes a notice of the
Default or Event of Default within 90 days after it occurs. Except in the case
of a Default or Event of Default in payment of principal of, premium, if any, or
interest on any Note, the Trustee may withhold the notice if and so long as a
committee of its Responsible Officers in good faith determines that withholding
the notice is in the interests of the Holders of the Notes.
SECTION 7.06 REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES.
Within 60 days after each May 15 beginning with the May 15 following the
date of this Indenture, and for so long as Notes remain outstanding, the Trustee
shall mail to the Holders of the Notes a brief report dated as of such reporting
date that complies with TIA (S) 313(a) (but if no event described in TIA (S)
313(a) has occurred within the twelve months preceding the reporting date, no
report need be transmitted). The Trustee also shall comply with TIA (S)
313(b)(2). The Trustee shall also transmit by mail all reports as required by
TIA (S) 313(c).
A copy of each report at the time of its mailing to the Holders of Notes
shall be mailed to the Company and filed with the SEC and each stock exchange on
which the Notes are listed in accordance with TIA (S) 313(d). The Company shall
promptly notify the Trustee when the Notes are listed on any stock exchange.
SECTION 7.07 COMPENSATION AND INDEMNITY.
The Company shall pay to the Trustee from time to time reasonable
compensation for its acceptance of this Indenture and services hereunder. 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 promptly
upon request for all reasonable disbursements, advances and expenses incurred or
made by it in addition to the compensation for its services. Such expenses shall
include the reasonable compensation, disbursements and expenses of the Trustee's
agents and counsel.
The Company shall indemnify the Trustee against any and all losses,
liabilities or expenses incurred by it arising out of or in connection with the
acceptance or administration of its duties under this Indenture, including the
costs and expenses of enforcing this Indenture against the Company (including
this Section 7.07) and defending itself against any claim (whether asserted by
the Company or any Holder or any other person) or liability in connection with
the exercise or performance of any of its powers or duties hereunder, except to
the extent any such loss, liability or expense may be attributable to its
negligence or bad faith. 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
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the claim and the Trustee shall cooperate in the defense. The Trustee may have
separate counsel and the Company shall pay the reasonable fees and expenses of
such counsel. The Company need not pay for any settlement made without its
consent, which consent shall not be unreasonably withheld.
The obligations of the Company under this Section 7.07 shall survive the
satisfaction and discharge of this Indenture.
To secure the Company's payment obligations in this Section, the Trustee
shall have a Lien prior to the Notes on all money or property held or collected
by the Trustee, except that held in trust to pay principal and interest on
particular Notes. Such Lien shall survive the satisfaction and discharge of this
Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(g) or (h) hereof occurs, the expenses and the
compensation for the services (including the fees and expenses of its agents and
counsel) are intended to constitute expenses of administration under any
Bankruptcy Law.
The Trustee shall comply with the provisions of TIA (S) 313(b)(2) to the
extent applicable.
SECTION 7.08 REPLACEMENT OF TRUSTEE.
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.
The Trustee may resign in writing at any time and be discharged from the
trust hereby created by so notifying the Company. The Holders of Notes of a
majority in principal amount of the then outstanding Notes may remove the
Trustee by so notifying the Trustee and the Company in writing. The Company may
remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or an order for
relief is entered with respect to the Trustee under any Bankruptcy Law;
(c) a Custodian or public officer takes charge of the Trustee or its
property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the office
of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the then outstanding Notes may appoint a
successor Trustee to replace the successor Trustee appointed by the Company.
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If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company, or
the Holders of Notes of at least 10% in principal amount of the then outstanding
Notes may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee, after written request by any Holder of a Note who has been
a Holder of a Note for at least six months, fails to comply with Section 7.10,
such Holder of a Note may petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of 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
Holders of the Notes. The retiring Trustee shall promptly transfer all property
held by it as Trustee to the successor Trustee, provided all sums owing to the
Trustee hereunder have been paid and subject to the Lien provided for in Section
7.07 hereof. Notwithstanding replacement of the Trustee pursuant to this Section
7.08, the Company's obligations under Section 7.07 hereof shall continue for the
benefit of the retiring Trustee.
SECTION 7.09 SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates, merges or converts into, or transfers all or
substantially all of its corporate trust business to, another corporation, the
successor corporation without any further act shall be the successor Trustee.
SECTION 7.10 ELIGIBILITY; DISQUALIFICATION.
There shall at all times be a Trustee hereunder that is a corporation
organized and doing business under the laws of the United States of America or
of any state thereof that is authorized under such laws to exercise corporate
trustee power, that is subject to supervision or examination by federal or state
authorities and that has a combined capital and surplus of at least $100 million
as set forth in its most recent published annual report of condition.
This Indenture shall always have a Trustee who satisfies the requirements of
TIA (S) 310(a)(1), (2) and (5). The Trustee is also subject to TIA (S) 310(b).
SECTION 7.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee is subject to TIA (S) 311(a), excluding any creditor
relationship listed in TIA (S) 311(b). A Trustee who has resigned or been
removed shall be subject to TIA (S) 311(a) to the extent indicated therein.
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ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.01 OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE.
The Company may, at the option of its Board of Directors evidenced by a
resolution set forth in an Officers' Certificate, at any time, elect to have
either Section 8.02 or 8.03 hereof be applied to all outstanding Notes upon
compliance with the conditions set forth below in this Article 8.
SECTION 8.02 LEGAL DEFEASANCE AND DISCHARGE.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.02, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be deemed to have been
discharged from its obligations with respect to all outstanding Notes on the
date the conditions set forth below are satisfied (hereinafter, "Legal
Defeasance"). For this purpose, Legal Defeasance means that the Company shall be
deemed to have paid and discharged the entire Indebtedness represented by the
outstanding Notes, which shall thereafter be deemed to be "outstanding" only for
the purposes of Section 8.05 hereof and the other Sections of this Indenture
referred to in (a) and (b) below, and to have satisfied all of its other
obligations under such Notes and this Indenture (and the Trustee, on demand of
and at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following provisions which shall survive
until otherwise terminated or discharged hereunder: (a) the rights of Holders of
outstanding Notes to receive solely from the trust fund described in Section
8.04 hereof, and as more fully set forth in such Section, payments in respect of
the principal of, premium, if any, and interest on such Notes when such payments
are due, (b) the Company's obligations with respect to such Notes under Article
2 and Section 4.02 hereof, (c) the rights, powers, trusts, duties and immunities
of the Trustee hereunder and the Company's obligations in connection therewith
and (d) this Article 8. Subject to compliance with this Article 8, the Company
may exercise its option under this Section 8.02 notwithstanding the prior
exercise of its option under Section 8.03 hereof.
SECTION 8.03 COVENANT DEFEASANCE.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.03, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be released from its
obligations under the covenants contained in Sections 4.07, 4.08, 4.09, 4.10,
4.11, 4.12, 4.13, 4.15, 4.16, 4.17, 4.18 and 4.19 hereof with respect to the
outstanding Notes on and after the date the conditions set forth below are
satisfied (hereinafter, "Covenant Defeasance"), and the Notes shall thereafter
be deemed not " outstanding' for the purposes of any direction, waiver, consent
or declaration or act of Holders (and the consequences of any thereof) in
connection with such covenants, but shall continue to be deemed "outstanding"
for all other purposes hereunder (it being understood that such Notes shall not
be deemed outstanding for accounting purposes). For this purpose, Covenant
Defeasance means that, with respect to the outstanding Notes,
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the Company may omit to comply with and shall have no liability in respect of
any term, condition or limitation set forth in any such covenant, whether
directly or indirectly, by reason of any reference elsewhere herein to any such
covenant or by reason of any reference in any such covenant to any other
provision herein or in any other document and such omission to comply shall not
constitute a Default or an Event of Default under Section 6.01 hereof, but,
except as specified above, the remainder of this Indenture and such Notes shall
be unaffected thereby. In addition, upon the Company's exercise under Section
8.01 hereof of the option applicable to this Section 8.03, subject to the
satisfaction of the conditions set forth in Section 8.04 hereof, Sections
6.01(d) through 6.01(f) hereof shall not constitute Events of Default.
SECTION 8.04 CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.
The following shall be the conditions to the application of either Section
8.02 or 8.03 hereof to the outstanding Notes:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Company must irrevocably deposit with the Trustee, in trust,
for the benefit of the Holders, cash in United States dollars, non-callable
Government Securities, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent
public accountants, to pay the principal of, premium and Liquidated
Damages, if any, and interest on the outstanding Notes on the stated date
for payment thereof or on the applicable redemption date, as the case may
be;
(b) in the case of an election under Section 8.02 hereof, the Company
shall have delivered to the Trustee an Opinion of Counsel in the United
States reasonably acceptable to the Trustee confirming that (A) the Company
has received from, or there has been published by, the Internal Revenue
Service a ruling or (B) since the date of 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 Holders of the outstanding Notes will not recognize income, gain or
loss for federal income tax purposes as a result of such Legal Defeasance
and will be subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such Legal
Defeasance had not occurred;
(c) in the case of an election under Section 8.03 hereof, the Company
shall have delivered to the Trustee an Opinion of Counsel in the United
States reasonably acceptable to the Trustee confirming that the Holders of
the outstanding Notes will not recognize income, gain or loss for federal
income tax purposes as a result of such Covenant Defeasance and will be
subject to federal income tax on the same amounts, in the same manner and
at the same times ac. would have been the case if such Covenant Defeasance
had not occurred;
(d) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of
Default resulting from the incurrence
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of Indebtedness all or a portion of the proceeds of which will be used to
defease the Notes pursuant to this Article 8 concurrently with such
incurrence) or insofar as Sections 6.01(g) or 6.01(h) hereof is concerned,
at any time in the period ending on the 91st day after the date of deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not result in
a breach or violation of, or constitute a default under, any material
agreement or instrument (other than this Indenture) to which the Company or
any of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound;
(f) the Company shall have delivered to the Trustee an opinion of
counsel to the effect that on the 91st day or on the day after the last day
of the applicable preference period under Bankruptcy Law following the
deposit, the trust funds will not be subject to the effect of any
applicable bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally;
(g) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the
intent of preferring the Holders over any other creditors of the Company or
with the intent of defeating, hindering, delaying or defrauding any other
creditors of the Company; and
(h) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for or relating to the Legal Defeasance or the Covenant
Defeasance have been complied with.
SECTION 8.05 DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST;
OTHER MISCELLANEOUS PROVISIONS.
Subject to Section 8.06 hereof, all money and non-callable Government
Securities (including the proceeds thereof) deposited with the Trustee (or other
qualifying trustee, collectively for purposes of this Section 8.05, the
"Trustee") pursuant to Section 8.04 hereof in respect of the outstanding Notes
shall be held in trust and applied by the Trustee, in accordance with the
provisions of such Notes and this Indenture, to the payment, either directly or
through any Paying Agent (including the Company acting as Paying Agent) as the
Trustee may determine, to the Holders of such Notes of all sums due and to
become due thereon in respect of principal, premium, if any, and interest, but
such money need not be segregated from other funds except to the extent required
by law.
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the cash or non-callable Government
Securities deposited pursuant to Section 8.04 hereof or the principal and
interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding Notes.
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Anything in this Article 8 to the contrary notwithstanding, the Trustee
shall deliver or pay to the Company from time to time upon the request of the
Company any money or non-callable Government Securities held by it as provided
in Section 8.04 hereof which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee (which may be the opinion delivered under Section
8.04(a) hereof), are in excess of the amount thereof that would then be required
to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance.
SECTION 8.06 REPAYMENT To COMPANY.
Any money deposited with the Trustee or any Paying Agent, or then held by
the Company, in trust for the payment of the principal of, premium, if any, or
interest on any Note and remaining unclaimed for two years after such principal,
and premium, if any, or interest has become due and payable shall be paid to the
Company on its request or (if then held by the Company) shall be discharged from
such trust; and the Holder of such Note shall thereafter, as a secured creditor,
look only to the Company for payment thereof, and all liability of the Trustee
or such Paying Agent with respect to such trust money, and all liability of the
Company as trustee thereof, shall thereupon cease; provided, however, that the
Trustee or such Paying Agent, before being required to make any such repayment,
may at the expense of the Company cause to be published once, in the New York
Times and The Wall Street Journal (national edition), notice that such money
remains unclaimed and that, after a date specified therein, which shall not be
less than 30 days from the date of such notification or publication, any
unclaimed balance of such money then remaining will be repaid to the Company.
SECTION 8.07 REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any United States dollars
or non-callable Government Securities in accordance with Section 8.02 or 8.03
hereof, as the case may be, by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company's obligations under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is
permitted to apply all such money in accordance with Section 8.02 or 8.03
hereof, as the case may be; provided, however, that, if the Company makes any
payment of principal of, premium, if any, or interest on any Note following the
reinstatement of its obligations, the Company shall be subrogated to the rights
of the Holders of such Notes to receive such payment from the money held by the
Trustee or Paying Agent.
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ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.01 WITHOUT CONSENT OF HOLDERS OF NOTES.
Notwithstanding Section 9.02 of this Indenture, the Company, the Guarantors
and the Trustee may amend or supplement this Indenture, the Subsidiary
Guarantees or the Notes without the consent of any Holder of a Note:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or in place of
certificated Notes;
(c) to provide for the assumption of the Company's or Guarantor's
obligations to the Holders of the Notes in the case of a merger or
consolidation in accordance with this Indenture;
(d) to provide for the issuance of Additional Notes in accordance
with the limitations set forth in this Indenture on the Issue Date;
(e) to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the
legal rights hereunder of any Holder of the Notes; or
(f) to comply with requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA.
Upon the request of the Company and the Guarantors accompanied by a
resolution of their respective Boards of Directors authorizing the execution of
any such amended or supplemental Indenture, and upon receipt by the Trustee of
the documents described in Section 7.02 hereof, the Trustee shall join with the
Company and the Guarantors in the execution of any amended or supplemental
Indenture authorized or permitted by the terms of this Indenture and to make any
further appropriate agreements and stipulations that may be therein contained,
but the Trustee shall not be obligated to enter into any such amended or
supplemental Indenture that affects its own rights, duties or immunities under
this Indenture or otherwise.
SECTION 9.02 WITH CONSENT OF HOLDERS OF NOTES.
Except as provided below in this Section 9.02, the Company, the Guarantors
and the Trustee may amend or supplement this Indenture (including Section 3.09,
4. 10 and 4.15 hereof), the Notes and the Subsidiary Guarantees may be amended
or supplemented, and, subject to Sections 6.04 and 6.07 hereof, any existing
Default or Event of Default (other than a Default or Event of Default in the
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payment of the principal of, premium, if any, or interest on the Notes, except a
payment default resulting from an acceleration that has been rescinded) or
compliance with any provision of this Indenture or the Notes may be waived, in
each case, with the consent of the Holders of a majority in principal amount of
the then outstanding Notes (including consents obtained in connection with a
purchase of, or tender offer or exchange offer for, the Notes).
Upon the request of the Company and the Guarantors accompanied by a
resolution of their respective Boards of Directors authorizing the execution of
any such amended or supplemental Indenture, and upon the filing with the Trustee
of evidence satisfactory to the Trustee of the consent of the Holders of Notes
as aforesaid, and upon receipt by the Trustee of the documents described in
Section 7.02 hereof, the Trustee shall join with the Company and the Guarantors
in the execution of such amended or supplemental Indenture unless such amended
or 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 amended or
supplemental Indenture.
It shall not be necessary for the consent of the Holders of Notes under
this Section 9.02 to approve the particular form of any proposed amendment or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to the Holders of Notes affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such amended or supplemental
Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a
majority in aggregate principal amount of the Notes then outstanding may waive
compliance in a particular instance by the Company with any provision of this
Indenture or the Notes. However, without the consent of each Holder affected, an
amendment or waiver may not (with respect to any Notes held by a non-consenting
Holder):
(a) reduce the principal amount of Notes whose Holders must consent
to an amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of any Note
or alter or waive any of the provisions with respect to the redemption of
the Notes (other than with respect to Sections 3.09, 4.10 and 4.15 hereof);
(c) reduce the rate of or change the time for payment of interest,
including default interest, on any Note;
(d) waive a Default or Event of Default in the payment of principal
of or premium, if any, or interest on the Notes (except a rescission of
acceleration of the Notes by the Holders of at least a majority in
aggregate principal amount of the then outstanding Notes and a waiver of
the payment default that resulted from such acceleration);
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(e) make any Note payable in money other than that stated in the
Notes;
(f) make any change in the provisions of this Indenture relating to
waivers of past Defaults or the rights of Holders of Notes to receive payments
of principal of or premium, if any, or Events of Default or interest on the
Notes;
(g) waive a redemption payment with respect to any Note (other than a
payment required by one of the covenants described above under Sections 4.10 and
4.15); or
(h) make any change in the foregoing amendment and waiver provisions.
In addition, any amendment to the provisions of Article 10 hereof
(which relate to subordination) or the related definitions will require the
consent of the Holders of at least 75% in aggregate principal amount of the
Notes then outstanding if such amendment would adversely affect the rights of
Holders of Notes.
SECTION 9.03 COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment or supplement to this Indenture, the Subsidiary
Guarantees or the Notes shall be set forth in an amended or supplemental
Indenture that complies with the TIA as then in effect.
SECTION 9.04 REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, supplement or waiver becomes effective, a consent
to it by a Holder of a Note is a continuing consent by the Holder of a Note and
every subsequent Holder of a Note or portion of a Note that evidences the same
debt as the consenting Holder's Note, even if notation of the consent is not
made on any Note. However, any such Holder of a Note or subsequent Holder of a
Note may revoke the consent as to its Note if the Trustee receives written
notice of revocation before the date the waiver, supplement or amendment becomes
effective. An amendment, supplement or waiver becomes effective in accordance
with its terms and thereafter binds every Holder.
SECTION 9.05 NOTATION ON OR EXCHANGE OF NOTES.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Note thereafter authenticated. The Company in
exchange for all Notes may issue and the Trustee shall authenticate new Notes
that reflect the amendment, supplement or waiver.
Failure to make the appropriate notation or issue a new Note shall not
affect the validity and effect of such amendment, supplement or waiver.
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SECTION 9.06 TRUSTEE TO SIGN AMENDMENT, ETC.
The Trustee shall sign any amended or supplemental indenture authorized
pursuant to this Article 9 if the amendment or supplement does not adversely
affect the rights, duties, liabilities or immunities of the Trustee. The Company
and each Subsidiary Guarantor may not sign an amendment or supplemental
Indenture until their respective Boards of Directors approves it. In executing
any amended or supplemental indenture, the Trustee shall be entitled to receive
and (subject to Section 7.01) shall be fully protected in relying upon, an
Officer's Certificate and an Opinion of Counsel stating that the execution of
such amended or supplemental indenture is authorized or permitted by this
Indenture.
ARTICLE 10
SUBORDINATION
SECTION 10.01 AGREEMENT TO SUBORDINATE.
The Company agrees, and each Holder by accepting a Note agrees, that the
Indebtedness evidenced by the Note is subordinated in right of payment, to the
extent and in the manner provided in this Article, to the prior payment in full
of all Senior Debt (whether outstanding on the date hereof or hereafter created,
incurred, assumed or guaranteed), and that the subordination is for the benefit
of the holders of Senior Debt.
SECTION 10.02 LIQUIDATION; DISSOLUTION; BANKRUPTCY.
Upon any distribution to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property, in
an assignment for the benefit of creditors or any marshalling of the Company's
assets and liabilities:
(1) holders of Senior Debt shall be entitled to receive payment in
full of all such Senior Debt (including interest after the commencement of
any such proceeding at the rate specified in the applicable Senior Debt)
before Holders of Notes shall be entitled to receive any payment with
respect to the Notes (except that Holders may receive (i) Permitted Junior
Securities and (ii) payments and other distributions made from any
defeasance trust created pursuant to Section 8.01 hereof); and
(2) until all Senior Debt (as provided in subsection (1) above) is
paid in full, any distribution to which Holders would be entitled but for
this Article shall be made to holders of Senior Debt (except that Holders
may receive (i) Permitted Junior Securities and (ii) payments and other
distributions made from any defeasance created pursuant to Section 8.01
hereof), as their interests may appear.
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SECTION 10.03 DEFAULT ON DESIGNATED SENIOR DEBT.
The Company may not make any payment or distribution to the Trustee or any
Holder in respect of Obligations with respect to the Notes and may not acquire
from the Trustee or any Holder any Notes for cash or property (other than (i)
Permitted Junior Securities and (ii) payments and other distributions made from
any defeasance trust created pursuant to Section 8.01 hereof) until all Senior
Debt has been paid in full if:
(i) a default in the payment of any principal or other Obligations.
with respect to Designated Senior Debt occurs and is continuing beyond any
applicable grace period in the agreement, indenture or other document
governing such Designated Senior Debt; or
(ii) a default, other than a payment default, on Designated Senior
Debt occurs and is continuing that would permit holders of the Designated
Senior Debt to accelerate its maturity and the Trustee receives a notice of
the default (a "Payment Blockage Notice") from a Representative with
respect to such Designated Senior Debt. If the Trustee receives any such
Payment Blockage Notice, no subsequent Payment Blockage Notice shall be
effective for purposes of this Section unless and until (i) at least 360
days shall have elapsed since the effectiveness of the immediately prior
Payment Blockage Notice and (ii) all scheduled payments of principal,
premium, if any, and interest on the Notes that have come due have been
paid in full in cash. No nonpayment default that existed or was continuing
on the date of delivery of any Payment Blockage Notice to the Trustee shall
be, or be made, the basis for a subsequent Payment Blockage Notice.
The Company may and shall resume payments on and distributions in respect
of the Notes and may acquire them upon the earlier of:
(1) the date upon which the default is cured or waived in writing by
the Representative with respect to the Designated Senior Debt, or
(2) in the case of a default referred to in Section 10.03(ii) hereof,
the passage of 179 days after the Payment Blockage Notice is received if
the maturity of such Designated Senior Debt has not been accelerated,
if this Article otherwise permits the payment, distribution or acquisition at
the time of such payment or acquisition.
SECTION 10.04 ACCELERATION OF NOTES.
If payment of the Notes is accelerated because of an Event of Default, the
Company shall promptly notify holders of Senior Debt of the acceleration.
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SECTION 10.05 WHEN DISTRIBUTION MUST BE PAID OVER.
In the event that the Trustee receives any payment of any Obligations with
respect to the Notes at a time when such payment is prohibited by Section 10.03
hereof, or in the event that any Holder receives any payment of any Obligations
with respect to the Notes at a time when such Holder has actual knowledge that
such payment is prohibited by Section 10.03 hereof, such payment shall be held
by the Trustee or such Holder in trust for the benefit of, and shall be paid
forthwith over and delivered, upon written request, to, the holders of Senior
Debt as their interests may appear or their Representative under the indenture
or other agreement (if any) pursuant to which Senior Debt may have been issued,
as their respective interests may appear, for application to the payment of all
Obligations with respect to Senior Debt remaining unpaid to the extent necessary
to pay such Obligations in full in accordance with their terms, after giving
effect to any concurrent payment or distribution to or for the holders of Senior
Debt.
With respect to the holders of Senior Debt, the Trustee undertakes to
perform only such obligations on the part of the Trustee as are specifically set
forth in this Article 10, and no implied covenants or obligations with respect
to the holders of Senior Debt shall be read into this Indenture against the
Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Debt, and shall not be liable to any such holders if the
Trustee shall pay over or distribute to or on behalf of Holders or the Company
or any other Person money or assets to which any holders of Senior Debt shall be
entitled by virtue of this Article 10, except if such payment is made as a
result of the willful misconduct or gross negligence of the Trustee.
SECTION 10.06 NOTICE BY COMPANY.
The Company shall promptly notify the Trustee and the Paying Agent of any
facts known to the Company that would cause a payment of any Obligations with
respect to the Notes to violate this Article, but failure to give such notice
shall not affect the subordination of the Notes to the Senior Debt as provided
in this Article.
SECTION 10.07 SUBROGATION.
After all Senior Debt is paid in full and until the Notes are paid in full,
Holders shall be subrogated (equally and ratably with all other Indebtedness
pari passu with the Notes) to the rights of holders of Senior Debt to receive
distributions applicable to Senior Debt to the extent that distributions
otherwise payable to the Holders have been applied to the payment of Senior
Debt. A distribution made under this Article to holders of Senior Debt that
otherwise would have been made to Holders is not, as between the Company and
Holders, a payment by the Company on the Notes.
SECTION 10.08 RELATIVE RIGHTS.
This Article defines the relative rights of Holders and holders of Senior
Debt. Nothing in this Indenture shall:
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(1) impair, as between the Company and Holders, the obligation of the
Company, which is absolute and unconditional, to pay principal of and
interest on the Notes in accordance with their terms;
(2) affect the relative rights of Holders and creditors of the Company
other than their rights in relation to holders of Senior Debt; or
(3) prevent the Trustee or any Holder from exercising its available
remedies upon a Default or Event of Default, subject to the rights of
holders and owners of Senior Debt to receive distributions and payments
otherwise payable to Holders.
If the Company fails because of this Article to pay principal of or
interest on a Note on the due date, the failure is still a Default or Event of
Default.
SECTION 10.09 SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY.
No right of any holder of Senior Debt to enforce the subordination of the
Indebtedness evidenced by the Notes shall be impaired by any act or failure to
act by the Company or any Holder or by the failure of the Company or any Holder
to comply with this Indenture.
SECTION 10.10 DISTRIBUTION OR NOTICE TO REPRESENTATIVE.
Whenever a distribution is to be made or a notice given to or by holders of
Senior Debt, the distribution may be made and the notice given to or by their
Representative.
Upon any payment or distribution of assets of the Company referred to in
this Article 10, the Trustee and the Holders shall be entitled to rely upon any
order or decree made by any court of competent jurisdiction or upon any
certificate of such Representative or of the liquidating trustee or agent or
other Person making any distribution to the Trustee or to the Holders for the
purpose of ascertaining the Persons entitled to participate in such
distribution, the holders of the Senior Debt and other Indebtedness of the
Company, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article 10.
SECTION 10.11 RIGHTS OF TRUSTEE AND PAYING AGENT.
Notwithstanding the provisions of this Article 10 or any other provision of
this Indenture, the Trustee shall not be charged with knowledge of the existence
of any facts that would prohibit the making of any payment or distribution by
the Trustee, and the Trustee and the Paying Agent may continue to make payments
on the Notes, unless the Trustee shall have received at its Corporate Trust
Office at least two Business Days prior to the date of such payment written
notice of facts that would cause the payment of any Obligations with respect to
the Notes to violate this Article. Only the Company or a Representative may give
the notice. Nothing in this Article 10 shall impair the claims of, or payments
to, the Trustee under or pursuant to Section 7.07 hereof.
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The Trustee in its individual or any other capacity may hold Senior Debt
with the same rights it would have if it were not the Trustee. Any Agent may do
the same with like rights.
SECTION 10.12 AUTHORIZATION TO EFFECT SUBORDINATION.
Each Holder of a Note by the Holder's acceptance thereof authorizes and
directs the Trustee on the Holder's behalf to take such action as may be
necessary or appropriate to effectuate the subordination as provided in this
Article 10, and appoints the Trustee to act as the Holder's attorney-in-fact for
any and all such purposes. If the Trustee does not file a proper proof of claim
or proof of debt in the form required in any proceeding referred to in Section
6.09 hereof at least 30 days before the expiration of the time to file such
claim, the Representatives are hereby authorized to file an appropriate claim
for and on behalf of the Holders of the Notes. Any distribution paid to the
Trustee in respect of such proof of claim filed by the Trustee, to the extent
payable to Holders of Senior Debt pursuant to this Article 10 will be held in
trust by the Trustee and paid to holders of Senior Debt.
SECTION 10.13 AMENDMENTS.
The provisions of this Article 10 and related definitions shall not be
amended or modified without the written consent of the holders of all Senior
Debt.
ARTICLE 11
SUBSIDIARY GUARANTEES
SECTION 11.01 SUBSIDIARY GUARANTEES.
Each of the Guarantors hereby, jointly and severally, unconditionally
guaranties to each Holder of a Note authenticated and delivered by the Trustee
and to the Trustee and its successors and assigns, irrespective of the validity
and enforceability of this Indenture, the Notes or the obligations of the
Company hereunder or thereunder, that: (a) the principal of and interest on the
Notes will be promptly paid in full when due, whether at maturity, by
acceleration, redemption or otherwise, and interest on the overdue principal of
and interest on the Notes, if any, if lawful, and all other obligations of the
Company to the Holders or the Trustee hereunder or thereunder will be promptly
paid in full or performed, all in accordance with the terms hereof and thereof;
and (b) in case of any extension of time of payment or renewal of any Notes or
any of such other obligations, that 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. Failing payment when
due of any amount so guaranteed or any performance so guaranteed for whatever
reason, the Guarantors will be jointly and severally obligated to pay the same
immediately. The Guarantors hereby agree that their obligations hereunder shall
be unconditional, irrespective of the validity, regularity or enforceability of
the Notes or this Indenture, the absence of any action to enforce the same, any
waiver or consent by any Holder of the Notes with respect to any provisions
hereof or thereof, the
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recovery of any judgment against the Company, any action to enforce the same or
any other circumstance which might otherwise constitute a legal or equitable
discharge or defense of a guarantor. Each 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, notice and all demands whatsoever and
covenant that this Subsidiary Guarantee will not be discharged except by
complete performance of the obligations contained in the Notes and this
Indenture. If any Holder or the Trustee is required by any court or otherwise
to return to the Company or Guarantors, or any Custodian, Trustee, liquidator or
other similar official acting in relation to either the Company or Guarantors,
any amount paid by either to the Assignee or such Holder, this Subsidiary
Guarantee, to the extent theretofore discharged, shall be reinstated in full
force and effect. Each Guarantor agrees that they shall not be entitled to any
right of subrogation in relation to the Holders in respect of any obligations
guaranteed hereby until payment in full of all obligations guaranteed hereby.
Each Guarantor further agrees that, as between the 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 6 for
the purposes of this Subsidiary Guarantee, 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 6, such obligations (whether or not due
and payable) shall forthwith become due and payable by the Guarantors for the
purpose of this Subsidiary Guarantee. The Guarantors shall have the right to
seek contribution from any non-paying Guarantor so long as the exercise of such
right does not impair the rights of the Holders under the Subsidiary Guarantees.
SECTION 11.02 EXECUTION AND DELIVERY OF SUBSIDIARY GUARANTEE.
To evidence its Subsidiary Guarantee set forth in Section 11.01, each
Guarantor hereby agrees that a notation of such Subsidiary Guarantee
substantially in the form included in Exhibit A shall be endorsed by an officer
of such Subsidiary Guarantor on each Note authenticated and delivered by the
Trustee and that this Indenture shall be executed on behalf of such Guarantor by
its Chief Executive Officer, President or one of its Vice Presidents and
attested to by an Officer.
Each Guarantor hereby agrees that its Subsidiary Guarantee set forth in
Section 11.01, shall remain in full force and effect notwithstanding any failure
to endorse on each Note a notation of such Subsidiary Guarantee.
If an officer or Officer whose signature is on this Indenture or on the
Subsidiary Guarantee no longer holds that office at the time the Trustee
authenticates the Note on which a Subsidiary Guarantee is endorsed, the
Subsidiary Guarantee shall be valid nevertheless.
The delivery of any Note by the Trustee, after the authentication thereof
hereunder, shall constitute due delivery of the Subsidiary Guarantee set forth
in this Indenture on behalf of the Guarantors.
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In the event that the Company creates or acquires any new Subsidiaries
subsequent to the date hereof, if required by Section 4.13 hereof, the Company
shall cause such Subsidiaries to execute a supplemental indenture to this
Indenture and Notation of Security Relating to Subsidiary Guarantees in
accordance with Section 4.13 hereof and this Article 11, to the extent
applicable.
SECTION 11.03 GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN TERMS.
(a) Except as set forth in Articles 4 and 5, nothing contained in this
Indenture or in any of the Notes shall prevent any consolidation or merger of a
Guarantor with or into the Company or shall prevent any sale or conveyance of
the property of a Guarantor as an entirety or substantially as an entirety, to
the Company.
(b) Except as set forth in Articles 4 and 5, nothing contained in this
Indenture or in any of the Notes shall prevent any consolidation or merger of a
Guarantor with or into a corporation or corporations other than the Company
(whether or not affiliated with the Guarantor), or successive consolidations or
mergers in which a Guarantor or its successor or successors shall be a party or
parties, or shall prevent any sale or conveyance of the property of a Guarantor
as an entirety or substantially as an entirety, to a corporation other than the
Company (whether or not affiliated with the Guarantor) authorized to acquire and
operate the same; provided, however, that each Guarantor hereby covenants and
agrees that: (i) upon any such consolidation, merger, sale or conveyance, the
Subsidiary Guarantee endorsed on the Notes, and the due and punctual performance
and observance of all of the covenants and conditions of this Indenture to be
performed by such Guarantor, shall be expressly assumed (in the event that the
Guarantor is not the surviving corporation in the merger), by supplemental
indenture in form and substance reasonably satisfactory in form to the Trustee,
executed and delivered to the Trustee, by the corporation formed by such
consolidation, or into which the Guarantor shall have been merged, or by the
corporation which shall have acquired such property, (ii) except in the case of
a merger of a Guarantor with or into the Company or another Subsidiary of the
Company, immediately after giving effect to such transaction, no Default or
Event of Default exists, (iii) except in the case of a merger of a Guarantor
with or into the Company or another Subsidiary of the Company, such Guarantor,
or any Person formed by or surviving any such consolidation or merger, would
have Consolidated Net Worth (immediately after giving effect to such
transaction), equal to or greater than the Consolidated Net Worth of such
Guarantor immediately preceding the transaction and (iv) except in the case of a
merger of a Guarantor with or into the Company or another Subsidiary of the
Company, the Company would be permitted by virtue of the Company's pro forma
Fixed Charge Coverage Ratio, immediately after giving effect to such
transaction, to incur at least $1.00 of additional Indebtedness pursuant to the
Fixed Charge Coverage Ratio test set forth in the first paragraph of Section
4.09 hereof. In case of any such consolidation, merger, sale or conveyance and
upon the assumption by the successor corporation, by supplemental indenture,
executed and delivered to the Trustee and satisfactory in form to the Trustee,
of the Subsidiary Guarantee endorsed upon the Notes and the due and punctual
performance of all of the covenants and conditions of this Indenture to be
performed by the Guarantor, such successor corporation shall succeed to and be
substituted for the Guarantor with the same effect as if it had been named
herein as a Guarantor. Such successor corporation thereupon may cause to be
signed any or all of the Subsidiary Guarantees to be endorsed upon all of the
Notes issuable
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hereunder which theretofore shall not have been signed by the Company and
delivered to the Trustee. All the Subsidiary Guarantees so issued shall in all
respects have the same legal rank and benefit under this Indenture as the
Subsidiary Guarantees theretofore and thereafter issued in accordance with the
terms of this Indenture as though all of such Subsidiary Guarantees had been
issued at the date of the execution hereof.
SECTION 11.04 RELEASES FOLLOWING SALE OF ASSETS.
Concurrently with any sale of assets (including, if applicable, all of the
capital stock of any Guarantor), any Liens in favor of the Trustee in the assets
sold thereby shall be released; provided that in the event of an Asset Sale, the
Net Proceeds from such sale or other disposition are treated in accordance with
the provisions of Section 4.10 hereof. If the assets sold in such sale or other
disposition include all or substantially all of the assets of any Guarantor or
all of the capital stock of any Guarantor, then such Guarantor (in the event of
a sale or other disposition of all of the capital stock of such Guarantor) or
the corporation acquiring the property (in the event of a sale or other
disposition of all or substantially all of the assets of a Guarantor) shall be
released and relieved of its obligations under its Subsidiary Guarantee or
Section 11.03, hereof, as the case may be; provided that in the event of an
Asset Sale, the Net Proceeds from such sale or other disposition are treated in
accordance with the provisions of Section 4.10 hereof. Upon delivery by the
Company to the Trustee of an Officers' Certificate and an Opinion of Counsel to
the effect that such sale or other disposition was made by the Company in
accordance with the provisions of this Indenture, including without limitation
Section 4.10 hereof, the Trustee shall execute any documents reasonably required
in order to evidence the release of any Guarantor from its obligations under its
Subsidiary Guarantee. Any Guarantor not released from its obligations under its
Subsidiary Guarantee shall remain liable for the full amount of principal of and
interest on the Notes and for the other obligations of any Guarantor under this
Indenture as provided in this Article 11.
SECTION 11.05 "TRUSTEE" TO INCLUDE PAYING AGENT.
In case at any time any Paying Agent other than the Trustee shall have been
appointed by the Company and be then acting hereunder, the term "Trustee" as
used in this Article 11, shall in such case (unless the context shall otherwise
require) be construed as extending to and including such Paying Agent within its
meaning as fully and for all intents and purposes as if such Paying Agent were
named in this Article 11, in place of the Trustee.
SECTION 11.06 SUBORDINATION OF SUBSIDIARY GUARANTEE.
The obligations of each Guarantor under its Subsidiary Guarantee pursuant
to this Article 11 shall be junior and subordinated to the Senior Debt of such
Guarantor on the same basis as the Notes are junior and subordinated to Senior
Debt. For the purposes of the foregoing sentence, the Trustee and the Holders
shall have the right to receive and/or retain payments by any of the Guarantors
only at such times as they may receive and/or retain payments in respect of the
Notes pursuant to this Indenture, including Article 10 hereof.
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<PAGE>
ARTICLE 12
MISCELLANEOUS
SECTION 12.01 TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies or conflicts with the
duties imposed by TIA (S)318(c), the imposed duties shall control.
SECTION 12.02 NOTICES.
Any notice or communication by the Company, a Guarantor or the Trustee to
the others shall be duly given if in writing and delivered in Person or mailed
by first class mail (registered or certified, return receipt requested), telex,
telecopier or overnight air courier guaranteeing next day delivery, to the
others' address:
If to the Company or a Guarantor:
American Builders & Contractors Supply Co., Inc.
One ABC Parkway
Beloit, Wisconsin 35311
Telecopier No.: (608) 362-2717
Attention: Kendra Story
If to the Trustee:
Norwest Bank Minnesota, National Association
Corporate Trust Services
Sixth and Marquette
Minneapolis, Minnesota 55479-0069
Telecopier No.: (612) 667-9825
Attention: Curtis D. Schwegman
The Company, a Guarantor or the Trustee, by notice to the others may
designate additional or different addresses for subsequent notices or
communications.
All notices and communications (other than those sent to Holders) shall be
deemed to have been duly given: at the time delivered by hand, if personally
delivered; five Business Days after being deposited in the mail, postage
prepaid, if mailed; when answered back, if telexed; when receipt acknowledged,
if telecopied; and the next Business Day after timely delivery to the courier,
if sent by overnight air courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by first class
mail, certified or registered, return receipt requested, or by overnight air
courier guaranteeing next day delivery to its
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<PAGE>
address shown on the register kept by the Registrar. Any notice or
communication shall also be so mailed to any Person described in TIA (S) 313(c),
to the extent required by the TIA. 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
within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company mails a notice or communication to Holders, it shall
mail a copy to the Trustee and each Agent at the same time.
SECTION 12.03 COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF NOTES.
Holders may communicate pursuant to TIA (S) 312(b) with other Holders
with respect to their rights under this Indenture or the Notes. The Company,
the Guarantors, the Trustee, the Registrar and anyone else shall have the
protection of TIA (S) 312(c).
SECTION 12.04 CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company and/or any Guarantor to
the Trustee to take any action under this Indenture, the Company and/or such
Guarantor, as the case may be, shall furnish to the Trustee:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set
forth in Section 12.05 hereof) stating that, in the opinion of the
signers, all conditions precedent and covenants, if any, provided for
in this Indenture relating to the proposed action have been satisfied;
and
(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set
forth in Section 12.05 hereof) stating that, in the opinion of such
counsel, all such conditions precedent and covenants have been
satisfied.
SECTION 12.05 STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than a certificate
provided pursuant to TIA (S) 14(a)(4)) shall comply with the provisions of TIA
(S) 314(e) and shall include:
(a) a statement that the Person making such certificate or
opinion has read such covenant or condition;
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<PAGE>
(b) 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;
(c) a statement that, in the opinion of such Person, he or she 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 satisfied; and
(d) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been satisfied.
SECTION 12.06 RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
SECTION 12.07 NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND
STOCKHOLDERS.
No director, officer, employee, incorporator or shareholder of the Company
or any Guarantor, as such, shall have any liability for any obligations of the
Company or any Guarantor under the Notes, the Subsidiary Guarantees, this
indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder of Notes by accepting a Note waives
and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes. Such waiver may not be effective to
waive liabilities under the federal securities laws and it is the view of the
SEC that such a waiver is against public policy.
SECTION 12.08 GOVERNING LAW.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THIS INDENTURE, THE NOTES AND THE SUBSIDIARY GUARANTEES.
SECTION 12.09 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret any other indenture, loan or
debt agreement of the Company or its Subsidiaries or of any other Person. Any
such indenture, loan or debt agreement may not be used to interpret this
Indenture, the Notes or the Subsidiary Guarantees.
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<PAGE>
SECTION 12.10 SUCCESSORS.
All agreements of the Company and the Guarantors in this Indenture,
the Subsidiary Guarantees and the Notes shall bind its successors. All
agreements of the Trustee in this Indenture shall bind its successors.
SECTION 12.11 SEVERABILITY.
In case any provision in this Indenture, the Subsidiary Guarantees or
in the Notes 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.
SECTION 12.12 COUNTERPART 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.
SECTION 12.13 TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents and Headings of the Articles and Sections of
this Indenture have been inserted for convenience of reference only, are not to
be considered a part of this Indenture and shall in no way modify or restrict
any of the terms or provisions hereof.
Signatures on following page
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<PAGE>
SIGNATURES
Dated as of May __, 1997
AMERICAN BUILDERS &
CONTRACTORS SUPPLY CO., INC.
By:
----------------------------------
Name: Kenneth A. Hendricks
Title: President and Chief Executive
Officer
Attest:
AMCRAFT BUILDING PRODUCTS CO.,
INC.
By:
----------------------------------
Name: Kenneth A. Hendricks
Title: President and CEO
Attest:
MULE-HIDE PRODUCTS CO., INC.
By:
----------------------------------
Name: Kenneth A. Hendricks
Title: President and CEO
Attest:
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
By:
----------------------------------
Name:
Title:
Attest:
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<PAGE>
SIGNATURES
Dated as of May __, 1997
AMERICAN BUILDERS &
CONTRACTORS SUPPLY CO., INC.
By:
----------------------------------
Name: Kenneth A. Hendricks
Title: President and Chief Executive
Officer
Attest:
AMCRAFT BUILDING PRODUCTS CO.,
INC.
By:
----------------------------------
Name: Kenneth A. Hendricks
Title: President and CEO
Attest:
MULE-HIDE PRODUCTS CO., INC.
By:
----------------------------------
Name: Kenneth A. Hendricks
Title: President and CEO
Attest:
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
By:
----------------------------------
Name:
Title:
Attest:
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<PAGE>
Exhibit A
(Face of Note)
10% [Series A] [Series B] Senior Subordinated Notes due 2007
No. $________
AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC
promises to pay to
or registered assigns,
the principal sum of
Dollars on May 15, 2007,
Interest Payment Dates: May 15 and November 15
Record Dates: May 1 and November 1
Dated:
-----------------------------------------
American Builders & Contractors Supply Co., Inc.
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<PAGE>
By:
-------------------------------------------------
Name: Kenneth A. Hendricks
Title: President and Chief Executive Officer
This is one of the Global
Notes referred to in the
within-mentioned Indenture:
Norwest Bank Minnesota, National Association
as Trustee
By:
-------------------------------------------------
Name:
Title:
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<PAGE>
(Back of Note)
10% [Series A] [Series B] Senior Subordinated Notes due 2007
[Unless and until it is exchanged in whole or in part for Notes in
definitive form, this Note may not be transferred except as a whole by the
Depositary to a nominee of the Depositary or by a nominee of the Depositary to
the Depositary or another nominee of the Depositary or by the Depositary or any
such nominee to a successor Depositary or a nominee of such successor
Depositary. Unless this certificate is presented by an authorized
representative of The Depository Trust Company (55 Water Street, New York, New
York) ("DTC") to the 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 may be requested by an authorized representative of DTC
(and any payment is made to Cede & Co. or such other entity as may be requested
by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the
registered owner hereof, Cede & Co., has an interest herein.]/1/
THE NOTE (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE NOTE
EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXECUTION THEREFROM. EACH
PURCHASER OF THE NOTE EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE
RELYING ON THE EXEMPTION PROVIDED BY RULE 144A UNDER THE SECURITIES ACT. THE
HOLDER OF THE NOTE EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT
(A) SUCH NOTE MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1) (a) TO A
PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS
DEFINED IN OF RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144 UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON
IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT
OR (d) IN ACCORDANCE WITH ANOTHER EXTENSION FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE CONTANY SO
REQUESTS), (2) TO THE CONTANY OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS
OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B)
THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER
- ------------------------
/1/ This paragraph should be included only if the Note is issued in
global form.
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<PAGE>
OF THE NOTE EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (1)
ABOVE./2/
Capitalized terms used herein shall have the meanings assigned to them in
the Indenture referred to below unless otherwise indicated.
1. INTEREST. American Builders & Contractors Supply Co., Inc, a Delaware
corporation (the "Company"), promises to pay interest on the principal amount of
this Note at 10%% per annum from May 7, 1997 until maturity and shall pay the
Liquidated Damages payable pursuant to Section 5 of the Registration Rights
Agreement referred to below. The Company will pay interest and Liquidated
Damages semi-annually on May 15 and November 15 of each year, or if any such day
is not a Business Day, on the next succeeding Business Day (each an "Interest
Payment Date"). Interest on the Notes will accrue from the most recent date to
which interest has been paid or, if no interest has been paid, from the date of
issuance; provided that if there is no existing Default in the payment of
interest, and if this Note is authenticated between a record date referred to on
the face hereof and the next succeeding Interest Payment Date, interest shall
accrue from such next succeeding Interest Payment Date; provided, further, that
the first Interest Payment Date shall be November 15, 1997. The Company shall
pay interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue principal and premium, if any, from time to time on
demand at a rate that is 1% per annum in excess of the rate then in effect; it
shall pay interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest and Liquidated Damages
(without regard to any applicable grace periods) from time to time on demand at
the same rate to the extent lawful. Interest will be computed on the basis of a
360-day year of twelve 30-day months.
2. METHOD OF PAYMENT. The Company will pay interest on the Notes (except
defaulted interest) and Liquidated Damages to the Persons who are registered
Holders of Notes at the close of business on the May 1 or November 1 next
preceding the Interest Payment Date, even if such Notes are canceled after such
record date and on or before such Interest Payment Date, except as provided in
Section 2.12 of the Indenture with respect to defaulted interest. The Notes
will be payable as to principal, premium, interest and Liquidated Damages at the
office or agency of the Company maintained for such purpose within or without
the City and State of New York, or, at the option of the Company, payment of
interest and Liquidated Damages may be made by check mailed to the Holders at
their addresses set forth in the register of Holders, and provided that payment
by wire transfer of immediately available funds will be required with respect to
principal of and interest, premium and Liquidated Damages on, all Global Notes
and all other Notes the Holders of which shall have provided wire transfer
instructions to the Company or the Paying Agent. Such payment shall be in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts.
- -------------------------
/2/ This paragraph should be included only if the Note is a Transfer
Restricted Security.
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<PAGE>
3. PAYING AGENT AND REGISTRAR. Initially, Norwest Bank Minnesota,
National Association, the Trustee under the Indenture, will act as Paying Agent
and Registrar. The Company may change any Paying Agent or Registrar without
notice to any Holder. The Company or any of its Subsidiaries may act in any
such capacity.
4. INDENTURE. The Company issued the Notes under an Indenture dated as
of May 7, 1997 ("Indenture") among the Company, the Guarantors and the Trustee.
The terms of the Notes include those stated in the Indenture and those made part
of the Indenture by reference to the Trust Indenture Act of 1939, as amended (15
U.S. Code (S)(S) 77aaa-77bbbb). The Notes are subject to all such terms, and
Holders are referred to the Indenture and such Act for a statement of such
terms. The Notes are unsecured obligations of the Company limited to $150
million in aggregate principal amount.
5. OPTIONAL REDEMPTION.
The Company shall not have the option to redeem the Notes prior to May 15,
2002. Thereafter, the Company shall have the option to redeem the Notes, in
whole or in part, upon not less than 30 nor more than 60 days' notice, at the
redemption prices (expressed as percentages of principal amount) set forth below
plus accrued and unpaid interest thereon and Liquidated Damages, if any, to the
applicable redemption date, if redeemed during the twelvemonth period beginning
on May 15 of the years indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C> <C>
2002................... 105.3125%
2003................... 103.5416%
2004................... 101.7708%
2005 and thereafter.... 100.0000%
</TABLE>
Notwithstanding the foregoing, the Company may, prior to May 15, 2000,
on any one or more occasions redeem up to an aggregate of 35% of the original
aggregate principal amount of Notes at a redemption price of 110.625% of the
principal amount thereof, plus accrued and unpaid interest thereon and
Liquidated Damages, if any, to the redemption date, with the net cash proceeds
of an initial public offering of common stock of the Company; provided that at
least 65% of the aggregate principal amount of Notes originally issued remain
outstanding immediately after the occurrence of such redemption; and provided,
further, that such redemption shall occur within 60 days of the date of the
closing of such initial public offering.
6. MANDATORY REDEMPTION.
Except as set forth in paragraph 7 below, the Company shall not be
required to make mandatory redemption payments with respect to the Notes.
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<PAGE>
7. REPURCHASE AT OPTION OF HOLDER.
(a) If there is a Change of Control, the Company shall be required to
make an offer (a "Change of Control Offer") to repurchase all or any part (equal
to $1,000 or an integral multiple thereof) of each Holder's Notes at a purchase
price equal to 101% of the aggregate principal amount thereof plus accrued and
unpaid interest, if any, to the date of purchase (in either case, a "Change of
Control Payment"). Within 10 days following any Change of Control, the Company
shall mail a notice to each Holder setting forth the procedures governing the
Change of Control Offer as required by the Indenture.
(b) If the Company or a Subsidiary consummates any Asset Sales, within
five days of each date on which the aggregate amount of Excess Proceeds exceeds
$5 million, the Company shall commence an offer to all Holders of Notes (an
"Asset Sale Offer") pursuant to Section 3.09 of the Indenture to purchase the
maximum principal amount of Notes that may be purchased out of the Excess
Proceeds at an offer price in cash in an amount equal to 100% of the principal
amount thereof plus accrued and unpaid interest thereon and Liquidated Damages,
if any, to the date fixed for the closing of such offer, in accordance with the
procedures set forth herein. To the extent that the aggregate amount of Notes
tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the
Company (or such Subsidiary) may use such deficiency for general corporate
purposes. If the aggregate principal amount of Notes surrendered by Holders
thereof exceeds the amount of Excess Proceeds, the Trustee shall select the
Notes to be purchased on a pro rata basis. Holders of Notes that are the
subject of an offer to purchase will receive an Asset Sale Offer from the
Company prior to any related purchase date and may elect to have such Notes
purchased by completing the form entitled "Option of Holder to Elect Purchase"
on the reverse of the Notes.
8. NOTICE OF REDEMPTION. Notice of redemption will be mailed at
least 30 days but not more than 60 days before the redemption date to each
Holder whose Notes are to be redeemed at its registered address. Notes in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000, unless all of the Notes held by a Holder are to be
redeemed. On and after the redemption date interest ceases to accrue on Notes
or portions thereof called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered
form without coupons in denominations of $1,000 and integral multiples of
$1,000. The transfer of Notes may be registered and Notes may be exchanged as
provided in the Indenture. The Registrar and the Trustee may require a Holder,
among other things, to furnish appropriate endorsements and transfer documents
and the Company may require a Holder to pay any taxes and fees required by law
or permitted by the Indenture. The Company need not exchange or register the
transfer of any Note or portion of a Note selected for redemption, except for
the unredeemed portion of any Note being redeemed in part. Also, it need not
exchange or register the transfer of any Notes for a period of 15 days before a
selection of Notes to be redeemed or during the period between a record date and
the corresponding Interest Payment Date.
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<PAGE>
10. PERSONS DEEMED OWNERS. The registered Holder of a Note may be
treated as its owner for all purposes.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions,
the Indenture or the Notes may be amended or supplemented with the consent of
the Holders of at least a majority in principal amount of the then outstanding
Notes, and any existing default or compliance with any provision of the
Indenture or the Notes may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Notes. Without the consent
of any Holder of a Note, the Indenture or the Notes may be amended or
supplemented to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Notes in addition to or in place of certificated Notes, to
provide for the assumption of the Company's, or any Guarantor's obligations to
Holders of the Notes in case of a merger or consolidation, to provide for the
issuance of Additional Notes in accordance with the limitations set forth
herein, to make any change that would provide any additional rights or benefits
to the Holders of the Notes or that does not adversely affect the legal rights
under the Indenture of any such Holder, or to comply with the requirements of
the SEC in order to effect or maintain the qualification of the Indenture under
the Trust Indenture Act.
12. DEFAULTS AND REMEDIES. Events of Default include: (a) default
for 30 days in the payment when due of interest on, or Liquidated Damages with
respect to, the Notes (whether or not prohibited by the subordination provisions
of the Indenture); (b) default in payment when due of the principal of or
premium, if any, on the Notes (whether or not prohibited by the subordination
provisions of the Indenture); (c) failure by the Company to comply with the
provisions described under Sections 4.07, 4.09, 4.10, or 4.15; (d) failure by
the Company for 60 days after notice to comply with any of its other agreements
in the Indenture or the Notes; (e) default under any mortgage, indenture or
instrument under which there may be issued or by which there may be secured or
evidenced any Indebtedness for money borrowed by the Company or any of its
Subsidiaries (or the payment of which is guaranteed by the Company or any of its
Subsidiaries) whether such Indebtedness or Subsidiary Guarantee now exists, or
is created after the date of the Indenture, which default (i) is caused by a
failure to pay principal of or premium, if any, or interest on such Indebtedness
prior to the expiration of the grace period provided in such Indebtedness on the
date of such default (a "Payment Default") or (b) results in the acceleration of
such Indebtedness prior to its express maturity and, in each case, the principal
amount of any such Indebtedness, together with the principal amount of any other
such Indebtedness under which there has been a Payment Default or the maturity
of which has been so accelerated, aggregates $5.0 million or more; (f) failure
by the Company or any of its Subsidiaries to pay final judgments aggregating in
excess of $5.0 million, which judgments are not paid, discharged or stayed for a
period of 60 days; (g) certain events of bankruptcy or insolvency with respect
to the Company or any of its Subsidiaries; (h) the Subsidiary Guarantee of any
Guarantor is held in judicial proceedings to be unenforceable or invalid or
ceases for any reason to be in full force and effect (other than in accordance
with the terms of the Indenture) or any Guarantor or any Person acting on behalf
of any Guarantor denies or disaffirms such Guarantor's obligations under its
Subsidiary Guarantee (other than by reason of a release of such Guarantor from
its Subsidiary Guarantee in accordance with the terms of the Indenture). If any
Event of Default (other than an Event of Default specified in clause (g) above
occurs and is continuing, the Trustee or the Holders of at least 25% in
principal amount of the then
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outstanding Notes may declare all the Notes to be due and payable immediately.
Notwithstanding the foregoing, in the case of an Event of Default specified in
clause (g) of this Section all outstanding Notes will become due and payable
without further action or notice. Holders may not enforce the Indenture or the
Notes except as provided herein. Subject to certain limitations, Holders of a
majority in principal amount of the then outstanding Notes may direct the
Trustee in its exercise of any tug or power. The Trustee may withhold from
Holders of the Notes notice of any continuing Default or Event of Default
(except a Default or Event of Default relating to the payment of principal or
interest) if it determines that withholding notice is in their interest. The
Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of the
Notes waive any existing Default or Event of Default and its consequences under
the Indenture except a continuing Default or Event of Default in the payment of
interest on, or the principal of, the Notes. The Company is required to deliver
to the Trustee annually a statement regarding compliance with the Indenture, and
the Company is required upon becoming aware of any Default or Event of Default,
to deliver to the Trustee a statement specifying such Default or Event of
Default.
13. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not the Trustee.
14. SUBORDINATION. This Note is subordinated in right of payment, to
the extent and in the manner provided in Article 10 of the Indenture, to the
prior payment in full of all Senior Debt (whether outstanding on the date hereof
or hereafter created, incurred, assumed or guaranteed), and that the
subordination is for the benefit of the holders of Senior Debt.
15 NO RECOURSE AGAINST OTHERS. A director, officer, employee,
incorporator or stockholder of the Company, as such, shall not have any
liability for any obligations of the Company under the Notes or the Indenture or
for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of the Notes.
16. AUTHENTICATION. This Note shall not be valid until authenticated
by the manual signature of the Trustee or an authenticating agent.
17. ABBREVIATIONS. Customary abbreviations may be used in the name
of a Holder 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/GWA (= Uniform Gifts to
Minors Act).
18. ADDITIONAL RIGHTS OF HOLDERS OF TRANSFER RESTRICTED SECURITIES.
In addition to the rights provided to Holders of Notes under the Indenture,
Holders of Transfer Restricted Securities shall have all the rights set forth in
the Registration Rights Agreement dated as of May 7, 1997, between the Company
and the parties named on the signature pages thereof (the "Registration Rights
Agreement").
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<PAGE>
19. 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 Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
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 Holder upon written request and
without charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to:
American Builders & Contractors Supply Co., Inc.
One ABC Parkway
Beloit, Wisconsin 35311
Attention: Kendra Story
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<PAGE>
FORM OF NOTATION OF NOTE
RELATING TO SUBSIDIARY GUARANTEE
For value received, each Guarantor (which term includes any successor
Person under the Indenture) has, jointly and severally, unconditionally
guaranteed, to the extent set forth in the Indenture and subject to the
provisions in the Indenture, (a) the due and punctual payment of the principal
of, premium, Liquidated Damages, if any, and interest on the Notes, whether at
maturity, by acceleration or otherwise, the due and punctual payment of interest
on overdue principal and premium, and, to the extent permitted by law, interest,
and the due and punctual performance of all other obligations of the Company to
the Holder's or the Trustee all in accordance with the terms of the Indenture
and (b) in case of any extension of time of payment or renewal of any Notes or
any of such other obligations, that 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. The obligations of
the Guarantors to the Holders of Notes and to the Trustee pursuant to the
Subsidiary Guarantee and the Indenture are expressly set forth in Article 11 of
the Indenture and reference is hereby made to the Indenture for the precise
terms of the Subsidiary Guarantee. The Indebtedness evidenced by this
Subsidiary Guarantee is, to the extent and in the manner provided in the
Indenture, subordinate and subject in right of payment to the prior payment in
full of all Senior Debt of each respective Guarantor as defined in the
Indenture, and this Subsidiary Guarantee is issued subject to such provisions.
Each Holder of a Note, by accepting the same, (a) agrees to and shall be bound
by such provisions, (b) authorizes and directs the Trustee, on behalf of such
Holder, to take such action as may be necessary or appropriate to effectuate the
subordination as provided in the Indenture and (c) appoints the Trustee
attorney-in-fact of such Holder for such purpose; provided, however, that the
Indebtedness evidenced by this Subsidiary Guarantee shall cease to be so
subordinated and subject in right of payment upon any defeasance of this Note in
accordance with the provisions of the Indenture.
-85-
<PAGE>
Guarantors:
AMCRAFT BUILDING PRODUCTS CO.,
INC.
By:
----------------------------
Name:
Title:
Attest:
MULE-HIDE PRODUCTS CO., INC.
By:
------------------------------
Name:
Title:
Attest:
-86-
<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and
transfer this Note to
- --------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint_________________________________________________________
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
- --------------------------------------------------------------------------------
Date:_________________
Your Signature:_________________________________________
(Sign exactly as your name appears on the
face of this Note)
Signature Guarantee
-87-
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company pursuant to
Section 4.10 or 4.15 of the Indenture, check the box below:
[ ] Section 4.10 [ ] Section 4.15
If you want to elect to have only part of the Note purchased by the Company
pursuant to Section 4.10 or Section 4.15 of the Indenture, state the amount you
elect to have purchased:
$_________________________
Date:_______________________ Your Signature:__________________________________
(Sign exactly as your name appears
on the Note)
Tax Identification No.:__________________________
Signature Guarantee
-88-
<PAGE>
SCHEDULE OF EXCHANGES OF DEFINITIVE NOTE/3/
The following exchanges of a part of this Global Note for Definitive Notes
have been made:
<TABLE>
<CAPTION>
Principal Amount of
this Global Note Signature of
Amount of decrease Amount of increase following such authorized officer of
in Principal Amount in Principal Amount decrease (or Trustee or Note
Date of Exchange of this Global Note of this Global Note increase) Custodian
- ---------------- ------------------- ------------------- ------------------- ---------------------
<S> <C> <C> <C> <C>
</TABLE>
- ---------------------------
/3/ This should be included only if the Note is issued in global form.
-89-
<PAGE>
EXHIBIT B
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF TRANSFER OF NOTES
Re: 10 5/8% Senior Subordinated Notes due 2007 of American Builders &
Contractors Supply Co., Inc.
This Certificate relates to $_____principal amount of Notes held in *______
book-entry or *______definitive form by________(the "Transferor").
The Transferor*:
[ ] has requested the Trustee by written order to deliver in exchange for
its beneficial interest in the Global Note held by the Depositary a Note or
Notes in definitive, registered form of authorized denominations in an aggregate
principal amount equal to its beneficial interest in such Global Note (or the
portion thereof indicated above); or
[ ] has requested the Trustee by written order to exchange or register the
transfer of a Note or Notes.
In connection with such request and in respect of each such Note, the
Transferor does hereby certify that the Transferor is familiar with the
Indenture relating to the above captioned Notes and, as provided in Section 2.06
of such Indenture, the transfer of this Note does not require registration under
the Securities Act (as defined below) because:*
[ ] Such Note is being acquired for the Transferor's own account, without
transfer (in satisfaction of Section 2.06(a)(ii)(A) or Section 2.06(d)(i)(A) of
the Indenture).
[ ] Such Note is being transferred to a "qualified institutional buyer"
(as defined in Rule 144A under the Securities Act of 1933, as amended (the
"Securities Act")) in reliance on Rule 144A (in satisfaction of Section
2.06(a)(ii)(B), Section 2.06(b)(i) or Section 2.06(d)(i)(B) of the Indenture) or
pursuant to an exemption from registration in accordance with Rule 904 under the
Securities Act (in satisfaction of Section 2.06(a)(ii)(B) or Section
2.06(d)(i)(B) of the Indenture.)
[ ] Such Note is being transferred in accordance with Rule 144 under the
Securities Act, or pursuant to an effective registration statement under the
Securities Act (in satisfaction of Section 2.06(a)(ii)(B) or Section
2.06(d)(i)(B) of the Indenture).
[ ] Such Note is being transferred in reliance on and in compliance with
an exemption from the registration requirements of the Securities Act, other
than Rule 144A, Rule 144 or Rule 904 under the Securities Act. An Opinion of
Counsel to the effect that such transfer does not require registration under the
Securities Act accompanies this Certificate (in satisfaction of Section
2.06(a)(ii)(C) or Section 2.06(d)(i)(C) of the Indenture).
-90-
<PAGE>
- ---------------------
*Check applicable box.
-------------------------------------------
[INSERT NAME OF TRANSFEROR]
By:
----------------------------------------
Date:
--------------------------------------
-91-
<PAGE>
EXHIBIT C
LETTER AGREEMENT REGARDING RELATED PARTY LEASES
-92-
<PAGE>
EXHIBIT C
KENNETH A. HENDRICKS and DIANE M. HENRICKS
d/b/a HENDRICKS COMMERCIAL PROPERTIES
One ABC Parkway
Beloit, Wisconsin 53511
May 7, 1997
American Builders & Contractors Supply Co., Inc.
One ABC Parkway
Beloitt, Wisconsin 53511
Re: Leases
------
Ladies and Gentlemen:
The undersigned (collectively, the "Landlord") hereby agree to enter into a
series of leases relating to properties currently leased by the Landlord to the
Company on or prior to May 31, 1997, which leases will be in the form attached
hereto as Annex A and will have a lease term no shorter than ten years nad no
longer than fifteen years. Annual payments due under such leases will be based
on the prevailing market rates in the areas in which such properties are
located and will be adjusted annually to reflect changes in the consumer price
index. Such leases will, in the aggregate, provide for annual rental payments
to the Landlord no greater than 110% of the aggregate annual rental payments due
to the Landlord under the leawes currently in effect between the Company and the
Landlord relating to the affected properties.
Very truly yours,
Kenneth A. Hendricks
Diane M. Hendricks
AGREED TO AND APPROVED:
American Builders & Contractors Supply Co., Inc.
By:
----------------------------------------
Kenneth A. Hendricks
Its: President and Chief Executive Officer
Attest:
----------------------------------------
Diane M. Hendricks
Its: Executive Vice President and Secretary
-93-
<PAGE>
INDUSTRIAL BUILDING LEASE
LANDLORD: Kenneth A. Hendricks and Diane M. Hendricks
d/b/a Hendricks Commercial Properties
One ABC Parkway
Beloit, Wisconsin 53511
TENANT: American Builders & Contractors Supply Co., Inc.
One ABC Parkway
Beloit, Wisconsin 53511
LEASED PREMISES:
-94-
<PAGE>
EXHIBIT 4.2
EXECUTION COPY
AMERICAN BUILDERS & CONTRACTORS
SUPPLY CO., INC.
$100,000,000
10 5/8% SENIOR SUBORDINATED NOTES DUE 2007
PURCHASE AGREEMENT
May 2, 1997
NationsBanc Capital Markets, Inc.
First Chicago Capital Markets, Inc.
c/o NationsBanc Capital Markets, Inc.
100 North Tryon Street
Charlotte, North Carolina 28255
Ladies and Gentlemen:
American Builders & Contractors Supply Co., Inc., a Delaware
corporation (the "Company"), proposes to issue and sell to you (the "Initial
Purchasers") $100,000,000 principal amount of its 10 5/8% Senior Subordinated
Notes due 2007 (the "Notes"). The Notes will be fully and unconditionally
guaranteed (the "Guarantees" and collectively with the Notes, the "Securities")
on a senior subordinated basis by each subsidiary of the Company (the
"Guarantors" and collectively with the Company, the "Issuers"). The Notes are to
be issued under an indenture (the "Indenture") dated as of May 7, 1997 among the
Issuers and Norwest Bank Minnesota, National Association, as trustee (the
"Trustee").
The sale of the Securities to the Initial Purchasers will be made
without registration of the Securities under the Securities Act of 1933, as
amended (the "Securities Act"), in reliance upon exemptions from the
registration requirements of the Securities Act. You have advised the Issuers
that you will offer and sell the Securities purchased by you hereunder in
accordance with Section 3 hereof as soon as you deem advisable.
In connection with the sale of the Securities, the Issuers have
prepared a preliminary offering memorandum, dated April 15, 1997 (the
"Preliminary Memorandum") and a final offering memorandum, dated May 2, 1997
(the "Final Memorandum"). Each of the Preliminary Memorandum and the Final
Memorandum sets forth certain information concerning the Issuers and the
Securities. The Issuers hereby confirm that they have authorized the use of the
Preliminary Memorandum and the Final Memorandum, and any amendment or supplement
thereto, in connection with the offer and sale of the Securities by the Initial
Purchasers. Unless stated to the contrary, all references herein to the Final
Memorandum are to the Final Memorandum at the time of execution and delivery of
this Agreement (the
<PAGE>
"Execution Time") and are not meant to include any amendment or supplement, or
any information incorporated by reference therein, subsequent to the Execution
Time.
The Initial Purchasers and their direct and indirect transferees will
be entitled to the benefits of the Registration Rights Agreement, substantially
in the form attached hereto as Exhibit A (the "Registration Rights Agreement"),
pursuant to which the Issuers will agree to use their best efforts to commence
an offer to exchange the Securities for securities (the "Exchange Securities")
that have been registered under the Securities Act, and that otherwise are
identical in all respects to the Securities, or to cause a shelf registration
statement to become effective under the Securities Act and to remain effective
for the period designated in such Registration Rights Agreement.
1. Representations and Warranties. The Issuers jointly and severally
represent and warrant to each Initial Purchaser as follows:
(a) The Preliminary Memorandum, at the date thereof, did not contain
any untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading. The Final Memorandum, at the
date hereof, does not, and at the Closing Date (as defined below) will not
(and any amendment or supplement thereto, at the date thereof and at the
Closing Date, will not), contain any untrue statement of a material fact or
omit to state any material fact necessary to make the statements therein,
in the light of the circumstances under which they were made, not
misleading; provided, however, that the Issuers make no representation or
warranty as to the information contained in or omitted from the Preliminary
Memorandum or the Final Memorandum, or any amendment or supplement thereto,
in reliance upon and in conformity with information furnished in writing to
the Issuers by or on behalf of the Initial Purchasers specifically for
inclusion therein. The Issuers acknowledge that the statements set forth in
the last paragraph of the cover page and in the third, fifth and sixth
paragraphs under the heading "Plan of Distribution" in the Preliminary
Memorandum and the Final Memorandum constitute the only such information.
(b) Neither the Issuers, nor any of their Affiliates (as defined in
Rule 501(b) of Regulation D under the Securities Act ("Regulation D")), nor
any person acting on their behalf has, directly or indirectly, made offers
or sales of any security, or solicited offers to buy any security, under
Circumstances that would require the registration of the Securities under
the Securities Act. Neither the Issuers, nor any of their Affiliates, nor
any person acting on their behalf has engaged in any form of general
solicitation or general advertising (within the meaning of Regulation D) in
connection with any offer or sale of the Securities. The Securities satisfy
the eligibility requirements of Rule 144A(d)(3) under the Securities Act.
The Final Memorandum and each amendment or supplement thereto, as of its
date, contains the information specified in Rule 144A(d)(4) under the Act.
The Issuers have been advised by the National Association of Securities
Dealers, Inc. Private Offerings, Resales and Trading through the Automated
Linkages Market ("PORTAL") that the Securities have been designated PORTAL
eligible
2
<PAGE>
securities in accordance with the rules and regulations of the National
Association of Securities Dealers, Inc.
(c) Neither the Company nor any of its subsidiaries is an "investment
company" within the meaning of the Investment Company Act of 1940, as
amended (the "Investment Company Act"), without taking account of any
exemption arising out of the number of holders of any Issuer's securities.
(d) Assuming (i) that the representations and warranties and
covenants of the Initial Purchasers contained in Section 3 hereof are true,
correct and complete and (ii) that the Initial Purchasers comply with their
covenants in Section 3 hereof, (A) registration under the Securities Act of
the Securities and qualification of the Indenture under the Trust Indenture
Act of 1939, as amended (the "Trust Indenture Act"), is not required in
connection with the offer and sale of the Securities to the Initial
Purchasers in the manner contemplated by the Final Memorandum or this
Agreement and (B) initial resales of the Securities by the Initial
Purchasers on the terms and in the manner set forth in the Final Memorandum
and Section 3 hereof are exempt from the registration requirements of the
Securities Act.
(e) Since the respective dates as of which information is given in
the Preliminary Memorandum and the Final Memorandum, except as otherwise
stated therein, (i) there has been no material adverse change in or effect
on the condition (financial or otherwise), earnings, affairs or business
prospects of the Company and its subsidiaries considered as a whole,
whether or not arising in the ordinary course of business (a "Material
Adverse Effect") and (ii) there have been no material transactions entered
into by the Company or any of its subsidiaries.
(f) Each of the Issuers has been duly organized and is validly
existing as a corporation in good standing under the laws of the state of
its incorporation, has corporate power and authority to own, lease and
operate its properties and conduct its business as described in the
Preliminary Memorandum and the Final Memorandum and is duly qualified as a
foreign corporation to transact business and is in good standing in each
jurisdiction in which it owns or leases properties or in which the conduct
of its business requires such qualification, except (i) to the extent that
the failure to be so qualified or be in good standing would not, singly or
in the aggregate, reasonably be expected to have a Material Adverse Effect
or (ii) to the extent that failure to be so qualified results from the
reincorporation of the Company from a Texas corporation to a Delaware
corporation.
(g) The authorized and outstanding capital stock of the Company at
December 31, 1996 was as set forth in Note 9 to the Combined Financial
Statements in the Preliminary Memorandum and the Final Memorandum. All of
the shares of capital stock of the Company have been duly authorized and
validly issued and are fully paid and nonassessable. All of the issued and
outstanding capital stock of each subsidiary has been duly authorized and
validly issued and is fully paid and nonassessable, and all such capital
stock of each subsidiary is owned by the Company,
3
<PAGE>
directly or through subsidiaries, free and clear of any mortgage, pledge,
lien, encumbrance, claim or equity.
(h) This Agreement has been duly authorized, executed and delivered
by the Issuers and constitutes the valid and binding agreement of the
Issuers, enforceable against the Issuers in accordance with its terms,
except as (i) enforcement hereof may be subject to (A) bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other
similar laws now or hereafter in effect relating to or affecting creditors'
rights generally and (B) general principles of equity (regardless of
whether enforceability is considered in a proceeding in equity or at law)
and (ii) the enforceability of any indemnification or contribution
provisions hereof may be limited under applicable securities laws or the
public policies underlying such laws.
(i) The Notes have been duly authorized by the Company, and, when
executed and authenticated in accordance with the provisions of the
Indenture and delivered to and paid for by the Initial Purchasers in
accordance with this Agreement, will constitute the valid and binding
obligations of the Company enforceable against the Company in accordance
with the terms, and will be entitled to the benefits, of the Indenture,
except as enforcement thereof may be subject to (A) bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
now or hereafter in effect relating to or affecting creditors' rights
generally and (B) general principles of equity (regardless of whether
enforceability is considered in a proceeding in equity or at law).
(j) The Guarantees endorsed on the Notes have been duly authorized by
each Guarantor, and, when the Notes are executed and authenticated in
accordance with the provisions of the Indenture and delivered to and paid
for by the Initial Purchasers in accordance with this Agreement, the
Guarantees will constitute the valid and binding obligation of the
Guarantors enforceable against the Guarantors in accordance with their
terms and will be entitled to the benefits of the Indenture except as (i)
enforcement thereof may be subject to (A) bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
now or hereafter in effect relating to or affecting creditors' rights
generally and (B) general principles of equity (regardless of whether
enforceability is considered in a proceeding in equity or at law) and (ii)
the enforceability of any indemnification or contribution provisions
thereof may be limited under applicable securities laws or the public
policies underlying such laws.
(k) The Indenture has been duly authorized, executed and delivered by
the Issuers and (assuming the due execution and delivery thereof by the
Trustee) is a legally valid and binding agreement of the Issuers,
enforceable against the Issuers in accordance with its terms except as
enforcement thereof may be subject to (A) bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
now or hereafter in effect relating to or affecting creditors' rights
generally and (B) general principles of equity (regardless of whether
enforceability is considered in a proceeding in equity or at law).
4
<PAGE>
(l) The Exchange Securities have been duly authorized, and, when duly
executed, authenticated, issued and delivered, will be validly issued and
outstanding, and will constitute the valid and binding obligations of the
Issuers, entitled to the benefits of the Indenture and enforceable against
the Issuers in accordance with their terms except as enforcement thereof
may be subject to (A) bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws now or hereafter in
effect relating to or affecting creditors' rights generally and (B) general
principles of equity (regardless of whether enforceability is considered in
a proceeding in equity or at law).
(m) The Registration Rights Agreement has been duly authorized by the
Issuers, and when duly executed and delivered by the Issuers (assuming the
due execution and delivery by the Initial Purchasers), will constitute a
valid and binding agreement of the Issuers, enforceable against the Issuers
in accordance with its terms except as (i) enforcement thereof may be
subject to (A) bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws now or hereafter in
effect relating to or affecting creditors' rights generally and (B) general
principles of equity (regardless of whether enforceability is considered in
a proceeding in equity or at law) and (ii) the enforceability of any
indemnification or contribution provisions thereof may be limited under
applicable securities laws or the public policies underlying such laws.
(n) On the Closing Date, the Credit Agreement (as defined in the
Final Memorandum) (a) shall have been duly authorized, executed and
delivered by the Company and will constitute the valid and binding
agreement of the Company, enforceable against the Company in accordance
with its terms except as enforcement thereof may be subject to (A)
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium
and other similar laws now or hereafter in effect relating to or affecting
creditors' rights generally and (B) general principles of equity
(regardless of whether enforceability is considered in a proceeding in
equity or at law) and (b) shall be in full force and effect. On the Closing
Date, no event of default thereunder or event which, with the giving of
notice or passage of time or both, would constitute an event of default
thereunder shall have occurred and all conditions to the extension of
credit thereunder shall have been satisfied.
(o) Each of the Asset Purchase Agreement dated April 12, 1997 between
Viking Building Products, Inc. and the Company and the Asset Purchase
Agreement dated April 12, 1997 between Viking Aluminum Products, Inc. and
the Company (together, the "Asset Purchase Agreements") has been duly
authorized, executed and delivered by the Company and constitutes the valid
and binding agreement of the Company enforceable against the Company in
accordance with its terms except as enforcement thereof may be subject to
(A) bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws now or hereafter in effect relating to or
affecting creditors' rights generally and (B) general principles of equity
(regardless of whether enforceability is considered in a proceeding in
equity or at law). The Asset Purchase Agreements are in full force and
effect and there exists
5
<PAGE>
no breach by the Company, or, to the knowledge of the Issuers, any other
party of any representation or covenant thereunder and the Company has no
reason to believe that the conditions to the consummation of the
transactions contemplated thereby will not be satisfied in accordance with
the terms thereof.
(p) The execution, delivery and performance of this Agreement, the
Indenture, the Registration Rights Agreement, the Credit Agreement and the
Asset Purchase Agreements by the Issuers (to the extent each is a party
thereto), the consummation of the transactions contemplated hereby and
thereby, and the issuance and sale of the Securities and Exchange
Securities by the Issuers will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a default
under, any indenture, mortgage, deed of trust, loan or credit agreement or
other agreement or instrument to which either the Company or any of its
subsidiaries is a party or by which the Company or any of its subsidiaries
is bound or to which any of the properties or assets of the Company or any
of its subsidiaries are subject, nor will any such action result in any
violation of any statute to which the Company or any of its subsidiaries
may be subject or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Company or any of
its subsidiaries or any of their properties or assets (except to the extent
any such conflict, breach, violation or default singly or in the aggregate,
would not reasonably expected to have a Material Adverse Effect), nor will
any such action result in any violation of the provisions of the charter or
by-laws of the Company or any of its subsidiaries; and except for such
consents, approvals, authorizations, registrations or qualifications as may
be required under applicable state securities and Blue Sky laws in
connection with the purchase and distribution of the Securities by the
Initial Purchasers or as set forth in the Registration Rights Agreement or
as may be required under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended (the "HSR Act") in connection with the consummation of
the transactions contemplated by the Asset Purchase Agreements, no consent,
approval, authorization or order of, or filing or registration with, any
such court or governmental agency or body is required for the execution,
delivery and performance of this Agreement, the Indenture, the Registration
Rights Agreement, the Credit Agreement and the Asset Purchase Agreements by
the Issuers (to the extent each is a party thereto), the consummation of
the transactions contemplated hereby and thereby, and the issuance and sale
of the Notes and Exchange Securities by the Issuers.
(q) Neither the Company nor any of its subsidiaries is in breach or
violation of any of the terms or provisions of any indenture, mortgage,
deed of trust, loan agreement or other agreement or instrument to which the
Company or any of its subsidiaries is a party or by which the Company or
any of its subsidiaries is bound or to which any of the properties or
assets of the Company or any of its subsidiaries are subject, nor is the
Company or any of its subsidiaries in violation of the provisions of any
statute or any judgment, order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Company, any of
its subsidiaries or any of their properties or assets (except to the extent
any such conflict, breach, violation or default is cured at or prior to the
Closing Date and within the grace period applicable
6
<PAGE>
thereto or would not, singly or in the aggregate, reasonably be expected to
have a Material Adverse Effect), nor is the Company or any of its
subsidiaries in violation of the provisions of its respective charter or
by-laws.
(r) The Securities, the Indenture, the Registration Rights Agreement,
the Credit Agreement and the Asset Purchase Agreements conform in all
material respects to the descriptions thereof contained in the Final
Memorandum and such descriptions are accurate summaries of such documents
in all material respects.
(s) Except as set forth in the Registration Rights Agreement, there
are no contracts, agreements or understandings between the Company or any
of its subsidiaries and any person granting such person the right to
require the Company or any of its subsidiaries to file a registration
statement under the Securities Act with respect to any securities owned or
to be owned by such person or to require the Company or any of its
subsidiaries to include such securities in any securities being registered
pursuant to any registration statement filed by the Company or any of its
subsidiaries under the Securities Act.
(t) Except as set forth in the Preliminary Memorandum and the Final
Memorandum, there is no action, suit or proceeding before or by any court
or governmental agency or body, domestic or foreign, now pending or, to the
knowledge of the Issuers, threatened against or affecting the Company or
any of its subsidiaries, which could, singly or in the aggregate,
reasonably be expected to have a Material Adverse Effect or materially and
adversely affect the offering of the Securities.
(u) The Company and each of its subsidiaries has good and
indefeasible title in fee simple to all real property and good and
indefeasible title to all personal property owned by it, in each case free
and clear of all liens, encumbrances and defects except such as are
referred to in the Final Memorandum or (ii) such as do not degrade the
value of such property to the Company or such subsidiary, and do not
interfere with the use made and proposed to be made of such property by the
Company or such subsidiary to an extent that such interference or
degradation could, singly or aggregate, reasonably be expected to have a
Material Adverse Effect. All leases to which the Company or any of its
subsidiaries is a party are valid and binding, and no default has occurred
or is continuing thereunder which could, singly or in the aggregate,
reasonably be expected to have a Material Adverse Effect or materially and
adversely affect the offering of the Securities, and the Company and its
subsidiaries enjoy peaceful and undisturbed possession under all such
leases to which any of them is a party as lessee (with such exceptions as
do not materially interfere with the use made by the Company or such
subsidiary). The Company and its subsidiaries possess adequate
certificates, authorizations or permits issued by the appropriate state,
federal or foreign regulatory agencies or bodies necessary to conduct the
business now operated by them, and neither the Company nor any of its
subsidiaries has received any notice of proceedings relating to the
revocation or modification of any such certificate, authority or permit
which, if the subject of an unfavorable decision, ruling or finding, could,
singly or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
7
<PAGE>
(v) To the best of the Company's knowledge, Ernst & Young L.L.P., who
have certified certain financial statements of the Company and its
subsidiaries, are independent public accountants within the meaning of the
Securities Act and the rules and regulations thereunder. The consolidated
financial statements included in the Preliminary Memorandum and the Final
Memorandum present fairly the financial position of the Issuers, on a
consolidated basis, as at the dates indicated and the results of their
operations and the changes in their consolidated financial position for the
periods specified; said financial statements have been prepared in
conformity with generally accepted accounting principles applied on a
consistent basis during the periods involved, except as indicated therein.
The Company and each of its subsidiaries maintain a system of internal
accounting controls sufficient to provide reasonable assurances that (i)
transactions are executed in accordance with management's general or
specific authorizations; (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability; (iii)
access to assets is permitted only in accordance with management's general
or specific authorization; and (iv) the recorded accountability for assets
is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(w) Neither the Company nor any of its subsidiaries is now or, after
giving effect to the issuance of the Securities and the application of the
proceeds thereof, will be (i) insolvent, (ii) left with unreasonably small
capital with which to engage in its anticipated businesses or (iii)
incurring debts beyond its ability to pay such debts as they become due.
(x) The Company and its subsidiaries own or otherwise possess the
right to use all patents, trademarks, service marks, trade names and
copyrights, all applications and registrations for each of the foregoing,
and all other proprietary rights and confidential information used in the
conduct of their respective businesses as currently conducted; and neither
the Company nor any of its subsidiaries has received any notice, or is
otherwise aware, of any infringement of or conflict with the rights of any
third party with respect to any of the foregoing which, if the subject of
an unfavorable decision, ruling or finding, could, singly or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
(y) The Company and its subsidiaries are (i) in compliance with any
and all applicable foreign, federal, state and local laws and regulations
relating to the protection of human health and safety, the environment or
hazardous or toxic substances or wastes, pollutants or contaminants
("Environmental Laws"), (ii) have received all permits, licenses or other
approvals required of them under applicable Environmental Laws to conduct
their respective businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval, except where such
noncompliance with Environmental Laws, failure to receive required permits,
licenses or other approvals or failure to comply with the terms and
conditions of such permits, licenses or approvals could not, singly or in
the aggregate, reasonably be expected to have a Material Adverse Effect. In
the ordinary course of its business, the Company conducts
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a periodic review of the effect of Environmental Laws on the business,
operations and properties of the Company and its subsidiaries, in the
course of which it identifies and evaluates associated costs and
liabilities (including, without limitation, any capital or operating
expenditures required for clean-up, closure of properties or compliance
with Environmental Laws or any permit, license or approval, any related
constraints on operating activities and any potential liabilities to third
parties). On the basis of such review, the Company has reasonably concluded
that such associated costs and liabilities could not, singly or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
(z) Except as described in the Final Memorandum, no labor problem or
disturbance with the employees of the Company or any of its subsidiaries
exists or, to the knowledge of the Issuers, is threatened which, singly or
in the aggregate, could reasonably be expected to have a Material Adverse
Effect.
(aa) Neither the Company nor any of its subsidiaries, nor, to any
Issuer's knowledge, any director, officer, agent, employee or other person
associated with or acting on behalf of the Company or any of its
subsidiaries, has used any corporate funds during the last five years for
any unlawful contribution, gift, entertainment or other unlawful expense
relating to political activity; made any unlawful payment to any foreign or
domestic government official or employee from corporate funds; violated or
is in violation of any provision of the Foreign Corrupt Practices Act of
1977; or made any bribe, payoff, influence payment, kickback or other
unlawful payment.
(ab) Neither the Company nor any of its subsidiaries has taken, and
none of them will take, any action that would cause this Agreement or the
issuance or sale of the Securities and Exchange Securities to violate
Regulation G, T, U or X of the Board of Governors of the Federal Reserve
System or analogous foreign laws and regulations.
(ac) The Issuers have complied with all provisions of Section 517.075,
Florida Statutes (Chapter 92-198, Laws of Florida) relating to doing
business with the Government of Cuba or with persons or affiliates located
in Cuba.
(ad) The Issuers maintain reasonably adequate insurance.
(ae) Except as disclosed in the Final Memorandum, there are no
business relationships or related party transactions which would be
required to be disclosed by Item 404 of Regulation S-K under the Securities
Act.
(af) Set forth on Schedule A hereto is a list of each employee pension
or benefit plan with respect to which any of the Issuers or any corporation
considered an affiliate (an "Affiliate") of any of the Issuers within the
meaning of Section 407(d)(7) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA") is a party in interest or disqualified
person. The execution and delivery of this Agreement, the Securities, the
Exchange Securities and the Registration Rights Agreement will not involve
any prohibited transaction within the meaning of Section
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406 of ERISA or Section 4975 of the Internal Revenue Code of 1986, as
amended. The representation made by the Issuers in the preceding sentence
is made in reliance upon and subject to the accuracy of, and compliance
with, the representations and covenants made or deemed made by the Eligible
Purchasers (as defined below) as set forth in the Final Memorandum under
the Section entitled "Notice to Investors."
(ag) Other than as set forth on Schedule B hereto, no Issuer is a
party to any contract or agreement that would be required to be filed with
the Commission as an exhibit to a registration statement on Form S-1
pursuant to entries (2), (4) and (10) of the Exhibit Table of Item 601 of
Regulation S-K under the Securities Act after giving effect to the
transactions contemplated in Section 7(s) hereof.
(ah) No Issuer or Affiliate of any Issuer has sold, offered for sale
or solicited offers to buy or otherwise negotiated in respect of any
security (as defined in the Securities Act) in a transaction that could be
integrated with the sale of the Securities in a manner which would require
the registration under the Securities Act of the Securities.
(ai) No Issuer is a "holding company" or a "subsidiary company" or an
"affiliate" of a holding company within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
2. Purchase and Sale. On the basis of the representations and
warranties contained in, and subject to the terms and conditions of, this
Agreement, the Issuers agree to sell to the Initial Purchasers, and each of the
Initial Purchasers, severally but not jointly, agrees to purchase the aggregate
principal amount of Securities set forth opposite its name as shown in Schedule
C hereto, at a purchase price equal to 97% of such principal amount thereof.
The Issuers shall not be obligated to deliver any of the Securities to be
delivered except upon payment for all the Securities to be purchased as provided
herein.
3. Sale and Resale of the Securities by the Initial Purchasers. Each
Initial Purchaser represents and warrants to the Issuers that it will offer the
Securities to be purchased hereunder for resale only upon the terms and
conditions set forth in this Agreement and in the Final Memorandum. Each of the
Initial Purchasers hereby represents and warrants to, and agrees with, the
Issuers that such Initial Purchaser (i) will not solicit offers for, or offer or
sell, the Notes by means of any form of general solicitation or general
advertising within the meaning of Regulation D or in any manner involving a
public offering within the meaning of Section 4(2) of the Securities Act and
(ii) will solicit offers for the Notes only from, and will offer, sell or
deliver the Notes, as part of its initial offering, only to the following
persons (each an "Eligible Purchaser") (A) persons in the United States whom
such Initial Purchaser reasonably believes to be qualified institutional buyers
("Qualified Institutional Buyers") as defined in Rule 144A under the Securities
Act, as such rule may be amended from time to time ("Rule 144A") or, if any such
person is buying for one or more institutional accounts for which such person is
acting as fiduciary or agent, only when such person has represented to such
Initial Purchaser that each such account is a Qualified Institutional Buyer, to
whom notice has
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been given that such sale or delivery is being made in reliance on Rule 144A,
and (B) to a limited number of institutional accredited investors as defined in
Rule 501(a) (1), (2), (3) or (7) under Regulation D ("Accredited Investors")
that, prior to their purchase of the Securities, executes and delivers a letter
containing certain representations and agreements in the form attached as Annex
A to the Final Memorandum, and in each case, in transactions under Rule 144A or
Regulation D in private sales exempt from registration under the Securities Act.
4. Delivery of and Payment for the Notes. Delivery of and payment for the
Securities shall be made at the office of Latham & Watkins, 885 Third Avenue,
New York, NY 10022, at 9:00 A.M., New York City time, on the third full business
day following the date of this Agreement or at such other date or place as shall
be determined by agreement between the Initial Purchasers and the Company. This
date and time are sometimes referred to as the "Closing Date." On the Closing
Date, the Issuers shall deliver or cause to be delivered the Securities to the
Initial Purchasers for the account of the Initial Purchasers against payment to
or upon the order of the Company of the purchase price by wire transfer in
federal (same-day) funds. Time shall be of the essence, and delivery at the time
and place specified pursuant to this Agreement is a further condition of the
obligation of the Initial Purchasers hereunder. Upon delivery, the Securities
shall be in definitive fully registered form and registered in the name of Cede
& Co., as nominee of The Depository Trust Company ("DTC"), or such other name or
names and in such denominations as the Initial Purchasers shall request in
writing not less than one business day prior to the Closing Date. For the
purpose of expediting the checking and packaging of the Securities, the Issuers
shall make the Securities available for inspection by the Initial Purchasers in
New York, New York, not later than 2:00 P.M., New York City time, on the
business day prior to the Closing Date.
5. Further Agreements of the Issuers. The Issuers jointly and severally
agree with each Initial Purchaser as set forth below in this Section 5:
(a) The Issuers will furnish to the Initial Purchasers, without
charge, as many copies of the Preliminary Memorandum and Final Memorandum
and any supplements and amendments thereto as they may reasonably request.
(b) Prior to making any amendment or supplement to the Final
Memorandum, the Issuers shall furnish a copy thereof to the Initial
Purchasers and counsel to the Initial Purchasers, and the Issuers will not
effect any such amendment or supplement to which the Initial Purchasers
shall reasonably object by notice to the Company after a reasonable period
of review.
(c) If, at any time prior to completion of the distribution of the
Securities by the Initial Purchasers, any event shall occur or condition
exist as a result of which it is necessary, in the opinion of counsel for
the Initial Purchasers or counsel for the Issuers, to amend or supplement
the Final Memorandum in order that the Final Memorandum will not include an
untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein not misleading in light
of the circumstances existing at the time it is delivered to a purchaser,
or if it is necessary to amend or supplement the Final Memorandum to comply
with applicable
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law, the Issuers will promptly prepare such amendment or supplement as may be
necessary to correct such untrue statement or omission or so that the Final
Memorandum, as so amended or supplemented, will comply with applicable law and
furnish to the Initial Purchasers such number of copies of such amendment or
supplement as they may reasonably request.
(d) So long as any Securities are outstanding and are "Restricted
Securities" within the meaning of Rule 144(a)(3) under the Securities Act,
and during any period in which the Issuers are not subject to Section 13 or
15(d) of the Securities Exchange Act, of 1934, as amended (the "Exchange
Act"), the Issuers will furnish to holders of the Securities and
prospective purchasers of Securities designated by such holders, upon
request of such holders or such prospective purchasers, the information, if
any, required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act.
(e) So long as the Securities and Exchange Securities are
outstanding, the Issuers will furnish to the Initial Purchasers copies of
any annual reports, quarterly reports and current reports filed with the
Securities and Exchange Commission ("SEC") on Forms 10-K, 10-Q and 8-K, or
such other similar forms as may be designated by the SEC, and such other
documents, reports and information as shall be required to be furnished by
the Issuers to the Trustee or to the holders of the Securities and Exchange
Securities pursuant to the Indenture.
(f) The Issuers will use their best efforts to qualify the Securities
for sale under the securities or Blue Sky laws of such jurisdictions as the
Initial Purchasers reasonably designate and to continue such qualifications
in effect so long as is reasonably required for the distribution of the
Securities. The Issuers will also arrange for the determination of the
eligibility for investment of the Securities under the laws of such
jurisdictions as the Initial Purchasers reasonably request. Notwithstanding
the foregoing, the Issuers shall not be obligated to qualify as a foreign
corporation in any jurisdiction in which it is not so qualified (or, in the
case of the Company, in which it was not so qualified immediately prior to
its reincorporation as a Delaware corporation) or to file a general consent
to service of process or to subject itself to taxation in respect of doing
business in any jurisdiction in which it is not otherwise subject.
(g) The Issuers will use their best efforts to permit the Securities
to be designated PORTAL securities in accordance with the rules and
regulations adopted by the National Association of Securities Dealers, Inc.
relating to trading in the PORTAL market and to permit the Securities to be
eligible for clearance and settlement through DTC.
(h) The Issuers will not, and will cause their Affiliates not to,
sell, offer for sale or solicit offers to buy or otherwise negotiate in
respect of any security (as defined in the Securities Act) in a transaction
that could be integrated with the sale of the Securities in a manner which
would require the registration under the Securities Act of the Securities.
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<PAGE>
(i) Except following the effectiveness of any Registration Statement
(as defined in the Registration Rights Agreement) and except for such
offers as may be made as a result of, or subsequent to, filing such
Registration Statement or amendments thereto prior to the effectiveness
thereof, the Issuers will not, and will cause their affiliates not to,
solicit any offer to buy or offer to sell the Securities by means of any
form of general solicitation or general advertising (as those terms are
used in Regulation D under the Securities Act) or in any manner involving a
public offering within the meaning of Section 4(2) of the Securities Act.
(j) The Company will apply the net proceeds from the sale of the
Securities as set forth in the Final Memorandum.
(k) The Issuers will take such steps as shall be necessary to ensure
that neither the Company nor any of its subsidiaries shall become an
"investment company" within the meaning of the Investment Company Act, or
(ii) a "holding company" or a "subsidiary company" or an "affiliate" of a
holding company within the meaning of the Public Utility Holding Company
Act of 1935, as amended.
(l) The Issuers will not, and will cause their Affiliates not to,
take any actions which would require the registration under the Securities
Act of the Securities (other than pursuant to the Registration Rights
Agreement).
(m) Prior to the consummation of the Exchange Offer or the
effectiveness of an applicable shelf registration statement, if, in the
reasonable judgment of the Initial Purchasers, the Initial Purchasers or
any of their Affiliates are required to deliver an offering memorandum in
connection with sales of, or market-making activities with respect to, the
Securities, (A) the Issuers will periodically amend or supplement the Final
Memorandum so that the information contained in the Final Memorandum
complies with the requirements of Rule 144A of the Securities Act, (B) the
Issuers will amend or supplement the Final Memorandum when necessary to
reflect any material changes in the information provided therein so that
the Final Memorandum will not contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances existing as of the date
the Final Memorandum is so delivered, not misleading and (C) the Issuers
will provide the Initial Purchasers with copies of each such amended or
supplemented Final Memorandum, as the Initial Purchasers may reasonably
request.
The Issuers hereby expressly acknowledge that the indemnification and
contribution provisions of Section 8 hereof are specifically applicable and
relate to each offering memorandum, registration statement, prospectus,
amendment or supplement referred to in this Section 5(m).
(n) If, as a result of its reincorporation as a Delaware corporation,
the Company has ceased to be qualified to do business as a foreign
corporation in any jurisdiction in which it owns or leases properties or in
which the conduct of its business
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requires such qualification, the Company will promptly seek to so qualify
to do business in such jurisdictions.
(o) The Issuers will do all things necessary to satisfy the closing
conditions set forth in Section 7 hereof.
6. Expenses. The Issuers, jointly and severally, agree to pay (a) the
costs incident to the authorization, issuance, sale and delivery of the
Securities and Exchange Securities and any issue or stamp taxes payable in
connection therewith; (b) the costs incident to the preparation and printing of
the Preliminary Memorandum, the Final Memorandum and any amendments, supplements
and exhibits thereto; (c) the costs of distributing the Preliminary Memorandum,
the Final Memorandum and any amendment or supplement thereto; (d) the fees and
expenses of qualifying the Securities and Exchange Securities under the
securities laws of the several jurisdictions as provided in Section 5(f) and of
preparing, printing and distributing a Blue Sky Memorandum (including related
fees and expenses of counsel to the Initial Purchasers); (e) the cost of
printing the Securities and the Exchange Securities; (f) the fees and expenses
of the Trustee and any agent of the Trustee and the fees and disbursements of
any counsel for the Trustee in connection with the Indenture and the Securities
and Exchange Securities; (g) any fees paid to rating agencies in connection with
the rating of the Securities and Exchange Securities; (h) the costs and expenses
of DTC and its nominee, including its book-entry system; (i) all expenses and
listing fees incurred in connection with the application for quotation of the
Securities on the PORTAL market; and (j) all other costs and expenses incidental
to the performance of the obligations of the Issuers under this Agreement.
7. Conditions of Initial Purchasers' Obligations. The obligations of the
Initial Purchasers to purchase the Securities shall be subject to the accuracy
of the representations and warranties on the part of the Issuers contained
herein at the Execution Time and the Closing Date, to the accuracy of the
statements of the Issuers made in any certificates delivered pursuant to the
provisions hereof, to the performance by the Issuers of their obligations
hereunder and to the following additional conditions:
(a) The Initial Purchasers shall not have discovered and disclosed to
the Company on or prior to the Closing Date that the Final Memorandum or
any amendment or supplement thereto contains an untrue statement of a fact
which, in the opinion of Latham & Watkins, counsel for the Initial
Purchasers, is material or omits to state a fact which, in the opinion of
such counsel, is material and is necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
(b) The Final Memorandum shall have been printed and copies
distributed to the Initial Purchasers on the next Business Day following
the date of this Agreement or at such later date and time as to which the
Initial Purchasers may agree, and no stop order suspending the
qualification or exemption from qualification of the Securities in any
jurisdiction referred to in Section 5(f) shall have been issued and no
proceeding for that purpose shall have been commenced or shall be pending
or threatened.
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(c) No action shall have been taken and no statute, rule, regulation
or order shall have been enacted, adopted or issued by any governmental
agency which could, as of the Closing Date, singly or in the aggregate,
reasonably be expected to have a Material Adverse Effect; no action, suit
or proceeding shall have been commenced and be pending against or affecting
or, to the knowledge of the Issuers, threatened against, the Company or any
of its subsidiaries before any court or arbitrator or any governmental
body, agency or official that, singly or in the aggregate, if adversely
determined, could reasonably be expected to result in a Material Adverse
Effect; and no stop order shall have been issued by the SEC or any
governmental agency of any jurisdiction referred to in Section 5(f)
preventing the use of the Final Memorandum, or any amendment or supplement
thereto, or which could reasonably be expected to have a Material Adverse
Effect.
(d) Since the dates as of which information is given in the Final
Memorandum and other than as set forth in the Final Memorandum (including
the description of the Distribution), (i) there shall not have been any
Material Adverse Effect, or any development that is reasonably likely to
result in a Material Adverse Effect, or any material change in the long-
term debt or material increase in the short-term debt of the Company and
the Guarantors from that set forth in the Final Memorandum, and there shall
have been no material transactions entered into by the Company or any of
its subsidiaries, (ii) no dividend or distribution of any kind shall have
been declared, paid or made by the Company on any class of its capital
stock and (iii) the Company and its subsidiaries shall not have incurred
any liabilities or obligations, direct or contingent, that are material,
individually or in the aggregate, to the Company and its subsidiaries,
taken as a whole, and that are required to be disclosed on a balance sheet
or notes thereto in accordance with generally accepted accounting
principles and are not disclosed on the latest balance sheet or notes
thereto included in the Final Memorandum.
(e) The Initial Purchasers shall have received a certificate, dated
the Closing Date, signed on behalf of the Company by (i) Ken Hendricks,
Chief Executive Officer and (ii) Kendra Story, Chief Financial Officer,
confirming that (A) such officers have participated in conferences with
other officers and representatives of the Issuers, representatives of the
independent public accountants of the Issuers and representatives of
counsel to the Issuers at which the contents of the Final Memorandum and
related matters were discussed and (B) the matters set forth in paragraphs
(b), (c), (d) and clauses (i) and (ii) of paragraph (m) of this Section 7
are true and correct as of the Closing Date.
(f) All corporate proceedings and other legal matters incident to the
authorization, form and validity of this Agreement, the Securities and
Exchange Securities, the Indenture, the Registration Rights Agreement, the
Final Memorandum, the Credit Agreement, the Asset Purchase Agreements and
all other legal matters relating to this Agreement and the transactions
contemplated hereby and thereby shall be satisfactory in all material
respects to counsel for the Initial Purchasers, and the
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issuers shall have furnished to such counsel all documents and information
that they may reasonably request to enable them to pass upon such matters.
(g) Kirkland & Ellis and Leo and Associates, counsel for the Issuers,
shall have furnished to the Initial Purchasers their respective written
opinions, addressed to the Initial Purchasers and dated the Closing Date,
in form and substance reasonably satisfactory to the Initial Purchasers,
substantially in the form attached hereto as Schedule D and Schedule E,
respectively:
(h) The Initial Purchasers shall have received on the Closing Date an
opinion of Latham & Watkins, counsel for the Initial Purchasers, dated the
Closing Date and addressed to the Initial Purchasers, in form and substance
reasonably satisfactory to the Initial Purchasers.
(i) The Issuers and the Trustee shall have entered into the Indenture
and the Initial Purchasers shall have received counterparts, conformed as
executed, thereof.
(j) The Issuers and the Initial Purchasers shall have entered into the
Registration Rights Agreement and the Initial Purchasers shall have
received counterparts, conformed as executed, thereof.
(k) The Issuers shall have amended the Credit Agreement (the form and
substance of which amendment shall be reasonably acceptable to the Initial
Purchasers) and the Initial Purchasers shall have received counterparts,
conformed as executed, thereof and of all other documents and agreements
entered into in connection therewith. There shall exist at and as of the
Closing Date no conditions that would constitute an event of default (or an
event that with notice or the lapse of time, or both, would constitute an
event of default) under the Credit Agreement. On the Closing Date, the
Credit Agreement shall be in full force and effect and shall not have been
modified since the date of the Final Memorandum, except as provided in the
Ninth Amendment to the Credit Agreement which has been approved in form and
substance by the Initial Purchasers.
(l) (i) At the Execution Time and at the Closing Date, Ernst & Young
L.L.P. shall have furnished to the Initial Purchasers a letter or letters,
dated respectively as of the Execution Time and as of the Closing Date, in
form and substance satisfactory to the Initial Purchasers confirming that
they are independent accountants within the meaning of the Securities Act
and the Exchange Act and the applicable rules and regulations thereunder
and Rule 101 of the Code of Professional Conduct of the American Institute
of Certified Public Accountants (the "AICPA") and otherwise satisfactory in
form and substance to the Initial Purchasers and their counsel and (ii) at
the Execution Time, Konowitz, Kahn & Company, P.C. shall have furnished to
the Initial Purchasers a letter in form and substance satisfactory to the
Initial Purchasers, confirming that they have compiled the balance sheet of
Viking Building Products, Incorporated as at February 29, 1996 and February
28, 1995, and the related
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statements of income and retained earnings, and cash flows for the years
then ended in accordance with Statements on Standards for Accounting and
Review Services issued by the American Institute of Certified Public
Accountants.
(m) (i) Neither the Company nor its subsidiaries shall have sustained
since the date of the latest audited financial statements included in the
Final Memorandum losses or interferences with their businesses, taken as a
whole, from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court or governmental
action, order or decree, otherwise than as set forth or contemplated in the
Final Memorandum and (ii) since such date there shall not have been any
change in the capital stock or long-term debt of the Company or any of its
subsidiaries or any change, or any development involving a prospective
change, in or affecting the general affairs, management, financial
position, stockholder's equity or results of operations of the Company or
its subsidiaries, taken as a whole, otherwise than as set forth or
contemplated in the Final Memorandum, the effect of which, in any such case
described in clause (i) or (ii), is, in the reasonable judgment of the
Initial Purchasers, so material and adverse as to make it impracticable or
inadvisable to proceed with the offering or the delivery of the Securities
being delivered on the Closing Date on the terms and in the manner
contemplated herein and in the Final Memorandum.
(n) Subsequent to the execution and delivery of this Agreement there
shall not have occurred any of the following: (i) trading in securities
generally on the New York Stock Exchange or The Nasdaq Stock Market's
National Market or in the over-the-counter market shall have been suspended
or materially limited, or minimum prices shall have been established on
such exchange by the SEC or by such exchange or by any other regulatory
body or governmental authority having jurisdiction, (ii) a banking
moratorium shall have been declared by Federal or state authorities, (iii)
the United States shall have become engaged in hostilities, there shall
have been an escalation in hostilities involving the United States or there
shall have been a declaration of a national emergency or war by the United
States or (iv) there shall have occurred such a material adverse change in
general economic, political or financial conditions (or the effect of
international conditions on the financial markets in the United States
shall be such) as to make it, in the reasonable judgment of the Initial
Purchasers, impracticable or inadvisable to proceed with the offering or
delivery of the Securities being delivered on the Closing Date on the terms
and in the manner contemplated herein and in the Final Memorandum.
(o) Latham & Watkins shall have been furnished with such documents, in
addition to those set forth above, as they may reasonably require for the
purpose of enabling them to review or pass upon the matters referred to in
this Section 7 and in order to evidence the accuracy, completeness or
satisfaction in all material respects of any of the representations,
warranties or conditions herein contained.
(p) The Tax Allocation Agreement and the Employment Agreement referred
to in the Final Memorandum shall have been duly authorized, executed and
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delivered and shall be in full force and effect, and the Issuers shall have
delivered to the Initial Purchasers and Latham & Watkins, counsel for the
Initial Purchasers, a secretary's certificate certifying that true, correct
and complete copies of the Tax Allocation Agreement and the Employment
Agreement are attached thereto.
(q) The Related Party Leases referred to under the heading "Certain
Transactions" in the Final Memorandum shall have been amended as so
described in the Final Memorandum and the Issuers shall have delivered to
the Initial Purchasers or Latham & Watkins, counsel for the Initial
Purchasers, a secretary's certificate certifying that true, complete and
correct copies of such leases are attached thereto.
(r) The Issuers shall have delivered to the Initial Purchasers or
Latham & Watkins, counsel for the Initial Purchasers, a secretary's
certificate certifying that true, correct and complete copies of all
Existing Guarantees (as defined in the Final Memorandum) are attached
thereto.
(s) The Initial Purchasers shall have received evidence reasonably
satisfactory to the Initial Purchasers and counsel to the Initial
Purchasers that: (1) American Builders & Contractors Supply Co., Inc., a
Texas corporation, shall have been merged with and into the Company in
accordance with the General Corporation Law of the State of Delaware, (ii)
Kenneth A. Hendricks shall have contributed to the Company all of the
capital stock of Amcraft Building Products Co., Inc. and Mule-Hide Products
Co., Inc. in accordance with the General Corporation Law of the State of
Delaware and (iii) the merger of Hendricks Real Estate Properties, Inc.
with and into the Company shall have become effective in accordance with
the General Corporation Law of the State of Delaware.
(t) Kenneth A. Hendricks shall have delivered a letter agreement to
the Initial Purchasers in form and substance reasonably satisfactory to the
Initial Purchasers, wherein he will agree to use $8.2 million of the
Distribution to repay all amounts owed by him to the Company as described
under the caption "Use of Proceeds" in the Final Memorandum.
(u) The Company shall have delivered letters from Gil Aleman and Kent
Nelson confirming that they have agreed to serve as directors of the
Company as described in the Final Memorandum.
(v) Prior to the Closing Date, the Issuers shall have furnished to
the Initial Purchasers such further information, certificates and documents
as the Initial Purchasers may reasonably request.
All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably satisfactory
to counsel for the Initial Purchasers.
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8. Indemnification and Contribution. (a) The Issuers jointly and
severally agree to indemnify and hold harmless each Initial Purchaser, the
directors, officers, employees and agents of each Initial Purchaser and each
person who controls any Initial Purchaser within the meaning of either the
Securities Act or the Exchange Act against any and all losses, claims, damages,
liabilities, joint or several, or judgments (including, without limitation, the
reasonable legal and other expenses incurred in connection with any action, suit
or proceeding or any claim asserted) to which they or any of them may become
subject under the Securities Act, the Exchange Act or other Federal or state
statutory law or regulation, at common law or otherwise, insofar as such losses,
claims, damages, liabilities judgments (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in the Preliminary Memorandum, the Final Memorandum or
any information provided by the Issuers to any holder or prospective purchaser
of Notes pursuant to Section 5(d), or in any amendment thereof or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading, and agree to reimburse each such indemnified party, as
incurred, for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability or action: provided, however, that the Issuers will not be liable in
any such case to any Initial Purchaser to the extent that any such loss, claim,
damage or liability arises out of or is based upon any such untrue statement or
alleged untrue statement or omission or alleged omission made in the Preliminary
Memorandum or the Final Memorandum, or in any amendment thereof or supplement
thereto, in reliance upon and in conformity with written information furnished
to the Issuers by or on behalf of such Initial Purchaser specifically for
inclusion therein. The Issuers acknowledge that the statements set forth in the
last paragraph of the cover page and in the third, fifth and sixth paragraphs
under the heading "Plan of Distribution" in the Preliminary Memorandum and the
Final Memorandum constitute the only such information. This indemnity agreement
will be in addition to any liability which the Company may otherwise have to the
persons referred to above in this Section 8(a).
(b) Each Initial Purchaser severally and not jointly agrees to
indemnify and hold harmless the Issuers, their directors, officers, and each
person who controls the Issuers within the meaning of either the Securities Act
or the Exchange Act to the same extent as the foregoing indemnity from the
Issuers to each Initial Purchaser, but only with respect to written information
relating to such Initial Purchaser furnished to the Issuers by or on behalf of
such Initial Purchaser specifically for inclusion in the Preliminary Memorandum
or the Final Memorandum (or in any amendment or supplement thereto). The Issuers
acknowledge that the statements set forth in the last paragraph of the cover
page and in the third, fifth and sixth paragraphs under the heading "Plan of
Distribution" in the Preliminary Memorandum and the Final Memorandum constitute
the only information furnished in writing by or on behalf of the Initial
Purchasers for inclusion in the Preliminary Memorandum or the Final Memorandum
(or any amendment or supplement thereto). This indemnity agreement will be in
addition to any liability which any Initial Purchaser may otherwise have to the
persons referred to above in this Section 8(b).
19
<PAGE>
(c) Promptly after receipt by an indemnified party under this Section
8 of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section 8, notify the indemnifying party in writing of the commencement thereof,
but the failure so to notify the indemnifying party (i) will not relieve it from
liability under paragraph (a) or (b) above unless and to the extent it did not
otherwise learn of such action and such failure results in the forfeiture by the
indemnifying party of substantial rights and defenses and (ii) will not, in any
event, relieve the indemnifying party from any obligations to any indemnified
party other than the indemnification obligation provided in paragraph (a) or (b)
above. The indemnifying party shall be entitled to appoint counsel of the
indemnifying party's choice at the indemnifying party's expense to represent the
indemnified party in any action for which indemnification is sought (in which
case the indemnifying party shall not thereafter be responsible for the fees and
expenses of any separate counsel retained by the indemnified party or parties
except as set forth below); provided, however that such counsel shall be
reasonably satisfactory to the indemnified party. Notwithstanding the
indemnifying party's election to appoint counsel to represent the indemnified
party in an action, the indemnified party shall have the right to employ
separate counsel (including local counsel), and the indemnifying party shall
bear the reasonable fees, costs and expenses of such separate counsel if (i) the
use of counsel chosen by the indemnifying party to represent the indemnified
party would, in the opinion of legal counsel to the indemnified party, present
such counsel with a conflict of interest, (ii) the actual or potential
defendants in, or targets of, any such action include both the indemnified party
and the indemnifying party and the indemnified party shall have been informed in
writing by legal counsel that there may be legal defenses available to it and/or
other indemnified parties which are different from or additional to those
available to the indemnifying party, (iii) the indemnifying party shall not have
employed counsel reasonably satisfactory to the indemnified party to represent
the indemnified party within a reasonable time after notice of the institution
of such action or (iv) the indemnifying party shall authorize the indemnified
party to employ separate counsel at the expense of the indemnifying party. An
indemnifying party will not, without the prior written consent of the
indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action) (a "Settlement") unless such settlement,
compromise or consent includes an unconditional release of each indemnified
party from all liability arising out of such claim, action, suit or proceeding.
An indemnifying party shall be liable for any Settlement effected with the prior
written consent of the indemnifying party, which consent shall not be
unreasonably withheld or delayed, and an indemnifying party shall indemnify and
hold harmless any indemnified party from and against any loss, claim, damage,
liability or expense by reason of any Settlement effected with its written
consent.
(d) In the event that the indemnity provided in paragraph (a) or (b)
of this Section 8 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, the Issuers and the Initial Purchasers agree
to contribute to the aggregate losses, claims, damages and liabilities
(including legal or other expenses reasonably incurred in connection with
investigating or defending the same) (collectively "Losses") to which the
Issuers and one or more of the Initial Purchasers may be subject in such
proportion as is appropriate to reflect
20
<PAGE>
the relative benefits received by the Issuers and by the Initial Purchasers from
the offering of the Securities; provided, however that in no case shall any
Initial Purchaser (except as may be provided in any agreement among the Initial
Purchasers relating to the offering of the Securities) be responsible for any
amount in excess of the purchase discount or commission applicable to the
Securities purchased by such Initial Purchaser hereunder. If the allocation
provided by the immediately preceding sentence is unavailable for any reason,
the Issuers and the Initial Purchasers shall contribute in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Issuers and of the Initial Purchasers in connection with the
statements or omissions which resulted in such Losses as well as any other
relevant equitable considerations. Benefits received by the Issuers shall be
deemed to be equal to the total net proceeds from the offering (before deducting
expenses), and benefits received by the Initial Purchasers shall be deemed to be
equal to the total purchase discounts and commissions received by the Initial
Purchasers from the Issuers in connection with the purchase of the Securities
hereunder. Relative fault shall be determined by reference to whether any
alleged untrue statement or omission relates to information provided by the
Issuers or the Initial Purchasers. The Issuers and the Initial Purchasers agree
that it would not be just and equitable if contribution were determined by pro
rata allocation or any other method of allocation which does not take account of
the equitable considerations referred to above. Notwithstanding the provisions
of this paragraph (d), 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. For purposes of this Section 8, each person who controls an
Initial Purchaser within the meaning of either the Securities Act or the
Exchange Act and each director, officer, employee and agent of an Initial
Purchaser shall have the same rights to contribution as such Initial Purchaser,
and each person who controls the Issuers within the meaning of either the
Securities Act or the Exchange Act and each officer and director of the Issuers
shall have the same rights to contribution as the Issuers, subject in each case
to the applicable terms and conditions of this paragraph (d).
9. Termination. The obligations of the Initial Purchasers hereunder may
be terminated by the Initial Purchasers by notice given to and received by the
Company prior to delivery of and payment for the Securities if, prior to that
time, any of the events described in Sections 7(m) or 7(n) shall have occurred
or if the Initial Purchasers shall decline to purchase the Securities for any
reason permitted under this Agreement.
10. Reimbursement of Initial Purchasers' Expenses. If (a) the Issuers
shall fail to tender the Securities for delivery to the Initial Purchasers
otherwise than for any reason permitted under this Agreement or (b) the Initial
Purchasers shall decline to purchase the Securities for any reason permitted
under this Agreement (other than pursuant to Section 7(n) hereof), the Issuers
shall reimburse the Initial Purchasers for the reasonable fees and expenses of
their counsel and for such other out-of-pocket expenses as shall have been
incurred by them in connection with this Agreement and the proposed purchase of
the Securities, and upon demand the Issuers shall pay the full amount thereof to
the Initial Purchasers.
11. Notices, etc. All statements, requests, notices and agreements
hereunder shall be in writing, and:
21
<PAGE>
(a) if to the Initial Purchasers, shall be delivered or sent by mail,
telex or facsimile transmission to NationsBanc Capital Markets, Inc., 100
North Tryon Street, 20th Floor, Charlotte, North Carolina 28255, Attention:
J. Scott Holmes (Fax: 704-3889941), and to First Chicago Capital Markets,
Inc., Suite 0595, One First National Plaza, Chicago, Illinois 60670-0701,
Attention: Evonne Taylor (Fax: 312-732-4172) with a copy to Latham &
Watkins, 885 Third Avenue, New York, New York 10022, Attention: Kirk A.
Davenport (Fax: 212-751-4864); and
(b) if to the Company, shall be delivered or sent by mail, telex or
facsimile transmission to the address of the Company set forth in the Final
Memorandum, Attention: Kendra Story (Fax: 608-362-2717), with a copy to
Kirkland & Ellis, 200 East Randolph Drive, Chicago, Illinois 60601,
Attention Carter W. Emerson, P.C. (Fax: 312-861-2200) and to Leo and
Associates, 200 Randolph Avenue, Huntsville, Alabama 35801, Attention: Karl
Leo (Fax: 205-539-6024).
Any such statements, requests, notices or agreements shall take effect at the
time of receipt thereof. The Issuers shall be entitled to act and rely upon any
request, consent, notice or agreement given or made by the Initial Purchasers.
12. Persons Entitled to Benefit of Agreement. This Agreement shall inure
to the benefit of and be binding upon the Initial Purchasers, the Issuers and
their respective successors. This Agreement and the terms and provisions hereof
are for the sole benefit of only those persons, except that (A) the
representations, warranties, indemnities and agreements of the Issuers contained
in this Agreement shall also be deemed to be for the benefit of the person or
persons, if any, who control an Initial Purchaser within the meaning of Section
15 of the Securities Act and (B) the indemnity agreement of the Initial
Purchasers contained in Section 8(b) of this Agreement shall be deemed to be for
the benefit of directors of the Issuers, officers of the Issuers and any person
controlling any of the Issuers within the meaning of Section 15 of the
Securities Act. Nothing in this Agreement is intended or shall be construed to
give any person, other than the persons referred to in this Section 12, any
legal or equitable right, remedy or claim under or in respect of this Agreement
or any provision contained herein.
13. Survival. The respective indemnities, representations, warranties and
agreements of the Issuers and the Initial Purchasers contained in this Agreement
or made by or on behalf on them, respectively, pursuant to this Agreement, shall
survive the delivery of and payment for the Securities and shall remain in full
force and effect, regardless of any investigation made by or on behalf of any of
them or any person controlling any of them.
14. Definition of "Business Day". For purposes of this Agreement,
"business day" means each Monday, Tuesday, Wednesday, Thursday and Friday that
is not a day on which banking institutions in The City of New York, New York are
authorized or obligated by law, executive order or regulation to close.
15. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of New York, without regard to the conflict of law
rules thereof.
22
<PAGE>
16. Counterparts. This Agreement may be executed in one or more
counterparts and, if executed in more than one counterpart, the executed
counterparts shall each be deemed to be an original and all such counterparts
shall together constitute one and the same instrument.
17. Headings. The headings herein are inserted for convenience of
reference only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.
[Signature pages follow]
23
<PAGE>
If the foregoing correctly sets forth the agreement between the Issuers and
the Initial Purchasers, please indicate your acceptance in the space provided
for that purpose below.
Very truly yours,
AMERICAN BUILDERS & CONTRACTORS
SUPPLY CO., INC.
By: /s/ Kenneth A. Hendricks
----------------------------
Name: Kenneth A. Hendicks
Title: President and CEO
AMCRAFT BUILDING PRODUCTS CO., INC.
By: /s/ Kenneth A. Hendricks
----------------------------
Name: Kenneth A. Hendicks
Title: President and CEO
MUL-HIDE PRODUCTS CO., INC.
By: /s/ Kenneth A. Hendricks
----------------------------
Name: Kenneth A. Hendicks
Title: President and CEO
-24-
<PAGE>
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
NATIONSBANC CAPITAL MARKETS, INC.
By: /s/ J. Scott Holmes
----------------------------
Name: J. Scott Holmes
Title: Director
FIRST CHICAGO CAPITAL MARKETS, INC.
By:
-----------------------------
Name:
Title:
25
<PAGE>
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
NATIONSBANC CAPITAL MARKETS, INC.
By:
----------------------------
Name:
Title:
FIRST CHICAGO CAPITAL MARKETS, INC.
By: /s/ Evonne W. Taylor
-----------------------------
Name: Evonne W. Taylor
Title: Vice President
26
<PAGE>
If the foregoing correctly sets forth the agreement between the
Issuers and the Initial Purchasers, please indicate your acceptance in the space
provided for that purpose below.
Very truly yours,
AMERICAN BUILDERS & CONTRACTORS
SUPPLY CO., INC
By: /s/ Kenneth A. Hendricks
---------------------------
Name:
Title:
AMCRAFT BUILDING PRODUCTS CO., INC.
By: /s/ Kenneth A. Hendricks
---------------------------
Name:
Title:
MULE-HIDE PRODUCTS CO., INC.
By: /s/ Kenneth A. Hendricks
---------------------------
Name:
Title:
27
<PAGE>
EXHIBIT A
Registration Rights Agreement
28
<PAGE>
EXHIBIT 4.3
EXECUTION COPY
EXHIBIT A
================================================================================
REGISTRATION RIGHTS AGREEMENT
Dated as of May 7, 1997
by and among
American Builders & Contractors Supply Co., Inc.
Mule-Hide Products Co., Inc.
Aircraft Building Products Co., Inc.
and
NationsBanc Capital Markets, Inc.
First Chicago Capital Markets, Inc.
================================================================================
<PAGE>
This Registration Rights Agreement (this "Agreement") is made and entered
into as of May 7, 1997 by and among American Builders & Contractors Supply Co.,
Inc., a Delaware corporation (the "Company"), Amcraft Building Products Co.,
Inc., a Delaware corporation ("Amcraft"), and Mule-Hide Products Co., Inc., a
Texas corporation ("Mule-Hide" and together with Amcraft, the "Guarantors"), and
NationsBanc Capital Markets, Inc. and First Chicago Capital Markets, Inc. (each
an "Initial Purchaser" and, collectively, the "Initial Purchasers"), each of
whom has agreed to purchase the Company's 5/8% Senior Subordinated Notes due
2007 (the "Series A Notes") pursuant to the Purchase Agreement (as defined
below).
This Agreement is made pursuant to the Purchase Agreement, dated May 2,
1997 (the "Purchase Agreement"), by and among the Company, the Guarantors and
the Initial Purchasers. In order to induce the Initial Purchasers to purchase
the Series A Notes, the Company has agreed to provide the registration rights
set forth in this Agreement. The execution and delivery of this Agreement is a
condition to the obligations of the Initial Purchasers set forth in Section 2 of
the Purchase Agreement.
The parties hereby agree as follows:
Section 1. Definitions
As used in this Agreement, the following capitalized terms shall have the
following meanings:
Act: The Securities Act of 1933, as amended.
Broker-Dealer: Any broker or dealer registered under the Exchange Act.
Closing Date: The date of this Agreement.
Commission: The Securities and Exchange Commission.
Consummate: A Registered Exchange Offer shall be deemed "Consummated"
for purposes of this Agreement upon the occurrence of (i) the filing and
effectiveness under the Act of the Exchange Offer Registration Statement
relating to the Series B Notes to be issued in the Exchange Offer, (ii) the
maintenance of such Registration Statement continuously effective and the
keeping of the Exchange Offer open for a period not less than the minimum period
required pursuant to Section 3(b) hereof, and (iii) the delivery by the Company
to the Registrar under the Indenture of Series B Notes in the same aggregate
principal amount as the aggregate principal amount of Series A Notes that were
tendered by Holders thereof pursuant to the Exchange Offer.
Damages Payment Date: With respect to the Series A Notes, each Interest
Payment Date.
Effectiveness Target Date: As defined in Section 5.
<PAGE>
Exchange Act: The Securities Exchange Act of 1934, as amended.
Exchange Offer: The registration by the Company under the Act of the
Series B Notes pursuant to a Registration Statement pursuant to which the
Company offers the Holders of all outstanding Transfer Restricted Securities the
opportunity to exchange all such outstanding Transfer Restricted Securities held
by such Holders for Series B Notes in an aggregate principal amount equal to the
aggregate principal amount of the Transfer Restricted Securities tendered in
such exchange offer by such Holders.
Exchange Offer Registration Statement: The Registration Statement relating
to the Exchange Offer, including the related Prospectus.
Exempt Resales: The transactions in which the Initial Purchasers propose
to sell the Series A Notes to certain "qualified institutional buyers," as such
term is defined in Rule 144A under the Act, and to certain institutional
"accredited investors," as such term is defined in Rule 501(a)(1), (2), (3) and
(7) of Regulation D under the Act ("Accredited Institutions").
Holders: As defined in Section 2(b) hereof.
Indemnified Holder: As defined in Section 8(a) hereof.
Indenture: The Indenture, dated as of May 7, 1997, among the Company,
Norwest Bank Minnesota, National Association, as trustee (the "Trustee"), and
the Guarantors, pursuant to which the Notes are to be issued, as such Indenture
is amended or supplemented from time to time in accordance with the terms
thereof.
Interest Payment Date: As defined in the Indenture and the Notes.
NASD: National Association of Securities Dealers, Inc.
Notes: The Series A Notes and the Series B Notes.
Person: An individual, partnership, corporation, trust or unincorporated
organization, or a government or agency or political subdivision thereof.
Prospectus: The prospectus included in a Registration Statement, as
amended or supplemented by any prospectus supplement and by all other amendments
thereto, including post-effective amendments, and all material incorporated by
reference into such Prospectus.
Record Holder: With respect to any Damages Payment Date relating to Notes,
each Person who is a Holder of Notes on the record date with respect to the
Interest Payment Date on which such Damages Payment Date shall occur.
Registration Default: As defined in Section 5 hereof.
-2-
<PAGE>
Registration Statement: Any registration statement of the Company relating
to (a) an offering of Series B Notes pursuant to an Exchange Offer or (b) the
registration for resale of Transfer Restricted Securities pursuant to the Shelf
Registration Statement, which is filed pursuant to the provisions of this
Agreement, in each case, including the Prospectus included therein, all
amendments and supplements thereto (including post-effective amendments) and all
exhibits and material incorporated by reference therein.
Series B Notes: The Company's 10% Series B Senior Subordinated Notes due
2007 to be issued pursuant to the Indenture in the Exchange Offer.
Shelf Filing Deadline: As defined in Section 4 hereof.
Shelf Registration Statement: As defined in Section 4 hereof.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb) as
in effect on the date of the Indenture.
Transfer Restricted Securities: Each Note, until the earliest to occur of
(a) the date on which such Note is exchanged in the Exchange Offer and entitled
to be resold to the public by the Holder thereof without complying with the
prospectus delivery requirements of the Act, (b) the date on which such Note has
been effectively registered under the Act and disposed of in accordance with a
Shelf Registration Statement or (c) the date on which such Note is distributed
to the public pursuant to Rule 144 under the Act or by a Broker-Dealer pursuant
to the "Plan of Distribution" contemplated by the Exchange Offer Registration
Statement (including delivery of the Prospectus contained therein).
Underwritten Registration or Underwritten Offering: A registration in
which securities of the Company are sold to an underwriter for reoffering to the
public.
Section 2. Securities Subject to this Agreement
(a) Transfer Restricted Securities. The securities entitled to the
benefits of this Agreement are the Transfer Restricted Securities.
(b) Holders of Transfer Restricted Securities. A Person is deemed to
be a holder of Transfer Restricted Securities (each, a "Holder") whenever such
Person owns Transfer Restricted Securities.
Section 3. Registered Exchange Offer.
(a) Unless the Exchange Offer shall not be permissible under applicable
law or Commission policy (after the procedures set forth in Section 6(a)(i)
below have been complied with), the Company and the Guarantors shall (i) cause
to be filed with the Commission as soon as
-3-
<PAGE>
practicable after the Closing Date, but in no event later than 45 days after the
Closing Date, a Registration Statement under the Act relating to the Series B
Notes and the Exchange Offer, (ii) use their best efforts to cause such
Registration Statement to become effective at the earliest possible time, but in
no event later than 120 days after the Closing Date, (iii) in connection with
the foregoing, file (A) all pre-effective amendments to such Registration
Statement as may be necessary in order to cause such Registration Statement to
become effective, (B) if applicable, a post-effective amendment to such
Registration Statement pursuant to Rule 430A under the Act and (C) cause all
necessary filings in connection with the registration and qualification of the
Series B Notes to be made under the Blue Sky laws of such jurisdictions as are
necessary to permit consummation of the Exchange Offer; provided, however, that
neither the Company nor the Guarantors shall be required to register or qualify
as a foreign corporation where it is not now so qualified (or was not so
qualified immediately prior to its reincorporation as a Delaware corporation) or
to take any action that would subject it to the service of process in suits or
taxation, other than as to matters and transactions relating to the Registration
Statement, in any jurisdiction where it is not now so subject, and (iv) upon the
effectiveness of such Registration Statement, commence the Exchange Offer. The
Exchange Offer shall be on the appropriate form permitting registration of the
Series B Notes to be offered in exchange for the Transfer Restricted Securities
and to permit resales of Notes held by Broker-Dealers as contemplated by Section
3(c) below.
(b) The Company shall cause the Exchange Offer Registration Statement to be
effective continuously and shall keep the Exchange Offer open for a period of
not less than the minimum period required under applicable federal and state
securities laws to consummate the Exchange Offer; provided, however, that in no
event shall such period be less than 20 business days. The Company shall cause
the Exchange Offer to comply with all applicable federal and state securities
laws. No securities other than the Notes shall be included in the Exchange
Offer Registration Statement. The Company shall use its best efforts to cause
the Exchange Offer to be Consummated on the earliest practicable date after the
Exchange Offer Registration Statement has become effective, but in no event
later than 30 business days thereafter.
(c) The Company shall indicate in a "Plan of Distribution" section
contained in the Prospectus contained in the Exchange Offer Registration
Statement that any Broker-Dealer who holds Series A Notes that are Transfer
Restricted Securities and that were acquired for its own account as a result of
market-making activities or other trading activities (other than Transfer
Restricted Securities acquired directly from the Company), may exchange such
Series A Notes pursuant to the Exchange Offer; however, such Broker-Dealer may
be deemed to be an "underwriter" within the meaning of the Act and must,
therefore, deliver a prospectus meeting the requirements of the Act in
connection with any resales of the Series B Notes received by such Broker-Dealer
in the Exchange Offer, which prospectus delivery requirement may be satisfied by
the delivery by such Broker-Dealer of the Prospectus contained in the Exchange
Offer Registration Statement. Such "Plan of Distribution" section shall also
contain all other information with respect to such resales by Broker-Dealers
that the Commission may require in order to permit such resales pursuant
thereto, but such "Plan of Distribution" shall not name any such Broker-Dealer
or disclose the amount of Notes held by any such Broker-Dealer except to the
extent required by the Commission as a result of a change in policy after the
date of this Agreement.
-4-
<PAGE>
Neither the Company nor the Guarantors shall have a duty to amend or
supplement the Prospectus contained in the Exchange Offer Registration Statement
unless the Company shall have received written notice from any Broker-Dealer
(each such Broker-Dealer so notifying the Company, a "Notifying Broker-Dealer")
of its prospectus delivery requirement under the Act within fifteen (15)
business days following the consummation of the Exchange Offer; provided, that
the Company shall prominently disclose such notice requirement in the Exchange
Offer Registration Statement and in the letter of transmittal related thereto.
In the event that the Company shall have received timely notice, the Company and
the Guarantors shall use their best efforts to keep the Exchange Offer
Registration Statement continuously effective, supplemented and amended as
required by the provisions of Section 6(c) below to the extent necessary to
ensure that it is available for resales of Notes acquired by Broker-Dealers for
their own accounts as a result of market-making activities or other trading
activities, and to ensure that it conforms with the requirements of this
Agreement, the Act and the policies, rules and regulations of the Commission as
announced from time to time, for a period of one year from the date on which the
Exchange Offer Registration Statement is declared effective; provided that,
following the 30th day after the Consummation of the Exchange Offer, the Company
shall not be required to amend or supplement the Exchange Offer Registration
Statement if (i) in the judgment of the Company's Board of Directors exercised
reasonably and in good faith the use of the Exchange Offer Registration
Statement and the disclosure required to be made therein would materially
interfere with a valid business purpose of the Company or the Guarantors and
(ii) the Company delivers a notice to such effect to such Broker-Dealers setting
forth the period of time (the "Prospectus Delivery Delay Period") (which shall
not be greater than 60 days) for which the Company's obligation to so amend or
supplement the Exchange Offer Registration Statement will be suspended; and
provided further that if the Company receives written notice form all Notifying
Broker-Dealers that they no longer have a prospectus delivery requirement under
the Act, the Company's obligation to keep the Exchange Offer Registration
Statement continuously effective, supplemented and amended during such one year
period shall terminate. Notwithstanding the foregoing, there shall not be more
than one Prospectus Delivery Delay Period declared in any one calendar year.
The Company shall use its reasonable efforts to minimize the length of any
Prospectus Delivery Delay Period and shall promptly notify such Broker-Dealers
upon the termination thereof.
The Company shall provide sufficient copies of the latest version of such
Prospectus to Broker-Dealers promptly upon request at any time during such one-
year period in order to facilitate such resales.
Section 4. Shelf Registration.
(a) Shelf Registration. If (i) the Company is not required to file an
Exchange Offer Registration Statement or to consummate the Exchange Offer
because the Exchange Offer is not permitted by applicable law or Commission
policy (after the procedures set forth in Section 6(a)(i) below have been
complied with) or (ii) if any Holder of Transfer Restricted Securities shall
notify the Company within 20 business days of the Consummation of the Exchange
Offer (A) that such Holder is prohibited by applicable law or Commission policy
from participating in the Exchange
-5-
<PAGE>
Offer, or (B) that such Holder may not resell the Series B Notes acquired by it
in the Exchange Offer to the public without delivering a prospectus and that the
Prospectus contained in the Exchange Offer Registration Statement is not
appropriate or available for such resales by such Holder, or (C) that such
Holder is a Broker-Dealer and holds Series A Notes acquired directly from the
Company or one of its affiliates, then the Company and the Guarantors shall:
(x) cause to be filed a shelf registration statement pursuant to Rule
415 under the Act, which may be an amendment to the Exchange Offer
Registration Statement (in either event, the "Shelf Registration
Statement") on or prior to the earliest to occur of the 45th day after the
date on which (1) the Company determines that it is not required to file
the Exchange Offer Registration Statement, (2) a change in applicable law
or Commission policy occurs that renders the Company unable to file the
Exchange Offer Registration Statement or to consummate the Exchange Offer
and (3) the Company receives notice from a Holder of Transfer Restricted
Securities as contemplated by clause (ii) above, (such earliest date being
the "Shelf Filing Deadline"), which Shelf Registration Statement shall
provide for resales of all Transfer Restricted Securities the Holders of
which shall have provided the information required pursuant to Section 4(b)
hereof; and
(y) use their best efforts to cause such Shelf Registration Statement
to be declared effective by the Commission on or before the 60th day after
the Shelf Filing Deadline.
The Company and the Guarantors shall use their best efforts to keep such Shelf
Registration Statement continuously effective, supplemented and amended as
required by the provisions of Sections 6(b) and (c) hereof to the extent
necessary to ensure that it is available for resales of Notes by the Holders of
Transfer Restricted Securities entitled to the benefit of this Section 4(a), and
to ensure that it conforms with the requirements of this Agreement, the Act and
the policies, rules and regulations of the Commission as announced from time to
time, for a period of at least two years following the Closing Date.
If in the judgment of the Company's Board of Directors exercised reasonably
and in good faith the use of the Shelf Registration Statement and the disclosure
required to be made therein would materially interfere with a valid business
purpose of the Company or the Guarantors, the Company may deliver a notice to
such effect to the Holders, and upon receipt of such notice, the Holders shall
cease distribution of the Notes under a Shelf Registration Statement for the
period of time (the "Shelf Delay Period") set forth in such notice (which shall
not be greater than 60 days). Notwithstanding the foregoing, there shall not be
more than one Shelf Delay Period declared in any one calendar year. The Company
shall use its reasonable efforts to minimize the length of any Shelf Delay
Period and shall promptly notify the Holders upon the termination thereof.
(b) Provision by Holders of Certain Information in Connection with the
Shelf Registration Statement. No Holder of Transfer Restricted Securities may
include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Company in writing, within 20 business days after receipt of a request
therefor, such information as the Company may reasonably request for use in
connection with any
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Shelf Registration Statement or Prospectus or preliminary Prospectus included
therein. No Holder of Transfer Restricted Securities shall be entitled to
Liquidated Damages pursuant to Section 5 hereof unless and until such Holder
shall have used its best efforts to provide all such reasonably requested
information. Each Holder as to which any Shelf Registration Statement is being
effected agrees to furnish promptly to the Company all information required to
be disclosed in order to make the information previously furnished to the
Company by such Holder not materially misleading.
Section 5. Liquidated Damages.
If (i) any of the Registration Statements required by this Agreement is not
filed with the Commission on or prior to the date specified for such filing in
this Agreement, (ii) any of such Registration Statements has not been declared
effective by the Commission on or prior to the date specified for such
effectiveness in this Agreement (the "Effectiveness Target Date"), (iii) the
Exchange Offer has not been consummated within 30 business days after the
Effectiveness Target Date with respect to the Exchange Offer Registration
Statement or (iv) any Registration Statement required by this Agreement is filed
and declared effective but shall thereafter cease to be effective or fail to be
usable for its intended purpose without being succeeded immediately by a post-
effective amendment to such Registration Statement that cures such failure and
that is itself immediately declared effective (each such event referred to in
clauses (i) through (iv), a "Registration Default"), the Company and the
Guarantors hereby jointly and severally agree to pay liquidated damages to each
Holder of Transfer Restricted Securities with respect to the first 90-day period
immediately following the occurrence of such Registration Default, in an amount
equal to $.05 per week per $1,000 principal amount of Transfer Restricted
Securities held by such Holder for each week or portion thereof that the
Registration Default continues. The amount of the liquidated damages shall
increase by an additional $.05 per week per $1,000 in principal amount of
Transfer Restricted Securities with respect to each subsequent 90-day period
until all Registration Defaults have been cured, up to a maximum amount of
liquidated damages of $.50 per week per $1,000 principal amount of Transfer
Restricted Securities. All accrued liquidated damages shall be paid to Record
Holders by the Company by wire transfer of immediately available funds or by
federal funds check on each Damages Payment Date, as provided in the Indenture.
Following the cure of all Registration Defaults relating to any particular
Transfer Restricted Securities, the accrual of liquidated damages with respect
to such Transfer Restricted Securities will cease.
All obligations of the Company and the Guarantors set forth in the
preceding paragraph that are outstanding with respect to any Transfer Restricted
Security at the time such security ceases to be a Transfer Restricted Security
shall survive until such time as all such obligations with respect to such
Security shall have been satisfied in full.
Section 6. Registration Procedures.
(a) Exchange Offer Registration Statement. In connection with the
Exchange Offer, the Company and the Guarantors shall comply with all of the
provisions of Section 6(c) below, shall use
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their best efforts to effect such exchange to permit the sale of Transfer
Restricted Securities being sold in accordance with the intended method or
methods of distribution thereof, and shall comply with all of the following
provisions:
(i) If in the reasonable opinion of counsel to the Company there is a
question as to whether the Exchange Offer is permitted by applicable law,
the Company and the Guarantors hereby agree to seek a no-action letter or
other favorable decision from the Commission allowing the Company and the
Guarantors to Consummate an Exchange Offer for such Series A Notes. The
Company and the Guarantors each hereby agrees to pursue the issuance of
such a decision to the Commission staff level, but shall not be required to
take commercially unreasonable action to effect a change of Commission
policy. The Company and the Guarantors each hereby agrees, however, to (A)
participate in telephonic conferences with the Commission, (B) deliver to
the Commission staff an analysis prepared by counsel to the Company setting
forth the legal bases, if any, upon which such counsel has concluded that
such an Exchange Offer should be permitted and (C) diligently pursue a
resolution (which need not be favorable) by the Commission staff of such
submission.
(ii) As a condition to its participation in the Exchange Offer
pursuant to the terms of this Agreement, each Holder of Transfer Restricted
Securities shall furnish, upon the request of the Company, prior to the
consummation thereof, a written representation to the Company (which may be
contained in the letter of transmittal contemplated by the Exchange Offer
Registration Statement) to the effect that (A) it is not an affiliate of
the Company, (B) it is not engaged in, and does not intend to engage in,
and has no arrangement or understanding with any person to participate in,
a distribution of the Series B Notes to be issued in the Exchange Offer and
(C) it is acquiring the Series B Notes in its ordinary course of business.
In addition, all such Holders of Transfer Restricted Securities shall
otherwise cooperate in the Company's preparations for the Exchange Offer.
Each Holder hereby acknowledges and agrees that any Broker-Dealer and any
such Holder using the Exchange Offer to participate in a distribution of
the securities to be acquired in the Exchange Offer (1) could not under
Commission policy as in effect on the date of this Agreement rely on the
position of the Commission enunciated in Morgan Stanley and Co., Inc.
(available June 5, 1991) and Exxon Capital Holdings Corporation (available
May 13, 1988), as interpreted in the Commission's letter to Shearman &
Sterling dated July 2, 1993, and similar no-action letters (including any
no-action letter obtained pursuant to clause (i) above), and (2) must
comply with the registration and prospectus delivery requirements of the
Act in connection with a secondary resale transaction and that such a
secondary resale transaction should be covered by an effective registration
statement containing the selling security holder information required by
Item 507 or 508, as applicable, of Regulation S-K if the resales are of
Series B Notes obtained by such Holder in exchange for Series A Notes
acquired by such Holder directly from the Company.
(iii) Prior to effectiveness of the Exchange Offer Registration
Statement, the Company and the Guarantors shall provide a supplemental
letter to the Commission (A) stating that the Company and the Guarantors
are registering the Exchange Offer in
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reliance on the position of the Commission enunciated in Exxon Capital
Holdings Corporation (available May 13, 1988), Morgan Stanley and Co., Inc.
(available June 5, 1991) and, if applicable, any no-action letter obtained
pursuant to clause (i) above and (B) including a representation that
neither the Company nor any Guarantor has entered into any arrangement or
understanding with any Person to distribute the Series B Notes to be
received in the Exchange Offer and that, to the best of the Company's and
each Guarantor's information and belief, each Holder participating in the
Exchange Offer is acquiring the Series B Notes in its ordinary course of
business and has no arrangement or understanding with any Person to
participate in the distribution of the Series B Notes received in the
Exchange Offer.
(b) Shelf Registration Statement. In connection with the Shelf
Registration Statement, the Company and the Guarantors shall comply with all the
provisions of Section 6(c) below and shall use their best efforts to effect such
registration to permit the sale of the Transfer Restricted Securities being sold
in accordance with the intended method or methods of distribution thereof, and
pursuant thereto the Company and the Guarantors will as expeditiously as
possible prepare and file with the Commission a Registration Statement relating
to the registration on any appropriate form under the Act, which form shall be
available for the sale of the Transfer Restricted Securities in accordance with
the intended method or methods of distribution thereof.
(c) General Provisions. In connection with any Registration Statement and
any Prospectus required by this Agreement to permit the sale or resale of
Transfer Restricted Securities (including, without limitation, any Registration
Statement and the related Prospectus required to permit resales of Notes by
Broker-Dealers), the Company and each Guarantor shall:
(i) use its best efforts to keep such Registration Statement
continuously effective and provide all requisite financial statements
(including, if required by the Act or any regulation thereunder, financial
statements of the Guarantors) for the period specified in Section 3 or 4 of
this Agreement, as applicable; upon the occurrence of any event that would
cause any such Registration Statement or the Prospectus contained therein
(A) to contain a material misstatement or omission or (B) not to be
effective and usable for resale of Transfer Restricted Securities during
the period required by this Agreement, the Company and the Guarantors shall
file promptly an appropriate amendment to such Registration Statement, in
the case of clause (A), correcting any such misstatement or emission, and,
in the case of either clause (A) or (B), use its best efforts to cause such
amendment to be declared effective and such Registration Statement and the
related Prospectus to become usable for their intended purpose(s) as soon
as practicable thereafter;
(ii) prepare and file with the Commission such amendments and post-
effective amendments to the Registration Statement as may be necessary to
keep the Registration Statement effective for the applicable period set
forth in Section 3 or 4 hereof, as applicable, or such shorter period as
will terminate when all Transfer Restricted Securities covered by such
Registration Statement have been sold; cause the Prospectus to be
supplemented by any required Prospectus supplement, and as so supplemented
to be filed pursuant to Rule 424
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under the Act, and to comply fully with the applicable provisions of Rules
424 and 430A under the Act in a timely manner; and comply with the
provisions of the Act with respect to the disposition of all securities
covered by such Registration Statement during the applicable period in
accordance with the intended method or methods of distribution by the
sellers thereof set forth in such Registration Statement or supplement to
the Prospectus;
(iii) advise the underwriters), if any, and selling Holders promptly
and, if requested by such Persons, to confirm such advice in writing, (A)
when the Prospectus or any Prospectus supplement or post-effective
amendment has been filed, and, with respect to any Registration Statement
or any post-effective amendment thereto, when the same has become
effective, (B) of any request by the Commission for amendments to the
Registration Statement or amendments or supplements to the Prospectus or
for additional information relating thereto, (C) of the issuance by the
Commission of any stop order suspending the effectiveness of the
Registration Statement under the Act or of the suspension by any state
securities commission of the qualification of the Transfer Restricted
Securities for offering or sale in any jurisdiction, or the initiation of
any proceeding for any of the preceding purposes, and (D) of the existence
of any fact or the happening of any event that makes any statement of a
material fact made in the Registration Statement, the Prospectus, any
amendment or supplement thereto, or any document incorporated by reference
therein untrue, or that requires the making of any additions to or changes
in the Registration Statement or the Prospectus in order to make the
statements therein not misleading. If at any time the Commission shall
issue any stop order suspending the effectiveness of the Registration
Statement, or any state securities commission or other regulatory authority
shall issue an order suspending the qualification or exemption from
qualification of the Transfer Restricted Securities under state securities
or Blue Sky laws, the Company and the Guarantors shall use their best
efforts to obtain the withdrawal or lifting of such order at the earliest
possible time;
(iv) furnish to each of the selling Holders and each of the
underwriters), if any, before filing with the Commission, copies of any
Registration Statement or any Prospectus included therein or any amendments
or supplements to any such Registration Statement or Prospectus (including
all documents incorporated by reference after the initial filing of such
Registration Statement), which documents will be subject to the review of
such Holders and underwriters), if any, for a period of at least five
business days, and the Company and each Guarantor will not file any such
Registration Statement or Prospectus or any amendment or supplement to any
such Registration Statement or Prospectus (including all such documents
incorporated by reference) to which a selling Holder of Transfer Restricted
Securities covered by such Registration Statement or the underwriters), if
any, shall reasonably object within five business days after the receipt
thereof. A selling Holder or underwriter, if any, shall be deemed to have
reasonably objected to such filing if such Registration Statement,
amendment, Prospectus or supplement, as applicable, as proposed to be
filed, contains a material misstatement or omission;
(v) promptly prior to the filing of any document that is to be
incorporated by reference into a Registration Statement or Prospectus,
provide copies of such document to
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the selling Holders and to the underwriters), if any, make the Company's
and the Guarantors' representatives available for discussion of such
document and other customary due diligence matters, and include such
information in such document prior to the filing thereof as such selling
Holders or underwriters), if any, reasonably may request;
(vi) make available at reasonable times for inspection by the selling
Holders, any underwriter participating in any disposition pursuant to such
Registration Statement, and any attorney or accountant retained by such
selling Holders or any of the underwriters), all financial and other
records, pertinent corporate documents and properties of the Company and
the Guarantors and cause the Company's and the Guarantors' officers,
directors and employees to supply all information reasonably requested by
any such Holder, underwriter, attorney or accountant in connection with
such Registration Statement subsequent to the filing thereof and prior to
its effectiveness;
(vii) if requested by any selling Holders or the underwriters), if
any, promptly incorporate in any Registration Statement or Prospectus,
pursuant to a supplement or post-effective amendment if necessary, such
information as such selling Holders and underwriters), if any, may
reasonably request to have included therein, including, without limitation,
information relating to the "Plan of Distribution" of the Transfer
Restricted Securities, information with respect to the principal amount of
Transfer Restricted Securities being sold to such underwriters), the
purchase price being paid therefor and any other terms of the offering of
the Transfer Restricted Securities to be sold in such offering; and make
all required filings of such Prospectus supplement or post-effective
amendment as soon as practicable after the Company is notified of the
matters to be incorporated in such Prospectus supplement or post-effective
amendment;
(viii) cause the Transfer Restricted Securities covered by the
Registration Statement to be rated with the appropriate rating agencies, if
so requested by the Holders of a majority in aggregate principal amount of
Notes covered thereby or the underwriters), if any;
(ix) furnish to each selling Holder and each of the underwriters), if
any, without charge, at least one copy of the Registration Statement, as
first filed with the Commission, and of each amendment thereto, including
all documents incorporated by reference therein and all exhibits (including
exhibits incorporated by reference therein);
(x) deliver to each selling Holder and each of the underwriters), if
any, without charge, as many copies of the Prospectus (including each
preliminary prospectus) and any amendment or supplement thereto as such
Persons reasonably may request; the Company and the Guarantors hereby
consent to the use of the Prospectus and any amendment or supplement
thereto by each of the selling Holders and each of the underwriters), if
any, in connection with the offering and the sale of the Transfer
Restricted Securities covered by the Prospectus or any amendment or
supplement thereto;
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(xi) enter into such agreements (including an underwriting
agreement), and make such representations and warranties, and take all such
other actions in connection therewith in order to expedite or facilitate
the disposition of the Transfer Restricted Securities pursuant to any
Registration Statement contemplated by this Agreement, all to such extent
as may be requested by any Initial Purchaser or by any Holder of Transfer
Restricted Securities or underwriter in connection with any sale or resale
pursuant to any Registration Statement contemplated by this Agreement; and
whether or not an underwriting agreement is entered into and whether or not
the registration is an Underwritten Registration, the Company and the
Guarantors shall:
(A) furnish to each Initial Purchaser, each selling Holder and
each underwriter, if any, in such substance and scope as they may
request and as are customarily made by issuers to underwriters in
primary underwritten offerings, upon the date of the effectiveness of
the Shelf Registration Statement:
(1) a certificate, dated the date of Consummation of the
Exchange Offer or the date of effectiveness of the Shelf
Registration Statement, as the case may be, signed by (y) the
Chief Executive Officer and (z) Chief Financial Officer of the
Company confirming, as of the date thereof, the matters set
forth in paragraphs (a), (b), (c) and (d) of Section 7 of the
Purchase Agreement and such other matters as such parties may
reasonably request;
(2) an opinion, dated the date of consummation of the
Exchange Offer or the date of effectiveness of the Shelf
Registration Statement, as the case may be, of counsel for the
Company and the Guarantors, covering the matters set forth in
paragraph (g) of Section 7 of the Purchase Agreement and such
other matters as such parties may reasonably request, and in any
event including a statement to the effect that such counsel has
participated in conferences with officers and other
representatives of the Company and the Guarantors,
representatives of the independent public accountants for the
Company and the Guarantors, the Initial Purchasers'
representatives and the Initial Purchasers' counsel in
connection with the preparation of such Registration Statement
and the related Prospectus and have considered the matters
required to be stated therein and the statements contained
therein, although such counsel has not independently verified
the accuracy, completeness or fairness of such statements; and
that such counsel advises that, on the basis of the foregoing
(relying as to materiality to a large extent upon facts provided
to such counsel by officers and other representatives of the
Company and the Guarantors and without independent check or
verification), no facts came to such counsel's attention that
caused such counsel to believe that the applicable Registration
Statement, at the time such Registration Statement or any post-
effective amendment thereto became effective, and, in the case
of the Exchange Offer Registration Statement, as
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of the date of consummation, contained an untrue statement of a
material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading, or that the Prospectus contained in such
Registration Statement as of its date and, in the case of the
opinion dated the date of Consummation of the Exchange Offer, as
of the date of Consummation, contained an untrue statement of a
material fact or omitted to state a material fact necessary in
order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
Without limiting the foregoing, such counsel may state further
that such counsel assumes no responsibility for, and has not
independently verified, the accuracy, completeness or fairness
of the financial statements, notes and schedules and other
financial data included in or omitted from any Registration
Statement contemplated by this Agreement or the related
Prospectus; and
(3) a customary comfort letter, dated as of the date of
Consummation of the Exchange Offer or the date of effectiveness
of the Shelf Registration Statement, as the case may be, from
the Company's and the Guarantors' independent accountants, in
the customary form and covering matters of the type customarily
covered in comfort letters by underwriters in connection with
primary underwritten offerings, and affirming the matters set
forth in the comfort letters delivered pursuant to Section 7(l)
of the Purchase Agreement, without exception;
(B) set forth in full or incorporate by reference in the
underwriting agreement, if any, the indemnification provisions and
procedures of Section 8 hereof with respect to all parties to be
indemnified pursuant to said Section; and
(C) deliver such other documents and certificates as may be
reasonably requested by such parties to evidence compliance with
clause (A) above and with any customary conditions contained in the
underwriting agreement or other agreement entered into by the Company
or the Guarantors pursuant to this clause (xi), if any.
If at any time the representations and warranties of the Company
and the Guarantors set forth in the certificate contemplated in clause
(A)(1) above cease to be true and correct, the Company or the Guarantors
shall so advise the Initial Purchasers and the underwriter(s), if any, and
each selling Holder promptly and, if requested by such Persons, shall
confirm such advice in writing;
(xii) prior to any public offering of Transfer Restricted
Securities, cooperate with the selling Holders, the underwriter(s), if any,
and their respective counsel in connection with the registration and
qualification of the Transfer Restricted Securities under the securities or
Blue Sky laws of such jurisdictions as the selling Holders or
underwriter(s) may request and
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do any and all other acts or things necessary or advisable to enable the
disposition in such jurisdictions of the Transfer Restricted Securities
covered by the Shelf Registration Statement; provided, however, that
neither the Company nor the Guarantors shall be required to register or
qualify as a foreign corporation where it is not now so qualified or to
take any action that would subject it to the service of process in suits or
to taxation, other than as to matters and transactions relating to the
Registration Statement, in any jurisdiction where it is not now so subject;
(xiii) shall issue, upon the request of any Holder of Series A Notes
covered by the Shelf Registration Statement, Series B Notes, having an
aggregate principal amount equal to the aggregate principal amount of
Series A Notes surrendered to the Company by such Holder in exchange
therefor or being sold by such Holder; such Series B Notes to be registered
in the name of such Holder or in the name of the purchaser(s) of such
Notes, as the case may be; in return, the Series A Notes held by such
Holder shall be surrendered to the Company for cancellation;
(xiv) cooperate with the selling Holders and the underwriters, if
any, to facilitate the timely preparation and delivery of certificates
representing Transfer Restricted Securities to be sold and not bearing any
restrictive legends; and enable such Transfer Restricted Securities to be
in such denominations and registered in such names as the Holders or the
underwriter(s), if any, may request at least two business days prior to any
sale of Transfer Restricted Securities made by such underwriter(s);
(xv) use its best efforts to cause the Transfer Restricted Securities
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 seller or sellers thereof or the underwriter(s), if any, to
consummate the disposition of such Transfer Restricted Securities, subject
to the proviso contained in clause (xii) above;
(xvi) if any fact or event contemplated by clause (c)(iii)(D) above
shall exist or have occurred, prepare a supplement or post-effective
amendment to the Registration Statement or related Prospectus or any
document incorporated therein by reference or file any other required
document so that, as thereafter delivered to the purchasers of Transfer
Restricted Securities, the Prospectus will not contain an untrue statement
of a material fact or omit to state any material fact necessary to make the
statements therein not misleading;
(xvii) provide a CUSIP number for all Transfer Restricted Securities
not later than the effective date of the Registration Statement, and
provide the Trustee under the Indenture with printed certificates for the
Transfer Restricted Securities which are in a form eligible for deposit
with The Depository Trust Company;
(xviii) cooperate and assist in any filings required to be made with
the NASD and in the performance of any due diligence investigation by any
underwriter (including any "qualified independent underwriter") that is
required to be retained in accordance with the
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rules and regulations of the NASD, and use its reasonable best efforts to
cause such Registration Statement to become effective and approved by such
governmental agencies or authorities as may be necessary to enable the
Holders selling Transfer Restricted Securities to consummate the
disposition of such Transfer Restricted Securities;
(xix) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make generally available to
its security holders, as soon as practicable, a consolidated earnings
statement meeting the requirements of Rule 158 (which need not be audited)
for the twelve-month period (A) commencing at the end of any fiscal quarter
in which Transfer Restricted Securities are sold to underwriters in a firm
or best efforts Underwritten Offering or (B) if not sold to underwriters in
such an offering, beginning with the first month of the Company's first
fiscal quarter commencing after the effective date of the Registration
Statement;
(xx) cause the Indenture to be qualified under the TIA not later
than the effective date of the first Registration Statement required by
this Agreement, and, in connection therewith, cooperate with the Trustee
and the Holders of Notes to effect such changes to the 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 best efforts to cause the Trustee to
execute, all documents that may be required to effect such changes and all
other forms and documents required to be filed with the Commission to
enable such Indenture to be so qualified in a timely manner;
(xxi) cause all Transfer Restricted Securities covered by the
Registration Statement to be listed on each securities exchange on which
similar securities issued by the Company are then listed if requested by
the Holders of a majority in aggregate principal amount of Series A Notes
or the managing underwriters), if any; and
(xxii) provide promptly to each Holder upon request each document
filed with the Commission pursuant to the requirements of Section 13 and
Section 15 of the Exchange Act.
Each Holder agrees by acquisition of a Transfer Restricted Security that,
upon receipt of any notice from the Company of the existence of any fact of the
kind described in Section 6(c)(iii)(D) hereof, such Holder will forthwith
discontinue disposition of Transfer Restricted Securities pursuant to the
applicable Registration Statement until such Holder's receipt of the copies of
the supplemented or amended Prospectus contemplated by Section 6(c)(xvi) hereof,
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 that are incorporated by reference in the Prospectus. If so
directed by the Company, each Holder will deliver to the Company (at the
Company's expense) all copies, other than permanent file copies then in such
Holder's possession, of the Prospectus covering such Transfer Restricted
Securities that was 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 such Registration Statement set forth in Section 3 or 4 hereof,
as applicable, shall be extended by the number of days during the period from
and including the date of the giving of such notice pursuant
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to Section 6(c)(iii)(D) hereof to and including the date when each selling
Holder covered by such Registration Statement shall have received the copies of
the supplemented or amended Prospectus contemplated by Section 6(c)(xvi) hereof
or shall have received the Advice.
Section 7. Registration Expenses
(a) All expenses incident to the Company's or the Guarantors' performance
of or compliance with this Agreement will be borne by the Company or the
Guarantors, regardless of whether a Registration Statement becomes effective,
including without limitation: (i) all registration and filing fees and expenses
(including filings made by any Initial Purchaser or Holder with the NASD (and,
if applicable, the fees and expenses of any "qualified independent underwriter"
and its counsel that may be required by the rules and regulations of the NASD));
(ii) all fees and expenses of compliance with federal securities and state Blue
Sky or securities laws; (iii) all expenses of printing (including printing
certificates for the Series B Notes to be issued in the Exchange Offer and
printing of Prospectuses), messenger and delivery services and telephone; (iv)
all fees and disbursements of counsel for the Company, the Guarantors and,
subject to Section 7(b) below, the Holders of Transfer Restricted Securities;
(v) all application and filing fees in connection with listing Notes on a
national securities exchange or automated quotation system pursuant to the
requirements hereof; and (vi) all fees and disbursements of independent
certified public accountants of the Company and the Guarantors (including the
expenses of any special audit and comfort letters required by or incident to
such performance).
The Company will, in any event, bear its and the Guarantors' internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expenses of
any annual audit and the fees and expenses of any Person, including special
experts, retained by the Company.
(b) In connection with any Registration Statement required by this
Agreement (including, without limitation, the Exchange Offer Registration
Statement and the Shelf Registration Statement), the Company will reimburse the
Initial Purchasers and the Holders of Transfer Restricted Securities being
tendered in the Exchange Offer and/or resold pursuant to the "Plan of
Distribution" contained in the Exchange Offer Registration Statement or
registered pursuant to the Shelf Registration Statement, as applicable, for the
reasonable fees and disbursements of not more than one counsel, who shall be
Latham & Watkins or such other counsel as may be chosen by the Holders of a
majority in principal amount of the Transfer Restricted Securities for whose
benefit such Registration Statement is being prepared.
Section 8. Indemnification.
(a) The Company and the Guarantors, jointly and severally, agree to
indemnify and hold harmless (i) each Holder, (ii) the directors, officers,
employees and agents of each Holder and (iii) each person who controls any
Holder within the meaning of either the Securities Act or the Exchange Act (any
person referred to in clause (i), (ii) or (iii) may hereinafter be referred to
as an "Indemnified Holder"), against any and all losses, claims, damages,
liabilities, joint and several, or
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judgments (including, without limitation, the reasonable legal and other
expenses incurred in connection with any action, suit or proceeding or any claim
asserted) to which any Indemnified Holder may become subject, insofar as such
losses, claims, damages, liabilities or judgments (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement or
Prospectus (or any amendment or supplement thereto), or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading, and
agree to reimburse each such Indemnified Holder, as incurred, for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the Company and the Guarantors will not be liable in any such case to any
Indemnified Holder to the extent that any such loss, claim, damage or liability
arises out of or is based upon any such untrue statement or alleged untrue
statement or omission or alleged omission made in reliance upon and in
conformity with information relating to any of the Holders furnished in writing
to the Company or the Guarantors by any of the Holders expressly for use in any
Registration Statement or Prospectus.
(b) Each Holder of Transfer Restricted Securities, severally and not
jointly, agrees to indemnity and hold harmless the Company and the Guarantors,
their directors, officers, and each person who controls the Company and the
Guarantors within the meaning of either the Securities Act or the Exchange Act
to the same extent as the foregoing indemnity from the Company and the
Guarantors to each Indemnified Holder, but only with respect to information
relating to such Holder furnished in writing to the Company or the Guarantors
specifically for inclusion in any Registration Statement (or in any amendment or
supplement thereto). In no event shall the liability of any selling Holder
hereunder be greater in amount than the dollar amount of the proceeds received
by such Holder upon the sale of the Transfer Restricted Securities giving rise
to such indemnification obligation or if, in lieu of receiving proceeds, the
Holder receives a Series B Note in exchange for a Series A Note, the principal
amount of such Holder's Series B Note.
(c) Promptly after receipt by an indemnified party under this Section 8 of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section 8, notify the indemnifying party in writing of the commencement thereof,
but the failure so to notify the indemnifying party (i) will not relieve it from
liability under paragraph (a) or (b) above unless and to the extent it did not
otherwise learn of such action and such failure results in the forfeiture by the
indemnifying party of substantial rights and defenses and (ii) will not, in any
event, relieve the indemnifying party from any obligations to any indemnified
party other than the indemnification obligation provided in paragraph (a) or (b)
above. The indemnifying party shall be entitled to appoint counsel of the
indemnifying party's choice at the indemnifying party's expense to represent the
indemnified party in any action for which indemnification is sought (in which
case the indemnifying party shall not thereafter be responsible for the fees and
expenses of any separate counsel retained by the indemnified party or parties
except as set forth below); provided, however that such counsel shall be
reasonably satisfactory to the indemnified party. Notwithstanding the
indemnifying party's election to appoint counsel to represent the indemnified
party in an action, the indemnified party shall have the right to employ
separate
-17-
<PAGE>
counsel (including local counsel), and the indemnifying party shall bear the
reasonable fees, costs and expenses of such separate counsel if (i) the use of
counsel chosen by the indemnifying party to represent the indemnified party
would, in the opinion of legal counsel to the indemnified party, present such
counsel with a conflict of interest, (ii) the actual or potential defendants in,
or targets of, any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have been informed in writing
by legal counsel that there may be legal defenses available to it and/or other
indemnified parties which are different from or additional to those available to
the indemnifying party, (iii) the indemnifying party shall not have employed
counsel reasonably satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after notice of the institution of
such action or (iv) the indemnifying party shall authorize the indemnified party
to employ separate counsel at the expense of the indemnifying party. An
indemnifying party will not, without the prior written consent of the
indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action) (a "Settlement") unless such settlement,
compromise or consent includes an unconditional release of each indemnified
party from all liability arising out of such claim, action, suit or proceeding.
An indemnifying party shall be liable for any Settlement effected with the prior
written consent of the Indemnifying Party, which consent shall not be
unreasonably withheld or delayed, and an indemnifying party shall indemnify and
hold harmless any indemnified party from and against any loss, claim, damage,
liability or expense by reason of any Settlement effected with its written
consent.
(d) In the event that the indemnify provided in paragraph (a) or (b) of
this Section 8 is unavailable to or insufficient to hold harmless an indemnified
party for any reason, the Company and the Guarantors and the Holders agree to
contribute to the aggregate losses, claims, damages and liabilities (including
legal or other expenses reasonably incurred in connection with investigating or
defending the same) (collectively "Losses") to which the Company and the
Guarantors and one or more of the Holders may be subject in such proportion as
is appropriate to reflect the relative benefits received by the Company and the
Guarantors on the one hand and by the Holders on the other hand from the
offering of Transfer Restricted Securities; provided, however, that in no case
shall any Holder be responsible for any amount in excess of the dollar amount of
the proceeds received by such Holder upon the sale of the Transfer Restricted
Securities or if, in lieu of receiving proceeds, the Holder receives a Series B
Note in exchange for a Series A Note, the principal amount of such Holder's
Series B Note. If the allocation provided by the immediately preceding sentence
is unavailable for any reason, the Company and the Guarantors on the one hand
and the Holders on the other hand shall contribute in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company and the Guarantors on the one hand and of the Holders on
the other hand in connection with the statements or emissions which resulted in
such Losses as well as any other relevant equitable considerations. Relative
fault shall be determined by reference to whether any alleged untrue statement
or omission relates to information provided by the Company and the Guarantors or
the Holder. The Company and the Guarantors and the Holders agree that it would
not be just and equitable if contribution were determined by pro rata allocation
or any other method of allocation which does not take account of the equitable
considerations referred to
-18-
<PAGE>
above. Notwithstanding the provisions of this paragraph (d), no person guilty of
fraudulent misrepresentation (within the meaning of Section 1l(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. For purposes of this Section 8,
each person who controls a Holder within the meaning of either the Securities
Act or the Exchange Act and each director, officer, employee and agent of a
Holder shall have the same rights to contribution as such Holder, and each
person who controls the Company and the Guarantors within the meaning of either
the Securities Act or the Exchange Act and each officer and director of the
Company and the Guarantors shall have the same rights to contribution as the
Company and the Guarantors, subject in each case to the applicable terms and
conditions of this paragraph (d).
Section 9. Rule 144A.
The Company and each Guarantor hereby agrees with each Holder, for so long
as any Transfer Restricted Securities remain outstanding, to make available to
any Holder or beneficial owner of Transfer Restricted Securities in connection
with any sale thereof and to any prospective purchaser of such Transfer
Restricted Securities from such Holder or beneficial owner, the information
required by Rule 144A(d)(4) under the Act in order to permit resales of such
Transfer Restricted Securities pursuant to Rule 144A.
Section 10. Participation in Underwritten Registrations.
No Holder may participate in any Underwritten Registration hereunder unless
such Holder (a) agrees to sell such Holder's Transfer Restricted Securities on
the basis provided in any underwriting arrangements approved by the Persons
entitled hereunder to approve such arrangements and (b) completes and executes
all reasonable questionnaires, powers of attorney, indemnities, underwriting
agreements, lock-up letters and other documents required under the terms of such
underwriting arrangements.
Section 11. Selection of Underwriters.
The Holders of Transfer Restricted Securities covered by the Shelf
Registration Statement who desire to do so may sell such Transfer Restricted
Securities in an Underwritten Offering. In any such Underwritten Offering, the
investment banker or investment bankers and manager or managers that will
administer the offering will be selected by the Holders of a majority in
aggregate principal amount of the Transfer Restricted Securities included in
such offering; provided that such investment bankers and managers must be
reasonably satisfactory to the Company.
-19-
<PAGE>
Section 12. Miscellaneous.
(a) Remedies. The Company and the Guarantors agree that monetary damages
(including the liquidated damages contemplated hereby) would not be adequate
compensation for any loss incurred by reason of a breach by it of the provisions
of this Agreement and hereby agree to waive the defense in any action for
specific performance that a remedy at law would be adequate.
(b) No Inconsistent Agreements. The Company and the Guarantors will not
on or after the date of this Agreement enter into any agreement with respect to
its securities that is inconsistent with the rights granted to the Holders in
this Agreement or otherwise conflicts with the provisions hereof. Neither the
Company nor any Guarantor has previously entered into any agreement granting any
registration rights with respect to its securities to any Person. The rights
granted to the Holders hereunder do not in any way conflict with and are not
inconsistent with the rights granted to the holders of the Company's securities
under any agreement in effect on the date hereof.
(c) Adjustments Affecting the Notes. The Company and each Guarantor will
not take any action, or permit any change to occur, with respect to the Notes
that would materially and adversely affect the ability of the Holders to
Consummate any Exchange Offer.
(d) Amendments and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to or departures from
the provisions hereof may not be given, unless the Company has obtained the
written consent of Holders of a majority of the outstanding principal amount of
Transfer Restricted Securities. Notwithstanding the foregoing, a waiver or
consent to departure from the provisions hereof that relates exclusively to the
rights of Holders whose securities are being tendered pursuant to the Exchange
Offer and that does not affect directly or indirectly the rights of other
Holders whose securities are not being tendered pursuant to such Exchange Offer
may be given by the Holders of a majority of the outstanding principal amount of
Transfer Restricted Securities being tendered or registered.
(e) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of the
Registrar under the Indenture, with a copy to the Registrar under the
Indenture; and
(ii) if to the Company or any Guarantor:
American Builders & Contractors Supply Co., Inc.
One ABC Parkway Beloit, WI 53511
Telecopier No.: (608) 362-2717
Attention: Kendra Story
-20-
<PAGE>
With a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Telecopier No.: (312) 861-2200
Attention: Carter W. Emerson, P.C.
and
Leo and Associates
200 Randolph Avenue
Huntsville, Alabama 35801
Telecopier No.: (205) 539-6024
Attention: Karl Leo
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt acknowledged, if telecopied; and on the
next business day, if timely delivered to an air courier guaranteeing overnight
delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
(f) Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of each of the parties, including
without limitation and without the need for an express assignment, subsequent
Holders of Transfer Restricted Securities; 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 acquired
Transfer Restricted Securities from such Holder.
(g) 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.
(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
-21-
<PAGE>
(i) Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(j) Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted by the Company with respect to
the Transfer Restricted Securities. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-22-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
AMERICAN BUILDERS &
CONTRACTORS SUPPLY CO., INC.
By:
-----------------------------------
Name: Kenneth A. Hendricks
Title: President and CEO
MULE-HIDE PRODUCTS CO., INC.
By:
-----------------------------------
Name: Kenneth A. Hendricks
Title: President and CEO
AMCRAFT BUILDING PRODUCTS CO., INC.
By:
-----------------------------------
Name: Kenneth A. Hendricks
Title: President and CEO
NATIONSBANC CAPITAL MARKETS, INC.
By:
--------------------------------
Name: J. Scott Holmes
Title: Director
FIRST CHICAGO CAPITAL MARKETS, INC.
By:
--------------------------------
Name:
Title:
-23-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
AMERICAN BUILDERS &
CONTRACTORS SUPPLY CO., INC.
By:
--------------------------------------
Name: Kenneth A. Hendricks
Title: President and CEO
MULE-HIDE PRODUCTS CO., INC.
By:
--------------------------------------
Name: Kenneth A. Hendricks
Title: President and CEO
AMCRAFT BUILDING PRODUCTS CO., INC.
By:
--------------------------------------
Name: Kenneth A. Hendricks
Title: President and CEO
NATIONSBANC CAPITAL MARKETS, INC.
By:
------------------------------
Name: J. Scott Holmes
Title: Director
FIRST CHICAGO CAPITAL MARKETS, INC.
By:
--------------------------------
Name:
Title:
-24-
<PAGE>
SCHEDULE A
Employee Benefit or Pension Plans (see Section 1(af))
<PAGE>
ABC SUPPLY CO.
<TABLE>
<CAPTION>
Name Used Type of Plan Carrier Group Number
<S> <C> <C> <C>
Hendricks Et Al Medical Insurance Unicare/Mass Mutual #114780
Henricks Group Long-Term Disability Guardian G-306862-FC
Hendricks Et Al Voluntary Term Life NASRA 01-0167350
ABC Supply Co. (401)k Plan Universal Life Royal Maccabees MMU05763
American Builders & Contracts STD-New York Standard Security Life 101118
Supply Co.
ABC Supply Company 401(k) Minnesota Mutual 61094
Employees' Savings &
Retirement Plan
</TABLE>
<PAGE>
SCHEDULE B
Material Agreements of the Issuers (see Section l(ag))
-27-
<PAGE>
SCHEDULE B
Indenture dated as of May 6, 1997 between the Company, Mule-Hide and Amcraft and
Norwest Bank Minnesota, National Association, as trustee (including form of New
Note and Senior Subordinated Guarantees).
Purchase Agreement dated as of May 2, 1997 between the Company, Mule-Hide and
Amcraft and NationsBanc Capital Markets, Inc. and First Chicago Capital Markets,
Inc.
Registration Rights Agreement dated as of May 6, 1997 between the Company, Mule-
Hide and Amcraft and NationsBanc Capital Markets, Inc. and First Chicago Capital
Markets, Inc.
Asset Purchase Agreement dated as of April 12, 1997, by and between Viking
Aluminum Products, Inc. and the Company.
Asset Purchase Agreement, dated as of April 12, 1997, by and between Viking
Building Products, Inc. and the Company.
Employment Agreement, dated as of May 1, 1997, between the Company and Kenneth
A. Hendricks.
Tax Allocation Agreement, dated as of May , 1997, among the Company, Mule-Hide
and Amcraft and Kenneth A. Hendricks.
Form of lease agreement between the Company and Hendricks Commercial Properties
Continuing Guarantee Agreement, dated July 20, 1996, between Mule-Hide and
Heritage Bank, N.A., for the benefit of Kenneth A. Hendricks.
Guaranty, dated December 22, 1992, between the Company and Transohio Savings
Bank, for the benefit of Kenneth A. Hendricks.
Guaranty, dated December 22, 1996, between the Company and MetLife Capital
Corporation, for the benefit of Kenneth A. Hendricks.
Amended and Restated Loan and Security Agreement among American National Bank
and Trust Company of Chicago, NationsBank of Texas, N.A. , Bankamerica Business
Credit, Inc. and the Company, as amended (the "Credit Agreement").
Amended and Restated Patent, Trademark and License Mortgage by the Company in
favor of NationsBank of Texas, N.A., as agent for the lenders under the Credit
Agreement, as amended.
Amended and Restated Limited Guaranty Agreement by Kenneth A. Hendricks, dated
as of February 8, 1996, in favor of NationsBank of Texas, N.A., individually or
as agent for the lenders under the Credit Agreement.
Third Amended and Restated Revolving Credit Note of the Company in the amount of
$25,000,000.00 made to the order of American National Bank and Trust Company of
Chicago.
Third Amended and Restated Revolving Credit Note of the Company in the amount of
$35,000,000.00 made to the order of NationsBank of Texas, N.A.
Revolving Credit Note of the Company in the amount of $32,500,000.00 made to the
order of Fleet Capital Corporation.
Revolving Credit Note of the Company in the amount of $22,500,000.00 made to the
order of Harris Trust and Savings Bank
Revolving Credit Note of the Company in the amount of $27,500,000.00 made to the
order of Sanwa Business Credit Corporation
Ninth Amendment to the Credit Agreement dated as of May 7, 1997.
<PAGE>
SCHEDULE C
American Builders and Contractors Supply Co., Inc.
<TABLE>
<CAPTION>
Principal
Initial Purchaser Amount
- ---------------------------------------------------------------- ------------
<S> <C>
NationsBanc Capital Markets, Inc. .............................. $ 80,000,000
First Chicago Capital Markets, Inc. ............................ $ 20,000,000
$100,000,000
============
</TABLE>
<PAGE>
SCHEDULE D
Opinion of Kirkland & Ellis
<PAGE>
May 7, 1997
NationsBanc Capital Markets, Inc.
First Chicago Capital Markets, Inc.
c/o NationsBanc Capital Markets, Inc.
100 North Tryon Street, Seventh Floor
Charlotte, North Carolina 28255
Re: American Builders & Contractors Supply Co., Inc.
------------------------------------------------
Ladies and Gentlemen:
We are issuing this opinion letter in our capacity as special legal counsel
to American Builders & Contractors Supply Co., Inc., a Delaware corporation
(the "Company"), in response to the requirement in Section 7(g) of the Purchase
Agreement (the "Purchase Agreement") dated as of May 2, 1997 among the Company,
each of the Subsidiary Guarantors (as defined below), NationsBanc Capital
Markets, Inc. ("NationsBanc") and First Chicago Capital Markets, Inc. ("First
Chicago" and, together with NationsBanc, the "Initial Purchasers").
All capitalized terms used herein and not defined herein shall have the
meanings given to such terms in the Purchase Agreement. Together, the Purchase
Agreement, the Indenture, the Registration Rights Agreement and the Securities
are referred to herein as the "Transaction Agreements." The following
subsidiaries of the Company are referred to herein as the "Subsidiaries" or
"Subsidiary Guarantors": Mule-Hide Products Co., Inc., a Texas corporation
("Mule-Hide"), and Amcraft Building Products Co., Inc., a Delaware corporation
("Amcraft").
In arriving at the opinions expressed herein, among other things, we have
examined the following:
(a) the Offering Memorandum of the Company, dated May 2, 1997, covering the
offering and sale of the Securities (the "Offering Memorandum");
(b) an executed original of the Purchase Agreement;
(c) executed originals of the Indenture and the Securities to. be delivered
on the date hereof,
(d) an executed original of the Registration Rights Agreement; and
(e) copies of all certificates and other documents delivered in connection
with the sale of the Securities on the date hereof and the consummation of the
other transactions contemplated by the Purchase Agreement.
<PAGE>
NationsBanc Capital Markets, Inc.
First Chicago Capital Markets, Inc.
May 7, 1997
Page 2
In preparing this letter, we have relied without any independent
verification upon the assumptions recited in Schedule A to this letter and upon:
(i) information contained in certificates obtained from governmental
authorities; (ii) factual information represented to be true in the Purchase
Agreement and the other Transaction Agreements; (iii) factual information
provided to us in the support certificate (the "Support Certificate") signed by
the Company and the Subsidiary Guarantors and attached hereto; and (iv) factual
information we have obtained from such other sources as we have deemed
reasonable. We have assumed without investigation that there has been no
relevant change or development between the dates as of which the information
cited in the preceding sentence was given and the date of this letter and that
the information upon which we have relied is accurate and does not omit
disclosures necessary to prevent such information from being misleading. For
purposes of each opinion in paragraph 1, we have relied exclusively upon
certificates issued by a governmental authority in each relevant jurisdiction,
and such opinion is not intended to provide any conclusion or assurance beyond
that conveyed by that certificate.
While we have not conducted any independent investigation to determine
facts upon which our opinions are based, we confirm that we do not have any
actual knowledge which has caused us to conclude that our reliance and
assumptions cited in the preceding paragraph are unwarranted or that any
information supplied in this letter is wrong. The term "actual knowledge"
whenever it is used in this letter with respect to our firm means conscious
awareness at the time this letter is delivered on the date it bears by the
following Kirkland & Ellis lawyers, who constitute all of the Kirkland & Ellis
lawyers who have devoted a significant amount of time to the negotiation or
preparation of the Transaction Agreements, the Offering Memorandum and the due
diligence associated therewith (herein called "our Designated Transaction
Lawyers"): Carter W. Emerson, P.C., Gerald T. Nowak and Julie A. Johnson.
Subject to the assumptions, qualifications, exclusions and other
limitations which are identified in this letter and in the schedules attached to
this letter, we advise you that:
1. The Company is a corporation existing and in good standing under the
General Corporation Law of the State of Delaware. The merger of American
Builders & Contractors Supply Co., Inc., a Texas corporation, with and into
the Company has become effective in accordance with the General Corporation
Law of the State of Delaware. The merger of Hendricks Real Estate
Properties, Inc., a Wisconsin corporation, with and into the Company has
become effective in accordance with the General Corporation Law of the
State of Delaware. Each of the Company and each Subsidiary Guarantor is
qualified as a foreign corporation in good standing in each of the
jurisdictions set forth on Schedule B hereto.
2. The Company was duly incorporated under the General Corporation Law of the
State of Delaware.
<PAGE>
NationsBanc Capital Markets, Inc.
First Chicago Capital Markets, Inc.
May 7, 1997
Page 3
3. No registration under the Securities Act of the Securities is required in
connection with the offer and sale of the Securities to the Initial
Purchasers in the manner contemplated by the Purchase Agreement and the
Offering Memorandum or in connection with the initial resale of the
Securities by the Initial Purchasers in accordance with Section 3 of the
Purchase Agreement, and prior to the commencement of the Exchange Offer or
the effectiveness of the Shelf Registration Statement, the Indenture is not
required to be qualified under the TIA, in each case assuming (i) that the
purchasers who buy such Securities in the initial resale thereof are, or
the Initial Purchasers reasonably believe them to be, Qualified
Institutional Buyers or Accredited Investors, (ii) the accuracy and
completeness of the Initial Purchasers' representations in Section 3 and
those of the Issuer contained in the Purchase Agreement regarding the
absence of a general solicitation in connection with the sale of such
Securities to the Initial Purchasers and the initial resale thereof, (iii)
the due performance by the Initial Purchasers of the agreements set forth
in Section 3 of the Purchase Agreement and (iv) the accuracy of the
representations made by each Accredited Investor who purchased Securities
in the initial resale as set forth in the Offering Memorandum.
4. Each of the Company and each Subsidiary Guarantor has the corporate power
to enter into and perform its obligations under the Transaction Agreements
to which it is a party, including without limitation the corporate power to
issue, sell and deliver the Notes and the Guarantees, respectively, as
contemplated by the Purchase Agreement.
5. Each of the Company and each Subsidiary Guarantor has duly executed and
delivered the Purchase Agreement, the Indenture and the Registration Rights
Agreement. The Company's execution, delivery and performance of the
Transaction Agreements to which it is a party have been duly authorized by
all necessary corporate action on the part of the Company. Each Subsidiary
Guarantees execution, delivery and performance of the Transaction
Agreements to which it is a party have been duly authorized by all
necessary corporate action on the part of such Subsidiary Guarantor. Each
of the Purchase Agreement, the Indenture and the Registration Rights
Agreement is a valid and binding obligation of each of the Company and each
Subsidiary Guarantor and (assuming the due authorization, execution and
delivery thereof by the other parties thereto) is enforceable against each
of the Company and each Subsidiary Guarantor in accordance with its terms.
6. The Company's execution, delivery and performance of the Notes have been
duly authorized by all necessary corporate action on the part of the
Company. The Notes have been duly executed and delivered by the Company
and, when paid for by the Initial Purchasers in accordance with the terms
of the Purchase Agreement (assuming the due authorization, execution and
delivery of the Indenture by the Trustee and due authentication and
delivery of the Notes by the Trustee in accordance with the Indenture),
will constitute the valid and
<PAGE>
NationsBanc Capital Markets, Inc.
First Chicago Capital Markets, Inc.
May 7, 1997
Page 4
binding obligations of the Company, entitled to the benefits of the
Indenture, and enforceable against the Company in accordance with their
terms.
7. Each Subsidiary Guarantor's execution, delivery and performance of the
Guarantees have been duly authorized by all necessary corporate action on
the part of such Subsidiary Guarantor. The Guarantees have been duly
executed and delivered by each of the Subsidiary Guarantors and, when the
Notes are duly and validly authorized, executed, issued and authenticated
in accordance with the terms of the Indenture and delivered against payment
therefor in accordance with the terms of the Purchase Agreement, will be
the valid and binding obligations of each of the Subsidiary Guarantors,
enforceable against each of the Subsidiary Guarantors in accordance with
their terms and entitled to the benefits of the Indenture.
8. The Company's execution, delivery and performance of the Exchange Notes
have been duly authorized by all necessary corporate action on the part of
the Company. When the Exchange Notes have been duly executed and delivered
by the Company in accordance with the terms of the Registration Rights
Agreement, the Exchange Offer and the Indenture (assuming the due
authorization, execution and delivery of the Indenture by the Trustee and
due authentication and delivery of the Exchange Notes by the Trustee in
accordance with the Indenture), the Exchange Notes will constitute the
valid and binding obligations of the Company, entitled to the benefits of
the Indenture, and enforceable against the Company in accordance with their
terms.
9. The Company's authorized equity capitalization is as set forth on Schedule
C attached hereto. To our actual knowledge, there are no outstanding (A)
options, warrants or other rights to purchase, (B) agreements or other
obligations of the Company to issue or (C) other fights to convert any
obligation into, or exchange any securities for, shares of capital stock of
or ownership interests in the Company. The Company is the sole owner of
record, and to our actual knowledge is the sole beneficial owner, of all
the capital stock of each Subsidiary Guarantor.
10. The execution and delivery of the Purchase Agreement, the Registration
Rights Agreement and the Indenture, and the contamination of the
transactions contemplated thereby (including, without limitation, the
issuance and sale of the Securities to the Initial Purchasers and the use
of the proceeds therefrom as set forth in the Offering Memorandum under the
caption "Use of Proceeds") do not and will not conflict with or constitute
or result in a breach or default under (or an event which with notice or
the passage of time or both would constitute a default under) or violation
of any of (i) the certificate of incorporation or bylaws of the Company or
any Subsidiary Guarantor, (ii) any statute or governmental rule or
regulation which, in our
<PAGE>
NationsBanc Capital Markets, Inc.
First Chicago Capital Markets, Inc.
May 7, 1997
Page 5
experience, is normally applicable both to general business corporations
that are not engaged in regulated business activities and to transactions
of the type contemplated by the Offering Memorandum (but without our having
made any special investigation as to other laws and provided that we
express no opinion in this paragraph with respect to (a) any laws, rules or
regulations to which the Company or any Subsidiary Guarantor may be subject
as a result of any of the Initial Purchasers! legal or regulatory status or
the involvement of any of the Initial Purchasers in such transactions or
(b) any laws, rules or regulations relating to disclosure,
misrepresentations or fraud), or (iii) the terms or provisions of any
contract set forth on Schedule D attached hereto, except (in the case of
clauses (ii) and (iii) above) for any such conflict, break, violation,
default or event which would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect. We do not have
actual knowledge that any provision in any Court Order would be breached or
otherwise violated by the Company's or any Subsidiary Guarantor's execution
or delivery of the Transaction Agreements to which it is a party or by the
Company's or any Subsidiary Guarantees performance of any of its agreements
in such Transaction Agreements. For purposes of this letter, the term
"Court Order" means a court or administrative order, writ, judgment or
decree that names the Company or any Subsidiary Guarantor and is
specifically directed to it or its property. For purposes of this letter,
our Designated Transaction Lawyers have not undertaken any investigation to
identify Court Orders to which the Company or any Subsidiary Guarantor may
be subject other than our inquiry with respect thereto of officers of the
Company and the Subsidiary Guarantors reflected in their statement set
forth in the Support Certificate.
11. To our actual knowledge, no consent, waiver, approval, authorization or
order of, or registration or filings with, any court or governmental
authority is required in connection with the execution and delivery by the
Issuers of the Transaction Agreements, for the issuance and sale by the
Company and the Subsidiary Guarantors of the Securities to the Initial
Purchasers, for the consummation by the Issuer and the Subsidiary
Guarantors of the other transactions contemplated by the Transaction
Agreements or for the issuance by the Company and the Subsidiary Guarantors
of the Exchange Securities, except such as may be required under the
Securities Act, the Exchange Act, the TIA and the security or Blue Sky laws
of the various states (and the rules and regulations thereunder), as to
which we express no opinion in this paragraph.
12. To our actual knowledge, (i) there are no legal or governmental proceedings
pending to which any Issuer is a party that would be required under the
Securities Act to be disclosed in a registration statement or a prospectus
delivered at the time of the confirmation of the sale of any offering of
securities registered under the Securities Act that are not described in
the Offering Memorandum and (ii) there are no legal or governmental
proceedings pending to
<PAGE>
NationsBanc Capital Markets, Inc.
First Chicago Capital Markets, Inc.
May 7, 1997
Page 6
which the Company or any Subsidiary Guarantor is a party or to which the
property or assets of the Company or the Subsidiary Guarantors is subject
which seek to restrain, enjoin or prevent the consummation of or otherwise
challenge the issuance or sale of the Securities to be sold to the Initial
Purchasers or the consummation of the other transactions contemplated by
the Transaction Agreements or under the caption "Use of Proceeds" in the
Offering Memorandum.
13. The statements in the Offering Memorandum under the headings "Description
of the Notes," "Description of the Credit Agreement" and "Certain
Transactions" insofar as such statements purport to summarize certain
provisions of the Indenture, the Notes, the Guarantees, the Registration
Rights Agreement, the Credit Agreement, the Employment Agreement and the
Tax Allocation Agreement and subject to the limitations contained in such
statements, provide a fair and accurate summary in all material respects of
such provisions of such agreements.
14. Neither the Company nor any Subsidiary Guarantor is, or immediately after
the sale of the Notes to the Initial Purchasers and application of the net
proceeds therefrom as described in the Offering Memorandum under the
caption "Use of Proceeds" will be, an "investment company" as such term is
defined in the Investment Company Act of 1940, as amended.
15. As of the date hereof none of the Securities are of the same class (within
the meaning of Rule 144A under the Securities Act) as securities of the
Company or any Subsidiary Guarantor t at are listed on a national
securities exchange registered under Section 6 of the Exchange Act or that
are quoted in a United States automated inter-dealer quotation system.
16. Neither the sale, issuance, execution or delivery of the Notes nor the
application of the net proceeds therefrom as described in the Offering
Memorandum under the caption "Use of Proceeds" will contravene Regulation G
(12 C.F.R. Part 207), Regulation T (12 C.F.R. Part 220), Regulation U (12
C.F.R. Part 221) or Regulation X (12 C.F.R. Part 224) of the Board of
Governors of the Federal Reserve System.
Because the primary purpose of our professional engagement was not to
establish factual matters and because of the nonlegal character of many
determinations involved in the preparation of the Offering Memorandum, we are
not passing upon, do not assume responsibility for and make no representation
that we have independently verified the accuracy, completeness or fairness of
the statements contained in the Offering Memorandum, other than as set forth in
paragraph 13 above. However, we have participated in conferences, in person or
by telephone, with directors, officers and other representatives of the Company
and the Subsidiary Guarantors, representatives of the independent public
accountants for the Company and the Subsidiary Guarantors, representatives of
<PAGE>
NationsBanc Capital Markets, Inc.
First Chicago Capital Markets, Inc.
May 7, 1997
Page 7
the Initial Purchasers and counsel for the initial Purchasers, at which
conferences the contents of the Offering Memorandum and related matters were
discussed and, on the basis of such participation (relying as to materiality to
the extent we deemed appropriate upon the views of officers and other
representatives of the Company and the Subsidiary Guarantors), we advise you
that we have no actual knowledge that the Offering Memorandum (other than the
financial statements and related notes and the other financial, statistical and
accounting data included in or omitted from the Offering Memorandum, as to which
no advice is given) as of its date or as of the date hereof, contained or
contains an untrue statement of a material fact or omitted or omits to state a
material fact necessary in order to make the statements contained therein, in
the light of the circumstances under which they were made, not misleading.
Our advice on every legal issue addressed in this letter is based
exclusively on the internal law of New York or the federal law of the United
States except that certain of the opinions in paragraphs 1 and 2 and 4 through
11 are based on the Delaware General Corporation Law. Certain of the opinions
in paragraph 1 are based on the Delaware General Corporation Law and (i) the
Wisconsin Business Corporation Act (the "Wisconsin Act") or (ii) the Texas
Business Corporation Act (the "Texas Act"). We have reviewed the Prentice Hall
Law & Business Corporation Guide as supplemented through March 17, 1997 (the
"Guide"). To the extent any opinion in paragraph I is based on the Wisconsin
Act or the Texas Act, we have assumed that the Guide accurately sets forth the
provisions of the Wisconsin Act and the Texas Act as in effect on the date
hereof and such opinion is based solely on such review and assumption. Issues
addressed by this letter may be governed in whole or in part by other laws, but
we express no opinion as to whether any relevant difference exists between the
laws upon which our opinions are based and any other laws which may actually
govern. Our opinions are subject to all qualifications in Schedule E and do not
cover or otherwise address any provision in the Purchase Agreement or any of the
other Transaction Agreements of any type identified in Schedule F. Furthermore,
our opinion expressed in paragraph 10 does not cover or otherwise address any
law or legal issue which is identified in the attached Schedule G. Provisions
in the Transaction Agreements which are not excluded by Schedule F or any other
part of this letter or its attachments are called the "Relevant Agreement
Terms."
Our advice on each legal issue addressed in this letter represents our
opinion as to how that issue would be resolved were it to be considered by the
highest court of the jurisdiction upon whose law our opinion on that issue is
based. The manner in which any particular issue would be treated in any actual
court case would depend in part on facts and circumstances particular to the
case, and this letter is not intended to guarantee the outcome of any legal
dispute which may arise in the future.
This letter speaks as of the time of its delivery on the date it bears. We
do not assume any obligation to provide you with any subsequent opinion or
advice by reason of any fact about which
<PAGE>
NationsBanc Capital Markets, Inc.
First Chicago Capital Markets, Inc.
May 7, 1997
Page 8
our Designated Transaction Lawyers did not have actual knowledge at that time,
by reason of any change subsequent to that time in any law covered by any of our
opinions, or for any other reason. The attached schedules are an integral part
of this letter, and any term defined in this letter or any schedule has that
defined meaning wherever it is used in this letter or in any schedule to this
letter.
You may rely upon this letter only for the purpose served by the provision
in the Purchase Agreement cited in the initial paragraph of this letter in
response to which it has been delivered. Without our written consent: (i) no
person other than you may rely on this letter for any purpose; (ii) this letter
may not be cited or quoted in any financial statement, prospectus, private
placement memorandum or other similar document; (iii) this letter may not be
cited or quoted in any other document or communication which night encourage
reliance upon this letter by any person or for any purpose excluded by the
restrictions in this paragraph; and (iv) copies of this letter may not be
furnished to anyone for purposes of encouraging such reliance.
Sincerely,
KIRKLAND & ELLIS
<PAGE>
Schedule A
Assumptions
For purposes of our letter, we have relied, without investigation, upon each
of the following assumptions:
1. The Initial Purchasers have purchased the Notes pursuant to the Purchase
Agreement and have paid the consideration therefor to the Company.
2. With respect to the enforceability of any Transaction Agreement by any
Initial Purchaser or the Trustee, such Initial Purchaser or the Trustee, as
the case may be, has satisfied those legal requirements that are applicable
to it to the extent necessary for such Transaction Agreement to be a binding
obligation of such party.
3. Each document submitted to us for review is accurate and complete, each such
document that is an original is authentic, each such document that is a copy
conforms to an authentic original, and all signatures (other than those of
or on behalf of the Company or the Subsidiary Guarantors) on each such
document are genuine.
<PAGE>
Schedule B
Good Standing
American Builders & Contractors Supply Co., Inc.
- ------------------------------------------------
Delaware
Mule-Hide Products Co., Inc.
- ----------------------------
California
Florida
Illinois
Louisiana
New York
North Carolina
Pennsylvania
Texas
Wisconsin
Amcraft Building Products Co., Inc.
- -----------------------------------
Delaware
Alabama
Wisconsin
<PAGE>
Schedule C
Capitalization
American Builders & Contractors Supply Co., Inc., a Delaware
corporation, 1,000 shares authorized, 147.04 shares issued and
outstanding.
<PAGE>
Schedule D
Specified Contracts
Indenture dated as of May 6, 1997 between the Company, Mule-Hide and Amcraft and
Norwest Bank Minnesota, National Association, as trustee (including form of New
Note and Senior Subordinated Guarantees).
Purchase Agreement dated as of May 2, 1997 between the Company, Mule-Hide and
Amcraft and NationsBanc Capital Markets, Inc. and First Chicago Capital Markets,
Inc.
Registration Rights Agreement dated as of May 6, 1997 between the Company, Mule-
Hide and Amcraft and NationsBanc Capital Markets, Inc. and First Chicago Capital
Markets, Inc.
Asset Purchase Agreement, dated as of April 12, 1997, by and between Viking
Aluminum Products, Inc. and the Company.
Asset Purchase Agreement, dated as of April 12, 1997, by and between Viking
Building Products, Inc. and the Company.
Employment Agreement, dated as of May 1, 1997, between the Company and Kenneth
A. Hendricks.
Tax Allocation Agreement, dated as of May 1, 1997, among the Company, Mule-Hide
and Amcraft and Kenneth A. Hendricks.
Form of lease agreement between the Company and Hendricks Commercial Properties
Continuing Guarantee Agreement, dated July 20, 1996, between Mule-Hide and
Heritage Bank, N.A., for the benefit of Kenneth A. Hendricks.
Guaranty, dated December 22, 1992, between the Company and Transohio Savings
Bank, for the benefit of Kenneth A. Hendricks.
Guaranty, dated December 22, 1996, between the Company and MetLife Capital
Corporation, for the benefit of Kenneth A. Hendricks.
Amended and Restated Loan and Security Agreement among American National Bank
and Trust Company of Chicago, NationsBank of Texas, N.A., Bankamerica Business
Credit, Inc. and the Company, as amended (the "Credit Agreement").
Amended and Restated Patent, Trademark and License Mortgage by the Company in
favor of NationsBank of Texas, N.A., as agent for the lenders under the Credit
Agreement, as amended.
Amended and Restated Limited Guaranty Agreement by Kenneth A. Hendricks, dated
as of February 8, 1996, in favor of NationsBank of Texas, N.A., individually or
as agent for the lenders under the Credit Agreement.
Third Amended and Restated Revolving Credit Note of the Company in the amount of
$25,000,000.00 made to the order of American National Bank and Trust Company of
Chicago.
Third Amended and Restated Revolving Credit Note of the Company 'in the amount
of $35,000,000.00 made to the order of NationsBank of Texas, N.A.
Revolving Credit Note of the Company in the amount of $32,500,000.00 made to the
order of Fleet Capital Corporation.
Revolving Credit Note of the Company in the amount of $22,500,000.00 made to the
order of Harris Trust and Savings Bank
Revolving Credit Note of the Company in the amount of $27,500,000.00 made to the
order of Sanwa Business Credit Corporation
Ninth Amendment to the Credit Agreement dated as of May 7, 1997.
<PAGE>
Schedule E
General Qualifications
All of our opinions ("our opinions") in the letter to which this Schedule
is attached ("our letter") are subject to each of the qualifications set forth
in this Schedule.
1. Bankruptcy and Insolvency Exception. Each of our opinions is subject to
the effect of:
a. all Federal and state bankruptcy, insolvency, reorganization,
receivership, moratorium and other laws that affect the rights of
creditors generally or that have reference to or affect only creditors
of specific types of debtors (which comprehends, among others, matters
of turnover, automatic stay, avoiding powers, preference, discharge,
conversion of a non-recourse obligation into a recourse claim,
limitations on ipso facto and anti-assignment clauses and the coverage
of pre-petition security agreements applicable to property acquired
after a petition is filed);
b. fraudulent transfer and conveyance laws; and
c. judicially developed doctrines in this area, such as substantive
consolidation of entities and equitable subordination.
2. Equitable Principles Limitation. Each of our opinions is subject to the
effect of general principles of equity, whether applied by a court of law
or equity. This limitation includes principles:
a. governing the availability of specific performance, injunctive relief
or other equitable remedies, which generally place the award of such
remedies, subject to certain guidelines, in the discretion of the
court to which application for such relief is made;
b. affording equitable defenses (e.g., waiver, laches and estoppel)
against a party seeking enforcement;
c. requiring good faith and fair dealing in the performance and
enforcement of a contract by the party seeking its enforcement;
d. requiring reasonableness in the performance and enforcement of an
agreement by the party seeking enforcement of the contract;
e. requiring consideration of the materiality of (i) a breach and (ii)
the consequences of the breach to the party seeking enforcement;
f. requiring consideration of the impracticability or impossibility of
performance at the
E-1
<PAGE>
time of attempted enforcement; and
g. affording defenses based upon the unconscionability of the enforcing
party's conduct after the parties have entered into the contract.
3 . Other Common Qualifications. Each of our opinions is subject to the effect
of rules of law that:
a. provide a time limitation after which a remedy may not be enforced;
b. Unit the enforceability of provisions releasing, exculpating or
exempting a party from, or requiring indemnification of a party for,
liability for its own action or inactior4 to the extent the action or
inaction involves negligence, violation of public policy or litigation
against another party determined adversely to such party;
c. may, where less than all of a contract may be unenforceable, limit the
enforceability of the balance of the contract to circumstances in
which the unenforceable portion is not an essential part of the agreed
exchange;
d. govern and afford judicial discretion regarding the determination of
damages; and
e. may render waivers of suretyship defenses ineffective under certain
circumstances.
4. Cross-Default Provisions. With respect to our opinion in paragraph 10
above, we express no opinion with respect to violations under cross-default
provisions referring to or based upon agreements that are not included on
Schedule D. For purposes of the preceding sentence, agreements which are
attached as exhibits, schedules or attachments to or are otherwise referred
to in agreements fisted on Schedule D, but are not directly listed on
Schedule D, shall not be deemed to be included on Schedule D.
E-2
<PAGE>
Schedule F
Excluded Provisions
None of the opinions in the letter to which this Schedule is attached
covers or otherwise addresses any of the following types of provisions which may
be contained in the Transaction Agreements:
1. Provisions mandating contribution towards judgments or settlements among
various parties.
2. Provisions which might require indemnification or contribution with respect
to any litigation by the Trustee under the Indenture against the Company
and the Subsidiary Guarantors determined adversely to the Trustee under the
Indenture, or with respect to any loss, cost or expense arising out of such
Trustee's negligence or bad faith.
3. Requirements in the Transaction Agreements specifying that provisions
thereof may only be waived in writing (these provisions may not be valid,
binding or enforceable to the extent that an oral agreement or an implied
agreement by trade practice or course of conduct has been created modifying
any provision of such documents).
F-1
<PAGE>
Schedule G
Excluded Law and Legal Issues
In addition to the limitations and exclusions otherwise set forth in
paragraph 10, none of the opinions or advice set forth in paragraph 10 of our
letter covers or otherwise addresses any of the following laws, regulations or
other governmental requirements or legal issues:
1. State "Blue Sky" laws and regulations; and
2. the statutes and ordinances, the administrative decisions and the rules and
regulations of counties, towns, municipalities and special political
subdivisions (whether created or enabled through legislative action at the
Federal, state or regional level) and judicial decisions to the extent that
they deal with any of the foregoing.
We have not undertaken any research for purposes of determining whether the
Company and Subsidiary Guarantors or any of the transactions which may occur in
connection with the Purchase Agreement or any of the other Transaction
Agreements is subject to any law or other governmental requirement other than to
those laws and requirements which in our experience would generally be
recognized as applicable, and none of our opinions covers any such law or other
requirement unless (i) one of our Designated Transaction Lawyers had actual
knowledge of its applicability at the time our letter was delivered on the date
it bears and (ii) it is not excluded from coverage by other provisions in our
letter or in any Schedule to our letter.
G-1
<PAGE>
Support Certificate
American Builders & Contractors Supply Co., Inc., a Delaware corporation (the
"Company"), Amcraft Building Products Co., Inc., a Delaware corporation
("Amcraft") and Mule-Hide Products Co., Inc., a Texas corporation ("Mule-Hide,"
and together with Amcraft, the "Subsidiary Guarantors") all hereby certify and
agree that:
1. Introduction. Kirkland & Ellis has acted as special legal counsel to the
Company and the Subsidiary Guarantors in connection with the negotiation
and preparation of the Purchase Agreement (the "Purchase Agreement") dated
as of May 2, 1997, among the Company, each of the Subsidiary Guarantors,
NationsBanc Capital Markets, Inc. ("NationsBanc") and First Chicago Capital
Markets, Inc. ("First Chicago" and, together with NationsBanc, the "Initial
Purchasers"). Section 7(g) of the Purchase Agreement provides that as a
condition to closing Kirkland & Ellis delivers an opinion letter to the
Initial Purchasers (the "Opinion Recipients"). The term "Kirkland Opinion"
whenever it is used in this certificate means the opinion letter which
Kirkland & Ellis will actually deliver at the closing in response to this
closing condition. Each term which is defined or given a special meaning in
the Kirkland Opinion has the same meaning whenever it is used in this
certificate.
2. Purpose. The Company and the Subsidiary Guarantors have provided this
certificate in order to provide Kirkland & Ellis with factual information
needed by Kirkland & Ellis in order to issue the Kirkland Opinion. The
Company and the Subsidiary Guarantors have made inquiries and
investigations reasonably calculated to assure that the information
provided in this certificate is accurate and complete, including (i)
inquiries of appropriate personnel responsible for legal matters, financial
matters and compliance with governmental requirements and (ii)
identification and review of relevant documents. After performing such
inquiries and reviewing the Kirkland Opinion, the Company and the
Subsidiary Guarantors are satisfied that the Kirkland Opinion does not
contain any untrue statements. The Company and the Subsidiary Guarantors
understand that Kirkland & Ellis will not check, audit or otherwise attempt
to verify the information in this certificate. The Company and the
Subsidiary Guarantors intend and agree that Kirkland & Ellis and the
Opinion Recipients may rely upon this certificate and all information
provided in this certificate.
3. Charters. The copies of the Company's Certificate of Incorporation,
Amcraft's Certificate of Incorporation and Mule-Hide's Articles of
Incorporation (each a "Charter") in the versions certified by the
responsible governmental office in the Company's and the Subsidiary
Guarantors' states of incorporation and delivered to the Opinion Recipients
in connection with the closing are accurate and complete and represent the
terms of the Company's and the Subsidiary Guarantors' Charters as
constituted at all times since the date of the latest amendment thereto
indicated in that certificate.
4. Bylaws. The copy of the Bylaws of the Company in the version attached to
the certificate issued by the Company's Secretary to the Opinion Recipients
at the closing is accurate and
-1-
<PAGE>
complete and represents the terms of the Company's Bylaws as constituted at
all times since prior to the adoption of the initial resolution authorizing
the transactions specified in the Transaction Agreements. The copies of the
Bylaws of the Subsidiary Guarantors in the versions attached to the
certificates issued by the Subsidiary Guarantors' Secretaries to the
Opinion Recipients at the closing are accurate and complete and represent
the terms of the Subsidiary Guarantors' Bylaws as constituted at all times
since prior to the adoption of the initial resolution authorizing the
transactions specified in the Transaction Agreements.
5. Good Standing. The practice of the Company and each Subsidiary Guarantor
is to make on a timely basis all filings and tax payments they were
required to make under the statute under which they are organized and under
the statutes under which they have qualified to do business in other
states. Neither the Company nor any Subsidiary Guarantor has received
notice from any governmental authority that any such filing or tax payment
which the Company or any Subsidiary Guarantor has made is delinquent or due
or that the Company or any Subsidiary Guarantor is not in good standing in
its state of incorporation or in any state in which it has qualified as a
foreign corporation. Neither the Company nor any Subsidiary Guarantor has
reason to believe that it is not in existence or good standing in its
respective state of incorporation, that it has ceased to be qualified to do
business or in good standing in any state in which it was previously
qualified, or that it has not qualified in any state in which such
qualification is required.
6. Authorizing Resolutions.
a. Attached hereto as Exhibit A is a complete and accurate copy of
resolutions adopted by the Company's Board of Directors on May 1, 1997
by Consent in Lieu of Special Meeting of Board of Directors. Such
resolutions have not been amended -or rescinded and remain in full
force and effect on the date hereof.
b. Attached hereto as Exhibit B is a complete and accurate copy of
resolutions adopted by Mule-Hide's Board of Directors on May 1, 1997
by Consent in Lieu of Special Meeting of Board of Directors. Such
resolutions have not been amended or rescinded and remain in full
force and effect on the date hereof.
c. Attached hereto as Exhibit C is a complete and accurate copy of
resolutions adopted by Amcraft's Board of Directors on May 1, 1997 by
Consent in Lieu of Special Meeting of Board of Directors. Such
resolutions have not been amended or rescinded and remain in full
force and effect on the date hereof.
d. At the time the Boards of Directors of the Company, Amcraft, and Mule-
Hide adopted the resolutions cited in the preceding paragraphs, no
vacancies existed on any of the Boards of Directors and each director
then on such Board of Directors was elected or appointed to such Board
of Directors in accordance with the requirements in the respective
Charter and Bylaws.
-2-
<PAGE>
e. Attached hereto as Exhibit D is a complete and accurate copy of the
resolutions adopted by the sole shareholder of Mule-Hide on May 1,
1997 by Consent in Lieu of Special Meeting of Shareholders. Such
resolutions have not been amended or rescinded and remain in full
force and effect on the date hereof.
f. Attached hereto as Exhibit E is a complete and accurate copy of the
resolutions adopted by the sole shareholder of Amcraft on May 1, 1997
by Consent in Lieu of Special Meeting of Board of Shareholders. Such
resolution ' s have not been amended or rescinded and remain in full
force and effect on the date hereof.
g. Attached hereto as Exhibit F is a complete and accurate copy of the
resolutions adopted by the sole shareholder of the Company on May 6,
1997 by Consent in Lieu of Special Meeting of Shareholders. Such
resolutions have not been amended or rescinded and remain in fall
force and effect on the date hereof
h. None of the Boards of Directors or the sole shareholders of the
Company or the Subsidiary Guarantors have adopted any other
resolutions which (i) restrict the authority of the Company or any
Subsidiary Guarantor to enter into any the Transaction Agreements or
to engage in any actions to be taken under or by reason of the
Transaction Agreements or (ii) restrict the Boards of Directors'
authority to approve any such action or activity or (iii) otherwise
relate to the execution or delivery by the Company or any Subsidiary
Guarantor of any of the Transaction Agreements or any activity to be
taken under or by reason of the Transaction Agreements.
7. Authorized Officers. Each individual who has executed any of the
Transaction Agreements or other document delivered at closing on behalf of
the Company and the Subsidiary Guarantors were validly appointed to the
officership position or other position with the respective company
indicated in connection with such execution and held that office at the
time of such person's execution and delivery of the relevant Transaction
Agreement(s) and/or other documents(s).
8. No Required Governmental Approvals. Neither the Company nor any
Subsidiary Guarantor engages in any banking, insurance, common carrier,
broadcasting, utility or other regulated activities to a degree which
requires it to obtain approval from any governmental authority as a
condition to executing or delivering any of the Transaction Agreements or
to performing any of its obligations under the Transaction Agreements.
Neither the Company nor any Subsidiary Guarantor is aware of any filing
required to be made or any governmental permit or authorization required to
be obtained in connection, with the execution or delivery of any of the
Transaction Agreements or the performance of any obligations of the Company
or any Subsidiary Guarantor under those Agreements which has not been made
or obtained on or prior to the date hereof.
-3-
<PAGE>
9. No Known Breach. Neither the Company nor any Subsidiary Guarantor is aware
of any contract or other obligation which would be breached by the
execution or delivery by the Company or any Subsidiary Guarantor of any of
the Transaction Agreements or any activity to be taken under or by reason
of the Transaction Agreements.
10. No Omissions. Neither the Company nor any Subsidiary Guarantor knows of
any other fact or development which indicates that any advice given in the
Kirkland Opinion is inaccurate or misleading.
11. Outstanding Judgments. Neither the Company nor any Subsidiary Guarantor is
aware of any judgment, decree or Court Order applicable to or binding upon
it or its respective assets or properties which would be breached by the
execution or delivery by the Company or any Subsidiary Guarantor of any of
the Transaction Agreements or any activity to be taken under or by mason of
the Transaction Agreements. For purposes of this certificate, the term
"Court Order" means a court or administrative order, writ, judgment or
decree that names the Company or any Subsidiary Guarantor and is
specifically directed to it or its property.
* * * * *
-4-
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Support Certificate
as of the 7th day of May, 1997.
AMERICAN BUILDERS &
CONTRACTORS SUPPLY CO., INC.
By:
-------------------------------------
Name: Kenneth A. Hendricks
Title: President, Chief Executive
Officer
By:
-------------------------------------
Name: Diane Hendricks
Title: Executive Vice President,
Secretary and Director
AMCRAFT BUILDING PRODUCTS CO., INC.
By:
-------------------------------------
Name: Kenneth A. Hendricks
Title: President and Chief Executive
Officer
By:
-------------------------------------
Name: Kendra Story
Title: Chief Financial Officer
MULE-HIDE PRODUCTS CO., INC.
By:
-------------------------------------
Name: Kenneth A. Kendricks
Title: Chief Executive Officer
By:
-------------------------------------
Name: Kimberlee K. Hendricks
Title: President
-5-
<PAGE>
SCHEDULE E
Opinion of Leo and Associates
-1-
<PAGE>
May 7, 1997
NationsBanc Capital Markets, Inc.
First Chicago Capital Markets, Inc.
c/o NationsBanc Capital Markets, Inc.
100 North Tryon Street, Seventh Floor
Charlotte, North Carolina 28255
Re: American Builders & Contractors Supply Co., Inc.
Ladies and Gentlemen:
We are issuing this opinion letter in our capacity as general legal counsel
to American Builders & Contractors Supply Co., Inc., a Delaware corporation (the
"Company"), in response to the requirement in Section 7(g) of the Purchase
Agreement (the "Purchase Agreement") dated as of May 7, 1997 among the Company,
each of the Subsidiary Guarantors (as defined below), NationsBanc Capital
Markets, Inc. ("NationsBanc") and First Chicago Capital Markets, Inc. ("First
Chicago" and, together with NationsBanc, the "Initial Purchasers").
All capitalized terms used herein and not defined herein shall have the
meanings given to such terms in the Purchase Agreement. Together, the Purchase
Agreement, the Indenture, the Registration Rights Agreement and the Securities
are referred to herein as the "Transaction Agreements". The following
subsidiaries of the Company together are referred to herein as the
"Subsidiaries" or "Subsidiary Guarantors": Mule-Hide Products Co., Inc., a Texas
corporation ("Mule-Hide") and Amcraft Building Products Co., Inc., a Delaware
corporation ("Amcraft").
In arriving at the opinions expressed herein, among other things, we have
examined the following:
(a) the Offering Memorandum of the Company, dated May 2, 1997, covering the
offering and sale of the Securities (the "Offering Memorandum");
(b) an executed copy of the Purchase Agreement;
(c) executed copies of the Indenture and the Securities to be delivered on
the date hereof,
(d) an executed copy of the Registration Rights Agreement;
(e) an executed original of the Asset Purchase Agreement between the
Company and Viking Building Products, Inc. and between the Company and
Viking Aluminum Products, Inc., each dated April 12, 1997 (together
"Asset Purchase Agreements"); and
(f) executed copies of the Amended and Restated Loan and Security Agreement
dated
<PAGE>
NationsBanc Capital Markets, Inc.
First Chicago Capital Markets, Inc.
May 7, 1997
Page 2
July 1, 1993 (the "Loan Agreement"); the First Amendment to the
Amended and Restated Loan Agreement dated September 2, 1994; the
Waiver and Second Amendment to the Amended and Restated Loan Agreement
dated June 19, 1995; the Third Amendment to the Amended and Restated
Loan Agreement dated September 18, 1995; the Waiver and Fourth
Amendment to the Amended and Restated Loan Agreement dated September
30, 1995; the Waiver and Fifth Amendment to the Amended and Restated
Loan Agreement dated December 29, 1995; the Waiver and Sixth Amendment
to the Amended and Restated Loan Agreement dated February 8, 1996; the
Waiver and Seventh Amendment to the Loan Agreement dated September 3,
1996; the Waiver and Eighth Amendment to the Loan Agreement dated
March 27, 1997; and the Ninth Amendment to the Loan Agreement dated
May 7, 1997 (together, the "Credit Agreement").
In preparing this letter, we have relied without any independent
verification upon the assumptions recited in Schedule A to this letter and upon:
(i) information contained in certificates obtained from governmental
authorities; (ii) factual information represented to be true in the Purchase
Agreement and the other Transaction Agreements; (iii) factual information
provided to us in the Support Certificate signed by the Company and the
Subsidiary Guarantors and attached hereto; and (iv) factual information we have
obtained from such other sources as we have deemed reasonable. We have assumed
without investigation that there has been no relevant change or development
between the dates as of which the information cited in the preceding sentence
was given and the date of this letter and that the information upon which we
have relied is accurate and does not omit disclosures necessary to prevent such
information from being materially and adversely misleading. For purposes of
each opinion expressed in paragraph 1 below, we have relied exclusively upon
certificates issued by a governmental authority in each relevant jurisdiction,
and such opinion is not intended to provide any conclusion or assurance beyond
that conveyed by that certificate.
While we have not conducted any independent investigation to determine
facts upon which our opinions are based, we confirm that we do not have any
actual knowledge which has caused us to conclude that our reliance and
assumptions cited in the preceding paragraph are unwarranted or that any
information supplied to or used by us in connection with this letter is wrong.
The term "actual knowledge" whenever it is used in this letter with respect to
our firm means conscious awareness at the time this letter is delivered on the
date it bears by the following Leo and Associates lawyers, who constitute all of
the Leo and Associates lawyers who have devoted a significant amount of time to
the negotiation or preparation of the Transaction Agreements, the Offering
Memorandum and the due diligence associated therewith (herein called "our
Designated Transaction Lawyers"): Karl Leo.
<PAGE>
NationsBanc Capital Markets, Inc.
First Chicago Capital Markets, Inc.
May 7, 1997
Page 3
. Subject to the assumptions, qualifications, exclusions and other
limitations which are identified in this letter and in the schedules attached to
this letter, we advise you that:
1. Each Subsidiary Guarantor is a corporation existing and in good standing
under the laws of its jurisdiction of incorporation.
2. The Subsidiary Guarantors' authorized shares are as set forth on Schedule B
hereto. To our actual knowledge, there are no outstanding (A) options,
warrants or other rights to purchase, (B) agreements or other obligations
of the Company or any Subsidiary Guarantor to issue or (C) other rights to
convert any obligation into, or exchange any securities for, shares of
capital stock of or ownership interests in any of the Subsidiary
Guarantors. All shares of capital stock of the Subsidiary Guarantors have
been duly authorized, validly issued, nonassessable, to our knowledge
without inquiry are fully paid and, except as disclosed in the Final
Memorandum, to the knowledge of such counsel without inquiry, all such
shares are owned by the Company or a subsidiary of the Company free and
clear of any security interests, liens, pledges or encumbrances.
3. The execution and delivery of the Credit Agreement and the Asset Purchase
Agreements, and the consummation of the transactions contemplated thereby
do not and will not conflict with or constitute or result in a breach or
default under (or an event which with notice or the passage of time or both
would constitute a default under) or violation of any of, (i) the
certificate of incorporation or bylaws of the Company or any Subsidiary
Guarantor, (ii) any statute or governmental rule or regulation which, in
our experience, is normally applicable both to general business
corporations that are not engaged in regulated business activities and to
transactions of the type conducted by the Company (but without our having
made any special investigation as to other laws, rules or regulations and
provided that we express no opinion in this paragraph with respect to (a)
any laws, rules or regulations to which the Company or any Subsidiary
Guarantor may be subject as a result of the legal or regulatory status or
the involvement of any parties to the Credit Agreement or the Asset
Purchase Agreements or (b) any laws, rules or regulations relating to
disclosure, misrepresentations or fraud) or (iii) the terms or provisions
of any contract set forth on Schedule C attached hereto, except (in the
case of clauses (ii) and (iii) above) for any such conflict, breach,
violation, default or event which would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect, after
giving effect to the Offering and the application of the net proceeds
therefrom as described in the Offering Memorandum.
4. To our actual knowledge without additional inquiry, none of the Company and
the Subsidiary Guarantors is in violation of its corporate charter or by-
laws, or is in default under any of the agreements set forth on Schedule C
attached hereto, which default could, singly or in the
<PAGE>
NationsBanc Capital Markets, Inc.
First Chicago Capital Markets, Inc.
May 7, 1997
Page 4
aggregate, reasonably be expected to have a Material Adverse Effect; to our
actual knowledge without additional inquiry, none of the Company and the
Subsidiary Guarantors is in violation of any law, ordinance, governmental
rule or regulation or court order or decree to which it may be subject, and
each has obtained each license, permit, or other governmental authorization
(collectively, "permits") necessary to the ownership of its properties or
to the conduct of its business as described in the Offering Memorandum,
other than permits being applied for in the ordinary course of business,
permits relating to the consummation of the Asset Purchase Agreements and
permits, the violation of which or the failure to obtain would not, singly
or in the aggregate, reasonably be expected to have a Material Adverse
Effect.
Because the primary purpose of our professional engagement was not to
establish factual matters and because of the nonlegal character of many
determinations involved in the preparation of the Offering Memorandum, we are
not passing upon, do not assume responsibility for and make no representation
that we have independently verified the accuracy, completeness or fairness of
the statements contained in the Offering Memorandum. However, we have
participated in conferences, in person or by telephone, with directors, officers
and other representatives of the Company and the Subsidiary Guarantors,
representatives of the independent public accountants for the Company and the
Subsidiary Guarantors, representatives of the Initial Purchasers and counsel for
the Initial Purchasers, at which conferences the contents of the Offering
Memorandum and related matters were discussed and, on the basis of such
participation (relying as to materiality to the extent we deemed appropriate
upon the statements of officers and other representatives of the Company and the
Subsidiary Guarantors), we advise you that we have no actual knowledge that the
Offering Memorandum (other than the financial statements and related notes and
the other financial, statistical and accounting data included in or omitted from
the Offering Memorandum, as to which no advice is given, and information
furnished to the auditors of the Company and the Subsidiary Guarantors regarding
pending litigation and unasserted claims which information has been made
available to your counsel in connection with the Transaction Agreements, as to
which no further advice is given) as of its date or as of the date hereof,
contained or contains an untrue statement of a material fact or omitted or omits
to state a material fact necessary in order to make the statements contained
therein, in the light of the circumstances under which they were made, not
materially adversely misleading.
Our advice on every legal issue addressed in this letter is based
exclusively on the internal law of Alabama or the federal law of the United
States except that certain of the opinions in paragraphs 1 are based on the
Delaware General Corporation Law or Texas Business Corporation Law. Issues
addressed by this letter may be governed in whole or in part by other laws, but
we express no opinion as to whether any relevant difference exists between the
laws upon which our opinions are based and any other laws which may actually
govern. Our opinions are subject to all qualifications in Schedule D.
Furthermore, our opinions expressed in paragraphs 3 and 4 do not cover or
otherwise address any law or legal issue which is identified in the attached
Schedule E.
<PAGE>
NationsBanc Capital Markets, Inc.
First Chicago Capital Markets, Inc.
May 7, 1997
Page 5
Without current inquiry or research, our advice on each legal issue
addressed in this letter represents our opinion as to how that issue would be
resolved were it to be considered by the highest court of the jurisdiction upon
whose law our opinion on that issue is based. The manner in which any
particular issue would be treated in any actual court case would depend in part
on facts circumstances particular to the case, and this letter is not intended
to guarantee the outcome of any legal dispute which may arise in the future.
This letter speaks as of the time of its delivery on the date it bears. We
do not assume any obligation to provide you with any subsequent opinion or
advice by reason of any fact about which our Designated Transaction Lawyers did
not have actual knowledge at that time, by reason of any change subsequent to
that time in any law covered by any of our opinions, or for any other reason.
The attached schedules are an integral part of this letter, and any term defined
in this letter or any schedule has that defined meaning wherever it is used in
this letter or in any schedule to this letter.
You may rely upon this letter only for the purpose served by Section 7(g)
in the Purchase Agreement and it has been delivered solely in response to such
provision. Without our written consent: (i) no person other than you may rely
on this letter for any purpose; (ii) this letter may not be used, reproduced,
cited or quoted in any financial statement, prospectus, private placement
memorandum or other similar document; (iii) this letter may not be used,
reproduced, cited or quoted in any other document or communication which might
encourage reliance upon this letter by any person or for any purpose excluded by
the restrictions in this paragraph; and (iv) copies of this letter may not be
furnished to anyone for purposes of encouraging reliance hereon.
Sincerely,
LEO AND ASSOCIATES
<PAGE>
Schedule A
Assumptions
For purposes of our letter, we have relied, without investigation, upon each
of the following assumptions:
1. The Initial Purchasers have purchased the Notes pursuant to the Purchase
Agreement and have paid the consideration therefor to the Company.
2. With respect to the enforceability of any Transaction Agreement by any
Initial Purchaser or the Trustee, such Initial Purchaser or the Trustee, as
the case may be, has satisfied those legal requirements that are applicable
to it to the extent necessary for such Transaction Agreement to be a binding
obligation of such party.
3. With respect to the enforceability of the Credit Agreement and the Asset
Purchase Agreements by any party thereto, such party has satisfied those
legal requirements which are applicable to it to the extent necessary for
such agreement to be a binding obligation of such party.
4. Each document submitted to us for review is accurate and complete, each such
document that is an original is authentic, each such document that is a copy
conforms to an authentic original, and all signatures (on each such document
are genuine.
<PAGE>
Schedule B
Capitalization
MULE-HIDE PRODUCTS CO., INC.
Common Stock Authorized: 10,000, no par
Common Stock Outstanding: 100
Other Stock Authorized: None
Ownership of Outstanding Stock: American Builders & Contractors Supply Co.,
Inc. owns 100 shares
AMCRAFT BUILDING PRODUCTS CO., INC.
Common Stock Authorized: 100,000, $0.01 per share par value
Common Stock Outstanding: 100
Other Stock Authorized: None
Ownership of Outstanding Stock: American Builders & Contractors Supply Co.,
Inc. owns 100 shares
<PAGE>
Schedule C
Specified Contracts
Indenture dated as of May 6, 1997 between the Company, Mule-Hide and Amcraft and
Norwest Bank Minnesota, National Association, as trustee (including form of New
Note and Senior Subordinated Guarantees).
Purchase Agreement dated as of May 2, 1997 between the Company, Mule-Hide and
Amcraft and NationsBanc Capital Markets, Inc. and First Chicago Capital Markets,
Inc.
Registration Rights Agreement dated as of May 6, 1997 between the Company, Mule-
Hide and Amcraft and NationsBanc Capital Markets, Inc. and First Chicago Capital
Markets, Inc.
Asset Purchase Agreement, dated as of April 12, 1997, by and between Viking
Aluminum Products, Inc. and the Company.
Asset Purchase Agreement, dated as of April 12, 1997, by and between Viking
Building Products, Inc. and the Company.
Employment Agreement, dated as of May 1, 1997, between the Company, Mule-Hide
and Amcraft and Kenneth A. Hendricks.
Tax Allocation Agreement, dated as of May 1, 1997, among the Company and Kenneth
A. Hendricks.
Form of lease agreement between the Company and Hendricks Commercial Properties.
Continuing Guaranty Agreement, dated July 20, 1996, between Mule-Hide and
Heritage Bank, N.A.
Amended and Restated Loan and Security Agreement among American National Bank
and Trust Company of Chicago, NationsBank of Texas, N.A., Bankamerica Business
Credit, Inc, and the Company, as amended including the Ninth Amendment dated May
7, 1997 (the "Credit Agreement").
Amended and Restated Patent, Trademark and License Mortgage by the Company in
favor of NationsBank of Texas, N.A., as agent for the lenders under the Credit
Agreement, as amended.
Third Amended and Restated Revolving Credit Note of the Company in the amount of
$25,000,000.00 made to the order of American National Bank and Trust Company of
Chicago.
Third Amended and Restated Revolving Credit Note of the Company in the amount of
$35,000,000.00 made to the order of NationsBank of Texas, N.A.
<PAGE>
Revolving Credit Note of the Company in the amount of $32,500,000.00 made to the
order of Fleet Capital Corporation.
Revolving Credit Note of the Company in the amount of $22,500,000.00 made to the
order of Harris Trust and Savings Bank.
Revolving Credit Note of the Company in the amount of $27,500,000.00 made to the
order of Sanwa Business Credit Corporation.
<PAGE>
Schedule D
General Qualifications
All of our opinions ("Our Opinions") in the letter to which this Schedule
is attached ("Our Letter") are subject to each of the qualifications set forth
in this Schedule.
1. Bankruptcy and Insolvency Exception. Each of Our Opinions is subject to the
effect of:
a. all Federal and state bankruptcy, insolvency, reorganization,
receivership, moratorium and other laws that affect the rights of
creditors generally or that have reference to or affect only creditors
of specific types of debtors (which comprehends, among others, matters
of turn-over, automatic stay, avoiding powers, preference, discharge,
conversion of a non-recourse obligation into a recourse claim,
limitations on ipso facto and anti-assignment clauses and the coverage
of pre-petition security agreements applicable to property acquired
after a petition is filed);
b. fraudulent transfer and conveyance laws; and
c. judicially developed doctrines in this area, such as substantive
consolidation of entities and equitable subordination.
2. Equitable Principles Limitation. Each of Our Opinions is subject to the
effect of general principles of equity, whether applied by a court of law
or equity. This limitation includes principles:
a. governing the availability of specific performance, injunctive relief
or other equitable remedies, which generally place the award of such
remedies, subject to certain guidelines, in the discretion of the court
to which application for such relief is made;
b. affording equitable defenses (e.g., waiver, laches and estoppel)
against a party seeking enforcement;
c. requiring good faith and fair dealing in the performance and
enforcement of a contract by the party seeking its enforcement;
d. requiring reasonableness in the performance and enforcement of an
agreement by the party seeking enforcement of the contract;
e. requiring consideration of the materiality of (i) a breach and (ii) the
consequences of the breach to the party seeking enforcement;
f. requiring consideration of the impracticability or impossibility of
performance at the time of attempted enforcement; and
<PAGE>
g. affording defenses based upon the unconscionability of the enforcing
party's conduct after the parties have entered into the contract.
3. Other Common Qualifications. Each of Our Opinions is subject to the effect
of the rules of law that:
a. limit the enforceability of provisions releasing, exculpating or
exempting a party from, or requiring indemnification of a party for,
liability for its own action or inaction, to the extent the action or
inaction involves negligence, violation of public policy or litigation
against another party determined adversely to such party;
b. may, where less than all of a contract may be unenforceable, limit the
enforceability of the balance of the contract to circumstances in which
the unenforceable portion is not an essential part of the agreed
exchange;
c. govern and afford judicial discretion regarding the determination of
damages and entitlement to attorney's fees and other costs;
d. may render waivers of suretyship defenses ineffective under certain
circumstances.
5. Cross-Default Provisions. With respect to Our Opinions in paragraphs 3 and
4 above, we express no opinion with respect to violations under cross-
default provisions referring to or based upon agreements that are not
included on Schedule C. For purposes of the preceding sentence, agreements
which are attached as exhibits, schedules or attachments to or are otherwise
referred to in agreements listed on Schedule C, but are not directly listed
on Schedule C, shall not be deemed to be included on Schedule C.
<PAGE>
Schedule E
Excluded Law and Legal Issues
In addition to the limitations and exclusions otherwise set forth in
paragraphs 3 and 4, none of the opinions or advice set forth in paragraphs 3 and
4 of our letter covers or otherwise addresses any of the following laws,
regulations or other governmental requirements or legal issues:
1. State "Blue Sky" laws and regulations;
2. the statutes and ordinances, the administrative decisions and the rules and
regulations of counties, towns, municipalities and special political
subdivisions (whether created or enabled through legislative action at the
Federal, state or regional level) and judicial decisions to the extent that
they deal with any of the foregoing.
We have not undertaken any research for purposes of determining whether the
Company and the Subsidiary Guarantors or any of the Transactions which may occur
in connection with the Purchase Agreement or any of the other Transaction
Agreements is subject to any law or other governmental requirement other than to
those laws and requirements which in our experience would generally be
recognized as applicable, and none of our opinions covers any such law or other
requirement unless (i) one of our Designated Transaction Lawyers had actual
knowledge of its applicability at the time our letter was delivered on the date
it bears and (ii) it is not excluded from coverage by other provisions in our
letter or in any Schedule to our letter.
<PAGE>
EXHIBIT 5.1
[LETTERHEAD OF KIRKLAND & ELLIS]
June 24, 1997
American Builders & Contractors Supply Co., Inc.
One ABC Parkway
Beloit, Wisconsin 53511
Re: American Builders & Contractors Supply Co., Inc.
Amcraft Building Products Co., Inc. and
Mule-Hide Products Co., Inc.
Registration Statement on Form S-4
Registration No. 33-26991
--------------------------------------
Ladies and Gentlemen:
We are issuing this opinion letter in our capacity as special legal counsel
to American Builders & Contractors Supply Co., Inc., a Delaware corporation (the
"Issuer"), Amcraft Building Products Co., Inc., a Delaware corporation
("Amcraft") and Mule-Hide Products Co., Inc., a Texas corporation ("Mule-Hide,"
and together with Amcraft, the "Guarantors," and together with the Issuer and
Amcraft, the "Registrants"), in connection with the proposed registration by the
Issuers of up to $100,000,000 in aggregate principal amount of the Issuer's
10 5/8% Series B Senior Subordinated Notes due 2007 (the "Exchange Notes"),
pursuant to a Registration Statement on Form S-4 (Registration No. 33-26991)
filed with the Securities and Exchange Commission on May 13, 1997 under the
Securities Act of 1933, as amended (the "Act") (such Registration Statement, as
amended or supplemented, is hereinafter referred to as the "Registration
Statement"). The obligations of the Issuer under the Exchange Notes will be
guaranteed by the Guarantors (the "Guarantee"). The Exchange Notes and the
Guarantee are to be issued pursuant to the Indenture (the "Indenture"), dated as
of May 7, 1997, among the Issuers, the Guarantors and Norwest Bank Minnesota,
National Association, as Trustee, in exchange for and in replacement of the
Issuer's outstanding 10 5/8% Senior Subordinated Notes due 2007 (the "Notes"),
of which $100,000,000 in aggregate principal amount is outstanding.
[LETTERHEAD OF KIRKLAND & ELLIS]
<PAGE>
KIRKLAND & ELLIS
American Builders & Contractors Supply Co., Inc.
June 24, 1997
Page 2
In that connection, we have examined originals, or copies certified or
otherwise identified to our satisfaction, of such documents, corporate records
and other instruments as we have deemed necessary for the purposes of this
opinion, including (i) the Certificate of Incorporation, as amended, or the
Articles of Incorporation, as amended, as the case may be, of the Registrants,
(ii) the By-Laws of the Registrants, (iii) minutes and records of the corporate
proceedings of the Registrants with respect to the issuance of the Exchange
Notes and the Guarantee, respectively, (iv) the Registration Statement, and (v)
the Registration Rights Agreement, dated May 7, 1997, among the Issuer and the
Guarantors, and NationsBanc Capital Markets, Inc. and First Chicago Capital
Markets, Inc.
For purposes of this opinion, we have assumed the authenticity of all
documents submitted to us as originals, the conformity to the originals of all
documents submitted to us as copies and the authenticity of the originals of all
documents submitted to us as copies. We have also assumed the genuineness of the
signatures of persons signing all documents in connection with which this
opinion is rendered, the authority of such persons signing on behalf of the
parties thereto and the due authorization, execution and delivery of all
documents by the parties thereto other than the Registrants. As to any facts
material to the opinions expressed herein which we have not independently
established or verified, we have relied upon statements and representations of
officers and other representatives of the Issuer and others.
Our opinion expressed below is subject to the qualifications that we
express no opinion as to the applicability of, compliance with, or effect of (i)
any bankruptcy, insolvency, reorganization, fraudulent transfer, fraudulent
conveyance, moratorium or other similar law affecting the enforcement of
creditors' rights generally, (ii) general principles of equity (regardless of
whether enforcement is considered in a proceeding in equity or at law), (iii)
public policy considerations which may limit the rights of parties to obtain
certain remedies and (iv) any laws except the laws of the State of New York, the
General Corporation Law of the State of Delaware and the federal laws of the
United States of America.
Based upon and subject to the assumptions, qualifications, assumptions and
limitations and the further limitations set forth below, we are of the opinion
that when (i) the Registration Statement becomes effective, (ii) the Board of
Directors and the appropriate officers of the Registrants have taken all
necessary action to fix and approve the terms of the Exchange Notes and the
Guarantee, respectively, (iii) the Indenture has been duly qualified under the
Trust Indenture Act of 1939, as
<PAGE>
KIRKLAND & ELLIS
American Builders & Contractors Supply Co., Inc.
June 24, 1997
Page 3
amended and (iv) the Exchange Notes and the Guarantee have been duly executed
and authenticated in accordance with the provisions of the Indenture and duly
delivered to the purchasers thereof in exchange for the Notes, the Exchange
Notes and the Guarantee will be validly issued obligations of the Registrants.
We hereby consent to the filing of this opinion with the commission as
Exhibit 5.1 to the Registration Statement. We also consent to the reference to
our firm under the heading "Legal Matters" in the Registration Statement. In
giving this consent, we do not thereby admit that we are in the category of
persons whose consent is required under Section 7 of the Act or the rules and
regulations of the Commission.
This opinion is limited to the specific issues addressed herein, and no
opinion may be inferred or implied beyond that expressly stated herein. We
assume no obligation to revise or supplement this opinion should the present
laws of the States of New York or Delaware or the federal law of the United
States be changed by legislative action, judicial decision or otherwise.
This opinion is furnished to you in connection with the filing of the
Registration Statement and is not to be used, circulated, quoted or otherwise
relied upon for any other purpose.
Sincerely,
\s\ Kirkland & Ellis
Kirkland & Ellis
<PAGE>
EXHIBIT 10.1
PURCHASE AND SALE AGREEMENT
BETWEEN
VIKING ALUMINUM PRODUCTS, INC.
and
AMERICAN BUILDERS & CONTRACTORS SUPPLY CO. INC.
<PAGE>
PURCHASE AND SALE AGREEMENT
THIS AGREEMENT, made and entered into as of this 12/th/ day of April, 1997,
by and between Viking Aluminum Products, Inc., a Connecticut corporation with
principal offices at 33-39 John Street, New Britain, CT 06051 ("Seller") and
American Builders & Contractors Supply Co., Inc., a Texas corporation with
principal offices at One ABC Parkway, Beloit, WI 53511("Buyer").
WITNESSETH:
----------
WHEREAS, by agreement being entered into contemporaneously herewith, Buyer
has agreed to acquire substantially all the assets of Viking, Building Products,
Inc. ("VBP"), an affiliate of Seller engaged in the distribution of roofing,
windows, siding, building products and related accessories (the "VBP Asset
Purchase Agreement");
WHEREAS, Seller is engaged in several businesses, including the
manufacturing of windows and related accessories; and
WHEREAS, one of the divisions of Seller is specifically engaged in the
manufacturing of seamless gutter accessories under the trademark "Rain Ware"
(the "Rain Ware Division");"
WHEREAS, one of the divisions of Seller is engaged in the distribution and
sale of roofing, windows, siding, building products and related accessories out
of a facility in Berlin, Connecticut (the "Berlin Division") located at 61
Massario Drive (the "Berlin Real Estate"); and
WHEREAS, in connection with the purchase of the VBP assets, Buyer desires
to purchase, and Seller desires to sell, the assets of the Rain Ware Division
(the "Rain Ware Assets"), the assets of the Berlin Division (the "Berlin
Assets"), its Andersen and Windsor Windows fabrication assets (the "Andersen
Assets") and certain of the other assets of the Seller all as more particularly
described in Schedule 1.01(d) (the "Additional Assets");
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements as to which the parties
acknowledge the sufficiency thereof, and upon the terms and subject to the
conditions hereinafter set forth, the parties do hereby agree as follows:
ARTICLE I
SALE AND PURCHASE OF ASSETS
---------------------------
1.01. Sale of Assets. Subject to the terms and conditions of this
Agreement, and except as otherwise specifically provided herein, on the Closing
Date (as defined in Article 3.01 below), Seller shall sell, assign, transfer and
convey to Buyer, and Buyer shall purchase, acquire and
<PAGE>
accept from Seller, free and clear of any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind (together, "Liens"), other than as
specifically assumed herein, all of the Seller's right, title and interest in
and to the Berlin Assets, the Rain Ware Assets, the Andersen Assets and the
Additional Assets (collectively, the "Assets") as follows:
(a) Berlin Assets. The Berlin Assets shall include only the following:
(i) all accounts receivable from customers of the Berlin Division and all
associated credit rights (including, without limitation, all Joint check
agreements, personal or other (warranties, third party payment arrangements,
bond and lien rights). together with any security or collateral therefor, all of
which shall be identified on Schedule 1.01(a)(1)(A) to be delivered at Closing
and incorporated herein by this reference ("Accounts Receivable"), but excluding
those accounts receivable (other than any accounts receivable with respect to
sales of products by Seller made after February 28, 1997) which have been or,
prior to the date of Closing, will be, written off Seller's books as bad debt or
turned over by Seller for collection by an attorney or collection agency
("Excluded Accounts Receivable"). A portion of those accounts receivable which
Seller will write-off, prior to Closing are identified on Schedule 1.01
(a)(i)(B) attached hereto and incorporated herein by this reference.
(ii) all furnishings, furniture, office equipment and supplies,
commercial vehicles, spare parts, tools, machinery, equipment, personal property
and other tangible property wherever located that are identified on the books
and records of, or used in connection with, the Berlin Division, including,
without limitation, those listed in Schedule 1.01(a)(ii) of this Agreement
(except as disposed of in the ordinary course of business consistent with past
practice and not in violation of any provision of this Agreement) (together with
the Assets described in clause (iii), the "Equipment");
(iii) all fixed assets, other than the items described in clause (ii),
that are identified on the books and records of, or used in connection with, the
Berlin Division (including, without limitation, those listed in Schedule
1.01(a)(111) of this Agreement);
(iv) all quantities of inventory, including raw materials, bulk,
components, work-in-process, finished goods, promotional items, packaging
materials and supplies (which includes the inventory of Andersen and Windsor
window products) as more fully defined in Article 2.02(a) and identified on the
books and records of, or used in connection with, the Berlin Division ("Berlin
Inventory") (including Berlin Inventory listed in Schedule 1.01(a)(iv) of this
Agreement, except as disposed of in the ordinary course of business consistent
with past practice and not in violation of any provision of this Agreement) and
all purchase orders for Berlin Inventory ordered by Seller in the ordinary
course of business but not received as of the Closing Date (Seller shall deliver
at Closing a schedule of pending Berlin purchase orders);
(v) all rights of the Seller under or pursuant to all warranties,
representations and (guarantees made by suppliers, manufacturers and contractors
in any way related to the business of the Berlin Division or affecting the
Berlin Assets described above, except to the extent such
3
<PAGE>
warranties, representations and guarantees relate to or affect the Excluded
Assets or Excluded Liabilities;
(vi) all contracts (excluding collective bargaining agreements and
pension and profit sharing plans), agreements, licenses, rights to receive
royalties. arrangements and/or commitments of any kind in any way related to the
business of the Berlin Division or Berlin Assets, and listed in Schedules
1.01(a)(vi) and 4.01 of this Agreement, and all customer purchase orders ordered
in the ordinary course of business or other commitments to purchase products
from Seller which have not been shipped as of the Closing Date, whether or not
listed in Schedules 1.01(a)("') or 4.01 of this Agreement;
(vii) all customer and vendor lists in any way related to the Berlin
Division, and all files and documents (including credit information) to the
extent relating to customers and vendors of the Berlin Division, and other
business and financial records, files, books and documents (whether in hard copy
or computer format or any other tangible form) in any way related to the Berlin
Assets and/or the business of the Berlin Division, including sales and
advertising, materials, sales, distribution and purchase correspondence,
personnel and employment records, any information relating to taxes imposed on
the Berlin Assets and trade association memberships (including, without
limitation, those listed in Schedule 1.01(vii) of this Agreement);
(viii) all of Seller's rights, claims, credits, causes of action or
rights of setoff against third parties in any way related to the business of the
Berlin Division or affecting the Berlin Assets or Assumed Liabilities;
(ix) all licenses, permits, certificates, franchises or other
governmental authorizations 'in any way related to the Berlin Division or any of
the Berlin Assets (including those listed in Schedule 1. 0 1 (a)(ix) of this
Agreement), subject to the provisions of Article 1.02;
(x) all goodwill associated with the Berlin Division and the Berlin
Assets; (together, the items set forth in clauses (a)(1) through (a)(x) are
referred to herein as "Berlin Assets"); and
(xi) except for the name "Viking" (which is an Excluded Asset), all
rights, title and interests of the Seller in all Jurisdictions in and to names,
tradenames, trademarks and service marks used or adopted, whether registered or
unregistered, and copyrights, and registrations of and applications to register
the same, owned by Seller or licensed to Seller by third parties and identified
on the books and records of, used in connection with, or in any way related to,
the Business, including, without limitation, in each case, those listed in
Schedule 1.01 (xi) of this Agreement, and any and all goodwill represented by or
pertaining to any of the foregoing (collectively, together with the rights and
interests described in clause (vii) above, the "Proprietary Rights").
(b) Rain Ware Assets
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(i) those items of machinery and equipment identified on the books
and records of or used in connection with, the Rain Ware Division as set forth
on Schedule 1.01(b)(1) annexed hereto;
(ii) all quantities of inventory, including raw materials, bulk,
components, work-in-process, finished goods, promotional items, packaging
materials and supplies as more fully defined in Article 2.02(b) ("Rain Ware
Inventory") and identified on the books and records of, or used in connection
with, the Rain Ware Division (including Rain Ware Inventory listed in Schedule
1.01(b)(11) of this Agreement, except as disposed of in the ordinary course of
business consistent with past practice and not in violation of any provision of
this Agreement) and all purchase orders for Rain Ware Inventory ordered by
Seller in the ordinary course of business but not received as of the Closing
Date (Seller shall deliver at Closing a Schedule of pending Rain Ware purchase
orders);
(iii) all of Seller's right, title and interest in and to the
trademark "Rain Ware", including the rights identified on Schedule 1.01(b)(111);
and
(iv) all goodwill associated with the Rain Ware Division and the
Rain Ware Assets;
(v) all contracts (excluding collective bargaining agreements and
pension and profit sharing plans), agreements, licenses, rights to receive
royalties, arrangements and/or commitments of any kind in any way related to the
business of the Rain Ware Division or Rain Ware Assets, and listed in Schedules
1.01(b)(v) and 4.01 of this Agreement, and all customer purchase orders ordered
in the ordinary course of business or other commitments to purchase Rain Ware
products from Seller which have not been shipped as of the Closing Date, whether
or not listed in Schedules 1.01(b)(v) or 4.01 of this Agreement;
(vi) all vendor lists in any way related to the Rain Ware Division,
and all files and documents to the extent relating to vendors of the Rain Ware
Division, and other business and financial records, files, books and documents
(whether in hard copy or computer format or any other tangible form) in any way
related to the Rain Ware Assets and/or the business of the Rain Ware Division,
including sales and advertising materials, sales, distribution and purchase
correspondence, personnel and employment records, any information relating to
taxes imposed on the Rain Ware Assets and trade association memberships
(including, without limitation, those listed in Schedule 1.01(b)(vi) of this
Agreement);
(vii) all of Seller's rights, claims, credits, causes of action or
rights of setoff against third parties in any way related to the business of the
Rain Ware Division or affecting the Rain Ware Assets or Assumed Liabilities
related to the Rain Ware Division; and
(viii) all licenses, permits, certificates, franchises or other
Environmental authorizations in any way related to the Rain Ware Division or any
of the Rain Ware Assets (including those listed in Schedule 1.01 (b)(viii) of
this Agreement), subject to the provisions of
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Article 1.02; (together, the items set forth in clauses (b)(1) through (b)(viii)
are referred to herein as "Rain Ware Assets");
(c) Andersen Assets
(i) those items of equipment identified on the books and records
of, or used in connection with, the Andersen Assets as set forth on Schedule
1.01(c)(1) annexed hereto;
(ii) the inventory of Andersen and Windsor window products referred
to in Article 1.01(a)(iv) and included within the Berlin Inventory;
(iii) all contracts, agreements, licenses, rights to receive
royalties, arrangements and/or commitments of any kind in any way related to the
fabrication by Seller of Andersen and Windsor Windows and listed in Schedules
1.01(c)(111) and 4.01 of this Agreement, and all customer purchase orders
ordered in the ordinary course of business or other commitments to purchase
Andersen and Windsor Window products from Seller which have not been shipped as
of the Closing Date, whether or not listed in Schedules 1.01(c)(111) or 4.01 of
this Agreement;
(iv) all rights of the Seller under or pursuant to all warranties,
representations and guarantees made by suppliers, manufacturers and contractors
in any way related to the Andersen Assets described above, except to the extent
such warranties, representations and guarantees relate to or affect the Excluded
Assets or Excluded Liabilities;
(v) all of Seller's rights, claims, credits, causes of action or
rights of setoff against third parties in any way related to the Andersen Assets
or Assumed Liabilities;
(vi) all licenses, permits, certificates, franchises or other
governmental authorizations in any way related to the Andersen Assets (including
those listed in Schedule 1.01(c)(vi) of this Agreement), subject to the
provisions of Article 1.02;
(vii) all goodwill associated with the Andersen Assets; (together,
the items set forth in clauses (c)(i) through (c)(vii) are referred to herein as
"Andersen Assets");
(d) Additional Assets
(i) the hardware, modems, cables, decorators, equipment stands not
retained by Seller, databases and software programs, source codes and user
manuals associated with the Versyss computer system, wherever located, and
itemized on Schedule 1.01(d)(1) annexed hereto (but excluding the AMS software
and certain personal computers as specifically noted on Schedule 1.01(d)(1) used
by Seller in connection with computers its manufacturing businesses), together
with dedicated telephone lines and telephone numbers used in connection with the
Versyss computer system;
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(ii) the equipment and vehicles set forth on Schedule 1.01(d)(ii)
annexed hereto; and
(iii) all contracts, licenses and leases related to the Additional
Assets as identified on Schedule 1.01(d)(111). (to(,ether, the items set forth
in clauses (c)(1) through c(iii) are referred to herein as "Additional Assets").
1.02. Assignment of Assets.
(a) Prior to the Closing, Seller shall use its best efforts, and Buyer
shall cooperate with Seller, to obtain all nongovernmental approvals, consents
or waivers (including all Required Third Party Consents (as defined in Article
1.02(b)) necessary to assign to Buyer all leases, contracts, licenses,
agreements, sales or purchase orders, commitments, property interests,
qualifications or other assets described in Article 1.01 hereof and any claim,
right or benefit arising thereunder or resulting therefrom (the "Interests"),
all of which Required Third Party Consents are identified on Schedule 1.02 (a).
(b) As used herein, "Required Third Party Consent" means each consent
required as a result of the execution, delivery and performance of this
Agreement or the consummation of the transactions contemplated hereby, under any
Commitment (as defined in Article 4.04(o hereof) that involves an annual payment
by or to Seller exceeding $2,500.00;
(c) To the extent any of the approvals, consents or waivers referred to
in Article 1.02(a) hereof have not been obtained by Seller as of the Closing and
Buyer waives the condition precedent in Article 9.06, if Buyer so requests,
Seller, for a period of eighteen (18) months after the Closing Date, shall
continue to use its best efforts, and Buyer shall cooperate with Seller (without
the payment of any consideration by Seller or Buyer), to obtain such approval,
consents or waivers. Regardless of any request by Buyer, Seller shall use its
best efforts during the remaining term of any Interest to, with Buyer
reimbursing Seller for any out-of-pocket expense: (i) cooperate with Buyer in
any reasonable and lawful arrangements under which Buyer would obtain the
benefits of, and assume the post-Closing obligations under, such Interest (other
than obligations resulting from Seller's breach thereof or default thereunder);
and (ii) enforce, at the request of Buyer and for the account of Buyer, any
rights of Seller arising from such Interest against the issuer thereof or the
other party or parties thereto (including the right to elect to terminate any
such Interest in accordance with the terms thereof upon the written advise of
Buyer). Seller will promptly pay (or cause to be paid) to Buyer when received
all amounts received by Seller under any Interest.
(d) Seller shall use its best efforts, and Buyer shall cooperate with
Seller, to obtain as of the Closing Date the Required Governmental Consents
described below in this Article 1.02; provided that Seller will assign, transfer
or convey to Buyer at the Closing those governmental permits and licenses
described in Schedule 1.01(a)(Ix) of this Agreement to the extent assignable. No
provision of this Article 1.02 shall be deemed to be a waiver or release of, or
otherwise affect any condition, night or obligation under Article 9.06.
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As used herein, "Required Governmental Consent" means each approval or
consent required as a result of the execution, delivery and performance of this
Agreement or the consummation of the transactions contemplated hereby, to obtain
or transfer (whether by assignment renewal, amendment or otherwise) the Permits
listed on Schedule 4.13 of this Agreement (with the only change being the
identity of Buyer as the holder thereof).
"Required Consent" means any Required Third Party Consent and any Required
Governmental Consent.
1.03. Excluded Assets. The parties to this Agreement expressly understand
and agree that Seller is only selling, assigning and transferring to Buyer the
Assets specifically described above and with respect to the Berlin Division, the
Andersen Assets, the Additional Assets and Rain Ware Division, is not selling,
assigning, transferring or conveying to Buyer pursuant to this Agreement any
other rights, properties or assets of Seller, and this Agreement specifically
excludes the following assets, rights and properties (the "Excluded Assets"):
(i) leasehold improvements which Leave become affixed to and part
of the real estate used in connection with the operation of the Berlin Division,
all of which shall be transferred to Buyer or its affiliates pursuant to the
Berlin Real Estate Contract (defined below in Article 9.09) being entered into
contemporaneously herewith;
(ii) except as otherwise set forth herein, any right, title and
interest under all contracts, agreements, licenses, waivers, consents, approvals
and other nongovernmental authorizations which are not transferable, whether by
their terms or applicable law;
(iii) any and all cash, bank, accounts, certificates of deposit,
treasury bills, promissory notes, marketable securities, and other investments;
(iv) the Excluded Accounts Receivable;
(v) the accounts receivable of the Rain Ware Division;
(vi) the Excluded Berlin Inventory and Excluded Rain Ware Inventory
(as defined in Article 2.02(a) below), if any;
(vii) all rights, claims, credits or causes of action against third
parties except to the extent solely related to the Excluded Assets or the
Excluded Liabilities;
(viii) Seller's pension and retirement plans;
(ix) the AMS software and certain personal computers as specifically
noted on Schedule 1.01(d)(1) used by Seller in connection with its manufacturing
businesses;
(x) Seller's collective bargaining agreements;
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(xi) the name "Viking," the name "Viking Aluminum Products" and the
Viking logo, all provided, however, that Seller acknowledges and agrees it shall
not interfere with or contravene Buyer's right and license granted to it by VBP,
to use the name "Viking" the name "Viking Building Products" and the Viking logo
in connection with Buyer's continuation of the distribution business being
acquired from VBP, which right and license and the terms thereof shall extend to
the continuation by Buyer of the distribution business of the Berlin Division;
and
(xii) Subject to adjustment pursuant to Article 2.04(c) below with
respect to purchases made by Seller from January 1, 1997 to the Closing Date,
all of Seller's rights to vendor rebates and discounts on purchases made by
Seller prior to the Closing pursuant to any vendor rebate programs in which
Seller participates (hereinafter referred to as "Vendor Rebate Provisions").
1.04. Assumed Liabilities; Excluded Liabilities.
(a) Upon the terms and subject to the conditions of this Agreement,
Buyer agrees, effective at the Closing, to assume the following liabilities (the
"Assumed Liabilities"):
(i) all liabilities of Seller arising in connection with the Berlin
Assets referred to in Article 1.01(a) to the extent arising out of the conduct
of the business of the Berlin Division after the Closing Date or otherwise
specifically assumed by Buyer in this Agreement;
(ii) all liabilities and obligations arising in respect of earned
and or/accrued vacation pay (and all related payroll and other taxes and
assessments) of the employees employed by the Berlin Division and Rain Ware
Division and hired by Buyer as of the Closing ("Assumed Vacation Pay") which
shall be scheduled as of the Closing Date and attached hereto as Schedule
1.04(a)(11), identifying each employee, date of hire, earned and/or accrued
vacation;
(iii) all liabilities and obligations arising in respect of the
Berlin Division's stated trade payables as of the Date of Closing to those
vendors identified on Schedule 4. 01 (y)(A) (hereinafter collectively referred
to as "Major Vendors") provided that, with respect to each Major Vendor so
identified on Schedule 4.01(y)(A), Buyer delivers to Seller at Closing an
Assumption and Release Agreement in the form of Exhibit A annexed hereto
executed by Buyer acknowledging its assumption of the payable with respect to
the Berlin Division and each such Major Vendor releasing the Seller from the
obligation (the "Assumed Trade Payables"); any liabilities and obligations
arising in respect of Major Vendors as of the Date of Closing for which Buyer
does not deliver to Seller at Closing an Assumption and Release Agreement and
all other vendors not identified on Schedule 4.01(y)(A), shall remain the
liability and obligation of Seller and shall not be assumed by the Buyer (the
"Non-Assumed Trade Payables"); and Seller's internal trade payables and product
transfers relating to any product manufactured by Seller's other divisions (e.g.
window manufacturing) for resale by the Berlin Division for the period beginning
forty-five (45) days prior to Closing, all of which shall be identified by
Seller on Schedule 1.04(a)(111) to be annexed hereto at Closing ("VAP Trade
Payables"). The VAP Trade Payables shall be due from Buyer in accordance with
Seller's ordinary terms, i.e., payment due on the tenth (10th) day of each
month, for invoices dated prior to the 26th of the previous month; date of
invoice;
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(iv) all liabilities arising in connection with the Rain Ware
Assets. the Andersen Assets and Additional Assets referred to in Articles
1.01(b), (c) and (d) to the extent such liabilities result from Buyer's
operation of the Berlin Division or Buyer's manufacture of Rain Ware products or
fabrication of Andersen and Windsor Windows after the Closing Date or otherwise
specifically assumed by Buyer in this Agreement;
(v) all liabilities and obligations for all stated customer
deposits with respect to any Accounts Receivable or pending contracts for
customer orders ("Customer Deposits");
(vi) all liabilities and obligations for Seller's current bonus
program with its salesmen pursuant to which each salesman is entitled to a bonus
equal to two percent (2%) of the salesman's gross sales from March 1, 1997 to
the Closing Date, less draw paid to that date (the "Salesmen Bonuses"), subject
to Buyer receiving a credit against the Purchase Price in an amount equal to
fifty percent (50%) of the Salesmen Bonuses earned as of the Closing Date or, in
the event the Closing occurs after May 27, 1997, in an amount (when aggregated
with the Salesmen Bonuses earned by VBP salesmen) equal to the lesser of fifty
percent (50%) of the Salesmen Bonuses earned as of the Closing Date or Forty
Thousand Dollars ($40,000.00) (the Salesman Bonus Credit") allocated by Seller
as between Seller and VBP;
(vi) all liabilities and obligations to Seller's customers
identified on Schedule 4.01(y)(B) pursuant to Seller's rebate and discount
programs which commenced March 1, 1997 for those customers and are unpaid as of
the Closing (the "Customer Discounts"), subject to Buyer receiving a credit from
Seller at the Closing for these Customer Discounts accrued as at the Closing,
but further subject to the parties adjusting these Customer Discounts post-
Closing, at the end of the calendar year, as provided in Article 2.04(d).
(b) Except as set forth in Article 1.04(a), Buyer shall not assume any
other liability or obligation of Seller of whatever nature whether existing at
any time in the past, presently in existence or arising hereafter. All such
other liabilities and obligations shall be retained by and remain obligations
and liabilities of Seller, all such liabilities are referred to herein as the
"Excluded Liabilities." Notwithstanding, anything to the contrary in Article
1.04(a) or this Article 1.04(b), the following shall constitute without
limitation, the Excluded Liabilities:
(i) all liabilities and obligations associated with the Excluded
Assets,
(ii) all lawsuits, claims and other liabilities and obligations
arising in connection with all actions, suits, claims, investigations or
proceedings pending on the Closing Date or arising after the Closing and
relating to the conduct of the business or the ownership of the Assets prior to
the Closing;
(iii) except the Assumed Vacation Pay and Salesmen Bonuses, all
liabilities or obligations relating to Seller's employee benefits or
compensation arrangements existing on or prior to the Closing Date, including
without limitation, any payroll obligations, earned and accrued vacation pay,
fringe benefits, employee benefits, bonuses, commissions on sales of products
delivered prior to the Closing Date, worker's compensation or other insurance
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premiums, severance pay, payroll taxes, Social Security or any other tax,
penalty or assessment relating thereto, and any liabilities or obligations under
any of Seller's employee benefit agreements, plans or other arrangements,
including without limitation, those listed on Schedule 4.01(m). Seller shall
deliver to Buyer at Closing an accurate schedule of earned and/or accrued
vacation pay, fringe benefits, bonuses and commissions on sale of products
delivered prior to Closing to which Seller's employees listed on Schedule
3.03(f) are entitled;
(iv) all liabilities or obligations (including any contra asset or
negative amount in respect of cash or other assets) owed by Seller or any other
business affiliated with Seller by common ownership ("Affiliate");
(v) all liabilities and obligations under any indebtedness for
borrowed money or under any guarantees made by Seller or Seller's shareholders;
(vi) all liabilities relating to products sold by Seller prior to the
Closing Date, including, without limitation, product warranty claims, product
returns and related credits or offsets against Accounts Receivable;
(vii) all Non-Assumed Trade Payables and liabilities and obligations
other than, or in excess of, the Assumed Trade Payables and the VAP Trade
Payables;
(viii) all liabilities relating to collective bargaining agreements
(except to the extent of any liability which arises, on or after the Closing,
out of Buyer's non-assumption of the collective bargaining agreements or its
failure to reach agreements with the respective collective bargaining units);
(ix) all liabilities related to Seller's pension and retirement plans
(including all underfunded and unfunded liabilities), and
(x) all other liabilities and obligations of Seller, whether known or
unknown, contingent or absolute, determined or determinable, not expressly
assumed pursuant to Article 1.04(a).
ARTICLE II
PURCHASE PRICE
--------------
2.01. Purchase Price. The purchase price of the Assets shall be the sum
of the following (referred to in the aggregate as the "Purchase Price"):
(a) Berlin Assets:
(i) the Seller's net book value of the equipment, fixed assets, and
all other Berlin Assets as at the Closing Date (exclusive of the Berlin
Inventory and Accounts
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Receivable which shall be valued respectively in accordance with subparagraphs
(ii) and (iii) of this Article 2.01(a) below);
(ii) inventory valued at the time and in the manner set forth in
Article 2.02(a) below, at the lesser of Seller's average invoice cost or
replacement cost, less all cash discounts, rebates, winter dating incentives
(with respect only to inventory purchased through winter dating incentives) and
volume incentive credits of any kind (whether earned or accrued); there shall be
no value assigned to Excluded Berlin Inventory (defined below in Article 2.02);
(iii) Gross Accounts Receivable of the Berlin Division which shall
include all interest and service charges accrued on the Accounts Receivable, all
of which as set forth on Schedule 1.01(a)(1)(A) to be delivered by Seller at
Closing, all provided, however that the purchase price for such interest and
service charges to be paid by Buyer (inclusive of interest and service charges
on VBP Accounts Receivable) shall not exceed $260,000.00 (the amount paid by
Buyer for such interest is hereinafter referred to as the "Accounts Receivable
Interest Payment"); and
(b) Rain Ware Assets: The sum of Fifty Thousand and 00/100 Dollars
($50,000.00), plus the value of the Rain Ware Inventory as provided in Article
2.02(c) below (there shall be no value assigned to the Excluded Rain Ware
Inventory, (defined below in Article 2.02(c)); and
(c) Andersen Assets: The Seller's net book value of all of the Andersen
Assets as at the Closing Date, plus the value of the Andersen Inventory, as
provided in Article 2.02(d) below; and
(d) Additional Assets: The net book value of the equipment, vehicles and
all other Additional Assets as at the Closing Date; and
(e) $1,450,000.00 for the Non-Competition agreements of the Seller and the
Shareholders as per Article 8.01 and
(f) An additional sum of $1,050,000.00; less
(g) The amount of the Assumed Trade Payables and VAP Trade Payables; less
(h) The amount of the Assumed Vacation Pay; less
(i) The amount of the Customer Deposits; less
(j) The Salesmen Bonus Credit, if any; less
(k) The Customer Discounts.
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2.02. Inventory.
(a) Berlin Inventory. Within four (4) business days prior to the Closing
Date, Buyer and Seller shall conduct a joint physical inspection and complete
item-by-item in Inventory as of the count of the Berlin Inventory for purposes
of valuing the Berlin Closing Date. During such count, Buyer and Seller shall
make appropriate record of (i) any damaged inventory, (ii) any obsolete
inventory (inventory not currently being offered by the original manufacturer in
its line), (iii) subject to the provisions of paragraph (b) of this Article
2.02. slow-moving inventory (inventory of a particular product other than Rain
Ware products, which exceeds a supply of more than 180 days based upon sales of
the product during the period from July 1, 1996 through December 31, 1996)
purchased or manufactured after January 1, 1997, (iv) decking materials and
related accessories (including but not limited to TREX decking) and (v) any
custom or special order items for which a customer order is not outstanding, and
Buyer shall, at the Closing, advise Seller which of such damaged or obsolete
Inventory does not intend to purchase (the "Excluded Berlin Inventory"). Seller
shall have the right to sell or in any other manner dispose of the Excluded
Berlin Inventory within ninety (90) days of the Closing and any and all proceeds
realized therefrom shall be the sole property of Seller. Buyer agrees to permit
Seller to store the Excluded Berlin Inventory at Seller's present warehouses
during this ninety (90) day period at no cost to Seller. Seller shall retain the
risk of loss with respect to any Excluded Berlin Inventory stored at Seller's
warehouses after the Closing. Any Excluded Berlin Inventory not removed from the
warehouses on the ninety-first (91st) day shall, at Buyer's election, become the
property and responsibility of Buyer; in the event Buyer does not elect to own
any remaining Excluded Berlin Inventory, the removal or disposal of such
Excluded Berlin Inventory shall be at Seller's sole expense and in Seller's
name.
(b) Anything to the contrary notwithstanding, particular products (other
than Rain Ware products which under no circumstances shall come within the
definition of slow moving inventory) purchased by Seller for the Berlin Division
after January 1, 1997 which would, in accordance with the foregoing definition
of slow moving inventory, be deemed to be slow moving inventory, shall not be
deemed to be Excluded Berlin Inventory provided that the aggregate cost of such
purchases does not exceed the sum of Ten Thousand Dollars ($10,000.00) and the
overall supply of slow moving inventory of all Berlin products as at the Closing
is less than such supply as at January 1, 1997.
(c) Rain Ware Inventory. Within four (4) business days prior to the
Closing Date, Buyer and Seller shall conduct a Joint physical inspection and
complete item-by-item count of the Rain Ware Inventory for purposes of valuing
the Rain Ware Inventory as of the Closing Date. Rain Ware Inventory consisting
of finished goods shall be valued at net invoice price; all other items of Rain
Ware Inventory including, without limitation, raw materials and packaging
materials, shall be valued at the lesser of Seller's average invoice cost or
market cost, less all cash discounts, rebates and volume incentive credits of
any kind (whether earned or accrued). During such count, Buyer and Seller shall
make appropriate record of (i) any damaged inventory, (ii) any obsolete
inventory (inventory not currently being offered by Seller in its line), and
(iii) any custom or special order items for which a firm customer purchase order
is not outstanding, and Buyer shall, at the Closing, advise Seller which of such
damaged or obsolete Inventory it does
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not intend to purchase (the "Excluded Rain Ware Inventory"). Seller shall have
the same rights with respect to the Excluded Rain Ware Inventory as Seller has
with respect to the Excluded Berlin Inventory pursuant to Article 2.02(a) above.
2.03. Payment of the Purchase Price. The Purchase Price shall be paid at
the Closing, in U.S. Dollars by wire transfer of immediately available funds to
such account as Seller may designate.
2.04. Apportionment of Certain Charges and Post Closing Adjustments.
(a) The parties shall adjust at the Closing utility charges, rents,
prepaid items, or other similar operating expenses related to the Assets. Such
adjustments shall be apportioned between Buyer and Seller with Seller bearing a
portion thereof based on the number of days in the period on and prior to the
Closing Date and Buyer bearing a portion based on the number of days in such
period after the Closing Date. Any adjustments required under this Article 2.04
shall be made as of the close of business on die Closing Date.
(b) If any liability arises after the Closing Date in respect of any
utility charges, rents, prepaid items, or other similar operating expenses and
such liability relates to a period which includes (but does not end on) the
Closing Date and has not been adjusted between the parties and paid at the
Closing or a liability which should have been apportioned at the Closing but was
not so apportioned, such liability shall be similarly apportioned between Buyer
and Seller as of the close of business on the Closing Date. Seller and Buyer
mutually agree that within ninety (90) days after the Closing Date, Buyer shall
submit to Seller a post closing adjustment report (the "Post Closing Adjustment
Report") which shall set forth any adjustment in the Purchase Price based upon
the apportionment of the charges described in Article 2.04(a) above (the
"Purchase Price Adjustment"). If Seller does not object to the Purchase Price
Adjustment within fifteen (15) days after receipt thereof, the Purchase Price
Adjustment shall be deemed final and Seller shall promptly remit to Buyer in
immediately available funds the amount of such Purchase Price Adjustment. If
Seller objects to the Purchase Price Adjustment within the fifteen (15) day
period described herein, or if within said fifteen (15) day period Seller
advises Buyer of an adjustment that should have, but was not adjusted for at the
Closing and Buyer objects, any dispute with respect thereto which is not
resolved by Seller and Buyer within thirty (' ) 0) days after receipt by Buyer
of Seller's obligations shall be submitted to arbitration under Article 13.16.
(c) Seller in its sole discretion may attempt to have those of its vendors
with whom Seller participates in a Vendor Rebate Program, agree to credit
Seller's purchases made from January 1, 1997 to the date of Closing ("Seller's
1997 Purchases") towards Buyer's purchases from such vendors for purposes of
Buyer's rebate program (if any) with such vendors. Seller shall advise Buyer in
writing on or before the Closing as to any vendor(s) agreeing to the foregoing
("Participating Vendor(s)"). If Buyer is entitled to a rebate from a
Participating Vendor (irrespective of whether Seller's 1997 Purchases enable
Buyer to qualify for the rebate), to the extent of Seller's 1997 Purchases,
Seller shall be entitled as a post-closing adjustment, to a prorated share of
the rebate earned by Buyer in the amount of the lesser of.- (1) the rebate
Seller would have received for Seller's 1997 Purchases under its Vendor Rebate
Program with the
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Participating Vendor, or (11) the portion of the rebate Buyer receives from the
Participating Vendor under its vendor rebate program allocable to Seller's 1997
Purchases. Such adjustment shall be paid to Seller within thirty (30) days of
receipt of the rebate by Buyer or the issuance of a credit to Buyer by the
Participating Vendor. Nothing herein shall be deemed to require Buyer to reveal
to Seller the terms of its vendor rebate program with any Participating Vendor
provided, however, Buyer shall reveal such information in strict confidence only
to a third party certified public accountant in the event of an audit of Buyer
with respect to this provision.
(d) The parties shall, on or before January 1, 1998, adjust the Customer
Discounts credit taken by Buyer at the Closing so that any rebate or discount
for which Buyer received a credit is recalculated and based upon a full fiscal
year. Such adjustment shall be apportioned between Buyer and Seller with Seller
being responsible for the portion of the Customer Discounts based on the
Seller's sales as a percentage of the total sales. Any such adjustment shall be
paid by the appropriate party to the other within fifteen (15) days of the date
the adjustment is calculated.
2.05. Allocation of Purchase Price.
(a) Buyer shall secure at its expense (exclusive of the Non-Competition
Agreement and Inventory which shall be valued in accordance with Articles 2.01
and 2.02 hereof) an appraisal or opinion of value of the tangible property
included in the Assets (the "Allocation") for purposes of Section 1060 of the
Internal Revenue Code of 1986, as amended (the "Code"). The Allocation shall be
delivered to Seller at the Closing.
(b) Seller and Buyer agree to report an allocation of the Purchase Price
among die Assets in a manner entirely consistent with the Allocation and agree
to act in accordance with such Allocation in the preparation of financial
statements and filing, of all tax returns, reports and claims (including,
without limitation, filing on a timely basis of Form 8594 with its Federal
income tax return for the taxable year that includes the date of the Closing)
and in the course of any tax audit, tax review, or tax litigation relating
thereto. Neither Seller nor Buyer will assert that the Allocation was not
separately bargained for at arm's length and in good faith. Seller and Buyer
agree not to assert, in connection with any tax return, audit or other similar
proceeding, any allocation of the Purchase Price which differs from the
Allocation agreed to herein.
(c) If a reduction is made with respect to the Purchase Price, the
Allocation shall be adjusted in accordance with Section 1060 of the Code, as
mutually agreed by Seller and Buyer. Seller and Buyer agree to file any
additional information return required to be filed pursuant to the regulations
under Section 1060(b) of the Code and to treat the Allocation as adjusted in the
manner described for purposes of the immediately preceding paragraph.
(d) Not later than thirty (30) days after Closing, Buyer shall deliver to
Seller a copy of its Form 8594. Seller shall notify Buyer in writing within
fifteen (15) calendar days of any objections to Buyer's Form 8594.
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(e) Each party shall notify the other within fifteen (15) calendar days
after receiving notice that the Internal Revenue Service or any other taxing
authority proposes to reallocate the Purchase Price.
ARTICLE III
CLOSING
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3.01. The Closing. The closing of the transactions contemplated hereby
(the "Closing") shall take place at the Empire State Building offices of Kudman,
Trachten & Kessler, counsel for Seller, contemporaneously with the closing
pursuant to the VBP Asset Purchase Agreement (provided that any conditions
required herein to be satisfied prior to the Closing have been satisfied or
waived as of such date), time being of the essence subject only to the
provisions of the VBP Asset Purchase Agreement with respect to Buyer's right to
adjourn the Closing for up to three weeks to a date no later than May 27, 1997.
3.02. Deliveries of Seller. At the Closing, Seller shall deliver the
following documents to Buyer:
(a) Bill of Sale and Assignment duly executed on behalf of Seller, dated
the Closing Date in the form attached hereto as Exhibit B, transferring to Buyer
all of the Seller's right, title and interest in and to the Assets;
(b) a receipt for the Purchase Price,
(c) the Required Consents, if any;
(d) the executed Assignment of Telephone Numbers with respect to the
telephone numbers used in connection with the Berlin Division as identified on,
and in the form of, the document attached hereto as Exhibit C;
(e) the executed Non-Competition Agreements of Seller's shareholders.
pursuant to Article 8.01(a);
(f) the opinion of Kudman, Trachten & Kessler, Seller's counsel, in
substantially the form of Exhibit D attached hereto;
(g) assignments of all contracts, if any with Seller's non-union employees
who are employed by Seller connection with the Berlin Division;
(h) a list of Customer Deposits;
(i) a list of Assumed Vacation Pay;
(j) a list of the Salesmen Bonuses;
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(k) a list of Customer Discounts; and
(1) the Schedules of pending purchase orders referred to in Articles
1.01(a)(iv) and (b)(ii).
3.03. Deliveries of Buyer. At the Closing, Buyer shall deliver, or cause
to be delivered, to Seller the following
(a) the Purchase Price, in accordance with paragraph 2.01 above;
(b) executed Assumption Agreement duly executed on behalf of Buyer in the
form of Exhibit E attached hereto;
(c) the executed Assumption and Release Agreements pursuant to Article
1.04(a)(iii);
(d) the Allocation pursuant to Article 2.05(a);
(e) the opinion of Leo and Associates, Buyer's counsel, in substantially
the form of Exhibit F attached hereto; and
(f) a list of all employees of Seller whom Buyer will offer to employ upon
Closing.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
----------------------------------------
4.01. Representations of Seller. Seller represents and warrants to Buyer
that:
(a) Seller is a corporation duly organized, validly existing and in good
standing under the laws of the State of Connecticut and has the authority to
execute, deliver and perform this Agreement and to consummate the transactions
contemplated hereby.
(b) The execution, delivery and performance by Seller of the consummation
by it of the transactions contemplated hereby are within Seller's corporate
powers and have been duly authorized by all necessary corporate action on the
part of Seller. This Agreement has been duly and validly executed and delivered
by Seller and constitutes its legal, valid and binding obligation, enforceable
against it in accordance with its terms, except to the extent that such
enforceability (i) may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to creditor's rights generally, and
(ii) is subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law). The
execution, delivery and performance by Seller of this Agreement and the
consummation by it of the transactions contemplated hereby will not, with or
without the giving of notice or the lapse of time, or both, (i) contravene or
conflict with the certificate of incorporation or bylaws of Seller, or any
resolution adopted by the board or directors or the shareholders of Seller, (ii)
contravene, conflict with or violate any provision of law, rule or
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regulation to which Seller or the Assets are subject, (iii) violate any order,
judgment or decree applicable to Seller or the Assets, or (iv) result in the
creation or imposition of any Lien on any Asset; or (v) subject to obtaining all
Required Third Party Consents, constitute a breach or default under or give rise
to any right of revocation, withdrawal, suspension, modification, termination,
cancellation or acceleration of any right or obligation of Seller or to a loss
of any benefit relating to the Assets to which Seller is entitled under any
Commitment or any Permit (as defined herein), or provision of any agreement,
contract or other instrument binding, upon Seller's Berlin or Rain Ware
Divisions or by which any of the Assets is or may be bound. Except as set forth
herein, Seller is not, nor will Seller be, required to give any notice to or
obtain any consent from any person in connection with the execution and delivery
of this Agreement of the consummation or performance of the transactions
contemplated herein.
(c) Schedule 1.01(a)(1) of this Agreement sets forth a description of all
material tangible personal property reflected on the books and records of, or
used in connection with, the Berlin Division, together with the gross book
value, accumulated depreciation and net book value as of the date indicated
(collectively, the "Berlin Tangible Personal Property").
(d) Seller has, or will as of the Closing Date have, good and marketable,
valid title to all of the Berlin Tangible Personal Property to be conveyed,
transferred or assigned by it and will convey, transfer and assign the Berlin
Tangible Personal Property to Buyer free and clear of any and all Liens other
than those expressly assumed by Buyer hereunder, as set forth on Schedule
4.01(d) of this Agreement. Upon consummation of the transactions contemplated
hereby, Buyer will have acquired good and marketable, valid title in and to the
Berlin Tangible Personal Property free and clear of all Liens, except for those
expressly assumed by Buyer hereunder.
(e) Seller has, or will as of the Closing Date have, good and marketable,
valid title to all of the Rain Ware Assets, Andersen Assets and Additional
Assets set forth on Schedules 1.01(b)(i), 1.01(c)(i) and 1.01(d)(i) and (ii),
and will convey, transfer and assign same to Buyer free and clear of any and all
Liens, except those specifically assumed by Buyer hereunder as set forth in
Schedule 4.01(e) to this Agreement. Upon consummation of the transactions
contemplated hereby, Buyer will have acquired good and marketable, valid title
in and to the Rain Ware Assets, Andersen Assets and Additional Assets, free and
clear of all Liens, except for those expressly assumed by Buyer hereunder.
Schedule 4.01(e) of this Agreement sets forth a list of proprietary rights owned
or licensed by Seller and used in connection with the Rain Ware Assets
(together, the "Proprietary Rights"). Seller has good, marketable and valid
title to the Proprietary Rights and shall convey, transfer and assign the
Proprietary Rights to Buyer free and clear of all Liens other than those
expressly assumed by Buyer hereunder as set forth on Schedule 4.01(e) of this
Agreement. There are no material licenses, sublicenses or other agreements with
respect to the Berlin Division or the Rain Ware Assets or the Andersen Assets or
the Additional Assets as to which Seller or any of its affiliates is a party and
pursuant to which any person is authorized to use such Proprietary Rights. The
Seller has no patents, trademarks, tradenames, copyrights or other Proprietary
Rights other than as set forth on Schedule 4.01(e) or Schedule 1.01(b)(iii).
None of the Proprietary Rights are infringed or, to the best of Seller's
knowledge, has been challenged or threatened in any way, and none of the
Proprietary Rights
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used by Seller infringes or is alleged to infringe any Intellectual property
rights of any third d party. Upon consummation of the transactions contemplated
herein, Buyer will have acquired good title to the Proprietary Rights, free and
clear of all Liens, except those expressly assumed by Buyer hereunder.
(f) Schedule 4.01(o of this Agreement contains a list of each written
contract or agreement (including any and all written amendments thereto) with
respect to the Assets to which Seller is a party or by which it is bound, which
except as otherwise noted on Schedule 4.01(f) or otherwise set forth herein, is
being assigned by Seller and assumed Buyer hereunder, which is not cancelable by
any party thereto without penalty or notice in excess of 60 days and which
involves the payment to or from Seller of amounts in excess of $1,000.00 per
year (collectively, the "Commitments"). Seller is not a party to any oral
contracts or agreements and there have been no oral amendments. modifications or
waivers with respect to the Commitments disclosed on Schedule 4.01(o). Each
Commitment disclosed in Schedule 1.01(a)(vii) of this Agreement or required to
be disclosed pursuant to this Article 4.01(o) is a valid and binding agreement
of Seller, in full force and effect, and neither Seller, nor, to the knowledge
of Seller, any other party thereto is in default in any material respect under
the terms of any such Commitment nor, to the knowledge of Seller, has any event
or circumstance occurred that, with notice or lapse of time or both, would
constitute any event of default thereunder. To Seller's knowledge, no event has
occurred or circumstance exists that (with or without notice or lapse of time)
may contravene, conflict with, or result in a material violation or breach of,
or give Seller or any other person the right to declare a default or exercise
any remedy under, or to accelerate the maturity or performance of, or to cancel,
terminate, or modify, any Commitment. The Commitments relating to the sale,
design, manufacture, or provision of products or services by Seller have been
entered into in the ordinary course of business and to the best of Seller's
knowledge, have been entered into without the commission of any act alone or in
concert with any other person, or any consideration having been paid or
promised, that is or would constitute an illegal act or payment. Except as
disclosed in Schedules 1.01(vi) and 4.01(f) of this Agreement, with respect to
the Berlin Division, Seller is not a party to or subject to:
(i) any lease;
(ii) any contract for the purchase of materials, supplies, goods,
services, equipment or other assets;
(iii) any sales, distribution or other similar agreement providing
for the sale by Seller of materials, supplies, goods, services, equipment or
other assets;
(iv) any partnership, joint venture or other similar contract
arrangement or agreement;
(v) any contract relating to indebtedness for borrowed money or the
deferred purchase price of property (whether incurred, assumed, guaranteed or
secured by any asset);
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(vi) license agreement, franchise agreement, right to any receive
or obligation to pay royalties or any other agreement in respect of similar
rights granted to or held by Seller or any of its affiliates;
(vii) any agency, dealer, sales representative or other similar
agreement;
(viii) any agreement, contract or commitment that substantially
limits the freedom of Seller to compete in any line of business or with any
person or in any area or to own, operate, sell, transfer, pledge or otherwise
dispose of or encumber any Asset or which would so limit the freedom of the
Buyer after the Closing Date;
(ix) any agreement, contract or commitment between Seller and any
of Seller's employees. officers, directors or shareholders; or
(x) any collective bargaining agreement or other agreement
contract or commitment with any union.
(g) Except as set forth in Schedule 4.01(g) of this Agreement, there is no
action, suit, investigation or proceeding before any court, arbitrator or before
any governmental authority, body, agency or official pending or, to Seller's
knowledge, threatened against or affecting, Seller in connection with the Assets
or which in any manner seeks to prevent, enjoin, alter or materially delay or
obtain damages in respect of the consummation of the transactions contemplated
hereby. To the Seller's knowledge, the litigation and any claim relating thereto
referred to in Schedule 4.01(g) has not had and will not have any adverse effect
on the Berlin Division or Rain Ware Division or any of the Assets (the
"Scheduled Litigation"). To Seller's knowledge, no event has occurred or
circumstance exists that may give rise to or serve as a basis for the
commencement of any such proceeding. Seller has delivered to Buyer copies of
all pleadings, correspondence and other documents relating to the Scheduled
Litigation. There is no order, judgment or decree to which Seller, the Berlin
Division , the Rain Ware Division or any of the Assets is subject, and to the
best of Seller's knowledge, no officer, director, agent, or employee of Seller
is subject to any order, judgment or decree that prohibits such officer,
director, agent, or employee from engaging in or continuing any conduct,
activity, or practice relating to the Berlin Division, Rain Ware Division or the
Assets. Except as set forth Schedule 4.01(g), to the best of Seller's
knowledge, (A) Seller is, and at all times since February 28, 1993 has been, in
material compliance with all of the ten-ns and requirements of each order,
judgment and decree to which it, or any of the Assets is or has been subject;
(B) no event has occurred or circumstance exists that may constitute or result
in (with or without notice or lapse of time) a material violation of or failure
to comply with any material term or requirement of any order, judgment or decree
to which Seller or any of the Assets is subject; and (C) Seller has not
received, at any time since February 28, 1993, any notice or other communication
(whether oral or written) from any governmental body or any other person
regarding any actual, alleged, possible, or potential material violation of, or
failure to comply with, any material term or requirement of any order, judgment
or decree to which Seller or any of the Assets is or has been subject.
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(h) Except as set forth on Schedule 4.01(h), to the best of Seller's
knowledge. Seller is, and at all times since February 28, 199-' ) has been, in
material compliance with all laws, rules, ordinances, regulations, orders,
judgments and decrees applicable to Seller, the conduct or operation of the
Berlin Division, the Rain Ware Division or the ownership, use, or sale of the
Assets. Seller is not in violation of, and Seller has not received notice of
violation of, and, to Seller's knowledge, Seller is not under investigation with
respect to any actual, alleged, possible or potential violation of, or failure
to materially comply with, any law, rule, ordinance, or regulation, or rudiment,
order or decree entered by any court, arbitrator or governmental authority,
domestic or foreign, applicable to the Assets which would have an adverse effect
on the ownership of the Assets or the consummation of the transactions
contemplated herein, or which would require Seller to undertake, or to bear all
or any portion of the cost of any remedial action of any nature. To Seller's
knowledge, Buyer shall be able to operate the businesses of the Berlin Division
and Rain Ware Division as is presently done without the need of obtaining any
additional permits, except as may be required due to changes in statutes or
regulations after the date of this Agreement.
(i) The Berlin, Rain Ware and Andersen Inventories set forth in Schedules
1.01(a)(iv), 1.01(b)(ii) and 1.01(c)(ii) were properly stated therein at average
invoice cost to Seller (after applying all available cash discounts, rebates,
winter dating incentives (with respect only to Berlin Inventory purchased
through inter dating incentives) and volume incentive credits of every kind).
Except as set forth on Schedule 4.01(i), all Inventory has been maintained in
the ordinary course of business and at sufficient levels to operate the business
in the ordinary course of business and the Berlin, Rain Ware and Andersen
Inventories are, or as at the Closing Date will be, owned by Seller and
transferred to Buyer free and clear of all Liens and, as of the Closing Date,
will have a value as determined in accordance with Article 2.02 hereof.
(j) The Accounts Receivable set forth on Schedule 1.01(a)(1)(A), to be
delivered at Closing and incorporated herein by this reference, arose from bona
fide transactions in the ordinary course of business and were properly reflected
on the books and records of Seller in accordance with generally accepted
accounting principles consistently applied ("GAAP"). Seller represents and
warrants that: (1) it has no knowledge, after due inquiry, of any dispute,
defense, credit or right of setoff with respect to any charge, invoice or
product sold in connection with the Accounts Receivable; (11) none of the
Accounts Receivable include any attorney's or other collection fees; (iii) the
Accounts Receivable do not include any interest or service charges except as set
forth on Schedule 1.01(a)(1)(A)- (iv) Seller owns all right title and interest
in and to the Accounts Receivable, and shall transfer the Accounts Receivable to
Buyer free and clear of all Liens except those expressly assumed by Buyer
hereunder; and (v) all Accounts Receivable shall be documented in accordance
with Seller's ordinary business practices (including appropriate credit and
purchase agreements). Prior to the Closing Seller shall have written off its
books those accounts receivable set forth on Schedule 1.01(a)(1)(B), attached
hereto and incorporated herein by this reference.
(k) With respect to the Berlin Division, except as disclosed in Schedule
4.01(k) of this Agreement (which includes a list of all existing union
contracts) and except for minor
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difficulties and controversies with individual employees which have not had and
will not have a material adverse effect on the Berlin Division or the Berlin
Asset;
(i) for a period of three (3) years from the date of this Agreement
there have been no claims, actions or controversies pending against Seller,
relating to Seller's employees including (A) any strike, slowdown, picketing,
work stoppage, or employee grievance process, or (B) any proceeding against or
affecting Seller relating to the alleged ,violation of any legal requirement
pertaining to labor relations or employment matters, including any charge or
complaint filed by an employee or union with the National Labor Relations Board,
the Equal Employment Opportunity Commission, OSHA or any comparable governmental
body, organizational activity, or other labor or employment dispute against or
affecting Seller or its facilities and (C) to Seller's knowledge, no event has
occurred or circumstance exists that could provide the basis for any work
stoppage or other labor dispute. There is no lockout of any employees by Seller,
and no such action is contemplated by Seller;
(ii) No union organizational efforts have been made or threatened
involving any employees of the Berlin Division;
(iii) To the best of its knowledge, Seller has complied with all laws
relating to the employment of labor, including, without limitation, any
provisions thereof relating to wages, hours, equal employment opportunity,
immigration, nondiscrimination, collective bargaining, occupational safety and
health, employee benefits (including the Employee Retirement and Income Security
Act of 1974, as amended ("ERISA")) and payment of Social Security and other
taxes, and is not liable for any arrears of wages, fringe benefits, employee
benefits, vacation or severance pay or any taxes or penalties for failure to
comply with any of the foregoing which would have a material adverse effect on
the Berlin Division or the Berlin Assets; and
(iv) There are no collective bargaining agreements relating to any
of the employees of the Berlin Division and Seller is not obligated under any
agreement to bargain with any labor organization or union on behalf of Seller's
Berlin Division employees.
(1) With respect to the Berlin Division,
(i) Schedule 4.01 (])(I) of this Agreement to be delivered at
Closing will contain a true and complete list of all current employees, both
full time and part time, of the Berlin Division and will disclose the date of
hire of each individual, the annual and/or hourly rate of compensation of each
individual, the amount of the bonus or other similar compensation payments made
to each individual during calendar years 1996 and 1997, and the bonus and
incentive arrangements with each and all commission arrangements and all fringe
benefits (including, without limitation, severance, vacation and sick-leave
arrangements) to which such employees are entitled.
(ii) Except as disclosed in Schedule 4.01(o or Schedule 401(l),
Seller is not party to any: (A) management, employment or other contract proving
for the employment or retention of executive services; (B) contract for the
employment of any employee which is not
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terminable by Seller on 30 days' notice without penalty; (C) bonus, incentive,
deferred compensation, severance pay, pension, profit-sharing retirement, stock
purchase, stock option, employee benefit or similar plan. agreement or
arrangement (including, without limitation, Christmas bonuses and similar year
end bonuses); (D) collective bargaining agreement or other agreement with -- any
labor union or other employee organization and no such agreement is currently
being requested by, or is under discussion by management with, any group of
employees or others; or (E) other employee contract or other compensation
agreement or arrangement affecting or relating, to current or former employees
of Seller. Except as set forth on Schedule 4.01(l), Seller has received no
notice that any officer or other key employee of the Berlin Division intends to
terminate his/her employment with Seller.
(m) With respect to the Berlin Division,
(i) Schedule 4.01(m) of this Agreement sets forth a complete list of
all employee benefit plans or arrangements presently maintained by Seller,
including, but not limited to: (A) the severance pay policy for employees who do
not h ave contractual severance pay arrangements; (B) any arrangements, policies
or understandings with respect to the payment of health, life, disability or
accidental death and dismemberment or other benefits to employees or their
families; (C) any bonus, incentive, deferred compensation, vacation and sick pay
policies, pension, profit-sharing, retirement, stock purchase, stock option, or
similar plan, arrangement or agreement (including, without limitation, Christmas
or other year-end bonuses; and (D) all other infringe benefits or payment
practices maintained by Seller and not otherwise identified in this Article.
(ii) No actions, suits or claims (other than routine claims for
benefits in the ordinary course of business) are pending or, to the knowledge of
Seller, threatened with respect to any plan or arrangement listed in Schedule
4.01(m), nor, to the knowledge of Seller, do any facts exist which could give
rise to any such actions, suits or claims (other than routine claims for
benefits in the ordinary course of business).
(iii) All plans and arrangements listed in Schedule 4.01(m) have been
administered in accordance with their respective material terms, and all
contributions to and payments from all plans and arrangements listed in Schedule
4.01(m) that may have been required to be made in accordance with the terms of
such plans and arrangements or any governmental law, regulation, decree.
decision or order have been made.
(iv) Except for the Assumed Vacation Pay, Seller shall be responsible
for the payment of all earned and/or accrued entitlements under all employee
benefit plans and benefit arrangements, up to the Closing Date for Employees,
including but not limited to wages, bonuses, severance and other compensation.
(v) Except as disclosed on Schedule 4.01(m), Seller is not a party to
a multi-employer plan as such term is defined in Section 400 1 (a) of ERISA.
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(vi) With respect to each of the benefit plans and arrangements
identified on Schedule 4.01(m):
(A) The plans are in substantial compliance with ERISA and each plan
which is intended to be qualified under Section 401(a) of the Internal Revenue
Code (the "Code") has been determined by the Internal Revenue Service ("IRS") to
be so qualified or a request for such determination has been timely filed with
the IRS (and to Seller's knowledge nothing has occurred between the date of the
last such determination and the Closing to cause the IRS to revoke such
determination);
(B) No accumulated funding deficiency, as defined by Section 302(a)(2)
of ERISA, exists (whether or not waived) with respect to the plans as of the
date hereof;
(C) Neither the plans nor Seller, its agents, representatives or any
fiduciaries of the plans have been or are presently engaged in any non-exempt
"prohibited transactions" as defined by Section 406 of ERISA or Section 4975 of
the Code;
(D) No liability has been, or is expected by Seller to be, incurred by
the Seller under Section 4062 of ERISA with respect to the Plans;
(E) Seller has not incurred any "withdrawal liability", as defined in
Part I of Subtitle 7 of Title IV of ERISA with respect to any plan which is a
"multlemployer plan" as defined in Section 4001(a) of ERISA.
(n) Intentionally Deleted.
(o) No other representation or warranty made by Seller or any of its
affiliates in this Agreement or any notice given or to be given by Seller
pursuant to the Agreement, and no statement contained in any certificate,
exhibit, document or other instrument furnished or to be furnished to Buyer
pursuant hereto or in connection with the transactions herein contemplated,
contains or will contain any untrue statement of material fact or omits or will
omit to state a material fact necessary to make the statements contained herein
and therein not misleading. There is no fact known to Seller or its shareholders
that materially adversely affects or materially threatens the Assets or the
business, prospects, financial condition, or results of operations of the Berlin
Division (on a consolidated basis) that has not been set forth in this Agreement
or the Schedules attached hereto.
(p) Since December 18, 1996, there has not been, and prior to the Closing
there will not be, any material adverse change in the business, operations,
properties, prospects, assets, or condition of Seller's Berlin Division or Rain
Ware Division, and to Seller's knowledge, no event has occurred or circumstance
exists that may result in such a material adverse change.
(q) The failure to obtain any third party consent to the transactions
contemplated hereby, other than Required Consents, will not result in a Material
Adverse Effect.
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(r) Schedules 1.01(a)(ix), 1.01(b)(viii) and 4.01(r) of this Agreement sets
forth a list of all material licenses, franchises, permits or similar
authorizations (the "Permits") issued by any federal, state or local
governmental agency or entity in respect of the business of the Berlin and/or
Rain Ware Divisions. The Permits constitute all material licenses, franchises,
permits or similar authorizations required by any law, rule, regulation or order
for Seller to own and conduct the business of the Berlin and Rain Ware
Divisions, and there are no outstanding material violations of any Permits.
Seller has received no notice from any governmental agency with respect to an
alleged or actual violation by Seller of any Permit and no action is pending or,
to the knowledge of Seller, threatened to cancel, modify or not renew any Permit
or which would result directly or indirectly in the revocation, withdrawal,
suspension, cancellation, or termination of, or any modification to, any Permit.
To the best of Seller's knowledge, Seller has not received, at any time since
February 28, 199' ), any notice or other communication (whether oral or written)
from any governmental body or any other person regarding (A) any actual,
alleged, possible, or potential material violation of or failure to materially
comply with any term or requirement of any Permit, or any actual, proposed,
possible, or potential revocation, withdrawal, suspension, cancellation,
termination of, or modification to any Permit. All applications required to
have been filed for the renewal of the Pen-nits have been duly filed on a timely
basis with the appropriate Governmental bodies, and all other filings required
to have been made with respect to such Permits have been duly made on a timely
basis with the appropriate governmental bodies. To the best of Sellers'
knowledge, the Permits collectively constitute all of the governmental
authorizations and permits necessary to permit Seller to lawfully conduct and
operate the business in the manner it is currently conducted and to operate the
Berlin and Rain Ware Divisions and to permit Seller to own and use the Assets in
the manner in which it currently owns and uses such assets.
(s) Seller has delivered, or will prior to Closing deliver, to Buyer: (a)
unaudited consolidated balance sheets of Seller as at February 28 or 29 (as the
case may be) in each of the years 1994 through 1997, and the related
consolidated statements of income, changes in stockholders' equity, and cash
flow for each of the fiscal years then ended, together with the report thereon
of Konowitz, Kahn & Company, P.C., independent certified public accountants, (b)
a consolidated balance sheet of Seller as at February 28, 1997 (including the
notes thereto), and the related consolidated statements of income, changes in
stockholders' equity, and cash flow for the fiscal year then ended, together
with the report thereon of Konowitz, Kahn & Company, P.C., independent certified
public accountants, and (c) an internally generated balance sheet and statement
of income as at November 30, 1996 for the nine (9) months then ended. Such
financial statements and notes fairly present the financial condition and the
results of operations, changes in stockholders' equity, and cash flow of Seller
as at the respective dates of and for the periods referred to in such financial
statements, all in accordance with GAAP, subject, in the case of interim
financial statements, to normal recurring year-end adjustments (the effect of
which will no individually or in the aggregate, be materially adverse); the
financial statements referred to in this Article 4.01(s) reflect the consistent
application of such accounting principles throughout the periods involved,
without regard to the notes to such financial statements. No financial
statements of any person other than Seller are required by GAAP to be included
in the consolidated financial statements of Seller. All of the foregoing
financial statements shall be identified in and attached hereto as Schedule
4.01(s).
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(t) The books of account, minute books, stock record books, and other
records of Seller, all of which have been or will be made available to Buyer,
are complete and correct in all material respects and have been maintained in
accordance with sound business practices. At the Closing, all of those books
and records necessary for the continuing operation of the Berlin Division and
the Rain Ware Division and the purchase of the Andersen Assets and Additional
Assets by Buyer will be transferred to Buyer.
(u) Schedule 4.0 1 (u), attached hereto and incorporated herein by
reference, contains a complete and accurate list of all real property,
leaseholds, or other interests therein owned by Seller relating to the Berlin
Division. Seller will make available to Buyer copies of the leases and other
instruments by which Seller acquired such real property leases or interests, and
copies of all title insurance policies, opinions, abstracts, environmental
reports and surveys in the possession of Seller or Seller's shareholders or any
related person, and relating to such property or interests. Seller owns no real
property related to the operation of the Berlin Division.
(v) The Equipment, the Rain Ware equipment, the Andersen equipment and the
Additional Assets of Seller are in good operating condition and repair, and are
adequate for the uses to which they are being put, and none of such equipment '
is in need of maintenance or repairs except for ordinary, routine maintenance
and repairs that are not material in nature or cost.
(w) Seller has filed or caused to be filed all sales, use, franchise,
personal property, occupancy or other tax returns that are or were required to
be filed pursuant to applicable law ("Taxes"). Seller has delivered or will
make available to Buyer copies of all such tax returns relating to income, sales
or franchise Taxes filed since 1993. Seller has paid, or made provision for the
payment of, all Taxes that have or may have become due pursuant to those tax
returns or otherwise, or pursuant to any assessment received by Seller. Seller
has not been given or requested to given any waivers or extensions (or is or
would be subject to a waiver or extension given by any other person) of any
statute of limitations relating to the payment of Taxes or for which Seller may
be liable. The charges, accruals, and reserves with respect to Taxes on the
books of Seller are adequate (determined in accordance with GAAP) and are at
least equal to Seller's liability for Taxes. There exists no proposed tax
assessment against the business or the Assets, except as disclosed in Schedule
4.0 l(w). No consent to the application of Section (41(0(2) of the IRC has
been filed with respect to any property or assets held, acquired, or to be
acquired by Seller in connection with the business. All Taxes that Seller is or
was required to withhold or collect have been duly withheld or collected and, to
the extent required, have been paid to the proper governmental body or other
person. All Tax returns filed by (or that include on a consolidated basis)
Seller are true, correct, and complete. There is no tax sharing agreement that
will require any payment by Buyer after the date of this Agreement. Seller is
not, or within the ten (10) year period preceding the Closing Date has not been,
an "S" corporation.
(x) Except as set forth in Schedule 4.01(x), since November 30, 1996,
Seller has conducted the Berlin and Rain Ware Divisions only in the ordinary
course of business and there has not been any: (i) payment or increase by Seller
of any bonuses, salaries, or other compensation to any stockholder, director,
officer, or (except in the ordinary course of business)
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employee or entry into any employment, severance, or similar contract with any
director, officer, or employee; (ii) adoption of, or increase in the payments to
or benefits under, any profit sharing, bonus, deferred compensation, savings.
insurance, pension, retirement, or other employee benefit plan for or with any
employees of Seller; (iii) damage to or destruction or loss of any Asset or
property of Seller to be transferred to Buyer pursuant to this Agreement,
whether or not covered by insurance, materially and adversely affecting the
properties, assets, business, financial condition, or prospects of Seller or the
business, taken as a whole; (iv) entry into, termination of, or receipt of
notice of termination of (A) any license, distributorship, dealer, sales
representative, joint venture, credit, or similar agreement, or (B) any contract
or transaction involving a total remaining commitment by or to Seller of at
least $5,000; (C) sale (other than sales of inventory in the ordinary course of
business), lease, or other disposition of any asset or property of Seller or
mortgage, pledge, or imposition of any Lien on any Asset or property of Seller
to be transferred to Buyer pursuant to this Agreement, including the sale, lease
or other disposition of the Assets; (D) cancellation or waiver of any claims or
rights with a value to Seller with respect to the business or the Assets in
excess of $5,000; (E) material change in the accounting methods used by Seller;
or (F) agreement, whether oral or written, by Seller to do any of the foregoing.
(y) Schedule 4.01(y)(A) sets forth the top ten (10) vendors (based on total
dollars purchased in the calendar year 1996) of products that are sold by Seller
as part of its Berlin Division inventory, including the vendor name, address,
telephone number, contact person, products and total dollar value of calendar
year 1996 purchases by Seller from the vendor, and all rebates, discounts,
volume or other incentives given by the vendor to Seller. Schedule 4.01(y)(B)
sets forth the top twenty (20) customers of the Berlin Division (based on dollar
volume of purchases in the calendar year 1996), including the customer name,
address,. phone number, contact person, dollar volume purchased by the customer
from Seller in calendar year 1996, and any rebates, volume discounts, or other
incentives provided by Seller to each such customer. Except as set forth in
Schedules 4.01(y)(A) and (B), there are no other rebates, discounts or other
incentives received by Seller from vendors or given by Seller to its customers.
Since January 1, 1997, there has been no material adverse change in Seller's
relationship with any of the vendors or customers set forth in Schedule
4.01(y)(A) or (B), except routine changes in pricing in the ordinary course of
business.
(z) The prices set forth in the Seller's current computer generated price
code books (which prices are subject to change without notice to customers)
attached hereto and incorporated herein by reference as Schedule 4.01 (z),
accurately reflect the prices charged by Seller to its customers, except for the
rebates, discounts and other incentives identified in Schedule 4.01(y)(A) and
(B).
(aa) Seller has delivered to Buyer (i) true and complete copies of all
policies of insurance (other than health insurance policies) to which Seller is
a party, or has been covered at any time within the five (5) years preceding
the date of this Agreement; and (ii) true and complete copies of all pending
applications for policies of insurance (other than health insurance policies).
Schedule 4.01(aa) describes: (i) any self-insurance arrangement by or affecting
the business or the Assets, including any expenses established thereunder; (ii)
any contract or arrangement, other than a policy of insurance, for the transfer
or sharing of any risk by Seller-,
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and (ii) all obligations of Seller to third parties with respect to insurance
(including such obligations under leases and service agreements) and identifies
the policy under which such coverage is provided. Seller has provided Buyer with
true, accurate and complete summaries of the loss experience under each policy.
Except as set forth on Schedule 4.01(aa), all policies to which Seller is a
party or that provide coverage to Seller are valid, outstanding, and
enforceable, will be maintained in full force and effect until the Closing Date,
and are sufficient for compliance with all legal requirements, Permits and
Commitments to which Seller is a party or by which it is bound. Seller has paid
all premiums due, and have otherwise performed all of its obligations, under
each policy to which Seller is a party or that provides coverage with respect to
the Berlin Division, Rain Ware Division, Assets or properties of Seller.
(bb) Seller and its agents have incurred no obligation or liability,
contingent or otherwise, for brokerage or finders' fees or agents' commissions
or other similar payment in connection with this Agreement or the contemplated
transactions.
(cc) Since February 28, 1992, except as set forth in Schedule 4.01(cc), to
the best of Seller's knowledge, Seller, nor any director, officer, agent, or
employee or shareholder of Seller, or any other person associated with or acting
for or on behalf of Seller, has directly or indirectly: (a) made any
contribution, gift, bribe, rebate, payoff, influence payment, kickback, or other
payment to any person, private or public, regardless of form, whether in money,
property, or services (i) to obtain favorable treatment in securing business,
(ii) to pay for favorable treatment for business secured, (iii) to obtain
special concessions or for special concessions already obtained, for or in
respect of Seller or the Berlin Division or the Rain Ware Division, or any
related person or affiliate of Seller, or (iv) in violation of any law; or (b)
established or maintained any fund or asset that has not been recorded in the
books and records of Seller.
4.02 Environmental Representation Warranties. With respect to the
operations of the Berlin and Rain Ware Divisions, except as set forth in
Schedule 4.02, to the best of Seller's knowledge:
(a) Seller is and at all times has been, in material compliance with, and
has not been and is not in violation of or liable under, any environmental law,
rule and regulation ("Environmental Law"). Seller has no basis to expect, nor
has any other person for whose conduct Seller is or may be held to be
responsible received, any actual or threatened order, notice, or other
communication from (i) any governmental body or private citizen acting in the
public interest, or (ii) the current or prior owner or operator of any
facilities of Seller, of any actual or potential violation or failure to comply
with any Environmental Law, or of any actual or threatened obligation to
undertake or bear the cost of environmental remediation with respect to any of
Seller's facilities or any other properties or assets (whether real, personal,
or mixed) in which Seller has had an interest, or with respect to any property
or facility at or to which Hazardous Materials (as defined by applicable law)
were generated, manufactured, refined, transferred, imported, used, or processed
by Seller or any other person for whose conduct Seller is or may be held
responsible, or from which Hazardous Materials have been transported, treated,
stored, handled, transferred, disposed, recycled, or received;
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(b) There are no pending or threatened claims, Liens, or other restrictions
of any nature, resulting from any environmental, health, and safety liabilities
or arising under or pursuant to any Environmental Law, with respect to or
affecting any of the facilities or any other properties and assets (whether
real, personal, or mixed) in which Seller has or had an interest;
(c) Seller has no knowledge of any basis to expect, nor has any other
person for whose conduct Seller is or may be held responsible, received, any
citation, directive, inquiry, notice, order, summons, warning, or other
communication that relates to hazardous activity, Hazardous Materials, or any
alleged, actual, or potential violation or failure to comply with any
Environmental Law, or of any alleged, actual, or potential obligation to
undertake or bear the cost of any environmental, health, and safety liabilities
with respect to any of the facilities or any other properties or assets (whether
real, personal, or mixed) in which Seller had an interest, or with respect to
any property or facility to which Hazardous Materials generated, manufactured,
refined, transferred, imported, used, or processed by Seller or any other person
for whose conduct it is or may be held responsible, have been transported,
treated, stored, handled, transferred, disposed, recycled, or received;
(d) Neither Seller nor any other person for whose conduct Seller is or may
be held responsible, has any environmental, health, and safety liabilities with
respect to the facilities or, to the best of Seller's knowledge, with respect to
any other properties and assets (whether real, personal, or mixed) in which
Sellers or the Business (or any predecessor), has or had an interest, or at any
property geologically or hydrologically adjoining the facilities or any such
other property or assets;
(e) Except for quantities of materials used in the ordinary course of
business and in compliance with applicable laws, there are no Hazardous
Materials present on or in the environment at the facilities or at any
geologically or hydrologically adjoining property, including any Hazardous
Materials contained in barrels, above or underground storage tanks, landfills,
land deposits, dumps, equipment (whether moveable or fixed) or other containers,
either temporary or permanent, and deposited or located in land, water, sumps,
or any other part of the facilities or such adjoining property, or incorporated
into any structure therein or thereon. Neither Seller nor any other person for
whose conduct Seller is or may be held responsible or any other person, has
permitted or conducted, or is aware of, any hazardous activity conducted with
respect to the facilities or any other properties or assets (whether real,
personal, or mixed) in which Seller has or had an interest except in full
compliance with all applicable Environmental Laws;
(f) There has been no release or threat of release, of any Hazardous
Materials at or from the facilities or at any other locations where any
Hazardous Materials were generated, manufactured, refined, transferred,
produced, imported, used, or processed from or by the facilities, or from or by
any other properties and assets (whether real, personal, or mixed) in which
Seller has or had an interest, or any geologically or hydrologically adjoining
property, whether by Seller or any other person;
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(g) Seller has delivered to Buyer true and complete copies and results of
any reports, studies, analyses, tests, or monitoring possessed or initiated by
Seller, or any person pertaining to Hazardous Materials or hazardous activities
in, on, or under the facilities, or concerning compliance by Seller or any other
person for whose conduct Seller is or may be held responsible, with
Environmental Laws.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
5.01. Representations of Buyer. Buyer represents and warrants to Seller
that:
(a) Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the State of Texas (provided, however, that prior to
Closing, Buyer may reincorporate in the State of Delaware which will necessitate
revisions to certain Closing documents accordingly), and has the authority to
execute, deliver and perform this Agreement and to consummate the transactions
contemplated hereby.
(b) The execution, delivery and performance by Buyer of this Agreement and
the consummation by Buyer of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Buyer.
(c) Buyer has, or will have at the Closing, sufficient funds to enable it
to consummate the transactions contemplated by this Agreement.
(d) There is no litigation pending or, to Buyer's knowledge threatened,
against Buyer or any of its affiliates which seeks to enjoin or obtain damages
in respect of the consummation of the transactions contemplated hereby.
ARTICLE VI
PRE-CLOSING COVENANTS OF SELLER
-------------------------------
From and after the date hereof and until the Closing Date, Seller hereby
covenants and agrees with Buyer as follows:
6.01. Cooperation and Assignments. Seller will use its best efforts to
obtain all Required Consents and other third party consents and to cause the
consummation of the transactions contemplated hereby in accordance with the
terms and conditions hereof.
6.02. Conduct of Business. From the date hereof to the Closing Date,
except as otherwise may be contemplated by this Agreement or required by any of
the documents listed in the Schedules annexed hereto and except as Buyer
otherwise may consent to in writing, Seller
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will cause the business of the Berlin and Rain Ware Divisions to be operated in
the ordinary course consistent with past practice in all material respects and
use its best efforts (without the requirement to expend any funds outside of the
ordinary course of business) to: (a) preserve the Assets as a whole intact; (b)
continue in effect all material existing policies of insurance (or comparable
insurance) with third-party carriers of or relating to the Assets; (c) keep
available the services of the present officers, employees and agents of the
Berlin Division; (d) preserve the Berlin Division's relationships with its
material suppliers, customers, licensors and licensees and others having
material business dealings with it; (e) continue production and promotional and
sales efforts of the Berlin Division in accordance with existing plans and
forecasts; from the date hereof to the Closing, except to the extent permitted
pursuant to Article 2.02(c), Seller shall not make any additional purchase of
inventory that is defined in Article 2.02 as "slow-moving" and shall use its
good faith efforts to liquidate any "slow-moving" inventory; and (g) Seller
shall not accelerate or prepay any of Seller's accounts payable. Seller will
not take or agree or commit to take any action that would make any
representation and warranty of Seller hereunder inaccurate or misleading in any
material respect at, or as of any time prior to, the Closing Date.
6.03. Access. (a) Seller shall continue to provide to Buyer, its
counsel, financial advisors, auditors and other authorized representatives such
reasonable information as such person from time to time may request with respect
to the Assets and the transactions contemplated by this Agreement and, upon
reasonable notice, to the properties, books and records of the Berlin and Rain
Ware Divisions, as Buyer from time to time may request. Seller shall also
provide Buyer with access to the Berlin Division employees pursuant to the
provisions of, and in accordance with the scheduling and restrictions provided
in, the VBP Asset Purchase Agreement and subject to, the covenants of Buyer set
forth in paragraph (c) of this Article 6.03. Seller shall fully cooperate with
Buyer if Buyer decides to audit the historic financial performance of the Berlin
and Rain Ware Divisions (including but not limited to making available its
records, personnel and outside accountants) in connection with Buyer's
contemplated Bond Offering (defined below), all provided, however, that neither
the taking of the audit or the results of the audit shall in any way affect this
Agreement or Buyer's obligations to close the transactions contemplated herein
and further provided that Buyer shall reimburse Seller for any and all direct
costs and expenses paid to third parties (including without limitation,
professional fees) incurred by Seller in connection therewith. No investigation
by Buyer pursuant to this Article shall effect, negate or constitute a waiver of
any representation or warranty given by Seller hereunder.
(b) Buyer further acknowledges that any and all information obtained
about Seller, the Berlin Division, Rain Ware Division and the Assets, shall be
deemed to be confidential and proprietary until the Closing and shall be subject
to, and shall come within the scope of, any and all Confidentiality Agreements
previously executed by Buyer. Notwithstanding anything herein to the contrary,
from time to time, Buyer shall have the right to contact Seller's employees
including, without limitation, those employees identified on Schedule 6.03 to
investigate Seller, the Berlin and Rain Ware Divisions and the Assets.
Furthermore, Buyer shall have the right to describe and disclose the
transactions contemplated herein and the business of the Berlin and Rain Ware
Divisions (including sales, profit and other summary financial data) in any
memorandum and/or prospectus in connection with an offering of debt by Buyer
(the "Bond
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Offering"), all provided, however, that Seller shall have the right to review
and approve such description (which approval shall not be unreasonably
withheld). In addition, in connection with the Bond Offering, Buyer shall have
the right to disclose financial information concerning the Berlin and Rain Ware
Divisions, to rating agencies, underwriters, accountants, attorneys and
government agencies on a confidential and need to know basis.
(c) The Buyer agrees that in the event the transaction contemplated
herein is not consummated as a result of Buyer's breach of this Agreement, it
will not for a period of one (1) year from and after the date the transaction
and this Agreement is terminated: (i) either directly or indirectly, for itself
or any third party, solicit, induce, recruit or cause another person 'in the
employ of the Seller to terminate his/her employment for the purpose of joining,
associating or becoming employed by the Buyer (or any of its affiliated
entities) or with any business or activity which is in competition with any
business or activity engaged in by the Seller; or (ii) directly or indirectly,
for itself for or through any subsidiary, affiliated or related entity,
establish or acquire distribution centers within the state of Connecticut
(exclusive of Buyer's existing branch in Stratford, Connecticut) for the
products sold by Seller's Berlin Division.
6.04. Notices of Certain Events.
-------------------------
(a) Between the date of this Agreement and the Closing Date, Seller will
promptly notify Buyer in writing if Seller becomes aware of-
(i) any notice or other communication alleging that the consent of
any person or governmental or regulatory agency or authority is or may be
required in connection with the transactions contemplated by this Agreement;
(ii) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions contemplated
by this Agreement; and
(iii) any actions, suits, claims, investigations or proceedings
commenced or, to the best of its knowledge threatened against relating to or
involving or otherwise affecting Seller or the Assets that, if pending on the
date of this Agreement, would have been required to have been disclosed pursuant
to Article 4.01 or that relate to the consummation of the transactions
contemplated by this Agreement.
(iv) any fact or condition that causes or constitutes a breach of any
of the representations and warranties set forth in Article IV hereof as of the
date of this Agreement, or if Seller becomes aware of the occurrence after the
date of this Agreement of any fact or condition that would (except as expressly
contemplated by this Agreement) cause or constitute a breach of any such
representation or warranty had such representation or warranty been made as of
the time of occurrence or discovery of such fact or condition.
(b) Should any such fact or condition require any change in the Schedules
annexed hereto if this Agreement was dated the date of the occurrence or
discovery of any such fact or
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condition, Seller will promptly deliver to Buyer a supplement to the Schedule(s)
specifying such change. During the same period, Seller will promptly notify
Buyer of the occurrence of any breach of any covenant in this Article VI, or of
the occurrence of any event that may make the satisfaction of the conditions in
Article IX impossible or unlikely.
6.05. Best Efforts. Between the date of this Agreement and the Closing
Date. Seller will use its best efforts to cause the conditions in Article IX
hereof to be satisfied and to cause the consummation of the transactions
contemplated hereby in accordance with the terms and conditions hereof.
6.06. Insurance. Schedule 6.06 of this Agreement contains a list of all
insurance policies and fidelity bonds covering the Assets and the operations of
the Berlin Division and its employees. Seller shall maintain all such insurance
policies in full force and effect through the Closing or until the termination
of this Agreement as provided in Article 12.
6.07 Trade Payables. Seller shall deliver to Buyer a schedule of all of
the Berlin Division Assumed Trade Payables, including all service, interest or
other charges thereon as of the Date of Closing.
6.08. Exclusive Dealing. From the date hereof until the earlier of the
date of termination of this Agreement or May 27, 1997, Seller shall deal
exclusively with Buyer regarding the sale of the Assets (other than in the
ordinary course) and Seller shall not contact, solicit, negotiate or contract
with any third party, or entertain any offer or request for information
regarding the sale of the Assets (other than in the ordinary course).
6.09. Licenses, Permits, Required Third Party Consents. Prior to Closing,
Seller will obtain all material licenses, permits and Required Third Party
Consents with respect to the Berlin and Rain Ware Divisions.
ARTICLE VII
COVENANTS OF BUYER
------------------
Buyer hereby covenants and agrees with Seller as follows:
7.01. Cooperation and Assumption. Subject to the fulfillment of the
conditions set forth in Article IX, Buyer will endeavor to cause the
consummation of the transactions contemplated hereby in accordance with the
terms and conditions hereof.
7.02 Intentionally Deleted.
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7.03. Books and Records. For a period of six (6) years after the
Closing Date (or such longer period as may be required by any governmental
agency or ongoing litigation or in connection with any administrative
proceeding):
(a) Buyer shall not dispose of or destroy any of the business records and
files of the Berlin Division, the Rain Ware Division and the Assets transferred
from die Seller to the Buyer.
(b) Buyer shall allow Seller and its representatives access to all
business records and files of the Berlin Division, Rain Ware Division and the
Assets which are transferred to Buyer and which are necessary for Seller to
wind-up its business or prepare tax or other government filing related thereto,
during regular business hours and upon reasonable notice at Buyer's principal
places of business or at any location where such records are stored, and Seller
shall have the right, at its own expense, to make copies of any such records and
files.
7.04. Confidentiality. Buyer acknowledges that any and all information
obtained about the Assets, shall be deemed to be confidential and proprietary
until the Closing and any and all information obtained about the Seller apart
from the Assets being acquired, shall be deemed to be confidential and
proprietary prior to and subsequent to the Closing. Buyer is contemporaneously
herewith executing a Confidentiality Agreement in the form of Exhibit G annexed
hereto and made a pan hereof.
7.05. Notices of Certain Events. Buyer shall promptly notify Seller of:
-------------------------
(a) any notices or other communication alleging that the consent of any
person or any governmental or regulatory agency or authority is or may be
required in connection with the transactions contemplated by this Agreement,
other than in respect of any consent identified as so required in a Schedule to
this Agreement;
(b) any notice or other communication from any governmental or regulatory
agency or authority in connection with the transactions contemplated by this
Agreement; and
(c) any actions, suits, claims, investigations or proceedings commenced
or, to the best of its knowledge threatened against, relating to or involving or
otherwise affecting Buyer that, if pending on the date of this Agreement, would
have been required to have been disclosed pursuant to Article 5.01.
7.06. Hiring of Employees. Buyer shall have no obligation to offer
employment to or hire any of Seller's Berlin Division employees; provided,
however, in the event Buyer does not offer employment to that number of Seller's
Berlin Division current employees sufficient to assure that the number of
Seller's current Berlin Division employees who are not offered employment by
Buyer does not exceed forty-five (45). then Buyer shall be responsible for all
state and federal plant closing notices and any associated liability in the
event such notices are not given.
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ARTICLE VIII
POST-CLOSING COVENANTS OF SELLER
--------------------------------
8.01. Non-Competition. (a) Seller agrees that for the periods stated below,
neither Seller nor any of its shareholders, Morris Trachten, David Trachten and
Fred Gross (the "Shareholders") shall engage in any capacity either directly or
indirectly, including, without limitation, as a principal or agent or for its
own account or solely or jointly with others, or as a stockholder in any
corporation, as a member of any limited liability company, or as a partner in
any partnership or joint venture, or as a consultant or independent contractor,
employee salesperson or manager on behalf of others, at any place within the
states of Connecticut, Massachusetts, New Hampshire, New York or Rhode Island
(together the "Non-Compete Area"),
(i) in the distribution of roofing, siding and related building
materials such as those products presently distributed by the Berlin Division
for a period of fifteen (15) full years from the Closing Date (the "15 Year Non-
Compete Period"); during the 15 Year Non-Compete Period, Seller and its
Shareholders shall not solicit sales in the Non-Compete Area for a business
which is in competition with the distribution of the types of products that
Seller or any of the Shareholders were distributing prior to Closing as
identified in this paragraph (a)(i); and
(ii) in the distribution of windows and doors for a period of five
(5) full years from the Closing Date (the "5 Year Non-Compete Period"); during
the 5 Year Non-Compete Period, Seller and its Shareholders shall not solicit
sales in the Non-Compete Area for a business which is in competition with the
distribution of the types of window products that Seller or any of the
Shareholders were distributing prior to Closing as identified in this paragraph
(a)(ii);
provided that nothing herein shall (i) prohibit the acquisition or ownership of
up to 1% of the outstanding voting securities of any corporation or other entity
which is publicly owned; or (ii) prohibit Seller and its Shareholders from
engaging as a manufacturer, contractor, or lumber yard representative so long as
such businesses do not distribute roofing, windows, siding, doors and related
building materials in competition with the types of distribution channels used
by Seller or any of its Shareholders prior to Closing.
During the 5 Year Non-Compete Period, neither Seller nor any of the
Shareholders shall solicit or employ any individual employed by Buyer at any
time during the 5 Year Non-Compete Period; thereafter, during the balance of the
15 Year Non-Compete Period, neither Seller nor any of the Shareholders shall
solicit any individual while in the employ of Buyer. Seller and Buyer hereby
agree that the consideration paid by Buyer under this Agreement is fair and
adequate for the obligations of Seller and the Shareholders under this Article
8.01(a). Seller shall cause the Shareholders each to execute a covenant not to
compete with Buyer in the form of the document attached hereto as Exhibit H and
incorporated herein by this reference ("Shareholder's Covenant"). The
obligations of the Shareholders under this Agreement shall be independent of and
in addition to their respective obligations under any other agreement, including
without limitation, the VBP Asset Purchase Agreement and any consulting or
employment agreement.
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(b) If any provision contained in this Article shall for any reason be
held invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provisions of this
Article, but this Article shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein. It is the intention of
the parties that if any of the restrictions or covenants contained herein is
held to cover a geographic area or to be for a length of time which is not
permitted by applicable law, or in any way construed to be too broad or to any
extent invalid, such provision shall not be construed to be null, void and of no
effect, but to the extent such provision would be valid or enforceable under
applicable law, a court of competent jurisdiction shall construe and interpret
or reform this Article to provide for a covenant having the maximum enforceable
geographic area, time period and other provisions (not greater than those
contained herein) as shall be valid and enforceable under such applicable law.
Seller acknowledges that Buyer would be irreparably harmed by any breach of this
Article and that there would be no adequate remedy at law or in damages to
compensate Buyer for any such breach. Seller agrees that Buyer shall be entitled
to injunctive relief requiring specific performance by Seller of this Article,
and Seller consents to the entry thereof, without the necessity of proving
actual damages, or posting bond or other security. Nothing herein shall be
deemed an election or remedies or preclude Buyer from seeking any and all other
remedies, both legal and equitable, for a breach of this Article 8.01.
8.02 Further Assurances. Following the Closing, Seller will execute and
deliver such other documents, certificates, agreements and other writings and
take such other actions as may be necessary or desirable in order to consummate
or implement the transactions contemplated by or to fulfill the terms and
conditions of this Agreement and to vest in Buyer good title to the Assets. At
the request of Buyer on a case by case basis, Seller shall execute and deliver
instruments sufficient to constitute and appoint. effective as of the Closing
Date. Buyer and its successors and assigns as the true and lawful attorney of
Seller with full power of substitution in the name of Buyer or in the name of
Seller, but for the benefit of Buyer (i) to collect for the account of Buyer any
Assets specified in Buyer's request, and (ii) to institute and prosecute all
proceedings which Buyer may in its sole discretion deem proper in order to
assert or enforce any right, title or interest in, to or under such Assets, and
to defend or compromise any and all actions, suits or proceedings in respect of
such Assets or the Assumed Liabilities. Buyer shall be entitled to retain for
its own account any amounts collected pursuant to the foregoing powers,
including any amounts payable as interest in respect thereof
8.03 Termination of Seller's Employees. At Closing, Seller shall
terminate the employment of Seller's employees set forth on the list delivered
pursuant to Article 3.03 (f).
8.04 Transition of the Business to Buyer. For a period of sixty (60) days
after the Closing, Seller shall cause the Shareholders to each assist Buyer in
transition of operation of the Berlin Division, Rain Ware Division and the
Assets by Buyer, including without limitation, contacting customers of the
Berlin Division for the purpose of encouraging the customers' continued
patronage of the Berlin Division after the Closing.
8.05 Post-Closing Access and Audit. For a period of one (1) year after
the Closing, upon Buyer's request, Seller shall provide access and cooperate
with Buyer with respect to a
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post-closing audit by Buyer of the historic financial performance of the Berlin
and Rain Ware Divisions, in connection with Buyer's Bond Offering and related
securities regulations which may require an audit to permit further
acquisitions, by Buyer of other businesses, provided that Buyer shall reimburse
Seller for any and all direct costs and expenses paid to third parties
(including without limitation, professional fees) incurred by Seller in
connection therewith. Any such access shall be subject to the limitations set
forth in Article 6.0'1(b).
ARTICLE VIII(A)
POST-CLOSING COVENANTS OF BUYER
-------------------------------
8A.01 COD-Plus Accounts/Discount-Rebate Applied Accounts. For a period of
two (2) years after the Closing, Buyer will maintain the past practices of
Seller with respect to "COD-Plus Accounts" (accounts where the account debtor
has a past due balance and makes current purchase on a cash-on-delivery basis
plus an additional amount to be applied to past due balance) and Discount-Rebate
Applied Accounts (accounts where the account debtor has a past due balance and
discounts and/or rebates to which the account debtor is entitled based on
historic practices disclosed to Buyer on Schedule 4.01(y)(B). are applied to the
past due balance). All payments received with respect to COD-Plus Accounts shall
be applied first to the current payment and then to the oldest item in the past
due account.
8A.02 Accounts Receivable Reporting.
(a) Buyer will provide reports to Seller every thirty (30) days regarding
the status of the Berlin Accounts Receivable. These reports will include an aged
trial balance. Buyer will provide other information reasonably requested by
Seller.
(b) Annexed hereto as Exhibit I is an outline of Buyer's standard
collection procedures ("the Collection Procedures"). Buyer agrees to diligently
and in good faith pursue the collection of all Berlin Accounts Receivable in
accordance with the Collection Procedures. Anything in the Collection Procedures
to the contrary notwithstanding, Buyer may but shall have no obligation to
commence legal action to collect any Berlin Accounts Receivable. Any and all
expenses incurred by Buyer in connection therewith, including without
limitation, attorneys fees, filing fees and costs of suit, shall be the sole
responsibility of Buyer, provided however, that any recoveries with respect to
any Berlin Accounts Receivable shall apply first to all of Buyer's direct
out-of-pocket expenses (including reasonable attorneys' fees), then to legally
recoverable interest charges and last to the principal balance of the debt. In
addition, unless payment is designated as payment for a specific account as to
which there is no accrued interest and/or service charges, the payment will be
applied first to post-Closing accrued interest and/or service charges, then to
Seller's pre-Closing interest and/or service charges and then to the principal
balance of the debt.
(c) Sixty (60) days after the Closing, Seller shall have the right in its
sole discretion at any time to assume from Buyer any Berlin Accounts Receivable
which Buyer does not pursue (either by the commencement of legal action or
otherwise) in accordance with the Collection Procedures as provided in paragraph
(b) of this Article 8A.02.
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(d) If Buyer wishes to compromise or accept less than full payment of any
Berlin Accounts Receivable, Buyer shall notify Seller and Seller shall within
five (5) business days of receipt of such notice advise Buyer if (i) the
proposed compromise or settlement is acceptable to Seller; or (ii) if Seller
wishes to assume the receivable from Buyer.
(e) After twenty four (24) months following the Closing, Buyer may return
any uncollected Berlin Accounts Receivable without the consent of Seller to the
extent of the then current Accounts Receivable Guaranty Balance as defined in
the N,"BP Asset Purchase Agreement.
8A.03 Removal of Rain Ware Assets. Within sixty (60) days after the
Closing, Buyer shall remove all of the Rain Ware Assets (including without
limitation, machinery, equipment and inventory of raw materials) from Seller's
premises. Any of the Rain Ware Assets not removed within the sixty (60) days may
be removed or disposed of by Seller at Buyer's sole cost and expense and in
Buyer's name.
8A.04 Payment of Salesmen Bonuses. All Salesmen Bonuses shall be paid by
Buyer no more than ten (10) business days after the Closing, provided, however,
that nothing herein shall require Buyer to hire any of Seller's salesmen.
ARTICLE IX
CONDITIONS TO BUYER'S OBLIGATIONS
---------------------------------
The obligations of Buyer to consummate the purchase of the Assets under
this Agreement shall be subject to the satisfaction (or written waiver by Buyer)
on or prior to the Closing Date of all of the following conditions
9.01. Representations, Warranties and Covenants of Seller. Seller shall
have complied in all material respects with all of its agreements,
representations, warranties and covenants contained herein to be performed at or
prior to the Closing Date (including the delivery to Buyer of all schedules,
exhibits and documents referenced in this Agreement or necessary to the
consummation of the transactions contemplated hereby), and all the
representations and warranties of Seller contained herein must have been
accurate in all material respects as of the date of this Agreement, and must be
accurate in all material respects on and as of the Closing Date with the same
effect as though made on and as of the Closing Date, except (a) as otherwise
expressly set forth herein, and (b) to the extent that such representations and
warranties were made as of a specified date (and as to such representations and
warranties the same shall continue on the Closing Date to have been true as of
the specified date).
9.02. Deliveries. Seller shall have delivered or caused to be delivered
to Buyer of all the items set forth in Article 3.02 hereof
9.03 VBP Asset Purchase. VBP shall simultaneously close the purchase and
sale of substantially all of the assets of VBP pursuant to the VBP Asset
Purchase Agreement.
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9.04. Supply Agreement. Seller shall have executed the Supply Agreement
in the form of the document attached hereto and incorporated herein by reference
as Exhibit J.
9.05. No Prohibition. No federal or state court, arbitrator or
governmental body, agency or official shall have issued any order, and there
shall not be any federal or state statute, rule or regulation, restraining or
prohibiting the consummation of the Closing or the effective operation by Buyer
of the business of the Berlin and Rain Ware Divisions after the Closing Date,
and no proceeding challenging this Agreement or the transactions contemplated
hereby or seeking to prohibit, alter or prevent or materially delay the Closing
shall have been threatened or instituted by any federal or state governmental
body, agency or official or any third party.
9.06. Required Consents. All Required Consents, in form and substance
reasonably satisfactory to Buyer, shall have been obtained, and no such Required
Consent shall have been revoked, conditioned or materially impaired.
9.07. No Material Adverse Effect. From the date of this Agreement to the
Closing Date, no event or occurrence shall have occurred which has a material
adverse effect on the Berlin Division, Rain Ware Division or the Assets.
9.08. Physical Inventory. The physical inventory provided for in Article
2.04 shall have been taken and Buyer and Seller shall have agreed upon the value
thereof in accordance with the provisions set forth in Article 2.02.
9.09. Real Estate Transactions. Contemporaneously with the Closing,
Seller's affiliates shall enter into a lease and contract of sale with respect
to the real estate property used in connection with the Berlin Division (the
"Berlin Real Estate") as identified on, and pursuant to the terms of the lease
and contract of sale set forth on Exhibit K annexed hereto.
9.10. 1997 VAP Receivables. Buyer has, prior to April 11, 1997, notified
Seller of its objections to the 1997 VAP Receivables for the reasons set forth
in Article 7.02(b) and the par-ties have not resolved such objections.
ARTICLE X
CONDITIONS TO SELLER'S OBLIGATIONS
----------------------------------
The obligations of Seller to consummate the sale of the Assets under this
Agreement shall be subject to the satisfaction (or written waiver by Seller) on
or prior to the Closing Date of all of the following conditions
10.01. Representations, Warranties and Covenants of Buyer. Buyer shall
have complied in all material respects with all of its agreements,
representations, warranties and covenants contained herein to be performed at or
prior to the Closing Date, and all of the representations and warranties of
Buyer contained herein must have been accurate in all material
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respects as of the date of this Agreement, and must be accurate in all material
respects on and as of the Closing Date with the same effect as though made on
and as of the Closing Date except (a) as otherwise contemplated hereby; and (b)
to the extent that such representations and warranties were made as of a
specified date (and as to such representations and warranties the same shall
continue on the Closing Date to have been true as of the specified date).
Seller shall have received a certificate of Buyer, dated as of the Closing Date
and signed by an officer of Buyer, certifying as to the fulfillment of the
conditions set forth in this Article 10.01.
10.02. Deliveries. Buyer shall have delivered or caused to be delivered
to Seller the items set forth in Article 3.03 hereof.
10.03. Intentionally Deleted.
10.04 VBP Asset Purchase. Buyer shall simultaneously close the purchase
and sale of substantially all of the assets of VBP pursuant to the VBP Asset
Purchase Agreement.
10.05. Real Estate Acquisitions. Contemporaneously with the purchase of
the Assets, Buyer or its affiliates shall enter into a lease and contract of
sale with respect to the Berlin Real Estate.
10.06. VAP Supply Agreement. Buyer shall execute and deliver the Supply
Agreement.
ARTICLE XI
INDEMNIFICATION AND RELATED MATTERS
-----------------------------------
11.01. Indemnification by Seller. Subject to the provisions of this
Article XI, Seller agrees to indemnify and hold Buyer harmless from and against
any losses, including without limitation, any claims, actions, demands, losses,
costs, expenses, liabilities joint or several), penalties, taxes, damages, and
reasonable attorneys' fees incurred in connection therewith ("Losses"):
(a) Any and all Losses resulting from or arising out of any
misrepresentation or breach of warranty made by Seller in this Agreement;
(b) Any and all Losses resulting from or arising out of the failure of
Seller to comply with any of the covenants, agreements or other obligations
contained in this Agreement which are required to be performed by Seller;
(c) Any and all Losses resulting from or arising out of Excluded
Liabilities or the Excluded Assets (including the Excluded Berlin Inventory and
the Excluded Rain Ware Inventory);
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(d) Any and all Losses of any nature whatsoever resulting from or arising
out of any violation by Seller of any federal or state laws relating to labor
and employment of persons employed by the Berlin and Rain Ware Divisions on or
before the Closing Date.
(e) Any and all Losses resulting from or arising directly or indirectly
from any agreements or commitments, whether oral or written, between the Seller
and any employee, independent contractor or other person who has provided
services on before the Closing Date to the Berlin or Rain Ware Divisions,
whether now or hereafter existing;
(f) Any and all Losses resulting from or arising out of the Scheduled
Litigation;
(g) Any and all Losses resulting from or arising out of the failure of the
Seller to pay any taxes with respect to the Berlin and Rain Ware Divisions, the
Assets or the Berlin Division employees arising or accruing on or prior to the
Closing;
(h) Any and all Losses resulting from or arising out of Seller's ownership
of the Berlin Division, Rain Ware Division or the Assets, or operation of the
Berlin Division or Rain Ware Division prior to Closing; and
(i) Any and all Losses resulting from or arising out of any of Seller's
pension or retirement plans.
11.02. Indemnification by Buyer. Subject to the provisions of this
Article XI, Buyer agrees to indemnify and hold Seller harmless from and against
any Losses, as defined in Article I 1.01, with respect to:
(a) Any and all Losses resulting from or arising out of any
misrepresentation or breach of warranty made by Buyer in this Agreement;
(b) Any and all Losses resulting from or arising out of the failure of
Buyer to comply with any of the covenants, agreements or other obligations
contained in this Agreement which are required to be performed by Buyer;
(c) Any and all Losses resulting from or arising out of Assumed
Liabilities after the Closing; and
(d) Any and all Losses resulting from and arising on or after the Closing
solely out of Buyer's non-assumption of Seller's collective bargaining
agreements or its failure to reach agreements with the respective collective
bargaining units.
11.03. Determination of Damages and Related Matters. In calculating any
amounts payable to Buyer pursuant to Article I 1. 0 1 or payable to Seller
pursuant to Article 11.02, any diminution of value to the Assets shall be deemed
damages suffered by Buyer, and Seller or Buyer, as the case may be, shall
receive credit for (i) any actual reduction in tax liability as a result of the
facts giving rise to the claim for indemnification, and (ii) any insurance
recoveries
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actually received by the party to be indemnified. The right to indemnification,
reimbursement or other remedy based on a breach of any representations,
warranties, covenants, and obligations hereunder will not be affected by any
investigation conducted with respect to, or any knowledge acquired (or capable
of being acquired) about the accuracy or inaccuracy of, or compliance with, any
such representation, warranty, covenant, or obligation.
11.04. Survival of Representations, Warranties and Covenants and
Obligations. The representations, warranties, covenants and obligations
contained in this Agreement and any schedule or document delivered pursuant to
this Agreement will survive the Closing Date. Neither Seller nor Buyer will have
any liability for indemnification under this Article XI unless notice of a claim
for indemnity or notice of facts as to which an indemnifiable loss is expected
to be incurred shall have been (-iv%-.n on a date which is on or before five
years from the Closing Date, except for a claim relating to or with respect to
the representations, warranties, covenants, agreements and obligations contained
in Article VIII, Articles 1.04, 4.01 (a), (d), (e) or (in) which may be made at
any time on or before the date which is ten years from the Closing Date.
11.05. Notice of Indemnification. In the event any legal proceeding,
shall be threatened or instituted or any claim or demand shall be asserted by
any person in respect of which payment may be sought by one person in respect of
which payment may be sought by one party hereto from the other party under the
provisions of this Article XI, the party seeking indemnification (the
"Indemnitee") shall promptly cause written notice of the assertion of any such
claim of which it has knowledge which is covered by this indemnity to be
forwarded to the other party (the "Indemnitor"); provided that the failure to
give such notice shall not affect the Indemnitee's rights hereunder except to
the extent the Indemnitor is materially prejudiced by such failure. Any notice
of a claim by reason of any of the representations, warranties or covenants
contained in this Agreement shall state specifically the representation,
warranty or covenant with respect to which the claim is made, the facts giving
rise to an alleged basis for the claim, and the amount of the liability asserted
against the Indemnitor by reason of the claim.
11.06. Indemnification Procedure for Third Party Claims. Except as
otherwise provided in Article XI hereof, in the event of the initiation of any
legal proceeding against an Indemnitee by a third party, the Indemnitor shall
have the absolute right after the receipt of notice, at its option and at its
own expense, to be represented by counsel of its choice, and to defend the
Indemnitee against, negotiate, settle or otherwise deal with any proceeding,
claim, or demand which relates to any Losses indemnified against hereunder;
provided, however, that the Indemnitee may participate in any such proceeding
with counsel of its choice and at its expense and the Indemnitor shall not
settle any such proceeding, claim or demand unless Indemnitee is fully released
without any admission of liability. The parties hereto agree to cooperate fully
with each other in connection with the defense, negotiation or settlement of any
such legal proceeding, claim or demand. To the extent the Indemnitor elects not
to defend such proceeding, claims or demand, and the Indemnitee defends against
or otherwise deals with any such proceeding, claim or demand, the Indenmitee may
retain counsel, at the expense of the Indemnitor, and control the defense of
such proceeding. The Indemnitee may not settle any such proceeding without the
consent of the Indemnitor, which shall not be unreasonably withheld or delayed.
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ARTICLE XII
TERMINATION PRIOR TO CLOSING
----------------------------
12.01 Termination. This Agreement may be terminated at any time prior to
the Closing.
(a) by either Buyer or Seller if a material breach of any provision of
this Agreement has been committed by the other party and such breach has not
been waived in writing by the non-breaching party;
(b) by Buyer if any of the conditions of Article IX have not been
satisfied as of the Closing Date or if satisfaction of such condition is or
becomes impossible (other than through the failure of Buyer to comply with its
obligations under this Agreement) and Buyer has not waived such condition on or
before the Closing Date;
(c) by Seller if any of the conditions in Article X have not been
satisfied as of the Closing Date or if satisfaction of such a condition is or
becomes impossible (other than through the failure of Seller to comply with its
obligations under this Agreement) and Seller has not waived such condition on or
before the Closing Date;
(d) by the mutual written consent of Buyer and Seller.
12.02 Effect of Termination. Each party's right of termination under
Article 12.01 is in addition to any other rights it may have under this
Agreement or otherwise, and the exercise of a right of termination will not be
an election of remedies. If this Agreement is terminated pursuant to Article
12. 0 1, all further obligations of the parties under this Agreement will
terminate, except that the obligations in Articles II, 13.07 and 13.08 and
Buyer's obligations of confidentiality set forth in Article 7.04 will survive;
provided, however, that if this Agreement is terminated by a party because of
the breach of the Agreement by the other party or because one or more of the
conditions to the terminating party's obligations under this Agreement is not
satisfied as a result of the other party's breach or default with respect to its
obligations under this Agreement, the terminating party's right to pursue all
legal remedies will survive such termination unimpaired.
ARTICLE XIII
MISCELLANEOUS
13.01. Entire Agreement. This Agreement and the agreements contemplated
hereby constitute the sole understanding of the parties with respect to the
matters provided for herein and supersede any previous agreements and
understandings between the parties with respect to the subject matter hereof.
No amendment, modification or alteration of the terms or provisions of this
Agreement shall be binding unless the same shall be in writing and duly executed
by the parties hereto.
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13.03. Successors and Assigns. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and permitted assigns of the parties hereto. This Agreement may not
be assigned by Buyer without the prior written consent of the Seller.
13.04. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
and all of which shall constitute the same instrument. This Agreement shall
become effective when each party hereto shall have received a counterpart hereof
signed by the other party hereto.
13.05. Section Headings; Construction. The headings of Articles and
Sections in this Agreement are provided for convenience only and will not affect
its construction or interpretation. All references to "Articles" or "Sections"
refer to the corresponding Articles or Sections of this Agreement. All words
used in this Agreement will be construed to be of such gender or number as the
circumstances require. Unless otherwise expressly provided, the word
"including" does not limit the preceding words or terms.
13.06. Amendments; No Waivers.
(a) Any provision of this Agreement may be amended or waived prior to the
Closing Date if, and only if, such amendment or waiver is in writing and signed,
in the case of an amendment, by Buyer and Seller, or in the case of a waiver, by
the party against whom the waiver is to be effective.
(b) No failure or delay by either party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by applicable law or in equity.
13.07. Broker's Fees. Except as disclosed in Schedule 13.07, each of the
par-ties hereto represents and warrants to the other that it has had no dealings
with any broker or finder in connection with the transactions contemplated by
this Agreement. Seller agrees to indemnify and bold Buyer harmless from and
against any and all liability to which Buyer or the Assets may be subjected by
reason of any broker's or finder's fee with respect to the transactions
contemplated hereby to the extent such fee is attributable to an action
undertaken by, or on behalf of Seller or is made by any person claiming by.
through or under Seller. Buyer agrees to indemnify and hold Seller harmless from
ane, against any and all liability to which Seller may be subjected by reason of
any broker's or finder's fee with respect to the transactions contemplated
hereby to the extent such fee is attributable to any action undertaken by or on
behalf of Buyer or is made by any person claiming by, through or under Buyer.
13.08. Expenses. Except as otherwise specifically provided for in this
Agreement, Seller and Buyer shall each pay all costs and expenses incurred by it
or on its behalf in connection with
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this Agreement and the transactions contemplated hereby, including fees and
expenses of its own financial consultants, accountant's and counsel.
13.09. Notices. Any notice, request, instruction or other document to
be given hereunder by any party hereto to any other party shall be in writing
and delivered personally or sent by registered or certified mail, postage
prepaid,
if to Seller to:
---------------
Mr. Fred Gross, President
Viking Aluminum Products, Inc.
33-39 John Street
New Britain, CT 06051
Facsimile: (203)) 827-1754
with a copy to:
--------------
Stuart Kudman, Esq.
Kudman, Trachten & Kessler
The Empire State Building
350 Fifth Avenue
Suite 1423
New York, NY 101 18-1487
Facsimile: (212) 868-0013
if to ABC to:
------------
Kenneth A. Hendricks, President
American Builders & Contractors Supply Co., Inc.
One ABC Parkway
Beloit, WI 53511
Facsimile: (608) 362-6529
with a copy to:
--------------
Karl W. Leo, Esq.
Leo and Associates
200 Randolph Avenue, Suite 200
Huntsville, AL 35801
Facsimile: (205) 539-6000
or at such other address for a party as shall be specified by like notice. Any
notice which is delivered personally in the manner provided herein shall be
deemed to have been duly given to the party to whom it is directed upon actual
receipt by such party (or its agent for notices hereunder). Any notice which is
addressed and mailed in the manner herein provided shall be
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deemed to have been duly given to the party to which it is addressed at the
close of business, local time of the recipient, on the fifth (5th) business day
after the day it is so placed in the mail.
13.10. Governing Law. This Agreement shall be construed in accordance
with and governed by the laws of the State of New York applicable to agreements
made and to be performed in such jurisdiction. Any action to enforce, which
arises out of or in any way relates to, any of the provisions of this Agreement
or the Closing documents shall be brought and prosecuted in the Courts of the
State of New York or any federal court with jurisdiction in the State of New
York. Each party irrevocably: (i) submits to the exclusive jurisdiction of the
Courts of New York and any federal court with general jurisdiction in the State
of New York; and (ii) waives any objection which it may have at any time to the
laying of venue of any suit, action or proceeding ("Proceeding") brought in any
such court, waives any claim that such Proceedings have been brought in an
inconvenient form and further waives the right to object, with respect to such
Proceedings, that such court does not have jurisdiction over such party. The
parties irrevocably consent to service of process given in the manner provided
for notices in' Article 13.09. Nothing in this Agreement will affect the right
of any party to serve process in any other manner permitted by law.
13.12. Further Assurances. At any time or from time to time after the
Closing Date, either party shall, at the request of the other party and at such
other party's expense, execute and deliver any further instruments or documents
and take all such further action as such party reasonably may requests in order
to consummate and make effecting the sale contemplated by this Agreement.
13.13. Severability. If any provisions hereof shall be held by any
court of competent jurisdiction to be illegality or unenforceable, such
provision shall be of no force and effect, but the illegality or
unenforceability shall have no effect upon and shall not impair the
enforceability of any other provision of this Agreement.
13.14. Sales and Transfer Taxes. All applicable sales, transfer and
other similar taxes and fees (excluding any income taxes of any kind) that may
be due or payable as a result of the purchase of the Assets by Buyer from Seller
contemplated in this Agreement, whether levied on the Seller or Buyer, shall be
borne by the Buyer. Ad valorem taxes on tangible personal property for the year
1997 shall be prorated from the Date of Closing. Ad valorem taxes on equipment
and inventory for the year 1997 shall be prorated as of the date of sale and a
credit or deficit against the Purchase Price shall be provided through the Date
of Closing. In the event actual ad valorem taxes have not been determined, the
ad valorem taxes for 1997 shall be based upon the ad valorem taxes for 1996,
subject to future adjustments when actual ad valorem taxes are determined.
13.15. Third Party Beneficiary. Nothing expressed or referred to in
this Agreement or any Schedule hereto is intended to or shall be construed to
give any person or entity other than the parties to this Agreement any legal or
equitable eight, remedy or claim under or with respect to this Agreement or any
provision hereof, it being the intention of the parties hereto that this
Agreement and all of its provisions and conditions are for the sole and
exclusive benefit of the
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parties to this Agreement their successors and permitted assigns, and for the
benefit of no other person or entity.
13.16 Arbitration. Any controversies or claim arising out of or relating
to this Agreement, or the breach thereof, shall be settled by arbitration in New
York, New York, in accordance with the Commercial Arbitration Rules of the
American Arbitration Association, and judgment on the award rendered by the
arbitrator(s) may be entered in any court having jurisdiction thereof. In the
event of arbitration and/or litigation regarding this Agreement or the subject
matter hereof, the prevailing party shall be entitled to recover from the other
party its actual costs and expenses, including reasonable attorney's fees and
arbitration costs; provided, however, that nothing in this Article 13.16 shall
require any award of costs and expenses if there is no "prevailing' party in the
discretion of the adjudicator.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed as of the date first above Written.
BUYER:
-----
AMERICAN BUILDERS & CONTRACTORS
SUPPLY CO., INC.
By:_______________________________
Jeff Stentz
SELLER:
------
VIKING ALUMINUM PRODUCTS, INC.
By:_________________________________
Fred Gross, President
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Exhibit 10.2
ASSET PURCHASE AGREEMENT
BETWEEN
VIKING BUILDING PRODUCTS, INC.
and
AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC.
<PAGE>
ASSET PURCHASE AGREEMENT
THIS AGREEMENT, made and entered into as of this 12/th/ day of April, 1997,
by and between Viking Building Products, Inc., a Connecticut corporation with
principal offices at 33-39 John Street, New Britain, CT 06051 ("Seller") and
American Builders & Contractors Supply Co., Inc., a Texas corporation with
principal offices at One ABC Parkway, Beloit, WI 53511 ("Buyer").
W I T N E S S E T H:
-------------------
WHEREAS, Seller is engaged in the distribution and sale of roofing,
windows, siding, building products and related accessories (the "Business"); and
WHEREAS, Buyer desires to purchase, and Seller desires to sell
substantially all of the assets and properties identified on the books and
records of, or used in connection with, the Business, which assets and
properties are currently held by Seller and more particularly described herein
below, and, as part of such purchase and sale, Buyer is willing to assume
certain specific obligations and liabilities of the Business, subject, in each
case, to the exceptions provided for herein; and
WHEREAS, in connection with the transactions contemplated herein, Buyer
desires to purchase and Viking Aluminum Products, Inc. ("VAP"), Seller's
affiliate, desires to sell certain of its assets used in connection with its
distribution business in Berlin, Connecticut, its Andersen and Windsor Windows
fabrication assets and its business related to the production of gutter
accessories ("Rain Ware") (but excluding any assets associated with VAP's other
manufacturing facilities or other businesses); and
WHEREAS, contemporaneously with the transactions contemplated herein, and
as a condition to the sale by Seller to Buyer of substantially all of the assets
of the Business, Buyer has agreed directly or through affiliates to acquire the
real estate properties used by the Seller in connection with the Business
(identified below as the "Trachten Real Estate Properties") or, under
circumstances specifically set forth in the contracts of sale being entered into
with respect to each of the Trachten Real Estate Properties in the form of
Exhibit A annexed hereto (collectively the "Trachten Real Estate Contracts"), to
lease rather than acquire any one or more of the Trachten Real Estate
Properties;
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements as to which the parties
acknowledge the sufficiency thereof, and upon the terms and subject to the
conditions hereinafter set forth, the parties do hereby agree as follows;
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ARTICLE I
SALE AND PURCHASE OF ASSETS
1.01. Transfer of Assets. Subject to the terms and conditions of this
Agreement, and except as otherwise specifically provided herein, on the Closing
Date (as defined in Article 3.01 hereof), Seller shall sell, assign, transfer
and convey to Buyer, and Buyer shall purchase, acquire and accept from Seller,
free and clear of all Liens (as defined in Article 4.01 hereof), all of the
Seller's right, title and interest in and to all the assets, properties,
contracts and rights identified on the books and records of, or used in
connection with, the Business, of every kind and description, wherever located,
whether tangible or intangible, real or personal or mixed, as the same shall
exist as of the Closing (as defined in Article 3.01 hereof) (collectively, the
"Assets"). The Assets shall include all assets, properties, contracts and rights
described in the following paragraphs (i) through (xiv):
(i) all leasehold improvements used in the operation of the Business
listed in Schedule 1.01 (i) of this Agreement and as more fully described in
Article 4.04 hereof ("Leasehold Improvements"), but excluding leasehold
improvements which have become affixed to and part of the Trachten Real Estate
Properties which are the subject of the Trachten Real Estate Contracts;
(ii) all furnishings, furniture, office equipment and supplies,
commercial vehicles, spare parts, tools, machinery, equipment, personal property
and other tangible property wherever located that are identified on the books
and records of, or used in connection with, the Business, including, without
limitation, those listed in Schedule 1.01(ii) of this Agreement (except as
disposed of in the ordinary course of business consistent with past practice and
not in violation of any provision of this Agreement) (together with the Assets
described in clause (iv), the "Equipment");
(iii) all computer systems, computer hardware, databases and software
programs, source codes and user manuals used in the operation of the Business
wherever located, including, without limitation, those listed in Schedule 1.01
(iii) of this Agreement, together with dedicated telephone lines and telephone
numbers used in connection with such computer systems;
(iv) all fixed assets, other than the items described in clause (ii),
that are identified on the books and records of, or used in connection with, the
Business (including, without limitation, those listed in Schedule 1.01 (iv) of
this Agreement);
(v) all quantities of inventory, including raw materials, bulk,
components, work-in-process, finished goods, promotional items, packaging
materials and supplies as more fully defined in Article 2.04 ("Inventory") and
identified on the books and records of, or used in connection with, the Business
and all purchase orders for Inventory ordered by Seller in the ordinary course
of business but not received as of the Closing Date (Seller shall deliver at
Closing, a Schedule of pending purchase orders);
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(vi) all rights of the Seller under or pursuant to all warranties,
representations and guarantees made by suppliers, manufacturers and contractors
in any way related to the Business or affecting the Assets described above
(except to the extent relating to or affecting the Excluded Assets or the
Excluded Liabilities);
(vii) all rights, title and interests, if any, of the Seller in and
to patents and patent applications owned by the Seller or licensed to the Seller
by third parties and used or held by Seller in connection with the Business, and
all rights and interests of the Seller in and to research, development,
processes, trade secrets, knowhow, inventions, formulae, process technology,
confidential information and engineering and other technical information
(whether in hard copy or computer format or any other tangible form), whether
owned by Seller or licensed from third parties by Seller, in any way related to
the Business (including, without limitation, in each case, those listed in
Schedule 1.01(vii) of this Agreement, and trade secrets and know-how which have
no physical embodiments);
(viii) subject to the provision below in this paragraph (viii) with
respect to the name "Viking," the name "Viking Building Products" and the Viking
logo, all rights, title and interests of the Seller in all jurisdictions in and
to names, tradenames, trademarks and service marks used or adopted, whether
registered or unregistered, and copyrights, and registrations of and
applications to register the same, owned by Seller or licensed to Seller by
third parties and identified on the books and records of, used in connection
with, or in any way related to, the Business, including, without limitation, in
each case, those listed in Schedule 1.01 (viii) of this Agreement, and any and
all goodwill represented by or pertaining to any of the foregoing (collectively,
together with the rights and interests described in clause (vii) above, the
"Proprietary Rights"). With respect to the "Viking" name, the name "Viking
Building Products" and the Viking logo, the Seller hereby grants to Buyer an
exclusive license for a term of five (5) years, commencing the date of Closing,
of all of Seller's right, title and interest in and to the name "Viking," the
name "Viking Building Products" and the Viking logo, for use in conjunction with
the Buyer's continuation of the Business being acquired herein, provided,
however that nothing herein shall be deemed to prevent or in any way limit the
use of the name "Viking" or the Viking logo by VAP or any of its affiliated
entities after the Closing in any business which does not violate Article 8.01
of this Agreement;
(ix) all contracts (excluding collective bargaining agreements,
pension and profit sharing plans), agreements, licenses, rights to receive
royalties, arrangements and/or commitments of any kind in any way related to the
Business or Assets, and listed in Schedules 1.01(ix) and 4.04 of this Agreement,
and all customer purchase orders ordered in the ordinary course of business or
other commitments to purchase products from Seller which have not been shipped
as of the Closing Date, whether or not listed in Schedules 1.01 (ix) or 4.04 of
this Agreement;
(x) all customer and vendor lists in any way related to the Business,
and all files and documents (including credit information) to the extent
relating to customers and vendors of the Business and other business and
financial records, files, books and documents (whether in hard copy or computer
format or any other tangible form) in any way related to the
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Assets and/or the Business, including sales and advertising materials, sales,
distribution and purchase correspondence, personnel and employment records, any
information relating to taxes imposed on Assets and trade association
memberships (including, without limitation, those listed in Schedule 1.01(x) of
this Agreement);
(xi) all of Seller's rights, claims, credits, causes of action or
rights of setoff against third parties in any way related to the Business or
affecting the Assets or Assumed Liabilities (except those relating solely to
Excluded Assets or Excluded Liabilities);
(xii) all licenses, permits, certificates, franchises or other
governmental authorizations in any way related to the Business or any of the
Assets (including those listed in Schedule 1.01 (xii) of this Agreement),
subject to the provisions of Article 1.03;
(xiii) all goodwill associated with the Seller, the Business and the
Assets; and
(xiv) all accounts receivable from customers of the Business and all
associated credit rights (including, without limitation, all joint check
agreements, personal or other guaranties, third party payment arrangements, bond
and lien rights), together with any security or collateral therefor, ("Accounts
Receivable") (including without limitation, those accounts receivable to be
identified on Schedule 1.01 (xiv)(A) to be attached hereto at Closing and
incorporated herein by this reference), but excluding those accounts receivable
(other than "Post February 28 Write-offs" defined below in Article 8.04) which
have, prior to the date of Closing, been turned over by Seller for collection to
an attorney or collection agency, and those accounts receivable that have been
or, prior to Closing, will be, written off Seller's books as bad debt (together,
the "Excluded Accounts Receivable"). A portion of those receivables in the
total amount of Six Hundred Seventy Nine Thousand Dollars ($679,000.00) which
Seller will write-off prior to Closing are identified on Schedule 1.01 (xiv)(B)
which is attached hereto and incorporated herein by reference.
(xv) all other useful assets of Seller not identified as Excluded
Assets.
1.02. Excluded Assets. The parties to this Agreement expressly understand
and agree that Seller is not selling, assigning, transferring or conveying to
Buyer pursuant to this Agreement the following assets, rights and properties
(the "Excluded Assets"):
(i) the assets of Seller listed in Schedule 1.02(i) of this Agreement,
and those items of personal property owned by any of the shareholders of Seller
and listed on Schedule 1.02(i);
(ii) except as otherwise set forth in Article 1.03(c) hereof, any
right, title and interest under all contracts, agreements, licenses, waivers,
consents, approvals and other nongovernmental authorizations which are not
transferable, whether by their terms or applicable law;
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(iii) all cash, bank accounts, certificates of deposit, treasury
bills, promissory notes, marketable securities, and other investments unrelated
to the Business other than the assets identified in Article 1.01 (xiv);
(iv) the Excluded Accounts Receivable;
(v) the Excluded Inventory (as defined in Article 2.04 below), if
any;
(vi) Seller's pension and retirement plans;
(vii) Seller's collective bargaining agreements;
(viii) all rights, claims, credits or causes of action against third
parties to the extent solely related to the Excluded Liabilities or the Excluded
Assets; and
(ix) Subject to adjustment pursuant to Article 2.05(c) below with
respect to purchases made by Seller from January 1, 1997 to the Closing Date,
all of Seller's rights to vendor rebates and discounts on purchases made by
Seller prior to the Closing pursuant to any vendor rebate programs in which
Seller participates (hereinafter referred to as "Vendor Rebate Programs").
1.03. Assignment of Assets. (a) Prior to the Closing, Seller shall use its
best efforts, and Buyer shall cooperate with Seller, to obtain all non-
governmental approvals, consents or waivers (including all Required Third Party
Consents (as defined in Article 1.03(b)) necessary to assign to Buyer all
leases, contracts, licenses, agreements, sales or purchase orders, commitments,
property interests, qualifications or other assets described in Section 1.01
hereof and any claim, right or benefit arising thereunder or resulting therefrom
(the "Interests"), all of which Required Third Party Consents are identified on
Schedule 1.03(a).
(b) As used herein, "Required Third Party Consent" means each
consent required as a result of the execution, delivery and performance of this
Agreement or the consummation of the transactions contemplated hereby, under any
Commitment (as defined in Article 4.04(a) hereof that involves an annual payment
by or to Seller exceeding $2,500.00;
(c) To the extent any of the approvals, consents or waivers
referred to in Article 1.03(a) hereof have not been obtained by Seller as of the
Closing, and Buyer waives the condition precedent in Article 9.05, if Buyer so
requests, Seller, for a period of eighteen (18) months after the Closing Date,
shall continue to use its best efforts, and Buyer shall cooperate with Seller
(without the payment of any consideration by Seller or Buyer), to obtain such
approval, consents or waivers. Regardless of any request by Buyer, Seller shall
use its best efforts during the remaining term of any Interest to, with Buyer
reimbursing Seller for any out-of-pocket expense: (i) cooperate with Buyer in
any reasonable and lawful arrangements under which Buyer would obtain the
benefits of, and assume the post-Closing obligations under, such Interest (other
than obligations resulting from Seller's breach ' thereof or default
thereunder); and (ii) enforce, at the request of Buyer and for the account of
Buyer, any rights of Seller arising
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from such Interest against the issuer thereof or the other party or parties
thereto (including the right to elect to terminate any such Interest in
accordance with the terms thereof upon the written advise of Buyer). Seller will
promptly pay (or cause to be paid) to Buyer when received all amounts received
by Seller under any Interest.
(d) No provision of this Article 1.03 shall be deemed to be a
waiver or release of, or otherwise affect any condition, right or obligation
under Article 9.05.
1.04. Obtaining Permits and Licenses. Seller shall use its best efforts,
and Buyer shall cooperate with Seller, to obtain as of the Closing Date the
Required Governmental Consents described below in this Article 1.04-provided
that Seller will assign, transfer or convey to Buyer at the Closing those
governmental permits and licenses described in Schedule 1.01 (xii) of this
Agreement to the extent assignable. No provision of this Article 1.04 shall be
deemed to be a waiver or release of, or otherwise affect any condition, right or
obligation under Article 9.05.
As used herein, "Required Governmental Consent" means each approval or
consent required as a result of the execution, delivery and performance of this
Agreement or the consummation of the transactions contemplated hereby, to obtain
or transfer (whether by assignment, renewal, amendment or otherwise) the Permits
listed on Schedule 4.13 of this Agreement (with the only change being the
identity of Buyer as the holder thereof).
"Required Consent" means any Required Third Party Consent and any Required
Governmental Consent.
1.05. Assumed Liabilities: Excluded Liabilities. (a) Upon the terms and
subject to the conditions of this Agreement, Buyer agrees, effective at the
Closing, to assume the following liabilities (the "Assumed Liabilities"):
(i) all liabilities of Seller arising in connection with the
Assets referred to in Section 1.01 (ix) to the extent arising out of the conduct
of the Business after the Closing Date or otherwise specifically assumed by
Buyer in this Agreement;
(ii) all liabilities and obligations arising in respect of earned
and or/accrued vacation pay (and all related payroll and other taxes and
assessments) of the employees employed by Seller in connection with the Business
and hired by Buyer as of the Closing ("Assumed Vacation Pay"), which shall be
scheduled as of the Closing Date and attached hereto as Schedule 1.05 (a)(ii),
identifying each employee, his/her hire date and vacation earned and/or accrued;
(iii) all liabilities and obligations arising in respect of
Seller's stated trade payables as of the. Date of Closing, to those vendors
identified on Schedule 4.23(A) (hereinafter collectively referred to as "Major
Vendors") provided that, with respect to each such Major Vendor so identified on
Schedule 4.23(A), Buyer delivers to Seller at Closing an Assumption and Release
Agreement in the form of Exhibit B annexed hereto executed by Buyer
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acknowledging its assumption of the payable and each such Major Vendor releasing
the Seller from the obligation (the "Assumed Trade Payables"); any liabilities
and obligations arising in respect of Major Vendors as of the Date of Closing
for which Buyer does not deliver to Seller at Closing an Assumption and Release
Agreement and all other vendors not identified on Schedule 4.23(A), shall remain
the liability and obligation of Seller and shall not be assumed by the Buyer
(the "Non-Assumed Trade Payables"); provided that Seller shall arrange for VAP
to consent to Buyer assuming the trade payables due from Seller to VAP to be
paid by Buyer in accordance with Seller's ordinary terms, i.e., payment due on
the tenth (10th) day of each month, for invoices dated prior to the 26th of the
previous month;
(iv) all liabilities and obligations for all stated customer deposits
with respect to any Accounts Receivable or pending contracts for customer orders
("Customer Deposits");
(v) all liabilities and obligations for Seller's current bonus
program with its salesmen pursuant to which each salesman is entitled to a bonus
equal to two percent (2%) of the salesman's gross sales from March 1, 1997 to
the Closing Date, less draw paid to that date (the "Salesmen Bonuses"), subject
to Buyer receiving a credit against the Purchase Price in an amount equal to
fifty percent (50%) of the Salesmen Bonuses earned as of the Closing Date or, in
the event the Closing occurs after May 27, 1997, in an amount (when aggregated
with the Salesmen Bonuses earned by VAP salesmen) equal to the lesser of fifty
percent (50%) of the Salesmen Bonuses earned as of the Closing Date or Forty
Thousand Dollars ($40,000.00) (the Salesman Bonus Credit") allocated by Seller
as between Seller and VAP; and
(vi) all liabilities and obligations to Seller's customers identified
on Schedule 4.23(B) pursuant to Seller's rebate and discount programs which
commenced March 1, 1997 for those customers and are unpaid as of the Closing
(the "Customer Discounts"), subject to Buyer receiving a credit from Seller at
the Closing for these Customer Discounts accrued as at the Closing, but further
subject to the parties adjusting these Customer Discounts post-Closing, at the
end of the calendar year, as provided in Article 2.05(d).
(b) Except as set forth in Article 1.05(a), Buyer shall not assume
any other liability or obligation of Seller (or any predecessor owner of all or
part of the Business) of whatever nature whether existing at any time in the
past, presently in existence or arising hereafter. All such other liabilities
and obligations shall be retained by and remain obligations and liabilities of
Seller, all such liabilities and obligations not being assumed being herein
referred to as the "Excluded Liabilities". Notwithstanding anything to the
contrary in Article 1.05(a) or this Article 1.05(b), the following shall
constitute, without limitation, the Excluded Liabilities:
(i) all liabilities and obligations associated with the Excluded
Assets;
(ii) all lawsuits, claims and other liabilities and obligations
arising in connection with all actions, suits, claims, investigations or
proceedings pending on the Closing Date or arising after the Closing and
relating to the conduct of the Business or the ownership of the Assets prior to
the Closing (nothing in this paragraph shall be deemed to supersede, modify
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or nullify the exception to the Excluded Liability relating to collective
bargaining agreements set forth in Article 1.05(b)(viii) or Buyer's
indemnification of Seller with respect thereto as set forth in Article
12.02(d));
(iii) except the Assumed Vacation Pay and the Salesmen Bonuses, all
liabilities or obligations relating to Seller's employee benefits or
compensation arrangements existing on or prior to the Closing Date, including,
without limitation, any payroll obligations, earned and accrued vacation pay,
fringe benefits, employee benefits, bonuses, commissions on sales of products
delivered prior to the Closing Date, worker's compensation or other insurance
premiums, severance pay, payroll taxes, Social Security or any other tax,
penalty or assessment relating thereto, and any liabilities or obligations under
any of Seller's employee benefit agreements, plans or other arrangements,
including without limitation, those listed on Schedule 4.11. Seller shall
deliver to Buyer at Closing an accurate schedule of earned and/or accrued
vacation pay, fringe benefits, bonuses and commissions on sale of products
delivered prior to Closing, to which Seller's employees listed on Schedule
3.03(h) are entitled;
(iv) all liabilities or obligations (including any contra asset or
negative amount in respect of cash or other assets) owed by Seller or any other
business affiliated with Seller by common ownership ("Affiliate");
(v) all liabilities and obligations under any indebtedness for
borrowed money or under any guarantees made by Seller or Seller's shareholders;
(vi) all liabilities relating to products sold by Seller prior to
the Closing Date, including, without limitation, product warranty claims,
product returns and related credits or offsets against Accounts Receivable;
(vii) all Non-Assumed Trade Payables and liabilities and obligations
other than, or in excess of, the Assumed Trade Payables;
(viii) all liabilities related to collective bargaining agreements
(except to the extent of any liability which arises, on or after the Closing,
out of Buyer's nonassumption of the collective bargaining agreements or its
failure to reach agreements with the respective collective bargaining units);
(ix) all liabilities related to Seller's pension and retirement
plans (including all underfunded and unfunded liabilities); and
(x) all other liabilities and obligations of Seller, whether known
or unknown, contingent or absolute, determined or determinable, not expressly
assumed pursuant to Article 1.05(a).
1.06. Certain Filings. Seller and Buyer shall cooperate with one another
in determining whether any action by or in respect of, or filing with, any
governmental body, agency, official or authority is required, or any actions,
consents, approvals or waivers are
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required to be obtained from parties to any Commitments (as defined in Article
4.04 hereof in connection with the consummation of the transactions contemplated
by this Agreement. Without limiting the generality of the foregoing, if
applicable, Buyer and Seller shall file any notification and report forms and
related materials that may be required to be filed with the Federal Trade
Commission and the Antitrust Division of the United States Department of Justice
under the Hart-Scott-Rodino Act (as amended) ("HSR"), and any further filings
pursuant thereto that may be necessary in connection therewith; any and all
filing fees required by each governmental authority in connection with such
filings shall be paid for by the Buyer and at the Closing, Buyer shall be
entitled to a credit for one-half of the fees so paid.
ARTICLE II
PURCHASE PRICE
2.01. Purchase Price. The purchase price of the Assets shall be the sum of
the following (collectively referred to as the "Purchase Price"):
(a) All Leasehold Improvements (other than those affixed to or part
of the Trachten Real Estate Properties and Equipment and all other acquired
Assets (other than Inventory and Accounts Receivable) valued at Seller's net
book value as of the Closing Date;
(b) Inventory valued at the lesser of Seller's average invoice cost
or replacement cost available to Seller, less all cash discounts, rebates,
winter dating incentives (with respect only to Inventory purchased through
winter.dating incentives) and volume incentive credits of any kind (whether
earned or accrued);
(c) Gross Accounts Receivable, which shall include all interest and
service charges accrued on the Accounts Receivable, all of which as set forth on
Schedule 1.01 (xiv)(A) to be delivered by Seller at Closing, all provided,
however that the purchase price for such interest and service charges to be paid
by Buyer (inclusive of interest and service charges on VAP Accounts Receivable)
shall not exceed $260,000.00 (the amount paid by Buyer for such interest is
hereinafter referred to as the "Accounts Receivable Interest Payment");
(d) Non-competition agreements of the Seller and the Principals as
per Article 8.01 at $2,900,000.00; and
(e) The sum of $2,000,000.00; less
(f) The amount of the Assumed Trade Payables; less
(g) The amount of the Assumed Vacation Pay; less
(h) The amount of the Customer Deposits; less
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(i) The Salesmen Bonus Credit, if any; less
(j) The Customer Discounts.
2.02. Payment of the Purchase Price. The Purchase Price shall be paid as
follows: $250,000.00 has been paid prior to the execution of this Agreement by
wire transfer (the "Initial Deposit") to "Kudman, Trachten & Kessler" ("Escrow
Agent"). Upon execution hereof, Buyer shall pay $500,000.00 ("Additional
Deposit") by wire transfer to the Escrow Agent, and the Initial Deposit and the
Additional Deposit and the Adjournment Deposit (as defined below in Article
3.01), if any, shall be held and disbursed in accordance with the terms of the
Escrow Agreement annexed hereto and incorporated herein by reference as Exhibit
C, which shall supersede the Initial Escrow Agreement. The Initial Deposit and
Additional Deposit are collectively referred to herein as the "Purchase Price
Deposit". At Closing, Buyer shall execute a promissory note, in the form of
Exhibit D (the"Note"), to be jointly and severally guaranteed by Kenneth A.
Hendricks and Diane Hendricks in the form of Exhibit E (the "Hendricks'
Guaranty"), in the principal amount of $3,000,000.00 which shall accrue interest
at a rate of eight and one-half percent (8.5%) per annum; interest shall be due
and payable quarterly and the entire principal balance with interest accrued and
unpaid shall be due and payable in full two (2) years from the Date of Closing;
and the balance of the Purchase Price shall be paid at the Closing in U.S.
Dollars by wire transfer of immediately available funds to such accounts as
Seller may designate. In the event of the willful failure of Buyer to close
and/or any other breach by Buyer of its obligations under this Agreement, Seller
shall have, as its sole remedy, the right to retain the Purchase Price Deposit.
All interest accruing on the Purchase Price Deposit shall be applied towards the
Purchase Price at Closing; if the Closing does not occur for any reason,
interest shall be paid pro-rata to the party entitled to the Purchase Price
Deposit; interest on the Adjournment Deposit, if any, shall be payable to the
Seller in all events.
2.03. Allocation of Purchase Price.
(a) Buyer shall secure at its expense (exclusive of Inventory which
shall be valued in accordance with Article 2.04 hereof and the value of the Non-
Competition covenants) an appraisal or opinion of value of the tangible and
intangible property included in the Assets (the "Allocation") for purposes of
Section 1060 of the Internal Revenue Code of 1986, as amended (the "Code"). The
Allocation shall be delivered to Seller at the Closing.
(b) Seller and Buyer agree to report an allocation of the Purchase
Price among the Assets in a manner entirely consistent with the Allocation and
agree to act in accordance with such Allocation in the preparation of financial
statements and filing of all tax returns, reports and claims (including, without
limitation, filing on a timely basis of Form 8594 with its Federal income tax
return for the taxable year that includes the date of the Closing) and in the
course of any tax audit, tax review, or tax litigation relating thereto. Neither
Seller nor Buyer will assert that the Allocation was not separately bargained
for at arm's length and in good faith, Seller and Buyer agree not to assert, in
connection with any tax return, audit or other similar proceeding, any
allocation of the Purchase Price which differs from the Allocation agreed to
herein.
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(c) If a reduction is made with respect to the Purchase Price, the
Allocation shall be adjusted in accordance with Section 1060 of the Code, as
mutually agreed by Seller and Buyer. Seller and Buyer agree to file any
additional information return required to be filed pursuant to the regulations
under Section 1060(b) of the Code and to treat the Allocation as adjusted in the
manner described for purposes of the immediately preceding paragraph.
(d) Not later than thirty (30) days after Closing, Buyer shall
deliver to Seller a copy of its Form 8594. Seller shall notify Buyer in writing
within fifteen (15) calendar days of any objections to Buyer's Form 8594.
(e) Each party shall notify the other within fifteen (1 5) calendar
days after receiving notice that the Internal Revenue Service or any other
taxing authority proposes to reallocate the Purchase Price.
2.04. Inventory.
(a) Within four (4) business days prior to the Closing Date, Buyer
and Seller, together with their respective auditors and agents if either so
desires, shall conduct a joint physical inspection and complete item-by-item
count of the Inventory for purposes of valuing the Inventory as of the Closing
Date. During such count, Buyer and Seller shall make appropriate record of (i)
any damaged inventory, (ii) any obsolete inventory (any inventory not currently
being offered by the original manufacturer in its line), and (iii) subject to
the provisions of paragraph (b) of this Article 2.04, slow-moving inventory
(inventory of a particular product other than Rain Ware products, which exceeds
a supply of more than 180 days based upon sales of the product during the period
from July 1, 1996 through December 31, 1996) purchased after January 1, 1997,
and (iv) decking materials and related accessories (including but not limited to
TREX decking), and Buyer shall, at the Closing, advise Seller which of such
Inventory it does not intend to purchase (the "Excluded Inventory").
(b) Anything to the contrary notwithstanding, particular products
purchased by Seller after January 1, 1997 which would, in accordance with the
foregoing definition of slow moving inventory, be deemed to be slow moving
inventory, shall not be deemed to be Excluded Inventory provided that the
aggregate cost of such purchases does not exceed the sum of Twenty Five Thousand
Dollars ($25,000.00) and the overall supply of slow moving inventory of all
products as at the Closing is less than such supply as at January 1, 1997.
(c) Seller shall have the right to sell or in any other manner
dispose of the Excluded Inventory within ninety (90) days of the Closing and any
and all proceeds realized therefrom shall be the sole property of Seller. Buyer
agrees to permit Seller to store the Excluded Inventory at Seller's present
warehouses during this ninety (90) day period at no cost to Seller. Seller shall
retain the risk of loss with respect to any Excluded Inventory stored at
Seller's warehouses after the Closing. Any Excluded Inventory not removed from
the warehouses on the ninety-first (91st) day shall, at Buyer's election, become
the property and responsibility of Buyer; in the event Buyer does not elect to
own any remaining Excluded Inventory, the removal or disposal of such Excluded
Inventory shall be at Seller's sole expense and in Seller's name.
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(d) As to the Excluded Inventory, no value will be assigned thereto
for purposes of determining the payment due Seller from Buyer for Inventory.
The allocation of the Purchase Price among the Assets described in Article 2.01
(b) hereof shall include an allocation to the Inventory as of the Closing Date
based upon the results of the physical inspection and count of the Inventory
described in this Article 2.04 and a valuation thereof performed in accordance
with the provisions of this Article 2.04 and based upon the lesser of Seller's
average invoice cost or current replacement cost available to Seller, less all
cash discounts, rebates, winter dating incentives (with respect only to
inventory purchased through winter dating incentives) and volume incentive
credits of any kind (whether earned or accrued).
2.05. Apportionment of Certain Charges and Post Closing Adjustments.
(a) The parties shall adjust at the Closing, utility charges, rents,
prepaid items, or other similar operating expenses. Such adjustments shall be
apportioned between Buyer and Seller with Seller bearing a portion thereof based
on the number of days in the period on and prior to the Closing Date and Buyer
bearing a portion based on the number of days in such period after the Closing
Date. Any adjustments required under this Article 2.05 shall be made as of the
close of business on the Closing Date.
(b) If any liability arises after the Closing Date in respect of any
utility charges, rents, prepaid items, or other similar operating expenses and
such liability relates to a period which includes (but does not end on) the
Closing Date and has not been adjusted between the parties and paid at the
Closing, or a liability which should have been apportioned at the Closing but
was not so apportioned, such liability shall be similarly apportioned between
Buyer and Seller as of the close of business on the Closing Date. Seller and
Buyer mutually agree that within ninety (90) days after the Closing Date, Buyer
shall submit to Seller a post closing adjustment report (the "Post Closing
Adjustment Report") which shall set forth any adjustment in the Purchase Price
based upon the apportionment of the charges described in Article 2.05(a) above
(the "Purchase Price Adjustment"). If Seller does not object to the Purchase
Price Adjustment within fifteen (15) days after receipt thereof, the Purchase
Price Adjustment shall be deemed final and Seller shall promptly remit to Buyer
in immediately available funds the amount of such Purchase Price Adjustment. If
Seller objects to the Purchase Price Adjustment within the fifteen (15) day
period described herein or if within said fifteen (15) day period Seller advises
Buyer of an adjustment that should have, but was not adjusted for at the Closing
and Buyer objects, any dispute with respect thereto which is not resolved by
Seller and Buyer within thirty (30) days after receipt by Buyer of Seller's
objections shall be submitted to arbitration under Article 14.16.
(c) Seller in its sole discretion may attempt to have those of its
vendors with whom Seller participates in a Vendor Rebate Program, agree to
credit Seller's purchases made from January 1, 1997 to the date of Closing
("Seller's 1997 Purchases") towards Buyer's purchases from such vendors for
purposes of Buyers rebate program (if any) with such vendors. Seller shall
advise Buyer in writing on or before the Closing as to any vendor(s) agreeing to
the foregoing ("Participating Vendor(s)"). If Buyer is entitled to a rebate
from a Participating Vendor (irrespective of whether Sellers 1997 Purchases
enable Buyer to qualify for the rebate),
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to the extent of Seller's 1997 Purchases, Seller shall be entitled as a post-
closing adjustment, to a prorated share of the rebate earned by Buyer in the
amount of the lesser of: (i) the rebate Seller would have received for Sellers
1997 Purchases under its Vendor Rebate Program with the Participating Vendor, or
(ii) the portion of the rebate Buyer receives from the Participating Vendor
under its vendor rebate program allocable to Sellers 1997 Purchases. Such
adjustment shall be paid to Seller within thirty (30) days of receipt of the
rebate by Buyer or the issuance of a credit to Buyer by the Participating
Vendor. Nothing herein shall be deemed to require Buyer to reveal to Seller the
terms of its vendor rebate program with any Participating Vendor; provided,
however, Buyer shall reveal such information in strict confidence only to a
third party certified public accountant in the event of an audit of Buyer with
respect to this provision.
(d) The parties shall, on or before January 31, 1998, adjust the
Customer Discounts credit taken by Buyer at the Closing so that any rebate or
discount for which Buyer received a credit is recalculated and based upon a full
fiscal year. Such adjustment shall be apportioned between Buyer and Seller with
Seller being responsible for the portion of the Customer Discounts based on the
Seller's sales as a percentage of the total sales. Any such adjustment shall be
paid by the appropriate party to the other within fifteen (15) days of the date
the adjustment is calculated.
ARTICLE III
CLOSING
3.01. The Closing.
(a) The closing of the transactions contemplated hereby (the
"Closing") shall take place at the Empire State Building offices of Kudman,
Trachten & Kessler, counsel for Seller, at 10:00 a.m. (New York City time) on
May 6, 1997 (provided that any conditions required herein to be satisfied prior
to the Closing have been satisfied or waived as of such date), time being of the
essence subject only to the provisions of paragraph (b) of this Article 3.01.
For the purpose of this Agreement, "Closing Date" shall mean 12:01 a.m. Eastern
Standard Time on May 6, 1997.
(b) From time to time, Buyer shall have the right to adjourn the
Closing for up to three (3) weeks to a date no later than May 27, 1997 (as to
which date time shall also be of the essence) solely and only in the event
Buyer's affiliates are unable to obtain and close on third party financing for
the acquisition of the Trachten Real Estate Properties by the Closing Date and
subject to Buyer giving the Seller written notice no less than four (4) business
days' prior to the Closing Date and within one (1) business day of such notice,
delivering to the Escrow Agent as an additional deposit towards the Purchase
Price, $75,000.00 for each requested adjourned week (the aggregate amount
delivered to the Escrow Agent being referred to as the "Adjournment Deposit").
Interest on the Adjournment Deposit shall in all events be payable to the
Seller. The failure of the Buyer to timely deliver the appropriate Adjournment
Deposit shall be deemed to be a material breach of this Agreement.
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(c) Anything to the contrary notwithstanding, Seller's willingness to
permit the Buyer to adjourn the Closing Date for the limited reason set forth in
paragraph (b) above, is an accommodation to the Buyer and the ability (or
inability) of Buyers affiliates to finance the acquisition of the Trachten Real
Estate Properties is not, and shall not be deemed to be, a contingency or
condition of this Agreement or the Trachten Real Estate Contracts or to the
Buyers obligation to consummate the transaction contemplated in this Agreement,
the Trachten Real Estate Contracts or any of the other agreements being entered
into contemporaneously herewith or to be entered into at the Closing.
(d) All matters at the Closing shall be considered to take place
simultaneously and no delivery of any document shall be deemed complete until
all transactions and deliveries of documents are completed.
3.02. Deliveries of Seller. At the Closing, Seller shall deliver the
following documents to Buyer:
(a) Bill of Sale and Assignment duly executed on behalf of Seller,
dated the Closing Date in the form attached hereto as Exhibit F, transferring to
Buyer all of the Seller's right, title and interest in and to the Assets (it
being understood that separate transfer documents will be delivered for certain
of the Assets as Buyer may reasonably request);
(b) the certificate referred to in Article 9.01 hereof;
(c) the opinion of Kudman, Trachten & Kessler, Sellers counsel, in
substantially the form of Exhibit G attached hereto;
(d) a receipt for the Purchase Price;
(e) a certificate of existence for Seller from the State of
Connecticut and good standing certificates for Seller with respect to each State
in which the Seller is doing business and qualification to do business in such
State is required by the laws of the State and certificate of the Secretary or
an Assistant Secretary of Seller as to the resolutions adopted by Seller's Board
of Directors and shareholders relating to the transactions contemplated hereby;
(f) the Required Consents;
(g) the guaranty of the Shareholders in the form attached hereto as
part of Exhibit H (the "Shareholder Guaranty");
(h) Intentionally Deleted;
(i) the executed consulting agreement of David Trachten specified in
Article 9.13;
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(j) the executed Non-Competition Agreements of Seller's Shareholders
as specified in Article 8.01;
(k) the executed Assignment of Telephone Number in the form of the
document attached hereto as Exhibit 1;
(l) assignments of all contracts with Seller's employees (other than
collective bargaining agreements and pension and retirement plans);
(m) a list of Customer Deposits;
(n) a list of Assumed Vacation Pay;
(o) a list of the Salesmen Bonuses;
(p) a list of Customer Discounts; and
(q) the Schedule of pending purchase orders referred to in Article
1.01 (v).
3.03. Deliveries of Buyer. At the Closing, Buyer shall deliver, or cause
to be delivered, to Seller the following:
(a) the Purchase Price, in accordance with Article 2.01 hereof,
including the Note and the Hendricks' Guaranty;
(b) the executed Assumption and Release Agreements pursuant to
Article 1.05(a)(iii);
(c) the Allocation pursuant to Article 2.03(a);
(d) the certificate referred to in Article 10.01 hereof;
(e) executed Assumption Agreement duly executed on behalf of Buyer in
the form of Exhibit J attached hereto;
(f) the opinion of Leo and Associates, Buyer's counsel, in
substantially the form of Exhibit K attached hereto;
(g) a good standing certificate for Buyer from the States of Texas
and Connecticut and certificate of the Secretary or an Assistant Secretary of
Buyer as to the resolutions adopted by Buyer's Board of Directors and
shareholders relating to the transactions contemplated hereby; and
(h) a list of all employees of Seller whom Buyer will offer to employ
upon Closing.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer that:
4.01. Corporate Power and Authority; Effect of Agreement. Seller is a
corporation duly organized, validly existing and in good standing under the laws
of the state of Connecticut, is qualified to do business and in good standing in
the States of Massachusetts, New Hampshire, New York, and Rhode Island, and has
all requisite corporate power and authority to carry on its business as it is
now being conducted, and to execute, deliver and perform this Agreement and to
consummate the transactions contemplated hereby. Seller has heretofore
delivered to Buyer a true and complete copy of the certificate of incorporation
and bylaws of Seller as currently in effect. The execution, delivery and
performance by Seller of this Agreement and the consummation by it of the
transactions contemplated hereby are within Seller's corporate powers and have
been duly authorized by all necessary corporate action on the part of Seller.
This Agreement has been duly and validly executed and delivered by Seller and
constitutes its legal, valid and binding obligation, enforceable against it in
accordance with its terms, except to the extent that such enforceability (A) may
be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to creditors' rights generally, and (B) is subject to
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law). The execution, delivery and
performance by Seller of this Agreement and the consummation by it of the
transactions contemplated hereby will not, with or without the giving of notice
or the lapse of time, or both, (i) contravene or conflict with the certificate
of incorporation or bylaws, or any resolution adopted by the board of directors
of the shareholders of Seller, (ii) contravene, conflict with or violate any
provision of law, rule or regulation to which Seller, the Assets or the Business
are subject, (iii) violate any order, judgment or decree applicable to Seller,
(iv) subject to obtaining all Required Third Party Consents, constitute a breach
or default under or give rise to any right of revocation, withdrawal,
suspension, modification, termination, cancellation or acceleration of any right
or obligation of Seller or to a loss of any benefit relating to the Business to
which Seller is entitled under any Commitment (as defined in Article 4.04 hereof
or any Permit (as defined in Article 4.13), or provision of any agreement,
contract or other instrument binding upon Seller or the Business, or by which
any of the Assets is or may be bound, or (v) result in the creation or
imposition of any mortgage, lien, pledge, charge, security interest or
encumbrance of any kind ("Lien") on any Asset, other than those expressly
assumed by Buyer hereunder; except, in each case, for violation, cancellation or
acceleration which in the aggregate would not materially hinder or impair the
consummation of the transactions contemplated hereby or reasonably would be
expected to have a material adverse effect on the Business, Assets, condition
(financial or otherwise), or results of operations of the Business taken as a
whole ("Material Adverse Effect").
Except as set forth herein or in any other provision of this Agreement, Seller
is not, nor will Seller be, required to give any notice to or obtain any consent
from any person in connection with the execution and delivery of this Agreement
or the consummation or performance of the transactions contemplated herein.
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4.02. Tangible Personal Property. (a) Schedule 4.02(a) of this Agreement
sets forth a description of all material tangible personal property reflected on
the books and records of, or used in connection with, the Business, together
with the gross book value, accumulated depreciation and net book value as of the
date indicated (collectively, the "Tangible Personal Property").
(b) Seller has, or will as of the Closing Date have, good and
marketable, valid title to all of the Tangible Personal Property to be conveyed,
transferred or assigned by it and will convey, transfer and assign the Tangible
Personal Property to Buyer free and clear of any and all Liens other than
Permitted Liens as set forth on Schedule 4.02(b) of this Agreement.
(c) Upon consummation of the transactions contemplated hereby, Buyer
will have acquired good and marketable, valid title in and to the Tangible
Personal Property, free and clear of all Liens, except for those expressly
assumed by Buyer hereunder.
4.03. Proprietary Rights. (a) Schedule 4.03(a) of this Agreement sets
forth a list of Proprietary Rights owned or licensed by Seller and used in the
Business. Seller has good, marketable and valid title to the Proprietary Rights
and shall convey, transfer and assign the Proprietary Rights to Buyer free and
clear of all Liens other than those expressly assumed by Buyer hereunder. There
are no material licenses, sublicenses or other agreements as to which Seller or
any of its affiliates is a party and pursuant to which any person is authorized
to use such Proprietary Rights. The Seller has no patents, trademarks,
tradenames, copyrights or other Proprietary Rights other than as set forth on
Schedule 4.03(a) or Schedule 1.01(vii). Schedule 4.03(a) sets forth a complete
and accurate list and summary description, including royalties and license fees
paid or received by Seller with respect to the Proprietary Rights owned or
licensed by Seller and used in the Business and all Commitments relating to the
Proprietary Rights to which Seller is a party or by which it is bound, except
licenses implied by sale of a product and perpetual paid-up software licenses
with a value less than $1,000.00. None of the Proprietary Rights are infringed
or, to the best of Seller's knowledge, has been challenged or threatened in any
way, and none of the Proprietary Rights used by Seller infringes or is alleged
to infringe any intellectual property rights of any third party. Upon
consummation of the transactions contemplated herein, Buyer will have acquired
good title to the Proprietary Rights, free and clear of all Liens, except those
expressly assumed by Buyer hereunder.
4.04. Commitments. (a) Schedule 4.04 of this Agreement contains a list of
each written contract or agreement (including any and all written amendments
thereto) with respect to the Business to which Seller is a party, which except
as otherwise noted on Schedule 4.04 or otherwise set forth herein, is being
assigned to Buyer hereunder, which is not cancelable by any party thereto
without penalty or notice in excess of 60 days and which involves the payment to
or from Seller of amounts in excess of $1,000.00 per year (collectively, the
"Commitments"). Seller is not a party to any oral contracts or agreements and
there have been no oral amendments, modifications or waivers with respect to the
Commitments disclosed on Schedule 4.04. Except as disclosed in Schedules
1.01(ix) and 4.04 of this Agreement, with respect to the Business, Seller is not
a party to or subject to:
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(i) any lease;
(ii) any contract for the purchase of materials, supplies, goods,
services, equipment or other assets;
(iii) any sales, distribution or other similar agreement providing for
the sale by Seller of materials, supplies, goods, services, equipment or other
assets;
(iv) any partnership, joint venture or other similar contract
arrangement or agreement;
(v) any contract relating to indebtedness for borrowed money or the
deferred purchase price of property (whether incurred, assumed, guaranteed or
secured by any asset);
(vi) any license agreement, franchise agreement, right to receive or
obligation to pay royalties or any other agreement in respect of similar rights
granted to or held by Seller or any of its affiliates;
(vii) any agency, dealer, sales representative or other similar
agreement;
(viii) any agreement, contract or commitment that substantially limits
the freedom of Seller to compete in any line of business or with any person or
in any area or to own, operate, sell, transfer, pledge or otherwise dispose of
or encumber any Asset or which would so limit the freedom of the Buyer after the
Closing Date;
(ix) any agreement, contract or commitment between Seller and any of
Seller's employees, officers, directors or shareholders; or
(x) any collective bargaining agreement or other agreement,
contract or commitment with any union.
(b) Each Commitment disclosed in Schedule 1.01 (ix) or 4.04(a) of
this Agreement or required to be disclosed pursuant to this Article 4.04 is a
valid and binding agreement of Seller, in full force and effect, and neither
Seller, nor, to the knowledge of Seller, any other party thereto is in default
in any material respect under the terms of any such Commitment, nor, to the
knowledge of Seller, has any event or circumstance occurred that, with notice or
lapse of time or both, would constitute any event of default thereunder.
(c) To Seller's knowledge, no event has occurred or circumstance
exists that (with or without notice or lapse of time) may contravene, conflict
with, or result in a material violation or breach of, or give Seller or any
other person the right to declare a default or exercise any remedy under, or to
accelerate the maturity or performance of, or to cancel, terminate, or modify,
any Commitment; and
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(d) The Commitments relating to the sale, design, manufacture, or
provision of products or services by Seller have been entered into in the
ordinary course of business and to the best of Seller's knowledge, have been
entered into without the commission of any act alone or in concert with any
other person, or any consideration having been paid or promised, that is or
would constitute an illegal act or payment.
4.05. Litigation. Except as set forth in Schedule 4.05 of this Agreement,
there is no action, suit, investigation or proceeding before any court,
arbitrator or before any governmental authority, body, agency or official
pending or, to Seller's knowledge, threatened (a) against or affecting Seller in
connection with the conduct of the Business or the Assets, or (b) which in any
manner seeks to prevent, enjoin, alter or materially delay or obtain damages in
respect of the consummation of the transactions contemplated hereby. To the
Seller's knowledge, the litigation and any claim relating thereto referred to in
Schedule 4.05 has not had and will not have any adverse effect on the Business
(the "Scheduled Litigation"). To Seller's knowledge, no event has occurred or
circumstance exists that may give rise to or serve as a basis for the
commencement of any such proceeding. Seller has delivered to Buyer copies of all
pleadings, correspondence and other documents relating to the Scheduled
Litigation. There is no order, judgment or decree to which Seller, the Business
or any of the Assets is subject, and to the best of Seller's knowledge, no
officer, director, agent, or employee of Seller is subject to any order,
judgment or decree that prohibits such officer, director, agent, or employee
from engaging in or continuing any conduct, activity, or practice relating to
the Business of Seller. Except as set forth Schedule 4.05, to the best of
Seller's knowledge (i) Seller is, and at all times since February 28, 1993 has
been, in material compliance with all of the terms and requirements of each
order, judgment and decree to which it, or any of the Assets is or has been
subject; and (ii) no event has occurred or circumstance exists that may
constitute or result in (with or without notice or lapse of time) a material
violation of or failure to comply with any material term or requirement of any
order, judgment or decree to which Seller or any of the Assets is subject; (iii)
Seller has not received, at any time since February 28, 1993, any notice or
other communication (whether oral or written) from any governmental body or any
other person regarding any actual, alleged, possible, or potential material
violation of, or failure to comply with, any material term or requirement of any
order, judgment or decree to which Seller or any of the Assets is or has been
subject.
4.06. Compliance with Laws. Except as set forth in Schedule 4.06, to the
best of Seller's knowledge, Seller is, and at all times since February 28, 1993
has been, in material compliance with all laws, rules, ordinances, regulations,
orders, judgments and decrees applicable to Seller, the conduct or operation of
the Business or the ownership, use, or sale of the Assets. Seller is not in
violation of, and Seller has not received notice of and, to Seller's knowledge,
Seller is not under investigation with respect to, any actual, alleged, possible
or potential violation of, or failure to materially comply with any law, rule,
ordinance or regulation, or judgment, order or decree entered by any court,
arbitrator or governmental authority, domestic or foreign, applicable to the
Assets or the conduct of the Business which would have an adverse effect on the
Business, the Assets or the consummation of the transactions contemplated
herein, or which would require Seller to undertake, or to bear all or any
portion of the cost of any remedial action of any nature. To Seller's knowledge,
Buyer shall be able to operate the Business as is presently done without the
need of obtaining any additional permits, except as may be
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required due to changes in statutes or regulations after the date of this
Agreement or as may be required with respect to lease agreement for premises
located at 110 Commerce Way, Woburn, Massachusetts, which lease is referenced on
Schedule 4.19.
4.07. Inventories. The Inventory set forth in Schedule 1.01 (v) was
properly stated therein at average invoice cost to Seller (after applying all
available cash discounts, rebates, winter dating incentives (with respect only
to Inventory purchased through winter dating incentives) and volume incentive
credits of every kind). Except as set forth on Schedule 4.07, all Inventory has
been maintained in the ordinary course of business and at sufficient levels to
operate the Business in the ordinary course of business and all Inventory is, or
as at the Closing Date will be, owned by Seller and is transferred to Buyer free
and clear of all Liens and, as of the Closing Date, will have a value as
determined in accordance with Article 2.04 hereof.
4.08. Accounts Receivable. The Accounts Receivable set forth on Schedule
1.01(xiv)(A), to be attached hereto at Closing and incorporated herein by this
reference, arose from bona fide transactions in the ordinary course of business
and were properly reflected thereon in accordance with generally accepted
accounting principles, consistently applied ("GAAP"). All Accounts Receivable at
the Closing Date will have arisen from bona fide transactions in the ordinary
course of business and will be reflected in a Statement of Accounts Receivable
to be delivered by Seller to Buyer at the Closing. Seller represents and
warrants that: (i) it has no knowledge, after due inquiry, of any dispute,
defense, credit or right of setoff with respect to any charge, invoice or
product sold in connection with the Accounts Receivable; (ii) none of the
Accounts Receivable include any attorney's or other collection fees; (iii) the
Accounts Receivable do not include any interest or service charges except as set
forth on Schedule 1.01 (xiv)(A); (iv) Seller owns all right title and interest
in and to the Accounts Receivable, and shall transfer the Accounts Receivable to
Buyer free and clear of all Liens except those expressly assumed by Buyer
hereunder; and (v) all Accounts Receivable shall be documented in accordance
with Seller's ordinary business practices (including appropriate credit and
purchase agreements). Prior to the Closing, Seller has written-off from its
books the accounts receivable identified on Schedule 1.01 (xiv)(B), attached
hereto and incorporated herein by this reference.
4.09. Labor Controversies. Except as disclosed in Schedules 4.04 and/or
4.09 of this Agreement and except for minor difficulties and controversies with
individual employees which have not had and will not have a Material Adverse
Effect:
(a) for a period of three (3) years from the date of this Agreement
there have been no claims, actions or controversies pending against the Seller
relating to Seller's employees, including (i) any strike, slowdown, picketing,
work stoppage, or employee grievance process, or (ii) any proceeding against or
affecting Seller relating to the alleged violation of any legal requirement
pertaining to labor relations or employment matters, including any charge or
complaint filed by an employee or union with the National Labor Relations Board,
the Equal Employment Opportunity Commission, OSHA or any comparable governmental
body, organizational activity, or other labor or employment dispute against or
affecting Seller or its facilities and (iii) to Seller's knowledge, no event has
occurred or circumstance exists that could
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provide the basis for any work stoppage or other labor dispute. There is no
lockout of any employees by Seller, and no such action is contemplated by
Seller;
(b) No union organizational efforts have been made or threatened
involving any employees of the Business;
(c) To the best of its knowledge, Seller has complied with all laws
relating to the employment of labor, including, without limitation, any
provisions thereof relating to wages, hours, equal employment opportunity,
immigration, nondiscrimination, collective bargaining, occupational safety and
health, employee benefits (including the Employee Retirement and Income Security
Act of 1974, as amended ("ERISA")) and payment of Social Security and other
taxes, and is not liable for any arrears of wages, fringe benefits, employee
benefits, vacation or severance pay or any taxes or penalties for failure to
comply with any of the foregoing which would have a Material Adverse Effect; and
(d) There are no collective bargaining agreements relating to any of
the employees of the Business and Seller is not obligated under any agreement to
recognize or bargain with any labor organization or union on behalf of Seller
employees.
4.10. Employees. (a) Schedule 4.1 0(a) of this Agreement contains a true
and complete list of all current employees, both full time and part time, of the
Business and all current consultants of the Business and discloses the date of
hire of each individual, the annual and/or hourly rate of compensation of each
individual, the amount of all bonus or other similar compensation payments made
to each individual during the calendar years 1996 and 1997, and the bonus and
incentive arrangements with each and all commission arrangements and all fringe
benefits (including, without limitation, severance, vacation and sick-leave
arrangements) to which such employees are entitled.
(b) Except as disclosed in Schedule 4.04, Seller is not party to
any:
(i) management, employment or other contract providing for the
employment or retention of executive services;
(ii) contract for the employment of any employee which is not
terminable by Seller on 30 days' notice without penalty;
(iv) bonus, incentive, deferred compensation, severance pay,
pension, profit-sharing, retirement, stock purchase, stock option, employee
benefit or similar plan, agreement or arrangement (including, without
limitation, Christmas bonuses and similar year end bonuses);
(iv) collective bargaining agreement or other agreement with any
labor union or other employee organization and non such agreement is currently
being requested by, or is under discussion by management with, any group of
employees or others; or
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(v) other employee contract or other compensation agreement or
arrangement affecting or relating to current or former employees of the Company.
(c) Except as disclosed in Schedule 4.10, Seller has received no
notice that any officer or other key employee of Seller intends to terminate
his/her employment with Seller.
4.11. Employee Benefit Plans.
(a) (i) the term "Employees" shall mean all employees employed or
on the payroll of the Business on the day immediately prior to the Closing Date,
including any employees on vacation, but excluding any employees on (A) long-
term disability or (B) short-term disability or workers' compensation until, in
the case of subclause (B), such employee is physically able to return to active
employment with Buyer.
(ii) The term "Employee Benefit Plans" shall mean each and all
"employee benefit plans" as defined in Section 3(3) of ERISA, which is or was
maintained, administered or contributed to by Seller and which provides benefits
to Employees, including (A) any such plans that are "employee welfare benefit
plans" as defined in Section 3(l) of ERISA, including post retirement medical
and life insurance plans, and (B) any such plans that are "employee pension
benefit plans" as defined in Section 3(2) of ERISA ("Pension Plans").
(iii) The term "Benefit Arrangements" shall mean life and health
insurance, hospitalization, bonus, deferred compensation, incentive
compensation, holiday, vacation, severance pay, sick pay, sick leave,
disability, fringe benefit or severance contracts and other policies (whether
written or oral) or practices of Seller providing employee or executive
compensation or benefits to Employees, other than Employee Benefit Plans.
(b) Except for the Assumed Vacation Pay, Seller shall be
responsible for the payment of all earned and/or accrued entitlements under all
Employee Benefit Plans and Benefit Arrangements, up to the Closing Date for
Employees, including but not limited to wages, bonuses, severance and other
compensation.
(c) Buyer shall arrange for the participation of the Employees who
become employees of Buyer in Buyer's Employee Benefit Plans in accordance with
the terms of such plans.
(d) No provision of this Article 4.11 shall create any third party
beneficiary or other rights in any Employee or former employee (including any
beneficiary or dependent thereof of Seller in respect of continued employment
(or resumed employment) with either Buyer or the Business or any of their
affiliates and no provision of this Article 4.1 1 shall create any such rights
in any such persons in respect of any benefits that may be provided, directly or
indirectly, under any Employment Benefit Plan or Benefit Arrangement, or any
plan or arrangement which may be established by Buyer or any of its affiliates.
Notwithstanding anything contained herein to the contrary, no provision of this
Agreement shall constitute a
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limitation on rights to amend, modify or terminate after the Closing Date any
such plans or arrangements of Buyer or any of its affiliates.
(e) Schedule 4.11 of this Agreement sets forth a complete list of all
employee benefit plans or arrangements presently maintained by Seller,
including, but not limited to (i) the severance pay policy for employees who do
not have contractual severance pay arrangements; (ii) any arrangements, policies
or understandings with respect to the payment of health, life, disability or
accidental death and dismemberment or other benefits to employees or their
families; (iii) any bonus, incentive, deferred compensation, vacation and sick
pay policies, pension, profit-sharing, retirement, stock purchase, stock option,
or similar plan, arrangement or agreement (including, without limitation,
Christmas or other year-end bonuses); and (iv) all other fringe benefits or
payment practices maintained by Seller and not otherwise identified in this
Article 4.11.
(f) No actions, suits or claims (other than routine claims for
benefits in the ordinary course of business) are pending or, to the knowledge of
Seller, threatened with respect to any plan or arrangement listed in Schedule
4.11, nor, to the knowledge of Seller, do any facts exist which could give rise
to any such actions, suits or claims (other than routine claims for benefits in
the ordinary course of business).
(g) Except as set forth on Schedule 4.11, all plans and arrangements
listed in Schedule 4.11 have been administered in accordance with their
respective material terms, and all contributions to and payments from all plans
and arrangements listed in Schedule 4.11 that may have been required to be made
in accordance with the terms of such plans and arrangements or any governmental
law, regulation, decree, decision or order have been made.
(h) Except as set forth on Schedule 4.1 1, Seller is not a party to a
multi-employer plan as such term is defined in Section 4001 (a) of ERISA.
(i) With respect to each of the benefit plans and arrangements
identified on Schedule 11.01 (d), except as set forth on Schedule 4.11:
(A) The plans are in substantial compliance with ERISA and each
plan which is intended to be qualified under Section 401 (a) of the Internal
Revenue Code (the "Code") has been determined by the Internal Revenue Service
("IRS") to be so qualified or a request for such determination has been timely
filed with the IRS (and to Seller's knowledge nothing has occurred between the
date of the last such determination and the Closing to cause the IRS to revoke
such determination);
(B) No accumulated funding deficiency, as defined by Section
302(a)(2) of ERISA, exists (whether or not waived) with respect to the plans as
of the date hereof;
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(C) Neither the plans nor Seller, its agents, representatives
or any fiduciaries of the plans have been or are presently engaged in any non-
exempt "prohibited transactions" as defined by Section 406 of ERISA or Section
4975 of the Code;
(D) No liability has been, or is expected by Seller to be,
incurred by the Seller under Section 4062 of ERISA with respect to the Plans;
(E) Seller has not incurred any "withdrawal liability", as
defined in Part 1 of Subtitle 7 of Title IV of ERISA with respect to any plan
which is a "multiemployer plan" as defined in Section 4001 (a) of ERISA.
4.12. Required Consents. The failure to obtain any third party consent to
the transactions contemplated hereby, other than Required Consents, will not
result in a Material Adverse Effect.
4.13. Permits. Schedules 1.01 (xii) and 4.13 of this Agreement sets forth
a list of all material licenses, franchises, permits or similar authorizations
(the "Permits") issued by any federal, state or local governmental agency or
entity in respect of the Business. The Permits constitute all material licenses,
franchises, permits or similar authorizations required by any law, rule,
regulation or order for Seller to own and conduct the Business, and there are no
outstanding material violations of any Permits, Seller has received no notice
from any governmental agency with respect to an alleged or actual violation by
Seller of any Permit and no action is pending or, to the knowledge of Seller,
threatened to cancel, modify or not renew any Permit or which would result
directly or indirectly in the revocation, withdrawal, suspension, cancellation,
or termination of, or any modification to, any Permit. To the best of Seller's
knowledge, Seller has not received, at any time since February 28, 1993, any
notice or other communication (whether oral or written) from any governmental
body or any other person regarding (A) any actual, alleged, possible, or
potential material violation of or failure to materially comply with any term or
requirement of any Permit, or any actual, proposed, possible, or potential
revocation, withdrawal, suspension, cancellation, termination of, or
modification to any Permit. All applications required to have been filed for the
renewal of the Permits have been duly filed on a timely basis with the
appropriate governmental bodies, and all other filings required to have been
made with respect to such Permits have been duly made on a timely basis with the
appropriate governmental bodies. To the best of Sellers' knowledge, the Permits
collectively constitute all of the governmental authorizations and permits
necessary to permit Seller to lawfully conduct and operate the Business in the
manner it is currently conducted and to operate the Businesses and to permit
Seller to own and use the Assets in the manner in which it currently owns and
uses such assets.
4.14. VBP Financial Information. Seller has delivered, or will prior to
Closing deliver, to Buyer: (a) unaudited balance sheets of the Seller as at
February 28 or 29 (as the case may be) in each of the years 1994 through 1997,
including the notes thereto, and the related statements of income, changes in
stockholders' equity, and cash flow for each of the fiscal years then ended,
together with the report thereon of Konowitz, Kahn & Company, P.C., independent
certified public accountants, (b) a balance sheet of Seller as at February 28,
1997 (including the
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notes thereto), and the related statements of income, changes in stockholders'
equity, and cash flow for the fiscal year then ended, together with the report
thereon of Konowitz, Kahn & Company, P.C., independent certified public
accountants, and (c) an internally generated balance sheet and statement of
income as at November 30, 1996 for the nine (9) months then ended. Except as set
forth in Schedule 4.14, such financial statements and notes are true and
complete and fairly present the financial condition and the results of
operations, changes in stockholders' equity, and cash flow of Seller as at the
respective dates of and for the periods referred to in such financial
statements, all in accordance with GAAP, subject, in the case of interim
financial statements, to normal recurring year-end adjustments (the effect of
which will not, individually or in the aggregate, be materially adverse); the
financial statements referred to in this Article 4.14 reflect the consistent
application of such accounting principles throughout the periods involved,
without regard to the notes to such financial statements. No financial
statements of any person other than Seller are required by GAAP to be included
in the financial statements of Seller. All of the foregoing financial statements
shall be identified in and attached hereto as Schedule 4.14.
4.15. Representations. No other representation or warranty made by Seller
or any of its affiliates in this Agreement, and no statement contained in any
certificate, exhibit, document or other instrument furnished or to be furnished
to Buyer pursuant hereto or in connection with the transactions herein
contemplated, contains or will contain any untrue statement of material fact or
omits or will omit to state a material fact necessary to make the statements
contained herein and therein not misleading. No notice given pursuant to this
Agreement will contain any untrue statement or omit to state a material fact
necessary to make the statements therein or in this Agreement, in light of the
circumstances in which they were made, not misleading. There is no fact known to
Seller or its shareholders that materially adversely affects or materially
threatens the assets, business, prospects, financial condition, or results of
operations of Seller or the Business (on a consolidated basis) that has not been
set forth in this Agreement or the Schedules attached hereto.
4.16. No Material Adverse Change. Since November 30, 1996, there has not
been, and prior to the Closing there will not be, any material adverse change in
the Business, operations, properties, prospects, Assets, or condition of Seller,
and to Seller's knowledge, no event has occurred or circumstance exists that may
result in such a material adverse change or Material Adverse Effect.
4.17. VAP Financial Information. Seller has delivered, or will prior to
the Closing deliver, to Buyer: (a) unaudited consolidated balance sheets of VAP
as at February 28 or 29 (as the case may be) in each of the years 1994 through
1997, and the related consolidated statements of income, changes in
stockholders' equity, and cash flow for each of the fiscal years then ended,
together with the report thereon of Konowitz, Kahn & Company, P.C., independent
certified public accountants, (b) a consolidated balance sheet of VAP as at
February 28, 1997 (including the notes thereto), and the related consolidated
statements of income,' changes in stockholders' equity, and cash flow for the
fiscal year then ended, together with the report thereon of Konowitz, Kahn &
Company, P.C., independent certified public accountants, and (c) an internally
generated balance sheet and statement of income as at November 30, 1996 for the
nine (9) months then ended. Such financial statements and notes fairly present
the financial condition
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and the results of operations, changes in stockholders' equity, and cash flow of
VAP as at the respective dates of and for the periods referred to in such
financial statements, all in accordance with GAAP, subject, in the case of
interim financial statements, to normal recurring year-end adjustments (the
effect of which will not, individually or in the aggregate, be materially
adverse); the financial statements referred to in this Section 4.17 reflect the
consistent application of such accounting principles throughout the periods
involved, without regard to the notes to such financial statements. No financial
statements of any person other than the VAP are required by GAAP to be included
in the consolidated financial statements of VAP. All of the foregoing financial
statements shall be identified in and attached hereto as Schedule 4.17.
4.18. Seller's Books and Records. The books of account, minute books,
stock record books, and other records of Seller, all of which have been or will
be made available to Buyer, are complete and correct in all material respects
and have been maintained in accordance with sound business practices. At the
Closing, all of those books and records necessary for the continuing operation
of the Business by Buyer will be transferred to Buyer.
4.19. Seller's Property Interests. Schedule 4.19, attached hereto and
incorporated herein by reference, contains a complete and accurate list of all
real property, leaseholds, or other interests therein owned by Seller. Seller
will make available to Buyer copies of the leases and other instruments by which
Seller acquired such real property leases or interests, and copies of all title
insurance policies, opinions, abstracts, environmental reports and surveys in
the possession of Seller or Seller's shareholders or any related person, and
relating to such property or interests. Seller owns no real property.
4.20. Seller's Equipment. The Equipment of Seller is in good operating
condition and repair, and is adequate for the uses to which they are being put,
and none of such equipment is in need of maintenance or repairs except for
ordinary, routine maintenance and repairs that are not material in nature or
cost.
4.21. Sales, Use and other Taxes. Seller has filed or caused to be filed
all sales, use, franchise, personal property, occupancy or other tax returns
that are or were required to be filed with respect to the Business or any of the
Assets, pursuant to applicable law ("Taxes"). Seller has delivered or will make
available to Buyer copies of all such tax returns relating to income, sales or
franchise Taxes filed since 1993. Seller has paid, or made provision for the
payment of, all Taxes that have or may have become due pursuant to those tax
returns or otherwise, or pursuant to any assessment received by Seller. Seller
has not been given or requested to given any waivers or extensions (or is or
would be subject to a waiver or extension given by any other person) of any
statute of limitations relating to the payment ' of Taxes or for which Seller
may be liable. The charges, accruals, and reserves with respect to Taxes on the
books of Seller are adequate (determined in accordance with GAAP) and are at
least equal to Sellers liability for Taxes. There exists no proposed tax
assessment against the Business or the Assets, except as disclosed in Schedule
4.21. No consent to the application of Section 341 (f)(2) of the IRC has been
filed -with respect to any property or assets held, acquired, or to be acquired
by Seller in connection with the Business. All Taxes that Seller is or was
required to withhold or collect have been duly withheld or collected and, to the
extent required, have been paid to the proper
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governmental body or other person. All Tax returns filed by (or that include on
a consolidated basis) Seller are true, correct, and complete. There is no tax
sharing agreement that will require any payment by Buyer after the date of this
Agreement. Seller is not, or within the ten (10) year period preceding the
Closing Date has not been, an "S" corporation.
4.22. Operation of the Business. Except as set forth in Schedule 4.22,
since November 30, 1996, Seller has conducted the Business only in the ordinary
course of business and there has not been any: (i) payment or increase by Seller
of any bonuses, salaries, or other compensation to any stockholder, director,
officer, or (except in the ordinary course of business) employee or entry into
any employment, severance, or similar contract with any director, officer, or
employee; (ii) adoption of, or increase in the payments to or benefits under,
any profit sharing, bonus, deferred compensation, savings, insurance, pension,
retirement, or other employee benefit plan for or with any employees of Seller;
(iii) damage to or destruction or loss of any Asset or property of Seller to be
transferred to Buyer pursuant to this Agreement, whether or not covered by
insurance, materially and adversely affecting the properties, assets, business,
financial condition, or prospects of Seller or the Business, taken as a whole;
(iv) entry into, termination of, or receipt of notice of termination of (a) any
license, distributorship, dealer, sales representative, joint venture, credit,
or similar agreement, or (b) any contract or transaction involving a total
remaining commitment by or to Seller of at least $5,000; (c) sale (other than
sales of inventory in the ordinary course of business), lease, or other
disposition of any asset or property of Seller or mortgage, pledge, or
imposition of any Lien on any Asset or property of Seller to be transferred to
Buyer pursuant to this Agreement, including the sale, lease or other disposition
of the Assets; (d) cancellation or waiver of any claims or rights with a value
to Seller with respect to the Business or the Assets in excess of $5,000; (e)
material change in the accounting methods used by Seller; or (f) agreement,
whether oral or written, by Seller to do any of the foregoing.
4.23. Vendors and Customers of Seller. Schedule 4.23(A) sets forth the top
fifteen (15) vendors (based on total dollars purchased in the calendar year
1996) of products that are sold by Seller as part of its inventory, including
the vendor name, address, telephone number, contact person, products and total
dollar value of calendar year 1996 purchases by Seller from the vendor, and all
rebates, discounts, volume or other incentives given by the vendor to Seller.
Schedule 4.23(6) sets forth the top two hundred (200) customers of Seller and
the top twenty (20) customers of each branch of Seller (in each case based
dollar volume of purchases in the calendar years 1995 and 1996), including the
customer name, address, phone number, contact person, dollar volume purchased by
the customer from Seller in calendar year 1996, and any rebates, volume
discounts, or other incentives provided by Seller to each such customer. Except
as set forth in Schedules 4.23(A) and (B), there are no other rebates, discounts
or other incentives received by Seller from vendors or given by Seller to its
customers. Since January 1, 1997, there has been no material adverse change in
Seller's relationship with any of the vendors or customers set forth in Schedule
4.23(A) or (B), except routine changes in pricing in the ordinary course of
business.
4.24. Product Pricing. The prices set forth in Seller's current computer
generated price code books (which prices are subject to change without notice to
customers) attached hereto and incorporated herein by reference as Schedule
4.24, accurately reflect the prices charged by Seller
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to its customers, except for the rebates, discounts and other incentives
identified in Schedule 4.23(A) and (B).
4.25. Insurance. Seller has delivered to Buyer (i) true and complete
copies of all policies of insurance (other than health insurance policies) to
which Seller is a party, or has been covered at any time within the five (5)
years preceding the date of this Agreement; and (ii) true and complete copies of
all pending applications for policies of insurance (other than health insurance
policies). Schedule 4.25 describes: (A) any self-insurance arrangement by or
affecting the Business or the Assets, including any reserves established
thereunder; (B) any contract or arrangement, other than a policy of insurance,
for the transfer or sharing of any risk by Seller; and (C) all obligations of
Seller to third parties with respect to insurance (including such obligations
under leases and service agreements) and identifies the policy under which such
coverage is provided. Seller has provided Buyer with true, accurate and complete
summaries of the loss experience under each policy. Except as set forth on
Schedule 4.25, all policies to which Seller is a party or that provide coverage
to Seller are valid, outstanding, and enforceable, will be maintained in full
force and effect until the Closing Date, and are sufficient for compliance with
all legal requirements, Permits and Commitments to which Seller is a party or by
which it is bound. Seller has paid all premiums due, and have otherwise
performed all of its obligations, under each policy to which Seller is a party
or that provides coverage with respect to the Business, Assets or properties of
Seller.
4.26. Broker's Fees. Seller and its agents have incurred no obligation or
liability, contingent or otherwise, for brokerage or finders' fees or agents'
commissions or other similar payment in connection with this Agreement or the
contemplated transactions.
4.27. Certain Payments. Since February 28, 1992, except as set forth in
Schedule 4.27, to the best of Seller's knowledge, Seller, nor any director,
officer, agent, or employee or shareholder of Seller, or any other person
associated with or acting for or on behalf of Seller, has directly or
indirectly: (a) made any contribution, gift, bribe, rebate, payoff, influence
payment, kickback, or other payment to any person, private or public, regardless
of form, whether in money, property, or services (i) to obtain favorable
treatment in securing business, (ii) to pay for favorable treatment for business
secured, (iii) to obtain special concessions or for special concessions already
obtained, for or in respect of Seller or the Business, or any related person or
affiliate of Seller, or (iv) in violation of any law; or (b) established or
maintained any fund or asset that has not been recorded in the books and records
of Seller.
4.28. Environmental Matters. Except as set forth in Schedule 4,28, to the
best of Seller's knowledge:
(a) Seller is, and at all times has been, in material compliance
with, and has not been and is not in violation of or liable under, any
environmental law, rule and regulation ("Environmental Law"). Seller has no
basis to expect, nor has any other person for whose conduct Seller is or may be
held to be responsible received, any actual or threatened order, notice, or
other communication from (i) any governmental body or private citizen acting in
the public interest, or (ii) the current or prior owner or operator of any
facilities of Seller, of any
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actual or potential violation or failure to comply with any Environmental Law,
or of any actual or threatened obligation to undertake or bear the cost of
environmental remediation with respect to any of Seller's facilities or any
other properties or assets (whether real, personal, or mixed) in which Seller
has had an interest, or with respect to any property or facility at or to which
Hazardous Materials (as defined by applicable law) were generated, manufactured,
refined, transferred, imported, used, or processed by Seller or any other person
for whose conduct Seller is or may be held responsible, or from which Hazardous
Materials have been transported, treated, stored, handled, transferred,
disposed, recycled, or received;
(b) There are no pending or threatened claims, Liens, or other
restrictions of any nature, resulting from any environmental, health, and safety
liabilities or arising under or pursuant to any Environmental Law, with respect
to or affecting any of the facilities or any other properties and assets
(whether real, personal, or mixed) in which Seller has or had an interest;
(c) Seller has no knowledge of any basis to expect, nor has any other
person for whose conduct Seller is or may be held responsible, received, any
citation, directive, inquiry, notice, order, summons, warning, or other
communication that relates to hazardous activity, Hazardous Materials, or any
alleged, actual, or potential violation or failure to comply with any
Environmental Law, or of any alleged, actual, or potential obligation to
undertake or bear the cost of any environmental, health, and safety liabilities
with respect to any of the facilities or any other properties or assets (whether
real, personal, or mixed) in which Seller had an interest, or with respect to
any property or facility to which Hazardous Materials generated, manufactured,
refined, transferred, imported, used, or processed by Seller or any other person
for whose conduct it is or may be held responsible, have been transported,
treated, stored, handled, transferred, disposed, recycled, or received;
(d) Neither Seller nor any other person for whose conduct Seller is
or may be held responsible, has any environmental, health, and safety
liabilities with respect to the facilities or, to the best of Seller's
knowledge, with respect to any other properties and assets (whether real,
personal, or mixed) in which Sellers or the Business (or any predecessor), has
or had an interest, or at any property geologically or hydrologically adjoining
the facilities or any such other property or assets;
(e) Except for quantities of materials used in the ordinary course of
business and in compliance with applicable laws, there are no Hazardous
Materials present on or in the environment at the facilities or at any
geologically or hydrologically adjoining property, including any Hazardous
Materials contained in barrels, above or underground storage tanks, landfills,
land deposits, dumps, equipment (whether moveable or fixed) or other containers,
either temporary or permanent, and deposited or located in land, water, sumps,
or any other part of the facilities or such adjoining property, or incorporated
into any structure therein or thereon. Neither Seller nor any other person for
whose conduct Seller is or may be held responsible or any other person, has
permitted or conducted, or is aware of, any hazardous activity conducted with
respect to the facilities or any other properties or assets (whether real,
personal, or mixed) in which Seller has or had an interest except in full
compliance with all applicable Environmental Laws;
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(f) There has been no release or threat of release, of any Hazardous
Materials at or from the facilities or at any other locations where any
Hazardous Materials were generated, manufactured, refined, transferred,
produced, imported, used, or processed from or by the facilities, or from or by
any other properties and assets (whether real, personal, or mixed) in which
Seller has or had an interest, or any geologically or hydrologically adjoining
property, whether by Seller or any other person;
(g) Seller has delivered to Buyer true and complete copies and
results of any reports, studies, analyses, tests, or monitoring possessed or
initiated by Seller, or any person pertaining to Hazardous Materials or
hazardous activities in, on, or under the facilities, or concerning compliance
by Seller or any other person for whose conduct Seller is or may be held
responsible, with Environmental Laws.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
5.01. Buyer's Organization. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Texas (provided,
however, that prior to Closing, Buyer may reincorporate in the State of Delaware
which will necessitate revisions to certain Closing documents accordingly), and
has all requisite corporate power and authority to carry on its business as it
is now being conducted, and to execute, deliver and perform this Agreement and
to consummate the transactions contemplated hereby.
5.02. Due Authorization, Execution and Delivery; Effect of Agreement. The
execution, delivery and performance by Buyer of this Agreement and the
consummation by Buyer of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Buyer. This
Agreement has been duly and validly executed and delivered by Buyer and
constitutes the legal, valid and binding obligation of Buyer, enforceable
against it in accordance with its terms, except to the extent that such
enforceability (a) may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to creditors rights generally, and (b)
is subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law). The
execution, delivery and performance by Buyer of this Agreement and the
consummation by Buyer of the transactions contemplated hereby will not, with or
without the giving of notice or the lapse of time, or both, subject to obtaining
any required consents, approvals, authorizations or exemptions referred to in
Article 5.03 hereof, (i) violate any provision of law, rule or regulation to
which Buyer is subject, (ii) violate any order, judgment or decree applicable to
Buyer, or (iii) conflict with, or result in a breach or default under, the
Articles of Incorporation, By-Laws or other similar charter documents of Buyer,
or any agreement or other instrument to which Buyer is a party or by which it
may be bound; except, in each case, for violations, conflicts, breaches or
defaults which in the aggregate would not materially hinder or impair the
consummation of the transactions contemplated hereby.
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5.03. Consents. Except for HSR approval as set forth in Article 9.12, no
consent, approval or authorization of, or exemption by, or filing with, any
governmental or regulatory authority or any other third party is required in
connection with the execution, delivery or performance by Buyer of this
Agreement.
5.04. Availability of Funds. Buyer will have available on the Closing Date
sufficient funds to, enable it to consummate the transactions by Buyer
contemplated by this Agreement.
5.05. Litigation. There is no litigation pending or, to Buyers knowledge,
threatened, against Buyer or any of its affiliates which seeks to enjoin or
obtain damages in respect of the consummation of the transactions contemplated
hereby.
ARTICLE VI
PRE-CLOSING COVENANTS OF SELLER
From and after the date hereof and until the Closing Date, Seller hereby
covenants and agrees with Buyer as follows:
6.01. Cooperation and Assignments. Seller will use its best efforts to
obtain all Required Consents and other third party consents and to cause the
consummation of the transactions contemplated hereby in accordance with the
terms and conditions hereof.
6.02. Conduct of Business. From the date hereof to the Closing Date,
except as otherwise may be contemplated by this Agreement or required by any of
the documents listed in the Schedules annexed hereto and except as Buyer
otherwise may consent to in writing, Seller will cause the Business to be
operated in the ordinary course consistent with past practice in all material
respects and use its best efforts (without the requirement to expend any funds
outside of the ordinary course of business) to: (a) preserve the Business as a
whole intact; (b) continue in effect all material existing policies of insurance
(or comparable insurance) with third-party carriers of or relating to the
Business; (c) keep available the services of the present officers, employees and
agents of the Business; (d) preserve the Business' relationships with its
material suppliers, customers, licensors and licensees and others having
material business dealings with it; (e) continue production and promotional and
sales efforts in accordance with existing plans and forecasts; (D from the date
hereof to the Closing, except to the extent permitted pursuant to Article
2.04(c), Seller shall not make any additional purchase of inventory that is
defined in Article 2.04 as "slow-moving" and shall use its good faith efforts to
liquidate the "slow-moving" Inventory and (g) Seller shall not accelerate or
prepay any of Seller's accounts payable. Seller will not take or agree or commit
to take any action that would make any representation and warranty of Seller
hereunder inaccurate or misleading in any material respect at, or as of any time
prior to, the Closing Date.
6.03. Access. (a) Seller shall continue to provide to Buyer, its counsel,
financial advisors, auditors and other authorized representatives such
reasonable information as such
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person from time to time may request with respect to the Business and the
transactions contemplated by this Agreement, and shall permit Buyer and its
representatives access, upon reasonable notice, to the properties, books and
records of the Business, as Buyer from time to time may request. Seller shall
also provide Buyer with access to its employees. Seller shall fully cooperate
with Buyer if Buyer decides to audit Seller's historic financial performance
(including but not limited to making available its records, personnel and
outside accountants) in connection with Buyer's contemplated Bond Offering
(defined below), all provided, however, that neither the taking of the audit or
the results of the audit shall in any way affect this Agreement or Buyer's
obligations to close the transactions contemplated herein and further provided
that Buyer shall reimburse Seller for any and all direct costs and expenses paid
to third parties (including without limitation, professional fees) incurred by
Seller in connection therewith. No investigation by Buyer pursuant to this
Section shall effect, negate or constitute a waiver of any representation or
warranty given by Seller hereunder.
(b) Buyer further acknowledges that any and all information obtained
about Seller, the Business and the Assets, shall be deemed to be confidential
and proprietary until the Closing and shall be subject to, and shall come within
the scope of, any and all Confidentiality Agreements previously executed by
Buyer. Notwithstanding anything herein to the contrary, from time to time, Buyer
shall have the right to contact Seller's employees, including without
limitation, management employees identified on Schedule 6.03 to investigate
Seller, the Business and the Assets. Furthermore, Buyer shall have the right to
describe and disclose the transactions contemplated herein and the Sellers
business (including sales, profit and other summary financial data) in any
memorandum and/or prospectus in connection with an offering of debt by Buyer
(the "Bond Offering"), all provided, however, that Seller shall have the right
to review and approve such description (which approval shall not be unreasonably
withheld). In addition, in connection with the Bond Offering, Buyer shall have
the right to disclose financial information concerning the Seller, to rating
agencies, underwriters, accountants, attorneys and government agencies on a
confidential and need to know basis.
(c) The Buyer agrees that in the event the transactions contemplated
herein are not consummated as a result of Buyer's breach of this Agreement, it
will not for a period of one (1) year from and after the date the transactions
and this Agreement are terminated: (i) either directly or indirectly, for itself
or any third party, solicit, induce, recruit or cause another person in the
employ of the Seller to terminate his/her employment for the purpose of joining,
associating or becoming employed by the Buyer (or any of its affiliated
entities) or with any business or activity which is in competition with any
business or activity engaged in by the Seller; or (ii) directly or indirectly,
for itself or for or through any subsidiary, affiliated or related entity,
establish or acquire distribution centers for the sale of products sold by
Seller, within the states of Connecticut (exclusive of Buyer's existing branch
in Strafford, Connecticut), Massachusetts, New Hampshire and Rhode Island, and
in the following counties within the state of New York: Rockland, Westchester,
Putnam, Orange, Dutchess, Ulster, Sullivan, Columbia, Greene, Delaware, Broome,
Tioga, Chemung, Rensselaer, Albany, Schoharie, Schenectady, Otsego, Chenango,
Cortland, Tompkins, Schuyler, Madison, Onandaga, Cayuga, Seneca, Yates, Ontario,
Monroe, Wayne, Fulton, Montgomery, Saratoga, Washington, Warren, Hamilton,
Herkimer, Oneida, Oswego, Jefferson, Lewis, St. Lawrence, Franklin, Clinton and
Essex.
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(d) In the event the restrictions on Buyer set forth in paragraph (c)
of this Article 6.03 become operative, Seller agrees that it will not for a
period of one (1) year from and after the date the transactions and this
Agreement are terminated, directly or indirectly, for itself or for or through
any subsidiary, affiliated or related entity, establish or acquire distribution
centers for the sale of products sold by Seller, within the county of Monroe,
State of New York.
6.04. Notices of Certain Events. (a) Between the date of this Agreement
and the Closing Date, Seller will promptly notify Buyer in writing if Seller
becomes aware of:
(i) any notice or other communication alleging that the consent of
any person or governmental or regulatory agency or authority is or may be
required in connection with the transactions contemplated by this Agreement;
(ii) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions contemplated
by this Agreement;
(iii) any actions, suits, claims, investigations or proceedings
commenced or, to the best of its knowledge threatened against, relating to or
involving or otherwise affecting Seller or the Business or the Assets that, if
pending on the date of this Agreement, would have been required to have been
disclosed pursuant to Article 4.05 or that relate to the consummation of the
transactions contemplated by this Agreement; and
(iv) any fact or condition that causes or constitutes a breach of
any of the representations and warranties set forth in Article IV hereof as of
the date of this Agreement, or if Seller becomes aware of the occurrence after
the date of this Agreement of any fact or condition that would (except as
expressly contemplated by this Agreement) cause or constitute a breach of any
such representation or warranty had such representation or warranty been made as
of the time of occurrence or discovery of such fact or condition.
(b) Should any such fact or condition require any change in the Schedules
annexed hereto if this Agreement was dated the date of the occurrence or
discovery of any such fact or condition, Seller will promptly deliver to Buyer a
supplement to the Schedule(s) specifying such change. During the same period,
Seller will promptly notify Buyer of the occurrence of any breach of any
covenant in this Article VI, or of the occurrence of any event that may make the
satisfaction of the conditions in Article IX impossible or unlikely.
6.05. Best Efforts. Between the date of this Agreement and the Closing
Date, Seller will use its best efforts to cause the conditions in Article IX
hereof to be satisfied and to cause the consummation of the transactions
contemplated hereby in accordance with the terms and conditions hereof.
6.06. Insurance. Schedule 6.06 of this Agreement contains a list of all
insurance policies and fidelity bonds covering the Assets, the operations of the
Business and its employees. Seller shall maintain all such insurance policies in
full force and effect through the Closing or until the termination of this
Agreement as provided in Article XIII.
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6.07. Trade Payables. Seller shall deliver to Buyer a schedule of all of
the Assumed Trade Payables, including all service, interest or other charges
thereon as of the Date of Closing.
6.08. Exclusive Dealing. From the date hereof until the earlier of the
date of termination of this Agreement or May 27, 1997, Seller shall deal
exclusively with Buyer regarding the sale of the Assets (other than in the
ordinary course) and/or the Business and Seller shall not contact, solicit,
negotiate or contract with any third party, or entertain any offer or request
for information regarding the sale of the Assets (other than in the ordinary
course) or the Business.
6.09. Licenses, Permits, Required Third Party Consents. Prior to Closing,
Seller will obtain all material licenses, permits and Required Third Party
Consents.
ARTICLE VII
COVENANTS OF BUYER
Buyer hereby covenants and agrees with Seller as follows:
7.01. Cooperation and Assumption. Subject to the fulfillment of the
conditions set forth in Article IX, Buyer will endeavor to cause the
consummation of the transactions contemplated hereby in accordance with the
terms and conditions hereof.
7.02. Intentionally Deleted.
7.03. Intentionally Deleted.
7.04. Books and Records; Personnel. For a period of six (6) years after
the Closing Date (or such longer period as may be required by any governmental
agency or ongoing litigation or in connection with any administrative
proceeding):
(a) Buyer shall not dispose of or destroy any of the business
records and files of the Business transferred from the Seller to the Buyer; and
(b) Buyer shall allow Seller and its representatives access to all
business records and files of the Business which are transferred to Buyer and
which are necessary for Seller to wind-up its business or prepare tax or other
government filing related thereto, during regular business hours and upon
reasonable notice at Buyer's principal places of business or at any location
where such records are stored, and Seller shall have the right, at its own
expense, to make copies of any such records and files.
7.05. Notices of Certain Events. Buyer shall promptly notify Seller of:
(a) any notices or other communication alleging that the consent of
any person or any governmental or regulatory agency or authority is or may be
required in connection
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with the transactions contemplated by this Agreement, other than in respect of
any consent identified as so required in a Schedule to this Agreement;
(b) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions contemplated
by this Agreement; and
(c) any actions, suits, claims, investigations or proceedings
commenced or, to the best of its knowledge threatened against, relating to or
involving or otherwise affecting Buyer that, if pending on the date of this
Agreement, would have been required to have been disclosed pursuant to Article
5.05.
7.06. Hiring of Employees. Buyer shall have no obligation to offer
employment to or hire any of Seller's employees; provided, however, in the event
Buyer does not offer employment to that number of Sellers current employees
sufficient to assure that the number of Seller's current employees who are not
offered employment by Buyer does not exceed forty-five (45), then Buyer shall be
responsible for all state and federal plant closing notices and any associated
liability in the event such notices are not given.
ARTICLE VIII
POST-CLOSING COVENANTS OF SELLER
8.01. Non-Competition. (a) Seller agrees that for the periods stated
below, neither Seller, nor its shareholders, David Trachten and Fred Gross
(together the "Shareholders"), nor Morris Trachten (the Shareholders and Morris
Trachten being collectively referred to as the "Principals"), shall engage in
any capacity either directly or indirectly, including, without limitation, as a
principal or agent or for its own account or solely or jointly with others, or
as a stockholder in any corporation, as a member of any limited liability
company, or as a partner in any partnership or joint venture, or as a consultant
or independent contractor, employee, salesperson or manager on behalf of others,
within the states of Connecticut, Massachusetts, New Hampshire, New York or
Rhode Island (together the "Non-Compete Area"),
(i) in the distribution of roofing, siding and related building
materials such as those products presently distributed by the Business for a
period of fifteen (1 5) full years from the Closing Date (the "15 Year Non-
Compete Period"); during the 15 Year Non-Compete Period, Seller and its
Shareholders shall not solicit sales in the Non-Compete Area for a business
which is in competition with the distribution of the types of products that
Seller or any of the Principals were distributing prior to Closing as identified
in this paragraph (a)(i); and
(ii) in the distribution of windows and doors for a period of five
(5) full years from the Closing Date (the "5 Year Non-Compete Period"); during
the 5 Year Non-Compete Period, Seller and the Principals shall not solicit sales
in the Non-Compete Area for a business which is in competition with the
distribution of the types of window products that Seller or any of the
Principals were distributing prior to Closing as identified in this paragraph
(a)(ii);
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provided that nothing herein shall (i) prohibit the acquisition or ownership of
up to 1% of the outstanding voting securities of any corporation or other entity
which is publicly owned; or (ii) prohibit Seller and its Principals from
engaging as a manufacturer, contractor, or lumber yard representative so long as
such businesses do not distribute roofing, windows, siding, doors and related
building materials in competition with the types of distribution channels used
by Seller or any of its Principals prior to Closing.
During the 5 Year Non-Compete Period, neither Seller nor any of the
Principals shall solicit or employ any individual employed by Buyer at any time
during the 5 Year Non-Compete Period; thereafter, during the balance of the 15
Year Non-Compete Period, neither Seller nor any of the Principals shall solicit
any individual while in the employ of Buyer. Seller and Buyer hereby agree that
the consideration paid by Buyer under this Agreement is fair and adequate for
the obligations of Seller and the Principals under this Article 8.01(a). Seller
shall cause the Principals each to execute a covenant not to compete with Buyer
in the form of the document attached hereto as Exhibit L and incorporated herein
by this reference ("Principal's Covenant"). The obligations of the Principals
under this Agreement shall be independent of and in addition to their respective
obligations under any other agreement, including without limitation, the VAP
Asset Purchase Agreement and any consulting or employment agreement.
(b) If any provision contained in this Article shall for any reason be
held invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provisions of this
Article, but this Article shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein. It is the intention of
the parties that if any of the restrictions or covenants contained herein is
held to cover a geographic area or to be for a length of time which is not
permitted by applicable law, or in any way construed to be too broad or to any
extent invalid, such provision shall not be construed to be null, void and of no
effect, but to the extent such provision would be valid or enforceable under
applicable law, a court of competent jurisdiction shall construe and interpret
or reform this Article to provide for a covenant having the maximum enforceable
geographic area, time period and other provisions (not greater than those
contained herein) as shall be valid and enforceable under such applicable law.
Seller acknowledges that Buyer would be irreparably harmed by any breach of this
Article and that there would be no adequate remedy at law or in damages to
compensate Buyer for any such breach. Seller agrees that Buyer shall be entitled
to injunctive relief requiring specific performance by Seller of this Section,
and Seller consents to the entry thereof, without the necessity of proving
actual damages, or posting bond or other security. Nothing herein shall be
deemed an election or remedies or preclude Buyer from seeking any and all other
remedies, both legal and equitable, for a breach of this Article 8.01.
8.02. Further Assurances and Power of Attorney.
(a) Following the Closing, Seller will execute and deliver such
other documents, certificates, agreements and other writings and take such other
actions as may be necessary or desirable in order to consummate or implement the
transactions contemplated by or to fulfill the terms and conditions of this
Agreement and to vest in Buyer good title to the Assets.
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(b) At the request of Buyer on a case by case basis, Seller shall
execute and deliver instruments sufficient to constitute and appoint, effective
as of the Closing Date, Buyer and its successors and assigns as the true and
lawful attorney of Seller with full power of substitution in the name of Buyer
or in the name of Seller, but for the benefit of Buyer (i) to collect for the
account of Buyer any Assets specified in Buyer's request, and (ii) to institute
and prosecute all proceedings which Buyer may in its sole discretion deem proper
in order to assert or enforce any right, title or interest in, to or under such
Assets, and to defend or compromise any and all actions, suits or proceedings in
respect of such Assets or the Assumed Liabilities. Buyer shall be entitled to
retain for its own account any amounts collected pursuant to the foregoing
powers, including any amounts payable as interest in respect thereof.
8.03. Accounts Receivable Collection Guaranty. Seller guarantees Buyer's
collection of the purchased Accounts Receivable and the accounts receivable
purchased by Buyer from VAP under the VAP Agreement ("VAP Accounts Receivable"),
provided, however, that the total aggregate liability of Seller shall be limited
to One Million and 00/100 Dollars ($1,000,000.00) plus (a) any reductions in the
Account Receivables and the VAP Accounts Receivable due to product warranty
claims, product returns, prompt pay discounts and related credits and offset all
in accordance with Sellers and/or VAP's standard policies (the "Maximum Accounts
Receivable Guaranty").
8.04. Post February 28, 1997 Accounts Receivable Collection Guaranty. Any
accounts receivable with respect to sales of products by Seller and/or VAP made
after February 28, 1997 which should be, prior to Closing, in the ordinary
course of business and in accordance with Seller's (or VAP'S, as the case may
be) standard credit/collection practices, written off Sellers (or VAP'S) books
as bad debt or turned over by Seller (or VAP) for collection by an attorney or
collection agency are hereinafter referred to as the "Post February 28 Write-
offs"). The Maximum Accounts Receivable Guaranty shall be increased on the
Closing Date by the amount of Post February 28 Write-Offs in excess of Seventy
Five Thousand Dollars ($75,000.00).
8.05. Accounts Receivable Interest Payment Collection Guaranty. Seller
guarantees Buyer's collection of fifty percent (50%) of the Accounts Receivable
Interest Payment (the "Accounts Receivable Interest Payment Guaranty").
8.06. Termination of Seller's Employees. At Closing, Seller shall
terminate the employment of Seller's employees set forth on the list delivered
pursuant to Article 3.03(h).
8.07. Transition of the Business to Buyer. For a period of sixty (60) days
after the Closing, Seller shall cause the Principals to each use reasonable
efforts to assist Buyer in transition of operation of the Business by Buyer,
including without limitation, contacting customers of the Business for the
purpose of encouraging the customers' continued patronage of the Business after
the Closing.
8.08. Post-Closing Access and Audit. For a period of one (1) year after
the Closing, upon Buyer's request, Seller shall provide access and cooperate
with Buyer with respect to a
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post-closing audit by Buyer of Seller's historic financial performance in
connection with Buyers Bond Offering and related securities regulations which
may require an audit to permit further acquisitions by Buyer of other
businesses, provided that Buyer shall reimburse Seller for any and all direct
costs and expenses paid to third parties (including without limitation,
professional fees) incurred by Seller in connection therewith. Any such access
shall be subject to the limitations set forth in Article 6.03(b).
ARTICLE VIII(A)
POST-CLOSING COVENANTS OF BUYER
8A.01. COD-Plus Accounts/Discount-Rebate Applied Accounts. For a period of
two (2) years after the Closing, Buyer will maintain the past practices of
Seller with respect to "COD-Plus Accounts" (accounts where the account debtor
has a past due balance and makes current purchases on a cash-on-delivery basis
plus an additional amount to be applied to past due balance) and Discount-Rebate
Applied Accounts (accounts where the account debtor has a past due balance and
discounts and/or rebates to which the account debtor is entitled based on
historic practices disclosed to Buyer on Schedule 4.23(B), are applied to the
past due balance). All payments received with respect to COD-Plus Account shall
be applied first to the current payment and then to the oldest item in the past
due account.
8A.02. Accounts Receivable Reporting, Collection and Return.
(a) Buyer will provide reports to Seller every thirty (30) days
regarding the status of the Accounts Receivable and VAP Accounts Receivable.
These reports will include an aged trial balance. Buyer will provide other
information reasonably requested by Seller.
(b) Annexed hereto as Exhibit M is an outline of Buyer's standard
collection procedures (The Collection Procedures"). Buyer agrees to diligently
and in good faith pursue the collection of all Accounts Receivable and VAP
Accounts Receivable in accordance with the Collection Procedures. Anything in
the Collection Procedures to the contrary notwithstanding, Buyer may but shall
have no obligation to commence legal action to collect any Accounts Receivable
or VAP Accounts Receivable. Any and all expenses incurred by Buyer in connection
therewith, including without limitation, attorneys fees, filing fees and costs
of suit, shall be the sole responsibility of Buyer, provided however, that any
recoveries with respect to any Accounts Receivable or VAP Accounts Receivable
shall apply first to all of Buyer's direct out-of-pocket expenses (including
reasonable attorneys' fees), then to legally recoverable interest charges and
last to the principal balance of the debt. In addition,
(i) unless payment is designated as payment for a specific account
as to which there is no accrued interest and/or service charges, the payment
Will be applied first to post-Closing accrued interest and/or service charges,
then to Seller's pre-Closing interest and/or service charges and then to the
principal balance of the debt; and
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(ii) any interest which accrues post-Closing shall not reduce the
Maximum Accounts Receivable Guaranty, all provided, however, that nothing shall
prevent Buyer from asserting or pursuing a claim for such interest against the
account debtor.
(c) Sixty (60) days after the Closing, Seller shall have the right
in its sole discretion at any time to assume from Buyer any Accounts Receivable
or VAP Accounts Receivable which Buyer does not pursue (either by the
commencement of legal action or otherwise) in accordance with the Collection
Procedures as provided in paragraph (b) of this Article 8A.02.
(d) If Buyer wishes to compromise or accept less than full payment
of any Accounts Receivable or VAP Accounts Receivable, Buyer shall notify Seller
and Seller shall within five (5) business days of receipt of such notice advise
Buyer if (i) the proposed compromise or settlement is acceptable to Seller; or
(ii) if Seller wishes to assume the receivable from Buyer.
(e) After twenty four (24) months following the Closing, Buyer may
return any uncollected Accounts Receivable or VAP Accounts Receivable without
the consent of Seller or VAP to the extent of the then current Accounts
Receivable Guaranty Balance.
(f) The Maximum Accounts Receivable Guaranty shall be reduced by and
to the extent of the amounts paid by Seller to Buyer (or at Buyer's option
offset against the Note) pursuant to this Article 8A.02 as follows:
(i) the amount of any Accounts Receivable or VAP Accounts Receivable
which Seller assumes from Buyer pursuant to paragraphs (c) and (e) on a dollar-
for-dollar basis;
(ii) the difference between the face amount of any Accounts
Receivable or VAP Accounts Receivable compromised pursuant to paragraph (d)(i)
and the gross amount paid to Buyer therefor;
(iii) the difference between the face amount of any Accounts
Receivable or VAP Accounts Receivable which Buyer presents to Seller for
compromise and Seller elects to assume pursuant to paragraph (d)(ii) and the
gross amount of the proposed compromised payment.
8A.03. Payment of Salesmen Bonuses. All Salesmen Bonuses shall be paid by
Buyer no more than ten (10) business days after the Closing, provided, however,
that nothing herein shall require Buyer to hire any of Seller's salesmen.
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ARTICLE IX
CONDITIONS TO BUYER'S OBLIGATIONS
The obligations of Buyer to consummate the purchase of the Assets under
this Agreement shall be subject to the satisfaction (or written waiver by Buyer)
on or prior to the Closing Date of all of the following conditions:
9.01. Representations, Warranties and Covenants of Seller. Seller shall
have complied in all material respects with all of its agreements,
representations, warranties and covenants contained herein to be performed at or
prior to the Closing Date (including the delivery to Buyer of all schedules,
exhibits and documents referenced in this Agreement or necessary to the
consummation of the transactions contemplated hereby), and all the
representations and warranties of Seller contained herein must have been
accurate in all material respects as of the date of this Agreement, and must be
accurate in all material respects on and as of the Closing Date with the same
effect as though made on and as of the Closing Date, except (a) as otherwise
expressly set forth herein, and (b) to the extent that such representations and
warranties were made as of a specified date (and as to such representations and
warranties the same shall continue on the Closing Date to have been true as of
the specified date). Buyer shall have received a certificate of Seller dated as
of the Closing Date and signed by an officer of Seller, certifying as to the
fulfillment of the conditions set forth in this Article 9.01.
9.02. No Prohibition. No federal or state court, arbitrator or
governmental body, agency or official shall have issued any order, and there
shall not be any federal or state statute, rule or regulation, restraining or
prohibiting the consummation of the Closing or the effective operation by Buyer
of the Business after the Closing Date, and no proceeding challenging this
Agreement or the transactions contemplated hereby or seeking to prohibit, alter
or prevent or materially delay the Closing shall have been threatened or
instituted by any federal or state governmental body, agency or official or any
third party.
9.03. Deliveries. Seller shall have delivered or caused to be delivered to
Buyer of all the items set forth in Article 3.02 hereof.
9.04. Leases. Seller shall have obtained the consents of each lessor to
Buyer's assumption of Seller's rights and obligations under each lease of
personal property or real property used in connection with the Business for
which such lessor consent is required pursuant to the terms of such lease. In
each consent, the lessor shall state certain factual matters, including, but not
limited to, whether Seller is in default, rent, term, and security deposit
amounts, if any. Lessor shall also agree that the conditions observed at the
premises are acceptable to the lessor or lessor will look solely to Seller for
any required repairs. The form and substance of the consent shall otherwise be-
acceptable to Buyer.
9.05. Required Consents. All Required Consents, in form and substance
reasonably satisfactory to Buyer, shall have been obtained, and no such Required
Consent shall have been revoked, conditioned or materially impaired.
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9.06. No Material Adverse Effect. From the date of this Agreement to the
Closing Date, no event or occurrence shall have occurred which has a Material
Adverse Effect.
9.07. 1997 Receivables. Buyer has, prior to April 11, 1997, notified
Seller of its objections to the 1997 Receivables for the reasons set forth in
Article 7.02(b) and the parties have not resolved such objections.
9.08. Physical Inventory. The physical inventory provided for in Article
2.04 shall have been taken and Buyer and Seller shall have agreed upon the value
thereof in accordance with the provisions set forth in Article 2.04.
9.09. Real Estate Transactions. Contemporaneously with the Closing,
Seller's affiliates shall enter into leases and contracts of sale with respect
to the Trachten Real Estate Properties.
9.10. VAP Asset Purchase. VAP shall simultaneously close the purchase and
sale of certain VAP assets located at VAP's Berlin, Connecticut center, pursuant
to the Asset Purchase Agreement between Buyer and VAP of even date ("VAP
Agreement").
9.11. VAP Supply Agreement. On or before the Closing, VAP shall enter into
a supply contract with Buyer in the form annexed hereto as Exhibit N (the
"Supply Agreement").
9.12. HSR Approval. Seller and Buyer shall have received all necessary
authorizations, consents and approvals of governmental agencies referred to in
Article 1.06, or all applicable waiting periods (and any extensions thereof
under HSR shall have expired or otherwise have been terminated.
9.13. Employment Matters and Contracts. A consulting agreement with David
Trachten in the form of Exhibit 0 annexed hereto and made a part hereof is
executed and delivered at Closing.
ARTICLE X
CONDITIONS TO SELLER'S OBLIGATIONS
The obligations of Seller to consummate the sale of the Assets under this
Agreement shall be subject to the satisfaction (or written waiver by Seller) on
or prior to the Closing Date of all of the following conditions:
10.01. Representations, Warranties and Covenants of Buyer. Buyer shall
have complied in all material respects with all of its agreements,
representations, warranties and covenants contained herein to be performed at or
prior to the Closing Date, and all of the representations and warranties of
Buyer contained herein must have been accurate in all material respects as of
the date of this Agreement, and must be accurate in all material respects on and
as of the Closing Date with the same effect as though made on and as of the
Closing Date except (a)
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as otherwise contemplated hereby; and (b) to the extent that such
representations and warranties were made as of a specified date (and as to such
representations and warranties the same shall continue on the Closing Date to
have been true as of the specified date). Seller shall have received a
certificate of Buyer, dated as of the Closing Date and signed by an officer of
Buyer, certifying as to the fulfillment of the conditions set forth in this
Article 10.01.
10.02. No Prohibition. No federal or state court, arbitrator or
governmental body, agency or official shall have issued any order, and there
shall not be any federal or state statute, rule or regulation, restraining or
prohibiting the consummation of the Closing, and no proceeding challenging this
Agreement or the transactions contemplated hereby or seeking to prohibit, alter
or prevent or materially delay the Closing shall have been threatened or
instituted by any federal or state governmental body, agency or official or any
third party.
10.03. Deliveries. Buyer shall have delivered or caused to be delivered to
Seller of the items set forth in Article 3.03 hereof.
10.04. Real Estate Acquisitions. Contemporaneously with the purchase of
the Assets, Buyer and its affiliates shall enter into leases and contracts of
sale with respect to the Trachten Real Estate Properties.
10.05. VAP Supply Agreement. Buyer shall execute and deliver the Supply
Agreement.
ARTICLE XI
INTENTIONALLY DELETED
ARTICLE XII
INDEMNIFICATION AND RELATED MATTERS
12.01. Indemnification by Seller. Subject to the provisions of this
Article XII, Seller agrees to indemnify and hold Buyer harmless from and against
any losses, including without limitation, any claims, actions, demands, losses,
costs, expenses, liabilities (joint or several), penalties, taxes, damages, and
reasonable attorneys' fees incurred in connection therewith ("Losses"):
(a) Any and all Losses resulting from or arising out of any
misrepresentation or breach of warranty made by Seller in this Agreement, the
certificate delivered pursuant to Section 9.01 hereof, or any other certificate
or document delivered by Seller pursuant to or in connection with this
Agreement;
(b) Any and all Losses resulting from or arising out of the
failure of Seller to comply with any of the covenants, agreements or other
obligations contained in this Agreement which are required to be performed by
Seller;
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(c) Any and all Losses resulting from or arising out of Excluded
Liabilities;
(d) Any and all Losses of any nature whatsoever resulting from or
arising out of any violation by Seller of any federal, state or other applicable
laws (including ERISA and the Code) relating to labor and employment of persons
employed by Seller on or before the Closing Date in connection with the
Business;
(e) Any and all Losses arising out of or relating to the waiver by
Seller and Buyer of compliance with any applicable bulk sale laws or
regulations, except with respect to any obligation which is an Assumed
Liability;
(f) Any and all Losses resulting from or arising directly or
indirectly from any agreements or commitments, whether oral or written, between
the Seller and any employee, independent contractor or other person who has
provided services on before the Closing Date to the Seller, whether now or
hereafter existing;
(g) Any and all Losses resulting from or arising out of the failure
of the Seller to pay any taxes with respect to the Business, the Assets or the
Employees arising or accruing on or prior to the Closing;
(h) Any and all Losses resulting from or arising out of the Scheduled
Litigation; and
(i) Any and all Losses resulting from or arising out of any of
Seller's pension or retirement plans.
12.02. Indemnification by Buyer. Subject to the provisions of this Article
Xii, Buyer agrees to indemnify and hold Seller harmless from and against any
Losses, as defined in Article 12.01, with respect to:
(a) Any and all Losses resulting from or arising out of any
misrepresentation or breach of warranty made by Buyer in this Agreement;
(b) Any and all Losses resulting from or arising out of the failure
of Buyer to comply with any of the covenants, agreements or other obligations
contained in this Agreement which are required to be performed by Buyer;
(c) Any and all Losses resulting from or arising out of Assumed
Liabilities after the Closing.
(d) Any and all Losses resulting from and arising on or after the
Closing solely out of Buyer's non-assumption of Seller's collective bargaining
agreements or its failure to reach agreements with the respective collective
bargaining units.
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12.03. Determination of Damages and Related Matters. In calculating any
amounts payable to Buyer pursuant to Article 12.01 or payable to Seller pursuant
to Article 12.02, any diminution of value to the Business shall be deemed
damages suffered by Buyer, and Seller or Buyer, as the case may be, shall
receive credit for (i) any actual reduction in tax liability as a result of the
facts giving rise to the claim for indemnification, and (ii) any insurance
recoveries actually received by the party to be indemnified. The right to
indemnification, reimbursement or other remedy based on a breach of any
representations, warranties, covenants, and obligations hereunder will not be
affected by any investigation conducted with respect to, or any knowledge
acquired (or capable of being acquired) about the accuracy or inaccuracy of, or
compliance with, any such representation, warranty, covenant, or obligation.
12.04. Survival of Representations, Warranties and Covenants and
Obligations. The representations, warranties, covenants and obligations
contained in this Agreement and any other certificate, schedule or document
delivered pursuant to this Agreement will survive the Closing Date. Neither
Seller nor Buyer will have any liability for indemnification under this Article
XII unless notice of a claim for indemnity or notice of facts as to which an
indemnifiable loss is expected to be incurred shall have been given on a date
which is on or before five years from the Closing Date, except for a claim
relating to or with respect to the representations, warranties, covenants,
agreements and obligations contained in Article VIII, Articles 1.05, 4.01,
4.02(b), 4.02(c), 4.03 or 4.11 which may be made at any time on or before the
date which is ten years from the Closing Date.
12.05. Notice of Indemnification. In the event any legal proceeding shall
be threatened or instituted or any claim or demand shall be asserted by any
person in respect of which payment may be sought by one person in respect of
which payment may be sought by one party hereto from the other party under the
provisions of this Article XII, the party seeking indemnification (the
"Indemnitee") shall promptly cause written notice of the assertion of any such
claim of which it has knowledge which is covered by this indemnity to be
forwarded to the other party (the "Indemnitor"); provided that the failure to
give such notice shall not affect the Indemnitee's rights hereunder except to
the extent the lndemnitor is materially prejudiced by such failure. Any notice
of a claim by reason of any of the representations, warranties or covenants
contained in this Agreement shall state specifically the representation,
warranty or covenant with respect to which the claim is made, the facts giving
rise to an alleged basis for the claim, and the amount of the liability asserted
against the Indemnitor by reason of the claim.
12.06. Indemnification Procedure for Third Party Claims. Except as
otherwise provided in Article XII hereof, in the event of the initiation of any
legal proceeding against an Indemnitee by a third party, the Indemnitor shall
have the absolute right after the receipt of notice, at its option and at its
own expense, to be represented by counsel of its choice, and to defend the
Indemnitee against, negotiate, settle or otherwise deal with any proceeding,
claim, or demand which relates to any Losses indemnified against hereunder;
provided, however, that the Indemnitee may participate in any such proceeding
with counsel of its choice and at its expense and the Indemnitor shall not
settle any such proceeding, claim or demand unless lndemnitee is fully released
without any admission of liability. The parties hereto agree to cooperate fully
with each other in connection with the defense, negotiation or settlement of any
such legal proceeding,
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claim or demand. To the extent the Indemnitor elects not to defend such
proceeding, claims or demand, and the Indemnitee defends against or otherwise
deals with any such proceeding, claim-or demand, the Indemnitee may retain
counsel, at the expense of the Indemnitor, and control the defense of such
proceeding. The Indemnitee may not settle any such proceeding without the
consent of the Indemnitor, which shall not be unreasonably withheld or delayed.
ARTICLE XIII
TERMINATION PRIOR TO CLOSING
13.01. Termination. This Agreement may be terminated at any time prior
to the Closing:
(a) by either Buyer or Seller if a material breach of any provision of
this Agreement has been committed by the other party and such breach has not
been waived in writing by the non-breaching party;
(b) (i) by Buyer if any of the conditions of Article IX has not been
satisfied as of the Closing Date or if satisfaction of such condition is or
becomes impossible (other than through the failure of Buyer to comply with its
obligations under this Agreement) and Buyer has not waived such condition on or
before the Closing Date;
(ii) by Seller if any of the conditions in Article X (including but
not limited to the conditions set forth in Article 10.04 or 10.05) have not been
satisfied as of the Closing Date or if satisfaction of such a condition is or
becomes impossible (other than through the failure of Seller to comply with its
obligations under this Agreement) and Seller has not waived such condition on or
before the Closing Date;
(c) by the mutual written consent of Buyer and Seller.
13.02. Effect of Termination. Each party's right of termination under
Article 13.01 is in addition to any other rights it may have under this
Agreement or otherwise, and the exercise of a right of termination will not be
an election of remedies. If this Agreement is terminated pursuant to Article
13.01, all further obligations of the parties under this Agreement will
terminate, except that the obligations in Articles 14.07 and 14.08 and Buyer's
obligations of confidentiality set forth in Article 6.03 (c) will survive;
provided, however, that if this Agreement is terminated by a party because of
the breach of the Agreement by the other party or because one or more of the
conditions to the terminating party's obligations under this Agreement is -not
satisfied as a result of the other party's breach or default with respect to its
obligations under this Agreement, the terminating party's rights and remedies
shall be limited to those set forth in the Escrow Agreement.
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ARTICLE XIV
MISCELLANEOUS
14.01. Entire Agreement. This Agreement and the agreements contemplated
hereby constitute the sole understanding of the parties with respect to the
matters provided for herein and supersede any previous agreements and
understandings between the parties with respect to the subject matter hereof. No
amendment, modification or alteration of the terms or provisions of this
Agreement shall be binding unless the same shall be in writing and duly executed
by the parties hereto.
14.02. Bulk Sales Laws. Buyer and Seller each hereby waive compliance by
Seller with the provisions of the "bulk sales", "bulk transfer" or similar laws
of any state of the United States. Seller agrees to indemnify and hold Buyer
harmless against any and all Losses incurred by Buyer or any of its affiliates
as a result of any failure to comply with any such "bulk sales", "bulk transfer"
or similar laws. Seller hereby agrees to fully comply with and cooperate with
Buyer concerning filing any notices or other information with the States of
Connecticut, Massachusetts, New Hampshire, New York and Rhode Island, prior to
the Closing in accordance with applicable statutes and regulations concerning
bulk sales tax liabilities of Seller, including compliance with any tax escrow
which may be required by the appropriate agency.
14.03. Successors and Assigns. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and permitted assigns of the parties hereto. This Agreement may not
be assigned by Buyer without the prior written consent of the Seller.
14.04. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
and all of which shall constitute the same instrument. This Agreement shall
become effective when each party hereto shall have received a counterpart hereof
signed by the other party hereto.
14.05. Articles and Section Headings; Construction. The headings of
Articles and Sections in this Agreement are provided for convenience only and
will not affect its construction or interpretation. All references to
"Articles" or "Sections" refer to the corresponding Articles or Sections of this
Agreement. All words used in this Agreement will be construed to be of such
gender or number as the circumstances require. Unless otherwise expressly
provided, the word "including" does not limit the preceding words or terms.
14.06. Amendments; No Waivers. (a) Any provision of this Agreement may
be amended or waived prior to the Closing Date if, and only if, such amendment
or waiver is in writing and signed, in the case of an amendment, by Buyer and
Seller, or in the case of a waiver, by the party against whom the waiver is to
be effective.
(b) No failure or delay by either party in exercising any right, power
or privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise
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thereof preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. The rights and remedies herein provided shall
be cumulative and not exclusive of any rights or remedies provided by applicable
law or in equity.
14.07. Broker's Fees. Except as disclosed in Schedule 14.07, each of the
parties hereto represents and warrants to the other that it has had no dealings
with any broker or finder in connection with the transactions contemplated by
this Agreement. Seller agrees to indemnify and hold Buyer harmless from and
against any and all liability to which Buyer or the Business may be subjected by
reason of any broker's or finder's fee with respect to the transactions
contemplated hereby to the extent such fee is attributable to any action
undertaken by or on behalf of Seller or is made by any person claiming by,
through or under Seller. Buyer agrees to indemnify and hold Seller harmless from
and against any and all liability to which Seller may be subjected by reason of
any broker's or finder's fee with respect to the transactions contemplated
hereby to the extent such fee is attributable to any action undertaken by or on
behalf of Buyer or is made by any person claiming by, through or under Buyer.
14.08. Expenses. Except as otherwise specifically provided for in this
Agreement, Seller and Buyer shall each pay all costs and expenses incurred by it
or on its behalf in connection with this Agreement and the transactions
contemplated hereby, including fees and expenses of its own financial
consultants, accountants and counsel.
14.09. Notices. Any notice, request, instruction or other document to be
given hereunder by any party hereto to any other party shall be in writing and
delivered personally or sent by registered or certified mail, postage prepaid,
if to Seller to:
David Trachten
Viking Building Products, Inc.
33-39 John Street
New Britain, CT 06051
Facsimile: (203) 827-1754
with a copy to:
Stuart Kudman, Esq.
Kudman, Trachten & Kessler
The Empire State Building
350 Fifth Avenue
Suite 1423
New York, NY 10118-1487
Facsimile: (212) 868-0013
if to Buyer to:
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Kenneth A. Hendricks, President
American Builders & Contractors Supply Co., Inc.
One ABC Parkway
Beloit, WI 53511
Facsimile: (608) 362-6529
with a copy to:
Karl W. Leo, Esq.
Leo and Associates
200 Randolph Avenue
Suite 200
Huntsville, AL 35801
Facsimile: (205) 539-6000
or at such other address for a party as shall be specified by like notice. Any
notice which is delivered personally in the manner provided herein shall be
deemed to have been duly given to the party to whom it is directed upon actual
receipt by such party (or its agent for notices hereunder). Any notice which is
addressed and mailed in the manner herein provided shall be deemed to have been
duly given to the party to which it is addressed at the close of business, local
time of the recipient, on the fifth (5th) business day after the day it is so
placed in the mail.
14.10. Governing Law. This Agreement shall be construed in accordance
with and governed by the laws of the State of New York applicable to agreements
made and to be performed in such jurisdiction. Any action to enforce, which
arises out of or in any way relates to, any of the provisions of this Agreement
or the Closing documents shall be brought and prosecuted in the Courts of the
State of New York or any federal court with jurisdiction in the State of New
York. Each party irrevocably: (i) submits to the exclusive jurisdiction of the
Courts of New York and any federal court with general jurisdiction in the State
of New York; and (ii) waives any objection which it may have at any time to the
laying of venue of any suit, action or proceeding ("Proceeding") brought in any
such court, waives any claim that such Proceedings have been brought in an
inconvenient forum and further waives the right to object, with respect to such
Proceedings, that such court does not have jurisdiction over such party. The
parties irrevocably consent to service of process given in the manner provided
for notices in Section 14.09. Nothing in this Agreement will affect the right of
any party to serve process in any other manner permitted by law.
14.11. Public Announcements. Neither Seller (nor any of its affiliates)
nor Buyer (nor any of its affiliates) shall make any public statements,
including any press releases, with respect to this Agreement and the
transactions contemplated hereby without the prior written consent of the other
party (which consent may not be unreasonably withheld), except as may be
required by law or pursuant to a listing agreement with a national securities
exchange.
14.12. Further Assurances. At any time or from time to time after the
Closing Date, either party shall, at the request of the other party and at such
other party's expense, execute and
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deliver any further instruments or documents and take all such further action as
such party reasonably may request in order to consummate and make effective the
sale contemplated by this Agreement.
14.13. Severability. If any provisions hereof shall be held by any court
of competent jurisdiction to be illegal, void or unenforceable, such provision
shall be of no force and effect, but the illegality or unenforceability shall
have no effect upon and shall not impair the enforceability of any other
provision of this Agreement.
14.14. Sales and Transfer Taxes. All applicable sales, transfer,
documentary, use filing and other similar taxes and fees (including smog
certificates due on vehicle transfer and excluding any income taxes of any kind)
that may be due or payable as a result of the purchase of the Assets by Buyer
from Seller contemplated in this Agreement, whether levied on the Seller or
Buyer, shall be borne by the Buyer. Ad valorem taxes on tangible personal
property for the year 1997 shall be prorated from the Date of Closing. Ad
valorem taxes on equipment and inventory for the year 1997 shall be prorated as
of the date of sale and a credit or deficit against the Purchase Price shall be
provided through the Date of Closing. In the event actual ad valorem taxes have
not been determined, the ad valorem taxes for 1997 shall be based upon the ad
valorem taxes for 1996, subject to future adjustments when actual ad valorem
taxes are determined.
14.15. Third Party Beneficiary. Nothing expressed or referred to in this
Agreement or any Schedule hereto is intended to or shall be construed to give
any person or entity other than the parties to this Agreement any legal or
equitable right, remedy or claim under or with respect to this Agreement, or any
provision hereof, it being the intention of the parties hereto that this
Agreement and all of its provisions and conditions are for the sole and
exclusive benefit of the parties to this Agreement, their successors and
permitted assigns, and for the benefit of no other person or entity.
14.16. Arbitration. Any controversies or claim arising out of or relating
to this Agreement, or the breach thereof, shall be settled by arbitration in New
York, New York, in accordance with the Commercial Arbitration Rules of the
American Arbitration Association, and judgment on the award rendered by the
arbitrator(s) may be entered in any court having jurisdiction thereof. In the
event of arbitration and/or litigation regarding this Agreement or the subject
matter hereof, the prevailing party shall be entitled to recover from the other
party its actual costs and expenses, including reasonable attorney's fees and
arbitration costs; provided, however, that nothing in this Article 14.16 shall
require any award of costs and expenses if there is no "prevailing" party in the
discretion of the adjudicator.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed as of the date first above written.
BUYER:
AMERICAN BUILDERS & CONTRACTORS
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SUPPLY CO., INC.
By:_______________________________
Jeff Stentz
SELLER:
------
VIKING BUILDING PRODUCTS, INC.
By:_______________________________
David Trachten, President
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EXHIBIT 10.3
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT is made as of May 1, 1997, between American Builders &
Contractors Supply Co., Inc., a Delaware corporation (the "Company"), and
Kenneth A. Hendricks ("Executive").
In consideration of the mutual covenants contained herein and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Employment. The Company shall employ Executive, and Executive hereby
accepts employment with the Company, upon the terms and conditions set forth in
this Agreement for the period beginning on the date hereof and ending as
provided in paragraph 5 hereof (the "Employment Period").
2. Position and Duties.
(a) During the Employment Period, Executive shall serve as the President
and Chief Executive Officer of the Company.
(b) Executive shall report to the Board, and Executive shall devote his
efforts to the business and affairs of the Company and its Subsidiaries.
Executive shall perform his duties and responsibilities to the best of his
abilities in a diligent, trustworthy, businesslike and efficient manner.
(c) For purposes of this Agreement, "Subsidiaries" shall mean any
corporation of which the securities having a majority of the voting power in
electing directors are, at the time of determination, owned by the Company,
directly or through one of more Subsidiaries.
3. Base Salary and Benefits.
(a) During the Employment Period, Executive's base salary shall be
$1,000,000.00 per annum (the "Base Salary"), which salary shall be payable in
regular installments in accordance with the Company's general payroll practices
and shall be subject to customary withholding. The Base Salary shall be subject
to annual increases to be effective beginning January 1 of each year of no more
than 20.0% of Executive's salary in the immediately preceding calendar year upon
the approval of the majority of the Company's Disinterested Directors. In
addition, during the Employment Period, Executive shall be entitled to
participate in all of the Company's employee benefit programs for which senior
executive employees of the Company and its Subsidiaries are generally eligible.
For purposes of this Agreement, "Disinterested Directors" shall mean the members
of the Company's board of directors who are not (i) full-time employees of the
Company or any of its Subsidiaries or (ii) related by blood or marriage to Mr.
Hendricks.
<PAGE>
(b) The Company shall reimburse Executive for all reasonable expenses
incurred by him in the course of performing his duties under this Agreement
which are consistent with the Company's policies in effect from time to time
with respect to travel, entertainment and other business expenses, subject to
the Company's requirements with respect to reporting and documentation of such
expenses.
4. Board Membership. With respect to all regular elections of directors
during the Employment Period, the Company shall nominate, and use its best
efforts to elect, Executive to serve as a member of the Board.
5. Term; Termination. The Employment Period shall continue until the
earlier of (i) the third anniversary of the date of this Agreement, (ii)
Executive's resignation, death or disability or other incapacity (as determined
by the Board in its good faith judgment) or (iii) a determination by the Board
in its good faith judgment that termination of Executive's employment is in the
best interests of the Company. The Employment Period shall be extended for a
subsequent one-year term on each anniversary of the date of this Agreement
beginning on the third anniversary unless notice to the contrary is delivered by
Executive or the Company at least thirty days prior to such anniversary.
6. Notices. Any notice provided for in this Agreement shall be in writing
and shall be either personally delivered, or mailed by first class mail, return
receipt requested, to the recipient at the address below indicated:
Notices to Executive:
c/o American Builders & Contractors Supply Co., Inc.
One ABC Parkway
Beloit, Wisconsin 53511
Notices to the Company:
American Builders & Contractors Supply Co., Inc.
One ABC Parkway
Beloit, Wisconsin 53511
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement shall be deemed to have been given when so delivered
or mailed.
7. Complete Agreement. This Agreement embodies the complete agreement and
understanding among the parties and supersedes and preempts any prior
understandings, agreements or representations by or among the parties, written
or oral, which may have related to the subject matter hereof in any way.
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8. Counterparts. This Agreement may be executed in separate counterparts,
each of which is deemed to be an original and all of which taken together
constitute one and the same agreement.
9. Successors and Assigns. This Agreement is intended to bind and inure
to the benefit of and be enforceable by Executive, the Company and their
respective heirs, successors and assigns, except that Executive may not assign
his rights or delegate his obligations hereunder without the prior written
consent of the Company.
10. Choice of Law. All issues and questions concerning the construction,
validity, enforcement and interpretation of this Agreement and the exhibits and
schedules hereto shall be governed by, and construed in accordance with, the
laws of the State of Wisconsin, without giving effect to any choice of law or
conflict of law rules or provisions (whether of the State of Wisconsin or any
other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of Wisconsin.
11. Amendment and Waiver. The provisions of this Agreement may be amended
or waived only with the prior written consent of the Company and Executive, and
no course of conduct or failure or delay in enforcing the provisions of this
Agreement shall affect the validity, binding effect or enforceability of this
Agreement.
* * * * *
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IN WITNESS WHEREOF, the parties hereto have executed this Employment
Agreement as of the date first written above.
AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC.
By
---------------------------
Its President and CEO
--------------------------
/s/ Kenneth A. Hendricks
------------------------------
KENNETH A. HENDRICKS
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EXHIBIT 10.4
TAX ALLOCATION AGREEMENT
AGREEMENT entered into as of May 1, 1997 by and among Kenneth A.
Hendricks ("Hendricks"), American Builders & Contractors Supply Co., Inc., a
Delaware corporation ("ABC"), Mule-Hide Products Co., Inc., a Texas corporation
("Mule-Hide"), and Amcraft Building Products Co., Inc., a Delaware corporation
("Amcraft").
WHEREAS, Hendricks owns all of the outstanding capital stock of ABC
and ABC owns all of the outstanding capital stock of Mule-Hide and Amcraft; and
WHEREAS, ABC, Mule-Hide and Amcraft have elected to be treated as "S"
corporations under Section 1361 et seq. of the Internal Revenue Code of 1986, as
amended (the "Code"); and
WHEREAS, Hendricks, as the sole stockholder of ABC, will be
responsible under the Code and applicable state and local income tax law for
paying U.S. federal and certain state and local income taxes on the sum of all
taxable net income ("Taxable Net Income") of ABC, and such Taxable Net Income
will include the Taxable Net Income of Mule-Hide and Amcraft and ABC's pro rata
share of the Taxable Net Income of any future "S" corporations or other entities
which qualify for pass-through treatment under the Code ("Pass-Through
Entities") in which ABC may have an ownership interest. Mule-Hide, Amcraft and
such Pass-Through Entities, if any, are referred to herein as the
"Subsidiaries"; and
WHEREAS, to the extent Hendricks transfers shares of ABC's capital
stock to any third party, or to the extent that ABC transfers shares of any
Subsidiary's capital stock to any third party, such third party will become
responsible for U.S. federal and state and local income taxes on the Taxable Net
Income of ABC or such Subsidiary to the extent of its pro rata ownership of such
capital stock. Hendricks and all such third parties, if any, are referred to
herein as the "Stockholders."
NOW, THEREFORE, in consideration of the mutual promises herein
exchanged and for other good and valuable consideration, the receipt and
sufficiency of which is mutually acknowledged, the parties hereto agree as
follows:
1. Tax Payment Obligation. ABC shall, or shall cause each of the
Subsidiaries to, make payments to each Stockholder (the "Tax Payments") in an
amount equal to such Stockholders' Tax Liabilities relating to ABC's and each
Subsidiary's Taxable Net Income, without duplication, in accordance with the
terms of this Agreement. The "Tax Liabilities" for any Stockholder relating to
ABC's or any Subsidiary's Taxable Net Income shall mean an amount (which shall
not be less than zero) equal to (i) (A) such Stockholder's aggregate U.S.
federal and state and local income tax liability calculated after including the
Taxable Net Income of ABC or such Subsidiary less (B) such Stockholder's
aggregate U.S. federal and state
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and local income tax liability calculated excluding the Taxable Net Income of
ABC or such Subsidiary plus (ii) a pro rata portion of all expenses incurred by
such Stockholder in respect of preparing and filing tax returns and responding
to any official inquiry regarding such returns and all tax-related interest or
penalties imposed on such Stockholder, each with respect to any taxable period
for which such Stockholder incurred any Tax Liability relating to ABC's or any
Subsidiary's Taxable Net Income.
2. Tax Payments. Each Stockholder shall notify ABC at least fifteen
(15) days prior to any date on which such Stockholder intends to make a payment
(including any prepayment) to any taxing authority in respect of any Tax
Liabilities. ABC shall, or shall cause each applicable Subsidiary to, make a Tax
Payment to such Stockholder within fifteen (15) days of such notice in an amount
equal to such Tax Liabilities as reasonably estimated by such Stockholder for
purposes of making such payment.
3. Year End Adjustment. Within sixty days following the filing of a
final U.S. federal income tax return for any taxable period by each Stockholder,
such Stockholder shall notify ABC of the surplus or shortfall of the aggregate
amount of all Tax Payments in respect of such taxable period as compared to the
actual aggregate Tax Liabilities of such Stockholder for such taxable period. In
the event of a shortfall, ABC shall make a Tax Payment to such Stockholder in
respect of such shortfall within fifteen (15) days of such notice. In the event
of a surplus, such Stockholder shall, at his option, reimburse ABC (or any
Subsidiary designated by ABC) for such surplus by cash or check, or apply such
surplus to the next Tax Payment due such Stockholder.
4. Entire Agreement. Except as otherwise expressly set forth herein,
this Agreement embodies the complete agreement and understanding among the
parties hereto with respect to the subject matter hereof and supersedes and
preempts any prior understandings, agreements or representations by or among the
parties, written or oral, which may have related to the subject matter hereof in
any way.
5. Successors and Assigns. Except as otherwise provided herein, this
Agreement shall bind and inure to the benefit of and be enforceable by Hendricks
or any Stockholder and any or their respective successors and assigns against
ABC or any Subsidiary whether now existing or formed or acquired in the future.
6. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be an original and all of which taken together
shall constitute one and the same agreement.
7. Governing Law. All issues and questions concerning the
construction, validity, interpretation and enforceability of this Agreement and
the exhibits and schedules hereto shall be governed by, and construed in
accordance with, the laws of the State of New York, without giving effect to any
choice of law or conflict of law rules or provisions (whether of the State of
New York or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of New York.
8. Notices. Any notice provided for in this Agreement shall be in
writing
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and shall be either personally delivered, or mailed first class mail (postage
prepaid) or sent by reputable overnight courier service (charges prepaid) to ABC
at the address set forth below and to any Stockholder at such address as is
indicated by the Company's records, or at such address or to the attention of
such other person as the recipient party has specified by prior written notice
to the sending party. Notices shall be deemed to have been given hereunder when
delivered personally, three days after deposit in the U.S. mail and one day
after deposit with a reputable overnight courier service. The Company's address
is:
American Builders & Contractors Supply Co., Inc.
One ABC Parkway
Beloit, Wisconsin 53511
* * * *
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IN WITNESS WHEREOF, the parties have caused this Tax Allocation
Agreement to be duly executed effective as of the 7th day of May, 1997.
AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC.
By: /s/ Kenneth A. Hendricks
---------------------------------------------
Name: Kenneth A. Hendricks
--------------------------------------------
Title: President and CEO
-------------------------------------------
MULE-HIDE PRODUCTS CO., INC.
By: /s/ Kenneth A. Hendricks
---------------------------------------------
Name: Kenneth A. Hendricks
--------------------------------------------
Title: President and CEO
-------------------------------------------
AMCRAFT BUILDING PRODUCTS CO., INC.
By: /s/ Kenneth A. Hendricks
---------------------------------------------
Name: Kenneth A. Hendricks
--------------------------------------------
Title: President and CEO
-------------------------------------------
/s/ Kenneth A. Hendricks
-------------------------------------------------
KENNETH A. HENDRICKS
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EXHIBIT 10.5
INDUSTRIAL BUILDING LEASE
THIS LEASE is made this ______ day of May, 1997, by and between KENNETH A.
HENDRICKS and DIANE M. HENDRICKS, doing business as Hendricks Commercial
Properties ("Landlord") and AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC.
("Tenant"), who hereby mutually covenant and agree as follows:
I. GRANT, TERM, DEFINITIONS AND BASIC LEASE PROVISIONS
1.1 Grant. Landlord, for and in consideration of the rents herein reserved
and of the covenants and agreements herein contained on the part of Tenant to be
performed, hereby leases to Tenant, and Tenant hereby lets from Landlord, the
real estate consisting of approximately ________ square feet of area, commonly
known as ____________________________________________________________________
_____________________________________________________________________________
and legally described on an exhibit which is attached hereto, identified as
Exhibit A, together with all improvements now located thereon (consisting of
approximately ________________ square feet in area), or to be located thereon
during the term of this Lease, together with all appurtenances belonging to or
in any way pertaining to the said premises (such real estate, improvements and
appurtenances hereinafter sometimes jointly or severally, as the context
requires, referred to as "leased Premises").
1.2 Term. The term of this Lease shall commence on June 1, 1997,
hereinafter sometimes referred to as "Commencement Date"), and shall end on
_________________________, unless earlier terminated as herein set forth.
1.3 Basic Lease Provisions.
(a) Purpose (See Section 3.1): a building material warehouse and
distribution center, and related lawful purposes.
(b) Initial Annual Base Rent (See Section 4.1): for the period from
June 1, 1997 through May 31, 1998.
(c) Increases in Annual Base Rent: The Rent reserved to Landlord under
Section 1.3(b) is subject to adjustment on June 1 of each fiscal year commencing
on June 1, 1998, as provided in Section 4.
(d) Security Deposit (See Section 20.1): _______________
(e) Form of Insurance (See Article VI): The insurance specified in
Section 6.2 shall comply with the provisions of Section 6.3.
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(f) Payee's Address (See Sections 4.1 and 4.2):
One ABC Parkway
Beloit, Wisconsin 53511
(f) Tenant's Address (for notices) (See Section 21.4):
One ABC Parkway
Beloit, Wisconsin 53511
(g) Landlord's Address (for notices) (See Section 21.4):
One ABC Parkway
Beloit, Wisconsin 53511
II. POSSESSION
2.1 Possession. Tenant is already in possession of the Leased Premises.
This Lease replaces and supersedes the existing lease between the parties.
Tenant accepts the Leased Premises "AS IS, WHERE IS" with all faults. Except as
set forth herein., LANDLORD MAKES NO REPRESENTATIONS OR WARRANTIES OF ANY KIND,
EXPRESS OR IMPLIED, CONCERNING THE PROPERTY, OR ANY PORTION OF IT, INCLUDING
WITHOUT LIMITATION AS TO THE FOLLOWING: (A) THE CONDITION, VALUE, NATURE OR
QUALITY OF THE LEASED PREMISES, INCLUDING ANY CONSTRUCTION ON THE LEASED
PREMISES AND ANY MATERIALS INCORPORATED INTO THE IMPROVEMENTS THEREOF; (B) THE
SOIL, WATER OR GEOLOGY RELATING TO LEASED PREMISES; (C) ANY INCOME DERIVED OR TO
BE DERIVED FROM THE LEASED PREMISES; (D) THE SUITABILITY OF THE LEASED PREMISES
TO ANY ACTIVITIES OR USES WHICH TENANT OR OTHERS MAY WISH TO CONDUCT ON OR
RELATING TO THE LEASED PREMISES OR ITS OPERATION WITH ANY LAW, ORDINANCE, RULE,
REGULATION, OR THE STATUS OF ANY PERMITS OR APPROVALS RELATING TO OR REQUIRED IN
CONNECTION WITH THE LEASED PREMISES.
III. PURPOSE
3.1 Purpose. The Leased Premises shall be used and occupied only for the
Purpose set forth in Section 1.3(a) hereof, except that no such use shall (a)
violate any certificate of occupancy or law, ordinance or other governmental
regulation, or any covenants, conditions or restrictions of record, in effect
from time to time affecting the Leased Premises or the use thereof, (b) cause
injury to the improvements, (c) cause the value or Usefulness of the Leased
Premises or any part thereof to diminish, (d) constitute a public or private
nuisance or waste, or (e) authorize Tenant to use, treat, store or dispose of
hazardous or toxic materials on the Leased Premises, or to render the insurance
on the Leased Premises void or the insurance risk more hazardous.
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3.2 Prohibition of Use. If the use of the Leased Premises should at any
time during the lease term be prohibited by law or ordinance or other
governmental regulation, or prevented by injunction, this Lease shall not be
thereby terminated, nor shall Tenant be entitled by reason thereof to surrender
the Leased Premises or to any abatement or reduction in rent, nor shall the
respective obligations of the parties hereto be otherwise affected.
IV. RENT
4.1 Annual Base Rent. Beginning with the Commencement Date until May 31,
1998, Tenant shall pay Annual Base Rent as set forth in Section 1.3(a) hereof
payable monthly in advance in installments as set forth in said Section. Annual
Base Rent, additional rent and other charges payable, hereunder (collectively
"Rent") Shall be paid to or upon the order of Payer at the Payee's Address.
Landlord shall have the right to change the Payee or the Payee's Address by
giving written notice thereof to Tenant. If Tenant occupies the Leased Premises
for the purpose of conducting business therein prior to the Commencement Date,
Tenant shall pay Rent on a pro rata basis from the date of occupancy to the
Commencement Date. All payments by Tenant shall be made in advance, without
notice, deduction, set off, discount or abatement, in lawful money of the United
States.
4.2 Increases in Annual Base Rent. The Rent reserved to Landlord under
Section 4.1 is subject to adjustment on June 1 of each calendar year commencing
on June 1, 1998, as provided in this Section 4.2. The amount of rent adjustment,
if any, shall be ascertained and fixed in the following manner:
(a) For the purposes of this Section 4.2, the following definitions
shall apply:
(i) "Index" shall mean "The New Consumer Price Index for All
Urban Consumers, United States National Index, Subgroup 'All Items' (1967 =
100)", and published by the United States Department of Labor, Bureau of
Labor Statistics. If at any rental adjustment date the Index is not
published in the same format as recited herein, the parties shall
substitute any official index published by the Bureau of Labor Statistics,
or successor or similar governmental agency, as may then be in existence
and shall be most nearly equivalent thereto.
(ii) "Base Month Index" shall mean the Index in effect as of
March, 1997.
(iii) "Anniversary Month" shall mean March of the calendar year
following the year in which the term of this Lease commences and each
successive March thereafter during the term of this Lease.
(iv) "Percentage Increase" shall mean the percentage equal to
the fraction, the numerator of which shall be the Index in the Anniversary
Month less the Base Month Index, and die denominator of which shall be the
Base Month Index.
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(b) The Rent shall be increased by the Percentage Increased.
(c) On or before June 1 of each succeeding year and after the
increase in the amount of Rent for each year under this Section has been thus
determined, Landlord shall provide Tenant a written statement ("Statement of
Increase") which shall set forth: (1) the Index on the Anniversary Month
preceding the notice, (2) the Base Month Index, (3) the Percentage Increase, (4)
the total increase in the annual rental rate attributable to this Article, and
(5) any other adjustments or increases required or permitted under other
provisions of this Lease Agreement.
(d) On June 1 and following Tenant's receipt of the Statement of
Increase, Tenant shall pay the amount of the Rent as increased pursuant to this
Section. Thereafter, monthly rental payments by Tenant shall reflect such
increases until receipt of a subsequent Statement of Increase.
4.3 Lock Box. Landlord may from time to time designate a lock box
collection agent for the collection of Rent due Landlord. In such event, the
date of payment shall be the date of receipt by the lock box collection agent of
such payment (or the date of collection of any such sum if payment is made in
the form of a negotiable instrument thereafter dishonored upon presentment);
however, for the purposes of this Lease, no such payment or collection shall be
deemed "accepted" by Landlord if an Event of Default shall then have occurred,
and if landlord thereafter remits a check payable to Tenant in the amount
received by the lock box collection agent within twenty-one (21) days after the
amount sent by the Tenant is received by the lock box collection agent or, in
the case of a dishonored instrument, within twenty one (21) days after
collection. Neither the negotiation of Tenant's negotiable instrument by the
lock box collection agent, nor the possession of the funds by Landlord during
the twenty-one (21) day period, nor the return of any such sum to Tenant shall
be deemed to be inconsistent with the rejection of Tenant's tender of such
payment for all purposes as of the date of Landlord's lock box collection
agent's receipt of such payment (or collection), nor shall any of such events be
deemed to be a waiver of any breach by Tenant of any terms, covenant or
conditions of this Lease nor a waiver of any of Landlord's rights or remedies.
4.4 Interest on Late Payments. Each and every installment of Rent which
shall not be paid when due shall bear interest at the highest rate then payable
by Tenant in the state in leased Premises are located or, in the absence of such
a maximum rate, at a rate per which the Leased Premises are located or, in the
absence of such a maximum rate, at a rate per annual equal to two percent (2%)
in excess of the announced base rate of interest of American National Bank and
Trust Company of Chicago in effect on the due date of such payment, from the
date when the same is payable under the terms of this Lease until the same shall
be paid.
V. IMPOSITIONS
5.1 Payment by Tenant. Tenant shall pay as additional Rent for the Leased
Premises, all taxes and assessments, general and special, water rates and all
other impositions, ordinary and extraordinary, of every kind an nature
whatsoever, which may be levied, assessed, charged or imposed during the term of
the Lease upon the Leased Premises, or any part thereof, or upon any
improvements at any time situated thereon, including without limitation, any
assessment by any
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association of owners of property in the complex of which the Leased Premises
are a part ("Impositions"); provided, however, that Impositions levied against
the Leased Premises shall be prorated between Landlord and Tenant as of the as
of the expiration of the Lease term for the last year of the Lease term (and
shall be paid by Tenant upon such expiration based on Landlord's reasonable
estimate thereof). Impositions shall also include fees and costs incurred by
Landlord during or prior to the Lease term for the purpose of contesting or
protesting tax assessments or rates, to the extent such fees and costs relate to
savings realized during the term of the Lease and any extension thereof. Any
Tenant shall be obligated to pay all Impositions assessed with respect to the
periods of time which constitute the term of this Lease.
5.2 Alternative Taxes. If at any time during the term of this Lease the
method of taxation prevailing at the commencement of the term hereof shall be
altered so that my new tax, assessment, levy imposition or charge, or any part
thereof, shall be measured by or be based in whole or in part upon the Lease, or
the Leased Premises, or the Annual Base Rent, additional rent or other income
therefrom and shall be imposed upon the Landlord, then all such taxes,
assessments, levies, impositions, or charges, or the part thereof, to the extent
that they are so measured or based, shall be deemed to be included within the
term Impositions for the purposes hereof to the extent that such Impositions
would be payable if the Leased Premises were the only property of Landlord
subject to such Impositions, and Tenant shall pay and discharge the same as
herein provided in respect of the payment of Impositions. There shall be
excluded from Impositions all federal income taxes, state and local net income
taxes, federal excess profit taxes, franchise, capital stock and federal or
state estate or inheritance taxes of Landlord.
5.3 Payment of Impositions and Insurance. Tenant shall pay monthly to
Landlord on the first day of each and every month of the Lease term, a sum equal
to one twelfth (1/12) of the last ascertainable amount (or at Landlord's
election, if Landlord's interest hereunder is subject to the lien of a mortgage
or trust deed, a sum equal to one twelfth (1/12) of the mortgagee's estimate of
the current amount) of Impositions and, also, insurance premiums as required
under the terms of Article VI of this Lease), which monthly payment shall be
held by Landlord and shall be used to the extent thereof, to pay the same as the
same become due and payable. The payment shall not limit or alter Tenant's
obligation to pay Impositions (or premiums); provided, however, that said
payment shall be fully utilized for the payment of Impositions (or premiums).
The amount of the deposits shall be readjusted annually, on the first day of the
month after the tax bills showing the actual amount of the taxes (or premiums).
Tenant shall not be entitled to interest on said payment.
5.4 Evidence of Payment. Tenant shall deliver to Landlord duplicate
receipts and canceled checks, or photocopies thereof showing the payments of all
Impositions and insurance premiums, within thirty (30) days after respective
payments evidenced thereby.
5.5 Right to Contest. Tenants shall be required to pay any Imposition or
charge upon or against the Leased Premises, or any part thereof, or the
improvements at any time situated thereon, even though Tenant shall, in good
faith and with due diligence, contest the same or the validity thereof by
appropriate legal proceeding unless such procedure shall have the effect of
preventing the collection of the Imposition or charge so contested; provided
that pending any such legal proceedings
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which stay the payment of such Imposition, Tenant shall give Landlord such
security as may be deemed satisfactory to Landlord to insure payment of the
amount of the Imposition or charge, and all interest and penalties thereon. If,
at any time during the continuance of such contest, the Leased Premises or any
part thereof is, in the judgment of Landlord, in imminent danger of being
forfeited or lost as a result of non-payment of the Imposition, Landlord may use
such security for the payment of such Imposition.
VI. RISK ALLOCATION AND INSURANCE
6.1 Allocation of Risks. The parties desire, to the extent permitted by
law, to allocate certain risks of personal injury, bodily injury or property
damage, and risks of loss of real or personal property by reason of fire,
explosion or other casualty, and to provide for the responsibility for insuring
those risks. It is the intent of the parties that, to the extent any event is
insured for or required herein to be insured for, any loss, cost, damage or
expense arising from such event, including, without limitation, the expense of
defense against claims or suits, be covered by insurance, without regard to the
fault of Tenant, its officers, employees or agents ("Tenant Protected Parties"),
and without regard to the fault of Landlord, its partners, shareholders,
members, agents, directors, officers and employees ("Landlord Protected
Parties"). As between Landlord Protected Parties, such risks are allocated as
follows:
(a) Tenant shall bear the risk of bodily injury, personal injury or
death, or damage to the property of third persons, occasioned by events
occurring on or about the Leased Premises, regardless of the party at fault.
Said risk shall be insured as provided in Section 6.2(a).
(b) Tenant shall bear the risk of damage to the improvements on the
Leased Premises and to Tenant's contents, trade fixtures, machinery, equipment,
furniture and furnishings in the Leased Premises arising out of loss by the
events to be insured against pursuant to Section 6.2(b), (d), (e) and (g).
6.2 Tenant's Insurance. Tenant shall procure and maintain policies of
insurance, at its own cost and expense, insuring:
(a) The Landlord Protected Parties (as "named insureds"), and
Landlord's mortgagees, if any, of which Tenant is given written notice, and
Tenant Protected Parties, from all damages, losses, costs and expenses, claims,
demands or actions made by or on behalf of any person or persons, firm or
corporation and arising from, related to or connected with the Leased Premises,
for bodily injury to, or personal injury to, or death of any person, or more
than one (1) person, or for damage to property and the amount of such insurance
shall be not less than $3,000,000.00 single limit per occurrence/$_________ in
the aggregate. Said insurance shall be written on an "occurrence" basis and not
on a "claims made" basis. Landlord shall have the right, exercisable by giving
written notice thereof to Tenant, to require Tenant to increase such limit if,
in Landlord's reasonable judgment, the amount thereof is insufficient to protect
the Landlord Protected Parties and Tenant Protected Parties from judgments which
might result from such damages, losses, costs or expenses, claims, demands or
actions.
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(b) The improvements at any time situated upon the Leased Premises
against loss or damage by fire, lightning, wind storm, hail storm, aircraft,
vehicles, smoke, explosion, sewer back-up, riot or civil commotion as provided
by the Standard Fire and Extended Coverage Policy and all other risks of direct
physical loss as insured against under Special Form ("all risk" coverage). The
insurance coverage shall be for not less than 100% of the replacement cost of
such improvements with agreed amount endorsement, and building ordinance
coverage to include demolition and increased cost of construction, which
building ordinance coverage endorsement shall be in an amount as Landlord shall
reasonably require, all subject only to such deductibles as Landlord shall
reasonably approve in writing. The full replacement cost of improvements shall
be designated annually by Landlord, in the good faith exercise of Landlord's
judgment. In the event that Tenant does not agree with Landlord's designation,
Tenant shall have the right to submit the matter an insurance appraiser
reasonably selected by Landlord and paid for by Tenant. The insurance appraiser
shall submit a written report of his appraisal and if said report discloses that
the improvements are not insured as therein required, Tenant shall promptly
obtain the insurance required. Landlord shall be named as the insured and all
proceeds of insurance shall be payable to Landlord. Said juice shall contain an
endorsement waiving the insurer's right of subrogation against any Landlord
Protected Party or any Tenant Protected Party, provided that such waiver of the
right of subrogation shall not be operative in any case where the effect thereof
is to invalidate such insurance coverage or increase the cost thereof (except
that either party shall have the right, within thirty (30) days following
written notice, to pay such increased cost, thereby keeping such waiver in full
force and effect).
(c) Landlord's business income, protecting Landlord from loss of
rents and other charges during the period while the Leased Premises are
untenantable due to fire or other casualty (for the period reasonably determined
by Landlord).
(d) Flood or earthquake insurance whenever, in the reasonable
judgment of Landlord, such protection is necessary and it is available at
commercially reasonable cost.
(e) All contents and Tenant's trade fixtures, machinery, equipment,
furniture and furnishings in the Leased Premises to the extent of at least
ninety percent (90%) of their replacement cost under Standard Fire and Extended
Coverage Policy and all other risks of direct physical loss as insured against
under Special Form ("all risk" coverage). Said insurance shall contain an
endorsement waiving the insurer's right of subrogation against any Landlord
Protected Party, provided that such waiver of the right of subrogation shall not
be operative in any case where the effect thereof is to invalidate such
insurance coverage or increase the cost thereof (except that either party shall
have the right, within thirty (30) days following written notice, to pay such
increased cost, thereby keeping such waiver in full force and effect).
(f) Tenant Protected Parties from all worker's compensation claims.
(g) Landlord and Tenant against breakage of all plate glass utilized
in the improvements on the Leased Premises.
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(h) Insurance against loss or damage from external explosion of
boilers, air conditioning equipment and miscellaneous electrical apparatus, if
any, in the Premises. Landlord shall be named as the insured and all proceeds of
insurance shall be payable to landlord. Said insurance shall contain the
endorsement waiving the insurer's right of subrogation against any Landlord
Protected Party or any Tenant Protected Party, provided that such waiver or
right of subrogation shall not be operative in any case where the effect thereof
is to invalidate such insurance coverage or increase the cost thereof (except
that either party shall have the right, within thirty (30) days following
written notice, to pay such increased costs, thereby keeping such waiver in full
force and effect).
6.3 Form of Insurance. All of the aforesaid insurance shall be in
responsible companies. The insurer and the form, substance and amount (where not
stated above) shall be satisfactory from time to time to Landlord and any
mortgagees of Landlord, and shall unconditionally provide that it is not subject
to cancellation or non-renewal except after at least thirty (30) days prior
written notice to Landlord and any mortgagee of Landlord. The insurance
specified in Section 6.2(b) shall contain a mortgage clause satisfactory to
Landlord' s mortgagee and the insurance specified in Sections 6.2(c), (d), (g)
and (h) shall also insure Landlord's mortgagee as required by Landlord's
mortgagees. Originals of Tenant' s insurance policies (or certificates thereof
satisfactory to Landlord), together with satisfactory evidence of payment of the
premiums thereon, shall be deposited with Landlord at the Commencement Date and
renewals thereof not less than thirty (30) days prior to the end of the term of
such coverage.
6.4 Fire Protection. Tenant shall conform with all applicable fire codes
of any governmental authority, and with the rules and regulations of Landlord's
fire underwriters and their fire protection engineers, including, without
limitations the installation of adequate fire extinguishers. In the event that
the Leased Premises are served by a sprinkler system, Tenant will, at all times
during the entire Lease term, cause the same to be served by a sprinkler
monitoring system connected to the local Fire department or to a qualified
monitoring service approved by Landlord; if, as of the Commencement Date, such a
sprinkler monitoring system is not installed and/or connected, Tenant shall, at
its sole cost and expense, install such a monitoring system and cause it to be
so connected.
VII. DAMAGE OR DESTRUCTION
7.1 Tenant's Obligation to Rebuild. In the event of damage to, or
destruction of, any improvements on the Leased Premises, or of the fixtures and
equipment therein, by fire or other casualty, Tenant shall promptly, it its
expense, repair, restore or rebuild the same to the condition existing prior to
the happening of such fire or other casualty; provided, however, that if the
damage or destruction is material and substantial, Landlord shall have the
right, subject to the consent of any first mortgagee whose consent thereto is
required, to terminate this Lease, effective on the date of such damage or
destruction, by giving written notice thereof to Tenant within sixty (60) days
after the event causing the damage or destruction. Rent shall not be reduced or
abated during the period of such repair, restoration or rebuilding even if the
improvement are not tenantable.
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7.2 Preconditions to Rebuilding. Before Tenant commences such repairing,
restoration or rebuilding involving an estimated cost of more than Fifty
Thousand Dollars ($50,000.00), plans and specifications therefor, prepared by a
licensed architect satisfactory to Landlord shall be submitted to Landlord for
approval and Tenant shall furnish to Landlord (a) an estimate of the cost of the
proposed work, certified to by said architect; (b) satisfactory evidence of
sufficient contractor's commercial general liability insurance covering
Landlord, builder's risk insurance, and worker's compensation insurance; and (c)
such security as Landlord may require to insure payment for the completion of
all work free and clear of liens.
7.3 Payment for Rebuilding. Provided that the insurer does not deny
liability as to the insureds, and provided Tenant is not then in default
hereunder, all sums arising by reason of loss under the insurance referred to in
Section 6.2(b), shall be deposited with the Depositary (as hereinafter defined)
to be available to Tenant for the work. Tenant shall deposit with the Depositary
any excess cost of the work over the amount held by the Depositary as proceeds
of the insurance within thirty (30) days after the date of the determination of
the cost of the work by the architect in accordance with Section 7.2(a) or, if
the insurer has denied liability as to the insureds, or if Tenant is then in
default hereunder, then Tenant shall promptly deposit the full amount of the
cost of the work with the Depositary. Tenant shall diligently pursue the repair
or rebuilding of the improvements in a good and workmanlike manner using only
high quality union workers and materials. The Depositary shall pay out
construction funds from time to time on the written direction of the architect
provided that the Depositary and Landlord shall first he permitted to inspect
the work and approve of the same, and shall be furnished with waivers of lien,
contractors, and subcontractors sworn statements and other evidence of cost and
payments so that the Depositary can verify that the amounts disbursed from time
to time are represented by completed and in-place work, and that said work is
free and clear of possible mechanics liens. No payment made prior to the final
completion of the work shall exceed ninety percent (90%) of the value of the
work completed and in place from time to time. At all times the undisbursed
balance remaining in the hands of Depositary shall be at least sufficient to pay
for the cost of completion of the work free and clear of liens. Any deficiency
shall be promptly paid into the Depositary by Tenant. Depositary, as used
herein, shall be any first mortgagee of the Leased Premises, or the Landlord if
there is no first mortgagee of the Leased Premises or if such first mortgagee
has refused to act as Depositary.
7.4 Excess Receipts by Depositary. Any excess of money received from
insurance remaining with the Depositary after the completed repair or rebuilding
of improvements, to Landlord's satisfaction, if there be no default by Tenant in
the performance of the Tenant's covenants and agreements hereunder, shall be
paid to Tenant.
7.5 Failure to Rebuild. If Tenant shall not enter upon the repair or
rebuilding of the improvements within a period of sixty (60) days after damage
or destruction by fire or otherwise, and prosecute the same thereafter with such
dispatch as may be necessary to complete the same within a reasonable period
after said damage or destruction occurs, (which repair period shall not to
exceed one hundred eighty (180) days after the date of commencement of such
repair or rebuilding), then Tenant shall be in default and in addition to
whatever other remedies Landlord may have under this Lease, at law in equity,
the money received by and then remaining in the hands of the Depositary
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shall be paid to and retained by Landlord as security for the continued
performance and observance by Tenant of the Tenant's covenants and agreements
hereunder, or Landlord (at Landlord's sole option) may terminate this Lease and
then be paid and retain the amount so held as liquidated damages resulting from
the failure on the part of Tenant to comply with the provisions of this Article.
VIII. CONDEMNATION
8.1 Taking of Whole. If the whole of the Leased Premises shall be taken or
condemned for a public or quasi public use or purpose by a competent authority,
or if such a portion of the Leased Premises shall be so taken that as a result
thereof the balance cannot be used for the same purpose and with substantially
the same utility to Tenant as immediately prior to such taking, or if the taking
is material and substantial and Landlord elects(subject to the consent of any
first mortgagee whose consent thereto is required) to terminate this Lease,
which election shall be made by giving written notice thereof to Tenant within
thirty(30) days, after delivery of possession to the condemning authority, then
in any of such events, the Lease shall terminate upon delivery of possession to
the condemning authority, and any award, compensation or damages (hereafter
sometimes called the "Award") shall be paid to and be the sole property of
Landlord whether the Award shall be made as compensation for diminution of the
value of the leasehold estate or the fee of the Leased Premises or otherwise and
Tenant hereby assigns to Landlord all of Tenant's right, title and interest in
and to any and all of the Award. Tenant shall continue to pay Rent until the
Lease is terminated and any Impositions and insurance premiums prepaid by Tenant
or any unpaid Impositions or other charges which accrue prior to the
termination, shall be adjusted between the parties.
8.2 Partial Taking. If only an insubstantial part of the Leased Premises
shall be so taken or condemned, but the Lease is not terminated pursuant to
Section 8.1 hereof, Tenant, at its sole cost and expense, shall repair and
restore the Leased Premises and all improvements thereon. There shall be no
abatement or reduction in any Rent because of such taking or condemnation.
Tenant shall promptly and diligently proceed to make a complete architectural
unit of the remainder of the improvements, complying with the procedure set
forth in Section 7.2. For such purpose, and provided Tenant is not then in
default hereunder, the amount of the Award relating to the improvements shall be
deposited with the Depositary (as defined in Section 7.3 hereof) which shall
disburse the Award to apply on the cost of said repairing or restoration in
accordance with the procedure set forth in Section 7.3. If Tenant does not make
a complete architectural unit of the remainder of the improvements within a
reasonable period after such taking or condemnation, (shall not exceed one
hundred eighty (180) days), then, in addition to whatever other remedies
Landlord may have under this Lease, at law in equity, the money received by and
then remaining in the custody of the Depositary shall, at Landlord's sole
election be paid to and retained by Landlord, as liquidated damages resulting
from failure of Tenant to comply with the provisions of this Section. Any
portion of the Award not intended for such repairing or restoration shall be
paid to Landlord.
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IX. MAINTENANCE AND ALTERATIONS
9.1 Maintenance Tenant shall keep and maintain the entire exterior and
interior of the Leased Premises, specifically including, without limitation, the
heating, ventilating and air conditioning equipment, the driveways, parking area
and the roof, exterior and interior walls, ceilings, floors and substructure in
good condition and repair. As used herein, each and every obligation of Tenant
to keep, maintain and repair shall include, without limitation, all ordinary and
extraordinary structural and nonstructural repairs and replacements. As to any
repair's costing in excess of $5,000.00, and as to any replacements whatsoever,
Tenant shall, in connection therewith, comply with the requirements of Section
9.2(b) hereof Tenant shall, to the extent possible, keep the Leased Premises
from falling temporarily out of repair or deteriorating. Tenant shall further
keep and maintain the improvements at any time situated upon the Leased
Premises, the parking area and all sidewalks and areas adjacent thereto, safe,
secure, clean and sanitary (including without limitation, snow and ice
clearance, planting and replacing flowers and landscaping, and necessary
interior painting and carpet cleaning at least once each year), and in full
compliance with all laws, statutes, rules, regulations, ordinances or orders of
any kind whatsoever having jurisdiction over the Leased Premises (including but
not limited to, zoning and building laws and ordinances, environmental
protection laws and regulations, the rules, regulations and orders of any
governmental agency and any building or environmental permit) and any condition,
easement, right-of-way, covenant or restriction of record, health, safety and
police regulations in force. Nothing in Section 1.4(a) shall be deemed to limit
Tenant's obligations under this Section 9.1(a). In the event the Leased Premises
are served or traversed by railroad switch or spur track, then Tenant,
notwithstanding the provision of any rail track agreements to the contrary,
shall repair and maintain, and remove snow from, or reimburse the railroad
carrier for repairing, maintaining and/or snow removal, as the case may be, the
portion of the track and related facilities on or serving the Leased Premises.
9.2 Alterations.
(a) Tenant shall make all alterations, additions and improvements
(hereinafter "Alterations") on the Leased Premises, and on. and to the
improvements, parking areas, sidewalks, and equipment thereon, required by any
governmental authority or which may be made necessary by the act or neglect of
Tenant, its employees, agents or contractors, invites or any persons, firm or
corporation, claiming by, through or under Tenant. Except as provided in the
immediately preceding sentence, Tenant shall not create any openings in the roof
or exterior walls, or make any other Alterations to the Leased Premises without
Landlord's prior written consent, which consent Landlord may, in its discretion,
withhold.
(b) As to any Alterations which Tenant is required hereunder to
perform or to which Landlord consents, and as to any repairs costing in excess
of $5,000.00, and as to any replacements whatsoever, or as to any work performed
pursuant to Article XVIII hereof, such work shall be performed with now
materials, in all good and workmanlike manner, strictly in accordance with plans
and specifications therefor and approved in writing by Landlord and in
accordance with all applicable laws and ordinances. Tenant shall, prior to the
commencement of such work, deliver
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to Landlord copies of all required permits. At Landlord's option (exercised by
notice in writing from Landlord to Tenant given within ten (10) days after
Landlord receives Tenant's plans and specifications), such work shall be
performed by employees of or contractors employed by Landlord, at Tenant's
expense. Tenant shall permit Landlord to monitor construction operations in
connection with such work, and to restrict, as may reasonably be required, the
passage of manpower and materials, and the conducting of construction activity
in order to avoid unreasonable disruption to Landlord or to other parties or
other damage to the Leased Premises. Tenant shall pay to Landlord, for
Landlord's overhead in connection with performing or monitoring such work, a sum
equal to ten percent (10%) of Tenant's costs for such work. Upon completion of
any such work or on behalf o Tenant, Tenant shall provide Landlord with such
documents as Landlord may require (including, without limitation, sworn
contractors' statements and supporting lien waivers) evidencing payment in full
for such work, and "as built" working drawings. In the event Tenant performs any
work not in compliance with the provisions of this Section 9.2(b), Tenant shall,
upon written notice from Landlord, immediately remove such work and restore the
Leased Premises to their condition immediately prior to the performance thereof.
If Tenant fails so to remove such work and restore the Leased Premises as
aforesaid, Landlord may, at its option, and in addition to all other rights or
remedies of Landlord under his Lease, at law or in equity, enter the Leased
Premises and perform said obligation of Tenant and Tenant shall reimburse
Landlord for the cost to the Landlord thereof, immediately upon being billed
therefor by Landlord. Such entry by Landlord shall not be deemed an eviction or
disturbance of Tenant's use or possession of the Leased Premises nor render
Landlord liable in any manner to Tenant.
X. ASSIGNMENT AND SUBLETTING
10.1 Consent Required.
(a) Tenant shall not, without Landlord's prior written consent, (i)
assign, convey or mortgage this Lease or any interest under it; (ii) sublet the
Leased Premises or any part thereof; (iii) amend a sublease previously consented
to by Landlord; or (iv) permit the use or occupancy of the Leased Premises or
any part thereof by anyone other than Tenant. If Tenant proposes to assign the
Lease or enter into any sublease of the Leased Premises, Tenant shall deliver
written notice thereof to Landlord, together with a copy of the proposed
assignment or sublease agreement at least thirty (30) days prior to the
effective date of the proposed assignment, or the commencement date of the term
of the proposed sublease. Any proposed assignment or sublease shall be expressly
subject to all of the terms, conditions and covenants of this Lease. Any
proposed assignment shall contain an express written assumption by assignee of
all of Tenant's obligations under this Lease. Any proposed sublease shall (i)
provide that the sublessee shall procure and maintain policies of insurance as
required of Tenant under the terms of Section 6.2 hereof, (ii) provide for a
copy to Landlord of notice of default by either party, and (iii) otherwise be
reasonably acceptable in form to Landlord.
(b) Landlord's consent to any assignment or subletting shall not
unreasonably be withheld. In making its determination as to whether to consent
to any proposed assignment or sublease, Landlord may consider, among other
things, the creditworthiness and business reputation
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of the proposed assignee or subtenant, the intended manner of use of the Leased
Premises by the proposed assignee or subtenant, estimated vehicular traffic on
or about the Leased Premises which would be generated by the proposed assignee
or subtenant or by its manner of use of the Leased Premises, and any other
factors which Landlord may reasonable deem relevant. Tenant's remedy, in the
event that Landlord shall unreasonably withhold to, an assignment or subletting,
shall be limited to injunctive relief or declaratory judgment and in no event
shall Landlord be liable for damages resulting therefrom. No consent by Landlord
to any assignment or subletting shall be deemed to any assignment or subletting
shall be deemed to be a consent to any further assignment, subletting, or sub-
subletting.
(c) In the event that Tenant proposes to assign the Lease or to enter
into a sublease of all or substantially all of the Leased Premises, Landlord
shall have the right, (so long as any first mortgage of Landlord shall consent
in writing) in lieu of consenting thereto, to terminate this Lease, effective as
of the effective date of the proposed assignment or the commencement date of the
proposed sublease, as the case may be. Landlord may exercise sold right by
giving Tenant written notice thereof within twenty (20) days after receipt by
Landlord of Tenant's notice, given in compliance with Section 10.l(a) hereof, of
the proposed assignment or sublease. In the event that Landlord exercises such
right, Tenant shall surrender the Leased Premises on the effective date of the
proposed assignment or sublease and this Lease shall thereupon terminate.
Landlord may, in the event of such termination, enter into a lease with any
proposed assignee or subtenant for the Leased Premises.
(d) In the event that Tenant subleases only a portion of the Leased
Premises, Tenant shall pay to Landlord, monthly, as additional rent hereunder,
fifty percent (50%) of the amount calculated by subtracting from the Rent and
other charges and consideration payable from time to time by the subtenant to
Tenant for said space, the amount of Rent payable by Tenant to Landlord under
this Lease, allocated (based on the relative rentable square foot area of the
total Leased Premises so subleased by Tenant) to the subleased portion of the
Leased Premises.
(e) No permitted assignment shall be effective and no permitted
sublease shall commence unless and until any default by Tenant hereunder shall
have been cured. No permitted assignment or subletting shall relieve Tenant from
Tenant's obligations and agreements hereunder and Tenant shall continue to be
liable as a principal and not as a guarantor or Surety to the same extent as
though no assignment or subletting had been made.
10.2 Merger or Consolidation. Tenant may, without Landlord's
consent, assign this Lease to any corporation resulting from a merger or
consolidation of the Tenant upon the following conditions: (a) that the total
assets and net worth of such assignee after such consolidation or merger shall
be equal to or more than that of Tenant immediately prior to such consolidation
or merger; (b) that Tenant is not at such time in default hereunder; and (c)
that such successor shall execute an instrument in writing fully assuming all of
the obligations and liabilities imposed upon Tenant hereunder and deliver the
same to Landlord prior to the effective date of such assignment.
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10.3 Voting Control of Tenant. If Tenant is a corporation, the shares of
which, at the time of execution of this Lease or during the term hereof are or
shall be held by fewer than one hundred (100) persons, and if at any time during
the term of this Lease the persons, firms or corporations who own a majority or
controlling number of its shares at the time of the execution of this Lease or
following Landlord's consent to a transfer of such shares cease to own such
shares (except as a result of transfer by bequest or inheritance) and such
cessation shall not first have been approved in writing by Landlord, then such
cessation shall, at the option of Landlord, be deemed a default by Tenant under
this Lease.
10.4 Other Transfer of Lease. Tenant shall not allow or permit any
transfer of this Lease, or any interest hereunder, by operation of law, or
mortgage, pledge, encumber or permit a lien on this Lease or any interest
herein.
XI. LIENS AND ENCUMBRANCES
11.1 Encumbering Title. Tenant shall not do any act which shall in any way
encumber the title of Landlord in and to the Leased Premises, nor shall the
interest or estate of Landlord in the Leased Premises in any way be subject to
any claim by way of lien or encumbrance, whether by operation of law or virtue
of any express or implied contract by Tenant. Any claim to, or lien upon, the
Leased Premises arising from any act or omission of Tenant shall accrue only
against the leasehold estate of Tenant and shall be subject and subordinate to
the paramount title and rights of Landlord in and to the Leased Premises.
11.2 Liens and Right to Contest. Tenant shall not permit the Leased
Premises to become subject to any mechanics', laborers' or materialmen's lien on
account of labor or material furnished to Tenant or claimed to have been
furnished to Tenant in connection with work of any character performed or
claimed to have been performed on the Leased Premises by, or at the direction or
sufferance of Tenant; provided, however, that Tenant shall have the right to
contest, in good faith and with reasonable diligence, the validity of any such
lien or claimed lien if Tenant shall give to Landlord such security as may be
deemed satisfactory to Landlord to assure payment thereof and to prevent any
sale, foreclosure, or forfeiture of the Leased Premises by reason of nonpayment
thereof; provided further, that on final determination of the lien or claim for
lien, Tenant shall immediately pay any judgment rendered, with all proper costs
and charges, and shall have the lien released and any judgment satisfied.
XII. UTILITIES
12.1 Utilities. Tenant shall purchase a utility services, including but
not limited to fuel, water, sewerage and electricity, from the utility or
municipality providing such service, and shall pay for such services when such
payments are due.
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XIII. INDEMNITY
13.1 Indemnity. Tenant will protect, indemnify and save harmless
Landlord Protected Parties (as defined in Section 6.1) (for the purpose of this
Article XIII only, the term "Landlord Protected Parties" shall also include each
mortgagee of Landlord and the agents of such mortgagee and any purchaser of the
Real Estate), from and against all liabilities, obligations, claims, damages,
penalties, causes of action, costs and expenses (including without limitation,
reasonable attorneys' fees and expenses) imposed upon or incurred by or asserted
against the Landlord Protected Parties or any of them and Landlord's mortgagee,
if any, of which Tenant is given written notice by reason of (i) any failure on
the part of Tenant to perform or comply with any of the terms of this Lease; or
(ii) performance of any labor or services or the furnishing of any materials or
other property in respect of the Leased Premises or any part thereof. In case
any action, suit or proceeding is brought against the Landlord Protected Parties
or any of them and Landlord's mortgagee, if any, of which Tenant is given
written notice by reason of any occurrence described in this Section 13.1,
Tenant will, at Tenant's expenses by counsel approved by Landlord, resist and
defend such action, suit or proceeding, or cause the same to be resisted and
defended. The obligations of Tenant under this Section 13.1 shall survive the
expiration or earlier termination of this Lease.
XIV. RIGHTS RESERVED TO LANDLORD
14.1 Rights Reserved to Landlord. Without limiting any other rights
reserved or available to Landlord under this Lease, at law or in equity,
Landlord, reserves the following rights to be exercised at Landlord's election:
(a) To change the street address of the Leased Premises;
(b) To inspect the Leased Premises and to make repairs, additions or
alterations to the Leased Premises;
(c) To show the Leased Premises to prospective purchasers,
mortgagees, or other persons having a legitimate interest in viewing the same,
and, at any time within one (1) year prior to the expiration of the Lease term
to persons wishing to rent the Leased Premises;
(d) During the last year of die, Lease term, to place and maintain
the usual "For Rent" sign in or on the Leased Premises;
(e) If Tenant shall theretofore have vacated the Leased Premises
(but not earlier than during the ninety (90) days of the Lease term), to
decorate, remodel, repair, alter or otherwise prepare the Leased Premises for
new occupancy; and
(f) To place and maintain "For Sale" signs on the Leased Premises
and on the exterior of the building on the Leased Premises.
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Landlord may enter upon the Leased Premises for any and all of said purposes and
may exercise any and all of the foregoing rights hereby reserved, during normal
business hours unless an emergency exists, without being deemed guilty of any
eviction or disturbance of Tenant's use or possession of the Leased Premises,
and without being liable in any manner to Tenant.
XV. QUIET ENJOYMENT
15.1 Quiet Enjoyment. So long as no Event of Default of Tenant has
occurred, Tenant's quiet and peaceable enjoyment of the Leased Premises shall
not be disturbed or interfered with by Landlord or by any person claiming by,
through or under Landlord.
XVI. SUBORDINATION OR SUPERIORITY
16.1 Subordination or Superiority. If the mortgagee or trustee named in
any first mortgage or first trust deed hereafter made shall agree that, if it
becomes the owner of the Leased Premises by foreclosure or deed in lieu of
foreclosure, it will recognize the rights and interest of Tenant under the Lease
and not disturb Tenant's use and occupancy of the Leased Premises if and so long
as no Event of Default of Tenant has occurred (which agreement may, at such
mortgagee's option, require attainment by Tenant), then all or a portion of the
rights and interests of Tenant under this Lease shall be subject and subordinate
to such first mortgage or first trust deed and to any and all advances to be
made thereunder, and to the interest thereon, and all renewals, replacements and
extensions thereof. Any such mortgagee or trustee may elect that, instead of
making this Lease subject and subordinate to its first mortgage or first trust
deed, the rights and interest of Tenant under this Lease shall have priority
over the lien of its mortgage or trust deed. Tenant agrees that it will, within
ten (10) days after demand in writing, execute and deliver whatever instruments
may be required, either to make this Lease subject and subordinate to such a
mortgage or trust deed, or to give the Lease priority over the lien of the
mortgage or trust deed, whichever alternative may be elected by the mortgagee or
trustee. If Tenant fails to execute and deliver any such instrument, Tenant does
hereby make, constitute and irrevocably appoint Landlord as its attorney in
fact, in its name, place and stead so to do.
XVII. SURRENDER
17.1 Surrender. Upon the termination of this Lease, whether by
forfeiture, lapse of time or otherwise, or upon termination of Tenant's right to
possession of the Leased Premises, Tenant will at once surrender and deliver up
the Leased Premises, together with all Improvements thereon, to Landlord, broom
swept, in good condition and repair, reasonable wear and tear excepted;
conditions existing because of Tenant's failure to perform maintenance, repairs
or replacements as required herein, or because of Tenant's particular use of the
Leased Premises (even if permitted pursuant to Section 1.4(a) hereof), shall not
be deemed "reasonable wear and tear". Tenant shall deliver to Agent all keys to
all doors therein. As used herein, the term "Improvements" shall include,
without limitation, all plumbing, lighting, electrical, heating, cooling and
ventilating fixtures and equipment, and all Alterations (as said term is defined
in Section 9.2 hereof) whether or not permitted under Section 9.2. All
Alterations, temporary or permanent, made in or upon the Leased Premises by
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Tenant shall become Landlord's property and shall remain upon the Leased
Premises on any such termination without compensation, allowance or credit to
Tenant; provided, however, that Landlord shall have the right to require Tenant
to remove any Alterations and restore the Leased Premises to their condition
prior to the making of such Alterations, repairing any damage occasioned by such
removal and restoration. Said right shall be exercised by Landlord giving
written notice thereof to Tenant on or before ninety (90) days after such
termination. If Landlord requires removal of any Alterations and Tenant does not
make such removal in accordance with this Section at the time of such
termination, or within ten (10) days after such request, whichever is later,
Landlord may remove the same (and repair any damage occasioned thereby), and
dispose thereof or, at its election, deliver the same to any other place of
business of Tenant or warehouse the same. Tenant shall pay to Landlord the costs
of such removal, repair, delivery and warehousing on demand.
17.2 Removal of Tenant's Property. Upon the termination of this Lease by
lapse of time, Tenant shall remove Tenant's articles of personal property
incident to Tenant's business ("Trade Fixtures"); provided, however, that Tenant
shall repair any injury or damage to the Leased Premises which may result from
such removal, and shall restore the Leased Premises to the same condition as
prior to the installation thereof. If Tenant does not remove Tenant's Trade
Fixtures from the Leased Premises prior to the expiration or earlier termination
of the Lease term, Landlord may, at its option, remove the same (and repair any
damage occasioned thereby) and dispose thereof or deliver the same to any other
place of business of Tenant or warehouse the same, and Tenant shall pay to
Landlord the cost of such removal, repair, delivery and warehousing on demand.
or Landlord may treat such Trade Fixtures as having been conveyed to Landlord
with this Lease as a Bill of Sale, without further payment or credit by Landlord
to Tenant.
17.3 Holding Over. Tenant shall have no right to occupy the Leased
premises or any portion thereof after the expiration of the Lease or after
termination of the Lease or of Tenant's right to Possession pursuant to Section
19.1 hereof. In the event Tenant or any party claiming by, through or under
Tenant holds over (including any assignee or sublessee), Landlord may exercise
any and all remedies available to it at law or in equity to recover possession
of the Leased Premises, and for damages. For each and every month or partial
month that Tenant or any party claiming by, through or under Tenant remains in
occupancy of all or any portion of the Leased Premises after the expiration of
the Lease or after termination of the Lease or Tenant's right to possession,
Tenant shall pay, as minimum damages and not as a penalty, monthly rental at a
rate equal to double the rate of Rent payable by Tenant hereunder immediately
prior to the expiration or other termination of the Lease or of Tenant's right
to possession. The acceptance by Landlord of any lesser sum shall be consumed as
a payment on account and not in satisfaction of damages for such holding over.
If the holding over occurs at the expiration of the Lease term or by reason of a
termination by mutual agreement of the parties, Landlord may, as an alternative
remedy, elect that such holding over shall constitute a renewal of this term for
one (1) year at a rental equal to 150% of the rate of Annual Base Rent payable
hereunder immediately prior to the expiration of the Lease, and upon all of the
other covenants and agreements contained in this Lease.
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XVIII. ENVIRONMENTAL CONDITIONS
18.1 "Environmental Condition" Defined. As used in this Lease, the
phrase "Environmental Condition" shall mean: (a) any advance condition relating
to surface water, ground water, drinking water supply, land, surface or
subsurface strata or the ambient air, and includes, without limitation, air,
land and water pollutants, noise, vibration, light and odors, or (b) any
condition which may result in a claim of Liability under the Comprehensive
Environment Response Compensation and Liability Act, as amended ("CERCLA"), or
the Resource Conservation and Recovery Act ("RCRA"), or any claim of violation
of the Clean Air Act, the Clear Water Act, the Toxic Substance Control Act
("TSCA"), or any claim of liability or of violation under any federal statute
hereafter enacted dealing with the protection of the environment or with the
health and safety of employees or members of the general public, or under any
rule, litigation, permit or plan under any of the foregoing, or under any law,
rule or regulation now or hereafter promulgated by the state in which the Leased
Premises are located, or any political subdivision thereof, relating to such
matters (collectively "Environmental Laws").
18.2 Compliance by Tenant. Tenant shall, at all times during the Lease
term, comply with all Environmental Laws applicable to the Leased Premises and
shall not, in the use and occupancy of the Leased Premises, cause or contribute
to, or permit or suffer any other party to cause or contribute to any
Environmental Condition on or about the Leased Premises. Without limiting the
generality of the foregoing, Tenant shall not, without the prior written consent
of Landlord, receive, keep, maintain or use on or about the Leased Premises any
substance as to which a filing with a local emergency planning committee, the
State Emergency Response Commission or the fire department having jurisdiction
over the Leased Premises is required pursuant to (S) 311 and/or (S) 312 of
CERCLA, as amended by the Superfund Amendment and Reauthorization Act of 1986
("SARA") (which latter Act includes the Emergency Planning and Community Right-
To-Know Act of 1986); in the event Tenant makes a filing pursuant to SARA, or
maintains substances as to which a filing would be required, Tenant shall
simultaneously deliver copies thereof to Agent or notify Agent in writing of the
presence of those substances.
18.3 Environmental Indemnity. Tenant will protect, indemnify and save
harmless the Landlord Protected Parties (as defined in Section 6.1), and all of
their respective agents, directors, officers and employees, and Landlord's
mortgagee, if any, of which Tenant is given written notice, from and against all
liabilities, obligations, claims, damages, penalties, causes of action, costs
and expenses (including, without limitation reasonable attorneys' fees and
expenses) of whatever kind or nature, contingent or otherwise, known or unknown,
incurred or imposed, based upon any Environmental Laws or resulting from any
Environmental Condition on or about the Leased Premises which occurs or is
contributed to during the Lease term. In case any action, suit or proceeding is
brought against any of the parties indemnified herein by man of any occurrence
described in this Section 18.3, Tenant will, at Tenant's expense, by counsel
approved by Landlord, resist and defend such action, suit or proceeding, or
cause the same to be resisted and defended. The obligations of Tenant under this
Section 18.3 shall survive the expiration or earlier termination of this Lease.
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18.4 Testing and Remedial Work. Landlord may conduct tests on or about
the Leased Premises for the purpose of determining the presence of any
Environmental Condition. If such tests indicate the presence of an Environmental
Condition on or about the Leased Premises which occurs or is contributed to
during the lease term, Tenant shall, in addition to its other obligations
hereunder, reimburse Landlord for the cost of conducting such tests. Without
limiting Tenant's liability under Section 18.3 hereof, in the event of any such
Environmental Condition, Tenant shall promptly and at its sole cost and expense,
take any and all steps necessary to remedy the same, complying with all
provisions of applicable laws and with Section 9.2(b) hereof, or shall, at
Landlord's election, reimburse Landlord for the cost to Landlord of remedying
the same. The reimbursement shall be paid by Tenant to Landlord in advance of
Landlord's performing such work based upon Landlord's reasonable estimate of the
cost thereof, and upon completion of such work by Landlord, Tenant shall pay to
Landlord any shortfall promptly after Landlord bills Tenant therefor, or
Landlord shall promptly refund to Tenant any excess deposit, as the case my be.
XIX. REMEDIES
19.1 Defaults. Tenant agrees that any one or more of the following events
shall be considered Events of Default as said term is used herein:
(a) Tenant shall be adjudged an involuntary bankrupt, or a decree or
order approving, as properly filed, a petition or answer filed against Tenant
asking reorganization of Tenant under the Federal bankruptcy laws as now or
hereafter amended, or under the laws of any state, shall be entered, and any
such decree or judgment or order shall not have been vacated or set aside within
sixty (60) days from the date of the entry or granting thereof; or
(b) Tenant shall file or admit the jurisdiction of the court and the
material allegations contained in any petition in bankruptcy or any petition
pursuant or purporting to be pursuant to the Federal bankruptcy laws as now or
hereafter amended or Tenant shall institute any proceeding or shall give its
consent to the institution of any proceedings for any relief of Tenant under any
bankruptcy or insolvency laws or any laws relating to the relief of debtors,
readjustment of indebtedness, reorganization, arrangements, composition or
extension; or
(c) Tenant shall make any assignment for the benefit of creditors or
shall apply for or consent to the appointment of a receiver for Tenant or any of
the property of Tenant; or
(d) The Leased Premises are levied upon by any revenue officer or
similar officer; or
(e) A decree or order appointing a receiver of the property of
Tenant shall be made and such decree or order shall not have been vacated or set
aside within sixty (60) days from the date of entry or granting thereof, or
(f) Tenant shall abandon the Leased Premises or vacate the same
during the term hereof, or
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(g) Tenant shall default in any payment of Rent or in any other
payment required to be made by Tenant hereunder when due as herein provided (all
of which other payments shall be deemed "additional rent" payable hereunder), or
shall default, under Section 6.2 or Section 21.2 hereof, and any such default
shall continue for five (5) days after notice thereof in writing to Tenant; or
(h) Tenant shall fail to contest the validity of any lien or claimed
lien and give security to Landlord to assess payment thereof, or, having
commenced to contest the same and having given such security, shall fail to
prosecute such contest with diligence, or shall fail to have the same released
and satisfy any judgment rendered thereon, and such default continues for ten
(10) days after notice thereof in writing to Tenant; or
(i) Tenant shall default in keeping, observing or performing any of
the other covenant or agreements herein contained to be kept, observed and
performed by Tenant, and such default shall continue for thirty (30) days after
notice thereof in writing to Tenant or shall exist at the expiration of the
Lease term; or
(j) Tenant shall default in keeping, observing or performing any
covenant or agreement herein contained to be kept, observed and performed by
Tenant, which default may result in the imminent risk of damage to property
(including without limitation the Leased Premises or the improvements thereon)
or injury to or death of persons, and such default shall not be cured
immediately upon notice to Tenant(which notice may be oral); or
(k) Tenant shall default (with time to cure expired) under any other
lease made by Tenant for any other premises owned by Landlord or managed by
Agent or by any successor to Agent as its agent for Landlord or the beneficiary
of Landlord; or
(l) Tenant shall repeatedly be law in the payment of Rent or other
charges required to be paid hereunder or shall repeatedly default in the
keeping, observing, or performing of any other covenants or agreements herein
contained to be kept, observed or performed by Tenant (provided notice of such
payment or other defaults shall have, been given to Tenant, but whether or not
Tenant shall have timely cured any such payment or other defaults of which
notice was given).
19.2 Remedies. Upon the occurrence of any one or more Events of Default,
Landlord may at its election terminate this Lease or terminate Tenant's right to
possession only, without terminating the Lease. Upon termination of the Lease,
or upon any termination of Tenant's right to possession without termination of
the Lease, Tenant shall surrender possession and vacate the Leased Premises
immediately, and deliver possession thereof to Landlord, and Tenant hereby
grants to Landlord the full and free right, without demand or notice of any kind
to Tenant (except as hereinabove expressly provided for), to enter into and upon
the Leased Premises in such event with or without process of law and to
repossess the Leased Premises as Landlord's former estate and to expel or remove
Tenant and any others who may be occupying or within the Leased Premises without
being deemed in any manner guilty of trespass, eviction, or forcible entry or
detainer, without incurring any liability for any damage resulting therefrom and
without relinquishing Landlord's rights to Rent or any other right
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given to Landlord hereunder or by operation of law. Upon termination of the
Lease, Landlord shall be entitled to recover as damages all Rent and other sums
due and payable by Tenant on the date of termination, plus (a) an amount equal
to the value, on an annual basis, of the excess (discounted to present value at
six percent (6 %) annually) of (i) the Rent and other sums provided herein to be
paid by Tenant for the residue of the stated term hereof over (ii) the fair
rental value of the Leased Premises for the residue of the stated term taking
into account the time and expenses necessary to obtain a replacement tenant or
tenants, including expenses hereinafter described relating to recovery of the
Leased Premises, preparation for releasing and for reletting itself), and (b)
the cost of performing any other covenants to be performed by Tenant. If
Landlord elects to terminate Tenant's right to possession only without
terminating the Lease, Landlord may, at Landlord's option, enter on to the
Leased Premises, remove Tenant's signs and other evidences of tenancy, and take
and hold possession thereof as hereinafter provided, without such entry and
possession terminating the Lease or releasing Tenant, in whole or in part, from
Tenant's obligations to pay the Rent and other than provided herein to be paid
by Tenant for the full term or from any other of its obligations under this
Lease. Landlord may relet all or any part of the Leased Premises for such Rent
and upon such terms as shall be satisfactory to Landlord (including the right to
relet the Leased Premises as a part of a larger area the right to change the
character or use made of the Leased Promises). For the purpose of such releting,
Landlord may decorate or make any repairs, changes, alterations or additions in
or to the Leased Premises that may be necessary or convenient. If Landlord does
not relet the Leased Premises, Tenant shall pay to Landlord on demand damages
equal to the amount of the Rent, and other sums provided herein to be paid by
Tenant for the remainder of the Lease term. If the Leased Premises are relet and
a sufficient sum shall not be realized from such releting after paying off of
the expenses of such decorations, repairs, changes, alterations, additions, the
expenses of such releting and the collection of the rent accruing therefrom
(including, but not by way of limitation. attorneys' fees and brokers'
commissions), to satisfy the Rent and other sums herein provided to be paid for
the remainder of the Lease term, Tenant shall pay to Landlord on demand any
deficiency and Tenant agrees that Landlord may file suit to recover any Rent or
other sums falling due under the terms of this section from time to time.
Landlord shall use reasonable efforts to mitigate its damages arising out of
Tenant's default; Landlord shall not be deemed to have failed to use such
reasonable efforts by reason of the fact that Landlord has leased or sought to
lease other vacant premises owned by Landlord (or Landlord's beneficiary, if
Landlord is an Illinois land trust), in preference to reletting the Leased
Premises, or by reason of the fact that Landlord has sought to relet the Leased
Premises at a rental rate higher than that payable by Tenant under the Lease
(but not in excess of the then current market rental rate).
19.3 Tenant's Opportunity to Cure. If Tenant defaults under Section
l9.1(i), and such default cannot with due diligence be cured within a period of
thirty (30) days, and if notice thereof in writing shall have been given to
Tenant, and if Tenant, prior to the expiration of thirty (30) days from and
after the giving of such notice, commences to eliminate the cause of such
default and proceeds diligently and with reasonable dispatch to take all steps
and do all work required to cure such default and does so cure such default,
then an Event of Default shall not be deemed to have occurred; provided,
however, that Tenant's right to core hereunder shall not extend beyond the
expiration of the Lease term, and provided further that the curing of any
default in such manner shall
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not be construed to limit or restrict Landlord's remedies for any other default
which becomes an Event of Default.
19.4 Landlord's Right to Cure. Landlord may, but shall not be obligated
to, cure any default by Tenant (specifically including, but not by way of
limitation, Tenant's failure to obtain insurance, make repairs, or satisfy lien
claims) and whenever Landlord so elects, all costs and expenses paid by Landlord
in curing such default, including without limitation reasonable attorneys' fees,
shall be so much additional rent due on the next rent date after such payment
together with interest (except in the case of said attorney's fees) at the
highest rate then payable by Tenant in the state in which the Leased Premises
are located or, in the absence of such a maximum rate, at a rate per annum equal
to two per cent (2%) in excess of the announced base rate or equivalent rate of
interest of American National Bank and Trust Company of Chicago (as publicly
announced by said bank) in effect on the date of such advance, from the date of
the advance to the date of repayment by Tenant to Landlord.
19.5 Remedies Cumulative. No remedy herein or otherwise conferred upon or
reserved to Landlord shall be considered to exclude or suspend any other remedy
but the same shall be cumulative and shall be in addition to every other remedy
given hereunder, or now or hereafter existing at law or in equity or by statute,
and every power and remedy given by this Lease to Landlord may be exercised from
time to time and so often as occasion may arise or as may be deemed expedient.
19.6 No Waiver. No delay or omission of Landlord to exercise any right or
power arising from any default shall impair any such right or power or be
construed to be a waiver of any such default or any acquiescence therein. No
waiver of any breach of any of the covenants of this Lease shall be construed,
taken or held to be a waiver of any other breach, or as a waiver, acquiescence
in or consent to any further or succeeding breach of the same covenant. The
acceptance by Landlord of any payment of Rent after the termination by Landlord
of this Lease or of Tenant's right to possession hereunder shall not, in the
absence of agreement in writing to the contrary by Landlord, be deemed to
restore this Lease or Tenant's right to possession hereunder, as the case may
be, but shall be construed as a payment on account, and not in satisfaction of
damages due from Tenant to Landlord.
XX. SECURITY DEPOSIT
20.1 Security Deposit. To secure the faithful performance by Tenant of all
the terms, covenants and conditions in this Lease set forth and contained on the
part of the Tenant to be fulfilled, kept, observed and performed, including, but
without limiting the generality of the foregoing, such terms, covenants and
conditions which become applicable upon the expiration or termination of the
same or upon termination of Tenant's right to possession pursuant to Section
19.2 of the Lease, Tenant has deposited herewith the Security Deposit with Agent
on the understanding (a) that the Security Deposit or any portion thereof not
previously applied, or from time to time such other portions thereof, may be
applied to the curing of any default that may then exist, without prejudice to
any other remedy or remedies which Landlord may have on account thereof, and
upon
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such application Tenant shall pay Agent on demand the amount so applied which
shall be added to the Security Deposit so the same may be restored to its
original amount, (b) that should the Leased Premises be conveyed by Landlord or
should Agent cease to be the agent of the beneficiary or beneficiaries of
Landlord, the Security Deposit or any portion thereof not previously applied may
be turned over to Landlord's grantee or the new agent, as the case may be, and
if the same be turned over as aforesaid, Tenant hereby releases Landlord and
Agent from any and all liability with respect to the Security Deposit and/or its
application or return, and Tenant agrees to look to such grantee or new agent,
as the case may be, for such application or return; (c) that Landlord shall have
no personal liability with respect to said sum and Tenant shall look exclusively
to Agent or its successors pursuant to subsection (b) hereof for return of said
sum when Tenant is entitled hereunder to such return; (d) that Agent or its
successor shall not be obligated to hold the Security Deposit as a separate
fund, but on the contrary may commingle the same with its other funds; (e) that
if Tenant shall faithfully fulfill, keep, perform and observe all of the
covenants, conditions, and agreements in this Lease set forth and contained on
the part of Tenant to be fulfilled, kept, performed and observed, the Security
Deposit or the part or portion thereof not previously applied shall be returned
to the Tenant without interest no later than thirty (30) days after the
expiration of the term of this lease or any renewal or extension thereof,
provided Tenant has vacated the Leased Premises and surrendered possession
thereof to Landlord at the expiration of said term or any extension or renewal
thereof as provided herein; (f) in the event that Landlord terminates the Lease
or Tenant's right to possession pursuant to Section 19.2 of this Lease, Agent
may apply the Security Deposit against all damages suffered to the date of such
termination and/or may return the Security Deposit to apply against such damages
as may be suffered or shall accrue thereafter by reason of Tenant's default; and
(g) in the event any bankruptcy insolvency, reorganization or other creditor
debtor proceedings shall be instituted by or against Tenant, or its successors
or assigns, the Security Deposit shall be deemed to be applied first to the
payment of any Rent and/or other sums due Landlord for all periods prior to the
institution of such proceedings, and the balance, if any, of the Security
Deposit may be retained or paid to Landlord in partial liquidation of Landlord's
damages.
XXI. MISCELLANEOUS
21.1 Non Merger. Notwithstanding the acquisition of the Leased Premises
and/or Real Estate or the beneficial interest or ownership thereof by the Lessee
or the fact that the interests of Lessor and Lessee hereunder shall be held by
the same person or persons, there shall not be a merger of leasehold estate into
the fee and this Lease shall remain valid and in full force and effect in
accordance with its terms.
21.2 Tenant's Statement. Tenant shall furnish to Landlord, within ten (10)
days after written request therefor from Landlord, a copy of the then most
recent audited and certified statement of Tenant. It is mutually agreed that
Landlord may deliver a copy of such statements to any mortgagee or prospective
mortgagee of Landlord, or any prospective purchaser of the Leased Premises, but
otherwise Landlord shall treat such 6mtements and information contained therein
as confidential.
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21.3 Estoppel Certificates. Tenant shall at any time and from time to time
upon not less than ten (10) days prior written request from Landlord, execute,
acknowledge and deliver to Landlord, in form reasonably satisfactory to Landlord
and/or Landlord's mortgagee, a written statement certifying (if true) that
Tenant has accepted the Leased Premises, that this lease is unmodified and in
full force and effect (or, if there have been modifications, that the same is in
full force and effect as modified and stating the modifications), that Landlord
is not in default hereunder, the date to which Rent has been paid in advance, if
any, and such other accurate certifications as may reasonably be required by
Landlord or Landlord's mortgagee, agreeing to give copies to any mortgagee of
Landlord of all notices by Tenant to Landlord and agreeing to afford Landlord's
mortgagee a reasonable opportunity to cure any default of Landlord. It is
intended that any such statement delivered pursuant to this Section may be
relied upon by any prospective purchaser or mortgagee of the Leased Premises and
their respective successors and assigns.
21.4 Amendments Must Be In Writing. None of the covenants, terms or
conditions of this Lease, to be kept and performed by either party, shall in any
manner be altered, waived, modified, changed or abandoned except by a written
instrument, duly signed and delivered by the other party.
21.5 Notices. All notices to or demands upon Landlord or Tenant desired or
required to be given under any of the provisions hereof shall be in writing. Any
notices or demands from Landlord to Tenant shall be deemed to have been duly and
sufficiently given when received or refused if sent by United States registered
or certified mail in an envelope property stamped and addressed or if sent by
courier service, with receipt, to Tenant at Tenant's Address or at such other
address as Tenant may theretofore have designated by written notice to landlord,
and any notices or demands from Tenant to landlord shall be deemed to have been
duly and sufficiently given if mailed by United States registered or certified
mail in an envelope properly stamped and addressed or sent by courier service,
with receipt, to Landlord at Landlord's Address or at such other address or to
such other agent as Landlord or Agent may theretofore have designated by written
notice to Tenant, with a copy to any first mortgagee of the Leased Premises, the
identity and address of which Tenant shall have received written notice.
21.6 Short Form Lease. This Lease shall not be recorded, but the parties
agree, at the request of either of them, to execute a Short Form Lese for
recording, containing the names of the parties, the legal description and the
term of the Lease.
21.7 Time of Essence. Time is of the essence of this Lease, and all
provisions herein relating thereto shall be strictly construed.
21.8 Relationship of Parties. Nothing contained herein shall be deemed or
construed by the parties hereto, or by any third party, as creating the
relationship of principal and agent or of partnership, or of joint venture, by
the parties hereto, it being understood and agreed that no provision contained
in this Lease nor any acts of the Parties hereto shall be deemed to create any
relationship other than the relationship of landlord and tenant.
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21.9 Captions. The captions of this Lease are for convenience only and
are not to be construed as part of this Lease and shall not be construed as
defining or limiting in any way the scope and intent of the provisions hereof.
21.10 Severability. If any term or provision of this Lease shall to any
extent be held invalid or unenforceable, the remaining terms and provisions of
this Lease shall not be affected thereby, but each term and provision of this
Lease shall be valid and be enforced to the full extent permitted by law.
21.11 Law Applicable. This Lease shall be construed and enforced in
accordance with the laws of the state where the Leased Premises are located.
21.12 Covenants Binding on Successors. All of the covenants, agreements,
conditions and undertakings contained in this Lease shall extend and inure to
and be binding upon the heirs, executors, administrators, successors and assigns
of the respective parties hereto, the same as if they were in every case
specifically named, and wherever in this Lease reference is made to either of
the parties hereto, it shall be held to include and apply to, wherever
applicable, the heirs, executors, administrators, successors and assigns of such
party. Nothing herein contained shall be construed to grant or confer upon any
person or persons, firm, corporation or governmental authority, other than the
parties hereto, their heirs, executors, administrators, successors and assigns,
any right, claim or, privilege by virtue of any covenant, agreement, condition
or undertaking in this Lease contained.
21.13 Brokerage. Tenant warrants that it has had no dealings with any
broker or agent in connection with this Lease. Tenant covenants to pay, hold
harmless, indemnify and defend Landlord from and against any and all costs,
expenses or liability for any compensation, commissions and charges claimed by
all brokers and agents with respect to this Lease or the negotiation thereof.
21.14 Landlord Means Owners. The term "Landlord" as used in this Lease, so
far as covenants or obligations on the part of the Landlord are concerned, shall
be limited to mean and include only the owner or owners at the time in question
of the fee of the Leased Premises, and in the event of any transfer or transfers
of the title to such fee, Landlord herein named (and in case of any subsequent
transfer or conveyances, the then grantor) shall be automatically freed and
relieved, from and after the date of such transfer or conveyance, of all
liability as respects the performance of any covenants or obligations on the
part of Landlord contained in this Lease thereafter to be performed; provided
that any funds in the hands of such Landlord or the then grantor at the time of
such transfer, in which Tenant has an interest, shall be turned over to the
grantee, and any amount then due and payable to Tenant by Landlord or the then
grantor under any provisions of this Lease shall be paid to Tenant.
21.15 Lender's Requirements. If any mortgagee or committed financier of
Landlord should require, as a condition precedent to the closing of any loan or
the disbursal of any money under any loan, that this Lease be amended or
supplemented in any manner (other than in the description of the Leased
Premises, the term, the purpose or the rent or other charges hereunder, or in
any other regard as will substantially or materially affect the rights of Tenant
under this Lease), Landlord shall give
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written notice thereof to Tenant, which notice shall be accompanied by a Lease
Supplement Agreement embodying such amendments and supplements. Tenant shall,
within ten (10) days after the effective date of Landlord's notice, either
consent to such amendments and supplements (which consent shall not be
unreasonably withheld) and execute the tendered Lease Supplement Agreement, or
deliver to Landlord a written statement of its reason or reasons for refusing to
so consent and execute. Failure of Tenant to respond within said ten (10) day
period shall be a default under this Lease without further notice. If Landlord
and Tenant are then unable to agree on a Lease Supplement Agreement satisfactory
to each of them and to the lender within thirty (30) days after delivery of
Tenant's written statement, Landlord shall have the right to terminate this
Lease within sixty (60) days after the end of said thirty (30) day period.
21.16 Signs. Tenant shall install no exterior sign without Landlord's
prior written approval of detailed plans and specifications therefor. If
Landlord has a standard form of identity sign for tenants in the industrial park
of which the Leased Premises are a part, and if Tenant desires to have an
identity sign on the Leased Premises, Tenant shall advise Landlord of the name
it desires to have on its sign, and Landlord shall install its standard sign
showing such name. Tenant shall reimburse Landlord for Landlord's costs of
producing and erecting said sign within ten (10) days after being billed
therefor by Landlord.
21.17 Force Majeure. Landlord shall not be deemed in default with respect
to any of the terms, covenants and conditions of this Lease on Landlord's part
to be performed. if Landlord's failure to timely perform same is due in whole or
in part to any strike, lockout, labor trouble (whether legal or illegal), civil
disorder, failure of power, restrictive governmental laws and regulations,
riots, insurrections, war, shortages, accidents, casualties, acts of God, acts
caused directly by Tenant or Tenant's agents, employees and invitees, or any
other cause beyond the reasonable control of Landlord.
21.18 Landlord's Expenses. Tenant agrees to pay on demand Landlord's
expenses, including reasonable attorneys' fees, expenses and administrative
hearing and court costs incurred either directly or indirectly in enforcing any
obligation of Tenant under this Lease, in curing any default by Tenant as
provided in Section 19.4, in connection with appearing, defending or otherwise
participating in any action or proceeding arising from the filing, imposition,
contesting, discharging or satisfaction of any lien or claim for lien, in
defending or otherwise participating in any legal proceedings initiated by or on
behalf of Tenant wherein Landlord is not adjudicated to be in default under this
Lease, or in connection with any investigation or review of any conditions or
documents in the event Tenant requests Landlord's agreement, approval or consent
to any action of Tenant which may be desired by Tenant or required of Tenant
hereunder.
21.19 Execution or Lease by Landlord. The submission of this document for
examination and negotiation does not constitute an offer to lease, or a
reservation of, or option for, the Leased Premises and this document shall
become effective and binding only upon the execution and delivery hereof by
Tenant and by Landlord. All negotiations, considerations, representations and
understandings between Landlord and Tenant are incorporated herein.
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21.20 Tenant's Authorization. Tenant shall furnish to Landlord. within ten
(10) days after written request therefor from Landlord, certified resolutions of
Tenant's directors or other governing person or body authorizing execution and
delivery of this Lease and performance by Tenant of its obligations hereunder,
and evidencing that the person who physically executed the Lease on behalf of
Tenant was duly authorized to do so.
Landlord and Tenant have executed this Lease the day and year first above
written.
LANDLORD: KENNETH A. HENDRICKS and DIANE M. HENDRICKS,
d/b/a HENDRICKS COMMERCIAL PROPERTIES
By:
------------------------------------------
Kenneth A. Hendricks
By:
------------------------------------------
Diane M. Hendricks
TENANT: AMERICAN BUILDERS & CONTRACTORS SUPPLY
CO., INC.
By:
------------------------------------------
Kenneth A. Hendricks
President, Chief Executive Officer and
Sole Shareholder
ATTEST:
By:
--------------------------
Diane M. Hendricks,
Executive Vice-President
and Secretary
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STATE OF WISCONSIN )
) SS.
COUNTY OF ROCK )
I, ________________________________________, a Notary Public in and for
said County, in the State aforesaid, do hereby certify that Kenneth A. Hendricks
and Diane M. Hendricks, personally known to me to be the same persons whose
names are subscribed to the foregoing instrument, appeared before me this day in
person and acknowledged that they signed, sealed and delivered the said
instrument as their free and voluntary act, for the uses and purposes therein
set forth.
GIVEN under my hand and Notarial Seal this _________ day of
____________________, 19__.
------------------------------------
Notary Public
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<PAGE>
STATE OF WISCONSIN )
) SS.
COUNTY OF ROCK )
I, ________________________________________, a Notary Public in and for
said County, in the State aforesaid, do hereby certify that Kenneth A.
Hendricks, personally known to me to be the President, Chief Executive Officer
and sole shareholder of American Builders & Contractors Supply Co., Inc., a
Delaware corporation, and Diane M. Hendricks, personally known to me to be the
Secretary of said corporation and personally known to me to be the persons whose
names are subscribed to the foregoing instrument, appeared before me this day in
person and severally acknowledged that they signed and delivered the said
instrument as President, Chief Executive Officer and Sole shareholder, and
Executive Vice President and Secretary respectively of said corporation, and
caused the Corporate Seal of said corporation to be affixed thereto, pursuant to
authority given by the Board of Directors of said corporation, as their free and
voluntary act and as the free and voluntary act and deed of said corporation,
for the uses and purposes therein set forth.
GIVEN under my hand and Notarial Seal this _____ day of____________, 19__.
----------------------------------
Notary Public
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<PAGE>
EXHIBIT A
LEGAL DESCRIPTION OF THE LEASED PREMISES
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EXHIBIT B
SITE PLAN OF THE LEASED PREMISES
See the following ____ page(s) attached hereto and made a part hereof.
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COMPILATION
of
SECOND AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
As Amended
This Compilation is made and prepared by American Builders & Contractors
Supply Co., Inc., a Delaware corporation ("Borrower"), with its principal place
of business and chief executive office at One ABC Parkway, Beloit, Wisconsin
53511, as follows:
RECITALS
--------
a. Borrower is party to the certain Amended and Restated Loan and
Security Agreement dated as of July 1, 1993, by and among Borrower,
NationsBank of Texas, N.A., in its capacity as Agent ("Agent"), American
National Bank and Trust Company of Chicago, in its capacity as Co-Agent
(the "Co-Agent"), and the following financial institutions: NationsBank of
Texas, N.A., American National Bank and Trust Company of Chicago,
BankAmerica Business Credit, Inc., LaSalle Business Credit, Inc., Harris
Trust and Savings Bank, Fleet Capital Corporation and Sanwa Business Credit
Corporation (each a "Lender" and collectively "Lenders"), as amended by
each of the following:
First Amendment to Amended and Restated Loan and Security Agreement
dated as of September 2, 1994;
Waiver and Second Amendment to Amended and Restated Loan and Security
Agreement dated as of June 19, 1995;
Third Amendment to Amended and Restated Loan and Security Agreement
dated as of September 18, 1995;
Waiver and Fourth Amendment to Amended and Restated Loan and Security
Agreement dated as of September 30, 1995;
Waiver and Fifth Amendment to Amended and Restated Loan and Security
Agreement dated as of December 29, 1995;
Waiver and Sixth Amendment to Amended and Restated Loan and Security
Agreement dated as of February 8, 1996;
Waiver and Seventh Amendment to Amended and Restated Loan and Security
Agreement undated but entered into as of September 10, 1996;
Waiver and Eighth Amendment to Amended and Restated Loan and Security
Agreement dated as of March 28, 1996; and
<PAGE>
Ninth Amendment to Amended and Restated Loan and Security Agreement
dated as of May 7, 1997;
(collectively the "Loan and Security Agreement"), pursuant to which the
Lenders have extended financial accommodations to the Borrower from time to
time as provided therein.
b. For ease of reference, Borrower has prepared the following
compilation to present the Loan and Security Agreement in a single document
which is the substantive equivalent of the Loan and Security Agreement, as
follows:
COMPILATION
1. DEFINITIONS.
1.1 General Terms. The terms "Agent", "Borrower", "Co-Agent",
"Lender" and "Lenders" shall have the meanings defined for such terms,
respectively, in the above preamble and Recitals. In addition, when used herein,
the following terms shall have the following meanings:
"Account Debtor" shall mean the party who is obligated on or under an
Account.
"Accounts" shall mean all present and future accounts receivable and
other rights of the Borrower to payment for goods sold or leased or for
services rendered, which are not evidenced by instruments or chattel paper,
and whether or not they have been earned by performance.
"Accounts Trial Balance" shall have the meaning assigned to such term
in Section 3.1.
"Affiliate" shall mean any Person (a) that directly or indirectly,
through one or more intermediaries, controls or is controlled by, or is
under common control with the Borrower, (b) that directly or beneficially
owns or holds twenty-five percent (25%) or more of any class of the voting
stock of the Borrower or (c) twenty-five percent (25%) or more of any class
of whose voting stock (or in the case of a Person which is not a
corporation, twenty-five percent (25%) or more of the equity interest) is
owned directly or beneficially or held by the Borrower.
"Affiliates Investments Limit" means an amount, determined as of the
first day of each January, April, July and October (which amount, upon each
such determination, shall remain fixed until the next determination), equal
to the sum of Ten Million Dollars ($10,000,000.00) plus an amount (not less
than $0.00) equal to ten percent (10.0%) of the amount by which the net
income of the Borrower and its Subsidiaries, determined on a consolidated
basis in accordance with GAAP for the period (taken as one accounting
period) beginning on January 1, 1997 and ending on the last day of the most
recently completed fiscal quarter, exceeds the aggregate amount of
dividends, if any, paid by the Borrower during such period pursuant to, and
to the extent allowed by, clause (i) of Section 8.10."
2
<PAGE>
"Agent" shall mean NationsBank of Texas, N.A. in its capacity as Agent
hereunder, and any successor agent hereunder."
"Applicable Margin" shall mean (a) with respect to a Floating Rate
Loan, an amount equal to zero percent (0.00%), and (b) with respect to a
Eurodollar Loan, an amount equal to one and one-quarter percent (1.25%).
"Blocked Accounts" shall have the meaning assigned to such term in
Section 3.6.
"Borrowing Date" shall mean a date on which a Eurodollar Loan is made
hereunder.
"Borrowing Notice" shall have the meaning ascribed to such term in
Section 2.11.
"Business Day" shall mean (a) with respect to any borrowing, payment
or rate selection of Eurodollar Loans, a day other than Saturday or Sunday
on which banks are open for business in Dallas, Texas and on which dealings
in United States Dollars are carried in the London interbank market and (b)
for all other purposes, a day other than Saturday or Sunday on which banks
are open for business in Dallas, Texas.
"Co-Agent" shall mean American National Bank and Trust Company of
Chicago in its capacity as Co-Agent hereunder, and any successor co-agent
hereunder.
"Code" shall mean the Uniform Commercial Code of the State of
Illinois.
"Collateral" shall mean all property and interests in property now
owned or hereafter acquired by the Borrower or any other Person in or upon
which a security interest, lien or mortgage is granted to the Agent or any
Lender by the Borrower or such other Person in order to secure the
Liabilities, whether under this Agreement, the other Financing Agreements
or under any other documents, instruments or writings executed by the
Borrower or any other Person and delivered to the Agent or any Lender.
"Collateral Report" shall have the meaning assigned to such term in
Section 3.1.
"Collecting Banks" shall have the meaning assigned to such term in
Section 3.6.
"Corporate Base Rate" shall mean the prime or base rate of interest
publicly announced from time to time by the Agent, whether or not such rate
is the best rate available. Any change in the Corporate Base Rate shall be
effective as of the effective date stated in the announcement by the Agent
of such change.
"Default" shall mean the occurrence or existence of any one or more of
the following events: (a) the Borrower fails to pay any of the Liabilities
when such Liabilities are due, declared due or demanded; (b) the Borrower
or any guarantor of the Liabilities fails or neglects to perform, keep or
observe any of the covenants, conditions, promises, or agreements contained
in this Agreement or any of the other Financing Agreements, and in the
3
<PAGE>
case of failure or neglect to perform, keep or observe any of the
covenants, conditions, promises or agreements contained in Sections 7.1
(solely with respect to the Borrower's obligations to keep its books or
records and accounts in accordance with GAAP), 7.3, 7.4, 7.8 or 7.11, such
failure or neglect shall continue for ten (10) days after an officer of the
Borrower located in Beloit, Wisconsin learns thereof or ten (10) days after
the Agent provides the Borrower with written notice thereof; (c) any
written warranty or representation heretofore, now or hereafter made by the
Borrower, or any guarantor of the Liabilities in connection with this
Agreement or any of the other Financing Agreements is untrue or incorrect
in any material respect, or any information contained in any schedule,
certificate, statement, report, financial data, notice, or writing
furnished at any time by the Borrower to the Agent or any Lender is untrue
or incorrect in any material respect, on the date as of which the facts set
forth therein are stated or certified; (d) judgments or orders requiring
aggregate payments in excess of one Hundred Thousand Dollars ($100,000),
for which the Borrower's insurer has not admitted liability, in writing, or
assumed the continued defense in the case where the judgment arises, shall
be rendered against the Borrower and such judgments or orders shall remain
unsatisfied or undischarged and in effect for thirty (30) consecutive days
without a stay of enforcement or execution; (e) a notice of lien, levy, or
assessment is filed or recorded with respect to ten percent (10%) or more
of the Collateral by the United States, or any department, agency or
instrumentality thereof, or by any state, county, municipality or other
governmental agency or any taxes or debts owing at any time or times
hereafter to any one or more of them become a lien upon ten percent (10%)
or more of the Collateral; provided, that this clause (e) shall not apply
to any liens, levies, or assessments which the Borrower or its Subsidiary
is contesting in good faith (provided the Borrower or its Subsidiary has
complied with the provisions of clauses (a) and (b) of Section 7.4) or
which relate to current taxes not yet due and payable; (f) ten percent
(10%) or more of the assets of the Borrower or any of its Subsidiaries or
the Collateral is attached, seized, subjected to a writ or distress
warrant, or is levied upon, or comes within the possession of any receiver,
trustee, custodian or assignee for the benefit of creditors and on or
before the thirtieth (30th) day thereafter such assets are not returned to
the Borrower or the owner thereof, as applicable, and/or such writ,
distress warrant or levy is not dismissed, stayed or lifted; (g) a
proceeding under any bankruptcy, reorganization, arrangement of debt,
insolvency, readjustment of debt or receivership law or statute is filed
against the Borrower, any of its Subsidiaries or any guarantor of the
Liabilities and such proceeding remains undismissed and unstayed for a
period of sixty (60) days, or a proceeding under any bankruptcy,
reorganization, arrangement of debt, insolvency or receivership law or
statute is filed by the Borrower, any of its Subsidiaries or any guarantor
of the Liabilities, or the Borrower, any of its Subsidiaries or any
guarantor of the Liabilities makes an assignment for the benefit of
creditors, or the Borrower, any of its Subsidiaries or any guarantor of the
Liabilities authorizes any of the foregoing by proper corporate action, as
applicable; (h) the Borrower or any of its Subsidiaries voluntarily or
involuntarily dissolves or is dissolved; (i) the Borrower, any of its
Subsidiaries or any guarantor of the Liabilities becomes insolvent or fails
generally to pay its debts as they become due; (j) the Borrower, any of its
Subsidiaries or any guarantor of the Liabilities is enjoined, restrained,
or in any way prevented by the order of any court or any administrative or
regulatory agency from conducting all or any material part of its business
affairs; provided, that the affected business affairs of any guarantor of
the Liabilities have a direct impact upon the business affairs of the
Borrower; (k) a breach by the
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Borrower, any of its Subsidiaries or any guarantor of the Liabilities shall
occur under any material agreement, document or instrument (other than an
agreement, document or instrument evidencing the lending of money), whether
heretofore, now or hereafter existing between the Borrower, any of its
Subsidiaries or such guarantor and any other Person, and such breach shall
continue beyond any applicable cure period contained in such agreement,
document or instrument; provided, that with respect to any guarantor of the
Liabilities, such agreement, document or instrument pertains to the
business affairs of the Borrower; (1) a breach by the Borrower, any of its
Subsidiaries or any guarantor of the Liabilities shall occur under any
written agreement, document or instrument evidencing the lending of money,
except for trade payables and normal accruals arising in the ordinary
course of business which are not evidenced by any promissory note or
similar written instrument, with respect to which the aggregate principal
balance is equal to or greater than Two Hundred Thousand Dollars
($200,000), whether theretofore, now or hereafter existing between the
Borrower, any of its Subsidiaries or such guarantor and any other Person,
and the effect thereof would be to permit the acceleration of the
indebtedness thereunder; provided, that with respect to any guarantor of
the Liabilities, such written agreement, document or instrument pertains to
the business affairs of the Borrower and provided further, that the Default
created by this clause (1) shall exist only for so long as the relevant
indebtedness may be accelerated; (m) any guarantor of the Liabilities shall
terminate or revoke the obligations of such guarantor under the applicable
guarantee agreement or breach any of the terms of such guarantee agreement
or any of the other Financing Agreements to which such guarantor is a
party; (n) a breach shall occur under the Subordination Agreement, or a
breach or default shall occur under the Senior Subordinated Notes or the
Indenture; (o) there shall occur any loss, theft, substantial damage or
destruction of any item or items of Collateral (a "Loss") if (i) the amount
of such Loss with respect to which an insurer has not admitted liability,
in writing, within a reasonable time after the occurrence of such Loss,
exceeds Two Hundred Fifty Thousand Dollars ($250,000) in the aggregate or
(ii) any such Loss results in an interruption of the business of the
Borrower or any of its Subsidiaries (which shall conclusively be presumed
to concern more than one (1) business location of the Borrower) which is
not, in the Agent's reasonable discretion, adequately covered by business
interruption insurance; (p) the Borrower, any of its Subsidiaries or any
guarantor of the Liabilities shall be indicted for any crime for which
forfeiture of a material amount of its or his property is a potential
penalty; (q) Kenneth A. Hendricks or his wife, their personal
representatives and estates, cumulatively shall cease to own either
directly or indirectly less than fifty-one percent (51%) of the Borrower's
outstanding voting securities; and (r) a material and adverse change shall
occur in the business, operations or financial condition of the Borrower or
any of its Subsidiaries or a material and adverse change shall occur in the
financial condition or the business affairs pertaining to the Borrower of
any guarantor of the Liabilities.
"EBITDA" means net income before interest, taxes depreciation and
amortization, determined on a consolidated basis for the Borrower and its
Subsidiaries in accordance with GAAP.
"Eligible Accounts" shall have the meaning assigned to such term in
Section 3.2.
"Eligible Inventory" shall have the meaning assigned to such term in
Section 3.10.
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"Environmental Laws" shall mean all federal, state and local laws,
statutes, rules, regulations, ordinances, programs, permits, guidances,
orders and consent decrees relating to health, safety and environmental
matters applicable to the business and property of the Borrower and its
Subsidiaries. Such laws and regulations include but are not limited to the
Resource Conservation and Recovery Act, 42 U.S.C. (S) 6901 et seq., as
amended; the Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA"), 42 U.S.C. (S) 9601 et seq., as amended; the Toxic
Substance Act, 15 U.S.C. (S) 2601 et seq., as amended; the Clean Water Act,
33 U.S.C. (S) 466 et seq., as amended; the Clean Air Act, 42 U.S.C. (S)
7401 et seq., as amended; state and federal superlien and environmental
cleanup programs; and U.S. Department of Transportation regulations.
"Environmental Notice" shall mean any summons, citation, directive,
information request, notice of potential responsibility, notice of
violation or deficiency, order, claim, complaint, investigation,
proceeding, judgment, letters or other written communication, actual or
threatened, from the United States Environmental Protection Agency or other
federal, state or local agency or authority, or any other entity or
individual, public or private, concerning any intentional or unintentional
act or omission which involves management of Hazardous Substances on or off
the property and is received by an officer or center manager of the
Borrower; the imposition of any lien on property, including but not limited
to liens asserted by government entities in connection with Responses to
the presence or Release of Hazardous Substances; any alleged violation of
or responsibility under Environmental Laws; and, after due inquiry and
investigation, any knowledge of any facts which could give rise to any of
the above is received or obtained by an officer or center manager of the
Borrower.
"Equipment" shall mean all of the Borrower's machinery, equipment,
fixtures and other tangible personal property, other than Inventory,
Rolling Stock and office equipment, whether located on the Borrower's
premises or located elsewhere, together with any and all accessions, parts
and appurtenances thereto, whether presently owned or hereafter acquired by
the Borrower.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Affiliate" shall mean each trade or business, including the
Borrower, whether or not incorporated, which together with the Borrower
would be treated as a single employer under Section 4001 of ERISA.
"Eurodollar Base Rate" shall mean, with respect to a Eurodollar Loan
for the relevant Eurodollar Interest Period, the rate of interest per annum
(rounded upwards, if necessary, to the nearest one-one hundredth of one
percent (1/100 of 1.0%) appearing on Telerate Page 3750 (or any successor
page) as the London interbank offered rate for deposits in United States
dollars at approximately 11:00 a.m. (London time) two Business Days prior
to the first day of such Eurodollar Interest Period for a term comparable
to such Eurodollar Interest Period. If for any reason such rate is not
available, the term "Eurodollar Base Rate" shall mean, with respect to any
Eurodollar Loan for a particular Eurodollar Interest Period, the rate of
interest per annum (rounded upwards, if necessary, to the nearest one-one
hundredth of
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one percent (1/100 of 1.0%) appearing on Reuters Screen LIBO Page as the
London interbank offered rate for deposits in United States dollars at
approximately 11:00 a.m. (London time) two Business Days prior to the first
day of such Eurodollar Interest Period for a term comparable to such
Eurodollar Interest Period, provided, that if more than one rate is
specified on Reuters Screen LIBO Page, the applicable rate shall be the
arithmetic mean of all such rates. As used herein, "Telerate Page 3750"
refers to the British Bankers Association Libor Rates (determined at 11:00
a.m. (London time) that are published by Dow Jones Telerate, Inc.
"Eurodollar Interest Period" shall mean, with respect to a Eurodollar
Loan, a period of one (1), two (2), three (3) or four (4) months commencing
on a Business Day selected by the Borrower pursuant to this Agreement. Such
Eurodollar Interest Period shall end on (but exclude) the day which
corresponds numerically to such date one (1), two (2), three (3) or four
(4) months thereafter, provided, that if there is no such numerically
corresponding day in such first (lst), second (2nd), third (3rd) or fourth
(4th) succeeding month, such Eurodollar Interest Period shall end on the
last Business Day of such first (lst), second (2nd), third (3rd) or fourth
(4th) succeeding month. If a Eurodollar Interest Period would otherwise end
on a day which is not a Business Day, such Eurodollar Interest Period shall
end on the next succeeding Business Day, provided, that if said next
succeeding Business Day falls in a new month, such Eurodollar Interest
Period shall end on the immediately preceding Business Day.
"Eurodollar Loan" shall mean the portion of the Revolving Loans which
bears interest at a Eurodollar Rate.
"Eurodollar Rate" shall mean, with respect to a Eurodollar Loan for
the relevant Eurodollar Interest Period, the sum of the Eurodollar Base
Rate applicable to that Eurodollar Interest Period plus the Applicable
Margin in effect at the beginning of such Eurodollar Interest Period.
"Event of Default" shall mean an event which through the passage of
time or the service of notice or both would (assuming no action is taken by
the Borrower to cure the same) mature into a Default.
"Excess Availability" shall mean (a) the lesser of (i) the Maximum
Facility less the aggregate undrawn face amount of the then outstanding
Letters of Credit, and (ii) Loan Availability less the aggregate undrawn
face amount of the then outstanding Letters of Credit, minus (b) the sum of
the outstanding balance of the Revolving Loans and the aggregate undrawn
face amount of the then outstanding Letters of Credit, but in no event
shall Excess Availability be less than zero (0).
"Financials" shall have the meaning assigned to such term in Section
6.4.
"Financing Agreements" shall mean this Agreement and all other
agreements, instruments and documents, including without limitation
security agreements, loan agreements, notes, guarantees, mortgages, deeds
of trust, subordination agreements, intercreditor agreements, pledges,
powers of attorney, consents, assignments, collateral assignments,
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reimbursement agreements, contracts, leases, financing statements and all
other written matter whether heretofore, now, or hereafter executed by or
on behalf of the Borrower, any of its Affiliates or any guarantor of the
Liabilities and delivered to the Agent or any Lender, together with all
agreements and documents referred to therein or contemplated thereby, as
each may be amended, modified, supplemented or extended from time to time,
but shall exclude all agreements, instruments and documents pertaining to
loans made by any Lender to Kenneth A. Hendricks, individually.
"Floating Rate" shall mean, with respect to a Floating Rate Loan, a
rate per annum equal to the sum of the Corporate Base Rate plus the
Applicable Margin, changing when and as the Corporate Base Rate changes.
"Floating Rate Loan" shall mean the portion of the Revolving Loan
which bears interest at a Floating Rate.
"Funded Debt" means indebtedness that matures more than one year from
the date of creation thereof, or that is directly or indirectly renewable
or extendible at the option of such Person under a revolving credit or
similar arrangement obligating the payee to renew or extend credit over a
period of more than one year from the date of such creation, determined on
a consolidated basis for the Borrower and its Subsidiaries.
"GAAP" shall mean generally accepted accounting principles as used by
the Financial Accounting Standards Board, as in effect from time to time,
consistently applied.
"General Intangibles" shall mean all general intangibles, choses in
action, causes of action and all other intangible personal property of the
Borrower of every kind and nature wherever located and whether presently
owned or hereafter acquired by the Borrower (other than Accounts),
including without limitation corporate or other business records,
inventions, designs, patents, patent applications, service marks, service
mark applications, trademarks, trademark applications, tradenames,
tradestyles, trade secrets, goodwill, registrations, computer software,
operational manuals, product formulas for industrial processes, blueprints,
drawings, copyrights, copyright applications, licenses, license agreements,
permits, operating rights and authorities to move heavy equipment,
franchises, customer lists, tax refunds, tax refund claims and the like.
"Hazardous Substances" shall mean hazardous substances, hazardous
wastes, hazardous waste constituents and reaction by-products, hazardous
materials, pesticides, oil and other petroleum products, and toxic
substances, including asbestos and PCBS, as those terms are defined
pursuant to Environmental Laws.
"Indenture" means the certain Indenture dated as of May 7, 1997 among
the Borrower, certain Subsidiaries of the Borrower and NorWest Bank
Minnesota, National Association, and any renewals, extensions,
modifications, amendments or restatements thereof, which governs the Senior
Subordinated Notes.
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"Initial Term" shall have the meaning assigned to such term in Section
2.8.
"Inventory" shall mean any and all inventory and goods, including
without limitation goods in transit, wheresoever located, whether now owned
or hereafter acquired by the Borrower, which are held for sale or lease,
furnished under any contract of service or held as raw materials, work-in-
process or supplies, and all materials used or consumed in the Borrower's
business, and shall include such property the sale or other disposition of
which has given rise to Accounts and which has been returned to or
repossessed or stopped in transit by the Borrower.
"Inventory Sublimit" shall have the meaning assigned to such term in
subsection 2.1(ii).
"Letters of Credit" shall have the meaning assigned to such term in
Section 2.2.
"Liabilities" shall mean all of the Borrower's liabilities,
obligations and indebtedness to the Agent and/or any of the Lenders of any
and every kind and nature, whether heretofore, now or hereafter owing,
arising, due or payable and howsoever evidenced, created, incurred,
acquired, or owing, whether primary, secondary, direct, contingent, fixed
or otherwise (including obligations of performance) and whether arising or
existing under written agreement, oral agreement or by operation of law,
but only to the extent that the foregoing arises under or in connection
with the Borrower's indebtedness and obligations to the Agent and/or any of
the Lenders under this Agreement (including without limitation all
"Liabilities" defined by the Existing Loan Agreement and renewed and
continued hereunder) and the other Financing Agreements and the Borrower's
reimbursement obligations with respect to any Letter of Credit.
"Loan Account" shall have the meaning assigned to such term in Section
2.4.
"Loan Availability" shall have the meaning assigned to such term in
Section 2.1.
"Manage" or "Management" shall mean to generate, handle, manufacture,
process, treat, store, use, re-use, refine, recycle, reclaim, blend or burn
for energy recovery, incinerate, accumulate speculatively, transport,
transfer, dispose of, release, threaten to release or abandon Hazardous
Substances.
"Maximum Facility" shall mean the maximum amount which the Lenders
have agreed to consider as a ceiling on the outstanding principal balance
of the Revolving Loans to be made and Letters of Credit to be issued under
this Agreement. The Maximum Facility shall be Two Hundred Million Dollars
($200,000,000.00).
"Monthly Report" shall have the meaning assigned to such term in
Section 3.1.
"Multiemployer Plan" shall have the meaning assigned to such term in
Section 6.23.
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"Overadvance" shall mean the amount, if any (determined upon the
funding of any Revolving Loan) by which the aggregate amount of all
Revolving Loans exceeds the Loan Availability.
"PBGC" shall have the meaning assigned to such term in Section 6.23.
"Person" shall mean any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated organization, association,
corporation, institution, entity, party, or government (whether national,
federal, state, provincial, county, city, municipal or otherwise, including
without limitation any instrumentality, division, agency, body or
department thereof).
"Plan" shall have the meaning assigned to such term in Section 6.23.
"Prohibited Transaction" shall have the meaning assigned to such term
in Section 6.23.
"Projections" shall mean, collectively, the consolidated and
consolidating projected financial statements of the Borrower and its
Subsidiaries delivered pursuant to Section 6.4 and those required to be
delivered to the Agent pursuant to Section 7.1. Each set of Projections
shall cover the one (1) year period immediately following the date thereof,
shall be prepared on a monthly basis in a manner substantially consistent
with the initial set of Projections delivered pursuant to Section 6.4,
shall be reasonably satisfactory, in substance, to the Agent and the
Lenders, and shall include: (a) projected balance sheets, (b) projected
cash flow statements, (c) projected profit and loss statements, (d)
projected capital expenditures detailed by anticipated major expenditures
and (e) appropriate supporting details and statements of underlying
assumptions.
"Pro Rata Share" shall mean the percentage interest of each of the
Lenders as indicated on the signature pages to this Agreement.
"Release" shall mean any actual or threatened spilling, leaking,
pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, dumping or disposing of Hazardous Substances into the
environment, as "environment" is defined in CERCLA.
"Reportable Event" shall have the meaning assigned to such term in
Section 6.23.
"Requisite Lenders" shall mean Lenders having, in the aggregate, Pro
Rata Shares of at least fifty-one percent (51.0%).
"Respond" or "Response" shall mean any action taken pursuant to
Environmental Laws to correct, remove, remediate, cleanup, prevent,
mitigate, monitor, evaluate, investigate or assess the Release of a
Hazardous Substance.
"Revolving Credit Notes" shall have the meaning assigned to such term
in Section 2.1.
"Revolving Loans" shall have the meaning assigned to such term in
Section 2.1.
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"Rolling Stock" shall mean the Borrower's forklifts, lift trucks,
motor vehicles, trailers and other rolling stock, whether located on the
Borrower's premises or located elsewhere together with any and all
accessions, parts and appurtenances thereto, including but not limited to
conveyors, booms, scissor beds and cranes, whether presently owned or
hereafter acquired by the Borrower.
"Senior Subordinated Notes" means the certain 10.625% Senior
Subordinated Notes due 2007, executed and issued by the Borrower in an
aggregate principal amount not exceeding One Hundred Million Dollars
($100,000,000.00) pursuant to the Indenture, and any and all renewals,
extensions, modifications, amendments or restatements thereof to the extent
accomplished in compliance with the prior consent of the Agent as required
by Section 8.20.
"Store Acquisition" shall mean the purchase of assets in connection
with the purchase of an "Additional Store" as provided in Section 8.3.
"Subordination Agreement" shall mean the Subordination Agreement dated
as of December 12, 1990, executed by GAF Corporation (or its successors-in-
interest) in favor of the Agent and the Lenders, and consented to by the
Borrower, as such agreement may be amended, modified or reaffirmed from
time to time.
"Subsidiary" shall mean any corporation of which more than fifty
percent (50%) of the outstanding capital stock having ordinary voting power
to elect a majority of the board of directors of such corporation
(irrespective of whether at the time stock of any other class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time, directly or indirectly, owned
by the Borrower or any partnership or joint venture of which more than
fifty percent (50%) of the outstanding equity interests are at the time,
directly or indirectly, owned by the Borrower. Subsidiary' includes,
without limitation, each of Mule-Hide Products Company, Inc. and Amcraft
Building Products Co., Inc., respectively.
"Subordinated Seller Obligations" shall have the meaning assigned to
such term in the definition of "Tangible Net Worth" as provided in this
Section 1.1.
"Tangible Net Worth" shall mean the total assets minus total
liabilities (excluding the Senior Subordinated Notes and excluding
Subordinated Seller Obligations, if any, defined hereinbelow) decreased by
the Affiliates Investments Limit and decreased by the book value of all
intangible assets (other than Accounts), including without limitation,
patents, brand names, trademarks, licenses, goodwill, customer lists,
mailing lists, subscription lists, organization expenses, and deferred
costs, determined on a consolidated basis for the Borrower and its
Subsidiaries in accordance with GAAP. In connection with the foregoing,
"Subordinated Seller Obligations" means purchase money obligations of the
Borrower incurred in connection with the purchase of Additional Stores (not
exceeding the maximum amount permitted under Section 8.3) to the extent
such obligations are expressly made subject to a written subordination
agreement among the holder of such obligations, the Borrower, the Agent and
the Lenders, in form satisfactory to the Agent and the Lenders, which
provides
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(without limitation) that (i) such obligations are subordinate in right of
payment and claim in favor of all Liabilities from time to time existing,
(ii) the Borrower's obligation to pay, and such holder's right to receive,
payments of such obligations shall be suspended upon written notice by the
Agent to such holder and the Borrower, which notice may be issued by the
Agent at any time in its discretion whether or not any Default or Event of
Default is in existence, (iii) in any event, prepayment of such obligations
is prohibited without the prior written consent of the Agent and the
Lenders and (iv) such holder may not exercise any remedies against the
Borrower in respect of collection or enforcement of such obligations until
the Financing Agreements have been terminated and all Liabilities have been
paid in full.
"Tax Code" shall have the meaning assigned to such term in Section
6.23.
"Term" shall have the meaning assigned to such term in Section 2.8.
1.2 Accounting Terms. Any accounting terms used in this Agreement
which are not specifically defined herein shall have the meanings customarily
given them in accordance with GAAP.
1.3 Others Defined in Code. All terms contained in this Agreement
(and which are not otherwise specifically defined herein) shall have the
meanings provided by the Code to the extent the same are used or defined
therein.
1.4 Effect of Amendment and Restatement. Upon the execution and
delivery of this Agreement, the obligations of the Borrower to repay the loans
and advances arising under the Existing Loan Agreement shall continue in full
force and effect and the liens and security interests securing payment thereof
shall be continuing, but shall now be governed by the terms of this Agreement
and each of the other Financing Agreements (exclusive of the Existing Loan
Agreement).
2. CREDIT.
2.1 Revolving Loans. Provided there does not then exist a Default or
an Event of Default, and subject to the provisions of Section 4, each Lender
will, from time to time, up to and including the last day of the Initial Term
or, if extended pursuant to Section 2.8, any subsequent Term, upon the
Borrower's request made in the manner set forth in Section 4.1, advance to the
Borrower on a revolving credit basis (the "Revolving Loans") such Lender's Pro
Rata Share of an aggregate amount equal to up to the lesser of (a) the Maximum
Facility, less the aggregate undrawn face amount of the then outstanding Letters
of Credit and (b) an amount equal to (i) Loan Availability less (ii) the
aggregate undrawn face amount of the then outstanding Letters of Credit. As
used herein, "Loan Availability" at any time shall mean the sum of the
following:
(i) up to eighty-five percent (85%) of the face amount (less maximum
discounts, credits and allowances which may be taken by or granted to
Account Debtors in connection therewith) then outstanding under existing
Eligible Accounts at such time, less such reserves as the Agent in its sole
discretion elects to establish; plus
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(ii) up to the lesser of (x) sixty percent (60%) (sixty-five percent
(65%) during the period from December 1 of each year through and including
June 30 of the following year) of Eligible Inventory, less such reserves as
the Agent in its sole discretion elects to establish and (y) the "Inventory
Sublimit. The "Inventory Sublimit" (a) at any time during the period from
December 1 of each year through and including June 30 of the following
year, shall be an amount equal to sixty percent (60.0%) of the aggregate
amount of Revolving Loans outstanding at any such time, and (b) at any time
during the period from July 1 of each year through and including November
30 of such year, shall be an amount equal to fifty percent (50.0%) of the
aggregate amount of Revolving Loans outstanding at any such time.
Each Lender irrevocably agrees that it shall make its Pro Rata share of each
Revolving Loan available to the Agent in accordance with the terms of this
Agreement. Payments made by the Agent to any Person on account of any Letter of
Credit shall constitute Revolving Loans hereunder, the proceeds of which shall
be used to reimburse the Agent for such payments. Each advance to the Borrower
under this Section 2.1 shall be in integral multiples of Five Thousand Dollars
($5,000) (other than Revolving Loans created by payment on a Letter of Credit)
and shall, on the day of such advance, be deposited, in immediately available
funds, in the Borrower's demand deposit account with the Agent, or in such other
account as the Borrower may, from time to time, designate. The indebtedness of
the Borrower under this Section 2.1 shall be evidenced by revolving credit notes
of even date herewith issued by the Borrower to the Lenders in the form attached
hereto as Exhibit A (the "Revolving Credit Notes"). The provisions of the
Revolving Credit Notes notwithstanding, the Liabilities evidenced by the
Revolving Credit Notes shall become immediately due and payable upon the earlier
to occur of (A) the last day of the Initial Term or, if extended pursuant to
Section 2.8, any subsequent Term and (B) the acceleration of the Liabilities.
The Borrower agrees that if at any time the sum of the outstanding principal
amount of the Revolving Loans plus the aggregate undrawn face amount of all
outstanding Letters of Credit shall exceed the lesser of (a) the Maximum
Facility and (b) Loan Availability, the Borrower shall promptly pay the Agent,
for the account of the Lenders, such amount as is necessary to eliminate such
excess.
2.2 Letters of Credit. Provided there does not then exist a Default
or an Event of Default, and subject to the provisions of Section 4, the Agent
may, in its sole discretion, from time to time, up to and including the seventy-
fifth (75th) day before the last day of the Initial Term or, if extended
pursuant to Section 2.8, any subsequent Term, issue upon the Borrower's request
and for the Borrower's account, irrevocable standby and documentary letters of
credit (collectively, the "Letters of Credit"). The aggregate undrawn face
amount of outstanding Letters of Credit (a) shall not at any time exceed Ten
Million Dollars ($10,000,000) and (b) shall serve to reduce the amount otherwise
available for Revolving Loans. Payments made by the Agent to any Person on
account of any Letter of Credit shall constitute Revolving Loans hereunder, the
proceeds of which shall be used to reimburse the Agent for such payments. No
Letter of Credit shall have an expiry date later than the last day of the
Initial Term or. any renewal Term, if applicable. Applications for the issuance
of Letters of Credit must be received by the Agent, in a form satisfactory to
the Agent, at least three (3) Business Days prior to the requested issuance date
thereof. It is expressly understood and agreed by the Borrower that nothing
contained in this Agreement shall, at any time, require the Agent to issue
Letters of Credit and the issuance of such Letters of Credit shall at all times
be in the Agent's sole discretion. The Borrower hereby agrees to protect,
indemnify, pay and save the Agent harmless from and against any and all claims,
actions, causes of action, judgments, suits, obligations, demands,
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liabilities, damages, losses, costs, charges and expenses (including reasonable
attorneys' fees and disbursements) which it may incur or be subject to as a
consequence, direct or indirect, of the issuance of the Letters of Credit, or
any drawing or purported drawing thereunder, other than as a result of the gross
negligence or willful misconduct of the Agent. Except for the Agent's gross
negligence or willful misconduct, the Borrower shall assume all risks of the
acts, omissions or misuse of the Letters of Credit by the beneficiaries thereof.
Except for the Agent's gross negligence or willful misconduct, the Agent shall
not be responsible: (a) for the form, validity, sufficiency, accuracy,
genuineness or legal effect of any document submitted by any party in connection
with the application for and issuance of the Letters of Credit, even if it
should in fact prove to be in any or all aspects invalid, insufficient,
inaccurate, fraudulent or forged; (b) for the validity or sufficiency of any
instrument transferring or assigning or purporting to transfer or assign the
Letters of Credit or the rights or benefits thereunder or proceeds thereof, in
whole or in part, which may prove to be invalid or ineffective for any reason;
(c) for errors, omissions, interruptions or delays in transmission or delivery
of any messages, by mail, cable, telegraph, telex or otherwise, whether or not
they be in cipher; (d) for errors in interpretation of technical terms; (e) for
any loss or delay in the transmission or otherwise of any document required in
order to make a drawing under the Letters of Credit or of the proceeds thereof;
and (f) for any consequences arising from causes beyond the control of the
Agent.
2.3 Principal Balance of Liabilities Not to Exceed the Maximum
Facility. The sum of the aggregate outstanding principal balance of the
Revolving Loans made under this Agreement and the aggregate face amount of the
outstanding Letters of Credit shall not, at any given time, exceed the lesser of
(a) the Maximum Facility and (b) an amount equal to the sum of (i) Loan
Availability at such time plus (ii) the amount of any Overadvance to the limited
extent allowed by Agent in its discretion pursuant to Section 11.9(b). The
Borrower agrees that if at any time any such excess shall arise, the Borrower
shall promptly pay to the Agent, for the account of the Lenders, such amount as
may be necessary to eliminate such excess. The Borrower further agrees that if
at any time the Inventory Sublimit or any of the other limits or ratios
contained in Section 2.1 or 2.2 are exceeded, the Borrower shall promptly pay to
the Agent, for the account of the Lenders, such amount as may be necessary to
eliminate such excess.
2.4 Borrower's Loan Account. The Agent shall maintain a loan account
(the "Loan Account") on its books in which shall be recorded (a) all Revolving
Loans made by the Lenders, or the Agent for the account of the Lenders, to the
Borrower pursuant to this Agreement, (b) all payments made by the Borrower on
all such Revolving Loans and (c) all other appropriate debits and credits as
provided in this Agreement or any of the other Financing Agreements, including
without limitation all fees, charges, expenses and interest. All entries in the
Borrower's Loan Account shall be made in accordance with the Agent's customary
accounting practices pursuant to GAAP as in effect from time to time. The
Borrower promises to pay the amount reflected as owing by it under its Loan
Account and all of its other obligations hereunder as such amounts become due or
are demanded or declared due pursuant to the terms of this Agreement.
2.5 Statements. All Revolving Loans to, and Letters of Credit issued
for the benefit of, the Borrower, and all other debits and credits provided for
in this Agreement or any of the other Financing Agreements, shall be evidenced
by entries made by the Agent in its internal data control systems showing the
date, amount and reason for each such debit or credit. Until such time
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as the Agent shall have rendered to the Borrower written statements of account
as provided herein, the balance in the Borrower's Loan Account, as set forth on
the Agent's most recent computer printout, shall be rebuttably presumptive
evidence of the amounts due and owing the Agent and the Lenders by the Borrower.
From time to time, the Agent shall render to the Borrower a statement setting
forth the balance of the Borrower's Loan Account, including principal, interest,
expenses and fees. Each such statement shall be subject to subsequent
adjustment by the Agent but shall, absent manifest errors or omissions, be
rebuttably presumed correct and to that extent binding upon the Borrower and
shall constitute an account stated unless, within thirty (30) days after receipt
of any statement from the Agent, the Borrower shall deliver to the Agent written
objection thereto specifying the error or errors, if any, contained in such
statement.
2.6 Interest and Fees.
(a) The Borrower shall pay to the Agent, for the account of the
Lenders, interest on the outstanding principal balance of (i) the Floating Rate
Loan at the Floating Rate and (ii) the Eurodollar Loan at the applicable
Eurodollar Rate. Notwithstanding the foregoing, upon the written election by
the Agent, following the occurrence and during the continuance of a Default, the
Borrower shall pay to the Agent, for the account of the Lenders, interest on the
outstanding principal balance of the Revolving Loans at the per annum rate of
two percent (2%) plus the interest rate otherwise in effect (the "Default
Rate"). Interest shall be payable monthly in arrears on the first day of each
calendar month commencing August 1, 1993, and shall be computed on the basis of
a year of three hundred sixty (360) days for the actual number of days elapsed.
(b) The Borrower shall pay to the Agent, for the account of the
Lenders, an unused facility fee equal to one-fourth percent (.25%) per annum of
the lesser of (i) Twenty-Five Million Dollars ($25,000,000.00) or (ii) the
amount by which the Maximum Facility exceeds the sum of the average outstanding
Revolving Loans during the immediately preceding calendar month plus the average
aggregate undrawn face amount of the Letters of Credit issued and outstanding
during the immediately preceding calendar month, computed on the basis of a year
of three hundred sixty (360) days for the actual number of days elapsed, which
shall be payable monthly in arrears on the first day of each calendar month
commencing February 1, 1996.
(c) The Borrower shall pay to the Agent, for the account of the
Lenders, a Letter of Credit fee equal to one percent (1.00%) per annum of the
average aggregate undrawn face amount of the Letters of Credit issued and
outstanding during the immediately preceding calendar month, computed on the
basis of a year of three hundred sixty (360) days for the actual number of days
elapsed. In addition, the Borrower will pay to the Agent, for its own account,
the Agent's customary issuance and processing charges and fees for letters of
credit. All of the foregoing fees and charges shall be payable monthly in
arrears on the first day of each calendar month commencing August 1, 1993. Upon
the written election of the Agent, following the occurrence and during the
continuance of a Default, the Letter of Credit fee shall be charged at the per
annum rate of three percent (3.00%) of the average aggregate undrawn face amount
of the Letters of Credit issued and outstanding during the immediately preceding
calendar month.
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(d) As a monthly servicing fee to the Agent (i) the Borrower shall pay
to the Agent, for its own account, a monthly servicing fee, payable monthly in
arrears on the last day of each calendar month, of $7,083.33 per month.
2.7 Method for Making Payments. All payments that the Borrower is
required to make to the Agent or the Lenders under this Agreement or under any
of the other Financing Agreements shall be made in immediately available funds
not later than 1:00 p.m. (Dallas, Texas time) on the date of payment at the
Agent's office at 901 Main Street, Dallas, Texas 75202, or at such other place
as the Agent directs from time to time, or in the Agent's sole discretion, by
appropriate debits to the Loan Account. Payments made after 1:00 p.m. (Dallas,
Texas time) shall be deemed to have been made on the next succeeding Business
Day.
2.8 Term of this Agreement. Subject to all other terms and
conditions hereof, this Agreement shall be effective until June 30, 2000 (the
"Initial Term") and shall automatically extend for successive one year periods
(each a "Term") of one year (each extending through the next succeeding June 30)
unless terminated by the Borrower or the Agent or any Lender by written notice
of intention to terminate this Agreement as of the end of the Initial Term or
any such Term, as the case may be, which, in order to be effective, must be
delivered to all other parties to this Agreement at least sixty (60) days prior
to the end of the Initial Term or any such Term, as the case may be. Following
timely delivery of any such notice, unless otherwise agreed in writing by the
Borrower, the Agent and all Lenders, this Agreement shall terminate as of the
expiration of the Initial Term or any such Term, as the case may be, provided
that (a) all of the Agent's and each Lender's rights and remedies under this
Agreement and (b) the security interests reaffirmed and created under Section
5.1 and under any of the other Financing Agreements, shall survive any such
termination until all of the Liabilities under this Agreement and the other
Financing Agreements have been paid in full. In addition, the Agent may at any
time demand repayment of the Liabilities and the Liabilities may be accelerated
as set forth in Section 9.1. Upon the effective date of termination, all of the
Liabilities shall become immediately due and payable without notice or demand.
Notwithstanding any termination, until all of the Liabilities hereunder shall
have been fully paid and satisfied, the Agent shall be entitled to retain its
security interests, for the benefit of the Lenders, in and to all existing and
future Collateral and the Borrower shall continue to remit collections of
Accounts and proceeds as provided herein.
2.9 Optional Prepayments. The Borrower may, at its option, prepay at
any time during the Initial Term or any subsequent Term all or any portion of
the Liabilities. Subject to the requirements of Section 2.11(c), prepayments of
a portion of the Liabilities may be made by the Borrower without incurring a
premium or prepayment fee; provided, if the Borrower prepays all of the
Liabilities in full and terminates this Agreement at any time prior to June 30,
1998, the Borrower shall pay the Agent, for the account of the Lenders, as
liquidated damages and compensation for the costs of the Lenders' being prepared
to make funds available to the Borrower under this Agreement, a prepayment fee
equal to one quarter of one percent (.25%) of the Maximum Facility.
Notwithstanding the foregoing, no fee shall be payable under this Section 2.9
with respect to a prepayment occurring (i) after the Revolving Loans have been
accelerated or (ii) after the Agent, on behalf of the Lenders, has requested in
writing that the Borrower attempt to prepay the Revolving Loans.
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2.10 Limitation on Charges. In no contingency or event whatsoever
shall the amount of interest under the Financing Agreements paid by Borrower,
received by Agent or Lenders, agreed to be paid by Borrower, or requested or
demanded to be paid by Agent, exceed the maximum rate of interest permitted from
day to day by any applicable state or federal law (the "Maximum Rate"). In the
event any such sums paid by Borrower would exceed the Maximum Rate, such excess
amount shall automatically be applied to any unpaid principal or, if the amount
of such excess exceeds said unpaid principal, such excess shall be paid to
Borrower. All sums paid, or agreed to be paid, by Borrower which are or
hereafter may be construed to be compensation for the use, forbearance, or
detention of money shall be amortized, prorated, spread and allocated in respect
of the Liabilities throughout the full term of this Agreement until the
Liabilities are paid in full. Notwithstanding any provisions contained in the
Financing Agreements, or in any notes or other related documents executed
pursuant hereto, Agent and Lenders shall never be entitled to receive, collect
or apply as interest any amount in excess of the Maximum Rate and, in the event
Agent or Lenders ever receive, collect, or apply any amount that otherwise would
be in excess of the Maximum Rate, such amount shall automatically be deemed to
be applied in reduction of the unpaid principal balance of the Liabilities and,
if such principal balance is paid in full, any remaining excess shall forthwith
be paid to Borrower. In determining whether or not the interest paid or payable
under any specific contingency exceeds the Maximum Rate, Borrower and Agent
shall, to the maximum extent permitted under applicable law, (i) characterize
any non-principal payment as a standby fee, commitment fee, prepayment charge,
delinquency charge or reimbursement for a third-party expense rather than as
interest, (ii) exclude voluntary prepayments and the effect thereof, and (iii)
amortize, prorate, allocate and spread in equal parts throughout the entire
period during which the indebtedness was outstanding the total amount of
interest at any time contracted for, charged or received. Nothing herein
contained shall be construed or so operate as to require Borrower to pay any
interest, fees, costs, or charges greater than is permitted by applicable law.
Subject to the foregoing, Borrower hereby agrees that the actual effective rate
of interest from time to time existing with respect to loans under this
Agreement, taking into account all amounts agreed to by Borrower or charged or
received by Lenders or Agent under the Financing Agreements which may be deemed
to be interest under applicable law, shall be deemed to be a rate which is
agreed to and stipulated by Borrower, Lenders and Agent in accordance with
applicable law.
2.11 Method of Selecting Rate Options; Additional Provisions
Regarding Eurodollar Loans.
(a) Except as otherwise provided herein, the Borrower may select a
Eurodollar Rate with respect to any Revolving Loans permitted under this
Agreement and as provided by this Section 2.11; provided, that no more than five
(5) Eurodollar Interest Periods may be in existence at any one time; and
provided, further, that at all times the amount of the Floating Rate Loans shall
be sufficient so that application of the proceeds of Accounts in accordance with
Section 3.6 will not necessitate a payment of the Eurodollar Loan on a day other
than the last day of the applicable Eurodollar Interest Period. Revolving Loans
shall bear interest at the Floating Rate unless the Borrower provides a
Borrowing Notice to the Agent and each Lender in the form of Exhibit F (a
"Borrowing Notice"), signed by a duly authorized officer of the Borrower,
irrevocably electing that a portion of the Revolving Loans is to bear interest
at a Eurodollar Rate. The Borrowing Notice shall be delivered to the Agent and
each Lender not later than three (3) Business Days before the Borrowing Date for
each Eurodollar Loan, and shall specify:
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(i) the Borrowing Date of such proposed Eurodollar Loan, which shall
be a Business Day;
(ii) the aggregate amount of such proposed Eurodollar Loan, each of
which shall be in the minimum principal amount of Five Million Dollars
($5,000,000) and in integral multiples of One Million Dollars ($1,000,000);
and
(iii) the Eurodollar Interest Period applicable thereto.
Each Eurodollar Loan shall bear interest from and including the first day of the
Eurodollar Interest Period applicable thereto to (but not including) the last
day of such Eurodollar Interest Period at the interest rate determined as
applicable to such Eurodollar Loan, but interest on such Eurodollar Loan shall
be payable as provided in subsection 2.6(a). If at the end of a Eurodollar
Interest Period for an outstanding Eurodollar Loan the Borrower has failed to
elect to continue such Eurodollar Loan as a Eurodollar Loan by providing an
appropriate Borrowing Notice to the Agent and each Lender as set forth above,
then such Eurodollar Loan shall be converted to a Floating Rate Loan on and
after the last day of such Eurodollar Interest Period. An outstanding Floating
Rate Loan may be converted to a Eurodollar Loan at any time subject to the
notice provisions and the limitations set forth above. The Borrower may not
select a Eurodollar Rate for a portion of the Revolving Loans if there exists a
Default or an Event of Default. The Borrower shall select Eurodollar Interest
Periods with respect to Eurodollar Loans so that no Eurodollar Interest Period
expires after the end of the Initial Term or, if extended pursuant to Section
2.8, any subsequent Term.
(b) If any Lender determines that maintenance of a Eurodollar Loan
would violate any applicable law, rule, regulation or directive, whether or not
having the force of law, such Lender shall suspend the availability of the
Eurodollar Rate option and require any Eurodollar Loans owing to it to be
converted to a Floating Rate Loan; or if any Lender determines that (i) deposits
of a type or maturity appropriate to match fund Eurodollar Loans are not
available, such Lender shall suspend the availability of the Eurodollar Rate
option after the date of any such determination, or (ii) the Eurodollar Rate
does not accurately reflect the cost of making a Eurodollar Loan, such Lender
shall suspend the availability of the Eurodollar Rate option after the date of
any such determination.
(c) If any payment of a Eurodollar Loan occurs on a date which is not
the last day of the applicable Eurodollar Interest Period, whether because of
acceleration, prepayment or otherwise, or a Eurodollar Loan is not made on the
date specified by the Borrower because the Borrower has not satisfied the
conditions precedent to such Eurodollar Loan contained in this Agreement or has
otherwise breached the terms of this Agreement, the Borrower will indemnify the
Lenders for any loss or cost incurred by any of them resulting therefrom,
including without limitation any loss or cost in liquidating or employing
deposits acquired to fund or maintain the Eurodollar Loan, provided, however,
that each Lender, as applicable, shall to the extent practical, notify the
Borrower of any expected loss or cost in advance and attempt in good faith to
mitigate or avoid any such loss or cost.
(d) A Lender shall deliver a written statement as to the amount due,
if any, under paragraph (c) above. Such written statement shall set forth in
reasonable detail the calculations upon
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which the Lender determined such amount and shall be presumed correct.
Determination of amounts payable under such paragraph in connection with a
Eurodollar Loan shall be calculated as though the Lender funded its Eurodollar
Loan through the purchase of a deposit of the type and maturity corresponding to
the deposit used as a reference in determining the Eurodollar Rate applicable to
such Revolving Loan whether in fact that is the case or not. Unless otherwise
provided herein, the amount specified in the written statement shall be payable
on demand after receipt by the Borrower of the written statement.
2.12 Yield Protection. If in the reasonable interpretation of the
Agent or any Lender the adoption of any law or any governmental or quasi-
governmental rule, regulation, policy, guideline or directive (whether or not
having the force of law) after the date hereof, or any change therein after the
date hereof, or any change in the interpretation or administration thereof after
the date hereof, or the compliance of the Agent or any Lender therewith after
the date hereof,
(a) subjects the Agent or any Lender to any tax, duty, charge, fee,
deduction or withholding on or from payments due from the Borrower
(excluding taxation of the overall net income of the Agent or the Lenders),
or changes the basis of taxation of payments to the Agent or any Lender in
respect of the Financing Agreements or other amounts due it hereunder, or
(b) imposes or increases or deems applicable any reserve, assessment,
insurance charge, special deposit or similar requirement against assets of,
deposits with or for the account of, or credit extended by, the Agent or
any Lender, or
(c) imposes or increases or renders applicable any special deposit,
assessment, insurance charge, reserve or liquidity or other similar
requirement (whether or not having the force of law) against assets held
by, or deposits in or for the account of, or loans by the Agent or any
Lender, or
(d) imposes any other condition the result of which is to increase the
cost to the Agent or any Lender of making, funding or maintaining advances
or reduces any amount receivable by the Agent or any Lender in connection
with advances, or requires the Agent or any Lender to make any payment
calculated by reference to the amount of advances held or interest received
by it, by an amount deemed material by the Agent or such Lender, or
(e) affects the amount of capital required or expected to be
maintained by the Agent or any Lender or any corporation controlling the
Agent or any Lender and the Agent or such Lender determines the amount of
capital required is increased by or based upon the existence of this
Agreement or its obligation to make loans hereunder or of commitments of
this type,
then, within fifteen (15) days of demand by the Agent or any Lender, the
Borrower shall pay the Agent or such Lender that portion of such increased
expense incurred (including, in the case of clause (e), any reduction in the
rate of return on capital to an amount below that which it could have achieved
but for such law, rule, regulation, policy, guideline or directive and after
taking into account the Agent's or such Lender's policies as to capital
adequacy) or reduction in an amount received
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which the Agent or such Lender determines is attributable to making, funding and
maintaining the Financing Agreements; provided, that the Borrower shall not be
liable for any portion of such increased expense incurred or reduction in such
amount received by the Agent or any Lender unless the Agent or such Lender
notifies the Borrower of such increased expense or reduction in amount received
within ninety (90) days of the date the Agent or such Lender actually learns of
such increased expense or reduction in amount received; provided, further, that
in the event the Borrower objects to such increased expense, the Borrower may
prepay the Liabilities, terminate this Agreement, and, in such event, the
Borrower shall incur no prepayment penalty as described in Section 2.9.
3. REPORTING AND ELIGIBILITY REQUIREMENTS/COLLATERAL.
3.1 Reports. The Borrower shall submit to the Agent, not later than
the last day of each month, a report (the "Monthly Report"), accompanied by a
certificate in the form attached hereto as Exhibit B, which shall be signed by
the Borrower's president or treasurer or such other officers as the Agent may
reasonably approve from time to time. The Monthly Report shall include, as of
the last business day of the preceding month: (a) an aged trial balance of
Accounts (the "Accounts Trial Balance") indicating which Accounts remain unpaid
thirty (30), sixty (60) and ninety (90) days past the invoice date thereof,
based on end-of-the-month agings, and listing the names of all applicable
Account Debtors; (b) a reconciliation of Inventory and Accounts in the forms
attached hereto as Exhibit C; (c) a schedule of Inventory valued at rolling
average FIFO cost (the "Schedule of Inventory") and separately listing (i) the
total value of all Inventory owned by the Borrower and in the Borrower's
possession, listed by location, (ii) all Inventory owned by the Borrower and in
the possession of any public warehouseman or other bailee (and specifying the
amount of Inventory at each such location) and (iii) all obsolete and slow-
moving Inventory if requested by the Agent; (d) an aging with respect to
accounts payable if requested by the Agent; (e) the outstanding principal
balance of the Liabilities (which representation regarding the balance of the
Liabilities will not, in any event, be binding on the Agent or any Lender); (f)
a listing of all outstanding guarantees of the Borrower and its Subsidiaries, if
any; and (g) if requested by the Agent, a schedule listing the payments due by
the Borrower during the prior month to taxing authorities and listing by
location the payments due by the Borrower during the prior month to real estate
lessors, public warehousemen and bailees of the Borrower's Inventory and the due
dates of all such payments, together with a representation by the Borrower
concerning whether all such payments have been made on or before their
respective due dates (and if so requested by the Agent, copies of canceled
checks, receipts or other reasonably satisfactory evidence that such payments
were made).
In addition, (i) at least once during each calendar week, provided that
Excess Availability (as defined below) exceeds $25,000,000.00 or (ii) on each
Business Day on which Excess Availability is equal to or less than
$25,000,000.00 or (iii) in any event, on each Business Day if required by Agent
at any time, from time to time, in its discretion, the Borrower shall provide
the Agent with a written report in the form of Exhibit D hereto (the "Collateral
Report") signed by the Borrower's president or treasurer or such other officers
as the Agent may reasonably approve from time to time, describing, in a form and
with such specificity as is satisfactory to the Agent, all Eligible Accounts
created or acquired by the Borrower subsequent to the immediately preceding
Collateral Report, and all changes to Eligible Inventory on a monthly basis or
on such shorter periodic basis as the Agent may require from time to time. The
Collateral Report shall also contain a calculation of Loan Availability based on
the most current information with regard to Eligible Accounts and Eligible
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Inventory. The Borrower shall furnish copies of any other reports or
information, in a form and with such specificity as is reasonably satisfactory
to the Agent, concerning Accounts and Inventory included, described or referred
to in the Collateral Reports and any other documents in connection therewith
requested by the Agent, including without limitation, but only if specifically
requested, copies of all invoices and purchase orders prepared in connection
with such Accounts and Inventory. The Collateral Reports shall also include, in
a form and with such specificity as is reasonably satisfactory to the Agent,
information on all amounts collected by the Borrower on Accounts collected by
the Borrower subsequent to the immediately preceding Collateral Report. The
Collateral Reports shall also contain such additional information as the Agent
shall reasonably require.
3.2 Eligible Accounts. The Agent shall have the sole right, in its
discretion, to determine which Accounts are eligible ("Eligible Accounts"). In
addition, without limiting the Agent's discretion, unless otherwise agreed by
the Agent in writing, the following Accounts are not Eligible Accounts: (a)
Accounts which remain unpaid more than ninety (90) days from the invoice date
based upon the end-of-the-month aging; (b) all Accounts owing by a single
Account Debtor, including currently scheduled Accounts, if fifty percent (50%)
or more of the balance owing by such Account Debtor to the Borrower is
ineligible for any reason; (c) Accounts with respect to which the Account Debtor
is a director, officer, employee, Subsidiary or Affiliate of the Borrower; (d)
Accounts with respect to which the Account Debtor is the United States of
America or any department, agency or instrumentality thereof, unless the
Borrower assigns its right to payment of such Accounts to the Agent pursuant to,
and in full compliance with, the Assignment of Claims Act of 1940, as amended;
(e) Accounts with respect to which the Account Debtor is not a resident of the
continental United States; (f) Accounts in dispute or with respect to which the
Account Debtor has asserted in writing or either the Borrower or the Agent has
reason to believe the Account Debtor is entitled to assert a counterclaim or has
asserted in writing or either the Borrower or the Agent has reason to believe
the Account Debtor is entitled to assert a right of setoff; (g) Accounts with
respect to which the prospect of payment or performance by the Account Debtor is
or will be impaired, as determined by the Agent in the exercise of its
discretion; (h) Accounts with respect to which the Agent does not have a first
and valid fully perfected security interest; (i) Accounts with respect to which
the Account Debtor is the subject of bankruptcy or a similar insolvency
proceeding or has made an assignment for the benefit of creditors or whose
assets have been conveyed to a receiver or trustee; (j) Accounts with respect to
which the Account Debtor's obligation to pay the Account is conditional upon the
Account Debtor's approval or is otherwise subject to any repurchase obligation
or return right, as with sales made on a bill-and-hold, guaranteed sale, sale-
and-return, sale on approval or consignment basis; (k) Accounts to the extent
that the Account Debtor's indebtedness to the Borrower exceeds a credit limit
determined by the Agent in the Agent's discretion; (1) Accounts with respect to
which the Account Debtor is located in New Jersey, Minnesota, Tennessee or
Indiana unless the Borrower (i) has received a certificate of authority to do
business, and is in good standing, in such state, or (ii) has filed a Notice of
Business Activities Report (or other comparable required report) with the proper
authorities of such state for the then current year; (m) Accounts which arise
out of sales not made in the ordinary course of the Borrower's business; (n)
Accounts with respect to which the Account Debtor has returned to the Borrower
all or any portion of the Inventory the sale of which gave rise to such
Accounts; and (o) Accounts with respect to which any document or agreement
executed or delivered in connection therewith, or any procedure used in
connection with any such document or agreement, fails in any material respect to
comply with the requirements of applicable law, or with respect to which any
representation or warranty contained in this Agreement is untrue. If the
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Borrower determines that a previously scheduled Eligible Account ceases to be an
Eligible Account under any of the above described criteria, the Borrower shall
notify the Agent thereof at the earliest reasonable opportunity.
3.3 Account Warranties. With respect to Accounts scheduled, listed
or referred to on the initial Accounts Trial Balance, on any subsequent Accounts
Trial Balance or on any Collateral Report or Monthly Report, the Borrower
warrants and represents to the Agent and each Lender that: (a) it is the lawful
owner of such Accounts and it has the right to subject such Accounts to a
security interest in favor of the Agent, for the benefit of the Lenders; (b)
they are genuine, are in all respects what they purport to be, and are not
evidenced by a judgment; (c) they represent undisputed, bona fide transactions
completed in accordance with the terms and provisions contained in the documents
delivered to the Agent with respect thereto; (d) the amounts shown on the
respective Accounts Trial Balance, the respective Collateral Report or Monthly
Report, the Borrower's books and records, and all invoices and statements which
may be delivered to the Agent with respect thereto, are actually and absolutely
owing to the Borrower and are not in any way contingent; (e) no payments have
been or shall be made thereon except payments immediately delivered to the Agent
pursuant to this Agreement; (f) there are no setoffs, counterclaims or disputes
asserted, or, to the best of the Borrower's knowledge, existing, with respect
thereto and the Borrower has not made any agreement with any Account Debtor for
any deduction therefrom except a discount or allowance allowed by the Borrower
in the ordinary course of its business for prompt payment; (g) there are no
facts, events or occurrences of which the Borrower has knowledge which in any
way impair the validity or enforcement thereof or tend to reduce the amount
payable thereunder as shown on the respective Accounts Trial Balance, the
respective Collateral Report or Monthly Report, the Borrower's books and
records, and all invoices and statements delivered to the Agent with respect
thereto; (h) to the best of the Borrower's knowledge, all Account Debtors have
the capacity to contract and are solvent; (i) the services furnished and/or
goods sold giving rise thereto were not, at the time of sale by the Borrower to
any Account Debtor, subject, to any lien, claim, encumbrance or security
interest except that of the Agent, for the benefit of the Lenders, and except as
specifically permitted below; (j) the Borrower has no knowledge of any fact or
circumstance which would tend to impair the validity or collectibility thereof;
(k) to the best of the Borrower's knowledge, there are no proceedings or actions
which are threatened or pending against any Account Debtor which might result in
any material adverse change in such Account Debtor's financial condition; and
(1) such Accounts satisfy the objective criteria for inclusion as Eligible
Accounts set forth in Section 3.2.
3.4 Verification of Accounts. The Agent shall have the right, at any
time or times hereafter, in the Agent's name or in the name of a nominee of the
Agent, to verify the validity, amount or any other matter relating to any
Accounts, by mail, telephone, telegraph or otherwise. The Agent shall promptly
notify the Borrower of the commencement of a verification process; provided,
that it is understood and agreed that the Agent shall not be required to specify
which Accounts of the Borrower are to be verified.
3.5 Account Covenants. With respect to those Accounts with an
aggregate balance in excess of Two Hundred Fifty Thousand Dollars ($250,000),
the Borrower shall, upon an officer of the Borrower located in Beloit, Wisconsin
learning thereof, promptly: (a) inform the Agent in writing of any material
delay in the Borrower's performance of any of its obligations to any Account
Debtor or of any assertion of any claims, offsets or counterclaims by any
Account Debtor;
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(b) furnish to and inform the Agent of all material adverse information relating
to the financial condition of any Account Debtor; and (c) notify the Agent in
writing if any of its then existing Accounts scheduled to the Agent with respect
to which the Lenders have made advances, are no longer Eligible Accounts.
3.6 Collection of Accounts and Payments. Upon the request of the
Agent from time to time the Borrower shall establish accounts (the "Blocked
Accounts") in the Borrower's name with a financial institution or institutions
reasonably acceptable to the Agent, to which the Borrower will immediately
deposit all payments made with respect to Accounts or for Inventory or services
provided by the Borrower in the identical form in which such payment was made,
whether by cash or check. Each financial institution with which a Blocked
Account is established shall acknowledge and agree, in a manner satisfactory to
the Agent, that the amounts on deposit in such Blocked Account are the sole and
exclusive property of the Agent, for the account of the Lenders, that such
financial institution has no right to setoff (except for NSF or "stop payment"
checks or other returned items) against the Blocked Account, and that such
financial institution will wire, or otherwise transfer in immediately available
funds in a manner satisfactory to the Agent, funds deposited in the Blocked
Account on a daily basis as such funds are collected. The Borrower agrees that
all payments received by the Agent, whether in respect of the Accounts or as
proceeds of other Collateral or otherwise, will be applied on account of the
Liabilities upon final collection. The Borrower and any Affiliates,
shareholders, directors, officers, employees, agents or those Persons acting for
or in concert with the Borrower shall, acting as trustee for the Agent, receive
any monies, checks, notes, drafts or any other payment relating to and/or
proceeds of Accounts, Inventory or other Collateral which come into the
possession or under the control of the Borrower or any Affiliates, shareholders,
directors, officers, employees, agents or those Persons acting for or in concert
with the Borrower, and immediately upon receipt thereof shall remit the same or
cause the same to be remitted, in kind, to the Blocked Accounts or as set forth
below. Upon the occurrence and during the continuation of a Default or an Event
of Default, the Borrower shall upon the direction of the Agent direct all of the
Borrower's Account Debtors to direct payments of Accounts to post office boxes
maintained by a financial institution selected by the Agent (the "Collecting
Banks") pursuant to an agreement satisfactory to the Agent. The Collecting
Banks will agree that all payments made to such post office boxes shall be
deposited to the Blocked Accounts in a manner satisfactory to the Agent. The
Collecting Banks will also agree that the amounts deposited in the post office
boxes are the sole and exclusive property of the Agent, for the benefit of the
Lenders, and that such Collecting Banks have no right to setoff against such
amounts. The Borrower agrees to pay to the Agent any and all fees, costs and
expenses which the Agent incurs in connection with opening and maintaining the
post office boxes maintained by the Collecting Banks and the Blocked Accounts
and depositing for collection by the Agent any check or item of payment received
and/or delivered to the Agent on account of the Liabilities.
3.7 Appointment of the Agent as the Borrower's Attorney-in-Fact. The
Borrower hereby irrevocably designates, makes, constitutes and appoints the
Agent (and all Persons designated by the Agent) as the Borrower's true and
lawful attorney-in-fact, and authorizes the Agent, in the Borrower's or the
Agent's name, to do the following: (i) at any time after the occurrence of a
Default (a) demand payment of Accounts; (b) enforce payment of Accounts by legal
proceedings or otherwise; (c) exercise all of the Borrower's rights and remedies
with respect to proceedings brought to collect any Account; (d) sell or assign
any Account upon such terms, for such amount and at such time or times as the
Agent deems advisable; (e) settle, adjust, compromise, extend or renew any
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Account; (f) discharge and release any Account; (g) prepare, file and sign the
Borrower's name on any proof of claim in bankruptcy or other similar document
against any Account Debtor; (h) notify the post office authorities to change the
address for delivery of the Borrower's mail to an address designated by the
Agent, have access to any lock box or postal box into which any of the
Borrower's mail is deposited, and open and dispose of all mail addressed to the
Borrower; (i) endorse the Borrower's name upon any chattel paper, document,
instrument, invoice or similar document or agreement relating to any Account or
any goods pertaining thereto; and (j) do all acts and things which are
necessary, in the Agent's reasonable discretion, to fulfill the Borrower's
obligations under this Agreement; and (ii) at any time, (x) take control in any
manner of any item of payment or proceeds thereof; (y) endorse the Borrower's
name upon any items of payment or proceeds thereof and deposit the same in the
Agent's account on account of the Liabilities; and (z) sign the Borrower's name
on any verification of Accounts and notices thereof to Account Debtors.
3.8 Chattel Paper and Instruments. Immediately upon the Borrower's
receipt thereof, the Borrower shall deliver or cause to be delivered to the
Agent, with appropriate endorsement and assignment to vest title, with full
recourse to the Borrower, and possession in the Agent, all chattel paper and
instruments which the Borrower now owns or may at any time or times hereafter
acquire.
3.9 Notice to Account Debtors. The Agent may, in its sole
discretion, at any time or times after the occurrence of a Default, and without
prior notice to the Borrower, notify any or all Account Debtors that the
Accounts have been assigned to the Agent, for the benefit of the Lenders, that
the Agent, for the benefit of the Lenders, has a security interest therein, and
that all payments upon the Accounts be made directly to the Agent or any account
designated by the Agent.
3.10 Eligible Inventory. The Agent shall have the sole right, in its
discretion, to determine which Inventory is eligible ("Eligible Inventory").
Without limiting the Agent's discretion, unless otherwise agreed by the Agent in
writing, the following Inventory is not Eligible Inventory: (a) Inventory which
is in transit; (b) Inventory which is not either currently usable or currently
salable in the ordinary course of the Borrower's business; (c) Inventory which
is obsolete or slow-moving; (d) Inventory which the Agent determines, in the
exercise of its discretion and in accordance with the Agent's customary business
practices, to be unacceptable due to age, type, category and/or quantity; (e)
Inventory with respect to which the Agent does not have a first and valid fully
perfected security interest; (f) Inventory which is stored with a bailee,
consignee, warehouseman or similar third party, unless the Borrower has (i)
previously complied with the terms of Section 3.13 with respect to such stored
Inventory and (ii) received satisfactory Uniform Commercial Code searches of the
Borrower's name at such location; and (g) Inventory as to which any
representation or warranty contained in this Agreement is untrue. If the
Borrower determines that previously scheduled Inventory ceases to be Eligible
Inventory under any of the above described criteria, the Borrower shall notify
the Agent thereof at the earliest reasonable opportunity.
3.11 Inventory Warranties. With respect to Inventory scheduled,
listed or referred to in any Monthly Report or Collateral Report, the Borrower
warrants that, except to the extent that the Borrower has otherwise notified the
Agent in writing (a) it is the lawful owner of such Inventory and has the right
to subject such Inventory to a security interest in favor of the Agent, for the
benefit of the Lenders; (b) it is located on one of the premises listed on
Schedule 3.11 and is not in transit;
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(c) it is not subject to any lien or security interest whatsoever except for the
security interests granted to the Agent, for the benefit of the Lenders,
hereunder and except as specifically permitted below; (d) it is of good and
merchantable quality, free from any defects which would affect the market value
of such Inventory; and (e) it satisfies the objective criteria for inclusion as
Eligible Inventory set forth in Section 3.10.
3.12 Inventory Records. The Borrower shall maintain a perpetual
inventory system which, with reasonable accuracy, tracks all of the Borrower's
Inventory and with reasonable accuracy itemizes and describes the kind, type,
quantity and value of Inventory and of Eligible Inventory, the Borrower's cost
therefor and daily withdrawals therefrom and additions thereto, all of which
records shall be available during the Borrower's usual business hours at the
request of any of the Agent's or any Lender's officers, employees or agents. In
addition, the Borrower shall conduct a physical count of the Inventory at least
once each calendar year and following each physical inventory, shall supply the
Agent with a report in a form and with such specificity as may be reasonably
satisfactory to the Agent concerning such physical count of the Inventory.
3.13 Safekeeping of Inventory and Inventory Covenants. Neither the
Agent nor any Lender shall be responsible for: (a) the safekeeping of the
Inventory; (b) any loss or damage to the Inventory; (c) any diminution in the
value of the Inventory; or (d) any act or default of any carrier, warehouseman,
bailee, forwarding agency or any other Person. All risk of loss, damage,
destruction or diminution in value of the Inventory shall be borne by the
Borrower absent the gross negligence or willful misconduct of the Agent or any
Lender. No Inventory shall be stored with a bailee, warehouseman, consignee or
similar third party unless the Borrower first (i) obtains the Agent's written
consent which shall not be unreasonably withheld and (ii) furnishes to the Agent
such agreements, instruments and documents as the Agent shall in its sole
discretion specify with respect to such stored Inventory, including without
limitation any negotiable warehouse receipts or other documents of title. The
Borrower shall not sell any Inventory to any customer on a bill-and-hold basis.
The Borrower shall notify the Agent if the Borrower has on its premises for
processing or otherwise, inventory or other goods owned by other Persons and the
Borrower agrees to keep all such inventory and goods segregated from the
Borrower's own Inventory.
3.14 Equipment Warranties. With respect to the Equipment, the
Borrower warrants that, (a) except as disclosed on Schedule 3.14, it is owned by
the Borrower and is located on one of the premises listed on Schedule 3.11, (b)
it is not subject to any lien or security interest whatsoever except for the
liens and security interests specifically permitted below, and (c) it is in
working condition and repair and is currently used or usable in the Borrower's
business.
3.15 Equipment Records. The Borrower shall at all times hereafter
keep reasonably correct and accurate records itemizing and describing the kind,
type, age and condition of the Equipment, the Borrower's cost therefor and
accumulated depreciation thereon; and retirements, sales, or other dispositions
thereof, all of which records shall be available during the Borrower's usual
business hours at the request of any of the Agent's or any Lender's officers,
employees or agents.
3.16 Safekeeping of Equipment. Neither the Agent nor any Lender
shall be responsible for: (a) the safekeeping of the Equipment; (b) any loss or
damage to the Equipment; (c) any diminution in the value of the Equipment; or
(d) any act or default of any repairman, bailee or any
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other Person with respect to the Equipment. All risk of loss, damage,
destruction or diminution in value of the Equipment shall be borne by the
Borrower absent the gross negligence or willful misconduct of the Agent.
3.17 Real Property. The Borrower represents and warrants that all of
the real property owned by the Borrower is disclosed on Schedule 3.17(a) and
that all of the real property leased to the Borrower is disclosed on Schedule
3.17(b).
3.18 Maintenance of Properties. Unless otherwise consented to by the
Agent in writing, which consent shall not be unreasonably withheld, the Borrower
shall and shall cause its Subsidiaries to maintain or cause to be maintained in
good repair, working order and condition, ordinary wear and tear excepted, all
of the material assets and properties now or hereafter owned, leased or
otherwise possessed by it and shall make or cause to be made all needful and
proper repairs, renewals, replacements and improvements thereto.
4. CONDITIONS OF ADVANCES.
Notwithstanding any other provisions contained in this Agreement, the
making of any Revolving Loan or the issuance of any Letter of Credit provided
for in this Agreement shall be condi tioned upon the following:
4.1 The Borrower's Request. The Agent shall have received, by no
later than 2:00 p.m. (Dallas, Texas time) on the day on which a Revolving Loan
is requested to be made hereunder and by no later than 2:00 p.m. (Dallas, Texas
time) on the third (3rd) Business Day preceding the day on which a Letter of
Credit is requested to be issued, (a) a telephonic request from an officer of
the Borrower (or any Person authorized by the Borrower pursuant to a written
list provided to the Agent), for a Revolving Loan or a Letter of Credit in a
specific amount, (b) copies of all reports and documents not previously
delivered but required to be delivered to the Agent under this Agreement or any
of the other Financing Agreements, and (c) in the case of a Letter of Credit, an
application therefor as described in Section 2.2. Unless otherwise stated to
the Agent in writing by the Borrower at the time of any such request, each such
request for a Revolving Credit Loan or Letter of Credit shall automatically be
deemed, without necessity of further certification or ratification by the
Borrower, to be a representation and warranty by the Borrower to the Agent, for
the benefit of the Lenders, that the funding of any such Revolving Credit Loan
or the issuance of any such Letter of Credit, and the resulting incurrence of
indebtedness and obligations in connection therewith, is permitted under the
Indenture and would not cause or otherwise result in a "Default" or "Event of
Default" as defined by the Indenture. The Agent shall have no liability to the
Borrower or any other Person as a result of acting on any telephonic request
that the Agent believes in good faith to have been made by any Person set forth
on Schedule 4.1.
4.2 Financial Condition. No material adverse change, as determined
by the Agent in its sole discretion, in the business, financial condition or
operations of the Borrower shall have occurred at any time or times subsequent
to the most recent request for a Revolving Loan or Letter of Credit under this
Agreement.
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4.3 No Default. Neither a Default nor an Event of Default shall have
occurred and be continuing.
4.4 Other Requirements. The Agent shall have received, in form and
substance reasonably satisfactory to the Agent, all certificates, orders,
authorities, consents, affidavits, schedules, instruments, security agreements,
financing statements, mortgages and other documents which are provided for
hereunder, or which the Agent may at any time reasonably request. Without
limitation of the foregoing, the Borrower shall have caused each of its
Subsidiaries to execute (i) a continuing unlimited guaranty agreement in favor
of the Agent, for the benefit of the Lenders, pursuant to which each such
Subsidiary shall guarantee the prompt payment and performance of the Liabilities
and all other obligations of the Borrower under the Financing Agreements and
(ii) a security agreement pursuant to which each such Subsidiary shall grant to
the Agent, for the benefit of the Lenders, a continuing first priority security
interest and lien in and to all property of the type or nature specified in
Section 5.1, at any time owned or acquired by such Subsidiary, as continuing
security for the Liabilities and for such Subsidiary's obligations under such
guaranty agreement, (iii) together with such UCC-1 financing statements as may
be required by the Agent, which in each case shall be in form and substance
satisfactory to the Agent and (iv) such documentation in respect of existence
and authorizing resolutions as the Agent may request, in each case in form and
substance satisfactory to the Agent and the Lenders.
4.5 Representations and Warranties. All of the representations and
warranties contained in this Agreement or any of the other Financing Agreements,
including without limitation those set forth in Section 6, shall be true and
correct as of the date the request for the Revolving Loan or Letter of Credit is
made, as though made on and as of such date.
5. COLLATERAL.
5.1 Security Interest. To secure payment and performance in full of
the obligations arising under the Existing Loan Agreement and the other
Financing Agreements defined therein, the Borrower previously granted to the
Agent, for the benefit of the Lenders, a right of setoff against and a
continuing security interest in and to certain of the Borrower's property and
interests in property, whenever acquired and wherever located (as set forth with
more specificity in the Existing Loan Agreement). The Borrower acknowledges
that such property and interests in property remain subject to a right of setoff
against and a continuing security interest of the Agent, for the benefit of the
Lenders (which rights and security interests were granted and continued pursuant
to the Existing Loan Agreement and related Financing Agreements) and that all of
such property and interests in property will constitute Collateral for the
Liabilities. Accordingly, the Borrower hereby reaffirms the prior grant of a
right of setoff against and a continuing security interests in and to certain of
the Borrower's property and interests in property, as more specifically
described below, whenever acquired and wheresoever located, and to secure
payment and performance in full of the Liabilities, the Borrower hereby grants
to the Agent, for the benefit of the Lenders, a right of setoff against and a
continuing security interest in and to the following property and interests in
property, whether now owned or hereafter owned or acquired by the Borrower and
wheresoever located: (a) Accounts, contract rights, General Intangibles, chattel
paper, instruments, notes, letters of credit, warehouse receipts, shipping
documents, documents and documents of title; (b) Inventory; (c) Equipment; (d)
deposit accounts (general or special) with, and credits and other claims
against, Agent or any Lender,
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or any other financial institution with which the Borrower maintains deposits;
(e) monies, and any and all other property and interests in property of the
Borrower now or hereafter coming into the actual possession, custody or control
of the Agent or any Lender or any agent or affiliate of the Agent or any Lender
in any way or for any purpose (whether for safekeeping, deposit, custody,
pledge, transmission, collection or otherwise) (but excluding Rolling Stock);
(f) interests in leases of real or personal property, whether as lessor or
lessee (including any option to purchase thereunder); (g) all insurance proceeds
of or relating to any of the foregoing; (h) books and records relating to any of
the foregoing and to the Borrower's business; and (i) all accessions and
additions to, substitutions for, and replacements, products and proceeds of any
of the foregoing.
5.2 Preservation of Collateral and Perfection of Security Interests
Therein. The Borrower shall execute and deliver to the Agent, concurrently with
the execution of this Agreement, and at any time or times hereafter at the
request of the Agent, all uniform commercial Code financing statements or other
documents (and pay the cost of filing or recording the same in all public
offices deemed necessary by the Agent) as the Agent may request, in a form
satisfactory to the Agent, to perfect and keep perfected the security interests
in the Collateral granted by the Borrower to the Agent, for the benefit of the
Lenders, herein and in the other Financing Agreements or to otherwise protect
and preserve the Collateral and the Agent's security interests therein. Should
the Borrower fail to do so, the Agent is authorized to sign any such financing
statements as the Borrower's agent. The Borrower further agrees that a carbon,
photographic, photostatic or other reproduction of this Agreement or of a
financing statement is sufficient as a financing statement. At any time or
times hereafter at the request of the Agent, the Borrower shall execute and
deliver to the Agent such instruments and documents as the Agent, in its sole
discretion, requests in order to protect and preserve the Collateral and perfect
and enforce the Agent's security interests therein, for the benefit of the
Lenders. The Borrower shall pay all costs of filing or recording such
instruments and documents in all public offices deemed necessary by the Agent.
5.3 Loss of Value of Collateral. The Borrower shall immediately
notify the Agent of any material loss or depreciation in the value of the
Collateral, other than loss or depreciation occurring in the ordinary course of
the Borrower's business.
5.4 Cash Collateral. In the event that the Agent has issued any
Letters of Credit for the account of the Borrower, the Agent may, at any time
after (a) the occurrence of a Default or an Event of Default, (b) demand by the
Agent for payment of the Liabilities as provided in Section 9.1 hereof, (c)
there exists no unpaid principal balance of the Liabilities, (d) this Agreement
shall terminate for any reason pursuant to Section 2.8 above or (e) at any time,
the sum of (i) the outstanding principal balance of the Revolving Loans plus
(ii) the aggregate undrawn face amount of all Letters of Credit shall exceed the
sum of (A) Loan Availability plus (B) the aggregate undrawn face amount of all
Letters of Credit, request of the Borrower, and the Borrower shall thereupon
deliver to the Agent, cash collateral for any Letter of Credit issued for the
account of the Borrower. If the Borrower fails to deliver such cash to the Agent
promptly upon the Agent's request therefor, the Agent may, without limiting the
Agent's rights or remedies arising from such failure to deliver cash, retain, as
cash collateral, cash proceeds of the Borrower's Collateral in an amount equal
to the aggregate undrawn face amount of all Letters of Credit then outstanding.
To the extent that the Agent retains proceeds in accordance with the immediately
preceding sentence at any time any Liabilities are outstanding, the Agent shall
apply such cash and cash collateral to the payment of such
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Liabilities, including without limitation to the payment of any or all of the
Borrower's reimbursement obligations with respect to any Letter of Credit. To
the extent that no Liabilities are outstanding at such time, the Agent may (but
shall not be obligated to) (y) invest the same in a savings account, under which
deposits are available for immediate withdrawal, with the Agent or such other
bank as the Agent may, in its sole discretion select, or (z) hold the same as a
credit balance in an account with the Agent in the Borrower's name. Interest
payable on any such savings account described in the foregoing sentence shall be
collected by the Agent and shall be paid to the Borrower as it is received by
the Agent, less any fees owing by the Borrower to the Agent with respect to any
Letter of Credit and less any amounts necessary to pay any of the Borrower's
Liabilities which may be due and payable at such time. The Agent shall have no
obligation to pay interest on any credit balances in any account opened for the
Borrower pursuant to this Agreement.
5.5 Agent Not Obligated or Liable. The Agent shall have no
obligation whatsoever to the other Lenders or to any other Person to assure that
the Collateral exists or is owned by the Borrower or is cared for, protected or
insured or that the liens or security interests granted to the Agent, for the
benefit of the Lenders, herein or pursuant hereto have been properly or
sufficiently or lawfully created, perfected, protected or enforced or are
entitled to any particular priority, or to exercise or continue exercising, any
of the rights, authorities and powers granted or available to the Agent in this
Agreement, it being understood and agreed that in respect of the Collateral, or
any act, omission or event related thereto, the Agent may act in any manner it
may deem appropriate, in its sole discretion, given the Agent's own interest in
the Collateral as one of the Lenders; provided that the Agent shall not engage
in gross negligence or willful misconduct.
6. WARRANTIES.
The Borrower represents and warrants to the Agent and to each of the
Lenders that as of the date of this Agreement, and continuing as long as any
Liabilities remain outstanding, and (even if there shall be no Liabilities
outstanding) as long as this Agreement remains in effect:
6.1 Corporate Existence. The Borrower and each of its Subsidiaries,
if any, is a corporation duly organized and in good standing under the laws of
the state of its incorporation and is duly qualified as a foreign corporation
and in good standing under the laws of all other states where the nature and
extent of the business transacted by it or the ownership of its assets makes
such qualification necessary, except those states in which the failure to
qualify does not and will not have a material adverse effect on the business or
condition of such corporation, financial or otherwise. The state of
incorporation of the Borrower and all states in which the Borrower is qualified
to do business as of the date hereof, are listed on Schedule 6.1 attached
hereto.
6.2 Corporate Authority. The execution and delivery by the Borrower
and each of its Subsidiaries, if any, as applicable, of this Agreement and all
of the other Financing Agreements and the performance of each such corporation
of its obligations hereunder and thereunder: (a) are within such corporation's
corporate powers; (b) are duly authorized by such corporation's Board of
Directors and, if necessary, such corporation's shareholders; (c) are not in
contravention of the terms of such corporation's Certificate or Articles of
Incorporation, as applicable, or By-Laws, or of any material indenture,
agreement or undertaking to which such corporation is a party or by which such
corporation or any of its property is bound; (d) do not, as of the execution
hereof, require any
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governmental consent, registration or approval; (e) do not contravene any
contractual or governmental restriction binding upon such corporation; and (f)
will not, except as contemplated herein, result in the imposition of any lien,
charge, security interest or encumbrance upon any property of such corporation
under any existing indenture, mortgage, deed of trust, loan or credit agreement
or other material agreement or instrument to which such corporation is a party
or by which it or any of its property may be bound or affected.
6.3 Binding Effect. This Agreement and all of the other Financing
Agreements are the legal, valid and binding obligations of the Borrower and each
of its Subsidiaries, if any, as applicable, and are enforceable against the
Borrower and each of its Subsidiaries, if any, as applicable, in accordance with
their terms.
6.4 Financial Data. The Borrower has furnished to the Agent and each
Lender (a) its audited consolidated financial statements dated December 31,
1996, (b) its unaudited interim consolidated financial statements dated April
30, 1997 and (c) Projections dated April 28, 1997, covering the period January
1, 1997 to and including December 31, 2000 (collectively referred to as the
"Financials"). All of the Financials (other than the Projections) have been,
and all financial statements to be furnished after the date hereof in accordance
with Section 7.1 (other than the Projections) will be, prepared in accordance
with the books and records of the Borrower and its Subsidiaries, if any, and
either fairly present or will fairly present, as applicable, the consolidated
and consolidating financial condition of the Borrower and its Subsidiaries at
the dates thereof and the results of operations for the periods indicated
(subject, in the case of unaudited financial statements, to normal year-end
adjustments). All of the Financials (other than the Projections) have been, and
all financial statements to be provided after the date hereof will be, prepared
in conformity with GAAP. The Projections furnished on the date hereof have
been, and the Projections to be furnished in accordance with Section 7.1 will
be, prepared by the Borrower and its financial personnel in light of the past
business of the Borrower and its subsidiaries and represent or will represent,
as applicable, as of the date thereof, the good faith belief of the Borrower and
such personnel as to the most probable course of the business of the Borrower
and its Subsidiaries, subject to the assumptions and qualifications stated
therein. Absent a finding by the Agent of a material adverse change in the
business, financial condition or operations of the Borrower and absent a breach
of any of the financial covenants contained in this Agreement, the failure by
the Borrower to achieve any of the Projections will not, in and of itself,
constitute a Default. All information, reports and other papers and data
furnished or to be furnished to the Agent or any Lender have been and will be,
at the time the same are so furnished to the Agent or any Lender, accurate and
correct in all material respects and complete insofar as necessary to give the
Agent and each Lender a true and accurate knowledge of the subject matter
thereof. Since the date of the Financials, there has been no material adverse
change in the financial condition, results of operations or business of the
Borrower or any of its Subsidiaries, if any.
6.5 Liens and Encumbrances; Locations. Except (a) as disclosed on
Schedule 6.5 attached hereto, (b) as contemplated in Section 8.1 or (c) as
otherwise contemplated herein, all of the Collateral of the Borrower and its
Subsidiaries, if any, is and will continue to be owned by the Borrower or a
Subsidiary, has been fully paid for and is free and clear of all security
interests, liens, claims, and encumbrances. All Collateral is and shall be kept
only at the locations
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specified on Schedule 3.11 and such other locations as the Agent has received
written notice of prior to the placement of Collateral thereon.
6.6 Solvency. The Borrower and each of its Subsidiaries, if any, is
solvent, is able to pay its debts as they become due and has capital sufficient
to carry on its business and all businesses in which it is about to engage, and
now owns property having a value both at fair valuation, and at present fair
saleable value, greater than the amount required to pay its debts, including
without limitation the Liabilities. The Eligible Inventory and Eligible
Accounts supporting the Revolving Loans to the Borrower are sufficient in value
to provide the Borrower with sufficient working capital and excess Loan
Availability to enable it to profitably operate its business, meet all debt
amortization requirements and perform its obligations under the Financing
Agreements and the other agreements evidencing indebtedness of the Borrower.
Neither the Borrower nor any of its Subsidiaries, if any, will be rendered
insolvent by the execution and delivery of any of the Financing Agreements or by
completion of the transactions contemplated hereunder or thereunder.
6.7 Principal Place of Business. The principal place of business and
chief executive office of the Borrower and each of its Subsidiaries, if any, is
located at One ABC Parkway, Beloit, Wisconsin 53511. If any change in such
location occurs, the Borrower shall promptly notify the Agent thereof. As of
the date hereof, the books and records of the Borrower and each of its
Subsidiaries, if any, and all records of account are located at the principal
place of, business and chief executive office of the Borrower, and if any change
in such location occurs, the Borrower shall promptly notify the Agent thereof.
6.8 Other Corporate Names. Except as disclosed on Schedule 6.8
attached hereto, neither the Borrower nor any of its Subsidiaries, if any, has
used any corporate or fictitious name (including any tradename, tradestyle,
assumed name, division name or any similar name), other than the corporate name
shown on such corporation's Certificate or Articles of Incorporation, as
applicable.
6.9 Tax Liabilities. The Borrower and each of its Subsidiaries, if
any, has filed all federal, state and local tax reports and returns required by
any law or regulation to be filed by it, except for extensions duly obtained,
and has either duly paid all taxes, duties and charges indicated due on the
basis of such returns and reports, or made adequate provision for the payment
thereof, and the assessment of any material amount of additional taxes in excess
of those paid and reported is not reasonably expected.
6.10 Loans. Except as disclosed on Schedule 6.10 attached hereto,
and except for trade payables and normal accruals arising in the ordinary course
of the Borrower's business since the date of the latest financial statements
delivered to the Agent and the Lenders pursuant to Section 7.1, neither the
Borrower nor any of its Subsidiaries, if any, is obligated on any loan or other
indebtedness for borrowed money in excess of Twenty-Five Thousand Dollars
($25,000) or Fifty Thousand Dollars ($50,000) in the aggregate.
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6.11 Margin Securities. Neither the Borrower nor any of its
Subsidiaries, if any, owns any margin securities and none of the Revolving Loans
advanced hereunder will be used for the purpose of purchasing or carrying any
margin securities or for the purpose of reducing or retiring any indebtedness
which was originally incurred to purchase any margin securities or for any other
purpose not permitted by Regulation U of the Board of Governors of the Federal
Reserve System. If requested by any Lender, the Borrower will furnish such
Lender with a statement in conformity with the requirements of Federal Reserve
Form U-1 referred to in said Regulation. The Borrower also warrants that no
part of the proceeds of the loans to be made hereunder will be used by it for
any purpose which violates, or which is inconsistent with, the provisions of
Regulation X of said Board of Governors.
6.12 Subsidiaries; Joint Ventures; Partnerships. The Borrower has no
Subsidiaries other than Mule-Hide Products Company, Inc. and Amcraft Building
Products Co., Inc., respectively. The Borrower is not engaged in any joint
venture or partnership with any other Person.
6.13 Litigation and Proceedings. Except as disclosed on Schedule
6.13 attached hereto, no judgments are outstanding against the Borrower or any
of its subsidiaries, if any, nor is there now pending or, to the best of the
Borrower's knowledge, threatened, any litigation, contested claim, or federal,
state or municipal governmental proceeding by or against the Borrower or any of
its Subsidiaries, except judgments and pending or threatened litigation,
contested claims and governmental proceedings which are not, in the aggregate,
material to the financial condition, results of operations or business of the
Borrower or any of its Subsidiaries, if any.
6.14 Other Agreements. Except as disclosed on Schedule 6.13 attached
hereto, neither the Borrower nor any of its Subsidiaries, if any, is in default
under any agreement, contract, lease, or commitment to which it is a party or by
which it is bound, the breach of which could be material to the financial
condition, results of operations or business of the Borrower or any of its
Subsidiaries, if any. The Borrower knows of no dispute regarding any agreement,
contract, lease, or commitment which is material to the continued financial
success and well-being of the Borrower or any of its Subsidiaries, if any.
6.15 Employee Controversies. Except as disclosed on Schedule 6.15
attached hereto, (a) there are no controversies pending or, to the best of the
Borrower's knowledge, threatened, between the Borrower or any of its
Subsidiaries, if any, and any of their respective employees, other than employee
grievances arising in the ordinary course of business which are not, in the
aggregate, material to the continued financial success and well-being of the
Borrower or any of its Subsidiaries, if any, (b) the Borrower and each of its
Subsidiaries, if any, is in material compliance with all federal and state laws
respecting employment and employment terms, conditions and practices and (c)
neither the Borrower nor any of its Subsidiaries, if any, has any union
representation questions, grievances, discrimination or unfair labor practice
complaints pending or threatened against it which are, in the aggregate,
material to the continued financial success and well being of the Borrower or
any of its Subsidiaries, if any.
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6.16 Compliance with Laws and Regulations. The execution and
delivery by the Borrower and each of its Subsidiaries, if any, as applicable, of
this Agreement and all of the other Financing Agreements and the performance of
the Borrower's obligations hereunder and thereunder are not in contravention of
any law or laws. The Borrower and each of its Subsidiaries, if any, has
obtained all licenses, authorizations, approvals and permits necessary in
connection with the operation of its business of which the failure to obtain
could be material to the financial condition, results of operations or business
of the Borrower or any of its Subsidiaries, if any. The Borrower and each of
its Subsidiaries, if any, is in compliance with all laws, orders, regulations
and ordinances of all federal, foreign, state and local governmental authorities
relating to its business operations and the assets, with which the failure to
comply could be material to the financial condition, results of operations or
business of the Borrower or any of its Subsidiaries, if any.
6.17 Patents, Trademarks, Licenses. The Borrower and each of its
Subsidiaries, if any, possesses adequate licenses, patents, patent applications,
copyrights, service marks, trade marks, trademark applications, tradestyles,
tradenames and similar assets to continue to conduct its business as heretofore
conducted by it, all of which are described on Schedule 6.17 attached hereto.
6.18 Environmental Matters. Except as disclosed on Schedule 6.18
attached hereto, (a) the Borrower and each of its Subsidiaries, if any, has
complied in all material respects with Environmental Laws regarding transfer,
construction on and operation of its business and property, including but not
limited to notifying authorities, observing restrictions on use, transferring,
modifying or obtaining permits, licenses, approvals and registrations, making
required notices, certifications and submissions, complying with financial
liability requirements, Managing Hazardous Substances and Responding to the
presence or Release of Hazardous Substances connected with operation of the
business or property; (b) the noncompliance by the Borrower or any of its
Subsidiaries, if any, with Environmental Laws would not have a material adverse
effect on its business, operations, prospects, assets, property or condition
(financial or otherwise); (c) neither the Borrower nor any of its Subsidiaries,
if any, has any material contingent liability with respect to the Management of
any Hazardous Substance; (d) during the term of this Agreement, neither the
Borrower nor any of its Subsidiaries, if any, shall permit others to, Manage,
whether on or off their respective property, Hazardous Substances connected with
the operation of its business or property, except in material compliance with
Environmental Laws; (e) the Borrower and each of its Subsidiaries, if any, shall
take prompt action in compliance with Environmental Laws to Respond to the on-
site or off-site Release of Hazardous Substances connected with the operation of
its business or property; and (f) neither the Borrower nor any of its
Subsidiaries, if any, has received any Environmental Notice.
6.19 Fees to Third Parties. Neither the Borrower nor any of its
Subsidiaries, if any, is in any way obligated to any Person in respect of any
finder's or broker's fee or similar commission in connection with the closing of
the transactions evidenced by the Financing Agreements. The Borrower agrees to
indemnify the Agent and each Lender and hold the Agent and each Lender harmless
from any claims for any such fees or commissions from any Persons.
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6.20 Securities Matters. The making of the Revolving Loans and the
issuance of the Letters of Credit hereunder, the application of the proceeds and
repayment thereof by the Borrower, and the consummation of the transactions
contemplated by the Financing Agreements, have not and will not violate any
provision of any federal or state securities statutes, rules or regulations, or
any order issued by the Securities and Exchange Commission (collectively,
"Securities Laws"). The Borrower agrees to indemnify the Agent and each Lender
and hold the Agent and each Lender harmless from the claims of any Persons in
connection with any Securities Laws.
6.21 Disclosure. Except as corrected prior to the date hereof in
writing, no information provided or statements made by the Borrower or its
representatives, or by any Subsidiary or its representatives, in writing to the
Agent or any Lender contains any untrue statement of a material fact or omits to
state a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
6.22 Equity Ownership. Schedule 6.22 attached hereto sets forth the
number of shares of each class of common and preferred stock authorized for each
of the Borrower and each of its subsidiaries, if any, the number of shares of
each such class of stock outstanding, the owners of such shares and the number
of shares of each such class of stock owned by each such owner. The outstanding
capital stock of the Borrower and each of the Subsidiaries, if any, is duly
authorized, validly issued, fully paid and nonassessable.
6.23 Pension Related Matters. Each employee pension or benefit plan
(other than a multiemployer plan within the meaning of Section 3 (37) of ERISA
and to which the Borrower or any ERISA Affiliate has or had any obligation to
contribute (a "Multiemployer Plan")) to which Section 4021(a) of ERISA applies
and (a) which is maintained for employees of the Borrower or any of its ERISA
Affiliates or (b) to which the Borrower or any of its ERISA Affiliates made, or
was required to make, contributions at any time within the preceding five (5)
years (a "Plan"), maintained by the Borrower or any ERISA Affiliate and each
Multiemployer Plan complies, and has been administered in accordance, with its
term and all material applicable requirements of ERISA and of the Internal
Revenue Code of 1986, as amended (the "Tax Code") and with all material
applicable rulings and regulations issued under the provisions of ERISA and the
Tax Code setting forth those requirements. No "Reportable Event," "Prohibited
Transaction" (as each is defined below) or withdrawal from a Multiemployer Plan
has occurred and no funding deficiency described in Section 302 of ERISA exists
with respect to any Plan or Multiemployer Plan which could have a material
adverse effect on the financial condition, results of operation or business of
the Borrower or any ERISA Affiliate. The Borrower and each ERISA Affiliate has
satisfied all of the funding standards applicable to such Plans and
Multiemployer Plans under Section 302 of ERISA and Section 412 of the Tax Code
and the Pension Benefit Guaranty Corporation ("PBGC") has not instituted any
proceedings, and there exists no event or condition which would constitute
grounds for the institution of proceedings by PBGC, to terminate any Plan or
Multiemployer Plan under Section 4042 or ERISA which could have a material
adverse effect on the financial condition, results of operation or business of
the Borrower or any ERISA Affiliate. Neither the Borrower nor any ERISA
Affiliate has taken any steps to terminate any Plan, which termination could
have a material adverse effect on the financial condition, results
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of operation or business of the Borrower or any ERISA Affiliate. Neither the
Borrower nor any ERISA Affiliate has taken any steps to terminate its
participation in any Multiemployer Plan or withdraw from any Multiemployer Plan,
which termination or withdrawal could have a material adverse effect on the
financial condition, results of operations or business of the Borrower or any
ERISA Affiliate. The Borrower and each ERISA Affiliate has made all
contributions to each Plan and each Multiemployer Plan to which it has become
obligated to contribute as to which the failure to make contributions could have
a material adverse effect on the financial condition, results of operation or
business of the Borrower or any ERISA Affiliate. The Borrower is not aware of
any assessments or assertions of withdrawal liability against it or any ERISA
Affiliate with respect to any Plan or Multiemployer Plan. The aggregate
potential withdrawal liability under all Multiemployer Plans to which the
Borrower and each ERISA Affiliate is obligated to contribute is less than an
amount which, if all such liabilities were incurred, could have a material
adverse effect on the financial condition, results of operation or business of
the Borrower or any ERISA Affiliate. For purposes hereof, (i) a "Prohibited
Transaction" shall mean, with respect to any Plan, any transaction described in
Section 406 of ERISA which is not exempt by reason of Section 408 of ERISA or
the transitional rules set forth in Section 414(c) of ERISA and any transaction
described in Section 4975(c) (1) of the Tax Code which is not exempt by reason
of Section 4975 (c) (2) or Section 4975 (d) of the Tax Code, or the transitional
rules of Section 2003(c) of ERISA and (ii) a "Reportable Event" shall mean (x) a
reportable event described in Section 4043 of ERISA and regulations thereunder,
(y) a withdrawal by a substantial employer from a single-employer plan which is
a Plan and which has two or more contributing sponsors at least two of which are
not under common control, as referred to in Section 4063(b) of ERISA, or (z) a
cessation of operations at a facility causing more than twenty percent (20%) of
plan participants to be separated from employment, as referred to in Section
4068(f) of ERISA.
7. AFFIRMATIVE COVENANTS.
The Borrower covenants and agrees that, as long as any Liabilities remain
outstanding, and (even if there shall be no Liabilities outstanding) as long as
this Agreement remains in effect:
7.1 Financial Statements. Except as otherwise expressly provided for
herein, the Borrower shall and shall cause each of its Subsidiaries, if any, to
keep proper books of record and account in which full and true entries will be
made of all dealings or transactions of or in relation to the business and
affairs of such corporation, in accordance with GAAP, and the Borrower shall
cause to be furnished to the Agent and each Lender: (a) as soon as practicable
and in any event within thirty (30) days after the end of each month (i)
statements of income, retained earnings and cash flow of the Borrower and its
Subsidiaries, if any, for such month and for the period from the beginning of
the then current calendar year to the end of such month and a balance sheet of
the Borrower and its Subsidiaries, if any, as of the end of such month,
accompanied by, in comparative form, figures for the corresponding periods in
the immediately preceding calendar year, all in reasonable detail and certified
as accurate by the president or the treasurer of the Borrower, subject to
changes resulting from normal year-end adjustments (such certification to be in
the form of Exhibit E attached hereto), (ii) copies of all operating statements
for such month prepared by the Borrower and its Subsidiaries, if any, for their
internal use, including without limitation statements of cash flow, purchases
and sales of Inventory and other
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similar data as the Lender may reasonably request, and (iii) a comparison of
actual cash flow and capital expenditures with amounts budgeted for such month;
(aa) as soon as practicable and in any event within forty-five (45) days after
the end of each calendar quarter, (i) statements of income, retained earnings
and cash flow of the Borrower and its Subsidiaries for such calendar quarter and
for the period from the beginning of the then current calendar year to the end
of such quarter and a balance sheet of the Borrower and its Subsidiaries as of
the end of such quarter, accompanied by, in comparative form, figures for the
corresponding periods in the immediately preceding calendar year, all in
reasonable detail and certified as accurate by the president or the treasurer of
the Borrower, subject to changes resulting from normal year-end adjustments
(such certification to be in the form of Exhibit "E" attached hereto, adjusted
as necessary for presentation of quarterly statements); (b) as soon as
practicable and in any event within one hundred twenty (120) days after the end
of each calendar year, statements of income, retained earnings and cash flow of
the Borrower and its Subsidiaries, if any, for such year, and a balance sheet of
the Borrower and its Subsidiaries, if any, as of the end of such year, setting
forth in each case, in comparative form, corresponding figures for the period
covered by the preceding annual audit and as of the end of the preceding
calendar year, all in reasonable detail and satisfactory in scope to the Agent
and examined by independent certified public accountants selected by the
Borrower and reasonably satisfactory to the Agent, whose opinion shall be
unqualified and otherwise in scope and substance satisfactory to the Lender; (c)
as soon as practicable and in any event within thirty (30) days before the end
of each calendar year of the Borrower, Projections for the succeeding calendar
year, and within thirty (30) days after the close of each calendar month during
such one (1) year period, a statement in which the actual results of such month
are compared with the corresponding forecasts contained in such Projections; (d)
as soon as practicable and in any event within ten (10) days of delivery to the
Borrower, a copy of any letter issued by the Borrower's independent certified
public accountants or other management consultants with respect to the
Borrower's financial or accounting systems or controls; (e) as soon as
practicable (but in any event not more than five (5) days after the president or
the treasurer of the Borrower obtains knowledge of the occurrence of an event or
the existence of a circumstance giving rise to a Default or an Event of
Default), notice of any and all Defaults and Events of Default hereunder; and
(f) and with reasonable promptness, such other business or financial data as the
Agent or any Lender may reasonably request. Whether or not required by the
rules or regulations of the Securities and Exchange Commission (the "SEC"), the
Borrower will deliver to the Agent and the Lenders (i) all quarterly and annual
financial information that would be required to be contained in a filing with
the SEC on Form 10-Q and Form 10-K, respectively, as if the Borrower were
required to file such forms, including a "Management's Discussion and Analysis
of Financial Condition and Risks of Operations" and, with respect to annual
information only, a report thereon by the Borrower's independent certified
accountants and (ii) all current reports that would be required to be filed with
the SEC on Form 8-K as if the Borrower were required to file such report, in
each case within the time periods specified in the SEC's rules and regulations.
In addition, and without limitation by the foregoing, the Borrower shall also
promptly deliver to the Agent and the Lenders any and all other filings, reports
and information at any time, from time to time, filed with or furnished by the
Borrower or any of its Subsidiaries to the SEC.
All financial statements delivered to the Agent and the Lenders pursuant to
the requirements of this Section 7.1 (except where otherwise expressly
indicated) shall be prepared in accordance with GAAP; all such financial
statements delivered pursuant to clause (a) thereof shall be separately prepared
and presented for the Borrower and each of its Subsidiaries, respectively, and
all financial
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statements delivered pursuant to clause (aa) and clause (b) thereof shall be
prepared on a consolidated and consolidating basis for the Borrower and its
Subsidiaries. Together with each delivery of financial statements required by
subsections 7.1(a), 7.1(aa), 7.1(b) and 7.1(c) above, the Borrower shall deliver
to the Agent and each Lender an officer's certificate (i) stating that there
exists no Default or Event of Default (such certification to be in the form of
Exhibit E attached hereto), or, if any Default or Event of Default exists,
specifying the nature thereof, the period of existence thereof and what action
the Borrower proposes to take with respect thereto and (ii) including a specific
line item disclosing the aggregate financial obligations of the Borrower and its
Subsidiaries for rental payments, principal payments, interest payments, service
charges, or otherwise, under all leases, lease acquisition agreements,
capitalized lease arrangements, conditional sales contracts, purchase money
security arrangements and other similar arrangements. Together with each
delivery of financial statements required by subsection 7.l(b) above, the
Borrower shall deliver to the Agent and each Lender a certificate of the
accountants who performed the audit in connection with such statements stating
that in making the audit necessary to the issuance of a report on such financial
statements, they have obtained no knowledge of any Default or Event of Default,
or, if such accountants have obtained knowledge of a Default or Event of
Default, specifying the nature and period of existence thereof. Such
accountants shall not be liable by reason of any failure to obtain knowledge of
any Default or Event of Default which would not be disclosed in the ordinary
course of an audit. The Agent and each Lender shall exercise reasonable efforts
to keep such information, and all information acquired as a result of any
inspection conducted in accordance with Section 7.2, confidential, provided,
that the Agent and each Lender may communicate such information to (w) any other
Person in accordance with the customary practices of commercial banks relating
to routine trade inquiries, (x) any regulatory authority having jurisdiction
over such Lender, (y) any other Person in connection with such Lender's sale of
any participations in the Liabilities, or (z) any other Person in connection
with the exercise of the Agent's or any Lender's rights hereunder or under any
of the other Financing Agreements. The Borrower authorizes the Agent and each
Lender to discuss the financial condition of the Borrower with the Borrower Is
independent certified public accountants and agrees that such discussion or
communication shall be without liability to any of the Agent, any Lender or the
Borrower's independent certified public accountants.
7.2 Inspection. The Agent or any Lender, or any Person designated by
the Agent or any Lender in writing, shall have the right, from time to time
hereafter, to call at the Borrower's or any Subsidiary's, if any, place or
places of business (or any other place where the Collateral or any information
relating thereto is kept or located) upon reasonable notice during ordinary
business hours, and, without hindrance or delay, (a) to inspect, audit, check
and make copies of and extracts from such corporation's books, records,
journals, orders, receipts and any correspondence and other data relating to its
business or to any transactions between the parties hereto, (b) to make such
verification concerning the Collateral as the Agent or any Lender may consider
reasonable under the circumstances and (c) to discuss the affairs, finances and
business of such corporation with any officers, employees or directors of such
corporation. The Borrower shall pay on demand all reasonable photocopying
expenses incurred by the Agent or any Lender under this Section 7.2.
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7.3 Conduct of Business. The Borrower shall and shall cause each of
its Subsidiaries, if any, to maintain its corporate existence, shall maintain in
full force and effect all licenses, permits, authorizations, bonds, franchises,
leases, patents, trademarks, contracts and other rights necessary or desirable
to the profitable conduct of its business, shall continue in, and limit its
operations to, the same general line of business as that presently conducted and
shall comply with all applicable laws, orders, regulations and ordinances of all
federal, foreign, state and local governmental authorities except for such laws,
orders, regulations and ordinances the violation of which would not, in the
aggregate, have a material adverse effect on such corporation's financial
condition, results of operations or business.
7.4 Claims and Taxes. Absent the Agent's and each Lender's gross
negligence or willful misconduct, the Borrower agrees to indemnify and hold the
Agent and each Lender and their respective affiliates, officers, directors,
employees, attorneys and agents harmless from and against any and all claims,
demands, liabilities, losses, damages, penalties, costs and expenses (including
attorneys' and paralegals' fees) relating to or in any way arising out of the
possession, use, operation or control of any of the Borrower's or any
Subsidiary's, if any, assets. The Borrower shall pay or cause to be paid all
license fees, bonding premiums and related taxes and charges and shall pay or
cause to be paid all of the Borrower's and each Subsidiary's, if any, real and
personal property taxes, assessments and charges and all of the Borrower's and
each Subsidiary's, if any, franchise, income, unemployment, use, excise, old age
benefit, withholding, sales and other taxes and other governmental charges
assessed against the Borrower or any subsidiary, if any, or payable by the
Borrower or any Subsidiary, if any, at such times and in such manner as to
prevent any penalty from accruing or any lien or charge from attaching to its
property; provided, that the Borrower or such Subsidiary, if any, as applicable,
shall have the right to contest in good faith, by an appropriate proceeding
promptly initiated and diligently conducted, the validity, amount or imposition
of any such tax, assessment or charge, and upon such good faith contest to delay
or refuse payment thereof, if (a) such corporation establishes adequate reserves
to cover such contested taxes, assessments or charges and (b) such contest does
not have a material adverse effect on the financial condition of such
corporation, the ability of such corporation to pay any of the Liabilities, or
the priority or value of the Agent's security interest in the Collateral.
7.5 Costs and Expenses as Additional Liabilities. The Borrower shall
reimburse the Agent for all expenses and reasonable fees paid or incurred in
connection with (a) the documentation, negotiation and closing of the Revolving
Loans and other transactions described herein and in the other Financing
Agreements, (b) any amendment, waiver or consent executed in connection with
this Agreement or any of the other Financing Agreements and (c) the enforcement
or preservation of the Agent's and each Lender's rights under this Agreement and
any of the other Financing Agreements, including without limitation stamp,
document, transfer, filing and recording fees and the expenses and reasonable
fees of the Agent's auditors, attorneys and paralegals, whether such expenses
and fees are incurred by the Agent prior to or after the date hereof. All such
costs and expenses incurred by the Agent with respect to the documentation,
negotiation, enforcement, collection and protection of the Agent's interests in
the Collateral, including without limitation the cost of such appraisals and
environmental update inspections as may hereafter be required by the Agent,
shall be additional Liabilities of the Borrower to the
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Agent, payable on demand, and secured by the Collateral and shall, if not paid
by the Borrower when due or demanded, bear interest at the rate applicable to
Floating Rate Loans.
7.6 The Borrower's Liability Insurance. The Borrower shall and shall
cause each of its Subsidiaries, if any, to maintain, at its expense, such public
liability and third party property damage insurance in such amounts and with
such deductibles as is ordinarily maintained by other Persons engaged in similar
businesses and shall deliver to the Agent the original (or a certified) copy of
each policy of insurance and evidence of the payment of all premiums therefor.
Such policies of insurance shall contain an endorsement showing the Agent and
each Lender as additional insured thereunder and providing that the insurance
company will give the Agent at least thirty (30) days prior written notice
before any such policy or policies of insurance shall be altered or canceled.
7.7 The Borrower's Property Insurance. The Borrower shall and shall
cause each of its Subsidiaries, if any, to, at its expense, keep and maintain
its assets insured against loss or damage by fire, theft, explosion, spoilage
and all other hazards and risks ordinarily insured against by other owners or
users of such properties in similar businesses in an amount at least equal to
the full insurable value of all such property. All such policies of insurance
shall be in form and substance satisfactory to the Agent. The Borrower shall
deliver to the Agent the original (or a certified) copy of each policy of
insurance and evidence of payment of all premiums therefor. Such policies of
insurance shall contain an endorsement, in form and substance satisfactory to
the Agent, showing all loss payable to the Agent, as its interests may appear,
as provided below in this Section 7.7. Such endorsement, or an independent
instrument furnished to the Agent, shall provide that such insurance company
will give the Agent at least thirty (30) days prior written notice before any
such policy or policies of insurance shall be altered or canceled and that no
act or default of the Borrower, any Subsidiary, if any, or any other Person
shall affect the right of the Agent to recover under such policy or policies of
insurance in case of loss or damage. The Borrower hereby directs all insurers
under such policies of insurance to pay all proceeds of insurance policies
directly to the Agent as its interests may exist and the Agent shall, in its
sole discretion, either apply such proceeds against the Liabilities (in such
order as the Agent, in its sole discretion, may determine) or permit the
Borrower to use such proceeds to restore or rebuild the damaged property. The
Borrower irrevocably makes, constitutes and appoints the Agent (and all
officers, employees or agents designated by the Agent), during the continuance
of a Default, as the Borrower's true and lawful attorney-in-fact for the purpose
of making, settling and adjusting claims under all such policies of insurance,
endorsing the name of the Borrower or any Subsidiary, if any, on any check,
draft, instrument or other item of payment received by the Borrower or the Agent
pursuant to any such policies of insurance and for making all determinations and
decisions with respect to such policies of insurance. If the Borrower or any
subsidiary, if any, at any time or times hereafter, shall fail to obtain or
maintain any of the policies of insurance required above or to pay any premium
in whole or in part relating thereto, then the Agent, without waiving or
releasing any obligation or default by the Borrower hereunder, may at any time
or times thereafter (but shall be under no obligation to do so) obtain and
maintain such policies of insurance and pay such premiums and take any other
action with respect thereto which the Agent deems advisable, and the amount so
expended shall be part of the Liabilities,
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payable on demand and secured by the Collateral and shall, if not paid by the
Borrower when due or demanded, bear interest at the rate applicable to Floating
Rate Loans.
7.8 Pension Plans. The Borrower shall and shall cause each ERISA
Affiliate to (a) make contributions to all of the Plans and Multiemployer Plans
in a timely manner and in a sufficient amount to comply with the requirements of
ERISA; (b) comply with all material requirements of ERISA and the Tax Code which
relate to Plans and Multiemployer Plans, the failure to comply with which could
have a material adverse effect on the financial condition, results of operation
or business of the Borrower or any ERISA Affiliate; (c) notify the Agent
immediately upon receipt by the Borrower of any notice of the institution of any
proceeding or other action which may result in the termination of any Plans or
Multiemployer Plans; and (d) immediately notify the Agent of the occurrence of a
"Termination Event" (as defined below). For purposes hereof, a "Termination
Event" shall mean (i) the occurrence of a Reportable Event or a Prohibited
Transaction, (ii) the complete or partial withdrawal (as defined in Sections
4203 and 4205 of ERISA) by the Borrower or any ERISA Affiliate from a
Multiemployer Plan, or the receipt by the Borrower or any ERISA Affiliate of a
demand from any Multiemployer Plan for withdrawal liability, (iii) the filing of
a notice of intent to terminate any Plan or the treatment of a plan amendment as
a termination of any such Plan under Section 4041 of ERISA, (iv) any action
causing termination under Section 4041A of ERISA of any Multiemployer Plan, (v)
the institution of proceedings to terminate any Plan or Multiemployer Plan by
the PBGC under Section 4042 of ERISA, or (vi) the occurrence of any other event
or condition which might constitute grounds under Sections 4041A or 4042 of
ERISA for the termination of, or the appointment of a trustee to administer, any
Plan.
7.9 Notice of Suit or Adverse Change in Business. The Borrower
shall, as soon as possible, and in any event within five (5) days after an
officer of the Borrower located in Beloit, Wisconsin learns of the following,
give written notice to the Agent of (a) any proceedings, potentially material to
the business or financial condition of the Borrower or any of its Subsidiaries,
if any, including without limitation all proceedings where the amount in
controversy exceeds Two Hundred Fifty Thousand Dollars ($250,000), being
instituted or threatened to be instituted by or against the Borrower or any of
its Subsidiaries in any federal, state, local or foreign court or before any
commission or other regulatory body (federal, state, local or foreign) and (b)
any material adverse change in the business, assets or condition, financial or
otherwise, of the Borrower or any of its Subsidiaries, if any.
7.10 Supervening Illegality. If, at any time or times hereafter,
there shall become effective any amendment to, deletion from or revision,
modification or other change in any provision of any statute, or any rule,
regulation or interpretation thereunder or any similar law or regulation,
adversely affecting any Lender's extension of credit described in this Agreement
and/or the selling of participations therein, the Borrower shall, at any
Lender's option, either (a) pay to such Lender the then outstanding balance of
such Lender's Pro Rata Share of the Liabilities, indemnify and hold such Lender
harmless from and against any and all obligations, fees, liabilities, losses,
penalties, costs, expenses and damages, of every kind and nature, imposed upon
or incurred by the Borrower by reason of such Lender's failure or inability to
comply with the terms of this Agreement or any of the other Financing Agreements
or (b) indemnify and hold
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such Lender harmless from and against any and all obligations, fees,
liabilities, losses, penalties, costs, expenses and damages, of every kind and
nature, imposed upon or incurred by such Lender by reason of such amendment,
deletion, revision, modification, or other change. In the event that any such
amendment to, deletion from or revision, modification or other change does not
materially adversely affect a Lender's extension of credit described in this
Agreement or the selling of participations therein, such Lender shall not elect
the provisions of clause (a) above.
7.11 Environmental Matters. The Borrower shall promptly notify and
furnish the Agent with a copy of any and all Environmental Notices which are
received by it or any of its Subsidiaries, if any. The Borrower shall and shall
cause its Subsidiaries, if any, to take prompt and appropriate action in
response to any and all such Environmental Notices and shall promptly furnish
the Agent with a description of such corporation's response thereto.
7.12 Use of Proceeds. The Borrower shall use the proceeds of the
disbursements of the Revolving Loans and the Letters of Credit for working
capital and other proper corporate purposes.
7.13 Notice of Business Interruption. The Borrower shall give the
Agent prompt notice if the Borrower or any of its Subsidiaries, if any, is
enjoined, restrained, or in any way prevented by the order of any court or any
administrative or regulatory agency from conducting all or any material part of
its business affairs.
7.14 Interest Rate Protection. Within sixty (60) days of any request
by the Agent, the Borrower shall execute and enter into an interest rate
protection agreement or other agreement for protection against the risk of
interest rate fluctuations, with a Person, and in form and substance,
satisfactory to the Agent (Borrower acknowledges in this regard that Borrower is
not required to enter into any such agreement with the Agent or any Lender, or
any Affiliate of the Agent or any Lender, as a condition for any of the benefits
to Borrower under this Agreement).
8. NEGATIVE COVENANTS.
The Borrower covenants and agrees that as long as any Liabilities remain
outstanding, and (even if there shall be no Liabilities outstanding) as long as
this Agreement remains in effect (unless the Agent shall give its prior written
consent thereto which consent, in the absence of Default or an Event of Default
shall not be unreasonably withheld in the case of acquisitions described in
Section 8.3):
8.1 Encumbrances. Except as set forth on Schedule 6.5 hereto,
neither the Borrower nor any of its Subsidiaries, if any, will create, incur,
assume or suffer to exist any security interest, mortgage, pledge, lien or other
encumbrance of any nature whatsoever on any of its assets, other than: (a) liens
securing the payment of taxes, either not yet due or the validity of which is
being contested in good faith by appropriate proceedings, and as to which the
Borrower or such Subsidiary, as applicable, shall, if appropriate under GAAP,
have set aside on its books and records adequate reserves; provided, however,
that such contest does not have a material adverse effect on the ability of such
corporation to pay any of the Liabilities, or the
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<PAGE>
priority or value of the Agent's security interest in the Collateral; (b)
deposits under worker's compensation, unemployment insurance, social security
and other similar laws, or to secure the performance of bids, tenders or
contracts (other than for the repayment of borrowed money) or to secure
indemnity, performance or other similar bonds for the performance of bids,
tenders or contracts (other than for the repayment of borrowed money) or to
secure statutory obligations or surety or appeal bonds, or to secure indemnity,
performance or other similar bonds in the ordinary course of business; (c)
security interests arising in connection with Equipment, Rolling Stock, real
estate and other capital expenditures as permitted by this Agreement; (d) liens
and security interests in favor of the Agent; and (e) liens securing
indebtedness to be repaid with the initial disbursement of the Revolving Loans.
8.2 Indebtedness. Except as set forth on Schedule 6.10 attached
hereto or as permitted under Section 8.8 or 8.12 hereof, neither the Borrower
nor any of its Subsidiaries, if any, shall incur, create, assume, become or be
liable in any manner with respect to, or permit to exist, any obligations or
indebtedness, except (a) the Liabilities, (b) trade payables and normal accruals
in the ordinary course of business or assumed by the Borrower in the purchase of
an Additional Store or Stores to the extent permitted in Section 8.3 not yet due
and payable, or with respect to which such corporation is contesting in good
faith the amount or Validity thereof by appropriate proceedings, and then only
to the extent that such corporation has set aside on its books adequate reserves
therefor, in accordance with GAAP, (c) other liabilities, assumed by the
Borrower in the purchase of an Additional Store or Stores to the extent
permitted in Section 8.3, and (d) indebtedness secured by Rolling Stock and/or
real estate and/or Equipment, (e) purchase money obligations incurred in
connection with the purchase of Additional Stores, to the extent permitted under
Section 8.3 and (f) indebtedness, not exceeding the aggregate principal amount
of One Hundred Million Dollars ($100,000,000.00), together with accrued interest
and other charges, if any, in each case incurred pursuant to the Senior
Subordinated Notes.
8.3 Consolidations, Mergers or Acquisitions. Neither the Borrower
nor any of its Subsidiaries, if any, shall recapitalize or consolidate with,
merge with, or otherwise acquire any shares or other equity interest in, or any
of the assets or properties of, any other Person, except for inventory, rolling
stock, equipment and real estate (provided, that in connection with all real
estate purchases made pursuant to this Section 8.3, the Borrower shall exercise
reasonable due diligence with respect to environmental risks involved in such
purchases, which due diligence shall include but not be limited to the review
of a timely phase I environmental audit) purchased in the ordinary course of
business, and except for assets (including accounts receivable and intangibles
but excluding shares or equity interests) purchased in connection with the
acquisition of any additional retail store or stores (an individual purchase of
any single store or group of stores is referred to herein as a purchase of an
"Additional Store"); provided, that assets of any Additional Store or Stores may
be purchased only if (a) within a reasonable time prior to such proposed
purchase the Borrower first provides the Agent and each Lender with notice of
such proposed purchase and promptly (and in any event within fifteen (15)
calendar days after Borrower's execution and delivery thereof) provides the
Agent and each Lender with a copy of the purchase agreement (including all
exhibits and schedules) relating thereto, and in addition, provides the Agent
and each Lender, promptly upon the request therefor (and in any event prior to
consummation of any such proposed purchase), with such other information,
documents, certificates or opinions relating to such proposed purchase as the
Agent or such Lender may request, (b) both immediately prior to and immediately
following any such purchase there shall
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exist no Default or Event of Default, (c) the purchase price of such assets does
not exceed Forty Five Million Dollars ($45,000,000.00) in the aggregate during
any calendar year (for purposes of this clause (c), the "purchase price" in
respect of any such purchase means the aggregate amount of the purchase price
payable by the Borrower to the seller including, without limitation, cash
payments, assumptions of liability and purchase money obligations, but excluding
the portion, if any, of any such purchase money obligations which by their terms
are amortized and payable in excess of eighteen (18) months after the date of
incurrence) and (d) the aggregate unpaid balance of purchase money obligations
at any time existing in connection with all such purchases shall not exceed
Fifteen Million Dollars ($15,000,000.00). No Person shall acquire all or
substantially all of the stock or assets of the Borrower. Neither the Borrower
nor any of its Subsidiaries, if any, shall create any additional Subsidiaries.
8.4 Investments or Loans. Neither the Borrower nor any of its
Subsidiaries, if any, shall make or permit to exist investments or loans in or
to any other Person, except (a) investments in short-term direct obligations of
the United States Government, (b) investments in negotiable certificates of
deposit issued by any Lender or by any other bank satisfactory to the Agent,
payable to the order of the Borrower or to bearer, (c) investments in commercial
paper rated A1 or P1, (d) loans to and investments in Affiliates which in the
aggregate shall not exceed the Affiliates Investments Limit, reduced by the
aggregate amount, if any, paid by the Borrower on or with respect to any
guaranty referred to in clause (b) of Section 8.5 (but only to the extent that
such guaranty payments by the Borrower have not been reimbursed, and provided,
that any such loans and investments will be made solely to permit the
acquisition of assets which will inure to the benefit of the Borrower and
provided further, that during the continuance of a Default or an Event of
Default, the Borrower shall not increase the principal balance of, or make any
new loan to or investment in, any Affiliate, but the balance due under the
existing loans may increase as the result of the accrual of interest and similar
charges and the Borrower may renew such loans), (e) loans by the Borrower to
Subsidiaries that are wholly owned by the Borrower, in an aggregate amount
outstanding at any time not exceeding Five Million Dollars ($5,000,000.00),
provided that such loans are for the purpose of providing working capital to any
such Subsidiary for its use in the ordinary course of business and (f)
investments in the equity securities of any Person having an aggregate fair
market value (measured on the date each such investment was made and without
giving effect to subsequent changes in value), when taken together with all
other such investments or loans made pursuant to this clause (f) that are at the
time outstanding, not to exceed One Million Dollars ($1,000,000.00).
8.5 Guarantees. Neither the Borrower nor any of its Subsidiaries, if
any, shall guarantee, endorse or otherwise in any way become or be responsible
for obligations of any other Person, whether by agreement to purchase the
indebtedness of any other Person or through the purchase of goods, supplies or
services, or maintenance of working capital or other balance sheet covenants or
conditions, or by way of stock purchase, capital contribution, advance or loan
for the purpose of paying or discharging any indebtedness or obligation of such
other Person or otherwise, except (a) endorsements of negotiable instruments for
collection in the ordinary course of business and (b) guarantees of indebtedness
not to exceed Ten Million Dollars ($10,000,000) in the aggregate outstanding at
any one time and, except for those guaranties set forth on Schedule 8.5 attached
hereto, and (c) guarantees of indebtedness evidenced by the Senior Subordinated
Notes, provided that such guarantees are subordinated in right of payment and
claim in favor of the prior payment to the Agent and the Lenders of all
Liabilities, in form and substance satisfactory to the
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<PAGE>
Agent and the Lenders, and the guaranty agreements evidencing such guarantees
are otherwise in form and substance satisfactory to the Agent and the Lenders
and (d) guarantees in favor of the Agent, for the benefit of the Lenders, of the
Liabilities. All guaranties outstanding as of the date of this Agreement are
set forth on Schedule 8.5 attached hereto.
8.6 Inventory Covenants. Neither the Borrower nor any of its
Subsidiaries, if any, shall sell any Inventory on a bill-and-hold or consignment
basis.
8.7 Disposal of Property. Neither the Borrower nor any of its
Subsidiaries, if any, shall sell, lease, transfer or otherwise dispose of any of
its properties, assets and rights to any Person except (a) sales of Inventory in
the ordinary course of business, (b) sales of Equipment or Rolling Stock being
replaced in the ordinary course of business with other Equipment or Rolling
Stock with a fair market value equal to or greater than the Equipment or Rolling
Stock being replaced and (c) sales in any calendar year of other Equipment or
Rolling Stock with an aggregate appraised market value not in excess of Four
Hundred Thousand Dollars ($400,000). In the event any of the Equipment or other
assets of the Borrower or any of its Subsidiaries, if any, is sold, transferred
or otherwise disposed of as herein provided, and such sale, transfer or
disposition is effected without replacement of the property so sold, transferred
or disposed of or such property is replaced by property leased by the Borrower
or any of its Subsidiaries, if any, the Borrower shall and shall cause its
Subsidiaries, if any, to deliver all of the cash proceeds of any such sale,
transfer or disposition to the Agent, for the benefit of the Lenders, subject to
the prior rights of the Persons listed on Schedule 6.5 attached hereto and
Persons contemplated by subsection 8.1(c), which proceeds shall be applied to
the repayment of the Liabilities. If any of the Equipment is sold, transferred
or otherwise disposed of as herein provided and such sale, transfer or
disposition is made in connection with the purchase by the Borrower of
replacement Equipment, the Borrower shall use the proceeds of such sale,
transfer or disposition to finance the purchase by the Borrower of replacement
Equipment and shall deliver to the Agent, for the benefit of the Lenders,
written evidence of the use of the proceeds for such purchase. All such
replacement Equipment purchased by the Borrower shall be free and clear of all
liens, claims and encumbrances, except as expressly allowed elsewhere in this
Agreement or as provided on Schedule 6.5 attached hereto.
8.8 Capital Expenditure Limitations. The Borrower and its
Subsidiaries, if any, shall not purchase, invest in or otherwise acquire,
additional real estate, equipment, rolling stock or other fixed assets, which,
in the aggregate, cost the Borrower and its Subsidiaries, if any, more than
Twenty Six Million Five Hundred Thousand Dollars ($26,500,000.00) during the
calendar year ending December 31, 1997, Twenty Seven Million Dollars
($27,000,000.00) during the calendar year ending December 31, 1998, Thirty
Million Dollars ($30,000,000.00) during the calendar year ending December 31,
1999 and any calendar year thereafter. For purposes of the foregoing, there
shall be excluded therefrom capital expenditures made to finance Store
Acquisitions pursuant to Section 8.3.
8.9 Loans to Officers; Consulting and Management Fees. Except as
provided in Section 8.4 and for advances for travel and expenses to the
Borrower's officers, directors or employees in the ordinary course of business,
neither the Borrower nor any of its Subsidiaries, if any, shall make any
individual loans in excess of Twenty-Five Thousand Dollars ($25,000) or
aggregate loans in excess of Fifty Thousand Dollars ($50,000) to officers,
directors, employees
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<PAGE>
or stockholders of the Borrower or any of its Subsidiaries, if any, and neither
the Borrower nor any of its Subsidiaries, if any, shall pay any consulting or
similar fees to any officer, director, employee, stockholder, Affiliate or
Subsidiary, if any, of the Borrower or any of its Subsidiaries, if any, whether
for services rendered to such corporation or otherwise.
8.10 Dividends and Stock Redemptions. Neither the Borrower nor any
of its Subsidiaries, if any, shall directly or indirectly, (a) apply any of its
funds, property or assets to, or set apart any funds, property or assets for,
the purchase, redemption or retirement of, or make any distribution, by
reduction of capital or otherwise in respect of any of its shares of capital
stock or other securities, whether now or hereafter outstanding, or (b) declare
or pay, or set apart any funds for the payment of, any dividends in any calendar
year on any class or classes of stock, except for (i) dividends in an aggregate
amount not to exceed the amount of federal and state income taxes attributable
to any preceding calendar year (and estimated for the current year) from such
stockholders' ownership of stock of the Borrower and (ii) additional dividends
in an amount not to exceed fifty percent (50%) of the excess of the net income
of the Borrower and its Subsidiaries, if any, determined on a consolidated basis
in accordance with GAAP, for the preceding calendar year, over the dividends
declared, paid or set apart for payment pursuant to clause (i) above during the
calendar year for which the additional dividends in this clause (ii) are being
calculated, provided, that additional dividends pursuant to this clause (ii) may
be declared, paid or set apart only if (y) the Agent shall have received the
financial statements required by clause (b) of Section 7.1 as of the last day of
the calendar year for which such dividends are being calculated, together with
the officer's certificate required by Section 7.1 for such period demonstrating
and certifying that no Default or Event of Default has occurred and existed as
of the last day of such calendar year and (z) no Default or Event of Default
shall have occurred and be continuing at the time of any such declaration,
payment or setting apart, or shall result therefrom.
8.11 Amendment of Certificate of Incorporation or By-Laws. Absent
not less than five (5) days' prior written notice to the Agent, neither the
Borrower nor any of its Subsidiaries, if any, shall amend its Certificate or
Articles of Incorporation, as applicable, or By-Laws.
8.12 [INTENTIONALLY BLANK]
8.13 Fiscal Year End. The Borrower shall not change the end of the
fiscal year of it and its Subsidiaries, if any, from December 31 of each year.
8.14 Transactions with subsidiaries and Affiliates. Except as
provided in Section 8.4, neither the Borrower nor any of its Subsidiaries, if
any, will transfer any cash or property to any Affiliate or enter into any
transaction, including without limitation the purchase, lease, sale or exchange
of property or the rendering of any service to any Affiliate; provided, that the
Borrower and its Subsidiaries, if any, may transfer cash or property to
Affiliates and enter into transactions with Affiliates for fair value in the
ordinary course of business pursuant to terms that are no less favorable to the
Borrower and its Subsidiaries, if any, than the terms upon which such transfers
or transactions would have been made had such transfers or transactions been
made to or with a Person that is not an Affiliate.
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8.15 Termination Events. The Borrower shall not permit to occur or
suffer to exist any Termination Event, if such Termination Event could have a
material adverse effect on the financial condition, results of operation or
business of the Borrower or any ERISA Affiliate.
8.16 Bonuses. Except as calculated pursuant to formulae illustrated
on Schedule 8.16 attached hereto, neither the Borrower nor any of its
Subsidiaries, if any, shall pay performance or similar bonuses to its directors,
officers or stockholders.
8.17 Minimum Tangible Net Worth. Tangible Net Worth, as determined
as of each date set forth below, shall not be less than the amount set forth
below opposite such date:
<TABLE>
<CAPTION>
Date Amount
---- ------
<S> <C>
December 31, 1997 $85,000,000.00
December 31, 1998 $75,000,000.00
Each fiscal year-end thereafter $75,000,000.00
</TABLE>
8.18 Maximum Funded Debt to EBITDA. The ratio of Funded Debt to
EBITDA, determined as of the last day of each calendar quarter and measured for
the preceding period of four calendar quarters, shall not exceed the following
prescribed amounts, as applicable:
<TABLE>
<CAPTION>
Date Ratio
---- -----
<S> <C>
June 30, 1997 6.60 to 1.0
September 30, 1997 6.50 to 1.0
December 31, 1997 6.20 to 1.0
March 31, 1998 6.70 to 1.0
June 30, 1998 6.80 to 1.0
September 30, 1998 6.50 to 1.0
December 31, 1998 6.30 to 1.0
March 31, 1999 6.20 to 1.0
June 30, 1999 6.80 to 1.0
September 30, 1999 6.50 to 1.0
December 31, 1999 6.30 to 1.0
March 31, 2000 5.90 to 1.0
June 30, 2000 6.80 to 1.0
</TABLE>
8.19 Minimum Fixed Charge Coverage Ratio. The ratio of (i) EBITDA to
(ii) the sum of interest expense plus the principal portion of current
maturities of long term indebtedness (determined on a consolidated basis for the
Borrower and its Subsidiaries), determined as of the last day of each calendar
quarter and measured for the preceding period of four calendar quarters, shall
not be less than the following prescribed amounts, as applicable:
<TABLE>
<CAPTION>
Date Ratio
---- -----
<S> <C>
June 30, 1997 1.45 to 1.0
September 30, 1997 1.35 to 1.0
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
December 31, 1997 1.25 to 1.0
March 31, 1998 1.10 to 1.0
June 30, 1998 1.15 to 1.0
September 30, 1998 1.25 to 1.0
December 31, 1998 1.35 to 1.0
March 31, 1999 1.20 to 1.0
June 30, 1999 1.25 to 1.0
September 30, 1999 1.35 to 1.0
December 31, 1999 1.40 to 1.0
March 31, 2000 1.80 to 1.0
June 30, 2000 1.85 to 1.0
</TABLE>
8.20 Senior Subordinated Notes and Related Guaranties. Neither the
Borrower nor any of its Subsidiaries on its behalf shall (i) make any prepayment
or any other payment other than scheduled interest payments and payment at
stated final maturity on or (ii) redeem, repurchase or otherwise reacquire or
(iii) elect or exercise either of the options provided under Section 8.01
("Option to Elect Legal Defeasance or Covenant Defeasance") of the Indenture
with respect to, any of the Senior Subordinated Notes without the prior written
consent of the Agent. The Borrower will not agree to any amendment, change,
modification or restatement of the Senior Subordinated Notes or the Indenture
without the prior written consent of the Agent.
9. DEFAULT, RIGHTS AND REMEDIES OF THE LENDER.
9.1 Acceleration. Upon the occurrence of a Default described in
clause (g) of the definition of "Default," all of the Liabilities shall
immediately and automatically, without notice of any kind, be immediately due
and payable; and upon the occurrence of any other Default, any or all of the
Liabilities may, at the option of the Agent, and shall at the direction of the
Requisite Lenders (which direction shall be preceded by not less than thirty
(30) days' prior written notice to the Agent from such Requisite Lenders of
their intent to give such direction) and without presentment, demand, protest or
notice of any kind (all of which are hereby expressly waived), be declared, and
thereupon shall become, immediately due and payable. Upon the occurrence of any
Default the Agent or the Requisite Lenders may, at its or their option,
terminate the obligations of the Lenders to make additional Revolving Loans and
issue additional Letters of Credit. Without limitation of or by the foregoing,
upon the occurrence of a Default, the Agent may, at its option, declare the
portion of the Revolving Loans comprised by Eurodollar Loans to be immediately
due and payable and, without further notice, cause such Eurodollar Loans to be
refinanced by a Revolving Loan in an amount equal to the aggregate unpaid
principal balance of such Eurodollar Loans, in which event accrued interest on
such unpaid principal amount, plus applicable payments required by Section
2.11(c), if any, shall be immediately due and payable.
9.2 Rights and Remedies Generally. Upon the occurrence of a Default,
the Agent, on behalf of the Lenders, shall have, in addition to any other rights
and remedies contained in this Agreement or in any of the other Financing
Agreements, all of the rights and remedies of a secured party under the Code or
other applicable laws, all of which rights and remedies shall be cumulative, and
non-exclusive, to the extent permitted by law. In addition to all such rights
and remedies, the sale, lease or other disposition of the Collateral, or any
part thereof, by the
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Agent after Default may be for cash, credit or any combination thereof, and the
Agent, on behalf of the Lenders, may purchase all or any part of the Collateral
at public or, if permitted by law, private sale, and in lieu of actual payment
of such purchase price, may set-off the amount of such purchase price against
the Liabilities then owing. Any sales of the Collateral may be adjourned from
time to time with or without notice. The Agent may, in its sole discretion,
cause the Collateral to remain on the Borrower's premises, at the Borrower's
expense, pending sale or other disposition of the Collateral. The Agent shall
have the right to conduct such sales on the Borrower's premises, at the
Borrower's expense, or elsewhere, on such occasion or occasions as the Agent may
see fit.
9.3 Entry Upon Premises and Access to Information. Upon the
occurrence of a Default, the Agent shall have the right to enter upon any
premises of the Borrower where the Collateral is located (or is believed to be
located) without any obligation to pay rent to the Borrower, or any other place
or places where the Collateral is believed to be located and kept, and remove
the Collateral therefrom to the premises of the Agent or any agent of the Agent,
for such time as the Agent may desire, in order effectively to collect or
liquidate the Collateral, and/or the Agent may require the Borrower to assemble
the Collateral and make it available to the Agent at a place or places to be
designated by the Agent. Upon the occurrence of a Default, the Agent shall have
the right to obtain access to the Borrower's data processing equipment, computer
hardware and software relating to the Collateral and to use all of the foregoing
and the information contained therein in any manner the Agent deems appropriate;
and the Agent shall have the right to notify post office authorities to change
the address for delivery of the Borrower's mail to an address designated by the
Agent and to receive, open and process all mail addressed to the Borrower.
9.4 Sale or Other Disposition of Collateral by the Agent. Any notice
required to be given by the Agent of a sale, lease or other disposition or other
intended action by the Agent with respect to any of the Collateral which is
deposited in the United States mails, postage prepaid and duly addressed to the
Borrower at the address specified in Section 10.13, at least ten (10) Business
Days prior to such proposed action shall constitute fair and reasonable notice
to the Borrower of any such action. The net proceeds realized by the Agent upon
any such sale or other disposition, after deduction for the expense of retaking,
holding, preparing for sale, selling or the like and the reasonable attorneys'
and paralegals' fees and legal expenses incurred by the Agent in connection
therewith, shall be applied as provided herein toward satisfaction of the
Liabilities including, without limitation the Liabilities described in Sections
7.5 and 10.2. The Agent shall account to the Borrower for any surplus realized
upon such sale or other disposition, and the Borrower shall remain liable for
any deficiency. The commencement of any action, legal or equitable, or the
rendering of any judgment or decree for any deficiency shall not affect the
Agent's security interest in the Collateral until the Liabilities are fully
paid. The Borrower agrees that neither the Agent nor any Lender has any
obligation to preserve rights to the Collateral against any other parties. The
Agent is hereby granted a license or other right to use, without charge, the
Borrower's labels, patents, copyrights, rights of use of any name, trade
secrets, trade names, tradestyles, trademarks, service marks and advertising
matter, or any property of a similar nature, as it pertains to the Collateral,
in completing production of, advertising for sale and selling
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any Collateral and the Borrower's rights under all licenses and all franchise
agreements shall inure to the Agent's benefit until the Liabilities are paid.
9.5 Waiver of Demand. Demand, presentment, protest, notice of
nonpayment, notice of intent to accelerate and notice of acceleration are hereby
waived by the Borrower. The Borrower also waives the benefit of all valuation,
appraisal and exemption laws.
9.6 Waiver of Notice. UPON THE OCCURRENCE OF A DEFAULT, THE BORROWER
HEREBY WAIVES ALL RIGHTS TO NOTICE AND HEARING OF ANY KIND PRIOR TO THE EXERCISE
BY THE LENDER OF ITS RIGHTS TO REPOSSESS THE COLLATERAL WITHOUT JUDICIAL PROCESS
OR TO REPLEVY, ATTACH OR LEVY UPON THE COLLATERAL WITHOUT PRIOR NOTICE OR
HEARING, EXCEPT AS OTHERWISE EXPRESSLY REQUIRED HEREIN.
9.7 Advice of Counsel. The Borrower acknowledges that it has been
advised by its counsel with respect to this transaction and this Agreement,
including without limitation any waivers contained herein.
10. MISCELLANEOUS.
10.1 Waiver. The Agent's and the Lenders' failure, at any time or
times hereafter, to require strict performance by the Borrower of any provision
of this Agreement shall not waive, affect or diminish any right of the Agent or
any Lender thereafter to demand strict compliance and performance therewith.
Any suspension or waiver by the Agent or any Lender of a Default by the Borrower
under this Agreement or a default under any of the other Financing Agreements
shall not suspend, waive or affect any other Default by the Borrower under this
Agreement or any other default under any of the other Financing Agreements,
whether the same is prior or subsequent thereto and whether of the same or of a
different kind or character. None of the undertakings, agreements, warranties,
covenants and representations of the Borrower contained in this Agreement or any
of the other Financing Agreements and no Default by the Borrower under this
Agreement or default under any of the other Financing Agreements shall be deemed
to have been suspended or waived by the Agent or any Lender unless such
suspension or waiver is in writing signed by an officer of the Agent, and
directed to the Borrower specifying such suspension or waiver.
10.2 Costs and Attorneys' Fees. Without limiting the provisions of
Section 7.5, if at any time or times hereafter the Agent employs counsel in
connection with protecting or perfecting the Agent's security interest in the
Collateral or in connection with any matters contemplated by or arising out of
this Agreement or any of the other Financing Agreements, whether (a) to
commence, defend, or intervene in any litigation or to file a petition,
complaint, answer, motion or other pleadings, (b) to take any other action in or
with respect to any suit or proceeding (bankruptcy or otherwise), (c) to consult
with officers of the Agent to advise the Agent, (d) to protect, collect, lease,
sell, take possession of, or liquidate any of the Collateral, (e) to attempt to
enforce or to enforce any security interest in any of the Collateral, or (f) to
attempt to enforce or to enforce any rights of the Agent or any Lender
hereunder, including without
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limitation the right to collect any of the Liabilities, then in any of such
events, all of the reasonable attorneys, fees arising from such services, and
any expenses, costs and charges relating thereto, including without limitation
all reasonable fees of the paralegals and other staff employed by such
attorneys, shall be part of the Liabilities, payable on demand and secured by
the Collateral and shall, if not paid by the Borrower when due or demanded, bear
interest at the rate applicable to Floating Rate Loans.
10.3 Expenditures by the Agent. In the event the Borrower shall fail
to pay taxes, insurance, assessments, costs or expenses which the Borrower is,
under any of the terms hereof or of any of the other Financing Agreements,
required to pay, or fails to keep the Collateral free from other security
interests, liens or encumbrances, except as permitted herein, the Agent may, in
its sole discretion, make expenditures for any or all of such purposes, and the
amount so expended, shall be part of the Liabilities, payable on demand and
secured by the Collateral and shall, if not paid by the Borrower when due or
demanded, bear interest at the rate applicable to Floating Rate Loans.
10.4 Custody and Preservation of Collateral. The Agent and the
Lenders shall be deemed to have exercised reasonable care in the custody and
preservation of any of the Collateral in its possession if it takes such action
for that purpose as the Borrower shall request in writing, but failure by the
Agent or any Lender to comply with any such request shall not of itself be
deemed a failure to exercise reasonable care, and no failure by the Agent or any
Lender to preserve or protect any right with respect to such Collateral against
prior parties, or to do any act with respect to the preservation of such
Collateral not so requested by the Borrower, shall of itself be deemed a failure
to exercise reasonable care in the custody or preservation of such Collateral.
10.5 Reliance by the Agent and the Lenders. The Borrower
acknowledges that the Agent and each Lender, in entering into this Agreement and
agreeing, in its discretion, to make Revolving Loans and otherwise extend credit
to the Borrower hereunder, has relied upon the accuracy of the covenants,
agreements, representations and warranties made herein by the Borrower and the
information delivered by the Borrower to the Agent or any Lender in connection
herewith (including without limitation the Financials).
10.6 Successors and Assigns. Whenever in this Agreement there is
reference made to any of the parties hereto, such reference shall be deemed to
include, whenever applicable, a reference to the successors and assigns of the
Borrower and the successors and assigns of the Agent and each of the Lenders,
respectively. Notwithstanding anything herein to the contrary, the Borrower may
not transfer any of its rights or obligations under this Agreement without the
prior written consent of the Agent and all Lenders. No Lender may transfer any
of its rights or obligations under this Agreement except as provided in Section
10.16.
10.7 Applicable Law; Severability. THIS AGREEMENT SHALL BE CONSTRUED
IN ALL RESPECTS IN ACCORDANCE WITH, AND GOVERNED BY, THE INTERNAL LAWS AND
DECISIONS, AND NOT THE CONFLICT OF LAW PROVISIONS, OF THE STATE OF ILLINOIS.
Whenever possible, each provision of this Agreement shall be
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interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited by or invalid under
applicable law, such provision shall be ineffective only to the extent of such
prohibition or invalidity, without invalidating the remainder of such provisions
or the remaining provisions of this Agreement.
10.8 Submission to Jurisdiction; Waiver of Bond. THE BORROWER, THE
AGENT AND EACH LENDER HEREBY CONSENT TO THE JURISDICTION OF ANY LOCAL, STATE, OR
FEDERAL COURT LOCATED WITHIN COOK COUNTY, ILLINOIS AND WAIVE ANY OBJECTION BASED
ON IMPROPER VENUE OR FORUM NON CONVENIENS TO THE CONDUCT OF ANY PROCEEDING IN
ANY SUCH COURT AND THE BORROWER CONSENTS THAT ALL SERVICE OF PROCESS UPON THE
BORROWER MAY BE MADE BY REGISTERED MAIL OR MESSENGER DIRECTED TO IT AT THE
ADDRESS SET FORTH IN SECTION 10.13 AND THAT SERVICE SO MADE SHALL BE DEEMED TO
BE COMPLETED UPON THE EARLIER OF ACTUAL RECEIPT OR THREE (3) DAYS AFTER THE SAME
SHALL HAVE BEEN POSTED TO THE BORROWER'S ADDRESS BY THE BORROWER'S AGENT AS SET
FORTH BELOW. THE BORROWER HEREBY APPOINTS CT CORPORATION, 208 SOUTH LASALLE
STREET, CHICAGO, ILLINOIS 60604, AS ITS AGENT FOR THE PURPOSE OF ACCEPTING THE
SERVICE OF ANY PROCESS WITHIN THE STATE OF ILLINOIS, WHICH APPOINTMENT MAY BE
REVOKED WITH THE AGENT'S PRIOR WRITTEN CONSENT. THE AGENT, EACH LENDER AND THE
BORROWER WAIVE, TO THE EXTENT PERMITTED BY LAW, TRIAL BY JURY, AND THE BORROWER
WAIVES ANY BOND OR SURETY OR SECURITY UPON SUCH BOND WHICH MIGHT, BUT FOR THIS
WAIVER, BE REQUIRED OF THE AGENT OR ANY LENDER. NOTHING CONTAINED IN THIS
SECTION 10.8 SHALL AFFECT THE RIGHT OF THE AGENT OR ANY LENDER TO SERVE LEGAL
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT THE RIGHT OF THE AGENT OR
ANY LENDER TO BRING ANY ACTION OR PROCEEDING AGAINST THE BORROWER OR ITS
PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION.
10.9 Application of Payments. Notwithstanding any contrary provision
contained in this Agreement or in any of the other Financing Agreements, the
Borrower irrevocably waives the right to direct the application of any and all
payments at any time or times hereafter received by the Agent, for the account
of the Lenders, from the Borrower or with respect to any of the Col lateral, and
the Borrower does hereby irrevocably agree that the Agent shall have the
continuing exclusive right to apply and reapply any and all payments received at
any time or times hereafter, whether with respect to the Collateral or
otherwise, against the Liabilities in such manner as the Agent may deem
advisable, notwithstanding any entry by the Agent or any Lender upon any of its
books and records.
10.10 Marshalling; Payments Set Aside. Neither the Agent nor any
Lender shall be under any obligation to marshall any assets in favor of the
Borrower or any other party or against or in payment of any or all of the
Liabilities. To the extent that the Borrower makes a payment or payments to the
Agent, for the account of the Lenders, or the Agent enforces its security
interests or the Agent or any Lender exercises its rights of setoff, and such
payment or payments or the proceeds of such enforcement or setoff or any part
thereof are subsequently
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invalidated, declared to be fraudulent or preferential, set aside and/or
required to be repaid to a trustee, receiver or any other party under any
bankruptcy law, state or federal law, common law or equitable cause, then to the
extent of such recovery, the obligation or part thereof originally intended to
be satisfied shall be revived and continued in full force and effect as if such
payment had not been made or such enforcement or setoff had not occurred.
10.11 Section Titles. The section and subsection titles contained in
this Agreement shall be without substantive meaning or content of any kind
whatsoever and are not a part of the agreement between the parties.
10.12 Continuing Effect. This Agreement, the Agent's security
interests in the Collateral, and all of the other Financing Agreements shall
continue in full force and effect so long as any Liabilities shall be owed to
any Lender, and (even if there shall be no Liabilities outstanding) so long as
this Agreement has not been terminated as provided in Section 2.8.
10.13 Notices. Except as otherwise expressly provided herein, any
notice required or desired to be served, given or delivered hereunder shall be
in writing, and shall be deemed to have been validly served, given or delivered
upon the earlier of (a) personal delivery to the address set forth below and (b)
in the case of mailed notice, three (3) days after deposit in the United States
mails, with proper postage for certified mail, return receipt requested,
prepaid, or in the case of notice by Federal Express or other reputable
overnight courier service, one (1) Business Day after delivery to such courier
service, addressed the party to be notified as follows:
(i) If to the Agent at:
NationsBank of Texas, N.A.
901 Main Street, 6th Floor
Dallas, Texas 75202
Attention: Business Credit/Regional Manager: URGENT"
(ii) If to any Lender, at the address set forth on the signature
pages hereto.
(iii) If to the Borrower at:
American Builders & Contractors Supply Co., Inc.
One ABC Parkway
Beloit, Wisconsin 53511
Attention: Mr. Kenneth A. Hendricks
with a copy to:
Leo and Associates
200 Randolph Avenue
Suite 200
Huntsville, Alabama 35801
Attention: Karl W. Leo
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or to such other address as each party designates to the other in the manner
herein prescribed; provided, that the foregoing methods of delivery are not
exclusive and written notice in any other manner (including without limitation
via telecopy transmission) which is actually delivered shall also be deemed
valid and effective.
10.14 Equitable Relief. The Borrower recognizes that, in the event
the Borrower fails to perform, observe or discharge any of its obligations or
liabilities under this Agreement, any remedy at law may prove to be inadequate
relief to the Agent and the Lenders; therefore, the Borrower agrees that the
Agent and the Lenders, if the Agent so requests, shall be entitled to temporary
and permanent injunctive relief in any such case without the necessity of
proving actual damages.
10.15 Entire Agreement; Amendments. This Agreement, together with
the Financing Agreements executed in connection herewith, constitutes the entire
agreement among the parties with respect to the subject matter hereof, and
supersedes all prior written or oral understandings with respect thereto. No
amendment to this Agreement shall be effective unless it is in writing. The
written consent of the Agent and all Lenders shall be required for any agreement
which by its terms would agree to: (i) extend the Initial Term or postpone the
date on which any installment of principal or interest, or any payment of fees
provided by Section 2.6(b) or Section 2.6(c), is payable under this Agreement;
(ii) change any interest rate payable by Borrower under this Agreement, or the
amount of any payment of fees provided by Section 2.6(b), Section 2.6(c) or
Section 2.9; (iii) increase the Maximum Facility or any Lender's Pro Rata Share,
or the maximum aggregate undrawn face amount of Letters of Credit prescribed by
Section 2.2, or the maximum amount, or maximum number of occurrences, of
Overadvances which may be allowed under Section 11.9(b); (iv) increase the
maximum advance rate applicable to Eligible Accounts or Eligible Inventory in
respect of determination of the Loan Availability, (v) release from liability
any Person who is a guarantor of the Liabilities (other than in consideration
for full payment and performance of the obligations which are the object of any
such release), (vi) release any Collateral (provided however, that
notwithstanding the foregoing, the Agent may in its sole discretion and without
the consent of any Lender, agree to release or subordinate any security interest
in Equipment which was purchased by the Borrower using proceeds of capital
expenditures, as may be requested by the Borrower for the purpose of refinancing
the purchase price thereof; it being understood and agreed, in any event,
however, that the Agent shall have no obligation to agree to any such request by
the Borrower), or consent to allow the disposition (other than as expressly
allowed by the Financing Agreements) of any Collateral; (vii) release or
discharge Borrower from any obligation to make payments of principal or accrued
interest under the Financing Agreements (other than in consideration for full
payment and performance), (viii) change the definition of "Inventory Sublimit"
or "Requisite Lenders" or (ix) amend the provisions of this Section 10.15. The
written consent of Agent and Requisite Lenders shall be required as a condition
to the effectiveness of any amendment to this Agreement or waiver of any
provisions of this Agreement which would: (i) waive or modify any covenants
contained in Sections 7 or Section 8 of this Agreement or (ii) consent to allow
any security interests, liens or encumbrances (in addition to those expressly
allowed by the Financing Agreements) on any Collateral (it being understood that
consent by the Agent or any Lender shall be conditioned upon execution of a
subordination and standstill agreement by the Borrower, the Agent for the
benefit of the Lenders and the proposed grantee of any such security interest,
lien or encumbrance, in form satisfactory to the Agent and any such Lender) or
(iii) agree to any request for consent to any prepayment by the
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Borrower on the Senior Subordinated Notes, or any redemption, repurchase or
reacquisition thereof, or agree to any request for consent to any amendment of
the provisions of the Senior Subordinated Notes or the Indenture which provide
for subordination of the Senior Subordinated Notes in favor of the Liabilities
or subordination of any guaranties thereof by any Subsidiary (including without
limitation Article 10 ("Subordination") or Section 11.06 ("Subordination of
Subsidiary Guaranties") of such Indenture). Otherwise, except as provided or
referenced above, the Agent may amend, modify or waive any of the terms of the
Financing Agreements, consent to any action or failure to act by Borrower, or
exercise or refrain from exercising any powers or rights which it may have under
the Financing Agreements or as a matter of law, without the requirement of prior
notice to or consent of Lenders. Any consent requested by the Agent from any
Lender, and any directive, consent or refusal of consent given to the Agent by
any Lender, shall be communicated as provided in Section 10.13. In the event
any consent requested by the Agent is not either granted or refused within ten
(10) Business Days after it is requested by the Agent, the same shall be deemed
to have been granted. With respect to any amendment, extension or waiver which
is to become effective at any time when any Default or Event of Default is in
existence, the Borrower agrees that, if required by the Agent in consideration
of and as a condition precedent to the effectiveness thereof, the Borrower shall
pay to the Agent, for the account of the Lenders, in addition to fees, costs and
expenses otherwise provided by this Agreement, an administration fee in an
amount determined by the Agent and the Borrower by mutual agreement.
10.16 Participations/Assignments. No Lender shall have the right,
without the prior written consent of the Agent, to sell participations in, or
assignments of, all or any portion of its interest under any or all of the
Financing Agreements, provided that if no Default or Event of Default is in
existence the identity of any Person purchasing any such participation or
assignment shall first be approved by Borrower as provided hereinbelow (it being
understood that no such approval shall be required if any Default or Event of
Default is in existence); and provided further that, in any event, any Lender
may assign (i) all or any portion of its interest under any or all of the
Financing Agreements to an Affiliate of such Lender or (ii) all of its interest
under all of the Financing Agreements to any Person in connection with the sale
of all or substantially all of the loan portfolio of such Lender to such other
Person, in each case without the consent of the Agent or approval of the
participant or assignee by Borrower. The Agent's consent to an assignment by a
Lender of all or a portion of its interest under the Financing Agreements may be
conditioned, among other criteria, upon the execution and delivery of an
assignment and acceptance agreement in form and substance acceptable to the
Agent, pursuant to which the assignee of such assignment shall become a party to
this Agreement as a Lender and agree to be bound by all of the terms and
provisions of the Financing Agreements, and confirmation to the Agent's
satisfaction, in form required by the Agent, that such assignee is organized
under the laws of the United States or a state thereof or, alternatively, is
exempt in a manner prescribed by applicable law from withholding requirements
relating to all amounts payable to such assignee with respect to the Revolving
Loans or otherwise under the Financing Agreements. In connection with the
foregoing and with respect to any request of the Borrower for its approval of a
participant or assignee, the Lender proposing to enter into any participation or
assignment with respect to which such approval is required as provided above (or
the Agent, at the request of such Lender) shall notify Borrower of the identity
of the proposed participant or assignee, and Borrower shall have until the third
Business Day following receipt of such notice to notify such Lender (or the
Agent, as the case may be) that it does or does not approve such Person as a
participant or assignee. If no such written notification is received from the
Borrower by such Lender
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(or the Agent, as the case may be) within such time, the Borrower shall be
deemed to have irrevocably granted its approval to such request. Borrower agrees
that, in any event, any requested approval of a participant or assignee shall
not be unreasonably withheld.
10.17 Indemnity. Without limiting any other indemnity provisions
contained in this Agreement or any of the other Financing Agreements, the
Borrower agrees to defend, protect, indemnify and hold harmless the Agent, each
Lender and each and all of their respective affiliates, officers, directors,
employees, attorneys and agents ("Indemnified Parties") from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, claims, costs, expenses and disbursements of any kind or nature
whatsoever (including without limitation the fees and disbursements of counsel
for the Indemnified Parties in connection with any investigative, administrative
or judicial proceeding, whether or not the Indemnified Parties shall be
designated as a party thereto), which may be imposed on, incurred by, or
asserted against any Indemnified Party (whether direct, indirect or
consequential and whether based on any federal or state laws or other statutory
regulations, including without limitation securities, environmental and
commercial laws and regulations, under common law or at equitable cause, or on
contract or otherwise) in any manner relating to or arising out of this
Agreement or the other Financing Agreements, or any act, event or transaction
related or attendant thereto, the making and the management of the Revolving
Loans and the issuance of the Letters of Credit hereunder (including without
limitation any liability under federal, state or local environmental laws or
regulations) or the use or intended use of the proceeds of the Revolving Loans
and the Letters of Credit hereunder; provided, that the Borrower shall not have
any obligation to any Indemnified Party hereunder with respect to matters caused
by or resulting from the willful misconduct or gross negligence of such
Indemnified Party or claims by one Indemnified Party against another. To the
extent that the undertaking to indemnify, pay and hold harmless set forth in the
preceding sentence may be unenforceable because it is violative of any law or
public policy, the Borrower shall contribute the maximum portion which it is
permitted to pay and satisfy under applicable law, to the payment and
satisfaction of all matters incurred by the Indemnified Parties. Any liability,
obligation, loss, damage, penalty, cost or expense incurred by the Indemnified
Parties shall be paid to the Indemnified Parties on demand, together with
interest thereon at the rate prescribed for the Floating Rate Loans pursuant to
Section 2.6 from the date incurred by the Indemnified Parties until paid by the
Borrower, and shall be added to the Liabilities, and be secured by the
Collateral. The provisions of and undertakings and indemnifications set out in
this Section 10.17 shall survive the satisfaction and payment of the Liabilities
and the termination of this Agreement.
10.18 Representations and Warranties. Notwithstanding anything to
the contrary contained herein, (a) each representation or warranty contained in
this Agreement or any of the other Financing Agreements shall survive the
execution and delivery of this Agreement and the other Financing Agreements and
the making of the Revolving Loans and the issuance of the Letters of Credit and
(b) each representation and warranty contained in this Agreement and each other
Financing Agreement that is not made only as of a specific date or time, shall
be remade on the date of each Revolving Loan made or Letter of Credit issued
hereunder.
10.19 Standard of Materiality. As a general rule, the Agent and
each Lender hereby acknowledges that any single business location of the
Borrower, with the exception of its
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corporate headquarters in Beloit, Wisconsin, is not material to the operations
of the Borrower, such that the loss of assets at, or the closure of, any single
business location will not be deemed by the Agent or any Lender to constitute a
material adverse occurrence; provided, that the foregoing shall not be construed
as an acknowledgment by the Agent or any Lender that if a single business
location of the Borrower generates liabilities that are binding upon the
Borrower, as a whole, such liability will not be deemed by the Agent or any
Lender to constitute a material adverse occurrence.
10.20 Ratable Sharing. Each Lender agrees that if it shall, through
the exercise of any right of counterclaim, set-off, banker's lien or otherwise,
receive payment of a proportion of the Liabilities which is greater than the
proportion received by any other Lender, that Lender receiving such
proportionately greater payment shall purchase participations (which it shall be
deemed to have done simultaneously upon the receipt of such payment) in the
claims of each of the other Lenders under this Agreement so that all such
recoveries with respect to the Liabilities shall be proportionate to their
respective Pro Rata Shares; provided, that if all or part of such
proportionately greater payment received by such purchasing Lender is thereafter
recovered from such Lender, those purchases shall be rescinded and the purchase
prices paid for such participation shall be returned to that Lender to the
extent of such recovery, but without interest.
11. THE AGENT.
11.1 Powers. Each Lender hereby irrevocably appoints and authorizes
NationsBank of Texas, N.A. to act as its Agent under this Agreement and the
other Financing Agreements. Each Lender hereby irrevocably appoints and
authorizes American National Bank and Trust Company of Chicago to act as Co-
Agent under this Agreement and the other Financing Agreements, provided, that
unless and until otherwise agreed in writing by the Agent, the Co-Agent and the
Lenders, the Co-Agent shall have no obligations or duties in its capacity as Co-
Agent. The Agent shall have and may exercise such powers under this Agreement
and the other Financing Agreements as are specifically delegated to the Agent by
the terms thereof, together with such powers as are reasonably incidental
thereto. The Agent shall have no duties or responsibilities except those
expressly set forth in this Agreement and the applicable Financing Agreements
and shall not by reason of this Agreement or any of the other Financing
Agreements have a fiduciary relationship with any Lender. The designated titles
of "Agent" and "Co-Agent" have been adopted solely for convenience of
identification, and it is expressly agreed that such terms shall not imply, or
be construed to create, any obligations or duties under principles of agency or
other applicable law.
11.2 Agent in its Capacity as a Lender. With respect to Revolving
Loans made by it, the Agent shall have the same rights and powers under this
Agreement and the other Financing Agreements as any Lender and may exercise the
same as though it were not Agent, and the terms "Lender" or "Lenders" shall,
unless the context otherwise indicates, include the Agent in its capacity as a
Lender hereunder. The Agent, any Lender and their respective affiliates may
accept deposits from, lend money to, and generally engage in any kind of banking
or trust business with the Borrower, or Affiliates of the Borrower, as if it
were not Agent or as if it or they were not a Lender and without any duty to
account therefor to the other parties to this Agreement.
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11.3 Independent Credit Analysis. Each Lender agrees that it has,
independently and without reliance upon the Agent, any other Lender, or the
directors, officers, agents, attorneys or employees of Agent or of any other
Lender, and instead in reliance upon information supplied to it by or on behalf
of the Borrower, and upon such other information as it has deemed appropriate,
made its own independent credit analysis and decision to enter into this
Agreement, and that it shall independently and without reliance upon the Agent,
any other Lender, or the directors, officers, agents, attorneys or employees of
the Agent or of any other Lender, continue to make its own independent credit
analysis and decisions, in acting or not acting under this Agreement and the
other Financing Agreements. The Agent shall not have any duty or responsibility
to provide any Lender with any credit or other information (other than notices
received by the Agent pursuant to Sections 7.9 and 7.13, and other than such
other reports and notices (including those referred to in Section 3.1), together
with supporting data, as any Lender may request from time to time, all of which
the Agent agrees to provide to each Lender on a prompt basis) concerning the
affairs, financial condition, litigation, liabilities, or business of the
Borrower which may at any time come into the possession of the Agent (or any of
its Affiliates). In the event such information is furnished to any Lender by the
Agent, the Agent shall have no duty to confirm or verify its accuracy or
completeness and shall have no liability whatsoever with respect thereto.
11.4 General Immunity. Neither the Agent nor any of its directors,
officers, agents, attorneys or employees shall be liable to any Lender for any
action taken or omitted to be taken by it or them under this Agreement or any of
the other Financing Agreements or in connection therewith except for its or
their own willful misconduct or gross negligence. Without limitation on the
generality of the foregoing but subject to the last sentence of this Section
11.4, the Agent: (a) shall not be responsible to Lenders for any recitals,
statements, warranties or representations under this Agreement or any of the
other Financing Agreements or any agreement or document relative thereto or for
the financial condition of the Borrower, (b) shall not be responsible for the
authenticity, accuracy, completeness, value, validity, effectiveness, due
execution, legality, genuineness, enforceability or sufficiency of this
Agreement or any of the other Financing Agreements or any other agreements or
any assignments, certificates, requests, financial statements, projections,
notices, schedules or opinions of counsel executed and delivered pursuant
thereto, (c) shall not be bound to ascertain or inquire as to the performance or
observance of any of the terms, covenants or conditions of this Agreement or any
of the other Financing Agreements on the part of the Borrower or of any of the
terms of any such agreement by any party thereto and shall have no duty to
inspect the property (including the books and records) of the Borrower, (d)
shall incur no liability under or in respect of this Agreement or any of the
other Financing Agreements or any other document or collateral by acting upon
any notice, consent, certificate or other instrument or writing (which may be by
telegram, cable or telex) believed by the Agent to be genuine and signed or sent
by the proper party, and (e) may consult with legal counsel (including counsel
for the Borrower), independent public accountants and other experts selected by
the Agent and shall not be liable for any action taken or omitted to be taken in
good faith in accordance with the advice of such counsel, accountants or
experts. The Agent agrees to use the same degree of care, with respect to the
performance of its duties hereunder, as it uses with respect to credit
facilities in which it alone is interested.
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11.5 Right to Indemnity. Agent shall be fully justified in failing
or refusing to take any action under this Agreement and each of the other
Financing Agreements or in relation thereto unless it shall first be indemnified
(upon requesting such indemnification) to its satisfaction by Lenders against
any and all liability and expense which it may incur by reason of taking or
continuing to take any such action. Lenders further agree to indemnify the Agent
ratably in accordance with their Pro Rata Shares for any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind and nature whatsoever which may be imposed
on, incurred by or asserted against the Agent in any way relating to or arising
out of this Agreement or any of the other Financing Agreements or the
transactions contemplated thereby, or the enforcement of any of the terms
thereof or of any other documents, provided no such liability, obligation, loss,
damage, penalty, action, judgment, suit, cost, expense or disbursement results
from Agent's gross negligence or willful misconduct. Each Lender agrees to
reimburse Agent in the amount of its Pro Rata Share of any out-of-pocket
expenses which the Agent is entitled to receive, but has not received,
reimbursement pursuant to this Agreement or any of the other Financing
Agreements.
11.6 Action by Agent.
(a) Actual Knowledge. The Agent may assume that no Event of Default
or Default has occurred and is continuing, unless Agent has actual knowledge of
the Event of Default or Default, has received notice from the Borrower or any of
their independent certified public accountants stating the nature of the Event
of Default or Default, or has received notice from a Lender stating the nature
of the Event of Default or Default and that Lender considers the Event of
Default or Default to have occurred and to be continuing.
(b) Agent's Obligations. The Agent has only those obligations under
this Agreement and the other Financing Agreements that are expressly set forth
therein as obligations. No duty to act, or refrain from acting, and no other
obligation whatsoever, shall be implied on the basis of or imputed in respect of
any right, power or authority granted to the Agent or shall become effective in
the event of any temporary or partial exercise of such rights, power or
authority.
(c) Discretion to Act. Except for any obligation expressly set forth
in this Agreement or any of the other Financing Agreements the Agent may, but
shall not be required to, exercise its discretion to act or not act, except
that, subject to the Agent's right to indemnity if requested by the Agent
pursuant to Section 11.5, the Agent shall be required to act or not act upon the
instructions of all of the Lenders and those instructions shall be binding upon
Agent, provided that Agent shall not be required to act or not act if to do so
would expose Agent to liability, would be inconsistent with the Agent's practice
in similar situations when acting solely for its own account, or would be
contrary to this Agreement, any of the other Financing Agreements or to
applicable law.
11.7 Proportionate Interest of Lenders under the Financing
Agreements. In the event any remedy may be exercised with respect to the
Financing Agreements or the Collateral, the Agent shall pursue remedies
designated by all of the Lenders subject to the proviso set forth
58
<PAGE>
in subsection 11.6(c). Each Lender agrees that no Lender shall have any right
individually to realize upon the security created by the Financing Agreements or
otherwise enforce any provision thereof, or make demand thereunder, it being
understood and agreed that such rights and remedies may be exercised by the
Agent for the ratable benefit of Lenders upon the terms of this Agreement and
the other Financing Agreements. All actions taken by the Agent under this
Agreement or any other Financing Agreement will be deemed taken by the Agent for
the ratable benefit of the Lenders. Nothing set forth in the previous sentence
shall confer any rights or benefit on Borrower or on any other Person except the
Lenders.
11.8 Agent's Resignation. The Agent may resign at any time by giving
at least thirty (30) days' prior written notice of its intention to do so to
each Lender and to Borrower, and upon any such notice, the Requisite Lenders
shall have the right to appoint a successor Agent; provided that if such
successor shall not be a signatory to this Agreement, such appointment shall be
subject to the consent of Borrower, which consent shall not be unreasonably
withheld. If no successor Agent shall have been so appointed and shall have
accepted such appointment within twenty (20) days after the Agent's giving of
such notice of resignation, then the resigning Agent may, with the consent of
Borrower, which consent shall not be unreasonably withheld, appoint a successor
Agent. After any resigning Agent's resignation hereunder as Agent, it shall be
discharged from its duties and obligations under this Agreement and the other
Financing Agreements but the provisions of this Section 11 shall continue to
inure to its benefit as to any actions taken or omitted to be taken by it while
it was Agent hereunder and thereunder. Upon appointment of a successor Agent,
the term "Agent" shall for all purposes of this Agreement thereafter mean such
successor.
11.9 Disbursement of Proceeds of Loans and Other Advances.
(a) Each Lender severally agrees that it shall, not later than 2:00
p.m. (Dallas, Texas time) on the date of each Revolving Loan, make available to
the Agent, in lawful money of the United States of America and in same day
funds, an amount equal to such Lender's Pro Rata Share of the Revolving Loan to
be made to the Borrower; provided that such Lender shall have received notice of
such Revolving Loan before 1:00 p.m. (Dallas, Texas time). The Agent shall make
such funds available to the Borrower, in same day funds in accordance with the
provisions of this Agreement. The proceeds of Revolving Loans requested by the
Borrower pursuant to subsection 2.1(a) of this Agreement, or otherwise disbursed
pursuant to the terms of this Agreement, shall be disbursed by the Agent on
behalf of each Lender. Each Lender's obligations under this Agreement are
several, and no Lender shall have any obligation, responsibility or liability
for any breach or default of any such obligations by any other Lender.
(b) The Agent may (and is hereby irrevocably so authorized by the
Lenders) at any time (whether or not any Event of Default or Default exists),
make Revolving Loans which result in an Overadvance, as the Agent may agree with
Borrower to allow in its sole discretion, provided that (i) the aggregate amount
of Overadvance existing upon funding any such Revolving Loan shall not in any
event exceed Five Million Dollars ($5,000,000.00), (ii) the Borrower shall agree
that any such Overadvance shall be eliminated within ten (10) Business Days
after the date of the occurrence thereof and (iii) the Agent and the Borrower
shall not agree to more than three (3) separate
59
<PAGE>
occurrences of any such Overadvance during any period of one (1) year; and
provided further, that it is agreed that the Agent shall not in any event be
obligated to allow any such Overadvance.
(c) The Agent's use of its own checks upon its funds or the Agent's
transfer of its own funds, by wire or otherwise, to an account of the Borrower
shall be deemed to be disbursements made by each Lender under this Agreement and
pursuant to the other Financing Agreements.
11.10 Participation in Letters of Credit. Immediately upon the
issuance by Agent of any Letter of Credit, each Lender shall be deemed to have
irrevocably and unconditionally purchased and received from the Agent, without
recourse or warranty, an undivided interest and participation, to the extent of
such Lender's Pro Rata Share, in such Letter of Credit and any security
therefore and any guaranty pertaining thereto. Notwithstanding the foregoing,
by its purchase of such participation, no Lender shall be deemed to have assumed
any liability to the beneficiary of any Letter of Credit. The Agent shall
promptly upon receipt thereof, remit to the Lenders, in accordance with their
respective Pro Rata Shares, all Letter of Credit fees received by the Agent
under subsection 2.6(c). In the event Agent makes any payment to any Person
with respect to any Letter of Credit, Agent shall promptly notify the other
Lenders with a participating interest in such Letter of Credit specifying the
amount reimbursable by the Borrower thereunder. If such reimbursement is not
made by the Borrower on the day when due the amount of such reimbursement
obligation shall be deemed to be a Revolving Loan made pursuant to Section 2.1.
11.11 Apportionment of Payments. Aggregate principal and interest
payments shall be apportioned among all outstanding Loans to which such payments
relate and payments of aggregate fees to Lenders (other than the Agent's fee
described in subsection 2.6(d)), shall be apportioned ratably among Lenders in
each case according to the payments remitted to the Agent and all their Pro Rata
Shares. All amounts received by the Agent shall be applied first to pay any
fees, expenses or indemnities then due the Agent, second to pay any fees then
due the Lenders, third to pay interest due on Revolving Loans, fourth to pay or
prepay principal of the Revolving Loans, and fifth to pay any other obligations
to any and all of the Lenders allocated, if sufficient funds are not available
to pay all such Liabilities, to the Lenders in proportion to their Pro Rata
Shares.
11.12 Agent Reports. The Agent shall, once every seven (7) days, or
sooner, at the option of the Agent, distribute to each Lender, at its primary
address set forth on the signature page hereof, such funds as it is entitled to
receive together with a statement ("Agent's Report") disclosing as of the
preceding Business Day, the aggregate principal balance of the Revolving Loans
outstanding as of such date, repayments and prepayments of principal received
from the Borrower with respect to the Revolving Loans since the immediately
preceding Agent's Report, additional Revolving Loans made to the Borrower since
date of the immediately preceding Agent's Report, interest and fees received
from the Borrower since the date of immediately preceding Agent's Report, the
aggregate amount of Eligible Accounts and Eligible Inventory and the Loan
Availability as of the Agent's most recent determination, the undrawn face
amount of all Letters of Credit issued by Agent for the account of Borrower, the
amount of any expenses of Agent paid by Agent since the immediately preceding
Agent's Report for which Agent has not been
60
<PAGE>
reimbursed by the Borrower and the amount received by the Agent from the
Borrower since the immediately preceding Agent's Report in payment of
outstanding expenses of Agent. Such Agent's Reports shall also disclose the net
amount due to or due from the Lenders. If the Agent's Report discloses a net
amount due from the Agent to the Lenders, the Agent shall, concurrently with the
delivery of the Agent's Report to the Lenders transfer, by wire or otherwise,
such amount to the Lenders in funds immediately available to the Lenders in
accordance with each Lender's instructions. If such report discloses a net
amount due to Agent from the Lenders, then the Lenders shall transfer by wire or
otherwise, such amount, in funds immediately available to the Agent as
instructed by the Agent. Such net amount due from a Lender to the Agent shall
be due on the same day such Lender receives such Agent's Report, if such Agent's
Report is received before 1:00 p.m. (Dallas, Texas time) and such net amount
shall be due on the Business Day following receipt of such Agent's Report, if
such Agent's Report is received after 1:00 p.m. (Dallas, Texas time). Any
amounts due hereunder to the Agent from the Lenders or vice versa which are not
paid when due shall bear interest from the date due until ten (10) days
thereafter at the weighted average of the rates on overnight federal funds
transactions with members of the Federal Reserve System only, arranged by
federal funds brokers as published as of such day by the Federal Reserve Bank of
New York and thereafter, until paid in full, at the rate applicable to the
Floating Rate Loans.
11.13 Designated Senior Debt. The Borrower hereby agrees that all
Liabilities now or hereafter existing, from time to time, are expressly deemed
and designated as being "Designated Senior Debt" within the meaning of the
certain Indenture, and is entitled to the benefits of subordination in favor of
such Designated Senior Debt as provided therein.
11.14 Consent and Agreement Regarding Viking Acquisition. Reference
hereby is made to paragraph 35 of the Ninth Amendment to Amended and Restated
Loan and Security Agreement dated as of May 7, 1997, previously executed by the
Borrower, the Agent, the Co-Agent and the Lenders, respecting consent and
agreement regarding the "Viking Acquisition" defined therein.
11.15 Exhibits and Schedules. Exhibits and Schedules to the Loan and
Security Agreement are omitted from this Compilation. Reference is made to the
Loan and Security Agreement for all such Exhibits and Schedules.
11.16 Compilation. This Compilation was prepared and is intended for
the purpose of ease of administration of the Loan and Security Agreement as the
substantive equivalent thereof. Nothing herein shall impair any rights or
obligations under the Loan and Security Agreement or be construed in any way in
limitation of any such rights or obligations. This Compilation is not itself a
legal agreement. Reference hereby is made to the Loan and Security Agreement as
the sole evidence of the actual definitive terms thereof.
END OF COMPILATION
61
<PAGE>
EXHIBIT 10.7
AMENDED AND RESTATED
PATENT, TRADEMARK AND LICENSE MORTGAGE
--------------------------------------
THIS AMENDED AND RESTATED PATENT, TRADEMARK AND LICENSE MORTGAGE (the
"Mortgage") made as of this lst day of July, 1993, by American Builders &
Contractors Supply Co., Inc., a Texas corporation having an address at 820 Broad
Street, Beloit, Wisconsin 53511 ("Mortgagor"), in favor of American National
Bank and Trust Company of Chicago, as Agent, having an office at 33 North
LaSalle Street, Chicago, Illinois 60690 ("Mortgagee") , hereby amends and
restates in its entirety that certain Patent, Trademark and License Mortgage
made as of December 13, 1990 by Mortgagor in favor of The First National Bank of
Chicago ("FNBC") , filed in the trademark records of the United States Patent
and Trademark Office on December 28, 1990 at Reel 0758, Frame 241 (the "Original
Mortgage"), which Original Mortgage was assigned by FNBC to Mortgagee by
assignment dated March 5, 1992, filed in the trademark records of the United
States Patent and Trademark Office on March 12, 1992 at Reel 0890, Frame 321:
W I T N E S S E T H:
-------------------
WHEREAS, Mortgagor, Mortgagee, American National Bank and Trust Company of
Chicago, in its individual capacity ("ANB") , NationsBank of Texas, N.A.
("NationsBank") and BankAmerica Business Credit, Inc. ("BOA") (ANB, NationsBank
and BOA being referred to herein collectively as "Lenders") , are parties to a
certain Amended and Restated Loan and Security Agreement, as amended from time
to time (the "Loan and Security Agreement") and other related loan documents
heretofore or now executed (collectively, with the Loan and Security Agreement,
the "Loan Agreements"), which Loan Agreements provide (i) for Mortgagee and
Lenders to, from time to time, extend credit to or for the account of Mortgagor
and (ii) for the grant by Mortgagor to Mortgagee of a security interest in
certain of Mortgagor's assets, including, without limitation, its patents,
patent applications, trademarks, trademark applications, tradenames, service
marks, service mark applications, goodwill and licenses, excluding the
trademarks, trademark registrations, trademark applications, tradenames and
tradestyles associated with the "Mule-Hide" business;
NOW, THEREFORE, in consideration of the premises set forth herein and for
other good and valuable consideration, receipt and sufficiency of which are
hereby acknowledged, Mortgagor agrees as follows:
1. Incorporation of Loan Agreements. The Loan Agreements and the terms
and provisions thereof are hereby incorporated herein in their entirety by this
reference thereto. All terms capitalized but not otherwise defined herein shall
have the same meanings herein as in the Loan and Security Agreement.
2. Mortgage of Patents, Trademarks and Licenses. To secure the complete
and timely satisfaction of all of Mortgagor's Liabilities, Mortgagor hereby
reaffirms its prior collateral assignment and grant to Mortgagee of a security
interest having priority over all other security interests, with power of sale,
to the extent permitted by law, upon the occurrence of a Default, and
<PAGE>
to the extent such prior collateral assignment and grant was or is insufficient,
hereby makes a collateral assignment and grants to Mortgagee a security interest
having priority over all other security interests, with power of sale, to the
extent permitted by law, upon the occurrence of a Default, in all of Mortgagor's
right, title and interest in and to all of its now existing and hereafter
created or acquired:
(i) patents and patent applications, including, without limitation,
the inventions and improvements described and claimed therein, and those
patents and patent applications listed on Exhibit A attached hereto and
hereby made a part hereof, and (a) the reissues, divisions, continuations,
renewals, extensions and continuations-in-part thereof, (b) all income,
damages and payments now and hereafter due or payable under or with respect
thereto, including, without limitation, damages and payments for past or
future infringements thereof, (c) the right to sue for past, present and
future infringements thereof, and (d) all rights corresponding thereto
throughout the world (all of the foregoing, together with the items
described in clauses (a) - (d) of this subsection 2 (i) , are sometimes
hereinafter referred to individually as a "Patent" and, collectively, as
the "Patents");
(ii) trademarks, trademark registrations, trademark applications,
tradenames and tradestyles, service marks, service mark registrations,
service mark applications and brand names, including without limitation
those trademarks, tradenames, service marks and applications and
registrations thereof listed on Exhibit B attached hereto and hereby made a
part hereof, but excluding the trademarks, trademark registrations,
trademark applications, tradenames and tradestyles associated with the
"MuleHide" business, and (a) renewals or extensions, thereof, (b) all
income, damages and payments now and hereafter due or payable with respect
thereto, including, without limitation, damages and payments for past or
future infringements thereof, (c) the right to sue for past, present and
future infringements thereof, and (d) all rights corresponding thereto
throughout the world (all of the foregoing, together with the items
described in clauses (a)-(d) of this subsection 2(ii), are sometimes
hereinafter referred individually as a "Trademark", and, collectively, as
the "Trademarks");
(iii) all license agreements with respect to any of the Patents or the
Trademarks or any other patent, trademark, service mark or any application
or registration thereof or any other tradename or tradestyle between
Mortgagor and any other party, whether Mortgagor is a licensor or licensee
under any such license agreement, including, without limitation, the
licenses listed on Exhibit C attached hereto and hereby made a part hereof,
but with respect to licenses pertaining to the trademarks, trademark
registrations, trademark applications, tradenames and tradestyles
associated with the "Mule-Hide" business, Mortgagee's interest shall be
limited to the proceeds thereof (all of the foregoing license agreements
and Mortgagor's rights thereunder are referred to collectively as the
"Licenses") ; and
(iv) the goodwill of Mortgagor's business connected with and
symbolized by the Trademarks.
3. Warranties and Representations. Mortgagor warrants and represents to
Mortgagee that:
-2-
<PAGE>
(i) no Patent, Trademark or License has been adjudged invalid or
unenforceable nor has any such Patent, Trademark or License been cancelled,
in whole or in part;
(ii) Mortgagor has adopted, used and is currently using all of the
Trademarks;
(iii) Mortgagor has no notice of any suits or actions commenced or
threatened with reference to the Patents, Trademarks or Licenses, except as
otherwise disclosed to Mortgagee in writing; and
(iv) Mortgagor has the unqualified right to execute and deliver this
Mortgage and perform its terms and has entered into or will enter into
written agreements with each of its present and future employees, agents
and consultants to the extent necessary to enable it to comply with the
covenants contained herein.
4. Restrictions on Future Agreements. Mortgagor agrees that until
Mortgagor's Liabilities shall have been satisfied in full and the Loan
Agreements shall have been terminated, Mortgagor shall not sell or assign its
interest in, or grant any license under, the Patents, Trademarks or Licenses, or
enter into any other agreement with respect to the Patents, Trademarks or
Licenses and Mortgagor further agrees that it shall not knowingly take any
action (other than infringement suits against others) , or knowingly permit any
action to be taken by others subject to its control, including licensees, or
knowingly fail to take any action, which would affect the validity or
enforcement of the rights transferred to Mortgagee under this Mortgage.
5. New Patents, Trademarks, and Licenses. Mortgagor represents and
warrants that, to the best of Mortgagor's knowledge, the Patents, Trademarks and
Licenses listed on Exhibits A, B and C, respectively, constitute all of the
Patents, Trademarks, and Licenses now owned by Mortgagor. If, before
Mortgagor's Liabilities shall have been satisfied in full or before the Loan
Agreements have been terminated, Mortgagor shall (i) become aware of any
existing Patents, Trademarks or Licenses of which Mortgagor has not previously
informed Mortgagee, (ii) obtain rights to any new patentable inventions,
Patents, Trademarks or Licenses, or (iii) become entitled to the benefit of any
Patents, Trademarks, or Licenses or any improvement on any Patent, the
provisions of this Mortgage above shall automatically apply thereto and
Mortgagor shall to the extent that it is aware thereof give to Mortgagee prompt
written notice thereof to the extent material to the continued operations of
Mortgagor. Mortgagor hereby authorizes Mortgagee to modify this Mortgage by
amending Exhibits A, B and C, as applicable, to include any such Patents,
Trademarks and Licenses.
6. Royalties; Terms. The term of the mortgages granted herein shall
extend until the earlier of (i) the expiration of each of the respective
Patents, Trademarks and Licenses assigned hereunder, and (ii) Mortgagor's
Liabilities have been paid in full and the Loan Agreements have been terminated.
Mortgagor agrees that upon the occurrence of a Default, the use by Mortgagee of
all Patents, Trademarks and Licenses shall be worldwide and without any
liability for royalties or other related charges from Mortgagee to Mortgagor.
-3-
<PAGE>
7. Product Quality. Upon the occurrence of a Default, Mortgagor agrees
that Mortgagee, or a conservator appointed by Mortgagee, shall have the right to
establish such product quality controls as Mortgagee, or said conservator, in
its reasonable judgment, may deem necessary to assure maintenance of the quality
of products sold by Mortgagor under the Trademarks.
8. Release of Mortgage. This Mortgage is made for collateral purposes
only. Upon payment in full of Mortgagor's Liabilities and termination of the
Loan Agreements, Mortgagee shall execute and deliver to Mortgagor all deeds,
assignments and other instruments, and shall take such other actions, as may be
necessary or proper to re-vest in Mortgagor full title to the Patents,
Trademarks and Licenses, subject to any disposition thereof which may have been
made by Mortgagee pursuant to the Loan Agreements.
9. Duties of Mortgagor. Where commercially reasonable and cost effective
as to Mortgagor, unless otherwise consented to by Mortgagee in writing,
Mortgagor shall have the duty (i) to file and prosecute any trademark or service
mark applications pending as of the date hereof or hereafter until Mortgagor's
Liabilities shall have been paid in full, and (ii) to preserve and maintain all
rights in the Patents, Trademarks and Licenses. Any expenses incurred in
connection with Mortgagor's obligations under this Section 9 shall be borne by
Mortgagor. Mortgagor shall not abandon any right to file a patent, trademark or
service mark application, or abandon any pending patent, trademark or service
mark application or any other Patent, Trademark or License.
10. Mortgagee's Right to Sue. Upon the occurrence of a Default, Mortgagee
shall have the right, but shall in no way be obligated, to bring suit in its own
name to enforce the Patents, Trademarks and Licenses, and, if Mortgagee shall
commence any such suit, Mortgagor shall, at the request of Mortgagee, do any and
all lawful acts and execute any and all proper documents required by Mortgagee
in aid of such enforcement and Mortgagor shall promptly, upon demand, reimburse
and indemnify Mortgagee for all reasonable costs and expenses incurred by
Mortgagee in the exercise of its rights under this Section 10.
11. Waivers. No course of dealing between Mortgagor and Mortgagee, nor
any failure to exercise, nor any delay in exercising, on the part of Mortgagee,
any right, power or privilege hereunder or under the Loan Agreements shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, power or privilege hereunder or thereunder preclude any other or further
exercise thereof or the exercise of any other right, power or privilege.
12. Severability. The provisions of this Mortgage are severable, and if
any clause or provision shall be held invalid and unenforceable in whole or in
part in any jurisdiction, then such invalidity or unenforceability shall affect
only such clause or provision, or part thereof, in such jurisdiction, and shall
not in any manner affect such clause or provision in any other jurisdiction, or
any other clause or provision of this Mortgage in any jurisdiction.
13. Modification. This Mortgage cannot be altered, amended or modified in
any way, except as specifically provided in Section 5 hereof or by a writing
signed by the parties hereto.
-4-
<PAGE>
14. Cumulative Remedies; Power of Attorney; Effect on Loan Agreements.
All of Mortgagee's rights and remedies with respect to the Patents, Trademarks
and Licenses, whether established hereby or by the Loan Agreements, or by any
other agreements or by law shall be cumulative and may be exercised singularly
or concurrently. Mortgagor hereby authorizes Mortgagee upon the occurrence of a
Default, to make, constitute and appoint any officer or agent of Mortgagee as
Mortgagee may select, in its reasonable discretion, as Mortgagor's true and
lawful attorney-in-fact, with power to (i) endorse Mortgagor's name on all
applications, documents, papers and instruments necessary or desirable for
Mortgagee in the use of the Patents, Trademarks and Licenses, or (ii) take any
other actions with respect to the Patents, Trademarks and Licenses as Mortgagee
deems to be in the best interest of Mortgagee, or (iii) grant or issue any
exclusive or non-exclusive license under the Patents, Trademarks or Licenses to
anyone, or (iv) assign, pledge, convey or otherwise transfer title in or dispose
of the Patents, Trademarks or Licenses to anyone. Mortgagee hereby ratifies all
that such attorney shall lawfully do or cause to be done by virtue hereof. This
power of attorney shall be irrevocable until Mortgagor's Liabilities shall have
been paid in full and the Loan Agreements, including any amendments thereto,
have been terminated. Mortgagor acknowledges and agrees that this Mortgage is
not intended to limit or restrict in any way the rights and remedies of
Mortgagee under the Loan Agreements but rather is intended to facilitate the
exercise of such rights and remedies. Mortgagee shall have, in addition to all
other rights and remedies given it by the terms of this Mortgage and the Loan
Agreements, all rights and remedies allowed by law and the rights and remedies
of a secured party under the Uniform Commercial Code as enacted in any
jurisdiction in which the Patents, Trademarks or Licenses may be located.
15. Binding Effect; Benefits. This Mortgage shall be binding upon
Mortgagor and its respective successors and assigns, and shall inure to the
benefit of Mortgagee, its successors, nominees and assigns.
16. Governing Law. This Mortgage shall be governed by and construed in
accordance with the laws of the State of Illinois.
17. Headings. Paragraph headings used herein are for convenience only and
shall not modify the provisions which they precede.
18. Further Assurances. Mortgagor agrees to execute and deliver such
further agreements, instruments and documents, and to perform such further acts,
as Mortgagee shall request from time to time in order to carry out the purpose
of this Mortgage and agreements set forth herein.
19. Survival of Representations. All representations and warranties of
Mortgagor contained in this Mortgage shall survive the execution and delivery of
this Mortgage and shall be remade on the date of each borrowing under the Loan
Agreements.
IN WITNESS WHEREOF, American Builders & Contractors Supply Co., Inc. has
duly executed this Mortgage in favor of American National Bank and Trust Company
of Chicago, as Agent.
AMERICAN BUILDERS & CONTRACTORS
-5-
<PAGE>
ATTEST: SUPPLY CO., INC.
By
- ----------------------------- ---------------------------------
Title Title
-------------------------- ------------------------------
-6-
<PAGE>
STATE OF ILLINOIS )
) SS.
COUNTY OF COOK )
The foregoing Amended and Restated Patent, Trademark and License Mortgage
was executed and acknowledged before me this____ day of __________, 1993, by
____________________ and personally known to me to be the ____________________
and ____________________, respectively of American Builders & Contractors Supply
Co., Inc., a Texas corporation, on behalf of such corporation.
__________________________________
Notary Public
My Commission expires:
__________________________________
Agreed and Accepted this lst
day of July, 1993
AMERICAN NATIONAL BANK AND
TRUST COMPANY OF CHICAGO, as
Agent
By_________________________________
Title________________________________
THIS INSTRUMENT PREPARED BY AND
AFTER FILING RETURN TO:
David M. Mason, Esq.
Goldberg, Kohn, Bell, Black,
Rosenbloom & Moritz, Ltd.
Suite 3900
55 East Monroe
Chicago, Illinois 60603
-7-
<PAGE>
EXHIBITS
--------
Exhibit A Patents and Patent Applications
Exhibit B Trademarks and Trademark Registrations
Exhibit C License Agreements
-8-
<PAGE>
EXHIBIT A
Patents and Patent Applications
-------------------------------
NONE
-9-
<PAGE>
EXHIBIT B
Trademarks and Trademark Registrations
--------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
Federal Service Mark
Registration Number Registration Date
------------ ------ -----------------
- -------------------------------------------------------------------------
<S> <C> <C>
ABC Supply Co., Inc. 1,394,477 May 20, 1986
- -------------------------------------------------------------------------
American Builders & 1,376,499 December 17, 1985
Contractors Supply Co., Inc.
- -------------------------------------------------------------------------
</TABLE>
Unregistered Trademarks
-----------------------
Construction Trade Tools
-10-
<PAGE>
FIRST AMENDMENT TO AMENDED AND
RESTATED PATENT, TRADEMARK AND LICENSE MORTGAGE
This First Amendment to Amended and Restated Patent, Trademark and License
Mortgage (this "Amendment"), effective as of February 8, 1996 (the "Effective
Date"), is entered into between American Builders & Contractors Supply Co.,
Inc., a Texas corporation (the "Borrower"), and NationsBank of Texas, N.A.
("NationsBank"), as Agent for the Lenders which are parties to the Loan
Agreement described below (in such capacity, the "Agent"):
W I T N E S S E T H:
-------------------
WHEREAS, the Borrower, the Lenders named therein and American National Bank
and Trust Company of Chicago, as Agent for the Lenders, are party to that
certain Amended and Restated Loan and Security Agreement (the "Original Loan
Agreement") dated as of July 1, 1993, as amended by that certain First Amendment
to Amended and Restated Loan and Security Agreement dated as of September 2,
1994 (the "First Amendment"), that certain Waiver and Second Amendment to
Amended and Restated Loan and Security Agreement dated as of June 19, 1995 (the
"Second Amendment"), that certain Third Amendment to Amended and Restated Loan
and Security Agreement dated as of September 18, 1995 (the "Third Amendment"),
that certain Waiver and Fourth Amendment to Loan and Security Agreement dated as
of September 30, 1995 (the "Fourth Amendment"), and that certain Waiver and
Fifth Amendment to Loan and Security Agreement dated as of December 29, 1995
(the "Fifth Amendment"; the Original Loan Agreement, as amended by the First
Amendment, the Second Amendment, the Third Amendment, the Fourth Amendment and
the Fifth Amendment, is referred to hereinafter as the "Loan Agreement")
pursuant to which Lenders have agreed to make certain loans and extend certain
other financial accommodations to the Borrower;
WHEREAS, concurrently herewith, the Borrower, the Agent and the Lenders are
entering into that certain Waiver and Sixth Amendment to Loan Agreement (the
"Sixth Amendment") pursuant to which NationsBank of Texas, N.A. is replacing
American National Bank and Trust Company of Chicago as agent under the Loan
Agreement and the Loan Agreement is being modified in certain other respects;
WHEREAS, concurrently with the execution of the Original Loan Agreement,
the Borrower executed and delivered to American National Bank and Trust Company
of Chicago, as agent for the Lenders, a certain Amended and Restated Patent,
Trademark and License Mortgage (the "Mortgage"), which Mortgage granted to
American National Bank and Trust Company of Chicago, as agent for the Lenders, a
collateral assignment of and security interest in the patents, patent
applications, trademarks, trademark registrations, and license agreements
described on Schedule I attached hereto and incorporated herein by reference,
and which Mortgage was filed in the trademark records of the United Stated
Patent and Trademark Office on July 12, 1993, at Reel 1002, Frame 0378;
WHEREAS, the Borrower and the Agent desire to amend the Mortgage to reflect
that NationsBank of Texas, N.A. has replaced American National Bank and Trust
Company of Chicago as the agent for the Lenders under the Loan Agreement;
<PAGE>
NOW, THEREFORE, in consideration of the terms and conditions contained
herein, and of any loans or financial accommodations heretofore, now or
hereafter made to or for the benefit of the Borrower by the Lenders, the parties
hereto agree as follows:
1. Definitions. All terms defined in the Loan Agreement and not otherwise
defined herein, wherever used in this Agreement, shall have the meanings
ascribed to such terms in the Loan Agreement as amended by the Sixth Amendment.
2. Amendment to Introductory Paragraph of the Mortgage. The introductory
paragraph of the Mortgage is hereby amended and restated to read in its entirety
as follows:
"THIS AMENDED AND RESTATED PATENT, TRADEMARK AND LICENSE MORTGAGE (the
"Mortgage") made as of this lst day of July, 1993, by American Builders &
Contractors Supply Co., Inc., a Texas corporation having an address at 820
Broad Street, Beloit, Wisconsin 53511 ("Mortgagor'), in favor of
NationsBank of Texas, N.A., as Agent, having an office at 901 Main Street,
6th Floor, Dallas, Texas 75202 ("Mortgagee"), hereby amends and restates in
its entirety that certain Patent, Trademark and License Mortgage made as of
December 13, 1990 by Mortgagor in favor of The First National Bank of
Chicago ("FNBC"), filed in the trademark records of the United States
Patent and Trademark Office on December 28, 1990 at Reel 0758, Frame 241
(the "Original Mortgage"), which Original Mortgage was assigned by FNBC to
Mortgagee by assignment dated March 5, 1992, filed in the trademark records
of the United States Patent and Trademark Office on March 12, 1992 at Reel
0890, Frame 321:"
3. Amendment to Final Paragraph of the Mortgage. The final paragraph of
the Mortgage is hereby amended and restated to read in its entirety as follows:
"IN WITNESS WHEREOF, American Builders & Contractors Supply Co., Inc.
has duly executed this Mortgage in favor of NationsBank of Texas, N.A., as
Agent. "
4. Representations and Warranties of Borrower. The Borrower hereby
represents and warrants that as of the date of this Amendment the
representations and warranties of the Borrower contained in the Mortgage are
true and correct on and as of the date hereof to the same extent as though made
on and as of the date hereof, and except as disclosed on Schedule 2 attached
hereto, all Exhibits attached to the Mortgage remain true, correct and complete.
5. Reference to and Effect on the Mortgage. Except as expressly provided
herein, the Mortgage shall remain unmodified and in full force and effect and is
hereby ratified and confirmed. The execution, delivery and effectiveness of this
Amendment shall not operate as a waiver or forbearance of (a) any right, power
or remedy of the Agent or the Lenders under the Mortgage, or (b) any Default or
Event of Default. This Amendment shall constitute a Financing Agreement. All
references in any of the Financing Agreements, other than this Amendment, to the
Mortgage shall be deemed to refer to the Mortgage as modified by this Amendment.
-2-
<PAGE>
6. Fees, Costs and Expenses. The Borrower agrees to pay on demand all
costs and expenses of the Lenders and the Agent in connection with the
preparation, execution, delivery and filing of this Amendment, including the
fees and out-of-pocket expenses of counsel for the Lenders and the Agent with
respect thereto.
7. Counterparts. This Amendment may be executed in any number of
counterparts and by different parties hereto as separate counterparts, each of
which counterparts, when so executed and delivered, shall be deemed to be an
original and all of which counterparts, when taken together, shall constitute
but one and the same agreement.
8. Effectiveness. This Amendment shall be deemed effective as of the
Effective Date specified in the preamble upon execution by the Borrower and the
Agent
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the day and year first written above.
AMERICAN BUILDERS &
ATTEST: CONTRACTORS SUPPLY CO., INC.
By:____________________________ By:_________________________________
Name:__________________________ Name:_______________________________
Title:_________________________ Title:______________________________
NATIONSBANK OF TEXAS, N.A.,
as Agent
By:_____________________________
Name:___________________________
Title:__________________________
Address for Notice:
901 Main Street, 6th Floor
Dallas, Texas 75202
Attention: Business Credit/Regional Manager: URGENT
STATE OF WISC (S)
(S)
COUNTY OF (S)
Subscribed and sworn to before me, the undersigned notary public, on the
____ day of ____________, 1996, by_______________ the_____________ of American
-3-
<PAGE>
Builders & Contractors Supply Co., Inc., a Texas corporation; for and on behalf
of said corporation.
[SEAL]
Notary Public in and for
The State of Wisconsin
My Commission Expires:___________________
-4-
<PAGE>
Schedule I
----------
Intellectual Property
Trademarks and Trademark Registrations
--------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
Federal Service Mark
Registration Number Registration Date
- ------------------------------------------------------------------------
<S> <C> <C>
ABC Supply Co., Inc. 1,394,477 May 20, 1986
- ------------------------------------------------------------------------
American Builders &
Contractors Supply Co., Inc. 1,376,499 December 17, 1985
- ------------------------------------------------------------------------
</TABLE>
Unregistered Trademarks
-----------------------
Construction Trade Tools
-5-
<PAGE>
Schedule 2
----------
Changes to Mortgage Exhibits
None
-6-
<PAGE>
EXHIBIT 10.8
AMENDED AND RESTATED LIMITED GUARANTY
-------------------------------------
For value received and in consideration of any loan, advance, or financial
accommodation of any kind whatsoever heretofore, now or hereafter made, given or
granted to American Builders & Contractors Supply Co., Inc., a Texas corporation
("Borrower") by NationsBank of Texas, N.A., individually or as Agent (in such
capacity, the "Agent") for the Lenders which are from time to time parties to
the Loan Agreement (as hereinafter defined) (the "Lenders") or any of the
Lenders, the undersigned, Kenneth A. Hendricks, unconditionally guaranties the
full and prompt payment when due, whether at maturity or earlier, by reason of
acceleration or otherwise, and at all times thereafter, of all of the
indebtedness, liabilities and obligations of every kind and nature of Borrower
to Agent or any Lender, howsoever created, arising or evidenced, whether direct
or indirect, absolute or contingent, joint or several, now or hereafter
existing, or due or to become due, and howsoever owned, held or acquired by
Agent or any Lender, whether through discount, overdraft, purchase, direct loan
or as collateral or otherwise, including, without limitation, all indebtedness,
liabilities and obligations of Borrower to Agent or any Lender under that
certain Amended and Restated Loan and Security Agreement (the "Original Loan
Agreement") dated as of July 1, 1993, by and among Borrower, Agent and the
Lenders, as amended by that certain First Amendment to Amended and Restated Loan
and Security Agreement dated as of September 2, 1994 (the "First Amendment"),
that certain Waiver and Second Amendment to Amended and Restated Loan and
Security Agreement dated June 19, 1995 (the "Second Amendment"), that certain
Third Amendment to Amended and Restated Loan and Security Agreement dated as of
September 18, 1995 (the "Third Amendment"), that certain Waiver and Fourth
Amendment to Amended and Restated Loan and Security Agreement dated as of
September 30, 1995 (the "Fourth Amendment"), that certain Waiver and Fifth
Amendment to Amended and Restated Loan and Security Agreement dated as of
December 29, 1995 (the "Fifth Amendment") and that certain Waiver and Sixth
Amendment to Amended and Restated Loan and Security Agreement dated as of
February 8, 1996 (the "Sixth Amendment"; the Original Loan Agreement, as amended
by the First Amendment, the Second Amendment, the Third Amendment, the Fourth
Amendment, the Fifth Amendment and the Sixth Amendment, and as the same may at
any time be further amended, is referred to hereinafter as the "Loan Agreement")
(all such indebtedness, liabilities and obligations of Borrower, being
hereinafter referred to as "Borrower's Obligations"). The undersigned further
agrees to pay all reasonable costs and reasonable expenses, including, without
limitation, all court costs and attorneys' and paralegals' fees and expenses
paid or incurred by Agent or any Lender in endeavoring to collect all or any
part of Borrower's Obligations from, or in prosecuting any action against, the
undersigned. The undersigned's liability with respect to Borrower's Obligations
shall not exceed $7,500,000, plus all amounts, if any, provided for in the
immediately preceding sentence.
The undersigned hereby agrees that, except as hereinafter provided, his
obligations under this Amended and Restated Limited Guaranty (this "Guaranty")
shall be unconditional, irrespective of (i) the validity or enforceability of
Borrower's Obligations or any part thereof, or of any promissory note or other
document evidencing all or any part of Borrower's Obligations, (ii) the absence
of any attempt to collect Borrower's Obligations from Borrower or any other
guarantor or other action to enforce the same, (iii) the waiver or consent by
Agent or any Lender with respect to any provision of any instrument evidencing
Borrower's Obligations, or any part thereof, or any other agreement now or
hereafter executed by Borrower and delivered to Agent or any Lender, (iv)
failure by Agent
<PAGE>
to take any steps to perfect and maintain its or the Lenders' security interest
in, or to preserve its or the Lenders' rights to, any security or collateral for
Borrower's Obligations, (v) Agent's or any Lender's election, in any proceeding
instituted under Chapter 11 of Title 11 of the United States Code (11 U.S.C.
(S)101 et seq.), as amended (the "Bankruptcy Code"), of the application of
Section 1111(b)(2) of the Bankruptcy Code, (vi) any borrowing or grant of a
security interest by Borrower as debtor-in-possession, under Section 364 of the
Bankruptcy Code, (vii) the disallowance, under Section 502 of the Bankruptcy
Code, of all or any portion of Agent's or any Lender's claim(s) for repayment of
Borrower's obligations, or (viii) any other circumstance which might otherwise
constitute a legal or equitable discharge or defense of a guarantor.
The undersigned hereby waives diligence, presentment, demand of payment,
filing of claims with a court in the event of receivership or bankruptcy of
Borrower, notice of intention to accelerate, notice of acceleration. protest or
notice with respect to Borrower's Obligations and all demands whatsoever, and
covenants that this Guaranty will not be discharged, except by complete
performance of the obligations and liabilities contained herein. Upon any
default by Borrower, as provided in any instrument or document evidencing all or
any part of Borrower's obligations, including, without limitation the Loan
Agreement, and the passage of one hundred fifty (150) days after acceleration of
Borrower's Obligations, Agent may, at its sole election, proceed directly and at
once, without notice, against the undersigned to collect and recover the full
amount or any portion of Borrower's obligations, without first proceeding
against Borrower, or any other person, firm, or corporation, or against any
security or collateral for Borrower's Obligations. Agent shall have the
exclusive right to determine the application of payments and credits, if any,
from the undersigned, Borrower or from any other person, fir-in or corporation,
on account of Borrower's Obligations or of any other liability of the
undersigned to Agent or any Lender.
Agent and Lenders are hereby authorized, without notice or demand and
without affecting the liability of the undersigned hereunder, to, from time to
time, (i) renew, extend, accelerate or otherwise change the time for payment of,
or other terms relating to, Borrower's Obligations or otherwise modify, amend or
change the terms of any promissory note or other agreement, document or
instrument now or hereafter executed by Borrower and delivered to Lender; (ii)
accept partial payments on Borrower's Obligations; (iii) take and hold security
or collateral for the payment of Borrower's Obligations guaranteed hereby, or
for the payment of this Guaranty, or for the payment of any other guaranties of
Borrower's Obligations or other liabilities of Borrower, and exchange, enforce,
waive and release any such security or collateral; (iv) apply such security or
collateral and direct the order or manner of sale thereof as in its discretion
it may determine; and (v) settle, release, compromise, collect or otherwise
liquidate Borrower's obligations and any security or collateral therefor in any
reasonable manner, without affecting or impairing the obligations of the
undersigned hereunder.
At any time any of Borrower's Obligations are due, Agent may, in its sole
discretion, without notice to the undersigned and regardless of the acceptance
of any security or collateral for the payment hereof, appropriate and apply
toward the payment of Borrower's Obligations (i) any indebtedness due or to
become due from Agent or any Lender to the undersigned, and (ii) any monies,
credits or other property belonging to the undersigned, at any time held by or
coming into
-2-
<PAGE>
the possession of Agent or any Lender or any affiliate of Agent or any Lender,
whether for deposit or otherwise.
The undersigned hereby assumes responsibility for keeping himself informed
of the financial condition of Borrower, and any and all endorsers and/or other
guarantors of any instrument or document evidencing all or any part of
Borrower's Obligations and of all other circumstances bearing upon the risk of
nonpayment of Borrower's Obligations or any part thereof that diligent inquiry
would reveal and the undersigned hereby agrees that Agent and Lenders shall have
no duty to advise the undersigned of information known to Agent or Lenders
regarding such condition or any such circumstances. In the event Agent or any
Lender, in its sole discretion, undertakes at any time or from time to time to
provide any such information to the undersigned, Agent or such Lender shall be
under no obligation (i) to undertake any investigation not a part of its regular
business routine, (ii) to disclose any information which, pursuant to accepted
or reasonable commercial finance practices, Agent or such Lender wishes to
maintain confidential or (iii) to make any other or future disclosures of such
information or any other information to the undersigned.
The undersigned consents and agrees that Agent and Lenders shall be under
no obligation to marshall any assets in favor of the undersigned or against or
in payment of any or all of Borrower's Obligations. The undersigned further
agrees that, to the extent that Borrower makes a payment or payments to Agent or
any Lender, or Agent or any Lender receives any proceeds of collateral, which
payment or payments or any part thereof are subsequently invalidated, declared
to be fraudulent or preferential, set aside and/or required to be repaid to
Borrower, its estate, trustee, receiver or any other party, including, without
limitation, the undersigned, under any bankruptcy law, state or federal law,
common law or equitable cause, then to the extent of such payment or repayment,
Borrower's Obligations or the part thereof which has been paid, reduced or
satisfied by such amount shall be reinstated and continued in full force and
effect as of the date such initial payment, reduction or satisfaction occurred.
Until the payment and performance in full of all of the Borrower's
Obligations and the termination of all financing arrangements between the Agent
and each Lender, on the one hand, and the Borrower, on the other hand, including
the termination of all commitments of the Lenders under the Loan Agreement, the
undersigned waives all claims for subrogation, reimbursement, exoneration,
contribution and indemnification in respect of sums paid or payable to Agent or
any Lender by the undersigned hereunder. The undersigned hereby waives any right
to enforce any remedy which Agent or any Lender now has or may hereafter have
against Borrower, any endorser or any other guarantor of all or any part of
Borrower's Obligations. The undersigned hereby waives any benefit of, and any
right to participate in, any security or collateral given to Agent or any Lender
to secure payment of Borrower's Obligations. No payment made by or for the
account or benefit of the undersigned (including, without limitation, (i) a
payment made by Borrower in respect of Borrower's obligations or (ii) a payment
made by any person under any other guaranty of Borrower's Obligations) pursuant
to this Guaranty shall entitle the undersigned, by subrogation, reimbursement,
exoneration, contribution, indemnification or otherwise to any payment by
Borrower or from or out of any property of Borrower. The undersigned further
agrees that any and all claims of the undersigned against Borrower, any endorser
or any other guarantor of all or any part of
-3-
<PAGE>
Borrower's Obligations, or against any of their properties, shall be subordinate
and subject in right of payment to the prior payment, in full, of all principal
and interest, all reasonable costs of collection (including attorneys, and
paralegals' fees and expenses) and any other liabilities or obligations owing to
Agent or any Lender by Borrower which may arise either with respect to or on any
note, instrument, document, item, agreement or other writing heretofore, now or
hereafter delivered to Agent or any Lender. The undersigned also waives all
setoffs and counterclaims and all presentments, demands for performance, notices
of nonperformance, protests, notices of protest, notices of dishonor, and
notices of acceptance of this Guaranty. The undersigned further waives all
notices of the existence, creation or incurring of new or additional
indebtedness, arising either from additional loans extended to Borrower or
otherwise, and also waives all notices that the principal amount, or any portion
thereof, and/or any interest on any instrument or document evidencing all or any
part of Borrower's Obligations is due, notices of any and all proceedings to
collect from the maker, any endorser or any other guarantor of all or any part
of Borrower's Obligations, or from anyone else, and, to the extent permitted by
law, notices of exchange, sale, surrender or other handling of any security or
collateral given to Agent or any Lender to secure payment of Borrower's
obligations.
No delay on the part of Agent or any Lender in the exercise of any right or
remedy shall operate as a waiver thereof, and no single or partial exercise by
Agent or any Lender of any right or remedy shall preclude any further exercise
thereof; nor shall any modification or waiver of any of the provisions of this
Guaranty be binding upon Agent or any Lender, except as expressly set forth in a
writing duly signed and delivered on Agent's or such Lender's behalf by Agent.
Agent's or any Lender's failure at any time or times hereafter to require strict
performance by Borrower or the undersigned of any of the provisions, warranties,
terms and conditions contained in any promissory note, security agreement,
agreement, guaranty, instrument or document now or at any time or times
hereafter executed by Borrower or the undersigned and delivered to Agent or any
Lender shall not waive, affect or diminish any right of Agent or any Lender at
any time or times hereafter to demand strict performance thereof and such right
shall not be deemed to have been waived by any act or knowledge of Agent or any
Lender, its agents, officers or employees, unless such waiver is contained in an
instrument in writing signed by Agent and directed to Borrower or the
undersigned, as applicable, specifying such waiver. No waiver by Agent or any
Lender of any default shall operate as a waiver of any other default or the same
default on a future occasion, and no action by Agent or any Lender permitted
hereunder shall in any way affect or impair Agent's or any Lender's rights or
the obligations of the undersigned under this Guaranty. Any determination by a
court of competent jurisdiction of the amount of any principal and/or interest
owing by Borrower to Agent or any Lender shall be conclusive and binding on the
undersigned irrespective of whether the undersigned was a party to the suit or
action in which such determination was made.
This Guaranty shall be binding upon the undersigned and upon the heirs,
legal representatives, successors and assigns of the undersigned and shall inure
to the benefit of Agent's and Lenders' successors and assigns; all references
herein to Borrower and to the undersigned shall be deemed to include their
respective successors and assigns. Borrower's successors and assigns shall
include, without limitation, a receiver, trustee or debtor in possession of or
for Borrower. All references to the singular shall be deemed to include the
plural where the context so requires.
-4-
<PAGE>
THIS GUARANTY HAS BEEN EXECUTED, DELIVERED AND ACCEPTED AT AND SHALL BE
DEEMED TO HAVE BEEN MADE AT CHICAGO, ILLINOIS, AND SHALL BE INTERPRETED, AND THE
RIGHTS AND LIABILITIES OF THE PARTIES HERETO DETERMINED, IN ACCORDANCE WITH THE
LAWS AND DECISIONS OF THE STATE OF ILLINOIS, AND THE UNDERSIGNED AGREES TO THE
EXCLUSIVE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURT WITHIN COOK COUNTY,
ILLINOIS, AND WAIVES ANY OBJECTION WHICH THE UNDERSIGNED MAY HAVE BASED ON
IMPROPER VENUE OR FORUM NON CONVENIENS TO THE CONDUCT OF ANY PROCEEDING IN ANY
SUCH COURT. THE UNDERSIGNED AGREES THAT ALL SERVICE OF PROCESS UPON HIM BE MADE
BY REGISTERED MAIL OR MESSENGER DIRECTED TO HIM AT THE ADDRESS SET FORTH BELOW
AND THAT SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED UPON THE EARLIER OF
ACTUAL RECEIPT OR THREE (3) DAYS AFTER THE SAME SHALL HAVE BEEN POSTED TO THE
UNDERSIGNED'S ADDRESS BY THE UNDERSIGNED'S AGENT AS SET FORTH BELOW. THE
UNDERSIGNED HEREBY IRREVOCABLY APPOINTS CT CORPORATION, 208 SOUTH LASALLE
STREET, CHICAGO, ILLINOIS, 60604, AS HIS AGENT FOR THE PURPOSE OF ACCEPTING THE
SERVICE OF ANY PROCESS WITHIN THE STATE OF ILLINOIS. AT THE OPTION OF AGENT, THE
UNDERSIGNED WAIVES, TO THE EXTENT PERMITTED BY LAW, TRIAL BY JURY, AND WAIVES
ANY BOND OR SURETY OR SECURITY UPON SUCH BOND WHICH MIGHT, BUT FOR THIS WAIVER,
BE REQUIRED OF AGENT OR ANY LENDER. NOTHING CONTAINED HEREIN SHALL AFFECT THE
RIGHT OF AGENT OR ANY LENDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR AFFECT THE RIGHT OF AGENT OR ANY LENDER TO BRING ANY ACTION
OR PROCEEDING AGAINST THE UNDERSIGNED OR HIS PROPERTY IN THE COURTS OF ANY OTHER
JURISDICTION.
Wherever possible each provision of this Guaranty shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Guaranty shall be prohibited by or invalid under such law,
such provision shall be ineffective to the extent of such prohibition or
invalidity without invalidating the remainder of such provision or the remaining
provisions of this Guaranty.
This Guaranty is executed and delivered in amendment and restatement of the
terms of, but not in discharge, novation or satisfaction of the obligations
evidenced by, that certain Limited Guaranty, dated July 1, 1993, delivered by
the undersigned to American National Bank and Trust Company of Chicago, as Agent
for the benefit of the Lenders (the "Prior Guaranty"). The obligations of the
undersigned under the Prior Guaranty are hereafter governed by the terms of this
Guaranty.
-5-
<PAGE>
IN WITNESS WHEREOF, this Guaranty has been duly executed by the undersigned
this 8th day of February, 1996.
___________________________________
KENNETH A. HENDRICKS
Accepted in Chicago, Illinois
this 8th day of February, 1996
NATIONSBANK OF TEXAS, N.A., as Agent
By__________________________________
Name________________________________
Title_________________________________
-6-
<PAGE>
EXHIBIT 10.9
CONTINUING GUARANTY (UNLIMITED)
(FOR CONSUMER OR BUSINESS TRANSACTIONS)
DATED JULY 17, 1996
GUARANTY, for value received, and to induce Heritage Bank, N.A. 4600
American Parkway, Madison, Wisconsin (Lender"), to extend credit or to grant or
continue other credit accommodations to Kenneth A. Hendricks ("Debtor"), the
undersigned jointly and severally guarantee payment of the Obligations defined
below when due or, to the extent not prohibited by law, at the time any Debtor
becomes a subject of bankruptcy or other insolvency proceedings. "Obligations"
means all loans, drafts, overdrafts, checks, notes, and all other debts,
obligations and liabilities of every kind and description, and either of the
same or of a different nature, rising out of credit previously granted, credit
contemporaneously granted or credit granted in the future by Lender for any
Debtor, to any Debtor and another, or to another guaranteed or endorsed by any
Debtor. Obligations include interest and charges and the amount of payments
made to Lender or another by or on behalf of any Debtor which are recovered from
Lender by a trustee, receiver, creditor or other party pursuant to applicable
federal or state law, and to the extent not prohibited by law, all costs,
expenses and attorneys' fees at any time paid or incurred before and after
judgment in endeavoring to collect all or part of any of the above, or to
realize upon this Guaranty, or any collateral securing any of the above,
including these incurred incident to any action or proceeding involving Debtor
or the undersigned brought pursuant to the United States Bankruptcy Code.
Unless a lien would be prohibited by law or would render a nontaxable account
taxable, the undersigned grants to Lender a security interest and lien in any
deposit account any of the undersigned may at any time have with Lender. Lender
may, at any time after the occurrence of an event of default and notice and
opportunity to cure, if required by (S) 425.106, Wis Stats. set-off any amount
unpaid on the Obligations against any deposit balances any of the undersigned
may at any time have with Lender, or other money now or hereafter owed any of
the undersigned by Lender. This Guaranty is also secured (to the extent not
prohibited by law) by all existing and future security agreements between Lender
and any of the undersigned and by any mortgage stating it secures guaranties of
any of the undersigned. This Guaranty is valid and enforceable against the
undersigned even though any Obligation is invalid or unenforceable against any
Debtor.
WAIVER. To the extent not prohibited by law, the undersigned expressly
waive notice of the acceptance of this Guaranty, the creation of any present or
future Obligation, default under any Obligation, proceedings to collect from any
Debtor or anyone else, all diligence of collection and presentment, demand,
notice and protest, and any right to
<PAGE>
disclosures from Lender regarding the financial condition of any Debtor or
guarantor of the Obligations or the enforceability of the Obligations. No claim,
including a claim for reimbursement, subrogation, contribution or
indemnification which any of the undersigned may, as a guarantor of the
Obligations, have against a co-guarantor of any of the Obligations or against
any Debtor shall be enforced nor any payment accepted until the Obligations are
paid in full and no payments to or collections by Lender are subject to any
rights of recovery.
CONSENT. With respect to any of the Obligations, Lender may from time to
time before or after revocation of this Guaranty without notice to the
undersigned and without affecting the liability of the undersigned (a)
surrender, release, impair, sell or otherwise dispense of any security or
collateral for the Obligations, (b) release or agree not to sue any guarantor or
surety, (c) fail to perfect its security interest in or realize upon any
security or collateral, (d) fail to realize upon any of the Obligations or to
proceed against any Debtor or any guarantor or surety, (e) renew or extend the
time of payment, (f) increase or decrease the rate of interest or the amount of
the Obligations, (g) accept additional security or collateral, (h) determine the
allocation and application of payments and credits and accept partial payments,
(i) determine what, if anything, may at any time be done with reference to any
security or collateral, and (j) settle or compromise the amount due or owing or
claimed to be due or owing from any Debtor, guarantor or surety, which
settlement or compromise shall not affect the undersigneds' liability for the
full amount of the unpaid Obligations. The undersigned expressly consent to and
waive notice of all of the above. To the extent not prohibited by law, the
undersigned consent that venue for any legal proceeding relating to the
collection of this Guaranty shall be, of Lender's option, the county in which
Lender has its principal office in this state, the county in which any of the
undersigned reside or the county in which this Guaranty was executed by the
undersigned.
PERSONS BOUND. This Guaranty benefits Lender, its successors and assigns,
and binds the undersigned, their respective heirs, personal representatives,
successors and assigns.
ENTIRE AGREEMENT. This Guaranty is intended by the undersigned and Lender
as a final expression of this Guaranty and as a complete and exclusive statement
of the terms and conditions to the full effectiveness of this Guaranty. This
Guaranty may not be supplemented or modified except in writing. This Guaranty
includes additional provisions on the reverse side.
Sec'd by SBSA
<PAGE>
dated 7/17/96
NOTICE TO GUARANTOR
- --------------------------------------------------------------------------------
You are being asked to guarantee the part, present and future Obligations of
Debtor. If Debtor does not pay, you will have to. You may also have to pay
collection costs. Lender can collect the Obligations from you without first
trying to collect from Debtor or another guarantor.
- --------------------------------------------------------------------------------
BY: Aircraft Builder, Products Company, Inc. (SEAL) (SEAL)
------------------------
[signature]
1345 Riverside Drive [handwritten] Beloit, WI 535611
------------------------
(_______________________) (_______________________)
For Wisconsin Purchasers only. Each guarantor who signs above represents that
this obligation is incurred in the interest of his or her marriage or family.
x x
--------------------------------------- ------------------------------------
<TABLE>
<S> <C> <C>
FOR LENDER CLERICAL USE ONLY Copies of documents or WBA 156 [ ] Documents Delivered: or
may be required [ ] 156 Delivered
_____________________________
_____________________________
_____________________________
</TABLE>
REPRESENTATIONS. The undersigned acknowledge and agrees that Lender (a)
has not made any representations or guarantees with respect to, (b) has not
assumed any responsibility to the undersigned for, and (c) has no data to the
undersigned to the undersigned regarding the enforceability of any of the
Obligations or the financial condition of any Debtor or guarantor. The
undersignedexpressly determined the credit worthiness of Debtor and the
enforceability of the Obligations owed until the Obligations are paid in full.
REVOCATION. This is a continuing guaranty and shall remain in full force
and effect until Lender receives written notice of its revocation signed by the
undersigned or actual notice of the death of the undersigned. Upon revocation by
written notice or actual notice of death, the Guaranty shall continue in full
force and effect until revocation by written notice or actual notice of death,
the Guaranty shall continue in full force and effect as to all Obligations
contracted for or incurred before revocation, and Lender shall have the rights
provided by the Guaranty as if no revocation had occurred. Any renewal,
extension or increase in the interest rate of any such Obligation, whether made
before or after revocation, shall constitute an Obligation contracted for or
incurred before revocation. Obligations contracted for or incurred before
revocation shall also include credit extended after revocation pursuant to
commitments made before revocation. Revocation by one of the undersigned shall
not affect any of the [liabilities ?] or obligations of any of the undersigned
and this Guaranty shall continue in full force and effect with respect to them.
ACKNOWLEDGMENT
STATE OF WISCONSIN )
) ss.
COUNTY OF ROCK )
This instrument was acknowledged before me on July 20, 1996 by Kimberlee/k
Hendricks
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
____________________________________
[Signature]
Notary Public Rock County, Wis.
My Commission Expires: 8/8/99
<PAGE>
GUARANTY
--------
THIS GUARANTY, effective the 22nd day of December, 1992, is executed and
delivered by American Builders & Contractors Supply Co., Inc., a Texas
corporation (hereinafter referred to as "Guarantor").
WITNESSETH:
WHEREAS, Transohio Saving Bank, a national banking association ("Lender")
has agreed to make a loan to KENNETH A. HENDRICKS ("Borrower") in the original
principal sum of ONE MILLION SIX HUNDRED FORTY THOUSAND and 00/100 DOLLARS
($1,640,000.00) evidenced by a Promissory Note (the "Note"); and
WHEREAS, the Note is secured by a Open-Ended Mortgage, Assignment of Rents
and Security Agreement dated July 29, 1988 ("Mortgage"), encumbering certain
real property in Palm Beach County, Florida, more particularly described in
Exhibit "A" attached hereto and made a part hereof (the "Property") and other
property described in the Mortgage; and
WHEREAS, Borrower is the President of Guarantor and Guarantor agrees to
execute this Guaranty to induce Lender to permit Borrower to transfer the
Property to Guarantor.
NOW, THEREFORE, in consideration of Lender making the loan, and accepting
the Note, Mortgage and related documents, which it is acknowledged and agreed
that Lender is doing in full reliance hereon, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
Guarantor hereby irrevocably covenants, warrants and agrees as follows:
1. That notwithstanding any provision in the Note or Mortgage, Grantor
hereby unconditionally and irrevocably guarantees to Lender the full payment
when due, whether by acceleration or otherwise, of any and all Liabilities, as
described herein of Borrower to Lender. The term "Liability" or "Liabilities"
as used herein shall mean any and all liabilities and obligations of Borrower to
Lender as evidenced by the Note and any and all indemnifications set forth in
the Note or Mortgage.
2. Lender may at any time and from time to time (whether before or after
revocation or termination of this Guaranty) without notice to Guarantor (except
as required by law), without incurring responsibility to Guarantor without
impairing releasing or otherwise affecting the obligations of Guarantor in whole
or in part and without the endorsement or execution by Guarantor of any
additional consent, waiver or guaranty, (a) change the manner, place or terms of
payment, and change or extend the time of or renew or alter, any Liability or
installment thereof, or any security therefore and the guaranty made herein
shall apply to the Liabilities as so changed, extended, renewed or altered; (b)
sell, exchange, release, surrender, realize upon or otherwise deal with in any
manner and in any order any property at any time pledged or mortgaged to secure
the Liabilities and any off-set thereagainst; (c) exercise or refrain from
exercising any rights against Borrower or others (including Guarantor) or act or
refrain from acting in any other manner;(d) settle or compromise any Liability
or any security therefor and may subordinate the payment of all or any part
thereof to the
<PAGE>
payment of any Liability (whether or not due) of Borrower to creditors of
Borrower other than Lender and Guarantor; and (e) apply any sums from any
sources to any Liability without regard to any Liabilities remaining unpaid.
3. Guarantor hereby waives any and all requirements that Lender institute
any action or proceeding, at law or in equity against Borrower or against any
other party or parties with respect to the Liabilities as a condition precedent
to bringing any action against Guarantor upon this Guaranty. All remedies
afforded to Lender by reason of this Guaranty are separate and cumulative
remedies and no one of such remedies, whether waived by Lender or not, shall be
deemed to be an exclusion of any one of the other remedies available to Lender
and shall not in any way limit or prejudice any other legal or equitable remedy
which Lender may have.
4. Guarantor further agrees that it shall not be released from its
obligations hereunder by reason of any amendment to or alteration of the terms
and conditions of the Note or Mortgage or the indebtedness arising thereunder,
nor shall Guarantor's obligations hereunder be altered or impaired by any delay
by Lender in enforcing the terms and obligations of the Note or Mortgage or by
any waiver of any default by Lender under the Note or Mortgage, it being the
intention that Guarantor shall remain fully liable hereunder, notwithstanding
any such event.
5. No extension of the time of payment or performance of any obligation
hereunder guaranteed, or the renewal thereof, nor delay in the enforcement
thereof or of this Guaranty, or the taking, exchanging, surrender or release of
other security therefor or the release or compromise of any liability of any
party shall affect the liability of or in any manner release Guarantor, and this
Guaranty shall be a continuing one and remain in full force and effect until
each and every obligation hereby guaranteed shall have been fully paid and
performed.
6. That until Guarantor is released as hereinbefore described, Guarantor
shall not be released by any action or thing which might, but for this provision
of this Guaranty, be deemed a legal or equitable discharge of Guarantor, or by
reason of any waiver, extension, modification, forbearance or delay by Lender,
or Lender's failure to proceed promptly or otherwise, or by reason of any
further obligation or agreement between any owner of the Property and the then
holder of the Mortgage and the Note secured thereby or any of the terms,
covenants and conditions contained therein, and Guarantor hereby expressly
waives and surrenders any defense to Guarantor's liability hereunder based upon
any of the foregoing act, things, agreements or waivers.
7. Lender shall not be required to give any notice to Guarantor hereunder
in order to preserve or enforce Lender's rights hereunder (including, without
limitation, notice of any default under or amendment to the Note or Mortgage),
any such notice being expressly waived by Guarantor. Upon the occurrence of a
default under the Note or Mortgage, Lender is hereby authorized, at any time and
from time to time, without notice to Guarantor or to any other person, any such
notice being hereby expressly waived, to immediately set-off, appropriate and
apply any and all deposits (general or special) and any other indebtedness at
any time held or owing by Lender to or for the credit or the account of
Guarantor against and on account of the obligations and liabilities of Guarantor
hereunder. Notwithstanding any payment or payments hereunder or any such set-
off, appropriation or application, until such time as all amounts owing to
Lender have been paid
<PAGE>
in full, Guarantor shall not be subrogated to any of the rights of Lender
against Borrower under the Note or Mortgage, or entitled to a tender, redelivery
or reassignment of the Note or the Mortgage, or entitled to a tender, redelivery
or reassignment of the Note or the Mortgage or any other collateral security
give for the loan.
8. Guarantor agrees that it shall make no claim or set-off, defense,
recoupment or counterclaim of any sort whatsoever, nor shall Guarantor seek to
impair, limit or defeat in any way its obligations hereunder and Guarantor
hereby waives any right to such a claim in limitation of its obligations
hereunder.
9. Guarantor shall be in default hereunder upon: (a) non-payment of any
liability when due; (b) failure of Borrower or Guarantor to perform any
agreement creating or otherwise affecting any Liability or any provision hereof,
or to pay in full when due, any obligation of Borrower or Guarantor under the
Note or Mortgage; (c) the death, dissolution, termination of existence,
insolvency, or business failure of Borrower or Guarantor, appointment of a
receiver of any part of the property of any such party, assignment for the
benefit of creditors by or the commencement of any proceeding in bankruptcy or
insolvency by or against Borrower or Guarantor; (d) the entry of a judgment
against Borrower or Guarantor; (e) the issuing of any attachment or garnishment,
or the filing of any lien against any property of Borrower or Guarantor; (f) the
taking of possession of any substantial part of the property of Borrower or
Guarantor at the instance of any governmental authority; (g) the merger,
consolidation or reorganization of Borrower; (h) the determination by Lender
that a material adverse change has occurred in the financial condition of
Borrower or Guarantor from the conditions set forth in the most recent financial
statement of any such party heretofore furnished to Lender or from the condition
of such party as heretofore most recently disclosed to Lender in any manner; or
(i) falsity in any material respect of, or any material omission in, any
representation or statement made to Lender by or on behalf of Borrower or
Guarantor in connection with any Liability.
10. Upon the occurrence of any default thereunder which continues after
the expiration of any applicable grace period, Lender shall have all of the
remedies of a creditor and, to the extent applicable, or a secured party, under
all applicable law. Without limiting the generality of the foregoing, Lender
may, at its option and without notice or demand; (a) declare any Liability
accelerated and due and payable at once; (b) take possession of any collateral
security wherever located, and sell, resell, assign, transfer and deliver all or
any part of said property of borrower or Guarantor, at any broker's board or
exchange or at any public or private sale, for cash or on credit for future
delivery, and in connection therewith Lender may grant options and may impose
reasonable conditions such as requiring any purchaser of any stock sold to
represent that such stock is purchased for investment purposes only, and, upon
any such sale, Lender, unless prohibited by law the provision of which cannot be
waived, may purchase all or any part of said property to be sold, free from and
discharge of all trusts, claims, right of redemption and equities of Guarantor
whatsoever; and (c) set-off against any or all Liability or other obligations of
Guarantor hereunder all money owed by Lender in any capacity to Guarantor
whether or not due, and also set-off against all other Liabilities of Borrower
or any obligations of Guarantor hereunder to Lender all money owed by Lender in
any capacity to Borrower or Guarantor, and Lender shall be deemed to have
<PAGE>
exercised such right of set-off and to have made a charge against any such money
immediately upon the occurrence of such default although made or entered on the
books subsequent thereto.
11. Guarantor shall pay all costs of collection and reasonable attorney's
fees, including attorneys' fees incurred with or without suit (and with suit,
including out of court resolution or at trial and appellate levels of
litigation), in bankruptcy proceeding or otherwise, incurred or paid by Lender
in enforcing the payment of any Liability or enforcing or preserving any right
or interest of Lender hereunder, including the collection, sale or delivery of
any collateral security from time to time pledged hereunder; and after deducting
such fees, cost and expenses from the proceeds of sale or collection, Lender may
apply any residue to pay any of the Liabilities and Guarantor shall continue to
be liable for any deficiency with interest, which shall remain a Liability.
12. in the event Lender pays, repays or recovers any amount or amounts in
payment or on account of any of the Liabilities, then Guarantor agrees that any
such payment, repayment or recovery shall be binding upon Guarantor,
notwithstanding any revocation hereof or the cancellation of any note or other
instrument evidencing any Liability, and Guarantor shall be and remain liable to
Lender hereunder for the amount so paid, repaid or recovered.
13. Lender shall not be bound to take any steps necessary to preserve any
right in any of the property of Guarantor against prior parties who may be
liable in connection therewith, and Guarantor hereby agrees to take any such
steps. Lender may nevertheless at any time: (a) take any action it may deem
appropriate for the care or preservation of such property or of any rights of
Guarantor or Lender therein; (b) demand, sue for, collect or receive any money
or property at any time due, payable or receivable on account of or in exchange
for any property of Guarantor, (c) compromise and settle with any person liable
on such property, or (d) extend the time of payment or otherwise change the term
thereof as to any party liable thereon, all without notice to, without incurring
responsibility to, and without affecting any of the obligations of Guarantor
hereunder.
14. Guarantor hereby acknowledges that its obligations hereunder are
primary and not secondary and that Lender shall not be required to proceed first
against Borrower, or any other person, firm or corporation, whether primarily or
secondarily liable, or against any collateral security held by it, before
resorting to Guarantor for payment, and Guarantor shall not be entitled to
assert as a defense to the enforceability of the guaranty set forth hereunder
any defense of Borrower with respect to any Liability.
15. Lender shall have the right, at any time, without notice, to: (a)
transfer into its own name or that of its nominee any of the property of
Guarantor; (b) notify any obligor on any of such property to make payment to
Lender of any amounts due thereon; and (c) take control of any proceeds of any
such property.
16. This Guaranty is assignable by Lender and shall bind the heir,
devisees, personal representatives, successors and assigns of the parties hereto
and shall inure to the benefit of any successor or assign of Lender.
<PAGE>
17. Guarantor hereby waives notice of acceptance of this Guaranty and all
of presentment, demand, protest, notice of protest and of dishonor, notice of
default and all other notices relative to this Guaranty of every kind and
description set forth in the Note or Mortgage, or provided by statute or role of
law.
18. Any notice, demand or request by Lender to Guarantor or from Guarantor
to Lender shall be in writing and shall be deemed to have been duly give or made
if either delivered personally or if mailed by certified or registered mail,
postage prepaid, addressed to the address set forth below (or at the correct
address of any assignee of Lender), except that mailed written notices shall not
be deemed given or served until three (3) days after the date of mailing
thereof.
If to Lender: Transohio Savings Bank
1250 Superior Avenue, N.E.
Cleveland, Ohio 44114
If to Guarantor: American Builders & Contractors Supply Co., Inc.
820 Broad Street
Beloit, Wisconsin 53511
19. This Guaranty shall, in all respect, be governed by and construed in
accordance with the laws of the State of Florida, including all matters of
construction, validity and performance. To the extent permitted by law,
Guarantor hereby waives any provision of law that renders any provision
hereunder prohibited or unenforceable in any respect.
20. In the event that any provision of this Guaranty is held to be void or
unenforceable, all other provisions shall remain unaffected and be enforceable.
21. No invalidity, irregularity or unenforceability of all or any part of
the Liabilities or of any security therefor shall affect, impair or be a defense
to this Guaranty, and this Guaranty is a primary and absolute obligation of
Guarantor.
<PAGE>
IN WITNESS WHEREOF, Guarantor has executed this Guaranty on the date
specified below:
WITNESSES: AMERICAN BUILDERS &
CONTRACTORS SUPPLY CO., INC.
- ---------------------------- ------------------------------------
Name: By: Kenneth A. Hendricks, President
(please print)
- ----------------------------
Name:
(please print)
<PAGE>
EXHIBIT "A"
LEGAL DESCRIPTION
-----------------
The West 17.5 feet of Lot 2, all of Lots 3 through 18 inclusive and the West
17.5 feet of Lot 19, all being in Block 27, ALTA VISTA PARK according to the
Plat thereof, as recorded in Plat Book 13, Page 24, of the Public Records of
Palm Beach County, Florida.
And;
The Southerly 25 feet of the 45 foot right-of-way of 14th Avenue as abandoned
(now known as 4th Avenue North), abutting the West 17.5 feet of Lot 2 and Lots 3
through 10 inclusive, Block 27, as shown on said plat of .ALTA VISTA PARK.
And:
The Northerly 25 feet of the 50 foot right-of-way of 13th Avenue, as abandoned
(now known as 3rd Avenue North), abutting Lots 11 through 18 inclusive and, the
West 17.5 feet of Lot 19, Block 27, as shown on said plat of ALTA VISTA PARK.
Together with a non exclusive easement for ingress and egress over the West
30.00 feet of the East 383.00 feet of Tract 22, and the West 30.00 feet of the
East 383.00 feet of Tract 19, SAWYER SUBDIVISION as recorded in Plat Book 5,
Page 12, Public Records of Palm Beach County, Florida, and the West 30.00 feet
of the East 383.00 feet of the North 20.00 feet of 14th Avenue, as abandoned,
(now known as 4th Avenue North): as shown on the plat of ALTA VISTA PARK,
according to the plat thereof, as recorded in Plat Book 13, Page 24, Public
Records of Palm Beach County, Florida.
<PAGE>
EXHIBIT 10.10
GUARANTY
--------
THIS GUARANTY, effective the 22nd day of December, 1992, is executed and
delivered by American Builders & Contractors Supply Co., Inc., a Texas
corporation (hereinafter referred to as "Guarantor").
WITNESSETH:
WHEREAS, Transohio Saving Bank, a national banking association ("Lender")
has agreed to make a loan to KENNETH A. HENDRICKS ("Borrower") in the original
principal sum of ONE MILLION SIX HUNDRED FORTY THOUSAND and 00/100 DOLLARS
($1,640,000.00) evidenced by a Promissory Note (the "Note"); and
WHEREAS, the Note is secured by a Open-Ended Mortgage, Assignment of Rents
and Security Agreement dated July 29, 1988 ("Mortgage"), encumbering certain
real property in Palm Beach County, Florida, more particularly described in
Exhibit "A" attached hereto and made a part hereof (the "Property") and other
property described in the Mortgage; and
WHEREAS, Borrower is the President of Guarantor and Guarantor agrees to
execute this Guaranty to induce Lender to permit Borrower to transfer the
Property to Guarantor.
NOW, THEREFORE, in consideration of Lender making the loan, and accepting
the Note, Mortgage and related documents, which it is acknowledged and agreed
that Lender is doing in full reliance hereon, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
Guarantor hereby irrevocably covenants, warrants and agrees as follows:
1. That notwithstanding any provision in the Note or Mortgage, Grantor
hereby unconditionally and irrevocably guarantees to Lender the full payment
when due, whether by acceleration or otherwise, of any and all Liabilities, as
described herein of Borrower to Lender. The term "Liability" or "Liabilities"
as used herein shall mean any and all liabilities and obligations of Borrower to
Lender as evidenced by the Note and any and all indemnifications set forth in
the Note or Mortgage.
2. Lender may at any time and from time to time (whether before or after
revocation or termination of this Guaranty) without notice to Guarantor (except
as required by law), without incurring responsibility to Guarantor without
impairing releasing or otherwise affecting the obligations of Guarantor in whole
or in part and without the endorsement or execution by Guarantor of any
additional consent, waiver or guaranty, (a) change the manner, place or terms of
payment, and change or extend the time of or renew or alter, any Liability or
installment thereof, or any security therefore and the guaranty made herein
shall apply to the Liabilities as so changed, extended, renewed or altered; (b)
sell, exchange, release, surrender, realize upon or otherwise deal with in any
manner and in any order any property at any time pledged or mortgaged to secure
the Liabilities and any off-set thereagainst; (c) exercise or refrain from
exercising any rights against Borrower or others
<PAGE>
(including Guarantor) or act or refrain from acting in any other manner;(d)
settle or compromise any Liability or any security therefor and may subordinate
the payment of all or any part thereof to the payment of any Liability (whether
or not due) of Borrower to creditors of Borrower other than Lender and
Guarantor; and (e) apply any sums from any sources to any Liability without
regard to any Liabilities remaining unpaid.
3. Guarantor hereby waives any and all requirements that Lender institute
any action or proceeding, at law or in equity against Borrower or against any
other party or parties with respect to the Liabilities as a condition precedent
to bringing any action against Guarantor upon this Guaranty. All remedies
afforded to Lender by reason of this Guaranty are separate and cumulative
remedies and no one of such remedies, whether waived by Lender or not, shall be
deemed to be an exclusion of any one of the other remedies available to Lender
and shall not in any way limit or prejudice any other legal or equitable remedy
which Lender may have.
4. Guarantor further agrees that it shall not be released from its
obligations hereunder by reason of any amendment to or alteration of the terms
and conditions of the Note or Mortgage or the indebtedness arising thereunder,
nor shall Guarantor's obligations hereunder be altered or impaired by any delay
by Lender in enforcing the terms and obligations of the Note or Mortgage or by
any waiver of any default by Lender under the Note or Mortgage, it being the
intention that Guarantor shall remain fully liable hereunder, notwithstanding
any such event.
5. No extension of the time of payment or performance of any obligation
hereunder guaranteed, or the renewal thereof, nor delay in the enforcement
thereof or of this Guaranty, or the taking, exchanging, surrender or release of
other security therefor or the release or compromise of any liability of any
party shall affect the liability of or in any manner release Guarantor, and this
Guaranty shall be a continuing one and remain in full force and effect until
each and every obligation hereby guaranteed shall have been fully paid and
performed.
6. That until Guarantor is released as hereinbefore described, Guarantor
shall not be released by any action or thing which might, but for this provision
of this Guaranty, be deemed a legal or equitable discharge of Guarantor, or by
reason of any waiver, extension, modification, forbearance or delay by Lender,
or Lender's failure to proceed promptly or otherwise, or by reason of any
further obligation or agreement between any owner of the Property and the then
holder of the Mortgage and the Note secured thereby or any of the terms,
covenants and conditions contained therein, and Guarantor hereby expressly
waives and surrenders any defense to Guarantor's liability hereunder based upon
any of the foregoing act, things, agreements or waivers.
7. Lender shall not be required to give any notice to Guarantor hereunder
in order to preserve or enforce Lender's rights hereunder (including, without
limitation, notice of any default under or amendment to the Note or Mortgage),
any such notice being expressly waived by Guarantor. Upon the occurrence of a
default under the Note or Mortgage, Lender is hereby authorized, at any time and
from time to time, without notice to Guarantor or to any other person, any such
notice being hereby expressly waived, to immediately set-off, appropriate and
apply any
<PAGE>
and all deposits (general or special) and any other indebtedness at any time
held or owing by Lender to or for the credit or the account of Guarantor against
and on account of the obligations and liabilities of Guarantor hereunder.
Notwithstanding any payment or payments hereunder or any such set-off,
appropriation or application, until such time as all amounts owing to Lender
have been paid in full, Guarantor shall not be subrogated to any of the rights
of Lender against Borrower under the Note or Mortgage, or entitled to a tender,
redelivery or reassignment of the Note or the Mortgage, or entitled to a tender,
redelivery or reassignment of the Note or the Mortgage or any other collateral
security give for the loan.
8. Guarantor agrees that it shall make no claim or set-off, defense,
recoupment or counterclaim of any sort whatsoever, nor shall Guarantor seek to
impair, limit or defeat in any way its obligations hereunder and Guarantor
hereby waives any right to such a claim in limitation of its obligations
hereunder.
9. Guarantor shall be in default hereunder upon: (a) non-payment of any
liability when due; (b) failure of Borrower or Guarantor to perform any
agreement creating or otherwise affecting any Liability or any provision hereof,
or to pay in full when due, any obligation of Borrower or Guarantor under the
Note or Mortgage; (c) the death, dissolution, termination of existence,
insolvency, or business failure of Borrower or Guarantor, appointment of a
receiver of any part of the property of any such party, assignment for the
benefit of creditors by or the commencement of any proceeding in bankruptcy or
insolvency by or against Borrower or Guarantor; (d) the entry of a judgment
against Borrower or Guarantor; (e) the issuing of any attachment or garnishment,
or the filing of any lien against any property of Borrower or Guarantor; (f) the
taking of possession of any substantial part of the property of Borrower or
Guarantor at the instance of any governmental authority; (g) the merger,
consolidation or reorganization of Borrower; (h) the determination by Lender
that a material adverse change has occurred in the financial condition of
Borrower or Guarantor from the conditions set forth in the most recent financial
statement of any such party heretofore furnished to Lender or from the condition
of such party as heretofore most recently disclosed to Lender in any manner; or
(i) falsity in any material respect of, or any material omission in, any
representation or statement made to Lender by or on behalf of Borrower or
Guarantor in connection with any Liability.
10. Upon the occurrence of any default thereunder which continues after
the expiration of any applicable grace period, Lender shall have all of the
remedies of a creditor and, to the extent applicable, or a secured party, under
all applicable law. Without limiting the generality of the foregoing, Lender
may, at its option and without notice or demand; (a) declare any Liability
accelerated and due and payable at once; (b) take possession of any collateral
security wherever located, and sell, resell, assign, transfer and deliver all or
any part of said property of borrower or Guarantor, at any broker's board or
exchange or at any public or private sale, for cash or on credit for future
delivery, and in connection therewith Lender may grant options and may impose
reasonable conditions such as requiring any purchaser of any stock sold to
represent that such stock is purchased for investment purposes only, and, upon
any such sale, Lender, unless prohibited by law the provision of which cannot be
waived, may purchase all or any part of said property to be
<PAGE>
sold, free from and discharge of all trusts, claims, right of redemption and
equities of Guarantor whatsoever; and (c) set-off against any or all Liability
or other obligations of Guarantor hereunder all money owed by Lender in any
capacity to Guarantor whether or not due, and also set-off against all other
Liabilities of Borrower or any obligations of Guarantor hereunder to Lender all
money owed by Lender in any capacity to Borrower or Guarantor, and Lender shall
be deemed to have exercised such right of set-off and to have made a charge
against any such money immediately upon the occurrence of such default although
made or entered on the books subsequent thereto.
11. Guarantor shall pay all costs of collection and reasonable attorney's
fees, including attorneys' fees incurred with or without suit (and with suit,
including out of court resolution or at trial and appellate levels of
litigation), in bankruptcy proceeding or otherwise, incurred or paid by Lender
in enforcing the payment of any Liability or enforcing or preserving any right
or interest of Lender hereunder, including the collection, sale or delivery of
any collateral security from time to time pledged hereunder; and after deducting
such fees, cost and expenses from the proceeds of sale or collection, Lender may
apply any residue to pay any of the Liabilities and Guarantor shall continue to
be liable for any deficiency with interest, which shall remain a Liability.
12. in the event Lender pays, repays or recovers any amount or amounts in
payment or on account of any of the Liabilities, then Guarantor agrees that any
such payment, repayment or recovery shall be binding upon Guarantor,
notwithstanding any revocation hereof or the cancellation of any note or other
instrument evidencing any Liability, and Guarantor shall be and remain liable to
Lender hereunder for the amount so paid, repaid or recovered.
13. Lender shall not be bound to take any steps necessary to preserve any
right in any of the property of Guarantor against prior parties who may be
liable in connection therewith, and Guarantor hereby agrees to take any such
steps. Lender may nevertheless at any time: (a) take any action it may deem
appropriate for the care or preservation of such property or of any rights of
Guarantor or Lender therein; (b) demand, sue for, collect or receive any money
or property at any time due, payable or receivable on account of or in exchange
for any property of Guarantor, (c) compromise and settle with any person liable
on such property, or (d) extend the time of payment or otherwise change the term
thereof as to any party liable thereon, all without notice to, without incurring
responsibility to, and without affecting any of the obligations of Guarantor
hereunder.
14. Guarantor hereby acknowledges that its obligations hereunder are
primary and not secondary and that Lender shall not be required to proceed first
against Borrower, or any other person, firm or corporation, whether primarily or
secondarily liable, or against any collateral security held by it, before
resorting to Guarantor for payment, and Guarantor shall not be entitled to
assert as a defense to the enforceability of the guaranty set forth hereunder
any defense of Borrower with respect to any Liability.
15. Lender shall have the right, at any time, without notice, to: (a)
transfer into its own name or that of its nominee any of the property of
Guarantor; (b) notify any obligor on any of such
<PAGE>
property to make payment to Lender of any amounts due thereon; and (c) take
control of any proceeds of any such property.
16. This Guaranty is assignable by Lender and shall bind the heir,
devisees, personal representatives, successors and assigns of the parties hereto
and shall inure to the benefit of any successor or assign of Lender.
17. Guarantor hereby waives notice of acceptance of this Guaranty and all
of presentment, demand, protest, notice of protest and of dishonor, notice of
default and all other notices relative to this Guaranty of every kind and
description set forth in the Note or Mortgage, or provided by statute or role of
law.
18. Any notice, demand or request by Lender to Guarantor or from Guarantor
to Lender shall be in writing and shall be deemed to have been duly give or made
if either delivered personally or if mailed by certified or registered mail,
postage prepaid, addressed to the address set forth below (or at the correct
address of any assignee of Lender), except that mailed written notices shall not
be deemed given or served until three (3) days after the date of mailing
thereof.
If to Lender: Transohio Savings Bank
1250 Superior Avenue, N.E.
Cleveland, Ohio 44114
If to Guarantor: American Builders & Contractors Supply Co., Inc.
820 Broad Street
Beloit, Wisconsin 53511
19. This Guaranty shall, in all respect, be governed by and construed in
accordance with the laws of the State of Florida, including all matters of
construction, validity and performance. To the extent permitted by law,
Guarantor hereby waives any provision of law that renders any provision
hereunder prohibited or unenforceable in any respect.
20. In the event that any provision of this Guaranty is held to be void or
unenforceable, all other provisions shall remain unaffected and be enforceable.
21. No invalidity, irregularity or unenforceability of all or any part of
the Liabilities or of any security therefor shall affect, impair or be a defense
to this Guaranty, and this Guaranty is a primary and absolute obligation of
Guarantor.
<PAGE>
IN WITNESS WHEREOF, Guarantor has executed this Guaranty on the date
specified below:
WITNESSES: AMERICAN BUILDERS &
CONTRACTORS SUPPLY CO., INC.
- ------------------------------ --------------------------------------
Name: By: Kenneth A. Hendricks, President
(please print)
- ------------------------------
Name:
(please print)
<PAGE>
EXHIBIT "A"
LEGAL DESCRIPTION
-----------------
The West 17.5 feet of Lot 2, all of Lots 3 through 18 inclusive and the West
17.5 feet of Lot 19, all being in Block 27, ALTA VISTA PARK according to the
Plat thereof, as recorded in Plat Book 13, Page 24, of the Public Records of
Palm Beach County, Florida.
And;
The Southerly 25 feet of the 45 foot right-of-way of 14th Avenue as abandoned
(now known as 4th Avenue North), abutting the West 17.5 feet of Lot 2 and Lots 3
through 10 inclusive, Block 27, as shown on said plat of .ALTA VISTA PARK.
And:
The Northerly 25 feet of the 50 foot right-of-way of 13th Avenue, as abandoned
(now known as 3rd Avenue North), abutting Lots 11 through 18 inclusive and, the
West 17.5 feet of Lot 19, Block 27, as shown on said plat of ALTA VISTA PARK.
Together with a non exclusive easement for ingress and egress over the West
30.00 feet of the East 383.00 feet of Tract 22, and the West 30.00 feet of the
East 383.00 feet of Tract 19, SAWYER SUBDIVISION as recorded in Plat Book 5,
Page 12, Public Records of Palm Beach County, Florida, and the West 30.00 feet
of the East 383.00 feet of the North 20.00 feet of 14th Avenue, as abandoned,
(now known as 4th Avenue North): as shown on the plat of ALTA VISTA PARK,
according to the plat thereof, as recorded in Plat Book 13, Page 24, Public
Records of Palm Beach County, Florida.
<PAGE>
PREPARED BY AND RETURN TO:
Karl W. Leo
Leo and Associates
200 Randolph Avenue, Suite 200
Huntsville, Alabama 35901
Property Tax I.D. No.:
- -------------------------------
Grantee's I.D. No.:
- -------------------------------
THIS WARRANTY DEED made this 22nd day of December, 1992, by Kenneth A.
Hendricks, a married man (hereinafter called "Grantor"), whose mailing address
is: 822 Broad Street, Beloit, Wisonsin 53511, and American Builders &
Contractors Supply Co., Inc., a Texas corporation (hereinafter called
"Grantee"), whose mailing address is 820 Broad Street, Boloit, Wisconsin 53511.
(Whenever used herein the terms"(Grantor" and "Grantee" include all the
parties to this instrument and the here, legal representatives and assigns
of individuals, and the successors ad assigns of corporations)
WITNESSETH:
----------
That the Grant, for and in consideration of the sum of TEN and 00/100
Dollars ($10.00), to him and in had paid by the Grantee, the receipt whereof is
hereby acknowledged, has granted, bargained and sole to the Grantee, all that
certain land situate and being in Duval County, Florida, more particularly
described as follows:
South 10 feet of the West 622.5 feet of Tract 6. Bowden Farms, Plat Book
Page 91, current public records.
Also that part of Tract 7, Bowden Farms, according to plat aforesaid,
described as: Beginning at the Northwest corner of said tract 7, thence
North 58 degrees 35 minutes past along the North line of said Tract 7,
622.5 feet to the interaction of said North line aforesaid with the
Westerly right-of-way line of U.S. Highway No. 1, also known as Florida
State Rad No. 4, as now established; thence South 31 degrees 25 minutes
<PAGE>
East along said right-of-way line 215.6 feet to a point, thence South 58
degrees 35 minutes West 369.5 feet to a point, thence South 31 degrees 25
minutes East 444.4 feet to a point in the South line of said Tract 7, the
South 58 35 minutes West along the Southerly line of said Tract 7, 253 feet
to the Southwest corner of said Tract 7, thence North 31 degrees 25 minutes
West along the Westerly line of said Tract 7, 660 feet to the point of
beginning, being the North 215.6 feet of the West 622.5 feet and the South
444.4 feet of the West 253 feet of said Tract 7.
SUBJECT TO a Mortgage to Medlife Capital Credit Corporation, dated
September 1, 1991, recorded in the Official Record Books of the Public Records
of Duval County, Florida.
SUBJECT TO taxes and assessments for the year 1992 and all subsequent
years; all applicable environmental zoning and land use ordinances,
restrictions, prohibitions and other requirements imposed by governmental
authority; and all matters appearing in the Plat of the Property.
GRANTOR warrants that this property is not and has never been his homestead
and does hereby covenant with Grantee that, except as noted above, at the time
of delivery of this Deed, the Premises were free from all encumbrances made by
Grantor, and that Grantor will warrant and defend the same against lawful claims
of persons whomsoever.
IN WITNESS WHEREOF, Grantor has caused these presents to be executed the
day and year first above written.
SIGNED, SEALED AND DELIVERED:
in the presence of:
- ------------------------------- -----------------------------------
Print: KENNETH A. HENDRICKS
-------------------------
- -------------------------------
Print:
-------------------------
<PAGE>
STATE OF WISCONSIN )
) ss.
COUNTY OF ROCK )
The foregoing instrument was acknowledged before me this ______ day of
________________, 1992, by Kenneth A. Hendricks. The above-named individual is
personally known to me and who did take an oath.
---------------------------------------
Notary Public:
Print Name:
----------------------------
Commission No.:
------------------------
(NOTARY SEAL) My Commission expires:
-----------------
<PAGE>
EXHIBIT 10.11
GUARANTY
--------
THIS GUARANTY, effective the 22nd day of December, 1992, is executed and
delivered by American Builders & Contractors Supply Co., Inc., a Texas
corporation (hereinafter referred to as "Guarantor").
WITNESSETH:
WHEREAS, MetLife Capital Credit Corporation, a national banking association
("Lender") has agreed to make a loan to KENNETH A. HENDRICKS ("Borrower") in the
original principal sum of FIVE HUNDRED THIRTY-EIGHT THOUSAND FIVE HUNDRED and
00/100 DOLLARS ($538,500.00) evidenced by a Promissory Note (the "Note"); and
WHEREAS, the Note is secured by a Mortgage and Security Agreement dated
September 1, 1991 ("Mortgage"), encumbering certain real property in Duval
County, Florida, more particularly described in Exhibit "A" attached hereto and
made a part hereof (the "Property") and other property described in the
Mortgage; and
WHEREAS, Borrower is the President of Guarantor and Guarantor agrees to
execute this Guaranty to induce Lender to permit Borrower to transfer the
Property to Guarantor.
NOW, THEREFORE, in consideration of Lender making the loan, and accepting
the Note, Mortgage and related documents, which it is acknowledged and agreed
that Lender is doing in full reliance hereon, and as an inducement to Lender to
do so and to make advances pursuant thereto, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
Guarantor hereby irrevocably covenants, warrants and agrees as follows:
1. That notwithstanding any provision in the Note or Mortgage, Grantor
hereby unconditionally and irrevocably guarantees to Lender the full payment
when due, whether by acceleration or otherwise, of any and all Liabilities, as
described herein of Borrower to Lender. The term "Liability" or "Liabilities"
as used herein shall mean any and all liabilities and obligations of Borrower to
Lender as evidenced by the Note and any and all indemnifications set forth in
the Note or Mortgage.
2. Lender may at any time and from time to time (whether before or after
revocation or termination of this Guaranty) without notice to Guarantor (except
as required by law), without incurring responsibility to Guarantor without
impairing releasing or otherwise affecting the obligations of Guarantor in whole
or in part and without the endorsement or execution by Guarantor of any
additional consent, waiver or guaranty, (a) change the manner, place or terms of
payment, and change or extend the time of or renew or alter, any Liability or
installment thereof, or any security therefore and the guaranty made herein
shall apply to the Liabilities as so changed, extended, renewed or altered; (b)
sell, exchange, release, surrender, realize upon or otherwise deal with in any
manner and in any order any property at any time pledged or mortgaged to secure
the Liabilities and
<PAGE>
any off-set there against; (c) exercise or refrain from exercising any rights
against Borrower or others (including Guarantor) or act or refrain from acting
in any other manner;(d) settle or compromise any Liability or any security
therefor and may subordinate the payment of all or any part thereof to the
payment of any Liability (whether or not due) of Borrower to creditors of
Borrower other than Lender and Guarantor; and (e) apply any sums from any
sources to any Liability without regard to any Liabilities remaining unpaid.
3. Guarantor hereby waives any and all requirements that Lender institute
any action or proceeding, at law or in equity against Borrower or against any
other party or parties with respect to the Liabilities as a condition precedent
to bringing any action against Guarantor upon this Guaranty. All remedies
afforded to Lender by reason of this Guaranty are separate and cumulative
remedies and no one of such remedies, whether waived by Lender or not, shall be
deemed to be an exclusion of any one of the other remedies available to Lender
and shall not in any way limit or prejudice any other legal or equitable remedy
which Lender may have.
4. Guarantor further agrees that it shall not be released from its
obligations hereunder by reason of any amendment to or alteration of the terms
and conditions of the Note or Mortgage or the indebtedness arising thereunder,
nor shall Guarantor's obligations hereunder be altered or impaired by any delay
by Lender in enforcing the terms and obligations of the Note or Mortgage or by
any waiver of any default by Lender under the Note or Mortgage, it being the
intention that Guarantor shall remain fully liable hereunder, notwithstanding
any such event.
5. No extension of the time of payment or performance of any obligation
hereunder guaranteed, or the renewal thereof, nor delay in the enforcement
thereof or of this Guaranty, or the taking, exchanging, surrender or release of
other security therefor or the release or compromise of any liability of any
party shall affect the liability of or in any manner release Guarantor, and this
Guaranty shall be a continuing one and remain in full force and effect until
each and every obligation hereby guaranteed shall have been fully paid and
performed.
6. That until Guarantor is released as hereinbefore described, Guarantor
shall not be released by any action or thing which might, but for this provision
of this Guaranty, be deemed a legal or equitable discharge of Guarantor, or by
reason of any waiver, extension, modification, forbearance or delay by Lender,
or Lender's failure to proceed promptly or otherwise, or by reason of any
further obligation or agreement between any owner of the Property and the then
holder of the Mortgage and the Note secured thereby or any of the terms,
covenants and conditions contained therein, and Guarantor hereby expressly
waives and surrenders any defense to Guarantor's liability hereunder based upon
any of the foregoing act, things, agreements or waivers.
7. Lender shall not be required to give any notice to Guarantor hereunder
in order to preserve or enforce Lender's rights hereunder (including, without
limitation, notice of any default under or amendment to the Note or Mortgage),
any such notice being expressly waived by Guarantor. Upon the occurrence of a
default under the Note or Mortgage, Lender is hereby authorized, at any time and
from time to time, without notice to Guarantor or to any other person,
<PAGE>
any such notice being hereby expressly waived, to immediately set-off,
appropriate and apply any and all deposits (general or special) and any other
indebtedness at any time held or owing by Lender to or for the credit or the
account of Guarantor against and on account of the obligations and liabilities
of Guarantor hereunder. Notwithstanding any payment or payments hereunder or any
such set-off, appropriation or application, until such time as all amounts owing
to Lender have been paid in full, Guarantor shall not be subrogated to any of
the rights of Lender against Borrower under the Note or Mortgage, or entitled to
a tender, redelivery or reassignment of the Note or the Mortgage, or entitled to
a tender, redelivery or reassignment of the Note or the Mortgage or any other
collateral security give for the loan.
8. Guarantor agrees that it shall make no claim or set-off, defense,
recoupment or counterclaim of any sort whatsoever, nor shall Guarantor seek to
impair, limit or defeat in any way its obligations hereunder and Guarantor
hereby waives any right to such a claim in limitation of its obligations
hereunder.
9. Guarantor shall be in default hereunder upon: (a) non-payment of any
liability when due; (b) failure of Borrower or Guarantor to perform any
agreement creating or otherwise affecting any Liability or any provision hereof,
or to pay in full when due, any obligation of Borrower or Guarantor under the
Note or Mortgage; (c) the death, dissolution, termination of existence,
insolvency, or business failure of Borrower or Guarantor, appointment of a
receiver of any part of the property of any such party, assignment for the
benefit of creditors by or the commencement of any proceeding in bankruptcy or
insolvency by or against Borrower or Guarantor; (d) the entry of a judgment
against Borrower or Guarantor; (e) the issuing of any attachment or garnishment,
or the filing of any lien against any property of Borrower or Guarantor; (f) the
taking of possession of any substantial part of the property of Borrower or
Guarantor at the instance of any governmental authority; (g) the merger,
consolidation or reorganization of Borrower; (h) the determination by Lender
that a material adverse change has occurred in the financial condition of
Borrower or Guarantor from the conditions set forth in the most recent financial
statement of any such party heretofore furnished to Lender or from the condition
of such party as heretofore most recently disclosed to Lender in any manner; or
(i) falsity in any material respect of, or any material omission in, any
representation or statement made to Lender by or on behalf of Borrower or
Guarantor in connection with any Liability.
10. Upon the occurrence of any default thereunder which continues after
the expiration of any applicable grace period, Lender shall have all of the
remedies of a creditor and, to the extent applicable, or a secured party, under
all applicable law. Without limiting the generality of the foregoing, Lender
may, at its option and without notice or demand; (a) declare any Liability
accelerated and due and payable at once; (b) take possession of any collateral
security wherever located, and sell, resell, assign, transfer and deliver all or
any part of said property of borrower or Guarantor, at any broker's board or
exchange or at any public or private sale, for cash or on credit for future
delivery, and in connection therewith Lender may grant options and may impose
reasonable conditions such as requiring any purchaser of any stock sold to
represent that such stock is purchased for investment purposes only, and, upon
any such sale, Lender, unless prohibited by
<PAGE>
law the provision of which cannot be waived, may purchase all or any part of
said property to be sold, free from and discharge of all trusts, claims, right
of redemption and equities of Guarantor whatsoever; and (c) set-off against any
or all Liability or other obligations of Guarantor hereunder all money owed by
Lender in any capacity to Guarantor whether or not due, and also set-off against
all other Liabilities of Borrower or any obligations of Guarantor hereunder to
Lender all money owed by Lender in any capacity to Borrower or Guarantor, and
Lender shall be deemed to have exercised such right of set-off and to have made
a charge against any such money immediately upon the occurrence of such default
although made or entered on the books subsequent thereto.
11. Guarantor shall pay all costs of collection and reasonable attorney's
fees, including attorneys' fees incurred with or without suit (and with suit,
including out of court resolution or at trial and appellate levels of
litigation), in bankruptcy proceeding or otherwise, incurred or paid by Lender
in enforcing the payment of any Liability or enforcing or preserving any right
or interest of Lender hereunder, including the collection, sale or delivery of
any collateral security from time to time pledged hereunder; and after deducting
such fees, cost and expenses from the proceeds of sale or collection, Lender may
apply any residue to pay any of the Liabilities and Guarantor shall continue to
be liable for any deficiency with interest, which shall remain a Liability.
12. In the event Lender pays, repays or recovers any amount or amounts in
payment or on account of any of the Liabilities, then Guarantor agrees that any
such payment, repayment or recovery shall be binding upon Guarantor,
notwithstanding any revocation hereof or the cancellation of any note or other
instrument evidencing any Liability, and Guarantor shall be and remain liable to
Lender hereunder for the amount so paid, repaid or recovered.
13. Lender shall not be bound to take any steps necessary to preserve any
right in any of the property of Guarantor against prior parties who may be
liable in connection therewith, and Guarantor hereby agrees to take any such
steps. Lender may nevertheless at any time: (a) take any action it may deem
appropriate for the care or preservation of such property or of any rights of
Guarantor or Lender therein; (b) demand, sue for, collect or receive any money
or property at any time due, payable or receivable on account of or in exchange
for any property of Guarantor, (c) compromise and settle with any person liable
on such property, or (d) extend the time of payment or otherwise change the term
thereof as to any party liable thereon, all without notice to, without incurring
responsibility to, and without affecting any of the obligations of Guarantor
hereunder.
14. Guarantor hereby acknowledges that its obligations hereunder are
primary and not secondary and that Lender shall not be required to proceed first
against Borrower, or any other person, firm or corporation, whether primarily or
secondarily liable, or against any collateral security held by it, before
resorting to Guarantor for payment, and Guarantor shall not be entitled to
assert as a defense to the enforceability of the guaranty set forth hereunder
any defense of Borrower with respect to any Liability.
15. Lender shall have the right, at any time, without notice, to: (a)
transfer into its own name or that of its nominee any of the property of
Guarantor; (b) notify any obligor on any of such
<PAGE>
property to make payment to Lender of any amounts due thereon; and (c) take
control of any proceeds of any such property.
16. This Guaranty is assignable by Lender and shall bind the heir,
devisees, personal representatives, successors and assigns of the parties hereto
and shall inure to the benefit of any successor or assign of Lender.
17. Guarantor hereby waives notice of acceptance of this Guaranty and all
of presentment, demand, protest, notice of protest and of dishonor, notice of
default and all other notices relative to this Guaranty of every kind and
description set forth in the Note or Mortgage, or provided by statute or role of
law.
18. Any notice, demand or request by Lender to Guarantor or from Guarantor
to Lender shall be in writing and shall be deemed to have been duly give or made
if either delivered personally or if mailed by certified or registered mail,
postage prepaid, addressed to the address set forth below (or at the correct
address of any assignee of Lender), except that mailed written notices shall not
be deemed given or served until three (3) days after the date of mailing
thereof.
If to Lender: Transohio Savings Bank
1250 Superior Avenue, N.E.
Cleveland, Ohio 44114
If to Guarantor: American Builders & Contractors Supply Co., Inc.
820 Broad Street
Beloit, Wisconsin 53511
19. This Guaranty shall, in all respect, be governed by and construed in
accordance with the laws of the State of Florida, including all matters of
construction, validity and performance. To the extent permitted by law,
Guarantor hereby waives any provision of law that renders any provision
hereunder prohibited or unenforceable in any respect.
20. In the event that any provision of this Guaranty is held to be void or
unenforceable, all other provisions shall remain unaffected and be enforceable.
21. No invalidity, irregularity or unenforceability of all or any part of
the Liabilities or of any security therefor shall affect, impair or be a defense
to this Guaranty, and this Guaranty is a primary and absolute obligation of
Guarantor.
<PAGE>
IN WITNESS WHEREOF, Guarantor has executed this Guaranty on the date
specified below:
WITNESSES: AMERICAN BUILDERS &
CONTRACTORS SUPPLY CO., INC.
- ------------------------------- -----------------------------------
Name: By: Kenneth A. Hendricks, President
(please print)
- -------------------------------
Name:
(please print)
<PAGE>
EXHIBIT A
All that certain land situate and being in Duval County, Florida, more
particularly described as follows:
South 10 feet of the West 622.5 feet of Tract 6, Bowden Farms, plat Book 6,
Page 91, current public records.
Also that part of Tract 7, Bowden Farms, according to plat aforesaid,
described as: Beginning at the Northwest corner of said tract 7, thence
North 58 degrees 35 minutes East along the North line of said Tract 7,
622.5 feet to the intersection of said North line aforesaid with the
Westerly right-of-way line of U.S. Highway No. 1, also known as Florida
State Rad No. 4, as now established; thence South 31 degrees 25 minutes
East along said right-of-way line 215.6 feet to a point, thence South 58
degrees 35 minutes West 369.5 feet to a point, thence South 31 degrees 25
minutes East 44.4 feet to a point in the South line of said Tract 7, thence
South 58 35 minutes West along the Southerly line of said Tract 7, 253 feet
to the Southwest corner of said Tract 7, thence North 31 degrees 25 minutes
West along the Westerly line of said Tract 7, 660 feet to the point of
beginning, being the North 215.6 feet of the West 622.5 feet and the South
444.4 feet of the West 253 feet of said Tract 7.
<PAGE>
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Summary Combined
Historical Financial Data," "Selected Combined Historical Financial Data," and
"Experts," and to the use of our reports dated March 21, 1997, except as to
Note 12 the date of which is May 7, 1997, in the Amendment No. 1 to
Registration Statement (Form S-4) and related Prospectus of American Builders
& Contractors Supply Co., Inc. for the registration of $100,000,000 principal
amount of 10 5/8% Senior Subordinated Notes due 2007.
Ernst & Young LLP
Milwaukee, Wisconsin
June 24, 1997
<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------------
FORM T-1
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)
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
(Exact name of trustee as specified in its charter)
A U.S. National Banking Association 41-1592157
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national Identification No.)
bank)
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479
(Address of principal executive offices) (Zip code)
Stanley S. Stroup, General Counsel
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479
(612) 667-1234
(Agent for Service)
-----------------------------
American Builders & Contractors Supply Co., Inc.
Amcraft Building Products Co., Inc.
Mule-Hide Products Co., Inc.
(Exact name of obligor as specified in its charter)
Delaware 39-1413708
Delaware 39-1701778
Texas 62-1277211
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One ABC Parkway
Beloit, Wisconsin 53511
(Address of principal executive offices) (Zip code)
-----------------------------
10 5/8% Senior Subordinated Notes Due 2007
(Title of the indenture securities)
================================================================================
<PAGE>
Item 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.
Comptroller of the Currency
Treasury Department
Washington, D.C.
Federal Deposit Insurance Corporation
Washington, D.C.
The Board of Governors of the Federal Reserve System
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust
powers.
The trustee is authorized to exercise corporate trust
powers.
Item 2. Affiliations with Obligor. If the obligor is an affiliate of the
trustee, describe each such affiliation.
None with respect to the trustee.
No responses are included for Items 3-14 of this Form T-1 because the obligor is
not in default as provided under Item 13.
Item 15. Foreign Trustee. Not applicable.
Item 16. List of Exhibits. List below all exhibits filed as a part of this
Statement of Eligibility. Norwest Bank incorporates
by reference into this Form T-1 the exhibits
attached hereto.
Exhibit 1. a. A copy of the Articles of Association of the
trustee now in effect.*
Exhibit 2. a. A copy of the certificate of authority of the
trustee to commence business issued June 28, 1872,
by the Comptroller of the Currency to The
Northwestern National Bank of Minneapolis.*
b. A copy of the certificate of the Comptroller of the
Currency dated January 2, 1934, approving the
consolidation of The Northwestern National Bank of
Minneapolis and The Minnesota Loan and Trust
Company of Minneapolis, with the surviving entity
being titled Northwestern National Bank and Trust
Company of Minneapolis.*
c. A copy of the certificate of the Acting Comptroller
of the Currency dated January 12, 1943, as to
change of corporate title of Northwestern National
Bank and Trust Company of Minneapolis to
Northwestern National Bank of Minneapolis.*
<PAGE>
d. A copy of the letter dated May 12, 1983 from the Regional
Counsel, Comptroller of the Currency, acknowledging
receipt of notice of name change effective May 1, 1983
from Northwestern National Bank of Minneapolis to Norwest
Bank Minneapolis, National Association.*
e. A copy of the letter dated January 4, 1988 from the
Administrator of National Banks for the Comptroller of the
Currency certifying approval of consolidation and merger
effective January 1, 1988 of Norwest Bank Minneapolis,
National Association with various other banks under the
title of "Norwest Bank Minnesota, National Association."*
Exhibit 3. A copy of the authorization of the trustee to exercise
corporate trust powers issued January 2, 1934, by the Federal
Reserve Board.*
Exhibit 4. Copy of By-laws of the trustee as now in effect.*
Exhibit 5. Not applicable.
Exhibit 6. The consent of the trustee required by Section 321(b) of the
Act.
Exhibit 7. A copy of the latest report of condition of the trustee
published pursuant to law or the requirements of its
supervising or examining authority.**
Exhibit 8. Not applicable.
Exhibit 9. Not applicable.
* Incorporated by reference to exhibit number 25 filed with registration
statement number 33-66026.
** Incorporated by reference to exhibit number 7 filed with registration
statement number 333-7575.
<PAGE>
LETTER OF TRANSMITTAL
TO TENDER FOR EXCHANGE
10 5/8% SENIOR SUBORDINATED NOTES DUE 2007
OF
AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC.
AMCRAFT BUILDING PRODUCTS CO., INC.
MULE-HIDE PRODUCTS CO., INC.
PURSUANT TO THE PROSPECTUS DATED , 1997
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 1997 UNLESS EXTENDED.
To: Norwest Bank Minnesota, National Association, The Exchange Agent
By Registered or Certified Mail:
Norwest Bank Minnesota, National Association
P.O. Box 1517
Minneapolis, Minnesota 55480-1517
Attn: Corporate Trust Operations
By Overnight Courier:
Norwest Bank Minnesota, National Association
Norwest Center
6th and Marquette Avenue
Minneapolis, Minnesota 55479-0113
Attn: Corporate Trust Operations
By Hand:
Norwest Bank Minnesota, National Association
Northstar East, 12th Floor
608 Second Avenue South
Minneapolis, Minnesota 55479-0113
Attn: Corporate Trust Operations
By Facsimile:
(612) 667-4927
Attn: Corporate Trust Operations
Confirm by telephone: (612) 667-9764
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF THIS INSTRUMENT VIA A FACSIMILE NUMBER OTHER THAN THE ONE
LISTED ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
The undersigned acknowledges receipt of the Prospectus, dated , 1997
(the "Prospectus") of American Builders & Contractors Supply Co., Inc.,
Amcraft Building Products Co., Inc. and Mule-Hide Products Co., Inc.
(collectively, the "Company") (the "Letter of Transmittal"), which together
describe the Company's offer (the "Exchange Offer") to exchange $1,000
principal amount of its 10 5/8 Senior Subordinated Notes due 2007, Series B
(the "Exchange Notes"), which
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have been registered under the Securities Act of 1933, as amended (the
"Securities Act"), pursuant to a Registration Statement, for each $1,000
principal amount of its outstanding 10 5/8% Senior Subordinated Notes due 2007
(the "Notes"), of which $100,000,000 principal amount is outstanding. 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 shall mean the latest date and time to which the Exchange
Offer is extended. The term "Holder" with respect to the Exchange Offer means
any person in whose name Notes are registered on the books of the Company or
any other person who has obtained a properly completed bond power from the
registered holder. Capitalized terms used but not defined herein have the
respective meanings set forth in the Prospectus.
This Letter of Transmittal is to be used by holders of Notes if (i)
certificates representing the Notes are to be physically delivered to the
Exchange Agent herewith, (ii) tender of the Notes is to be made by book entry
transfer to the Exchange Agent's account at The Depository Trust Company (the
"Book-Entry Transfer Facility") pursuant to the procedures set forth in the
Prospectus under the caption "The Exchange Offer--Procedures for Tendering" by
any financial institution that is a participant in the Book-Entry Transfer
Facility and whose name appears on a security position listing as the owner of
Notes (such participants acting on behalf of holders, are referred to herein,
together with such holders, as "Authorized Holders") or (iii) tender of the
Notes is to be made according to the guaranteed delivery procedures described
in the Prospectus under the caption "The Exchange Offer--Guaranteed Delivery
Procedures." See Instruction 2. Delivery of documents to the Book-Entry
Transfer Facility does not constitute delivery to the Exchange Agent.
The undersigned has completed, executed and delivered this Letter of
Transmittal to indicate the action the undersigned desires to take with respect
to the Exchange Offer. Holders who wish to tender their Notes must complete
this letter in its entirety.
[_]CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE
TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY TRANSFER
FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution: _____________________________________________
Account Number: ____________________________________________________________
Transaction Code Number: ___________________________________________________
Principal Amount of Tendered Notes: ________________________________________
If Holders desire to tender Notes pursuant to the Exchange Offer and (i) time
will not permit this Letter of Transmittal, certificates representing Notes or
other required document to reach the Exchange Agent prior to the Expiration
Date, or (ii) the procedures for book-entry transfer cannot be completed prior
to the Expiration Date, such Holders may effect a tender of such Notes in
accordance with the guaranteed delivery procedures set forth in the Prospectus
under the caption "The Exchange Offer--Guaranteed Delivery Procedures." See
Instruction 2 below.
[_]CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY DELIVERED TO THE EXCHANGE AGENT AND COMPLETE THE
FOLLOWING (SEE INSTRUCTION 2):
Name of Registered or Acting Holder(s): ____________________________________
Window Ticket No. (if any): ________________________________________________
Date of Execution of Notice of Guaranteed Delivery: ________________________
Name of Eligible Institution
that Guaranteed Delivery: __________________________________________________
If Delivered by Book-Entry Transfer,
the Account Number: ________________________________________________________
Transaction Code Number: ___________________________________________________
2
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[_]CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
PLEASE NOTE: THE COMPANY HAS AGREED THAT, FOR A PERIOD OF 180 DAYS AFTER
THE EXPIRATION DATE, IT WILL MAKE COPIES OF THE PROSPECTUS AVAILABLE TO ANY
PARTICIPATING BROKER-DEALER FOR USE IN CONNECTION WITH RESALES OF THE
EXCHANGE NOTES; PROVIDED, HOWEVER, THAT THE COMPANY HAS NO OBLIGATION TO
AMEND OR SUPPLEMENT THE PROSPECTUS UNLESS IT HAS RECEIVED WRITTEN NOTICE
FROM A PARTICIPATING BROKER-DEALER OF ITS PROSPECTUS DELIVERY REQUIREMENTS
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, WITHIN FIFTEEN
BUSINESS DAYS FOLLOWING CONSUMMATION OF THE EXCHANGE OFFER.
Name: ______________________________________________________________________
Address: ___________________________________________________________________
Attention: _________________________________________________________________
List below the Notes to which this Letter of Transmittal relates. If the
space provided below is inadequate, the certificate numbers and principal
amount of Notes should be listed on a separate signed schedule affixed hereto.
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING THE BOXES
BOX 1
DESCRIPTION OF 10 5/8% SENIOR SUBORDINATED NOTES DUE 2007*
- --------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF AGGREGATE PRINCIPAL
REGISTERED HOLDER(S) CERTIFICATE PRINCIPAL AMOUNT
(PLEASE FILL IN, IF BLANK) NUMBER(S) AMOUNT TENDERED (MUST
REPRESENTED BE
BY AN INTEGRAL
CERTIFICATE(S) MULTIPLE
OF $1,000)**
- --------------------------------------------------------------------------------
---------------------------------------------
---------------------------------------------
---------------------------------------------
---------------------------------------------
---------------------------------------------
TOTAL
- --------------------------------------------------------------------------------
* Need not be completed by Holders tendering by book-entry transfer.
** Unless indicated in the column labeled "Principal Amount Tendered," any
tendering Holder of 10 5/8% Senior Subordinated Notes due 2007 will be
deemed to have tendered the entire aggregate principal amount represented
by the column labeled "Aggregate Principal Amount Represented by
Certificate(s)." If the space provided above is inadequate, list the
certificate numbers and principal amounts on a separate signed schedule
and affix the list to this Letter of Transmittal.
The minimum permitted tender is $1,000 in principal amount of 10 5/8%
Senior Subordinated Notes due 2007. All other tenders must be in integral
multiples of $1,000.
3
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BOX 2 BOX 3
SPECIAL REGISTRATION SPECIAL REGISTRATION
INSTRUCTIONS INSTRUCTIONS
(SEE INSTRUCTIONS 4, 5 AND 6) (SEE INSTRUCTIONS 4, 5 AND 6)
To be completed ONLY if To be completed ONLY if
certificates for Notes in a certificates for Notes in a
principal amount not tendered, or principal amount not tendered, or
Exchange Notes issued in exchange Exchange Notes issued in exchange
for Notes accepted for exchange, for Notes accepted for exchange,
are to be issued in the name of are to be sent to someone other
someone other than the undersigned. than the undersigned, or to the
undersigned at an address other
than that shown above.
Issue certificate(s) to:
Name _______________________________ Deliver certificate(s) to:
(Please Print)
Name _______________________________
Address ____________________________ (Please Print)
------------------------------------
(Include Zip Code) Address ____________________________
------------------------------------ ------------------------------------
(Tax Indemnification or Social (Include Zip Code)
Security Number) ------------------------------------
(Tax Indemnification or Social
Security Number)
BOX 4
BROKER-DEALER STATUS
[_]Check this box if the Beneficial Owner of the Notes is a Participating
Broker-Dealer and such Participating Broker-Dealer acquired the Notes for
its own account as a result of market-making activities or other trading
activities. IF THIS BOX IS CHECKED, PLEASE SEND A COPY OF THIS LETTER OF
TRANSMITTAL TO KENDRA A. STORY, CHIEF FINANCIAL OFFICER OF THE COMPANY,
VIA FACSIMILE: (608) 362-2717. THE TENDER OF NOTES VIA AGENT'S MESSAGE
WILL NOT CONSTITUTE NOTICE TO THE COMPANY OF A HOLDER'S STATUS AS A
PARTICIPATING BROKER-DEALER. PARTICIPATING BROKER-DEALERS DESIRING TO
PROVIDE SUCH NOTICE MUST STILL DO SO IN WRITING WITHIN FIFTEEN BUSINESS
DAYS FOLLOWING THE CONSUMMATION OF THE EXCHANGE OFFER.
4
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NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Subject to the terms and conditions of the Exchange Offer, the undersigned
hereby tenders to American Builders & Contractors Supply Co., Inc., Amcraft
Building Products Co., Inc. and Mule-Hide Products Co., Inc. (collectively, the
"Company"), the principal amount of Notes indicated above.
Subject to and effective upon the acceptance for exchange of the principal
amount of Notes tendered in accordance with this Letter of Transmittal, the
undersigned sells, assigns and transfers to, or upon the order of, the Company
all right, title and interest in and to the Notes tendered hereby. The
undersigned hereby irrevocably constitutes and appoints the Exchange Agent its
agent and attorney-in-fact (with full knowledge that the Exchange Agent also
acts as the agent of the Company) with respect to the tendered Notes with the
full power of substitution to (i) present such Notes and all evidences of
transfer and authenticity to, or transfer ownership of, such Notes on the
account books maintained by the Book-Entry Transfer Facility to, or upon, the
order of, the Company, (ii) deliver certificates for such Notes to the Company
and deliver all accompanying evidences of transfer and authenticity to, or upon
the order of, the Company and (iii) present such Notes for transfer on the
books of the Company and receive all benefits and otherwise exercise all rights
of beneficial ownership of such Notes, all in accordance with the terms of the
Exchange Offer.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Notes tendered
hereby and that the Company will acquire good, valid and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances
and not subject to any adverse claims, when the same are acquired by the
Company. The undersigned hereby further represents that any Exchange Notes
acquired in exchange for Notes tendered hereby will have been acquired in the
ordinary course of business of the person receiving such Exchange Notes,
whether or not such person is the undersigned, that neither the undersigned nor
any other such person has any arrangement or understanding with any person to
participate in the distribution of such Exchange Notes and that neither the
undersigned nor any such other person is an "affiliate," as defined in Rule 405
under the Securities Act of 1933, as amended, of the Company. In addition, the
undersigned and any such person acknowledge that (a) any person participating
in the Exchange Offer for the purpose of distributing the Exchange Notes must,
in the absence of an exemption therefrom, comply with the registration and
prospectus delivery requirements of the Securities Act in connection with a
secondary resale of the Exchange Notes and cannot rely on the position of the
Staff of the Securities and Exchange Commission enunciated in no-action letters
and (b) failure to comply with such requirements in such instance could result
in the undersigned or such person incurring liability under the Securities Act
for which the undersigned or such person is not indemnified by the Company. The
undersigned will, upon request, execute and deliver any additional documents
deemed by the Exchange Agent or the Company to be necessary or desirable to
complete the assignment, transfer and purchase of the Notes tendered hereby. If
the undersigned is not a broker-dealer, the undersigned represents that it is
not engaged in and does not intend to engage in, a distribution of Exchange
Notes. If the undersigned 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 acknowledges that it
will deliver a Prospectus in connection with any resale of such Exchange Notes,
however, by so acknowledging and by delivering a Prospectus, the undersigned
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act. Unless otherwise notified in accordance with the
instructions set forth herein in Box 3 under "Broker-Dealer Status," the
Company will assume that the undersigned is not a Participating Broker-Dealer.
For purposes of the Exchange Offer, the Company shall be deemed to have
accepted validly tendered Notes when, as and if the Company has given oral or
written notice thereof to the Exchange Agent.
If any Notes tendered herewith are not accepted for exchange pursuant to the
Exchange Offer for any reason, certificates for any such unaccepted Notes will
be returned, without expense, to the undersigned at the address shown below or
to a different address as may be indicated herein in Box 3 under "Special
Delivery Instructions" as promptly as practicable after the Expiration Date.
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death, incapacity or dissolution of the
undersigned, and every obligation of the undersigned under this Letter of
Transmittal shall be binding upon the undersigned's heirs, personal
representative, successors and assigns.
5
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The undersigned understands that tenders of Notes pursuant to the procedures
described under the caption "The Exchange Offer--Procedures for Tendering" in
the Prospectus and in the instructions hereto will constitute a binding
agreement between the undersigned and the Company upon the terms and subject
to the conditions of the Exchange Offer, subject only to withdrawal of such
tenders on the terms set forth in the Prospectus under the caption "The
Exchange Offer--Withdrawal of Tenders."
Unless otherwise indicated in Box 2 under "Special Registration
Instructions," please issue the certificates (or electronic transfers)
representing the Exchange Notes issued in exchange for the Notes accepted for
exchange and any certificates (or electronic transfers) for Notes not tendered
or not exchanged, in the name(s) of the undersigned. Similarly, unless
otherwise indicated in Box 3 under "Special Delivery Instructions," please
send the certificates, if any, representing the Exchange Notes issued in
exchange for the Notes accepted for exchange and any certificates for Notes
not tendered or not exchanged (and accompanying documents, as appropriate) to
the undersigned at the address shown below in the undersigned's signature(s).
In the event that both "Special Registration Instructions" and "Special
Delivery Instructions" are completed, please issue the certificates
representing the Exchange Notes issued in exchange for the Notes accepted for
exchange in the name(s) of, and return any certificates for Notes not tendered
or not exchanged to, the person(s) so indicated. The undersigned understands
that the Company has no obligation pursuant to the "Special Registration
Instructions" and "Special Delivery Instructions" to transfer any Notes from
the name of the registered Holder(s) thereof if the Company does not accept
for exchange any of the Notes so tendered.
Holders who wish to tender their Notes and (i) whose Notes are not
immediately available or (ii) who cannot deliver the Notes, this Letter of
Transmittal or any other documents required hereby to the Exchange Agent prior
to the Expiration Date, may tender their Notes according to the guaranteed
delivery procedures set forth in the Prospectus under the caption "The
Exchange Offer--Guaranteed Delivery Procedures." See Instruction 2 regarding
the completion of this Letter of Transmittal printed below.
The below lines must be signed by the registered holder(s) exactly as their
name(s) appear(s) on the Notes or by a participant in the Book-Entry Transfer
Facility, exactly as such participant's name appears on a security position
listing as the owner of the Notes, or by person(s) authorized to become
registered holder(s) by a properly completed bond power from the registered
holder(s), a copy of which must be transmitted with this Letter of
Transmittal. If Notes to which this Letter of Transmittal relate are held of
record by two or more joint holders, then all such holders must sign this
Letter of Transmittal.
PLEASE SIGN HERE WHETHER OR NOT
NOTES ARE BEING PHYSICALLY TENDERED HEREBY
x
- ----------------------------------------------------------- -------------------
Date
x
- ----------------------------------------------------------- -------------------
Date
Area Code and Telephone Number: ___________________________
6
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If signature is by a trustee, executor, administrator, guardian, attorney-in-
fact, officer of a corporation or other person acting in a fiduciary or
representative capacity, then such person must (i) set forth his or her full
title below and (ii) submit evidence satisfactory to the Company of such
person's authority so to act. See Instruction 5 regarding the completion of
this Letter of Transmittal printed below.
Name(s): _______________________________________________________________________
(Please Print)
Capacity: ______________________________________________________________________
Address: _______________________________________________________________________
(Include Zip Code)
- --------------------------------------------------------------------------------
MEDALLION SIGNATURE GUARANTEE
(If required by Instruction 5)
Certain Signatures must be Guaranteed by an Eligible Institution
Signature(s) Guaranteed by an Eligible Institution: ____________________________
(Authorized Signature)
- --------------------------------------------------------------------------------
(Title)
- --------------------------------------------------------------------------------
(Name of Firm)
- --------------------------------------------------------------------------------
(Address, Include Zip Code)
- --------------------------------------------------------------------------------
(Area Code and Telephone Number)
Dated: _________________________________________________________________________
7
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES FOR NOTES OR BOOK-
ENTRY CONFIRMATIONS. Certificates representing the tendered Notes (or a
confirmation of book-entry transfer into the Exchange Agent's account with the
Book-Entry Transfer Facility for tendered Notes transferred electronically), as
well as a properly completed and duly executed copy of this Letter of
Transmittal (or facsimile thereof), or (in the case of a book-entry transfer)
an Agent's Message (as defined below) in lieu of this Letter of Transmittal, a
Substitute Form W-9 (or facsimile thereof) and any other documents required by
this Letter of Transmittal must be received by the Exchange Agent at its
address set forth herein prior to the Expiration Date. The tender of Notes via
Agent's Message will not constitute notice to the Company of a holder's status
as a Participating Broker-Dealer. Participating Broker-Dealers desiring to
provide such notice must still do so in writing within fifteen business days
following the consummation of the Exchange Offer. The method of delivery of
certificates for Notes and all other required documents is at the election and
sole risk of the tendering holder and delivery will be deemed made only when
actually received by the Exchange Agent. If delivery is by mail, registered
mail with return receipt requested, properly insured, is recommended. As an
alternative to delivery by mail, the holder may wish to use an overnight or
hand delivery service. In all cases, sufficient time should be allowed to
assure timely delivery. Neither the Company nor the Exchange Agent is under an
obligation to notify any tendering holder of the Company's acceptance of
tendered Notes prior to the completion of the Exchange Offer. The term "Agent's
Message" means a message, transmitted by the Book-Entry Transfer Facility to
and received by the Exchange Agent and forming a part of a book-entry
confirmation, which states that the Book-Entry Transfer Facility has received
an express acknowledgment from the tendering participant, which acknowledgement
states that such participant has received and agrees to be bound by the terms
of this Letter of Transmittal and that the Company may enforce the terms of
this Letter of Transmittal against such participant.
2. GUARANTEED DELIVERY PROCEDURES. Holders who wish to tender their Notes but
whose Notes are not immediately available and who cannot deliver their
certificates for Notes (or comply with the procedures for book-entry transfer
prior to the Expiration Date), the Letter of Transmittal (or Agent's Message)
and any other documents required by the Letter of Transmittal to the Exchange
Agent prior to the Expiration Date must tender their Notes according to the
guaranteed delivery procedures set forth below. Pursuant to such procedures:
(i) such tender must be made by or through a firm which is a member of a
registered national securities exchange or of the National Association of
Securities Dealers, Inc., or a commercial bank or trust company having an
office or correspondent in the United States (an "Eligible Institution");
(ii) prior to the Expiration Date, the Exchange Agent must have received
from the holder and the Eligible Institution a properly completed and duly
executed Notice of Guaranteed Delivery (by facsimile transmission, mail, or
hand delivery) setting forth the name and address of the holder, the
certificate number or numbers of the tendered Notes, and the principal
amount of tendered Notes and stating that the tender is being made thereby
and guaranteeing that, within five New York Stock Exchange trading days
after the Expiration Date, the Letter of Transmittal (or facsimile thereof)
or Agent's Message, together with the tendered Notes (or a confirmation of
book-entry transfer into the Exchange Agent's account with the Book-Entry
Transfer Facility for Notes transferred electronically) and any other
required documents will be deposited by the Eligible Institution with the
Exchange Agent; and
(iii) such properly completed and executed Letter of Transmittal (or
Agent's Message) and certificates representing the tendered Notes in proper
form for transfer (or a confirmation of book-entry transfer into the
Exchange Agent's account with the Book-Entry Transfer Facility for Notes
transferred electronically) must be received by the Exchange Agent within
three New York Stock Exchange trading days after the Expiration Date.
Any holder who wishes to tender Notes pursuant to the guaranteed delivery
procedures described above must ensure that the Exchange Agent receives the
Notice of Guaranteed Delivery relating to such Notes prior to the Expiration
Date. Failure to complete the guaranteed delivery procedures outlined above
will not, of itself, affect the validity or effect a revocation of any Letter
of Transmittal form properly completed and executed by a Holder who attempted
to use the guaranteed delivery person.
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3. TENDER BY HOLDER. Only a holder of Notes may tender such Notes in the
Exchange Offer. Any beneficial owner of Notes who is not the registered holder
and who wishes to tender should arrange with such holder to execute and deliver
this Letter of Transmittal on such owner's behalf or must, prior to completing
and executing this Letter of Transmittal and delivering such Notes, either make
appropriate arrangements to register ownership of the Notes in such owner's
name or obtain a properly completed bond power from the registered holder.
4. PARTIAL TENDERS. Tenders of Notes will be accepted only in integral
multiples of $1,000 in principal amount. If less than the entire principal
amount of Notes is tendered, the tendering holder should fill in the principal
amount tendered in the column labeled "Aggregate Principal Amount Tendered" of
the box entitled "Description of Notes" (Box 1) above. The entire principal
amount of Notes delivered to the Exchange Agent will be deemed to have been
tendered unless otherwise indicated. If the entire principal amount of Notes is
not tendered, Notes for the principal amount of Notes not tendered and Exchange
Notes exchanged for any Notes tendered will be sent to the holder at his or her
registered address (or transferred to the account of the Book-Entry Facility
designated above), unless a different address (or account) is provided in the
appropriate box on this Letter of Transmittal, as soon as practicable following
the Expiration Date.
5. SIGNATURES ON THE LETTER OF TRANSMITTAL; BOND POWERS AND ENDORSEMENTS;
MEDALLION GUARANTEE OF SIGNATURES. If this Letter of Transmittal is signed by
the registered holder(s) of the Notes tendered herewith, the signatures must
correspond with the name(s) as written on the face of the tendered Notes
without alteration, enlargement, or any change whatsoever. If this Letter of
Transmittal is signed by a participant in the Book-Entry Transfer Facility, the
signature must correspond with the name as it appears on the security position
listing as the owner of the Notes.
If any of the tendered Notes are owned of record by two or more joint owners,
all such owners must sign this Letter of Transmittal. If any tendered Notes are
held in different names on several Notes, it will be necessary to complete,
sign, and submit as many separate copies of the Letter of Transmittal documents
as there are names in which tendered Notes are held.
If this Letter of Transmittal is signed by the registered holder or Acting
Holder, and Exchange Notes are to be issued and any untendered or unaccepted
principal amount of Notes are to be reissued or returned to the registered
holder or Acting Holder, then, the registered holder or Acting Holder need not
and should not endorse any tendered Notes nor provide a separate bond power. In
any other case (including if this Letter of Transmittal is not signed by the
Acting Holder), the registered holder or Acting Holder must either properly
endorse the Notes tendered or transmit a properly completed separate bond power
with this Letter of Transmittal (in either case, executed exactly as the
name(s) of the registered holder(s) appear(s) on such Notes, and, with respect
to a participant in the Book-Entry Transfer Facility whose name appears on a
security position listing as the owner of Notes, exactly as the name(s) of the
participant(s) appear(s) on such security position listings), with the
signature(s) on the endorsement or bond power guaranteed by an Eligible
Institution unless such certificates or bond powers are signed by an Eligible
Institution.
If this Letter of Transmittal or any 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 this Letter of
Transmittal.
No medallion signature guarantee is required if (i) this Letter of
Transmittal is signed by the registered holder(s) of the Notes tendered
herewith (or by a participant in the Book-Entry Transfer Facility whose name
appears on a security position listing as the owner of the Tendered Notes) and
the issuance of Exchange Notes (and any Notes not tendered or not accepted) are
to be issued directly to such registered holder(s) (or, if signed by a
participant in the Book-Entry Transfer Facility, any Exchange Notes or Notes
not tendered or not accepted are to be deposited to such participant's account
at such Book-Entry Transfer Facility) and neither the "Special Delivery
Instructions" (Box 3) nor the "Special Registration Instructions" (Box 2) has
been completed, or (ii) such Notes are tendered for the account of an Eligible
Institution. In all other cases, all signatures on this Letter of Transmittal
must be guaranteed by an Eligible Institution.
6. SPECIAL REGISTRATION AND DELIVERY INSTRUCTIONS. Tendering holders should
indicate, in the applicable box, the name and address (or account at the Book-
Entry Transfer Facility) in which the Exchange Notes and/or substitute Notes
for principal amounts not tendered or not accepted for exchange are to be sent
(or deposited), if different from the name and
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address or account of the person signing this Letter of Transmittal. In the
case of issuance in a different name, the employer identification number or
social security number of the person named must also be indicated and the
indicated and the tendering holders should complete the applicable box.
If no such instructions are given, the Exchange Notes (and any Notes not
tendered or not accepted) will be issued in the name of and sent to the Acting
Holder of the Notes or deposited at such Acting Holders' account at the Book-
Entry Transfer Facility.
7. TRANSFER TAXES. The Company will pay all transfer taxes, if any,
applicable to the sale and transfer of Notes to it or its order pursuant to the
Exchange Offer. If, however, a transfer tax is imposed for any reason other
than the transfer and sale of Notes to the Company or its order pursuant to the
Exchange Offer, then the amount of any such transfer taxes (whether imposed on
the registered holder or on any other person) will be payable by the tendering
holder. If satisfactory evidence of payment of such taxes or exemption from
taxes therefrom is not submitted with this Letter of Transmittal, the amount of
transfer taxes will be billed directly to such tendering holder.
Except as provided in this Instruction 7, it will not be necessary for
transfer tax stamps to be affixed to the Notes listed in this Letter of
Transmittal.
8. TAX IDENTIFICATION NUMBER. Federal income tax law required that a holder
of any Notes which are accepted for exchange must provide the Company (as
payor) with its correct taxpayer identification number ("TIN"), which, in the
case of a holder who is an individual, is his or her social security number. If
the Company is not provided with the correct TIN, the Holder may be subject to
a $50 penalty imposed by Internal Revenue Service. (If withholding results in
an over-payment of taxes, a refund may be obtained.) Certain holders
(including, among other, all corporations and certain foreign individuals) are
not subject to these backup withholding and reporting requirements. See the
enclosed "Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9" for additional instructions.
To prevent backup withholding, each tendering holder must provide such
holder's correct TIN by completing the Substitute Form W-9 set forth herein,
certifying that the TIN provided is correct (or that such holder is awaiting a
TIN), and that (i) the holder has not been notified by the Internal Revenue
Service that such holder is subject to backup withholding as a result of
failure to report a interest or dividends or (ii) the Internal Revenue Service
has notified the holder that such holder is no longer subject to backup
withholding. If the Notes are registered in more than one name or are not in
the name of the actual owner, see the enclosed "Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9" for information on which
TIN to report.
The Company reserves the right in its sole discretion to take whatever steps
are necessary to comply with the Company's obligation regarding backup
withholding.
9. VALIDITY OF TENDERS. All questions as to the validity, form, eligibility
(including time of receipt), and acceptance of tendered Notes will be
determined by the Company, in its sole discretion, which determination will be
final and binding. The Company reserves the right to reject any and all Notes
not validly tendered or any Notes, the Company's acceptance of which would, in
the opinion of the Company or its counsel, be unlawful. The Company also
reserves the right to waive any conditions of the Exchange Offer or defects or
irregularities in tenders of Notes as to any ineligibility of any holder who
seeks to tender Notes in the Exchange Offer. The interpretation of the terms
and conditions of the Exchange Offer (includes this Letter of Transmittal and
the instructions hereto) by the Company shall be final and binding on all
parties. Unless waived, any defects or irregularities in connection with
tenders of Notes must be cured within such time as the Company shall determine.
The Company will use reasonable efforts to give notification of defects or
irregularities with respect to tenders of Notes, but shall not incur any
liability for failure to give such notification.
10. WAIVER OF CONDITIONS. The Company reserves the absolute right to amend,
waive, or modify specified conditions in the Exchange Offer in the case of any
tendered Notes.
11. NO CONDITIONAL TENDER. No alternative, conditional, irregular, or
contingent tender of Notes on transmittal of this Letter of Transmittal will be
accepted.
10
<PAGE>
12. MUTILATED, LOST, STOLEN, OR DESTROYED NOTES. Any tendering holder whose
Notes have been mutilated, lost, stolen, or destroyed should contact the
Exchange Agent at the address indicated above for further instruction.
13. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests for
assistance and requests for additional copies of the Prospectus may be
directed to the Exchange Agent at the address specified in the Prospectus.
Holders may also contact their broker, dealer, commercial bank, trust company,
or other nominee for assistance concerning the Exchange Offer.
14. ACCEPTANCE OF TENDERED NOTES AND ISSUANCE OF EXCHANGE NOTES; RETURN OF
NOTES. Subject to the terms and conditions of the Exchange Offer, the Company
will accept for exchange all validly tendered Notes as soon as practicable
after the Expiration Date and will issue Exchange Notes therefor as soon as
practicable thereafter. For purposes of the Exchange Offer, the Company shall
be deemed to have accepted tendered Notes when, as and if the Company has
given written and oral notice thereof to the Exchange Agent. If any tendered
Notes are not exchanged pursuant to the Exchange Offer for any reason, such
unexchanged Notes will be returned, without expense, to the undersigned at the
address shown above (or credited to the undersigned's account at the Book-
Entry Transfer Facility designated above) or at a different address as may be
indicated under "Special Delivery Instructions."
15. WITHDRAWAL. Tenders may be withdrawn only pursuit to the limited
withdrawal rights set forth in the Prospectus under the caption "The Exchange
Offer--Withdrawal of Tenders."
PAYOR'S NAME: AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC., AMCRAFT
BUILDING PRODUCTS CO., INC. AND MULE-HIDE PRODUCTS CO., INC.
- -------------------------------------------------------------------------------
Name (if joint names, list first and circle the name of
the person or entity whose number you enter in Part I
below. See instructions if your name has changed.)
-------------------------------------------------------------
Address
-------------------------------------------------------------
SUBSTITUTE City, State and ZIP Code
FORM W-9
DEPARTMENT OF -------------------------------------------------------------
THE TREASURY
INTERNAL List account number(s) here (optional)
REVENUE SERVICE
-------------------------------------------------------------
PAYER'S REQUEST
FOR Part 1--PLEASE PROVIDE YOUR Social Security Number
TAXPAYER TAXPAYER IDENTIFICATION or TIN
IDENTIFICATION NUMBER ("TIN") IN THE BOX AT
NUMBER (TIN) RIGHT AND CERTIFY BY SIGNING
AND DATING BELOW
-------------------------------------------------------------
Part 2-Check the box if you are NOT subject to backup
withholding under the provisions of section 3408(a)(1)(C)
of the Internal Revenue Code because (1) you have not
been notified that you are subject to backup withholding
as a result of failure to report all interest of
dividends or (2) the Internal Revenue Service has
notified you that you are no longer subject to backup
withholding. [_]
-------------------------------------------------------------
CERTIFICATION--UNDER THE PENALTIES OF
PERJURY, I CERTIFY THAT THE
INFORMATION PROVIDED ON THIS FORM IS Part 3--
TRUE, CORRECT AND COMPLETE.
SIGNATURE - DATE - Awaiting
TIN - [_]
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE EXCHANGE
OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF
TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL
DETAILS.
11
<PAGE>
NOTICE OF GUARANTEED DELIVERY
WITH RESPECT TO
AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC.
AMCRAFT BUILDING PRODUCTS CO., INC.
MULE-HIDE PRODUCTS CO., INC.
10 5/8% SENIOR SUBORDINATED NOTES DUE 2007
This form must be used by a holder of 10 5/8% Senior Subordinated Notes due
2007 (the "Notes") of American Builders & Contractors Supply Co., Inc.,
Amcraft Building Products Co., Inc. and Mule-Hide Products Co., Inc.
(collectively, the "Company"), who wishes to tender Notes to the Exchange
Agent pursuant to the guaranteed delivery procedures described in "The
Exchange Offer--Guaranteed Delivery Procedures" of the Prospectus, dated
(the "Prospectus"), and in Instruction 2 to the related Letter
of Transmittal. Any holder who wishes to tender Notes pursuant to such
guaranteed delivery procedures must ensure that the Exchange Agent receives
this Notice of Guaranteed Delivery prior to the Expiration Date of the
Exchange Offer. Capitalized terms not defined herein have the meanings
ascribed to them in the Prospectus or the Letter of Transmittal.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, UNLESS EXTENDED (THE "EXPIRATION DATE").
To: Norwest Bank Minnesota, National Association
(the "Exchange Agent")
By Registered or Certified Mail:
Norwest Bank Minnesota, National Association
P.O. Box 1517
Minneapolis, Minnesota 55480-1517
Attn: Corporate Trust Operations
By Overnight Courier:
Norwest Bank Minnesota, National Association
Norwest Center
6th and Marquette Avenue
Minneapolis, Minnesota 55479-0113
Attn: Corporate Trust Operations
By Hand:
Norwest Bank Minnesota, National Association
Northstar East, 12th Floor
608 Second Avenue South
Minneapolis, Minnesota 55479-0113
Attn: Corporate Trust Operations
By Facsimile:
(612) 667-4927
Attn: Corporate Trust Operations
Confirm by telephone: (612) 667-9764
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS, OR TRANSMISSION VIA FACSIMILE,
OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on the
Letter of Transmittal is required to be guaranteed by an "Eligible
Institution" under the instructions thereto, such signature guarantee must
appear in the applicable space provided in the signature box on the Letter of
Transmittal.
<PAGE>
LADIES AND GENTLEMEN:
The undersigned hereby tenders to the Company, upon the terms and subject to
the conditions set forth in the Prospectus and the related Letter of
Transmittal, receipt of which is hereby acknowledged, the principal amount of
Notes set forth below pursuant to the guaranteed delivery procedures set forth
in the Prospectus and in Instruction 2 of the Letter of Transmittal.
The undersigned hereby tenders the Notes listed below:
<TABLE>
<CAPTION>
<S> <C>
CERTIFICATE NUMBER(S) (IF KNOWN) OF NOTES OR ACCOUNT AGGREGATE PRINCIPAL AGGREGATE PRINCIPAL
NUMBER AT THE BOOK-ENTRY FACILITY AMOUNT REPRESENTED AMOUNT TENDERED
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
</TABLE>
PLEASE SIGN AND COMPLETE
Signatures of Registered Holder(s) Date: , 1997
or Address: ____________________________
Authorized Signatory: _______________ _____________________________________
_____________________________________ Area Code and Telephone No.: ________
_____________________________________
Name of Registered Holder(s): _______
_____________________________________
_____________________________________
This Notice of Guaranteed Delivery must be signed by the Holder(s) exactly
as their name(s) appear on certificates for Notes or on a security position
listing as the owner of Notes, or by person(s) authorized to become
Holder(s) by endorsements and documents transmitted with this Notice of
Guaranteed Delivery. If signature is by a trustee, executor, administrator,
guardian, attorney-in-fact, officer or other person acting in a fiduciary or
representative capacity, such person must provide the following information.
Please print name(s) and address(es)
Name(s): ____________________________________________________________________
-----------------------------------------------------------------------------
Capacity: ___________________________________________________________________
Address(es): ________________________________________________________________
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
2
<PAGE>
GUARANTEE
(Not to be used for signature guarantee)
The undersigned, a firm which is a member of a registered national
securities exchange or of the National Association of Securities Dealers,
Inc., or is a commercial bank or trust company having an office or
correspondent in the United States, or is otherwise an "eligible guarantor
institution" within the meaning of Rule 17Ad-15 under the Securities
Exchange Act of 1934, as amended, guarantees deposit with the Exchange Agent
of the Letter of Transmittal (or facsimile thereof), together with the Notes
tendered hereby in proper form for transfer (or confirmation of the book-
entry transfer of such Notes into the Exchange Agent's account at Book-Entry
Transfer Facility described in the Prospectus under the caption "The
Exchange Offer-- Guaranteed Delivery Procedures" and in the Letter of
Transmittal) and any other required documents, all by 5:00 p.m., New York
City time, on the third New York Stock Exchange trading day following the
Expiration Date.
Name of Firm: _______________________ -------------------------------------
Address: ____________________________ Authorized Signature
-------------------------------------
Area Code and Telephone No.: ________ Name: _______________________________
Title: ______________________________
Date:_________________________ , 1997
DO NOT SEND NOTES WITH THIS FORM. ACTUAL SURRENDER OF NOTES MUST BE MADE
PURSUANT TO, AND BE ACCOMPANIED BY, AN EXECUTED LETTER OF TRANSMITTAL.
3
<PAGE>
INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY
1. Delivery of this Notice of Guaranteed Delivery. A properly completed and
duly executed copy of this Notice of Guaranteed Delivery and any other
documents required by this Notice of Guaranteed Delivery must be received by
the Exchange Agent at its address set forth herein prior to the Expiration
Date. The method of delivery of this Notice of Guaranteed Delivery and any
other required documents to the Exchange Agent is at the election and sole risk
of the holder, and the delivery will be deemed made only when actually received
by the Exchange Agent. If delivery is by mail, registered mail with return
receipt requested, properly insured, is recommended. As an alternative to
delivery by mail, the holders may wish to consider using an overnight or hand
delivery service. In all cases, sufficient time should be allowed to assure
timely delivery. For a description of the guaranteed delivery procedures, see
Instruction 2 of the Letter of Transmittal.
2. Signatures on this Notice of Guaranteed Delivery. If this Notice of
Guaranteed Delivery is signed by the registered holder(s) of the Notes referred
to herein, the signature must correspond with the name(s) written on the face
of the Notes without alteration, enlargement, or any change whatsoever. If this
Notice of Guaranteed Delivery is signed by a participant of the Book-Entry
Transfer Facility whose name appears on a security position listing as the
owner of Notes, the signature must correspond with the name shown on the
security position listing as the owner of the Notes.
If this Notice of Guaranteed Delivery is signed by a person other than the
registered holder(s) of any Notes listed or a participant of the Book-Entry
Transfer Facility, this Notice of Guaranteed Delivery must be accompanied by
appropriate bond powers, signed as the name of the registered holder(s) appears
on the Notes or signed as the name of the participant shown on the Book-Entry
Transfer Facility's security position listing.
If this Notice of Guaranteed Delivery is signed by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation, or other
person acting in a fiduciary or representative capacity, such person should so
indicate when signing and submit with the Letter of Transmittal evidence
satisfactory to the Company of such person's authority to so act.
3. Requests for Assistance or Additional Copies. Questions and requests for
assistance and requests for additional copies of the Prospectus may be directed
to the Exchange Agent at the address specified in the Prospectus. Holders may
also contact their broker, dealer, commercial bank, trust company, or other
nominee for assistance concerning the Exchange Offer.
4
<PAGE>
INSTRUCTIONS TO REGISTERED HOLDER AND/OR
BOOK-ENTRY TRANSFER FACILITY PARTICIPANT FROM BENEFICIAL OWNER
OF
AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC.
AMCRAFT BUILDING PRODUCTS CO., INC.
MULE-HIDE PRODUCTS CO., INC.
10 5/8% SENIOR SUBORDINATED NOTES DUE 2007
To Registered Holder and/or Participant of the Book-Entry Transfer Facility:
The undersigned hereby acknowledges receipt of the Prospectus, dated
(the "Prospectus"), of American Builders & Contractors Supply
Co., Inc., Amcraft Building Products Co., Inc. and Mule-Hide Products Co.,
Inc. (collectively, the "Company"), and the accompanying Letter of Transmittal
(the "Letter of Transmittal"), that together constitute the Company's offer
(the "Exchange Offer"). Capitalized terms used but not defined herein have the
meanings ascribed to them in the Prospectus.
This will instruct you, the registered holder and/or book-entry transfer
facility participant, as to the action to be taken by you relating to the
Exchange Offer with respect to the 10 5/8% Senior Subordinated Notes due 2007
(the "Notes") held by you for the account of the undersigned.
The aggregate face amount of the Notes held by you for the account of the
undersigned is (FILL IN AMOUNT):
$ of the 10 5/8% Senior Subordinated Notes due 2007.
With respect to the Exchange Offer, the undersigned hereby instructs you
(CHECK APPROPRIATE BOX):
[_]TO TENDER the following Notes held by you for the account of the
undersigned (INSERT PRINCIPAL AMOUNT OF NOTES TO BE TENDERED, IF ANY): $
[_]NOT TO TENDER any Notes held by you for the account of the undersigned.
If the undersigned instruct you to tender the Notes held by you for the
account of the undersigned, it is understood that you are authorized (a) to
make, on behalf of the undersigned (and the undersigned, by its signature
below, hereby makes to you), the representation and warranties contained in
the Letter of Transmittal that are to be made with respect to the undersigned
as a beneficial owner, including but not limited to the representations that
(i) the undersigned's principal residence is in the state of (fill in state)
, (ii) the undersigned is acquiring the Exchange Notes in the
ordinary course of business of the undersigned, (iii) the undersigned is not
participating, does not intend to participate, and has no arrangement or
understanding with any person to participate in the distribution of the
Exchange Notes, (iv) the undersigned acknowledges that any person
participating in the Exchange Offer for the purpose of distributing the
Exchange Notes must comply with the registration and prospects delivery
requirements of the Securities Act of 1933, as amended (the "Act"), in
connection with a secondary resale transaction of the Exchange Notes acquired
by such person and cannot rely on the position of the Staff of the Securities
and Exchange Commission set forth in no-action letters that are discussed in
the section of the Prospectus entitled "The Exchange Offer--Resales of the
Exchange Notes," and (v) the undersigned is not an "affiliate," as defined in
Rule 405 under the Act, of the Company; (b) to agree, on behalf of the
undersigned, as set forth in the Letter of Transmittal; and (c) to take such
other action as necessary under the Prospectus or the Letter of Transmittal to
effect the valid tender of such Notes.
[_]Check this box if the Beneficial Owner of the Notes is a Participating
Broker-Dealer and such Participating Broker-Dealer acquired the Notes
for its own account as a result of market-making activities or other
trading activities. IF THIS BOX IS CHECKED, PLEASE SEND A COPY OF THESE
INSTRUCTIONS TO KENDRA A. STORY, CHIEF FINANCIAL OFFICER OF THE
COMPANY, VIA FACSIMILE: (608) 362-2717.
<PAGE>
SIGN HERE
Name of beneficial owner(s): ______________________________________________
Signature(s): _____________________________________________________________
Name (please print): ______________________________________________________
Address: __________________________________________________________________
---------------------------------------------------------------------
---------------------------------------------------------------------
Telephone number: _________________________________________________________
Taxpayer Identification or Social Security Number: ________________________
Date: _____________________________________________________________________
