<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 30, 1997
REGISTRATION STATEMENT NO. 333-33053
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
MEADOWCRAFT, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 2500 63-0891252
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
1401 MEADOWCRAFT ROAD
BIRMINGHAM, ALABAMA 35215
(205) 853-2220
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
---------------------
WILLIAM J. MCCANNA
PRESIDENT
MEADOWCRAFT, INC.
1401 MEADOWCRAFT ROAD
BIRMINGHAM, ALABAMA 35215
(205) 853-2220
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
---------------------
COPIES OF COMMUNICATIONS TO:
<TABLE>
<S> <C>
JOHN H. COOPER, ESQ. JAMES C. SCOVILLE, ESQ.
SIROTE & PERMUTT, P.C. DEBEVOISE & PLIMPTON
2222 ARLINGTON AVENUE SOUTH 875 THIRD AVENUE
BIRMINGHAM, ALABAMA 35255-5727 NEW YORK, NEW YORK 10022
TEL: (205) 930-5108 TEL: (212) 909-6000
FAX: (205) 930-5301 FAX: (212) 909-6836
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after the Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [ ]
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
================================================================================
<PAGE> 2
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 SEPTEMBER 30, 1997
PROSPECTUS
3,125,000 SHARES
MEADOWCRAFT, INC.
COMMON STOCK
------------------------------
All of the shares of Common Stock, par value $.01 per share (the "Common
Stock"), offered hereby (the "Offering") are being sold by Meadowcraft, Inc.
(the "Company" or "Meadowcraft"). Prior to the Offering, there has been no
public market for the Common Stock of the Company. It is currently anticipated
that the initial public offering price will be between $13.00 and $15.00 per
share. See "Underwriting" for a discussion of the factors to be considered in
determining the initial public offering price. The Company has applied for the
Common Stock to be listed on the New York Stock Exchange under the symbol "MWI".
At the Company's request, up to 357,143 shares (the "Directed Shares") will
be reserved for sale at the initial public offering price and offered to
directors, officers or employees of Meadowcraft and other persons associated
with Meadowcraft's directors or officers, including up to 290,643 shares for
sale to the existing stockholders and members of their immediate family. See
"Underwriting." Upon consummation of the Offering, the existing stockholders of
the Company and members of their immediate family will own approximately 85.2%
of the outstanding Common Stock (approximately 83.1% if the Underwriters'
over-allotment option is exercised in full). See "Principal Stockholders."
SEE "RISK FACTORS" BEGINNING ON PAGE 7 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
===================================================================================================================
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share............................ $ $ $
- -------------------------------------------------------------------------------------------------------------------
Total(3)............................. $ $ $
===================================================================================================================
</TABLE>
(1) See "Underwriting" for indemnification arrangements with the Underwriters.
(2) Before deducting expenses payable by the Company, estimated at $425,000. The
Underwriters have agreed to reimburse the Company $100,000 for certain
expenses incurred in connection with the Offering.
(3) The Company has granted the Underwriters a 30-day option to purchase up to
468,750 shares of Common Stock solely to cover over-allotments, if any. If
such option is exercised in full, the total Price to Public, Underwriting
Discount and Proceeds to Company will be $ , $ and
$ , respectively. See "Underwriting."
------------------------------
The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as and if issued to and accepted by them and subject to
certain conditions, including the approval of certain legal matters by counsel.
The Underwriters reserve the right to withdraw, cancel or modify such offer and
to reject any orders in whole or in part. It is expected that delivery of the
shares of Common Stock will be made on or about , 1997.
------------------------------
A.G. EDWARDS & SONS, INC.
THE DATE OF THIS PROSPECTUS IS , 1997
<PAGE> 3
[LOGO]
[PHOTO TO BE FILED BY AMENDMENT]
"Meadowcraft," "Plantation Patterns," "Arlington House," "Salterini,"
"Interior Images by Salterini," and "Home Collection from Plantation Patterns"
are trademarks of Meadowcraft, Inc.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK. SUCH
TRANSACTIONS MAY INCLUDE THE PURCHASE OF COMMON STOCK TO COVER SYNDICATE SHORT
POSITIONS, OR FOR THE PURPOSE OF MAINTAINING THE PRICE OF THE COMMON STOCK, AND
THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."
2
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and the financial statements
and related notes thereto appearing elsewhere in this Prospectus. Unless
otherwise indicated, (i) all information in this Prospectus assumes that the
Underwriters' over-allotment option is not exercised; (ii) all references to the
assumed initial public offering price of $14.00 per share of Common Stock are
based on the midpoint of the range set forth on the cover page of this
Prospectus; (iii) references to "Fiscal 1991," "Fiscal 1992," "Fiscal 1993,"
"Fiscal 1994," "Fiscal 1995," and "Fiscal 1996" refer to the Company's fiscal
year ending on the Sunday closest to April 30 of that year, references to
"Fiscal 1997" refer to the Company's fiscal year ended May 3, 1997, and
references to "Fiscal 1998" refer to the Company's fiscal year ending July 31,
1998; and (iv) "Seasonal" year refers to the 12-month period ending July 31 of
the particular year and represents the fiscal year to which the Company plans to
change upon consummation of the Offering.
THE COMPANY
Meadowcraft is one of the leading domestic producers of casual outdoor
furniture and is the largest manufacturer of outdoor wrought iron furniture in
the United States. The Company designs, manufactures and distributes a variety
of wrought iron consumer products, including outdoor and indoor furniture and
accessories, outdoor cushions and umbrellas, and garden products, which it
markets to mass merchandisers and specialty stores primarily in the United
States. The Company believes that it has established a reputation as an
innovator in the design, manufacturing, distribution and marketing of moderately
priced, quality wrought iron furniture. Meadowcraft's net sales have grown from
$50.5 million in Fiscal 1991 to $141.9 million in Fiscal 1997, while pro forma
net income has increased from $1.2 million to $15.9 million over the same
period. For Seasonal 1997, Meadowcraft had net sales of $145.1 million and pro
forma net income of $16.7 million.
The Company offers consumers a wide variety of products across different
price points in three markets: the outdoor mass market under the Plantation
Patterns brand name; the outdoor specialty market under the Meadowcraft,
Arlington House and Salterini brand names; and the indoor specialty and mass
markets under the Interior Images by Salterini and Home Collection from
Plantation Patterns brand names, respectively. For Fiscal 1997, outdoor mass
market sales accounted for approximately 75.1% of the Company's gross sales,
while outdoor specialty market sales represented approximately 16.9% of gross
sales and indoor specialty and mass market sales constituted approximately 4.2%
of gross sales.
Meadowcraft attributes its strong market position in the casual outdoor
furniture industry to the following competitive strengths:
- Meadowcraft's ability to produce quality wrought iron furniture and
accessories with traditional, "high-end" design features, broad
consumer appeal, and high value-to-price characteristics.
- Meadowcraft's ability to ship large quantities of products on a
reliable and timely basis due to its advanced manufacturing and
distribution facilities and computerized inventory tracking and
shipping systems.
- Meadowcraft's excellent relationships with its mass market retail
customers and its extensive network of specialty retail customers.
- Meadowcraft's senior managers with their extensive experience in
the casual furniture and other manufacturing industries.
3
<PAGE> 5
Meadowcraft's objective is to continue to grow sales, earnings and market
share of the casual outdoor and indoor furniture markets by:
- Introducing new products and expanding offerings in its existing
product lines with the same quality and customer value as its
existing products.
- Increasing its manufacturing and product distribution capacity to
meet the demands of new and existing customers in new geographic
regions, as well as to enhance the Company's ability to provide
products to all customers on a timely and reliable basis.
- Heightening brand name awareness and increasing consumer demand for
the Company's products through expanded product offerings and
national marketing and advertising campaigns, such as the Paul
Harvey national radio show.
The Company was incorporated under the laws of Delaware in 1985 as Sam
Blount Company, Inc. and changed its name to Meadowcraft, Inc. in July 1994. The
Company's principal executive and administrative offices are located at 1401
Meadowcraft Road, Birmingham, Alabama 35215, and the Company's telephone number
is (205) 853-2220.
OWNERSHIP
Upon consummation of the Offering, the existing stockholders of the Company
and members of their immediate family will own an aggregate of approximately
85.2% of the outstanding Common Stock (approximately 83.1% if the Underwriters'
over-allotment option is exercised in full), with Samuel R. Blount, Chairman of
the Board of Directors, and his immediate family owning an aggregate of
approximately 76.1% of the outstanding Common Stock (approximately 74.2% if the
Underwriters' over-allotment option is exercised in full). See "Principal
Stockholders."
THE OFFERING
Common Stock offered by the
Company............................. 3,125,000 shares
Common Stock to be outstanding after
the Offering(1)..................... 19,125,000 shares
Use of Proceeds..................... The Company will use the net proceeds
from the Offering to pay approximately
$32.7 million of the S Corporation
Distribution (as defined herein) to the
Company's existing stockholders, and
the balance will be used to finance
capital expenditures. See "Use of
Proceeds."
Proposed NYSE symbol................ MWI
- ---------------
(1) Excludes 1,000,000 shares of Common Stock reserved for issuance and not yet
issued under the Company's 1997 Stock Option Plan (the "Plan"). See
"Management -- 1997 Stock Option Plan."
RISK FACTORS
For a discussion of certain factors that should be considered in evaluating
an investment in the Common Stock, see "Risk Factors."
4
<PAGE> 6
SUMMARY HISTORICAL AND SEASONAL FINANCIAL DATA(1)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THIRTEEN WEEKS
FISCAL YEAR ENDED ENDED
-------------------------------------------------------------------------- ----------------------
APRIL 28, MAY 3, MAY 2, MAY 1, APRIL 30, APRIL 28, MAY 3, JULY 31, JULY 31,
1991 1992 1993 1994 1995 1996 1997 1996 1997
--------- ------- ------- ------- --------- --------- -------- ----------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net sales................... $50,523 $68,359 $73,062 $96,189 $120,767 $117,419 $141,945 $32,233 $35,368
Gross profit................ 13,111 17,519 17,191 25,384 32,180 29,570 43,630 7,963 9,436
Operating income............ 6,126 9,082 8,491 14,972 20,914 17,572 30,652 5,399 6,477
Income before pro forma
provision for income
taxes..................... 1,900 5,108 4,415 10,087 16,033 12,554 25,378 4,095 5,316
Pro forma net income(2)..... 1,206 3,244 2,790 6,415 9,962 7,869 15,939 2,572 3,338
Pro forma net income per
share(3).................. .96 .20
Pro forma weighted average
shares outstanding(3)..... 16,521 16,521
OTHER DATA:
Capital expenditures(4)..... $ 297 $ 1,508 $ 1,700 $ 7,615 $ 16,034 $ 18,676 $ 4,081 $ 1,628 $ 2,070
Depreciation and
amortization.............. 1,242 1,189 1,221 1,482 2,340 4,006 5,099 1,235 1,237
</TABLE>
<TABLE>
<CAPTION>
JULY 31, 1997
---------------------------------------
PRO FORMA
ACTUAL PRO FORMA(5) AS ADJUSTED(6)
------- ------------ --------------
(AUDITED) (UNAUDITED)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Total assets................................................ $71,072 $73,772 $81,365
Total debt.................................................. 28,168 28,168 28,168
Stockholders' equity........................................ 33,144 3,174 43,437
</TABLE>
<TABLE>
<CAPTION>
SEASONAL YEAR ENDED JULY 31,
----------------------------------------------------------------------
1991 1992 1993 1994 1995 1996 1997
------- ------- ------- ------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net sales.............................. $54,750 $67,144 $83,937 $99,155 $116,894 $126,926 $145,080
Gross profit........................... 14,960 17,105 20,394 27,909 29,139 32,930 45,103
Operating income....................... 7,858 7,683 10,910 18,047 17,715 20,642 31,730
Income before pro forma provision for
income taxes......................... 3,388 3,932 6,714 13,019 12,728 15,507 26,600
Pro forma net income(2)................ 2,151 2,497 4,243 8,280 7,915 9,725 16,705
OTHER DATA:
Capital expenditures(4)................ $ 596 $ 1,506 $ 1,735 $ 9,825 $ 19,049 $ 13,973 $ 4,523
Depreciation and amortization.......... 1,038 1,196 1,272 1,576 2,664 4,226 5,101
</TABLE>
- ---------------
5
<PAGE> 7
(1) The Company utilizes a 52/53 week fiscal year. In each of Fiscal 1991, 1992,
1993, 1994, 1995 and 1996, the fiscal year ended on the Sunday closest to
the last day of April. In Fiscal 1997, the Company changed its fiscal year
end to the Saturday closest to the last day of April. All fiscal and
seasonal years presented herein represent 52 weeks of operations, except for
Fiscal 1992 and Fiscal 1997 which include 53 weeks of operations. The
12-month period ended July 31 ("Seasonal Year") represents the Company's
natural, or seasonal, year which corresponds to the Company's annual
business cycle. However, due to certain regulations under the Internal
Revenue Code of 1986, as amended (the "Code"), relating to S corporation
elections, the Company's fiscal year was not permitted to match its Seasonal
Year. Upon consummation of the Offering, the Company will terminate its S
corporation election and change its fiscal year end to July 31 to coincide
with the Company's Seasonal Year. As a result, certain unaudited Seasonal
Year information is presented to aid investors in measuring and identifying
trends with respect to the Company's performance related to its Seasonal
Years.
(2) Pro forma net income is presented as if the Company had been a C corporation
for tax purposes for all periods presented. See Notes 2 and 7 of the
Company's audited financial statements and related notes thereto (the
"Financial Statements") included elsewhere in this Prospectus.
(3) The weighted average number of shares of Common Stock outstanding gives
effect to the estimated number of shares of Common Stock that would be
required to be sold, at an assumed initial public offering price of $14.00
per share, to pay the portion of the S Corporation Distribution to be paid
out of the net proceeds of the Offering in excess of Fiscal 1997 earnings.
See "Use of Proceeds."
(4) Capital expenditures include capital leases and capital expenditures
financed with debt.
(5) Reflects, as appropriate, (i) the approximately $32.7 million portion of the
S Corporation Distribution to be paid out of the net proceeds of the
Offering, which represents undistributed earnings from October 1, 1986
through May 3, 1997 that were previously taxed to the existing stockholders,
and (ii) the effect of recording net deferred tax assets which will result
from the termination of the Company's S corporation election, amounting to
approximately $2.7 million at July 31, 1997 (see Notes 2 and 7 of the
Financial Statements included elsewhere in this Prospectus). See "Use of
Proceeds."
(6) Represents pro forma balance sheet data as adjusted to reflect the issuance
and sale of 3,125,000 shares of Common Stock by the Company at an assumed
initial public offering price of $14.00 per share providing assumed net
proceeds of $40.3 million and the application of such proceeds to pay
approximately $32.7 million of the S Corporation Distribution. See "Use of
Proceeds."
6
<PAGE> 8
RISK FACTORS
In addition to the other information contained in this Prospectus,
prospective investors should consider the following factors in evaluating the
Company and its business before purchasing any of the shares of the Common Stock
offered hereby.
CUSTOMER CONCENTRATION
A substantial portion of the Company's sales is derived from a limited
number of customers. In Fiscal 1997, the Company's top five customers
represented approximately 62.6% of the Company's net sales. Wal-Mart Stores,
Inc. ("Wal-Mart") and Sam's Club, Inc. (each of which is a subsidiary of
Wal-Mart, Inc.) represented approximately 21.4% and 12.6%, respectively, of net
sales in Fiscal 1997. The Company has no long-term written contracts for the
purchase of products with its customers, but instead sells its products under
short-term purchase orders, which is consistent with general industry practice.
The loss of any significant customer or a substantial reduction in purchases by
any such customer would have a material adverse effect on the Company if the
Company were unable to replace such customer or purchases. In addition, changes
and consolidation in the retail industry could adversely affect one or more of
the Company's significant customers which, in turn, could materially adversely
affect the Company. See "Business -- Customers and Marketing."
SEASONALITY
The Company's sales in its quarter ended October are significantly lower
than its sales in other quarters due to the seasonal nature of the casual
outdoor furniture industry. The Company has historically experienced operating
losses in the quarter ended October of each year. During the months of August,
September and October, shipments of products to customers are relatively low due
to the completion of the mass market retail selling season and reduced demand
for outdoor casual furniture in the fall and winter months. At the same time,
the Company continues to manufacture products to build inventory to meet
customer orders and anticipated demand for the next selling season, incurring
operating and overhead costs without corresponding sales during the period. In
addition, the Company's sales are also subject to fluctuations on a quarterly
basis due to such factors as weather and customer ordering decisions. Trading
volume and prices for the Common Stock could be subject to wide fluctuations in
response to these variations in operating results. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Quarterly
Results and Seasonality."
CYCLICALITY
The Company's business is subject to cyclical fluctuations based on
economic conditions generally and conditions in the casual furniture industry,
including the effects of consumer behavior, preferences, and confidence; the
level of discretionary spending; housing activity; demographics; interest rates;
and credit availability. These factors not only affect the ultimate consumer,
but also impact mass and specialty retailers, the Company's primary customers.
Recessions or prolonged economic downturns could have a material adverse effect
on the Company's business, financial condition or results of operations.
COMPETITION
The casual furniture industry is highly competitive and includes a large
number of manufacturers, none of which dominate the market. The Company competes
against other domestic and foreign wrought iron furniture manufacturers as well
as manufacturers of aluminum, resin and plastic, wicker and rattan, and wood
casual furniture with respect to its outdoor products and traditional furniture
companies with respect to its indoor products. A number of the companies which
compete directly with the Company may have greater financial and other resources
than the Company. Management believes that competition in the casual furniture
industry is generally a function of timeliness of delivery, price, quality,
product design, product availability and customer service. While sales of
imported, foreign-produced wrought iron consumer products represent a small
percentage of total U.S. wrought iron furniture sales, such sales have increased
in recent years and could adversely affect the Company's sales. See
"Business -- Industry and Competition."
7
<PAGE> 9
MANAGEMENT OF GROWTH
As part of its planned expansion, the Company is constructing an
approximately 530,000 square foot distribution facility and office in
Birmingham, Alabama, and is expanding its Selma and Wadley, Alabama facilities
by approximately 70,000 and 20,000 square feet, respectively. In addition, the
Company is constructing an approximately 600,000 square foot manufacturing,
distribution and office facility in Arizona in Fiscal 1998, and has entered into
a definitive agreement for the purchase of an approximately 175,000 square foot
manufacturing facility in Sonora, Mexico. See "Business -- Properties." The
Company also plans to introduce new products, including a new line of tubular
steel furniture in Fiscal 1998, and further diversify its product offerings.
Although the Company has been successful in managing its recent growth and has
taken steps to ensure that its systems and controls are adequate to address its
current and anticipated needs, there can be no assurance that the Company's
systems and controls or staff will be adequate to sustain future growth. If the
Company is unable to manage expansion effectively, its business, results of
operations or financial condition could be materially adversely affected.
FLUCTUATIONS IN PRICE OF RAW MATERIALS
The principal raw materials used by the Company in manufacturing and
distributing its products are steel, fabrics, cardboard, paint and umbrella
frames. Although the Company purchases raw materials from a number of domestic
and foreign suppliers and believes that there are an adequate number of
alternative suppliers available, there can be no assurance that the cost of
these raw materials will not increase in the future or that the Company will
continue to have available necessary raw materials at reasonable prices. The
Company has annual contracts with many of its major suppliers. The Company
commits to purchase the raw materials that it estimates will be needed for the
ensuing year at fixed prices in order to attempt to control production costs and
has historically been able to build increased raw material costs into the prices
of its products. However, there can be no assurance that market and competitive
pressures will permit the Company to build these costs into the prices of its
products on a timely basis if raw material prices increase or that the Company
will be able to offset such raw material cost increases through cost reductions
and, therefore, enable it to maintain the level of profit margins for its
products. See "Business -- Raw Materials and Suppliers."
RISK OF BUSINESS INTERRUPTION
Any prolonged disruption at any of the Company's production facilities due
to labor difficulties, equipment failure, destruction of or material damage to
such facility, or other reasons, could have a material adverse effect on the
Company's business, financial condition or results of operations. Although the
Company maintains property and business interruption insurance to protect
against any such disruptions (other than for labor-related disruptions), there
can be no assurance that the proceeds from such insurance would be adequate to
compensate the Company for losses, including the loss of customers, incurred
during the period of any such disruption or thereafter. See
"Business -- Properties."
DEPENDENCE ON KEY PERSONNEL
The Company's growth has been dependent upon the skills and efforts of its
senior managers and many other key employees. Although the Company has been
successful in hiring qualified and experienced personnel, the loss of services
of any of these executive officers or other key personnel could have a material
adverse effect on the Company's business, financial condition or results of
operations. In addition, the Company's future growth and development will
require it to continue to attract and retain additional qualified personnel.
There can be no assurance that the Company will be able to attract and retain
personnel with the skills and experience necessary to successfully manage the
Company's business and operations. The Company has no employment agreements or
noncompete agreements with any of its employees. The Company has a key-man life
insurance policy on Mr. McCanna in the face amount of five million dollars. See
"Management."
8
<PAGE> 10
CONTROL BY EXISTING STOCKHOLDERS
At the Company's request, up to 357,143 shares (the "Directed Shares") will
be reserved for sale at the initial public offering price (less the underwriting
discount) and offered to directors, officers or employees of Meadowcraft and
other persons associated with Meadowcraft's directors or officers, including up
to 290,643 shares for sale to members of the immediate family of the existing
stockholders. See "Underwriting." Upon completion of the Offering, existing
stockholders of the Company and members of their immediate family will own an
aggregate of approximately 85.2% of the outstanding Common Stock (approximately
83.1% assuming that the Underwriters' over-allotment option is exercised in
full), with Samuel R. Blount, Chairman of the Board of Directors, and members of
his immediate family owning an aggregate of approximately 76.1% of the
outstanding Common Stock (74.2% assuming that the Underwriters' over-allotment
option is exercised in full). Mr. Blount will have effective control over the
Company through his ability to control the election of directors and all other
matters that require action by the Company's stockholders. Such control may have
the effect of preventing any change in control of the Company opposed by him,
which may have an adverse effect on the market price of the Common Stock. See
"Management -- Executive Officers, Directors and Director Nominees," "Principal
Stockholders" and "Description of Capital Stock."
GOVERNMENT REGULATIONS
The Company's operations must meet federal, state and local regulatory
standards in the areas of safety, health, labor and environmental pollution
controls. Historically, compliance with these standards has not had any material
adverse effect on the Company. If the Company fails to comply with such
regulations, the Company could be subject to liability ranging from monetary
damages to injunctive action, which could have an adverse effect on the
Company's business, financial condition or results of operations. Future changes
in such regulations could also have an adverse effect on the Company's business,
financial condition or results of operations. See "Business -- Regulatory
Matters."
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have outstanding
19,125,000 shares of Common Stock. Of these shares, the 3,125,000 shares
(3,593,750 shares if the Underwriters' over-allotment option is exercised in
full) of Common Stock sold in the Offering will be freely tradeable without
restriction or limitation under the Securities Act of 1933, as amended (the
"Securities Act"), except to the extent such shares are subject to the agreement
with the Underwriters described below, and except for any shares purchased by
"affiliates," as that term is defined under the Securities Act, of the Company.
The remaining 16,000,000 shares are "restricted securities" within the meaning
of Rule 144 under the Securities Act, and as such, may not be sold in the
absence of registration under the Securities Act or an exemption therefrom,
including the exemption under Rule 144. The restricted shares were issued and
sold by the Company in private transactions in reliance upon exemptions from
registration under the Securities Act. In addition, the Company has reserved
1,000,000 shares of Common Stock for issuance upon the exercise of options to be
granted under the 1997 Stock Option Plan (the "Plan"). In general, pursuant to
Rule 701 under the Securities Act, any employee, officer or director of the
Company who purchases his or her shares of Common Stock pursuant to the Plan is
entitled to rely on the resale provisions of Rule 701, which permit
non-affiliates to sell such shares without compliance with the public
information, holding period, volume limitation or notice provisions of Rule 144,
and permit affiliates to sell such shares without compliance with the holding
period provisions of Rule 144, in each case commencing 90 days after the date of
this Prospectus. As of the date of this Prospectus, no options have been granted
under the Plan, but the Board of Directors of the Company expects to grant
options under the Plan at the initial public offering price to certain key
employees and nonemployee directors immediately prior to consummation of this
Offering. See "Management -- 1997 Stock Option Plan" and "-- Compensation of
Directors." The Company, its existing stockholders, certain officers and its
directors have agreed not to issue, sell, offer or agree to sell, grant any
option (other than pursuant to the Plan) or other right for the sale of, or
otherwise dispose of, directly or indirectly, any shares of Common Stock (or any
securities convertible into, exercisable for, or exchangeable for Common Stock)
during a period of 270 days from the date of this Prospectus without the prior
written consent of A.G. Edwards & Sons, Inc.,
9
<PAGE> 11
with certain limited exceptions. After expiration of the 270-day period, the
Company and such stockholders, officers and directors may sell shares of Common
Stock without regard to such limitations, subject to the volume limitations, as
applicable, of Rule 144. The sale of a substantial number of shares of Common
Stock held by existing stockholders, or the perception that such sales could
occur, could adversely affect the market price of the Common Stock. See
"Principal Stockholders" and "Underwriting."
DILUTION
Purchasers of the shares of Common Stock offered hereby will experience
immediate and substantial dilution in the net tangible book value per share of
the Common Stock of $11.75 from the initial public offering price. See
"Dilution."
NO PRIOR MARKET FOR COMMON STOCK; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to the Offering, there has been no public market for the Common
Stock, and there can be no assurance that an active trading market will develop
or be sustained in the future or that the market price of the Common Stock will
not decline below the initial public offering price. The initial public offering
price of the Common Stock will be determined by negotiations between the Company
and the representatives of the Underwriters and may not be indicative of the
market price of the Common Stock after the Offering. See "Underwriting." From
time to time after the Offering, there may be significant volatility in the
market price for the Common Stock. Quarterly operating results of the Company;
changes in general conditions in the economy, the financial markets, or the
casual furniture industry; or other developments affecting the Company or its
competitors could cause the market price of the Common Stock to fluctuate
substantially. In addition, in recent years, the stock market has experienced
significant price and volume fluctuations. This volatility has affected the
market prices of securities issued by many companies for reasons unrelated to
their operating performance.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 3,125,000 shares of
Common Stock offered by the Company hereby are estimated to be $40.3 million
($46.4 million if the Underwriters' over-allotment option is exercised in full),
assuming an initial public offering price of $14.00 per share and after
deducting discounts and commissions and estimated Offering expenses.
The Company elected to be taxed as a corporation under subchapter S of the
Code ("S Corporation") beginning October 1, 1986, and, therefore, the income of
the Company is attributable to its existing stockholders for federal and certain
state tax purposes. Upon consummation of the Offering, the Company will
terminate its S Corporation election and will become subject to U.S. federal and
state income taxes at prevailing corporate rates. In connection with the
termination of the Company's S Corporation election, the Company will pay to its
existing stockholders a distribution (the "S Corporation Distribution"), which
will be declared, but not paid, prior to the Offering. The S Corporation
Distribution will be equal to the amount of the Company's undistributed earnings
from October 1, 1986 to May 3, 1997 which were previously taxed to its existing
stockholders plus the Company's S Corporation earnings attributable to the
period from May 4, 1997 to the date of termination of the S Corporation
election. It is not possible to predict the actual amount of the S Corporation
Distribution at this time, because the Company's S Corporation earnings for the
period from May 4, 1997 to the date of termination of the S Corporation election
will be based on a pro rata allocation of the Company's earnings for the
12-month period ending May 2, 1998 (based on the number of days in the period).
The Company will use approximately $32.7 million of the net proceeds of the
Offering to pay a portion of the S Corporation Distribution upon consummation of
the Offering, and, once the actual S Corporation Distribution is determined, the
Company expects to use cash on hand to fund the balance of the S Corporation
Distribution. Purchasers of shares of Common Stock in the Offering will not be
entitled to any portion of the S Corporation Distribution. The Company intends
to use the balance of the net proceeds to finance capital expenditures. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
10
<PAGE> 12
DIVIDEND POLICY
The Company made distributions to its stockholders of $5.1 million in
Fiscal 1995, $8.3 million in Fiscal 1996, $6.3 million in Fiscal 1997, and $11.5
million in the thirteen week period ended July 31, 1997 to pay their tax
liabilities resulting from the Company's status as an S Corporation. See "Use of
Proceeds" and the Financial Statements included elsewhere in this Prospectus.
Except as described under "Use of Proceeds," the Company currently intends to
retain its earnings following the Offering for use in the operation and
expansion of its business, and the Company currently does not anticipate
declaring or paying cash dividends for the foreseeable future. The payment of
cash dividends in the future will depend upon such factors as the Company's
earnings, capital requirements, financial condition, contractual restrictions
and other factors deemed relevant by the Board of Directors. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
DILUTION
The net tangible book value of the Company at July 31, 1997, was $32.7
million, or $2.05 per share of Common Stock. Net tangible book value per share
represents total tangible assets less total liabilities, divided by the number
of outstanding shares of Common Stock.
Dilution in net tangible book value per share represents the difference
between the amount per share paid by purchasers of the shares of Common Stock in
the Offering and the net tangible book value per share upon consummation of the
Offering. Net tangible book value, after giving effect to (i) the approximately
$32.7 million portion of the S Corporation Distribution to be paid out of the
net proceeds of the Offering and (ii) the approximately $2.7 million of pro
forma net deferred tax assets that will be recorded as a result of the
termination of the Company's S Corporation election, would be approximately $2.8
million or $.17 per share of Common Stock. After giving effect to the issuance
and sale by the Company of the 3,125,000 shares of Common Stock offered hereby
at an assumed initial public offering price of $14.00 per share (after deducting
underwriting discounts and estimated expenses of the Offering) and the
application of the estimated net proceeds therefrom, the net tangible book value
of the Company after the Offering would be $43.0 million, or $2.25 per share of
Common Stock. This represents an immediate increase in net tangible book value
of $.20 per share to the existing stockholders and an immediate dilution of
$11.75 per share to new investors. The following table illustrates this dilution
on a per share basis:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $ 14.00
Net tangible book value per share prior to the Offering... $ 2.05
Decrease in net tangible book value per share attributable
to approximately $32.7 million of the S Corporation
Distribution........................................... (2.04)
Increase in net tangible book value per share attributable
to pro forma net deferred tax assets................... .17
Increase in net tangible book value per share attributable
to net proceeds of the Offering........................ 2.07
Pro forma net tangible book value per share after the
Offering.................................................. 2.25
-------
Dilution in net tangible book value per share to new
investors................................................. $ 11.75
=======
</TABLE>
11
<PAGE> 13
The following table summarizes (i) the number and percentage of shares of
Common Stock purchased from the Company (assuming no exercise of the
Underwriters' over-allotment option), (ii) the total cash consideration paid for
the Common Stock, and (iii) the average price per share of Common Stock paid by
existing stockholders and by purchasers of the Common Stock offered hereby (at
an assumed initial public offering price of $14.00 per share):
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
----------------------- ------------------------ AVERAGE PRICE
NUMBER PERCENTAGE AMOUNT PERCENTAGE PER SHARE
---------- ---------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders......... 16,000,000 83.7% $ 500,000 1.1% $ .03
New investors................. 3,125,000 16.3 43,750,000 98.9 14.00
---------- ----- ----------- -----
Total............... 19,125,000 100.0% $44,250,000 100.0%
========== ===== =========== =====
</TABLE>
Each of the foregoing tables excludes 1,000,000 shares of Common Stock
reserved for issuance and not yet issued under the Plan. See "Management -- 1997
Stock Option Plan."
12
<PAGE> 14
CAPITALIZATION
The following table sets forth the capitalization of the Company as of July
31, 1997 (i) on an actual basis, (ii) on a pro forma basis after giving effect
to the payment of approximately $32.7 million of the S Corporation Distribution
and the recording of net deferred tax assets of approximately $2.7 million and
(iii) on a pro forma as adjusted basis after giving effect to the issuance and
sale of the 3,125,000 shares of Common Stock offered by the Company hereby,
based on an assumed initial public offering price of $14.00 per share, and the
application of the net proceeds therefrom as described in "Use of Proceeds" and
assuming no exercise of the Underwriters' over-allotment option. This table
should be read in conjunction with the Financial Statements included elsewhere
in this Prospectus.
<TABLE>
<CAPTION>
JULY 31, 1997
---------------------------------
PRO PRO FORMA AS
ACTUAL FORMA(1) ADJUSTED(2)
------- -------- ------------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
Long-term debt.............................................. $13,392 $13,392 $13,392
------- ------- -------
Stockholders' equity:
Common Stock, par value $.01 per share; 100,000,000 shares
authorized; 16,000,000 shares issued and outstanding,
actual and pro forma; 19,125,000 shares issued and
outstanding, as adjusted(3)............................ 160 160 191
Additional paid-in capital................................ 340 340 40,572
Retained earnings......................................... 32,644 2,674 2,674
------- ------- -------
Total stockholders' equity........................ 33,144 3,174 43,437
------- ------- -------
Total capitalization.............................. $46,536 $16,566 $56,829
======= ======= =======
</TABLE>
- ---------------
(1) Pro forma stockholders' equity reflects (i) the approximately $32.7 million
portion of the S Corporation Distribution to be paid out of the net proceeds
of the Offering, which represents undistributed earnings from October 1,
1986 through May 3, 1997 that were previously taxed directly to the existing
stockholders, and (ii) the effect of recording net deferred tax assets which
will result from the termination of the Company's S Corporation election,
amounting to approximately $2.7 million at July 31, 1997 (see Notes 2 and 7
of the Financial Statements included elsewhere in this Prospectus). The
actual net deferred tax assets will be adjusted to reflect the effect of
operations of the Company for the period from August 1, 1997 to the date of
termination of its S Corporation election. The actual amount of the S
Corporation Distribution will be equal to approximately $32.7 million plus
an additional amount based on the Company's S Corporation earnings
attributable to the 12-month period ending May 2, 1998. The Company expects
to use cash on hand to fund such additional amount. See "Use of Proceeds."
(2) Represents pro forma capitalization as adjusted to reflect the issuance and
sale of 3,125,000 shares of Common Stock by the Company at an assumed
initial public offering price of $14.00 per share providing assumed net
proceeds of $40.3 million and the application of such proceeds to pay
approximately $32.7 million of the S Corporation Distribution. See "Use of
Proceeds."
(3) Excludes 1,000,000 shares of Common Stock reserved for issuance and not yet
issued under the Plan. See "Management -- 1997 Stock Option Plan" and Note
11 to the Financial Statements included elsewhere in this Prospectus.
13
<PAGE> 15
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The selected statement of income data, other data and balance sheet data
for each of the five fiscal years in the period ended May 3, 1997 and the
thirteen week period ended July 31, 1997 set forth below have been derived from
the financial statements of the Company audited by Arthur Andersen LLP,
independent public accountants. The selected statements of income data, other
data and balance sheet data for each of the two fiscal years in the period ended
May 3, 1992 set forth below have been derived from the audited financial
statements of the Company. The data for the thirteen week period ended July 31,
1996 has been derived from unaudited financial statements of the Company. The
unaudited financial statements include all adjustments, consisting of normal
recurring adjustments, which the Company considers necessary for a fair
representation of its financial position and results of operations for this
period. The following data should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Company's Financial Statements included elsewhere in this Prospectus.
The selected statement of income data, other data and balance sheet data
set forth below with respect to the Company's Seasonal Years has been derived
from the Company's unaudited financial statements based on the twelve month
periods ending July 31, 1991 to 1997, which represent the Company's Seasonal
Year and correspond to its annual business cycle. Due to certain Code
regulations relating to S Corporation elections, the Company's fiscal year was
not permitted to match its Seasonal Year. Upon consummation of the Offering, the
Company will terminate its S Corporation election and change its fiscal year end
to July 31 to coincide with the Company's Seasonal Year. As a result, certain
unaudited Seasonal Year information is presented to aid investors in measuring
and identifying trends with respect to the Company's performance related to its
Seasonal Years. In the opinion of management, the unaudited financial statements
from which Seasonal Year data have been derived include all adjustments
(consisting of only normal recurring adjustments) necessary for a fair
presentation of the Seasonal Year information set forth below.
<TABLE>
<CAPTION>
THIRTEEN WEEKS
FISCAL YEAR ENDED(1) ENDED
-------------------------------------------------------------------------- ----------------------
APRIL 28, MAY 3, MAY 2, MAY 1, APRIL 30, APRIL 28, MAY 3, JULY 31, JULY 31,
1991 1992 1993 1994 1995 1996 1997 1996 1997
--------- ------- ------- ------- --------- --------- -------- ----------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net sales................... $50,523 $68,359 $73,062 $96,189 $120,767 $117,419 $141,945 $32,233 $35,368
Cost of sales............... 37,412 50,840 55,871 70,805 88,587 87,849 98,315 24,270 25,932
------- ------- ------- ------- -------- -------- -------- ------- -------
Gross profit................ 13,111 17,519 17,191 25,384 32,180 29,570 43,630 7,963 9,436
Selling expense............. 3,015 4,675 4,328 5,551 6,101 6,092 6,939 1,232 1,517
General and administrative
expense.................... 3,970 3,762 4,372 4,861 5,165 5,906 6,039 1,332 1,442
------- ------- ------- ------- -------- -------- -------- ------- -------
Operating income............ 6,126 9,082 8,491 14,972 20,914 17,572 30,652 5,399 6,477
Interest expense............ 4,226 3,974 4,076 4,885 4,881 5,018 5,274 1,304 1,161
------- ------- ------- ------- -------- -------- -------- ------- -------
Income before pro forma
provision for income
taxes...................... 1,900 5,108 4,415 10,087 16,033 12,554 25,378 4,095 5,316
Pro forma provision for
income taxes(2)............ 694 1,864 1,625 3,672 6,071 4,685 9,439 1,523 1,978
------- ------- ------- ------- -------- -------- -------- ------- -------
Pro forma net income(2)..... $ 1,206 $3,244 $2,790 $6,415 $ 9,962 $ 7,869 $ 15,939 $ 2,572 $ 3,338
======= ======= ======= ======= ======== ======== ======== ======= =======
Pro forma net income per
share(3)................... $ .96 $ .20
======== =======
Pro forma weighted average
shares outstanding(3) 16,521 16,521
======== =======
OTHER DATA:
Capital expenditures(4)..... $ 297 $1,508 $1,700 $7,615 $ 16,034 $ 18,676 $ 4,081 $ 1,628 $ 2,070
Depreciation and
amortization............... 1,242 1,189 1,221 1,482 2,340 4,006 5,099 1,235 1,237
</TABLE>
<TABLE>
<CAPTION>
APRIL 28, MAY 3, MAY 2, MAY 1, APRIL 30, APRIL 28, MAY 3, JULY 31,
1991 1992 1993 1994 1995 1996 1997 1996
--------- ------- ------- ------- --------- --------- -------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets......... $ 39,142 $46,353 $56,133 $79,921 $111,815 $126,479 $127,061 $68,360
Total debt........... 44,867 44,471 50,219 64,614 71,836 84,737 68,966 38,910
Stockholders' equity
(deficit)........... (14,559) (9,451) (5,036) 5,051 15,984 20,200 39,328 18,795
<CAPTION>
JULY 31, 1997
---------------------------------
PRO PRO FORMA AS
ACTUAL FORMA(5) ADJUSTED(6)
------- -------- ------------
(UNAUDITED)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Total assets......... $71,072 $73,772 $81,365
Total debt........... 28,168 28,168 28,168
Stockholders' equity
(deficit)........... 33,144 3,174 43,437
</TABLE>
14
<PAGE> 16
<TABLE>
<CAPTION>
SEASONAL YEAR ENDED JULY 31,(1)
----------------------------------------------------------------------
1991 1992 1993 1994 1995 1996 1997
------- ------- ------- ------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net sales................................................ $54,750 $67,144 $83,937 $99,155 $116,894 $126,926 $145,080
Cost of sales............................................ 39,790 50,039 63,543 71,246 87,755 93,996 99,977
------- ------- ------- ------- -------- -------- --------
Gross profit............................................. 14,960 17,105 20,394 27,909 29,139 32,930 45,103
Selling expense.......................................... 3,371 5,295 4,463 5,250 6,072 6,198 7,224
General and administrative expense....................... 3,731 4,127 5,021 4,612 5,352 6,090 6,149
------- ------- ------- ------- -------- -------- --------
Operating income......................................... 7,858 7,683 10,910 18,047 17,715 20,642 31,730
Interest expense......................................... 4,470 3,751 4,196 5,028 4,987 5,135 5,130
------- ------- ------- ------- -------- -------- --------
Income before pro forma provision for income taxes....... 3,388 3,932 6,714 13,019 12,728 15,507 26,600
Pro forma provision for income taxes(2).................. 1,237 1,435 2,471 4,739 4,813 5,782 9,895
------- ------- ------- ------- -------- -------- --------
Pro forma net income(2).................................. $ 2,151 $ 2,497 $ 4,243 $ 8,280 $ 7,915 $ 9,725 $ 16,705
======= ======= ======= ======= ======== ======== ========
OTHER DATA:
Capital expenditures(4).................................. $ 596 $ 1,506 $ 1,735 $ 9,825 $ 19,049 $ 13,973 $ 4,523
Depreciation and amortization............................ 1,038 1,196 1,272 1,576 2,664 4,226 5,101
</TABLE>
<TABLE>
<CAPTION>
JULY 31,
---------------------------------------------------------------------
1991 1992 1993 1994 1995 1996 1997
------- ------- ------- ------- -------- -------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets.............................................. $15,255 $16,410 $28,233 $37,706 $ 61,842 $ 68,360 $71,072
Total debt................................................ 25,907 21,338 25,275 26,626 40,384 38,909 28,168
Stockholders' equity (deficit)............................ (14,154) (10,221) (3,507) 5,497 11,126 18,795 33,144
</TABLE>
- ---------------
(1) The Company utilizes a 52/53 week fiscal year. In each of Fiscal 1991, 1992,
1993, 1994, 1995 and 1996, the fiscal year ended on the Sunday closest to
the last day of April. In Fiscal 1997, the Company changed its fiscal year
end to the Saturday closest to the last day of April. All fiscal years and
seasonal years presented herein represent 52 weeks of operations, except for
Fiscal 1992 and Fiscal 1997 which include 53 weeks of operations.
(2) Pro forma provision for income taxes and pro forma net income are presented
as if the Company were a C corporation for tax purposes for all periods
presented. See Notes 2 and 7 of the Financial Statements included elsewhere
in this Prospectus.
(3) The weighted average number of shares of Common Stock outstanding gives
effect to the estimated number of shares of Common Stock that would be
required to be sold, at an assumed initial public offering price of $14.00
per share, to pay the portion of the S Corporation Distribution to be paid
out of the net proceeds of the Offering in excess of Fiscal 1997 earnings.
See "Use of Proceeds."
(4) Capital expenditures include capital leases and capital expenditures
financed with debt.
(5) Reflects, as appropriate, (i) the approximately $32.7 million portion of the
S Corporation Distribution to be paid out of the net proceeds of the
Offering, which represents undistributed earnings from October 1, 1986
through May 3, 1997 that were previously taxed to the existing stockholders,
and (ii) the effect of recording net deferred tax assets which will result
from the termination of the Company's S Corporation election, amounting to
approximately $2.7 million at July 31, 1997 (see Notes 2 and 7 of the
Financial Statements included elsewhere in this Prospectus). See "Use of
Proceeds."
(6) Represents pro forma balance sheet data as adjusted to reflect the issuance
and sale of 3,125,000 shares of Common Stock by the Company at an assumed
initial public offering price of $14.00 per share providing assumed net
proceeds of $40.3 million and the application of such proceeds to pay
approximately $32.7 million of the S Corporation Distribution. See "Use of
Proceeds."
15
<PAGE> 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Meadowcraft is one of the leading domestic producers of casual outdoor
furniture and is the largest manufacturer of outdoor wrought iron furniture in
the United States. The Company sells its products in three markets: the outdoor
mass market under the Plantation Patterns brand name; the outdoor specialty
market under the Meadowcraft, Arlington House and Salterini brand names; and the
indoor specialty and mass markets under the Interior Images by Salterini and
Home Collection from Plantation Patterns brand names, respectively. During
Fiscal 1997, the Company introduced a line of wrought iron garden products to
both the specialty and mass markets. The following is a summary of the
percentage of gross sales by market category for each of the last three fiscal
years and for the thirteen weeks ended July 31, 1996 and 1997:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED THIRTEEN WEEKS ENDED
-------------------------------- ----------------------
APRIL 30, APRIL 28, MAY 3, JULY 31, JULY 31,
1995 1996 1997 1996 1997
--------- --------- ------ -------- --------
<S> <C> <C> <C> <C> <C>
Outdoor mass...................... 75.7% 75.7% 75.1% 69.6% 69.4%
Outdoor specialty................. 21.3 18.7 16.9 23.6 19.5
Indoor specialty and mass......... 2.6 4.6 4.2 4.4 5.0
Garden products................... 0.0 0.0 2.3 0.0 3.9
Other............................. 0.4 1.0 1.5 2.4 2.2
----- ----- ----- ----- -----
Total gross sales....... 100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== =====
</TABLE>
In recent years, the Company has supported its sales growth by investing in
additional manufacturing and distribution capacity. During the last three fiscal
years, Meadowcraft has invested $38.8 million in expanding and enhancing its
facilities. In 1994 and 1995, Meadowcraft increased distribution capacity by
approximately 1,300,000 square feet with the completion of the Birmingham
(Carson Road) and Wadley distribution facilities. In 1996, Meadowcraft completed
the construction of a new production facility in Birmingham and a manufacturing
and distribution facility in Selma. At present, the Company is constructing a
new 530,000 square foot distribution center and office building in Birmingham
(Carson Road) as well as expanding the Selma and Wadley plants, all of which are
expected to be completed by December 1997. Additionally, the Company intends
during Fiscal 1998 to establish manufacturing and distribution facilities in
Mexico and Arizona to serve customers in the western United States.
The Company was on a 52/53 week year with the fiscal year ending on the
Sunday closest to the last day of April. During Fiscal 1997, the Company changed
its reporting period to a fiscal year ending on the Saturday closest to the last
day of April. As a result of this change, Fiscal 1997 includes 53 weeks of
operations versus 52 weeks in each of Fiscal 1996 and 1995.
Net sales as reflected throughout Management's Discussion and Analysis of
Financial Condition and Results of Operations reflect gross sales less returns,
allowances and discounts. The Company generally does not allow returns unless
products are damaged, in which case they would be covered under its warranty
policy. The Company offers up to a 36-month limited warranty on certain
products. As such, estimated warranty costs are accrued at the time products are
sold based on a historical percentage of warranty costs to gross sales. The
charge for such accrual is reflected as returns and allowances, which reduces
gross sales to net sales. Historically, warranty costs as a percentage of gross
sales have not been material. See Note 2 of the Financial Statements included
elsewhere in this Prospectus.
16
<PAGE> 18
RESULTS OF OPERATIONS
The following table sets forth certain information relating to the
Company's operations expressed as a percentage of the Company's net sales for
the respective periods:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED THIRTEEN WEEKS ENDED
-------------------------------- ----------------------
APRIL 30, APRIL 28, MAY 3, JULY 31, JULY 31,
1995 1996 1997 1996 1997
--------- --------- ------ -------- --------
<S> <C> <C> <C> <C> <C>
Net sales......................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales..................... 73.4 74.8 69.3 75.3 73.3
----- ----- ----- ----- -----
Gross profit...................... 26.6 25.2 30.7 24.7 26.7
Selling expense................... 5.1 5.2 4.8 3.8 4.3
General and administrative
expense......................... 4.2 5.0 4.3 4.1 4.1
----- ----- ----- ----- -----
Operating income.................. 17.3 15.0 21.6 16.8 18.3
Interest expense.................. 4.1 4.3 3.7 4.1 3.3
----- ----- ----- ----- -----
Income before pro forma provision
for income taxes................ 13.2 10.7 17.9 12.7 15.0
Pro forma provision for income
taxes........................... 5.0 4.0 6.7 4.7 5.6
----- ----- ----- ----- -----
Pro forma net income.............. 8.2% 6.7% 11.2% 8.0% 9.4%
===== ===== ===== ===== =====
</TABLE>
THIRTEEN WEEKS ENDED JULY 31, 1997 COMPARED TO THIRTEEN WEEKS ENDED JULY 31,
1996
Net Sales
Net sales increased $3.1 million, or 9.7%, to $35.4 million for the
thirteen weeks ended July 31, 1997 from $32.2 million in the comparable period
in the prior year. The increase was due primarily to an approximately $2.6
million, or 12.9%, increase in gross sales in the Plantation Patterns product
line resulting from increased end of season sales.
Gross Profit
Gross margin is defined as gross profit as a percentage of net sales. Gross
profit for the thirteen weeks ended July 31, 1997 increased $1.4 million, or
17.5%, to $9.4 million from $8.0 million in the comparable period in the prior
year. Gross margin improved to 26.7% of net sales for the thirteen weeks ended
July 31, 1997 from 24.7% of net sales for the comparable period in the prior
year. The improvement was due to production efficiencies achieved in conjunction
with the extended production period required as a result of increased sales.
Selling Expense
Selling expense as a percentage of net sales increased to 4.3% for the
thirteen weeks ended July 31, 1997 from 3.8% for the comparable period in the
prior year due primarily to the national radio advertising program implemented
in 1997 with Paul Harvey. Selling expense, which includes commissions,
advertising and promotion expense, increased $0.3 million, or 23.1%, to $1.5
million for the thirteen weeks ended July 31, 1997 from $1.2 million for the
comparable period in the prior year.
General and Administrative
General and administrative expense as a percentage of net sales remained
flat at 4.1%. General and administrative expense, which includes corporate
salaries, employee benefits and professional fees, increased $0.1 million, or
8.3%, to $1.4 million for the thirteen weeks ended July 31, 1997 from $1.3
million for the comparable period in the prior year primarily due to increases
in management incentives, which were due to the enhanced financial performance
for the quarter.
17
<PAGE> 19
Interest Expense
Interest expense as a percentage of net sales declined to 3.3% for the
thirteen weeks ended July 31, 1997 from 4.1% for the comparable period in the
prior year. Interest expense, which includes factor fees, decreased by $0.1
million, or 11.0%, to $1.2 million for the thirteen weeks ended July 31, 1997
from $1.3 million in the comparable period in the prior year due to lower debt
levels, which were the result of the Company's financial performance.
Pro Forma Provision for Income Taxes
Since the Company has elected to be taxed as an S Corporation, no provision
for income taxes has been provided in the Company's historical financial
statements. The pro forma provision for income taxes gives effect to the
application of income taxes that would have been reported had the Company been a
C Corporation subject to federal and state income taxes. The pro forma income
tax provision for the thirteen week's ended July 31, 1997 was $2.0 million
versus $1.5 million for the comparable period in the prior year. The effective
tax rate in both 1997 and 1996 was 37.2%.
FISCAL 1997 COMPARED TO FISCAL 1996
Net Sales
Net sales in Fiscal 1997 increased $24.5 million, or 20.9%, to $141.9
million from $117.4 million in Fiscal 1996. This increase was due primarily to a
$17.7 million, or 18.8%, increase in gross sales of the Company's Plantation
Patterns product line. In addition, other product lines contributed to the
growth in sales. The Home Collection from Plantation Patterns indoor furniture
line increased to $3.3 million in Fiscal 1997, from $1.0 million in gross sales
in Fiscal 1996 while gross sales from the introduction of the garden products
line were $3.3 million in Fiscal 1997.
Gross Profit
Gross margin improved to 30.7% in Fiscal 1997 from 25.2% in Fiscal 1996,
primarily as the result of higher production volume required to meet additional
customer demand and efficiencies realized at the new Birmingham production
facility (Carson Road) and a more favorable product mix. Gross profit in Fiscal
1997 increased $14.0 million, or 47.5%, to $43.6 million from $29.6 million in
Fiscal 1996.
Selling Expense
Selling expense as a percentage of net sales declined to 4.8% in Fiscal
1997 from 5.2% in Fiscal 1996 because of increases in net sales without
corresponding increases in selling expense. In Fiscal 1997, selling expense
increased by $0.8 million, or 13.9%, to $6.9 million from $6.1 million in Fiscal
1996, due primarily to increases in advertising expense, of which $0.4 million
related to the Company's newly implemented national radio advertising campaign
featuring Paul Harvey. Additionally, higher net sales resulted in an increase in
sales commissions and other variable selling costs.
General and Administrative Expense
General and administrative expense as a percentage of net sales decreased
to 4.3% in Fiscal 1997 from 5.0% in Fiscal 1996 as the growth in sales outpaced
increases in general and administrative expense. General and administrative
expense increased $0.1 million, or 2.3%, to $6.0 million in Fiscal 1997 from
$5.9 million in Fiscal 1996. This increase was due partially to a $0.5 million
increase in management incentives attributable to the increased performance of
the Company in Fiscal 1997, which was offset by a legal settlement in favor of
the Company in the amount of $0.7 million.
Interest Expense
Interest expense as a percentage of net sales declined to 3.7% in Fiscal
1997 from 4.3% in Fiscal 1996. Interest expense increased by $0.3 million, or
5.1%, to $5.3 million in Fiscal 1997 from $5.0 million in Fiscal 1996 due to
higher interest rates on consistent debt levels.
18
<PAGE> 20
Pro Forma Provision for Income Taxes
The pro forma income tax provision in Fiscal 1997 was $9.4 million versus
$4.7 million in Fiscal 1996. The effective tax rate in Fiscal 1997 was 37.2%
versus 37.3% in Fiscal 1996.
FISCAL 1996 COMPARED TO FISCAL 1995
Net Sales
Net sales in Fiscal 1996 decreased $3.3 million, or 2.8%, to $117.4 million
from $120.8 million in Fiscal 1995. Net sales during the first quarter of Fiscal
1996 (May, June and July of 1995) were $3.9 million lower than the comparable
period in Fiscal 1995. The first quarter decline was primarily due to decreased
sales of outdoor products in both the mass and specialty markets caused
principally by weak consumer confidence in the first half of 1995 and a late
spring in most parts of the U.S., which caused retailers to reduce late season
purchases in order to liquidate inventory.
Gross Profit
Gross margin declined to 25.2% in Fiscal 1996 from 26.6% in Fiscal 1995.
The decline in net sales during the first quarter of Fiscal 1996 and the
resulting cut back in production levels accounted for $1.3 million of the gross
profit decline. Higher raw material costs and inefficiencies associated with the
start up of the new Birmingham production facility accounted for the balance of
the decline. Gross profit in Fiscal 1996 declined $2.6 million, or 8.1%, to
$29.6 million from $32.2 million in Fiscal 1995.
Selling Expense
Selling expense as a percentage of net sales rose modestly to 5.2% in
Fiscal 1996 from 5.1% in Fiscal 1995 primarily as a result of lower sales in
Fiscal 1996 without a corresponding reduction in certain fixed selling costs.
Selling expense remained virtually flat at $6.1 million in Fiscal 1996.
General and Administrative Expense
General and administrative expense as a percentage of net sales increased
to 5.0% in Fiscal 1996 from 4.2% in Fiscal 1995. General and administrative
expense increased $0.7 million, or 14.3%, to $5.9 million in Fiscal 1996 from
$5.2 million in Fiscal 1995. The increase in general and administrative expense
in Fiscal 1996 was primarily due to higher salary cost of $0.3 million resulting
from an increase in employees related to the expansion of the Company's
operations and, to a lesser extent, higher legal fees related to certain
litigation.
Interest Expense
Interest expense as a percentage of net sales increased to 4.3% in Fiscal
1996 from 4.1% in Fiscal 1995. Interest expense increased by $0.1 million, or
2.8%, to $5.0 million in Fiscal 1996, from $4.9 million in Fiscal 1995 due to
higher debt levels incurred to fund capital expansion programs. Higher debt
levels were offset in part with lower interest rates achieved by the Company on
revolving credit borrowings.
Pro Forma Provision for Income Taxes
The pro forma income tax provision in Fiscal 1996 was $4.7 million versus
$6.1 million in Fiscal 1995. The effective tax rate in Fiscal 1996 was 37.3%
versus 37.9% in Fiscal 1995 which was due to a higher federal tax rate that was
applicable in Fiscal 1995 as a result of higher income in Fiscal 1995.
QUARTERLY RESULTS AND SEASONALITY
Consistent with the nature of the casual outdoor furniture industry, the
Company's sales are very seasonal. Historically, approximately 50% of the
Company's net sales have been realized in the quarter ended April, while only
approximately 5% of the Company's net sales have occurred in the quarter ended
October. As a result, the Company typically shuts down its production facilities
during August for vacation, repairs and
19
<PAGE> 21
maintenance. The Company begins manufacturing in September and October to build
inventory to meet customer orders and anticipated demand for the next selling
season, incurring increased operating and overhead costs without corresponding
sales for the period. The Company has historically experienced operating losses
in the quarter ended October of each year. In addition, the Company's sales are
subject to fluctuations on a quarterly basis due to such factors as weather and
customer ordering decisions.
In order to stimulate off-season sales and, thus, lessen the effects of
seasonality, the Company utilizes several incentive programs for its outdoor
specialty product lines. Most of these programs provide for some form of
deferred payment, referred to as "dating," to promote the early shipment of
products to customers and the recognition of sales during the off-season. Upon
shipment, the Company recognizes sales. Although shipments are made early in the
Company's seasonal year, dated receivables are generally due from April through
June.
Since the Company's revolving credit facility is used to support both the
build-up of inventory during the fall and winter months and the dating programs,
short term borrowings and interest expense peak during the period from January
through April. To lessen further the effects of seasonality, the Company has
expanded its offerings of indoor products and diversified into garden products.
By increasing off-season sales, the Company can extend its production period and
level its production activity and, thus, better match sales to operating
expenses.
The following table sets forth certain unaudited financial statement data
from the Company's statements of income for each of the Company's last 11
quarters in the period ended May 3, 1997. The financial statement data for the
quarter ended July 31, 1997 has been audited by Arthur Andersen LLP, independent
public accountants. In the opinion of management, the unaudited financial
statements from which this data have been derived include all adjustments
(consisting of only normal recurring adjustments) necessary for a fair
presentation of the information set forth therein. Pro forma net income (loss)
is presented as if the Company had been a C corporation for tax purposes for all
periods presented. See "Use of Proceeds" and "Selected Financial Data."
<TABLE>
<CAPTION>
TWELVE MONTHS
QUARTER ENDED ENDED
---------------------------------------------- -------------
OCTOBER 31, JANUARY 31, MAY 3, JULY 31, JULY 31,
1996 1997 1997 1997 1997
----------- ----------- ------- -------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net sales................................. $ 6,622 $27,183 $75,907 $35,368 $145,080
Gross profit.............................. 555 9,137 25,975 9,436 45,103
Operating income (loss)................... (1,841) 7,043 20,051 6,477 31,730
Income (loss) before pro forma provision
for income taxes........................ (2,826) 5,866 18,244 5,316 26,600
Pro forma net income (loss)............... (1,775) 3,684 11,458 3,338 16,705
</TABLE>
<TABLE>
<CAPTION>
TWELVE MONTHS
QUARTER ENDED ENDED
------------------------------------------------ -------------
OCTOBER 31, JANUARY 31, APRIL 28, JULY 31, JULY 31,
1995 1996 1996 1996 1996
----------- ----------- --------- -------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net sales................................. $ 5,277 $21,971 $67,445 $32,233 $126,926
Gross profit (loss)....................... (1,339) 5,222 21,084 7,963 32,930
Operating income (loss)................... (3,488) 2,434 16,297 5,399 20,642
Income (loss) before pro forma provision
for income taxes........................ (4,330) 1,160 14,582 4,095 15,507
Pro forma net income (loss)............... (2,714) 727 9,140 2,572 9,725
</TABLE>
20
<PAGE> 22
<TABLE>
<CAPTION>
TWELVE MONTHS
QUARTER ENDED ENDED
------------------------------------------------ -------------
OCTOBER 31, JANUARY 31, APRIL 30, JULY 31, JULY 31,
1994 1995 1995 1995 1995
----------- ----------- --------- -------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net sales................................. $ 6,987 $23,272 $63,909 $22,726 $116,894
Gross profit (loss)....................... (731) 6,024 19,243 4,603 29,139
Operating income (loss)................... (2,723) 3,466 14,643 2,329 17,715
Income (loss) before pro forma provision
for income taxes........................ (3,387) 2,233 12,740 1,142 12,728
Pro forma net income (loss)............... (2,104) 1,387 7,916 716 7,915
</TABLE>
In the quarter ended October, the Company's sales to mass merchandisers are
relatively low since at this time these customers have just completed the mass
retail selling season (namely, the period from January through July) and are
planning their product selections for the next selling season. The Company's
sales during this period are primarily to specialty retail customers who have a
longer selling season. Gross profit in this quarter is normally low due to the
lower amount of sales. In addition, production levels of inventory are lower in
this quarter due to the shutdown of facilities which reduces the absorption of
fixed costs.
In the quarter ended January, sales increase over the previous quarter as
the selling season begins with mass merchandisers and specialty retailers
filling their floor space. Production of inventory is at its highest level
thereby absorbing fixed costs more efficiently than in the previous quarter. As
a result of these factors, gross profit increases during this period.
Sales and profitability are highest in the quarter ended April since this
is the high point of the mass retail selling season. Production continues at
high levels during this quarter to meet existing orders and to replenish
retailers' inventories. In the quarter ended May 3, 1997, the Company changed
its year end to the Saturday closest to April 30 from the Sunday closest to
April 30. The effect of this change was to increase the number of weeks in the
quarter ended May 3, 1997 to 14 weeks versus 13 weeks in the quarters ended
April 28, 1996 and April 30, 1995.
In the quarter ended July, the Company's sales are significantly lower than
in the previous quarter as the mass retail selling season comes to a close.
Additionally, production levels generally decrease resulting in less efficient
absorption of fixed costs than in the quarter ended April. As a result of these
factors, gross profit is lower than in the quarter ended April.
LIQUIDITY AND CAPITAL RESOURCES
The following table presents a summary of the Company's cash flows for the
respective periods:
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
---------------------
APRIL 30, APRIL 28, MAY 3, JULY 31, JULY 31,
1995 1996 1997 1996 1997
--------- --------- -------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net cash provided by operations..... $ 6,137 $ 14,361 $ 26,102 $ 52,956 $ 54,368
INVESTING ACTIVITIES:
Capital expenditures................ (16,034) (15,676) (3,406) (1,628) (2,070)
FINANCING ACTIVITIES:
Net borrowings (payments) on notes
payable........................... 11,704 2,656 (11,632) (45,519) (38,670)
Proceeds from issuance of long-term
debt.............................. 8,720 10,500 0 974 0
Principal payments of long-term
debt.............................. (5,374) (3,255) (4,814) (1,283) (2,128)
Payment of S Corporation
distributions..................... (5,100) (8,338) (6,250) (5,500) (11,500)
</TABLE>
The Company has historically financed its operations and growth from
seasonal borrowings under its bank line of credit, from internally generated
funds, and from other term debt. The Company's primary liquidity requirements
are for capital expenditures, working capital and debt service.
21
<PAGE> 23
The Company's operating activities in the thirteen week periods ended July
31, 1996 and July 31, 1997 provided cash of $52.9 million and $54.4 million,
respectively. This was primarily due to a decrease of total receivables of $50.1
million and $47.0 million at July 31, 1996 and July 31, 1997, respectively,
caused by the mass retail selling season coming to a close. Cash flows from
investing activities are related solely to capital expenditures. Financing
activities in the thirteen week periods ended July 31, 1996 and July 31, 1997
resulted in net payments of debt in the amounts of $45.8 million and $40.8
million, respectively, which were funded out of working capital generated by
operations. S Corporation distributions during the thirteen week periods ended
July 31, 1996 and July 31, 1997 were $5.5 million and $11.5 million,
respectively. Such distributions were utilized by the stockholders to pay income
taxes on the Company's earnings.
The Company's operating activities over the last three fiscal years have
generated cash of $46.6 million. Net cash provided by operations for Fiscal 1997
amounted to $26.1 million, primarily the result of $25.4 million in net income
in Fiscal 1997. Net cash provided by operations in Fiscal 1996 of $14.4 million
was primarily the result of net income of $12.6 million. In Fiscal 1995, net
cash provided by operations of $6.1 million was the result of net income of
$16.0 million and the offset of higher accounts receivable balances due to the
growth in sales primarily in the fourth quarter of Fiscal 1995. See
"-- Factoring."
Cash flows from investing activities are related solely to capital
expenditures. Capital expenditures (excluding capital leases and certain capital
expenditures financed with debt) incurred by the Company over the last three
fiscal years amounted to $35.1 million and were primarily related to the
Company's new manufacturing and distribution facilities in Birmingham, Alabama
and construction of the Selma, Alabama facility. Capital expenditures in Fiscal
1997 were significantly lower than in Fiscal 1996 and 1995 as these projects
were completed in Fiscal 1996. It is anticipated that the Company will invest
approximately $32.5 million over the next twelve months for production and
distribution facilities to service the western United States, new distribution
facilities in Birmingham and Selma and continued productivity and product line
improvements for existing facilities.
Financing activities are generally related to the issuance and repayment of
debt and the payment of S Corporation distributions. Financing activities in
Fiscal 1997 resulted in net payments of debt in the amount of $16.4 million as
compared to net borrowings of debt in Fiscal 1996 and Fiscal 1995 of $9.9
million and $15.1 million, respectively. The decline in permanent debt financing
is primarily attributable to the improvement in cash generated from operations
in Fiscal 1995, Fiscal 1996 and Fiscal 1997 and the reduction in capital
expenditures in Fiscal 1997 as the major capital projects were completed in
Fiscal 1996. S Corporation distributions in Fiscal 1997, 1996 and 1995 were $6.3
million; $8.3 million; and $5.1 million, respectively. Such distributions were
utilized by the stockholders to pay income taxes on the Company's earnings.
Upon consummation of the Offering, the Company intends to terminate its S
Corporation election and, as a result, the Company will become a taxable C
corporation. While S Corporation distributions, other than the portion of the S
Corporation Distribution which will not be paid out of the net proceeds of the
Offering, will no longer be made upon conversion to a C corporation, the Company
will be required to pay the income tax liability which arises from the Company's
future earnings. The actual amount of the S Corporation Distribution will be
equal to approximately $32.7 million plus an additional amount based on the
Company's S Corporation earnings attributable to the 12-month period ending May
2, 1998. The Company expects to use cash on hand to fund such additional amount.
See "Use of Proceeds."
Currently, the Company maintains a $90 million revolving line of credit
(the "Revolving Credit Facility") and $36.4 million of term debt facilities (the
"Term Debt Facilities" and, together with the Revolving Credit Facility, the
"Credit Facilities") with a consortium of lenders led by NationsBank N.A.
("NationsBank"). As a result of the seasonal nature of the Company's business,
the Company utilizes the Revolving Credit Facility to build up inventory levels
during the first half of the Company's fiscal year, among other things. This
build-up is necessary to meet the peak selling season which occurs in the latter
part of the quarter ended April and generally lasts through June. See
"-- Quarterly Results and Seasonality." The Company also finances this inventory
build-up through a vendor deferred payment program, which allows the
22
<PAGE> 24
Company to order and receive raw materials for production in the fall and winter
months and delay vendor payments until the spring.
The Revolving Credit Facility is subject to certain borrowing base
limitations, which are related primarily to accounts receivable and inventory
balances, and compliance with customary financial and other covenants. As of
August 31, 1997, the outstanding balance under the Revolving Credit Facility
amounted to $0.1 million, and $9.7 million was available to be borrowed at
August 31, 1997 based upon the borrowing base. In addition, $18.6 million was
outstanding and $17.8 million was available to be borrowed under the Term Debt
Facilities at August 31, 1997.
The Company's debt agreements contain, among other things, certain
restrictions relating to net worth, capital expenditures, current ratio and debt
service ratio. The Company was in compliance with all covenants at August 31,
1997. The Company's total debt obligations maturing in each of the next five
fiscal years at May 3, 1997 are as follows: $4.8 million in 1998, $4.5 million
in 1999, $3.4 million in 2000, $2.4 million in 2001, $1.0 million in 2002 and
$4.1 million thereafter.
The Company believes that cash flow from operations, together with the
Company's unused borrowing capacity under the Credit Facilities and proceeds
from this Offering, will be sufficient to fund the Company's debt service
requirements, capital expenditures and working capital needs through the
maturity date of the Credit Facilities. See "Use of Proceeds." Pursuant to its
terms, the Revolving Credit Facility expires on August 28, 2000 and the
principal balances outstanding on all loans thereunder will mature on that date.
In addition, to provide any additional funds necessary for the continued pursuit
of the Company's growth strategies, the Company may incur, from time to time,
additional short- and long-term bank indebtedness and may issue additional debt
or equity securities, the availability and terms of which would depend upon
market and other conditions. There can be no assurance that such additional
financing would be available on terms acceptable to the Company.
FACTORING
In order to provide additional liquidity and to reduce the Company's
exposure to the credit risk of certain of its customers, the Company factors a
significant portion of its trade accounts receivable without recourse to the
Company with respect to credit risk. Currently, the Company maintains two
factoring agreements with financial institutions. The vast majority of the
factored receivables are with an affiliate of NationsBank, and the proceeds from
factoring are generally used to repay the outstanding borrowings on the Credit
Facility. When the Company makes a sale to a customer, generally the receivable
from that customer is factored without recourse. Thereafter, the Company removes
the receivable from the balance sheet and records a receivable from the factor
at a discounted amount. Such amount is referred to as "Due from Factor" in the
Financial Statements. The difference in the account receivable from the customer
and the amount recorded as Due from Factor represents factor fees which are
reflected as interest expense in the Financial Statements. The Due from Factor
amount is paid to the Company by the factor on a predetermined date, based
primarily upon the customer's invoice due date, and is not contingent upon
collection of the customer's receivable by the factor. The Company does not
factor its receivables related to certain of its large customers. Therefore, the
Company retains credit risk with respect to these customers, which the Company
believes is insignificant. See Note 2 to the Financial Statements included
elsewhere in this Prospectus.
INFLATION
The Company believes that the relatively moderate rate of inflation
experienced over the last three years has not had a material impact on its sales
or profitability. The Company generally has been able to absorb increases in
costs without significantly increasing the selling prices of its products due to
cost reductions and improved manufacturing efficiencies. However, there can be
no assurances that the Company's business will not be adversely affected by
inflation in the future.
23
<PAGE> 25
FORWARD-LOOKING STATEMENTS
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and other sections of this Prospectus contain forward-looking
statements which are subject to various risks and uncertainties. Actual results
could differ materially from those discussed herein. Important factors that
could cause or contribute to such differences include those discussed under
"Risk Factors" as well as those discussed elsewhere in this Prospectus.
24
<PAGE> 26
BUSINESS
OVERVIEW
The Company is one of the leading domestic producers of casual outdoor
furniture and is the largest manufacturer of outdoor wrought iron furniture in
the United States. The Company designs, manufactures and distributes a variety
of wrought iron consumer products, including outdoor and indoor furniture and
accessories, outdoor cushions and umbrellas, and garden products, which it
markets to mass merchandisers and specialty stores primarily in the United
States. The Company believes that it has established a reputation as an
innovator in the design, manufacturing, distribution and marketing of moderately
priced, quality wrought iron furniture. The Company's net sales have grown from
$50.5 million in Fiscal 1991 to $141.9 million in Fiscal 1997, while pro forma
net income has increased from $1.2 million to $15.9 million over the same
period. For Seasonal 1997, the Company had net sales of $145.1 million and pro
forma net income of $16.7 million.
The Company offers consumers a wide variety of products across different
price points in three markets: the outdoor mass market under the Plantation
Patterns brand name; the outdoor specialty market under the Meadowcraft,
Arlington House and Salterini brand names; and the indoor specialty and mass
markets under the Interior Images by Salterini and Home Collection from
Plantation Patterns brand names, respectively. For Fiscal 1997, outdoor mass
market sales accounted for approximately 75.1% of the Company's gross sales,
while outdoor specialty market sales represented approximately 16.9% of gross
sales and indoor specialty and mass market sales constituted approximately 4.2%
of gross sales.
COMPETITIVE STRENGTHS
The Company attributes its strong market position to the high
value-to-price characteristics and design of its products as well as its
low-cost production and efficient distribution systems. These factors have
contributed to the Company's success with its customers -- both mass and
specialty retailers and consumers. The Company believes its competitive
strengths include the following:
Low-Cost Producer. The Company believes that its low-cost,
high-volume production systems have enabled it to design, manufacture
and distribute quality wrought iron furniture and accessories with
traditional, "high-end" design features, broad consumer appeal, and
high value-to-price characteristics. The Company developed its
low-cost production systems by combining design and production
expertise developed for the specialty markets with efficient,
innovative manufacturing and distribution systems designed to
accommodate the needs of mass merchandisers. Management believes that
by applying its low-cost manufacturing expertise to additional product
lines it can increase its share of the casual outdoor furniture market
as well as gain market share in the indoor furniture market.
Advanced Manufacturing and Distribution Systems. The Company's
advanced manufacturing and distribution facilities and computerized
inventory tracking and shipping systems enable the Company to produce
and ship large quantities of products on a timely and reliable basis.
Timely and reliable shipment of products is an important competitive
factor in the casual furniture industry, especially in the mass market
where customers often require shipment of a large volume of products
on short notice throughout the spring and summer months. The Company's
manufacturing facilities are designed to accommodate efficient
production of products for both the mass and specialty markets, with
common product design elements and flexible production systems
permitting rapid transition between product styles and colors. In
addition, the Company's management information systems integrate all
aspects of production, distribution and shipping.
Relationships with Mass Market and Specialty Retail
Customers. By manufacturing and delivering quality products reliably,
the Company has built excellent relationships with its mass market
customers and has developed an extensive network of specialty
retailers. The Company sells its mass market products to seven of the
top ten U.S. discount retailers/mass merchants and home centers in
terms of 1996 revenues, and believes that it has excellent
relationships with its existing mass market customers. For example,
the Company was named "Vendor/Partner of the Year" by
25
<PAGE> 27
Wal-Mart in the outdoor products category for 1995, the most recent period
for which the award was given, and was one of only 40 of Wal-Mart's
approximately 10,000 vendors to receive this award. In the specialty
market, the Company maintains an extensive network of over 1,500 specialty
accounts, which allows the Company to test new products before introducing
them into the mass markets. The Company believes that its relationships
with mass market retail customers and specialty retail customers position
it to increase sales of existing products and introduce new products and
product lines successfully through these distribution channels. In
addition, by leveraging relationships established in the outdoor furniture
market, management believes that the Company will be able to gain access to
distribution channels for new products such as indoor furniture and
accessories and garden products.
Experienced Management. The Company believes that its
experienced and dedicated management team has been instrumental in its
success and distinguishes the Company from other manufacturers of
wrought iron furniture. The Company's top five senior executives have
each been with the Company for over six years, and its senior
management team has extensive experience in the casual furniture and
other manufacturing industries. The Company's Chairman has 18 years of
experience in the casual furniture industry, and its President has 32
years of management experience in the casual furniture and other
manufacturing industries, the most recent six of which have been at
the Company.
STRATEGY
Since 1991, the Company has profitably built its business by providing
quality wrought iron furniture to the mass and specialty markets. Meadowcraft
has redefined and expanded the outdoor wrought iron furniture market by
designing, producing and shipping on a reliable, timely and cost-effective basis
quality products with broad consumer appeal and high value-to-price
characteristics. The Company has identified future growth opportunities and has
developed a strategy to increase its sales, earnings and market share of the
casual outdoor and indoor furniture markets, including the following
initiatives:
Introduce New Products and Expand Product Offerings. The Company
intends to apply its low-cost production expertise to introduce more
new products with traditional, "high end" design features, broad
consumer appeal, and high value-to-price characteristics, and to
expand product offerings in its existing product lines. For example,
in the outdoor market, the Company introduced a new line of wrought
iron garden products in Fiscal 1997 and plans to introduce a new line
of tubular steel outdoor furniture in Fiscal 1998. In the indoor
market, the Company is expanding the product offerings under its Home
Collection from Plantation Patterns and Interior Images by Salterini
lines. This strategy is designed to expand market share within the
casual outdoor and indoor furniture markets.
Increase Manufacturing and Distribution Capacity. The Company
plans to increase its manufacturing and product distribution capacity
to allow the Company to meet the demands of new and existing customers
in new geographic regions, as well as to enhance the Company's ability
to provide products to all customers on a timely and reliable basis.
For example, the Company plans to add a manufacturing facility in
Mexico and a distribution facility in the southwestern United States
in Fiscal 1998 to serve customers in the western United States. In
addition, the Company is converting an idle manufacturing facility in
Alabama to the production of tubular steel outdoor furniture, which is
expected to be completed by December 1997. The Company will continue
to evaluate opportunities to produce and distribute products
efficiently in markets outside of the United States.
Heighten Brand Awareness. In addition to expanded offerings of
products with high value-to-price characteristics, management believes
that by targeting the ultimate consumer directly through national
marketing and advertising campaigns, such as the Paul Harvey national
radio show, the Company will heighten brand name awareness and
increase consumer demand for the Company's products.
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<PAGE> 28
PRODUCTS
The Company designs and manufactures a variety of quality wrought iron
outdoor and indoor furniture and accessories, cushions and umbrellas, and garden
products. These products are sold primarily in the United States through mass
merchants and specialty retailers. For Fiscal 1997, sales of the Company's
outdoor furniture and accessories (including cushions and umbrellas) constituted
approximately 92.0% of gross sales, while sales of indoor furniture and
accessories and garden products represented 4.2% and 2.3% of gross sales,
respectively.
Historically, the Company manufactured exclusively outdoor wrought iron
furniture. In Fiscal 1993, the Company expanded its product lines to include
indoor wrought iron furniture and accessories. In addition, Meadowcraft further
broadened its product offerings with the introduction of wrought iron garden
products in Fiscal 1997. In Fiscal 1998, the Company plans to introduce a line
of tubular steel outdoor furniture.
The Company's outdoor products are sold through mass merchandisers under
the Plantation Patterns brand name and include dining groups composed of action
chairs, stack chairs, dining tables, bistro groups and accent tables;
accessories such as chaises, gliders, bakers' racks and tea carts; cushions and
umbrellas; and garden products. In addition, the Company sells a similar line of
outdoor products in the specialty market under the Meadowcraft, Arlington House
and Salterini brand names. The Company's outdoor casual furniture products come
in a variety of styles and colors and are sold across different price points to
appeal to a range of consumers in the mass and specialty markets.
The Company's indoor wrought iron furniture is sold to specialty furniture
stores and department stores under the Interior Images by Salterini brand name
and to mass merchants under the Home Collection from Plantation Patterns brand
name. The indoor collections include occasional tables, dining groups and beds,
as well as accent pieces. The Company's garden products include shepherds'
hooks, trellises, arbors, and plant stands and are sold through both mass
merchandisers and specialty retailers under the Plantation Patterns brand name.
The Company continuously designs and develops new products and new product
styles and expands product lines to meet customer demand and changes in consumer
preferences. The Company's product design process begins with marketing
personnel identifying customer needs and creating product ideas. A variety of
sketches are produced, usually by Company engineers, from which prototype
products are built. The Company's engineering department then prepares the
prototype for actual full-scale production. The Company consults with its
marketing personnel, sales representatives and selected customers throughout
this process to develop quality products that satisfy both specialty and mass
market consumers. The Company often introduces new products through its network
of over 1,500 specialty accounts in order to gather market feedback before
introducing the products in the mass market.
CUSTOMERS AND MARKETING
The Company's primary customers are domestic retailers in the mass and
specialty markets. Meadowcraft serves three markets: the outdoor mass market,
which includes national chains, discount retailers, mass merchants, and home
centers; the outdoor specialty market, which includes furniture stores,
specialty stores and garden shops; and the indoor market, which includes
specialty furniture stores, mass merchandisers and department stores. In Fiscal
1997, the Company sold products to over 1,500 mass and specialty accounts,
including seven of the top ten U.S. discount retailers/mass merchants and home
centers (based on 1996 revenues). Sales to its top five customers accounted for
approximately 62.6% of the Company's net sales in Fiscal 1997. The Company's top
three customers, Wal-Mart Stores, Inc., Sam's Club, Inc. (each of which is a
subsidiary of Wal-Mart, Inc.) and Service Merchandise, Inc., represented
approximately 21.4%, 12.6% and 9.8%, respectively, of the Company's net sales in
Fiscal 1997.
The Company believes that its relationship with all of its top customers is
excellent, which management believes positions the Company to increase sales of
existing products and introduce new products. In 1996, Wal-Mart awarded the
Company its "Vendor/Partner of the Year" award in the outdoor products category
for 1995, the most recent period for which the award was given. The Company was
one of only 40 vendors of Wal-
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<PAGE> 29
Mart's approximately 10,000 vendors to receive this award. In 1997, ShopKo
Stores, Inc. awarded the Company its "Vendor of the Year" award in the indoor
and outdoor furniture category. For Seasonal 1998, Wal-Mart has informed the
Company that it has been selected as the sole supplier for Wal-Mart's outdoor
wrought iron furniture products.
To service its mass merchant and specialty accounts, Meadowcraft has
tailored its sales strategy to meet the distinct needs of each market.
The mass market sales team consists of the Vice President of Sales and
Marketing (Mass Accounts) and three national sales managers. This four person
in-house sales staff is supported by 15 independent sales representatives with
account coverage organized by territory. Each summer, Meadowcraft's sales
managers meet with their mass market accounts to plan product purchases and
shipping schedules for the following selling season. The Company's marketing
efforts in the mass market culminate with the National Hardware Show in August
at which Meadowcraft exhibits its product line for the upcoming mass retail
selling season. Typically, by September of each year, the Company has received
estimated requirements from customers for approximately seventy percent of the
sales that it will produce and ship during the following selling season.
Throughout the selling season, Meadowcraft works closely with its customers to
assure timely shipment of sales orders and to monitor and respond to sales
trends and feedback.
The specialty market sales team is served by an in-house team consisting of
the Vice President of Sales and Marketing (Specialty Accounts) and four regional
sales managers (including two who cover international accounts), as well as 35
independent sales representatives. This team markets both standard and made-to-
order products to over 1,500 specialty accounts throughout North America and
Europe. Given the number of specialty accounts and the seasonality of its
business, the Company believes that the use of independent representatives is an
effective and cost-efficient means to serve the specialty market. These
representatives are paid on a commission-only basis, which the Company believes
makes them highly entrepreneurial. Participation in trade shows, particularly
the International Casual Furniture Market held at the Merchandise Mart in
Chicago, is an important element of Meadowcraft's marketing efforts directed at
specialty retail customers.
To supplement its sales efforts to mass market and specialty account
customers, Meadowcraft uses a variety of means to advertise and promote its
products, including product brochures, trade shows and cooperative advertising
with some of its specialty accounts.
In addition, to complement the Company's marketing efforts to its mass and
specialty accounts, Meadowcraft targets consumers directly through a national
radio advertising campaign featuring Paul Harvey. The Company believes that by
enhancing brand awareness among consumers, Meadowcraft can build a brand
franchise and ultimately increase sales.
MANUFACTURING AND DISTRIBUTION
The Company operates four manufacturing facilities and four distribution
centers in Alabama. The Company believes that it operates advanced manufacturing
and distribution systems. These facilities are run by well-trained and
experienced production personnel and have allowed the Company to become a
low-cost producer in the wrought iron furniture industry.
The Company's manufacturing process combines sophisticated, computerized
materials handling systems and advanced primer and paint systems with a skilled
work force. The Company emphasizes cost-efficiencies in the manufacturing
process and has consistently modernized its manufacturing equipment and
facilities through capital expenditures in order to improve the process. Due to
the Company's high volume of business with mass merchandisers, Meadowcraft
begins production and warehouses products during the off season in order to meet
in-season purchases from customers. Through the extension of the production
season and the leveling of production activity, Meadowcraft reduces the
seasonality of the manufacturing process.
The Company's modern distribution facilities are located adjacent to its
manufacturing facilities and utilize integrated materials handling systems. The
Company utilizes sophisticated computer systems to code and track inventory and
to coordinate and monitor loading and shipment of products to retailers.
Coordination
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<PAGE> 30
of the manufacturing, packaging and distribution functions allows for greater
quality control and production efficiencies.
MANAGEMENT INFORMATION SYSTEMS
The Company believes that it is technologically advanced and that its
manufacturing and distribution systems and computerized inventory tracking and
shipping systems are superior to its competitors largely because of its
sophisticated management information systems. Initially, the Company developed
its proprietary management information systems for its specialty retail business
in order to track special orders (particularly made-to-order items) and to
determine what and when to build. The Company subsequently expanded the systems
to support all product lines. The Company uses a forecasting system that
integrates all aspects of production, distribution and shipping and guides the
Company by one Company-wide plan. The forecasting system allows the Company to
build sales forecasts based on feedback from retail buyers and then to derive
materials planning and production allocation, as well as to monitor production
capacity, inventory and invoicing of finished goods. The Company employs its own
computer programmers and owns all of its information systems hardware, which is
serviced under maintenance and support agreements.
INDUSTRY AND COMPETITION
Although there are no published figures available, the Company estimates
that wholesale sales of outdoor casual furniture exceeded $1.0 billion in 1996.
Home Furnishings News ("HFN"), a trade publication, reported that retail sales
of outdoor casual furniture were $1.5 billion in 1996. The residential casual
furniture market consists of five principal product categories: aluminum
(including tubular, wrought and cast), wrought iron, resin and plastic, wicker
and rattan, and wood.
Access to diverse distribution channels is an important factor in the
residential casual furniture industry. According to the HFN, the major
distribution channels for outdoor casual furniture in 1996 included mass
merchants (32%), home centers (30%), national chains (13%), specialty stores
(12%) and warehouse clubs (10%). Management believes that the Company is well
positioned to service these channels. In May 1997, Home Improvement Executive,
another industry publication, reported that home center chains predicted that
the Company's Plantation Patterns line would comprise approximately 76% of their
outdoor wrought iron furniture business. Management believes that the Company's
Plantation Patterns products will have equal or greater penetration in Fiscal
1998 with certain national mass merchants, home center chains and warehouse
clubs, but there can be no assurance that the Company will achieve such
penetration in Fiscal 1998.
The casual furniture industry is highly competitive and includes a large
number of manufacturers, none of which dominate the market. The Company competes
against other domestic and foreign wrought iron furniture manufacturers as well
as manufacturers of aluminum, resin and plastic, wicker and rattan, and wood
casual furniture with respect to its outdoor products and traditional furniture
companies with respect to its indoor products. A number of the companies which
compete directly with the Company may have greater financial and other resources
than the Company. Management believes that the competition in the wrought iron
furniture industry is generally a function of timeliness of delivery, price,
quality, product design, product availability and customer service. In addition
to the factors which the Company believes allow it to compete effectively with
all of its competitors, the Company believes that the proximity of its U.S.
manufacturing and distribution facilities to its customers is a competitive
advantage over foreign manufacturers due to its ability to respond timely to
in-season orders and the higher freight costs incurred in shipping products from
foreign manufacturers.
RAW MATERIALS AND SUPPLIERS
The primary raw materials used by the Company to manufacture and distribute
its products are steel, fabrics, cardboard, paint and umbrella frames. Each
year, the Company purchases its raw materials from a number of domestic and
foreign suppliers. The Company has annual contracts with many of its major
suppliers, and the Company does not anticipate, nor has it experienced, any
difficulty in obtaining any of its raw materials. The Company believes that
there are a relatively large number of other suppliers of raw
29
<PAGE> 31
materials available, which enable the Company to obtain competitive prices for
its raw materials. While the cost of raw materials is subject to fluctuations,
the Company commits to purchase the raw materials that it estimates will be
needed for the ensuing year at fixed prices in order to attempt to control
production costs. Significant increases in the costs of raw materials in a
particular year could have an effect on the Company's margins for its products
if the Company were unable to build these costs into the prices of its products
or to offset such raw material cost increases through cost reductions in the
following year. See "Risk Factors--Raw Materials."
REGULATORY MATTERS
The Company's operations must meet federal, state and local regulatory
standards in the areas of safety, health, labor and environmental pollution
controls. To the best of the Company's knowledge, it is in substantial
compliance with all federal, state and local regulatory standards and
environmental protection provisions. Historically, compliance with these
standards has not had any material adverse effect on the Company's results of
operations. In addition, the Company is subject to numerous environmental laws
and regulations concerning air emissions, discharges into waterways and the
generation, handling, storage, transportation, treatment and disposal of waste
materials. These laws and regulations are subject to change, and it is
impossible to predict with accuracy the effect they may have on the Company in
the future. Like many other industrial companies, the Company's manufacturing
operations entail the risk of noncompliance, which may result in fines,
penalties and remediation costs, and there can be no assurance that such costs
will be insignificant. The Company believes that any future fines, penalties and
remediation costs associated with noncompliance should not have a material
adverse effect on capital expenditures, earnings or the Company's competitive
position. However, legal and regulatory requirements in those areas have been
increasing, and there can be no assurance that significant costs and liabilities
will not be incurred in the future due to regulatory noncompliance.
LEGAL PROCEEDINGS
The Company, from time to time, is subject to legal proceedings and other
claims arising in the ordinary course of its business. Management believes that
the Company is not presently a party to any litigation, the outcome of which
would have a material adverse effect on its business or operations.
EMPLOYEES
As of May 3, 1997, the Company employed approximately 1,630 persons,
approximately 1,409 of whom were subject to collective bargaining agreements.
Employment levels fluctuate throughout the year due to the seasonal nature of
the Company's business. The Company's non-salaried employees are covered by
three separate collective bargaining agreements. One of the Company's collective
bargaining agreements, covering an aggregate of approximately 786 employees at
two facilities in Birmingham, Alabama, expires on July 1, 1998. The Company
believes that its relations with its employees are good.
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<PAGE> 32
PROPERTIES
The table below presents certain information with respect to the Company's
principal properties. The Company believes that all of its properties are
well-maintained and in good condition and are capable of handling increased
production. All of the properties are equipped with automatic sprinkler systems
and modern fire protection equipment, which management believes are adequate.
<TABLE>
<CAPTION>
APPROXIMATE SIZE
LOCATION PRIMARY USE (SQUARE FEET) OWNED/LEASED
- -------- ----------- ---------------- ------------
<S> <C> <C> <C>
BIRMINGHAM, AL
Carson Road.......... Manufacturing/Offices/Distribution 1,000,000 Owned
Meadowcraft Road..... Manufacturing/Offices 240,000 Leased (1)
Goodrich Drive....... Distribution 340,000 Leased (2)
WADLEY, AL............. Manufacturing/Distribution 989,000 Owned
SELMA, AL.............. Manufacturing/Distribution 202,000 Owned
</TABLE>
- ---------------
(1) Lease expires August 29, 2000.
(2) Lease expires September 30, 1997. The Company is currently negotiating with
the lessor for extension of this lease through May 31, 1999.
In addition to these properties, the Company is constructing a new 530,000
square foot distribution facility and office in Birmingham, Alabama (Carson
Road), that is expected to be completed in December 1997. The Company is also
expanding the Selma and Wadley plants, which should be completed in December
1997. The Company also leases approximately 9,000 square feet of showroom space
in Chicago, Illinois and approximately 5,400 square feet of showroom space in
High Point, North Carolina.
The Company has entered into a definitive agreement for the purchase of an
approximately 175,000 square foot manufacturing facility in Sonora, Mexico and
has purchased approximately 75 acres in Yuma County, Arizona on which it is
constructing an approximately 100,000 square foot painting and packing facility
and an approximately 500,000 square foot distribution facility. These facilities
will enable the Company to serve mass and specialty retailers in the western
United States. These purchases are expected to close in October 1997, but there
can be no assurances that they will close when scheduled or at any time.
TRADEMARKS
The Company has registered the trade name "Interior Images by Salterini"
with the United States Patent and Trademark Office ("USPTO"). The Company has
filed applications with the USPTO to register the trade names "Meadowcraft,"
"Plantation Patterns," "Arlington House," "Salterini," and "Home Collection from
Plantation Patterns." In the opinion of management, the Company's trademark
position is adequately protected in all markets in which the Company does
business. The Company believes that its various trade names are generally well
recognized by dealers and distributors and are associated with a high level of
quality and value.
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<PAGE> 33
MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND DIRECTOR NOMINEES
Certain information concerning the executive officers, directors and
director nominees of the Company is set forth below:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
- ---- --- -------------------------
<S> <C> <C>
Samuel R. Blount............................. 50 Chairman of the Board of Directors
William J. McCanna........................... 57 President and Director
T. Morris Hackney(1)......................... 64 Director Nominee
James M. Scott(1)............................ 61 Director Nominee
Reese H. McKinney, Jr.(1).................... 49 Director Nominee
Steven C. Braswell........................... 47 Vice President of Finance, Chief
Financial Officer and Secretary
Timothy M. LeRoy............................. 33 Vice President of Sales and Marketing
(Mass Accounts)
Rory S. Rehmert.............................. 37 Vice President of Sales and Marketing
(Specialty Accounts)
</TABLE>
- ---------------
(1) Messrs. Hackney, Scott, and McKinney have each agreed to serve as a director
and a member of the Audit and Compensation Committees of the Board of
Directors upon completion of the Offering.
Samuel R. Blount. Mr. Blount is Chairman of the Board of Directors of the
Company and has served in such capacity since the Company's formation in 1985.
Mr. Blount has over 18 years of experience with the Company and its predecessor.
Prior to the formation of the Company, Mr. Blount served as President of HBC,
Incorporated, a holding company that owned several manufacturing businesses. Mr.
Blount has also served in various positions at Blount Inc. and Western River
Expeditions, Inc. Mr. Blount presently serves or has served on numerous
educational and civic boards. Mr. Blount attended the University of the South
and served in the U.S. Marine Corps.
William J. McCanna. Mr. McCanna is President and a director of the Company
and has served in such capacities since 1991. Mr. McCanna has over 30 years of
experience in manufacturing, operations and senior management. Prior to joining
the Company, Mr. McCanna served as Chief Operating Officer and Director of
Philips Industries in Dayton, Ohio. Mr. McCanna has also served in a variety of
capacities at General Electric, Emerson Electric and Allis Chalmers. Mr. McCanna
received his BSc. in Electrical Engineering from Penn State University in 1965.
Mr. McCanna is also a graduate of the Advanced Management Program at Harvard
Business School and served in the U.S. Marine Corps.
T. Morris Hackney. Mr. Hackney is the Chairman of the Board and Chief
Executive Officer of Citation Corporation and has served in such capacities
since 1974. Citation Corporation is a publicly-traded metal component supplier
to the capital goods and durable goods industries. Mr. Hackney is also a member
of the Board of Directors of Alabama National Bancorporation and Chairman of the
Board of the Hackney Group, a diversified corporation. Mr. Hackney presently
serves on the board of numerous charitable and business organizations. Mr.
Hackney is a graduate of the Naval Academy in Annapolis, MD and served in the
U.S. Navy.
James M. Scott. Mr. Scott is a partner, Chairman of the Board of Governors
and past Chairman of the Business and Tax Section of Capell, Howard, Knabe and
Cobbs, P.A., a law firm located in Montgomery, Alabama. Mr. Scott has held
various positions with the firm since 1964. Mr. Scott received his B.A. from the
University of the South, J.D. from the University of Alabama and LLM from New
York University. Mr. Scott is a member of the Board of Trustees of The
University of Alabama Graduate Tax Program and past Chairman of the Tax Section
of the Alabama State Bar Association. Mr. Scott has been listed in Best Lawyers
in America since 1989. Mr. Scott is the author of various articles and handbooks
on tax, partnership and
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<PAGE> 34
corporate law matters. Mr. Scott is a lecturer for the Alabama Bar Review. Mr.
Scott served in the U.S. Army, Special Forces.
Reese H. McKinney, Jr. Mr. McKinney is Administrative Assistant to the
Mayor of the City of Montgomery, Alabama and has served in such capacity since
1978. Mr. McKinney has served on the Board of the Central Alabama Aging
Consortium and past Chairman of the Board for the Central Alabama Regional
Planning and Development Commission. Mr. McKinney has also served on the boards
of numerous other political and civic organizations. Mr. McKinney received a
Bachelor of Science degree in Business Administration from Huntingdon College
and a B.F.A. degree in Environmental Design from the New School of Social
Research in New York City.
Steven C. Braswell. Mr. Braswell is Vice President of Finance, Chief
Financial Officer and Secretary of the Company and has served in such capacities
since 1991. Mr. Braswell has over 25 years of experience in finance and
accounting, including thirteen years at Hanson Industries in various financial
positions including Group Controller and Vice President, two years as Manager of
Finance and Accounting at Perkin Elmer Corporation in its Interdata Division and
five years at Price Waterhouse. Mr. Braswell received his BS in Accounting from
Rider College in 1972. Mr. Braswell is a Certified Public Accountant in the
state of New Jersey.
Timothy M. LeRoy. Mr. LeRoy is Vice President of Sales and Marketing (Mass
Accounts) of the Company and has served in such capacity since 1991. Prior to
joining the Company, Mr. LeRoy was with Central Hardware Company for eight years
as Supervisor, Buyer and Merchandiser. Mr. LeRoy received his BS from the
University of Missouri in 1987.
Rory S. Rehmert. Mr. Rehmert is Vice President of Sales and Marketing
(Specialty Accounts) of the Company and has served in such capacity since 1991.
Prior to joining Meadowcraft, Mr. Rehmert served as National Sales Manager for
Lyon Shaw Furniture Company and Special Accounts Manager for Winston Furniture
Company and as Store Manager with Flower City, Inc. Mr. Rehmert received his BS
from Kansas State University in 1981.
BOARD OF DIRECTORS AND COMMITTEES
The members of the Board of Directors are elected annually and serve for
terms of one year until reelected or replaced or until their earlier resignation
or removal. Executive officers of the Company are elected annually by, and serve
at the discretion of, the Board of Directors. Upon consummation of the Offering,
the Company intends to add the three outside director nominees listed in the
table under the caption "-- Executive Officers, Directors and Director
Nominees."
Upon consummation of the Offering, the Board of Directors intends to
designate an Audit Committee and a Compensation Committee and will appoint the
outside directors to each of the committees upon their election to the Board of
Directors. The Audit Committee will be responsible for recommending independent
auditors, reviewing with the independent auditors the scope and results of
audits, monitoring the Company's financial policies and control procedures,
monitoring the nonaudit services provided by the Company's auditors and
reviewing all potential conflict of interest situations. The Compensation
Committee will be responsible for reviewing, determining and establishing the
salaries, bonuses and other compensation of the executive officers of the
Company.
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<PAGE> 35
EXECUTIVE COMPENSATION
The following table sets forth a summary of the compensation paid or
accrued by the Company for services rendered in all capacities to the Company
during Fiscal 1997, to the Company's Chairman of the Board of Directors and the
four other highest paid executive officers (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
BASE ALL OTHER
NAME AND PRINCIPAL POSITION HELD SALARY BONUS COMPENSATION(2)
- -------------------------------- -------- -------- ---------------
<S> <C> <C> <C>
Samuel R. Blount................................ $300,000 $ 0 $1,566
Chairman of the Board of Directors
William J. McCanna.............................. $276,242 $584,144(1) $4,050
President
Steven C. Braswell.............................. $108,975 $ 51,962 $1,169
Vice President of Finance, Chief Financial
Officer and Secretary
Timothy M. LeRoy................................ $105,192 $ 89,308 $ 343
Vice President of Sales and Marketing (Mass
Accounts)
Rory S. Rehmert................................. $ 89,167 $ 76,205 $ 351
Vice President of Sales and Marketing
(Specialty Accounts)
</TABLE>
- ---------------
(1) Includes $333,333, which was paid to Mr. McCanna pursuant to an agreement to
pay him a bonus of $1.0 million in three equal annual installments, plus
interest at the average prime rate on the last two installments. Mr. McCanna
received the first installment in Fiscal 1996 and received the last
installment in August 1997. See "-- Employment Agreements; Confidentiality
Agreements."
(2) Represents dollar value of insurance premiums paid with respect to life
insurance for the benefit of the Named Executive Officer.
EMPLOYMENT AGREEMENTS; CONFIDENTIALITY AGREEMENTS
The Company has not entered into any employment agreements or noncompete
agreements with any of its employees. In 1992, the Company agreed to pay William
J. McCanna a bonus of $1.0 million when the Company achieved audited year-end
equity of $10.0 million, provided certain other conditions were satisfied. Mr.
McCanna became eligible to receive the bonus in August 1995. The bonus was
accrued in each of Fiscal 1995, 1996 and 1997 and was paid out in three annual
installments.
The Company maintains a long-term incentive program for certain of its key
employees, excluding the Chairman of the Board of Directors and President. Cash
awards are granted to the key employees as determined by the Chairman of the
Board of Directors and President. The cash bonuses vest at the rate of 20% per
year based on the attainment of goals and objectives by the Company and by the
employee. Once fully vested, the bonuses are payable to the employee at the rate
of 20% per year and the unpaid balance bears interest at the prime rate. The
bonus is subject to forfeiture if the employee voluntarily terminates employment
before the bonus is fully vested. If employment is terminated for any other
reason, the employee is entitled to receive the vested portion of the bonus at
the rate of 20% per year.
All of the Company's exempt salaried employees, including the executive
officers, have each signed a confidentiality agreement pursuant to which each
has agreed not to disclose any of the Company's confidential information and to
assign to the Company any rights he or she may have in any design, invention,
software, process, trade secret or intellectual property that relates to or
resulted from work performed at the Company.
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<PAGE> 36
1997 STOCK OPTION PLAN
On July 31, 1997, the Board of Directors of the Company adopted the
Company's 1997 Stock Option Plan (the "Plan"), which was approved by the
Stockholders on July 31, 1997. The Plan provides for the grant of stock options
("Options") to participants. The objectives of the Plan are to promote the
success and enhance the value of the Company by providing flexibility in the
Company's ability to motivate, attract and retain the services of employees. A
total of 1,000,000 shares of Common Stock have been reserved for issuance under
the Plan. The Plan authorizes the grant of nonqualified Options and Options
intended to qualify as incentive stock options ("Incentive Options") under
Section 422 of the Code.
The Plan will be administered by the Board of Directors, which has the
exclusive power to (i) designate participants, (ii) determine the number of
Options to be granted, (iii) fix the terms and conditions of any Option, (iv)
prescribe the form of each Option agreement, (v) decide all other matters that
must be determined in connection with an Option, (vi) establish, adopt or revise
any rules and regulations as it may deem necessary or advisable to administer
the Plan, and (vii) make all other decisions and determinations that may be
required under the Plan. The Plan provides that the Board of Directors will
select participants from among employees, officers and directors of the Company
or its future subsidiaries.
The exercise price for each Option granted under the Plan will be
determined by the Board of Directors, but will not be less than the fair market
value of the Common Stock on the date of grant. No Incentive Options may be
granted to any employee who owns, at the date of grant, stock representing in
excess of 10% of the combined voting power of all classes of stock of the
Company or any subsidiary unless the exercise price for stock subject to such
Incentive Options is at least 110% of the fair market value of such stock at the
time of grant and the Incentive Option term does not exceed five years.
The term of each Option will be for the period as determined by the Board
of Directors, provided no Option will exceed a period of 10 years from the date
of grant. If a participant who holds Options ceases, for any reason, to be an
employee of the Company (the "Termination"), the Options expire three months
after such Termination. Notwithstanding the foregoing, in the event of
Termination due to the optionee's death, the Options may be exercised for a
period of 12 months following the date of such optionee's death. Options granted
under the Plan may be exercisable in installments.
Upon the exercise of Incentive Options, the option exercise price must be
paid in full, either in cash or other form acceptable to the Board of Directors,
including delivery of shares of Common Stock already owned by the optionee.
Unless terminated earlier, the Plan will terminate on July 30, 2007. As of the
date hereof, no Options have been granted under the Plan but the Board of
Directors of the Company expects to grant options under the Plan at the initial
public offering price to certain key employees and nonemployee directors
immediately prior to consummation of this Offering. See "-- Compensation of
Directors."
401(K) PLAN
The Company maintains a Section 401(k) Profit Sharing Plan (the "KPlan")
for its salaried employees. The KPlan is a Code Section 401(k) plan which
requires, subject to certain limited exceptions, 12 months of service and
attainment of age 21 to become a participant in the KPlan. The KPlan allows the
employees to make pretax contributions to the KPlan, which are matched at a rate
determined by the Company's Board of Directors (currently 33%) up to a maximum
of 10% of the employee's compensation. The total KPlan expense for Fiscal 1997,
1996 and 1995 was $94,000, $82,000 and $63,000, respectively.
COMPENSATION OF DIRECTORS
Upon election to the Board of Directors, each nonemployee director will be
awarded options to purchase shares of Common Stock under the Plan with an
aggregate exercise price of $100,000 based on the initial public offering price,
subject to vesting at the rate of 20% per year. The chairman of the Audit
Committee will receive additional cash compensation in the amount of $5,000 per
year. No additional compensation will be paid to directors for serving on
committees. All directors will receive reimbursement of travel expenses incurred
in attending meetings of the Board of Directors and committees.
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<PAGE> 37
CERTAIN TRANSACTIONS
TRANSACTION WITH DIRECTOR NOMINEE
On July 1, 1987, the Company entered into an Assignment of Sublease with
Champion International Corporation, a New York corporation ("CIC"), and Pinson
Partners, an Alabama general partnership, with respect to the substitution of
the Company as sublessee under a Sublease dated January 31, 1977 (the
"Sublease") between CIC and Birmingham Ornamental Iron Company, Inc., an Alabama
corporation ("BOIC"). Under the terms of the Sublease, the Company subleases the
Meadowcraft Road property from CIC for use as a manufacturing facility. The
current rental rate is approximately $32,100 per month, of which approximately
$29,500 per month is payable to Pinson Partners. Mr. T. Morris Hackney, a
director nominee, and his wife, Brenda Hackney, own a 40% interest in Pinson
Partners which entitles them to approximately $11,800 per month of the rental
payments made by the Company to Pinson Partners. The Company, as sublessee, is
also required to maintain insurance on the premises and pay all operating
expenses, including utility charges, with respect to the premises. The
Meadowcraft Road property is currently exempt from ad valorem taxes, but the
Company is required to pay all such taxes if and when the premises become
taxable. The underlying lease between BOIC and the City of Tarrant City, a
municipal corporation, expires on August 29, 2000. The Company believes that the
terms of the underlying lease, including the monthly rental rate, are at least
as favorable to the Company as those which could have been negotiated with an
unaffiliated third party.
S CORPORATION TERMINATION
Upon consummation of the Offering, the Company will terminate its S
Corporation election. In connection therewith, the Company intends to declare a
distribution effecting the S Corporation Distribution to its existing
stockholders before the completion of the Offering. The Company expects to pay
approximately $32.7 million of S Corporation Distribution with a portion of the
net proceeds from the Offering. See "Use of Proceeds."
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of July 31, 1997, and as adjusted to
reflect the sale of the Common Stock offered hereby, by: (i) each director of
the Company, (ii) all directors and executive officers as a group, and (iii)
each stockholder known by the Company to be the beneficial owner of more than
five percent of the outstanding Common Stock. Except as otherwise indicated,
each person or entity listed below has sole voting and investment power with
respect to all shares shown to be beneficially owned by such person. Under the
rules of the Securities and Exchange Commission (the "Commission"), a person is
deemed to be a "beneficial owner" of a security if such person has or shares the
power to vote or direct the voting of such security or the power to dispose of
or to direct the disposition of such security. Accordingly, more than one person
may be deemed to be a beneficial owner of the same security.
<TABLE>
<CAPTION>
NUMBER OF SHARES NUMBER OF SHARES
BENEFICIALLY OWNED BENEFICIALLY OWNED
NAME OF BENEFICIAL OWNER(1) PRIOR TO THE OFFERING PERCENT AFTER THE OFFERING PERCENT
- --------------------------- --------------------- ------- ------------------ -------
<S> <C> <C> <C> <C>
Samuel R. Blount.............................. 14,400,000(2) 90.0% 14,504,929(3) 75.8%
William J. McCanna............................ 1,600,000 10.0% 1,600,000 8.4%
All Named Executive Officers, directors and
director nominees as a group (8 persons).... 16,000,000 100.0% 16,138,500(3) 84.4%
</TABLE>
- ---------------
(1) The address of the directors and Named Executive Officers set forth in the
table is the address of the Company appearing elsewhere in this Prospectus.
(2) Includes 11,200,000 shares of Common Stock held of record by Mr. Blount and
3,200,000 shares of Common Stock beneficially owned by him.
(3) Includes Directed Shares to be beneficially owned by such persons at
the completion of the Offering.
36
<PAGE> 38
DESCRIPTION OF CAPITAL STOCK
GENERAL
The Company's authorized capital stock consists of 100,000,000 shares of
common stock, par value $.01 per share. Immediately prior to the closing of the
Offering, the Company will have 16,000,000 shares of Common Stock outstanding.
Upon the closing of the Offering, assuming no exercise of the Underwriters'
over-allotment option, the Company will have 19,125,000 shares of Common Stock
outstanding. The following summary is qualified in its entirety by reference to
the Amended and Restated Certificate of Incorporation ("Restated Certificate"),
which is included as an exhibit to the Registration Statement of which this
Prospectus is a part.
COMMON STOCK
The issued and outstanding shares of Common Stock are, and the shares of
Common Stock being offered will be, upon payment therefor, validly issued, fully
paid and nonassessable. The holders of outstanding shares of Common Stock are
entitled to receive dividends out of assets legally available therefor at such
times and in such amounts as the Board of Directors may from time to time
determine. The shares of Common Stock are neither redeemable nor convertible,
and the holders thereof have no preemptive or subscription rights to purchase
any securities of the Company. Upon liquidation, dissolution or winding up of
the Company, the holders of Common Stock are entitled to receive pro rata the
assets of the Company which are legally available for distribution, after
payment of all debts and other liabilities. Each outstanding share of Common
Stock is entitled to one vote on all matters submitted to a vote of
stockholders.
STATUTORY BUSINESS COMBINATION PROVISION
The Company is a Delaware corporation and is subject to Section 203 of the
Delaware General Corporation Law ("DGCL"). In general, Section 203 prevents an
"interested stockholder" (defined generally as a person owning 15% or more of a
corporation's outstanding voting stock) from engaging in a "business
combination" (as defined) with a Delaware corporation for three years following
the time such person became an interested stockholder unless (i) before such
person became an interested stockholder, the board of directors of the
corporation approved the transaction in which the interested stockholder became
an interested stockholder or approved the business combination, (ii) upon
consummation of the transaction that resulted in the stockholder's becoming an
interested stockholder, the interested stockholder owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced (excluding stock held by directors who are also officers of the
corporation and by employee stock plans that do not provide employees with the
rights to determine confidentially whether shares held subject to the plan will
be tendered in a tender or exchange offer) or (iii) following the transaction in
which such person became an interested stockholder, the business combination was
approved by the board of directors of the corporation and authorized at a
meeting of stockholders, and not by written consent, by the affirmative vote of
the holders of two thirds of the outstanding shares of voting stock of the
corporation not owned by the interested stockholder. Under Section 203, the
restrictions described above also do not apply to certain business combinations
proposed by an interested stockholder following the announcement or notification
of one of certain extraordinary transactions involving the corporation and a
person who had not been an interested stockholder during the previous three
years or who became an interested stockholder with the approval of a majority of
the corporation's directors, if such extraordinary transaction is approved or
not opposed by a majority of the directors who were directors prior to any
person's becoming an interested stockholder during the previous three years or
were recommended for election or elected to succeed such directors by a majority
of such directors.
CERTAIN PROVISIONS OF RESTATED CERTIFICATE AND BYLAWS
Delaware law authorizes corporations to limit or eliminate the personal
liability of directors to corporations and their stockholders for monetary
damages for breach of a director's fiduciary duty of care. The duty of care
requires that, when acting on behalf of the corporation, directors must exercise
an informed
37
<PAGE> 39
business judgment based on all material information reasonably available to
them. Absent the limitations authorized by Delaware law, directors are
accountable to corporations and their stockholders for monetary damages for
conduct constituting gross negligence in the exercise of their duty of care.
Delaware law enables corporations to limit available relief to equitable
remedies such as injunction or rescission. The Restated Certificate limits the
liability of directors of the Company to the Company or its stockholders to the
fullest extent permitted by Delaware law. Specifically, directors of the Company
will not be personally liable for monetary damages for breach of a director's
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Company or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) for unlawful payments of dividends or unlawful stock
repurchases or redemptions as provided in Section 174 of the DGCL or (iv) for
any transaction from which the director derived an improper personal benefit.
The inclusion of this provision in the Restated Certificate may have the
effect of reducing the likelihood of derivative litigation against directors and
may discourage or deter stockholders or management from bringing a lawsuit
against directors for breach of their duty of care, even though such an action,
if successful, might otherwise have benefitted the Company and its stockholders.
The Restated Certificate provides indemnification to the Company's officers and
directors and certain other persons with respect to certain matters.
The Restated Certificate provides that the number of directors will be
fixed from time to time by, or in the manner provided in, the bylaws of the
Company. The Amended and Restated Bylaws of the Company provide that the number
of directors constituting the whole Board of Directors of the Company will be
fixed by the affirmative vote of a majority of the members at any time
constituting the Board of Directors, and such number may be increased or
decreased from time to time; provided, however, that no such decrease may
shorten the term of any incumbent director. The Restated Certificate also
provides that directors may be removed only for cause. These provisions, in
conjunction with provisions of the Restated Certificate authorizing the Board of
Directors to fill vacant directorships, will prevent stockholders from removing
incumbent directors without cause and filling the resulting vacancies with their
own nominees.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Company's Common Stock is AmSouth
Bank.
SHARES ELIGIBLE FOR FUTURE SALE
Upon consummation of the Offering, the Company will have outstanding
19,125,000 shares of Common Stock (19,593,750 if the Underwriters'
over-allotment option is exercised in full) of which the 3,125,000 shares sold
in the Offering (3,593,750 if the Underwriters' over-allotment option is
exercised in full) will be freely tradeable without restriction or further
registration under the Securities Act, except for those held by "affiliates" (as
defined in the Securities Act) of the Company, which shares will be subject to
the resale limitations of Rule 144 under the Securities Act. The remaining
16,000,000 shares of Common Stock are deemed "restricted securities" under Rule
144 in that they were originally issued and sold by the Company in private
transactions in reliance upon exemptions under the Securities Act, and may be
publicly sold only if registered under the Securities Act or sold in accordance
with an applicable exemption from registration, such as those provided by Rule
144 promulgated under the Securities Act as described below.
In general, under Rule 144, if a minimum of one year has elapsed since the
later of the date of acquisition of restricted securities from the issuer or
from an affiliate of the issuer, the acquirer or subsequent holder would be
entitled to sell within any three-month period a number of those shares that
does not exceed the greater of one percent of the number of shares of such class
of stock then outstanding or the average weekly trading volume of the shares of
such class of stock during the four calendar weeks preceding the filing of a
Form 144 with respect to such sale. Sales under Rule 144 are also subject to
certain manner of sale provisions and notice requirements and to the
availability of current public information about the issuer. In addition, if a
period of at least two years has elapsed since the later of the date of
acquisition of restricted securities from the issuer or from any affiliate of
the issuer, and the acquirer or subsequent holder thereof is deemed not to have
38
<PAGE> 40
been an affiliate of the issuer of such restricted securities at any time during
the 90 days preceding a sale, such person would be entitled to sell such
restricted securities under Rule 144(k) without regard to the requirements
described above. Rule 144 does not require the same person to have held the
securities for the applicable periods. The foregoing summary of Rule 144 is not
intended to be a complete description thereof.
As of July 31, 1997, 1,000,000 shares of Common Stock were reserved for
issuance upon the exercise of options to be granted under the Plan. See
"Management -- 1997 Stock Option Plan." In general, pursuant to Rule 701 under
the Securities Act, any employee, officer or director of the Company who
purchases his or her shares of Common Stock pursuant to a written compensatory
plan or contract is entitled to rely on the resale provisions of Rule 701, which
permit non-affiliates to sell such shares without compliance with the public
information, holding period, volume limitation or notice provisions of Rule 144,
and permit affiliates to sell such shares without compliance with the holding
period provisions of Rule 144, in each case commencing 90 days after the date of
this Prospectus. As of the date of this Prospectus, no options have been granted
under the Plan, but the Board of Directors of the Company expects to grant
options under the Plan at the initial public offering price to certain key
employees and nonemployee directors immediately prior to consummation of this
Offering. See "Management -- 1997 Stock Option Plan" and "-- Compensation of
Directors."
The Company, its existing stockholders, certain officers and its directors
have agreed not to issue, sell, offer or agree to sell, grant any option (other
than pursuant to the Plan) or other right for the sale of, or otherwise dispose
of, directly or indirectly, any shares of Common Stock (or any securities
convertible into, exercisable for or exchangeable for Common Stock) during the
270-day period after the date of this Prospectus without the prior written
consent of A.G. Edwards & Sons, Inc., with certain limited exceptions.
Prior to the Offering, there has been no established public market for the
Common Stock. No prediction can be made of the effect, if any, that sales of
shares under Rule 144, or otherwise, or the availability of shares for sale will
have on the market price of the Common Stock prevailing from time to time after
the Offering. The Company is unable to estimate the number of shares that may be
sold in the public market under Rule 144, or otherwise, because such amount will
depend on the trading volume in, and market price for, the Common Stock and
other factors. Nevertheless, sales of substantial amounts of shares in the
public market, or the perception that such sales could occur, could adversely
affect the market price of the Common Stock of the Company. See "Underwriting."
39
<PAGE> 41
UNDERWRITING
Subject to the terms and conditions of an Underwriting Agreement among the
Company and A.G. Edwards & Sons, Inc. (the "Representative"), the underwriters
listed below (the "Underwriters") have severally agreed to purchase from the
Company the aggregate number of shares of the Company's Common Stock set forth
opposite their respective names below:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
----------- ---------
<S> <C>
A.G. Edwards & Sons, Inc....................................
---------
Total............................................. 3,125,000
=========
</TABLE>
Pursuant to the terms of the Underwriting Agreement, the Underwriters will
acquire the shares of Common Stock offered hereby from the Company at the public
offering price set forth on the cover page hereof less the underwriting
discounts and commissions set forth on the cover page. The Underwriters propose
to offer the shares to the public at the public offering price set forth on the
cover page. Some of the shares offered to the public will be sold to certain
dealers at the public offering price less a dealers' concession not in excess of
$ per share. The Underwriters and such dealers may allow a discount not in
excess of $ per share to other dealers. After the shares are released for
sale to the public, the public offering price and other terms may be varied by
the Representative.
The nature of the obligations of the Underwriters is such that if any of
the shares offered hereby are purchased, all of such shares must be purchased.
The Company has granted to the Underwriters an option for 30 days to
purchase (at the public offering price less the underwriting discounts and
commissions shown on the cover page of this Prospectus) up to 468,750 additional
shares. The Underwriters may exercise such option only to cover over-allotments
of shares made in connection with the sale of the shares offered hereby. To the
extent the Underwriters exercise such option, each of the Underwriters will have
a firm commitment, subject to certain conditions, to purchase approximately the
same percentage of the option shares that the number of shares of Common Stock
to be purchased by it shown in the above table bears to 3,125,000, and the
Company will be obligated, pursuant to the option, to sell such shares to the
Underwriters.
The Company, its existing stockholders, certain officers and its directors
have agreed to enter into lock-up agreements pursuant to which they will agree
that they will not, for 270 days from and after the date of this Prospectus,
sell, offer to sell, or otherwise dispose of, directly or indirectly, any shares
of capital stock of the Company (other than shares offered hereby, shares
issuable pursuant to a plan for employees or shareholders in effect on the date
of this Prospectus, and Common Stock issuable on conversion of securities or
exercise of warrants or options outstanding on the date of this Prospectus)
without the prior written consent of A.G. Edwards & Sons, Inc.
Prior to the Offering, there has been no public market for the Common
Stock. The initial public offering price of the shares of Common Stock will be
negotiated among the Company and the Representative. In addition to prevailing
market conditions, among the factors that may be considered in determining the
initial public offering price of the shares of Common Stock are the Company's
historical financial performance, estimates of the business potential and
earning prospects of the Company, an assessment of the Company's management and
the consideration of the above factors in relation to the market valuations of
companies in similar business.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as amended,
or to contribute to payments the Underwriters may be required to make in respect
thereof.
In connection with the Offering, certain Underwriters and selling group
members and their respective affiliates may engage in transactions that
stabilize, maintain or otherwise affect the market price of the
40
<PAGE> 42
Common Stock. Such transactions may include stabilization transactions effected
in accordance with Rule 104 of Regulation M, pursuant to which such persons may
bid for or purchase Common Stock for the purpose of stabilizing its market
price. The Underwriters also may create a short position for the account of the
Underwriters by selling more Common Stock in connection with the Offering than
they are committed to purchase from the Company, and in such case may purchase
Common Stock in the open market following completion of the Offering to cover
all or a portion of such short position. The Underwriters may also cover all or
a portion of such short position, up to 468,750 shares of Common Stock, by
exercising the Underwriters' over-allotment option referred to above. In
addition, A.G. Edwards & Sons, Inc., on behalf of the Underwriters, may impose
"penalty bids" under contractual arrangements with the Underwriters whereby it
may reclaim from an Underwriter (or dealer participating in the offering) for
the account of the other Underwriters, the selling concession with respect to
Common Stock that is distributed in the Offering but subsequently purchased for
the account of the Underwriters in the open market. Any of the transactions
described in this paragraph may result in the maintenance of the price of the
Common Stock at a level above that which might otherwise prevail in the open
market. None of the transactions described in this paragraph is required, and,
if they are undertaken, they may be discontinued at any time.
The Representative has informed the Company that the Underwriters do not
intend to confirm sales to any accounts over which they exercise discretionary
authority.
At the Company's request, the Underwriters will reserve for sale at the
initial public offering price up to 357,143 Directed Shares which may be sold to
directors, officers or employees of the Company and other persons associated
with the Company's directors or officers, including up to 290,643 Directed
Shares for sale to members of the immediate family of the existing stockholders.
The number of shares available for sale to the general public will be reduced to
the extent any Directed Shares are purchased. Any Directed Shares not so
purchased will be offered by the Underwriters on the same basis as the other
shares offered hereby. Each purchaser of Directed Shares will be required to
agree to restrictions on resale similar to those described above. See "Principal
Stockholders."
EXPERTS
The audited balance sheets of the Company as of April 28, 1996, May 3,
1997, and July 31, 1997 and the related statements of income, stockholders'
equity, and cash flows for each of the three fiscal years in the period ended
May 3, 1997, and the thirteen weeks ended July 31, 1997, included in this
Prospectus and the Registration Statement of which this Prospectus is a part,
have been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in giving said reports.
LEGAL MATTERS
The legality of the Common Stock offered hereby will be passed upon for the
Company by Sirote & Permutt, P.C., Birmingham, Alabama. Certain legal matters
related to the Offering will be passed upon for the Underwriters by Debevoise &
Plimpton, New York, New York.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-1 (together with all exhibits, schedules and amendments relating thereto, the
"Registration Statement") with respect to the Common Stock offered hereby. This
Prospectus, filed as part of the Registration Statement, does not contain all
the information contained in the Registration Statement, certain portions of
which have been omitted in accordance with the rules and regulations of the
Commission. For further information with respect to the Company and the Common
Stock offered hereby, reference is made to the Registration Statement including
the exhibits thereto. Statements contained in this Prospectus as to the contents
of any contract or other document filed as an exhibit to the Registration
Statement accurately describe the material provisions of such document and are
qualified in their entirety by reference to such exhibits for complete
statements of their
41
<PAGE> 43
provisions. All of these documents may be inspected without charge at the Public
Reference Section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549, and at the following regional offices of the
Commission: Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661; and 7 World Trade Center, 13th Floor, New York, New York 10048.
Copies can also be obtained from the Commission at prescribed rates. The
Commission maintains a Web site (http://www.sec.gov) that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the Commission. Upon completion of the Offering,
the Company will be subject to the information reporting requirements of the
Securities Exchange Act of 1934 and, in accordance therewith, will file reports,
proxy statements and other information with the Commission.
The Company intends to furnish its stockholders with annual reports
containing financial statements audited by the Company's independent accountants
and quarterly reports for the first three fiscal quarters of each fiscal year
containing unaudited interim financial information after the completion of the
Offering.
42
<PAGE> 44
INDEX TO FINANCIAL STATEMENTS
MEADOWCRAFT, INC.
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
Report of Independent Public Accountants.................... F-2
Balance Sheets as of April 28, 1996, May 3, 1997, July 31,
1996 (unaudited) and July 31, 1997........................ F-3
Statements of Income for the years ended April 30, 1995,
April 28, 1996, May 3, 1997 and the thirteen weeks ended
July 31, 1996 (unaudited) and July 31, 1997............... F-4
Statements of Stockholders' Equity for the years ended April
30, 1995, April 28, 1996, May 3, 1997 and the thirteen
weeks ended July 31, 1997................................. F-5
Statements of Cash Flows for the years ended April 30, 1995,
April 28, 1996, May 3, 1997 and the thirteen weeks ended
July 31, 1996 (unaudited) and July 31, 1997............... F-6
Notes to Financial Statements............................... F-7
</TABLE>
F-1
<PAGE> 45
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Meadowcraft, Inc.:
We have audited the accompanying balance sheets of Meadowcraft, Inc. (a
Delaware corporation) as of April 28, 1996, May 3, 1997 and July 31, 1997 and
the related statements of income, stockholders' equity, and cash flows for each
of the three fiscal years in the period ended May 3, 1997 and the thirteen weeks
ended July 31, 1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Meadowcraft, Inc. as of
April 28, 1996, May 3, 1997, and July 31, 1997 and the results of its operations
and its cash flows for each of the three fiscal years in the period ended May 3,
1997, and the thirteen weeks ended July 31, 1997 in conformity with generally
accepted accounting principles.
/s/ ARTHUR ANDERSEN LLP
--------------------------------------
Arthur Andersen LLP
Birmingham, Alabama
August 22, 1997
F-2
<PAGE> 46
MEADOWCRAFT, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
PRO FORMA
STOCKHOLDERS'
EQUITY AT
APRIL 28, 1996 MAY 3, 1997 JULY 31, 1996 JULY 31, 1997 JULY 31, 1997
-------------- ------------ ------------- ------------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Due from factor.............. $ 41,067,000 $ 35,549,000 $10,365,000 $ 10,758,000
Accounts receivable.......... 22,938,000 27,915,000 3,565,000 5,700,000
Inventories.................. 19,240,000 21,472,000 10,843,000 11,590,000
Prepaid expenses and other... 319,000 330,000 288,000 293,000
------------ ------------ ----------- ------------
83,564,000 85,266,000 25,061,000 28,341,000
------------ ------------ ----------- ------------
PROPERTY, PLANT, AND
EQUIPMENT:
Land......................... 4,183,000 4,801,000 4,183,000 4,966,000
Buildings.................... 21,996,000 22,459,000 21,996,000 22,459,000
Machinery and equipment...... 24,828,000 26,141,000 24,829,000 26,141,000
Leasehold improvements....... 1,287,000 1,287,000 1,287,000 1,287,000
Furniture and fixtures....... 1,698,000 2,707,000 2,490,000 2,707,000
Construction in process...... 208,000 403,000 1,043,000 2,309,000
------------ ------------ ----------- ------------
54,200,000 57,798,000 55,828,000 59,869,000
Less accumulated depreciation
and amortization........... (12,123,000) (16,670,000) (13,326,000) (17,908,000)
------------ ------------ ----------- ------------
42,077,000 41,128,000 42,502,000 41,961,000
------------ ------------ ----------- ------------
OTHER ASSETS................. 838,000 667,000 797,000 770,000
------------ ------------ ----------- ------------
$126,479,000 $127,061,000 $68,360,000 $ 71,072,000
============ ============ =========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term
debt....................... $ 4,790,000 $ 4,750,000 $ 5,089,000 $ 4,550,000
Notes payable................ 60,528,000 48,896,000 15,009,000 10,226,000
Accounts payable............. 11,488,000 9,331,000 3,792,000 2,847,000
Accrued expenses............. 7,047,000 6,720,000 5,051,000 5,602,000
Warranty and other
reserves................... 3,007,000 2,716,000 1,812,000 1,311,000
------------ ------------ ----------- ------------
86,860,000 72,413,000 30,753,000 24,536,000
------------ ------------ ----------- ------------
LONG-TERM DEBT............... 19,419,000 15,320,000 18,812,000 13,392,000
------------ ------------ ----------- ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value,
100,000,000 shares
authorized, 16,000,000
shares issued and
outstanding................ 160,000 160,000 160,000 160,000 160,000
Additional paid-in capital... 340,000 340,000 340,000 340,000 340,000
Retained earnings ........... 19,700,000 38,828,000 18,295,000 32,644,000 2,674,000
------------ ------------ ----------- ------------ -----------
20,200,000 39,328,000 18,795,000 33,144,000 $ 3,174,000
------------ ------------ ----------- ------------ ===========
$126,479,000 $127,061,000 $68,360,000 $ 71,072,000
============ ============ =========== ============
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-3
<PAGE> 47
MEADOWCRAFT, INC.
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FISCAL YEAR ENDED THIRTEEN WEEKS ENDED
------------------------------------------ -------------------------
APRIL 30, APRIL 28, MAY 3, JULY 31, JULY 31,
1995 1996 1997 1996 1997
------------ ------------ ------------ ----------- -----------
(52 WEEKS) (52 WEEKS) (53 WEEKS) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
NET SALES........................ $120,767,000 $117,419,000 $141,945,000 $32,233,000 $35,368,000
COST OF SALES.................... 88,587,000 87,849,000 98,315,000 24,270,000 25,932,000
------------ ------------ ------------ ----------- -----------
Gross Profit..................... 32,180,000 29,570,000 43,630,000 7,963,000 9,436,000
------------ ------------ ------------ ----------- -----------
OPERATING EXPENSES:
Selling.......................... 6,101,000 6,092,000 6,939,000 1,232,000 1,517,000
General and administrative....... 5,165,000 5,906,000 6,039,000 1,332,000 1,442,000
------------ ------------ ------------ ----------- -----------
11,266,000 11,998,000 12,978,000 2,564,000 2,959,000
------------ ------------ ------------ ----------- -----------
Operating Income....... 20,914,000 17,572,000 30,652,000 5,399,000 6,477,000
INTEREST EXPENSE................. 4,881,000 5,018,000 5,274,000 1,304,000 1,161,000
------------ ------------ ------------ ----------- -----------
Net
income -- historical............. $ 16,033,000 $ 12,554,000 $ 25,378,000 $ 4,095,000 $ 5,316,000
============ ============ ============ =========== ===========
PRO FORMA PRESENTATION:
Net income -- historical......... $ 16,033,000 $ 12,554,000 $ 25,378,000 $ 4,095,000 $ 5,316,000
Pro forma provision for income
taxes (Notes 2 and 7).......... 6,071,000 4,685,000 9,439,000 1,523,000 1,978,000
------------ ------------ ------------ ----------- -----------
Pro forma net income
(Notes 2 and 7)................ $ 9,962,000 $ 7,869,000 $ 15,939,000 $ 2,572,000 $ 3,338,000
============ ============ ============ =========== ===========
Pro forma net income per share (Notes 2 and 7)................ $ .96 $ .20
============ ===========
Pro forma weighted average shares outstanding (Note 2)........ 16,521,000 16,521,000
============ ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE> 48
MEADOWCRAFT, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
--------------------- ADDITIONAL
SHARES PAID-IN RETAINED
ISSUED AMOUNT CAPITAL EARNINGS TOTAL
---------- -------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
BALANCE, MAY 1, 1994................ 16,000,000 $160,000 $340,000 $ 4,551,000 $ 5,051,000
Net income for the year........... 0 0 0 16,033,000 16,033,000
S corporation distributions....... 0 0 0 (5,100,000) (5,100,000)
---------- -------- -------- ------------ ------------
BALANCE, APRIL 30, 1995............. 16,000,000 160,000 340,000 15,484,000 15,984,000
Net income for the year........... 0 0 0 12,554,000 12,554,000
S corporation distributions....... 0 0 0 (8,338,000) (8,338,000)
---------- -------- -------- ------------ ------------
BALANCE, APRIL 28, 1996............. 16,000,000 160,000 340,000 19,700,000 20,200,000
Net income for the year........... 0 0 0 25,378,000 25,378,000
S corporation distributions....... 0 0 0 (6,250,000) (6,250,000)
---------- -------- -------- ------------ ------------
BALANCE, MAY 3, 1997................ 16,000,000 160,000 340,000 38,828,000 39,328,000
Net income for period............. 0 0 0 5,316,000 5,316,000
S corporation distributions....... 0 0 0 (11,500,000) (11,500,000)
---------- -------- -------- ------------ ------------
BALANCE, JULY 31, 1997.............. 16,000,000 $160,000 $340,000 $ 32,644,000 $ 33,144,000
========== ======== ======== ============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE> 49
MEADOWCRAFT, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FISCAL YEAR ENDED THIRTEEN WEEKS ENDED
------------------------------------------ ---------------------------
APRIL 30, APRIL 28, MAY 3, JULY 31, JULY 31,
1995 1996 1997 1996 1997
------------ ------------ ------------ ------------ ------------
(52 WEEKS) (52 WEEKS) (53 WEEKS) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................... $ 16,033,000 $ 12,554,000 $ 25,378,000 $ 4,095,000 $ 5,316,000
------------ ------------ ------------ ------------ ------------
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization........ 2,340,000 4,006,000 5,099,000 1,235,000 1,237,000
Changes in assets and liabilities:
Due from factor.................... (25,462,000) 22,736,000 5,518,000 30,702,000 24,791,000
Accounts receivable, net........... 12,410,000 (22,938,000) (4,977,000) 19,373,000 22,215,000
Inventories........................ (5,094,000) 496,000 (2,232,000) 8,397,000 9,882,000
Prepaid expenses and other......... 93,000 4,000 (11,000) 0 37,000
Other assets....................... (94,000) (44,000) 102,000 41,000 (103,000)
Accounts payable................... 4,624,000 (4,064,000) (2,157,000) (7,696,000) (6,484,000)
Accrued expenses................... 422,000 1,603,000 (327,000) (1,996,000) (1,118,000)
Warranty and other reserves........ 865,000 8,000 (291,000) (1,195,000) (1,405,000)
------------ ------------ ------------ ------------ ------------
Total adjustments........... (9,896,000) 1,807,000 724,000 48,861,000 49,052,000
------------ ------------ ------------ ------------ ------------
Net cash provided by
operating activities...... 6,137,000 14,361,000 26,102,000 52,956,000 54,368,000
------------ ------------ ------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures................. (16,034,000) (15,676,000) (3,406,000) (1,628,000) (2,070,000)
------------ ------------ ------------ ------------ ------------
Net cash used in investing
activities................ (16,034,000) (15,676,000) (3,406,000) (1,628,000) (2,070,000)
------------ ------------ ------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (payments) on notes
payable............................ 11,704,000 2,656,000 (11,632,000) (45,519,000) (38,670,000)
Proceeds from issuance of long-term
debt............................... 8,720,000 10,500,000 0 974,000 0
Principal payments of long-term
debt............................... (5,374,000) (3,255,000) (4,814,000) (1,283,000) (2,128,000)
Payment of loan costs................ (53,000) (248,000) 0 0 0
Payment of S corporation
distributions...................... (5,100,000) (8,338,000) (6,250,000) (5,500,000) (11,500,000)
------------ ------------ ------------ ------------ ------------
Net cash provided by (used
in) financing
activities................ 9,897,000 1,315,000 (22,696,000) (51,328,000) (52,298,000)
------------ ------------ ------------ ------------ ------------
Net change in cash.......... 0 0 0 0 0
CASH, BEGINNING OF YEAR.............. 0 0 0 0 0
------------ ------------ ------------ ------------ ------------
CASH, END OF YEAR.................... $ 0 $ 0 $ 0 $ 0 $ 0
============ ============ ============ ============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the period for
interest........................... $ 4,886,000 $ 4,736,000 $ 5,395,000 $ 1,059,000 $ 1,207,000
============ ============ ============ ============ ============
NONCASH INVESTING AND FINANCING
ACTIVITIES:
Capital leases originated............ $ 0 $ 3,000,000 $ 0 $ 0 $ 0
============ ============ ============ ============ ============
Capital expenditures financed with
debt............................... $ 0 $ 0 $ 675,000 $ 0 $ 0
============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE> 50
MEADOWCRAFT, INC.
NOTES TO FINANCIAL STATEMENTS
1. BUSINESS
Meadowcraft, Inc. (the "Company") designs, manufactures and distributes a
variety of wrought iron consumer products, including outdoor and indoor
furniture and accessories, outdoor cushions and umbrellas, and garden products,
which it markets to mass merchandisers and specialty stores primarily in the
United States.
Revenue and expenses are subject to material seasonal variations. The
seasonal nature of the Company's business requires an inventory build-up during
the fall and winter months in order to meet customer demand during the spring
and summer selling seasons. The Company relies upon bank borrowings and cash
flow from operations to finance this production (see Note 3).
The Company is proceeding with an initial public offering of Common Stock
(the "Offering"). A portion of the estimated net proceeds to the Company will be
used to make an S corporation distribution, which will be declared, but not
paid, prior to the Offering. The S corporation distribution will be equal to the
amount of the Company's undistributed earnings from October 1, 1986 to May 3,
1997 which were previously taxed to its existing stockholders plus the Company's
S Corporation earnings attributable to the period from May 4, 1997 to the date
of termination of the S corporation election. This amount has not been accrued
as of May 3, 1997. The Company intends to use the balance of the net proceeds
for capital expenditures.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FISCAL YEAR END
Prior to Fiscal 1997, the Company was on a 52/53 week year with the fiscal
year ending on the Sunday closest to the last day of April. During fiscal 1997,
the Company changed its reporting period to a fiscal year ending on the Saturday
closest to the last day of April. As a result of this change, fiscal 1997
includes 53 weeks of operations versus 52 weeks in each of fiscal 1996 and 1995.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect (1) the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and (2) the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
DUE FROM FACTOR
The Company maintains agreements with two financial institutions under
which a substantial portion of its trade accounts receivable are factored. Such
agreements provide for the factoring of accounts receivables without recourse;
therefore, the financial institutions assume all credit risk with respect to
factored customer accounts. The vast majority of the Company's factored accounts
receivable are factored with the bank which provides its $80,000,000 revolving
line of credit (see Note 3). The Company does not factor the receivables related
to four of its customers, and the related amounts are reflected in accounts
receivable in the accompanying balance sheets (see Note 10).
F-7
<PAGE> 51
MEADOWCRAFT, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
INVENTORIES
Inventories are valued at first-in, first-out ("FIFO") cost which is not in
excess of market. An analysis of inventories at April 28, 1996, May 3, 1997 and
July 31, 1997 follows:
<TABLE>
<CAPTION>
APRIL 28, 1996 MAY 3, 1997 JULY 31, 1996 JULY 31, 1997
-------------- ----------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Raw materials and purchased parts... $ 7,405,000 $ 8,207,000 $ 4,680,000 $ 6,273,000
Work-in-process..................... 422,000 610,000 493,000 569,000
Finished goods...................... 11,413,000 12,655,000 5,670,000 4,748,000
----------- ----------- ----------- -----------
$19,240,000 $21,472,000 $10,843,000 $11,590,000
=========== =========== =========== ===========
</TABLE>
PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment are recorded at cost less accumulated
depreciation and amortization and include expenditures for major renewals and
betterments that substantially increase the useful lives of existing assets as
well as the net amount of interest cost associated with significant capital
additions. Interest cost incurred during fiscal 1996 and 1997 amounted to
$5,456,000 and $5,274,000, respectively, of which $438,000 and $0, respectively,
was capitalized. Maintenance and repairs are charged to expense as incurred.
Upon sale, retirement, or other disposition of these assets, the cost and
related accumulated depreciation are removed from the respective accounts, and
the related gain or loss is credited or charged to income.
Depreciation is computed using the straight-line method over the estimated
service lives of the depreciable assets as follows:
<TABLE>
<S> <C>
Buildings................................ 13 to 28 years
Machinery and equipment.................. 5 to 13 years
Furniture and fixtures................... 3 to 5 years
Leasehold improvements................... Shorter of lease term or 13 years
</TABLE>
REVENUE RECOGNITION/WARRANTY AND OTHER RESERVES
The Company recognizes sales when products are shipped. As the Company
offers up to a 36-month limited warranty on certain products, estimated warranty
costs are accrued at the time products are sold based on a historical percentage
of warranty costs to gross sales. The charge for such accrual is reflected as
returns and allowances, which reduces gross sales to net sales. Included in the
warranty reserve is an estimate for customer credits arising from co-op
advertising programs and purchased volume discounts. These amounts are accrued
based on individual customer agreements or Company rebate programs.
SELF-INSURANCE ACCRUAL
The Company is substantially self insured for workers' compensation and
health care claims. The Company purchases insurance for all workers'
compensation claims in excess of $250,000 per occurrence with an annual
aggregate stop loss limit of $1,440,000 and for all employee health care claims
in excess of $100,000 per occurrence. As self insurance claims become probable
and reasonably estimable, the estimated cost of such claims are accrued,
including related expenses. Management considers the accrued liabilities for
unsettled claims to be adequate; however, there is no assurance that the amounts
accrued will not vary from the ultimate amounts incurred upon final disposition
of all outstanding claims. As a result, periodic adjustments to the reserves
will be made as events occur which indicate changes are necessary. In the
opinion of management, based on current information, these periodic adjustments
will not be material to the Company's financial condition or results of
operations.
F-8
<PAGE> 52
MEADOWCRAFT, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DERIVATIVE FINANCIAL INSTRUMENTS
The Company, from time to time, uses interest rate swap contracts ("Swaps")
and interest rate caps ("Caps") to manage interest rate risks arising from
certain of the Company's financing sources, such as the revolving credit line
and certain long-term debt. All Swaps and Caps employed by the Company represent
end-user activities designed as hedges, and, therefore, changes in fair values
of such derivatives are not included in the results of operations. Interest
receivable or payable from such contracts is accrued and recognized as an
adjustment to interest expense related to the specific financing source being
hedged.
FAIR VALUE OF FINANCIAL INSTRUMENTS
In preparing disclosures about the fair value of financial instruments,
management has assumed that the carrying amount approximates fair value for
current financial instruments due to the short maturities of those instruments.
The estimated fair values of long-term debt instruments are based upon the
current interest rate environment and remaining term to maturity.
PRO FORMA INFORMATION
Pro forma stockholders' equity at July 31, 1997 reflects (i) $32,670,000 of
the S corporation distribution, which represents undistributed earnings from
October 1, 1986 through May 3, 1997 that were previously taxed to the existing
stockholders, and (ii) the effect of recording net deferred tax assets which
will result from the termination of the Company's S Corporation election,
amounting to approximately $2,700,000 at July 31, 1997. (See Note 7).
Prior to the Offering, the Company was taxed under the provisions of
Subchapter S of the Internal Revenue Code. As such, the taxable income of the
Company had been included in the individual income tax returns of the Company's
stockholders for income tax purposes. Accordingly, no provision for income taxes
had been provided in the Company's financial statements. Upon consummation of
the Offering, the Company intends to terminate its S Corporation election and,
as a result, the Company will become a taxable C corporation. The pro forma net
income shown on the statements of income presented herein gives effect to the
application of pro forma income taxes that would have been reported had the
Company been a C corporation subject to federal and state income taxes for all
periods presented.
Pro forma net income per share for the year ended May 3, 1997 and for the
thirteen weeks ended July 31, 1997, is calculated by dividing pro forma net
income by the sum of the weighted average number of shares of common stock
outstanding (16,000,000) and 521,000 shares of common stock that would be
required to be sold, at an assumed initial public offering price of $14.00 per
share, to pay the portion of the S corporation distribution to be paid out of
the net proceeds of the Offering in excess of fiscal 1997 earnings. Share
information reflects the 16,000-for-1 stock split described in Note 11.
Historical per share information has not been presented in view of the Company's
S Corporation status and the anticipated change in capital structure upon
completion of the Offering.
3. NOTES PAYABLE
In order to meet working capital needs, the Company maintains a variable
rate (7.48%, 7.73% and 7.71% at April 28, 1996, May 3, 1997 and July 31, 1997
respectively) revolving line of credit in the amount of $80,000,000 (see Note
12). The revolving line bears interest at the prime rate. However, the Company
has the option of converting the borrowing rate to LIBOR plus 2.04% for all or a
portion of the outstanding balance. At May 3, 1997 and July 31, 1997,
$46,196,000 and $7,526,000 were outstanding under the line of credit. Of the
amounts outstanding at May 3, 1997 and July 31, 1997, $2,196,000 and $3,526,000,
respectively, were based on the prime rate, and $44,000,000 and $4,000,000,
respectively, were based on the LIBOR rate. At May 3, 1997 and July 31, 1997,
$14,478,000 and $17,145,000, respectively, were available to be borrowed. The
F-9
<PAGE> 53
MEADOWCRAFT, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
average borrowings outstanding were $33,305,000, 30,945,000, and $24,600,000,
and the maximum borrowings outstanding were $58,276,000, $59,460,000, and
$42,257,000, in fiscal 1996, 1997, and the thirteen weeks ended July 31, 1997,
respectively. The weighted average interest rate on these borrowings was
approximately 7.79%, 7.53%, and 7.87% in fiscal 1996, 1997, and the thirteen
weeks ended July 31, 1997, respectively. All bank borrowings are collateralized
by all assets of the Company, except for preexisting pledged assets.
The Company also maintains a $3,000,000 variable rate (7.75%, 8.0%, and
8.0% at April 28, 1996, May 3, 1997, and July 31, 1997, respectively) line of
credit (see Note 12). Of this amount, $3,000,000, $2,700,000, and $2,700,000
were outstanding at April 28, 1996, May 3, 1997, and July 31, 1997,
respectively. The average borrowings outstanding were $3,000,000, $2,986,000,
and $2,700,000 in fiscal 1996, 1997, and the thirteen weeks ended July 31, 1997,
respectively, and the maximum borrowings outstanding were $3,000,000 in each
fiscal year and $2,700,000 in the thirteen weeks ended July 31, 1997. The
weighted average interest rate on these borrowings was approximately 8.17%,
7.78%, and 7.73% in fiscal 1996, 1997, and the thirteen weeks ended July 31,
1997, respectively. The $3,000,000 line of credit is guaranteed by the Company's
principal stockholder.
The Company maintains an interest rate cap as a hedge against the variable
interest rate exposure on the $80,000,000 line of credit. This interest rate
cap, which expires June 1, 1999, establishes the maximum prime interest rate at
8.0% for all periods presented on varying notional amounts, which range from $0
to $30,000,000, and have been based on expected seasonal borrowings. At April
28, 1996, May 3, 1997, and July 31, 1997, the notional amounts amounted to
$30,000,000, $15,000,000 and $0, respectively. During fiscal years ended April
30, 1995, April 28, 1996, and May 3, 1997 as well as the thirteen weeks ended
July 31, 1997, the interest rate cap had no material effect on interest expense.
F-10
<PAGE> 54
MEADOWCRAFT, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
4. LONG-TERM DEBT
Long-term debt consists of the following at April 28, 1996, May 3, 1997 and
July 31, 1997:
<TABLE>
<CAPTION>
APRIL 28, 1996 MAY 3, 1997 JULY 31, 1997
-------------- ----------- -------------
<S> <C> <C> <C>
Term note, 8.33%, due in quarterly installments
of $450,000, plus interest, until February 28,
2001, secured by building and equipment with a
net book value of $14,074,000................. $ 8,550,000 $ 6,750,000 $ 6,300,000
Term note, 8.89%, due in quarterly installments
of $146,875, plus interest, until August 16,
2005, secured by building and equipment with a
net book value of $6,960,000.................. 5,434,000 4,847,000 4,700,000
Capitalized lease obligation, variable rates
(4.75% and 3.9% at May 3, 1997 and July 31,
1997, respectively), subject to an interest
rate swap (see below) due in semiannual
installments of $100,000 until February 1,
2011, secured by building and equipment with a
net book value of $3,817,000.................. 3,000,000 2,800,000 2,700,000
Promissory notes, variable rates (8.09% and
7.94% at May 3, 1997 and July 31, 1997,
respectively), due in quarterly installments
of $250,000 until January 1, 1999,
cross-collateralized by all assets except
preexisting pledged assets.................... 2,750,000 1,750,000 1,500,000
Term note, 7.90%, due in quarterly installments
of $200,000, plus interest, until June 30,
1999, secured by building and equipment with a
net book value of $5,570,000.................. 2,400,000 1,600,000 1,400,000
Promissory notes, 7.73% repaid in July 1997..... 1,156,000 953,000 0
Promissory note, 8.50%, due in monthly
installments through June 2, 1999, guaranteed
by the principal stockholder.................. 833,000 733,000 717,000
Promissory note, 8.00%, due in monthly
installments through May 29, 2006, secured by
equipment with a net book value of $710,000... 0 637,000 625,000
Various capital leases, repaid in fiscal 1997... 86,000 0 0
----------- ----------- -----------
24,209,000 20,070,000 17,942,000
Less amounts due within one year................ (4,790,000) (4,750,000) (4,550,000)
----------- ----------- -----------
$19,419,000 $15,320,000 $13,392,000
=========== =========== ===========
</TABLE>
During fiscal 1996, the Company entered into an interest rate swap
agreement which expires in 2011 related to its capital lease obligation covering
the entire principal balance outstanding on such obligation. The agreement is
designed to fix the interest rate at 5.85%.
The Company's debt agreements contain, among other things, certain
restrictions relating to net worth, capital expenditures, the current ratio, and
the debt service ratio. The Company was in compliance with all covenants at May
3, 1997 and July 31, 1997.
The Company's total debt obligations maturing in each of the next five
fiscal years at May 3, 1997 are as follows: $4,750,000 in 1998, $4,479,000 in
1999, $3,367,000 in 2000, $2,388,000 in 2001, $1,009,000 in 2002, and $4,077,000
thereafter.
F-11
<PAGE> 55
MEADOWCRAFT, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
5. OPERATING LEASES
The Company has operating leases for office, plant, and warehouse
facilities and manufacturing and office equipment. Minimum future rental
payments for all operating leases having remaining terms in excess of one year
at May 3, 1997 are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDING IN:
- ----------------------
<S> <C>
1998........................................................ $ 862,000
1999........................................................ 646,000
2000........................................................ 644,000
2001........................................................ 308,000
2002........................................................ 180,000
Thereafter.................................................. 60,000
----------
$2,700,000
==========
</TABLE>
Total rental expense amounted to $1,746,000, $1,400,000, and $1,361,000 for
the years ended April 30, 1995, April 28, 1996, and May 3, 1997, respectively,
and $297,000 for the thirteen weeks ended July 31, 1997.
6. EMPLOYEE BENEFIT PLANS
The Company maintains a 401(k) Profit Sharing Plan (the "Plan") for its
salaried employees which allows these employees to make pretax contributions to
the Plan. The Plan covers all full-time salaried employees who have completed
one year of service and who are at least 21 years of age. Participants in the
Plan may voluntarily contribute from 3% to 10% of their annual compensation
within certain dollar limits as allowed by law. Company contributions to the
Plan are determined by the Company's Board of Directors and are limited to a
maximum of 10% of the employee's compensation. Contribution expense for the
years ended April 30, 1995, April 28, 1996, and May 3, 1997 amounted to $63,000,
$82,000, and $94,000, respectively and $26,000 for the thirteen weeks ended July
31, 1997.
The Company also maintains a defined benefit pension plan covering the
hourly employees of the Birmingham plants. The benefits are based on certain
Company monthly contributions for each year of credited service. The Company's
funding policy is to contribute annually no less than the minimum amount
required by ERISA and no more than the maximum amount that can be deducted for
federal income tax purposes. Contributions are intended to provide not only for
benefits attributed to service to date but also for those expected to be earned
in the future.
Net pension expense for the years ended April 30, 1995, April 28, 1996, and
May 3, 1997, and the thirteen weeks ended July 31, 1997, includes the following
components:
<TABLE>
<CAPTION>
APRIL 30, APRIL 28, MAY 3, JULY 31,
1995 1996 1997 1997
-------------- -------------- ----------- -------------
<S> <C> <C> <C> <C>
Service cost of the current period.......... $113,000 $130,000 $158,000 $ 40,000
Interest cost on the projected benefit
obligation................................ 75,000 98,000 115,000 32,000
Actual return on assets held in the plan.... (58,000) (52,000) (64,000) (29,000)
Net amortization and deferral of prior
service cost, transition liability, and
net gain.................................. (8,000) (11,000) 4,000 7,000
-------- -------- -------- --------
Net pension expense......................... $122,000 $165,000 $213,000 $ 50,000
======== ======== ======== ========
</TABLE>
F-12
<PAGE> 56
MEADOWCRAFT, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The following sets forth the funded status of the pension plan at April 30,
1995, April 28, 1996, May 3, 1997, and July 31, 1997:
<TABLE>
<CAPTION>
APRIL 30, APRIL 28, MAY 3, JULY 31,
1995 1996 1997 1997
-------------- -------------- ----------- -------------
<S> <C> <C> <C> <C>
Accumulated benefit obligation.............. $1,201,000 $1,360,000 $1,529,000 $1,569,000
========== ========== ========== ==========
Vested accumulated benefit obligation....... 1,144,000 1,283,000 1,452,000 1,493,000
========== ========== ========== ==========
Projected benefit obligation................ 1,289,000 1,473,000 1,726,000 1,786,000
Fair value of assets held in the plan....... 1,067,000 1,040,000 1,453,000 1,515,000
---------- ---------- ---------- ----------
Excess of projected benefit obligation over
fair value of plan assets................. (222,000) (433,000) (273,000) (271,000)
Unrecognized net loss....................... 152,000 205,000 210,000 210,000
Unrecognized initial obligation............. 62,000 53,000 44,000 42,000
Unrecognized prior service cost............. 57,000 83,000 149,000 145,000
---------- ---------- ---------- ----------
Prepaid (accrued) pension cost.......... $ 49,000 $ (92,000) $ 130,000 $ 126,000
========== ========== ========== ==========
</TABLE>
Pension plan assets consist primarily of group annuity policies at April
30, 1995, April 28, 1996, May 3, 1997 and July 31, 1997. The weighted average
discount rate used to measure the projected benefit obligation and the expected
long-term rate of return on assets was 7.50% at April 30, 1995, April 28, 1996,
May 3, 1997 and July 31, 1997. The Company uses the straight-line method of
amortization for prior service cost and unrecognized gains and losses.
The Company contributes to the Retail, Wholesale, and Department Store
Union Industry Pension Plan on behalf of each employee of the plants not covered
by the aforementioned pension plan as prescribed in the Company's collective
bargaining agreements. The Company contributes $2.40 to $3.40 per week for each
full-time employee on the active payroll subject to these agreements. Pension
expense under these plans amounted to approximately $67,000, $70,000, and
$88,000 for the years ended April 30, 1995, April 28, 1996, and May 3, 1997,
respectively, and $15,000 for the thirteen weeks ended July 31, 1997.
The Company also maintains discretionary performance compensation plans
covering certain management employees as approved by the Chairman and President
of the Company. The Company's discretionary provision for these plans amounted
to $1,340,000, $1,143,000, and $1,653,000 for the years ended April 30, 1995,
April 28, 1996, and May 3, 1997, respectively, and $300,000 for the thirteen
weeks ended July 31, 1997.
The Company does not provide any additional post-retirement or
post-employment benefits to its employees.
7. INCOME TAXES
Upon consummation of the Offering, the Company intends to terminate its S
corporation election and, accordingly, will become a taxable C corporation. Upon
termination of its S corporation election, the Company will record net deferred
tax assets which at July 31, 1997 the pro forma components are as follows:
<TABLE>
<S> <C>
Depreciation................................................ $ (833,000)
Inventory................................................... 260,000
Warranty reserve............................................ 1,432,000
Payroll-related accrued expenses............................ 893,000
Other accrued expenses...................................... 912,000
----------
Pro forma deferred tax assets, net.......................... $2,664,000
==========
</TABLE>
F-13
<PAGE> 57
MEADOWCRAFT, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
A summary of the components of the pro forma provision for income taxes is
as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED THIRTEEN WEEKS ENDED
------------------------------------ -------------------------
APRIL 30, APRIL 28, MAY 3, JULY 31, JULY 31,
1995 1996 1997 1996 1997
---------- ---------- ---------- ------------ ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Federal:
Current.................... $6,316,000 $4,580,000 $7,658,000 $1,134,000 $1,453,000
Deferred................... (780,000) (312,000) 941,000 253,000 349,000
---------- ---------- ---------- ---------- ----------
5,536,000 4,268,000 8,599,000 1,387,000 1,802,000
---------- ---------- ---------- ---------- ----------
State:
Current.................... 611,000 448,000 748,000 111,000 144,000
Deferred................... (76,000) (31,000) 92,000 25,000 32,000
---------- ---------- ---------- ---------- ----------
535,000 417,000 840,000 136,000 176,000
---------- ---------- ---------- ---------- ----------
Pro forma provision for
income taxes............... $6,071,000 $4,685,000 $9,439,000 $1,523,000 $1,978,000
========== ========== ========== ========== ==========
</TABLE>
The provision for income taxes differs from the amounts computed by
applying federal statutory rates due to the following:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED THIRTEEN WEEKS ENDED
------------------------------------ -------------------------
APRIL 30, APRIL 28, MAY 3, JULY 31, JULY 31,
1995 1996 1997 1996 1997
---------- ---------- ---------- ------------ ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Tax provision computed at the
federal statutory rate
(35%)...................... $5,612,000 $4,394,000 $8,882,000 $1,433,000 $1,861,000
Effect of state income taxes,
net of benefits............ 348,000 271,000 546,000 88,000 114,000
Other........................ 111,000 20,000 11,000 2,000 3,000
---------- ---------- ---------- ---------- ----------
$6,071,000 $4,685,000 $9,439,000 $1,523,000 $1,978,000
========== ========== ========== ========== ==========
</TABLE>
8. CONTINGENCIES
The Company is a party to various legal proceedings incidental to its
business. In the opinion of management, after consultation with legal counsel,
the ultimate liability, if any, with respect to these proceedings will not
materially affect the financial position or results of operations of the
Company.
9. FAIR VALUE OF FINANCIAL INSTRUMENTS AND DERIVATIVE FINANCIAL
INSTRUMENTS
Statement of Financial Accounting Standards ("SFAS") No. 107, "Disclosure
About Fair Value of Financial Instruments," requires all businesses to disclose
the fair value of financial instruments, both assets and liabilities recognized
and not recognized on the balance sheet, for which it is practicable to estimate
fair value. The estimated fair value of the Company's on-balance sheet financial
instruments at July 31, 1997, approximated their carrying value at that date.
As of May 3, 1997 and July 31, 1997, and as discussed in Notes 3 and 4, the
Company is party to an interest rate cap agreement and an interest rate swap
agreement, both of which are considered derivative financial instruments. The
fair value of these instruments, which are specifically used for hedging
purposes, is the estimated amount that the Company would pay or receive if these
agreements were terminated as of May 3, 1997 and July 31, 1997. Such estimates
of fair value take into account current interest rates and the
F-14
<PAGE> 58
MEADOWCRAFT, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
present creditworthiness of the counterparties. Under the restrictions of the
bank credit agreements, the Company does not expect to cancel these agreements,
and expects them to expire as originally contracted. As of May 3, 1997 and July
31, 1997, the carrying amount of these financial instruments, which represents
amounts paid to obtain such instruments, exceeds the estimated fair value by
$127,000 and $203,000, respectively.
10. MAJOR CUSTOMERS
During the thirteen weeks ended July 31, 1997, three major customers
accounted for sales of approximately $17,146,000 of total net sales. During the
years ended April 30, 1995, April 28, 1996, and May 3, 1997 three major
customers accounted for sales of approximately $56,319,000, $55,266,000, and
$72,133,000, respectively, of total net sales. As of April 28, 1996, May 3,
1997, and July 31, 1997, the outstanding balance, included in accounts
receivable on the respective balance sheets, related to these customers was
$18,389,000, $24,615,000, and $5,700,000, respectively.
11. STOCKHOLDERS' EQUITY
On July 31, 1997, the Board of Directors approved a 16,000-for-1 stock
split of the Company's Common Stock. All share information presented herein
reflects this stock split.
On July 31, 1997, the Company adopted a Stock Option Plan reserving
1,000,000 shares of the Company's common stock for grants to executive officers,
directors, and key employees. Options to be granted will expire within ten years
after the date of grant and the option exercise price will equal the fair market
value of the common stock on the date of the grant. As of July 31, 1997, no
options had been granted under the plan.
12. SUBSEQUENT EVENTS
Effective August 1, 1997, the Company entered into an asset purchase
agreement with Virco Manufacturing Corporation to acquire all of the assets
located and in possession of Virsan, a Mexican Company and a subsidiary of
Virco, in Sonora, Mexico. The agreement stipulates cash payments for the
purchase of assets, in the amount of $2,175,000 and is expected to be primarily
funded under the Company's revolving credit agreement. Pro forma financial
information has not been provided as it would not be meaningful since customers,
products and operations of the Company will differ significantly from that of
Virsan.
On August 5, 1997, the Company revised the terms on its existing credit
agreement with its primary lender. The revised agreement allows the Company to
borrow up to an amount not to exceed $126,350,000. This credit facility is
comprised of a $90,000,000 revolving credit facility and $36,350,000 of term
loans. Interest rates on the revolving credit facility remain variable and all
borrowings continue to be collateralized by all assets of the Company, except
for preexisting pledged assets. Additionally, the Bank extended four new term
loans in the aggregate of $19,750,000 to mature August 31, 2004. These loans are
collateralized by the assets that are being constructed and acquired with the
funds provided by the Bank.
F-15
<PAGE> 59
======================================================
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 OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR ANY OF THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF ANY OFFER TO BUY ANY SECURITY
OTHER THAN THE SHARES OF COMMON STOCK OFFERED BY THIS PROSPECTUS, NOR DOES IT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY THE SHARES OF
COMMON STOCK BY ANYONE IN ANY JURISDICTION IN WHICH SUCH AN OFFER OR
SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO, 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 ANY 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>
Prospectus Summary................... 3
Risk Factors......................... 4
Use of Proceeds...................... 10
Dividend Policy...................... 11
Dilution............................. 11
Capitalization....................... 13
Selected Financial Data.............. 14
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 16
Business............................. 25
Management........................... 32
Certain Transactions................. 36
Principal Stockholders............... 36
Description of Capital Stock......... 37
Shares Eligible for Future Sale...... 38
Underwriting......................... 40
Experts.............................. 41
Legal Matters........................ 41
Additional Information............... 41
Index to Financial Statements........ F-1
</TABLE>
---------------------
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
======================================================
======================================================
3,125,000 SHARES
[LOGO]
MEADOWCRAFT, INC.
COMMON STOCK
----------------------------------
PROSPECTUS
----------------------------------
A.G. EDWARDS & SONS, INC.
, 1997
======================================================
<PAGE> 60
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Set forth below is an estimate of the fees and expenses to be incurred in
connection with the issuance and distribution of the shares of Common Stock, par
value $.01 per share, offered hereby.
<TABLE>
<CAPTION>
TO BE PAID
BY THE
COMPANY
----------
<S> <C>
Securities and Exchange Commission Registration Fee......... $ 15,152
NASD Filing Fee............................................. 5,500
NYSE Original Listing Fee................................... 81,100
Blue Sky Fees and Expenses.................................. 1,500
Legal Fees and Expenses..................................... 125,000
Accounting Fees............................................. 110,000
Printing and Engraving Costs................................ 75,000
Transfer Agent's Fee........................................ 2,000
Miscellaneous Expenses...................................... 9,748
--------
Total............................................. $425,000
========
</TABLE>
- ---------------
* To be filed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
DELAWARE GENERAL CORPORATION LAW
Section 145(a) of the General Corporation Law of the State of Delaware (the
"DGCL") provides that a corporation may indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (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, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorney's
fees), judgements, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such 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 was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere 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.
Section 145(b) of the DGCL states that a corporation may indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed 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, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorney's fees) actually and reasonably
incurred by him in connection with the defense or settlement of such 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 to the corporation
unless and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances
II-1
<PAGE> 61
of the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper.
Section 145(c) of the DGCL provides that to the extent that a director,
officer, employee or agent of a corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in
subsections (a) and (b) of Section 145, or in defense of any claim, issue or
matter therein, he shall be indemnified against expenses (including attorney's
fees) actually and reasonably incurred by him in connection therewith.
Section 145(d) of the DGCL states that any indemnification under
subsections (a) and (b) of Section 145 (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 subsections (a) and (b). Such determination shall be made (1) by a
majority vote of the directors who are not parties to such action, suit or
proceeding, even though less than a quorum, or (2) if there are no such
directors, or, if such directors so direct, by independent legal counsel in a
written opinion, or (3) by the stockholders.
Section 145(e) of the DGCL provides that expenses (including attorneys'
fees) incurred by an officer or director in defending any civil, criminal,
administrative or investigative action, suit or proceeding may be paid by the
corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the corporation as authorized in Section 145. Such
expenses (including attorneys' fees) 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 145(f) of the DGCL states that the indemnification and advancement
of expenses provided by, or granted pursuant to, the other subsections of
Section 145 shall not be deemed exclusive of any other rights to which those
seeking indemnification or advancement of expenses may be entitled under any
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.
Section 145(g) of the DGCL provides that a corporation shall have the 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 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 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 Section 145.
Section 145(j) of the DGCL states that the indemnification and advancement
of expenses provided by, or granted pursuant to, Section 145 shall, unless
otherwise provided when authorized or ratified, 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.
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
The Amended and Restated Certificate of Incorporation (the "Restated
Certificate") of the Company provides that a director of the Company shall not
be personally liable to the Company or 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 Company or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the DGCL or (iv) for any
transaction from which the director derived an improper personal benefit. If the
DGCL is amended to authorize the further elimination or limitation of the
liability of directors, then the liability of a director of the Company, in
addition to the limitation on personal liability described above, shall be
eliminated or limited to the fullest extent permitted by the amended DGCL.
Further, any repeal or modification of such provision of the Restated
Certificate by the stockholders of the Company shall be prospective only, and
shall
II-2
<PAGE> 62
not adversely affect any limitation on the personal liability of a director of
the Company existing at the time of such repeal or modification.
The Restated Certificate also provides that each person who was or is made
a party or is threatened to be made a party or is involved in any threatened,
pending or completed action, suit or proceeding, whether formal or informal,
whether of a civil, criminal, administrative or investigative nature
(hereinafter a "proceeding"), by reason of the fact that he or she, or a person
of whom he or she is the legal representative, is or was a director or officer
of the Company, whether the basis of such proceeding is an alleged action or
inaction in an official capacity or in any other capacity while serving as a
director or officer, shall be indemnified and held harmless by the Company to
the fullest extent permissible under Delaware law, as in effect on the date of
filing of the Restated Certificate or to such greater extent as applicable law
may thereafter permit, against all costs, charges, expenses, liabilities and
losses (including, without limitation, attorneys' fees, judgments, fines,
Employee Retirement Income Security Act of 1974 excise taxes, or penalties and
amounts paid or to be paid in settlement) reasonably incurred or suffered by
such person in connection therewith and such indemnification shall continue as
to a person who has ceased to be a director or officer and shall inure to the
benefit of his or her heirs, executors and administrators. The Restated
Certificate further provides that the Company shall pay expenses actually
incurred in connection with any proceeding in advance of its final disposition;
provided, however, that if Delaware law then requires, the payment of such
expenses incurred in advance of the final disposition of a proceeding shall be
made only upon delivery to the Company of an undertaking, by or on behalf of
such director or officer, to repay all amounts so advanced if it shall
ultimately be determined that such director or officer is not entitled to be
indemnified.
The Company may, but is not required to, provide indemnification to
employees and agents of the Company to the fullest extent permissible under
Delaware law.
The foregoing rights to indemnification conferred on directors, officers,
employees and agents are contract rights and any repeal or amendment of the
provisions in the Restated Certificate granting such rights shall not adversely
affect any right thereunder of any person existing at the time of such repeal or
amendment with respect to any act or omission occurring prior to the time of
such repeal or amendment, and, further, shall not apply to any proceeding,
irrespective of when the proceeding is initiated, arising from service of such
person prior to such repeal or amendment.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
None.
II-3
<PAGE> 63
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
1 -- Form of Underwriting Agreement
*3.1 -- Amended and Restated Certificate of Incorporation of the
Registrant
3.2 -- Amended and Restated Bylaws of the Registrant
4 -- Form of Stock Certificate
5.1 -- Opinion of Sirote & Permutt, P.C. regarding legality
*10.1 -- Assignment of Sublease between Champion International
Corporation, Pinson Partners and the Company, dated July 1,
1997
*10.2 -- Sublease Agreement between The Uniroyal Goodrich Tire
Company and the Company, dated September 30, 1993
10.3 -- Amended and Restated Loan and Security Agreement, dated
August 28, 1997
10.4 -- 1997 Stock Option Plan of the Registrant
23.1 -- Consent of Arthur Andersen LLP
23.2 -- Consent of Sirote & Permutt, P.C. (included in Exhibit 5
above)
*24 -- Powers of Attorney (included in Page II-6)
27 -- Financial Data Schedule
99.1 -- Consent of T. Morris Hackney (Director Nominee)
99.2 -- Affidavit of Registrant regarding consent of James M. Scott
(Director Nominee)
99.3 -- Consent of Reese H. McKinney, Jr. (Director Nominee)
</TABLE>
- ---------------
* Previously filed.
(b) Financial Statements Schedules:
Schedule II -- Valuation and Qualifying Accounts
All other schedules are omitted because they are not applicable or the
requested information is shown in the Financial Statements of the Registrant or
the Notes thereto.
ITEM 17. UNDERTAKINGS
The undersigned Registrant undertakes hereby to provide to the Underwriters
at the Closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "Securities Act"), may be permitted to directors,
officers and controlling persons of the Registrant pursuant to Item 14 hereof,
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 of 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.
II-4
<PAGE> 64
The undersigned Registrant further undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-5
<PAGE> 65
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, hereunto duly authorized in the City of Birmingham,
State of Alabama, on the 30th day of September, 1997.
MEADOWCRAFT, INC.
By: /s/ SAMUEL R. BLOUNT
------------------------------------
Samuel R. Blount
Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ SAMUEL R. BLOUNT Chairman of the Board September 30, 1997
- -----------------------------------------------------
Samuel R. Blount
/s/ WILLIAM J. MCCANNA President and Director September 30, 1997
- ----------------------------------------------------- (Principal Executive
William J. McCanna Officer)
/s/ STEVEN C. BRASWELL Vice President of September 30, 1997
- ----------------------------------------------------- Finance,
Steven C. Braswell Chief Financial
Officer and Secretary
(Principal Financial
and Accounting
Officer)
</TABLE>
II-6
<PAGE> 66
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON SUPPLEMENTAL SCHEDULE
To Meadowcraft, Inc.:
We have audited in accordance with generally accepted auditing standards, the
financial statements of Meadowcraft, Inc. (a Delaware corporation), included
in this registration statement and have issued our report dated August 22,
1997. Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. Schedule II included in Part II of the
registration statement is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly state in all material respects the financial data required to
be set forth therin in relation to the basic financial statements taken as a
whole.
/s/ Arthur Andersen LLP
-----------------------
Birmingham, Alabama
August 22, 1997
<PAGE> 67
SCHEDULE II
MEADOWCRAFT, INC.
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED APRIL 30, 1995, APRIL 28, 1996,
AND MAY 3, 1997 AND THE 13-WEEKS ENDED JULY 31, 1997
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND END OF
DESCRIPTION OF YEAR EXPENSES DEDUCTIONS YEAR
<S> <C> <C> <C> <C>
For the year ended April 30, 1995:
Warranty and other reserves $2,134,000 $6,338,000 ($5,473,000) $2,999,000
For the year ended April 28, 1996:
Warranty and other reserves $2,999,000 $6,473,000 ($6,465,000) $3,007,000
For the year ended May 3, 1997:
Warranty and other reserves $3,007,000 $4,667,000 ($4,958,000) $2,716,000
For the 13-weeks ended July 31, 1997:
Warranty and other reserves $2,716,000 $1,674,000 ($3,079,000) $1,311,000
</TABLE>
<PAGE> 68
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
1 Form of Underwriting Agreement
* 3.1 Amended and Restated Certificate of Incorporation of the
Registrant
3.2 Form of Amended and Restated Bylaws of the Registrant
4 Form of Stock Certificate
5.1 Opinion of Sirote & Permutt, P.C. regarding legality
* 10.1 Assignment of Sublease between Champion International Corporation,
Pinson Partners and the Company, dated July 1, 1997
* 10.2 Sublease Agreement between The Uniroyal Goodrich Tire Company and
the Company, dated September 30, 1993
10.3 Amended and Restated Credit Facility
10.4 1997 Stock Option Plan
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Sirote & Permutt, P.C. (included in Exhibit 5 above)
24 Powers of Attorney (included in Page II-6)
27 Financial Data Schedule
99.1 Consent of T. Morris Hackney (Director Nominee)
99.2 Affidavit of Registrant regarding consent of James M. Scott
(Director Nominee)
99.3 Consent of Reese H. McKinney, Jr. (Director Nominee)
(b) Financial Statements Schedules:
Schedule II - Valuation and Qualifying Accounts
All other schedules are omitted because they are not applicable or
the requested information is shown in the Financial Statements of
the Registrant or the Notes thereto.
</TABLE>
- ----------------------
* Previously filed.
<PAGE> 1
EXHIBIT 1
[ ] Shares of Common Stock
MEADOWCRAFT, INC.
UNDERWRITING AGREEMENT
----------------------
October [ ], 1997
A.G. EDWARDS & SONS, INC.
as Representatives of the
several Underwriters named in
Schedule I attached hereto
c/o A.G. Edwards & Sons, Inc.
One North Jefferson Avenue
St. Louis, Missouri 63103
Dear Sirs:
Meadowcraft, Inc., a corporation organized and existing under
the laws of the State of Delaware (the "Company"), proposes, subject to the
terms and conditions stated herein, to issue and sell to the several
underwriters named in Schedule I hereto (the "Underwriters") an aggregate of
[ ] shares (the "Firm Shares") of its common stock, par value $.01 per
share (the "Common Stock") and, for the sole purpose of covering
over-allotments in connection with the sale of the Firm Shares, at the option
of the Underwriters, up to an additional [ ] shares (the
"Additional Shares") of Common Stock. The Firm Shares and any Additional
Shares purchased by the Underwriters are referred to herein as the "Shares".
The Shares are more fully described in the Registration Statement referred to
below.
1. Representations and Warranties of the Company. The
Company represents and warrants to, and agrees with, the Underwriters that:
(a) The Company has filed with the Securities and Exchange
Commission (the "Commission") a registration statement, and may have filed an
amendment or
<PAGE> 2
amendments thereto, on Form S-1 (No. 333-33053), for the registration of the
Shares under the Securities Act of 1933, as amended (the "Act"). Such
registration statement, including the prospectus, financial statements and
schedules, exhibits and all other documents filed as a part thereof, as amended
at the time of effectiveness of the registration statement, including any
information deemed to be a part thereof as of the time of effectiveness
pursuant to paragraph (b) of Rule 430A or Rule 434 of the Rules and Regulations
of the Commission under the Act (the "Regulations"), and any additional related
registration statement filed pursuant to Rule 462(b) of the Regulations, is
herein called the "Registration Statement" and the prospectus, in the form
first filed with the Commission pursuant to Rule 424(b) of the Regulations or
filed as part of the Registration Statement at the time of effectiveness if no
Rule 424(b) or Rule 434 filing is required, is herein called the "Prospectus".
The term "preliminary prospectus" as used herein means a preliminary prospectus
as described in Rule 430 of the Regulations.
(b) At the time of the effectiveness of the Registration
Statement or the effectiveness of any post-effective amendment to the
Registration Statement, when the Prospectus is first filed with the Commission
pursuant to Rule 424(b) or Rule 434 of the Regulations, when any supplement to
or amendment of the Prospectus is filed with the Commission and at the Closing
Date and the Additional Closing Date, if any, (as hereinafter respectively
defined), each of the Registration Statement and the Prospectus and any
amendments thereof and supplements thereto complied or will comply in all
material respects with the applicable provisions of the Act and the Regulations
and does not or will not contain an untrue statement of a material fact and
does not or will not omit to state any material fact required to be stated
therein or necessary in order to make the statements therein (i) in the case of
the Registration Statement, not misleading and (ii) in the case of the
Prospectus, in light of the circumstances under which they were made, not
misleading. When any related preliminary prospectus was first filed with the
Commission (whether filed as part of the registration statement for the
registration of the Shares or any amendment thereto or pursuant to Rule 424(a)
of the Regulations) and when any amendment thereof or supplement thereto was
first filed with the Commission, such preliminary prospectus and any amendments
thereof and supplements thereto complied in all material respects with the
applicable provisions of the Act and the Regulations and did not contain an
untrue statement of a material fact and did not omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein in light of the circumstances under which they were made not
misleading. No representation and warranty is made in this subsection (b),
however, with respect to any information contained in or omitted from the
Registration Statement or the Prospectus or any related preliminary prospectus
or any amendment thereof or supplement thereto in reliance upon and in
conformity with
2
<PAGE> 3
information furnished in writing to the Company by or on behalf of any
Underwriter through you as herein stated expressly for use in connection with
the preparation thereof. If Rule 434 is used, the Company will comply with the
requirements of Rule 434.
(c) Arthur Andersen LLP, who have certified the financial
statements and supporting schedules included in the Registration Statement, are
independent public accountants as required by the Act and the Regulations.
(d) Subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus, except
as set forth in the Registration Statement and the Prospectus, there has been
no material adverse change or any development involving a prospective material
adverse change in the business, prospects, properties, operations, condition
(financial or other) or results of operations of the Company and its
subsidiaries, taken as a whole, whether or not arising from transactions in the
ordinary course of business, and since the date of the latest balance sheet
presented in the Registration Statement and the Prospectus, neither the Company
nor any of its subsidiaries has incurred or undertaken any liabilities or
obligations, direct or contingent, which are material to the Company and its
subsidiaries, taken as a whole, except for liabilities or obligations which are
reflected in the Registration Statement and the Prospectus.
(e) This Agreement and the transactions contemplated herein,
including, without limitation, the stock split of the Company's outstanding
shares of Common Stock, as described in the Registration Statement and the
Prospectus (the "Stock Split"), the termination of the Company's S corporation
election and the S Corporation Distribution (as defined in the Registration
Statement and the Prospectus), have been duly and validly authorized by the
Company; this Agreement has been duly and validly executed and delivered by the
Company; and the Stock Split has occurred.
(f) The execution, delivery, and performance of this
Agreement and the consummation of the transactions contemplated hereby,
including, without limitation, the Stock Split, the termination of the
Company's S Corporation election and the S Corporation Distribution, do not and
will not (i) conflict with or result in a breach of any of the terms and
provisions of, or constitute a default (or an event which with notice or lapse
of time, or both, would constitute a default) under, or result in the creation
or imposition of any lien, charge or encumbrance upon any property or assets of
the Company or any of its subsidiaries pursuant to, any agreement, instrument,
franchise, license or permit to which the Company or any of its subsidiaries is
a party or by which any of such corporations or their respective properties or
assets may be
3
<PAGE> 4
bound or (ii) violate or conflict with any provision of the certificate of
incorporation or by-laws of the Company or any of its subsidiaries or any
judgment, decree, order, statute, rule or regulation of any court or any
public, governmental or regulatory agency or body having jurisdiction over the
Company or any of its subsidiaries or any of their respective properties or
assets. No consent, approval, authorization, order, registration, filing,
qualification, license or permit of or with any court or any public,
governmental or regulatory agency or body having jurisdiction over the Company
or any of its subsidiaries or any of their respective properties or assets is
required for the execution, delivery and performance of this Agreement or the
consummation of the transactions contemplated hereby (including the issuance,
sale and delivery of the Shares to be issued, sold and delivered by the Company
hereunder, the Stock Split, the termination of the Company's S Corporation
election and the S Corporation Distribution), except the registration under the
Act of the Shares and such consents, approvals, authorizations, orders,
registrations, filings, qualifications, licenses and permits as may be required
under state securities or Blue Sky laws in connection with the purchase and
distribution of the Shares by the Underwriters.
(g) All of the outstanding shares of Common Stock are duly
and validly authorized and issued, fully paid and nonassessable and were not
issued and are not now in violation of or subject to any preemptive rights.
The Shares, when issued, delivered and sold in accordance with this Agreement,
will be duly and validly issued and outstanding, fully paid and nonassessable,
and will not have been issued in violation of or be subject to any preemptive
rights. The Company had, at July 31, 1997, an authorized and outstanding
capitalization as set forth in the Registration Statement and the Prospectus.
The Common Stock, the Firm Shares and the Additional Shares conform to the
descriptions thereof contained in the Registration Statement and the
Prospectus.
(h) Each of the Company and its subsidiaries has been duly
organized and is validly existing as a corporation in good standing under the
laws of its jurisdiction of incorporation. Each of the Company and its
subsidiaries is duly qualified and in good standing as a foreign corporation in
each jurisdiction in which the character or location of its properties (owned,
leased or licensed) or the nature or conduct of its business makes such
qualification necessary, except for those failures to be so qualified or in
good standing that would not in the aggregate have a material adverse effect on
the Company and its subsidiaries, taken as a whole. The only subsidiary of the
Company is [Meadowcraft Mexico]. All of the issued and outstanding capital
stock of [Meadowcraft Mexico] is owned directly by the Company, free and clear
of any lien, encumbrance, claim, security interest, restriction on transfer,
shareholders' agreement, voting trust or other defect of title whatsoever.
4
<PAGE> 5
(i) Each of the Company and its subsidiaries has all
requisite power and authority, and all necessary consents, approvals,
authorizations, orders, registrations, qualifications, licenses and permits
(collectively, "Permits") of and from all public, regulatory or governmental
agencies and bodies, to own, lease and operate its properties and conduct its
business as now being conducted and as described in the Registration Statement
and the Prospectus. No Permit contains a materially burdensome restriction not
adequately disclosed in the Registration Statement and the Prospectus. The
Company and its subsidiaries are in compliance in all material respects with
the terms and conditions of all Permits and have not received any notice of
proceedings relating to the revocation or modification of any Permit.
(j) Neither the Company nor any of its subsidiaries is (i) in
violation of its certificate of incorporation or by-laws; (ii) in default in
the performance or observance of any obligation, agreement, covenant or
condition contained in any indenture, mortgage, deed of trust, loan agreement,
lease or other agreement or instrument to which it is a party or by which it or
any of its properties may be bound; or (iii) in violation of any applicable
law, statute, ordinance, rule or regulation of any applicable jurisdiction,
except, in the case of this clause (iii), for such violations that,
individually or in the aggregate, do not or would not have a material adverse
effect on the Company and its subsidiaries, taken as a whole.
(k) Except as described in the Prospectus, there is no
litigation or governmental proceeding to which the Company or any of its
subsidiaries is a party or to which any property of the Company or any of its
subsidiaries is subject or which is pending or, to the knowledge of the
Company, contemplated against the Company or any of its subsidiaries which
might result in any material adverse change or any development involving a
material adverse change in the business, prospects, properties, operations,
condition (financial or other) or results of operations of the Company and its
subsidiaries, taken as a whole, or which is required to be disclosed in the
Registration Statement and the Prospectus.
(l) The Company and its subsidiaries have good and marketable
title in fee simple to all real property and good and marketable title to all
personal property owned by them, in each case free and clear of all liens,
encumbrances and defects except such as are described in the Registration
Statement and the Prospectus or such as do not materially affect the value of
such property and do not interfere with the use made and proposed to be made of
such property by the Company and its subsidiaries. Any real property and
buildings held under lease by the Company and its subsidiaries are held by them
under valid, subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed to be made of such
5
<PAGE> 6
property and buildings by the Company and its subsidiaries. The Company and
its subsidiaries are in compliance in all material respects with all applicable
zoning laws and regulations.
(m) Except as described in the Prospectus and except as,
individually or in the aggregate, would not have a material adverse effect on
the Company and its subsidiaries, taken as a whole, (i) neither the Company nor
any of its subsidiaries is in violation of any federal, state, local or foreign
statute, law, rule, regulation, ordinance, code, policy or rule of common law
or any judicial or administrative interpretation thereof, including any
judicial or administrative order, consent, decree or judgment, relating to
pollution or protection of human health, the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or subsurface
strata) or wildlife, including, without limitation, laws and regulations
relating to the release or threatened release of chemicals, pollutants,
contaminants, wastes, toxic substances, hazardous substances, petroleum or
petroleum products (collectively, "Hazardous Materials") or to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Materials (collectively, "Environmental Laws"), (ii) the
Company and its subsidiaries have all permits, authorizations and approvals
required under any applicable Environmental Laws and are each in compliance
with their requirements, (iii) there are no pending or threatened
administrative, regulatory or judicial actions, suits, demands, demand letters,
claims, liens, notices of noncompliance or violation, investigation or
proceedings relating to any Environmental Law against the Company or any of its
subsidiaries and (iv) there are no events or circumstances that might
reasonably be expected to form the basis of an order for clean-up or
remediation, or an action, suit or proceeding by any private party or
governmental body or agency, against or affecting the Company or any of its
subsidiaries relating to Hazardous Materials or any Environmental Laws.
(n) The Company and its subsidiaries own or possess, or can
acquire on reasonable terms, adequate patents, patent rights, licenses,
inventions, copyrights, know-how (including trade secrets and other unpatented
and/or unpatentable proprietary or confidential information, systems or
procedures), trademarks, service marks, trade names or other intellectual
property (collectively, "Intellectual Property") necessary to carry on the
business now operated by them, and neither the Company nor any of its
subsidiaries has received any notice or is otherwise aware of any infringement
of or conflict with asserted rights of others with respect to any Intellectual
Property or of any facts or circumstances which would render any Intellectual
Property invalid or inadequate to protect the interest of the Company or any of
its subsidiaries therein.
6
<PAGE> 7
(o) No labor dispute with the employees of the Company or any
of its subsidiaries exists or, to the best knowledge of the Company, is
imminent, and the Company is not aware of any existing or imminent labor
disturbance by the employees of any of its principal suppliers or contractors,
that, in either case, would have a material adverse effect on the Company and
its subsidiaries, taken as a whole.
(p) The Company and its subsidiaries are insured by insurers
of recognized financial responsibility against losses and risks and in amounts
as are prudent and customary in the businesses in which it is engaged. The
Company has no reason to believe that it will not be able to renew its existing
insurance coverage as and when such coverage expires or to obtain similar
coverage from similar insurers as may be necessary to continue its businesses
at a cost that would not have a material adverse effect on the Company and its
subsidiaries, taken as a whole.
(q) The Company has not taken and will not take, directly or
indirectly, any action designed to cause or result in, or which constitutes or
which might reasonably be expected to constitute, the stabilization or
manipulation of the price of the shares of Common Stock to facilitate the sale
or resale of the Shares.
(r) The historical financial statements, including the notes
thereto, and supporting schedules included in the Registration Statement and
the Prospectus present fairly the financial position of the Company as of the
dates indicated and the results of its operations for the periods specified;
except as otherwise stated in the Registration Statement, said financial
statements have been prepared in conformity with generally accepted accounting
principles applied on a consistent basis; and the supporting schedules included
in the Registration Statement present fairly the information required to be
stated therein. The pro forma financial statements and data and the related
notes thereto included in the Registration Statement and the Prospectus present
fairly the information shown therein, have been prepared in accordance with the
Commission's rules and guidelines with respect to pro forma financial
statements and have been properly compiled on the bases described therein, and
the assumptions used in the preparation thereof are reasonable and the
adjustments used therein are appropriate to give effect to the transactions and
circumstances referred to therein.
(s) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurance 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
7
<PAGE> 8
(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.
(t) Except as described in the Prospectus, no holder of
securities of the Company has any rights to the registration of securities of
the Company because of the filing of the Registration Statement or otherwise in
connection with the sale of the Shares contemplated hereby, and there are no
outstanding options, warrants, or other rights calling for the issuance of, and
no commitments, plans or arrangements to issue, any shares of capital stock of
the Company or any security convertible into or exchangeable for capital stock
of the Company.
(u) The Company is not, and upon consummation of the
transactions contemplated hereby will not be, subject to registration as an
"investment company" under the Investment Company Act of 1940.
(v) The Company elected to be treated as a S corporation
under Section 1362(a) of the Code (an "S Corporation") effective October 1,
1986, and has been an S Corporation at all times since such effective date
through the date hereof. Except as disclosed or contemplated in the
Prospectus, no taxes have been or will be imposed on the Company in connection
with the termination of the Company's S Corporation election or the S
Corporation Distribution.
(w) The Shares have been approved for listing on the New York
Stock Exchange upon notice of issuance.
2. Purchase, Sale and Delivery of the Shares.
(a) On the basis of the representations, warranties,
covenants and agreements herein contained, but subject to the terms and
conditions herein set forth, the Company agrees to sell to the Underwriters and
the Underwriters, severally and not jointly, agree to purchase from the
Company, at a purchase price per share of $[ ], the number of Firm Shares
set forth opposite the respective names of the Underwriters in Schedule I
hereto plus any additional number of Shares which such Underwriter may become
obligated to purchase pursuant to the provisions of Section 9 hereof.
(b) Payment of the purchase price for, and delivery of
certificates for, the Shares shall be made at the office of Debevoise &
Plimpton, 875 Third Avenue, New York, New York, or at such other place as shall
be agreed upon by you and the Company, at 10:00 A.M. on the third or fourth
business day (as permitted under Rule 15c6-1 under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"))
8
<PAGE> 9
(unless postponed in accordance with the provisions of Section 9 hereof)
following the date of the effectiveness of the Registration Statement (or, if
the Company has elected to rely upon Rule 430A of the Regulations, the third or
fourth business day (as permitted under Rule 15c6-1 under the Exchange Act)
after the determination of the initial public offering price of the Shares), or
such other time not later than ten business days after such date as shall be
agreed upon by you and the Company (such time and date of payment and delivery
being herein called the "Closing Date"). Payment shall be made to the Company
by wire transfer in same day funds, against delivery to you for the respective
accounts of the Underwriters of certificates for the Shares to be purchased by
them. Certificates for the Shares shall be registered in such name or names
and in such authorized denominations as you may request in writing at least two
full business days prior to the Closing Date. The Company will permit you to
examine and package such certificates for delivery at least one full business
day prior to the Closing Date.
(c) In addition, the Company hereby grants to the
Underwriters the option to purchase up to [ ] Additional Shares at the same
purchase price per share to be paid by the Underwriters to the Company for the
Firm Shares as set forth in this Section 2, for the sole purpose of covering
over-allotments in the sale of Firm Shares by the Underwriters. This option
may be exercised at any time, in whole or in part, on or before the thirtieth
day following the date of the Prospectus, by written notice by you to the
Company. Such notice shall set forth the aggregate number of Additional Shares
as to which the option is being exercised and the date and time, as reasonably
determined by you, when the Additional Shares are to be delivered (such date
and time being herein sometimes referred to as the "Additional Closing Date");
provided, however, that the Additional Closing Date shall not be earlier than
the Closing Date or later than the third full business day after the date on
which the option shall have been exercised (unless such time and date are
postponed in accordance with the provisions of Section 9 hereof). Certificates
for the Additional Shares shall be registered in such name or names and in such
authorized denominations as you may request in writing at least two full
business days prior to the Additional Closing Date. The Company will permit you
to examine and package such certificates for delivery at least one full
business day prior to the Additional Closing Date.
The number of Additional Shares to be sold to each Underwriter
shall be the number which bears the same ratio to the aggregate number of
Additional Shares being purchased as the number of Firm Shares set forth
opposite the name of such Underwriter in Schedule I hereto (or such number
increased as set forth in Section 9 hereof) bears to the total number of Firm
Shares being purchased from the Company,
9
<PAGE> 10
subject, however, to such adjustments to eliminate any fractional shares as you
in your sole discretion shall make.
Payment for the Additional Shares shall be made by wire
transfer in same day funds at the offices of Debevoise & Plimpton, 875 Third
Avenue, New York, New York, or such other location as may be mutually
acceptable, upon delivery of the certificates for the Additional Shares to you
for the respective accounts of the Underwriters.
3. Offering. Upon your authorization of the release of the
Firm Shares, the Underwriters propose to offer the Shares for sale to the
public upon the terms set forth in the Prospectus.
4. Covenants of the Company. The Company covenants and
agrees with the Underwriters that:
(a) If the Registration Statement has not yet been declared
effective the Company will use its best efforts to cause the Registration
Statement and any amendments thereto to become effective as promptly as
possible, and if Rule 430A is used or the filing of the Prospectus is otherwise
required under Rule 424(b) or Rule 434, the Company will file the Prospectus
(properly completed if Rule 430A has been used) pursuant to Rule 424(b) or Rule
434 within the prescribed time period and will provide evidence satisfactory to
you of such timely filing. If the Company elects to rely on Rule 434, the
Company will prepare and file a term sheet that complies with the requirements
of Rule 434.
The Company will notify you immediately (and, if requested by
you, will confirm such notice in writing) (i) when the Registration Statement
and any amendments thereto become effective, (ii) of any request by the
Commission for any amendment of or supplement to the Registration Statement or
the Prospectus or for any additional information, (iii) of the mailing or the
delivery to the Commission for filing of any amendment of or supplement to the
Registration Statement or the Prospectus, (iv) of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement or any post-effective amendment thereto or of the initiation, or the
threatening, of any proceedings therefor, (v) of the receipt of any comments
from the Commission, and (vi) of the receipt by the Company of any notification
with respect to the suspension of the qualification of the Shares for sale in
any jurisdiction or the initiation or threatening of any proceeding for that
purpose. If the Commission shall propose or enter a stop order at any time,
the Company will make every reasonable effort to prevent the issuance of any
such stop order and, if
10
<PAGE> 11
issued, to obtain the lifting of such order as soon as possible. The Company
will not file any amendment to the Registration Statement or any amendment of
or supplement to the Prospectus (including the prospectus required to be filed
pursuant to Rule 424(b)or Rule 434) that differs from the prospectus on file at
the time of the effectiveness of the Registration Statement before or after the
effective date of the Registration Statement to which you shall reasonably
object in writing after being timely furnished in advance a copy thereof.
(b) If at any time when a prospectus relating to the Shares
is required to be delivered under the Act any event shall have occurred as a
result of which the Prospectus as then amended or supplemented would, in the
judgment of the Underwriters or the Company include an untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, or if it shall be necessary at any
time to amend or supplement the Prospectus or Registration Statement to comply
with the Act or the Regulations, the Company will notify you promptly and
prepare and file with the Commission an appropriate amendment or supplement (in
form and substance satisfactory to you) which will correct such statement or
omission and will use its best efforts to have any amendment to the
Registration Statement declared effective as soon as possible.
(c) The Company will promptly deliver to you two signed
copies of the Registration Statement, including exhibits and all amendments
thereto, and the Company will promptly deliver to each of the Underwriters such
number of copies of any preliminary prospectus, the Prospectus, the
Registration Statement, and all amendments of and supplements to such
documents, if any, as you may reasonably request.
(d) The Company will endeavor in good faith, in cooperation
with you, at or prior to the time of effectiveness of the Registration
Statement, to qualify the Shares for offering and sale under the securities
laws relating to the offering or sale of the Shares of such jurisdictions as
you may designate and to maintain such qualification in effect for so long as
required for the distribution thereof; except that in no event shall the
Company be obligated in connection therewith to qualify as a foreign
corporation or to execute a general consent to service of process.
(e) The Company will make generally available (within the
meaning of Section 11(a) of the Act) to its security holders and to you as soon
as practicable, but not later than 45 days after the end of its fiscal quarter
in which the first anniversary date of the effective date of the Registration
Statement occurs, an earning statement (in
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<PAGE> 12
form complying with the provisions of Rule 158 of the Regulations) covering a
period of at least twelve consecutive months beginning after the effective date
of the Registration Statement.
(f) During the period of 270 days from the date of the
Prospectus, the Company will not, without your prior written consent, issue,
sell, offer or agree to sell, grant any option for the sale of, or otherwise
dispose of, directly or indirectly, any Common Stock (or any securities
convertible into, exercisable for or exchangeable for Common Stock), and the
Company will obtain the undertaking of each of its officers and directors and
such of its shareholders as have been heretofore designated by you and listed
on Schedule II attached hereto not to engage in any of the aforementioned
transactions on their own behalf, other than the Company's sale of Shares
hereunder and the Company's issuance of Common Stock upon the exercise of
presently outstanding stock options.
(g) During a period of three years from the effective date of
the Registration Statement, the Company will furnish to you copies of (i) all
reports to its shareholders; and (ii) all reports, financial statements and
proxy or information statements filed by the Company with the Commission or any
national securities exchange.
(h) The Company will apply the proceeds from the sale of the
Shares as set forth under "Use of Proceeds" in the Prospectus.
(i) The Company will use its best efforts to cause the Shares
to be listed on the New York Stock Exchange.
(j) The Company will file with the Commission such reports on
Form SR as may be required pursuant to Rule 463 of the Regulations.
5. Payment of Expenses. Whether or not the transactions
contemplated in this Agreement are consummated or this Agreement is terminated,
the Company hereby agrees to pay all costs and expenses incident to the
performance of the obligations of the Company hereunder, including those in
connection with (i) preparing, printing, duplicating, filing and distributing
the Registration Statement, as originally filed and all amendments thereof
(including all exhibits thereto), any preliminary prospectus, the Prospectus
and any amendments or supplements thereto (including, without limitation, fees
and expenses of the Company's accountants and counsel), the underwriting
documents (including this Agreement and the Agreement Among Underwriters and
the Selling Agreement) and all other documents related to the public offering
of the Shares (including those supplied to the Underwriters in quantities as
hereinabove stated), (ii)
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<PAGE> 13
the issuance, transfer and delivery of the Shares to the Underwriters,
including any transfer or other taxes payable thereon, (iii) the qualification
of the Shares under state or foreign securities or Blue Sky laws, including the
costs of printing and mailing a preliminary and final "Blue Sky Survey" and the
fees of counsel for the Underwriters and such counsel's disbursements in
relation thereto, (iv) listing the Shares on the New York Stock Exchange, (v)
filing fees of the Commission and the National Association of Securities
Dealers, Inc., (vi) the costs of printing certificates representing the Shares,
(vii) the costs and charges of any transfer agent or registrar and (viii) all
costs and expenses of the Underwriters, including the fees of counsel for the
Underwriters and such counsel's disbursements, in connection with matters
related to any directed, or reserved, shares that are reserved by the
Underwriters for sale to directors, officers or employees of the Company and
other persons affiliated with the Company's directors or officers. It is
understood, however, that, except as provided in this Section 5, and Sections
7, 8 and 11 hereof, the Underwriters will pay the fees and expenses of their
counsel.
6. Conditions of Underwriters' Obligations. The obligations
of the Underwriters to purchase and pay for the Firm Shares and the Additional
Shares, as provided herein, shall be subject to the accuracy of the
representations and warranties of the Company herein contained, as of the date
hereof and as of the Closing Date (for purposes of this Section 6 "Closing
Date" shall refer to the Closing Date for the Firm Shares and any Additional
Closing Date, if different, for the Additional Shares), to the absence from any
certificates, opinions, written statements or letters furnished to you or to
Debevoise & Plimpton ("Underwriters' Counsel") pursuant to this Section 6 of
any misstatement or omission, to the performance by the Company of its
obligations hereunder, and to the following additional conditions:
(a) The Registration Statement, including any related
registration statement filed pursuant to Rule 462(b) of the Regulations, shall
have become effective not later than 5:30 P.M., New York time, on the date of
this Agreement, or at such later time and date as shall have been consented to
in writing by you; if the Company shall have elected to rely upon Rule 430A or
Rule 434 of the Regulations, the Prospectus shall have been filed with the
Commission in a timely fashion in accordance with Section 4(a) hereof; and, at
or prior to the Closing Date no stop order suspending the effectiveness of the
Registration Statement or any post-effective amendment thereof shall have been
issued and no proceedings therefor shall have been initiated or threatened by
the Commission.
(b) At the Closing Date you shall have received the opinion
of Sirote & Permutt, P.C., counsel for the Company, dated the Closing Date
addressed to the
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<PAGE> 14
Underwriters and in form and substance satisfactory to Underwriters' Counsel,
to the effect that:
(i) Each of the Company and its subsidiaries has been duly
organized and is validly existing as a corporation in good standing
under the laws of its jurisdiction of incorporation. Each of the
Company and its subsidiaries is duly qualified and in good standing as
a foreign corporation in each jurisdiction in which the character or
location of its properties (owned, leased or licensed) or the nature
or conduct of its business makes such qualification necessary, except
for those failures to be so qualified or in good standing that would
not in the aggregate have a material adverse effect on the Company and
its subsidiaries, taken as a whole. Each of the Company and its
subsidiaries has all requisite corporate authority to own, lease and
license its respective properties and conduct its business as now
being conducted and as described in the Registration Statement and the
Prospectus. The only subsidiary of the Company is [Meadowcraft
Mexico]. All of the issued and outstanding capital stock of
[Meadowcraft Mexico] is owned directly by the Company, free and clear
of any lien, encumbrance, claim, security interest, restriction on
transfer, shareholders' agreement, voting trust or other defect of
title whatsoever.
(ii) The Company has an authorized capital stock as set forth
in the Registration Statement and the Prospectus. All of the
outstanding shares of Common Stock are duly and validly authorized and
issued, are fully paid and nonassessable and were not issued in
violation of or subject to any preemptive rights. The Shares to be
delivered on the Closing Date have been duly and validly authorized
and, when delivered by the Company in accordance with this Agreement,
will be duly and validly issued, fully paid and nonassessable and will
not have been issued in violation of or subject to any preemptive
rights. The Common Stock, the Firm Shares and the Additional Shares
conform to the descriptions thereof contained in the Registration
Statement and the Prospectus.
(iii) The Shares to be sold under this Agreement to the
Underwriters are duly authorized for listing on the New York Stock
Exchange.
(iv) This Agreement has been duly and validly authorized,
executed and delivered by the Company.
(v) There is no litigation or governmental or other action,
suit, proceeding or investigation before any court or before or by any
public, regulatory or governmental agency or body pending or to the
best of such counsel's knowledge,
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<PAGE> 15
threatened against, or involving the properties or business of, the
Company or any of its subsidiaries, which is of a character required
to be disclosed in the Registration Statement and the Prospectus which
has not been properly disclosed therein.
(vi) The execution, delivery, and performance of this
Agreement and the consummation of the transactions contemplated hereby
by the Company, including, without limitation, the Stock Split, the
termination of the Company's S Corporation election and the S
Corporation Distribution, do not and will not (i) conflict with or
result in a breach of any of the terms and provisions of, or
constitute a default (or an event which with notice or lapse of time,
or both, would constitute a default) under, or result in the creation
or imposition of any lien, charge or encumbrance upon any property or
assets of the Company or any of its subsidiaries pursuant to, any
agreement, instrument, franchise, license or permit known to such
counsel to which the Company or any of its subsidiaries is a party or
by which any of such corporations or their respective properties or
assets may be bound or (ii) violate or conflict with any provision of
the certificate of incorporation or by-laws of the Company or any of
its subsidiaries, or, to the best knowledge of such counsel, any
judgment, decree, order, statute, rule or regulation of any court or
any public, governmental or regulatory agency or body having
jurisdiction over the Company or any of its subsidiaries or any of
their respective properties or assets. No consent, approval,
authorization, order, registration, filing, qualification, license or
permit of or with any court or any public, governmental, or regulatory
agency or body having jurisdiction over the Company or any of its
subsidiaries or any of their respective properties or assets is
required for the execution, delivery and performance of this Agreement
or the consummation of the transactions contemplated hereby,
including, without limitation, the Stock Split, the termination of the
Company's S Corporation election and the S Corporation Distribution,
except for (1) such as may be required under state securities or Blue
Sky laws in connection with the purchase and distribution of the
Shares by the Underwriters (as to which such counsel need express no
opinion) and (2) such as have been made or obtained under the Act.
(vii) To the best of such counsel's knowledge, neither the
Company nor any of its subsidiaries is (i) in violation of its
certificate of incorporation or by-laws; (ii) in default in the
performance or observance of any obligation, agreement, covenant or
condition contained in any indenture, mortgage, deed of trust, loan
agreement, lease or other agreement or instrument to which it is a
party or by which it or any of its properties may be bound; or (iii)
in violation of any applicable law, statute, ordinance, rule or
regulation of any applicable jurisdiction,
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<PAGE> 16
except, in the case of this clause (iii), for such violations that,
individually or in the aggregate, do not and would not have a material
adverse effect on the Company and its subsidiaries, taken as a whole.
(viii) Each of the Stock Split, the termination of the
Company's S Corporation election and the S Corporation Distribution
has been duly and validly authorized by the Company, and the Stock
Split has occurred.
(ix) The Registration Statement and the Prospectus and any
amendments thereof or supplements thereto (other than the financial
statements and schedules and other financial data included or
incorporated by reference therein, as to which no opinion need be
rendered) comply as to form in all material respects with the
requirements of the Act and the Regulations.
(x) The Registration Statement is effective under the Act,
and, to the best knowledge of such counsel, no stop order suspending
the effectiveness of the Registration Statement or any post-effective
amendment thereof has been issued and no proceedings therefor have
been initiated or threatened by the Commission and all filings
required by Rule 424(b) of the Regulations have been made.
(xi) In addition, such opinion shall also contain a statement
that such counsel has participated in conferences with officers and
representatives of the Company, representatives of the independent
public accountants for the Company and the Underwriters at which the
contents of the Prospectus and related matters were discussed and, no
facts have come to the attention of such counsel which would lead such
counsel to believe that either the Registration Statement at the time
it became effective (including the information deemed to be part of
the Registration Statement at the time of effectiveness pursuant to
Rule 430A(b) or Rule 434, if applicable), or any amendment thereof
made prior to the Closing Date as of the date of such amendment,
contained an untrue statement of a material fact or omitted to state
any material fact required to be stated therein or necessary to make
the statements therein not misleading or that the Prospectus as of its
date (or any amendment thereof or supplement thereto made prior to the
Closing Date as of the date of such amendment or supplement) and as of
the Closing Date contained or contains an untrue statement of a
material fact or omitted or omits to state any material fact required
to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading
(it being understood that such counsel need express no belief or
opinion with respect to the financial statements and schedules and
other financial data included or incorporated by reference therein).
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<PAGE> 17
In rendering such opinion, such counsel may rely (A) as to
matters involving the application of laws other than the laws of the United
States and jurisdictions in which they are admitted, to the extent such counsel
deems proper and to the extent specified in such opinion, if at all, upon an
opinion or opinions (in form and substance reasonably satisfactory to
Underwriters' Counsel) of other counsel reasonably acceptable to Underwriters'
Counsel, familiar with the applicable laws; (B) as to matters of fact, to the
extent they deem proper, on certificates of responsible officers of the Company
and certificates or other written statements of officers of departments of
various jurisdictions having custody of documents respecting the corporate
existence or good standing of the Company and its subsidiaries, provided that
copies of any such statements or certificates shall be delivered to
Underwriters' Counsel. The opinion of such counsel for the Company shall state
that the opinion of any such other counsel is in form satisfactory to such
counsel and, in their opinion, you and they are justified in relying thereon.
(c) All proceedings taken in connection with the sale of the
Firm Shares and the Additional Shares as herein contemplated shall be
satisfactory in form and substance to you and to Underwriters' Counsel, and the
Underwriters shall have received from said Underwriters' Counsel a favorable
opinion, dated as of the Closing Date with respect to the issuance and sale of
the Shares, the Registration Statement and the Prospectus and such other
related matters as you may reasonably require, and the Company shall have
furnished to Underwriters' Counsel such documents as they request for the
purpose of enabling them to pass upon such matters.
(d) At the Closing Date you shall have received a certificate
of the President and the Chief Financial Officer of the Company, dated the
Closing Date to the effect that (i) the condition set forth in subsection (a)
of this Section 6 has been satisfied, (ii) as of the date hereof and as of the
Closing Date the representations and warranties of the Company set forth in
Section 1 hereof are accurate, (iii) as of the Closing Date the obligations of
the Company to be performed hereunder on or prior thereto have been duly
performed and (iv) subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus, the Company and its
subsidiaries have not sustained any material loss or interference with their
respective businesses or properties from fire, flood, hurricane, accident or
other calamity, whether or not covered by insurance, or from any labor dispute
or any legal or governmental proceeding, and there has not been any material
adverse change, or any development involving a material adverse change, in the
business prospects, properties, operations, condition (financial or otherwise),
or results of operations of the Company and its subsidiaries, taken as a whole,
except in each case as described in or contemplated by the Prospectus.
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<PAGE> 18
(e) At the time this Agreement is executed and at the Closing
Date, you shall have received a letter, from Arthur Andersen, LLP, independent
public accountants for the Company, dated, respectively, as of the date of this
Agreement and as of the Closing Date addressed to the Underwriters and in form
and substance satisfactory to you, to the effect that: (i) they are independent
certified public accountants with respect to the Company within the meaning of
the Act and the Regulations and stating that the answer to Item 10 of the
Registration Statement is correct insofar as it relates to them; (ii) stating
that, in their opinion, the financial statements and schedules of the Company
included in the Registration Statement and the Prospectus and covered by their
opinion therein comply as to form in all material respects with the applicable
accounting requirements of the Act and the applicable published rules and
regulations of the Commission thereunder; (iii) on the basis of procedures
consisting of a reading of the latest available unaudited interim consolidated
financial statements of the Company, a reading of the minutes of meetings and
consents of the shareholders and board of directors of the Company and the
committees of such board subsequent to July 31, 1997, inquiries of officers and
other employees of the Company who have responsibility for financial and
accounting matters of the Company with respect to transactions and events
subsequent to July 31, 1997 and other specified procedures and inquiries to a
date not more than five days prior to the date of such letter, nothing has come
to their attention that would cause them to believe that: (A) the unaudited
consolidated financial statements and schedules of the Company presented in the
Registration Statement and the Prospectus do not comply as to form in all
material respects with the applicable accounting requirements of the Act and,
if applicable, the Exchange Act and the applicable published rules and
regulations of the Commission thereunder or that such unaudited consolidated
financial statements are not fairly presented in conformity with generally
accepted accounting principles applied on a basis substantially consistent with
that of the audited consolidated financial statements included in the
Registration Statement and the Prospectus; (B) with respect to the period
subsequent to July 31, 1997 there were, as of the date of the most recent
available monthly consolidated financial statements of the Company, if any, and
as of a specified date not more than five days prior to the date of such
letter, any changes in the capital stock or long-term indebtedness of the
Company or any decrease in the net current assets or stockholders' equity of
the Company, in each case as compared with the amounts shown in the most recent
balance sheet presented in the Registration Statement and the Prospectus,
except for changes or decreases which the Registration Statement and the
Prospectus disclose have occurred or may occur or which are set forth in such
letter or (C) that during the period from July 31, 1997 to the date of the most
recent available monthly consolidated financial statements of the Company, if
any, and to a specified date not more than five days prior to the date of such
letter, there was any decrease, as compared with the corresponding period in
the prior fiscal
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<PAGE> 19
year, in total revenues, or total or per share net income, except for decreases
which the Registration Statement and the Prospectus disclose have occurred or
may occur or which are set forth in such letter; and (iv) stating that they
have compared specific dollar amounts, numbers of shares, percentages of
revenues and earnings, and other financial information pertaining to the
Company set forth in the Registration Statement and the Prospectus, which have
been specified by you prior to the date of this Agreement, to the extent that
such amounts, numbers, percentages, and information may be derived from the
general accounting and financial records of the Company or from schedules
furnished by the Company, and excluding any questions requiring an
interpretation by legal counsel, with the results obtained from the application
of specified readings, inquiries, and other appropriate procedures specified by
you set forth in such letter, and found them to be in agreement.
(f) Prior to the Closing Date the Company shall have
furnished to you such further information, certificates and documents as you
may reasonably request.
(g) You shall have received from each person who is a
director or officer of the Company and such persons as have been heretofore
designated by you and listed on Schedule II an agreement to the effect that
such person will not, directly or indirectly, without your prior written
consent, offer, sell, offer or agree to sell, grant any option to purchase or
otherwise dispose (or announce any offer, sale, grant of an option to purchase
or other disposition) of any shares of Common Stock (or any securities
convertible into, exercisable for or exchangeable or exercisable for shares of
Common Stock) for a period of 270 days after the date of the Prospectus.
(h) At the Closing Date, the Shares shall have been approved
for listing on the New York Stock Exchange upon notice of issuance.
If any of the conditions specified in this Section 6 shall not
have been fulfilled when and as required by this Agreement, or if any of the
certificates, opinions, written statements or letters furnished to you or to
Underwriters' Counsel pursuant to this Section 6 shall not be in all material
respects reasonably satisfactory in form and substance to you and to
Underwriters' Counsel, all obligations of the Underwriters hereunder may be
canceled by you at, or at any time prior to, the Closing Date and the
obligations of the Underwriters to purchase the Additional Shares may be
canceled by you at, or at any time prior to, the Additional Closing Date.
Notice of such cancellation shall be given to the Company in writing, or by
telephone, telex or telegraph, confirmed in writing.
7. Indemnification.
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(a) The Company agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, against
any and all losses, liabilities, claims, damages and expenses whatsoever as
incurred (including but limited to attorneys' fees and any and all expenses
whatsoever incurred in investigating, preparing or defending against any
litigation, commenced or threatened, or any claim whatsoever, and any and all
amounts paid in settlement of any claim or litigation), joint or several, to
which they or any of them may become subject under the Act, the Exchange Act or
otherwise, insofar as such losses, liabilities, claims, damages or expenses (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 registration
statement for the registration of the Shares, as originally filed or any
amendment thereof, or any related preliminary prospectus or the Prospectus, or
in any supplement thereto or amendment thereof, 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 not
misleading; provided, however, that the Company will not be liable in any such
case to the extent but only to the extent that any such loss, liability, claim,
damage or expense arises out of or is based upon any such untrue statement or
alleged untrue statement or omission or alleged omission made therein in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of any Underwriter through you expressly for use
therein. This indemnity agreement will be in addition to any liability which
the Company may otherwise have, including under this Agreement.
(b) Each Underwriter severally, and not jointly, agrees to
indemnify and hold harmless the Company, each of the directors of the Company,
each of the officers of the Company who shall have signed the Registration
Statement, and each other person, if any, who controls the Company within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, against
any losses, liabilities, claims, damages and expenses whatsoever as incurred
(including but not limited to attorneys' fees and any and all expenses
whatsoever incurred in investigating, preparing or defending against any
litigation, commenced or threatened, or any claim whatsoever, and any and all
amounts paid in settlement of any claim or litigation), jointly or several, to
which they or any of them may become subject under the Act, the Exchange Act or
otherwise, insofar as such losses, liabilities, claims, damages or expenses (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 registration
statement for the registration of the Shares, as originally filed or any
amendment thereof, or any related preliminary prospectus or the Prospectus, 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
20
<PAGE> 21
material fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent,
that any such loss, liability, claim, damage or expense arises out of or is
based upon any such untrue statement or alleged untrue statement or omission or
alleged omission made therein in reliance upon and in conformity with written
information furnished to the Company by or on behalf of any Underwriter through
you expressly for use therein; provided, however, that in no case shall any
Underwriter be liable or responsible for any amount in excess of the
underwriting discount applicable to the Shares purchased by such Underwriter
hereunder. The Company acknowledges that the statements set forth in the last
paragraph of the cover page and in the third, fifth, tenth and eleventh
paragraphs under the caption "Underwriting" in the Prospectus constitute the
only information furnished in writing by or on behalf of any Underwriter
expressly for use in the registration statement relating to the Shares as
originally filed or in any amendment thereof, any related preliminary
prospectus or the Prospectus or in any amendment thereof or supplement thereto,
as the case may be.
(c) Promptly after receipt by an indemnified party under
subsection (a) or (b) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against
the indemnifying party under such subsection, notify each party against whom
indemnification is to be sought in writing of the commencement thereof (but the
failure so to notify an indemnifying party shall not relieve it from any
liability which it may have under this Section 7). In case any such action is
brought against any indemnified party, and it notifies an indemnifying party of
the commencement thereof, the indemnifying party will be entitled to
participate therein, and to the extent it may elect by written notice delivered
to the indemnified party promptly after receiving the aforesaid notice from
such indemnified party, to assume the defense thereof with counsel satisfactory
to such indemnified party. Notwithstanding the foregoing, the indemnified
party or parties shall have the right to employ its or their own counsel in any
such case, but the fees and expenses of such counsel shall be at the expense of
such indemnified party or parties unless (i) the employment of such counsel
shall have been authorized in writing by one of the indemnifying parties in
connection with the defense of such action, (ii) the indemnifying parties shall
not have employed counsel to have charge of the defense of such action within a
reasonable time after notice of commencement of the action, or (iii) such
indemnified party or parties shall have reasonably concluded that there may be
defenses available to it or them which are different from or additional to
those available to one or all of the indemnifying parties (in which case the
indemnifying parties shall not have the right to direct the defense of such
action on behalf of the indemnified party or parties), in any of which events
such fees and expenses shall be borne by the indemnifying parties. Anything in
this subsection to the contrary
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<PAGE> 22
notwithstanding, an indemnifying party shall not be liable for any settlement
of any claim or action effected without its written consent; provided, however,
that such consent was not unreasonably withheld.
8. Contribution. In order to provide for contribution in
circumstances in which the indemnification provided for in Section 7 hereof is
for any reason held to be unavailable from any indemnifying party or is
insufficient to hold harmless a party indemnified thereunder, the Company and
the Underwriters shall contribute to the aggregate losses, claims, damages,
liabilities and expenses of the nature contemplated by such indemnification
provision (including any investigation, legal and other expenses incurred in
connection with, and any amount paid in settlement of, any action, suit or
proceeding or any claims asserted, but after deducting in the case of losses,
claims, damages, liabilities and expenses suffered by the Company any
contribution received by the Company from persons, other than the Underwriters,
who may also be liable for contribution, including persons who control the
Company within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act, officers of the Company who signed the Registration Statement and
directors of the Company) as incurred to which the Company and one or more of
the Underwriters may be subject, in such proportions as is appropriate to
reflect the relative benefits received by the Company and the Underwriters from
the offering of the Shares or, if such allocation is not permitted by
applicable law or indemnification is not available as a result of the
indemnifying party not having received notice as provided in Section 7 hereof,
in such proportion as is appropriate to reflect not only the relative benefits
referred to above but also the relative fault of the Company and the
Underwriters in connection with the statements or omissions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative benefits received by the
Company and the Underwriters shall be deemed to be in the same proportion as
(x) the total proceeds from the offering (net of underwriting discounts and
commissions but before deducting expenses) received by the Company and (y) the
underwriting discounts and commissions received by the Underwriters,
respectively, in each case as set forth in the table on the cover page of the
Prospectus. The relative fault of the Company and of the Underwriters shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to
state a material fact relates to information supplied by the Company or the
Underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The Company
and the Underwriters agree that it would not be just and equitable if
contribution pursuant to this Section 8 were determined by pro rata allocation
(even if the Underwriters were treated as one entity for such purpose) or by
any other method of allocation which does not take account of the equitable
considerations referred to
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<PAGE> 23
above. Notwithstanding the provisions of this Section 8, (i) in no case shall
any Underwriter be liable or responsible for any amount in excess of the
underwriting discount applicable to the Shares purchased by such Underwriter
hereunder, and (ii) no person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
Notwithstanding the provisions of this Section 8 and the preceding sentence, no
Underwriter shall be required to contribute any amount in excess of the amount
by which the total price at which the Shares underwritten by it and distributed
to the public were offered to the public exceeds the amount of any damages that
such Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. For purposes of this
Section 8, each person, if any, who controls an Underwriter within the meaning
of Section 15 of the Act or Section 20(a) of the Exchange Act shall have the
same rights to contribution as such Underwriter, and each person, if any, who
controls the Company within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act, each officer of the Company who shall have signed
the Registration Statement and each director of the Company shall have the same
rights to contribution as the Company, subject in each case to clauses (i) and
(ii) of this Section 8. Any party entitled to contribution will, promptly
after receipt of notice of commencement of any action, suit or proceeding
against such party in respect of which a claim for contribution may be made
against another party or parties, notify each party or parties from whom
contribution may be sought, but the omission to so notify such party or parties
shall not relieve the party or parties from whom contribution may be sought
from any obligation it or they may have under this Section 8 or otherwise. No
party shall be liable for contribution with respect to any action or claim
settled without its consent; provided, however, that such consent was not
unreasonably withheld.
9. Default by an Underwriter.
(a) If any Underwriter or Underwriters shall default in its
or their obligation to purchase Firm Shares or Additional Shares hereunder, and
if the Firm Shares or Additional Shares with respect to which such default
relates do not (after giving effect to arrangements, if any, made by you
pursuant to subsection (b) below) exceed in the aggregate 10% of the number of
Firm Shares or Additional Shares, to which the default relates shall be
purchased by the non-defaulting Underwriters in proportion to the respective
proportions which the numbers of Firm Shares set forth opposite their
respective names in Schedule I hereto bear to the aggregate number of Firm
Shares set forth opposite the names of the non-defaulting Underwriters.
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<PAGE> 24
(b) In the event that such default relates to more than 10%
of the Firm Shares or Additional Shares, as the case may be, you may in your
discretion arrange for yourself or for another party or parties (including any
non-defaulting Underwriter or Underwriters who so agree) to purchase such Firm
Shares or Additional Shares, as the case may be, to which such default relates
on the terms contained herein. In the event that within 5 calendar days after
such a default you do not arrange for the purchase of the Firm Shares or
Additional Shares, as the case may be, to which such default relates as
provided in this Section 9, this Agreement or, in the case of a default with
respect to the Additional Shares, the obligations of the Underwriters to
purchase and of the Company to sell the Additional Shares shall thereupon
terminate, without liability on the part of the Company with respect thereto
(except in each case as provided in Section 5, 7(a) and 8 hereof) or the
Underwriters, but nothing in this Agreement shall relieve a defaulting
Underwriter or Underwriters of its or their liability, if any, to the other
Underwriters and the Company for damages occasioned by its or their default
hereunder.
(c) In the event that the Firm Shares or Additional Shares to
which the default relates are to be purchased by the non-defaulting
Underwriters, or are to be purchased by another party or parties as aforesaid,
you or the Company shall have the right to postpone the Closing Date or
Additional Closing Date, as the case may be for a period, not exceeding five
business days, in order to effect whatever changes may thereby be made
necessary in the Registration Statement or the Prospectus or in any other
documents and arrangements, and the Company agrees to file promptly any
amendment or supplement to the Registration Statement or the Prospectus which,
in the opinion of Underwriters' Counsel, may thereby be made necessary or
advisable. The term "Underwriter" as used in this Agreement shall include any
party substituted under this Section 9 with like effect as if it had originally
been a party to this Agreement with respect to such Firm Shares and Additional
Shares.
10. Survival of Representations and Agreements. All
representations and warranties, covenants and agreements of the Underwriters
and the Company contained in this Agreement, including the agreements contained
in Section 5, the indemnity agreements contained in Section 7 and the
contribution agreements contained in Section 8, shall remain operative and in
full force and effect regardless of any investigation made by or on behalf of
any Underwriter or any controlling person thereof or by or on behalf of the
Company, any of its officers and directors or any controlling person thereof,
and shall survive delivery of and payment for the Shares to and by the
Underwriters. The representations contained in Section 1 and the agreements
contained in Sections 5, 7, 8 and 11(d) hereof shall survive the termination of
this Agreement, including termination pursuant to Section 9 or 11 hereof.
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11. Effective Date of Agreement; Termination.
(a) This Agreement shall become effective, upon the later of
when (i) you and the Company shall have received notification of the
effectiveness of the Registration Statement or (ii) the execution of this
Agreement. If either the initial public offering price or the purchase price
per Share has not been agreed upon prior to 5:00 P.M., New York time, on the
fifth full business day after the Registration Statement shall have become
effective, this Agreement shall thereupon terminate without liability to the
Company or the Underwriters except as herein expressly provided. Until this
Agreement becomes effective as aforesaid, it may be terminated by the Company
by notifying you or by you notifying the Company. Notwithstanding the
foregoing, the provisions of this Section 11 and of Sections 1, 5, 7 and 8
hereof shall at all times be in full force and effect.
(b) You shall have the right to terminate this Agreement at
any time prior to the Closing Date or the obligations of the Underwriters to
purchase the Additional Shares at any time prior to the Additional Closing
Date, as the case may be, if (A) any domestic or international event or act or
occurrence has materially disrupted, or in your opinion will in the immediate
future materially disrupt, the market for the Company's securities or
securities in general; or (B) if trading on the New York or American Stock
Exchanges shall have been suspended, or minimum or maximum prices for trading
shall have been fixed, or maximum ranges for prices for securities shall have
been required, on the New York or American Stock Exchanges by the New York or
American Stock Exchanges or by order of the Commission or any other
governmental authority having jurisdiction; or (C) if a banking moratorium has
been declared by a state or federal authority or if any new restriction
materially adversely affecting the distribution of the Firm Shares or the
Additional Shares, as the case may be, shall have become effective; or (D) (i)
if the United States becomes engaged in hostilities or there is an escalation
of hostilities involving the United States or there is a declaration of a
national emergency or war by the United States or (ii) if there shall have been
such change in political, financial or economic conditions if the effect of any
such event in (i) or (ii) as in your judgment makes it impracticable or
inadvisable to proceed with the offering, sale and delivery of the Firm Shares
or the Additional Shares, as the case may be, on the terms contemplated by the
Prospectus.
(c) Any notice of termination pursuant to this Section 11
shall be by telephone, telex, or telegraph, confirmed in writing by letter.
(d) If this Agreement shall be terminated pursuant to any of
the provisions hereof (otherwise than pursuant to (i) notification by you as
provided in Section 11(a)
25
<PAGE> 26
hereof or (ii) Section 9(b) or 11(b) hereof), or if the sale of the Shares
provided for herein is not consummated because any condition to the obligations
of the Underwriters set forth herein is not satisfied or because of any
refusal, inability or failure on the part of the Company to perform any
agreement herein or comply with any provision hereof, the Company will, subject
to demand by you, reimburse the Underwriters for all out-of-pocket expenses
(including the fees and expenses of their counsel), incurred by the
Underwriters in connection herewith.
12. Notices. All communications hereunder, except as may be
otherwise specifically provided herein, shall be in writing and , if sent to
any Underwriter, shall be mailed, delivered, or telexed or telegraphed and
confirmed in writing, to such Underwriter c/o A. G. Edwards & Sons, Inc., One
North Jefferson Avenue, St. Louis, Missouri 63103, Attention: Syndicate; if
sent to the Company, shall be mailed, delivered, or telegraphed and confirmed
in writing to the Company, 1401 Meadowcraft Road, Birmingham, Alabama 35215,
Attention: Steven C. Braswell.
13. Parties. This Agreement shall insure solely to the
benefit of, and shall be binding upon, the Underwriters and the Company and the
controlling persons, directors, officers, employees and agents referred to in
Section 7 and 8, and their respective successors and assigns, and no other
person shall have or be construed to have any legal or equitable right, remedy
or claim under or in respect of or by virtue of this Agreement or any provision
herein contained. The term "successors and assigns" shall not include a
purchaser, in its capacity as such, of Shares from any of the Underwriters.
14. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, BUT WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
26
<PAGE> 27
If the foregoing correctly sets forth the understanding
between you and the Company, please so indicate in the space provided below for
that purpose, whereupon this letter shall constitute a binding agreement among
us.
Very truly yours,
MEADOWCRAFT, INC.
By ________________________
Accepted as of the date first above written
A.G. EDWARDS & SONS, INC.
By _______________________
On behalf of themselves and the other
Underwriters named in Schedule I hereto.
27
<PAGE> 28
SCHEDULE I
<TABLE>
<CAPTION>
Number of Firm
Name of Underwriter Shares to be Purchased
- ------------------- ----------------------
<S> <C>
A.G. Edwards & Co., Inc.
----------
Total . . . . . . . . . . . . .
==========
</TABLE>
<PAGE> 29
SCHEDULE II
[Names of persons subject to the lock-up provision]
<PAGE> 1
EXHIBIT 3.2
AMENDED AND RESTATED BYLAWS
OF
MEADOWCRAFT, INC.
ARTICLE I
OFFICES
The registered office shall be in the City of Wilmington, County of
New Castle, State of Delaware. The Corporation may also have offices at such
other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the Corporation
may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Stockholder Meetings. All meetings of the stockholders for
the election of directors shall be held at such place as may be fixed from time
to time by the Board of Directors, or at such other place either within or
without the State of Delaware as shall be designated from time to time by the
Board of Directors and stated in the notice of the meeting. Meetings of
stockholders for any other purpose may be held at such time and place, within
or without the State of Delaware, as shall be stated in the notice of the
meeting or in a duly executed waiver of notice thereof.
Section 2. Annual Meetings. Annual meetings of the stockholders shall
be held on such date as shall be designated from time to time by the Board of
Directors and stated in the notice of the meeting, at which they shall elect by
a plurality vote a Board of Directors, and transact such other business as may
properly be brought before the meeting.
Section 3. Notice of Annual Meeting. Written notice of the annual
meeting stating the place, date and hour of the meeting shall be given to each
stockholder entitled to vote at such meeting not less than ten nor more than
sixty days before the date of the meeting.
Section 4. Voting List. The officer who has charge of the stock ledger
of the Corporation shall prepare and make, at least ten days before every
meeting of stockholders, a complete list of the stockholders entitled to vote
at the meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of
<PAGE> 2
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 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 5. Special Meetings. Special meetings of the stockholders, for
any purpose or purposes, unless otherwise prescribed by statute or by the
Certificate of Incorporation, as amended from time to time (the "Certificate of
Incorporation"), may be called by the chairman of the board or the president
and shall be called by the president or secretary at the request in writing of
a majority of the Board of Directors, or at the request in writing of
stockholders owning a majority in amount of the entire capital stock of the
Corporation issued and outstanding and entitled to vote. Such request shall
state the purpose or purposes of the proposed meeting.
Section 6. Notice of Special Meeting. Written notice of a special
meeting stating the place, date and hour of the meeting and the purpose or
purposes for which the meeting is called, shall be given not less than ten nor
more than sixty days before the date of the meeting, to each stockholder
entitled to vote at such meeting.
Section 7. Transaction of Business. Business transacted at any special
meeting of stockholders shall be limited to the purposes stated in the notice.
Section 8. Quorum. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
Certificate of Incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement
at the meeting, until a quorum shall be present or represented. At such
adjourned meeting at which a quorum shall be present or represented any
business may be transacted which might have been transacted at the meeting as
originally notified. If the adjournment is for more than thirty 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.
When a quorum is present at any meeting, the vote of the holders of a
majority of the stock having voting power present in person or represented by
proxy shall decide any question brought before such meeting, unless the
question is one upon which by express provision of the statutes 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.
2
<PAGE> 3
Section 9. Voting of Shares. Unless otherwise provided in the
Certificate of Incorporation each stockholder shall at every meeting of the
stockholders be entitled to one vote in person or by proxy for each share of
the capital stock having voting power held by such stockholder, but no proxy
shall be voted on after three years from its date, unless the proxy provides
for a longer period.
Section 10. 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 there is a
consent in writing, setting forth the action so taken, bearing the signature
and date of signature of the holders of outstanding stock having not less than
the minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted. Prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing.
Section 11. Stockholder Proposals at Annual Meetings. At an annual
meeting of the stockholders, only such business shall be conducted as shall
have been properly brought before the meeting. To be properly brought before an
annual meeting, business must be specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board of Directors,
otherwise properly brought before the meeting by or at the direction of the
Board of Directors or otherwise properly brought before the meeting by a
stockholder. In addition to any other applicable requirements, for business to
be properly brought before an annual meeting by a stockholder, the stockholder
must have given timely notice thereof in writing to the secretary of the
Corporation. To be timely, a stockholder's notice must be delivered to or
mailed and received at the principal executive offices of the Corporation, not
less than sixty days nor more than ninety days prior to the meeting; provided,
however, that in the event that less than seventy days' notice or prior public
disclosure of the date of the meeting is given or made to stockholders, notice
by the stockholder to be timely must be so received not later than the close of
business on the tenth day following the day on which such notice of the date of
the annual meeting was mailed or such public disclosure was made. A
stockholder's notice to the secretary shall set forth as to each matter the
stockholder proposes to bring before the annual meeting, (i) a brief
description of the business desired to be brought before the annual meeting and
the reasons for conducting such business at the annual meeting, (ii) the name
and record address of the stockholder proposing such business, (iii) the class
or series and number of shares of capital stock of the Corporation which are
owned beneficially or of record by the stockholder, (iv) a description of all
arrangements or understandings between the stockholder and any other person or
persons (including their names) in connection with the proposal of such
business by the stockholder and any material interest of the stockholder in
such business, and (v) a representation that the stockholder intends to appear
in person or by proxy at the annual meeting to bring such business before the
meeting.
3
<PAGE> 4
Notwithstanding anything in these Amended and Restated Bylaws (these
"Bylaws") to the contrary, no business shall be conducted at the annual meeting
except in accordance with the procedures set forth in this Section 11,
provided, however, that nothing in this Section 11 shall be deemed to preclude
discussion by any stockholder of any business properly brought before the
annual meeting in accordance with said procedure.
The Chairman of an annual meeting shall, if the facts warrant,
determine and declare to the meeting that business was not properly brought
before the meeting in accordance with the provisions of this Section 11, and if
he or she should so determine, he or she shall so declare to the meeting and
any such business not properly brought before the meeting shall not be
transacted.
Section 12. Nominations of Persons for Election to the Board of
Directors. In addition to any other applicable requirements, only persons who
are nominated in accordance with the following procedures shall be eligible for
election as directors. Nominations of persons for election to the Board of
Directors of the Corporation may be made at a meeting of stockholders by or at
the direction of the Board of Directors, by any nominating committee or person
appointed by the Board of Directors or by any stockholder of the Corporation
entitled to vote for the election of directors at the meeting who complies with
the notice procedures set forth in this Section 12. Such nominations, other
than those made by or at the direction of the Board of Directors, shall be made
pursuant to timely notice in writing to the secretary of the Corporation. To be
timely, a stockholder's notice shall be delivered to or mailed and received at
the principal executive offices of the Corporation not less than sixty days nor
more than ninety days prior to the meeting; provided, however, that in the
event that less than seventy days' notice or prior public disclosure of the
date of the meeting is given or made to stockholders, notice by the
stockholders to be timely must be so received not later than the close of
business on the tenth day following the day on which such notice of the date of
the meeting was mailed or such public disclosure was made. Such stockholder's
notice shall set forth (a) as to each person whom the stockholder proposes to
nominate for election or re-election as a director, (i) the name, age, business
address and residence address of the person, (ii) the principal occupation or
employment of the person, (iii) the class and number of shares of the
Corporation which are beneficially owned by the person and (iv) any other
information relating to the person that is required to be disclosed in
solicitations for proxies for election of directors pursuant to Section 14 of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
rules and regulations promulgated thereunder; and (b) as to the stockholder
giving the notice, (i) the name and record address of the stockholder, (ii) the
class or series and number of shares of capital stock of the Corporation which
are owned beneficially or of record by the stockholder, (iii) a description of
all arrangements or understandings between the stockholder and each proposed
nominee and any other person or persons (including their names) pursuant to
which the nominations(s) are to be made by the stockholder, (iv) a
representation that such stockholder intends to appear in person or by proxy at
the meeting to nominate the persons named in such notice and (v) any other
information relating to the stockholder that would be required to be disclosed
in a proxy statement or other filings required to be made in connection with
solicitations of proxies for the election of directors pursuant to Section 14
of the Exchange Act and the rules and regulations promulgated thereunder. Such
notice must be accompanied by
4
<PAGE> 5
a written consent of each proposed nominee being named as a nominee and to
serve as a director if elected. The Corporation may require any proposed
nominee to furnish such other information as may reasonably be required by the
Corporation to determine the eligibility of such proposed nominee to serve as a
director of the Corporation. No person shall be eligible for election as a
director of the Corporation unless nominated in accordance with the procedures
set forth herein.
The Chairman of the meeting shall, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with the
foregoing procedure, and if he should so determine, he shall so declare to the
meeting and the defective nomination shall be disregarded.
ARTICLE III
DIRECTORS
Section 1. General Powers. The business of the Corporation shall be
managed by or under the direction of its Board of Directors which may exercise
all such powers of the Corporation and do all such lawful acts and things as
are not by law or by the Certificate of Incorporation or by these Bylaws
directed or required to be exercised or done by the stockholders.
Section 2. Number. The number of directors that shall constitute the
whole Board of Directors of the Corporation shall be fixed by the affirmative
vote of a majority of the members at any time constituting the Board of
Directors, and such number may be increased or decreased from time to time;
provided, however, that no such decrease shall have the effect of shortening
the term of any incumbent director.
Section 3. Term of Office and Removal. At each annual meeting of
stockholders, the directors shall be elected for a one-year term. A director
shall hold office until the next annual meeting and until his or her successor
has been elected and qualifies. The Board of Directors shall increase or
decrease the number of directors by resolution of the Board, but in no case
shall a decrease in the number of directors shorten the term of any incumbent
director. A director may be removed from office for cause only and, subject to
such removal, death, resignation, retirement or disqualification, shall hold
office until the annual meeting for the year in which his or her term expires
and until his or her successor shall be elected and qualify. No alteration,
amendment or repeal of these Bylaws shall be effective to shorten the term of
any director holding office at the time of such alteration, amendment or repeal
or to permit any such director to be removed without cause, unless such
alteration, amendment or repeal has been approved by either the holders of all
shares of stock entitled to vote thereon or by a vote of a majority of the
entire Board of Directors.
Section 4. Vacancies. Vacancies and newly created directorships
resulting from any increase in the authorized number of directors may be filled
by the affirmative vote of a majority of the directors then in office, though
less than a quorum, or by a sole remaining director, in accordance with the
provisions of the Certificate of Incorporation, and the directors so chosen
5
<PAGE> 6
shall hold office until the next annual election and until their successors are
duly elected and shall qualify, unless sooner displaced. If there are no
directors in office, then an election of directors may be held in the manner
provided by law.
Section 5. Meetings. The Board of Directors of the Corporation may
hold meetings, both regular and special, either within or without the State of
Delaware.
Section 6. Regular Meetings. Regular meetings of the Board of
Directors may be held without notice at such time and at such place as shall
from time to time be determined by the Board of Directors.
Section 7. Special Meetings. Special meetings of the Board of
Directors may be called by the chairman of the board or president on two days'
notice to each director, either personally or by mail telegram or facsimile
transmission; special meetings shall be called by the president or secretary in
like manner and on like notice on the written request of two directors unless
the Board of Directors consists of only one director, in which case special
meetings shall be called by the president or secretary in like manner and on
like notice on the written request of the sole director.
Section 8. Quorum. At all meetings of the Board of Directors a
majority of the directors shall constitute a quorum for the transaction of
business and the act of a majority of the directors present at any meeting at
which there is a quorum shall be the act of the Board of Directors, except as
may be otherwise specifically provided by statute or by the Certificate of
Incorporation. If a quorum shall not be present at any meeting of the Board of
Directors the directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present.
Section 9. Unanimous Consent. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee
thereof may be taken without a meeting, if all members of the Board of
Directors or committee, as the case may be, consent thereto in writing, and the
writing or writings are filed with the minutes of proceedings of the Board of
Directors or committee.
Section 10. Telephonic Meetings. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, members of the Board of
Directors, or any committee designated by the Board of Directors, may
participate in a meeting of the Board of Directors, or any committee, by means
of conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other, and such
participation in a meeting shall constitute presence in person at the meeting.
Section 11. 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. The
Board of Directors may designate one or more
6
<PAGE> 7
directors as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee. Any such committee, to the
extent provided in the resolution of the Board of Directors, shall have and may
exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the Corporation, and may authorize
the seal of the Corporation to be affixed to all papers which may require it;
but no such committee shall have the power or authority in reference to
amending the Certificate of Incorporation (except that a committee may, to the
extent authorized in the resolution or resolutions providing for the issuance
of shares of stock adopted by the Board of Directors as provided in the
Certificate of Incorporation fix any of the preferences or rights of such
shares relating to dividends, redemption, dissolution, any distribution of
assets of the Corporation or the conversion into, or the exchange of such
shares for, shares of any other class or classes or any other series of the
same or any other class or classes of stock of the Corporation), adopting an
agreement of merger or consolidation, recommending to the stockholders the
sale, lease or exchange of all or substantially all of the Corporation's
property and assets, recommending to the stockholders a dissolution of the
Corporation or a revocation of a dissolution, or amending the Bylaws; and,
unless the resolution or the Certificate of Incorporation expressly so
provides, no such committee shall have the power or authority to declare a
dividend or to authorize the issuance of stock or to adopt a certificate of
ownership and merger. Such committee or committees shall have such name or
names as may be determined from time to time by resolution adopted by the Board
of Directors.
Section 12. Minutes. Each committee shall keep regular minutes of its
meetings and report the same to the Board of Directors when required.
Section 13. Compensation. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, the Board of Directors shall have
the authority to fix the compensation of directors. The directors may be paid
their expenses, if any, of attendance at each meeting of the Board of Directors
and may be paid a fixed sum for attendance at each meeting of the Board of
Directors or a stated salary as director. No such payment shall preclude any
director from serving the Corporation in any other capacity and receiving
compensation therefor. Members of special or standing committees may be allowed
like compensation for attending committee meetings.
ARTICLE IV
NOTICES
Section 1. Notice to Stockholders. Whenever, under the provisions of
applicable law or of the Certificate of Incorporation or of these Bylaws,
notice is required to be given to any stockholder, it shall not be construed to
mean personal notice only, but such notice may be given in writing, by mail,
addressed to such stockholder, at such stockholder=s address as it appears on
the records of the corporation, with postage thereon prepaid, and such notice
shall be deemed to be given at the time when the same shall be deposited in the
United States mail.
7
<PAGE> 8
Section 2. Notice to Directors. Whenever, under the provisions of
applicable law or of the Certificate of Incorporation or of these Bylaws,
notice is required to be given to any director, it shall be delivered by the
chairman of the board, the president or the secretary to such director within
the time provided in Section 7 of Article III of these Bylaws. Such notice
either (i) may be in writing (A) delivered personally, (B) delivered by mailing
to a director at such director's address as it appears in the records of the
Corporation, (C) delivered by telecopier or other means of electronic facsimile
transmission, (D) delivered by telegram or (E) delivered by overnight mail or
courier service to a director at such director's address as it appears in the
records of the Corporation, or (ii) may be oral given either in person or by
telephone. If mailed, such notice shall be deemed to be delivered when
deposited in the United States mail, so addressed, with postage thereon prepaid
at least five (5) days prior to the date on which such notice is required to be
given. If by telecopier or other electronic means of facsimile transmittal,
such notice shall be deemed delivered upon completion of transmittal from the
sender thereof, provided that it shall have been directed to such a place as is
reasonably calculated to cause actual receipt of such notice by such director.
If by telegram, such notice shall be deemed to be delivered when the telegram
is delivered to the telegraph company, provided that the notice shall have been
directed to such a place as is reasonably calculated to cause actual receipt of
such notice by such director. If by overnight mail or courier service, such
notice shall be deemed delivered on the date such notice is scheduled to be
delivered by such overnight mail or courier service following deposit of such
notice with such overnight mail or courier service, so addressed, with delivery
charges therefor paid by the sender thereof. 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 any notice of such meeting.
Section 3. Waiver of Notice. Whenever any notice is required to be
given under the provisions of the statutes or of the Certificate of
Incorporation or of these Bylaws to a stockholder or director, a waiver thereof
in writing, signed by the person or persons entitled to said notice, whether
before or after the time stated therein, shall be deemed equivalent thereto.
Attendance of a person at a meeting shall constitute a waiver of notice of such
meeting, except when the person attends a meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting was not lawfully called or convened. Neither the business
to be transacted at, nor the purpose of, any regular or special meeting of the
stockholders, directors, or members of a committee of directors need be
specified in any written waiver of notice unless so required by the Certificate
of Incorporation.
8
<PAGE> 9
ARTICLE V
OFFICERS
Section 1. Officers. The officers of the Corporation shall be chosen
by the Board of Directors and shall be a chairman of the board and a president,
one of whom may be designated by the Board of Directors as the chief executive
officer of the Corporation, a vice president, a secretary and a treasurer. The
Board of Directors may also choose one or more vice chairmen of the Board,
additional vice presidents, one or more of whom may be designated as executive
or senior vice presidents, and one or more assistant secretaries and assistant
treasurers. The Board of Directors shall also designate which officer shall
serve as the chief operating officer (if any), the chief financial officer and
such other special officers as the Board of Directors shall deem necessary. Any
number of officers may be held by the same person unless the Certificate of
Incorporation otherwise provides.
Section 2. Additional Officers. The Board of Directors may appoint
such other officers and agents as it shall deem necessary who shall hold their
offices for such terms and shall exercise such powers and perform such duties
as shall be determined from time to time by the Board.
Section 3. Compensation. The salaries and other compensation of the
chairman of the board and the president of the Corporation, and of such other
persons as the Board of Directors may determine, shall be fixed by the Board of
Directors.
Section 4. Term of Office; Removal; Vacancies. The officers of the
Corporation shall serve at the pleasure of the Board of Directors and shall
hold office until their successors are duly elected and qualified or until
their earlier resignation or removal. Any officer elected or appointed by the
Board of Directors may be removed at any time with or without cause by the
affirmative vote of a majority of the Board of Directors. Any vacancy occurring
in any office of the Corporation shall be filled by the Board of Directors.
Section 5. Duties of Officers. The officers of the Corporation, if and
when elected by the Board of Directors of the Corporation, shall have the
following duties:
(a) Chairman of the Board. The chairman of the board shall
preside at all meetings of the stockholders and of the Board of Directors, and
shall be a senior executive officer of the Corporation responsible to the Board
of Directors for the direction and development of the Corporation, for
oversight responsibility on all activities in which the Corporation may engage,
and shall work with the other executives to insure that the policies and
objectives of the Corporation are achieved. The chairman of the board shall
advise and counsel with the other officers of the Corporation on any and all
activities in which the Corporation may engage, and shall perform such other
duties as may be assigned to such officer by the Board of Directors. The
chairman of the board may sign certificates for shares of the Corporation and
deeds, mortgages, bonds, contracts, or other instruments on behalf of the
Corporation, except where required by law
9
<PAGE> 10
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. In general, the chairman of the board
shall perform all duties incident to the office of chairman of the board and
such other duties as may be prescribed by the Board of Directors.
(b) Chief Executive Officer. The chief executive officer of
the Corporation, if any, shall report to the Board of Directors of the
Corporation and, if requested by the Board of Directors, to the chairman of the
board. He shall have general and active management and control of the business
and operations of the Corporation and shall see that all orders and resolutions
of the Board of Directors are carried into effect. In general, the chief
executive officer shall perform all duties incident to the office and position
of chief executive officer and such other duties as may be from time to time
prescribed by the Board of Directors.
(c) President. The president shall have general and active
management of such areas and divisions of the business of the Corporation as
may be designated by the Board of Directors or by the chairman of the board.
The president of the Corporation, if not the chairman of the board, shall carry
into effect the orders of the chairman of the board. The president may sign
certificates for shares of the Corporation and deeds, mortgages, bonds,
contracts or other instruments on behalf of the Corporation except where
required 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. In general, the
president shall perform all duties incident to the office of president and such
other duties as may be prescribed by the Board of Directors or the chairman of
the board.
(d) Vice Presidents. The vice presidents shall perform such
duties and have such powers as the chairman of the board, the chief executive
officer or the president may from time to time prescribe.
(e) Secretary. The secretary shall attend all meetings of the
Board of Directors and all meetings of the stockholders and record all the
proceedings of the meetings of the stockholders and of the Board of Directors
in a book to be kept for that purpose and shall perform like duties for the
standing committees when required. The secretary shall give, or cause to be
given, notice of all meetings of the stockholders and special meetings of the
Board of Directors, and shall perform such other duties as may be prescribed by
the Board of Directors or the chairman of the board, the chief executive
officer or the president, under whose supervision the secretary shall be. The
secretary shall have custody of the corporate seal of the Corporation and the
secretary, or an assistant secretary, shall have authority to affix the same to
any instrument requiring it and when so affixed, it may be attested by the
secretary=s 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 such officer=s signature.
(f) Assistant Secretaries. The assistant secretary, or if
there be more than one, the Assistant Secretaries in the order determined by
the Board of Directors (or if there
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<PAGE> 11
be no such determination, then in the order of their election), shall, in the
absence of the secretary or in the event of the secretary's inability or
refusal to act, 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 may from time to time prescribe.
(g) Chief Financial Officer. The chief financial officer, if
any, shall be a vice president and shall act in an executive financial
capacity. The chief financial officer shall assist the chairman of the board,
the chief executive officer and the president in the general supervision of the
Corporation=s financial policies and affairs and shall perform such other
duties and have such other powers as the Board of Directors, the chairman of
the board, the chief executive officer or the president may from time to time
prescribe.
(h) Treasurer. The treasurer shall, subject to the direction
and supervision of the chief financial officer of the Corporation, if any,
exercise general supervision over the receipt, custody and disbursement of
corporate funds. The treasurer shall cause the funds of the Corporation to be
deposited in such banks as may be authorized by the Board of Directors, or in
such banks as may be designated as depositories in the manner provided by
resolution of the Board of Directors. The treasurer shall perform such other
duties and shall have such other powers as the Board of Directors, the chairman
of the board, the chief executive officer, the president or the chief financial
officer may from time to time prescribe.
(i) Assistant Treasurers. The assistant treasurer, or if
there shall be more than one, the assistant treasurers in the order determined
by the Board of Directors (or if there be no such determination, then in the
order of their election), shall, in the absence of the treasurer or in the
event of the treasurer's inability or refusal to act, perform the duties and
exercise the powers of the treasurer and shall perform such other duties and
have such other powers as the Board of Directors may from time to time
prescribe.
ARTICLE VI
CONTRACTS, LOANS, CHECKS AND DEPOSITS
Section 1. Contracts. The Board of Directors may authorize any officer
or officers, agent or agents, to enter into any contract or execute and deliver
any instrument in the name of and on behalf of the Corporation, and such
authority may be general or confined to specific instances.
Section 2. Loans. No loans shall be contracted on behalf of the
Corporation and no evidences of indebtedness shall be issued in its name unless
authorized by a resolution of the Board of Directors. Such authority may be
general or confined to specific instances.
Section 3. 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
11
<PAGE> 12
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 resolution of the Board
of Directors.
Section 4. 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 the Board of Directors
may select.
ARTICLE VII
CAPITAL STOCK
Section 1. Share Ownership. Shares for the capital stock of the
Corporation may be certificated or uncertificated. Owners of shares of the
capital stock of the Corporation shall be evidenced by a certificate or book
entry notation in the share transfer records of the Corporation. Any
certificates representing such shares shall be in such form as shall be
determined by the Board of Directors, shall be signed by an officer of the
Corporation and may be sealed with the seal of the Corporation or a facsimile
thereof. A record of share ownership shall be kept.
Section 2. Cancellation. All certificates transferred on the books of
the Corporation shall be surrendered and cancelled. No new certificates shall
be issued until the former certificate, or certificates, for the same number of
shares have been surrendered and cancelled, except in case of lost or destroyed
certificates, when new certificates therefor may be issued under such
conditions as the Board of Directors may prescribe.
Section 3. Transfer of Shares. Transfer of shares of the Corporation
shall be made only on the stock transfer books of the Corporation by the holder
of record thereof or by his or her legal representatives, who shall furnish
proper evidence of their authority in writing. Certificated shares shall be
transferred in the share transfer records of the Corporation upon the surrender
for cancellation of properly endorsed certificates for such shares.
Uncertificated shares shall be transferred in the share transfer records of the
Corporation upon the written instruction originated by the appropriate person
to transfer the shares.
Section 4. Fixing Record Date. 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, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock
or for the purpose of any other lawful action, the Board of Directors may fix,
in advance, a record date, which shall not be more than sixty nor less than ten
days before the date of such meeting, nor more than sixty days prior to any
other action. 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.
12
<PAGE> 13
Section 5. Registered Stockholders. The Corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, and to hold
liable for calls and assessments a person registered on its books as the owner
of shares, and shall not be bound to recognize any equitable or other claim to
or interest in such share or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as otherwise provided
by the laws of Delaware.
ARTICLE VIII
DIVIDENDS
Section 1. Paying Dividends. The Board of Directors may from time to
time declare, and the Corporation may pay, dividends on the outstanding shares
of the Corporation in the manner and upon the terms and conditions provided by
law and by the Certificate of Incorporation of the Corporation or any
amendments thereto. Dividends may be paid in cash, in property, or in shares of
the capital stock, subject to the provisions of the Certificate of
Incorporation.
Section 2. Setting Aside Funds. Before payment of any dividend, there
may be set aside out of any funds of the Corporation available for dividends
such sum or sums as the directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
Corporation, or for such other purpose as the directors shall think conducive
to the interest of the Corporation, and the directors may modify or abolish any
such reserve in the manner in which it was created.
ARTICLE IX
AMENDMENTS
These Bylaws may be altered, amended or repealed or new Bylaws may be
adopted by the stockholders or by the Board of Directors, when such power is
conferred upon the Board of Directors by the Certificate of Incorporation, at
any regular meeting of the stockholders or Board of Directors, or at any
special meeting of the stockholders or of the Board of Directors if notice of
such alteration, amendment, repeal or adoption of new Bylaws be contained in
the notice of such special meeting. If the power to adopt, amend or repeal
Bylaws is conferred upon the Board of Directors by the Certificate of
Incorporation, it shall not divest or limit the power of the stockholders to
adopt, amend or repeal these Bylaws.
ARTICLE X
MISCELLANEOUS
Section 1. Fiscal Year. The initial taxable year of the Corporation
shall commence on the date the Certificate of Incorporation is filed, and end
on such date as the Board of Directors
13
<PAGE> 14
may determine, in accordance with all applicable provisions of the Internal
Revenue Code of 1986, as amended.
Section 2. Seal. The corporate seal shall have inscribed thereon the
name of the Corporation, the year of its organization 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.
These Amended and Restated Bylaws of Meadowcraft, Inc. were adopted by
the Board of Directors of the Corporation and approved by the
Stockholders of the Corporation by unanimous written consent on the
31st day of July, 1997.
14
<PAGE> 1
EXHIBIT 4
<TABLE>
<S> <C>
TEMPORARY CERTIFICATE - EXCHANGEABLE FOR DEFINITIVE ENGRAVED CERTIFICATE WHEN READY FOR DELIVERY
NUMBER MEADOWCRAFT(R) SHARES
M
[LOGO]
COMMON STOCK COMMON STOCK
THIS CERTIFICATE IS TRANSFERABLE IN MEADOWCRAFT, INC. SEE REVERSE FOR
BIRMINGHAM, ALA. OR NEW YORK, N.Y. CERTAIN DEFINITIONS
INCORPORATED UNDER THE LAWS OF
THE STATE OF DELAWARE
THIS CERTIFIES that
is the owner of
FULLY PAID AND NONASSESSABLE SHARES OF COMMON STOCK, $.01 PAR VALUE PER SHARE, OF
Meadowcraft, Inc. transferable on the books of the Corporation in person or by duly authorized attorney upon surrender of this
certificate properly endorsed. This certificate is not valid unless countersigned and registered by the Transfer Agent and
Registrar.
Witness the facsimile seal of the Corporation and the facsimile signatures of its duly authorized officers.
Dated: /s/ Samuel R. Blount
COUNTERSIGNED AND REGISTERED: [CORPORATE SEAL] Chairman of the Board
AMSOUTH BANK OF ALABAMA
(BIRMINGHAM, ALA.) TRANSFER AGENT
BY AND REGISTRAR /s/ St. C. Ball
Vice President of Finance,
AUTHORIZED SIGNATURE Chief Financial Officer and Secretary
</TABLE>
<PAGE> 2
MEADOWCRAFT, INC.
THE CORPORATION WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO
REQUESTS A STATEMENT OF THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE,
PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OR
SERIES THEREOF OF THE CORPORATION, AND THE QUALIFICATIONS, LIMITATIONS OR
RESTRICTIONS OF SUCH PREFERENCES AND/OR RIGHTS. SUCH REQUEST MAY BE MADE TO THE
CORPORATION OR THE TRANSFER AGENT.
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM -- as tenants in common
TEN ENT -- as tenants by the entireties
JT TEN -- as joint tenants with right of survivorship and not as
tenants in common
UNIF GIFT MIN ACT -- _______________ Custodian _______________
(Cust) (Minor)
under Uniform Gifts to Minors Act
_____________________
(State)
Additional abbreviations may also be used though not in the above list.
For Value Received, ____________________ hereby sell, assign and
transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
______________________________________
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
________________________________________________________________________________
________________________________________________________________________________
_________________________________________________________________________ Shares
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
_______________________________________________________________________ Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated __________________
Signature:
________________________________________________________
Notice: The signature to this assignment must
correspond with the name as written upon the face of
the certificate in every particular, without
alteration or enlargement or any change whatever.
Signature guaranteed:
________________________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND
LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN
AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM),
PURSUANT TO S.E.C. RULE 17Ad-15.
<PAGE> 1
EXHIBIT 5.1
(205) 930-5108
September , 1997
Meadowcraft, Inc.
1401 Meadowcraft Road
Birmingham, Alabama 35215
Re: Registration Statement on Form S-1
Registration No. 333-33053
Gentlemen:
We have acted as your counsel in connection with the preparation of a
registration statement on Form S-1 filed with the Securities and Exchange
Commission on August 7, 1997, as subsequently amended (the "Registration
Statement"), in connection with the registration of up to shares
of Common Stock, $.01 par value (the "Shares"), of Meadowcraft, Inc., a
Delaware corporation (the "Company"), which are to be sold to the underwriters
represented by Bear, Stearns & Co. Inc. and A.G. Edwards & Sons, Inc. (the
"Representatives"), pursuant to the Underwriting Agreement between the Company
and the Representatives filed as Exhibit 1 to the Registration Statement (the
"Underwriting Agreement").
In connection with this opinion, we have examined and relied upon such
records, documents and other instruments as in our judgment are necessary and
appropriate in order to express the opinions hereinafter set forth and have
assumed the genuineness of all signatures, the authenticity of all documents
submitted to us as originals, and the conformity to original documents of all
documents submitted to us as certified or photostatic copies.
Based upon the foregoing, we are of the opinion that the Shares, when
issued and delivered in the manner and on the terms described in the
Registration Statement and the Underwriting Agreement (after the Registration
Statement is declared effective), will be duly authorized, validly issued,
fully paid and non-assessable.
<PAGE> 2
Meadowcraft, Inc.
September , 1997
Page 2
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and further consent to the reference to us under the
caption "Legal Matters" in the prospectus included in the Registration
Statement.
Very truly yours,
SIROTE & PERMUTT, P.C.
<PAGE> 1
EXHIBIT 10.3
[EXECUTION COPY]
- -------------------------------------------------------------------------------
AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
Dated as of August 28, 1997
among
MEADOWCRAFT, INC.
(the Borrower)
THE FINANCIAL INSTITUTIONS PARTY
HERETO FROM TIME TO TIME
(the Lenders)
and
NATIONSBANK, N.A.
(the Agent)
- -------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS(1)
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
ARTICLE 1 DEFINITIONS.............................................................................................. 1
SECTION 1.1. Definitions........................................................................................ 1
SECTION 1.2. General............................................................................................33
ARTICLE 2 REVOLVING CREDIT FACILITY................................................................................34
SECTION 2.1. Revolving Credit...................................................................................34
SECTION 2.2. Manner of Borrowing Revolving Credit Loans.........................................................34
SECTION 2.3. Repayment of Revolving Credit Loans................................................................36
SECTION 2.4. Revolving Credit Note..............................................................................36
ARTICLE 3 LETTER OF CREDIT FACILITY; IRB L/CS......................................................................37
SECTION 3.1. Agreement to Issue.................................................................................37
SECTION 3.2. Amounts............................................................................................37
SECTION 3.3. Conditions.........................................................................................37
SECTION 3.4. Issuance of Letters of Credit......................................................................38
SECTION 3.5. Duties of NationsBank..............................................................................38
SECTION 3.6. Payment of Reimbursement Obligations...............................................................39
SECTION 3.7. Participations.....................................................................................39
SECTION 3.8. Indemnification, Exoneration.......................................................................41
SECTION 3.9. Supporting Letter of Credit; Cash Collateral.......................................................42
SECTION 3.10. IRB Letters of Credit..............................................................................43
ARTICLE 4 TERM LOAN FACILITY.......................................................................................44
SECTION 4.1. Term Loan..........................................................................................44
SECTION 4.2. Manner of Borrowing Term Loans; Interim Construction Loans.........................................44
SECTION 4.3. Repayment of Term Loans............................................................................45
SECTION 4.4. Term Notes.........................................................................................45
SECTION 4.6. Voluntary Prepayment of Term Loans.................................................................46
ARTICLE 5 GENERAL LOAN PROVISIONS..................................................................................47
SECTION 5.1. Interest...........................................................................................47
SECTION 5.2. Certain Fees.......................................................................................51
SECTION 5.3. Manner of Payment..................................................................................52
SECTION 5.4. Loan Accounts; Statements of Account...............................................................53
SECTION 5.5. Termination of Agreement...........................................................................53
SECTION 5.6. Making of Loans....................................................................................54
SECTION 5.7. Settlement Among Lenders...........................................................................55
SECTION 5.8. Mandatory Prepayments..............................................................................59
</TABLE>
- -------------
(1) This Table of Contents is included for reference purposes only and
does not constitute part of the Loan and Security Agreement
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<PAGE> 3
<TABLE>
<S> <C> <C>
SECTION 5.9. Early Termination Fee..............................................................................60
SECTION 5.10. Aggregate Amount of Loans and Letter of Credit Obligations.........................................60
SECTION 5.11. Funds Transfer Services............................................................................60
ARTICLE 6 CONDITIONS PRECEDENT.....................................................................................62
SECTION 6.1. Conditions Precedent to Effectiveness..............................................................62
SECTION 6.2. All Loans; Letters of Credit.......................................................................65
ARTICLE 7 REPRESENTATIONS AND WARRANTIES OF BORROWER...............................................................66
SECTION 7.1. Representations and Warranties.....................................................................66
SECTION 7.2. Survival of Representations and Warranties, Etc....................................................77
ARTICLE 8 SECURITY INTEREST........................................................................................78
SECTION 8.1. Security Interest..................................................................................78
SECTION 8.2. Continued Priority of Security Interest............................................................79
ARTICLE 9 COLLATERAL COVENANTS.....................................................................................81
SECTION 9.1. Collection of Receivables..........................................................................81
SECTION 9.2. Verification and Notification......................................................................82
SECTION 9.3. Disputes, Returns and Adjustments..................................................................82
SECTION 9.4. Invoices...........................................................................................83
SECTION 9.5. Delivery of Instruments............................................................................83
SECTION 9.6. Sales of Inventory.................................................................................83
SECTION 9.7. Ownership and Defense of Title.....................................................................83
SECTION 9.8. Insurance..........................................................................................84
SECTION 9.9. Location of Offices and Collateral.................................................................84
SECTION 9.10. Records Relating to Collateral.....................................................................85
SECTION 9.11. Inspection.........................................................................................85
SECTION 9.12. Information and Reports............................................................................86
SECTION 9.13. Power of Attorney..................................................................................86
SECTION 9.14. Additional Real Estate and Leases..................................................................87
SECTION 9.15. Assignment of Claims Act...........................................................................88
SECTION 9.16. 1997 Projects......................................................................................88
ARTICLE 10 AFFIRMATIVE COVENANTS....................................................................................89
SECTION 10.1. Preservation of Corporate Existence and Similar Matters............................................89
SECTION 10.2. Compliance with Applicable Law.....................................................................89
SECTION 10.3. Maintenance of Property............................................................................89
SECTION 10.4. Conduct of Business................................................................................89
SECTION 10.5. Insurance..........................................................................................89
SECTION 10.6. Payment of Taxes and Claims........................................................................90
SECTION 10.7. Accounting Methods and Financial Records...........................................................90
SECTION 10.8. Use of Proceeds....................................................................................90
SECTION 10.9. Hazardous Waste and Substances; Environmental Requirements.........................................91
SECTION 10.10. Warranty Reserves.................................................................................91
</TABLE>
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<PAGE> 4
<TABLE>
<S> <C> <C>
ARTICLE 11 INFORMATION............................................................................................. 92
SECTION 11.1. Financial Statements.............................................................................. 92
SECTION 11.2. Accountants' Certificate.......................................................................... 92
SECTION 11.3. Officer's Certificate............................................................................. 93
SECTION 11.4. Copies of Other Reports........................................................................... 93
SECTION 11.5. Notice of Litigation and Other Matters............................................................ 94
SECTION 11.6. ERISA............................................................................................. 94
SECTION 11.7. Accuracy of Information........................................................................... 95
SECTION 11.8. Revisions or Updates to Schedules................................................................. 95
ARTICLE 12 NEGATIVE COVENANTS...................................................................................... 96
SECTION 12.1. Financial Ratios.................................................................................. 96
SECTION 12.2. Indebtedness for Money Borrowed................................................................... 96
SECTION 12.3. Guaranties........................................................................................ 97
SECTION 12.4. Investments....................................................................................... 97
SECTION 12.5. Capital Expenditures.............................................................................. 97
SECTION 12.6. Restricted Dividend Payments and Purchases, Etc................................................... 97
SECTION 12.7. Merger, Consolidation and Sale of Assets.......................................................... 97
SECTION 12.8. Transactions with Affiliates...................................................................... 98
SECTION 12.9. Liens............................................................................................. 98
SECTION 12.10. Capitalized Lease Obligations.................................................................... 98
SECTION 12.11. Operating Leases................................................................................. 98
SECTION 12.12. [Reserved]....................................................................................... 98
SECTION 12.13. Plans............................................................................................ 98
SECTION 12.14. Sales and Leasebacks............................................................................. 98
SECTION 12.15. Factored Receivables............................................................................. 98
SECTION 12.16. Clean Down....................................................................................... 98
ARTICLE 13 DEFAULT................................................................................................. 99
SECTION 13.1. Events of Default................................................................................. 99
SECTION 13.2. Remedies..........................................................................................102
SECTION 13.3. Application of Proceeds...........................................................................105
SECTION 13.4. Power of Attorney.................................................................................105
SECTION 13.5. Miscellaneous Provisions Concerning Remedies......................................................106
ARTICLE 14 ASSIGNMENTS.............................................................................................108
SECTION 14.1. Successors and Assigns; Participations............................................................108
SECTION 14.2. Representation of Lenders.........................................................................111
ARTICLE 15 AGENT...................................................................................................112
SECTION 15.1. Appointment of Agent..............................................................................112
SECTION 15.2. Delegation of Duties..............................................................................112
SECTION 15.3. Exculpatory Provisions............................................................................112
SECTION 15.4. Reliance by Agent.................................................................................112
SECTION 15.5. Notice of Default.................................................................................113
SECTION 15.6. Non-Reliance on Agent and Other Lenders...........................................................113
</TABLE>
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<TABLE>
<S> <C> <C>
SECTION 15.7. Indemnification...................................................................................114
SECTION 15.8. Agent in Its Individual Capacity..................................................................114
SECTION 15.9. Successor Agent...................................................................................114
SECTION 15.10. Notices from Agent to Lenders....................................................................115
ARTICLE 16 MISCELLANEOUS...........................................................................................116
SECTION 16.1. Notices...........................................................................................116
SECTION 16.2. Expenses..........................................................................................116
SECTION 16.3. Stamp and Other Taxes.............................................................................118
SECTION 16.4. Setoff............................................................................................118
SECTION 16.5. Litigation........................................................................................119
SECTION 16.6. Waiver of Rights..................................................................................119
SECTION 16.7. Consent to Advertising and Publicity..............................................................119
SECTION 16.8. Reversal of Payments..............................................................................120
SECTION 16.9. Injunctive Relief.................................................................................120
SECTION 16.10. Accounting Matters...............................................................................120
SECTION 16.11. Amendments.......................................................................................120
SECTION 16.12. Performance of Borrower's Duties.................................................................122
SECTION 16.13. Indemnification..................................................................................122
SECTION 16.14. All Powers Coupled with Interest.................................................................122
SECTION 16.15. Survival.........................................................................................122
SECTION 16.16. Titles and Captions..............................................................................123
SECTION 16.17. Severability of Provisions.......................................................................123
SECTION 16.18. Governing Law....................................................................................123
SECTION 16.19. Counterparts.....................................................................................123
SECTION 16.20. Reproduction of Documents........................................................................123
SECTION 16.21. Increased Capital................................................................................124
SECTION 16.22. Pro-Rata Participation...........................................................................124
SECTION 16.23. Not an "Alabama" Transaction.....................................................................125
</TABLE>
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<TABLE>
<S> <C>
ANNEX A PRICING MATRIX
ANNEX B WIRE TRANSFER PROCEDURE
EXHIBIT A FORM OF REVOLVING CREDIT NOTE
EXHIBIT C FORM OF BORROWING BASE CERTIFICATE
EXHIBIT D FORM OF OPINION OF COUNSEL FOR BORROWER
EXHIBIT E FORM OF SETTLEMENT REPORT
Schedule 1.1A [RESERVED]
Schedule 1.1B Permitted Investments
Schedule 1.1C Permitted Liens
Schedule 5.2(c) Projections
Schedule 7.1(a) Organization
Schedule 7.1(b) Capitalization
Schedule 7.1(d) Subsidiaries; Ownership of Stock
Schedule 7.1(f) Compliance with Laws
Schedule 7.1(h) Governmental Approvals
Schedule 7.1(i) Title to Properties
Schedule 7.1(j) Liens
Schedule 7.1(k) Indebtedness and Guaranties
Schedule 7.1(l) Litigation
Schedule 7.1(m) Tax Matters
Schedule 7.1(q) ERISA
Schedule 7.1(u) Location of Offices and Receivables
Schedule 7.1(v) Location of Inventory
Schedule 7.1(w) Equipment
Schedule 7.1(x) Real Estate
Schedule 7.1(y) Corporate and Fictitious Names
Schedule 7.1(bb) Employee Relations
Schedule 7.1(cc) Proprietary Rights
Schedule 7.1(dd) Trade Names
Schedule 10.8 Use of Proceeds
</TABLE>
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<PAGE> 7
AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
Dated as of August 28, 1997
MEADOWCRAFT, INC., a Delaware corporation, the financial
institutions party to this Agreement from time to time as Lenders, and
NATIONSBANK, N.A., a national banking association, as agent for the Lenders,
agree as follows:
Preliminary Statement
The Borrower, the Lenders (as of the Agreement Date) and the Agent
(each as hereinafter defined) are parties to a Loan and Security Agreement dated
as of August 16, 1995, as amended. The Borrower has requested, among other
things, an increase in the revolving and term credit facilities thereunder,
funding for additional construction projects, and changes in certain covenants
of the said Loan and Security Agreement.
The Lenders and the Agent have agreed to the Borrower's requests, upon
and subject to the terms, covenants and conditions hereinafter set forth. For
the convenience of all parties, the Borrower, the Lenders and the Agent have
agreed to amend and restate the said Loan and Security Agreement in its
entirety. This amendment and restatement is not intended to be and shall not be
construed as a refinancing, prepayment or novation of any indebtedness
outstanding under the said Loan and Security Agreement, but is only an amendment
and restatement of the terms applicable thereto.
Accordingly, in consideration of the said Loan and Security Agreement,
the advances and other financial accommodations made by the Lenders and
outstanding thereunder and the mutual promises contained in this Agreement, the
Borrower, the Lenders and the Agent hereby agree:
ARTICLE 1
DEFINITIONS
SECTION 1.1. Definitions. For the purposes of this
Agreement:
"AAA Distribution" means one or more distributions by the
Borrower to its shareholders of amounts not exceeding in the aggregate, the
amount of the Borrower's undistributed earnings taxed to such shareholders for
the period October 1, 1986 through the completion date of the IPO (that is, the
entire period of the Borrower's effective election to be taxed as a subchapter S
corporation), declared to the extent of approximately $32.7 million prior to
completion of the IPO and as to the balance of such distributions, promptly upon
determination of the amount thereof.
"Account Debtor" means a Person who is obligated on a
Receivable.
-1-
<PAGE> 8
"Acquire" or "Acquisition", as applied to any Business Unit or
Investment, means the acquiring or acquisition of such Business Unit or
Investment by purchase, exchange, issuance of stock or other securities, or by
merger, reorganization or any other method.
"Adjusted Net Worth" and "Adjusted Tangible Net Worth" mean,
respectively, the Consolidated Net Worth, and the Consolidated Tangible Net
Worth of the Borrower and its Consolidated Subsidiaries, less the amount
included therein for any amounts due from Affiliates.
"Advance" means amounts advanced by each Lender to the
Borrower under the Revolving Credit Facility as provided in ARTICLE 2 and shall
include Prime Rate Advances and Eurodollar Rate Advances.
"Affiliate" means, with respect to a Person, (a) any partner,
officer, shareholder (if holding more than 10% of the outstanding shares of
capital stock of such Person), director, employee or managing agent of such
Person, (b) any other Person (other than a Subsidiary) that, (i) directly or
indirectly through one or more intermediaries, controls, or is controlled by, or
is under common control with, such given Person, (ii)directly or indirectly
beneficially owns or holds 10% or more of any class of voting stock or
partnership or other voting interest of such Person or any Subsidiary of such
Person, or (iii) 10% or more of the voting stock or partnership or other voting
interest of which is directly or indirectly beneficially owned or held by such
Person or a Subsidiary of such Person. The term "control" means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through ownership of voting
securities or partnership or other voting interest, by contract or otherwise.
"Agency Account" means an account of the Borrower maintained
by it with a Clearing Bank pursuant to an Agency Account Agreement.
"Agency Account Agreement" means an agreement among the
Borrower, the Agent and a Clearing Bank, in form and substance satisfactory to
the Agent, concerning the collection of payments which represent the proceeds of
Receivables or of any other Collateral.
"Agent" means NationsBank, N.A., a national banking
association, and any successor agent appointed pursuant to SECTION 15.9.
"Agent's Office" means the office of the Agent specified in or
determined in accordance with the provisions of SECTION 16.1.
"Agreement" means this Agreement, including all Schedules,
Exhibits and other attachments hereto.
"Agreement Date" means the date as of which this Agreement is
dated.
"Alternative Revolver Rate" means at any time the lower of (i)
the Prime Rate at such time and (ii) the sum of the Federal Funds Effective Rate
at such time, plus the annual rate of interest appearing on the pricing matrix
attached hereto as ANNEX A under the caption "ARR" that is applicable at such
time.
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"Applicable Law" means all applicable provisions of
constitutions, statutes, rules, regulations and orders of all governmental
bodies and of all orders and decrees of all courts and arbitrators, including,
without limitation, Environmental Laws.
"Applicable Margin" means (1) as applied to any Eurodollar
Rate Term Loan, (A) 1.375% per annum if Funded Debt to EBITDA is 2.0 to 1 or
greater and (B) 1.25% per annum if Funded Debt to EBITDA is lower than 2.0 to 1,
and (2) as applied to any Eurodollar Rate Loan outstanding under the Revolving
Credit Facility, the per annum rate indicated under the caption "Applicable
Margin" opposite the applicable Funded Debt to EBITDA on the pricing matrix
attached hereto as ANNEX A. Each change in the Applicable Margin shall become
effective as of the first day of a calendar month that is at least 10 days after
the date on which quarterly financial statements and the related officer's
certificate are delivered in accordance with SECTIONS 11.1(B) and 11.3(A),
respectively.
"Arizona Facility" means the manufacturing facility
constructed by the Borrower in 1997-1998, in Yuma, Arizona.
"Arizona L/C" means the letter of credit, as and when issued,
issued by NationsBank pursuant to SECTION 4.5.
"Arizona L/C Agreement" means the Letter of Credit and
Reimbursement Agreement pursuant to which the Arizona L/C, if any, is issued and
outstanding.
"Asset Disposition" means the disposition of any asset of the
Borrower or any of its Subsidiaries, other than sales of Inventory in the
ordinary course of business.
"Assignment and Acceptance" means an assignment and acceptance
assigning all or a portion of a Lender's interests, rights and obligations under
this Agreement pursuant to SECTION 14.1.
"Assignment of Factoring Proceeds" means the document by that
name, [dated the Agreement Date], as amended, among the Borrower, the Factor,
and the Agent.
"Assignment of Life Insurance Policy" means an assignment to
Agent, for the benefit of Lenders, in form and substance satisfactory to Agent,
of a key man life insurance policy on the life of William McCanna, in the face
amount of $5 million.
"Availability" means at any time (a) the Borrowing Base at
such time MINUS (b) the aggregate principal amount of Revolving Credit Loans
outstanding at such time.
"Benefit Plan" means an "employee pension benefit plan" as
defined in Section 3(2) of ERISA (other than a Multiemployer Plan) in respect of
which the Borrower or any Related Company is, or within the immediately
preceding six years was, an "employer" as defined in Section 3(5) of ERISA,
including such plans as may be established after the Agreement Date.
"Blount" means S. Roberts Blount, party to the Support
Agreement.
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"Borrower" means Meadowcraft, Inc., a Delaware corporation,
and its successors and permitted assigns.
"Borrowing Base" means at any time an amount equal to the
lesser of:
(a) the Revolving Credit Facility MINUS the sum of
(i) the Letter of Credit Reserve, PLUS
(ii) any Interest Rate Protection Reserves, PLUS
(iii) the aggregate amount of the Environmental
Compliance Reserves, PLUS
(iv) such other reserves as the Agent in its
reasonable credit judgment shall establish from time to time,
and
(b) an amount equal to
(i) 93% (or such lesser percentage as the Agent
may in its absolute discretion determine from time to time) of
the face value of Factoring Credit Balances due and owing by
the Factor at such time, PLUS
(ii) 88% (or such lesser percentage as the Agent may
in its absolute discretion determine from time to time) of the
face value of Eligible Receivables due and owing at such time
by Walmart, Sam's Club, Home Depot, and Lowes, PLUS
(iii) in the months of March through September, 50%,
and in the months of October through February, 60% (or such
lesser percentage as the Agent may in its absolute discretion
determine from time to time) of the lesser of cost determined
on a FIFO (or first-in-first-out) accounting basis and fair
market value of Eligible Inventory, MINUS
(iv) the sum of
(A) the Letter of Credit Reserve, PLUS
(B) any Interest Rate Protection Reserves, PLUS
(C) the aggregate amount of the Environmental
Compliance Reserves, PLUS
(D) such other reserves as the Agent in its
reasonable credit judgment may establish from time to
time.
"Borrowing Base Certificate" means a certificate in the form
attached hereto as EXHIBIT C or in such other form as may be accepted to the
Agent.
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<PAGE> 11
"Business Day" means any day other than a Saturday, Sunday or
other day on which banks in Atlanta, Georgia are authorized to close.
"Business Unit" means the assets constituting the business or
a division or operating unit thereof of any Person.
"Capital Expenditures" means, with respect to any Person, all
expenditures made and liabilities incurred for the acquisition of assets (other
than assets which constitute a Business Unit) which are not, in accordance with
GAAP, treated as expense items for such Person in the year made or incurred or
as a prepaid expense applicable to a future year or years.
"Capitalized Lease" means a lease that is required to be
capitalized for financial reporting purposes in accordance with GAAP.
"Capitalized Lease Obligation" means Indebtedness represented
by obligations under a Capitalized Lease, and the amount of such Indebtedness
shall be the capitalized amount of such obligations determined in accordance
with GAAP.
"Cash Collateral" means collateral consisting of cash or Cash
Equivalents on which the Agent, for the benefit of itself as Agent and the
Lenders, has a first priority Lien.
"Cash Equivalents" means
(a) marketable direct obligations issued or unconditionally
guaranteed by the United States or issued by any agency thereof and
backed by the full faith and credit of the United States, in each case
maturing within one year from the date of acquisition thereof;
(b) commercial paper maturing no more than one year from the
date issued and, at the time of acquisition thereof, having a rating of
at least A-1 from Standard & Poor's Ratings Group or at least P-1 from
Moody's Investors Service, Inc.;
(c) certificates of deposit or bankers' acceptances issued in
Dollar denominations and maturing within one year from the date of
issuance thereof issued by any commercial bank organized under the laws
of the United States of America or any state thereof or the District of
Columbia having combined capital and surplus of not less than $100
million and, unless issued by the Agent or a Lender, not subject to
set-off or offset rights in favor of such bank arising from any banking
relationship with such bank; and
(d) repurchase agreements in form and substance and for
amounts satisfactory to the Agent.
"Clearing Bank" means NationsBank and any other banking
institution with which an Agency Account has been established pursuant to an
Agency Account Agreement.
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"Collateral" means all of the Borrower's right, title and
interest in and to each of the following, wherever located and whether now or
hereafter existing or now owned or hereafter acquired or arising:
(a) all Receivables,
(b) all Inventory,
(c) all Equipment,
(d) all Contract Rights,
(e) all General Intangibles,
(f) all Real Estate,
(g) all goods and other property, whether or not delivered,
(i) the sale or lease of which gives or purports to
give rise to any Receivable, including, but not limited to,
all merchandise returned or rejected by or repossessed from
customers, or
(ii) securing any Receivable,
including, without limitation, all rights as an unpaid vendor or lienor
(including, without limitation, stoppage in transit, replevin and
reclamation) with respect to such goods and other property,
(h) all mortgages, deeds to secure debt and deeds of trust on
real or personal property, guaranties, leases, security agreements, and
other agreements and property which secure or relate to any Receivable
or other Collateral, or are acquired for the purpose of securing and
enforcing any item thereof,
(i) all documents of title, policies and certificates of
insurance, securities, chattel paper and other documents and
instruments evidencing or pertaining to any and all items of
Collateral,
(j) all files, correspondence, computer programs, tapes, discs
and related data processing software which contain information
identifying or pertaining to any of the Receivables or any Account
Debtor, or showing the amounts thereof or payments thereon or otherwise
necessary or helpful in the realization thereon or the collection
thereof,
(k) all cash deposited with the Agent or any Lender or any
Affiliate of the Agent or any Lender or which the Agent, for the
benefit of the Lenders, or any Lender or such Affiliate is entitled to
retain or otherwise possess as collateral pursuant to the provisions of
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<PAGE> 13
this Agreement or any of the Security Documents or any agreement
relating to any Letter of Credit, and
(l) any and all products and proceeds of the foregoing
(including, but not limited to, any claim to any item referred to in
this definition, and any claim against any third party for loss of,
damage to or destruction of any or all of, the Collateral or for
proceeds payable under, or unearned premiums with respect to, policies
of insurance) in whatever form, including, but not limited to, cash,
negotiable instruments and other instruments for the payment of money,
chattel paper, security agreements and other documents.
"Commitment" means, as to each Lender, the amount set forth
opposite such Lender's name on the signature pages hereof (or, from and after
the Effective Date, in the Register), representing such Lender's obligation,
upon and subject to the terms and conditions of this Agreement (including the
applicable provisions of SECTION 14.1), to make or maintain Revolving Credit
Loans, Interim Construction Loans and Term Loans and to maintain or purchase
participations in Letters of Credit and IRB L/Cs and its corresponding interest
in Term Loans outstanding.
"Commitment Percentage" means, as to any Lender, the
percentage of the Total Commitment obtained by dividing such Lender's Commitment
by the Total Commitment.
"Consolidated", when used with reference to financial accounts
means the sum of such financial account of the Borrower and its Consolidated
Subsidiaries, as consolidated after the elimination of intercompany items and,
in the case of Net Income and Tangible Net Worth, after appropriate deductions
for any minority interests in any Subsidiaries, and, when used with reference to
such accounts of any other Person, means the sum of such accounts of such Person
and its consolidated Subsidiaries as so adjusted.
"Consolidated Subsidiaries" means, as to the Borrower, the
Subsidiaries of the Borrower whose accounts are at the time in question, in
accordance with GAAP and pursuant to the written consent of the Required
Lenders, which consent may be withheld in their absolute discretion and which
may be conditioned upon, inter alia, the execution and delivery of guaranties,
security agreements, mortgages and other documents required by the Required
Lenders in their absolute discretion, consolidated with those of the Borrower.
"Contaminant" means any waste, pollutant, hazardous substance,
toxic substance, hazardous waste, special waste, petroleum or petroleum-derived
substance or waste, or any constituent of any such substance or waste.
"Contract Rights" means any rights under contracts not yet
earned by performance and not evidenced by an instrument or chattel paper.
"Controlled Disbursement Account" means one or more accounts
maintained by and in the name of the Borrower with a Disbursing Bank for the
purposes of disbursing Revolving Credit Loan proceeds and other amounts
deposited thereto.
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"Copyrights" means, in each case whether now existing or
hereafter arising, all of the Borrower's right, title and interest in and to
(a) all copyrights, rights and interests in copyrights, works
protectable by copyright, copyright registrations and copyright
applications;
(b) all renewals of any of the foregoing;
(c) all income, royalties, damages and payments now or
hereafter due and/or payable under any of the foregoing, including,
without limitation, damages or payments for past or future
infringements of any of the foregoing;
(d) the right to sue for past, present and future
infringements of any of the foregoing; and
(e) all rights corresponding to any of the foregoing
throughout the world.
"Debt" means:
(a) Indebtedness for money borrowed,
(b) Indebtedness, whether or not in any such case the same was
for money borrowed,
(i) represented by notes payable, and drafts
accepted, that represent extensions of credit,
(ii) constituting obligations evidenced by bonds,
debentures, notes or similar instruments, or
(iii) upon which interest charges are customarily
paid or that was issued or assumed as full or partial payment
for property (other than trade credit that is incurred in the
ordinary course of business),
(c) Indebtedness that constitutes a Capitalized Lease
Obligation, and
(d) Indebtedness that is such by virtue of CLAUSE (C) of the
definition thereof, but only to the extent that the obligations
Guaranteed are obligations that would constitute Debt.
"Debt Service" means, without duplication, for any period, the
sum of: (a) interest expense PLUS (b) current maturities of Funded Debt PLUS (c)
Permitted Subchapter S Distributions or cash dividends paid PLUS (d) cash
expenditures for federal and state income taxes in each case, for such period.
"Debt Service Coverage Ratio" means the ratio of EBITDA to
Debt Service.
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<PAGE> 15
"Default" means any of the events specified in SECTION 13.1
which with the passage of time or giving of notice or both would constitute an
Event of Default.
"Default Margin" means 3.0%.
"Disbursing Bank" means any commercial bank with which a
Controlled Disbursement Account is maintained after the Effective Date.
"Dollar" and "$" means freely transferable United States
dollars.
"EBITDA" means Net Income before provision for interest
expense, income taxes, amortization and depreciation.
"Effective Date" means the later of:
(a) the Agreement Date, and
(b) the first date on which all of the conditions set forth in
ARTICLE 6 shall have been fulfilled.
"Effective Interest Rate" means each rate of interest per
annum on the Revolving Credit Loans and the Term Loans in effect from time to
time pursuant to the provisions of SECTIONS 5.1(A) and (B) and pursuant to the
Term Notes.
"Eligible Assignee" means (i) a commercial bank organized
under the laws of the United States, or any State thereof, having total assets
in excess of $1 billion or any commercial finance or asset based lending
affiliate of any such commercial bank; (ii) a savings and loan association or
savings bank organized under the laws of the United States, or any State
thereof, having a net worth of at least $250 million calculated in accordance
with GAAP; (iii) any Affiliate of NationsBank, NationsBanc Commercial
Corporation, or Fleet Financial Group, Inc., and any successor or assign of any
of them; and (iv) any Lender listed on the signature page of this Agreement;
PROVIDED in each case that the representation contained in SECTION 14.1(C)(I)
hereof shall be applicable with respect to such institution or Lender.
"Eligible Inventory" means the Borrower's Inventory which the
Agent, in its absolute discretion, determines to meet all of the following
requirements:
(a) such Inventory is owned by the Borrower, is stored at a
location listed on SCHEDULE 7.1(V), is subject to the Security
Interest, which is perfected as to such Inventory, and is subject to no
other Lien whatsoever other than a Permitted Lien,
(b) such Inventory consists of finished goods or raw materials
and not work-in- process, packing, hardware or supplies,
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<PAGE> 16
(c) such Inventory is in good condition and meets all
standards imposed by any governmental agency, or department or division
thereof, having regulatory authority over such goods, their use or
sale,
(d) such Inventory is currently either usable or salable, at
prices approximating at least cost, in the normal course of the
Borrower's business and is not slow moving or stale,
(e) such Inventory is not obsolete or returned or repossessed
or used goods taken in trade,
(f) such Inventory is located within the United States at one
of the locations set forth in the most recent Schedule of Inventory,
(g) such Inventory is in the possession and control of the
Borrower and not any third party or if the Inventory is held by a third
party bailee and a negotiable instrument has not been issued with
respect to it (i) a financing statement which names the third party
bailee as the debtor/bailee, names the Borrower as the secured
party/bailor, names the Agent as assignee of the secured party/bailor
and contains a description of such Inventory acceptable to the Agent
and otherwise in compliance with the requirements of Section 9-304(3)
of the UCC has been filed in the appropriate filing office and (ii)
such other steps as the Agent may reasonably require in order to
establish and preserve the priority of the Security Interest against
secured creditors of the third party bailee or the Borrower shall have
been taken,
(h) if such Inventory is located in a warehouse or other
facility leased by the Borrower, the lessor has delivered to the Agent,
on behalf of the Lenders, a waiver and consent in form and substance
satisfactory to the Agent,
(i) such Inventory is not fabric located in Borrower's Selma,
Alabama location that has not been sold in 360 days or more, or has
been designated as noncurrent by the Borrower,
(j) such Inventory is not located at Borrower's Boaz, Alabama
location, and
(k) such Inventory is not determined by the Agent, on behalf
of the Lenders, in its absolute discretion to be ineligible for any
other reason.
"Eligible Receivable" means a Receivable owing to the Borrower
(which shall exclude any of the Borrower's accounts receivable sold to the
Factor) that consists of the unpaid portion of the obligation stated on the
invoice issued to an Account Debtor suitable to Agent in its sole discretion
with respect to Inventory sold and shipped to or services performed for such
Account Debtor in the ordinary course of business, net of any credits or rebates
owed by the Borrower to the Account Debtor and that the Agent, in its absolute
discretion determines to meet all of the following requirements:
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<PAGE> 17
(a) such Receivable is owned by the Borrower and represents a
complete bona fide transaction which requires no further act under any
circumstances on the part of the Borrower to make such Receivable
payable by the Account Debtor,
(b) such Receivable has terms of 60 days or less and is no
more than 60 days past due,
(c) the goods the sale of which gave rise to such Receivable
were shipped or delivered to the Account Debtor on an absolute sale
basis and not on a bill and hold sale basis, a consignment sale basis,
a guaranteed sale basis, a sale or return basis, or on the basis of any
other similar understanding and no material part of such goods has been
returned or rejected,
(d) such Receivable is not evidenced by chattel paper or an
instrument of any kind,
(e) the Account Debtor with respect to such Receivable is not
insolvent or the subject of any bankruptcy or insolvency proceedings of
any kind or of any other proceeding or action, threatened or pending,
which might, in the Agent's sole judgment, have a Materially Adverse
Effect on such Account Debtor, and is not, in the reasonable discretion
of the Agent, deemed ineligible for credit or other reasons,
(f) such Receivable is not owing by an Account Debtor having
50% or more in face value of its then-existing accounts owing to the
Borrower ineligible for any reason,
(g) with respect to any Receivable not owing by Walmart, Sam's
Club, Home Depot or Lowes, such Receivable shall not be deemed an
Eligible Receivable to the extent the then-existing accounts owing to
the Borrower by the Account Debtor thereon exceed in the aggregate in
face amount 20% of the Borrower's total Eligible Receivables plus the
Borrower's total Factoring Credit Balances,
(h) with respect to any Receivable owing by Walmart or Sam's
Club, such Receivable shall not be deemed an Eligible Receivable to the
extent the then-existing accounts owing to the Borrower by Walmart and
Sam's Club exceed in the aggregate in face amount 45% of the Borrower's
total Eligible Receivables plus the Borrower's total Factoring Credit
Balances,
(i) if such Receivable arises from the performance of
services, such services have been fully rendered and do not relate to
any warranty claim or obligation,
(j) such Receivable is not owing by an Account Debtor that is
located outside of the United States of America (for this purpose, the
Commonwealth of Puerto Rico shall be considered located within the
United States of America), unless such Receivable is backed by a letter
of credit, satisfactory to the Agent as to form, substance, and issuer,
that has been assigned to Agent in a manner satisfactory to Agent,
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<PAGE> 18
(k) such Receivable is a valid, legally enforceable obligation
of the Account Debtor with respect thereto and is not subject to any
present or contingent (and no facts exist which are the basis for any
future) offset, deduction or counterclaim, dispute or other defense on
the part of such Account Debtor,
(l) such Receivable is subject to the Security Interest, which
is perfected as to such Receivable, and is subject to no other Lien
whatsoever other than a Permitted Lien,
(m) such Receivable is evidenced by an invoice or other
documentation in form acceptable to the Agent,
(n) the Receivable is not subject to the Assignment of Claims
Act of 1940, as amended from time to time, or any Applicable Law now or
hereafter existing similar in effect thereto, or to any other
prohibition (under Applicable Law, by contract or otherwise) against
its assignment or requiring notice of or consent to such assignment,
unless all such required notices have been given, all such required
consents have been received and all other procedures have been complied
with such that such Receivable shall have been duly and validly
assigned to the Agent, for the benefit of the Lenders,
(o) the goods giving rise to such Receivable were not, at the
time of the sale thereof, subject to any Lien, except the Security
Interest and Permitted Liens,
(p) such Receivable does not arise out of any transaction with
any Subsidiary, Affiliate, creditor, tenant, lessor or supplier of the
Borrower,
(q) the Borrower is not the beneficiary of any letter of
credit, except as permitted by clause (l) of this definition, nor has
any bond or other undertaking by a guarantor or surety been obtained,
supporting such Receivable and the Account Debtor's obligations in
respect thereof,
(r) such Receivable does not arise out of finance or similar
charges by the Borrower or other fees for the time value of money,
(s) such Receivable has not been charged back to the Borrower
by the Factor,
(t) the Account Debtor with respect to such Receivable is not
located in New Jersey or any other state denying creditors access to
its courts in the absence of qualification to transact business in such
state or the filing of a Notice of Business Activities Report or other
similar filing, unless the Borrower has either qualified as a foreign
corporation authorized to transact business in such state or has filed
a Notice of Business Activities Report or similar filing with the
applicable state agency for the then current year,
(u) such Receivable did not result from the sale of goods or
services at retail and is not subject to ss. 15-9-1 et seq., Code of
Alabama (1975) as amended (commonly known as the "Alabama Mini-Code"),
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<PAGE> 19
(v) such Receivable is not owing by an Account Debtor who has
any of its accounts payable to the Borrower (but for the factoring
thereof) factored under the Factoring Agreement, and
(w) neither the Account Debtor with respect to such
Receivable, nor such Receivable, is determined by the Agent in its
absolute discretion to be ineligible for any other reason.
"Environmental Compliance Reserves" means reserves for the
cost of Remedial Action by the Borrower determined by the Agent from time to
time in its discretion based upon the reports delivered pursuant to SECTION
10.9(B) and such other advice, analysis and engineering studies as it deems
appropriate.
"Environmental Laws" means all federal, state, local and
foreign laws now or hereafter in effect relating to pollution or protection of
the environment, including laws relating to emissions, discharges, Releases or
threatened Releases of pollutants, Contaminants, chemicals, or industrial, toxic
or hazardous substances or wastes into the environment (including, without
limitation, ambient air, surface water, ground water, or land), or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, removal, transport, or handling of pollutants, Contaminants,
chemicals, or industrial, toxic or hazardous substances or wastes, and any and
all regulations, notices or demand letters issued, entered, promulgated or
approved thereunder; such laws and regulations include but are not limited to
the Resource Conservation and Recovery Act, 42 U.S.C. ss. 6901 et seq., as
amended; the Comprehensive Environmental Response, Compensation and Liability
Act, 42 U.S.C. ss. 9601 et seq., as amended; the Toxic Substances Control Act,
15 U.S.C. ss. 2601 et seq., as amended; the Clean Air Act, 46 U.S.C. ss. 7401 et
seq., as amended; and state and federal lien and environmental cleanup programs.
"Environmental Lien" means a Lien in favor of any governmental
entity for (a) any liability under Environmental Laws or (b) damages arising
from, or costs incurred by such governmental entity in response to, a Release or
threatened Release of Contaminant into the environment.
"Equipment" means all machinery, apparatus, equipment, motor
vehicles, tractors, trailers, rolling stock, fittings, fixtures and other
tangible personal property (other than Inventory) of every kind and description
used in the Borrower's business operations or owned by the Borrower or in which
the Borrower has an interest, and all parts, accessories and special tools and
all increases and accessions thereto and substitutions and replacements
therefor.
"ERISA" means the Employee Retirement Income Security Act of
1974, as in effect from time to time.
"Eurodollar Rate" means, with respect to any Eurodollar Rate
Advance, for the Interest Period applicable thereto, a simple per annum interest
rate determined pursuant to the following formula:
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<PAGE> 20
Eurodollar Rate = Interbank Offered Rate
-----------------------------------
1 - Eurodollar Reserve Percentage
The Eurodollar Rate shall be adjusted automatically as of the effective date of
any change in the Eurodollar Reserve Percentage.
"Eurodollar Rate Advance" means any Advance which bears
interest at the time in question computed with reference to the Eurodollar Rate.
"Eurodollar Rate Loan" means (a) any Revolving Credit Loan
consisting of Eurodollar Rate Advances and (b) the Term Loan (or any part
thereof) that bears interest at a rate computed with reference to the
Eurodollar.
"Eurodollar Reserve Percentage" means, for any day, that
percentage (expressed as a decimal) which is in effect from time to time under
Regulation D of the Board of Governors of the Federal Reserve System, as such
regulation may be amended from time to time, or any successor regulation, as the
maximum reserve requirement (including, without limitation, any basic,
supplemental, emergency, special, or marginal reserves) applicable to any member
bank with respect to Eurocurrency liabilities as that term is defined in
Regulation D (or against any other category of liabilities that includes
deposits by reference to which the interest rate of Eurodollar Rate Advances is
determined), whether or not any Lender has any Eurocurrency liabilities subject
to such reserve requirement at that time. Eurodollar Rate Advances shall be
deemed to constitute Eurocurrency liabilities and as such shall be deemed
subject to reserve requirements without the benefit of credits for proration,
exceptions or offsets that may be available from time to time to Agent.
"Event of Default" means any of the events specified in
SECTION 13.1, provided that any requirement for notice or lapse of time or any
other condition specified in SECTION 13.1 has been satisfied.
"Existing Loan Agreement" means the Loan and Security
Agreement dated as of August 16, 1995, as amended and in effect on the Effective
Date, to which the Borrower, the Agent and the Lenders are parties.
"Factor" means NationsBanc Commercial Corporation.
"Factoring Agreement" means the Amended and Restated Factoring
Agreement by and between the Factor and the Borrower, dated August 16, 1995, as
amended and in effect on the Agreement Date.
"Factoring Credit Balances" means the aggregate of the
outstanding Reserve Balance for accounts receivable factored by the Borrower
with the Factor at the Factor's credit risk.
"Federal Funds Effective Rate" means, for any period, a
fluctuating interest rate per annum equal for each day during such period to the
weighted average of the rates on overnight federal funds transactions with
members of the Federal Reserve system arranged by federal funds brokers, as
published for such day (or, if such day is not a Business Day, for the next
preceding
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<PAGE> 21
Business Day) by the Federal Reserve Bank of Atlanta, or, if such rate is not so
published for any day which is a Business Day, the average of the quotations for
such day on such transactions received by NationsBank from three federal funds
brokers of recognized standing selected by NationsBank.
"Financed Capex" means Capital Expenditures financed by Debt
(other than the Loans).
"Financial Officer" means the chief financial officer,
Treasurer or Controller of the Borrower.
"Financing Statements" means any and all Uniform Commercial
Code financing statements, in form and substance satisfactory to the Agent,
executed and delivered by the Borrower to the Agent, naming the Agent, for the
benefit of the Lenders, as secured party and the Borrower as debtor, in
connection with this Agreement.
"fiscal year" of the Borrower means (i) at all times prior to
completion of the IPO, the period of 365 or 366 days beginning on the Sunday
after the Saturday closest to April 30 in one calendar year and ending on the
Saturday closest to April 30 in the following calendar year and (ii) after
completion of the IPO, each 12-month period ending July 31.
"Funded Debt" means, as applied to any Person, all outstanding
Debt of such Person.
"Funded Debt to EBITDA" means, as of the last day of any
fiscal quarter of the Borrower, the RATIO of (i) Funded Debt of the Borrower and
its Consolidated Subsidiaries on such day provided that Revolving Credit Loans
shall be included in Funded Debt in an amount equal to the monthly average
outstanding balance thereof during the period of four consecutive fiscal
quarters of the Borrower ended on such day TO (ii) EBITDA of the Borrower and
its Consolidated Subsidiaries for the period of four consecutive fiscal quarters
of the Borrower ended on such day.
"GAAP" means generally accepted accounting principles
consistently applied and maintained throughout the period indicated and, when
used with reference to the Borrower or any Subsidiary, consistent with the prior
financial practice of the Borrower, as reflected on the financial statements
referred to in SECTION 7.1(O); PROVIDED, HOWEVER, that, in the event that
changes shall be mandated by the Financial Accounting Standards Board or any
similar accounting authority of comparable standing, or shall be recommended by
the Borrower's independent public accountants, such changes shall be included in
GAAP as applicable to the Borrower only from and after such date as the
Borrower, the Required Lenders and the Agent shall have amended this Agreement
to the extent necessary to reflect any such changes in the financial covenants
set forth in ARTICLE 12.
"General Intangibles" means all of the Borrower's now owned or
hereafter acquired general intangibles, choses in action and causes of action
and all other intangible personal property of the Borrower of every kind and
nature (other than Receivables), including, without limitation, all Proprietary
Rights, corporate or other business records, inventions, designs, blueprints,
plans, specifications, goodwill, computer software, customer lists,
registrations, licenses, franchises, tax refund claims, reversions or any rights
thereto and any other amounts payable to the Borrower from
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any Plan or other employee benefit plan, rights and claims against carriers and
shippers, rights to indemnification, business interruption insurance and
proceeds thereof, property, casualty or any similar type of insurance and any
proceeds thereof, proceeds of insurance covering the lives of key employees on
which the Borrower is beneficiary and any rights under any letter of credit,
guarantee, claims, security interest or other security held by or granted to the
Borrower to secure payment by an Account Debtor of any of the Receivables.
"Governmental Approvals" means all authorizations, consents,
approvals, licenses and exemptions of, registrations and filings with, and
reports to, all governmental bodies, whether federal, state, local or foreign
national or provincial and all agencies thereof.
"Guaranty", as applied to any obligation of another Person,
means (and derivative words such as "Guaranteed" or to "Guarantee" refer to)
(a) a guaranty (other than by endorsement of negotiable
instruments for collection in the ordinary course of business),
directly or indirectly, in any manner, of any part or all of such
obligation of such other Person, and
(b) an agreement, direct or indirect, contingent or otherwise,
and whether or not constituting a guaranty, the practical effect of
which is to assure the payment or performance (or payment of damages in
the event of nonperformance) of any part or all of such obligation of
such other Person whether by
(i) the purchase of securities or obligations,
(ii) the purchase, sale or lease (as lessee or
lessor) of property or the purchase or sale of services
primarily for the purpose of enabling the obligor with respect
to such obligation to make any payment or performance (or
payment of damages in the event of nonperformance) of or on
account of any part or all of such obligation, or to assure
the owner of such obligation against loss,
(iii) the supplying of funds to or in any other
manner investing in the obligor with respect to such
obligation,
(iv) repayment of amounts drawn down by
beneficiaries of letters of credit, or
(v) the supplying of funds to or investing in a
Person on account of all or any part of such Person's
obligation under a Guaranty of any obligation or indemnifying
or holding harmless, in any way, such Person against any part
or all of such obligation.
"IPO" means the initial public offering of common stock of the
Borrower, in an underwritten offering completed in compliance with Applicable
Law (including without being limited to, applicable securities laws), the cash
proceeds of which to the Borrower are at least equal to the
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sum of (1) the AAA Distribution declared prior to the closing date of the
offering, plus (2) the costs and expenses of the offering.
"IRB L/Cs" means the Selma L/C and, if and when issued, the
Arizona L/C.
"IRB L/C Agreement" has the meaning specified in SECTION 3.10.
"Indebtedness" of any Person means, without duplication, all
Liabilities of such Person, and to the extent not otherwise included in
Liabilities, the following:
(a) all obligations for money borrowed or for the deferred
purchase price of property or services,
(b) all obligations (including, during the noncancellable term
of any lease in the nature of a title retention agreement, all future
payment obligations under such lease discounted to their present value
in accordance with GAAP) secured by any Lien to which any property or
asset owned or held by such Person is subject, whether or not the
obligation secured thereby shall have been assumed by such Person,
(c) all obligations of other Persons which such Person has
Guaranteed, including, but not limited to, all obligations of such
Person consisting of recourse liability with respect to accounts
receivable sold or otherwise disposed of by such Person,
(d) all obligations of such Person in respect of Interest Rate
Protection Agreements, and
(e) in the case of the Borrower (without duplication) all
obligations under the Revolving Credit Loans and the Term Loans.
"Installment Payment Date" means the first day of each
February, May, August and November, commencing on May 1, 1998.
"Interbank Offered Rate" means, for any Eurodollar Rate Loan
for any Interest Period therefor, the rate per annum (rounded upwards, if
necessary, to the nearest 1/100 of 1%) appearing on Telerate Page 3750 in
Dollars at approximately 11:00 a.m. (London time) two Business Days prior to the
first day of such Interest Period for a term comparable to such Interest Period.
If for any reason such rate is not available, the term "Interbank Offered Rate"
shall mean, for any Eurodollar Rate Loan for any Interest Period therefor, the
rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%)
appearing on Reuters Screen LIBO Page as the London interbank offered rate for
deposits in Dollars at approximately 11:00 a.m. (London time) two Business Days
prior to the first day of such Interest Period for a term comparable to such
Interest Period; PROVIDED, HOWEVER, is more than one rate as specified on
Reuters Screen LIBO Page, the applicable rate shall be the arithmetic mean of
all such rates..
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"Interest Payment Date" means the first day of each calendar
month commencing on October 1, 1997 and continuing thereafter until the Secured
Obligations have been irrevocably paid in full.
"Interest Period" means, in connection with any Eurodollar
Rate Advance, the term of such Advance selected by the Borrower or otherwise
determined in accordance with this Agreement, which may have a duration of one,
two, three or six months. Notwithstanding the foregoing, (A) any Interest Period
which would otherwise end on a day which is not a Business Day shall end on the
next succeeding Business Day unless such Business Day falls in another calendar
month, in which case such Interest Period shall end on the next preceding
Business Day, (B) any Interest Period which begins on a day for which there is
no numerically corresponding day in the calendar month during which such
Interest Period is to end shall (subject to clause (A) above) end on the last
day of such calendar month, and (C) no Interest Period shall extend beyond the
Termination Date or such earlier date as would interfere hereunder with the
repayment obligations of the Borrower. Interest shall be due and payable with
respect to any Advance as provided in SECTION 5.1 hereof.
"Interest Rate Protection Agreement" means an interest rate
swap, cap or collar agreement or similar arrangement between the Borrower and a
Lender, providing for the transfer or mitigation of interest risks either
generally or under specific contingencies.
"Interest Rate Protection Reserve" means the aggregate amount
of the estimated liability of the Borrower and its Subsidiaries under all
Interest Rate Protection Agreements in effect on the date of determination, as
determined by the Agent applying its customary methodology.
"Interim Construction Facility" means the sum of: (1) the
lesser of (A) $6 million and (B) 75% of the construction cost of the 1997
Birmingham Warehouse plus 75% of the cost of Equipment installed therein PLUS
(2) the lesser of (A) $10.5 million and (B) 75% of the construction cost of the
Arizona Facility plus 75% of the cost of Equipment installed therein, PLUS (3)
the lesser of (A) $1.25 million and (B) 75% of the construction cost of the 1997
Birmingham Tubular Facility plus 75% of the cost of Equipment installed therein.
"Interim Construction Loan" means each loan made to the
Borrower pursuant to SECTION 4.2(B).
"Internal Revenue Code" means the Internal Revenue Code of
1986.
"Inventory" means all inventory as such term is defined in the
Uniform Commercial Code and shall include, without limitation,
(a) all goods intended for sale or lease by the Borrower, or
for display or demonstration,
(b) all work in process,
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<PAGE> 25
(c) all raw materials and other materials and supplies of
every nature and description used or which might be used in connection
with the manufacture, packing, shipping, advertising, selling, leasing
or furnishing of such goods or otherwise used or consumed in the
Borrower's business, and
(d) all documents evidencing and general intangibles relating
to any of the foregoing.
"Investment" means, with respect to any Person:
(a) the acquisition or ownership by such Person of any share
of capital stock, evidence of Indebtedness or other security issued by
any other Person,
(b) any loan, advance or extension of credit to, or
contribution to the capital of, any other Person, excluding advances to
employees in the ordinary course of business for business expenses,
(c) any Guaranty of the obligations of any other Person,
(d) any other investment (other than the Acquisition of a
Business Unit) in any other Person, and
(e) any commitment or option to make any of the investments
listed in CLAUSES (A) through (D) above if, in the case of an option,
the consideration therefor exceeds $100.00.
"IRS" means the Internal Revenue Service.
"Lender" means at any time any financial institution party to
this agreement at such time, including any such Person becoming a party hereto
pursuant to the provisions of ARTICLE 14, and its successors and permitted
assigns, and "Lenders" means at any time all of the financial institutions party
to this Agreement at such time, including any such Persons becoming parties
hereto pursuant to the provisions of ARTICLE 14, and their successors and
permitted assigns.
"Letter of Credit" means any letter of credit issued by
NationsBank for the account of the Borrower (i) under the Existing Loan
Agreement and outstanding on the Effective Date (other than the Selma L/C) or
(ii) pursuant to ARTICLE 3.
"Letter of Credit Amount" means, with respect to any Letter of
Credit, the aggregate maximum amount at any time available for drawing under
such Letter of Credit.
"Letter of Credit Facility" means an amount equal to the
Revolving Credit Facility.
"Letter of Credit Obligations" means, at any time, the sum of
(a) the Reimbursement Obligations of the Borrower at such time, plus (b) the
aggregate Letter of Credit Amount of Letters of Credit outstanding at such time,
plus (c) the aggregate Letter of Credit Amount of Letters of
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Credit the issuance of which has been authorized by the Agent and NationsBank
pursuant to SECTION 3.4(B) but that have not yet been issued, in each case as
determined by the Agent.
"Letter of Credit Reserve" means, at any time, the aggregate
Letter of Credit Obligations at such time, other than Letter of Credit
Obligations that are fully secured by Cash Collateral.
"Liabilities" of any Person means all items (except for items
of capital stock, additional paid-in capital or retained earnings, or of general
contingency or deferred tax reserves) which in accordance with GAAP would be
included in determining total liabilities as shown on the liability side of a
balance sheet of such Person as at the date as of which Liabilities are to be
determined.
"Lien" as applied to the property of any Person means:
(a) any mortgage, deed to secure debt, deed of trust, lien,
pledge, charge, lease constituting a Capitalized Lease Obligation,
conditional sale or other title retention agreement, or other security
interest, security title or encumbrance of any kind in respect of any
property of such Person, or upon the income or profits therefrom,
(b) any arrangement, express or implied, under which any
property of such Person is transferred, sequestered or otherwise
identified for the purpose of subjecting the same to the payment of
Indebtedness or performance of any other obligation in priority to the
payment of the general, unsecured creditors of such Person,
(c) any Indebtedness which is unpaid more than 30 days after
the same shall have become due and payable and which if unpaid might by
law (including, but not limited to, bankruptcy and insolvency laws), or
otherwise, be given any priority whatsoever over the claims of general
unsecured creditors of such Person, and
(d) the filing of, or any agreement to give, any financing
statement under the Uniform Commercial Code or its equivalent in any
jurisdiction, excluding informational financing statements relating to
property leased by the Borrower.
"Loan" means any Revolving Credit Loan, any Interim
Construction Loan or any Term Loan, as well as all such loans collectively, as
the context requires.
"Loan Account" and "Loan Accounts" shall have the meanings
ascribed thereto in SECTION 5.4(A).
"Loan Documents" means collectively this Agreement, the Notes,
the Security Documents and each other instrument, agreement or document executed
by the Borrower, Blount or any Affiliate or Subsidiary of the Borrower in
connection with (i) the Existing Loan Agreement and which remains in effect on
the Effective Date or (ii) this Agreement, whether prior to, on or after the
Effective Date and each other instrument, agreement or document referred to
herein or contemplated hereby.
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<PAGE> 27
"Loan Year" means each period of 12 consecutive months
commencing on the Effective Date and on each anniversary thereof.
"Lockbox" means each U.S. Post Office Box specified in a
Lockbox Agreement.
"Lockbox Agreement" means each agreement between the Borrower
and a Clearing Bank concerning the establishment of a Lockbox for the collection
of Receivables.
"Long-Term Liabilities" means, with respect to any Person, the
aggregate amount of all Liabilities of such Person other than Current
Liabilities.
"Margin Stock" means margin stock as defined in Section
221.1(h) of Regulation U, as the same may be amended or supplemented from time
to time.
"Materially Adverse Effect" means, with respect to any Person,
a materially adverse effect upon such Person's business, assets, liabilities,
condition (financial or otherwise), results of operations or business prospects,
and in addition (i) with respect to the Borrower, means a materially adverse
effect upon the Borrower's ability to perform its obligations hereunder or under
any other Loan Document to which it is a party or upon the enforceability of
such obligations against the Borrower and (ii) with respect to Blount, means a
materially adverse effect upon Blount's ability to perform his obligations under
the Support Agreement.
"Minimum Commitment" means $10 million.
"Mortgages" means and includes any and all of the mortgages,
deeds of trust, deeds to secure debt, assignments and other instruments executed
and delivered by the Borrower to or for the benefit of the Agent by which the
Agent, on behalf of the Lenders, acquires a Lien on the Borrower's Real Estate
or a collateral assignment of the Borrower's interest under leases of Real
Estate, and all amendments, modifications and supplements thereto.
"Multiemployer Plan" means a "multiemployer plan" as defined
in Section 4001(a)(3) of ERISA to which the Borrower or a Related Company is
required to contribute or has contributed within the immediately preceding six
years.
"NationsBank" means NationsBank, N.A., a national banking
association.
"Net Amount" means, with respect to any Investments made by
any Person, the gross amount of all such Investments MINUS the aggregate amount
of all cash received and the fair value, at the time of receipt by such Person,
of all property received as payments of principal or premiums, returns of
capital, liquidating dividends or distributions, proceeds of sale or other
dispositions with respect to such Investments.
"Net Income" means, as applied to any Person, the net income
(or net loss) of such Person for the period in question after giving effect to
deduction of or provision for all operating expenses, all taxes and reserves
(including reserves for deferred taxes), Permitted Subchapter S Distributions in
respect of shareholders' tax liabilities attributable to income of the Borrower,
and
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all other proper deductions, all determined in accordance with GAAP, provided
that there shall be excluded:
(a) the net income (or net loss) of any Person accrued prior
to the date it becomes a Subsidiary of, or is merged into or
consolidated with, the Person whose Net Income is being determined or a
Subsidiary of such Person,
(b) the net income (or net loss) of any Person in which the
Person whose Net Income is being determined or any Subsidiary of such
Person has an ownership interest, except, in the case of net income, to
the extent that any such income has actually been received by such
Person or such Subsidiary in the form of cash dividends or similar
distributions,
(c) any restoration of any contingency reserve, except to the
extent that provision for such reserve was made out of income during
such period,
(d) any net gains or losses on the sale or other disposition,
not in the ordinary course of business, of Investments, Business Units
and other capital assets, provided that there shall also be excluded
any related charges for taxes thereon,
(e) any net gain arising from the collection of the proceeds
of any insurance policy,
(f) any write-up of any asset, and
(g) any other extraordinary item.
"Net Outstandings" of any Lender means, at any time, the sum
of (a) all amounts paid by such Lender (other than pursuant to SECTION 15.7) to
the Agent in respect of Revolving Credit Loans or otherwise under this
Agreement, MINUS (b) all amounts paid by the Agent to such Lender which are
received by the Agent and which, pursuant to this Agreement, are paid over to
such Lender for application in reduction of the outstanding principal balance of
the Revolving Credit Loans.
"Net Proceeds" means proceeds received by the Borrower or any
of its Subsidiaries in cash from any Asset Disposition (including, without
limitation, payments under notes or other debt securities received in connection
with any Asset Disposition), net of: (a) the transaction costs of such sale,
lease, transfer or other disposition; (b) any sales tax liability arising from
such transaction; and (c) amounts applied to repayment of Indebtedness (other
than the Secured Obligations) secured by a Permitted Lien of the type described
in CLAUSES (D) and (E), of the definition "Permitted Liens" on the asset or
property disposed.
"Net Worth" means, with respect to any Person, such Person's
total shareholder's equity (including capital stock, additional paid-in capital
and retained earnings, after deducting treasury stock) which would appear as
such on a balance sheet of such Person prepared in accordance with GAAP.
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<PAGE> 29
"1997 Birmingham Tubular Facility" means [DESCRIPTION].
"1997 Birmingham Warehouse" means [DESCRIPTION].
"1997 Projects" means the Arizona Facility, the 1997
Birmingham Tubular Facility and the 1997 Birmingham Warehouse.
"Non-Ratable Loan" means a Revolving Credit Loan made by
NationsBank in accordance with the provisions of SECTION 5.7(C)(II).
"Note" means any of the Revolving Credit Notes and the Term
Notes and "Notes" means more than one such Note.
"Operating Lease" means any lease (other than a lease
constituting a Capitalized Lease Obligation) of real or personal property.
"PBGC" means the Pension Benefit Guaranty Corporation and any
successor agency.
"Patents" means and includes, in each case whether now
existing or hereafter arising, all of the Borrower's right, title and interest
in and to
(a) any and all patents and patent applications,
(b) inventions and improvements described and claimed therein,
(c) reissues, divisions, continuations, renewals, extensions
and continuations-in- part thereof,
(d) income, royalties, damages, claims and payments now or
hereafter due and/or payable under and with respect thereto, including,
without limitation, damages and payments for past and future
infringements thereof,
(e) rights to sue for past, present and future infringements
thereof, and
(f) all rights corresponding to any of the foregoing
throughout the world.
"Permitted Investments" means Investments of the Borrower in:
(a) negotiable certificates of deposit and time deposits
issued by NationsBank or by any United States bank or trust company
having capital, surplus and undivided profits in excess of $100
million,
(b) any direct obligation of the United States of America or
any agency or instrumentality thereof which has a remaining maturity at
the time of purchase of not more than one year and repurchase
agreements relating to the same,
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(c) sales of inventory on credit in the ordinary course of
business,
(d) shares of capital stock, evidence of Indebtedness or other
security acquired by the Borrower in consideration for or as evidence
of past-due or restructured Receivables in an aggregate face amount of
such Receivables at any time not to exceed $1 million,
(e) Guaranties permitted pursuant to SECTION 12.3,
(f) those items described on SCHEDULE 1.1B - PERMITTED
INVESTMENTS, and
(g) other Investments not in excess of $10,000 individually or
$50,000 in the aggregate in any fiscal year of the Borrower.
"Permitted Liens" means:
(a) Liens securing taxes, assessments and other governmental
charges or levies (excluding any Lien imposed pursuant to any of the
provisions of ERISA) or the claims of materialmen, mechanics, carriers,
warehousemen or landlords for labor, materials, supplies or rentals
incurred in the ordinary course of business, but (i)in all cases only
if payment shall not at the time be required to be made in accordance
with SECTION 10.6, and (ii)in the case of warehousemen or landlords,
only if such liens are junior to the Security Interest in any of the
Collateral,
(b) Liens consisting of deposits or pledges made in the
ordinary course of business in connection with, or to secure payment
of, obligations under workers' compensation, unemployment insurance or
similar legislation or under payment or performance bonds,
(c) Liens constituting encumbrances in the nature of zoning
restrictions, easements, and rights or restrictions of record on the
use of real property, which do not materially detract from the value of
such property or impair the use thereof in the business of the
Borrower, and other liens on the Real Estate specifically permitted in
the Mortgages,
(d) Purchase Money Liens,
(e) Liens shown on SCHEDULE 1.1C - PERMITTED LIENS, and
(f) Liens of the Agent, for the benefit of the Lenders,
arising under this Agreement and the other Loan Documents.
"Permitted Purchase Money Debt" means Purchase Money Debt of
the Borrower incurred after the Agreement Date
(a) which is secured by a Purchase Money Lien,
(b) the aggregate principal amount of which does not exceed an
amount equal to 100% of the lesser of
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(i) the cost (including the principal amount of such
Indebtedness, whether or not assumed) of the property (other
than Inventory) subject to such Lien, and
(ii) the fair value of such property (other than
Inventory) at the time of its acquisition, and
(c) which, when aggregated with the principal amount of all
other such Indebtedness and Capitalized Lease Obligations of the
Borrower at the time outstanding, does not exceed $3 million.
For the purposes of this definition, the principal amount of any Purchase Money
Debt consisting of Capitalized Leases shall be computed as a Capitalized Lease
Obligation.
"Permitted Subchapter S Distributions" means (i) amounts
distributed by the Borrower to its shareholders in respect of each fiscal year
of the Borrower in an amount not to exceed, in the aggregate, the liability of
its shareholders for federal and state income taxes attributable to the income
of the Borrower includable in the taxable income of such shareholders by reason
of the Borrower's effective election to be taxed as a Subchapter S corporation
under the Code, as amended from time to time and (ii) the AAA Distribution.
"Person" means an individual, corporation, limited liability
company, partnership, association, trust or unincorporated organization, or a
government or any agency or political subdivision thereof.
"Plan" means any employee benefit plan as defined in Section
3(3) of ERISA in respect of which the Borrower or any Related Company is, or
within the immediately preceding six years was, an "employer" as defined in
Section 3(5) of ERISA.
"Prime Rate" means on any day the interest rate per annum
equal to the rate of interest publicly announced by the Agent at its head office
in Atlanta, Georgia as its "prime" rate, as in effect on the last Business Day
of the calendar month immediately preceding the month in which such day falls.
The Agent lends at rates above and below the Prime Rate.
"Prime Rate Advance" means an Advance bearing interest at the
Alternative Revolver Rate.
"Project Completion Date" means March 31, 1998 or such earlier
date on which the Borrower shall have certified to the Agent and the Lenders the
completion of all 1997 Projects pursuant to SECTION 4.1.
"Projections" means the forecasted (a) balance sheets, (b)
income statements, (c) cash flow statements, and (d) average balances of
Revolving Credit Loans of the Borrower for the Borrower's fiscal years ending
April 30, 1998 and thereafter, prepared on a monthly basis for the fiscal year
ending April 30, 1998 and on an annual basis for each fiscal year thereafter,
together with appropriate supporting details and a statement of underlying
assumptions, delivered to the Agent and the Lenders prior to the Agreement Date.
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"Proprietary Rights" means all of the Borrower's now owned and
hereafter arising or acquired: Patents, Copyrights, Trademarks, including,
without limitation, those Proprietary Rights set forth on SCHEDULE 7.1(CC)
hereto, and all other rights under any of the foregoing, all extensions,
renewals, reissues, divisions, continuations, and continuations-in-part of any
of the foregoing, and all rights to sue for past, present and future
infringement of any of the foregoing.
"Purchase Money Debt" means
(a) Indebtedness created to secure the payment of all or any
part of the purchase price of any property (other than Inventory),
(b) any Indebtedness incurred at the time of or within 30 days
prior to or after the acquisition of any property (other than
Inventory) for the purpose of financing all or any part of the purchase
price thereof, and
(c) any renewals, extensions or refinancings thereof, but not
any increases in the principal amounts thereof outstanding at the time
of any such renewal, extension or refinancing.
"Purchase Money Lien" means any Lien securing Purchase Money
Debt, but only if such Lien shall at all times be confined solely to the
property (other than Inventory) the purchase price of which was financed through
the incurrence of the Purchase Money Debt secured by such Lien.
"Real Estate" means all of the Borrower's now or hereafter
owned or leased estates in real property, including, without limitation, all
fees, leaseholds and future interests, together with all of the Borrower's now
or hereafter owned or leased interests in the improvements and emblements
thereon, the fixtures attached thereto and the easements appurtenant thereto,
including, without limitation the real property described on SCHEDULE 7.1(X).
"Receivables" means
(a) any and all rights to the payment of money or other forms
of consideration of any kind (whether classified under the Uniform
Commercial Code as accounts, contract rights, chattel paper, general
intangibles, or otherwise) including, but not limited to, accounts
receivable, letters of credit and the right to receive payment
thereunder, chattel paper, tax refunds, insurance proceeds, Contract
Rights, notes, drafts, instruments, documents, acceptances, and all
other debts, obligations and liabilities in whatever form from any
Person,
(b) all guarantees, security and Liens for payment thereof,
(c) all goods, whether now owned or hereafter acquired, and
whether sold, delivered, undelivered, in transit or returned, which may
be represented by, or the sale or lease of which may have given rise
to, any such right to payment or other debt, obligation or liability,
and
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<PAGE> 33
(d) all proceeds of any of the foregoing.
"Regulation U" means Regulation U of the Board of Governors of
the Federal Reserve System (or any successor).
"Reimbursement Agreement" means, with respect to a Letter of
Credit, such form of application therefor and form of reimbursement agreement
therefor (whether in a single document or several documents) as NationsBank may
employ in the ordinary course of business for its own account, with such
modifications thereto as may be agreed upon by NationsBank and the Borrower,
provided that such application and agreement and any modifications thereto are
not inconsistent with the terms of this Agreement.
"Reimbursement Obligations" means the reimbursement or
repayment obligations of the Borrower to NationsBank pursuant to SECTION 3.6 or
pursuant to a Reimbursement Agreement with respect to amounts that have been
drawn under Letters of Credit.
"Related Company" means any (i) corporation which is a member
of the same controlled group of corporations (within the meaning of Section
414(b) of the Internal Revenue Code) as any Borrower; (ii) partnership or other
trade or business (whether or not incorporated) under common control (within the
meaning of Section 414(c) of the Internal Revenue Code) with any Borrower; or
(iii) member of the same affiliated service group (within the meaning of Section
414(m) of the Internal Revenue Code) as any Borrower, any corporation described
in CLAUSE (I) above or any partnership, trade or business described in CLAUSE
(II) above.
"Release" means release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration into
the indoor or outdoor environment or into or out of any property, including the
movement of Contaminants through or in the air, soil, surface water or
groundwater.
"Remedial Action" means actions required to (i) clean up,
remove, treat or in any other way address Contaminants in the indoor or outdoor
environment; (ii) prevent the Release or threat of Release or minimize the
further Release of Contaminants so they do not migrate or endanger or threaten
to endanger public health or welfare or the indoor or outdoor environment; or
(iii) perform pre-remedial studies and investigations and post-remedial
monitoring and care.
"Reportable Event" has the meaning set forth in Section
4043(b) of ERISA, but shall not include a Reportable Event as to which the
provision for 30 days notice to the PBGC is waived under applicable regulations.
"Required Lenders" means, at any time, all Lenders other than
any Lender who has failed to fund as required by this Agreement.
"Reserve Balance" means the net amount payable by the Factor
to the Borrower at any time for accounts receivable factored under the Factoring
Agreement, after accounting for customer disputes and other deductions.
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"Restricted Dividend Payment" means any dividend, distribution
or payment on or with respect to (a) any shares of a Person's capital stock
(other than dividends payable solely in shares of its capital stock) or (b) any
partnership interest in a Person, excluding, however, any such dividend,
distribution or payment to the Borrower by any Subsidiary of the Borrower.
"Restricted Payment" means (a) any redemption or prepayment or
other retirement, prior to the stated maturity thereof or prior to the due date
of any regularly scheduled installment or amortization payment with respect
thereto, of any Indebtedness for Borrowed Money or of any Indebtedness that is
junior and subordinate to the Secured Obligations, (b) the payment by any Person
of the principal amount of or interest on any Indebtedness (other than trade
debt) owing to a shareholder, partner or equity holder of such Person or to any
Affiliate of any such shareholder, partner or equity holder and (c) the payment
of any management, consulting or similar fee by any Person to any Affiliate of
such Person.
"Restricted Purchase" means any payment on account of the
purchase, redemption or other acquisition or retirement by a Person of any (a)
shares of such Person's capital stock (except shares acquired on the conversion
thereof into other shares of capital stock of such Person), (b) a partnership
interest in such Person, if such Person is a partnership, or (c) a membership
interest in such Person, if such Person is a limited liability company.
"Revolving Credit Facility" means the principal amount of $90
million or such lesser or greater amount as shall be agreed upon from time to
time in writing by the Agent, the Lenders and the Borrower.
"Revolving Credit Loans" means loans made to the Borrower
pursuant to SECTION 2.1.
"Revolving Credit Note" means each Revolving Credit Note made
by the Borrower payable to the order of a Lender evidencing the obligation of
the Borrower to pay the aggregate unpaid principal amount of the Revolving
Credit Loans made to it by such Lender (and any promissory note or notes that
may be issued from time to time in substitution, renewal, extension, replacement
or exchange therefor whether payable to such Lender or to a different Lender in
connection with a Person becoming a Lender after the Effective Date or
otherwise) substantially in the form of EXHIBIT A hereto, with all blanks
properly completed, either as originally executed or as the same may from time
to time be supplemented, modified, amended, renewed, extended or refinanced.
"Schedule of Inventory" means a schedule delivered by the
Borrower to the Agent pursuant to the provisions of SECTION 9.12(B).
"Schedule of Receivables" means a schedule delivered by the
Borrower to the Agent pursuant to the provisions of SECTION 9.12(A).
"Secured Obligations" means, in each case whether now in
existence or hereafter arising,
(a) the principal of, and interest and premium, if any, on,
the Loans,
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(b) the Reimbursement Obligations, the Borrower's obligation
to reimburse drawings under the IRB L/Cs, and all other obligations of
the Borrower to the Agent or any Lender arising in connection with the
issuance of Letters of Credit or any IRB L/C,
(c) all obligations of the Borrower in respect of any Interest
Rate Protection Agreement, and
(d) all indebtedness, liabilities, obligations, covenants and
duties of the Borrower to the Agent or to the Lenders of every kind,
nature and description arising under or in respect of any of the Loan
Documents or the Banking Relationship, whether direct or indirect,
absolute or contingent, due or not due, contractual or tortious,
liquidated or unliquidated, and whether or not evidenced by any note,
and whether or not for the payment of money, including without
limitation, fees required to be paid pursuant to ARTICLE 5 and expenses
required to be paid or reimbursed pursuant to SECTION 16.2. For
purposes of this clause (d), the "Banking Relationship" means
obligations of the Borrower relating to MasterCard charges (not to
exceed $200,000 of outstanding charges) and checking and operating
account charges incurred by the Borrower to NationsBank in the ordinary
course of business.
"Security Documents" means each of the following:
(a) the Mortgages,
(b) the Mortgage Modifications,
(c) the Financing Statements,
(d) the Assignment of Life Insurance Policy,
(e) the Assignment of Factoring Proceeds,
(f) the Support Agreement, and
(g) each other writing executed and delivered by the Borrower
or any other Person securing the Secured Obligations.
"Security Interest" means the Liens of the Agent, for the
benefit of the Lenders, on and in the Collateral effected hereby or by any of
the Security Documents or pursuant to the terms hereof or thereof.
"Selma Bonds" means $3,000,000 original principal amount of
Revenue Bonds, Series 1996-A (Meadowcraft, Inc.), issued by The Industrial
Development Board of the City of Selma.
"Selma L/C" means the letter of credit in the face amount of
$2,731,068.50 million as of the Effective Date issued by NationsBank for the
account of the Borrower in connection with the Selma Bonds.
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"Selma L/C Agreement" means Letter of Credit and Reimbursement
Agreement dated January 1, 1996, pertaining to the Selma L/C, between the
Borrower and NationsBank.
"Settlement Date" means each Monday that is a Business Day
after the Effective Date selected by the Agent in its sole discretion subject to
and in accordance with the provisions of SECTION 5.7(C)(I) as of which a
Settlement Report is delivered by the Agent and on which settlement is to be
made among the Lenders in accordance with the provisions of SECTION 5.7.
"Settlement Report" means each report, substantially in the
form attached hereto as EXHIBIT E, prepared by the Agent and delivered to each
Lender and setting forth, among other things, as of the Settlement Date
indicated thereon and as of the next preceding Settlement Date, the aggregate
principal balance of all Revolving Credit Loans outstanding, each Lender's
Commitment Percentage thereof, each Lender's Net Outstandings and all
Non-Ratable Loans made, and all payments of principal, interest and fees
received by the Agent from the Borrower during the period beginning on such next
preceding Settlement Date and ending on such Settlement Date.
"Subordinated Indebtedness" means the Indebtedness of the
Borrower to National Bank of Commerce, Birmingham, Alabama, evidenced by the
Subordinated Notes, including principal thereof and interest and premium, if
any, thereon, together with any and all Indebtedness related thereto.
"Subordinated Notes" means the promissory notes dated
_____________, 19__ and _____________, 19__, respectively, one in the original
principal amount of $3 million, and one in the original principal amount of $1
million, executed by the Borrower in favor of National Bank of Commerce,
Birmingham, Alabama, as the same may be amended, modified, extended, renewed or
replaced from time to time with the consent of the Required Lenders.
"Subordination Agreement" means the Subordination Agreement
dated as of, ________, 1995 as confirmed effective as of the Effective Date, by
and among, the Agent, National Bank of Commerce, Birmingham, Alabama, and the
Borrower, as the same may be amended, modified or supplemented from time to time
with the consent of the Required Lenders.
"Subsidiary"
(a) when used to determine the relationship of a Person to
another Person, means a Person of which an aggregate of 50% or more of
the stock of any class or classes or 50% or more of other ownership
interests is owned of record or beneficially by such other Person, or
by one or more Subsidiaries of such other Person, or by such other
Person and one or more Subsidiaries of such Person,
(i) if the holders of such stock, or other ownership
interests, (A)are ordinarily, in the absence of contingencies,
entitled to vote for the election of a majority of the
directors (or other individuals performing similar functions)
of such Person, even though the right so to vote has been
suspended by the happening of such a contingency, or (B)are
entitled, as such holders, to vote for the election of a
majority of the directors (or individuals performing similar
functions) of such Person,
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whether or not the right so to vote exists by reason of the
happening of a contingency, or
(ii) in the case of such other ownership interests,
if such ownership interests constitute a majority voting
interest, and
(b) when used without designation of ownership, means a
Subsidiary of the Borrower.
"Support Agreement" means the Support Agreement, in form and
substance satisfactory to the Agent, dated on or about August 16, 1995, made by
Blount in favor of the Agent, for the benefit of the Lenders, as amended by an
amendment entered into as of the Effective Date, providing, among other things,
for the termination of said Agreement upon completion of the IPO.
"Tangible Net Worth" means, as applied to the Borrower, the
Adjusted Net Worth of the Borrower and its Consolidated Subsidiaries at the time
in question, after excluding therefrom the amount of all intangible items
reflected therein, including, without limitation, all unamortized debt discount
and expense, unamortized research and development expense, unamortized deferred
charges, goodwill, patents, trademarks, service marks, trade names, copyrights,
unamortized excess cost of investment in non-Consolidated Subsidiaries over
equity at dates of acquisition and all similar items which should properly be
treated as intangibles in accordance with GAAP.
"Term Loan" means the Term Loans, as defined in and made under
the Existing Loan Agreement, outstanding on the Effective Date, plus the loans
made to the Borrower pursuant to SECTION 4.1(A) on the Effective Date, plus the
Interim Construction Loans.
"Term Loan Facility" means the sum of $13.9 million, plus $2
million, plus the Interim Construction Facility.
"Term Note " means each promissory note made by the Borrower
payable to the order of a Lender evidencing the obligation of the Borrower to
pay the aggregate unpaid principal amount of any Term Loan made to it by such
Lender (and any promissory note or notes that may be issued from time to time in
substitution, renewal, extension, replacement or exchange therefor whether
payable to such Lender or to a different Lender in connection with a Person
becoming a Lender after the Effective Date or otherwise) substantially in the
form of EXHIBIT B hereto, with all blanks properly completed, either as
originally executed or as the same may from time to time be supplemented,
modified, amended, renewed, extended or refinanced.
"Termination Date" means August 28, 2000 or such earlier date
as all Secured Obligations shall have been irrevocably paid in full and the
Revolving Credit Facility shall have been terminated.
"Termination Event" means
(a) a Reportable Event, or
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(b) the filing of a notice of intent to terminate a Plan or
the treatment of a Plan amendment as a termination under Section 4041
of ERISA, or
(c) the institution of proceedings to terminate a Plan by the
PBGC under Section 4042 of ERISA, or the appointment of a trustee to
administer any Plan.
"Total Commitment" means the sum of the Commitments.
"Trademarks" means and includes in each case whether now
existing or hereafter arising, all of the Borrower's right, title and interest
in and to
(a) trademarks (including service marks), trade names and
trade styles and the registrations and applications for registration
thereof and the goodwill of the business symbolized by the trademarks,
(b) licenses of the foregoing, whether as licensee or
licensor,
(c) renewals thereof,
(d) income, royalties, damages and payments now or hereafter
due and/or payable with respect thereto, including, without limitation,
damages, claims and payments for past and future infringements thereof,
(e) rights to sue for past, present and future infringements
thereof, including the right to settle suits involving claims and
demands for royalties owing, and
(f) all rights corresponding to any of the foregoing
throughout the world.
"Unfunded Vested Accrued Benefits" means with respect to any
Plan at any time, the amount (if any) by which
(a) the present value of all vested nonforfeitable benefits
under such Plan exceeds
(b) the fair market value of all Plan assets allocable to such
benefits,
all determined as of the then most recent valuation date for such Plan.
"Uniform Commercial Code" means the Uniform Commercial Code as
in effect from time to time in the State of Georgia.
"Warranty Reserves" means reserves on the Borrower's books for
the cost of defending and disposing of claims and actions for breach of express
or implied representation or warranty.
"Wholly-Owned Subsidiary" when used to determine the
relationship of a Subsidiary to a Person means a Subsidiary all of the issued
and outstanding shares (other than directors'
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qualifying shares) of the capital stock of which shall at the time be owned by
such Person or one or more of such Person's Wholly-Owned Subsidiaries or by such
Person and one or more of such Person's Wholly-Owned Subsidiaries.
SECTION 1.2. General. All terms of an accounting nature not
specifically defined herein shall have the meaning ascribed thereto by GAAP. The
terms accounts, chattel paper, contract rights, documents, equipment,
instruments, general intangibles and inventory, as and when used in this
Agreement or the Security Documents without being capitalized, shall have the
meanings given those terms in the Uniform Commercial Code. Unless otherwise
specified, a reference in this Agreement to a particular section or subsection
is a reference to that section or subsection of this Agreement, and the words
"hereof," "herein," "hereunder" and words of similar import, when used in this
Agreement, refer to this Agreement as a whole and not to any particular
provision, section or subsection of this Agreement. Wherever from the context it
appears appropriate, each term stated in either the singular or plural shall
include the singular and plural, and pronouns stated in the masculine, feminine
or neuter gender shall include the masculine, the feminine and the neuter. Words
denoting individuals include corporations and other entities and vice versa.
References to any legislation or statute or code, or to any provisions of any
legislation or statute or code, shall include any modification or reenactment
of, or any legislative, statutory or code provision substituted for, such
legislation, statute or code or provision thereof. References to any document or
agreement (including this Agreement) shall include references to such document
or agreement as amended, novated, supplemented, modified or replaced from time
to time, so long as and to the extent that such amendment, novation, supplement,
modification or replacement is either not prohibited by the terms of this
Agreement or is consented to by the Required Lenders and the Agent. The word
"including" shall mean "including, without limitation." The term "ratable" (and
with corollary meaning, "ratably") as applied to the Lenders at any time, means
ratably according to the Lenders' respective Commitment Percentages at such
time.
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ARTICLE 2
REVOLVING CREDIT FACILITY
SECTION 2.1. Revolving Credit.
Loans. Upon the terms and subject to the conditions of, and in
reliance upon the representations and warranties made under, this Agreement,
each Lender agrees, severally, but not jointly, to make Revolving Credit Loans
to the Borrower from time to time from the Effective Date to but not including
the Termination Date, as requested or deemed requested by the Borrower in
accordance with the terms of SECTION 2.2, in amounts equal to such Lender's
Commitment Percentage of each such Loan requested or deemed requested hereunder
up to an aggregate amount at any one time outstanding equal to such Lender's
Commitment Percentage of the Borrowing Base; PROVIDED, HOWEVER, that the
aggregate principal amount of all outstanding Revolving Credit Loans (after
giving effect to the Loans requested) shall not exceed the Borrowing Base. It is
expressly understood and agreed that the Lenders intend to use the Borrowing
Base as a maximum ceiling on Revolving Credit Loans to the Borrower; PROVIDED,
HOWEVER, that it is agreed that should the Revolving Credit Loans exceed the
ceiling so determined or any other limitation set forth in this Agreement, such
Revolving Credit Loans shall nevertheless constitute Secured Obligations and, as
such, shall be entitled to all benefits thereof and security therefor. The
principal amount of any Revolving Credit Loan which is repaid may be reborrowed
by the Borrower, subject to the terms and conditions of this Agreement, in
accordance with the terms of this SECTION 2.1. The Agent's and each Lender's
books and records reflecting the date and the amount of each Revolving Credit
Loan and each repayment of principal thereof shall constitute PRIMA FACIE
evidence of the accuracy of the information contained therein, subject to the
provisions of SECTION 5.4.
SECTION 2.2. Manner of Borrowing Revolving Credit Loans.
Borrowings under the Revolving Credit Facility shall be made as follows:
(a) Requests for Borrowing. A request for a borrowing shall be
made, or shall be deemed to be made, in the following manner:
(i) with respect to the initial Revolving Credit
Loan, the Borrower shall give the Agent prior notice of the
Effective Date, which notice shall be irrevocable, and, as to
subsequent Revolving Credit Loans, the Borrower may give the
Agent notice, before 2:00 p.m. (Atlanta time) on the proposed
borrowing date as to any Revolving Credit Loan consisting of
Prime Rate Advances or before 12:00 noon (Atlanta time) three
Business Days before the proposed borrowing date as to any
Revolving Credit Loan consisting of Eurodollar Rate Advances,
of its intention to borrow, specifying the amount of the
proposed borrowing and the proposed borrowing date and, if
applicable, the Interest Period for the Eurodollar Rate
Advances comprising such borrowing,
(ii) whenever a check or other item is presented to a
Disbursing Bank for payment against a Controlled Disbursement
Account in an amount greater than the then available balance
in such account, such Disbursing Bank shall, and is hereby
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irrevocably authorized by the Borrower to, give the Agent
notice thereof, which notice shall be deemed to be a request
for a Revolving Credit Loan consisting of Prime Rate Advances
on the date of such notice in an amount equal to the excess of
such check or other item over such available balance,
(iii) unless payment is otherwise made by the
Borrower, the becoming due of any amount required to be paid
under this Agreement or any of the Notes as interest shall be
deemed to be a request for a Revolving Credit Loan consisting
of Prime Rate Advances on the due date in the amount required
to pay such interest,
(iv) unless payment is otherwise made by the
Borrower, the becoming due of any other Secured Obligation
shall be deemed to be a request for a Revolving Credit Loan
consisting of Prime Rate Advances on the due date in the
amount then so due, and such request shall be irrevocable, and
(v) the receipt by the Agent of notification from
NationsBank to the effect that a drawing has been made under a
Letter of Credit or under an IRB L/C and that the Borrower has
failed to reimburse NationsBank therefor in accordance with
the terms of the Letter of Credit or IRB L/C, the
Reimbursement Agreement or IRB L/C Agreement and ARTICLE 3,
shall be deemed to be a request for a Revolving Credit Loan
consisting of Prime Rate Advances on the date such
notification is received in the amount of such drawing which
is so unreimbursed;
PROVIDED that if any notice referred to in CLAUSE (I) above is received
after 2:00 p.m. (Atlanta time) on the proposed borrowing date, the
proposed borrowing will be postponed automatically to the next Business
Day. Unless the Agent has elected periodic settlements pursuant to
SECTION 5.7, the Agent shall promptly notify the Lenders of any notice
of borrowing given or deemed given pursuant to this SECTION 2.2(A) by
2:30 p.m. (Atlanta time) on the proposed borrowing date. Not later than
3:30 p.m. (Atlanta time) on the proposed borrowing date, each Lender
will make available to the Agent, for the account of the Borrower, at
the Agent's Office in funds immediately available to the Agent, an
amount equal to such Lender's Commitment Percentage of the Revolving
Credit Loans to be made on such borrowing date.
(b) Disbursement of Loans. The Borrower hereby irrevocably
authorizes the Agent to disburse the proceeds of each borrowing requested, or
deemed to be requested, pursuant to this SECTION 2.2 as follows:
(i) the proceeds of each borrowing requested under
SECTIONS 2.2(A)(I) or (II) shall be disbursed by the Agent in
Dollars in immediately available funds, (A) in the case of the
initial borrowing, in accordance with the terms of the letter
from the Borrower to the Agent referred to in SECTION
6.1(F)(XVIII), and (B) in the case of each subsequent
borrowing, by wire transfer to a Controlled Disbursement
Account or, in the absence of a Controlled Disbursement
Account, by wire transfer to such other account as may be
agreed upon by the Borrower and the Agent from time to time,
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(ii) the proceeds of each borrowing deemed requested
under SECTION 2.2(A)(III) or (IV) shall be disbursed by the
Agent by way of direct payment of the relevant interest or
Secured Obligation, as the case may be, and
(iii) the proceeds of each borrowing deemed requested
under SECTION 2.2(A)(V) shall be disbursed by the Agent
directly to NationsBank on behalf of the Borrower.
SECTION 2.3. Repayment of Revolving Credit Loans. The
Revolving Credit Loans will be repaid as follows:
(a) Whether or not any Default or Event of Default has
occurred, the outstanding principal amount of all the Revolving Credit
Loans is due and payable, and shall be repaid by the Borrower in full,
not later than the Termination Date;
(b) If at any time the aggregate outstanding unpaid principal
amount of the Revolving Credit Loans exceeds the Borrowing Base in
effect at such time, the Borrower shall repay the Revolving Credit
Loans in an amount sufficient to reduce the aggregate unpaid principal
amount of such Revolving Credit Loans by an amount equal to such
excess, together with accrued and unpaid interest on the amount so
repaid to the date of repayment;
(c) Unless otherwise specified by the Borrower, except as
otherwise required by SECTION 5.1(C)(IV) and except for repayments made
under SECTION 5.1(C)(VII), amounts repaid hereunder shall first be
applied to Prime Rate Advances, and shall be applied to Eurodollar Rate
Advances only to the extent that the amount repaid exceeds the
principal amount of Prime Rate Advances outstanding at the time of such
payment (and to the extent that amounts repaid are applied to
Eurodollar Rate Advances, Borrower shall pay any amounts required by
SECTION 5.1(C)(V)); and
(d) The Borrower hereby instructs the Agent to repay the
Revolving Credit Loans outstanding on any day in an amount equal to the
amount received by the Agent on such day pursuant to SECTION 9.1(B).
SECTION 2.4. Revolving Credit Note. Each Lender's Revolving
Credit Loans and the obligation of the Borrower to repay such Revolving Credit
Loans shall also be evidenced by a Revolving Credit Note payable to the order of
such Lender. Each Revolving Credit Note shall be dated the Effective Date and be
duly and validly executed and delivered by the Borrower.
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ARTICLE 3
LETTER OF CREDIT FACILITY; IRB L/CS
SECTION 3.1. Agreement to Issue. Upon the terms and subject to
the conditions of, and in reliance upon the representations and warranties made
under, this Agreement, NationsBank agrees to issue for the account of the
Borrower one or more Letters of Credit in accordance with this ARTICLE 3, from
time to time during the period commencing on the Effective Date and ending on
the Termination Date.
SECTION 3.2. Amounts. NationsBank shall not have any
obligation to issue any Letter of Credit at any time:
(a) if, after giving effect to the issuance of the requested
Letter of Credit, (i) the aggregate Letter of Credit Obligations of the
Borrower would exceed the Letter of Credit Facility then in effect or
(ii) the aggregate principal amount of the Revolving Credit Loans
outstanding would exceed the Borrowing Base (after reduction for the
Letter of Credit Reserve in respect of such Letter of Credit); or
(b) which has a term longer than one calendar year or an
expiration date after the last Business Day that is more than 30 days
prior to the Termination Date.
SECTION 3.3. Conditions. The obligation of NationsBank to
issue any Letter of Credit is subject to the satisfaction of (i) the conditions
precedent contained in ARTICLE 6 and (ii) the following additional conditions
precedent in a manner satisfactory to the Agent and NationsBank:
(a) the Borrower shall have delivered to NationsBank and the
Agent at such times and in such manner as NationsBank or the Agent may
prescribe an application in form and substance satisfactory to
NationsBank and the Agent for the issuance of the Letter of Credit, a
Reimbursement Agreement and such other documents as may be required
pursuant to the terms thereof, and the form and terms of the proposed
Letter of Credit shall be satisfactory to NationsBank and the Agent;
and
(b) as of the date of issuance, no order of any court,
arbitrator or governmental authority having jurisdiction or authority
over NationsBank shall purport by its terms to enjoin or restrain banks
generally from issuing letters of credit of the type and in the amount
of the proposed Letter of Credit, and no law, rule or regulation
applicable to banks generally and no request or directive (whether or
not having the force of law) from any governmental authority with
jurisdiction over banks generally shall prohibit, or request that
NationsBank refrain from, the issuance of letters of credit generally
or the issuance of such Letter of Credit.
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SECTION 3.4. Issuance of Letters of Credit.
(a) Request for Issuance. The Borrower shall give NationsBank
and the Agent written notice of the Borrower's request for the issuance
of a Letter of Credit no later than six Business Days prior to the
proposed date of issuance of the Letter of Credit. Such notice shall be
irrevocable and shall specify the original face amount of the Letter of
Credit requested, the effective date (which date shall be a Business
Day) of issuance of such requested Letter of Credit, whether such
Letter of Credit may be drawn in a single or in multiple draws, the
date on which such requested Letter of Credit is to expire (which date
shall be a Business Day earlier than the Business Day prior to the
Termination Date), the purpose for which such Letter of Credit is to be
issued and the beneficiary of the requested Letter of Credit. The
Borrower shall attach to such notice the form of the Letter of Credit
that the Borrower requests to be issued.
(b) Responsibilities of the Agent; Issuance. The Agent shall
determine, as of the Business Day immediately preceding the requested
effective date of issuance of the Letter of Credit set forth in the
notice from the Borrower pursuant to SECTION 3.4(A), the amount of the
unused Letter of Credit Facility and the Borrowing Base. If (i) the
form of the Letter of Credit delivered by the Borrower to the Agent is
acceptable to NationsBank and the Agent in their sole, reasonable
discretion, (ii) the undrawn face amount of the requested Letter of
Credit is less than or equal to the lesser of (A) the unused Letter of
Credit Facility and (B) the unused Borrowing Base and (iii) the Agent
has received a certificate from the Borrower stating that the
applicable conditions set forth in ARTICLE 6 have been satisfied, then
NationsBank will cause the Letter of Credit to be issued.
(c) Notice of Issuance. Promptly after the issuance of any
Letter of Credit, NationsBank shall give the Agent written or facsimile
notice, or telephonic notice confirmed promptly thereafter in writing,
of the issuance of such Letter of Credit, and the Agent shall give each
Lender written or facsimile notice, or telephonic notice confirmed
promptly thereafter in writing, of the issuance of such Letter of
Credit.
(d) No Extension or Amendment. No Letter of Credit shall be
extended or amended unless the requirements of this SECTION 3.4 are met
as though a new Letter of Credit were being requested and issued.
SECTION 3.5. Duties of NationsBank. Any action taken or
omitted to be taken by NationsBank under or in connection with any Letter of
Credit or IRB L/C, if taken or omitted in the absence of gross negligence or
willful misconduct, shall not result in any liability of NationsBank to any
Lender or relieve any Lender of its obligations hereunder to NationsBank. In
determining whether to pay under any Letter of Credit or IRB L/C, NationsBank
shall have no obligation to any Lender other than to confirm that any documents
required to be delivered under such Letter of Credit or IRB L/C in connection
with such drawing have been presented and appear on their face to comply with
the requirements of such Letter of Credit.
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SECTION 3.6. Payment of Reimbursement Obligations.
(a) Payment to Issuer. Notwithstanding any provisions to the
contrary in any Reimbursement Agreement (but subject, as to any IRB
L/C, to the terms and conditions of the applicable IRB L/C Agreement),
the Borrower agrees to reimburse NationsBank for any drawings (whether
partial or full) under each Letter of Credit and each IRB L/C and
agrees to pay to NationsBank the amount of all other Reimbursement
Obligations and other amounts payable to NationsBank under or in
connection with such Letter of Credit or IRB L/C immediately when due,
irrespective of any claim, set-off, defense or other right which the
Borrower may have at any time against NationsBank or any other Person.
(b) Recovery or Avoidance of Payments. In the event that any
payment by or on behalf of the Borrower with respect to any Letter of
Credit (or any Reimbursement Obligation relating thereto) or IRB L/C
received by NationsBank, or by the Agent and distributed by the Agent
to the Lenders on account of their respective participations therein,
is thereafter set aside, avoided or recovered from NationsBank or the
Agent in connection with any receivership, liquidation or bankruptcy
proceeding, the Lenders shall, upon demand by the Agent, pay to the
Agent, for the account of the Agent or NationsBank, their respective
Commitment Percentages of such amount set aside, avoided or recovered
together with interest at the rate required to be paid by the Agent
upon the amount required to be repaid by it.
SECTION 3.7. Participations.
(a) Purchase of Participations. On the Effective Date, as to
all Letters of Credit and IRB L/Cs outstanding on the Effective Date,
and thereafter, immediately upon issuance by NationsBank of a Letter of
Credit or IRB L/C, each Lender shall be deemed to have irrevocably and
unconditionally purchased and received without recourse or warranty, an
undivided interest and participation in such Letter of Credit or IRB
L/C, equal to such Lender's Commitment Percentage of the face amount
thereof (including, without limitation, all obligations of the Borrower
with respect thereto, other than amounts owing to NationsBank under
SECTION 5.2(D)(II), and any security therefor or guaranty pertaining
thereto).
(b) Sharing of Payments. In the event that NationsBank makes a
payment under any Letter of Credit or IRB L/C and NationsBank shall not
have been repaid such amount pursuant to SECTION 3.6 or the applicable
IRB L/C Agreement, then NationsBank shall be deemed to have made a
Non-Ratable Loan in the amount of such payment, and notwithstanding the
occurrence or continuance of a Default or Event of Default at the time
of such payment, such Non-Ratable Loan shall be subject to the
provisions of SECTION 5.7(C) and the absolute obligations of the
Lenders to pay for their respective participation interests therein.
(c) Sharing of Reimbursement Obligation Payments. Whenever
NationsBank receives a payment from or on behalf of the Borrower on
account of a Reimbursement Obligation or a payment previously made
under an IRB L/C and unreimbursed by the
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Borrower as to which the Agent has previously received for the account
of NationsBank payment from a Lender pursuant to this SECTION 3.7,
NationsBank shall promptly pay to the Agent, for the benefit of such
Lender, such Lender's Commitment Percentage of the amount of such
payment from the Borrower in Dollars. Each such payment shall be made
by NationsBank on the Business Day on which NationsBank receives
immediately available funds pursuant to the immediately preceding
sentence, if received prior to 11:00 a.m. (Atlanta time) on such
Business Day and otherwise on the next succeeding Business Day.
(d) Documentation. Upon the request of any Lender, the Agent
shall furnish to such Lender copies of any Letter of Credit, IRB L/C,
Reimbursement Agreement, IRB L/C Agreement or application for any
Letter of Credit or IRB L/C and such other documentation as may
reasonably be requested by such Lender.
(e) Obligations Irrevocable. The obligations of each Lender to
make payments to the Agent with respect to any Letter of Credit or any
IRB L/C and their participations therein pursuant to the provisions of
SECTION 5.7(C) hereof or otherwise and the obligations of the Borrower
to make payments to NationsBank or to the Agent, for the account of
Lenders, shall be irrevocable, shall not be subject to any
qualification or exception whatsoever and shall be made in accordance
with the terms and conditions of this Agreement (assuming, in the case
of the obligations of the Lenders to make such payments, that the
Letter of Credit has been issued in accordance with SECTION 3.4),
including, without limitation, any of the following circumstances:
(i) Any lack of validity or enforceability of this
Agreement or any of the other Loan Documents;
(ii) The existence of any claim, set-off, defense or
other right which the Borrower may have at any time against a
beneficiary named in a Letter of Credit or IRB L/C or any
transferee of any Letter of Credit or IRB L/C (or any Person
for whom any such transferee may be acting), any Lender,
NationsBank or any other Person, whether in connection with
this Agreement, any Letter of Credit, any IRB L/C or IRB L/C
Agreement the transactions contemplated herein or any
unrelated transactions (including any underlying transactions
between the Borrower or any other Person and the beneficiary
named in any Letter of Credit or IRB L/C);
(iii) Any draft, certificate or any other document
presented under the Letter of Credit or IRB L/C upon which
payment has been made in good faith and according to its terms
proving to be forged, fraudulent, invalid or insufficient in
any respect or any statement therein being untrue or
inaccurate in any respect;
(iv) The surrender or impairment of any Collateral
or any other security for the Secured Obligations or the
performance or observance of any of the terms of any of the
Loan Documents;
(v) The occurrence of any Default or Event of
Default; or
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(vi) The Agent's failure to deliver to the Lenders
the notice provided for in SECTION 3.4(C).
SECTION 3.8. Indemnification, Exoneration.
(a) Indemnification. In addition to amounts payable as
elsewhere provided in this ARTICLE 3, the Borrower agrees to protect,
indemnify, pay and save the Lenders and the Agent harmless from and
against any and all claims, demands, liabilities, damages, losses,
costs, charges and expenses (including reasonable attorneys' fees)
which any Lender or the Agent may incur or be subject to as a
consequence, directly or indirectly, of
(i) the issuance of any Letter of Credit or IRB L/C,
other than as a result of its gross negligence or willful
misconduct, as determined by a court of competent
jurisdiction, or
(ii) the failure of NationsBank to honor a drawing
under any Letter of Credit or IRB L/C as a result of any act
or omission, whether rightful or wrongful, of any present or
future de jure or de facto governmental authority (all such
acts or omissions being hereinafter referred to collectively
as "Government Acts").
(b) Assumption of Risk by the Borrower. As among the Borrower,
the Lenders and the Agent, the Borrower assumes all risks of the acts
and omissions of, or misuse of any of the Letters of Credit or any IRB
L/C by the respective beneficiaries of such Letters of Credit and IRB
L/Cs. In furtherance and not in limitation of the foregoing, subject to
the provisions of the applications for the issuance of Letters of
Credit and the applicable terms of the respective IRB L/C Agreements,
the Lenders and the Agent shall not be responsible for:
(i) the form, validity, sufficiency, accuracy,
genuineness or legal effect of any document submitted by any
Person in connection with the application for and issuance of
and presentation of drafts with respect to any of the Letters
of Credit or IRB L/C, even if it should prove to be in any or
all respects invalid, insufficient, inaccurate, fraudulent or
forged;
(ii) the validity or sufficiency of any instrument
transferring or assigning or purporting to transfer or assign
any Letter of Credit or IRB L/C or the rights or benefits
thereunder or proceeds thereof, in whole or in part, which may
prove to be invalid or ineffective for any reason;
(iii) the failure of the beneficiary of any Letter of
Credit or IRB L/C to comply duly with conditions required in
order to draw upon such Letter of Credit or IRB L/C;
(iv) 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;
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(v) errors in interpretation of technical terms;
(vi) any loss or delay in the transmission or
otherwise of any document required in order to make a drawing
under any Letter of Credit or IRB L/C or of the proceeds
thereof;
(vii) the misapplication by the beneficiary of any
Letter of Credit or IRB L/C of the proceeds of any drawing
under such Letter of Credit or IRB L/C; or
(viii) any consequences arising from causes beyond
the control of the Lenders or the Agent, including, without
limitation, any Government Acts.
None of the foregoing shall affect, impair or prevent the vesting of
any of the Agent's rights or powers under this SECTION 3.8.
(c) Exoneration. In furtherance and extension, and not in
limitation, of the specific provisions set forth above, any action
taken or omitted by the Agent, NationsBank or any Lender under or in
connection with any of the Letters of Credit or any IRB L/C or any
related certificates, if taken or omitted in good faith, shall not
result in any liability of any Lender or the Agent to the Borrower or
relieve the Borrower of any of its obligations hereunder to any such
Person.
SECTION 3.9. Supporting Letter of Credit; Cash Collateral. If,
notwithstanding the provisions of SECTION 3.2(B), any Letter of Credit or IRB
L/C is outstanding on the Termination Date, then on or prior to such Termination
Date, or if the Agent so demands while an Event of Default exists, then upon
demand by the Agent, the Borrower shall deposit with the Agent, for the ratable
benefit of the Lenders (ratable in accordance with their Commitment
Percentages), with respect to each Letter of Credit or IRB L/C then outstanding,
as the Agent shall specify, either (a) a standby letter of credit (a "Supporting
Letter of Credit") in form and substance satisfactory to the Agent, issued by an
issuer reasonably satisfactory to the Agent in an amount equal to the greatest
amount for which such Letter of Credit or IRB L/C may be drawn, under which
Supporting Letter of Credit the Agent is entitled to draw amounts necessary to
reimburse the Agent and the Lenders for payments made by the Agent and the
Lenders under such Letter of Credit and IRB L/C or under any reimbursement or
guaranty agreement with respect thereto, or (b) Cash Collateral in an amount
necessary to reimburse the Agent and the Lenders for payments made by the Agent
and the Lenders under such Letter of Credit or IRB L/C or under any
reimbursement or guaranty agreement with respect thereto. Such Supporting Letter
of Credit or Cash Collateral shall be held by the Agent for the ratable benefit
of the Lenders (ratable in accordance with their Commitment Percentages), as
security for, and to provide for the payment of, the Reimbursement Obligations.
In addition, the Agent may at any time after the Termination Date apply any or
all of such Cash Collateral to the payment of any or all of the Secured
Obligations then due and payable. At the Borrower's request, but subject to the
Agent's reasonable approval, the Agent shall invest any Cash Collateral
consisting of cash or any proceeds of Cash Collateral consisting of cash in Cash
Equivalents, and any commissions, expenses and penalties incurred by the Agent
in connection with any investment and redemption of such Cash Collateral shall
be Secured Obligations hereunder secured by the Collateral, shall bear interest
at the rates provided herein for the Loans and shall be
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charged to the Borrower's Loan Accounts, or, at the Agent's option, shall be
paid out of the proceeds of any earnings received by the Agent from the
investment of such Cash Collateral as provided herein or out of such cash
itself. The Agent makes no representation or warranty as to, and shall not be
responsible for, the rate of return, if any, earned on any Cash Collateral. Any
earnings on Cash Collateral shall be held as additional Cash Collateral on the
terms set forth in this SECTION 3.9.
SECTION 3.10. IRB Letters of Credit. Each IRB L/C and the
Borrower's and NationsBank's respective rights and obligations in respect
thereof shall be subject to a separate letter of credit and reimbursement
agreement (each, an "IRB L/C Agreement") between NationsBank and the Borrower,
entered into in connection with the issuance of such IRB L/C. In the case of any
conflict between the provisions of any IRB L/C Agreement and the provisions of
this ARTICLE 3 (other than such provisions as are inapplicable to IRB L/Cs), the
provisions of this ARTICLE 3 shall control.
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ARTICLE 4
TERM LOAN FACILITY
SECTION 4.1. Term Loan. Upon the terms and subject to the
conditions of, and in reliance upon the representations and warranties made
under, this Agreement, each Lender agrees severally, but not jointly, (a) to
make a Term Loan to the Borrower on the Effective Date in a principal amount
equal to such Lender's Commitment Percentage of $2 million, (b) to continue as a
Term Loan, its Commitment Percentage of $13.9 million, being the entire
outstanding principal amount as of the Effective Date of Term Loans outstanding
under and as defined in the Existing Loan Agreement, and (c) to make additional
Term Loans to the Borrower from time to time after the Effective Date and on or
prior to the Project Completion Date, each in an amount equal to such Lender's
Commitment Percentage of the Interim Construction Loan requested by the
Borrower, PROVIDED that no Lender shall be obligated to maintain or make or have
outstanding, Term Loans in excess of such Lender's Commitment Percentage of the
Term Loan Facility.
SECTION 4.2. Manner of Borrowing Term Loans; Interim
Construction Loans.
(a) The Borrower shall give the Agent prior notice of the
Effective Date and the Agent shall promptly notify each Lender thereof.
Each Lender will make the amount equal to its Commitment Percentage of
the aggregate principal amount of the Term Loans to be made or
continued on the Effective Date (or the excess of such amount over the
aggregate principal amount of Term Loans (under and as defined in the
Existing Loan Agreement) owing to such Lender on the Effective Date, as
requested by the Agent) available to the Agent, for the account of the
Borrower, at the Agent's Office, prior to 12:00 noon (Atlanta time) on
the Effective Date in funds immediately available to the Agent. Not
later than 1:00 p.m. (Atlanta time) on the Effective Date, upon
satisfaction of the applicable conditions set forth in SECTIONS 6.1 and
6.2, the Agent will disburse the Term Loans to be made on the Effective
Date (or such aggregate excess), in same day funds in accordance with
the terms of the letter from the Borrower to the Agent referred to in
SECTION 6.1(F)(XVIII).
(b) Each request for an Interim Construction Loan shall be
made by written notice by the Borrower to the Agent (which shall
promptly notify each lender thereof) given not later than 2:00 p.m.
(Atlanta time) on the proposed borrowing date, of its intention to
borrow, specifying the amount of the proposed borrowing and the
proposed borrowing date, identifying the 1997 Project (or 1997
Projects) in respect of which such borrowing is being requested, and
certifying with respect to each 1997 Project in respect of which any
borrowing is requested, that the principal amount of such borrowing,
when added to the aggregate principal amount of all previous borrowings
attributable to such 1997 Project, does not exceed an amount equal to
the lesser of (i) the Dollar Amount for such 1997 Project set forth in
the definition "Interim Construction Facility" and (ii) 75% of the
total costs of construction and Equipment purchases and installation
set forth in the project description of such 1997 Project that has been
furnished to, and accepted by, the Agent and the Lenders prior to the
Effective Date.
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(c) Each Lender will make an amount equal to its Commitment
Percentage of the aggregate principal amount of Interim Construction
Loans to be made on each such borrowing date, available to the Agent,
for the account of the Borrower, at the office of the Agent, prior to
3:30 p.m. (Atlanta time) on the specified borrowing date in funds
immediately available to the Agent. Not later than 4:30 p.m. (Atlanta
time) on such borrowing date, upon satisfaction of the applicable
conditions set forth in SECTIONS 6.1 and 6.2, the Agent will disburse
the Interim Construction Loans in same day funds in accordance with the
terms of the notice of such borrowing from the Borrower to the Agent.
(d) As soon as available after the last day of each month
ending after the Effective Date and before the Project Completion Date,
but in no event later than the 20th day of the following month, and on
the Project Completion Date, the Borrower will deliver to the Agent a
report, in reasonable detail and otherwise in form and substance
satisfactory to the Agent, setting forth the (i) total cost of
construction and of Equipment purchases and installation for each 1997
Project reflected in the description of such 1997 Project delivered to
the Agent prior to the Agreement Date, (ii) the total amount of such
costs paid by the Borrower on or prior to such last day of the month or
the Project Completion Date, as the case may be, (iii) the percentage
(which may be the Borrower's good faith estimate thereof) of completion
of such 1997 Project (which shall be 100% on the Project Completion
Date), and (iv) the aggregate principal amount of Interim Construction
Loans outstanding with respect to such 1997 Project. The principal
amount of Interim Construction Loans outstanding on the Project
Completion Date shall continue as a portion of the Term Loan of each
Lender in such Lender's Commitment Percentage thereof after the Project
Completion Date, except to the extent that the report delivered in
accordance with this SECTION 4.2(D) on and as of the Project Completion
Date reflects any EXCESS of the outstanding principal amount of Interim
Construction Loans, OVER the Interim Construction Facility. Any such
excess shall be repaid by the Borrower not later than the first
Business Day after the Project Completion Date (including by
application of proceeds of a Revolving Credit Loan).
SECTION 4.3. Repayment of Term Loans.
The principal amount of the Term Loans shall be repaid in
accordance with the provisions of Term Notes EXCEPT that if the Term Notes refer
exclusively to this Agreement for such repayment terms, then the principal
amount of the Term Loans shall be repaid in consecutive quarterly installments
payable on each Installment Payment Date beginning on May 1, 1998, the first
such payment to be in an amount equal to $397,500 and each subsequent payment to
be in an amount equal to the greater of (i) $597,500 and (ii) the sum of
$397,500 plus 1/40th of the total principal amount of Interim Construction Loans
continued as a part of the Term Loan principal on the Project Completion Date,
PROVIDED, that the final such quarterly payment, payable on February 1, 2003,
shall be in the entire unpaid principal amount of the Term Loan then
outstanding.
SECTION 4.4. Term Notes. The Term Loans made, maintained or
continued and the Interim Construction Loans made by each Lender and the
obligation of the Borrower to
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repay such Loans shall also be evidenced by Term Notes payable to the order of
such Lender. Each such Term Note shall be dated the Effective Date (or any later
"effective date" of any Assignment and Acceptance pursuant to which such Note is
issued), and be duly and validly executed and delivered by the Borrower. As of
the Project Completion Date, the adjusted principal amount of the Interim
Construction Loans owing to each Lender shall also be evidenced by the Term Note
owing to such Lender.
SECTION 4.5. Arizona Bond Financing Option. The Borrower
shall have the right to convert a portion of the Term Loan Facility, and the
Interim Construction Facility to the extent relating to the Arizona Facility, to
a facility for a standby letter of credit supporting a lower floater industrial
revenue bond issue. To do so, the Borrower must notify the Agent and each
Lender, at least 30 days before the expected closing date of such bond
financing, of the Borrower's intention to exercise this option, and must finally
close such bond financing under this option on or before September 1, 2000. The
bond financing under this option (a) shall include letter-of-credit provisions
substantially the same as those in ARTICLE 3 (but with a separate credit limit
of up to $10 million, an expiry date of up to two years after the issuance date
(but nevertheless subject to Termination Date support substantially identical to
that specified in SECTION 3.9)), (b) shall be collateralized with all collateral
supporting the Term Loan Facility and the Interim Construction Facility to the
extent relating to the Arizona Facility, and (c) shall in all respects be
satisfactory in form and substance to the Agent and each Lender. Any such letter
of credit shall be renewable (by the Agent) annually, with the beneficiary
having the right to draw after any notice of non-renewal. Upon the closing of
the bond financing under this option, the Borrower shall repay the Term Loans
and any related Interim Construction Loan then outstanding to the extent related
to the Arizona Facility, and the Borrower, the Agent, and each Lender shall
execute and deliver any amendment to this Agreement with respect to such
financing that the Agent may reasonably specify in its discretion. All expenses
(including legal fees) relating to the bond financing contemplated by this
SECTION 4.5 and the issuance of the Arizona L/C, whether or not actually closed,
shall be payable by the Borrower under SECTION 16.2.
SECTION 4.6. Voluntary Prepayment of Term Loans. All
prepayments of the Term Loans shall be applied to the principal installments
payable thereon in inverse order of maturity. Any prepayment that the Borrower
directs be applied to the Interim Construction Loans outstanding prior to the
Project Completion Date, shall be applied permanently to reduce the Interim
Construction Facility allocable to the project specified by the Borrower in its
notice of prepayment.
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ARTICLE 5
GENERAL LOAN PROVISIONS
SECTION 5.1. Interest.
(a) Choice of Interest Rate for Revolving Credit Loans. Each
Advance that is part of a Revolving Credit Loan shall, at the option of
Borrower, be made as a Prime Rate Advance or a Eurodollar Rate Advance.
Eurodollar Rate Advances shall in all cases be subject to SECTION
5.1(C) hereof. Any notice given to the Agent in connection with a
requested Advance hereunder shall be given prior to 2:00 p.m. (Atlanta
time) in order for such Business Day to count toward the minimum number
of Business Days required. If Borrower fails to give the Agent timely
notice of its selection of a Eurodollar Rate, or if for any reason a
determination of a Eurodollar Rate for any Advance is not timely
concluded, the Alternative Revolver Rate shall apply to such Advance.
(b) Prime Rate Advances.
(i) Repayments and Reborrowings. The Borrower may
repay a Prime Rate Advance at any time and (A) reborrow all or
a portion of the principal amount thereof as one or more Prime
Rate Advances or Eurodollar Rate Advances, or (B) not reborrow
all or any portion of such Prime Rate Advance.
(ii) Prepayment. The principal amount of any Prime
Rate Advance may be prepaid in full or in part at any time
without penalty.
(c) Eurodollar Rate Advances.
(i) Advances. The Borrower shall give the Agent, in
the case of Eurodollar Rate Advances, at least three Business
Days irrevocable telephonic notice of its election confirmed
immediately in writing. The Agent, whose determination shall
be conclusive, shall determine the available Eurodollar Rate
and shall notify the Borrower of such Eurodollar Rate and the
Applicable Margin. The Borrower shall promptly notify the
Agent by telecopy or by telephone, and shall immediately
confirm any such telephonic notice in writing, of its
selection of a Eurodollar Rate and Interest Period for such
Advance.
(ii) Repayments and Reborrowings. At least three
Business Days prior to the maturity date for a Eurodollar Rate
Advance, the Borrower shall give the Agent written notice
specifying whether all or a portion of any Eurodollar Rate
Advance outstanding on such date (A) is to be continued in
whole or in part as a Eurodollar Rate Advance, (B) is to be
converted to a Prime Rate Advance, or (C) is to be repaid and
not reborrowed. Borrower's failure to give a proper notice
shall be deemed a request to convert the entire amount of such
Eurodollar Rate Advance into a Prime Rate Advance on the last
day of the applicable Interest Period.
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(iii) Limitation on Eurodollar Rate Advances. Each
Eurodollar Rate Advance shall be in an amount of not less than
$1 million or an integral multiple thereof.
(iv) Prepayment. Eurodollar Rate Advances may be
prepaid in whole or in part prior to the last day of the
applicable Interest Period, upon four Business Days prior
written notice to the Agent, PROVIDED that the Borrower shall
reimburse the Lenders, on the earlier of demand or the
Termination Date, an amount computed as provided in CLAUSE (I)
below. Any notice of prepayment of a Eurodollar Rate Advance
shall be irrevocable.
(i) Payments Not at End of Interest Period; Failure
to Borrow. If for any reason any payment of principal with
respect to any Eurodollar Rate Advance is made on any day
prior to the last day of the Interest Period applicable to
such Eurodollar Rate Advance or, after having given a Notice
of Borrowing with respect to any Revolving Credit Loan to be
comprised of Eurodollar Rate Advances or a notice of
conversion or continuation with respect to any Revolving
Credit Loan to be continued as or converted into Eurodollar
Rate Advances, such Revolving Credit Loan is not made or is
not continued as or converted into Eurodollar Rate Advances
due to the Borrower's failure to borrow or to fulfill the
applicable conditions set forth in ARTICLE 6, the Borrower
shall pay to Lenders, in addition to any amounts that may be
due hereunder, an amount (if a positive number) computed
pursuant to the following formula:
L = (R-T) x P x D
-------------
360
L = amount payable
R = interest rate applicable to the
Eurodollar Rate Advance or Eurodollar Rate Loan
unborrowed or prepaid
T = effective interest rate per annum at
which any readily marketable bonds or other
obligations of the United States, selected
at the Agent's sole discretion, maturing on
or near the last day of the then applicable
or requested Interest Period for such Loan
and in approximately the same amount as such
Loan, can be purchased by such Lender on the
day of such payment of principal or failure
to borrow
P = the amount of principal paid or the
amount of the requested Loan
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D = the number of days remaining in
the Interest Period as of the date of such
payment or the number of days in the
requested Interest Period
The Borrower shall pay such amount upon presentation by the
Agent of a statement setting forth the amount and the Agent's
calculation thereof pursuant hereto, which statement shall be
deemed true and correct absent manifest error.
(v) Eurodollar Rate Determined Inadequate or
Unfair. Notwithstanding anything contained herein which may be
construed to the contrary, if with respect to any proposed
Eurodollar Rate Advance for any Interest Period, the Agent or
any Lender determines that deposits in Dollars (in the
applicable amount) are not being offered to the Agent in the
relevant market for such Interest Period on a basis sufficient
to permit a fair establishment of the Eurodollar Rate, the
Agent shall forthwith give notice thereof to Borrower,
whereupon until the Agent notifies the Borrower that the
circumstances giving rise to such situation no longer exist,
the obligations of the Lenders to make such Eurodollar Rate
Advances shall be suspended.
(vi) Illegality. If any applicable law, rule or
regulation, or any change therein, or any interpretation or
change in interpretation or administration thereof by any
governmental authority, central bank or comparable agency
charged with the interpretation or administration thereof, or
compliance by the Lenders with any request or directive
(whether or not having the force of law) of any such
authority, central bank or comparable agency, shall make it
unlawful or impossible any Lender to make, maintain or fund
its Eurodollar Rate Advances or Eurodollar Rate Loans, then
such Lender shall notify the Agent, the other Lenders, and the
Borrower. Upon receipt of such notice, notwithstanding
anything contained in SECTION 5.1 hereof, the Borrower shall
repay in full the then outstanding principal amount of each
affected Eurodollar Rate Advance, together with accrued
interest thereon either (a) on the last day of the then
current Interest Period applicable to such Eurodollar Rate
Advance if the Lenders may lawfully continue to maintain and
fund such Eurodollar Rate Advance to such day or (b)
immediately if the Lenders may not lawfully continue to fund
and maintain such Eurodollar Rate Advance, unless the Borrower
converts such outstanding Eurodollar Rate Advance to a Prime
Rate Advance pursuant to a right to do so hereunder.
(vii) Effect on Other Advances. If notice has been
given to the Borrower suspending the obligation of the Lenders
to make any Eurodollar Rate Advance, or requiring Eurodollar
Rate Advances to be repaid, then, unless and until the Agent
notifies the Borrower that the circumstances giving rise to
such repayment requirement no longer apply, all Advances which
would otherwise be made by the Lenders as Eurodollar Rate
Advances shall, at the option of the Borrower, be made instead
as Prime Rate Advances, or, if available, as another type of
fixed rate advance.
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(d) General Interest Provisions.
(i) The Borrower shall pay interest on the unpaid
principal amount of each Revolving Credit Loan for each day
from the day such Loan is made until such Loan is due (whether
at maturity, by reason of acceleration or otherwise), at a
rate per annum equal to (A) the Eurodollar Rate plus the
Applicable Margin or (B) or the Alternative Revolver Rate, as
elected by the Borrowers in accordance with the provisions set
forth herein. Interest on Prime Rate Advances shall be payable
monthly in arrears on each Interest Payment Date. Interest on
Eurodollar Rate Advances shall be payable on the last day of
such Interest Period. Interest accrued on Eurodollar Rate
Advances with Interest Periods of two, three or six months
shall be payable on each Interest Payment Date during the
Interest Period therefor and on the last day of such Interest
Period.
(ii) Interest on the Term Loan for each Interest
Period applicable thereto (or to any portion thereof) shall
accrue at the Eurodollar Rate plus the Applicable Margin and
shall be payable as provided for Eurodollar Rate Advances in
CLAUSE (I) above, provided that (A) prior to Project
Completion Date, any Interim Construction Loan that is
requested in an amount smaller than the minimum Eurodollar
Advance amount or at a time less than one full month prior to
the Project Completion Date shall bear interest at the
Alternative Revolver Rate payable as provided above for Prime
Rate Advances and (B) at any time after the Effective Date if
Eurodollar Rate Advances are not available pursuant to the
foregoing provisions of this SECTION 5.1, the Term Loan shall
bear interest at the Alternative Revolver Rate, payable as
provided above for Prime Rate Advances.
(iii) From and after the occurrence of an Event of
Default, except to the extent otherwise provided in the Term
Notes, the unpaid principal amount of each Secured Obligation
shall bear interest until paid in full (or, if earlier, until
such Event of Default is cured or waived in writing by the
Agent) at a rate per annum equal to the Default Margin plus
the Prime Rate, payable on demand. The interest rate provided
for in this SECTION 5.1(D)(III) shall to the extent permitted
by Applicable Law apply to and accrue on the amount of any
judgment entered with respect to any Secured Obligation.
(iv) The interest rates provided for in this SECTION
5.1 shall be computed on the basis of a year of 360 days and
the actual number of days elapsed.
(v) It is not intended by the Lenders, and nothing
contained in this Agreement or the Notes shall be deemed, to
establish or require the payment of a rate of interest in
excess of the maximum rate permitted by Applicable Law (the
"Maximum Rate"). If, in any month, the Effective Interest
Rate, absent such limitation, would have exceeded the Maximum
Rate, then the Effective Interest Rate for that month shall be
the Maximum Rate, and, if in future months, the Effective
Interest Rate would otherwise be less than the Maximum Rate,
then the Effective Interest Rate shall remain at the Maximum
Rate until such time as the amount of
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interest paid hereunder equals the amount of interest which
would have been paid if the same had not been limited by the
Maximum Rate. In the event, upon payment in full of the
Secured Obligations, the total amount of interest paid or
accrued under the terms of this Agreement is less than the
total amount of interest which would have been paid or accrued
if the Effective Interest Rate had at all times been in
effect, then the Borrower shall, to the extent permitted by
Applicable Law, pay to the Lenders an amount equal to the
excess, if any, of (i) the lesser of (A) the amount of
interest which would have been charged if the Maximum Rate
had, at all times, been in effect and (B) the amount of
interest which would have accrued had the Effective Interest
Rate, at all times, been in effect and (ii) the amount of
interest actually paid or accrued under this Agreement. In the
event the Lenders receive, collect or apply as interest any
sum in excess of the Maximum Rate, such excess amount shall be
applied to the reduction of the principal balance of the
Secured Obligations, and if no such principal is then
outstanding, such excess or part thereof remaining, shall be
paid to the Borrower.
SECTION 5.2. Certain Fees.
(a) Origination Fee. The Borrower shall pay to the Agent for
the ratable account of the Lenders, as additional consideration for the
new extensions of credit provided for hereunder, in addition to any
interest due under this Agreement, an origination fee in an amount
equal to 0.3% of (i) $2 million, payable on the Effective Date and (ii)
the aggregate principal amount of Interim Construction Loans continued
as part of the Term Loan on the Project Completion Date, payable on the
Project Completion Date. The origination fee shall be fully earned when
payable and shall not be subject to refund or rebate.
(b) Agent Fee. For administration and other services performed
by the Agent in connection with its continuing administration of this
Agreement, the Borrower shall pay to the Agent, for its own account,
and not for the account of the Lenders, an annual fee of 0.125% of the
amount of the Revolving Credit Facility on the payment date, payable
annually in advance on the Effective Date and on each anniversary of
the Effective Date for so long as any Secured Obligation shall remain
outstanding or the Revolving Credit Facility shall not have been
terminated. The fee payable pursuant to this SECTION 5.2(B) shall be
fully earned by the Agent on the date payment thereof is due and shall
not be subject to refund or rebate.
(c) Nonusage/Overusage. In connection with and as
consideration for the Lenders' reliance on the Borrower's use of its
projected amount of the Revolving Credit Facility, the Borrower will
pay a fee to the Agent, for the ratable account of the Lenders, for
each day from the Effective Date until the Termination Date, in an
amount equal to 1/8th% per annum of the amount by which the Borrower's
actual usage of Revolving Credit Loans, differs from (i.e., is less
than or greater than) the Borrower's projected usage of the Revolving
Credit Facility as shown in the Projections attached hereto as SCHEDULE
5.2(C). Such difference shall be computed for each calendar month (or
partial month, if the Effective Date or Termination Date falls in that
month) by adding the amount for each day by which the Borrower's actual
usage of the Revolving Credit Facility differs from the Borrower's
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projected usage (the amount for each day being a positive or negative
number or zero) and dividing that total by the number of days in the
month (such difference to be a positive number even if the foregoing
computation produces a negative number). Such fee for each calendar
month shall be payable on the following Interest Payment Date, and
shall be fully earned when due and payable and shall not be subject to
refund or rebate. Such fee is not, and shall not be deemed to be,
interest or a charge for the use of money.
(d) Letter of Credit Fees.
(i) The Borrower agrees to pay to the Agent for the
ratable benefit of the Lenders Letter of Credit fees equal to
the Applicable Margin applicable to Eurodollar Rate Advances
on the date on which a letter of Credit is issued (or renewed
or extended) on the face amount of each standby Letter of
Credit (except for workers' compensation Letters of Credit)
from time to time outstanding during the term of this
Agreement for the stated term thereof. The Borrower agrees to
pay to the Agent for the ratable benefit of the Lenders Letter
of Credit fees equal (A) to 1% per annum based on the average
daily aggregate Letter of Credit Amount of all workers'
compensation Letters of Credit and (B) .75% per annum on the
face amount of each commercial or documentary Letter of
Credit, in each case from time to time outstanding during the
term of this Agreement. Such fees shall be payable to the
Agent for the ratable benefit of the Lenders in accordance
with their respective Commitment Percentages in advance on the
date of issuance (or renewal or extension) of each Letter of
Credit and shall be calculated based on a year of 360 days and
the actual number of days elapsed.
(ii) The Borrower agrees to pay to Agent, for the
account of NationsBank, the standard fees and charges of
NationsBank for issuing, administering, amending, renewing,
paying, transferring and canceling letters of credit, as and
when assessed.
(e) Collateral Reporting Fee. The Borrower agrees to pay to
Agent for its own account, and not for the account of the Lenders, a
collateral reporting fee of $850.00 per month, payable in advance on
the first day of each month.
SECTION 5.3. Manner of Payment. Except as otherwise expressly
provided in SECTION 9.1(B), each payment (including prepayments) by the Borrower
on account of the principal of or interest on the Loans or of any other amounts
payable to the Lenders under this Agreement or any Note shall be made not later
than 12:00 noon (Atlanta time) on the date specified for payment under this
Agreement to the Agent, for the account of the Lenders, at the Agent's Office,
in Dollars, in immediately available funds and shall be made without any setoff,
counterclaim or deduction whatsoever. Any payment received after such time but
before 1:00 p.m. (Atlanta time) on such day shall be deemed a payment on such
date for the purposes of SECTION 13.1, but for all other purposes shall be
deemed to have been made on the next succeeding Business Day.
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SECTION 5.4. Loan Accounts; Statements of Account.
(a) Each Lender shall open and maintain on its books a loan
account in the Borrower's name (each, a "Loan Account" and
collectively, the "Loan Accounts"). Each such Loan Account shall show
as debits thereto each Loan made under this Agreement by such Lender to
the Borrower and as credits thereto all payments received by such
Lender and applied to principal of such Loan, so that the balance of
the loan account at all times reflects the principal amount due such
Lender from the Borrower.
(b) The Agent shall maintain on its books a control account
for the Borrower in which shall be recorded (i)the amount of each
disbursement made hereunder, (ii)the amount of any principal or
interest due or to become due from the Borrower hereunder, and (iii)the
amount of any sum received by the Agent hereunder from the Borrower and
each Lender's ratable share therein.
(c) The entries made in the accounts pursuant to SUBSECTIONS
(A) and (B) shall be PRIMA FACIE evidence, in the absence of manifest
error, of the existence and amounts of the obligations of the Borrower
therein recorded and in case of discrepancy between such accounts, in
the absence of manifest error, the accounts maintained pursuant to
SUBSECTION (B) shall be controlling.
(d) The Agent will account separately to the Borrower monthly
with a statement of Loans, charges and payments made to and by the
Borrower pursuant to this Agreement, and such accounts rendered by the
Agent shall be deemed final, binding and conclusive, save for manifest
error, unless the Agent is notified by the Borrower in writing to the
contrary within 30 days of the date the account to the Borrower was so
rendered. Such notice by the Borrower shall be deemed an objection to
only those items specifically objected to therein. Failure of the Agent
to render such account shall in no way affect the rights of the Agent
or of the Lenders hereunder.
SECTION 5.5. Termination of Agreement. Subject to the
provisions of SECTION 5.9, the Borrower shall have the right, at any time, to
terminate this Agreement upon not less than 30 Business Days prior written
notice of its intention to terminate this Agreement, which notice shall specify
the effective date of such termination. Upon receipt of such notice, the Agent
shall promptly notify each Lender thereof. On the date specified in such notice,
such termination shall be effected, PROVIDED, that the Borrower shall, on or
prior to such date, pay to the Agent, for the benefit of the Lenders, ratably in
proportion to their ownership of all outstanding Secured Obligations, in same
day funds, an amount equal to all Secured Obligations then outstanding,
including, without limitation, all (i) accrued interest thereon, (ii) all
accrued fees provided for hereunder, and (iii)any amounts payable to the Lender
pursuant to SECTIONS 5.9, 16.2, 16.3 and 16.14, and, in addition thereto, shall
deliver to the Agent, in respect of each outstanding Letter of Credit, either a
Supporting Letter of Credit or Cash Collateral as provided in SECTION 3.9.
Following a notice of termination as provided for in this SECTION 5.5 and upon
payment in full of the amounts and delivery of Cash Collateral or a Supporting
Letter of Credit specified in this SECTION 5.5, this Agreement shall be
terminated and the Agent, the Lenders and the Borrower shall have no further
obligations
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to any other party hereto except for the Borrower's obligations to the Agent
and the Lenders pursuant to SECTION 16.15 hereof.
SECTION 5.6. Making of Loans.
(a) Nature of Obligations of Lenders to Make Loans.
The obligations of the Lenders under this Agreement to make the Loans
are several and are not joint or joint and several.
(b) Assumption by Agent. Subject to the provisions of SECTION
5.7 and notwithstanding the occurrence or continuance of a Default or
Event of Default or other failure of any condition to the making of
Revolving Credit Loans hereunder subsequent to the Effective Date,
unless the Agent shall have received notice from a Lender in
accordance with the provisions of SECTION 5.7(C) prior to a proposed
borrowing date that such Lender will not make available to the Agent
such Lender's ratable portion of the amount to be borrowed on such
date, the Agent may assume that such Lender will make such portion
available to the Agent in accordance with SECTION 2.2(A), and the
Agent may, in reliance upon such assumption, make available to the
Borrower on such date a corresponding amount. If and to the extent
such Lender shall not make such ratable portion available to the
Agent, such Lender and the Borrower severally agree to repay to the
Agent forthwith on demand such corresponding amount (the "Make-Whole
Amount"), together with interest thereon for each day from the date
such amount is made available to the Borrower until the date such
amount is repaid to the Agent at the Effective Interest Rate (if paid
by the Borrower) or the Federal Funds Effective Rate (if paid by such
Lender) or (in either case), if lower, the Maximum Rate as defined in
SECTION 5.1(D). If such Lender shall repay to the Agent such
corresponding amount, the amount so repaid shall constitute such
Lender's Commitment Percentage of the Loan made on such borrowing date
for purposes of this Agreement. The failure of any Lender to make its
Commitment Percentage of any Loan available shall not (without regard
to whether a Borrower shall have returned the amount thereof to the
Agent in accordance with this SECTION 5.7) relieve it or any other
Lender of its obligation, if any, hereunder to make its Commitment
Percentage of such Loan available on such borrowing date, but no
Lender shall be responsible for the failure of any other Lender to
make its Commitment Percentage of such Loan available on the borrowing
date.
(c) Delegation of Authority to Agent. Without limiting the
generality of SECTION 15.1, each Lender expressly authorizes the Agent
to determine on behalf of such Lender (i) any change in advance rates
applicable to the Borrowing Base, so long as such advance rates do not
at any time exceed the rates set forth in the Borrowing Base
definition, (ii) the creation or elimination of any reserves (other
than the Letter of Credit Reserve) against the Revolving Credit
Facility and the Borrowing Base and (iii) whether or not Inventory or
Receivables shall be deemed to constitute Eligible Inventory or
Eligible Receivables. Such authorization may be withdrawn by the
Required Lenders by giving the Agent written notice of such withdrawal
signed by the Required Lenders; PROVIDED, HOWEVER, that unless
otherwise agreed by the Agent, such withdrawal of authorization shall
not become effective until the thirtieth Business Day after receipt of
such notice by the Agent. Thereafter, the Required Lenders shall
jointly instruct the Agent in writing regarding such matters with such
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frequency as the Required Lenders shall jointly determine. Unless and
until the Agent shall have received written notice from a Lender as to
the existence of a Default, an Event of Default or some other
circumstance which would relieve the Lenders of their respective
obligations to make Loans hereunder, which notice shall be in writing
and shall be signed by the such Lender giving the notice and shall
expressly state that such Lender does not intend to make available to
the Agent such Lender's ratable share of Loans made after the
effective date of such notice, the Agent shall be entitled to continue
to make the assumptions described in SECTION 5.6(B). After receipt of
the notice described in the preceding sentence, which shall become
effective on the second Business Day after receipt of such notice by
the Agent unless otherwise agreed by the Agent, the Agent shall be
entitled to make the assumptions described in SECTION 5.6(B) as to any
Loans as to which it has not received a written notice to the contrary
prior to 11:00 a.m. (Atlanta time) on the Business Day next preceding
the day on which the Loan is to be made. The Agent shall not be
required to make any Loan as to which it shall have received notice by
a Lender of such Lender's intention not to make its ratable portion of
such Loan available to the Agent. Any withdrawal of authorization
under this SECTION 5.6(C) shall not affect the validity of any Loans
made prior to the effectiveness thereof.
SECTION 5.7. Settlement Among Lenders.
(a) Term Loans. The Agent shall pay to each Lender its
ratable share (based on the principal amount of the Term Loans owing
to such Lender) of all payments received by the Agent hereunder in
immediately available funds in respect of the principal of, or
interest on, the Term Loans, net of any amounts payable by such Lender
to the Agent, by wire transfer of same day funds, not later than 2:00
p.m. (Atlanta time) on the same day received by the Agent, if received
prior to 1:00 p.m. (Atlanta time), otherwise on the following Business
Day.
(b) Revolving Credit Loans. It is agreed that each Lender's
Net Outstandings are intended by the Lenders to be equal at all times
to such Lender's Commitment Percentage of the aggregate principal
amount of all Revolving Credit Loans outstanding. Notwithstanding such
agreement, the several and not joint obligation of each Lender to fund
Revolving Credit Loans made in accordance with the terms of this
Agreement ratably in accordance with such Lender's Commitment
Percentage for Revolving Credit Loans and each Lender's right to
receive its ratable share of principal payments on Revolving Credit
Loans in accordance with its Commitment Percentage for Revolving
Credit Loans, the Lenders agree that in order to facilitate the
administration of this Agreement and the Loan Documents that
settlement among them may take place on a periodic basis in accordance
with the provisions of this SECTION 5.7.
(c) Settlement Procedures as to Revolving Credit Loans. To
the extent and in the manner hereinafter provided in this SECTION 5.7,
settlement among the Lenders as to Revolving Credit Loans may occur
periodically on Settlement Dates determined from time to time by the
Agent, which may occur before or after the occurrence or during the
continuance of a Default or Event of Default and whether or not all of
the conditions set forth in SECTION 6.2 have been met. On each
Settlement Date payments shall be made by
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or to NationsBank and the other Lenders in the manner provided in this
SECTION 5.7 in accordance with the Settlement Report delivered by the
Agent pursuant to the provisions of this SECTION 5.7 in respect of
such Settlement Date so that as of each Settlement Date, and after
giving effect to the transactions to take place on such Settlement
Date, each Lender's Net Outstandings shall equal such Lender's
Commitment Percentage of the Revolving Credit Loans outstanding.
(i) Selection of Settlement Dates. If the
Agent elects, in its discretion, but subject to the consent
of NationsBank, to settle accounts among the Lenders with
respect to principal amounts of Revolving Credit Loans less
frequently than each Business Day, then the Agent shall
designate periodic Settlement Dates which may occur on any
Business Day after the Effective Date; PROVIDED, HOWEVER,
that the Agent shall designate as a Settlement Date any
Business Day which is an Interest Payment Date; and PROVIDED
FURTHER, that a Settlement Date shall occur at least once
during each seven-day period. The Agent shall designate a
Settlement Date by delivering to each Lender a Settlement
Report not later than 12:00 noon (Atlanta time) on the
proposed Settlement Date, which Settlement Report will be in
the form of EXHIBIT E hereto and shall be with respect to the
period beginning on the next preceding Settlement Date and
ending on such designated Settlement Date.
(ii) Non-Ratable Loans and Payments. Between
Settlement Dates, the Agent shall request and NationsBank may
(but shall not be obligated to) advance to the Borrower out
of NationsBank's own funds, the entire principal amount of
any Revolving Credit Loan requested or deemed requested
pursuant to SECTION 2.2(A) (any such Revolving Credit Loan
being referred to as a "Non-Ratable Loan"). The making of
each Non-Ratable Loan by NationsBank shall be deemed to be a
purchase by NationsBank of a 100% participation in each other
Lender's Commitment Percentage of the amount of such
Non-Ratable Loan. All payments of principal, interest and any
other amount with respect to such Non-Ratable Loan shall be
payable to and received by the Agent for the account of
NationsBank. Upon demand by NationsBank, with notice thereof
to the Agent, each other Lender shall pay to NationsBank, as
the repurchase of such participation, an amount equal to 100%
of such Lender's Commitment Percentage of the principal
amount of such Non-Ratable Loan. Any payments received by the
Agent between Settlement Dates which in accordance with the
terms of this Agreement are to be applied to the reduction of
the outstanding principal balance of Revolving Credit Loans,
shall be paid over to and retained by NationsBank for such
application, and such payment to and retention by NationsBank
shall be deemed, to the extent of each other Lender's
Commitment Percentage of such payment, to be a purchase by
each such other Lender of a participation in the Revolving
Credit Loans (including the repurchase of participations in
Non-Ratable Loans) held by NationsBank. Upon demand by
another Lender, with notice thereof to the Agent, NationsBank
shall pay to the Agent, for the account of such other Lender,
as a repurchase of such participation, an amount equal to
such other Lender's Commitment Percentage of any such amounts
(after application thereof to the repurchase of any
participations of NationsBank in such other Lender's
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Commitment Percentage of any Non-Ratable Loans) paid only to
NationsBank by the Agent.
(iii) Net Decrease in Outstandings. If on any
Settlement Date the increase, if any, in the dollar amount of
any Lender's Net Outstandings which is required to comply
with the first sentence of SECTION 5.7(B) is less than such
Lender's Commitment Percentage of amounts received by the
Agent but paid only to NationsBank since the next preceding
Settlement Date, such Lender and the Agent, in their
respective records, shall apply such Lender's Commitment
Percentage of such amounts to the increase in such Lender's
Net Outstandings, and NationsBank shall pay to the Agent, for
the account of such Lender, the excess allocable to such
Lender.
(iv) Net Increase in Outstandings. If on
any Settlement Date the increase, if any, in the dollar
amount of any Lender's Net Outstandings which is required to
comply with the first sentence of SECTION 5.7(B) exceeds such
Lender's Commitment Percentage of amounts received by the
Agent but paid only to NationsBank since the next preceding
Settlement Date, such Lender and the Agent, in their
respective records, shall apply such Lender's Commitment
Percentage of such amounts to the increase in such Lender's
Net Outstandings, and such Lender shall pay to the Agent, for
the account of NationsBank, any excess.
(v) No Change in Outstandings. If a Settlement
Report indicates that no Revolving Credit Loans have been
made during the period since the next preceding Settlement
Date, then such Lender's Commitment Percentage of any amounts
received by the Agent but paid only to NationsBank shall be
paid by NationsBank to the Agent, for the account of such
Lender. If a Settlement Report indicates that the increase in
the dollar amount of a Lender's Net Outstandings which is
required to comply with the first sentence of SECTION 5.7(B)
is exactly equal to such Lender's Commitment Percentage of
amounts received by the Agent but paid only to NationsBank
since the next preceding Settlement Date, such Lender and the
Agent, in their respective records, shall apply such Lender's
Commitment Percentage of such amounts to the increase in such
Lender's Net Outstandings.
(vi) Return of Payments. If any amounts received
by NationsBank in respect of the Secured Obligations are
later required to be returned or repaid by NationsBank to the
Borrower or any other obligor or their respective
representatives or successors in interest, whether by court
order, settlement or otherwise, in excess of the
NationsBank's Commitment Percentage of all such amounts
required to be returned by all Lenders, each other Lender
shall, upon demand by NationsBank with notice to the Agent,
pay to the Agent for the account of NationsBank, an amount
equal to the excess of such Lender's Commitment Percentage of
all such amounts required to be returned by all Lenders over
the amount, if any, returned directly by such Lender.
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(vii) Payments to Agent, Lenders. (A) Payment by any
Lender to the Agent shall be made not later than 1:00 p.m.
(Atlanta time) on the Business Day such payment is due,
PROVIDED that if such payment is due on demand by another
Lender, such demand is made on the paying Lender not later
than 10:00 a.m. (Atlanta time) on such Business Day. Payment
by the Agent to any Lender shall be made by wire transfer,
promptly following the Agent's receipt of funds for the
account of such Lender and in the type of funds received by
the Agent, PROVIDED that if the Agent receives such funds at
or prior to 1:00 p.m. (Atlanta time), the Agent shall pay
such funds to such Lender by 2:00 p.m. (Atlanta time) on such
Business Day. If a demand for payment is made after the
applicable time set forth above, the payment due shall be
made by 2:00 p.m. (Atlanta time) on the first Business Day
following the date of such demand.
(A) If a Lender shall, at any time, fail to
make any payment to the Agent required hereunder,
the Agent may, but shall not be required to, retain
payments that would otherwise be made to such Lender
hereunder and apply such payments to such Lender's
defaulted obligations hereunder, at such time, and
in such order, as the Agent may elect in its sole
discretion.
(B) With respect to the payment of any
funds under this SECTION 5.7(B), whether from the
Agent to a Lender or from a Lender to the Agent, the
party failing to make full payment when due pursuant
to the terms hereof shall, upon demand by the other
party, pay such amount together with interest on
such amount at the Federal Funds Effective Rate.
(d) Settlement of Other Secured Obligations. All other
amounts received by the Agent on account of, or applied by the Agent
to the payment of, any Secured Obligation owed to the Lenders
(including, without limitation, fees payable to the Lenders pursuant
to SECTIONS 5.2(C), (D), and (E) and proceeds from the sale of, or
other realization upon, all or any part of the Collateral following an
Event of Default) that are received by the Agent on or prior to 1:00
p.m. (Atlanta time) on a Business Day will be paid by the Agent to
each Lender on the same Business Day, and any such amounts that are
received by the Agent after 1:00 p.m. (Atlanta time) will be paid by
the Agent to each Lender on the following Business Day. Unless
otherwise stated herein, the Agent shall distribute fees payable to
the Lenders pursuant to SECTIONS 5.2(C) AND (D) ratably to the Lenders
based on each Lender's Commitment Percentage as described in such
Sections, and shall distribute proceeds from the sale of, or other
realization upon, all or any part of the Collateral following an Event
of Default ratably to the Lenders based on the amount of the Secured
Obligations then owing to each Lender.
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SECTION 5.8. Mandatory Prepayments.
(a) Prepayments from Asset Dispositions. Immediately upon
receipt by the Borrower or any of its Subsidiaries of the Net Proceeds
of any Asset Disposition, the Borrower shall apply such Net Proceeds
in prepayment of the Loans as provided in SECTION 5.8(C); PROVIDED,
HOWEVER, that the Borrower shall not be required to make such
prepayment to the extent that the Net Proceeds from Asset Dispositions
during any fiscal year of the Borrower do not exceed, in the
aggregate, $1 million. Concurrently with the making of any such
payment, the Borrower shall deliver to Agent a certificate of the
Borrower's Financial Officer demonstrating the calculations of the
amount required to be paid. Notwithstanding the foregoing, to the
extent that the gross proceeds from Asset Dispositions during any
fiscal year of the Borrower do not exceed, in the aggregate, $2
million, if the Borrower reasonably expects such proceeds to be
reinvested within six months of receipt in productive assets of a kind
then used or useable in the business of the Borrower and that are not
subject to any Lien other than the Security Interest in favor of the
Agent, for the benefit of the Lenders, than (a) to the extent such
proceeds do not exceed the balance from time to time of the Revolving
Credit Loan, such proceeds shall be applied to the repayment of the
outstanding balance of the Revolving Credit Loans and the Agent shall,
until such time as the reinvestment of such proceeds, establish a
reserve against the Borrowing Base in the amount of the proceeds so
applied and (b)to the extent such proceeds exceed the balance from
time to time of the Revolving Credit Loans, the Borrower shall deposit
such proceeds with the Agent to be held as Cash Collateral. Upon the
Borrower's reinvestment of such proceeds as described above, the Agent
shall (provided no Event of Default exists) release its security
interest in such Cash Collateral in respect of the reinvested funds
and shall eliminate the reserve against the Borrowing Base. To the
extent that the Borrower fails to reinvest such proceeds within six
months as provided above, the Borrower authorizes and directs the
Agent to eliminate such reserve, to apply the amount of the Cash
Collateral in respect of the unreinvested amount to the prepayment of
the Loans as provided in SECTION 5.8(C), to make Revolving Credit
Loans in an amount equal to the reserved amount that is not reinvested
and to apply the proceeds of such Revolving Credit Loans in prepayment
of the Loans as provided in SECTION 5.8(C).
(b) Prepayments from Equity Offerings. In the event that at
any time after the Effective Date, the Borrower issues capital stock
or other securities, other than as proceeds of the IPO, or receives an
additional capital contribution in respect of existing capital stock
or other securities, no later than the third Business Day following
the date of receipt of the proceeds from such issuance, the Borrower
shall apply such proceeds, net of underwriting discounts and
commissions and other reasonable costs associated therewith, in
prepayment of the Loans as provided in SECTION 5.8(C).
(c) Application of Proceeds of Prepayments. All prepayments
pursuant to this SECTION 5.8 shall be applied in the manner described
in SECTION 4.6, with any excess to be deposited with the Agent to be
held as Cash Collateral for the Secured Obligations and applied by the
Agent from time to time to outstanding Revolving Credit Loans promptly
upon the making of such Revolving Credit Loans or, after the
Termination Date, to any of the Secured Obligations in such manner as
the Agent shall determine in its sole discretion.
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SECTION 5.9. Early Termination Fee. If the Borrower prepays
the Loans in whole or in part prior to August 31, 2000, for any reason other
than in connection with the IPO or another equity offering under SECTION
5.8(B), the Borrower shall pay to the Agent for the ratable benefit of the
Lenders on such date of termination (in accordance with their Commitment
Percentages), as liquidated damages and compensation for the costs of making
funds available to the Borrower under this Agreement, and not as a penalty, an
amount equal to the percentage amount specified below for the date in which
such prepayment is made TIMES, in the case of a prepayment in part, the
principal amount of such prepayment or, in the case of a prepayment in full,
the sum of (a) the aggregate outstanding principal amount of the Term Loans
PLUS (b) the Revolving Credit Facility then in effect:
<TABLE>
<CAPTION>
Date Percent
---- -------
<S> <C>
On or before August 27, 1998 2%
August 28, 1998 to August 27, 1999 1%
</TABLE>
For the purposes of this SECTION 5.9,
(a) the Revolving Credit Loans shall be deemed to have been
prepaid in part only on any day that the Borrower voluntarily reduces
the Revolving Credit Facility; and
(b) the amount of such deemed prepayment shall be in the case
of a deemed prepayment under CLAUSE (A) above, the amount by which the
Borrower voluntarily reduces the Revolving Credit Facility.
SECTION 5.10. Aggregate Amount of Loans and Letter of Credit
Obligations. The Agent and the Lenders shall not be required to make any Loan
or extend any Letter of Credit or IRB L/C that would cause the aggregate
principal amount of all Loans, Letter of Credit Obligations and Secured
Obligations in respect of IRB L/Cs outstanding, to exceed $126.35 million in
the aggregate.
SECTION 5.11. Funds Transfer Services.
(a) The Borrower acknowledges that the Lender has made available to it
as ANNEX B hereto a description of security procedures regarding funds
transfers executed by the Lender or an affiliate bank at the request of the
Borrower (the Security Procedures). The Borrower and the lender agree that the
Security Procedures are commercially reasonable. The Borrower further
acknowledges that the full scope of the Security Procedures which the Lender or
such affiliate bank offers and strongly recommends for funds transfers is
available only if the Borrower communicates directly with the Lender or such
affiliate bank as applicable in accordance with said procedures. If the
Borrower attempts to communicate by any other method or otherwise not in
accordance with the Security Procedures, the Lender or such affiliate bank, as
applicable, shall not be required to execute such instructions, but if the
Lender or such affiliate bank, as applicable, does so, the Borrower will be
deemed to have refused the Security Procedures that the Lender or such
affiliate bank as applicable offers and strongly recommends, and the Borrower
will be bound by any funds transfer, whether or not authorized, which is issued
in the Borrower's name and accepted by the Lender or such affiliate bank, as
applicable, in good faith. The Lender or such affiliate bank, as applicable,
may modify the Security Procedures at such time or times and in such manner as
the
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Lender or such affiliate bank, as applicable, in its sole discretion, deems
appropriate to meet prevailing standards of good banking practice. By
continuing to use the Lender's or such affiliate bank's, as applicable, wire
transfer services after receipt of any modification of the Security Procedures,
the Borrower agrees that the Security Procedures, as modified, are likewise
commercially reasonable. The Borrower further agrees to establish and maintain
procedures to safeguard the Security Procedures and any information related
thereto.
(b) The Lender or such affiliate bank, as applicable, will generally
use the Fedwire funds transfer system for domestic funds transfers, and the
funds transfer system operated by the Society for Worldwide International
Financial Telecommunication (SWIFT) for international funds transfers.
International funds transfers may also be initiated through the Clearing House
InterBank Payment System (CHIPs) or international cable. However, the Lender or
such affiliate bank, as applicable, may use any means and routes that the
Lender or such affiliate bank, as applicable, in its sole discretion, may
consider suitable for the transmission of funds. Each payment order, or
cancellation thereof, carried out through a funds transfer system or a
clearinghouse will be governed by all applicable funds transfer system rules
and clearing house rules and clearing arrangements, whether or not the Lender
or such affiliate bank, as applicable, is a member of the system, clearinghouse
or arrangement and the Borrower acknowledges that the Lender's of such
affiliate bank's, as applicable, right to reverse, adjust, stop payment or
delay posting of an executed payment order is subject to the laws, regulations,
rules, circulars and arrangements described herein.
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ARTICLE 6
CONDITIONS PRECEDENT
SECTION 6.1. Conditions Precedent to Effectiveness.
Notwithstanding any other provision of this Agreement, this Agreement will not
be effective and no Lender shall have any obligation to make or maintain any
Advance or Loan or participation in any Letter of Credit (or IRB L/C) until the
fulfillment of each of the following conditions:
(a) Fees. Borrower shall have paid all of the fees payable on
the Effective Date referred to herein (or payable under the Existing
Loan Agreement in connection with the termination thereof) and all
additional fees due in accordance with the terms of this Agreement.
(b) Capitalization. Borrower shall have a Net Worth of
not less than $29 million.
(c) Security Interests. The Agent shall have received
satisfactory evidence that the Agent (for the benefit of Lenders) has
a valid and perfected first priority security interest as of such date
in all of the Collateral, subject only to Permitted Liens.
(d) Closing Documents. The Agent shall have received
each of the following documents, all of which shall be satisfactory in
form and substance to the Agent and its special counsel and to the
Lenders:
(i) certified copies of the articles or
certificate of incorporation and bylaws of the Borrower as in
effect on the Effective Date,
(ii) certified copies of all corporate action,
including shareholder approval, if necessary, taken by the
Borrower to authorize the execution, delivery and performance
of this Agreement, the Loan Documents, and the borrowings
under this Agreement,
(iii) certificates of incumbency and specimen
signatures with respect to each of the officers of the
Borrower authorized to execute and deliver this Agreement and
the Loan Documents on behalf of the Borrower or other Person
executing any document, certificate or instrument to be
delivered in connection with this Agreement or the Loan
Documents and, in the case of the Borrower, to request
borrowings under this Agreement,
(iv) a certificate evidencing the good standing
of the Borrower in the jurisdiction of its incorporation and
in each other jurisdiction in which it is required to be
qualified as a foreign corporation to transact its business
as presently conducted,
(v) copies of all financial statements referred
to in SECTION 7.1(O) and meeting the requirements thereof,
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(vi) a signed opinion of counsel for the
Borrower, which counsel shall be satisfactory to Lenders,
substantially in the form of EXHIBIT D, and of such local
counsel for the Borrower, or for the Agent and the Lenders,
opining as to such matters in connection with the
transactions contemplated by this Agreement, as the Agent or
its special counsel shall reasonably request,
(vii) any additional Financing Statements
requested by the Agent, duly executed and delivered by the
Borrower and acknowledgment copies evidencing the filing of
such Financing Statements in each jurisdiction where such
filing may be necessary or appropriate to perfect the
Security Interest,
(viii) a certification from the principal officers
\ of the Borrower as to such factual matters as shall be
requested by the Agent,
(ix) certificates or binders of insurance
relating to each of the policies of insurance covering any of
the Collateral together with loss payable clauses which
comply with the terms of SECTION 9.8,
(x) a certificate of the President or a
Financial Officer of the Borrower stating that, to the best
of his knowledge and based on an examination sufficient to
enable him to make an informed statement,
(A) all of the representations and
warranties made or deemed to be made under this
Agreement are true and correct as of the Effective
Date, after giving effect to the Revolving Credit
Loan and the Term Loans, if any, to be made at such
time and the application of the proceeds thereof,
and
(B) no Default or Event of Default
exists,
(xi) a Borrowing Base Certificate, a Schedule of
Inventory and a Schedule of Receivables, prepared as of (or
within 30 days prior to) the Effective Date,
(xii) copies of each Mortgage Modification and
additional Mortgage duly executed and delivered by the
Borrower and evidencing the recording of each such instrument
in the appropriate jurisdiction for the recording thereof on
the Real Estate subject thereto or, at the option of the
Agent, in proper form for recording in such jurisdiction,
(xiii) one or more fully paid mortgagee title
insurance policies or, at the option of the Agent,
unconditional commitments for the issuance thereof with all
requirements and conditions to the issuance of the final
policy deleted or marked satisfied, issued by a title
insurance company satisfactory to the Agent, each in an
amount equal to not less than the fair market value of the
Real Estate subject to the Mortgage insured thereby, insuring
that such Mortgage (including any Mortgage as modified)
creates a valid first lien on, and security title to, all
Real Estate described
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therein, with no survey exceptions and no other exceptions
which the Agent shall not have approved in writing,
(xiv) such materials and information concerning
the Real Estate as the Agent may require, including, without
limitation, (A)current and accurate surveys satisfactory to
the Agent of all of the owned Real Estate, certified to the
Agent and showing the location of the 100-year and 50-year
flood plains thereon, (B) zoning letters as to the zoning
status of all of the owned Real Estate, (C) certificates of
occupancy covering all of the Real Estate, (D) owner's
affidavits as to such matters relating to the owned Real
Estate as the Agent may request, and (E) such other
requirements as are set forth in the Construction Loan
Agreements,
(xv) landlord's or mortgagee's waiver and
consent agreements duly executed on behalf of each landlord
or mortgagee, as the case may be, of Real Estate and any
other real property on which any Collateral is located,
(xvi) a letter, conforming to the requirements of
SECTION 10.8, from the Borrower to the Agent requesting any
Revolving Credit Loans or Term Loans to be made on the
Effective Date and specifying the method of disbursement,
(xvii) copies of each of the other Loan Documents
duly executed by the parties thereto, together with evidence
satisfactory to the Agent of the due authorization and
binding effect of each such Loan Document on such party, and
(xviii) such other documents and instruments as the
Agent or any Lender may reasonably request.
(e) Notes. Each Lender shall have received an Amended and
Restated Revolving Credit Note and an Amended, Restated and
Consolidated Term Note, each duly executed and delivered by the
Borrower, complying with the terms of SECTIONS 2.4 and 4.4, as
applicable.
(f) Subordination Agreement. The Agent shall have received a
confirmation of the Subordination Agreement, duly executed and
delivered by the Borrower and the subordinated creditor.
(g) Other Security Documents. The Agent shall have received
each other Security Document, duly executed and delivered by the
Borrower.
(h) Availability. The Agent shall be provided with evidence
satisfactory to it, confirmed by a certificate of a Financial Officer
of the Borrower, that as of the Effective Date the Availability, after
giving effect to the reasonably expected amount of the Letter of
Credit Reserve in effect 60 days after the Effective Date, is not less
than $100,000.
(i) No Injunctions, Etc. No action, proceeding,
investigation, regulation or legislation shall have been instituted,
threatened or proposed before any court, governmental agency or
legislative body to enjoin, restrain, or prohibit, or to obtain
damages in respect
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of, or which is related to or arises out of this Agreement or the
consummation of the transactions contemplated hereby or which, in the
Lenders' reasonable discretion, would make it inadvisable to
consummate the transactions contemplated by this Agreement.
(j) Material Adverse Change. As of the Effective Date, there
shall not have occurred any change which is materially adverse, in the
Lenders' sole discretion, to the assets, liabilities, businesses,
operations, condition (financial or otherwise) or prospects of the
Borrower from those presented by the unaudited financial statements of
the Borrower described in SECTION 7.1(O).
(k) Release of Security Interests. The Agent shall have
received evidence satisfactory to it of the release and termination of
all Liens other than Permitted Liens.
SECTION 6.2. All Loans; Letters of Credit. No Lender shall
have any obligation to make any Loan hereunder, and NationsBank shall
not have any obligation to issue any Letter of Credit or IRB L/C
hereunder, unless, at the time of making of such Loan (whether the
initial Revolving Credit Loan, a Term Loan, an Interim Construction
Loan or any subsequent Loan) or the issuance of such Letter of Credit
or IRB L/C:
(a) all of the representations and warranties made or deemed
to be made under this Agreement shall be true and correct at such time
both with and without giving effect to the Loan to be made at such
time and the application of the proceeds thereof,
(b) the corporate actions of the Borrower referred to in
SECTION 6.1 shall remain in full force and effect and the incumbency
of officers shall be as stated in the certificates of incumbency
delivered pursuant to SECTION 6.1 or as subsequently modified and
reflected in a certificate of incumbency delivered to the Agent,
(c) no Event of Default shall exist, and
(d) such Loan or Letter of Credit shall not cause the
aggregate principal amount of all Loans and Letter of Credit
Obligations outstanding to exceed $126.35 million in the aggregate.
Each request or deemed request for any borrowing or Letter of Credit hereunder
shall be deemed to be a certification by the Borrower to the Agent and the
Lenders as to the matters set forth in SECTION 6.2(A) and (B), and the Agent
may, without waiving either condition, consider the conditions specified in
SECTION 6.2(A) and (B) fulfilled and a representation by the Borrower to such
effect made, if no written notice to the contrary is received by the Agent
prior to the making of the Loan then to be made or the issuance of the Letter
of Credit then to be issued.
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ARTICLE 7
REPRESENTATIONS AND WARRANTIES OF BORROWER
SECTION 7.1. Representations and Warranties. The Borrower
represents and warrants to the Agent and to the Lenders as follows:
(a) Organization; Power; Qualification. The Borrower and each
of its Subsidiaries is a corporation, duly organized, validly existing
and in good standing under the laws of its jurisdiction of
incorporation, having the power and authority to own its properties
and to carry on its business as now being and hereafter proposed to be
conducted and is duly qualified and authorized to do business in each
jurisdiction in which the character of its properties or the nature of
its business requires such qualification or authorization. The
jurisdictions in which each of the Borrower and each of its
Subsidiaries is qualified to do business as a foreign corporation are
listed on SCHEDULE 7.1(A).
(b) Capitalization. The outstanding capital stock of the
Borrower has been duly and validly issued and is fully paid and
nonassessable, and the number and owners of such shares of capital
stock of the Borrower are set forth on SCHEDULE 7.1(B). The issuance
and sale of the Borrower's capital stock have been registered or
qualified under applicable federal and state securities laws or are
exempt therefrom.
(c) Subordinated Indebtedness. The Borrower has the corporate
power and authority to incur the Subordinated Indebtedness and to
issue the Subordinated Note. The issuance and sale of the Subordinated
Note have been registered or qualified under applicable federal and
state securities laws or are exempt therefrom. The Subordinated Note
is the legally valid and binding obligations of the Borrower
enforceable against the Borrower in accordance with its terms
(including those pertaining to subordination). The Borrower has
delivered to the Agent a complete and correct copy of all documents
evidencing or relating to the Subordinated Indebtedness, and each of
the representations and warranties given by the Borrower therein is
true and correct in all material respects. The subordination
provisions of the Subordination Agreement will be enforceable against
the holder of the Subordinated Note. All of the Secured Obligations
constitute senior Indebtedness entitled to the benefits of
subordination created by the Subordination Agreement.
(d) Subsidiaries. SCHEDULE 7.1(D) correctly sets forth the
name of each Subsidiary of the Borrower, its jurisdiction of
incorporation, the name of its immediate parent or parents, and the
percentage of its issued and outstanding securities owned by the
Borrower or any other Subsidiary of the Borrower and indicating
whether such Subsidiary is a Consolidated Subsidiary. Except as set
forth on SCHEDULE 7.1(D),
(i) no Subsidiary of the Borrower has issued any
securities convertible into shares of such Subsidiary's
capital stock or any options, warrants or other rights to
acquire any shares or securities convertible into such
shares,
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(ii) the outstanding stock and securities of each
Subsidiary of the Borrower are owned by the Borrower or a
Wholly-Owned Subsidiary of the Borrower, or by the Borrower
and one or more of its Wholly-Owned Subsidiaries, free and
clear of all Liens, warrants, options and rights of others of
any kind whatsoever, and
(iii) the Borrower has no Subsidiaries.
The outstanding capital stock of each Subsidiary of the Borrower has
been duly and validly issued and is fully paid and nonassessable by
the issuer, and the number and owners of the shares of such capital
stock are set forth on SCHEDULE 7.1(D).
(e) Authorization of Agreement, Notes, Loan Documents and
Borrowing. The Borrower has the right and power, and has taken all
necessary action to authorize it, to execute, deliver and perform this
Agreement and each of the Loan Documents in accordance with their
respective terms. This Agreement and each of the Loan Documents have
been duly executed and delivered by the duly authorized officers of
the Borrower and each is, or each when executed and delivered in
accordance with this Agreement will be, a legal, valid and binding
obligation of the Borrower, enforceable in accordance with its terms.
(f) Compliance of Agreement, Notes, Loan Documents and
Borrowing with Laws, Etc. Except as set forth on SCHEDULE 7.1(F), the
execution, delivery and performance of this Agreement and each of the
Loan Documents in accordance with their respective terms and the
borrowings hereunder do not and will not, by the passage of time, the
giving of notice or otherwise,
(i) require any Governmental Approval or violate
any Applicable Law relating to the Borrower or any of its
Subsidiaries,
(ii) conflict with, result in a breach of or
constitute a default under the articles or certificate of
incorporation or by-laws of the Borrower or any of its
Subsidiaries,
(iii) conflict with, result in a breach of or
constitute a default under any material provisions of any
indenture, agreement or other instrument to which the
Borrower or any of its Subsidiaries is a party or by which
the Borrower, any of its Subsidiaries or any of the
Borrower's or such Subsidiaries' property may be bound or any
Governmental Approval relating to the Borrower or any of its
Subsidiaries, or
(iv) result in or require the creation or imposition
of any Lien upon or with respect to any property now owned or
hereafter acquired by the Borrower other than the Security
Interest.
(g) Business. The Borrower is engaged principally in the
business of manufacturing furniture.
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(h) Compliance with Law; Governmental Approvals.
(i) Except as set forth in SCHEDULE 7.1(H), the Borrower and
each of its Subsidiaries
(A) has all Governmental Approvals, including
permits relating to federal, state and local Environmental
Laws, ordinances and regulations, required by any Applicable
Law for it to conduct its business, each of which is in full
force and effect, is final and not subject to review on
appeal and is not the subject of any pending or, to the
knowledge of the Borrower, threatened attack by direct or
collateral proceeding, and
(B) is in compliance with each Governmental Approval
applicable to it and in compliance with all other Applicable
Laws relating to it, including, without being limited to, all
Environmental Laws and all occupational health and safety
laws applicable to the Borrower, any of its Subsidiaries or
their respective properties,
except for instances of noncompliance which would not, singly or in
the aggregate, cause a Default or Event of Default or have a
Materially Adverse Effect on the Borrower or any of its Subsidiaries
and in respect of which reserves in respect of the Borrower's or such
Subsidiary's reasonably anticipated liability therefor have been
established on the books of the Borrower or such Subsidiary, as
applicable.
(ii) Without limiting the generality of the above, except as
disclosed on a report delivered pursuant to SECTION 6.1(F)(XIX) or
(XX) or with respect to matters which could not reasonably be expected
to have, singly or in the aggregate, a Materially Adverse Effect on
the Borrower or any of its Subsidiaries:
(A) the operations of the Borrower and each of its
Subsidiaries comply in all material respects with all
applicable environmental, health and safety requirements of
Applicable Law;
(B) the Borrower and each of its Subsidiaries has
obtained all environmental, health and safety permits
necessary for its operation, and all such permits are in good
standing and the Borrower and each of its Subsidiaries is in
compliance in all material respects with all terms and
conditions of such permits;
(C) neither the Borrower nor any of its Subsidiaries
nor any of their respective present or past property or
operations are subject to any order from or agreement with
any public authority or private party respecting (x) any
environmental, health or safety requirements of Applicable
Law, (y) any Remedial Action, or (z) any liabilities and
costs arising from the Release or threatened Release of a
Contaminant into the environment;
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(D) none of the operations of the Borrower
or of any of its Subsidiaries is subject to any
judicial or administrative proceeding alleging a
violation of any environmental, health or safety
requirement of Applicable Law;
(E) none of the present nor past operations
of the Borrower or any of its Subsidiaries is the
subject of any investigation by any public authority
evaluating whether any Remedial Action is needed to
respond to a Release or threatened Release of a
Contaminant into the environment;
(F) neither the Borrower nor any of its
Subsidiaries has filed any notice under any
requirement of Applicable Law indicating past or
present treatment, storage or disposal of a
hazardous waste, as that term is defined under 40
CFR Part 261 or any state equivalent;
(G) neither the Borrower nor any of its
Subsidiaries has filed any notice under any
requirement of Applicable Law reporting a Release of
a Contaminant into the environment;
(H) Except in compliance in all material
respects with applicable Environmental Laws, during
the course of the Borrower's or any of its
Subsidiaries' ownership of or operations on the Real
Estate, there have been no (1) generation,
treatment, recycling, storage or disposal of
hazardous waste, as that term is defined under 40
CFR Part 261 or any state equivalent, (2) use of
underground storage tanks or surface impoundments,
(3) use of asbestos-containing materials, or (4) use
of polychlorinated biphenyls (PCB) used in hydraulic
oils, electrical transformers or other equipment;
(I) neither the Borrower nor any of its
Subsidiaries has entered into any negotiations or
agreements with any Person (including, without
limitation, any prior owner of any of the Real
Estate or other property of the Borrower or any of
its Subsidiaries) relating to any Remedial Action or
environmental related claim;
(J) neither the Borrower nor any of its
Subsidiaries has received any notice or claim to the
effect that it is or may be liable to any Person as
a result of the Release or threatened Release of a
Contaminant into the environment;
(K) neither the Borrower nor any of its
Subsidiaries has any material contingent liability
in connection with any Release or threatened Release
of any Contaminant into the environment;
(L) no Environmental Lien has attached to
any of the Real Estate or other property of the
Borrower or of any of its Subsidiaries;
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(M) the presence and condition of all
asbestos-containing material which is on or part of
the Real Estate (excluding any raw materials used in
the manufacture of products or products themselves)
do not violate in any material respect any currently
applicable requirement of Applicable Law; and
(N) neither the Borrower nor any of its
Subsidiaries manufactures, distributes or sells, and
has never manufactured, distributed or sold,
products which contain asbestos-containing material.
(iii) The Borrower has notified the Lender of the
receipt by it or by any of its Subsidiaries of any notice of
a material violation of any Environmental Laws and
occupational health and safety laws applicable to the
Borrower, any of its Subsidiaries or any of their respective
properties.
(i) Title to Properties. Except as set forth in SCHEDULE
7.1(I), the Borrower and each of its Subsidiaries has valid and legal
title to or leasehold interest in all personal property, Real Estate
owned and other assets used in its business.
(j) Liens. Except as set forth in SCHEDULE 7.1(J), none of
the properties and assets of the Borrower or any Subsidiary of the
Borrower is subject to any Lien, except Permitted Liens. Other than
the Financing Statements, no financing statement under the Uniform
Commercial Code of any State or other instrument evidencing a Lien
which names the Borrower or any Subsidiary of the Borrower as debtor
has been filed (and has not been terminated) in any State or other
jurisdiction, and neither the Borrower nor any Subsidiary of the
Borrower has signed any such financing statement or other instrument
or any security agreement authorizing any secured party thereunder to
file any such financing statement or instrument, except to perfect
those Liens listed on SCHEDULE 7.1(J). No financing statement under
the Uniform Commercial Code of any State or other instrument
evidencing a Lien which names the Seller as debtor and covers any of
the Acquired Assets has been filed (and has not been terminated) in
any State or other jurisdiction.
(k) Indebtedness and Guaranties. SCHEDULE 7.1(K) is a
complete and correct listing of all (i)Debt, and (ii)Guaranties of
each of the Borrower and each of its Subsidiaries. Each of the
Borrower and its Subsidiaries has performed and is in compliance with
all of the terms of such Debt and Guaranties and all instruments and
agreements relating thereto, and no default or event of default, or
event or condition which with notice or lapse of time or both would
constitute such a default or event of default, exists with respect to
any such Debt or Guaranty.
(l) Litigation. Except as set forth on SCHEDULE 7.1(L), there
are no actions, suits or proceedings pending (nor, to the knowledge of
the Borrower, are there any actions, suits or proceedings threatened,
or any reasonable basis therefor) against or in any other way relating
to or affecting the Borrower or such Subsidiaries or any of the
Acquired Assets or any of the Borrower's or any of its Subsidiaries'
other properties in any court or before any arbitrator of any kind or
before or by any governmental body, except actions, suits or
proceedings of the character normally incident to the kind of business
conducted by the
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Borrower or any of its Subsidiaries which, if adversely determined,
would not singly or in the aggregate have a Materially Adverse Effect
on the Borrower or such Subsidiary, and there are no strikes or
walkouts in progress, pending or contemplated relating to any labor
contracts to which the Borrower or any of its Subsidiaries is a party,
relating to any labor contracts being negotiated, or otherwise.
(m) Tax Returns and Payments. Except as set forth on SCHEDULE
7.1(M), all United States federal, state and local as well as foreign
national, provincial and local and other tax returns of the Borrower
and each of its Subsidiaries required by Applicable Law to be filed
have been duly filed, and all United States federal, state and local
and foreign national, provincial and local and other taxes,
assessments and other governmental charges or levies upon the Borrower
and each of its Subsidiaries and the Borrower's and any of its
Subsidiaries' property, income, profits and assets which are due and
payable have been paid, except any such nonpayment which is at the
time permitted under SECTION 10.6. The charges, accruals and reserves
on the books of the Borrower and each of its Subsidiaries in respect
of United States federal, state and local and foreign national,
provincial and local taxes for all fiscal years and portions thereof
since the organization of the Borrower are in the judgment of the
Borrower adequate, and the Borrower knows of no reason to anticipate
any additional assessments for any of such years which, singly or in
the aggregate, might have a Materially Adverse Effect on the Borrower.
(n) Burdensome Provisions. Neither the Borrower nor any of
its Subsidiaries is a party to any indenture, agreement, lease or
other instrument, or subject to any charter or corporate restriction,
Governmental Approval or Applicable Law compliance with the terms of
which might have a Materially Adverse Effect on the Borrower or any of
its Subsidiaries.
(o) Financial Statements.
(i) The Borrower has furnished to the Agent and the
Lenders copies of its audited balance sheet as of May 3,
1997, and the related audited statements of income and cash
flow for the fiscal year of the Borrower then ended, and its
interim unaudited balance sheet as of [July 31,] 1997, and
the related statement of income for the 13-week period then
ended, which financial statements were prepared in accordance
with GAAP and present fairly in all material respects the
financial position of the Borrower as at May 3, 1997, and
[July 31,] 1997 and the results of operations of the Borrower
for the fiscal year then ended and the 13-week period then
ended, respectively.
(ii) The Borrower has furnished to the Agent and the
Lenders copies of the Projections. The Projections have been
be prepared by the Borrower in light of the past operations
of the business of the Borrower and its Subsidiaries and
represent as of the respective dates thereof the good faith
opinion of the Borrower and its senior management concerning
the most probable course of business of the Borrower and its
Subsidiaries.
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(iii) Except as disclosed or reflected in the
financial statements described in CLAUSE (I) above, the
Borrower does not have any material liabilities, contingent
or otherwise, and there were no material unrealized or
anticipated losses of the Borrower.
(p) Adverse Change. Since the date of the last financial
statements of the Borrower delivered to the Agent pursuant to SECTION
7.1(O)(I), after giving effect to the transactions reflected in the
Pro Forma,
(i) no material adverse change has occurred in
the business, assets, liabilities, financial condition,
results of operations or business prospects of the Borrower,
and
(ii) no event has occurred or failed to occur which
has had, or may have, singly or in the aggregate, a
Materially Adverse Effect on the Borrower.
(q) ERISA.
(i) Neither the Borrower nor any Related Company
maintains or contributes to any Benefit Plan other than those
listed on SCHEDULE 7.1(Q).
(ii) No Benefit Plan has been terminated or
partially terminated, and no Multiemployer Plan is insolvent
or in reorganization, nor have any proceedings been
instituted to terminate any Benefit Plan or to reorganize any
Multiemployer Plan.
(iii) Neither the Borrower nor any Related Company
has withdrawn from any Benefit Plan or Multiemployer Plan,
nor has a condition occurred which if continued would result
in a withdrawal.
(iv) Neither the Borrower nor any Related Company
has incurred any withdrawal liability, including contingent
withdrawal liability, to any Multiemployer Plan pursuant to
Title IV of ERISA.
(v) Neither the Borrower nor any Related Company
has incurred any liability to the PBGC other than for
required insurance premiums which have been paid when due.
(vi) No Reportable Event has occurred with respect
to a Plan.
(vii) No Benefit Plan has an "accumulated funding
deficiency" (whether or not waived) as defined in Section 302
of ERISA or in Section 412 of the Internal Revenue Code.
(viii) Each Plan is in substantial compliance with
ERISA, and neither the Borrower nor any Related Company has
received any communication from a governmental agency
asserting that a Plan is not in compliance with ERISA.
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(ix) Each Plan which is intended to be a qualified
Plan has been determined by the IRS to be qualified under
Section 401(a) of the Internal Revenue Code as currently in
effect or will be submitted to the IRS for such determination
prior to the end of the remedial amendment period under
Section 401(b) of the Internal Revenue Code and the
regulations promulgated thereunder and neither the Borrower
nor any Related Company knows or has reason to know why each
such Plan should not continue to be so qualified, and each
trust related to such Plan that has been submitted to the IRS
for determination of exempt status has been determined to be
exempt from federal income tax under Section 501(a) of the
Internal Revenue Code or will be submitted to the IRS for a
determination of exempt status.
(x) Except as provided on SCHEDULE 7.1(Q), neither
the Borrower nor any Related Company maintains or contributes
to any employer welfare benefit plan within the meaning of
Section 3(l) of ERISA which provides benefits to employees
after termination of employment other than as required by
Section 601 of ERISA.
(xi) Schedule B to the most recent annual report
filed with the IRS with respect to each Benefit Plan and
furnished to the Lender is complete and accurate. Since the
date of each such Schedule B, there has been no adverse
change in funding status or financial condition of the
Benefit Plan relating to such Schedule B.
(xii) Neither the Borrower nor any Related Company
has failed to make a required installment under Subsection
(m) of Section 412 of the Internal Revenue Code or any other
payment required under Section 412 of the Internal Revenue
Code on or before the due date for such installment or other
payment.
(xiii) Neither the Borrower nor any Related Company
is required to provide security to a Benefit Plan under
Section 401(a)(29) of the Internal Revenue Code due to a
Benefit Plan amendment that results in an increase in current
liability for the plan year.
(xiv) Neither the Borrower, nor any Related Company,
nor any other "party-in-interest" or "disqualified person"
has engaged in a nonexempt "prohibited transaction," as such
terms are defined in Section 4975 of the Internal Revenue
Code and Section 406 of ERISA, in connection with any Plan or
has taken or failed to take any action which would constitute
or result in a Termination Event.
(xv) Neither the Borrower nor any Related Company
has failed to comply with the health care continuation
coverage requirements of Section 4980B of the Internal
Revenue Code in respect of employees and former employees of
such Borrower or such Related Company and their dependents
and beneficiaries which alone or in the aggregate would
subject such Borrower or such Related Company to any material
liability.
(xvi) Neither the Borrower nor any Related Company
has (i) failed to make a required contribution or payment to
a Multiemployer Plan or (ii) made a complete
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or partial withdrawal under Sections 4203 or 4205 of ERISA
from a Multiemployer Plan. Except as provided on SCHEDULE
7.1(Q), to the best knowledge of the Borrower after due
inquiry, neither the Borrower nor any Related Company shall
have any obligation to (A) make contributions to any
Multiemployer Plan on or after the Effective Date, or (B) pay
withdrawal liability to any Multiemployer Plan in an amount
in excess of a "de minimis amount" as such term is defined in
Section 4209 of ERISA.
(r) Absence of Defaults. Neither the Borrower nor any of its
Subsidiaries is in default under its articles or certificate of
incorporation or by-laws and no event has occurred, which has not been
remedied, cured or waived,
(i) which constitutes a Default or an Event of
Default, or
(ii) which constitutes, or which with the passage of
time or giving of notice or both would constitute, a default
or event of default by the Borrower or any of its
Subsidiaries under any material agreement (other than this
Agreement) or judgment, decree or order to which the Borrower
or any of its Subsidiaries is a party or by which the
Borrower, any of its Subsidiaries or any of the Borrower's or
any of its Subsidiaries' properties may be bound or which
would require the Borrower or any of its Subsidiaries to make
any payment under any thereof prior to the scheduled maturity
date therefor, except, in the case only of any such
agreement, for alleged defaults which are being contested in
good faith by appropriate proceedings and with respect to
which reserves in respect of the Borrower's or such
Subsidiary's reasonably anticipated liability have been
established on the books of the Borrower or such Subsidiary.
(s) Accuracy and Completeness of Information.
(i) All written information, reports and other
papers and data produced by or on behalf of the Borrower and
furnished to the Agent or any Lender were, at the time the
same were so furnished, complete and correct in all material
respects, to the extent necessary to give the recipient a
true and accurate knowledge of the subject matter. No fact is
known to the Borrower which has had, or may in the future
have (so far as the Borrower can foresee), a Materially
Adverse Effect upon the Borrower or any of its Subsidiaries
which has not been set forth in the financial statements or
disclosure delivered prior to the Effective Date, in each
case referred to in SECTION 7.1(O), or in such written
information, reports or other papers or data or otherwise
disclosed in writing to the Agent and the Lenders prior to
the Agreement Date. No document furnished or written
statement made to the Agent or any Lender by the Borrower in
connection with the negotiation, preparation or execution of
this Agreement or any of the Loan Documents contains or will
contain any untrue statement of a fact material to the
creditworthiness of the Borrower or omits or will omit to
state a material fact necessary in order to make the
statements contained therein not misleading.
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(ii) The Borrower has no reason to believe that any
document furnished or written statement made to the Agent or
any Lender by any Person other than the Borrower in
connection with the negotiation, preparation or execution of
this Agreement or any of the Loan Documents contained any
incorrect statement of a material fact or omitted to state a
material fact necessary in order to make the statements made,
in light of the circumstances under which they were made, not
misleading.
(t) Solvency. In each case after giving effect to the
Indebtedness represented by the Loans outstanding and to be incurred,
the transactions contemplated by this Agreement, the Borrower and each
of its Subsidiaries is solvent, having assets of a fair salable value
which exceeds the amount required to pay its debts as they become
absolute and matured (including contingent, subordinated, unmatured
and unliquidated liabilities), and the Borrower and each of its
Subsidiaries is able to and anticipates that it will be able to meet
its debts as they mature and has adequate capital to conduct the
business in which it is or proposes to be engaged.
(u) Receivables.
(i) Status.
(A) Each Receivable reflected in the
computations included in any Borrowing Base
Certificate meets the criteria enumerated in CLAUSES
(A) through (V) of the definition of Eligible
Receivables, except as disclosed in such Borrowing
Base Certificate or as disclosed in a timely manner
in a subsequent Borrowing Base Certificate or
otherwise in writing to the Agent.
(B) The Borrower has no knowledge of any
fact or circumstance not disclosed in a Borrowing
Base Certificate or otherwise in writing which would
impair the validity or collectibility of any
Receivable of $100,000 or more or of Receivables
which (regardless of the individual amount thereof)
aggregate $500,000 or more.
(ii) Chief Executive Office. The chief executive
office of the Borrower and the books and records relating to
the Receivables are located at the address or addresses set
forth on SCHEDULE 7.1(U); the Borrower has not maintained its
chief executive office or books and records relating to any
Receivables at any other address at any time during the five
years immediately preceding the Agreement Date except as
disclosed on SCHEDULE 7.1(U).
(v) Inventory.
(i) Schedule of Inventory. All Inventory included
in any Schedule of Inventory or Borrowing Base Certificate
delivered to the Lender pursuant to SECTION 9.12 meets the
criteria enumerated in CLAUSES (A) through (J) of the
definition of Eligible Inventory, except as disclosed in such
Schedule of Inventory or Borrowing
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Base Certificate or in a subsequent Schedule of Inventory or
Borrowing Base Certificate, or as otherwise specifically
disclosed in writing to the Agent.
(ii) Condition. All Inventory is in good condition,
meets all standards imposed by any governmental agency, or
department or division thereof, having regulatory authority
over such goods, their use or sale, and is currently either
usable or salable in the normal course of the Borrower's
business, except to the extent reserved against in the
financial statements referred to in SECTION 7.1(O) or
delivered pursuant to ARTICLE 11 or as disclosed on a
Schedule of Inventory delivered to the Agent pursuant to
SECTION 9.13(B).
(iii) Location. All Inventory is located on the
premises set forth on SCHEDULE 7.1(V) or is Inventory in
transit to one of such locations, except as otherwise
disclosed in writing to the Agent; the Borrower has not, in
the last year, located such Inventory at premises other than
those set forth on SCHEDULE 7.1(V).
(w) Equipment. All Equipment is in good order and repair in
all material respects and is located on the premises set forth on
SCHEDULE 7.1(W) and has been so located at all times during the last
year.
(x) Real Property. The Borrower owns no Real Estate and
leases no Real Estate other than that described on SCHEDULE 7.1(X) and
other than Real Estate acquired or leased after the Effective Date for
which the Borrower has complied with the requirements of SECTION 9.14.
(y) Corporate and Fictitious Names. Except as otherwise
disclosed on SCHEDULE 7.1(Y), during the five-year period preceding
the Agreement Date, neither the Borrower nor any predecessor thereof
has been known as or used any corporate or fictitious name other than
the corporate name of the Borrower on the Effective Date.
(z) Federal Reserve Regulations. Neither the Borrower nor any
of its Subsidiaries is engaged and none will engage, principally or as
one of its important activities, in the business of extending credit
for the purpose of "purchasing" or "carrying" any "margin stock" (as
each of the quoted terms is defined or used in Regulations G and U of
the Board of Governors of the Federal Reserve System). No part of the
proceeds of any of the Loans will be used for so purchasing or
carrying margin stock or, in any event, for any purpose which
violates, or which would be inconsistent with, the provisions of
Regulation G, T, U or X of such Board of Governors. If requested by
the Agent or any Lender, the Borrower will furnish to the Agent and
the Lenders a statement or statements in conformity with the
requirements of said Regulation G, T, U or X to the foregoing effect.
(aa) Investment Company Act. The Borrower is not an
"investment company" or a company "controlled" by an "investment
company" (as each of the quoted terms is defined or used in the
Investment Company Act of 1940, as amended).
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(ab) Employee Relations. The Borrower and each of its
Subsidiaries has a stable work force in place and is not, except as
set forth on SCHEDULE 7.1(BB), party to any collective bargaining
agreement nor has any labor union been recognized as the
representative of the Borrower's or any of its Subsidiaries'
employees, and the Borrower knows of no pending, threatened or
contemplated strikes, work stoppage or other labor disputes involving
the Borrower's or any of its Subsidiaries' employees.
(ac) Proprietary Rights. SCHEDULE 7.1(CC) sets forth a
correct and complete list of all of the Proprietary Rights. None of
the Proprietary Rights is subject to any licensing agreement or
similar arrangement except as set forth on SCHEDULE 7.1(CC) or as
entered into in the sale or distribution of the Borrower's Inventory
in the ordinary course of business. To the best of the Borrower's
knowledge, none of the Proprietary Rights infringes on or conflicts
with any other Person's property, and no other Person's property
infringes on or conflicts with the Proprietary Rights. The Proprietary
Rights described on SCHEDULE 7.1(CC) constitute all of the property of
such type necessary to the current and anticipated future conduct of
the Borrower's business.
(ad) Trade Names. All trade names or styles under which the
Borrower sells Inventory or Equipment or creates Receivables, or to
which instruments in payment of Receivables are made payable, are
listed on SCHEDULE 7.1(DD).
SECTION 7.2. Survival of Representations and Warranties, Etc.
All representations and warranties set forth in this ARTICLE 7 and all
statements contained in any certificate, financial statement, or other
instrument, delivered by or on behalf of the Borrower pursuant to or in
connection with this Agreement or any of the Loan Documents (including, but not
limited to, any such representation, warranty or statement made in or in
connection with any amendment thereto) shall constitute representations and
warranties made under this Agreement. All representations and warranties made
under this Agreement shall be made or deemed to be made at and as of the
Agreement Date, at and as of the Effective Date and at and as of the date of
each Loan, except that representations and warranties which, by their terms are
applicable only to one such date shall be deemed to be made only at and as of
such date. All representations and warranties made or deemed to be made under
this Agreement shall survive and not be waived by the execution and delivery of
this Agreement, any investigation made by or on behalf of the Lender or any
borrowing hereunder.
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ARTICLE 8
SECURITY INTEREST
SECTION 8.1. Security Interest.
(a) To secure the payment, observance and performance of the
Secured Obligations, the Borrower hereby mortgages, pledges and
assigns all of the Collateral to the Agent, for the benefit of itself
as Agent and for the pro rata benefit of the Lenders (in proportion to
each Lender's ownership of all Secured Obligations from time to time),
and grants to the Agent, for the benefit of itself as Agent and for
the pro rata benefit of the Lenders (also in such proportion), a
continuing security interest in, and a continuing Lien upon, all of
the Collateral; PROVIDED, that no part of the Revolving Credit Loans
shall be secured by Real Estate or fixtures located in Alabama.
(b) As additional security for all of the Secured
Obligations, the Borrower grants to the Agent, for the benefit of
itself as Agent and the Lenders, a security interest in, and assigns
to the Agent, for the benefit of itself as Agent and the Lenders, all
of the Borrower's right, title and interest in and to, any deposits or
other sums at any time credited by or due from each Lender and each
Affiliate of a Lender to the Borrower, with the same rights therein as
if the deposits or other sums were credited by or due from such
Lender. The Borrower hereby authorizes each Lender and each Affiliate
of such Lender to pay or deliver to the Agent, for the account of the
Lenders, without any necessity on the Agent's or any Lender's part to
resort to other security or sources of reimbursement for the Secured
Obligations, at any time during the continuation of any Event of
Default or in the event that the Agent, on behalf of the Lenders,
should make demand for payment hereunder and without further notice to
the Borrower (such notice being expressly waived), any of the
aforesaid deposits (general or special, time or demand, provisional or
final) or other sums for application to any Secured Obligation,
irrespective of whether any demand has been made or whether such
Secured Obligation is mature, and the rights given the Agent, the
Lenders, their Affiliates hereunder are cumulative with such Person's
other rights and remedies, including other rights of set-off. The
Agent will promptly notify the Borrower of its receipt of any such
funds for application to the Secured Obligations, but failure to do so
will not affect the validity or enforceability thereof. The Agent may
give notice of the above grant of a security interest in and
assignment of the aforesaid deposits and other sums, and
authorization, to, and make any suitable arrangements with, any
Lender, any such Affiliate of any Lender or participant for
effectuation thereof, and the Borrower hereby irrevocably appoints
Agent as its attorney to collect any and all such deposits or other
sums to the extent any such payment is not made to the Agent or any
Lender by such Lender or Affiliate. Notwithstanding the foregoing,
each of the Agent and the Lenders agrees with each other that it shall
not, without the express consent of the Required Lenders, and that it
shall (to the extent that it is lawfully entitled to do so) upon the
request of the Required Lenders, exercise its setoff rights hereunder
against any accounts of the Borrower now or hereafter maintained with
the Agent, such Lender, or any Affiliate of any of them. If any party
(or its Affiliate) exercises the right of setoff provided for
hereunder, such party shall be obligated to share any such setoff in
the manner and to the extent required by SECTION 16.22.
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SECTION 8.2. Continued Priority of Security Interest.
(a) The Security Interest granted by the Borrower shall at
all times be valid, perfected and enforceable against the Borrower and
all third parties in accordance with the terms of this Agreement, as
security for the Secured Obligations, and the Collateral shall not at
any time be subject to any Liens that are prior to, on a parity with
or junior to the Security Interest, other than Permitted Liens.
(b) The Borrower shall, at its sole cost and expense, take
all action that may be necessary or desirable, or that the Agent may
reasonably request, so as at all times to maintain the validity,
perfection, enforceability and rank of the Security Interest in the
Collateral in conformity with the requirements of SECTION 8.2(A), or
to enable the Agent and the Lenders to exercise or enforce their
rights hereunder, including, but not limited to:
(i) paying all taxes, assessments and other claims
lawfully levied or assessed on any of the Collateral, except
to the extent that such taxes, assessments and other claims
constitute Permitted Liens,
(ii) obtaining, after the Agreement Date, landlords'
and mortgagees' releases, subordinations or waivers, and
using all reasonable efforts to obtain mechanics' releases,
subordinations or waivers,
(iii) delivering to the Agent, for the benefit of
the Lenders, endorsed or accompanied by such instruments of
assignment as the Agent may specify, and stamping or marking,
in such manner as the Agent may specify, any and all chattel
paper, instruments, letters and advices of guaranty and
documents evidencing or forming a part of the Collateral, and
(iv) executing and delivering financing statements,
pledges, designations, hypothecations, notices and
assignments in each case in form and substance satisfactory
to the Agent relating to the creation, validity, perfection,
maintenance or continuation of the Security Interest under
the Uniform Commercial Code or other Applicable Law.
(c) The Agent is hereby authorized to file one or more
financing or continuation statements or amendments thereto without the
signature of or in the name of the Borrower for any purpose described
in SECTION 8.2(B). The Agent will give the Borrower notice of the
filing of any such statements or amendments, which notice shall
specify the locations where such statements or amendments were filed.
A carbon, photographic, xerographic or other reproduction of this
Agreement or of any of the Security Documents or of any financing
statement filed in connection with this Agreement is sufficient as a
financing statement.
(d) The Borrower shall mark its books and records as directed
by the Agent and as may be necessary or appropriate to evidence,
protect and perfect the Security Interest and shall cause its
financial statements to reflect the Security Interest.
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ARTICLE 9
COLLATERAL COVENANTS
Until the Revolving Credit Facility has been terminated and
all the Secured Obligations have been paid in full, unless the Required Lenders
shall otherwise consent in the manner provided in SECTION 16.11:
SECTION 9.1. Collection of Receivables.
(a) At the request of the Agent, the Borrower will cause all
monies, checks, notes, drafts and other payments relating to or
constituting proceeds of trade accounts receivable to be forwarded to
a Lockbox for deposit in an Agency Account in accordance with the
procedures set out in the corresponding Agency Account Agreement. The
Borrower will promptly cause all monies, checks, notes, drafts and
other payments relating to or constituting proceeds of other
Receivables, of any other Collateral and of any trade accounts
receivable that are not forwarded to a Lockbox, to be transferred to
or deposited in an Agency Account. In particular, the Borrower will:
(i) advise each Account Debtor on trade accounts
receivable to address all remittances with respect to amounts
payable on account thereof to a specified Lockbox,
(ii) advise each other Account Debtor that makes
payment to the Borrower by wire transfer, automated
clearinghouse transfer or similar means to make payment
directly to an Agency Account, and
(iii) stamp all invoices relating to trade accounts
receivable with a legend satisfactory to the Agent indicating
that payment is to be made to the Borrower via a specified
Lockbox.
(b) The Borrower and the Agent shall cause all collected
balances, once they exceed $50,000 in the aggregate in all Agency
Accounts, to be transmitted by wire transfer, depository transfer
check or other means in accordance with the procedures set forth in
the corresponding Agency Account Agreement, to the Agent at the
Agent's Office:
(i) for application, on account of the Secured
Obligations, as provided in SECTIONS 2.3(C), 13.2, and 13.3,
such credits to be entered as of the Business Day they are
received if they are received prior to 1:30 p.m. (Atlanta
time) and to be conditioned upon final payment in cash or
solvent credits of the items giving rise to them, and
(ii) with respect to the balance, so long as no
Default or Event of Default has occurred and is continuing,
for transfer by wire transfer or depository transfer check to
a Controlled Disbursement Account.
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(c) Any monies, checks, notes, drafts or other payments
referred to in SUBSECTION (A) of this SECTION 9.1 which,
notwithstanding the terms of such subsection, are received by or on
behalf of the Borrower will be held in trust for the Agent and will be
delivered to the Agent or a Clearing Bank, as promptly as possible, in
the exact form received, together with any necessary endorsements for
application by the Agent directly to the Secured Obligations or, if
applicable, for deposit in the Agency Account maintained with a
Clearing Bank and processing in accordance with the terms of the
corresponding Agency Account Agreement.
SECTION 9.2. Verification and Notification. The Agent
shall have the right at any time and from time to time,
(a) in the name of the Agent or in the name of the Borrower,
to verify the validity, amount or any other matter relating to any
Receivables by mail, telephone, telegraph or otherwise,
(b) to review, audit and make extracts from all records and
files related to any of the Receivables, and
(c) to notify the Account Debtors or obligors under any
Receivables of the assignment of such Receivables to the Agent, for
the benefit of the Lenders, and to direct such Account Debtor or
obligors to make payment of all amounts due or to become due
thereunder directly to the Agent, for the account of the Lenders, and,
upon such notification and at the expense of the Borrower, to enforce
collection of any such Receivables and to adjust, settle or compromise
the amount or payment thereof, in the same manner and to the same
extent as the Borrower might have done.
SECTION 9.3. Disputes, Returns and Adjustments.
(a) In the event any amounts due and owing under any single
Receivable for an amount in excess of $250,000 are in dispute between
the Account Debtor and the Borrower, or the aggregate amount in
dispute for all Receivables exceeds $500,000, the Borrower shall
provide the Agent with prompt written notice thereof. Discounts
offered in the ordinary cause of business and advertising allowances
shall be excluded from the calculation of the disputed amount under
this SECTION 9.3(A).
(b) The Borrower shall notify the Agent promptly of all
returns and credits in excess of $250,000 in respect of any
Receivable, and in excess of $500,000 in respect of all Receivables in
the aggregate for any month, which notice shall specify the
Receivables affected. Discounts offered in the ordinary course of
business and advertising allowances shall be excluded from the
calculation of the credits under this SECTION 9.3(B).
(c) The Borrower may, in the ordinary course of business
unless a Default or an Event of Default has occurred and is
continuing, grant any extension of time for payment of any Receivable
or compromise, compound or settle the same for less than the full
amount thereof, or release wholly or partly any Person liable for the
payment thereof, or allow any credit or discount whatsoever therein;
PROVIDED that (i) no such action results in the
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reduction of more than $250,000 in the amount payable with respect to
any Receivable or of more than $1 million with respect to all
Receivables in any fiscal year of the Borrower (in each case,
excluding the allowance of credits or discounts generally available to
Account Debtors in the ordinary course of the Borrower's business and
appropriate adjustments to the accounts of Account Debtors in the
ordinary course of business), and (ii)the Agent is promptly notified
of the amount of such adjustments and the Receivable(s) affected
thereby.
SECTION 9.4. Invoices.
(a) The Borrower will not use any invoices other than
invoices in the form delivered to the Agent prior to the Agreement
Date without giving the Agent 30 days prior notice of the intended use
of a different form of invoice together with a copy of such different
form.
(b) Upon the request of the Agent, the Borrower shall deliver
to the Agent, at the Borrower's expense, copies of customers' invoices
or the equivalent, original shipping and delivery receipts or other
proof of delivery, customers' statements, customer address lists, the
original copy of all documents, including, without limitation,
repayment histories and present status reports, relating to
Receivables and such other documents and information relating to the
Receivables as the Agent shall specify.
SECTION 9.5. Delivery of Instruments. In the event any
Receivable is at any time evidenced by a promissory note, trade acceptance or
any other instrument for the payment of money, the Borrower will immediately
thereafter deliver such instrument to the Agent, appropriately endorsed to the
Agent, for the benefit of the Lenders.
SECTION 9.6. Sales of Inventory. All sales of Inventory
will be made in compliance with all requirements of Applicable Law.
SECTION 9.7. Ownership and Defense of Title.
(a) Except for Permitted Liens, the Borrower shall at all
times be the sole owner or lessee of each and every item of Collateral
and shall not create any lien on, or sell, lease, exchange, assign,
transfer, pledge, hypothecate, grant a security interest or security
title in or otherwise dispose of, any of the Collateral or any
interest therein, except for sales of Inventory in the ordinary course
of business, for cash or on open account or on terms of payment
ordinarily extended to its customers, and except for dispositions that
are otherwise expressly permitted under this Agreement. The inclusion
of "proceeds" of the Collateral under the Security Interest shall not
be deemed a consent by the Agent or the Lenders to any other sale or
other disposition of any part or all of the Collateral.
(b) The Borrower shall defend its title or leasehold interest
in and to, and the Security Interest in, the Collateral against the
claims and demands of all Persons.
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SECTION 9.8. Insurance.
(a) The Borrower shall at all times maintain insurance on the
Inventory and Equipment against loss or damage by fire, theft
(excluding theft by employees), burglary, pilferage, loss in transit
and such other hazards as the Agent or Required Lenders shall
reasonably specify, in amounts not to exceed those obtainable at
commercially reasonable rates and under policies issued by insurers
acceptable to the Agent in the exercise of its reasonable judgment.
All premiums on such insurance shall be paid by the Borrower and
copies of the policies delivered to the Agent. The Borrower will not
use or permit the Inventory or Equipment to be used in violation of
Applicable Law or in any manner which might render inapplicable any
insurance coverage.
(b) All insurance policies required under SECTION 9.8(A)
shall name the Agent, for the benefit of the Lenders, as an additional
insured and shall contain loss payable clauses in the form submitted
to the Borrower by the Agent, or otherwise in form and substance
satisfactory to the Required Lenders, naming the Agent, for the
benefit of the Lenders, as loss payee, as its interests may appear,
and providing that
(i) all proceeds thereunder shall be payable to the
Agent, for the benefit of the Lenders,
(ii) no such insurance shall be affected by any act
or neglect of the insurer or owner of the property described
in such policy, and
(iii) such policy and loss payable clauses may be
canceled, amended or terminated only upon at least 10 days
prior written notice given to the Agent.
(c) Any proceeds of insurance referred to in this SECTION 9.8
which are paid to the Agent, for the pro rata benefit of the Lenders,
shall be, at the option of the Required Lenders in their sole
discretion, either (i) applied to replace the damaged or destroyed
property, or (ii)applied to the payment or prepayment of the Secured
Obligations.
SECTION 9.9. Location of Offices and Collateral.
(a) The Borrower will not change the location of its chief
executive office or the place where it keeps its books and records
relating to the Collateral or change its name, its identity or
corporate structure without giving the Agent and each Lender at least
60 days prior written notice thereof.
(b) All Inventory, other than Inventory in transit to any
such location, will at all times be kept by the Borrower at the
locations set forth in SCHEDULE 7.1(V), and shall not, without the
prior written consent of the Agent, be removed therefrom except
pursuant to sales of Inventory permitted under SECTION 9.7(A).
(c) If any Inventory is in the possession or control of any
of the Borrower's agents or processors, the Borrower shall notify such
agents or processors of the Security
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Interest (and shall promptly provide copies of any such notice to the
Agent and the Lenders) and, upon the occurrence of an Event of
Default, shall instruct them (and cause them to acknowledge such
instruction) to hold all such Inventory for the account of the account
of the Lenders, subject to the instructions of the Agent.
SECTION 9.10. Records Relating to Collateral.
(a) The Borrower will at all times
(i) keep complete and accurate records of Inventory
on a basis consistent with past practices of the Borrower so
as to permit comparison of Inventory records relating to
different time periods, itemizing and describing the kind,
type and quantity of Inventory and the Borrower's cost
therefor and a current price list for such Inventory, and
(ii) keep complete and accurate records of all other
Collateral.
(b) The Borrower will prepare a physical listing of all
Inventory, wherever located, at least annually.
SECTION 9.11. Inspection. The Agent and each Lender (by any
of their officers, employees or agents) shall have the right, to the extent
that the exercise of such right shall be within the control of the Borrower, at
any time or times to
(a) visit the properties of the Borrower and its
Subsidiaries, inspect the Collateral and the other assets of the
Borrower and its Subsidiaries and inspect and make extracts from the
books and records of the Borrower and its Subsidiaries, including but
not limited to, management letters prepared by independent accounts,
all during customary business hours at such premises;
(b) discuss the Borrower's and its Subsidiaries' business,
assets, liabilities, financial condition, results of operations and
business prospects, insofar as the same are reasonably related to the
rights of the Agent or the Lenders hereunder or under any of the Loan
Documents, with the Borrower's and its Subsidiaries' (i) principal
officers, (ii) independent accountants, and (iii) any other Person
(except that any such discussion with any third parties shall be
conducted only in accordance with the Agent's or such Lender's
standard operating procedures relating to the maintenance of the
confidentiality of confidential information of borrowers);
(c) verify the amount, quantity, value and condition of, or
any other matter relating to, any of the Collateral (other than
Receivables) and in this connection to review, audit and make extracts
from all records and files related to any of the Collateral.
The Borrower will deliver to the Agent or any Lender, upon its request, any
instrument necessary for it to obtain records from any service bureau
maintaining records on behalf of the Borrower.
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SECTION 9.12. Information and Reports.
(a) Schedule of Receivables. The Borrower shall deliver to
the Agent and to each Lender on or before the Effective Date and on
the fifth Business Day of each month thereafter, a Schedule of
Receivables which
(i) shall be as of the last Business Day of the
immediately preceding week or month, as the case may be,
(ii) shall be reconciled to the Borrowing Base
Certificate as of such last Business Day, and
(iii) shall set forth a line item summary aging,
and, on a monthly basis, a detailed aged trial balance by
invoice of all its then-existing Receivables, specifying the
name, address and balance due for each Account Debtor
obligated on a Receivable so listed.
(b) Schedule of Inventory. The Borrower shall deliver to the
Agent and to each Lender on or before the Effective Date and not later
than the fifth Business Day of each calendar month thereafter a
Schedule of Inventory as of the last Business Day of the immediately
preceding month of the Borrower, itemizing and describing the kind,
type and quantity of Inventory, the Borrower's cost thereof and the
location thereof.
(c) Borrowing Base Certificate. The Borrower shall deliver to
the Agent and to each Lender on the fifth Business Day of each month
after the Effective Date a Borrowing Base Certificate prepared as of
the close of business on the last day of the preceding month.
(d) Notice of Diminution of Value. The Borrower shall give
prompt notice to the Agent and to each Lender of any matter or event
which has resulted in, or may result in, the diminution in excess of
$1 million in the value of any of its Collateral, except for any such
diminution in the value of any Receivables or Inventory in the
ordinary course of business which has been appropriately reserved
against, as reflected in financial statements previously delivered to
the Agent and the Lenders pursuant to ARTICLE 11.
(e) Additional Information. The Agent may in its discretion
from time to time request that the Borrower deliver to the Agent and
to each Lender the schedules, certificates described in SECTIONS
9.12(A), (B) and (C) more or less often and on different schedules
than specified in such Sections and the Borrower will comply with such
requests. The Borrower will also furnish to the Agent and each Lender
such other information with respect to the Collateral as the Agent or
such Lender may from time to time reasonably request.
SECTION 9.13. Power of Attorney. The Borrower hereby appoints
the Agent as its attorney, with power
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(a) to endorse the name of the Borrower on any checks, notes,
acceptances, money orders, drafts or other forms of payment or
security that may come into the Agent's or any Lender's possession,
and
(b) to sign the name of the Borrower on any invoice or bill
of lading relating to any Receivable, Inventory or other Collateral,
on any drafts against customers related to letters of credit, on
schedules and assignments of Receivables furnished to the Agent or any
Lender by the Borrower, on notices of assignment, financing statements
and other public records relating to the perfection or priority of the
Security Interest, verifications of account and notices to or from
customers.
SECTION 9.14. Additional Real Estate and Leases.
(a) Promptly upon the Borrower's acquisition of any interest
(including a leasehold interest) in any Real Estate, the Borrower
shall deliver to the Agent, for the benefit of itself as Agent and the
Lenders, an executed Mortgage in form and substance satisfactory to
the Agent, conveying to the Agent, for the benefit of itself and the
Lenders, a first priority Lien on such Real Estate, subject only to
such prior Liens as the Agent shall consent to in writing. If
requested by the Agent, the Borrower shall also deliver to the Agent
at Borrower's expense a mortgagee title insurance policy in favor of
the Agent and the Lenders insuring such Mortgage to create and convey
such Lien, subject only to such exceptions consented to by the Agent
and shall deliver to the Agent the other items set forth in SECTION
6.1(F)(XIII), (XIV), (XV), (XIX), (XX) and (XXI) with respect to such
Real Estate, all in form and substance satisfactory to the Agent.
(b) Promptly upon the Borrower's entry into any lease of Real
Estate (other than a lease conveying an interest in Real Estate, which
shall be subject to the provisions of CLAUSE (A) above), the Borrower
shall collaterally assign to the Agent, for the benefit of itself and
the Lenders, the Borrower's interest in such lease, in form and
substance satisfactory to the Agent. The Borrower shall also deliver
to the Agent an executed landlord's waiver and consent with respect to
such lease in form and substance satisfactory to the Agent.
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SECTION 9.15. Assignment of Claims Act. Upon the request of
the Agent, the Borrower shall execute any documents or instruments and shall
take such steps or actions reasonably required by the Agent so that all monies
due or to become due under any contract with the United States of America, the
District of Columbia or any state, county, municipality or other domestic or
foreign governmental entity, or any department, agency or instrumentality
thereof, will be assigned to the Agent, for the benefit of itself and the
Lenders, and notice given thereof in accordance with the requirements of the
Assignment of Claims Act of 1940, as amended, or any other laws, rules or
regulations relating to the assignment of any such contract and monies due to
or to become due.
SECTION 9.16. 1997 Projects. Promptly following the Project
Completion Date, at the request of the Agent, the Borrower will cause "as
built" surveys reflecting completion of the 1997 Projects, in a form that
satisfies applicable state requirements, to be delivered to the Agent and, with
respect to the Arizona facility, shall furnish a report from a qualified
engineering firm or other qualified consultant acceptable to the Agent with
respect to an investigation and audit of the Arizona Facility and the Real
Estate on which it is located, which shall be based on a thorough review of
past and present uses, occupants, ownership and tenancy of the property and/or
adjacent properties and/or upgradient properties regarding, (a) subsurface
ground water hazards, soils and/or test boring reports; (b)contact with local,
state or federal agencies regarding known or suspected hazardous material
contamination of the property or other properties in the area; (c) review of
aerial photographs; (d) visual site inspection noting unregulated fills,
storage tanks or areas, ground discoloration or soil odors; (e) other
investigative methods deemed necessary by the consultant or the Agent to enable
the consultant to report that there is no apparent or likely contamination of
the property or another property in the area; and (f) if deemed reasonably
necessary to further investigate suspected or likely contamination,
supplemental environmental reports prepared by qualified consultants of the
analysis of core drilling or ground water samples from the property, showing no
contamination by hazardous materials.
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ARTICLE 10
AFFIRMATIVE COVENANTS
Until the Revolving Credit Facility has been terminated and
all the Secured Obligations have been paid in full, unless the Required Lenders
shall otherwise consent in the manner provided for in SECTION 16.11, the
Borrower will, and will cause each of its Subsidiaries to:
SECTION 10.1. Preservation of Corporate Existence and Similar
Matters. Preserve and maintain its corporate existence, rights, franchises,
licenses and privileges in the jurisdiction of its incorporation and qualify
and remain qualified as a foreign corporation and authorized to do business in
each jurisdiction in which the character of its properties or the nature of its
business requires such qualification or authorization.
SECTION 10.2. Compliance with Applicable Law. Comply with all
Applicable Law relating to the Borrower or such Subsidiary except to the extent
being contested in good faith by appropriate proceedings and for which reserves
in respect of the Borrower's or such Subsidiary's reasonably anticipated
liability therefor have been appropriately established.
SECTION 10.3. Maintenance of Property. In addition to, and
not in derogation of, the requirements of SECTION 9.7 and of the Security
Documents,
(a) protect and preserve all properties material to its
business, including copyrights, patents, trade names and trademarks,
and maintain in good repair, working order and condition in all
material respects, with reasonable allowance for wear and tear, all
tangible properties, and
(b) from time to time make or cause to be made all needed and
appropriate repairs, renewals, replacements and additions to such
properties necessary for the conduct of its business, so that the
business carried on in connection therewith may be properly and
advantageously conducted at all times.
SECTION 10.4. Conduct of Business. At all times carry on its
business in an efficient manner and engage only the business described in
SECTION 7.1(G).
SECTION 10.5. Insurance. Maintain, in addition to the
coverage required by SECTION 9.8 and the Security Documents, insurance with
responsible insurance companies against such risks and in such amounts as is
customarily maintained by similar businesses or as may be required by
Applicable Law, and from time to time deliver to the Agent or any Lender upon
its request a detailed list of the insurance then in effect, stating the names
of the insurance companies, the amounts and rates of the insurance, the dates
of the expiration thereof and the properties and risks covered thereby.
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SECTION 10.6. Payment of Taxes and Claims. Pay or discharge
when due
(a) all taxes, assessments and governmental charges or levies
imposed upon it or upon its income or profits or upon any properties
belonging to it, except that real property AD VALOREM taxes shall be
deemed to have been so paid or discharged if the same are paid before
they become delinquent, and
(b) all lawful claims of materialmen, mechanics, carriers,
warehousemen and landlords for labor, materials, supplies and rentals
which, if unpaid, might become a Lien on any properties of the
Borrower;
except that this SECTION 10.6 shall not require the payment or discharge of any
such tax, assessment, charge, levy or claim which is being contested in good
faith by appropriate proceedings and for which reserves in respect of the
reasonably anticipated liability therefor have been appropriately established.
SECTION 10.7. Accounting Methods and Financial Records.
Maintain a system of accounting, and keep such books, records and accounts
(which shall be true and complete), as may be required or as may be necessary
to permit the preparation of financial statements in accordance with GAAP.
SECTION 10.8. Use of Proceeds.
(a) Use the proceeds of
(i) the initial Revolving Credit Loan and the Term
Loans made on the Effective Date to pay amounts indicated on
SCHEDULE 10.8 to the Persons indicated thereon,
(ii) all Interim Construction Loans only to pay or
reimburse the payment of costs of construction and
acquisition of new Equipment related to the 1997 Birmingham
Warehouse, the 1997 Birmingham Tubular and the Arizona
Facilities, and
(iii) all subsequent Loans only for working capital
and general business purposes, and
(b) not use any part of such proceeds to purchase or, to
carry or reduce or retire or refinance any credit incurred to purchase
or carry, any margin stock (within the meaning of Regulation G or U of
the Board of Governors of the Federal Reserve System) or, in any
event, for any purpose which would involve a violation of such
Regulation G or U or of Regulation T or X of such Board of Governors,
or for any purpose prohibited by law or by the terms and conditions of
this Agreement.
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SECTION 10.9. Hazardous Waste and Substances; Environmental
Requirements.
(a) In addition to, and not in derogation of, the
requirements of SECTION 10.2 and of the Security Documents, comply
with all Environmental Laws and all Applicable Laws relating to
occupational health and safety (except for instances of noncompliance
that are being contested in good faith by appropriate proceedings if
reserves in respect of the Borrower's or such Subsidiary's reasonably
anticipated liability therefor have been appropriately established),
promptly notify the Agent of its receipt of any notice of a violation
of any such Environmental Laws or other such Applicable Laws and
indemnify and hold the Agent and the Lenders harmless from all loss,
cost, damage, liability, claim and expense incurred by or imposed upon
the Agent or any Lender on account of the Borrower's failure to
perform its obligations under this SECTION 10.9.
(b) Whenever the Borrower gives notice to the Agent pursuant
to this SECTION 10.9 with respect to a matter that reasonably could be
expected to result in liability to the Borrower in excess of $500,000
in the aggregate, the Borrower shall, at the Agent's request and the
Borrower's expense (i) cause an independent environmental engineer
acceptable to the Agent to conduct an assessment, including tests
where necessary, of the site where the noncompliance or alleged
noncompliance with Environmental Laws has occurred and prepare and
deliver to the Agent a report setting forth the results of such
assessment, a proposed plan to bring the Borrower into compliance with
such Environmental Laws (if such assessment indicates noncompliance)
and an estimate of the costs thereof, and (ii) provide to the Agent a
supplemental report of such engineer whenever the scope of the
noncompliance, or the response thereto or the estimated costs thereof,
shall materially adversely change.
SECTION 10.10. Warranty Reserves. Maintain adequate Warranty
Reserves.
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ARTICLE 11
INFORMATION
Until the Revolving Credit Facility has been terminated and
all the Secured Obligations have been paid in full, unless the Required Lenders
shall otherwise consent in the manner set forth in SECTION 16.11, the Borrower
will furnish to the Agent and to each Lender at the offices then designated for
such notices pursuant to SECTION 16.1:
SECTION 11.1. Financial Statements.
(a) Audited Year-End Statements. As soon as available, but in
any event within 120 days after the end of each fiscal year of the
Borrower, copies of the consolidating and Consolidated balance sheets
of the Borrower and its Consolidated Subsidiaries as at the end of
such fiscal year and the related statements of earnings, shareholders'
equity and statement of cash flows for such fiscal year, in each case
setting forth in comparative form the figures for the previous fiscal
year of the Borrower, reported on, as to such Consolidated statements,
without qualification as to the scope of the audit or the status of
the Borrower as a "going concern", by independent certified public
accountants of nationally recognized standing; and
(b) Monthly Financial Statements. As soon as available after
the end of each month, but in any event within 30 days after the end
of each month, copies of the unaudited consolidated balance sheet of
the Borrower and its Consolidated Subsidiaries as at the end of such
month and the related unaudited consolidated statements of earnings
and cash flows for the Borrower and its Consolidated Subsidiaries for
such month and for the portion of the fiscal year of the Borrower
through such month, certified by a Financial Officer of the Borrower
as presenting fairly the financial condition and results of operations
of the Borrower (subject to normal year-end audit adjustments);
all such financial statements to be complete and correct in all material
respects and prepared in accordance with GAAP (except, with respect to interim
financial statements, for the omission of notes and for the effect of normal
year-end audit adjustments) applied consistently throughout the periods
reflected therein.
SECTION 11.2. Accountants' Certificate. Together with the
financial statements referred to in SECTION 11.1(A), the Borrower shall deliver
a certificate of such accountants addressed to the Agent and each Lender
(a) stating that in making the examination necessary for the
certification of such financial statements, nothing has come to their
attention to lead them to believe that any Default or Event of Default
exists and, in particular, they have no knowledge of any Default or
Event of Default or, if such is not the case, specifying such Default
or Event of Default and its nature, and
(b) having attached the calculations, prepared by the
Borrower and reviewed by such accountants, required to establish
whether or not the Borrower is in compliance with
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the covenants contained in SECTIONS 12.1, 12.2, 12.5, 12.6 12.10 AND
12.11, as at the date of such financial statements.
SECTION 11.3. Officer's Certificate. At the time that the
Borrower furnishes the financial statements pursuant to SECTION 11.1(B) for any
month that is the last month of a fiscal quarter of the Borrower, the Borrower
shall also furnish a certificate of its President or a Financial Officer
substantially in the form of EXHIBIT F.
(a) setting forth as at the end of such fiscal quarter or
fiscal year, as the case may be, the calculations required to
establish whether or not the Borrower was in compliance with the
requirements of SECTIONS 12.1, 12.2, 12.5, 12.6, 12.10 AND 12.11, as
at the end of each respective period,
(b) stating that the information on the schedules to this
Agreement are complete and accurate as of the date of such certificate
or, if such is not the case, attaching to such certificate updated
schedules, and
(c) stating that, based on a reasonably diligent examination,
no Default or Event of Default exists, or, if such is not the case,
specifying such Default or Event of Default and its nature, when it
occurred, whether it is continuing and the steps being taken by the
Borrower with respect to such Default or Event of Default.
SECTION 11.4. Copies of Other Reports.
(a) Promptly upon receipt thereof, copies of all reports, if
any, submitted to the Borrower or its Board of Directors by its
independent public accountants, including, without limitation, any
management report.
(b) As soon as practicable, copies of all financial
statements and reports that the Borrower shall send to its
shareholders generally and of all registration statements and all
regular or periodic reports which the Borrower shall file with the
Securities and Exchange Commission or any successor commission.
(c) From time to time and as soon as reasonably practicable
following each request, such forecasts, data, certificates, reports,
statements, opinions of counsel, documents or further information
regarding the business, assets, liabilities, financial condition,
results of operations or business prospects of the Borrower or any of
its Subsidiaries as the Agent or any Lender may reasonably request and
that the Borrower has or (except in the case of legal opinions
relating to the perfection or priority of the Security Interest)
without unreasonable expense can obtain; PROVIDED, HOWEVER, that the
Lenders shall, to the extent reasonably practicable, coordinate
examinations of the Borrower's records by their respective internal
auditors. The rights of the Agent and the Lenders under this SECTION
11.4 are in addition to and not in derogation of their rights under
any other provision of this Agreement or of any other Loan Document.
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(d) If requested by the Agent or any Lender, the Borrower
will furnish to the Agent and the Lenders statements in conformity
with the requirements of Federal Reserve Form G-3 or U-1 referred to
in Regulation G and U, respectively, of the Board of Governors of the
Federal Reserve System.
SECTION 11.5. Notice of Litigation and Other Matters. Prompt
notice of:
(a) the commencement, to the extent the Borrower is aware of
the same, of all proceedings and investigations by or before any
governmental or nongovernmental body and all actions and proceedings
in any court or before any arbitrator against or in any other way
relating to or affecting the Borrower, any of its Subsidiaries or any
of the Borrower's or any of its Subsidiaries' properties, assets or
businesses, which might, singly or in the aggregate, result in the
occurrence of a Default or an Event of Default, or have a Materially
Adverse Effect on the Borrower or any of its Subsidiaries,
(b) any amendment of the articles of incorporation or by-laws
of the Borrower or any of its Subsidiaries,
(c) any change in the business, assets, liabilities,
financial condition, results of operations or business prospects of
the Borrower or any of its Subsidiaries which has had or may have,
singly or in the aggregate, a Materially Adverse Effect on the
Borrower or any of its Subsidiaries and any change in the executive
officers of the Borrower, and
(d) any Default or Event of Default or any event which
constitutes or which with the passage of time or giving of notice or
both would constitute a default or event of default by the Borrower or
any of its Subsidiaries under any material agreement (other than this
Agreement) to which the Borrower or any of its Subsidiaries is a party
or by which the Borrower, any of its Subsidiaries or any of the
Borrower's or any of its Subsidiaries' properties may be bound.
SECTION 11.6. ERISA. As soon as possible and in any event
within 30 days after the Borrower knows, or has reason to know, that:
(a) any Termination Event with respect to a Plan has occurred
or will occur, or
(b) the aggregate present value of the Unfunded Vested
Accrued Benefits under all Plans is equal to an amount in excess of
$0.00, or
(c) the Borrower or any of its Subsidiaries is in "default"
(as defined in Section 4219(c)(5) of ERISA) with respect to payments
to a Multiemployer Plan required by reason of the Borrower's or such
Subsidiary's complete or partial withdrawal (as described in Section
4203 or 4205 of ERISA) from such Multiemployer Plan,
a certificate of the President or a Financial Officer of the Borrower setting
forth the details of such event and the action which is proposed to be taken
with respect thereto, together with any notice
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or filing which may be required by the PBGC or other agency of the United
States government with respect to such event.
SECTION 11.7. Accuracy of Information. All written
information, reports, statements and other papers and data furnished to the
Agent or any Lender, whether pursuant to this ARTICLE 11 or any other provision
of this Agreement or of any other Loan Document, shall be, at the time the same
is so furnished, complete and correct in all material respects to the extent
necessary to give the Agent and the Lenders true and accurate knowledge of the
subject matter.
SECTION 11.8. Revisions or Updates to Schedules. Should any
of the information or disclosures provided on any of the Schedules originally
attached hereto become outdated or incorrect in any material respect, the
Borrower shall deliver to the Agent and the Lenders as part of the officer's
certificate required pursuant to SECTION 11.3(B) such revisions or updates to
such Schedule(s) as may be necessary or appropriate to update or correct such
Schedule(s), PROVIDED that no such revisions or updates to any Schedule(s)
shall be deemed to have amended, modified or superseded such Schedule(s) as
originally attached hereto, or to have cured any breach of warranty or
representation resulting from the inaccuracy or incompleteness of any such
Schedule(s), unless and until the Required Lenders in their sole and absolute
discretion, shall have accepted in writing such revisions or updates to such
Schedule(s).
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ARTICLE 12
NEGATIVE COVENANTS
Until the Revolving Credit Facility has been terminated and
all the Secured Obligations have been paid in full, unless the Required Lenders
shall otherwise consent in the manner set forth in SECTION 16.11, the Borrower
will not directly or indirectly and, in the case of SECTIONS 12.2 through
12.15, will not permit its Subsidiaries to:
SECTION 12.1. Financial Ratios. Permit:
(a) Minimum Adjusted Tangible Net Worth. Adjusted Tangible
Net Worth at any time to be negative, or to be less than $29 million
on the Effective Date or, at any time thereafter, less than $29
million plus an amount equal to 70% of Consolidated Net Income of the
Borrower and its Consolidated Subsidiaries after May 3, 1997 and prior
to such time, on a cumulative basis (without deduction for any net
loss), plus from and after completion of the IPO, 100% of the net cash
proceeds thereof received by the Borrower remaining after making the
AAA distribution.
(b) Ratio of Consolidated Total Liabilities to Tangible Net
Worth. The ratio of total Consolidated Liabilities of the Borrower and
its Consolidated Subsidiaries to Tangible Net Worth of the Borrower
and its Consolidated Subsidiaries on the dates set forth below to be
greater than 2.5 to 1 as of the last day of any fiscal year of the
Borrower.
(c) Minimum Debt Service Coverage. As of the last day of any
fiscal quarter, the Consolidated Debt Service Coverage Ratio of the
Borrower and its Consolidated Subsidiaries for the period of four
consecutive fiscal quarters ending on such last day to be less than
1.2 to 1:
(d) Maximum Funded Debt to EBITDA. Funded Debt to EBITDA as
of the last day of any fiscal quarter of the Borrowers to be greater
than 2.5 to 1.
SECTION 12.2. Indebtedness for Money Borrowed. Create,
assume, or otherwise become or remain obligated in respect of, or permit or
suffer to exist or to be created, assumed or incurred or to be outstanding any
Indebtedness for Money Borrowed, except that this SECTION 12.2 shall not apply
to:
(a) Indebtedness of the Borrower for Money Borrowed
represented by the Loans and the Notes,
(b) Indebtedness for Money Borrowed reflected on SCHEDULE
7.1(K), excluding any such Indebtedness that is to be paid in full on
the Effective Date,
(c) Permitted Purchase Money Indebtedness, and
(d) the Subordinated Indebtedness.
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SECTION 12.3. Guaranties. Become or remain liable with
respect to any Guaranty of any obligation of any other Person.
SECTION 12.4. Investments. Acquire, after the Agreement Date,
any Business Unit or Investment or, after such date, maintain any Investment
other than Permitted Investments, EXCEPT that this Section 12.4 shall not apply
to any Acquisition, of which the Agent and the lenders have at least 30 days'
written notice, (1) of a Business Unit in the same line of business as the
Borrower, (2) for a total Investment (including any Debt of such Acquired
Person or secured by Liens on any acquired assets) of not more than $10
million, (3) in respect of which the Borrower shall have delivered to the Agent
and the Lenders a consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries prepared on a pro forma basis for the period of four
full consecutive fiscal quarters ended immediately before the proposed date of
such Acquisition as if such Acquisition had been consummated on the first day
of such four-quarter period (and as though any other Acquisition or issuance of
or permanent reduction in Debt consummated during such four-quarter period had
occurred on the first day of such period, demonstrating compliance on a pro
forma basis with the provisions of this Agreement, (4) in respect of which the
Agent shall have completed a customary due diligence investigation with results
satisfactory to it in its sole discretion and (5) contemporaneously with the
consummation of which, any Acquired Person shall, if requested by the Agent or
the Required Lenders, have delivered an unconditional guaranty of the Secured
Obligations, in form and substance satisfactory to the Agent, or become a party
as a co-Borrower to this Agreement, and, in either case, pledged to the Agent
by instruments and agreements satisfactory in form and substance to the Agent,
all of its property, real and personal, as security for its obligations under
such guaranty or hereunder.
SECTION 12.5. Capital Expenditures. Make or incur any Capital
Expenditures in the aggregate in excess of the amount set forth below for the
fiscal year of the Borrower set forth opposite such amount:
<TABLE>
<CAPTION>
Fiscal Year Amount
- ----------- ------
<C> <C>
1998 $34 million
1999 $10 million
2000 $10 million
</TABLE>
plus in each of fiscal years 1999 and 2000, any excess of permitted Capital
Expenditures for the preceding fiscal year over actual Capital Expenditure in
such year.
SECTION 12.6. Restricted Dividend Payments and Purchases,
Etc. Declare or make any Restricted Dividend Payment, Restricted Payment or
Restricted Purchase, EXCEPT that this SECTION 12.6 shall not apply to Permitted
Subchapter S Distribution or to the AAA Distribution or, after completion of
the IPO, to the payment of cash dividends on outstanding common stock of the
Borrower.
SECTION 12.7. Merger, Consolidation and Sale of Assets. Merge
or consolidate with any other Person or sell, lease or transfer or otherwise
dispose of all or a substantial portion of its assets to any Person other than
sales of Inventory in the ordinary course of business.
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SECTION 12.8. Transactions with Affiliates. Effect any
transaction with any Affiliate on a basis less favorable to the Borrower than
would be the case if such transaction had been effected with a Person not an
Affiliate.
SECTION 12.9. Liens. Create, assume or permit or suffer to
exist or to be created or assumed any Lien on any of the Collateral or its
other assets, other than Permitted Liens.
SECTION 12.10. Capitalized Lease Obligations. Without the
consent of the Required Lenders, which consent shall not be unreasonably
withheld, incur or permit to exist any Capitalized Lease Obligations if such
Capitalized Lease Obligation when added to existing Capitalized Lease
Obligations and Permitted Purchase Money Indebtedness of the Borrower would
exceed $1 million in the aggregate.
SECTION 12.11. Operating Leases. Without the consent of the
Required Lenders, enter into any Operating Lease if the aggregate annual rental
payable under all Operating Leases of the Borrower would exceed $5 million in
the aggregate at any time after the Effective Date.
SECTION 12.12. [Reserved].
SECTION 12.13. Plans. Permit any condition to exist in
connection with any Plan which might constitute grounds for the PBGC to
institute proceedings to have such Plan terminated or a trustee appointed to
administer such Plan, and any other condition, event or transaction with
respect to any Plan which could result in the incurrence by the Borrower of any
material liability, fine or penalty.
SECTION 12.14. Sales and Leasebacks. Enter into any
arrangement with any Person providing for the Borrower's leasing from such
Person any real or personal property which has been or is to be sold or
transferred, directly or indirectly, by the Borrower to such Person.
SECTION 12.15. Factored Receivables. Submit for factoring
under the Factoring Agreement any Receivable of an Account Debtor who is also
the Account Debtor with respect to any Receivable that is submitted as an
Eligible Receivable under the Borrowing Base, or submit as an Eligible
Receivable under this Agreement any Receivable of an Account Debtor for whom
any account payable to Borrower (but for the factoring thereof) is then
factored under the Factoring Agreement, or, unless the Factor has declined to
factor such account receivable at the rates in effect under the Factoring
Agreement, factor any account receivable with any Person other than the Factor.
SECTION 12.16. Clean Down. Maintain the aggregate principal
amount of all outstanding Revolving Credit Loans at $20 million or less for a
period of 30 consecutive days during each calendar year ending after December
31, 1997.
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ARTICLE 13
DEFAULT
SECTION 13.1. Events of Default. Each of the following shall
constitute an Event of Default, whatever the reason for such event and whether
it shall be voluntary or involuntary or be effected by operation of law or
pursuant to any judgment or order of any court or any order, rule or regulation
of any governmental or nongovernmental body:
(a) Default in Payment. The Borrower shall default in any
payment of principal of or interest on any Loan or any Note when and
as due (whether at maturity, by reason of acceleration or otherwise).
(b) Other Payment Default. The Borrower shall default in the
payment, as and when due, of principal of or interest on, any other
Secured Obligation, and such default shall continue for a period of 10
days after any of the Borrower's officers learns of it (whether as a
result of written notice thereof given to the Borrower by the Agent or
any Lender, or otherwise).
(c) Misrepresentation. Any representation or warranty made or
deemed to be made by the Borrower under this Agreement or any Loan
Document, or any amendment hereto or thereto, shall at any time prove
to have been incorrect or misleading in any material respect when
made.
(d) Default in Performance. The Borrower shall default in the
performance or observance of any term, covenant, condition or
agreement to be performed by the Borrower, contained in
(i) ARTICLES 8, 9, 11 or 12, or SECTIONS 10.1
(insofar as it requires the preservation of the corporate
existence of the Borrower), or 10.8, and the Agent shall have
delivered to the Borrower written notice of such default, or
(ii) this Agreement (other than as specifically
provided for otherwise in this SECTION 13.1) and such default
shall continue (aa) for 30 days after any of the Borrower's
officers learns of it, if the default is of a type that any
Loan Document requires the Borrower to notify the Agent of,
and (bb) in all other cases, for 30 days after written notice
thereof has been given to the Borrower by the Agent.
(e) Indebtedness Cross-Default.
(i) The Borrower or any Subsidiary of the Borrower
shall fail to pay when due and payable the principal of or
interest on the Subordinated Indebtedness or any other
Indebtedness for Money Borrowed (other than the Loans) in an
amount in excess of $10,000, provided that the Borrower's
failure to make a payment of the principal of or interest on
the Subordinated Indebtedness on account of the operation of
the subordination provisions thereof shall not be an Event of
Default, or
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(ii) the maturity of any such Indebtedness shall
have (A) been accelerated in accordance with the provisions
of any indenture, contract or instrument providing for
the creation of or concerning such Indebtedness, or (B)been
required to be prepaid prior to the stated maturity thereof,
or
(iii) any event shall have occurred and be continuing
which would permit any holder or holders of such Indebtedness,
any trustee or agent acting on behalf of such holder or
holders or any other Person so to accelerate such maturity,
and the Borrower shall have failed to cure such default prior
to the expiration of any applicable cure or grace period.
(f) Other Cross-Defaults. The Borrower or any of its
Subsidiaries shall default in the payment when due, or in the
performance or observance, of any obligation or condition of any
agreement, contract or lease (other than this Agreement, the Security
Documents or any such agreement, contract or lease relating to
Indebtedness for Money Borrowed) if the existence of any such defaults,
singly or in the aggregate, could in the reasonable judgment of the
Agent have a Materially Adverse Effect on the Borrower or any of its
Subsidiaries; provided, however, that for the purposes of this
provision where such a default could result only in a monetary loss, a
Material Adverse Effect shall not be deemed to have occurred unless the
aggregate of such losses would exceed $10,000; or the Borrower or any
of its Subsidiaries shall default in the payment when due, or in the
performance or observance, of any obligation or condition of the
Guidance Facility Loan Agreement dated as of the date of this Agreement
by and among the Agent, Lenders, and the Borrower, or the Factoring
Agreement.
(g) Voluntary Bankruptcy Proceeding. The Borrower or any
of its Subsidiaries shall
(i) commence a voluntary case under the federal
bankruptcy laws (as now or hereafter in effect),
(ii) file a petition seeking to take advantage of
any other laws, domestic or foreign, relating to
bankruptcy, insolvency, reorganization, winding up or
composition for adjustment of debts,
(iii) consent to or fail to contest in a timely and
appropriate manner any petition filed against it in any
involuntary case under such bankruptcy laws or other laws,
(iv) apply for or consent to, or fail to consent in
a timely and appropriate manner, the appointment of, or the
taking of possession by, a receiver, custodian, trustee, or
liquidator or itself or of a substantial part of its property,
domestic or foreign,
(v) admit in writing its inability to pay its debts
as they become due,
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(vi) make a general assignment for the benefit of
creditors, or
(vii) take any corporate action for the purpose of
authorizing any of the foregoing.
(h) Involuntary Bankruptcy Proceeding. A case or other
proceeding shall be commenced against the Borrower or any of its
Subsidiaries in any court of competent jurisdiction seeking
(i) relief under the federal bankruptcy laws (as
now or hereafter in effect) or under any other laws, domestic
or foreign, relating to bankruptcy, insolvency,
reorganization, winding up or adjustment of debts,
(ii) the appointment of a trustee, receiver,
custodian, liquidator or the like of the Borrower, any of its
Subsidiaries or of all or any substantial part of the assets,
domestic or foreign, of the Borrower or any of its
Subsidiaries,
and such case or proceeding shall continue undismissed or unstayed for
a period of 60 consecutive calendar days, or an order granting the
relief requested in such case or proceeding against the Borrower or any
of its Subsidiaries (including, but not limited to, an order for relief
under such federal bankruptcy laws) shall be entered.
(i) Failure of Agreements. The Borrower shall challenge the
validity and binding effect of any provision of any Loan Document after
delivery thereof hereunder or shall state its intention to make such a
challenge in writing, or any Loan Document, after delivery thereof
hereunder, shall for any reason (except to the extent permitted by the
terms thereof) cease to create a valid and perfected first priority
Lien (except for Permitted Liens) on, or security interest in, any of
the Collateral purported to be covered thereby.
(j) Judgment. A final, unappealable judgment or order for the
payment of money in an amount that exceeds the uncontested insurance
available therefor by $500,000 or more shall be entered against the
Borrower by any court and such judgment or order shall continue
undischarged or unstayed for 10 days.
(k) Attachment. A warrant or writ of attachment or execution
or similar process which exceeds $500,000 in value shall be issued
against any property of the Borrower and such warrant or process shall
continue undischarged or unstayed for 10 days.
(l) Loan Documents. Any event of default under any Loan
Document other than this Agreement shall occur or the Borrower shall
default in the performance or observance of any term, covenant,
condition or agreement contained in, or the payment of any other sum
covenanted to be paid by the Borrower under, any such Loan Document;
PROVIDED, HOWEVER that no event of default under any such Loan Document
shall be deemed to have occurred until any notice required under such
Loan Document has been given and any grace period granted under such
Loan Document has expired.
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(m) ERISA.
(i) Any Termination Event with respect to a Plan
shall occur that, after taking into account the excess, if
any, of (A) the fair market value of the assets of any other
Plan with respect to which a Termination Event occurs on the
same day (but only to the extent that such excess if the
property of the Borrower) over (B) the present value on such
day of all vested nonforfeitable benefits under such other
Plan, results in an Unfunded Vested Accrued Benefit in excess
of $0.00, or
(ii) any Plan shall incur an "accumulated funding
deficiency" (as defined in Section 412 of the Internal Revenue
Code or Section 302 of ERISA) for which a waiver has not been
obtained in accordance with the applicable provisions of the
Internal Revenue Code and ERISA, or
(iii) the Borrower is in "default" (as defined in
Section 4219(c)(5) of ERISA) with respect to payments to a
Multiemployer Plan resulting from the Borrower's complete or
partial withdrawal (as described in Section 4203 or 4205 of
ERISA) from such Multiemployer Plan.
(n) Change in Control. Blount and the members of his immediate
family shall cease to own, beneficially and of record, at least 51% of
the outstanding capital stock of the Borrower.
(o) General Insecurity. The occurrence of any event or
condition which, in the Agent's or the Required Lenders' discretion,
constitutes a Material Adverse Effect.
SECTION 13.2. Remedies.
(a) Automatic Acceleration and Termination of Facilities. Upon
the occurrence of an Event of Default with respect to the Borrower
specified in SECTION 13.1(G) or (H), (i) the principal of and the
interest on the Loans and any Note at the time outstanding, and all
other amounts owed to the Agent or the Lenders under this Agreement or
any of the Loan Documents and all other Secured Obligations, shall
thereupon become due and payable without presentment, demand, protest,
or other notice of any kind, all of which are expressly waived,
anything in this Agreement or any of the Loan Documents to the contrary
notwithstanding, and (ii) the Revolving Credit Facility and the right
of the Borrower to request borrowings under this Agreement shall
immediately terminate.
(b) Other Remedies. If any Event of Default shall have
occurred, and during the continuance of any such Event of Default, the
Agent may, and at the direction of the Required Lenders in their sole
and absolute discretion shall, do any of the following:
(i) declare the principal of and interest on the
Loans and any Note at the time outstanding, and all other
amounts owed to the Agent or the Lenders under this Agreement
or any of the Loan Documents and all other Secured
Obligations, to be forthwith due and payable, whereupon the
same shall immediately become due and
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payable without presentment, demand, protest or other notice
of any kind, all of which are expressly waived, anything in
this Agreement or the Loan Documents to the contrary
notwithstanding;
(ii) terminate the Revolving Credit Facility and any
other right of the Borrower to request borrowings hereunder;
(iii) notify, or request the Borrower to notify, in
writing or otherwise, any Account Debtor or obligor with
respect to any one or more of the Receivables to make payment
to the Agent, for the benefit of the Lenders, or any agent or
designee of the Agent, at such address as may be specified by
the Agent and if, notwithstanding the giving of any notice,
any Account Debtor or other such obligor shall make payments
to the Borrower, the Borrower shall hold all such payments it
receives in trust for the Agent, for the account of the
Lenders, without commingling the same with other funds or
property of, or held by, the Borrower, and shall deliver the
same to the Agent or any such agent or designee of the Agent
immediately upon receipt by the Borrower in the identical form
received, together with any necessary endorsements;
(iv) settle or adjust disputes and claims directly
with Account Debtors and other obligors on Receivables for
amounts and on terms which the Agent considers advisable and
in all such cases only the net amounts received by the Agent,
for the account of the Lenders, in payment of such amounts,
after deductions of costs and attorneys' fees, shall
constitute Collateral and the Borrower shall have no further
right to make any such settlements or adjustments or to accept
any returns of merchandise;
(v) enter upon any premises in which Inventory or
Equipment may be located and, without resistance or
interference by the Borrower, take physical possession of any
or all thereof and maintain such possession on such premises
or move the same or any part thereof to such other place or
places as the Agent shall choose, without being liable to the
Borrower on account of any loss, damage or depreciation that
may occur as a result thereof, so long as the Agent shall act
reasonably and in good faith;
(vi) require the Borrower to and the Borrower shall,
without charge to the Agent or any Lender, assemble the
Inventory and Equipment and maintain or deliver it into the
possession of the Agent or any agent or representative of the
Agent at such place or places as the Agent may designate and
as are reasonably convenient to both the Agent and the
Borrower;
(vii) at the expense of the Borrower, cause any of
the Inventory and Equipment to be placed in a public or field
warehouse, and the Agent shall not be liable to the Borrower
on account of any loss, damage or depreciation that may occur
as a result thereof, so long as the Agent shall act reasonably
and in good faith;
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(viii) without notice, demand or other process, and
without payment of any rent or any other charge, enter any of
the Borrower's premises and, without breach of the peace,
until the Agent, on behalf of the Lenders, completes the
enforcement of its rights in the Collateral, take possession
of such premises or place custodians in exclusive control
thereof, remain on such premises and use the same and any of
the Borrower's Equipment, for the purpose of (A) completing
any work in process, preparing any Inventory for disposition
and disposing thereof, and (B) collecting any Receivable, and
the Agent for the benefit of the Lenders is hereby granted a
license or sublicense and all other rights as may be
necessary, appropriate or desirable to use the Proprietary
Rights in connection with the foregoing, and the rights of the
Borrower under all licenses, sublicenses and franchise
agreements shall inure to the Agent for the benefit of the
Lenders (provided, however, that any use of any federally
registered trademarks as to any goods shall be subject to the
control as to the quality of such goods of the owner of such
trademarks and the goodwill of the business symbolized
thereby);
(ix) exercise any and all of its rights under any
and all of the Security Documents, including, without
limitation, the Construction Loan Agreements;
(x) apply any Collateral consisting of cash to the
payment of the Secured Obligations in any order in which the
Agent, on behalf of the Lenders, may elect or use such cash in
connection with the exercise of any of its other rights
hereunder or under any of the Security Documents;
(xi) establish or cause to be established one or
more Lockboxes or other arrangement for the deposit of
proceeds of Receivables, and, in such case, the Borrower
shall cause to be forwarded to the Agent at the Agent's
Office, on a daily basis, copies of all checks and other
items of payment and deposit slips related thereto deposited
in such Lockboxes, together with collection reports in form
and substance satisfactory to the Agent; and
(xii) exercise all of the rights and remedies of a
secured party under the Uniform Commercial Code and under any
other Applicable Law, including, without limitation, the
right, without notice except as specified below and with or
without taking the possession thereof, to sell the Collateral
or any part thereof in one or more parcels at public or
private sale, at any location chosen by the Agent, for cash,
on credit or for future delivery, and at such price or prices
and upon such other terms as the Agent may deem commercially
reasonable. The Borrower agrees that, to the extent notice of
sale shall be required by law, at least 10 days notice to the
Borrower of the time and place of any public sale or the time
after which any private sale is to be made shall constitute
reasonable notification, but notice given in any other
reasonable manner or at any other reasonable time shall
constitute reasonable notification. The Agent shall not be
obligated to make any sale of Collateral regardless of notice
of sale having been given. The Agent may adjourn any public or
private sale from time to time by announcement at the time and
place fixed
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therefor, and such sale may, without further notice, be made
at the time and place to which it was so adjourned.
SECTION 13.3. Application of Proceeds. All proceeds from each
sale of, or other realization upon, all or any part of the Collateral following
an Event of Default shall be applied or paid over as follows:
(a) First: to the payment of all costs and expenses incurred
in connection with such sale or other realization, including reasonable
attorneys' fees,
(b) Second: to the payment of the Secured Obligations (with
the Borrower remaining liable for any deficiency) as the Agent may
elect,
(c) Third: the balance (if any) of such proceeds shall be paid
to the Borrower, subject to any duty imposed by law, or otherwise to
whomsoever shall be entitled thereto.
THE BORROWER SHALL REMAIN LIABLE AND WILL PAY, ON DEMAND, ANY DEFICIENCY
REMAINING IN RESPECT OF THE SECURED OBLIGATIONS, TOGETHER WITH INTEREST THEREON
AT A RATE PER ANNUM EQUAL TO THE HIGHEST RATE THEN PAYABLE HEREUNDER ON SUCH
SECURED OBLIGATIONS, WHICH INTEREST SHALL CONSTITUTE PART OF THE SECURED
OBLIGATIONS.
SECTION 13.4. Power of Attorney. In addition to the
authorizations granted to the Agent under SECTION 9.13 or under any other
provision of this Agreement or of any other Loan Document, during the
continuance of an Event of Default, the Borrower hereby irrevocably designates,
makes, constitutes and appoints the Agent (and all Persons designated by the
Agent from time to time) as the Borrower's true and lawful attorney, and agent
in fact, and the Agent, or any agent of the Agent, may, without notice to the
Borrower, and at such time or times as the Agent or any such agent in its sole
discretion may determine, in the name of the Borrower, the Agent or the Lenders,
(i) demand payment of the Receivables,
(ii) enforce payment of the Receivables by legal
proceedings or otherwise,
(iii) exercise all of the Borrower's rights and
remedies with respect to the collection of Receivables,
(iv) settle, adjust, compromise, extend or renew any
or all of the Receivables,
(v) settle adjust or compromise any legal
proceedings brought to collect the Receivables,
(vi) discharge and release the Receivables or any of
them,
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(vii) prepare, file and sign the name of the
Borrower on any proof of claim in bankruptcy or any similar
document against any Account Debtor,
(viii) prepare, file and sign the name of the
Borrower on any notice of Lien, assignment or satisfaction of
Lien, or similar document in connection with any of the
Collateral,
(ix) endorse the name of the Borrower upon any
chattel paper, document, instrument, notice, freight bill,
bill of lading or similar document or agreement relating to
the Receivables, the Inventory or any other Collateral,
(x) use the stationery of the Borrower and sign
the name of the Borrower to verifications of the Receivables
and on any notice to the Account Debtors,
(xi) open the Borrower's mail,
(xii) notify the post office authorities to change
the address for delivery of the Borrower's mail to an address
designated by the Agent, and
(xiii) use the information recorded on or contained
in any data processing equipment and computer hardware and
software relating to the Receivables, Inventory or other
Collateral to which the Borrower have access.
SECTION 13.5. Miscellaneous Provisions Concerning Remedies.
(a) Rights Cumulative. The rights and remedies of the Agent
and the Lenders under this Agreement, the Notes and each of the Loan
Documents shall be cumulative and not exclusive of any rights or
remedies which it or they would otherwise have. In exercising such
rights and remedies the Agent and the Lenders may be selective and no
failure or delay by the Agent or any Lender in exercising any right
shall operate as a waiver of it, nor shall any single or partial
exercise of any power or right preclude its other or further exercise
or the exercise of any other power or right.
(b) Waiver of Marshalling. The Borrower hereby waives any
right to require any marshalling of assets and any similar right.
(c) Limitation of Liability. Nothing contained in this ARTICLE
13 or elsewhere in this Agreement or in any of the Loan Documents shall
be construed as requiring or obligating the Agent, any Lender or any
agent or designee of the Agent or any Lender to make any demand, or to
make any inquiry as to the nature or sufficiency of any payment
received by it, or to present or file any claim or notice or take any
action, with respect to any Receivable or any other Collateral or the
monies due or to become due thereunder or in connection therewith, or
to take any steps necessary to preserve any rights against prior
parties, and the Agent, the Lenders and their agents or designees shall
have no liability to the Borrower for actions taken pursuant to this
ARTICLE 13, any other provision of this
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Agreement or any of the Loan Documents so long as the Agent or such
Lender shall act reasonably and in good faith.
(d) Appointment of Receiver. In any action under this ARTICLE
13, the Agent shall be entitled during the continuance of an Event of
Default to the appointment of a receiver, without notice of any kind
whatsoever, to take possession of all or any portion of the Collateral
and to exercise such power as the court shall confer upon such
receiver.
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ARTICLE 14
ASSIGNMENTS
SECTION 14.1. Successors and Assigns; Participations.
(a) This Agreement shall be binding upon and inure to the
benefit of the Borrower, the Lenders, the Agent, all future holders of
the Notes, and their respective successors and assigns, except that the
Borrower may not assign or transfer any of its rights or obligations
under this Agreement without the prior written consent of the Required
Lenders.
(b) Each Lender may assign to one or more Eligible Assignees
all or a portion of its interests, rights and obligations under this
Agreement (including, without limitation, all or a portion of the Loans
at the time owing to it and the Notes held by it); provided that (i)
each such assignment shall be of a constant, and not a varying,
percentage of all the assigning Lender's rights and obligations under
this Agreement, (ii) the amount of the Commitment of the assigning
Lender that is subject to each such assignment (determined as of the
date the Assignment and Acceptance with respect to such assignment is
delivered to the Agent) shall in no event be less than the Minimum
Commitment, (iii) in the case of a partial assignment, the amount of
the Commitment that is retained by the assigning Lender (determined as
of the date the Assignment and Acceptance with respect to such
assignment is delivered to the Agent) shall in no event be less than
the Minimum Commitment, (iv) the parties to each such assignment shall
execute and deliver to the Agent, for its acceptance and recording in
the Register (as defined in SECTION 14.1(D)) an Assignment and
Acceptance, together with any Note or Notes subject to such assignment
and such assignee's pro rata share of the Agent's syndication expenses
(pro rata in proportion to the share purchased by such assignee
relative to all assigned shares), (v)such assignment shall not, without
the consent of the Borrower, require the Borrower to file a
registration statement with the Securities and Exchange Commission or
apply to or qualify the Loans or the Notes under the blue sky laws of
any state, and (vi)the representation contained in SECTION 14.2 hereof
shall be true with respect to any such proposed assignee. Upon such
execution, delivery, acceptance and recording, from and after the
effective date specified in each Assignment and Acceptance, which
effective date shall be at least five Business Days after the execution
thereof, (x) the assignee thereunder shall be a party hereto and, to
the extent provided in such Assignment and Acceptance, have the rights
and obligations of a Lender hereunder, and (y) the Lender assignor
thereunder shall, to the extent provided in such assignment, be
released from its obligations under this Agreement.
(c) By executing and delivering an Assignment and Acceptance,
the Lender assignor thereunder and the assignee thereunder confirm to
and agree with each other and the other parties hereto as follows: (i)
other than the representation and warranty that it is the legal and
beneficial owner of the interest being assigned thereby free and clear
of any adverse claim, such Lender assignor makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this
Agreement or the execution, legality, validity, enforceability,
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genuineness, sufficiency or value of this Agreement or any other
instrument or document furnished pursuant hereto; (ii) such Lender
assignor makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the Borrower
or the performance or observance by the Borrower of any of its
obligations under this Agreement or any other instrument or document
furnished pursuant hereto; (iii) such assignee confirms that it has
received a copy of this Agreement, together with copies of the
financial statements referred to in SECTION 7.1(O) and such other
documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into such Assignment and
Acceptance; (iv) such assignee will, independently and without reliance
upon the Agent, such Lender assignor or any other Lender, and based on
such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking
action under this Agreement; (v) such assignee confirms that it is an
Eligible Assignee; (vi) such assignee appoints and authorizes the Agent
to take such action as agent on its behalf and to exercise such powers
under this Agreement and the other Loan Documents as are delegated to
the Agent by the terms hereof and thereof, together with such powers as
are reasonably incidental thereto; and (vii) such assignee agrees that
it will perform in accordance with their terms all of the obligations
which by the terms of this Agreement are required to be performed by it
as a Lender.
(d) The Agent shall maintain a copy of each Assignment and
Acceptance delivered to it and a register for the recordation of the
names and addresses of the Lenders and the Commitment Percentage of,
and principal amount of the Loans owing to, each Lender from time to
time (the "Register"). The entries in the Register shall be conclusive,
in the absence of manifest error, and the Borrower, the Agent and the
Lenders may treat each person whose name is recorded in the Register as
a Lender hereunder for all purposes of this Agreement. The Register
shall be available for inspection by the Borrower or any Lender at any
reasonable time and from time to time upon reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance executed
by an assigning Lender and an Eligible Assignee together with any Note
or Notes subject to such assignment and the written consent to such
assignment, the Agent shall, if such Assignment and Acceptance has been
completed, (i) accept such Assignment and Acceptance, (ii) record the
information contained therein in the Register, (iii) give prompt notice
thereof to the Lenders and the Borrower, and (iv) promptly deliver a
copy of such Acceptance and Assignment to the Borrower. Within five
Business Days after receipt of notice, the Borrower shall execute and
deliver to the Agent in exchange for the surrendered Note or Notes a
new Note or Notes to the order of such Eligible Assignee in amounts
equal to the Commitment Percentage assumed by such Eligible Assignee
pursuant to such Assignment and Acceptance and a new Note or Notes to
the order of the assigning Lender in an amount equal to the Commitment
retained by it hereunder. Such new Note or Notes shall be in an
aggregate principal amount equal to the aggregate principal amount of
such surrendered Note or Notes, shall be dated the effective date of
such Assignment and Acceptance and shall otherwise be in substantially
the form of the assigned Notes delivered to the assignor Lender. Each
surrendered Note or Notes shall be canceled and returned to the
Borrower.
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(f) Each Lender may, without the consent of the Borrower, sell
participations to one or more Eligible Assignees in all or a portion of
its rights and obligations under this Agreement (including, without
limitation, all or a portion of its commitments hereunder and the Loans
owing to it and the Notes held by it); PROVIDED, HOWEVER, that (i) each
such participation shall be in an amount not less than the Minimum
Commitment, (ii) such Lender's obligations under this Agreement
(including, without limitation, its commitments hereunder) shall remain
unchanged, (iii) such Lender shall remain solely responsible to the
other parties hereto for the performance of such obligations, (iv) such
Lender shall remain the holder of the Notes held by it for all purposes
of this Agreement, (v) the Borrower, the Agent and the other Lenders
shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under this
Agreement; PROVIDED, that such Lender may agree with any participant
that such Lender will not, without such participant's consent, agree to
or approve any waivers or amendments which would reduce the principal
of or the interest rate on any Loans, extend the term or increase the
amount of the commitments of such participant, reduce the amount of any
fees to which such participant is entitled, extend any scheduled
payment date for principal or release Collateral securing the Loans
(other than Collateral disposed of pursuant to SECTION 9.7 hereof or
otherwise in accordance with the terms of this Agreement or the
Security Documents), and (vi) any such disposition shall not, without
the consent of the Borrower, require any Borrower to file a
registration statement with the Securities and Exchange Commission to
apply to qualify the Loans or the Notes under the blue sky law of any
state. The Lender selling a participation to any bank or other entity
that is not an Affiliate of such Lender shall give prompt notice
thereof to the Borrower.
(g) Any Lender may, in connection with any assignment,
proposed assignment, participation or proposed participation pursuant
to this SECTION 14.1, disclose to the assignee, participant, proposed
assignee or proposed participant, any information relating to the
Borrower furnished to such Lender by or on behalf of the Borrower,
provided that, prior to any such disclosure, each such assignee,
proposed assignee, participant or proposed participant shall agree with
the Borrower or such Lender (which in the case of an agreement with
only such Lender, the Borrower shall be recognized as a third party
beneficiary thereof) to preserve the confidentiality of any
confidential information relating to the Borrower received from such
Lender.
(h) Notwithstanding SECTIONS 14.1(B) and 14.1(F), neither
NationsBank nor NationsBanc Commercial Corporation shall assign or
grant any participation in its rights, interests, and obligations under
this Agreement without the written consent of Fleet Capital Corporation
or its corporate successor (if Fleet Capital Corporation or any of its
Affiliates then holds any interest in any Loan or Note) unless, after
such assignment or participation, NationsBank and its Affiliates
collectively own, beneficially and of record, at least 25% of all
Lenders' rights, interests, and obligations under this Agreement.
(i) Notwithstanding SECTIONS 14.1(B) and 14.1(F), any Lender
who proposes to assign or to grant any participation in any of its
rights, interests, and obligations under this Agreement (a
"Transferring Lender") must give at least seven Business Days' prior
written notice thereof to each other Lender (each, a "Notified
Lender"), along with a notice that
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each Notified Lender may share in such assignment or participation
under this SECTION 14.1 pro rata in accordance with its Commitment
Percentage for the rights, interests, and obligations being assigned or
participated (the "Transferred Interest"), and a copy of the proposed
documentation for the transfer of the Transferred Interest. (For
example, if a Transferring Lender having a 25% Commitment Percentage
for Revolving Credit Loans proposes to assign half its rights,
interests, and obligations for Revolving Credit Loans (viz., a $10
million "piece"), and at that time there were two Notified Lenders,
having 25% and 50% Commitment Percentages for Revolving Credit Loans,
such Notified Lenders would be entitled to assign to the assignee $2.5
million and $5 million, respectively, of their own rights, interests,
and obligations for Revolving Credit Loans, on the same terms as the
Transferring Lender, and the Transferring Lender would be entitled to
assign to such assignee only $2.5 million, plus any amount not assigned
to such assignee by the Notified Lenders, of the Transferring Lender's
rights, interests, and obligations for Revolving Credit Loans.) To
share in such assignment or participation, a Notified Lender must give
written notice to the Transferring Lender, within five Business Days
after receiving the notice described in the first sentence of this
SECTION 14.1(I), that such Notified Lender will assign or participate
an amount (which shall be specified in such notice to the Transferring
Lender) of its rights, interests, and obligations in accordance with
the terms of this SECTION 14.1(I).
SECTION 14.2. Representation of Lenders. Each Lender hereby
represents that it will make each Loan hereunder as a commercial loan for its
own account in the ordinary course of its business; PROVIDED, HOWEVER, that
subject to SECTION 14.1 hereof, the disposition of the Notes or other evidence
of the Secured Obligations held by any Lender shall at all times be within its
exclusive control.
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ARTICLE 15
AGENT
SECTION 15.1. Appointment of Agent. Each of the Lenders hereby
irrevocably designates and appoints NationsBank, N.A. as the agent of such
Lender under this Agreement and the other Loan Documents, and each such Lender
irrevocably authorizes Agent, subject to the provisions of SECTION 5.6(C), as
the Agent for such Lender to take such action on its behalf under the provisions
of this Agreement and the other Loan Documents and to exercise such powers and
perform such duties as are expressly delegated to the Agent by the terms of this
Agreement and such other Loan Documents, including, without limitation, to make
determinations as to the eligibility of Inventory and Receivables and to lower
the advance ratios contained in the definition of "Borrowing Base", together
with such other powers as are reasonably incidental thereto. Notwithstanding any
provision to the contrary elsewhere in this Agreement or such other Loan
Documents, the Agent shall not have any duties or responsibilities, except those
expressly set forth herein and therein, or any fiduciary relationship with any
Lender, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or the other Loan
Documents or otherwise exist against the Agent.
SECTION 15.2. Delegation of Duties. The Agent may execute any
of its duties under this Agreement and the other Loan Documents by or through
agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Agent shall not be
responsible for the negligence or misconduct of any agents or attorneys-in-fact
selected by it with reasonable care.
SECTION 15.3. Exculpatory Provisions. Neither the Agent nor
any of its trustees, officers, directors, employees, agents, attorneys-in-fact
or other Affiliates (collectively, "Agent and Agent-Persons") shall be (i)
liable to any Lender for any action lawfully taken or omitted to be taken by
Agent or any Agent-Person under or in connection with this Agreement or the
other Loan Documents (except for Agent's or such Agent-Person's own gross
negligence or willful misconduct), or (ii) responsible in any manner to any
Lender for any recitals, statements, representations or warranties made by the
Borrower or any officer thereof contained in this Agreement or the other Loan
Documents or in any certificate, report, statement or other document referred to
or provided for in, or received by the Agent under or in connection with, this
Agreement or the other Loan Documents or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or the other Loan
Documents or for any failure of the Borrower to perform its obligations
hereunder or thereunder. The Agent shall not be under any obligation to any
Lender to ascertain or to inquire as to the observance or performance of any of
the agreements contained in, or conditions of, this Agreement, or to inspect the
properties, books or records of the Borrower; except that, if any Lender so
requests, the Agent will conduct at least two field examinations of the Borrower
per year.
SECTION 15.4. Reliance by Agent. The Agent shall be entitled
to rely, and shall be fully protected in relying, upon any Note, writing,
resolution, notice, consent, certificate, affidavit, letter, cablegram,
telegram, telecopy, telex or teletype message, statement, order or other
document or communication (written or oral) believed by it to be genuine and
correct and to have
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been signed, sent or made by the proper Person or Persons and upon advice and
statements of legal counsel (including, without limitation, counsel to the
Borrower), independent accountants and other experts selected by the Agent. The
Agent may deem and treat the payee named in any Note as the owner thereof for
all purposes unless such Note shall have been transferred in accordance with
SECTION 14.1. The Agent shall be fully justified in failing or refusing to take
any action under this Agreement and the other Loan Documents unless it shall
first receive such advice or concurrence of the Required Lenders as it deems
appropriate or it shall first be indemnified to its satisfaction by the Lenders
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. The Agent shall in all cases be
fully protected in acting, or in refraining from acting, under this Agreement
and the Notes in accordance with a request of the Required Lenders, and such
request and any action taken or failure to act pursuant thereto shall be binding
upon all the Lenders and all future holders of the Notes.
SECTION 15.5. Notice of Default. The Agent shall not be deemed
to have knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless the Agent has received notice from a Lender or the Borrower
referring to this Agreement, describing such Default or Event of Default and
stating that such notice is a "notice of default". In the event that the Agent
receives such a notice, the Agent shall promptly give notice thereof to the
Lenders. The Agent shall take such action with respect to such Default or Event
of Default as shall be reasonably directed by the Required Lenders; PROVIDED
that unless and until the Agent shall have received such directions, the Agent
may (but shall not be obligated to) continue making Revolving Credit Loans to
the Borrower on behalf of the Lenders in reliance on the provisions of SECTION
5.6 and take such other action, or refrain from taking such action, with respect
to such Default or Event of Default as it shall deem advisable in the best
interests of the Lenders.
SECTION 15.6. Non-Reliance on Agent and Other Lenders. Each
Lender expressly acknowledges that neither the Agent nor any of its officers,
directors, employees, agents, attorneys-in-fact or Affiliates has made any
representations or warranties to it and that no act by the Agent hereinafter
taken, including any review of the affairs of the Borrower, shall be deemed to
constitute any representation or warranty by the Agent to any Lender. Each
Lender represents to the Agent that it has, independently and without reliance
upon the Agent or any other Lender, and based on such documents and information
as it has deemed appropriate, made its own appraisal of and investigation into
the business, operations, property, financial and other condition and
creditworthiness of the Borrower and made its own decision to make its Loans
hereunder and enter into this Agreement. Each Lender also represents that it
will, independently and without reliance upon the Agent or any other Lender, and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under this Agreement and the other Loan Documents,
and to make such investigation as it deems necessary to inform itself as to the
business, operations, property, financial and other condition and
creditworthiness of the Borrower. Except as otherwise expressly required by the
Loan Documents, the Agent shall not have any duty or responsibility to provide
any Lender with any credit or other information concerning the business,
operations, property, financial and other condition or creditworthiness of the
Borrower which may come into the possession of the Agent or any of its officers,
directors, employees, agents, attorneys-in-fact or Affiliates.
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SECTION 15.7. Indemnification. The Lenders agree to indemnify
the Agent in its capacity as agent hereunder (to the extent not reimbursed by
the Borrower and without limiting the obligation of the Borrower to do so),
ratably according to their respective Commitment Percentages, from and against
any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind whatsoever which
may at any time (including, without limitation, at any time following the
payment of the Notes) be imposed on, incurred by or asserted against the Agent
in any way relating to or arising out of this Agreement or the other Loan
Documents, or any documents contemplated by or referred to herein or therein or
the transactions contemplated hereby or thereby or any action taken or omitted
by the Agent under or in connection with any of the foregoing; PROVIDED that no
Lender shall be liable for the payment of any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting solely from the Agent's gross negligence or
willful misconduct or resulting solely from transactions or occurrences that
occur at a time after such Lender has assigned all of its interests, rights and
obligations under this Agreement pursuant to SECTION 14.1 or, in the case of a
Lender to which an assignment is made hereunder pursuant to SECTION 14.1, at a
time before such assignment. The agreements in this subsection shall survive the
payment of the Notes, the Secured Obligations and all other amounts payable
hereunder and the termination of this Agreement.
SECTION 15.8. Agent in Its Individual Capacity. The Agent and
its Affiliates may make loans to, accept deposits from and generally engage in
any kind of business with the Borrower, Blount, or any of the Borrower's
Affiliates if the Agent were not the agent hereunder. With respect to its
Commitment, the Loans made or renewed by it and any Note issued to it and any
Letter of Credit issued by it, the Agent shall have and may exercise the same
rights and powers under this Agreement and the other Loan Documents and is
subject to the same obligations and liabilities as and to the extent set forth
herein and in the other Loan Documents for any other Lender. The terms "Lenders"
or "Required Lenders" or any other term shall, unless the context clearly
otherwise indicates, include the Agent in its individual capacity as a Lender or
one of the Required Lenders.
SECTION 15.9. Successor Agent. The Agent may resign as agent
under this Agreement upon 30 days notice to the Lenders. If the Agent shall
resign as agent under this Agreement, then the Required Lenders shall appoint
from among the Lenders a successor agent for the Lenders which successor agent
shall be approved by the Borrower (which approval shall not be unreasonably
withheld and is hereby deemed given with respect to the appointment as successor
agent of NationsBank, Fleet Capital Corporation, NationsBanc Commercial
Corporation, or any Eligible Assignee), whereupon such successor agent shall
succeed to the rights, powers and duties of the Agent, and the term "Agent"
shall mean such successor agent effective upon its appointment, and the former
Agent's rights, powers and duties as agent hereunder shall be terminated,
without any other or further act or deed on the part of such former Agent or any
of the parties to this Agreement or any holders of the Notes. The effective date
of an Agent's resignation shall in all cases be postponed until a successor
agent has been appointed. After any retiring Agent's resignation hereunder as
agent, the provisions of SECTION 15.7 shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Agent under this
Agreement.
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SECTION 15.10. Notices from Agent to Lenders. The Agent shall
promptly, upon receipt thereof, forward to each Lender copies of any written
notices, reports or other information supplied to it by the Borrower which is
requested by such Lender or which the Borrower is not required to supply
directly to the Lenders.
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ARTICLE 16
MISCELLANEOUS
SECTION 16.1. Notices.
(a) Method of Communication. Except as specifically provided
in this Agreement or in any of the Loan Documents, all notices and the
communications hereunder and thereunder shall be in writing or by
telephone, subsequently confirmed in writing. Notices in writing shall
be delivered personally or sent by certified or registered mail,
postage pre-paid, or by overnight courier or facsimile transmission and
shall be deemed received in the case of personal delivery, when
delivered, in the case of mailing, when receipted for, in the case of
overnight delivery, on the next Business Day after delivery to the
courier, and in the case of facsimile transmission, upon transmittal,
provided that in the case of notices to the Agent, notice shall be
deemed to have been given only when such notice is actually received by
the Agent. A telephonic notice to the Agent, as understood by the
Agent, will be deemed to be the controlling and proper notice in the
event of a discrepancy with or failure to receive a confirming written
notice.
(b) Addresses for Notices. Notices to any party shall be sent
to it at the following addresses, or any other address of which all the
other parties are notified in writing
If to the Borrower: Meadowcraft, Inc.
1401 Meadowcraft Road
Birmingham, Alabama 35215
Attn.: Steve Braswell, CFO
Facsimile No.: (205) 854-4054
If to the Agent: NationsBank, N.A.
One Perimeter Park South
Suite 100-N
Birmingham, Alabama 35243
Attn.: W. Alan Schweer
Facsimile No.: 205-970-6176
If to a Lender: At the address of such
Lender set forth on the signature
page hereof.
(c) Agent's Office. The Agent hereby designates its office
located at 600 Peachtree Street, Atlanta, Georgia 30308, or any
subsequent office which shall have been specified for such purpose by
written notice to the Borrower, as the office to which payments due are
to be made and at which Loans will be disbursed.
SECTION 16.2. Expenses. The Borrower agrees to pay or
reimburse on demand all costs and expenses incurred by the Agent or any Lender,
including, without limitation, the reasonable fees and disbursements of counsel,
in connection with
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(a) the negotiation, preparation, execution, delivery,
administration, enforcement and termination of this Agreement and each
of the other Loan Documents, whenever the same shall be executed and
delivered, including, without limitation
(i) the out-of-pocket costs and expenses incurred in
connection with the administration and interpretation of this Agreement
and the other Loan Documents;
(ii) the costs and expenses of appraisals of the Collateral;
(iii) the costs and expenses of lien and title searches and
title insurance;
(iv) the costs and expenses of environmental reports with
respect to the Real Estate;
(v) taxes, fees and other charges for recording the
Mortgages, filing the Financing Statements and continuations and the
costs and expenses of taking other actions to perfect, protect, and
continue the Security Interests;
PROVIDED, HOWEVER, that the Borrower shall not be required to pay the
expenses of any Person which becomes a Lender more than 90 days after
the Effective Date incurred in connection with such Person's so
becoming a Lender;
(b) the negotiation, preparation, execution and delivery of
any actual or proposed waiver, amendment, supplement or consent by the
Agent or the Lenders relating to this Agreement or any of the Loan
Documents;
(c) sums paid or incurred to pay any amount or take any action
required of the Borrower under the Loan Documents that the Borrower
fails to pay or take;
(d) costs of inspections and verifications of the Collateral
(including per diem fees charged by the Agent, travel, lodging, and
meals) for inspections of the Collateral and the Borrower's operations
and books and records by the Agent up to four times per year,
regardless of whether an Event of Default exists;
(e) costs of inspections and verifications of the Collateral
(including per diem fees charged by the Agent or a Lender, travel,
lodging, and meals) for inspections of the Collateral and the
Borrower's operations and books and records by the Agent or any Lender,
whenever an Event of Default exists;
(f) costs and expenses of forwarding loan proceeds, collecting
checks and other items of payment, and establishing and maintaining
each Controlled Disbursement Account, Agency Account and Lockbox;
(g) costs and expenses of preserving and protecting the
Collateral;
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(h) consulting, after the occurrence of a Default, with one or
more Persons, including appraisers, accountants and lawyers, concerning
the value of any Collateral for the Secured Obligations or related to
the nature, scope or value of any right or remedy of the Agent or any
Lender hereunder or under any of the Loan Documents, including any
review of factual matters in connection therewith, which expenses shall
include the fees and disbursements of such Persons;
(i) reasonable costs and expenses paid or incurred to obtain
payment of the Secured Obligations, enforce the Security Interests,
sell or otherwise realize upon the Collateral, and otherwise enforce
the provisions of the Loan Documents, or to prosecute or defend any
claim in any way arising out of, related to or connected with, this
Agreement or any of the Loan Documents, which expenses shall include
the reasonable fees and disbursements of counsel and of experts and
other consultants retained by the Agent or any Lender.
The foregoing shall not be construed to limit any other provisions of the Loan
Documents regarding costs and expenses to be paid by the Borrower. The Borrower
hereby authorizes the Agent and the Lenders to debit the Borrower's Loan
Accounts (by increasing the principal amount of the Revolving Credit Loan) in
the amount of any such costs and expenses owed by the Borrower when due.
SECTION 16.3. Stamp and Other Taxes. The Borrower will pay any
and all stamp, registration, recordation and similar taxes, fees or charges and
shall indemnify the Agent and the Lenders against any and all liabilities with
respect to or resulting from any delay in the payment or omission to pay any
such taxes, fees or charges, which may be payable or determined to be payable in
connection with the execution, delivery, performance or enforcement of this
Agreement and any of the Loan Documents or the perfection of any rights or
security interest thereunder, including, without limitation, the Security
Interest.
SECTION 16.4. Setoff. In addition to any rights now or
hereafter granted under Applicable Law and not by way of limitation of any such
rights, during the continuance of any Event of Default, each Lender and each
Affiliate of each Lender are hereby authorized by the Borrower at any time or
from time to time, without notice to the Borrower or to any other Person, any
such notice being hereby expressly waived, to set off and to appropriate and to
apply any and all deposits (general or special, including, but not limited to,
indebtedness evidenced by certificates of deposit, whether matured or unmatured)
and any other indebtedness at any time held or owing by any Lender or any
Affiliate of any Lender to or for the credit or the account of the Borrower
against and on account of the Secured Obligations (any such setoff and
appropriation to be subject in all respects to SECTION 16.22 and, as to the
Factor, to limitations in the Assignment of Factoring Proceeds), irrespective or
whether or not:
(a) the Agent or such Lender shall have made any demand under
this Agreement or any of the Loan Documents, or
(b) the Agent or such Lender shall have declared any or all of
the Secured Obligations to be due and payable as permitted by SECTION
13.2 and although such Secured Obligations shall be contingent or
unmatured.
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SECTION 16.5. Litigation. THE BORROWER, THE AGENT AND EACH
LENDER HEREBY KNOWINGLY, INTENTIONALLY AND VOLUNTARILY WAIVE TRIAL BY JURY IN
ANY ACTION OR PROCEEDING OF ANY KIND OR NATURE IN ANY COURT IN WHICH AN ACTION
MAY BE COMMENCED BY OR AGAINST THE BORROWER, THE AGENT AND SUCH LENDER ARISING
OUT OF THIS AGREEMENT, THE COLLATERAL OR ANY ASSIGNMENT THEREOF OR BY REASON OF
ANY OTHER CAUSE OR DISPUTE WHATSOEVER BETWEEN THE BORROWER AND THE AGENT OR ANY
LENDER OF ANY KIND OR NATURE. The Borrower, the Agent and the Lenders hereby
agree that the federal court of the Northern District of Georgia or, at the
option of the Agent or any Lender, any court in which the Agent or such Lender
shall initiate legal or equitable proceedings and which has subject matter
jurisdiction over the matter in controversy, shall have nonexclusive
jurisdiction to hear and determine any claims or disputes between the Borrower
and the Agent or such Lender, pertaining directly or indirectly to this
Agreement or the Loan Documents or to any matter arising therefrom. The Borrower
expressly submits and consents in advance to such jurisdiction in any action or
proceeding commenced in such courts, hereby waiving personal service of the
summons and complaint, or other process or papers issued therein and agreeing
that service of such summons and complaint or other process or papers may be
made by registered or certified mail addressed to the Borrower at the address of
the Borrower set forth in SECTION 16.1. Should the Borrower fail to appear or
answer any summons, complaint, process or papers so served within 30 days after
the mailing thereof, it shall be deemed in default and an order and/or judgment
may be entered against it as demanded or prayed for in such summons, complaint,
process or papers. The nonexclusive choice of forum set forth in this section
shall not be deemed to preclude the enforcement of any judgment obtained in such
forum or the taking of any action under this Agreement to enforce same in any
appropriate jurisdiction.
SECTION 16.6. Waiver of Rights. THE BORROWER HEREBY KNOWINGLY,
INTENTIONALLY AND VOLUNTARILY WAIVES ALL RIGHTS WHICH BORROWER HAS UNDER CHAPTER
14 OF TITLE 44 OF THE OFFICIAL CODE OF GEORGIA OR UNDER ANY SIMILAR PROVISION OF
APPLICABLE LAW TO NOTICE AND TO A JUDICIAL HEARING PRIOR TO THE ISSUANCE OF A
WRIT OF POSSESSION ENTITLING THE AGENT OR ANY LENDER, OR THE SUCCESSORS AND
ASSIGNS OF THE AGENT OR SUCH LENDER TO POSSESSION OF THE COLLATERAL UPON EVENT
OF DEFAULT. Without limiting the generality of the foregoing and without
limiting any other right which the Agent or the Lenders may have, the Borrower
consents that if the Agent files a petition for an immediate writ of possession
in compliance with Sections 44-14-261 and 44-14-262 of the Official Code of
Georgia or under any similar provision of applicable law, and this waiver or a
copy hereof is alleged in such petition and attached thereto, the court before
which such petition is filed may dispense with all rights and procedures herein
waived and may issue forthwith an immediate writ of possession in accordance
with Chapter 14 of Title 44 of the Official Code of Georgia or in accordance
with any similar provision of applicable law, without the necessity of an
accompanying bond as otherwise required by Section 44-14-263 of the Official
Code of Georgia or by any similar provision under applicable law.
SECTION 16.7. Consent to Advertising and Publicity. With
the prior written consent of the Borrower, which consent shall not be
unreasonably withheld, the Agent, on behalf of the Lenders, may issue and
disseminate to the public information describing the credit
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accommodation entered into pursuant to this Agreement, including the name and
address of the Borrower, the amount, interest rate, maturity, collateral and a
general description of the Borrower's business.
SECTION 16.8. Reversal of Payments. The Agent and each Lender
shall have the continuing and exclusive right to apply, reverse and re-apply any
and all payments to any portion of the Secured Obligations in a manner
consistent with the terms of this Agreement. To the extent the Borrower makes a
payment or payments to the Agent, for the account of the Lenders, or any Lender
receives any payment or proceeds of the Collateral for the Borrower's benefit,
which payment(s) or proceeds or any part thereof are subsequently 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
payment or proceeds received, the Secured Obligations or part thereof intended
to be satisfied shall be revived and continued in full force and effect, as if
such payment or proceeds had not been received by the Agent or such Lender.
SECTION 16.9. Injunctive 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 if any Event of Default shall have occurred and be
continuing, the Agent and the Lenders, if the Agent or any Lender so requests,
shall be entitled to temporary and permanent injunctive relief without the
necessity of proving actual damages.
SECTION 16.10. Accounting Matters. All financial and
accounting calculations, measurements and computations made for any purpose
relating to this Agreement, including, without limitation, all computations
utilized by the Borrower to determine whether it is in compliance with any
covenant contained herein, shall, unless this Agreement otherwise provides or
unless Required Lenders shall otherwise consent in writing, be performed in
accordance with GAAP.
SECTION 16.11. Amendments.
(a) Except as set forth in SUBSECTION (B) below, any term,
covenant, agreement or condition of this Agreement or any of the Loan
Documents may be amended or waived, and any departure therefrom may be
consented to if, but only if, such amendment, waiver or consent is in
writing signed by the Required Lenders and, in the case of an amendment
(other than an amendment described in SECTION 16.11(D)), by the
Borrower, and in any such event, the failure to observe, perform or
discharge any such term, covenant, agreement or condition (whether such
amendment is executed or such waiver or consent is given before or
after such failure) shall not be construed as a breach of such term,
covenant, agreement or condition or as a Default or an Event of
Default. Unless otherwise specified in such waiver or consent, a waiver
or consent given hereunder shall be effective only in the specific
instance and for the specific purpose for which given. In the event
that any such waiver or amendment is requested by the Borrower, the
Agent and the Lenders may require and charge a fee in connection
therewith and consideration thereof in such amount as shall be
determined by the Agent and the Required Lenders in their discretion.
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<PAGE> 127
(b) Except as otherwise set forth in this Agreement, without
the prior unanimous written consent of the Lenders,
(i) no amendment, consent or waiver shall affect
the amount or extend the time of the obligation of the
Lenders to make Loans or extend the originally scheduled
time or times of payment of the principal of any Loan
or alter the time or times of payment of interest on any Loan
or the amount of the principal thereof or the rate of
interest thereon or the amount of any fee payable hereunder
to or for the benefit of the Lenders or permit any
subordination of the principal or interest on such Loan,
permit the subordination of the Security Interests in any
material Collateral or amend the definition of "Borrowing
Base", the definition of "Required Lenders" (or any
requirement that the Agent act or not act as instructed by
Required Lenders), the definition of "Eligible Assignee", the
definition of "Commitment Percentage", the definitions used
in SECTION 5.1 hereof relating to interest rates, the
provisions of ARTICLE 13 or 15 or of SECTION 5.1(C)(V), (VI),
(VII), OR (VIII), 5.9, 14.1(B), 16.11, 16.21, or 16.22, and
the ratable treatment of each Lender with respect to
obligations hereunder or with respect to repayment of Loans
and entitlement to proceeds of Collateral,
(ii) no material Collateral shall be released by the
Agent other than as specifically permitted in this Agreement,
and
(iii) no amendment, consent, or waiver shall be made
with respect to any Note;
PROVIDED, HOWEVER, that anything herein to the contrary
notwithstanding, Required Lenders shall have the right to waive any
Default or Event of Default (other than those caused by Borrower's
failure to comply with a covenant which requires the unanimous written
consent of the Lenders to amend) and the consequences hereunder of such
Default or Event of Default and shall have the right to enter into an
agreement with the Borrower or Blount providing for the forbearance
from the exercise of any remedies provided hereunder or under the other
Loan Documents without waiving any Default or Event of Default.
(c) The making of Loans hereunder by the Lenders during the
existence of a Default or Event of Default shall not be deemed to
constitute a waiver of such Default or Event of Default.
(d) Notwithstanding any provision of this Agreement or the
other loan documents to the contrary, no consent, written or otherwise,
of the Borrower shall be necessary or required in connection with any
amendment to ARTICLE 15 or SECTION 5.6, and any amendment to such
provisions shall be effected solely by and among the Agent and the
Lenders, provided that no such amendment shall impose any additional
obligation on the Borrower.
(e) If a Lender refuses to consent to any requested amendment
or waiver that relates to or is triggered by a then-existing material
Event of Default (failure to consent
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within ten Business Days being deemed in any event a refusal to
consent), then, in order to effectuate such amendment or waiver, the
other Lenders (to the extent that each elects to do so) may at any time
thereafter buy (and such refusing Lender shall sell) all (but, in the
aggregate, not less than all) such refusing Lender's interest, rights,
and obligations under this Agreement (including its Loans and Notes),
for the principal amount of such Lender's Loans and all interest
accrued thereon. Such refusing Lender shall cease to be a "Lender" upon
such sale (but shall retain its rights and be subject to its
obligations for events and circumstances occurring or existing before
it ceases to be a "Lender").
SECTION 16.12. Performance of Borrower's Duties.
(a) The Borrower's obligations under this Agreement and each
of the Loan Documents shall be performed by the Borrower at its sole
cost and expense.
(b) If the Borrower shall fail to do any act or thing which it
has covenanted to do under this Agreement or any of the Loan Documents,
the Agent, on behalf of the Lenders, may (but shall not be obligated
to) do the same or cause it to be done either in the name of the Agent
or the Lenders or in the name and on behalf of the Borrower, and the
Borrower hereby irrevocably authorizes the Agent so to act.
SECTION 16.13. Indemnification. The Borrower agrees to
reimburse the Agent and the Lenders for all costs and expenses, including
reasonable counsel fees and disbursements, incurred, and to indemnify and hold
the Agent and the Lenders harmless from and against all losses suffered by, the
Agent or any Lender in connection with
(i) the exercise by the Agent or any Lender of
any right or remedy granted to it under this Agreement or any
of the Loan Documents,
(ii) any claim, and the prosecution or defense
thereof, arising out of or in any way connected with this
Agreement or any of the Loan Documents, and
(iii) the collection or enforcement of the
Secured Obligations or any of them,
other than such costs, expenses and liabilities arising out of such Person's
gross negligence or willful misconduct.
SECTION 16.14. All Powers Coupled with Interest. All powers of
attorney and other authorizations granted to the Agent and the Lenders and any
Persons designated by the Agent or the Lenders pursuant to any provisions of
this Agreement or any of the Loan Documents shall be deemed coupled with an
interest and shall be irrevocable so long as any of the Secured Obligations
remain unpaid or unsatisfied.
SECTION 16.15. Survival. Notwithstanding any
termination of this Agreement,
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<PAGE> 129
(a) until all Secured Obligations have been irrevocably paid
in full or otherwise satisfied, the Agent, for the benefit of the
Lenders, shall retain its Security Interest and shall retain all rights
under this Agreement and each of the Security Documents with respect to
such Collateral as fully as though this Agreement had not been
terminated,
(b) the indemnities to which the Agent and the Lenders are
entitled under the provisions of this ARTICLE 16 and any other
provision of this Agreement and the Loan Documents shall continue in
full force and effect and shall protect the Agent and the Lenders
against events arising after such termination as well as before, and
(c) in connection with the termination of this Agreement and
the release and termination of the Security Interests, the Agent, on
behalf of itself as agent and the Lenders, may require such assurances
and indemnities as it shall reasonably deem necessary or appropriate to
protect the Agent and the Lenders against loss on account of such
release and termination, including, without limitation, with respect to
credits previously applied to the Secured Obligations that may
subsequently be reversed or revoked.
SECTION 16.16. Titles and Captions. Titles and captions of
Articles, Sections and subsections in this Agreement are for convenience only,
and neither limit nor amplify the provisions of this Agreement.
SECTION 16.17. Severability of Provisions. Any provision of
this Agreement or any Loan Document which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective only to the extent
of such prohibition or unenforceability without invalidating the remainder of
such provision or the remaining provisions hereof or thereof or affecting the
validity or enforceability of such provision in any other jurisdiction.
SECTION 16.18. Governing Law. This Agreement and the Notes
shall be construed in accordance with and governed by the law of the State of
Georgia.
SECTION 16.19. Counterparts. This Agreement may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and shall be binding upon all parties, their successors and assigns, and all of
which taken together shall constitute one and the same agreement.
SECTION 16.20. Reproduction of Documents. This Agreement, each
of the Loan Documents and all documents relating thereto, including, without
limitation, (a)consents, waivers and modifications that may hereafter be
executed, (b)documents received by the Agent or any Lender, and (c)financial
statements, certificates and other information previously or hereafter furnished
to the Agent or any Lender, may be reproduced by the Agent or such Lender by any
photographic, photostatic, microfilm, microcard, miniature photographic or other
similar process and such Person may destroy any original document so produced.
Each party hereto stipulates that, to the extent permitted by Applicable Law,
any such reproduction shall be as admissible in evidence as the original itself
in any judicial or administrative proceeding (whether or not the original shall
be in existence and whether or not such reproduction was made by the Agent or
such Lender in the
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<PAGE> 130
regular course of business), and any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible in evidence.
SECTION 16.21. Increased Capital. If any Lender shall have
determined that the adoption of any applicable law, rule, regulation, guideline,
directive or request (whether or not having force of law) regarding capital
requirements for banks or bank holding companies, or any change therein or in
the interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by such Lender with any of the foregoing
imposes or increases a requirement by such Lender to allocate capital resources
to such Lender's Commitment to make Loans hereunder which has or would have the
effect of reducing the return on such Lender's capital to a level below that
which such Lender could have achieved (taking into consideration such Lender's
then existing policies with respect to capital adequacy and assuming full
utilization of such Lender's capital) but for such adoption, change or
compliance by any amount deemed by such Lender to be material: (i)such Lender
shall promptly after its determination of such occurrence give notice thereof to
the Borrower; and (ii)the Borrower shall pay to such Lender from time to time on
demand such amount as such Lender certifies to be the amount that will
compensate it for such reduction. A certificate of such Lender claiming
compensation under this SECTION 16.21 shall be conclusive in the absence of
manifest error. Such certificate shall set forth the nature of the occurrence
giving rise to such compensation, the additional amount or amounts to be paid to
it hereunder and the method by which such amounts were determined. In
determining such amount, such Lender may use any reasonable averaging and
attribution methods.
SECTION 16.22. Pro-Rata Participation.
(a) If any Lender shall obtain any payment or reduction
(including any amounts received as adequate protection of a deposit
treated as cash collateral under the Bankruptcy Code) of any Secured
Obligation of Borrower hereunder (whether voluntary, involuntary,
through the exercise of any right of set-off, or otherwise) in excess
of its pro rata share of payments or reductions on account of such
Secured Obligations obtained by all of the Lenders, such Lender shall
forthwith (i) notify the other Lenders and the Agent of such receipt,
and (ii) purchase from the other Lenders such participations in the
affected Secured Obligations as shall be necessary to cause such
purchasing Lender to share the excess payment or reduction, net of
costs incurred in connection therewith, on a pro rata basis (in
proportion to all Secured Obligations); PROVIDED, that if all or any
portion of such excess payment or reduction is thereafter recovered
from such purchasing Lender or additional costs are incurred, the
purchase shall be rescinded and the purchase price restored to the
extent of such recovery or such additional costs, but without interest.
The Borrower agrees that any Lender so purchasing a participation from
another Lender pursuant to this SECTION 16.22 may, to the fullest
extent permitted by Applicable Law, exercise all of its rights of
payment (including the right of set-off) with respect to such
participation as fully as if such Lender were the direct creditor of
the Borrower in the amount of such participation.
(b) Each Lender which receives such a secured claim shall
exercise its rights in respect of such secured claim in a manner
consistent with the rights of the Lenders entitled under this SECTION
16.22 to share in the benefits of any recovery on such secured claim.
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<PAGE> 131
(c) The Borrower expressly consents to the foregoing
arrangements.
SECTION 16.23. Not an "Alabama" Transaction. The Borrower, the
Agent, and the Lenders expressly acknowledge and agree that (i) the Borrower's
obligations hereunder were not issued in the State of Alabama, and none of the
Loan Documents were entered into or delivered in the State of Alabama, and (ii)
the transactions contemplated by this Agreement and the related documents are
intended to be transactions in interstate commerce within the meaning of the
Constitution of the United States of America. If, notwithstanding the foregoing,
any court of competent jurisdiction should reach a contrary conclusion, the
Borrower hereby expressly waives, disclaims, and agrees not to assert or
otherwise seek to invoke any right, remedy, or option under or as a result of
any applicable law of the State of Alabama relating to the transacting of
business in Alabama. The Borrower further acknowledges and agrees that it cannot
require the Agent or any Lender to perform any of its obligations hereunder in
the State of Alabama.
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<PAGE> 132
IN WITNESS WHEREOF, the parties hereto have caused this Loan
and Security Agreement to be executed by their duly authorized officers in
several counterparts all as of the day and year first written above.
BORROWER:
MEADOWCRAFT, INC.
[Corporate Seal]
By:
-----------------------------------
William J. McCanna
President
Attest:
By:
----------------------
Larry York
Assistant Secretary
LENDERS:
Commitment Amount: NATIONSBANK, N.A.
47.4% of the Revolving Credit
Facility and each Term Loan,
Letter of Credit, and By:
--------------------------------
David B. Jackson
Senior Vice President
Address: 600 Peachtree St, NE
Atlanta, Georgia 30308
Attn.: W. Alan Schweer
Facsimile No.: 205-970-6176
(Signatures continued on following page)
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<PAGE> 133
(Signatures continued from previous page)
Commitment Amount: FLEET CAPITAL CORPORATION
29% of the Revolving Credit Facility
and each Term Loan, Letter of Credit,
and IRB L/C By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
Address: 300 Galleria Parkway, N.W.,
Suite 800
Atlanta, Georgia 30339
Attn.:
Facsimile No.: 404-859-2483
Commitment Amount: NATIONSBANC COMMERCIAL
CORPORATION
23.6% of the Revolving Credit Facility
and each Term Loan, Letter of Credit,
and IRB L/C By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
Address: 2059 Northlake Parkway
Tucker, Georgia 30084
Attn.: Doug Monda
Facsimile No.: 404-491-4007
AGENT:
NATIONSBANK, N.A.
By:
----------------------------------
David B. Jackson
Senior Vice President
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<PAGE> 1
EXHIBIT 10.4
1997 STOCK OPTION PLAN
OF
MEADOWCRAFT, INC.
1. PURPOSE OF THE PLAN
The purposes of this 1997 Stock Option Plan (the "Plan") of
MEADOWCRAFT, INC. (the "Company") are to:
1.1 furnish incentives to individuals or entities chosen to
receive options because they are considered capable of responding by improving
operations and increasing the profits of the Company;
1.2 encourage selected employees to accept or continue
employment with the Company or its Affiliates; and
1.3 increase the interest of selected employees, officers and
directors in the Company's welfare through their participation in the growth in
value of the common stock, $.01 par value, of the Company (the "Common Stock").
To accomplish the foregoing objectives, this Plan provides a means
whereby individuals may receive options ("Options") to purchase Common Stock.
Options granted under this Plan will be either nonqualified options ("NQOs")
subject to federal income taxation upon exercise or Options intended to be
incentive stock options ("ISOs") not subject to immediate federal income
taxation upon exercise (except for the possible application of the alternative
minimum tax provisions).
2. ELIGIBLE PERSONS
2.1 General. Every person who at the date on which an Option
granted to the person becomes effective (the "Grant Date") is a full-time
employee, officer or director of the Company or of any Affiliate is eligible to
receive Options under this Plan.
2.2 Definition of Affiliate. The term "Affiliate," as used in
this Plan, means a "parent corporation" or "subsidiary corporation," as defined
in Section 424 of the Internal Revenue Code of 1986, as amended (the "Code").
The term "employee" shall have the meaning ascribed thereto for purposes of
Section 3401(c) of the Code and the Treasury Regulations promulgated thereunder
and shall include an officer or a director who is also an employee.
3. STOCK SUBJECT TO THIS PLAN
A total of 1,000,000 shares of Common Stock have been reserved for
issuance upon the exercise of Options under the Plan. The shares of Common
Stock covered by the portion of any grant that expires unexercised under this
Plan shall become available again for grants under this Plan. The number
<PAGE> 2
of shares reserved for issuance under this Plan is subject to adjustment in
accordance with the provisions for adjustment in this Plan.
4. ADMINISTRATION
This Plan shall be administered by the Board of Directors of the
Company. The Board of Directors may delegate nondiscretionary administrative
duties to other employees of the Company as it deems proper. The Board of
Directors shall have the authority to select the persons to receive Options
under this Plan, to fix the number of shares that each optionee may purchase,
to set the terms and conditions of each Option, and to determine all other
matters relating to this Plan. All questions of interpretation, implementation
and application of this Plan shall be determined by the Board of Directors.
Such determinations shall be final and binding on all persons. No member of the
Board of Directors shall be liable for any action or determination made in good
faith with respect to the Plan or any option granted under the Plan.
5. GRANTING OF RIGHTS
5.1 Ten Year Limitation. No Options shall be granted under
this Plan after ten years from the effective date of this Plan.
5.2 Written Agreement; Effect. Each Option shall be evidenced
by a written agreement (the "Option Agreement"), in form satisfactory to the
Board of Directors, executed by the Company and by the person to whom such
Option is granted. The Option Agreement shall specify whether each Option it
evidences is a NQO or an ISO. Failure of the grantee to execute an Option
Agreement shall not void or invalidate the grant of an Option. An Option may
not be exercised, however, until the Option Agreement is executed.
5.3 Annual $100,000 Limitation on ISOs. To the extent
required by Section 422(d) of the Code, the aggregate fair market value of
shares of the Common Stock with respect to which incentive stock options are
exercisable for the first time by any individual during any calendar year shall
not exceed $100,000. For this purpose, fair market value shall be the fair
market value of the shares of Common Stock covered by the ISOs when the ISOs
were granted. If by their terms such ISOs taken together would first become
exercisable at a faster rate, this $100,000 limitation shall be applied by
deferring the exercisability of those ISOs or portions of ISOs which have the
highest per share exercise prices. The ISOs or portions of ISOs, the
exercisability of which are so deferred, shall become exercisable on the first
day of the first subsequent calendar year during which they may be exercised,
as determined by applying these same principles of this Section and all other
provisions of this Section and all other provisions of this Plan, including
those relating to the expiration and termination of ISOs.
5.4 Advance Approvals. The Board of Directors may approve the
grant of Options to a person who is expected to become an employee, officer or
member of the Board of Directors of the Company, but is not an employee,
officer or member of the Board of Directors at the date of approval. In such
cases, the Option shall be deemed granted, without further approval, on the
date the grantee becomes an employee, officer or member of the Board of
Directors, and must satisfy all requirements of this Plan for Options granted
on that date.
2
<PAGE> 3
6. TERMS AND CONDITIONS OF OPTIONS
Each Option shall be designated as an ISO or a NQO and shall
be subject to the terms and conditions set forth in Section 6.1. NQOs shall
also be subject to the terms and conditions set forth in Section 6.2, but not
those set forth in Section 6.3. ISOs shall also be subject to the terms and
conditions set forth in Section 6.3, but not those set forth in Section 6.2.
6.1 Terms and Conditions to Which All Options Are Subject.
All Options shall be subject to the following terms and conditions:
(a) Changes in Capital Structure. Subject to Section 6.1(b),
if the Common Stock of the Company is changed by reason of a stock split,
reverse stock split, stock dividend, or recapitalization, or converted into or
exchanged for other securities as a result of a merger, consolidation, or
reorganization, appropriate adjustments shall be made in (A) the number and
class of shares of stock subject to this Plan and each outstanding Option, and
(B) the exercise price of each outstanding Option; provided, however, that the
Company shall not be required to issue fractional shares as a result of any
such adjustment. Each such adjustment shall be determined by the Board of
Directors in its sole discretion, which determination shall be final and
binding on all persons.
(b) Corporate Transactions. New option rights may be
substituted for Options granted, or the Company's obligations as to outstanding
Options may be assumed, by an employer corporation other than the Company, or
an Affiliate thereof, in connection with any merger, consolidation,
acquisition, separation, reorganization, dissolution, liquidation, sale, or
like occurrence in which the Company is involved ("Corporate Transaction") and
which the Board of Directors determines, in its absolute discretion, would
materially alter the Company's capital structure. Substitution shall be done in
such manner that the then outstanding Options which are ISOs will continue to
be "incentive stock options" within the meaning of Section 422 of the Code to
the full extent permitted thereby. Notwithstanding the provisions of Section
6.1(a), if such an event occurs and if such employer corporation, or an
Affiliate thereof, does not substitute new option rights for, and substantially
equivalent to, the outstanding Options granted hereunder, or assume the
outstanding Options granted hereunder, or if there is no employer corporation,
or if the Board of Directors determines, in its sole discretion, that
outstanding Options should not then continue to be outstanding, the Board of
Directors may upon ten (10) days prior written notice to optionees in its
absolute discretion (A) shorten the period during which Options are exercisable
(provided they remain exercisable, to the extent otherwise exercisable, for at
least thirty (30) days after the date the notice is given), or (B) cancel
Options upon payment to the optionee in cash, with respect to each Option to
the extent then exercisable, of an amount which, in the absolute discretion of
the Board of Directors, is determined to be equivalent to any excess of the
fair market value (at the effective time of the Corporate Transaction) of the
consideration that the optionee would have received if the Option had been
exercised before the effective time of the Corporate Transaction, over the
exercise price of the Option; provided, however, if there is a successor
corporation and replacement options are not granted by the successor
corporation, all outstanding Options shall become exercisable prior to the
consummation of the Corporate Transaction such that the optionees shall have
not less than thirty (30) days to exercise their Options and become
stockholders of record entitled to receive the consideration paid to the other
stockholders of the Company. Furthermore, notwithstanding the provisions of
this Section 6.1(b), the Company may, in its sole discretion, provide in any
Option Agreement that all Options granted thereunder shall vest and become
immediately exercisable for a period of at least thirty (30) days prior to the
consummation of a Corporate Transaction. If an optionee fails to exercise his
option within any exercise period described in this
3
<PAGE> 4
paragraph and the Corporate Transaction is consummated, his option shall no
longer be exercisable. Any unexercised option shall be cancelled and
terminated. Notwithstanding anything herein to the contrary, nothing shall
extend an optionee's right to exercise an Option after the expiration of ten
(10) years from the date it is granted. The actions described in this Section
may be taken without regard to any resulting tax consequences to the optionee.
(c) Option Grant Date. Each Option Agreement shall specify
the date as of which it shall be effective, which date shall be the Grant Date
(determined pursuant to Section 5.4 in the case of advance approvals).
(d) Fair Market Value. For purposes of this Plan, the fair
market value of the Company's Common Stock shall be determined as follows:
(1) if the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the New York
Stock Exchange, its fair market value shall be the closing sales price for the
Common Stock, or the mean between the high bid and low asked prices if no sales
were reported, as quoted on such system or exchange (or the largest such
exchange) for the date the value is to be determined (or if there are no sales
or bids for such date, then for the last preceding business day on which there
were sales or bids), as reported in the Wall Street Journal or similar
publication;
(2) if the Common Stock is regularly quoted by a
recognized securities dealer but selling prices are not reported, its fair
market value shall be the mean between the high bid and low asking prices for
the Common Stock on the date the value is to be determined (or if there are no
quoted prices for the date of grant, then for the last preceding business day
on which there were quoted prices); or
(3) in the absence of an established market for the
Common Stock, the fair market value shall be determined in "good faith" by the
Board of Directors, with reference to the Company's net worth, prospective
earning power, dividend-paying capacity, and other relevant factors, including
sales for the most recent 12-month period, the goodwill of the Company, the
economic outlook in the Company's industry, the Company's position in the
industry and its management and the values of stock of other corporations in
the same or a similar line of business.
(e) Time of Option Exercise. The Options shall become
exercisable as set forth in the Option Agreement.
(f) Nonassignability of Option Rights. No Option shall be
assignable or otherwise transferable by the optionee except by will or by the
laws of descent and distribution. During the life of the optionee, an Option
shall be exercisable only by the optionee or the optionee's guardian or legal
representative.
(g) Payment. Except as provided below, payment in full, in
cash, shall be made for all Common Stock purchased at the time written notice
of exercise of an Option is given to the Company, and proceeds of any payment
shall constitute general funds of the Company. At the time an Option is granted
or before it is exercised, the Board of Directors, in the exercise of its
absolute discretion, may authorize any one or more of the following additional
methods of payment:
4
<PAGE> 5
(1) delivery by the optionee of Common Stock or
other securities of the Company already owned by the optionee for all or part
of the aggregate exercise price of the shares of Common Stock being acquired,
provided the fair market value of such Common Stock or securities is equal on
the date of exercise to the aggregate exercise price of the shares of Common
Stock being acquired, or such portion thereof as the optionee is authorized to
pay by delivery of such Common Stock or securities; and
(2) any other property, so long as such property is
acceptable to the Board of Directors and constitutes valid consideration under
applicable law for the shares being acquired and is surrendered in good form
for transfer.
(h) Termination.
(1) Employees and Officers:
(A) Except as set forth in Section 6.1(h)(1)(B)
hereof, any Options or portions thereof granted to an employee or officer,
which have not expired or been exercised on or before the date on which such
optionee ceases to be an employee or officer of or otherwise affiliated with
the Company ("Termination"), shall expire ninety (90) days after the date of
Termination. A leave of absence duly authorized by the Company shall not be
deemed a Termination or a break in continuous employment.
(B) Notwithstanding the foregoing, if Termination is
due to the death of the optionee, the optionee's personal representative or any
other person who acquires Options from the optionee by will or the applicable
laws of descent and distribution, may, within twelve months after the date of
Termination, exercise such Options to the extent they were exercisable on the
date of Termination.
(2) Board of Directors:
Any Options or portions thereof granted to a
nonemployee member of the Board of Directors, which have not expired or been
exercised on or before the date on which such optionee ceases to be a member of
the Board of Directors for any reason, shall be exercisable by such Optionee,
or such Optionee's personal representative or heirs in the event of the
Optionee's death or disability, for the remaining period of the option term as
provided in Section 6.2(b) hereof to the extent they were exercisable on the
date of Termination.
(i) Other Provisions. Each Option Agreement may contain such
other terms, provisions, and conditions not inconsistent with this Plan,
including rights of repurchase, as may be determined by the Board of Directors,
and each ISO granted under this Plan shall include such provisions and
conditions as are necessary to qualify such option as an "incentive stock
option" within the meaning of Section 422 of the Code.
(j) Withholding and Employment Taxes. At the time of exercise
of an Option, the optionee shall remit to the Company in cash all applicable
federal and state withholding and employment taxes. If and to the extent
authorized and approved by the Board of
5
<PAGE> 6
Directors in its sole discretion, an optionee may elect, by means of a form of
election to be prescribed by the Board of Directors, to have shares of Common
Stock which are acquired upon exercise of an Option withheld by the Company or
tender other shares of Common Stock or other securities of the Company owned by
the optionee to the Company at the time the amount of such taxes is determined
in order to pay the amount of such tax obligations, subject to the following
limitations:
(1) such election shall be irrevocable;
(2) such election shall be subject to the
disapproval of the Board of Directors at any time;
(3) such election may not be made within
six months of the Grant Date of the Option the exercise of which resulted in
the tax withholding obligation (the "Related Option") (except that this
limitation shall not apply in the event death or disability of the optionee
occurs before the expiration of the six-month period); and
(4) such election must be made either (i)
six months before the date that the amount of tax to be withheld upon exercise
of the Related Option is determined or (ii) in any ten-day period before such
tax determination date beginning on the third business day following the date
of release by the Company for publication of quarterly or annual summary
statements of sales or earnings of the Company.
Any shares of Common Stock or other securities so withheld or tendered will be
valued by the Company as of the date they are withheld or tendered. Unless the
Board of Directors otherwise determines, the optionee shall pay to the Company
in cash, promptly when the amount of such obligations become determinable, all
applicable federal and state withholding taxes resulting from the lapse of
restrictions imposed on exercise of an Option, from a transfer or other
disposition of shares of Common Stock acquired upon exercise of an Option or
otherwise related to the Option or the shares of Common Stock acquired upon
exercise of the Option.
6.2 Terms and Conditions to Which Only NQOs Are Subject.
Options granted under this Plan which are designated as NQOs shall be subject
to the following terms and conditions:
(a) Exercise Price. The exercise price of an NQO shall not
be less than the fair market value of the Common Stock on the Grant Date.
(b) Option Term. Unless an earlier expiration date is
specified by the Board of Directors at the Grant Date in the Option Agreement,
each NQO shall expire ten years from its Grant Date.
6.3 Terms and Conditions to Which Only ISOs Are Subject.
Options granted under this Plan which are designated as ISOs shall be subject
to the following terms and conditions:
(a) Exercise Price. The exercise price of an ISO shall be
determined in accordance with the applicable provisions of the Code and shall
in no event be less than the fair market value of the Common Stock at the Grant
Date; provided, however, that the exercise price of an ISO granted to any
person who owns, directly or indirectly (or is treated as owning by reason of
attribution rules, currently set forth in Section 424 of the Code), Common
Stock of the Company constituting more than ten
6
<PAGE> 7
percent of the total combined voting power of all classes of outstanding stock
of the Company or of any Affiliate of the Company shall in no event be less
than 110 percent of such fair market value.
(b) Option Term. Unless an earlier expiration date
is specified by the Board of Directors at the Grant Date in the Option
Agreement, each ISO shall expire ten (10) years from its Grant Date; except
that an ISO granted to any person who owns, directly or indirectly (or is
treated as owning by reason of applicable attribution rules currently set forth
in Section 424 of the Code) stock of the Company constituting more than ten
percent of the total combined voting power of the Company's outstanding stock,
or the stock of any Affiliate of the Company, shall expire five years from its
Grant Date.
(c) Disqualifying Dispositions. If shares of Common
Stock acquired by exercise of an ISO is disposed of within two years from the
Grant Date or within one year after the transfer of the Common Stock to the
optionee, the holder of the Common Stock immediately prior to the disposition
shall promptly notify the Company in writing of the date and terms of the
disposition and shall provide such other information regarding the disposition
as the Company may reasonably require. Such holder shall pay to the Company any
withholding and employment taxes which the Company in its sole discretion deems
applicable. The Company may instruct its stock transfer agent by appropriate
means, including placement of legends on stock certificates, not to transfer
stock acquired by exercise of an ISO unless it has been advised by the Company
that the requirements of this Section have been satisfied.
7. MANNER OF EXERCISE
An optionee wishing to exercise an Option shall give written
notice to the Company at its principal executive office, to the attention of
the Secretary of the Company, accompanied by an executed stock purchase
agreement in form and substance satisfactory to the Company, by payment of the
exercise price and by such other documents as the Board of Directors may
request. The date the Company receives written notice of an exercise hereunder
accompanied by payment of the exercise price and all such other documents will
be considered the date the Option was exercised. Promptly after receipt of
written notice of exercise of an Option, the Company shall, without stock issue
or transfer taxes to the optionee or any other person entitled to exercise the
Option, deliver to the optionee or such other person a certificate or
certificates for the requisite number of shares of Common Stock. An optionee or
transferee of an Option shall not have any privileges as stockholder with
respect to any Common Stock covered by the Option until the date of issuance of
a stock certificate.
8. RELATIONSHIP WITH THE COMPANY
Nothing in this Plan or any Option granted hereunder shall
interfere with or limit in any way the right of the Company to terminate any
optionee's employment, affiliation or other relationship with the Company at
any time, nor confer upon any optionee any right to continue in the employ of,
as an officer of, as a director of, or otherwise affiliated in any way with,
the Company.
9. AMENDMENT, SUSPENSION OR TERMINATION OF THIS PLAN
The Board of Directors may at any time amend, alter, suspend
or discontinue this Plan. The Board of Directors may amend this Plan and the
terms of any Option outstanding hereunder if the amendment is designed to
maximize federal income tax benefits accorded to Options; provided, that with
respect to outstanding Options, the optionee consents to such amendment.
7
<PAGE> 8
10. LIABILITY AND INDEMNIFICATION OF BOARD OF DIRECTORS
No member of the Board of Directors shall be liable for any
act or omission on such member's own part, including but not limited to the
exercise of any power or discretion given to such director under this Plan,
except for those acts or omissions resulting from such director's own gross
negligence or willful misconduct. The Company shall indemnify each present and
future member of the Board of Directors against, and each member of the Board
of Directors shall be entitled without further act on his or her part to
indemnity from the Company for, all expenses (including attorneys' fees and the
amount of judgments and the amount of approved settlements made with a view to
the curtailment of costs of litigation, other than amounts paid to the Company
itself) reasonably incurred by such person in connection with or arising out of
any action, suit, or proceeding to which the Board of Directors or any member
of the Board of Directors may be a party by reason of any action taken or
failure to act under or in connection with the Plan or any option granted or
not granted under the Plan to the full extent permitted by law and by the
Amended and Restated Certificate of Incorporation and Amended and Restated
Bylaws of the Company. The right of indemnity described in this Section 10
shall be in addition to such other rights of indemnification as the members of
the Board of Directors shall otherwise be entitled because of their serving on
the Board of Directors of the Company or as an employee of the Company.
11. EFFECTIVE DATE OF THIS PLAN
This Plan shall become effective upon adoption by the Board
of Directors of the Company.
Adopted by the Board of Directors on July 31, 1997.
8
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our reports
dated August 22, 1997 and to all references to our Firm included in or made a
part of this Registration Statement.
/s/ Arthur Andersen LLP
Birmingham, Alabama
September 26, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
EXHIBIT 27
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF MEADOWCRAFT, INC. FOR THE FISCAL YEAR ENDED MAY 3, 1997
AND FOR THE THIRTEEN WEEKS ENDED JULY 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR 3-MOS
<FISCAL-YEAR-END> MAY-03-1997 JUL-31-1997
<PERIOD-START> APR-29-1996 MAY-04-1997
<PERIOD-END> MAY-03-1997 JUL-31-1997
<CASH> 0 0
<SECURITIES> 0 0
<RECEIVABLES> 63,464 16,458
<ALLOWANCES> 0 0
<INVENTORY> 21,472 11,590
<CURRENT-ASSETS> 85,266 28,341
<PP&E> 57,798 59,869
<DEPRECIATION> 16,670 17,908
<TOTAL-ASSETS> 127,061 71,072
<CURRENT-LIABILITIES> 72,413 24,536
<BONDS> 15,320 13,392
0 0
0 0
<COMMON> 160 160
<OTHER-SE> 39,168 32,984
<TOTAL-LIABILITY-AND-EQUITY> 127,061 71,072
<SALES> 141,945 35,368
<TOTAL-REVENUES> 141,945 35,368
<CGS> 98,315 25,932
<TOTAL-COSTS> 98,315 25,932
<OTHER-EXPENSES> 12,978 2,959
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 5,274 1,161
<INCOME-PRETAX> 25,378 5,316
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 25,378 5,316
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 25,378 5,316
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
<PAGE> 1
EXHIBIT 99.1
CONSENT OF DIRECTOR NOMINEE
Meadowcraft, Inc.:
I hereby consent to the inclusion in the Prospectus and Amendment No. 1
to Registration Statement on Form S-1 of Meadowcraft, Inc. (the "Company") of
my name and information relating to my status as a director nominee of
Meadowcraft, Inc. Effective upon consummation of the offering contemplated by
the Prospectus, I hereby agree to become a director of the Company.
/s/ T. Morris Hackney
----------------------------
T. Morris Hackney
Date: 9/30/97
<PAGE> 1
EXHIBIT 99.2
AFFIDAVIT OF REGISTRANT WITH RESPECT TO
CONSENT OF JAMES M. SCOTT (Director Nominee)
Pursuant to Rule 438 of Regulation C as promulgated by the Securities
and Exchange Commission, the undersigned Samuel R. Blount, Chairman of the
Board of Meadowcraft, Inc. (the "Registrant"), submits this affidavit in lieu
of the written consent of James M. Scott, named as a Director Nominee in the
accompanying Registration Statement, and states as follows:
1. The affiant is the Chairman of the Board of the Registrant.
2. The Board of Directors of the Registrant has nominated James M.
Scott as a Director Nominee and intends to appoint Mr. Scott to
serve as a member of the Board of Directors of the Registrant
effective immediately upon consummation of the Registrant's
initial public offering.
3. Mr. Scott is traveling internationally and is unreachable by
telecopier. The Registrant is unable to obtain a signed consent
from Mr. Scott in connection with the filing of Amendment No. 1
to its Registration Statement on Form S-1.
4. Attached as Exhibit A to this consent is a letter dated
September 18, 1997, from James M. Scott indicating his
willingness to serve as a member of the Board of Directors upon
consummation of the Offering.
Dated, this 30th day of September, 1997.
/s/ Samuel R. Blount
------------------------------
Samuel R. Blount
Chairman of the Board
<PAGE> 2
[CAPEL, HOWARD, KNABE & COBBS, P.A. LETTERHEAD]
September 18, 1997
Mr. William McCanna
President
Meadowcraft, Inc.
1401 Meadowcraft Road
Birmingham, Alabama 35215
Dear Bill:
If you are as effective in inspiring confidence in your employees,
co-workers, customers, suppliers and potential investors as you were with your
two prospective outside directors, Meadowcraft's continued growth in size and
profits is a foregone conclusion. I want to thank you so very much for
spending your time with Reece McKinney and me Tuesday. It was a great day
looking at wonderfully, well-run plants and meeting an absolutely first-rate
management team. I look forward to working with this company, and have every
confidence that whatever business prestige I have in the community will be
greatly enhanced by my association with you and Meadowcraft over the years.
Thanks again. I really look forward to working with you.
Warmest personal regards,
/s/ James M. Scott
James M. Scott
JMS/eb
<PAGE> 1
EXHIBIT 99.3
CONSENT OF DIRECTOR NOMINEE
Meadowcraft, Inc.:
I hereby consent to the Prospectus and Amendment No. 1 to Registration
Statement on Form S-1 of Meadowcraft, Inc. (the "Company") of my name and
information relating to my status as a director nominee of Meadowcraft, Inc.
Effective upon consummation of the offering contemplated by the Prospectus, I
hereby agree to become a director of the Company.
/s/ Reese H. Mckinney. Jr.
--------------------------------
Reese H. McKinney, Jr.
Date: 9/30/97
