<PAGE> 1
As filed with the Securities and Exchange Commission on November 25, 1998
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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ALBECCA INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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GEORGIA 5199 39-1389732
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER IDENTIFICATION
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) NUMBER)
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3900 STEVE REYNOLDS BOULEVARD, NORCROSS, GEORGIA 30093
(770) 279-5210
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
CRAIG A. PONZIO
CHIEF EXECUTIVE OFFICER
ALBECCA INC.
3900 STEVE REYNOLDS BOULEVARD
NORCROSS, GEORGIA 30093
(770) 279-5210
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
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COPY TO:
PHILIP H. MOISE, ESQ.
NELSON MULLINS RILEY & SCARBOROUGH, L.L.P.
FIRST UNION PLAZA, SUITE 1400
999 PEACHTREE STREET, N.E.
ATLANTA, GEORGIA 30309
(404) 817-6000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As
soon as practicable after the effective date of this Registration Statement.
If the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. |_|
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CALCULATION OF REGISTRATION FEE
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Title of Each Class of Amount to be Proposed Maximum Proposed Maximum Amount of
Securities to be Registered Registered Offering Price Aggregate Offering Registration Fee
Per Unit Price (1)
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10 3/4% Senior Subordinated Notes Dues
2008.............................. $200,000,000 100% $200,000,000 $55,600
=========================================================================================================================
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(1) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(c) under the Securities Act of 1933, as
amended.
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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 COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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ALBECCA INC.
REGISTRATION STATEMENT ON FORM S-4
(CROSS REFERENCE SHEET FURNISHED PURSUANT TO
ITEM 501(B) OF REGULATION S-K)
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ITEM LOCATION IN PROSPECTUS
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1. Forepart of Registration Statement and Outside Front
Cover Page of Prospectus............................. Outside Front Cover of Prospectus; Cover Page
of the Registration Statement; Cross Reference
Sheet
2. Inside Front and Outside Back Cover Pages of
Prospectus........................................... Available Information; Incorporation of Certain
Documents by Reference; Outside Back Cover of
Prospectus
3. Risk Factors, Ratio of Earnings to Fixed Charges and
Other Information.................................... Summary; Risk Factors; Business; Selected
Financial Data
4. Terms of the Transaction............................. Summary; Risk Factors; The Exchange Offer;
Description of the New Notes; Plan of
Distribution; Certain United States Federal
Income Tax Considerations
5. Financial Information...................... Summary; Capitalization; Selected Consolidated
Financial Data
6. Material Contracts with the Company Being Acquired.... Not Applicable
7. Additional Information Required for Reoffering
by Not Applicable Persons and Parties Deemed
to be Underwriters................................... Not Applicable
8. Interests of Named Experts and Counsel............... Not Applicable
9. Disclosure of Commission Position on Indemnification Not Applicable
for Securities Act Liabilities.......................
10. Information With Respect to S-3 Registrants.......... Not Applicable
11. Incorporation of Certain Information by Reference.... Not Applicable
12. Information With Respect to S-2 or S-3 Registrants... Not Applicable
13. Incorporation of Certain Information by Reference.... Not Applicable
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ITEM LOCATION IN PROSPECTUS
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14. Information With Respect to Registrants Other Than
S-3 or S-2 Registrants............................... Outside Front Cover of Prospectus; Summary;
Risk Factors; Selected Consolidated
Financial Data; Management's Discussion and
Analysis of Financial Condition and Results
of Operations; Business; Consolidated
Financial Statements
15. Information With Respect to S-3 Companies............ Not Applicable
16. Information With Respect to S-2 or S-3 Companies..... Not Applicable
17. Information With Respect to Companies Other Than S-2
or S-3 Companies..................................... Not Applicable
18. Information if Proxies, Consents or Authorizations
are to be Solicited.................................. Not Applicable
19. Information if Proxies, Consents or
Authorizations are not to be Solicited, or in an
Exchange Offer....................................... Summary; Management; Certain Relationships
and Related Transactions
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<PAGE> 4
ALBECCA INC. LOGO
PROSPECTUS
EXCHANGE OFFER FOR
$200,000,000
10-3/4% SENIOR SUBORDINATED NOTES DUE 2008
Terms of Exchange Offer
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- Expires 5:00 p.m., New York City time, - The exchange of notes will not be a taxable
_____________, 1999, unless extended. exchange for U.S. federal income tax purposes.
- Not subject to any condition other than that the - We will not receive any proceeds from the
Exchange Offer not violate applicable law or any Exchange Offer.
applicable interpretation of the Staff of the
Securities and Exchange Commission. - The terms of the notes to be issued are
substantially identical to the outstanding
- All outstanding notes that are validly tendered notes, except for certain transfer
and not validly withdrawn will be exchanged. restrictions and registration rights relating
to the outstanding notes.
- Tenders of outstanding notes may be
withdrawn any time prior to the expiration of
the Exchange Offer.
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Investing in the notes involves certain risks. See "Risk Factors" beginning on
page 7.
Neither the Securities and Exchange Commission nor any state securities
commission has approved the notes to be distributed in the Exchange Offer, nor
have any of these organizations determined that this Prospectus is truthful or
complete. Any representation to the contrary is a criminal offense.
, 1998
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[INSIDE FRONT COVER OF PROSPECTUS]
ii
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TABLE OF CONTENTS
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SUMMARY .................................................................................. 1
RISK FACTORS ............................................................................. 7
USE OF PROCEEDS .......................................................................... 15
CAPITALIZATION ........................................................................... 15
SELECTED CONSOLIDATED FINANCIAL DATA ..................................................... 16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS .... 17
BUSINESS ................................................................................. 23
MANAGEMENT ............................................................................... 33
PRINCIPAL SHAREHOLDERS ................................................................... 36
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ........................................... 36
DESCRIPTION OF CERTAIN INDEBTEDNESS ...................................................... 37
THE EXCHANGE OFFER ....................................................................... 38
DESCRIPTION OF THE NOTES ................................................................. 45
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS .................................. 77
PLAN OF DISTRIBUTION ..................................................................... 79
LEGAL MATTERS ............................................................................ 79
EXPERTS................................................................................... 80
INDEX TO FINANCIAL STATEMENTS ............................................................ F-1
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iii
<PAGE> 7
SUMMARY
The following summary highlights selected information from this Prospectus
and may not contain all of the information that is important to you. This
Prospectus includes specific terms of the notes we are offering, as well as
information regarding our business and detailed financial data. We encourage
you to read this Prospectus in its entirety.
THE COMPANY
Albecca Inc., which primarily does business under the Larson-Juhl name, is
a worldwide leader in the custom framing industry. We design, manufacture and
distribute a complete line of high quality, branded custom framing products,
including wood and metal moulding, matboard, foam board, glass, equipment and
other framing supplies. Our principal brands include the "Larson-Juhl Classic
Collection" and the "Craig Ponzio Signature Collection." For over 100 years,
our company has been designing, manufacturing and distributing custom framing
products that enhance the aesthetic qualities of prints, paintings, drawings
and other art and memorabilia. By combining traditional craftsmanship with
modern manufacturing technology, our company creates frames characterized by
distinctive design and superior quality. We have attained our worldwide
leadership position by offering a complete selection of quality branded
products and outstanding service to our retail custom framing customers and,
more recently, by increasing awareness of our products through consumer
advertising.
We believe our company is the market leader in North America (United States
and Canada) and estimate that our company holds a leading market position in
the other countries in which it operates. We believe the company has achieved
its leading market position by combining innovative design of premium, branded
products, a complete line of quality products, global leadership in sales and
customer service and cost-efficient manufacturing and distribution. These
competitive strengths have made the Larson-Juhl brand one of the most globally
recognized names in the custom framing industry. We believe that consumers are
placing an increased emphasis on the home, its decor and the expression of
individual style, which will contribute to the growth of the custom framing
market. To capitalize on this trend, our business strategy is focused on
continuing to introduce premium, branded product collections, increasing
product and brand awareness through consumer advertising, increasing sales
penetration to retail custom framers, improving profitability of operations and
pursuing complementary acquisitions.
Our company conducts its operations through 76 locations in 20 countries.
In North America, our company operates four moulding and frame manufacturing
plants and 28 light manufacturing/distribution centers. Internationally, the
company operates 16 moulding and frame manufacturing plants and 36 light
manufacturing/distribution centers. In North America, Albecca's primary
customers are retail custom framers. In Europe, the company primarily serves
retail custom framers and home decorating centers.
We estimate that in 1998 the wholesale custom framing industry had sales to
retailers of approximately $1.2 billion in North America and approximately $1.2
billion in the rest of the world. There are approximately 20,000 custom framing
retail store fronts in North America, of which independent, non-franchised
stores represent approximately 85% and national chains, regional chains and
franchised operations comprise the balance. In North America, we compete with
over 300 manufacturers and distributors of custom framing products. We believe
that our company is the largest manufacturer and distributor of custom framing
products in North America and the only such manufacturer operating a
broad-based North American distribution network. The custom framing industry in
Europe is similar to that in North America, although home decorating center
chains, primarily in France and Germany, also sell custom framing products.
CORPORATE INFORMATION
Albecca Inc. has been treated for federal and certain state income tax
purposes as an S corporation under the Internal Revenue Code of 1986, as
amended (the "Code"), since 1987. Accordingly, our taxable income is reported
by and taxed directly to our shareholders. We have made, and intend to continue
to make, distributions to our shareholders to pay their income tax obligations
as a result of the company's status as an S corporation. See "Use of Proceeds,"
"Principal Shareholders" and "Certain Relationships and Related Transactions."
1
<PAGE> 8
SUMMARY CONSOLIDATED FINANCIAL DATA
The following table sets forth summary consolidated financial data of
our company. Our financial statements are prepared in accordance with U.S.
generally accepted accounting principles ("U.S. GAAP").
The information as of and for the fiscal years ended August 28, 1994,
August 27, 1995, August 25, 1996, August 31, 1997 and August 30, 1998 are
derived from our audited consolidated financial statements.
It is important that you read the summary consolidated financial data
presented below along with "Management's Discussion and Analysis of Financial
Condition and Results of Operations," the Consolidated Statements of Operations
and the Consolidated Financial Statements of our company and the related notes
included elsewhere in this Prospectus.
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FISCAL YEAR (1)
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1994 1995 1996 1997 1998
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(DOLLARS IN THOUSANDS)
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STATEMENT OF OPERATIONS DATA:
Net sales.................................. $ 157,346 $ 225,359 $ 300,788 $ 354,058 $ 381,137
Gross profit............................... 66,542 97,018 126,824 153,308 165,056
Restructuring charges...................... -- -- -- -- 2,262
Operating income........................... 15,534 22,471 30,229 35,601 31,961
Costs of cancelled initial public equity -- -- -- -- 1,273
offering....................................
Net income(2).............................. 13,335 16,044 19,404 22,490 $ 14,363
OTHER DATA:
EBITDA(3).................................. $ 17,807 $ 28,174 $ 35,531 $ 42,486 $ 46,404
EBITDA margin(4)........................... 11.3% 12.5% 11.8% 12.0% 12.2%
Depreciation and amortization.............. $ 2,273 $ 5,703 $ 5,302 $ 6,885 $ 8,213
Capital expenditures....................... 2,873 5,291 5,461 7,746 8,378
CREDIT DATA:
Cash interest expense(5) ..................................................................... $ 11,893
Ratio of EBITDA to cash interest expense(5)................................................... 3.9x
Ratio of net debt to EBITDA(6) ............................................................... 4.5
Ratio of earnings to fixed charges(7) ........................................................ 3.2
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As of
August 30, 1998
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BALANCE SHEET DATA:
Cash and cash equivalents..................................................................... $ 54,884
Working capital............................................................................... 97,150
Total assets.................................................................................. 305,922
Total debt.................................................................................... 262,769
Shareholders' deficit......................................................................... (25,644)
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(1) The Company ends its fiscal year on the last Sunday in August. Accordingly,
fiscal years 1994 through 1998 ended on August 28, 1994, August 27, 1995,
August 25, 1996, August 31, 1997 and August 30, 1998, respectively.
Moreover, fiscal year 1997 was a 53-week year.
(2) The Company is an S corporation and is not required to pay United States
federal and certain state income taxes.
(3) EBITDA is defined as operating income plus depreciation, amortization
(excluding amortization of bond issuance costs), restructuring charges and
certain non-recurring costs (see "Management's Discussion and Analysis of
Financial Condition and Results of Operations"). EBITDA is presented as the
Company believes it is a useful indicator of a company's ability to meet
debt service and capital expenditure requirements. It is not, however,
intended as an alternative measure of operating results or cash flow from
operations (as determined in accordance with generally accepted accounting
principles). EBITDA is not necessarily comparable to similarly titled
measures for other companies and does not necessarily represent amounts of
funds available for management's discretionary use.
(4) EBITDA margin represents EBITDA as a percentage of net sales.
(5) Cash interest expense represents total interest expense less amortization
of bond issuance costs.
(6) Net debt is defined as total debt less cash and cash equivalents.
(7) Earnings represent operating income plus restructuring changes and certain
non-recurring costs (see Management's Discussion and Analysis of Financial
Condition and Results of Operations) and fixed charges represent actual
interest charges for the period. The ratio of earnings to fixed charges was
15.0x, 5.6x, 4.4x, 3.7x and 3.2x for 1994 through 1998.
2
<PAGE> 9
THE EXCHANGE OFFER
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Registration Rights Agreement...... You are entitled to exchange your notes for registered notes with substantially identical
terms. The Exchange Offer is intended to satisfy these rights. After the Exchange Offer is
complete, you will no longer be entitled to any exchange or registration rights with
respect to your notes.
The Exchange Offer................. We are offering to exchange $1,000 principal amount of 10 3/4% Senior Subordinated Notes
due 2008 of Albecca Inc. which have been registered under the Securities Act of 1933 for
each $1,000 principal amount of its outstanding 10 3/4% Senior Subordinated Notes due 2008
which were issued in August 1998 in a private offering. In order to be exchanged, an
outstanding note must be properly tendered and accepted. All outstanding notes that are
validly tendered and not validly withdrawn will be exchanged.
As of this date there are $200 million principal amount of notes outstanding.
We will issue registered notes on or promptly after the expiration of the
Exchange Offer.
Resale of New Notes................ We believe that the notes issued in the Exchange Offer may be offered for resale, resold
and otherwise transferred by you without compliance with the registration and prospectus
delivery provisions of the Securities Act of 1933 provided that:
- the notes issued in the Exchange Offer are being acquired in the ordinary course of your
business;
- you are not participating, do not intend to participate, and have no arrangement or
understanding with any person to participate, in the distribution of the notes issued to
you in the Exchange Offer; and
- you are not an "affiliate" of ours.
If our belief is inaccurate and you transfer any note issued to you in the Exchange Offer
without delivering a prospectus meeting the requirements of the Securities Act of 1933 or
without an exemption from registration of your notes from such requirements, you may incur
liability under the Securities Act of 1933. We do not assume or indemnify you against such
liability. Each broker-dealer that is issued notes in the Exchange Offer for its own
account in exchange for notes which were acquired by such broker-dealer as a result of
market-making or other trading activities, must acknowledge that it will deliver a
prospectus meeting the requirements of the Securities Act of 1933, as amended, in
connection with any resale of the notes issued in the Exchange Offer. A broker-dealer may
use this Prospectus for an offer to resell, resale or other retransfer of the notes issued
to it in the Exchange Offer.
Consequences of Not Exchanging If you do not exchange your notes for notes issued in the Exchange Offer, you will no
Old Notes..................... longer be entitled to registration rights and will not be able to offer or sell your notes,
unless they are subsequently registered under the Securities Act (which, except for limited
exceptions, we will have no obligation to do), except pursuant to an exemption from, or in
a transaction not subject to, the Securities Act and applicable state securities laws.
Expiration Date.................... The Exchange Offer will expire at 5:00 p.m., New York City time, __________, 1999, unless
we decide to extend the expiration date.
Yield and Interest on the New Notes The notes issued in the Exchange Offer bear interest at the rate of 10 3/4% per annum,
payable semi-annually on February 15 and August 15 of each year, commencing February 15,
1999.
Conditions to the Exchange Offer... The Exchange Offer is not conditioned upon any minimum principal amount of notes being
tendered for exchange. However, the Exchange Offer is subject to certain customary
conditions, which may, under certain circumstances, be waived by the Company. See "The
Exchange Offer - Conditions." Except for the requirements of applicable federal and state
securities laws, there are no federal or state regulatory requirements to be complied with
or obtained by the Company in connection with the Exchange Offer.
Procedures for Tendering Old Notes. Subject to certain conditions, if you want to accept the Exchange Offer, you must complete,
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3
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sign and date the Letter of Transmittal, or a facsimile of it, in accordance with the
instructions contained herein and therein, and mail or otherwise deliver the Letter of
Transmittal, or such facsimile, together with your notes to be exchanged and any other
required documentation to the Exchange Agent (as defined herein) at the address set forth
herein, or effect a tender of your notes pursuant to the procedures for book-entry transfer
as provided for herein. See "The Exchange Offer - Procedures for Tendering" and
"--Book-Entry Transfer."
Guaranteed Delivery Procedures..... If you wish to tender your notes and they are not immediately available or you cannot
deliver them and a properly completed Letter of Transmittal or any other documents
required by the Letter of Transmittal to the Exchange Agent prior to __________, 1999,
you may tender your notes according to the guaranteed delivery procedures set forth in
"The Exchange Offer - Guaranteed Delivery Procedures."
Withdrawal Rights.................. You may withdraw the tender of your notes at any time prior to 5:00 p.m., New York City
time, on __________, 1999. To withdraw a tender of your notes, a written or facsimile
transmission notice of withdrawal must be received by the Exchange Agent at its address
set forth herein under "The Exchange Offer - Exchange Agent" prior to 5:00 p.m., New
York City time, on __________, 1999.
Acceptance of Old Notes and Delivery Subject to certain conditions, any and all notes that are properly tendered in the
of New Notes....................... Exchange Offer prior to 5:00 p.m., New York City time, on _________, 1999 will be
accepted for exchange. The new notes issued pursuant to the Exchange Offer will be
delivered promptly following __________, 1999. See "The Exchange Offer - Terms of the
Exchange Offer."
Certain Tax Considerations......... The exchange of new notes for old notes should not be considered a sale or exchange or
otherwise a taxable event for federal income tax purposes. See "Certain United States
Federal Income Tax Considerations."
Exchange Agent..................... State Street Bank and Trust Company is serving as exchange agent (the "Exchange
Agent") in connection with the Exchange Offer.
Fees and Expenses.................. We will pay all expenses incident to the Exchange Offer.
Use of Proceeds.................... We will not receive any cash proceeds from the issuance of the notes
pursuant to the Exchange Offer. See "Use of Proceeds."
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SUMMARY OF TERMS OF NEW NOTES
The form and terms of the notes to be issued in the Exchange Offer are
the same as the form and terms of outstanding notes except that the notes to be
issued in the Exchange Offer will be registered under the Securities Act of
1933 and, therefore, will not bear legends restricting their transfer and will
not be entitled to registration under the Securities Act of 1933. The notes
issued in the Exchange Offer will evidence the same debt as the outstanding
notes and both the outstanding notes and the notes to be issued are governed by
the same indenture.
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Maturity Date...................... August 15, 2008.
Interest Rate...................... 10 3/4% per annum, payable semi-annually on February 15 and August 15 of each year,
commencing February 15, 1999.
Optional Redemption................ On or after August 15, 2003, the notes will be redeemable at our option, in whole or in
part, at any time in cash at the redemption prices set forth in this Prospectus under the
heading "Description of the New Notes - Optional Redemption."
Subsidiary Guarantees.............. The notes are guaranteed, jointly and severally, by all of the Subsidiary Guarantors,
which consist of almost all of the Company's subsidiaries other than foreign subsidiaries
as described in this Prospectus under the heading "Description of the Notes - Subsidiary
Guarantees."
Ranking............................ The notes and subsidiary guarantees are:
- general unsecured obligations of the company and the Subsidiary Guarantors; and
- are subordinated in right of payment to all existing and future senior debt of the
company.
The Indenture will:
- permit the company and the Subsidiary Guarantors to incur additional indebtedness
subject to certain limitations; and
- prohibit the incurrence of any indebtedness by the company and the subsidiary
guarantors that is senior to the notes and the subsidiary guarantees, as the case may
be, and subordinated to senior debt of the Company and the Subsidiary Guarantors, as
the case may be.
Change of Control.................. Upon a change in control of the company, we are required to repurchase all of the notes
from you at a price in cash equal to 101% of the aggregate principal amount thereof plus
accrued and unpaid interest and liquidated damages, if any.
Restrictive Covenants.............. The Indenture under which the outstanding notes have been and the new notes are being
issued contains certain covenants for your benefit which, among other things and subject to
certain exceptions, restrict our ability to:
- pay dividends;
- redeem capital stock;
- incur additional indebtedness or issue preferred equity interests;
- merge, consolidate or sell all or substantially all assets;
- create liens on assets; and
- enter into certain transactions with affiliates;
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<PAGE> 12
FORWARD-LOOKING STATEMENTS
Certain of the information contained in this Prospectus, including
information with respect to our plans and strategy for our business and its
financing, are forward-looking statements. For a discussion of important
factors that could cause actual results to differ materially from the
forward-looking statements, see "Risk Factors."
RISK FACTORS
See "Risk Factors" immediately following this summary, for a discussion of
certain factors that you should consider in connection with your investment in
the notes to be issued in the Exchange Offer.
PRINCIPAL EXECUTIVE OFFICE
Our headquarters are located at 3900 Steve Reynolds Boulevard, Norcross,
Georgia 30093. Our telephone number is (770) 279-5210.
WHERE YOU CAN FIND MORE INFORMATION
Albecca, Inc. has filed with the Securities and Exchange Commission (the
"SEC") a Registration Statement on Form S-4 under the Securities Act of 1933,
as amended, covering the notes to be issued in the Exchange Offer. This
Prospectus does not contain all of the information included in the Registration
Statement. Any statement made in this Prospectus concerning the contents of any
contract, agreement or other document is not necessarily complete. If we have
filed any such contract, agreement or other document as an exhibit to the
Registration Statement, you should read the exhibit for a more complete
understanding of the document or matter involved. Each statement regarding a
contract, agreement or other document is qualified in its entirety by reference
to the actual document.
Following the Exchange Offer, we will be required to file periodic reports
and other information with the SEC under the Securities Exchange Act of 1934,
as amended. Our obligation to file periodic reports with the SEC will be
suspended if the notes issued in the Exchange Offer are held of record by fewer
than 300 holders as of the beginning of any year. However, the indenture
governing the notes nevertheless requires us to file with the SEC financial and
other information for public availability. In addition, the indenture governing
the notes requires us to deliver to you, or to State Street Bank and Trust for
forwarding to you, copies of all reports that we file with the SEC without any
cost to you. We will also furnish such other reports as we may determine or as
the law requires.
You may read and copy the Registration Statement, including the attached
exhibits, and any reports, statements or other information that we file at the
SEC's public reference room in Washington, D.C. You can request copies of these
documents, upon payment of a duplicating fee, by writing the SEC. Please call
the SEC at 1-800-SEC-0330 for further information on the operation of the
public reference rooms. Our SEC filings will also be available to the public on
the SEC Internet site (http://www.sec.gov).
You should rely only on the information provided in this Prospectus. No
person has been authorized to provide you with different information.
We are not making an offer to exchange notes in any jurisdiction where the
offer is not permitted.
The information in this Prospectus is accurate as of the date on the front
cover. You should not assume that the information contained in this Prospectus
is accurate as of any other date.
6
<PAGE> 13
RISK FACTORS
An investment in the registered notes to be issued pursuant to this
Prospectus (the "New Notes") is subject to a number of risks. You should
carefully consider the following factors, as well as the mote detailed
descriptions cross-referenced to the body of the Prospectus and the other
matters described in this Prospectus, in evaluating Albecca Inc. (together with
its direct and indirect subsidiaries, the "Company"), the Company's business
and the custom picture framing industry. The term "Note" or "Notes" includes
the outstanding notes (the "Old Notes") and the New Notes.
SUBSTANTIAL LEVERAGE AND SHAREHOLDERS' DEFICIT
In connection with the offering of the Old Notes, the Company incurred a
significant amount of additional indebtedness and is highly leveraged. As of
August 30, 1998, the Company and its subsidiaries had outstanding approximately
$262.8 million of total indebtedness and shareholders' deficit of approximately
$25.6 million. The level of the Company's indebtedness could have important
consequences to Holders of Notes, including, but not limited to, the following:
(i) the Company's ability to obtain additional financing in the future for
working capital, capital expenditures, acquisitions, general corporate purposes
or other purposes may be impaired; (ii) a significant portion of the Company's
cash flow from operations must be dedicated to the payment of principal and
interest on the Company's indebtedness, thereby reducing the funds available to
the Company for its operations; (iii) a portion of the Company's borrowings
will bear interest at variable rates, which could result in higher interest
expense in the event of increases in interest rates; (iv) the Indenture and
other existing or future credit agreements contain or may contain financial and
other restrictive covenants, the failure to comply with which may result in an
Event of Default which, if not cured or waived, could have a material adverse
effect on the Company; (v) the Company may be substantially more leveraged than
certain of its competitors, which may place the Company at a competitive
disadvantage; and (vi) the Company's substantial degree of leverage may limit
its flexibility to adjust to changing market conditions, reduce its ability to
withstand competitive pressures and make it more vulnerable to a downturn in
general economic conditions or its business. See "Description of the Notes."
LIQUIDITY AND NEED FOR ADDITIONAL FINANCING
The Company's ability to make scheduled payments of principal of, or to pay
the interest or Liquidated Damages, if any, on, or to refinance, its
indebtedness (including the Notes), or to fund planned capital or other
expenditures, will depend upon its future financial and operating performance,
which will be affected by prevailing economic conditions and financial,
business and other factors, many of which are beyond its control. There can be
no assurance that the Company's operating results, cash flow and capital
resources will be sufficient for payment of the Company's indebtedness in the
future. As a result of the issuance of the Old Notes, and after giving effect
to the repayment of indebtedness and the distributions to shareholders
described in "Use of Proceeds," the offering of the Old Notes provided the
Company with approximately an additional $51 million of cash. In addition, the
Company has a series of foreign credit facilities available to finance working
capital needs and acquisitions in certain foreign countries. However, the
Company does not have a bank credit facility in place to fund its U.S.
operations. The Company plans to enter into a senior bank credit facility to be
used to finance future working capital needs, capital expenditures and
acquisitions. The Indenture permits the Company and the Subsidiary Guarantors
to incur additional indebtedness, including pursuant to a bank credit facility,
which indebtedness may be senior in right of payment to the Notes and the
Subsidiary Guarantees. At present, the Company has not entered into any
agreements, commitments or understandings with respect to such a credit
facility. Moreover, there can be no assurances that the Company will be able to
obtain such financing in the amounts or at the times such financing may be
required, or that, if obtained, any such financing would be on acceptable
terms.
In the absence of adequate operating results and capital resources, or the
inability to obtain sufficient additional debt financing, the Company could
face substantial liquidity problems and might be required to dispose of
material assets or operations to meet its debt service and other obligations,
and there can be no assurance as to the timing of such sales or the proceeds
that the Company could realize therefrom. If the Company is unable to service
its indebtedness, it may take actions such as reducing or delaying planned
expansion and capital expenditures, selling assets, restructuring or
refinancing its indebtedness or seeking equity capital. There can be
7
<PAGE> 14
no assurance that any of these actions could be effected on satisfactory terms,
if at all, and the failure to take these actions successfully could have a
material adverse effect on the Company's business, financial condition and
operating results. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources."
SUBORDINATION OF NOTES AND SUBSIDIARY GUARANTEES; FOREIGN SUBSIDIARIES
The Notes are subordinated in right of payment to all existing and future
Senior Debt of the Company, and the Subsidiary Guarantees are subordinated in
right of payment to all existing and future Senior Debt of the Subsidiary
Guarantors, which consist of all of the Company's Restricted Subsidiaries other
than Foreign Subsidiaries. As of August 30, 1998, the Company and the
Subsidiary Guarantors had outstanding approximately $4.6 million of Senior
Debt. By reason of such subordination, in the event of bankruptcy, liquidation,
reorganization or other winding-up of the Company or any Subsidiary Guarantor
or upon a default in payment with respect to, or the acceleration of, any
Senior Debt, the assets of the Company or such Subsidiary Guarantor will be
available to pay obligations on the Notes only after all Senior Debt has been
paid in full, and there may not be sufficient assets remaining to pay amounts
due on any or all of the Notes then outstanding. In addition, under certain
circumstances, no payments may be made with respect to principal of or interest
on the Notes if a default exists with respect to Senior Debt. If the Company
incurs any additional pari passu debt, the holders of such debt would be
entitled to share ratably with Holders of Notes in any proceeds distributed in
connection with any insolvency, liquidation, reorganization, dissolution or
other winding-up of the Company. This may have the effect of reducing the
amount of proceeds paid to Holders of Notes. In addition, no cash payments may
be made with respect to the Notes during the continuance of a payment default
with respect to Designated Senior Debt (as defined) and, under certain
circumstances, no payments may be made with respect to the principal of (and
premium, if any) on the Notes for a period of up to 179 days if a nonpayment
default exists with respect to Designated Senior Debt. See "Description of the
Notes -- Subordination."
The Company conducts certain of its foreign operations through Foreign
Subsidiaries. The Foreign Subsidiaries will not, and future Foreign
Subsidiaries are not expected to, guarantee the Notes. Consequently, any right
of the Company or the Subsidiary Guarantors to receive the assets of any such
Foreign Subsidiary upon such Foreign Subsidiary's liquidation or reorganization
(and the consequent right of the holders of the Notes to participate in the
distribution of the proceeds of those assets) effectively will be subordinated
by operation of law to the claims of such Foreign Subsidiary's creditors
(including trade creditors) and holders of its preferred stock, if any. As of
August 30, 1998, the Foreign Subsidiaries had approximately $58.2 million of
indebtedness.
ABILITY TO CONTINUE AND MANAGE GROWTH
As part of its growth strategy, the Company seeks to expand its market
presence and increase sales penetration to retail custom framers both in the
North American and international markets. The Company also intends to continue
to grow through complementary acquisitions of manufacturers and distributors of
custom framing products. There can be no assurance that the Company will be
able to continue to expand its market presence in its current locations or
successfully complete future acquisitions. In addition, while the Company has
increased its net sales and EBITDA significantly since 1994, there can be no
assurance that the Company will be able to maintain such growth. The Company's
ability to continue to grow will depend on a number of factors, including the
demand for the Company's existing and new custom framing products, the ability
to maintain sufficient profit margins and the impact of existing and emerging
competition. To accommodate growth, the Company must also recruit, retain and
develop qualified personnel, manage costs and, when needed, adapt its
infrastructure and modify its information systems and process technologies.
Activities related to the implementation of the Company's growth strategies may
at times divert management's attention from the Company's business operations,
and the costs associated with such activities may adversely affect the
Company's profitability. The Company's failure or inability to continue, or to
manage, its growth strategy successfully may have a material adverse effect on
the Company's business, financial condition and results of operations. See
"Business."
8
<PAGE> 15
ACQUISITION RISKS
A substantial portion of the Company's growth in net sales has been the
result of acquisitions. Following the Exchange Offer, the Company intends to
continue to pursue complementary acquisitions of manufacturers and distributors
of custom framing products. The Company has a disciplined approach to
acquisitions, evaluating certain operating and financial criteria for each
candidate, including product design and quality, geographic markets and
customer segments served, management team strength and return on invested
capital. Accordingly, there can be no assurance that in the future the Company
will be able to identify acquisition candidates that meet the Company's
criteria, to enter into acquisition agreements on favorable terms, consummate
any acquisition or successfully integrate any acquired business into the
Company's operations. In addition, the Company competes for acquisition
candidates with both strategic and financial buyers, and continued
consolidation in the industry may result in fewer opportunities for
acquisitions. Future acquisitions may also result in the incurrence of
additional debt (under existing or new credit facilities or through the public
or private issuance of debt securities), the write-off of in-process product
development and capitalized product costs, integration costs, and the
amortization of expenses related to goodwill and other intangible assets, any
of which could have a material adverse effect on the Company's business,
financial condition and results of operations. The successful integration of
acquisitions involves a number of risks, including difficulties in the
assimilation of the operations, products and personnel of the acquired company,
differing corporate cultures, the diversion of management's attention from
other business concerns and the potential loss of key employees. Any one or
more of the foregoing risks may have a material adverse effect on the Company's
business, financial condition and results of operations. See "Business."
ACCOUNTING FOR GOODWILL
The Company's consolidated balance sheet as of August 31, 1998 includes an
amount designated as goodwill that represents 14% of total assets. Goodwill is
recorded when the purchase price paid for a business is greater than the fair
value of the acquired business' net assets, including both tangible assets and
identified intangible assets. Goodwill and identified intangible assets are
amortized over the periods estimated to be benefited, but not more than 40
years. For the acquired companies, management has determined that goodwill and
other identifiable intangible assets should be amortized over 10 to 40 years.
Generally accepted accounting principles require that management identify the
tangible and intangible assets acquired and allocated purchase price to those
assets based on their fair values. Reported earnings therefore are effected by
management's identification and valuation of tangible and intangible assets as
well as management's estimate of the useful lives of tangible assets and the
period that are expected to be benefited by the identified intangible assets
and goodwill. When the fair values of longer lived assets are greater than the
fair values of shorter lived assets, annual amortization and depreciation
charges are less than when the fair values of shorter lived assets are greater
than the fair values of longer lived assets. Further, earnings are affected
when new information or changes in circumstances indicate that an asset has
been impaired or that its estimated useful life is less than originally
expected. For example, if management subsequently determines that the value of
goodwill has been impaired, a charge to earnings will be required. Based on
management's assessment, there is no persuasive evidence that goodwill should
be amortized over a period of less than 40 years.
DEPENDENCE ON KEY MANAGEMENT
The Company is dependent upon the abilities and expertise of Craig Ponzio,
its Chief Executive Officer, and other key managers. The Company believes it
has developed significant depth and experience within its management; however,
no assurance can be given that the Company's business, financial condition and
results of operations would not be adversely affected if any of these key
managers ceased to be active in the business of the Company. The Company does
not have employment agreements with any of its key managers. See "Management."
9
<PAGE> 16
DEPENDENCE ON THIRD-PARTY MANUFACTURERS AND SUPPLIERS
The Company is dependent upon third parties for the manufacture and supply
of a majority of its custom framing products. While the inability of a
manufacturer to ship orders of the Company's products in a timely manner or to
meet the Company's quality standards has seldom been a problem for the Company,
any increase in untimely shipments or failure to meet quality standards could
affect the Company's ability to maintain adequate inventory to meet its
customers' needs, which could have a material adverse effect on the Company's
business, financial condition and results of operations. The Company does not
have supply contracts with any of its manufacturers or suppliers; however, the
Company has long-standing relationships with many of these third parties and
has historically experienced only limited difficulty in satisfying its
inventory requirements. See "Business -- Manufacturing and Sourcing."
SHORTAGES AND CHANGES IN COSTS OF RAW MATERIALS
The Company's profitability is dependent on its ability to offer quality
custom framing products at competitive prices. Various factors beyond the
Company's control may affect the availability and/or cost of its raw materials.
While management of the Company has been able to anticipate and react to
changing costs and availability of raw materials, particularly wood for its
mouldings, to date through its price adjustments, purchasing practices and
product variation, there can be no assurance that the Company will be able to
do so in the future. The Company does not have supply contracts with any of its
suppliers of raw materials; however, the Company has long-standing
relationships with many of these suppliers and has historically experienced
only limited difficulty in satisfying its raw materials requirements. See
"Business -- Manufacturing and Sourcing."
FOREIGN CURRENCY FLUCTUATION RISKS; RISKS ASSOCIATED WITH CHANGES IN SOCIAL,
POLITICAL, ECONOMIC AND OTHER CONDITIONS AFFECTING FOREIGN OPERATIONS
Outside the U.S., the Company currently manufactures and sells products
primarily in Canada and western Europe. The manufacturing costs, profit margins
and competitive position of the Company are consequently affected by the
strength of the currencies in countries where its products are manufactured
relative to the strength of the currencies in the countries where its products
are sold. The Company's results of operations and financial condition may be
adversely affected by fluctuations in foreign currencies and by translations of
the financial statements of the Company's foreign subsidiaries from local
currencies into U.S. dollars. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources" and Note 1 of notes to the Company's consolidated financial
statements.
Other risks inherent in foreign operations include changes in social,
political and economic conditions which could result in the disruption of trade
from the countries in which the Company's operations, manufacturers or
suppliers are located, the imposition of additional regulations relating to
imports and exports, the imposition of additional duties, taxes and other
charges on imports and exports or restrictions on the transfer of funds, any of
which could have a material adverse effect on the Company's business, financial
condition and results of operations.
COMPETITION
Competition is strong in the segments of the custom framing industry in
which the Company operates. The Company competes with numerous domestic and
foreign manufacturers and distributors of custom framing products. In
particular, the Company estimates that its largest competitor in the
manufacture and distribution of wood moulding in North America is The
Williamson Company. The principal manufacturers of metal moulding are Nielsen &
Bainbridge and Cardinal Aluminum Company, which primarily supply their products
to custom framers through distributors. The Company's business depends on its
ability to anticipate and respond to changing consumer tastes and demands by
producing marketable products, as well as on its ability to remain competitive
in the areas of quality, delivery and price. In a broader sense, the Company
competes in the larger home decorating market, where consumers may forego
custom framing and choose ready-made picture frames or framed art works, and in
the larger wholesale contract framing market, where wholesale picture framers
produce framed art works in volume for large accounts such as hotels or office
complexes. There can be no assurance that the
10
<PAGE> 17
Company will be able to maintain its profitability if the competitive
environment changes. See "Business -- Competition."
INTELLECTUAL PROPERTY RISKS
The Company uses a number of trademarks to distinguish its brands. The
Company has registered or applied for registration of these trademarks in the
U.S. and Canada and in numerous countries in Europe, Asia and elsewhere. The
Company regards its trademarks and other property rights as valuable assets in
the marketing of its products, and on a worldwide basis, vigorously seeks to
protect them against infringement. There can be no assurance that the actions
taken by the Company to establish and protect its trademarks and other
proprietary rights will be adequate to prevent imitation of its products by
others or to prevent others from seeking to block sales of the Company's
products as violative of the trademarks and other proprietary rights of others.
In addition, the laws of certain foreign countries may not protect proprietary
rights to the same extent as do the laws of the United States. The Company also
regards its moulding designs as critical to the success of its marketing
efforts, and seeks to protect those designs prior to their introduction to the
marketplace. However, after such introduction there are no practical means to
prevent others from copying or imitating such designs or specific design
elements. See "Business -- Trademarks."
RESTRICTIVE DEBT COVENANTS
The Indenture contains a number of significant covenants that, among other
things, restrict the ability of the Company and its subsidiaries to dispose of
assets, incur additional indebtedness, prepay indebtedness (including the
Notes) or amend certain debt instruments (including the Indenture), issue
preferred stock, pay dividends, create liens on assets, enter into sale and
leaseback transactions, make investments, loans or advances, make acquisitions,
engage in mergers or consolidations, change the business conducted by the
Company or its subsidiaries, or engage in certain transactions with affiliates
and otherwise restrict certain corporate activities. See "Description of the
Notes."
The Company's ability to comply with these covenants may be affected by
events beyond its control, including prevailing economic, financial and
industry conditions. The breach of any of these covenants or restrictions could
result in a default under existing or future credit facilities and/or the
Indenture, which would permit any senior lenders, or Holders of Notes, or both,
as the case may be, to declare all amounts borrowed thereunder to be due and
payable, together with accrued and unpaid interest and Liquidated Damages, if
any, and the commitments of senior lenders to make further extensions of credit
under existing or future credit facilities could be terminated. If the Company
were unable to repay its indebtedness to any senior lenders, those lenders
could proceed against any collateral that may secure such indebtedness. See "--
Subordination of Notes and Subsidiary Guarantees; Foreign Subsidiaries."
POSSIBLE INABILITY TO REPURCHASE NOTES UPON CHANGE OF CONTROL
The Indenture provides that upon the occurrence of a Change of Control, the
Company will make an offer to purchase all or any part of the Notes at a price
in cash equal to 101% of the aggregate principal amount thereof plus accrued
and unpaid interest and Liquidated Damages, if any, to the date of purchase.
The Company's existing and future credit facilities may prohibit the Company
from purchasing any Notes (except in certain limited amounts) and will also
provide that certain change of control events with respect to the Company will
constitute a default thereunder. Any future credit agreements or other
agreements relating to Senior Debt to which the Company becomes a party may
contain similar restrictions and provisions. In the event a Change of Control
occurs at a time when the Company is prohibited from purchasing the Notes, the
Company could seek the consent of its lenders to the purchase of the Notes or
could attempt to refinance the borrowings that contain the prohibition. If the
Company does not obtain that consent or repay those borrowings, the Company
will remain prohibited from purchasing the Notes by the relevant Senior Debt.
In that case, the Company's failure to purchase the tendered Notes would
constitute an Event of Default under the Indenture which would, in turn,
constitute a default under existing or future credit facilities and could
constitute a default under other Senior Debt. In those circumstances, the
subordination provisions in the Indenture would likely restrict payments to
Holders of Notes. Furthermore, no assurance can be given that the Company will
have sufficient resources to satisfy its repurchase
11
<PAGE> 18
obligation with respect to the Notes following the occurrence of a Change of
Control. See "Description of the Notes."
FRAUDULENT TRANSFER STATUTES
Under federal or state fraudulent transfer laws, if a court were to find
that, at the time the Notes and Subsidiary Guarantees were issued, the Company
or a Subsidiary Guarantor, as the case may be, (i) issued the Notes or a
Subsidiary Guarantee with the intent of hindering, delaying or defrauding
current or future creditors or (ii)(A) received less than fair consideration or
reasonably equivalent value for incurring the indebtedness represented by the
Notes or a Subsidiary Guarantee, and (B)(1) was insolvent or was rendered
insolvent by reason of the issuance of the Notes or such Subsidiary Guarantee,
(2) was engaged, or about to engage, in a business or transaction for which its
assets were unreasonably small or (3) intended to incur, or believed (or should
have believed) it would incur, debts beyond its ability to pay as such debts
mature (as all of the foregoing terms are defined in or interpreted under such
fraudulent transfer statutes), such court could void all or a portion of the
Company's or a Subsidiary Guarantor's obligations to Holders of Notes,
subordinate the Company's or a Subsidiary Guarantor's obligations to Holders of
Notes to other existing and future indebtedness of the Company or such
Subsidiary Guarantor, as the case may be, the effect of which would be to
entitle such other creditors to be paid in full before any payment could be
made on the Notes, and take other action detrimental to Holders of Notes,
including in certain circumstances, invalidating the Notes. In that event,
there would be no assurance that any repayment on the Notes or under the
Subsidiary Guarantees would ever be recovered by Holders of Notes.
The definition of insolvency for purposes of the foregoing considerations
varies among jurisdictions depending upon the federal or state law that is
being applied in any such proceeding. However, the Company or a Subsidiary
Guarantor generally would be considered insolvent at the time it incurs the
indebtedness constituting the Notes or a Subsidiary Guarantee, as the case may
be, if (i) the fair market value (or fair saleable value) of its assets is less
than the amount required to pay its total existing debts and liabilities
(including the probable liability on contingent liabilities) as they become
absolute or matured or (ii) it is incurring debts beyond its ability to pay as
such debts mature. There can be no assurance as to what standard a court would
apply in order to determine whether the Company or a Subsidiary Guarantor was
"insolvent" as of the date the Notes and Subsidiary Guarantees were issued, or
that, regardless of the method of valuation, a court would not determine that
the Company or a Subsidiary Guarantor was insolvent on that date. Nor can there
be any assurance that a court would not determine, regardless of whether the
Company or a Subsidiary Guarantor was insolvent on the date the Notes and
Subsidiary Guarantees were issued, that the payments constituted fraudulent
transfers on another ground. To the extent that proceeds from the sale of the
Notes are used to repay indebtedness under existing credit facilities, or to
make distributions to shareholders on account of the ownership of capital
stock, a court may find that the Company or a Subsidiary Guarantor did not
receive fair consideration or reasonably equivalent value for the incurrence of
the indebtedness represented by the Notes or a Subsidiary Guarantee, as the
case may be.
To the extent any Subsidiary Guarantees were avoided as a fraudulent
conveyance or held unenforceable for any other reason, Holders of Notes would
cease to have any claim in respect of such Subsidiary Guarantor and would be
creditors solely of the Company and any Subsidiary Guarantor whose Subsidiary
Guarantee was not avoided or held unenforceable. In such event, the claims of
Holders of Notes against the issuer of an invalid Subsidiary Guarantee would
effectively be subject to the prior payment of all liabilities and preferred
stock claims of such Subsidiary Guarantor. There can be no assurance that,
after providing for all prior claims and preferred stock interests, if any,
there would be sufficient assets to satisfy the claims of Holders of Notes
relating to any voided portions of any of the Subsidiary Guarantees.
Based upon financial and other information currently available to it,
management of the Company believes that the Notes and the Subsidiary Guarantees
are being incurred for proper purposes and in good faith and that the Company
and each Subsidiary Guarantor (i) is solvent and will continue to be solvent
after issuing the Notes or its Subsidiary Guarantees, as the case may be, (ii)
will have sufficient capital for carrying on its business after such issuance,
and (iii) will be able to pay its debts as they mature. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources."
12
<PAGE> 19
In addition, if a court were to void the Subsidiary Guarantees under
fraudulent conveyance laws or other legal principles, or, by the terms of such
Subsidiary Guarantees, the obligations thereunder were reduced as necessary to
prevent such avoidance, or the Subsidiary Guarantees were released, the claims
of other creditors of the Subsidiary Guarantors, including trade creditors,
would to such extent have priority as to the assets of such Subsidiary
Guarantors over the claims of Holders of Notes. The Subsidiary Guarantees of
the Notes by any Subsidiary Guarantor will be released upon the sale of such
Subsidiary Guarantor. The Indenture limits the ability of the Company and its
Restricted Subsidiaries to incur additional indebtedness and to enter into
agreements that would restrict the ability of any subsidiary to make
distributions, loans or other payments to the Company. However, these
limitations are subject to certain exceptions. See "Description of the Notes."
ABSENCE OF PUBLIC MARKET; RESTRICTIONS ON RESALE
The Old Notes have been designated as eligible for trading in the PORTAL
market. Prior to this Exchange Offer, there has been no public market for the
New Notes. If such a market were to develop, the New Notes could trade at
prices that may be higher or lower than their principal amount. The Company
does not intend to apply for listing of the New Notes on any securities
exchange or for quotation of the New Notes on The Nasdaq Stock Market's
National Market or otherwise. The Initial Purchasers have previously made a
market in the Old Notes, and the Company has been advised that the Initial
Purchasers currently intend to make a market in the New Notes, as permitted by
applicable laws and regulations, after consummation of the Exchange Offer. The
Initial Purchasers are not obligated, however, to make a market in the Old
Notes or the New Notes and any such market-making activity may be discontinued
at any time without notice at the sole discretion of the Initial Purchasers.
There can be no assurance as to the liquidity of the public market for the New
Notes or that any active public market for the New Notes will develop or
continue. If an active public market does not develop or continue, the market
price and liquidity of the New Notes may be adversely affected.
CONSEQUENCES OF FAILURE TO EXCHANGE
The issuance of the New Notes in exchange for the Old Notes pursuant
to the Exchange Offer will be made only after a timely receipt by the Company
of such Old Notes, a properly completed and duly executed Letter of Transmittal
and all other required documents. Therefore, holders of Old Notes should allow
sufficient time to ensure timely delivery. The Company is under no duty to give
notification of defects or irregularities with respect to the tenders of Old
Notes for exchange. Old Notes that are not tendered following the consummation
of the Exchange Offer will continue to be subject to the existing restrictions
upon transfer thereof and the Company will have no further obligation to
provide for the registration under the Securities Act of 1933, as amended, (the
"Securities Act"), of such Old Notes. In addition, any holder of Old Notes who
tenders in the Exchange Offer for the purpose of participating in a
distribution of the New Notes may be deemed to have received securities and, if
so, will be required to comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction.
To the extent that Old Notes are tendered in the Exchange Offer, the trading
market for untendered and tendered but unaccepted Old Notes could be adversely
affected. See "The Exchange Offer." Each broker or dealer that receives New
Notes for its own account in exchange for Old Notes where such New Notes were
acquired by such broker or dealer as a result of market-making activities or
other trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. See "Plan of Distribution."
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
The information contained herein contains forward-looking statements that
involve a number of risks and uncertainties. A number of factors could cause
actual results, performance, achievements of the Company, or industry results
to be materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. These factors include,
but are not limited to the following: the competitive environment in the
Company's business in general and in the Company's specific market areas;
changes in prevailing interest rates and the availability of and terms of
financing to fund the anticipated growth of the Company's business; inflation;
changes in costs of goods and services, including the raw materials used in the
Company's products; economic conditions in general and in the Company's
specific market areas; changes in or failure to comply with federal, state
and/or local government regulations; liability and other claims asserted
13
<PAGE> 20
against the Company; changes in operating strategy or development plans; the
ability to attract and retain qualified personnel; the ability to control
inventory levels; the significant indebtedness of the Company; the ability to
maintain arrangements with suppliers on favorable terms; changes in the
Company's capital expenditure plans; and other factors referenced herein. In
addition, such forward-looking statements are necessarily dependent upon
assumptions, estimates and dates that may be incorrect or imprecise and involve
known and unknown risks, uncertainties and other factors. Forward-looking
statements regarding sales and EBITDA are particularly subject to a variety of
assumptions, some or all of which may not be realized. Accordingly, any
forward-looking statements included herein do not purport to be predictions of
future events or circumstances and may not be realized. Forward-looking
statements can be identified by, among other things, the use of forward-looking
terminology such as "believes," "expects," "may," "will," "should," "seeks,"
"pro forma," "anticipates" or "intends" or the negative of any thereof, or
other variations thereon or comparable terminology, or by discussions of
strategy or intentions. Given these uncertainties, prospective investors are
cautioned not to place undue reliance on such forward-looking statements. The
Company disclaims any obligations to update any of these factors or to announce
publicly the results of any revisions to any of the forward-looking statements
contained herein to reflect future events or developments.
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<PAGE> 21
USE OF PROCEEDS
The Exchange Offer is being effected to satisfy the Company's
obligations under the Old Notes, the Indenture and the Registration Rights
Agreement. There will be no cash proceeds payable to the Company from the
issuance of the New Notes pursuant to the Exchange Offer. In consideration of
issuing the New Notes in the Exchange Offer, the Company will receive an equal
principal amount of Old Notes. Old Notes that are properly tendered in the
Exchange Offer and not validly withdrawn will be accepted, cancelled and
retired and cannot be reissued.
The proceeds from the sale of the Old Notes were used to: (i) repay
and retire the Company's principal credit facility, which had an outstanding
balance of $82.3 million at the closing of the sale of the Old Notes and (ii)
fund the distribution of previously undistributed S corporation earnings to the
Company's shareholders, in an aggregate amount of $60.0 million. The remainder
of the net proceeds of approximately $50.9 million will be used for general
corporate purposes, which may include future acquisitions. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources" and "Certain Relationships and Related
Transactions."
CAPITALIZATION
The following table sets forth the capitalization of the Company at August
30, 1998. See "Certain Relationships and Related Transactions." This table
should be read in conjunction with the Company's consolidated financial
statements and the related notes thereto, "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and the other financial
information appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF
AUGUST 30, 1998
---------------
(IN THOUSANDS)
<S> <C>
Cash and cash equivalents .......................................... $ 54,884
=========
Debt (including current maturities):
Notes ............................................................ 200,000
Other existing indebtedness ...................................... 62,769
---------
Total debt ................................................... 262,769
Shareholders' deficit .............................................. (25,644)
---------
Total capitalization ......................................... $ 237,125
=========
</TABLE>
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<PAGE> 22
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data is qualified by
reference to, and should be read in conjunction with, the consolidated
financial statements and the related notes thereto and other financial
information included elsewhere in this Prospectus, as well as "Management's
Discussion and Analysis of Financial Condition and Results of Operations." The
selected consolidated financial data of the Company as of and for the fiscal
years ended August 28, 1994, August 27, 1995, August 25, 1996, August 31, 1997
and August 30, 1998 are derived from the Company's audited consolidated
financial statements. Historical results are not necessarily indicative of the
results to be expected in the future.
<TABLE>
<CAPTION>
FISCAL YEAR (1)
-----------------------------------------------------------
1994 1995 1996 1997 1998
--------- ---------- ----------- ----------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net sales.......................................... $ 157,346 $ 225,359 $ 300,788 $ 354,058 $ 381,137
Cost of sales...................................... 90,804 128,341 173,964 200,750 216,081
--------- --------- --------- --------- ---------
Gross profit................................... 66,542 97,018 126,824 153,308 165,056
Operating expenses................................. 51,008 74,547 96,595 117,707 130,833
Restructuring charges.............................. -- -- -- -- 2,262
--------- --------- --------- --------- ---------
Operating income............................... 15,534 22,471 30,229 35,601 31,961
Costs of cancelled initial public equity offering.. -- -- -- -- 1,273
Interest income.................................... -- -- -- -- (116)
Interest expense................................... 1,034 4,008 6,846 9,722 11,949
Provision for income taxes......................... 1,165 2,322 3,679 3,243 4,021
Minority interest.................................. -- 97 300 146 471
--------- --------- --------- --------- ---------
Net income(2)...................................... $ 13,335 $ 16,044 $ 19,404 $ 22,490 $ 14,363
========= ========= ========= ========= =========
OTHER DATA:
EBITDA(3).......................................... $ 17,807 $ 28,174 $ 35,531 $ 42,486 $ 46,404
EBITDA margin(4)................................... 11.3% 12.5% 11.8% 12.0% 12.2%
Depreciation and amortization...................... $ 2,273 $ 5,703 $ 5,302 $ 6,885 $ 8,213
Capital expenditures............................... 2,873 5,291 5,461 7,746 8,378
CREDIT DATA:
Cash interest expense(5)......................................................................... $ 11,893
Ratio of EBITDA to cash interest expense(5)...................................................... 3.9x
Ratio of net debt to EBITDA(6)................................................................... 4.5
Ratio of earnings to fixed charges(7)............................................................ 3.2
BALANCE SHEET DATA:
Cash and cash equivalents.......................... $ 1,362 $ 3,376 $ 4,363 $ 5,301 $ 54,884
Working capital.................................... 24,615 32,936 39,456 43,302 97,150
Total assets....................................... 58,458 122,781 190,168 208,689 305,922
Total debt......................................... 14,067 53,969 93,062 108,726 262,769
Shareholders' equity (deficit)..................... 26,583 29,106 35,343 37,313 (25,644)
</TABLE>
- ------------------------------------------
(1) The Company ends its fiscal year on the last Sunday in August. Accordingly,
fiscal years 1994 through 1998 ended on August 28, 1994, August 27, 1995,
August 25, 1996, August 31, 1997 and August 30, 1998 respectively.
Moreover, fiscal year 1997 was a 53-week year.
(2) The Company is an S corporation and is not required to pay United States
federal and certain state income taxes.
(3) EBITDA is defined as operating income plus depreciation, amortization
(excluding amortization of bond issuance costs), restructuring charges and
certain non-recurring costs (see "Management's Discussion and Analysis of
Financial Condition and Results of Operations"). EBITDA is presented as the
Company believes it is a useful indicator of a company's ability to meet
debt service and capital expenditure requirements. It is not, however,
intended as an alternative measure of operating results or cash flow from
operations (as determined in accordance with generally accepted accounting
principles). EBITDA is not necessarily comparable to similarly titled
measures for other companies and does not necessarily represent amounts of
funds available for management's discretionary use.
(4) EBITDA margin represents EBITDA as a percentage of net sales.
(5) Cash interest expense represents total interest expense less amortization
of bond issuance costs.
(6) Net debt is defined as total debt less cash and cash equivalents.
(7) Earnings represent operating income plus restructuring charges and certain
non-recurring costs (see Management's Discussion and Analysis of Financial
Condition and Results of Operations) and fixed charges represent actual
interest charges for the period. The ratio of earnings to fixed charges was
15.0x, 5.6x, 4.4x, 3.7x and 3.2x for 1994 through 1998.
16
<PAGE> 23
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the "Selected Consolidated Financial Data" and the Company's consolidated
financial statements and the related notes thereto which are included elsewhere
in this Prospectus. In this "Management's Discussion and Analysis of Financial
Condition and Results of Operations," all references to the Company's
international operations ("International") include all of Albecca's operations
outside of the U.S. The Company uses a 52-53 week fiscal year ending on the
last Sunday in August. Accordingly, fiscal years 1996, 1997 and 1998 ended on
August 25, 1996, August 31, 1997, and August 30, 1998, respectively. Moreover,
fiscal 1997 was a 53-week year.
OVERVIEW
Albecca is a worldwide leader in the custom framing industry, designing,
manufacturing and distributing high quality, branded custom framing products,
including wood and metal moulding, matboard, foam board, glass, equipment and
other framing supplies.
Albecca's net sales consist primarily of sales of branded custom framing
products to independent retail custom framers and franchise operations. With
operations in 20 countries, Albecca's net sales are geographically diversified.
U.S. customers accounted for 54.0%, 46.7% and 48.7% of net sales in 1996, 1997
and 1998, respectively, with International customers accounting for the
balance. Albecca has grown internally and through the acquisition of 38 other
manufacturers and distributors of custom framing products since 1988. Of these
acquisitions, Albecca completed ten in 1996, six in 1997 and six in 1998.
Albecca's cost of sales for manufactured goods consists primarily of the
cost of raw materials (primarily lumber), direct labor and the overhead
associated with the manufacturing processes. The Company's cost of sales for
products purchased for resale primarily consists of the cost of the product and
the related freight costs. Albecca's operating expenses include the expenses
associated with the Company's customer service, marketing, selling,
distribution processes and general and administrative support.
Albecca Inc. has been an S corporation under the Code since 1987 and
Larson-Juhl International L.L.C. has been a limited liability company since
inception. Therefore, neither has been subject to federal and certain state
income taxes. The provision for income taxes that the Company historically has
recorded has been primarily for certain state and foreign income taxes. In
connection with the offering of the Old Notes, the Company distributed $60.0
million of previously undistributed S corporation earnings to its shareholders.
See "Use of Proceeds" and "Certain Relationships and Related Transactions." The
Company intends to continue to make distributions to its shareholders to pay
their income tax obligations as a result of the Company's status as an S
corporation.
17
<PAGE> 24
RESULTS OF OPERATIONS
The following table sets forth certain consolidated statements of
operations data as a percentage of net sales for the periods indicated:
<TABLE>
<CAPTION>
FISCAL YEAR
-------------------------------
1996 1997 1998
------- ------- -------
<S> <C> <C> <C>
Net sales...................................... 100.0% 100.0% 100.0%
Cost of sales.................................. 57.8 56.7 56.7
------- ------- -------
Gross profit................................ 42.2 43.3 43.3
Operating expenses............................. 32.1 33.2 34.3
Restructuring charges.......................... -- -- 0.6
------- ------- -------
Operating income............................ 10.1 10.1 8.4
Cost of cancelled initial public offering...... -- -- 0.3
Interest expense, net.......................... 2.2 2.8 3.1
------- ------- -------
Income before provision for income taxes and
Minority interest......................... 7.9 7.3 5.0
Provision for income taxes..................... 1.2 0.9 1.1
Minority interest.............................. 0.1 -- 0.1
------- ------- ---------
Net income..................................... 6.6% 6.4% 3.8%
======= ======= =======
EBITDA......................................... 11.8% 12.0% 12.2%
======= ======= =======
</TABLE>
1998 Compared to 1997
Net Sales. Net sales increased $27.1 million, or 7.6%, to $381.1 million in
1998 from $354.1 million in 1997. This increase is primarily a result of
internal growth, the acquisition of six manufacturers and distributors of
custom framing products in 1998, the full period impact of the six acquisitions
completed during 1997 and the expansion of the Company's lines of premium
custom frame mouldings, partially offset by changes in currency. Currency
fluctuations in 1998 reduced net sales by 2.5%, primarily due to a
strengthening of the U.S. dollar against the German Mark, Dutch Guilder,
Australian dollar and Canadian dollar. In constant currency terms, excluding
the 53-week impact of 1997, net sales increased by 12.3% in 1998 from 1997.
U.S. net sales increased 12.2% in 1998 from 1997 and, on a constant currency
basis, International net sales increased 8.7% in the same period. The increase
in U.S. net sales resulted from the acquisition of four distributors of custom
framing products and an estimated 6.4% increase in sales to independent custom
framing retailers, offset by a decline in sales to framing departments of craft
chains. The increase in International net sales resulted primarily from the
acquisition of two manufacturers and distributors of custom framing products in
1998 and the full period impact of the six International acquisitions completed
during 1997.
Cost of Sales. Cost of sales increased $15.3 million, or 7.6%, to $216.1
million in 1998 from $200.8 million in 1997, primarily as a result of increased
net sales. Cost of sales as a percentage of net sales was 56.7% in both 1998
and 1997. In the U.S., gross profit margin decreased to 46.0% in 1998 from
46.7% in 1997. This decrease was primarily the result of a 7.5% increase in the
cost of the Company's sampling program and lower gross profit margins on
products sold by acquired businesses. This decrease was partially offset by an
improvement in the product mix, primarily resulting from increased sales of
products that comprise the "Craig Ponzio Signature Collection." International
gross profit margin increased to 40.8% in 1998 from 40.3% in 1997, primarily
due to the Company's success in leveraging its buying power with existing
suppliers, sourcing of products from additional vendors and the consolidation
of certain international activities, including distribution centers and
manufacturing facilities.
Operating Expenses. Operating expenses increased $13.1million, or 11.2%, to
$130.8 million in 1998 from $117.7 million in 1997. Operating expenses as a
percentage of net sales increased to 34.3% in 1998 from 33.2% in the comparable
period in 1997. The increase in operating expenses is primarily attributable to
the acquisition of six manufacturers and distributors of custom framing
products during 1998 and operating expenses for the full period from the six
acquisitions completed during 1997. In the U.S., operating expenses as a
percentage of net sales increased to 32.1% in 1998 from 31.9% in 1997. This
increase was primarily due to a 27.5% increase in spending for marketing
programs, including the consumer advertising program, as well as $2.1 million
of non-
18
<PAGE> 25
recurring costs associated with the integration of four acquired distributors
of custom framing products and with upgrading the Company's information systems
(including Year 2000 compliance), offset by improved efficiencies throughout
the Company's U.S. distribution network. International operating expenses as a
percentage of net sales increased to 36.4% in 1998 from 34.4% in 1997,
primarily due to the acquisition of two manufacturers and distributors of
custom framing products which had higher operating expenses as a percentage of
net sales, as well as $1.4 million in non-recurring costs primarily related to
the integration of existing and acquired facilities.
Restructuring Charges. In June 1998, the Company initiated a plan to close
its plastic moulding manufacturing facility located in the United Kingdom and
recorded a charge to operations of approximately $1,800,000. This charge
included $230,000 related to severance and other termination benefits, $450,000
of lease termination and exit costs, $790,000 for the write-down of non-current
assets to estimated realizable value and additional reserves for uncollectable
accounts receivable of $330,000. The charge related to the additional reserves
for uncollectable accounts receivable has been included in operating expenses
in the accompanying statement of operations for the year ended August 30, 1998.
During the fourth quarter of 1998, the Company initiated a plan to close its
operations in Greece and recorded a charge to operations of approximately
$700,000. This charge included severance of $80,000, write-off of goodwill of
$330,000, additional reserves for uncollectable accounts receivable of $178,000
and other exit costs of approximately $110,000. The charge related to the
additional reserves for uncollectable accounts receivable has been included in
operating expenses in the accompanying statement of operations for the year
ended August 30, 1998. Additionally, during the fourth quarter, the Company
initiated a plan to close two duplicate facilities existing as a result of
recent acquisitions and recorded a charge to operations of approximately
$276,000 related to these closures, primarily consisting of $234,000 of
severance and other termination benefits. The Company expects to incur an
additional $300,000 in restructuring related costs during the first quarter of
1999 for inventory relocation and facility closing costs. Revenue and net
operating results from the activities that will not be continued are not
significant to the overall operations of the Company.
Costs of Cancelled Initial Public Equity Offering. In July 1998, the
Company cancelled a planned initial public equity offering of its common stock.
As a result of the decision not to complete the offering, the Company wrote off
the associated expenses incurred of approximately $1.3 million.
Interest Expense. Interest expense increased $2.2 million, or 22.9%, to
$11.9 million in 1998 from $9.7 million in 1997. The increase in interest
expense is primarily due to $28.1 million of additional indebtedness incurred
in connection with the acquisition of six manufacturers and distributors of
custom framing products during 1998.
Provision for Income Taxes. Provision for income taxes increased $0.8
million, or 24.0%, to $4.0 million in 1998 from $3.2 million in 1997. Provision
for income taxes as a percentage of net sales was 1.1% in 1998 and 0.9% in
1997.
EBITDA. For the reasons set forth above, EBITDA increased by $3.9 million,
or 9.2%, to $46.4 million in 1998 from $42.5 million in 1997.
1997 Compared to 1996
Net Sales. Net sales increased $53.3 million, or 17.7%, to $354.1 million
in 1997 from $300.8 million in 1996. This increase is primarily a result of
internal growth, the acquisition of six manufacturers and distributors of
custom framing products in 1997, the full period impact of the 10 acquisitions
completed during 1996 and the expansion of the Company's lines of premium
custom frame mouldings, partially offset by changes in currency. Currency
fluctuations in 1997 reduced net sales by 3.1%, primarily due to a
strengthening of the U.S. dollar against the French Franc and Dutch Guilder. In
constant currency terms, excluding the 53-week impact of 1997, net sales
increased by 19.2% in 1997 compared to 1996. U.S. net sales increased 1.9% in
1997 from 1996 and, on a constant currency basis, International net sales
increased 46.1% in the same period. The increase in U.S. net sales is primarily
due to a 4.8% increase in sales to independent custom framing retailers,
partially offset by a decline in sales to framing departments of craft chains.
The increase in International net sales resulted primarily
19
<PAGE> 26
from the acquisition of six manufacturers and distributors of custom framing
products in 1997 and the full period impact of the 10 International
acquisitions completed during 1996.
Cost of Sales. Cost of sales increased $26.8 million, or 15.4%, to $200.8
million in 1997 from $174.0 million in 1996, primarily as a result of increased
net sales. Cost of sales as a percentage of net sales decreased to 56.7% in
1997 from 57.8% in 1996. In the U.S., gross profit margin increased to 46.7% in
1997 from 44.0% in 1996. This increase was primarily the result of an
improvement in the product mix, primarily resulting from increased sales of
products that currently comprise the "Craig Ponzio Signature Collection,"
partially offset by a 16.0% increase in the cost of the Company's sampling
program. International's gross profit margin increased to 40.3% in 1997 from
40.0% in 1996. The six acquisitions completed in 1997 did not have a
significant impact on gross margin.
Operating Expenses. Operating expenses increased $21.1 million, or 21.9%,
to $117.7 million in 1997 from $96.6 million in 1996. Operating expenses as a
percentage of net sales increased to 33.2% in 1997 from 32.1% in 1996. The
increase in operating expenses is primarily attributable to the acquisition of
six manufacturers and distributors of custom framing products during 1997, a
full year of operating expenses from the 10 acquisitions completed during 1996
and the U.S. consumer advertising program which commenced in September 1996. In
the U.S., operating expenses as a percentage of net sales increased to 31.9% in
1997 compared to 31.0% in 1996. This increase was primarily due to the
investment in the U.S. consumer advertising program, partially offset by
improved efficiencies throughout the Company's U.S. distribution network.
International operating expenses as a percentage of net sales increased to
34.4% in 1997 from 33.4% in 1996, primarily due to acquisition of six
manufacturers and distributors of custom framing products which had higher
operating expenses as a percentage of net sales.
Interest Expense. Interest expense increased $2.9 million, or 42.0%, to
$9.7 million in 1997 from $6.8 million in 1996. The increase in interest
expense is primarily due to $18.4 million of additional indebtedness incurred
in connection with the acquisition of six manufacturers and distributors of
custom framing products during 1997.
Provision for Income Taxes. Provision for income taxes decreased $0.4
million, or 11.9%, to $3.2 million in 1997 from $3.7 million in 1996. Provision
for income taxes as a percentage of sales was 0.9% in 1997 compared to 1.2% in
1996.
Net Income. For the reasons set forth above, net income increased $3.1
million, or 15.9%, to $22.5 million in 1997 from $19.4 million in 1996. Net
income as a percentage of net sales decreased to 6.4% in 1997 from 6.5% in
1996.
EBITDA. For the reasons set forth above, EBITDA increased by $7.0 million,
or 19.6%, to $42.5 million in 1997 from $35.5 million in 1996.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $30.6 million, $22.2 million
and $15.6 million in 1996, 1997 and 1998, respectively. The Company's primary
cash requirements have been to fund working capital, maintenance capital
expenditures and acquisitions. The Company has generally used internally
generated funds and amounts available under its existing bank credit facilities
as its primary sources of liquidity. Net cash used in investing activities is
primarily used for the acquisition of manufacturers and distributors of custom
framing products. The Company invested $34.1 million for acquisitions in 1996,
$18.4 million for acquisitions in 1997 and $28.1 million for acquisitions in
1998.
Capital expenditures (excluding acquisition costs) were $5.5 million, $7.7
million and $8.4 million in 1996, 1997 and 1998, respectively. The Company's
historical capital expenditures have been primarily used to expand its
distribution network, enhance management information systems and improve
manufacturing efficiencies.
20
<PAGE> 27
At August 30, 1998, the Company had outstanding indebtedness of
approximately $262.8 million, consisting of $200.0 million in principal amount
of the Notes and $62.8 million of other indebtedness. See "Risk Factors --
Substantial Leverage and Shareholders' Deficit." The Company's primary sources
of liquidity will be cash flow from operations and its available cash and cash
equivalents of $54.9 million. The Company's liquidity needs following the
Offering will relate primarily to payment of principal and interest on
outstanding indebtedness, primarily constituting principal and interest on the
Notes, the funding of capital expenditures, working capital and complementary
acquisitions and the funding of distributions to the Company's shareholders to
pay income taxes as a result of its status as an S corporation.
The Company's ability to make scheduled payments of the principal of, or to
pay the interest or Liquidated Damages, if any, on, or to refinance, its
indebtedness (including the Notes), or to fund planned capital or other
8expenditures will depend on its future financial or operating performance,
which will be affected by prevailing economic conditions and financial,
business and other factors, many of which are beyond its control. Based upon
the current level of operations, management believes that cash flow from
operations and available cash and cash equivalents will be adequate to meet the
Company's anticipated future requirements for working capital, capital
expenditures, scheduled payments of principal and interest on its indebtedness,
including the Notes, and acquisitions at least until the end of fiscal 1999.
There can be no assurance that the Company's business will generate sufficient
cash flow from operations or that future borrowings will be available in an
amount sufficient to enable the Company to service its indebtedness, including
the Notes, or to make anticipated capital and other expenditures.
The Company does not have a bank credit facility in place to fund its U.S.
operations, although the Company plans to enter into a senior bank credit
facility to finance future working capital needs, capital expenditures and
complementary acquisitions. The Company from time to time reviews and will
continue to review acquisition opportunities as well as changes in the capital
markets. If the Company were to consummate a significant acquisition or elect
to take advantage of favorable opportunities in the capital markets, the
Company may supplement availability or revise the terms under its credit
facilities or undertake public or private offerings of equity or debt
securities. At present, the Company has not entered into any agreements,
commitments or understandings with respect to such a credit facility. Moreover,
there can be no assurances that the Company will be able to obtain such
financing in the amounts or at the times such financing may be required, or
that, if obtained, any such financing would be on acceptable terms. See "Risk
Factors -- Liquidity and Need for Additional Financing."
EXCHANGE RATES
The Company is affected by the movement of currencies in the 19 foreign
countries in which it operates. The Company's results of operations and
financial condition may be adversely affected by fluctuations in foreign
currencies and by translations of the financial statements of the Company's
International operations from local currencies into U.S. dollars. The Company
addresses this exposure by financing most funding needs in the applicable
foreign currencies. In addition, the exposure is further mitigated by each of
the International operations transacting business primarily in its local
currency.
YEAR 2000 COMPLIANCE
The Company has initiated a program to assess the impact of Year 2000
compliance on its information technology ("IT") systems and its non-IT systems
and has formulated a plan to address business disruption associated with
potential date processing problems.
Through its assessments, the Company has identified potential Year 2000
issues in its IT systems, both hardware and software and in its non-IT systems.
The Company is in the process of addressing these deficiencies through
upgrades, replacements, specific enhancements and other corrective measures.
The Company expects to complete remediation of its material IT systems no later
than August 1999. In connection with its non-IT systems (building security,
HVAC and other equipment with date sensitive operating controls) the Company is
in the process of identifying those items which may require replacement or
upgrading. The Company expects to complete testing and correcting the date
sensitive non-IT systems by September 1999.
21
<PAGE> 28
The Company has initiated inquires of third parties with whom the Company
has significant business relationships (such as customers, vendors, lessors) to
assess their state of addressing Year 2000 issues that will materially and
adversely impact the Company. The Company has just begun requesting that
significant business relationships respond in writing to the Company's Year
2000 compliance inquiries that they will be Year 2000 compliant by the end of
1999. The Company plans to continue to assess its significant third party
business relationships' efforts in addressing Year 2000 issues through other
techniques as it deems appropriate. Despite the Company's efforts, there can be
no guarantee that the systems of other companies which the Company relies upon
to conduct its business will be Year 2000 compliant.
The Company estimates that it will incur expenses of $700,000 to $1.0
million in conjunction with the Year 2000 compliance project. As of August 30,
1998, the Company has spent approximately $600,000 in connection with this
project. The majority of these expenditures have been and will be expensed as
incurred.
The estimated dates of completion and costs of the Year 2000 initiatives
are based on management's best estimate. However, there can be no guarantees
that these estimates will be achieved, and actual results could differ
materially from the those plans.
The Company believes that its most reasonably likely worst case Year 2000
scenario would be a failure by a significant third party in supplying the
Company its products and services it needs to conduct its day-to-day
operations. This risk is not limited to its vendors but also includes, without
limitation, utilities or other general service providers or government
entities. The Company is focusing its remedial efforts on those factors which
it can reasonably be expected to have influence upon. The extent of lost
revenue as a result of such scenarios cannot be estimated at this time.
The Company has not yet completed its planning and preparation to handle
the most likely worst case scenarios described above. The Company intends to
develop contingency plans for these scenarios by March 31, 1999.
RECENT ACCOUNTING PRONOUNCEMENTS
For a discussion of the impact of recent accounting pronouncements, see the
Company's consolidated financial statements and the related notes thereto which
are included elsewhere in this Prospectus.
22
<PAGE> 29
BUSINESS
OVERVIEW
Albecca, which primarily does business under the Larson-Juhl name, is a
worldwide leader in the custom framing industry. Albecca designs, manufactures
and distributes a complete line of high quality, branded custom framing
products, including wood and metal moulding, matboard, foam board, glass,
equipment and other framing supplies. The Company's principal brands include
the "Larson-Juhl Classic Collection" and the "Craig Ponzio Signature
Collection." For over 100 years, the Company has been designing, manufacturing
and distributing custom framing products that enhance the aesthetic qualities
of prints, paintings, drawings and other art and memorabilia. By combining
traditional craftsmanship with modern manufacturing technology, Albecca creates
frames characterized by distinctive design and superior quality. Albecca has
attained its worldwide leadership position by offering a complete selection of
quality branded products and outstanding service to its retail custom framing
customers and, more recently, by increasing awareness of its products through
consumer advertising.
Albecca believes it is a market leader in North America (United States and
Canada) and estimates that it holds a leading market position in the other
countries in which it operates. Albecca believes it has achieved its leading
market position by combining innovative design of premium, branded products, a
complete line of quality products, global leadership in sales and customer
service and cost-efficient manufacturing and distribution. These competitive
strengths have made the Larson-Juhl brand one of the most globally recognized
names in the custom framing industry. The Company believes that consumers are
placing an increased emphasis on the home, its decor and the expression of
individual style, which will contribute to the growth of the custom framing
market. To capitalize on this trend, Albecca's business strategy is focused on
continuing to introduce premium, branded product collections, increasing
product and brand awareness through consumer advertising, increasing sales
penetration to retail custom framers, improving profitability of operations and
pursuing complementary acquisitions.
Albecca conducts its operations through 76 locations in 20 countries. In
North America, Albecca operates four moulding and frame manufacturing plants
and 28 light manufacturing/distribution centers. Internationally, the Company
operates 16 moulding and frame manufacturing plants and 36 light
manufacturing/distribution centers. In North America, Albecca's primary
customers are retail custom framers. In Europe, the Company primarily serves
retail custom framers and home decorating centers.
Craig Ponzio, the Company's Chairman, President, Chief Executive Officer
and principal shareholder joined Larson Picture Frame, Inc. in 1973 and
purchased that company in 1981. In 1988, Larson Picture Frame, Inc. acquired
Juhl-Pacific Corporation creating Larson-Juhl. Following the 1981 acquisition,
the management team initiated a program to expand Albecca's product lines,
develop an organizational infrastructure, and acquire and consolidate
manufacturers and distributors of custom framing products.
THE CUSTOM FRAMING INDUSTRY
While art work has been framed by hand for centuries, the custom framing
industry began in the 1890s with the development of special clamps, mat cutters
and other framing equipment. The real growth of the industry began in the 1970s
with the advent of technological advances in equipment and distribution
processes, which decreased the custom framer's barrier to entry and allowed an
increasing number of entrepreneurs to start custom framing businesses. These
trends paralleled the continuing growth of an economically strong middle class
seeking to decorate their homes with art work, photographs and other personal
items. Today the industry in North America includes approximately 20,000 retail
custom frame store fronts and over 300 manufacturers and distributors of custom
framing products. Independent custom framers currently account for
approximately 89% of custom framing sales in North America. The remaining 11%
of sales are principally generated by custom framing departments of craft
chains and franchise operations. Outside North America, the Company estimates
there are over 20,000 retail custom frame store fronts and over 500
manufacturers and distributors of custom framing products. Albecca estimates
that sales to retail custom framers in 1998 were approximately $1.2 billion in
North America and approximately $1.2 billion in the rest of the world.
23
<PAGE> 30
The Company believes the industry will grow as consumers place greater
emphasis on the home and its decor. The Company believes this trend is
contributing to the growth of the custom framing industry and, when combined
with the Company's consumer advertising program, will allow the Company to help
generate increased consumer awareness and sales of custom framing products.
Historically, due to inventory and cost limitations, retail custom framers
were unable to offer a wide selection of products and instead marketed
themselves as craftsmen. Today, with advances in technology and distribution
processes, the retail custom framer is able to rely on manufacturers and
distributors to provide a wide assortment of framing products and supplies on a
just-in-time basis. Because custom framers are now able to offer a full line of
branded products without inventory limitations, the retail custom framing
industry is less dependent on technical ability than on design and marketing
skills. The Company believes this shift will continue to benefit manufacturers
and distributors, such as Albecca, that are able to provide fast delivery of a
complete line of custom framing products as well as assist retail custom
framers with merchandising, design and selling strategies.
PRODUCTS
Albecca designs, manufactures and distributes a complete line of quality
branded custom framing products, including wood and metal moulding, matboard,
foam board, glass, equipment and other framing supplies. This product offering
allows the Company to be a complete source supplier to retail custom framers.
Albecca offers over 8,000 branded products in North America and over 17,000
additional branded products in the rest of the world. Of the Company's
worldwide products, over 12,000 are branded custom frame wood moulding
products. The Company believes it offers the widest variety of products for the
retail custom framer in the industry.
The following illustration depicts a completed custom frame, utilizing a
variety of framing products sold by the Company:
[GRAPHIC]
WOOD MOULDING
Albecca is one of the world's largest manufacturers and suppliers of wood
moulding to the custom framing industry, based upon sales. Albecca provides
branded custom moulding in a variety of shapes, sizes, finishes and forms to
meet each customer's specific needs. The Company's finishes include water
gilded gold leaf, naturally stained North American hardwoods, genuine European
burlwood and hand applied beeswax, as well as a variety of finishes inspired by
antique frames and furniture. The styles of these wood mouldings range from
contemporary geometric shapes to heavily embossed Baroque patterns. With a
variety of widths and styles available, multiple mouldings can be used within a
single frame to create thousands of framing combinations. Custom framers
purchase moulding from the Company in a variety of formats including (i) long
lengths of moulding which the framers cut to size; (ii) moulding cut to
specific lengths (chop service); and (iii) moulding assembled as a completed
frame (join service).
Albecca's design team has created each of its over 1,100 branded wood
mouldings in North America. Most of the Company's wood moulding products are
produced either in the Company's plants in the U.S., Canada, Europe and South
Africa, or by third-party manufacturers in Europe and Asia that have devoted a
significant amount of their capacity to producing Albecca's high quality,
proprietary moulding products. See "-- Manufacturing and Sourcing."
The Company markets its wood moulding under the "Larson-Juhl Classic
Collection" and the "Craig Ponzio Signature Collection" brand names. Each
collection consists of a series of lines designed to evoke a particular era,
location, style or culture. The "Craig Ponzio Signature Collection" contains
the Company's finest lines of wood moulding, allowing the Company to market
differentiated products to multiple segments of the custom framing industry.
See "-- Design."
24
<PAGE> 31
METAL MOULDING
Albecca distributes approximately 1,000 different branded metal mouldings
worldwide. Sales of these mouldings predominantly require chop service, as
retail custom framers generally do not have the equipment necessary to cut
metal moulding. The Company markets one proprietary line of metal moulding,
Clark, which is one of the market leaders in metal moulding.
MATBOARD AND FOAM BOARD
The Company sells matboard, which is cut to surround the art work and used
inside the frame, and foam board, which is used as a firm backing for certain
art work and other items to be framed. The Company sells all major brands of
matboard and foam board to meet the preferences of retail custom framers. As
consumers have become increasingly concerned about preserving framed items
against discoloration and damage, certain premium conservation types of
matboard and foam board have been developed. In 1997, the Company launched its
own proprietary line of premium conservation matboard, under the Artique brand
name, in an effort to promote this trend of preservation framing.
GLASS, EQUIPMENT AND OTHER FRAMING SUPPLIES
Albecca supplies a variety of glass types, generally priced based on
differing levels of ultraviolet filtering properties and reflectivity. The
Company also sells a full complement of custom framing equipment and supplies
as a convenience to its customers. This selection includes joining machines,
matboard cutters and framing hardware. The Company's net sales of custom
framing equipment have not been material. All of the glass, equipment and other
framing supplies sold by the Company are produced by third-party manufacturers.
SALES AND MARKETING
The Company markets its products to custom frame shops principally through
Company-employed sales representatives, advertisements in trade magazines and
attendance at industry trade shows. The Company also markets to consumers by
advertising in widely-distributed magazines that the Company considers
influential among consumers and decorators, as well as through the use of
direct mail materials and in-store promotional displays. Through educational
seminars and consultations with the Company's sales team, Albecca also provides
technical, marketing and other business advice both to established retail
custom framers and to prospective customers establishing new custom framing
businesses.
The Company's sales representatives update customers on the Company's
product lines, advise customers on framing design and provide information on
more effective merchandising, design and selling techniques. Sales
representatives assist retail custom framers in redesigning their frame sample
display walls. Albecca's direct sales force also works with retail custom
framers to help them create and sell more sophisticated custom frames, and
thereby increase the average price per frame. The sales representatives also
listen carefully to the retail custom framers in order to understand and
respond to issues concerning the Company's products, trends in consumer demand
and competitive activities in the marketplace. Sales representatives are
employed by the Company and compensated principally by salary, with commission
and bonus components available based on sales and other performance criteria.
The Company establishes a local presence by consolidating both the sales
and operations functions in each distribution center under the supervision of a
general manager. This decentralization of management has allowed most sales and
distribution issues to be decided at the local level, thereby improving the
level and speed of service provided to customers. The Company believes the
skill and experience of its general managers has contributed to the Company's
ability to build personal relationships with its retail custom framers.
The Company markets to the retail custom framer directly through catalogs
and sales literature and through publicity and advertising in trade
publications such as Art Business News, Art World News, Art Expressions, Decor,
der Kunsthandel, Picture Framing Magazine and The Picture Business. These
advertisements generally focus on the Company's image and the introduction of
new premium branded products.
25
<PAGE> 32
Albecca has embarked on an aggressive plan to increase consumer awareness
and appreciation of the value of custom framing in general, and specifically,
the Company's premium branded products. The Company believes consumers are more
likely to perceive value in premium branded products. In 1996, the Company
began to extensively advertise its branded products in well-known publications
that the Company considers influential among consumers and decorators in the
home furnishing industry, such as Architectural Digest, Elle Decor, House and
Garden, House Beautiful, Metropolitan Home and Traditional Home. The Company
believes it is the only manufacturer and distributor of custom framing products
marketing its products through a national consumer advertising program. These
advertisements portray the warmth and individuality custom frames can add to a
home. Through these advertisements, the Company targets sophisticated consumers
with the economic power to purchase its high quality, premium branded products.
In addition, the Company provides its customers with direct mail literature as
well as advertisements suitable for inclusion in local publications.
DESIGN
The Company's goal is to develop and produce the best-designed products in
the industry. The Company believes that quality designs not only will increase
consumer interest in its own products, but will also help to lead the entire
industry to improve design quality and thereby attract more consumers to custom
framing. Led by Mr. Ponzio, the Company's design team extensively researches
and studies furniture, architectural and historical design elements and art and
decorating trends from around the world. The Company incorporates these
elements into branded product lines introduced under one of the Company's
moulding collections.
Mr. Ponzio is the Company's chief designer and provides leadership in all
aspects of the design process. Mr. Ponzio's 25 years of design experience are
complemented by the other members of the corporate design team, who have an
average of 17 years of design experience in the custom framing industry. The
corporate design team works in collaboration with designers in each of the
Company's manufacturing facilities to create mouldings that bring together the
best in design with the manufacturing strengths of a particular facility. By
combining their creative vision with the Company's commitment to developing
high-quality products, the entire design team strives to understand what
consumers desire and which designs are most likely to be commercially viable.
Albecca designs all of its wood moulding collections and the Clark
collection of metal moulding. In addition, the Company recently introduced
Artique, its first proprietary matboard design. The team creates products which
are manufactured both by Albecca as well as by third-party manufacturers.
Traditionally, the time involved from design and conception to production of a
new product line is approximately six months.
Listed below is a brief description from the Company's marketing materials
of recent introductions of wood moulding lines under the "Craig Ponzio
Signature Collection:"
<TABLE>
<CAPTION>
NAME DESCRIPTION YEAR INTRODUCED
---- ----------- ---------------
<S> <C> <C>
Aubusson..................... Inspired by artfully woven French rugs, 1998
Aubusson reflects the delicate detail,
carefully crafted color and design of antique
French tapestries.
Castillano................... The splendor of Spain is captured in this 1996
rich, bold, distinctive moulding. The pleasing
proportions and beautifully embossed
patterns exude tradition and fine quality.
Cortona...................... Like a comfortable piece of antique furniture 1998
or an heirloom passed down from generation
to generation, this collection of
beautifully patterned genuine burlwood
evokes the same feelings of antiquity.
Couleurs Provence............ Harvested from the French countryside, this 1998
moulding captures the authentic detailing of
aged wormwood, the classic colors of Provence
and the beauty of a natural beeswax finish.
El Greco..................... This majestic, deeply embossed Spanish moulding 1998
is
</TABLE>
26
<PAGE> 33
<TABLE>
<S> <C> <C>
designed in the style of the royal court
during the 15th century. Our artisans
meticulously recapture the bold, strong
distinction of this regal age.
Imperial..................... The grace and stately detail of 17th century 1996
France lives again in this collection of
delicately embossed profiles.
Kensington................... The natural beauty and unique characteristics 1997
of authentic mahogany and European burlwood
veneers give this collection a sense of warmth
and character that stands the test of time.
Musee........................ Our Master Guilders create this distinctive 1996
collection of beautiful mouldings using the
same time-honored techniques of hand-finished
waterguilding that began centuries ago.
Prado........................ Seemingly lit from within, the dark, rich glow 1997
of this moulding collection reflects the
accumulated age of the beautiful monasteries of
Old World Europe.
Stradivarius................. The graceful shapes and rich finishes of the 1997
Stradivarius violin served as the inspiration
for this exquisitely designed moulding
collection.
Umbria....................... Borrowing its name from the tranquil Italian 1998
region, Umbria embodies the strength, hand
craftsmanship and timeless tradition of this
region.
Vermeer...................... Named in honor of the Dutch master, Vermeer, 1998
these elegant, smooth mouldings bring together
classic and modern influences to create a
collection that is the true work of a master.
</TABLE>
MANUFACTURING AND SOURCING
Albecca also produces wood moulding in thirteen Company-owned manufacturing
plants. Most of the wood moulding sold by the Company is produced by
third-party manufacturers. As an industry leader in design, and as one of the
largest distributors of wood moulding to retail custom framers, the Company has
developed close working relationships with many of these third-party
manufacturers who produce Albecca's proprietary products to its designs and
specifications. Many of these manufacturers have devoted a significant amount
of their capacity to the production of Albecca's high quality products. In
addition to moulding manufacturing plants, the Company has seven pre-assembled
frame manufacturing plants in Europe and the U.S. The Company distributes its
products from its light manufacturing/distribution centers. See "--
Distribution."
The following lists certain information regarding the Company's
manufacturing facilities:
<TABLE>
<CAPTION>
NUMBER OF
COUNTRY PRODUCTS FACILITIES
------- -------- ----------
<S> <C> <C>
Austria........................................ Mouldings 1
Canada......................................... Mouldings 2
Czech Republic................................. Mouldings and Frames 2
Finland........................................ Mouldings 1
France......................................... Mouldings and Frames 4
Germany........................................ Frames 1
Italy.......................................... Mouldings 1
Netherlands.................................... Frames 1
Russia......................................... Frames 1
South Africa................................... Mouldings 2
Sweden......................................... Mouldings 2
United States.................................. Mouldings and Frames 2
----
Total................................ 20
</TABLE>
The wood moulding manufacturing process begins with raw board lumber, from
which the moulding is milled and then sanded to produce the finished profile.
Then a variety of staining, distressing and hand-applied finishing
27
<PAGE> 34
techniques are used to produce the completed moulding. There are typically
between eight and 25 process steps involved in producing the Company's
high-quality wood moulding products.
Wood, the principal raw material used in the Company's manufacturing
processes, is purchased from a variety of suppliers in the U.S., Canada, Asia
and Africa as kiln-dried blanks or as raw lumber that is then dried by the
Company. The primary types of wood used by the Company are North American oak
and ash, as well as European pine. The Company has long-standing relationships
with many of its suppliers and has experienced only limited difficulty in
satisfying its raw materials requirements. Although the loss of any supplier
may have an adverse effect on the Company's short-term operating results, the
Company believes it could replace suppliers without having a material adverse
effect on the Company. Over the past three years, prices of the Company's
primary types of wood have remained relatively stable.
The Company does not manufacture any other products, but instead purchases
them from numerous other manufacturers and distributors. The Company works with
one manufacturer to produce its proprietary line of Clark metal moulding. The
Company is the only purchaser of metal picture frame moulding from this
manufacturer. The Company also works with one manufacturer to produce its
Artique brand of matboard.
The Company's manufacturing and sourcing staff oversees manufacturing and
production, negotiates purchases of raw materials and researches and identifies
new suppliers and third-party manufacturers. The Company's products are
manufactured according to plans prepared each year which reflect prior years'
experience, current industry trends, economic conditions and the Company's
estimates of a particular line's performance. The Company separately negotiates
with suppliers for the purchase of required raw materials in accordance with
the Company's specifications and limits its exposure to holding excess raw
material inventory by purchasing based on demand. The Company believes that its
policy of limiting its commitments for purchases reduces its exposure to excess
inventory and obsolescence. The Company is not responsible for procuring raw
materials used by its third-party manufacturers.
DISTRIBUTION
Albecca provides a complete line of framing materials and supplies, and
fills orders rapidly and dependably. By supplying a broad line of quality
products, Albecca offers retail custom framers numerous alternatives to meet
the individual tastes of consumers. The Company has developed a user-friendly
order and fulfillment system in North America that includes features such as
toll-free telephone and fax ordering, customer service and technical
representatives, extended customer service hours, instant stocking information
and next-day shipping on most orders from the Company's distribution centers.
This system, and advancements in framing technology, allow retail custom
framers to offer dependable service to their customers without requiring
significant amounts of capital to be tied up in inventory and equipment. This,
in turn, allows Albecca's customers to enhance their marketing by committing
more of their shop space to retail display and more of their time to designing
and selling, and less to back-room operations.
NORTH AMERICA
A typical custom framing transaction in North America begins with an
Albecca retail custom framing customer helping a consumer determine the best
way to preserve, mount and display a work of art or personal item. Consumers
select the style and color of framing materials to suit their individual taste,
aided by displays of moulding samples ("corners") and other framing materials.
Then, the retail custom framer determines the proper amount and dimensions of
each kind of material needed to complete the framing (e.g., moulding, matboard
and glass) and contacts Albecca's customer service center by telephone or fax
to place the order. After confirming the order and the customer's credit
availability on Albecca's integrated management information system, the order
is automatically printed or displayed at the distribution center closest to the
customer. Upon receiving the order, personnel in the distribution center pull
the required materials, cut the moulding to its required dimensions (if chop
service is requested), join the frame, if necessary, inspect and package the
order. Depending on the location of the customer, orders are either delivered
by one of Albecca's delivery trucks or by a package delivery company with the
goal of shipping the order for delivery the next business day. After receiving
the order, the retail custom
28
<PAGE> 35
framer completes the preparation of the materials and assembles the finished
frame using matboard cutters, glass cutters and moulding joiners.
Albecca distributes its products in North America through 28 distribution
centers. The number and location of these distribution centers make Albecca the
only manufacturer with a broad-based North American distribution network.
The Company's Chicago and Los Angeles distribution centers also serve as
distribution hubs that receive and process container-size deliveries of the
Company's products and ship smaller quantities of products, generally weekly,
to the other distribution centers based on customer demand.
In North America, the Company operates distribution centers in the
following metropolitan areas:
<TABLE>
<S> <C>
Atlanta, Georgia Miami, Florida
Boston, Massachusetts Minneapolis, Minnesota
Calgary, Alberta Montreal, Quebec
Chicago, Illinois New Orleans, Louisiana
Cincinnati, Ohio Newark, New Jersey
Cleveland, Ohio Philadelphia, Pennsylvania
Dallas, Texas Phoenix, Arizona
Denver, Colorado San Diego, California
Detroit, Michigan San Francisco, California
Greensboro, North Carolina Seattle, Washington
Houston, Texas St. Louis, Missouri
Huntsville, Alabama Toronto, Ontario
Lakeland, Florida Vancouver, British Columbia
Los Angeles, California Washington, D.C.
</TABLE>
INTERNATIONAL
Outside North America, the Company has relied to date on the distribution
systems in place for the companies it has acquired, and is in the process of
integrating and rationalizing these systems. The Company's goal for its
international operations is to develop a fast, user-friendly order-fulfillment
system that operates through a logistical network similar to the one existing
in North America. In order to realize this goal, the Company has developed a
central distribution center in Germany to improve response to European framers
as well as to better control distribution costs. This center began operations
in August 1998.
The Company operates distribution centers from the following countries
outside of North America:
<TABLE>
<CAPTION>
NUMBER OF
COUNTRY FACILITIES
-------- ----------
<S> <C>
Australia.................................................. 6
Austria.................................................... 2
Belgium.................................................... 1
Czech Republic............................................. 1
Finland.................................................... 1
France..................................................... 2
Germany.................................................... 1
Greece..................................................... 1
Italy...................................................... 1
Japan...................................................... 1
Korea...................................................... 1
Netherlands................................................ 4
New Zealand................................................ 3
Norway..................................................... 1
Russia..................................................... 1
South Africa............................................... 2
Sweden..................................................... 5
United Kingdom............................................. 2
----
Total............................................ 36
</TABLE>
29
<PAGE> 36
CUSTOMERS
In North America, Albecca's target customers are the approximately 20,000
custom framing retail store fronts that serve middle to upper income consumers.
To date, the Company has served approximately 90% of these retail store fronts.
Outside North America, the Company targets the over 20,000 retail custom frame
store fronts and home decorating centers.
MANAGEMENT INFORMATION SYSTEMS
The Company believes that information and technology are essential to
maintaining its competitive position. The Company's management information
system is designed to provide responsive and efficient order processing,
inventory control, financial reporting and management information for the
Company's sales, marketing, procurement, distribution and financial analysis
functions. The Company's management information system allows it to track
inventory on a real time basis throughout its North American distribution
network. The Company's North American operations utilize J.D. Edwards'
WorldSoftware release 7.3 software and IBM Series 640-2239 hardware (AS400
series) which are supported at the Company's headquarters in Norcross, Georgia.
In addition, the Company has introduced an electronic data interchange ("EDI")
system to facilitate processing customer orders and inventory replenishment.
The Company believes that substantially all of its information systems are Year
2000 compliant and plans to replace or upgrade non-compliant systems prior to
September 1999. The Company believes that additional costs incurred in
connection with these replacements and upgrades will not have a material impact
on the Company's financial condition or results of operations.
CREDIT ANALYSIS AND CONTROL
Albecca manages its credit and collection functions regionally in the U.S.
Outside of the U.S., credit and collection functions are managed separately in
each country in which the Company operates. The Company extends credit based on
an evaluation of the customer's financial condition and history with the
Company. Albecca monitors credit levels on an ongoing basis to minimize credit
risk. The Company does not factor its accounts receivable or maintain credit
insurance.
INVENTORY MANAGEMENT
Albecca believes that a key competitive advantage is its complete line of
quality branded products, which allows the Company to be a complete source
supplier to retail custom framers. In the U.S., the Company's sales information
system is integrated into its inventory procurement system in order to provide
current demand trends and to optimize inventory stocking levels. This demand
information is reviewed on an ongoing, location-by-location basis in order to
more effectively control the Company's inventory investment.
QUALITY CONTROL
A key factor in the Company maintaining the quality of its products has
been to ensure that through the careful design of such products, they can be
manufactured consistently over a long period of time. The Company monitors the
quality of its raw materials prior to the manufacture of products and inspects
prototypes of each product before production runs are commenced. The Company
also performs in-line quality control checks during and after production. Final
inspections occur when the products are processed for final shipment at each of
the Company's distribution centers. The Company believes that its careful
inspection policy is an important element in maintaining the quality and
reputation of its products. In addition, the Company conducts quarterly reviews
with each of its manufacturers and suppliers to assess and improve performance
levels. Albecca offers its customers a 100% satisfaction guarantee on every
product sold.
COMPETITION
Albecca competes with over 300 North American and over 500 international
manufacturers and distributors of custom framing products. Albecca is one of
the largest manufacturers and distributors of wood moulding in North America,
where it estimates its largest competitor is The Williamson Company. The
principal manufacturers of
30
<PAGE> 37
metal moulding are Nielsen & Bainbridge and Cardinal Aluminum Company, which
primarily supply their products to custom framers through distributors. Albecca
believes it is one of the largest metal moulding customers of both companies.
The principal manufacturers of matboard are Crescent Cardboard Company and
Nielsen & Bainbridge which primarily supply their products to custom framers
through distributors. Albecca believes it is the largest single matboard
customer of both companies.
The Company competes primarily on the basis of product design and quality,
on-time delivery, inventory availability, service and price. The Company
believes its principal competitive strengths are leadership in design and
premium, branded products to the custom framing industry; a wide variety of
custom framing products; a direct sales force regularly visiting retail custom
framers to introduce new products and assist with in-store merchandising; and
strategically located manufacturing/distribution centers for rapid, efficient
response to customers. The Company seeks to protect its designs, but they are
commonly imitated in the industry. In addition, many of the Company's
competitors offer a wide variety of custom framing products, have active direct
sales forces, and are geographically located close to large numbers of
customers.
In the broader sense, the Company competes in the larger home decorating
market, where consumers may forego custom framing and choose ready-made picture
frames or framed art works, and in the larger wholesale contract framing
market, where wholesale picture framers produce framed art works in volume for
large accounts such as hotels or office complexes. Albecca believes that other
home furnishing items such as furniture, floor and wall coverings and window
treatments compete with custom framing for consumer dollars, and the Company's
challenge is to enable the custom framing industry to capture more of those
sales.
TRADEMARKS
The Company uses a number of trademarks to distinguish its brands,
principally, Larson-Juhl, Clark and Artique. The Company has registered or
applied for registration of these trademarks in the U.S. and Canada and in
numerous countries in Europe, Asia and elsewhere. Mr. Ponzio has granted the
Company a perpetual right to use the name "Craig Ponzio" to identify and brand
the Company's premium custom framing products. The Company regards its
trademarks and other proprietary rights as valuable assets in the marketing of
its products, and on a worldwide basis, seeks to protect them against
infringement. There can be no assurance that the actions taken by the Company
to establish and protect its trademarks and other proprietary rights will be
adequate to prevent imitation of its products by others or to prevent others
from seeking to block sales of the Company's products as violative of the
trademarks and other proprietary rights of others. In addition, the laws of
certain foreign countries may not protect proprietary rights to the same extent
as do the laws of the United States. The Company also regards its moulding
designs as critical to the success of its marketing efforts, and seeks to
protect those designs prior to their introduction to the marketplace. However,
after such introduction there are no practical means to prevent others from
copying or imitating such designs or specific design elements.
EMPLOYEES
At August 30, 1998, the Company had approximately 3,100 full-time team
members (employees), of which approximately 2,400 were in operations, 310 were
in sales and marketing and 350 were in corporate and general administrative
positions. In certain of the European countries in which the Company operates,
the Company's relationships with its team members are as mandated by such
countries' laws or covered by social legislation governing employment
practices. Management believes that the Company's relationship with its team
members is good.
ENVIRONMENTAL MATTERS
The Company is subject to various federal, state, local and foreign
environmental laws and regulations relating to the handling and management of
certain chemicals used and generated in manufacturing its products. The Company
believes that its operations currently comply in all material respects with
these laws and regulations. Based on the annual costs incurred by the Company
over the past several years, management does not believe that compliance with
these laws and regulations will have a material adverse effect upon the
Company's business, financial condition and results of operations. The Company
believes, however, that it is reasonably likely that the
31
<PAGE> 38
trend in environmental litigation and regulation will continue to be toward
stricter standards. Such changes in the law and regulations may require the
Company to make additional capital expenditures which, while not presently
estimable with certainty, are not presently expected to have a material adverse
effect on the Company's business, financial condition and results of
operations.
PROPERTIES AND FACILITIES
The Company's principal executive offices are located in a 65,000 square
foot office building located in Norcross, Georgia owned by L-J Properties Inc.,
a company owned by Messrs. Ponzio, Trimarco and Scheppmann, each of whom is an
executive officer of the Company. Mr. Ponzio is also a director of the Company.
The Company's lease for this facility terminates in August 2001 and the annual
rent currently is $708,000. See "Certain Relationships and Related
Transactions."
The Company owns two facilities in Ashland, Wisconsin containing
approximately 58,000 and 54,000 square feet each. These facilities are used in
the manufacture of moulding, sample frames and ready-made frames. The Company
also owns facilities in Denver, Colorado and Waldorf, Maryland which are used
as light manufacturing/distribution centers. The Company leases 27 other
facilities in North America which are used to manufacture and/or distribute the
Company's products. These facilities vary in size from approximately 12,600 to
103,500 square feet and have lease termination dates ranging from January 1999
to May 2006. See "-- Manufacturing and Sourcing" and "-- Distribution."
The Company owns 15 facilities and leases 30 facilities in 18 countries
outside of North America which are used to manufacture and/or distribute the
Company's products. The leased facilities vary in size from approximately 1,350
to 105,000 square feet and have lease termination dates ranging from December
1998 to December 2003. See "-- Manufacturing and Sourcing" and "--
Distribution."
The Company believes that its properties and facilities are adequate for
its current needs. The Company does not anticipate any material difficulty in
replacing such facilities or securing new facilities.
LEGAL PROCEEDINGS
The Company is a party from time to time in actions incidental to its
business. The Company believes that any currently pending proceedings are of a
routine nature and will not, individually or in the aggregate, have a material
adverse effect upon the Company.
32
<PAGE> 39
MANAGEMENT
The following table sets forth the names, ages and principal positions of
the Company's executive officers and directors:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Craig A. Ponzio................................. 47 Chairman of the Board, President, Chief Executive
Officer and Director
June R. Ponzio.................................. 36 Vice Chairman of the Board and Director
_____________________........................... __ Director
William P. Trimarco............................. 39 President, U.S. Operations
Stephen M. Scheppmann........................... 43 Senior Vice President and Chief Financial Officer
Stephen E. McKenzie............................. 36 Senior Vice President, Marketing
Patrick R. Cronin............................... 51 Vice President, Human Resources
R. Bradley Goodson.............................. 39 Vice President, Business Development and Secretary
</TABLE>
Craig A. Ponzio has served as the Company's Chairman of the Board,
President, Chief Executive Officer and a Director since 1981. He has been
actively involved with the Company since 1973 and acquired the Company in 1981.
Mr. Ponzio oversees the Company's operations, including the development and
execution of its strategy, and is active in the identification and consummation
of acquisitions. Mr. Ponzio is the Company's chief designer and provides
leadership in all aspects of the design process.
June R. Ponzio has served as the Company's Vice Chairman of the Board and a
Director since May 1998. She served as Corporate Secretary from October 1993
until May 1998. She participates in corporate strategic planning, with
particular experience in acquisitions, vendor relationships and team member
relations. Prior to joining Albecca in 1992, she held a management position
with Freshens Yogurt.
[New Director]
William P. Trimarco has served as the Company's President, U.S. Operations
since July 1997. Mr. Trimarco joined the Company in 1982 as Distribution
Coordinator. He served as Vice President of Operations from 1987 to 1995, and
Senior Vice President, U.S. Operations from 1995 to 1997.
Stephen M. Scheppmann has served as the Company's Senior Vice President and
Chief Financial Officer since December 1997, and prior thereto served as its
Vice President and Chief Financial Officer since joining the Company in
December 1988. From 1978 to 1988, he was employed by Arthur Andersen & Co.
Stephen E. McKenzie has served as the Company's Senior Vice President,
Marketing since September 1998 and from September 1995 served as its Vice
President, Marketing. From 1991 until 1995, Mr. McKenzie held the positions of
Product Manager and Marketing Manager. Before joining the Company in August
1991, he was the buyer for framing and import products for a national retailer.
Patrick R. Cronin has served as the Company's Vice President, Human
Resources since March 1991. Prior to joining the Company, Mr. Cronin was Vice
President, Human Resources for the Great Atlantic & Pacific Tea Co., Inc.
R. Bradley Goodson has served as the Company's Vice President, Business
Development and Secretary since May 1998. Mr. Goodson joined the Company in
August 1994 and held the positions of Finance Manager and Business Development
Manager. His primary focus is the Company's acquisition activity. From 1983
until August 1994, Mr. Goodson was employed by Arthur Andersen & Co.
33
<PAGE> 40
Craig Ponzio and June Ponzio are married. There are no other family
relationships among the Company's directors and executive officers.
BOARD OF DIRECTORS
The Bylaws provide that the size of the Board of Directors shall be
determined by the Board of Directors or by the shareholders of the Company. The
size of the Board of Directors is currently fixed at three members, two of whom
are members of the Company's management. Directors of the Company are generally
elected at the annual meeting of shareholders. Directors of the Company are
elected or appointed to serve until they resign or are removed, or until their
successors are elected and have qualified.
EXECUTIVE COMPENSATION
The following table summarizes the compensation paid or accrued for
services rendered to the Company by the Company's Chief Executive Officer and
the four most highly compensated other executive officers whose total salary
and bonus exceeded $100,000 (collectively, the "Named Executive Officers")
during the year ended August 30, 1998. The Company did not grant any stock
appreciation rights or make any long-term incentive plan payouts during that
period.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
------------------------------- ------------
Other
Annual Securities All Other
Compen- Underlying Compen-
Name and Principal Position Year Salary($) Bonus(1) sation($) Options sation($)
--------------------------- ---- --------- -------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Craig A. Ponzio, Chairman of the Board,
President and Chief Executive Officer .. 1998 680,000 -- 19,000 -- --
William P. Trimarco, President,
U.S. Operations ........................ 1998 240,000 -- -- 34,062 --
Stephen M. Scheppmann, Senior Vice President
and Chief Financial Officer ............ 1998 188,000 -- -- -- 100,000(2)
Stephen E. McKenzie, Senior Vice President,
Marketing .............................. 1998 117,000 -- -- -- --
Patrick J. Cronin, Vice President, Human
Resources .............................. 1998 131,000 -- -- -- --
</TABLE>
(1) A bonus may be paid to certain of the Named Executive Officers,
however the amount of bonus earned for the fiscal year ended August
30, 1998 has not been allocated to the individuals through the date
hereof.
(2) Represents the difference between the purchase price of the common
stock purchased on December 1, 1997 and the fair market value of such
common stock. See Note 6 of notes to the Company's consolidated
financial statements.
34
<PAGE> 41
OPTION GRANTS
The following table sets forth information concerning each grant of
stock options to the Company's executive officers during the year ended August
30, 1998:
<TABLE>
<CAPTION>
Individual Grants Potential Realizable
------------------------------------------------------------- Value at Assumed
Percent Annual Rates of
Number of of Total Stock Price
Securities Options Appreciation for
Underlying Granted to Exercise or Option Term(2)
Options Employees in Base Price Expiration ---------------------
Granted(1) Fiscal Year ($/Sh) Date 5%($) 10%($)
-------------------------------------------------------------------------------------
Name
- ----
<S> <C> <C> <C> <C> <C> <C>
William P. Trimarco 34,062 100% 8.80 4/30/03 265,444 414,584
</TABLE>
- -------------
(1) Represents option to purchase shares of the Company's Class A common
stock. Options were granted at the fair market value of the common
stock on the date of grant as determined by the Board of Directors,
and vested immediately.
(2) The 5% and 10% assumed annual rates of compounded stock price
appreciation are mandated by rules of the Securities and Exchange
Commission. The actual stock price may increase or decrease over the
term. Unless the market price of the common stock appreciates over the
option term, no value will be realized from the option grants made to
the executive officers.
1998 STOCK OPTION PLAN
In May 1998, the Board of Directors and the Company's shareholders approved
the Company's 1998 Stock Option Plan (the "Plan"). The purpose of the Plan is
to advance the interests of the Company and its shareholders by affording
certain employees and directors of the Company, as well as key consultants and
advisors to the Company, an opportunity to acquire or increase their
proprietary interests in the Company. The objective of the issuance of stock
options under the Plan is to promote the growth and profitability of the
Company because the optionees will be provided with an additional incentive to
achieve the Company's objectives through participation in its success and
growth and by encouraging their continued association with or service to the
Company.
Options under the Plan will be granted by the Compensation Committee of the
Board of Directors and may include incentive stock options ("ISOs") and/or
non-incentive stock options ("non-ISOs"). The Compensation Committee will
administer the Plan and generally will have discretion to determine the terms
of an option grant, including the number of option shares, option price, term,
vesting schedule, the post-termination exercise period and whether the grant
will be an ISO or non-ISO. Notwithstanding this discretion: (i) if an option is
intended to be an ISO, the option price per share of Class A Common Stock may
not be less than 100% of the fair market value of such share at the time of
grant, and the fair market value at the time of grant of shares first
purchasable under the option in any one year cannot exceed $100,000; (ii) if an
option is intended to be an ISO and is granted to a shareholder holding more
than 10% of the combined voting power of all classes of the Company's stock or
of its parent or subsidiary on the date of the grant of the option, the option
price per share of Class A Common Stock may not be less than 110% of the fair
market value of such shares at the time of grant; and (iii) the term of any
option may not exceed 10 years, or five years if the option is intended to be
an ISO and is granted to a shareholder owning more than 10% of the total
combined voting power of all classes of stock on the date of the grant of the
option.
A maximum of 2,600,000 shares of Class A Common Stock may be granted under
the Plan, unless it is amended to increase that number. Shares of Class A
Common Stock which are attributable to options that have expired, terminated or
been cancelled are available in connection with future option grants.
The Plan will remain in effect until terminated by the Board of Directors.
No ISO may be granted after May 1, 2008. The Plan may be amended by the Board
of Directors without the consent of the shareholders of the Company, except
that for any amendment to be effective as to ISOs, it must be approved by the
Company's shareholders within one year after approval by the Board of Directors
if the amendment increases the total number of shares issuable pursuant to ISOs
or changes the class of employees eligible to receive ISOs that may participate
in the Plan.
35
<PAGE> 42
PRINCIPAL SHAREHOLDERS
The authorized capital stock of the Company consists of 250,000,000 shares
of Class A Common Stock, $0.01 par value per share, 100,000,000 shares of Class
B Common Stock, $0.01 par value per share, and 50,000,000 shares of Preferred
Stock, $0.01 par value per share. The following table sets forth certain
information regarding the beneficial ownership of the Company's two classes of
Common Stock as of the date of this Prospectus with respect to: (i) each person
who owns beneficially more than 5% of the Common Stock and (ii) all executive
officers and directors of the Company as a group. Except as otherwise
indicated, the persons or entities listed below have sole voting and investment
power with respect to such shares.
<TABLE>
<CAPTION>
SHARES OWNED(1)(2)
-------------------------------------------------
TOTAL
VOTING POWER
CLASS A CLASS B AFTER THE
COMMON STOCK COMMON STOCK OFFERING
--------------------- ----------------------- ------------
NUMBER PERCENT NUMBER PERCENT PERCENT
------ ------- -------- ------- ------------
<S> <C> <C> <C> <C> <C>
Craig A. Ponzio(3).......................... -- -- 16,626,000 100% 99.8%
June R. Ponzio(3)........................... -- -- 16,626,000 100% 99.8%
All executive officers and directors as a
Group (8 persons)......................... 374,000 100% 16,626,000 100% 100%
</TABLE>
- ----------
(1) For purposes of this table, a person or group of persons is deemed to have
"beneficial ownership" of any shares that such person or group has the
right to acquire within 60 days after the date of this Prospectus or with
respect to which such person has or shares voting or investment power. For
purposes of computing the percentages of outstanding shares held by each
person or group of persons, shares which such person or group has the right
to acquire within 60 days after such date are deemed to be outstanding for
purposes of computing the percentage for such person or group but are not
deemed to be outstanding for the purpose of computing the percentage of any
other person or group.
(2) Each share of Class B Common Stock is convertible at the option of the
holder into one share of Class A Common Stock. The number of shares of
Class A Common Stock and percentages contained under this heading do not
account for such conversion rights. Holders of Class A Common Stock are
entitled to one vote per share.
Holders of Class B Common Stock are entitled to 10 votes per share.
(3) The address for Craig A. Ponzio and June R. Ponzio is 3900 Steve Reynolds
Boulevard, Norcross, Georgia 30093. All shares of Class B Common Stock
attributable to Mrs. Ponzio are owned of record by her husband, Mr.
Ponzio. Mrs. Ponzio disclaims beneficial ownership of such shares.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company leases its corporate headquarters in Norcross, Georgia from L-J
Properties Inc. ("L-J Properties"), a company owned by Messrs. Ponzio, Trimarco
and Scheppmann. L-J Properties is owned 80% by Mr. Ponzio and 10% by each of
Messrs. Trimarco and Scheppmann. The lease commenced in August 1991 and
terminates in August 2001, subject to the Company's option to extend the lease
for two 36-month periods. The Company currently pays L-J Properties $708,000
per year in rent, with certain annual increases determined by a formula set
forth therein. The Company believes that the lease with L-J Properties is on
terms at least as favorable to the Company as those obtainable from
unaffiliated third parties in the Company's area of operations. In fiscal years
1996, 1997 and 1998 the Company made payments of $642,000, $661,000 and
$680,000, respectively, to L-J Properties under this lease.
On May 1, 1998, the Company distributed $10.5 million of previously
undistributed S corporation earnings to its shareholders as of that date,
through the issuance of S corporation notes payable in full upon demand and
bearing interest at 11% per annum, with interest payable quarterly until the
notes are paid in full ("S Corp Notes"). On June 10, 1998, Albecca Inc. repaid,
using borrowings under its existing credit facility, $4.0 million of the S Corp
Notes plus accrued interest. On June 24, 1998, the holders of the S Corp Notes,
who constituted all of the existing shareholders and members of Albecca Inc.
and Larson-Juhl International LLC ("L-J International"), respectively,
contributed the then outstanding $6.5 million balance on such S Corp Notes to
L-J International in satisfaction of a $6.5 million capital call made by L-J
International on June 5, 1998. L-J
36
<PAGE> 43
International demanded repayment of the S Corp Notes on June 24, 1998. Albecca
Inc. repaid the S Corp Notes, plus accrued interest, on June 24, 1998, using
borrowings under the existing credit facilities. On June 26, 1998, the members
of L-J International contributed their respective membership interests in L-J
International to Albecca Inc., at which time L-J International became a
wholly-owned subsidiary of Albecca Inc. No consideration was given to the
members for their contribution since the shareholders of Albecca Inc. also
constituted all of the members of L-J International.
The Company used a portion of the net proceeds of the Offering to distribute
an additional $60.0 million of previously undistributed S corporation earnings
to its shareholders concurrently with the consummation of the Offering. The
amount of this distribution to Mr. Ponzio was $58.68 million, to Mr. Trimarco
$720,000 and to Mr. Scheppmann $600,000. See "Use of Proceeds."
In May 1998 the Company amended existing arrangements with Mr. Ponzio and
Mr. Cronin, two of the Company's executive officers, relating to the payment of
deferred compensation amounts previously accrued in prior years. The aggregate
amount of such deferred payments was $2.8 million in 1998. Subject to certain
exceptions, payment of these amounts will be deferred and paid in annual
installments of $450,000 through 2003 and $550,000 in 2004. Of the accrued
amount, Messrs. Ponzio and Cronin are entitled to aggregate payments of
$2,700,000 and $100,000, respectively.
DESCRIPTION OF CERTAIN INDEBTEDNESS
Simultaneously with the consummation of the sale of the Old Notes, the
Company repaid all amounts outstanding under, and retired, its existing
principal credit facility, as described in "Use of Proceeds." As of August 30,
the Company and the Subsidiary Guarantors have outstanding certain purchase
money financing obligations, which had an outstanding balance of $4.6 million.
Such obligations rank senior in right of payment to the Notes and Subsidiary
Guarantees. In addition, the Foreign Subsidiaries have outstanding indebtedness
under various foreign credit facilities, term notes and purchase money
financing obligations, which had an aggregate outstanding balance of $58.2
million. Indebtedness of the Foreign Subsidiaries is effectively senior to the
Notes and the Subsidiary Guarantees.
The largest of the Company's foreign credit facilities is the $7.5 million
credit facility entered into by Larson-Juhl Canada Ltd. ("L-J Canada") to fund
its Canadian operations (the "Canadian Facility"). Borrowings under the
Canadian Facility bear interest at rates ranging from LIBOR plus 0.75% to the
Canadian prime rate and mature in August 2000. The Canadian Facility is secured
by all of the assets of L-J Canada. The Canadian Facility is subject to certain
customary financial and other covenants, including without limitation: (i)
financial reporting, (ii) funded indebtedness to total capitalization ratios,
(iii) leverage ratio, (iv) tangible net worth and (v) limitations on
indebtedness, contingent obligations, liens, loans, advances, investments,
acquisitions, mergers and sale of assets. As of August 30, 1998, approximately
$0.3 million was outstanding under the Canadian Facility.
The Company's other foreign revolving credit facilities and term notes
include a series of credit facilities used to finance working capital needs and
acquisitions in the respective countries in which the Company operates. These
facilities range in size from less than $100,000 to $3.6 million. The
indebtedness under these facilities generally bears interest at rates ranging
from 2.0% to 19.0% per annum (as of August 30, 1998) and matures on various
dates ranging through September 2017. Certain of these facilities are secured
by assets of the respective borrowers, including accounts receivable,
inventory, property or capital stock, and are generally subject to certain
customary financial and other covenants.
Upon consummation of the Exchange Offer, the Company will not have a bank
credit facility in place to fund its U.S. operations, although the Company
plans to enter into a senior bank credit facility to finance future working
capital needs, capital expenditures and complementary acquisitions. At present,
the Company has not entered into any agreements, commitments or understandings
with respect to such a credit facility. The Indenture will permit the Company
and the Subsidiary Guarantors to incur additional indebtedness, including
Senior Debt, subject to certain limitations. See "Risk Factors -- Liquidity and
Need for Additional Financing" and "Description of the Notes -- Certain
Covenants."
37
<PAGE> 44
THE EXCHANGE OFFER
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and reference is made to the
provisions of the Registration Rights Agreement, which has been filed as an
exhibit to the Registration Statement and a copy of which is available as set
forth under the heading "Available Information."
TERMS OF THE EXCHANGE OFFER
In connection with the issuance of the Old Notes pursuant to a
Purchase Agreement dated as of August 11, 1998, by and among the Company and
the Initial Purchasers, the Initial Purchasers and their respective assignees
became entitled to the benefits of the Registration Rights Agreement.
Under the Registration Rights Agreement, the Company is required to
file by December 9, 1998, a registration statement (the "Exchange Offer
Registration Statement") for a registered exchange offer with respect to an
issue of New Notes. Under the Registration Rights Agreement, the Company is
required to (i) use its best efforts to cause such Exchange Offer Registration
Statement to become effective by February 8, 1999, (ii) use its best efforts to
keep the Exchange Offer open for at least 20 business days (or longer if
required by applicable law), (iii) use its best efforts to consummate the
Exchange Offer by March 10, 1999, and (iv) cause the Exchange Offer to comply
with all applicable federal and state securities laws. The Exchange Offer being
made hereby, if commenced and consummated within the time periods described in
this paragraph, will satisfy those requirements under the Registration Rights
Agreement.
Upon the terms and subject to the conditions set forth in this
Prospectus and in the Letter of Transmittal, all Old Notes validly tendered and
not withdrawn prior to 5:00 p.m., New York City time, on the Expiration Date
will be accepted for exchange. New Notes of the same class will be issued in
exchange for an equal principal amount at maturity of outstanding Old Notes
accepted in the Exchange Offer. Old Notes may be tendered only in integral
multiples of $1,000 of principal amount at maturity. This Prospectus, together
with the Letter of Transmittal, is being sent to all registered holders as of ,
1998. The Exchange Offer is not conditioned upon any minimum principal amount
at maturity of Old Notes being tendered in exchange. However, the obligation to
accept Old Notes for exchange pursuant to the Exchange Offer is subject to
certain conditions as set forth herein under "--Conditions."
Old Notes will be deemed to have been accepted as validly tendered
when, as and if the Trustee has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering holders
of Old Notes for the purposes of receiving the New Notes and delivering New
Notes to such holders.
Based on interpretations by the staff of the Commission, as set forth
in no-action letters issued to third parties, including the Exchange Offer
No-Action Letters, the Company believes that the New Notes issued pursuant to
the Exchange Offer may be offered for resale, resold or otherwise transferred
by each holder thereof other than a broker-dealer who acquires such New Notes
directly from the Company for resale pursuant to Rule 144A under the Securities
Act or any other available exemption under the Securities Act and other than
any holder that is an "affiliate" (as defined in Rule 405 under the Securities
Act) of the Company without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that such New Notes are
acquired in the ordinary course of such holder's business and such holder is
not engaged in, and does not intend to engage in, a distribution of such New
Notes and has no arrangement with any person to participate in a distribution
of such New Notes. By tendering the Old Notes in exchange for New Notes, each
holder, other than a Participating Broker-Dealer, will represent to the Company
that: (i) it is not an affiliate (as defined in Rule 405 under the Securities
Act) of the Company; (ii) it is not a broker-dealer tendering Old Notes
acquired for its own account directly from the Company; (iii) any New Notes to
be received by it will be acquired in the ordinary course of its business; and
(iv) it is not engaged in, and does not intend to engage in, a distribution of
such New Notes and has no arrangement or understanding to participate in a
distribution of the New Notes. If a holder of New Notes is engaged in or
intends to engage in a distribution of the New Notes or has any arrangement or
understanding with respect to the distribution of the New Notes to be acquired
pursuant to the Exchange Offer, such
38
<PAGE> 45
holder may not rely on the applicable interpretations of the staff of the
Commission and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any secondary resale
transaction. Each Participating Broker-Dealer that receives New Notes for its
own account pursuant to the Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such New Notes. The
Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a Participating Broker-Dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act. This Prospectus,
as it may be amended or supplemented from time to time, may be used by a
Participating Broker-Dealer in connection with resales of New Notes received in
exchange for Old Notes where such Old Notes were acquired by such Participating
Broker-Dealer as a result of market-making activities or other trading
activities. The Company has agreed that it will make this Prospectus available
to any Participating Broker-Dealer for a period of time not to exceed one year
after the date on which the Exchange Offer is consummated for use in connection
with any such resale. See "Plan of Distribution."
In the event that: (i) any changes in law or the applicable
interpretations of the staff of the Commission do not permit the Company to
effect the Exchange Offer, or (ii) if any holder of Transfer Restricted
Securities (as defined herein) notifies the Company within 20 business days
following the consummation of the Exchange Offer that: (A) such holder was
prohibited by law or Commission policy from participating in the Exchange Offer
or (B) such holder may not resell the New Notes acquired by it in the Exchange
Offer to the public without delivering a prospectus and the prospectus
contained in the Exchange Offer Registration Statement is not appropriate or
available for such resales by such holder or (C) such holder is a broker-dealer
and holds Old Notes acquired directly from the Company or one of its
affiliates, then the Company will (x) cause to be filed a shelf registration
statement pursuant to Rule 415 under the Act (the "Shelf Registration
Statement") on or prior to 30 days after the date on which the Company
determines that it is not required to file the Exchange Offer Registration
Statement pursuant to clause (i) above or 75 days after the date on which the
Company receives the notice specified in clause (ii) above and will (y) use its
best efforts to cause such Shelf Registration Statement to become effective
within 75 days after the date on which the Company becomes obligated to file
such Shelf Registration Statement. If, after the Company has filed an Exchange
Offer Registration Statement, the Company is required to file and make
effective a Shelf Registration Statement solely because the Exchange Offer will
not be permitted under applicable federal law, then the filing of the Exchange
Offer Registration Statement will be deemed to satisfy the requirements of
clause (x) above. Such an event will have no effect on the requirements of
clause (y) above. The Company will use its best efforts to keep the Shelf
Registration Statement continuously effective, supplemented and amended to the
extent necessary to ensure that it is available for sales of Transfer
Restricted Securities (as defined below) by the holders thereof for a period of
at least two years following the date on which such Shelf Registration
Statement first becomes effective under the Securities Act. The term "Transfer
Restricted Securities" means each Old Note, until the earliest to occur of (a)
the date on which such Old Note is exchanged in the Exchange Offer and entitled
to be resold to the public by the holder thereof without complying with the
prospectus delivery requirements of the Act, (b) the date on which such Old
Note has been disposed of in accordance with a Shelf Registration Statement,
(c) the date on which such Old Note is disposed of by a broker-dealer pursuant
to the "Plan of Distribution" contemplated by the Exchange Offer Registration
Statement (including delivery of the prospectus contained therein) or (d) the
date on which such Old Note is distributed to the public pursuant to Rule 144
under the Act.
If (i) the Exchange Offer Registration Statement or the Shelf
Registration Statement is not filed with the Commission on or prior to the date
specified in the Registration Rights Agreement, (ii) any such Registration
Statement has not been declared effective by the Commission on or prior to the
date specified for such effectiveness in the Registration Rights Agreement,
(iii) the Exchange Offer has not been consummated thirty days of the effective
date; or (iv) any Registration Statement required by the Registration Rights
Agreement is filed and declared effective but will thereafter cease to be
effective or fail to be usable for its intended purpose without being succeeded
within two (2) days by a post-effective amendment to such Registration
Statement that cures such failure and that is itself declared effective within
five (5) days of filing such post-effective amendment to such Registration
Statement (each such event referred to in clauses (i) through (iv), a
"Registration Default"), then the Company has agreed to pay Liquidated Damages
to each holder of New Transfer Restricted Securities. With respect to the first
90-day period immediately following the occurrence of such Registration Default
the Liquidated Damages will equal $.05 per week per $1,000 principal amount of
Transfer Restricted Securities held by such holder for each week or portion
thereof that the Registration Default continues. The amount of the
39
<PAGE> 46
Liquidated Damages will increase by an additional $.05 per week per $1,000 in
principal amount of Transfer Restricted Securities with respect to each
subsequent 90-day period until all Registration Defaults have been cured, up to
a maximum amount of Liquidated Damages of $.30 per week per $1,000 principal
amount of Transfer Restricted Securities. Following the cure of all
Registration Defaults, the accrual of Liquidated Damages will cease.
All accrued Liquidated Damages will be paid to the holder of the
global notes representing the Old Notes by wire transfer of immediately
available funds or by federal funds check and to holders of certificated
securities by mailing checks to their registered addresses on each February 15
and August 15. All obligations of the Company set forth in the preceding
paragraph that are outstanding with respect to any Transfer Restricted Security
at the time such security ceases to be a Transfer Restricted Security will
survive until such time as all such obligations with respect to such security
will have been satisfied in full.
Upon consummation of the Exchange Offer, subject to certain
exceptions, holders of Old Notes who do not exchange their Old Notes for New
Notes in the Exchange Offer will no longer be entitled to registration rights
and will not be able to offer or sell their Old Notes, unless such Old Notes
are subsequently registered under the Securities Act (which, subject to certain
limited exceptions, the Company will have no obligation to do), except pursuant
to an exemption from, or in a transaction not subject to, the Securities Act
and applicable state securities laws. See "Risk Factors--Risk Factors Relating
to the Notes--Consequences of Failure to Exchange."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS; TERMINATION
The term "Expiration Date" will mean , 1999 (20 business days
following the commencement of the Exchange Offer), unless the Exchange Offer is
extended, if and as required by applicable law, in which case the term
"Expiration Date" will mean the latest date to which the Exchange Offer is
extended.
In order to extend the Expiration Date, the Company will notify the
Exchange Agent of any extension by oral or written notice and will notify the
holders of the Old Notes by means of a press release or other public
announcement prior to 9:00 a.m., New York City time, on the next business day
after the previously scheduled Expiration Date.
The Company reserves the right (i) to delay acceptance of any Old
Notes, to extend the Exchange Offer or to terminate the Exchange Offer and not
permit acceptance of Old Notes not previously accepted if any of the conditions
set forth herein under "--Conditions" has occurred and has not been waived by
the Company, by giving oral or written notice of such delay, extension or
termination to the Exchange Agent, or (ii) to amend the terms of the Exchange
Offer in any manner deemed by it to be advantageous to the holders of the Old
Notes. Any such delay in acceptance, extension, termination or amendment will
be followed as promptly as practicable by oral or written notice thereof to the
Exchange Agent. If the Exchange Offer is amended in a manner determined by the
Company to constitute a material change, the Company will promptly disclose
such amendment in a manner reasonably calculated to inform the holders of the
Old Notes of such amendment.
PROCEDURES FOR TENDERING
To tender in the Exchange Offer, a holder must complete, sign and date
the Letter of Transmittal, or a facsimile thereof, have the signatures thereon
guaranteed if required by the Letter of Transmittal, and mail or otherwise
deliver such Letter of Transmittal or such facsimile, together with any other
required documents, to the Exchange Agent prior to 5:00 p.m., New York City
time, on the Expiration Date. In addition, either (i) certificates for such Old
Notes must be received by the Exchange Agent along with the Letter of
Transmittal, (ii) a timely confirmation of a book-entry transfer (a "Book-Entry
Confirmation") of such Old Notes, if such procedure is available, into the
Exchange Agent's account at DTC (the "Book-Entry Transfer Facility") pursuant
to the procedure for book-entry transfer described below, must be received by
the Exchange Agent prior to the Expiration Date or (iii) the holder must comply
with the guaranteed delivery procedures described below. THE METHOD OF DELIVERY
OF OLD NOTES, LETTERS OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE
ELECTION AND RISK OF THE HOLDERS OF OLD NOTES. IF SUCH DELIVERY IS BY MAIL, IT
IS RECOMMENDED THAT REGISTERED MAIL, PROPERLY INSURED,
40
<PAGE> 47
WITH RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE TIMELY DELIVERY. NO LETTERS OF TRANSMITTAL OR OLD NOTES
SHOULD BE SENT TO THE COMPANY. Delivery of all documents must be made to the
Exchange Agent at its address set forth below. Holders of Old Notes may also
request their respective brokers, dealers, commercial banks, trust companies or
nominees to effect such tender for such holders.
The tender by a holder of Old Notes will constitute an agreement
between such Holder and the Company in accordance with the terms and subject to
the conditions set forth herein and in the Letter of Transmittal.
Only a holder of Old Notes may tender such Old Notes in the Exchange
Offer. The term "holder" with respect to the Exchange Offer means any person in
whose name Old Notes are registered on the books of the Company or any other
person who has obtained a properly completed bond power from the registered
holder.
Any beneficial owner whose Old Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact such registered holder promptly and instruct such
registered holder to tender on his behalf. If such beneficial owner wishes to
tender on his own behalf, such beneficial owner must, prior to completing and
executing the Letter of Transmittal and delivering his Old Notes, either make
appropriate arrangements to register ownership of the Old Notes in such owner's
name or obtain a properly completed bond power from the registered holder. The
transfer of registered ownership may take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal, as
the case may be, must be guaranteed by any member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
a commercial bank or trust company having an office or correspondent in the
United States or an "eligible guarantor" institution within the meaning of Rule
17Ad-15 under the Exchange Act (each an "Eligible Institution") unless the Old
Notes tendered pursuant thereto are tendered (i) by a registered holder who has
not completed the box entitled "Special Issuance Instructions" or "Special
Delivery Instructions" on the Letter of Transmittal or (ii) for the account of
an Eligible Institution.
If the Letter of Transmittal is signed by a person other than the
registered holder of any Old Notes listed therein, such Old Notes must be
endorsed or accompanied by bond powers and a proxy which authorizes such person
to tender the Old Notes on behalf of the registered holder, in each case as the
name of the registered holder or holders appears on the Old Notes.
If the Letter of Transmittal or any Old Notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and unless waived by
the Company, evidence satisfactory to the Company of their authority to so act
must be submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt) and withdrawal of the tendered Old Notes will be determined by the
Company in its sole discretion, which determination will be final and binding.
The Company reserves the absolute right to reject any and all Old Notes not
properly tendered or any Old Notes which, if accepted, would, in the opinion of
counsel for the Company, be unlawful. The Company also reserves the absolute
right to waive any irregularities or conditions of tender as to particular Old
Notes. The Company's interpretation of the terms and conditions of the Exchange
Offer (including the instructions in the Letter of Transmittal) will be final
and binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Old Notes must be cured within such time as the
Company will determine. Neither the Company, the Exchange Agent nor any other
person will be under any duty to give notification of defects or irregularities
with respect to tenders of Old Notes, nor will any of them incur any liability
for failure to give such notification. Tenders of Old Notes will not be deemed
to have been made until such irregularities have been cured or waived. Any Old
Notes received by the Exchange Agent that are not properly tendered and as to
which the defects or irregularities have not been cured or waived will be
returned without cost to such holder by the Exchange Agent to the tendering
holders of Old Notes, unless otherwise provided in the Letter of Transmittal,
as soon as practicable following the Expiration Date.
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<PAGE> 48
In addition, the Company reserves the right in its sole discretion,
subject to the provisions of the Indenture, to (i) purchase or make offers for
any Old Notes that remain outstanding subsequent to the Expiration Date, or
(ii) to terminate the Exchange Offer in accordance with the terms of the
Registration Rights Agreement and (iii) to the extent permitted by applicable
law, purchase Old Notes in the open market, in privately negotiated
transactions or otherwise. The terms of any such purchases or offers could
differ from the terms of the Exchange Offer.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange
Offer, all Old Notes properly tendered will be accepted, promptly after the
Expiration Date, and the New Notes will be issued promptly after acceptance of
the Old Notes. See "--Conditions" below. For purposes of the Exchange Offer,
Old Notes will be deemed to have been accepted as validly tendered for exchange
when, as and if the Company has given oral or written notice thereof to the
Exchange Agent.
In all cases, issuance of New Notes for Old Notes that are accepted
for exchange pursuant to the Exchange Offer will be made only after timely
receipt by the Exchange Agent of certificates for such Old Notes or a timely
Book-Entry Confirmation of such Old Notes into the Exchange Agent's account at
the Book-Entry Transfer Facility, a properly completed and duly executed Letter
of Transmittal and all other required documents. If any tendered Old Notes are
not accepted for any reason set forth in the terms and conditions of the
Exchange Offer or if Old Notes are submitted for a greater principal amount
than the holder desires to exchange, such unaccepted or non-exchanged Old Notes
will be returned without expense to the tendering holder thereof (or, in the
case of Old Notes tendered by book-entry transfer procedures described below,
such non-exchanged Old Notes will be credited to an account maintained with
such Book-Entry Transfer Facility) as promptly as practicable after the
expiration or termination of the Exchange Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with
respect to the Old Notes at the Book-Entry Transfer Facility for purposes of
the Exchange Offer within two business days after the date of this Prospectus.
Any financial institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of Old Notes by causing the
Book-Entry Transfer Facility to transfer such Old Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility in accordance with such
Book-Entry Transfer Facility's procedures for transfer. However, although
delivery of Old Notes may be effected through book-entry transfer at the
Book-Entry Transfer Facility, the Letter of Transmittal or facsimile thereof
with any required signature guarantees and any other required documents must,
in any case, be transmitted to and received by the Exchange Agent at one of the
addresses set forth below under "--Exchange Agent" on or prior to the
Expiration Date or the guaranteed delivery procedures described below must be
complied with.
GUARANTEED DELIVERY PROCEDURES
If a registered holder of Old Notes desires to tender such Old Notes,
and the Old Notes are not immediately available, or time will not permit such
holder's Old Notes or other required documents to reach the Exchange Agent
before the Expiration Date, or the procedures for book-entry transfer cannot be
completed on a timely basis, a tender may be effected if (i) the tender is made
through an Eligible Institution, (ii) prior to the Expiration Date, the
Exchange Agent receives from such Eligible Institution a properly completed and
duly executed Letter of Transmittal and Notice of Guaranteed Delivery,
substantially in the form provided by the Company (by mail or hand delivery),
setting forth the name and address of the holder of New Old Notes and the
amount of Old Notes tendered, stating that the tender is being made thereby and
guaranteeing that within three New York Stock Exchange ("NYSE") trading days
after the date of execution of the Notice of Guaranteed Delivery, the
certificates for all physically tendered Old Notes, in proper form for
transfer, or a Book-Entry Confirmation, as the case may be, and any other
documents required by the Letter of Transmittal will be deposited by the
Eligible Institution with the Exchange Agent and (iii) the certificates for all
physically tendered Old Notes, in proper form for transfer, or a Book-Entry
Confirmation, as the case may be, and all other
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<PAGE> 49
documents required by the Letter of Transmittal are received by the Exchange
Agent within three NYSE trading days after the date of execution of the Notice
of Guaranteed Delivery.
WITHDRAWAL OF TENDERS
Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m.,
New York City time on the Expiration Date.
For a withdrawal to be effective, a written notice of withdrawal must
be received by the Exchange Agent prior to 5:00 p.m., New York City time on the
Expiration Date at one of the addresses set forth below under "--Exchange
Agent." Any such notice of withdrawal must specify the name of the person
having tendered the Old Notes to be withdrawn, identify the Old Notes to be
withdrawn (including the principal amount of such Old Notes) and (where
certificates for Old Notes have been transmitted) specify the name in which
such Old Notes are registered, if different from that of the withdrawing
holder. If certificates for Old Notes have been delivered or otherwise
identified to the Exchange Agent, then, prior to the release of such
certificates, the withdrawing holder must also submit the serial numbers of the
particular certificates to be withdrawn and a signed notice of withdrawal with
signatures guaranteed by an Eligible Institution unless such holder is an
Eligible Institution. If Old Notes have been tendered pursuant to the procedure
for book-entry transfer described above, any notice of withdrawal must specify
the name and number of the account at the Book-Entry Transfer Facility to be
credited with the withdrawn Old Notes and otherwise comply with the procedures
of such facility. All questions as to the validity, form and eligibility
(including time of receipt) of such notices will be determined by the Company,
whose determination will be final and binding on all parties. Any Old Notes so
withdrawn will be deemed not to have been validly tendered for exchange for
purposes of the Exchange Offer. Any Old Notes which have been tendered for
exchange but which are not exchanged for any reason will be returned to the
holder thereof without cost to such holder (or, in the case of Old Notes
tendered by book-entry transfer into the Exchange Agent's account at the
Book-Entry Transfer Facility pursuant to the book-entry transfer procedures
described above, such Old Notes will be credited to an account maintained with
such Book-Entry Transfer Facility for the Old Notes) as soon as practicable
after withdrawal, rejection of tender or termination of the Exchange Offer.
Properly withdrawn Old Notes may be retendered by following one of the
procedures described under "--Procedures for Tendering" and "--Book-Entry
Transfer" above at any time on or prior to the Expiration Date.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, Old Notes will
not be required to be accepted for exchange, nor will New Notes be issued in
exchange for any Old Notes, and the Company may terminate or amend the Exchange
Offer as provided herein before the acceptance of such Old Notes, if because of
any change in law, or applicable interpretations thereof by the Commission, the
Company determines that it is not permitted to effect the Exchange Offer. The
Company has no obligation to, and will not knowingly, permit acceptance of
tenders of Old Notes from affiliates (within the meaning of Rule 405 under the
Securities Act) of the Company or from any other holder or holders who are not
eligible to participate in the Exchange Offer under applicable law or
interpretations thereof by the Commission, or if the New Notes to be received
by such holder or holders of Old Notes in the Exchange Offer, upon receipt,
will not be tradable by such holder without restriction under the Securities
Act and the Exchange Act and without material restrictions under the "blue sky"
or securities laws of substantially all of the states of the United States.
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<PAGE> 50
EXCHANGE AGENT
State Street Bank and Trust Company has been appointed as Exchange
Agent for the Exchange Offer. Questions and requests for assistance and
requests for additional copies of this Prospectus or of the Letter of
Transmittal should be directed to the Exchange Agent addressed as follows:
By Registered or Certified Mail: By Overnight Mail or Courier:
Corporate Trust Department Corporate Trust Department
P.O. Box 778 Two International Place, 4th Floor
Boston, Massachusetts 02102-0078 Boston, Massachusetts 02110
Attention: Kellie Mullen Attention: Kellie Mullen
By Facsimile:
Corporate Trust Department
(617) 664-5290
Attention: Kellie Mullen
For information call:
(617) 664-5587
FEES AND EXPENSES
The expenses of soliciting tenders pursuant to the Exchange Offer will
be borne by the Company. The principal solicitation for tenders pursuant to the
Exchange Offer is being made by mail; however, additional solicitations may be
made by telegraph, telephone, fax or in person by officers and regular
employees of the Company.
The Company will not make any payments to brokers, dealers or other
persons soliciting acceptances of the Exchange Offer. The Company, however,
will pay the Exchange Agent reasonable and customary fees for its services and
will reimburse the Exchange Agent for its reasonable out-of-pocket expenses in
connection therewith. The Company may also pay brokerage houses and other
custodians, nominees and fiduciaries the reasonable out-of-pocket expenses
incurred by them in forwarding copies of the Prospectus and related documents
to the beneficial owners of the Old Notes, and in handling and forwarding
tenders for exchange.
The expenses to be incurred in connection with the Exchange Offer will
be paid by the Company, including fees and expenses of the Exchange Agent and
Trustee and accounting, legal, printing and related fees and expenses.
The Company will pay all transfer taxes, if any, applicable to the
exchange of Old Notes pursuant to the Exchange Offer. If, however, certificates
representing New Notes or Old Notes for principal amounts not tendered or
accepted for exchange are to be delivered to, or are to be registered or issued
in the name of, any person other than the registered holder of New the Old
Notes tendered, or if tendered Old Notes are registered in the name of any
person other than the person signing the Letter of Transmittal, or if a
transfer tax is imposed for any reason other than the exchange of Old Notes
pursuant to the Exchange Offer, then the amount of any such transfer taxes
(whether imposed on the registered holder or any other persons) will be payable
by the tendering holder. If satisfactory evidence of payment of such taxes or
exemption therefrom is not submitted with the Letter of Transmittal, the amount
of such transfer taxes will be billed directly to such tendering holder.
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<PAGE> 51
DESCRIPTION OF THE NOTES
GENERAL
The Notes were issued, and the New Notes offered hereby will be issued
pursuant to the Indenture dated as of August 11, 1998 (the "Indenture") among
the Company, the Subsidiary Guarantors and State Street Bank and Trust Company,
as trustee (the "Trustee). The terms of the Notes include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"). The New Notes
are subject to all such terms, and prospective holders of the New Notes are
referred to the Indenture and the Trust Indenture Act for a statement thereof.
The following summary of the material provisions of the Indenture does not
purport to be complete and is qualified in its entirety by reference to the
Indenture, including the definitions therein, of certain terms used below.
Copies of the proposed form of Indenture and Registration Rights Agreement are
available as set forth below under "-- Additional Information." The definitions
of certain terms used in the following summary are set forth below under "--
Certain Definitions." For purposes of this summary, the term "Company" refers
only to Albecca Inc. and not to any of its subsidiaries.
The New Notes will be general unsecured obligations of the Company and will
be subordinated in right of payment to all existing and future Senior Debt of
the Company. The New Notes will be guaranteed, jointly and severally, by the
Subsidiary Guarantors, which consist of all of the Company's existing
Restricted Subsidiaries other than Foreign Subsidiaries. The Subsidiary
Guarantees will be general unsecured obligations of the Subsidiary Guarantors
and will be subordinated in right of payment to all existing and future Senior
Debt of the Subsidiary Guarantors. As of August 30, 1998, the Company and the
Subsidiary Guarantors had outstanding approximately $4.6 million of Senior Debt
which would rank senior in right of payment to the New Notes and the Subsidiary
Guarantees, and the Foreign Subsidiaries had approximately $58.2 million of
indebtedness which would be effectively senior to the New Notes and Subsidiary
Guarantees.
As of the Issue Date, all of the Company's subsidiaries will be Restricted
Subsidiaries. However, under certain circumstances, the Company will be able to
designate current or future Subsidiaries as Unrestricted Subsidiaries.
Unrestricted Subsidiaries will not be subject to many of the restrictive
covenants set forth in the Indenture.
PRINCIPAL, MATURITY AND INTEREST
New Notes in an aggregate principal amount of $200.0 million will be issued
in the Exchange Offer. In addition to the Notes issued in the offering, the
Indenture provides for the issuance of up to $100.0 million aggregate principal
amount of additional Notes having identical terms and conditions to the Notes
offered hereby (the "Additional Notes") if such Additional Notes are placed,
purchased or underwritten by Donaldson, Lufkin & Jenrette Securities
Corporation acting as lead private placement agent, initial purchaser or
underwriter. Interest will accrue on the Additional Notes issued pursuant to
the Indenture from and including the date of issuance of such Additional Notes.
Any such Additional Notes will be issued on the same terms as the Notes offered
hereby and will constitute part of the same series as the Notes and will vote
together as one series on all matters with respect to the Notes. All references
to the Notes includes the Additional Notes.
The New Notes will mature on August 15, 2008. Interest on the New Notes
will accrue at the rate of 10 3/4% per annum and will be payable semi-annually
in arrears on February 15 and August 15, commencing on February 15, 1999, to
holders of record on the immediately preceding February 1 and August 1,
respectively. Interest on the New Notes will accrue from the most recent date
to which interest has been paid or, if no interest has been paid, from the date
of original issuance. Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months. Principal, premium, if any, and interest and
Liquidated Damages, if any, on the New Notes will be payable at the office or
agency of the Company maintained for such purpose within the City and State of
New York or, at the option of the Company, payment of principal, premium,
interest and Liquidated Damages may be made by check mailed to Holders of New
Notes at their respective addresses set forth in the register of Holders of New
Notes; provided that all payments of principal, premium, interest and
Liquidated Damages with respect to New Notes represented by one or more
permanent Global Notes will be required to be made by wire transfer of
immediately available funds to the accounts of DTC or any successor thereto.
Until
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<PAGE> 52
otherwise designated by the Company, the Company's office or agency in New York
will be the office of the Trustee maintained for such purpose. The New Notes
will be issued in denominations of $1,000 and integral multiples thereof.
SUBSIDIARY GUARANTEES
The Company's payment obligations under the New Notes will be jointly and
severally guaranteed by the Subsidiary Guarantors, which consist of all of the
Company's Restricted Subsidiaries other than the Foreign Subsidiaries. The
Subsidiary Guarantee of each Subsidiary Guarantor will be subordinated to the
prior payment in full of all Senior Debt of such Subsidiary Guarantor. The
obligations of each Subsidiary Guarantor under its Subsidiary Guarantee will be
limited so as not to constitute a fraudulent conveyance under applicable law.
See "Risk Factors -- Fraudulent Transfer Statutes."
The Indenture provides that no Subsidiary Guarantor may consolidate with or
merge with or into (whether or not such Subsidiary Guarantor is the surviving
Person), another Person or entity whether or not affiliated with such
Subsidiary Guarantor unless (i) subject to the provisions of the following
paragraph, the Person formed by or surviving any such consolidation or merger
(if other than such Subsidiary Guarantor) assumes all the obligations of such
Subsidiary Guarantor, pursuant to a supplemental indenture in form and
substance reasonably satisfactory to the Trustee, under the Indenture and the
Subsidiary Guarantees; and (ii) immediately after giving effect to such
transaction, no Default or Event of Default exists.
The Indenture provides that in the event of a sale or other disposition of
all of the assets of any Subsidiary Guarantor, by way of merger, consolidation
or otherwise, or a sale or other disposition of all of the capital stock of any
Subsidiary Guarantor, then such Subsidiary Guarantor (in the event of a sale or
other disposition, by way of such a merger, consolidation or otherwise, of all
of the capital stock of such Subsidiary Guarantor) or the corporation acquiring
the property (in the event of a sale or other disposition of all or
substantially all of the assets of such Subsidiary Guarantor) will be released
and relieved of any obligations under its Subsidiary Guarantee. In addition,
the Indenture provides that, in the event the Company designates a Restricted
Subsidiary to be an Unrestricted Subsidiary in accordance with the Indenture,
then such Restricted Subsidiary shall be released from its obligations under
its Subsidiary Guarantee. See "-- Certain Covenants -- Asset Sales."
SUBORDINATION
The payment of Obligations in respect of the New Notes will be subordinated
in right of payment, as set forth in the Indenture, to the prior payment in
full of all Obligations in respect of Senior Debt of the Company, whether
outstanding on the date of the Indenture or thereafter incurred. In addition,
as set forth in "Subsidiary Guarantees" below, the Subsidiary Guarantees will
be subordinated in right of payment, as set forth in the Indenture, to the
prior payment in full of all Obligations in respect of Senior Debt of the
Subsidiary Guarantors, whether outstanding on the date of the Indenture or
thereafter incurred. The New Notes and the Subsidiary Guarantees will be
effectively subordinated to indebtedness of the Foreign Subsidiaries.
Upon any payment or distribution to creditors of the Company or a
Subsidiary Guarantor of any kind, whether in cash, property or securities in a
liquidation or dissolution of the Company or a Subsidiary Guarantor or in a
bankruptcy, reorganization, insolvency, receivership or similar proceeding
relating to the Company or its property or a Subsidiary Guarantor or its
property, an assignment for the benefit of creditors or any marshaling of the
assets and liabilities of the Company or a Subsidiary Guarantor, whether
voluntary or involuntary, the holders of Senior Debt of the Company or such
Subsidiary Guarantor, as the case may be, will be entitled to receive payment
in full in cash of all Obligations due in respect of such Senior Debt
(including interest after the commencement of any such proceeding at the rate
specified in the applicable Senior Debt whether or not allowable as a claim in
any such proceeding) before Holders will be entitled to receive any payment or
distribution of any kind with respect to the Notes or such Subsidiary
Guarantee, and until all Obligations with respect to such Senior Debt are paid
in full, any payment or distribution to which Holders would be entitled shall
be made to the holders of such Senior Debt (except that Holders may receive and
retain Permitted Junior Securities and payments made from the trust described
under "-- Legal Defeasance and Covenant Defeasance").
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<PAGE> 53
The Company and the Subsidiary Guarantors also may not make any payment
upon or in respect of the Notes or the applicable Subsidiary Guarantees (except
in Permitted Junior Securities or from the trust described under "-- Legal
Defeasance and Covenant Defeasance") if (i) a default in the payment of the
principal of, premium, if any, or interest on Designated Senior Debt occurs and
is continuing (a "Payment Default") or (ii) any other default occurs and is
continuing with respect to Designated Senior Debt that permits holders of the
Designated Senior Debt as to which such default relates to accelerate its
maturity (a "Nonpayment Default") and the Trustee receives a notice of such
Nonpayment Default invoking the provisions described in this paragraph (a
"Payment Blockage Notice") from the holders of any Designated Senior Debt or
any agent or trustee therefor. Payments on the Notes may and shall be resumed
(a) in the case of a Payment Default, upon the date on which such Payment
Default is cured or waived and (b) in case of a Nonpayment Default, the earlier
of the date on which such Nonpayment Default is cured or waived or 179 days
after the date on which the applicable Payment Blockage Notice is received,
unless the maturity of any Designated Senior Debt has been accelerated and such
acceleration has not been rescinded or waived. No new period of payment
blockage (other than for a Payment Default) may be commenced unless and until
360 days have elapsed since the effectiveness of the immediately prior Payment
Blockage Notice. No Nonpayment Default that existed or was continuing on the
date of delivery of any Payment Blockage Notice to the Trustee shall be, or be
made, the basis for a subsequent Payment Blockage Notice unless such default
shall have been cured or waived for a period of not less than 90 days. If any
Holder receives any payment or distribution that such Holder is not entitled to
receive with respect to the Notes, such Holder shall be required to pay the
same over to the holders of Senior Debt.
The Indenture requires that the Company promptly notify holders of Senior
Debt if payment of the Notes is accelerated because of an Event of Default.
As a result of the subordination provisions described above, in the event
of a liquidation or insolvency, Holders of New Notes and Subsidiary Guarantees
may recover less ratably than creditors of the Company and Subsidiary
Guarantors who are holders of Senior Debt. The Indenture limits, subject to
certain financial tests, the amount of additional Indebtedness, including
Senior Debt, that the Company and its Subsidiaries can incur. See "-- Certain
Covenants -- Incurrence of Indebtedness and Issuance of Preferred Stock."
No provision contained in the Indenture, the New Notes or the Subsidiary
Guarantees will affect the obligation of the Company and the Subsidiary
Guarantors, which is absolute and unconditional, to pay, when due, principal
of, premium, if any, and interest on the New Notes. The subordination
provisions of the Indenture, the Notes and the Subsidiary Guarantees will not
prevent the occurrence of any Default or Event of Default under the Indenture
or limit the rights of the Trustee or any Holder to pursue any other rights or
remedies with respect to the New Notes or the Subsidiary Guarantees.
OPTIONAL REDEMPTION
Except as described below, the New Notes will not be redeemable at the
Company's option prior to August 15, 2003. Thereafter, the Notes will be
subject to redemption at any time at the option of the Company, in whole or in
part, upon not less than 30 nor more than 60 days' notice, at the redemption
prices (expressed as percentages of principal amount) set forth below plus
accrued and unpaid interest and Liquidated Damages, if any, thereon to the
applicable redemption date, if redeemed during the twelve-month period
beginning on August 15 of the years indicated below:
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
<S> <C>
2003.................................................. 105.375%
2004.................................................. 103.583%
2005.................................................. 101.792%
2006 and thereafter................................... 100.000%
</TABLE>
Notwithstanding the foregoing, at any time on or prior to August 15, 2001,
the Company may (but shall not have the obligation to) redeem, on one or more
occasions, up to an aggregate of 35% of the principal amount of Notes originally
issued at a redemption price equal to 110.75% of the principal amount thereof,
plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the
redemption date, with the net cash proceeds of one or more Equity Offerings;
provided that at least 65% in aggregate principal amount of the Notes originally
issued
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<PAGE> 54
remains outstanding immediately after the occurrence of such redemption; and
provided further, that such redemption shall occur within 90 days after the date
of the closing of such Equity Offering.
If less than all of the New Notes are to be redeemed at any time, selection
of New Notes for redemption will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which
the New Notes are listed, or, if the New Notes are not so listed, on a pro rata
basis, by lot or by such other method as the Trustee deems fair and
appropriate; provided further, that no Notes of $1,000 or less shall be
redeemed in part. Notices of redemption may not be conditional. Notices of
redemption shall be mailed by first class mail at least 30 but not more than 60
days before the redemption date to each Holder of Notes to be redeemed at its
registered address. If any Note is to be redeemed in part only, the notice of
redemption that relates to such Note shall state the portion of the principal
amount thereof to be redeemed. A new Note in principal amount equal to the
unredeemed portion thereof will be issued in the name of the Holder thereof
upon cancellation of the original Note. On and after the redemption, interest
and Liquidated Damages will cease to accrue on Notes or portions of them called
for redemption.
MANDATORY REDEMPTION
The Company is not required to make mandatory redemption or sinking fund
payments with respect to the New Notes.
CERTAIN COVENANTS
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, the Company will be required to
offer to repurchase all or any part (equal to $1,000 or an integral multiple
thereof) of such Holder's New Notes on the terms and conditions described below
(the "Change of Control Offer") at a price in cash equal to 101% of the
aggregate principal amount thereof plus accrued and unpaid interest and
Liquidated Damages thereon, if any, to the date of purchase (the "Change of
Control Payment"). Within 30 days following any Change of Control, the Company
will mail a notice to each Holder describing the transaction or transactions
that constitute the Change of Control and offering to repurchase New Notes on
the date specified in such notice, which date shall be no earlier than 30 days
(or such shorter time period as may be permitted under applicable law, rules
and regulations) and no later than 60 days from the date such notice is mailed
(the "Change of Control Payment Date"), pursuant to the procedures required by
the Indenture and described in such notice. The Company will comply with the
requirements of Rule 14e-1 under the Exchange Act and any other securities laws
and regulations thereunder to the extent such laws and regulations are
applicable in connection with the repurchase of the New Notes as a result of a
Change of Control. To the extent that the provisions of any securities laws or
regulations conflict with the provisions of the Indenture relating to such
Change of Control Offer, the Company will comply with the applicable securities
laws and regulations and shall not be deemed to have breached its obligations
described in the Indenture by virtue thereof.
On the Change of Control Payment Date, the Company will, to the extent
lawful, (1) accept for payment all New Notes or portions thereof properly
tendered pursuant to the Change of Control Offer, (2) deposit with the Paying
Agent an amount equal to the Change of Control Payment in respect of all New
Notes or portions thereof so tendered and (3) deliver or cause to be delivered
to the Trustee the New Notes so accepted together with an Officers' Certificate
stating the aggregate principal amount of New Notes or portions thereof being
purchased by the Company. The Paying Agent will promptly mail to each Holder of
New Notes so tendered the Change of Control Payment for such New Notes, and the
Trustee will promptly authenticate and mail (or cause to be transferred by book
entry) to each Holder a new New Note equal in principal amount to any
unpurchased portion of the New Notes surrendered, if any; provided that each
such new New Note will be in a principal amount of $1,000 or an integral
multiple thereof. The Indenture provides that, prior to complying with the
provisions of this covenant, but in any event within 90 days following a Change
of Control, the Company will either repay all outstanding Senior Debt or obtain
the requisite consents, if any, under all agreements governing outstanding
Senior Debt to permit the repurchase of New Notes required by this covenant.
The Company will not be required to purchase any New Notes until it has
complied with the preceding sentence, but failure to comply with the
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<PAGE> 55
preceding sentence shall constitute an Event of Default. The Company will
publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
The Change of Control provisions described above will be applicable whether
or not any other provisions of the Indenture are applicable. Except as
described above with respect to a Change of Control, the Indenture does not
contain provisions that permit Holders of New Notes to require that the Company
repurchase or redeem the New Notes in the event of a takeover, recapitalization
or similar transaction.
Future credit agreements or other agreements relating to Senior Debt to
which the Company becomes a party may contain provisions restricting the
Company from making or consummating a Change of Control Offer. In the event a
Change of Control occurs at a time when the Company is prohibited from
purchasing New Notes, the Company could seek the consent of its lenders for the
purchase of New Notes or could attempt to refinance the borrowings that contain
such prohibition. If the Company does not obtain such a consent or repay such
borrowings, the Company will remain prohibited from purchasing New Notes. In
such case, the Company's failure to purchase tendered New Notes would
constitute an Event of Default under the Indenture which may, in turn,
constitute a default under such credit agreements. In such circumstances, the
subordination provisions in the Indenture would likely restrict payments to
Holders of New Notes. In addition, the acceptance by Holders of New Notes of a
Change of Control Offer could cause a default under such Senior Debt, even if
the Change of Control itself does not, due to the financial effect of such
repurchases on the Company. Finally, the Company's ability to pay cash to
Holders of New Notes upon a repurchase may be limited by the Company's then
existing financial resources.
The Company will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set
forth in the Indenture applicable to a Change of Control Offer made by the
Company and purchases all New Notes validly tendered and not withdrawn under
such Change of Control Offer.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of the Company and its Subsidiaries taken as a whole. Although
there is a developing body of case law interpreting the phrase "substantially
all," there is no precise established definition of the phrase under applicable
law. Accordingly, the ability of a Holder of New Notes to require the Company
to repurchase such New Notes as a result of a sale, lease, transfer, conveyance
or other disposition of less than all of the assets of the Company and its
Subsidiaries taken as a whole to another Person or group may be uncertain.
ASSET SALES
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, consummate an Asset Sale unless (i) the
Company (or the Restricted Subsidiary, as the case may be) receives
consideration at the time of such Asset Sale at least equal to the fair market
value (evidenced by a resolution of the Board of Directors set forth in an
Officers' Certificate delivered to the Trustee) of the assets or Equity
Interests issued or sold or otherwise disposed of and (ii) at least 75% of the
consideration therefor received by the Company or such Restricted Subsidiary is
in the form of cash or Cash Equivalents, provided that the amount of (x) any
liabilities (as shown on the Company's or such Restricted Subsidiary's most
recent balance sheet) of the Company or any Restricted Subsidiary (other than
contingent liabilities and liabilities that are by their terms subordinated to
the New Notes or any guarantee thereof) that are assumed by the transferee of
any such assets pursuant to a customary novation agreement that releases the
Company or such Restricted Subsidiary from further liability and (y) any
securities, notes or other obligations received by the Company or any such
Restricted Subsidiary from such transferee that are converted by the Company or
such Restricted Subsidiary into cash (to extent of the cash received) within
180 days following the closing of such Asset Sale, shall be deemed to be cash
for purposes of this provision.
Within 360 days after the receipt of any Net Proceeds from an Asset Sale,
the Company or the Restricted Subsidiaries may apply such Net Proceeds, at its
option, (a) to permanently repay or retire Senior Debt, or (b) to the
investment in, or the making of a capital expenditure or the acquisition of
other long-term assets, in each case
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used or useable in a Permitted Business, from a party other than the Company or
a Restricted Subsidiary, or (c) the acquisition of Capital Stock of any Person
primarily engaged in a Permitted Business if, as a result of the acquisition by
the Company or any Restricted Subsidiary thereof, such Person becomes a
Restricted Subsidiary, or (d) a combination of the uses described in clauses
(a), (b) and (c). Pending the final application of any such Net Proceeds, the
Company or its Restricted Subsidiaries may temporarily reduce Senior Debt or
otherwise invest such Net Proceeds in any manner that is not prohibited by the
Indenture. Any Net Proceeds from Asset Sales that are not applied or invested
as provided in the first sentence of this paragraph will be deemed to
constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds
exceeds $10.0 million, the Company will be required to make an offer to all
Holders of New Notes and, to the extent required by the terms of any Pari Passu
Indebtedness, all holders of such Pari Passu Indebtedness (an "Asset Sale
Offer"), to purchase the maximum principal amount of New Notes and any such
Pari Passu Indebtedness that may be purchased out of the Excess Proceeds, at an
offer price in cash in an amount equal to 100% of the principal amount thereof
plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the
date of purchase, in accordance with the procedures set forth in the Indenture
or such Pari Passu Indebtedness, as applicable. To the extent any Excess
Proceeds remain after consummation of the Asset Sale Offer, the Company may use
such Excess Proceeds for any purpose not otherwise prohibited by the Indenture.
If the aggregate principal amount of New Notes and any such Pari Passu
Indebtedness tendered pursuant to an Asset Sale Offer exceeds the amount of
Excess Proceeds, the Trustee shall select the New Notes to be purchased on a
pro rata basis. Upon completion of such Asset Sale Offer, the amount of Excess
Proceeds shall be reset at zero.
RESTRICTED PAYMENTS
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly: (i) declare or pay
any dividend or make any other payment or distribution on account of the
Company's or any of its Restricted Subsidiaries' Equity Interests (including,
without limitation, any such dividend, distribution or other payment made in
connection with any merger or consolidation involving the Company or any of its
Restricted Subsidiaries), other than dividends or distributions payable in
Equity Interests (other than Disqualified Stock) of the Company or dividends or
distributions payable to the Company or any Wholly Owned Subsidiary of the
Company; (ii) purchase, redeem or otherwise acquire or retire for value
(including, without limitation, any such purchase, redemption, or other
acquisition or retirement for value made as a payment in connection with any
merger or consolidation involving the Company) any Equity Interests of the
Company or any Restricted Subsidiary (other than any such Equity Interests
owned by the Company or any Restricted Subsidiary of the Company); (iii) make
any payment on or with respect to, or purchase, redeem, defease or otherwise
acquire or retire for value, any Indebtedness that is subordinated to the New
Notes, except a payment of interest or a payment of principal at Stated
Maturity; or (iv) make any Restricted Investment (all such payments and other
actions set forth in clauses (i) through (iv) above being collectively referred
to as "Restricted Payments"), unless, at the time of and immediately after
giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing; and
(b) the Company would, at the time of such Restricted Payment, and
after giving pro forma effect thereto as if any Indebtedness incurred in
order to make such Restricted Payment had been incurred at the beginning of
the applicable four quarter period, have been permitted to incur at least
$1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage
Ratio test set forth in the first paragraph of the covenant described below
under caption "-- Incurrence of Indebtedness and Issuance of Preferred
Stock;" and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Restricted
Subsidiaries after the date of the Indenture (excluding Restricted Payments
permitted by clauses (ii) and (iii) of the next succeeding paragraph and
excluding Restricted Payments made to the Company or any Wholly-Owned
Restricted Subsidiary permitted by clause (iv) of the next succeeding
paragraph), is less than the sum (without duplication) of (i) 50% of the
Consolidated Net Income of the Company for the period (taken as one
accounting period) from the beginning of the first fiscal quarter
commencing after the date of the Indenture to the end of the Company's most
recently ended fiscal quarter for which internal financial statements are
available at the time of such Restricted Payment (or, if such Consolidated
Net Income for such period is a deficit, less 100% of such deficit), plus
(ii) 100% of the
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aggregate Qualified Proceeds received by the Company from contributions to
the Company's capital or the issue or sale subsequent to the date of the
Indenture of Equity Interests of the Company (other than Disqualified
Stock) or of Disqualified Stock or debt securities of the Company that have
been converted into such Equity Interests (other than Equity Interests (or
Disqualified Stock or convertible debt securities) sold to a Subsidiary of
the Company and other than Disqualified Stock or convertible debt
securities that have been converted into Disqualified Stock), plus (iii) to
the extent that any Restricted Investment that was made after the date of
the Indenture is sold for Qualified Proceeds or otherwise liquidated or
repaid in whole or in part (including, without limitation, by way of a
dividend or other distribution, a repayment of a loan or advance or other
transfer of assets), the lesser of (A) the Qualified Proceeds with respect
to such Restricted Investment (less the cost of disposition, if any) and
(B) the initial amount of such Restricted Investment, plus (iv) upon the
redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary, the
lesser of (x) the fair market value of such Subsidiary or (y) the aggregate
amount of all Investments made in such Subsidiary subsequent to the Issue
Date by the Company and its Restricted Subsidiaries, plus (v) $1.0 million.
The foregoing provisions will not prohibit (i) the payment of any dividend
within 60 days after the date of declaration thereof, if at said date of
declaration such payment would have complied with the provisions of the
Indenture; (ii) the redemption, repurchase, retirement, defeasance or other
acquisition of any subordinated Indebtedness or Equity Interests of the Company
or any Subsidiary Guarantor in exchange for, or out of the net cash proceeds of
the substantially concurrent sale (other than to a Restricted Subsidiary of the
Company) of, other Equity Interests of the Company (other than any Disqualified
Stock); provided that the amount of any such net cash proceeds that are
utilized for any such redemption, repurchase, retirement, defeasance or other
acquisition shall be excluded from clause (c)(ii) of the preceding paragraph;
(iii) the defeasance, redemption, repurchase, retirement or other acquisition
of subordinated Indebtedness in exchange for, or with the net cash proceeds
from, an incurrence of Permitted Refinancing Indebtedness; (iv) the payment of
any dividend (or the making of a similar distribution or redemption) by a
Restricted Subsidiary of the Company to the holders of its common Equity
Interests on a pro rata basis; (v) so long as no Default or Event of Default
shall have occurred and is continuing, the repurchase, redemption or other
acquisition or retirement for value of any Equity Interests of the Company or
any Restricted Subsidiary of the Company, held by any member of the Company's
(or any of its Subsidiaries') management, employees or consultants pursuant to
any management, employee or consultant equity subscription agreement or plan or
stock option agreement or stock plan; provided that the aggregate price paid
for all such repurchased, redeemed, acquired or retired Equity Interests shall
not exceed (1) $1.0 million in any twelve-month period and (2) in the
aggregate, the sum of (A) $5.0 million and (B) the aggregate cash proceeds
received by the Company from any reissuance of Equity Interests by the Company
to members of management of the Company and its Subsidiaries (provided that the
cash proceeds referred to in this clause (B) shall be excluded from clause
(c)(ii) of the preceding paragraph) and (vi) the payment of Permitted Quarterly
Tax Distributions to the holders of Capital Stock of the Company as described
below.
For so long as the Company is an S corporation or a substantially similar
pass-through entity for federal income tax purposes, the Company may make
distributions to its shareholders, during each Quarterly Payment Period, in an
aggregate amount not to exceed the Permitted Quarterly Tax Distribution in
respect of the related Estimation Period. If any portion of a Permitted
Quarterly Tax Distribution is not distributed during such Quarterly Payment
Period, subsequent Permitted Quarterly Tax Distributions shall be increased by
such undistributed portion.
Within 30 days following the Company's filing of Internal Revenue Service
Form 1120S for the immediately preceding taxable year (or within 30 days of a
redetermination of the taxable income of the Company as a result of a final
agreement with a tax authority), the Tax CPA shall file with the Trustee a
written statement indicating in reasonable detail the calculation of the
True-up Amount. In the case of a True-up Amount due to the shareholders, the
Permitted Quarterly Tax Distribution payable during the immediately following
Quarterly Payment Period shall be increased by such True-up Amount. In the case
of a True-up Amount due to the Company, the Permitted Quarterly Tax
Distribution payable during the immediately following Quarterly Payment Period
shall be reduced by such True-up Amount and the excess, if any, of such True-up
Amount over such Permitted Quarterly Tax Distribution shall be applied to
reduce the immediately following Permitted Quarterly Tax Distributions until
such True-up Amount is entirely offset.
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The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if such designation would not cause a Default or an
Event of Default. For purposes of making such determination, all outstanding
Investments by the Company and its Restricted Subsidiaries (except to the
extent repaid in cash) in the Subsidiary so designated will be deemed to be
Restricted Payments at the time of such designation and will reduce the amount
available for Restricted Payments under the first paragraph of this covenant.
All such outstanding Investments will be deemed to constitute Investments in an
amount equal to the greater of (i) the net book value of such Investments at
the time of such designation and (ii) the fair market value of such Investments
at the time of such designation. Such designation will only be permitted if
such Restricted Payment would be permitted at such time and if such Restricted
Subsidiary otherwise meets the definition of an Unrestricted Subsidiary.
The amount of all (i) Restricted Payments (other than cash) shall be the
fair market value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued by the Company or such
Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment
and (ii) Qualified Proceeds (other than cash) shall be the fair market value on
the date of receipt thereof by the Company of such Qualified Proceeds. The fair
market value of any non-cash Restricted Payment and Qualified Proceeds shall be
determined by the Board of Directors whose resolution with respect thereto
shall be delivered to the Trustee, such determination to be supported by an
opinion or appraisal issued by an accounting, appraisal or investment banking
firm of national standing, if such fair market value exceeds $1.0 million. Not
later than the date of making any Restricted Payment, the Company shall deliver
to the Trustee an Officers' Certificate stating that such Restricted Payment is
permitted and setting forth the basis upon which the calculations required by
the covenant "-- Restricted Payments" were computed, together with a copy of
any fairness opinion or appraisal required by the Indenture.
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK
The Indenture provides that: (i) the Company will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly, create, incur,
issue, assume, guarantee or otherwise become directly or indirectly liable,
contingently or otherwise, with respect to (collectively "incur") any
Indebtedness (including Acquired Debt); (ii) that neither the Company nor any
Subsidiary Guarantor will issue any Disqualified Stock; and (iii) that the
Company will not permit any of its Restricted Subsidiaries that are not
Subsidiary Guarantors to issue any shares of preferred stock; provided,
however, that the Company or any Restricted Subsidiary may incur Indebtedness
(including Acquired Debt) or issue shares of Disqualified Stock if the Fixed
Charge Coverage Ratio for the Company's most recently ended four full fiscal
quarters for which internal financial statements are available immediately
preceding the date on which such additional Indebtedness is incurred or such
Disqualified Stock is issued would have been at least 2.0 to 1.0, determined on
a pro forma basis (including a pro forma application of the net proceeds
therefrom), as if the additional Indebtedness had been incurred, or the
Disqualified Stock had been issued, as the case may be, at the beginning of
such four-quarter period.
The provisions of the first paragraph of this covenant will not apply to
the incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt"):
(i) the incurrence by the Company and the Subsidiary Guarantors of
Indebtedness under Credit Facilities (and the guarantee of such Company
Indebtedness by the Subsidiary Guarantors) to the extent that the aggregate
principal amount of all Indebtedness (with letters of credit being deemed
to have a principal amount equal to the maximum potential liability of the
Company and the Subsidiary Guarantors thereunder) outstanding under this
clause (i) after giving effect to such incurrence, including all
Indebtedness incurred to refund, refinance or replace any Indebtedness
incurred pursuant to this clause (i), does not exceed an amount equal to
$65.0 million less the aggregate amount of all principal repayments
(optional and mandatory) thereunder constituting permanent reductions of
such Indebtedness pursuant to and in accordance with the covenant described
under "-- Certain Covenants -- Asset Sales;"
(ii) the incurrence by the Company and the Subsidiary Guarantors of
Indebtedness represented by the New Notes and the Subsidiary Guarantees;
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(iii) the incurrence by the Company or any of the Restricted
Subsidiaries of Indebtedness represented by Capital Lease Obligations,
mortgage financings or purchase money obligations, in each case incurred
for the purpose of financing all or any part of the purchase price of
property, plant or equipment or the cost of construction or improvements of
property used in the business of the Company or such Restricted Subsidiary
to the extent the aggregate principal amount does not exceed $7.5 million
at any time outstanding;
(iv) other Indebtedness of the Company and its Restricted Subsidiaries
outstanding on the Issue Date;
(v) the incurrence by the Company or any of its Restricted
Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the
net proceeds of which are used to refund, refinance or replace Indebtedness
(other than intercompany Indebtedness) that was permitted by the Indenture
to exist or be incurred;
(vi) the incurrence of intercompany Indebtedness (A) between or among
the Company and any Wholly Owned Restricted Subsidiaries of the Company or
(B) by a Restricted Subsidiary that is not a Wholly Owned Restricted
Subsidiary to the Company or a Wholly Owned Restricted Subsidiary;
provided, however, that (i) if the Company is the obligor on such
Indebtedness, such Indebtedness is expressly subordinated to the prior
payment in full in cash of all Obligations with respect to the New Notes,
and if a Subsidiary Guarantor incurs such Indebtedness to a Restricted
Subsidiary that is not a Subsidiary Guarantor, such Indebtedness is
subordinate in right of payment to the Subsidiary Guarantee of such
Subsidiary Guarantor; and (ii)(A) any subsequent issuance or transfer of
Equity Interests that results in any such Indebtedness being held by a
Person other than the Company or a Wholly Owned Restricted Subsidiary of
the Company and (B) any sale or other transfer of any such Indebtedness to
a Person that is not either the Company or a Wholly Owned Restricted
Subsidiary of the Company shall be deemed, in each case, to constitute an
incurrence of such Indebtedness by the Company or such Subsidiary, as the
case may be, not permitted by this clause (vi);
(vii) the incurrence by the Company or any of the Restricted
Subsidiaries of Hedging Obligations that are incurred for the purpose of
fixing or hedging (i) interest rate risk with respect to any floating rate
Indebtedness that is permitted by the terms of this Indenture to be
outstanding, (ii) the value of foreign currencies purchased or received by
the Company in the ordinary course of business or (iii) the price of raw
materials used by the Company or its Restricted Subsidiaries in a Permitted
Business;
(viii) Indebtedness arising from agreements of the Company or a
Restricted Subsidiary providing for indemnification, adjustment of purchase
price or similar obligations, in each case, incurred or assumed in
connection with the disposition of any business, assets or Capital Stock of
a Restricted Subsidiary to the extent that the amount of any such
Indebtedness does not exceed 25% of the gross proceeds of such disposition;
(ix) the guarantee by the Company or any of the Restricted
Subsidiaries of Indebtedness of the Company or a Restricted Subsidiary that
was permitted to be incurred by another provision of this covenant;
(x) the incurrence by the Company or any of its Restricted
Subsidiaries of Acquired Debt in an aggregate principal amount at any time
outstanding not to exceed $10.0 million;
(xi) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument inadvertently
(except in the case of daylight overdrafts) drawn against insufficient
funds in the ordinary course of business; provided, however, that such
Indebtedness is extinguished within five business days of incurrence; and
(xii) the incurrence by the Company or any Restricted Subsidiary of
additional Indebtedness (which may be Indebtedness under Credit Facilities)
in an aggregate principal amount (or accreted value, as applicable) at any
time outstanding, including all Indebtedness incurred to refund, refinance
or replace any Indebtedness incurred pursuant to this clause (xii), not to
exceed $20.0 million.
For purposes of determining compliance with this covenant, in the event
that an item of Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (i) through (xii) above or is
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entitled to be incurred pursuant to the first paragraph of this covenant, the
Company shall, in its sole discretion, classify such item of Indebtedness in
any manner that complies with this covenant and such item of Indebtedness will
be treated as having been incurred pursuant to only one of such clauses or
pursuant to the first paragraph hereof. Accrual of interest, the accretion of
accreted value and the payment of interest in the form of additional
Indebtedness will not be deemed to be an incurrence of Indebtedness for
purposes of this covenant.
LIENS
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly, create, incur,
assume or suffer to exist any Lien securing Indebtedness or trade payables on
any asset now owned or hereafter acquired, or any income or profits therefrom
or assign or convey any right to receive income therefrom for purposes of
security, except Permitted Liens unless the New Notes are secured by such Lien
on an equal and ratable basis.
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly, create or otherwise
cause or suffer to exist or become effective any encumbrance or restriction on
the ability of any Restricted Subsidiary to (i)(a) pay dividends or make any
other distributions to the Company or any of its Restricted Subsidiaries (1) on
its Capital Stock or (2) with respect to any other interest or participation
in, or measured by, its profits, or (b) pay any Indebtedness owed to the
Company or any of its Restricted Subsidiaries, (ii) make loans or advances to
the Company or any of its Restricted Subsidiaries; (iii) guarantee any
Indebtedness of the Company or any Restricted Subsidiary of the Company
(provided that this clause (iii) shall apply only to Restricted Subsidiaries
that are Subsidiary Guarantors); or (iv) transfer any of its properties or
assets to the Company or any of its Restricted Subsidiaries, except for such
encumbrances or restrictions existing under or by reason of (a) loan agreements
and credit facilities as in effect as of the date of the Indenture, and any
amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings thereof, provided that such
amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings, taken as a whole, are no more
restrictive with respect to such dividend and other payment restrictions than
those contained in such loan agreements and credit facilities as in effect on
the date of the Indenture, (b) the Indenture and the New Notes, (c) applicable
law or any applicable rule, regulation or order, (d) any agreement or
instrument governing Indebtedness or Capital Stock of a Person acquired by the
Company or any of its Restricted Subsidiaries as in effect at the time of such
acquisition (except to the extent such agreement or instrument was created or
entered into in connection with or in contemplation of such acquisition), which
encumbrance or restriction is not applicable to any Person, or the properties
or assets of any Person, other than the Person, or the property or assets of
the Person, so acquired, provided that, in the case of Indebtedness, such
Indebtedness was permitted to be incurred under the terms of the Indenture, (e)
customary non-assignment provisions in leases, licenses, encumbrances,
contracts or similar assets entered into in the ordinary course of business and
consistent with past practices, (f) purchase money obligations for property
acquired in the ordinary course of business that impose restrictions of the
nature described in clause (iv) above on the property so acquired, (g)
Permitted Refinancing Indebtedness, provided that the restrictions contained in
the agreements governing such Permitted Refinancing Indebtedness are no more
restrictive than those contained in the agreements governing the Indebtedness
being refinanced and (h) contracts for the sale of assets containing customary
restrictions with respect to a Subsidiary pursuant to an agreement that has
been entered into for the sale or disposition of all or substantially all of
the Capital Stock or assets of such Subsidiary.
MERGER, CONSOLIDATION OR SALE OF ASSETS
The Indenture provides that the Company may not consolidate or merge with
or into (whether or not the Company is the surviving corporation), or, sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially
all of its properties or assets in one or more related transactions, to another
Person unless (i) the Company is the surviving corporation or the Person formed
by or surviving any such consolidation
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or merger (if other than the Company) or to which such sale, assignment,
transfer, lease, conveyance or other disposition shall have been made is a
corporation or limited liability company organized or existing under the laws
of the United States, any state thereof or the District of Columbia; (ii) the
Person formed by or surviving any such consolidation or merger (if other than
the Company) or the Person to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made assumes all the
obligations of the Company under the New Notes and the Indenture pursuant to a
supplemental indenture in a form reasonably satisfactory to the Trustee; (iii)
immediately after such transaction no Default or Event of Default exists; and
(iv) except in the case of a merger of the Company with or into a Wholly Owned
Restricted Subsidiary of the Company, the Company or the entity or Person
formed by or surviving any such consolidation or merger (if other than the
Company), or to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made will, at the time of such transaction
and after giving pro forma effect thereto as if such transaction had occurred
at the beginning of the applicable four-quarter period, be permitted to incur
at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage
Ratio test set forth in the first paragraph of the covenant described above
under the caption "-- Incurrence of Indebtedness and Issuance of Preferred
Stock." For purposes of this covenant, the sale, lease, conveyance, assignment,
transfer, or other disposition of all or substantially all of the properties
and assets of one or more Subsidiaries of the Company, which properties and
assets, if held by the Company instead of such Subsidiaries, would constitute
all or substantially all of the properties and assets of the Company on a
consolidated basis, shall be deemed to be the transfer of all or substantially
all of the properties and assets of the Company.
TRANSACTIONS WITH AFFILIATES
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, make any payment to or Investment in, or
sell, lease, transfer or otherwise dispose of any of its properties or assets
to, or purchase any property or assets from, or enter into or make or amend any
transaction, contract, agreement, understanding, loan, advance or guarantee
with, or for the benefit of, any Affiliate (each of the foregoing, an
"Affiliate Transaction"), unless (i) such Affiliate Transaction is on terms
that are no less favorable to the Company or the relevant Restricted Subsidiary
than those that would have been obtained in a comparable transaction by the
Company or such Restricted Subsidiary with an unrelated Person and (ii) the
Company delivers to the Trustee (a) with respect to any Affiliate Transaction
or series of related Affiliate Transactions involving aggregate consideration
in excess of $2.0 million, a resolution of the Board of Directors set forth in
an Officers' Certificate certifying that such Affiliate Transaction complies
with clause (i) above and that such Affiliate Transaction has been approved by
a majority of the disinterested members of the Board of Directors and (b) with
respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $10.0 million, an
opinion as to the fairness to the holders of such Affiliate Transaction from a
financial point of view issued by an accounting, appraisal or investment
banking firm of national standing; provided that the following shall not be
deemed to be Affiliate Transactions: (1) any employment agreements, stock
option or other compensation agreements or plans (and the payment of amounts or
the issuance of securities thereunder) and other reasonable fees, compensation,
benefits and indemnities paid or entered into by the Company or any of its
Restricted Subsidiaries in the ordinary course of business of the Company or
such Restricted Subsidiary to or with the officers, directors or employees of
the Company or its Restricted Subsidiaries (other than (x) any increase in
excess of 10% in any fiscal year in the aggregate amount of base annual
compensation paid to Craig A. Ponzio, including stock options and other
employee benefits and (y) any bonus or bonuses payable to Craig A. Ponzio with
respect to any fiscal year aggregating in excess of two times the aggregate
amount of Mr. Ponzio's base annual salary in effect on the date of the
Indenture),(2) transactions between or among the Company and/or its Restricted
Subsidiaries, (3) Restricted Payments (other than Restricted Investments) that
are permitted by the provisions of the Indenture described above under the
caption "-- Restricted Payments," (4) transactions with suppliers or customers,
in each case in the ordinary course of business (including, without limitation,
pursuant to joint venture agreements) and otherwise in accordance with the
terms of the Indenture, which are fair to the Company in the good faith
determination of the Board of Directors of the Company and are on terms at
least as favorable as might reasonably have been obtained at such time from an
unaffiliated party and (5) the current lease on the Company's Atlanta
headquarters, any payments thereunder, and any change or modification to such
lease to the extent that such change or modification satisfies the tests set
forth in subsection (i) above.
LIMITATION ON LAYERING DEBT
The Indenture provides that (i) the Company will not incur, create, issue,
assume, guarantee or otherwise become liable for any Indebtedness that is
subordinate or junior in right of payment to any Senior Debt and senior in any
respect in right of payment to the New Notes, and (ii) no Subsidiary Guarantor
will incur, create, issue,
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assume, guarantee or otherwise become liable for any Indebtedness that is
subordinate or junior in right of payment to Senior Debt of such Subsidiary
Guarantor and senior in any respect in right of payment to such Subsidiary
Guarantor's Subsidiary Guarantee.
BUSINESS ACTIVITIES
The Company will not, and will not permit any Restricted Subsidiary to,
engage in any business other than Permitted Businesses.
ADDITIONAL SUBSIDIARY GUARANTEES
The Indenture provides that the Company will not permit any Restricted
Subsidiary (other than a Foreign Subsidiary) to guarantee the payment of any
Indebtedness of the Company or any Indebtedness of any other Restricted
Subsidiary (in each case, the "Guaranteed Debt"), unless (i) if such Restricted
Subsidiary is not a Subsidiary Guarantor, such Restricted Subsidiary
simultaneously executes and delivers a supplemental indenture to the Indenture
providing for a Subsidiary Guarantee of payment of the New Notes by such
Restricted Subsidiary, (ii) if the New Notes or the Subsidiary Guarantee (if
any) of such Restricted Subsidiary are subordinated in right of payment to the
Guaranteed Debt, the Subsidiary Guarantee under the supplemental indenture
shall be subordinated to such Restricted Subsidiary's guarantee with respect to
the Guaranteed Debt substantially to the same extent as the New Notes or the
Subsidiary Guarantee are subordinated to the Guaranteed Debt under the
Indenture, (iii) if the Guaranteed Debt is by its express terms subordinated in
right of payment to the New Notes or the Subsidiary Guarantee (if any) of such
Restricted Subsidiary, any such guarantee of such Restricted Subsidiary with
respect to the Guaranteed Debt shall be subordinated in right of payment to
such Restricted Subsidiary's Subsidiary Guarantee with respect to the New Notes
substantially to the same extent as the Guaranteed Debt is subordinated to the
New Notes or the Subsidiary Guarantee (if any) of such Restricted Subsidiary,
(iv) such Restricted Subsidiary subordinates rights of reimbursement, indemnity
or subrogation or any other rights against the Company or any other Restricted
Subsidiary as a result of any payment by such Restricted Subsidiary under its
Subsidiary Guarantee to its obligation under its Subsidiary Guarantee, and (v)
such Restricted Subsidiary shall deliver to the Trustee an opinion of counsel
substantially to the effect that (A) such Subsidiary Guarantee of the New Notes
has been duly authorized, executed and delivered, and (B) such Subsidiary
Guarantee of the New Notes constitutes a valid, binding and enforceable
obligation of such Restricted Subsidiary, except insofar as enforcement thereof
may be limited by bankruptcy, insolvency or similar laws (including, without
limitation, all laws relating to fraudulent transfers) and except insofar as
enforcement thereof is subject to general principles of equity.
REPORTS
The Indenture provides that, whether or not required by the rules and
regulations of the Commission, so long as any New Notes are outstanding, the
Company will furnish to Holders of New Notes (i) all quarterly and annual
financial information that would be required to be contained in a filing with
the Commission on Forms 10-Q and 10-K if the Company were required to file such
Forms, including a "Management's Discussion and Analysis of Financial Condition
and Results of Operations" that describes the financial condition and results of
operations of the Company and its consolidated Subsidiaries and, with respect to
the annual information only, a report thereon by the Company's certified
independent accountants and (ii) all current reports that would be required to
be filed with the Commission on Form 8-K if the Company were required to file
such reports, in each case within the time periods set forth in the Commission's
rules and regulations. In addition, whether or not required by the rules and
regulations of the Commission, at any time after the consummation of the
Exchange Offer contemplated by the Registration Rights Agreement (or, if the
Exchange Offer is not consummated, after the effectiveness of the Shelf
Registration Statement), the Company will file a copy of all such information
and reports with the Commission for public availability within the time periods
set forth in the Commission's rules and regulations (unless the Commission will
not accept such a filing) and make such information available to securities
analysts and prospective investors upon request. In addition, at all times that
the Commission does not accept the filings provided for in the preceding
sentence, the Company and the Subsidiary Guarantors have agreed that, for so
long as any New Notes remain outstanding, they will furnish to Holders and to
securities analysts and prospective
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investors, upon their request, the information required to be delivered pursuant
to Rule 144A(d)(4) under the Securities Act.
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default (an "Event of Default"): (i) default for 30 days in the payment when
due of interest on, or Liquidated Damages with respect to, the New Notes
(whether or not prohibited by the subordination provisions of the Indenture);
(ii) default in payment when due of the principal of or premium, if any, on the
New Notes (whether or not prohibited by the subordination provisions of the
Indenture); (iii) failure by the Company or any of its Restricted Subsidiaries
for 30 days after notice by the Trustee or by Holders of at least 25% in
principal amount of New Notes then outstanding to comply with the provisions
described under the captions "-- Certain Covenants -- Change of Control" or "--
Asset Sales," "-- Certain Covenants -- Restricted Payments" or "-- Incurrence
of Indebtedness and Issuance of Preferred Stock;" (iv) failure by the Company
or any of its Restricted Subsidiaries for 60 days after notice by the Trustee
or by Holders of at least 25% in principal amount of New Notes then outstanding
to comply with any of its other agreements in the Indenture or the New Notes;
(v) default under any mortgage, indenture or instrument under which there may
be issued or by which there may be secured or evidenced any Indebtedness for
money borrowed by the Company or any of its Restricted Subsidiaries (or the
payment of which is guaranteed by the Company or any of its Restricted
Subsidiaries) whether such Indebtedness or guarantee now exists, or is created
after the date of the Indenture, which default (a) is caused by a failure to
pay principal of such Indebtedness after giving effect to any grace period
provided in such Indebtedness (a "Payment Default") or (b) results in the
acceleration of such Indebtedness prior to its stated maturity and, in each
case, the principal amount of any such Indebtedness, together with the
principal amount of any other such Indebtedness under which there has been a
Payment Default or the maturity of which has been so accelerated, aggregates
$7.5 million or more; (vi) failure by the Company or any of its Restricted
Subsidiaries to pay final non-appealable judgments aggregating in excess of
$7.5 million (net of any amounts with respect to which a reputable and
creditworthy insurance company has acknowledged liability in writing), which
judgments are not paid, discharged or stayed for a period of 60 days; (vii)
except as permitted by the Indenture, any Subsidiary Guarantee shall be held in
any judicial proceeding to be unenforceable or invalid or shall cease for any
reason to be in full force and effect or any Subsidiary Guarantor, or any
Person acting on behalf of any Subsidiary Guarantor, shall deny or disaffirm
its obligations under its Subsidiary Guarantee; and (viii) certain events of
bankruptcy or insolvency with respect to the Company or any of its Significant
Subsidiaries.
If any Event of Default occurs and is continuing, the Trustee or Holders of
at least 25% in principal amount of the then outstanding New Notes may declare
all the New Notes to be due and payable immediately. Notwithstanding the
foregoing, in the case of an Event of Default arising from certain events of
bankruptcy or insolvency, with respect to the Company or any Significant
Subsidiary, all outstanding New Notes will become due and payable without
further action or notice. Holders of New Notes may not enforce the Indenture or
the New Notes except as provided in the Indenture. Subject to certain
limitations, Holders of a majority in principal amount of the then outstanding
New Notes may direct the Trustee in its exercise of any trust or power. The
Trustee may withhold from Holders of New Notes notice of any continuing Default
or Event of Default (except a Default or Event of Default relating to the
payment of principal or interest) if it determines that withholding notice is
in their interest. In the event of a declaration of acceleration of the New
Notes because an Event of Default has occurred and is continuing as a result of
the acceleration of any Indebtedness described in clause (v) of the preceding
paragraph, the declaration of acceleration of the New Notes shall be
automatically annulled if the holders of any Indebtedness described in clause
(v) of the preceding paragraph have rescinded the declaration of acceleration
in respect of such Indebtedness within 30 days of the date of such declaration
and if (a) the annulment of the acceleration of New Notes would not conflict
with any judgment or decree of a court of competent jurisdiction and (b) all
existing Events of Default, except nonpayment of principal or interest on the
New Notes that became due solely because of the acceleration of the New Notes,
have been cured or waived.
The Holders of a majority in aggregate principal amount of the New Notes
then outstanding by notice to the Trustee may on behalf of Holders of all New
Notes waive any existing Default or Event of Default and its consequences under
the Indenture except a continuing Default or Event of Default in the payment of
interest on, or the principal of, the New Notes.
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The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND SHAREHOLDERS
No director, officer, employee, incorporator or shareholder of the Company,
as such, shall have any liability for any obligations of the Company under the
New Notes, the Indenture or the Subsidiary Guarantees or for any claim based
on, in respect of, or by reason of, such obligations or their creation. Each
Holder of New Notes by accepting a New Note waives and releases all such
liability. The waiver and release are part of the consideration for issuance of
the New Notes. Such waiver may not be effective to waive liabilities under the
federal securities laws and it is the view of the Commission that such a waiver
is against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have all of its
obligations and the obligations of the Subsidiary Guarantors discharged with
respect to the outstanding New Notes ("Legal Defeasance") except for (i) the
rights of Holders of outstanding New Notes to receive payments in respect of
the principal of, premium, if any, and interest and Liquidated Damages, if any,
on such New Notes when such payments are due from the trust referred to below,
(ii) the Company's obligations with respect to the New Notes concerning issuing
temporary New Notes, registration of New Notes, mutilated, destroyed, lost or
stolen New Notes and the maintenance of an office or agency for payment and
money for security payments held in trust, (iii) the rights, powers, trusts,
duties and immunities of the Trustee, and the Company's obligations in
connection therewith and (iv) the Legal Defeasance provisions of the Indenture.
In addition, the Company may, at its option and at any time, elect to have the
obligations of the Company released with respect to certain covenants that are
described in the Indenture ("Covenant Defeasance") and thereafter any omission
to comply with such obligations shall not constitute a Default or Event of
Default with respect to the New Notes. In the event Covenant Defeasance occurs,
certain events (not including non-payment, bankruptcy, receivership,
rehabilitation and insolvency events) described under "-- Events of Default and
Remedies" will no longer constitute an Event of Default with respect to the New
Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i)
the Company must irrevocably deposit with the Trustee, in trust, for the
benefit of holders of New Notes, cash in U.S. dollars, non-callable Government
Securities, or a combination thereof, in such amounts as will be sufficient, in
the opinion of a nationally recognized firm of independent public accountants,
to pay the principal of, premium, if any, and interest and Liquidated Damages
on the outstanding New Notes on the stated maturity or on the applicable
redemption date, as the case may be, and the Company must specify whether the
New Notes are being defeased to maturity or to a particular redemption date;
(ii) in the case of Legal Defeasance, the Company shall have delivered to the
Trustee an opinion of counsel in the United States reasonably acceptable to the
Trustee confirming that (A) the Company has received from, or there has been
published by, the Internal Revenue Service a ruling or (B) since the date of
the Indenture, there has been a change in the applicable federal income tax
law, in either case to the effect that, and based thereon such opinion of
counsel shall confirm that, subject to customary assumptions and exclusions,
Holders of the outstanding New Notes will not recognize income, gain or loss
for federal income tax purposes as a result of such Legal Defeasance and will
be subject to federal income tax on the same amounts, in the same manner and at
the same times as would have been the case if such Legal Defeasance had not
occurred; (iii) in the case of Covenant Defeasance, the Company shall have
delivered to the Trustee an opinion of counsel in the United States reasonably
acceptable to the Trustee confirming that, subject to customary assumptions and
exclusions, Holders of the outstanding New Notes will not recognize income,
gain or loss for federal income tax purposes as a result of such Covenant
Defeasance and will be subject to federal income tax on the same amounts, in
the same manner and at the same times as would have been the case if such
Covenant Defeasance had not occurred; (iv) no Default or Event of Default shall
have occurred and be continuing on the date of such deposit (other than a
Default or Event of Default resulting from the financing of amounts to be
applied to such deposit) or insofar as Events of Default from bankruptcy or
insolvency events are concerned, at any time in the period ending on the 91st
day after the date of deposit; (v) such Legal Defeasance or Covenant Defeasance
will not result in a
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breach or violation of, or constitute a default under any material agreement or
instrument (other than the Indenture) to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries is
bound; (vi) the Company must have delivered to the Trustee an opinion of
counsel to the effect that, subject to customary assumptions and exclusions
(which assumptions and exclusion shall not relate to the operation of Section
547 of the United States Bankruptcy Code or any analogous New York State law
provision), after the 91st day following the deposit, the trust funds will not
be subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally; (vii) the
Company must deliver to the Trustee an Officers' Certificate stating that the
deposit was not made by the Company with the intent of preferring Holders of
New Notes over the other creditors of the Company with the intent of defeating,
hindering, delaying or defrauding creditors of the Company or others; and
(viii) the Company must deliver to the Trustee an Officers' Certificate and an
opinion of counsel, each stating that all conditions precedent provided for
relating to the Legal Defeasance or the Covenant Defeasance have been complied
with.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange New Notes in accordance with the
Indenture. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Company may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Company is not required to transfer or exchange
any New Note selected for redemption. Also, the Company is not required to
transfer or exchange any New Note for a period of 15 days before a selection of
New Notes to be redeemed.
The registered Holder of a New Note will be treated as the owner of it for
all purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Indenture,
the Subsidiary Guarantees or the New Notes may be amended or supplemented with
the consent of Holders of at least a majority in principal amount of the New
Notes then outstanding (including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer for, New
Notes), and any existing default or compliance with any provision of the
Indenture, the Subsidiary Guarantees or the New Notes may be waived with the
consent of Holders of a majority in principal amount of the then outstanding
New Notes (including consents obtained in connection with a purchase of, or
tender offer or exchange offer for, New Notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any New Notes held by a non-consenting Holder): (i) reduce the
principal amount of New Notes whose Holders must consent to an amendment,
supplement or waiver, (ii) reduce the principal of or change the fixed maturity
of any New Note or alter the provisions with respect to the redemption of the
New Notes (other than provisions relating to the covenants described above
under the caption "-- Certain Covenants"), (iii) reduce the rate of or change
the time for payment of interest on any New Note, (iv) waive a Default or Event
of Default in the payment of principal of or premium, if any, or interest on
the New Notes (except a rescission of acceleration of the New Notes by Holders
of at least a majority in aggregate principal amount of the New Notes and a
waiver of the payment default that resulted from such acceleration), (v) make
any New Note payable in money other than that stated in the New Notes, (vi)
make any change in the provisions of the Indenture relating to waivers of past
Defaults or the rights of Holders of New Notes to receive payments of principal
of or premium, if any, or interest on the New Notes, (vii) waive a redemption
payment with respect to any New Note (other than a payment required by one of
the covenants described above under the caption "-- Certain Covenants"), (viii)
except as otherwise permitted by the Indenture release any Subsidiary Guarantor
from any of its obligations under its Subsidiary Guarantee or the Indenture, or
amend the provisions of the Indenture relating to the release of Subsidiary
Guarantors, or (ix) make any change in the foregoing amendment and waiver
provisions. In addition, any amendment to the provisions of Article 10 of the
Indenture (which relate to subordination) or the related definitions will
require the consent of Holders of at least 75% in aggregate principal amount of
the New Notes then outstanding if such amendment would adversely affect the
rights of Holders of New Notes.
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Notwithstanding the foregoing, without the consent of any holder of New
Notes, the Company, the Subsidiary Guarantors and the Trustee may amend or
supplement the Indenture, the Subsidiary Guarantees or the New Notes to cure
any ambiguity, defect or inconsistency, to provide for uncertificated New Notes
in addition to or in place of certificated New Notes, to provide for the
assumption of the Company's or a Subsidiary Guarantor's obligations to Holders
of New Notes in the case of a merger or consolidation, to make any change that
would provide any additional rights or benefits to Holders of New Notes or that
does not adversely affect the legal rights under the Indenture of any such
Holder, to comply with requirements of the Commission in order to effect or
maintain the qualification of the Indenture under the Trust Indenture Act or to
allow any Restricted Subsidiary to guarantee the New Notes.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any
such claim as security or otherwise. The Trustee will be permitted to engage in
other transactions; however, if it acquires any conflicting interest it must
eliminate such conflict within 90 days, apply to the Commission for permission
to continue or resign.
Holders of a majority in principal amount of the then outstanding New Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur (which shall not be cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the
conduct of his own affairs. Subject to such provisions, the Trustee will be
under no obligation to exercise any of its rights or powers under the Indenture
at the request of any Holder of New Notes, unless such Holder shall have
offered to the Trustee security and indemnity satisfactory to it against any
loss, liability or expense.
BOOK-ENTRY; DELIVERY; FORM AND TRANSFER
The Old Notes were offered and sold to qualified institutional buyers in
reliance on Rule 144A. New Notes will be issued in registered, global form in
minimum denominations of $1,000 principal amount at maturity and integral
multiples of $1,000 in excess thereof.
The Global Notes will be deposited upon issuance with the Trustee as
custodian for DTC, in New York, New York, and registered in the name of DTC or
its nominee, in each case for credit to an account of a direct or indirect
participant in DTC as described below.
Except as set forth below, the Global Notes may be transferred, in whole
and not in part, only to another nominee of DTC or to a successor of DTC or its
nominee. Beneficial interests in the Global Notes may not be exchanged for New
Notes in certificated form except in the limited circumstances described below.
See "Exchange of Book-Entry for Certificated Notes."
In addition, transfer of beneficial interests in the Global Notes will be
subject to the applicable rules and procedures of DTC and its direct or
indirect participants (including, if applicable, those of Euroclear and CEDEL),
which may change from time to time.
Initially, the Trustee will act as Paying Agent and Registrar with respect
to the New Notes. The New Notes may be presented for registration of transfer
and exchange at the offices of the Registrar.
DEPOSITARY PROCEDURES
DTC has advised the Company that DTC is a limited-purpose trust company
created to hold securities for its participating organizations (collectively,
the "Direct Participants") and to facilitate the clearance and settlement of
transactions in those securities between Direct Participants through electronic
book-entry changes in accounts of Participants. The Direct Participants include
securities brokers and dealers (including the Initial Purchasers), banks, trust
companies, clearing corporations and certain other organizations, including
Euroclear and Cedel.
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Access to DTC's system is also available to other entities that clear through,
or maintain a direct or indirect custodial relationship with, a Direct
Participant (collectively, the "Indirect Participants").
DTC has advised the Company that, pursuant to DTC's procedures, (i) upon
deposit of the Global Notes, DTC will credit the accounts of the Direct
Participants designated by the Initial Purchasers with portions of the
principal amount of the Global Notes that have been allocated to them by the
Initial Purchasers, and (ii) DTC will maintain records of the ownership
interests of such Direct Participants in the Global Notes and the transfer of
ownership interests by and between Direct Participants. DTC will not maintain
records of the ownership interests of, or the transfer of ownership interests
by and between, Indirect Participants or other owners of beneficial interests
in the Global Notes. Direct Participants and Indirect Participants must
maintain their own records of the ownership interests of, and the transfer of
ownership interests by and between, Indirect Participants and other owners of
beneficial interests in the Global Notes.
Investors in the U.S. Global Notes may hold their interests therein
directly through DTC if they are Direct Participants in DTC or indirectly
through organizations that are Direct Participants in DTC. Investors in the Reg
S Temporary Global Notes may hold their interests therein directly through
Euroclear or CEDEL or indirectly through organizations that are participants in
Euroclear or CEDEL. After the expiration of the 40-Day Restricted Period (but
not earlier), investors may also hold interests in the Reg S Permanent Global
Notes through organizations other than Euroclear and CEDEL that are Direct
Participants in the DTC system. Morgan Guaranty Trust Company of New York,
Brussels office is the operator and depository of Euroclear and Citibank, N.A.
is the operator and depository of CEDEL (each a "nominee" of Euroclear and
CEDEL, respectively). Therefore, they will each be recorded on DTC's records as
the holders of all ownership interests held by them on behalf of Euroclear and
CEDEL, respectively. Euroclear and CEDEL must maintain on their own records the
ownership interests, and transfers of ownership interests by and between, their
own customers' securities accounts. DTC will not maintain such records. All
ownership interests in any Global Notes, including those of customers'
securities accounts held through Euroclear or CEDEL, may be subject to the
procedures and requirements of DTC.
The laws of some states in the United States require that certain persons
take physical delivery in definitive, certificated form, of securities that
they own. This may limit or curtail the ability to transfer beneficial
interests in a Global Note to such persons. Because DTC can act only on behalf
of Direct Participants, which in turn act on behalf of Indirect Participants
and others, the ability of a person having a beneficial interest in a Global
Note to pledge such interest to persons or entities that are not Direct
Participants in DTC, or to otherwise take actions in respect of such interests,
may be affected by the lack of physical certificates evidencing such interests.
For certain other restrictions on the transferability of the Notes see "-- Reg
S Temporary and Reg S Permanent Global Notes" and "-- Transfers of Interests in
Global Notes for Certificated Notes."
EXCEPT AS DESCRIBED IN "-- TRANSFERS OF INTERESTS IN GLOBAL NOTES FOR
CERTIFICATED NOTES", OWNERS Of BENEFICIAL INTERESTS IN THE GLOBAL NOTES WILL
NOT HAVE NOTES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE PHYSICAL DELIVERY OF
NOTES IN CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE REGISTERED OWNERS OR
HOLDERS THEREOF UNDER THE INDENTURE FOR ANY PURPOSE.
Under the terms of the Indenture, the Company, the Guarantors and the
Trustee will treat the persons in whose names the Notes are registered
(including Notes represented by Global Notes) as the owners thereof for the
purpose of receiving payments and for any and all other purposes whatsoever.
Payments in respect of the principal, premium, Liquidated Damages, if any, and
interest on Global Notes registered in the name of DTC or its nominee will be
payable by the Trustee to DTC or its nominee as the registered holder under the
Indenture. Consequently, neither the Company, the Trustee nor any agent of the
Company or the Trustee has or will have any responsibility or liability for (i)
any aspect of DTC's records or any Direct Participant's or Indirect
Participant's records relating to or payments made on account of beneficial
ownership interests in the Global Notes or for maintaining, supervising or
reviewing any of DTC's records or any Direct Participant's or Indirect
Participant's records relating to the beneficial ownership interests in any
Global Note or (ii) any other matter relating to the actions and practices of
DTC or any of its Direct Participants or Indirect Participants.
DTC has advised the Company that its current payment practice (for payments
of principal, interest and the like) with respect to securities such as the
Notes is to credit the accounts of the relevant Direct Participants with
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such payment on the payment date in amounts proportionate to such Direct
Participant's respective ownership interests in the Global Notes as shown on
DTC's records. Payments by Direct Participants and Indirect Participants to the
beneficial owners of the Notes will be governed by standing instructions and
customary practices between them and will not be the responsibility of DTC, the
Trustee, the Company or the Guarantors. Neither the Company, the Guarantors nor
the Trustee will be liable for any delay by DTC or its Direct Participants or
Indirect Participants in identifying the beneficial owners of the Notes, and
the Company and the Trustee may conclusively rely on and will be protected in
relying on instructions from DTC or its nominee as the registered owner of the
Notes for all purposes.
The Global Notes will trade in DTC's Same-Day Funds Settlement System and,
therefore, transfers between Direct Participants in DTC will be effected in
accordance with DTC's procedures, and will be settled in immediately available
funds. Transfers between Indirect Participants (other than Indirect
Participants who hold an interest in the Notes through Euroclear or CEDEL) who
hold an interest through a Direct Participant will be effected in accordance
with the procedures of such Direct Participant but generally will settle in
immediately available funds. Transfers between and among Indirect Participants
who hold interests in the Notes through Euroclear and CEDEL will be effected in
the ordinary way in accordance with their respective rules and operating
procedures.
Subject to compliance with the transfer restrictions applicable to the
Notes described herein, cross-market transfers between Direct Participants in
DTC, on the one hand, and Indirect Participants who hold interests in the Notes
through Euroclear or CEDEL, on the other hand, will be effected by Euroclear's
or CEDEL's respective Nominee through DTC in accordance with DTC's rules on
behalf of Euroclear or CEDEL; however, delivery of instructions relating to
crossmarket transactions must be made directly to Euroclear or CEDEL, as the
case may be, by the counterparty in accordance with the rules and procedures of
Euroclear or CEDEL and within their established deadlines (Brussels time for
Euroclear and UK time for CEDEL). Indirect Participants who hold interest in
the Notes through Euroclear and CEDEL may not deliver instructions directly to
Euroclear's or CEDEL's Nominee. Euroclear or CEDEL will, if the transaction
meets its settlement requirements, deliver instructions to its respective
Nominee to deliver or receive interests on Euroclear's or CEDEL's behalf in the
relevant Global Note in DTC, and make or receive payment in accordance with
normal procedures for same-day fund settlement applicable to DTC.
Because of time zone differences, the securities accounts of an Indirect
Participant who holds an interest in the Notes through Euroclear or CEDEL
purchasing an interest in a Global Note from a Direct Participant in DTC will
be credited, and any such crediting will be reported to Euroclear or CEDEL
during the European business day immediately following the settlement date of
DTC in New York. Although recorded in DTC's accounting records as of DTC's
settlement date in New York, Euroclear and CEDEL customers will not have access
to the cash amount credited to their accounts as a result of a sale of an
interest in a Reg S Permanent Global Note to a DTC Participant until the
European business day for Euroclear or CEDEL immediately following DTC's
settlement date.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of Notes only at the direction of one or more Direct
Participants to whose account interests in the Global Notes are credited and
only in respect of such portion of the aggregate principal amount of the Notes
to which such Direct Participant or Direct Participants has or have given
direction. However, if there is an Event of Default under the Notes, DTC
reserves the right to exchange Global Notes (without the direction of one or
more of its Direct Participants) for legended Notes in certificated form, and
to distribute such certificated forms of Notes to its Direct Participants. See
"-- Transfers of Interests in Global Notes for Certificated Notes."
Although DTC, Euroclear and CEDEL have agreed to the foregoing procedures
to facilitate transfers of interests in the Reg S Permanent Global Notes and in
the U.S. Global Notes among Direct Participants, including Euroclear and CEDEL,
they are under no obligation to perform or to continue to perform such
procedures, and such procedures may be discontinued at any time. None of the
Company, the Guarantors, the Initial Purchasers or the Trustee shall have any
responsibility for the performance by DTC, Euroclear or CEDEL or their
respective Direct and Indirect Participants of their respective obligations
under the rules and procedures governing any of their operations.
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The information in this section concerning DTC, Euroclear and CEDEL and
their book-entry systems has been obtained from sources that the Company
believes to be reliable, but the Company takes no responsibility for the
accuracy thereof.
REG S TEMPORARY AND REG S PERMANENT GLOBAL NOTES
An Indirect Participant who holds an interest in Reg S Temporary Global
Notes through Euroclear or CEDEL must provide Euroclear or CEDEL, as the case
may be, with a certificate in the form required by the Indenture certifying
that such Indirect Participant is either not a U.S. Person (as defined below)
or has purchased such interests in a transaction that is exempt from the
registration requirements under the Securities Act, and Euroclear or CEDEL, as
the case may be, must provide to the Trustee (or the Paying Agent, if other
than the Trustee) a certificate in the form required by the Indenture prior to
any exchange of such beneficial interests for beneficial interests in Reg S
Permanent Global Notes.
"U.S. Person" means (i) any individual resident in the United States, (ii)
any partnership or corporation organized or incorporated under the laws of the
United States, (iii) any estate of which an executor or administrator is a U.S.
Person (other than an estate governed by foreign law and of which at least one
executor or administrator is a non-U.S. Person who has sole or shared
investment discretion with respect to its assets), (iv) any trust of which any
trustee is a U.S. Person (other than a trust of which at least one trustee is a
non-U.S. Person who has sole or shared investment discretion with respect to
its assets and no beneficiary of the trust (and no settler, if the trust is
revocable) is a U.S. Person), (v) any agency or branch of a foreign entity
located in the United States, (vi) any non-discretionary or similar account
(other than an estate or trust) held by a dealer or other fiduciary for the
benefit or account of a U.S. Person, (vii) any discretionary or similar account
(other than an estate or trust) held by a dealer or other fiduciary organized,
incorporated or (if an individual) resident in the United States (other than
such an account held for the benefit or account of a non-U.S. Person), (viii)
any partnership or corporation organized or incorporated under the laws of a
foreign jurisdiction and formed by a U.S. person principally for the purpose of
investing in securities not registered under the Securities Act (unless it is
organized or incorporated and owned by "accredited investors" within the
meaning of Rule 501(a) under the Securities Act who are not natural persons,
estates or trusts); provided, however that the term "U.S. Person" shall not
include (A) a branch or agency of a U.S. Person that is located and operating
outside the United States for valid business purposes as a locally regulated
branch or agency engaged in the banking or insurance business, (B) any employee
benefit plan established and administered in accordance with the law, customary
practices and documentation of a foreign country and (C) the international
organizations set forth in Section 902(o)(7) of Regulation S under the
Securities Act and any other similar international organizations, and their
agencies, affiliates and pension plans.
TRANSFERS OF INTERESTS IN ONE GLOBAL NOTE FOR INTERESTS IN ANOTHER GLOBAL NOTE
Prior to the expiration of the 40-Day Restricted Period, an Indirect
Participant who holds an interest in Reg S Temporary Global Notes through
Euroclear or CEDEL will not be permitted to transfer its interest to a U.S.
Person who takes delivery in the form of an interest in U.S. Global Notes.
After the expiration of the 40-Day Restricted Period, an Indirect Participant
who holds an interest in Reg S Global Notes will be permitted to transfer its
interest to a U.S. Person who takes delivery in the form of an interest in U.S.
Global Notes only upon receipt by the Trustee of a written certification from
the transferor to the effect that such transfer is being made in accordance
with the restrictions on transfer set forth under "-- Notice to Investors" and
set forth in the legend printed on the Reg S Permanent Global Notes.
Prior to the expiration of the 40-Day Restricted Period, a Direct or
Indirect Participant who holds an interest in U.S. Global Notes will not be
permitted to transfer its interests to any person that takes delivery thereof
in the form of an interest in the Reg S Temporary Global Notes. After the
expiration of the 40-Day Restricted Period, a Direct or Indirect Participant
who holds an interest in U.S. Global Notes may transfer its interests to a
person who takes delivery in the form of an interest in Reg S Permanent Global
Notes only upon receipt by the Trustee of a written certification from the
transferor to the effect that such transfer is being made in accordance with
Rule 904 of Regulation S.
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Transfers involving an exchange of a beneficial interest in Reg S Global
Notes for a beneficial interest in U.S. Global Notes or vice versa will be
effected by DTC by means of an instruction originated by the Trustee through
DTC/Deposit Withdraw at Custodian (DWAC) system. Accordingly, in connection
with such transfer, appropriate adjustments will be made to reflect a decrease
in the principal amount of the one Global Note and a corresponding increase in
the principal amount of the other Global Note, as applicable. Any beneficial
interest in the one Global Note that is transferred to a person who takes
delivery in the form of the other Global Note will, upon transfer, cease to be
an interest in such first Global Note and become an interest in such other
Global Note and, accordingly, will thereafter be subject to all transfer
restrictions and other procedures applicable to beneficial interests in such
other Global Note for as long as it remains such an interest.
TRANSFERS OF INTERESTS IN GLOBAL NOTES FOR CERTIFICATED NOTES
An entire Global Note may be exchanged for definitive Notes in registered,
certificated form without interest coupons ("Certificated Notes") if (i) DTC
(x) notifies the Company that it is unwilling or unable to continue as
depositary for the Global Notes and the Company thereupon fails to appoint a
successor depositary within 90 days or (y) has ceased to be a clearing agency
registered under the Exchange Act, (ii) the Company, at its option, notifies
the Trustee in writing that it elects to cause the issuance of Certificated
Notes or (iii) there shall have occurred and be continuing a Default or an
Event of Default with respect to the Notes. In any such case, the Company will
notify the Trustee in writing that, upon surrender by the Direct and Indirect
Participants of their interest in such Global Note, Certificated Notes will be
issued to each person that such Direct and Indirect Participants and the DTC
identify as being the beneficial owner of the related Notes.
Beneficial interests in Global Notes held by any Direct or Indirect
Participant may be exchanged for Certificated Notes upon request to DTC, by
such Direct Participant (for itself or on behalf of an Indirect Participant),
to the Trustee in accordance with customary DTC procedures. Certificated Notes
delivered in exchange for any beneficial interest in any Global Note will be
registered in the names, and issued in any approved denominations, requested by
DTC on behalf of such Direct or Indirect Participants (in accordance with DTC's
customary procedures).
Neither the Company, the Guarantors nor the Trustee will be liable for any
delay by the holder of any Global Note or DTC in identifying the beneficial
owners of Notes, and the Company and the Trustee may conclusively rely on, and
will be protected in relying on, instructions from the holder of the Global
Note or DTC for all purposes.
TRANSFERS OF CERTIFICATED NOTES FOR INTERESTS IN GLOBAL NOTES
Certificated Notes may only be transferred if the transferor first delivers
to the Trustee a written certificate (and, in certain circumstances, an opinion
of counsel) confirming that, in connection with such transfer, it has complied
with the restrictions on transfer described under "-- Notice to Investors."
SAME DAY SETTLEMENT AND PAYMENT
The Indenture requires that payments in respect of the New Notes
represented by the Global Notes (including principal, premium, if any, interest
and Liquidated Damages, if any) be made by wire transfer of immediately
available same day funds to the accounts specified by the holder of interests
in such Global Note. With respect to Certificated Notes, the Company will make
all payments of principal, premium, if any, interest and Liquidated Damages, if
any, by wire transfer of immediately available same day funds to the accounts
specified by the holders thereof or, if no such account is specified, by
mailing a check to each such holder's registered address. The Company expects
that secondary trading in the Certificated Notes will also be settled in
immediately available funds.
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REGISTRATION RIGHTS; LIQUIDATED DAMAGES
Pursuant to the Registration Rights Agreement, the Company agreed to file
with the Commission the Exchange Offer Registration Statement on the
appropriate form under the Securities Act with respect to the New Notes. Upon
the effectiveness of the Exchange Offer Registration Statement, the Company
will offer to the holders of Transfer Restricted Securities pursuant to the
Exchange Offer who are able to make certain representations the opportunity to
exchange their Transfer Restricted Securities for New Notes. If (i) the Company
is not required to file the Exchange Offer Registration Statement or permitted
to consummate the Exchange Offer because the Exchange Offer is not permitted by
applicable law or Commission policy or (ii) any holder of Transfer Restricted
Securities (as defined herein) notifies the Company within the specified time
period that (A) it is prohibited by law or Commission policy from participating
in the Exchange Offer (other than due solely to the status of such holder as an
affiliate of the Company within the meaning of the Securities Act) or (B) that
it may not resell the New Notes acquired by it in the Exchange Offer to the
public without delivering a prospectus and the prospectus contained in the
Exchange Offer Registration Statement is not appropriate or available for such
resales or (C) that it is a broker-dealer and owns Notes acquired directly from
the Company or an affiliate of the Company, the Company will file with the
Commission a Shelf Registration Statement to cover resales of the Notes by the
Holders thereof who satisfy certain conditions relating to the provision of
information in connection with the Shelf Registration Statement. The Company
will use its best efforts to cause the applicable registration statement to be
declared effective as promptly as possible by the Commission. For purposes of
the foregoing, "Transfer Restricted Securities" means each Note until (i) the
date on which such Note has been exchanged by a person other than a
broker-dealer for a New Note in the Exchange Offer, (ii) following the exchange
by a broker-dealer in the Exchange Offer of a Note for a New Note, the date on
which such New Note is sold to a purchaser who receives from such broker-dealer
on or prior to the date of such sale a copy of the prospectus contained in the
Exchange Offer Registration Statement, (iii) the date on which such Note has
been effectively registered under the Securities Act and disposed of in
accordance with the Shelf Registration Statement or (iv) the date on which such
Note is distributed to the public pursuant to Rule 144 under the Securities
Act.
The Registration Rights Agreement provides that (i) the Company will file
an Exchange Offer Registration Statement with the Commission on or prior to 120
days after the Closing, (ii) the Company will use its best efforts to have the
Exchange Offer Registration Statement declared effective by the Commission on
or prior to 180 days after the Closing, (iii) unless the Exchange Offer would
not be permitted by applicable law or Commission policy, the Company will
commence the Exchange Offer and use its best efforts to issue within 210 days
after the Issue Date New Notes in exchange for all Notes tendered prior thereto
in the Exchange Offer and (iv) if obligated to file the Shelf Registration
Statement, the Company will use its best efforts to file the Shelf Registration
Statement with the Commission on or prior to 75 days after such filing
obligation arises and to cause the Shelf Registration Statement to be declared
effective by the Commission on or prior to 150 days after such obligation
arises. If (a) the Company fails to file any of the Registration Statements
required by the Registration Rights Agreement on or before the date specified
for such filing, (b) any of such Registration Statement is not declared
effective by the Commission on or prior to the date specified for such
effectiveness (the "Effectiveness Target Date"), or (c) the Company fails to
consummate the Exchange Offer within 210 days after the Issue Date, or (d) the
Shelf Registration Statement or the Exchange Offer Registration Statement is
declared effective but thereafter ceases to be effective or usable in
connection with resales of Transfer Restricted Securities during the periods
specified in the Registration Rights Agreement (each such event referred to in
clauses (a) through (d) above a "Registration Default"), then the Company will
pay Liquidated Damages to each Holder of Notes, with respect to such 90-day
period immediately following the occurrence of the first Registration Default
in an amount equal to $0.05 per week per $1,000 principal amount of Notes held
by such Holder. The amount of the Liquidated Damages will increase by an
additional $0.05 per week per $1,000 principal amount of Notes with respect to
each subsequent 90-day period until all Registration Defaults have been cured,
up to a maximum amount of Liquidated Damages of $0.30 per week per $1,000
principal amount of Notes. All accrued Liquidated Damages will be paid by the
Company to the Global Note Holder by wire transfer of immediately available
funds or by federal funds check and to Holders of Certificated Securities by
wire transfer to the accounts specified by them or by mailing checks to their
registered addresses if no such accounts have been specified. Following the
cure of all Registration Defaults, the accrual of Liquidated Damages will
cease.
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Holders of Notes will be required to make certain representations to the
Company (as described in the Registration Rights Agreement) in order to
participate in the Exchange Offer and will be required to deliver information
to be used in connection with the Shelf Registration Statement and to provide
comments on the Shelf Registration Statement within the time periods set forth
in the Registration Rights Agreement in order to have their Notes included in
the Shelf Registration Statement and benefit from the provisions regarding
Liquidated Damages set forth above.
ADDITIONAL INFORMATION
Anyone who receives this Prospectus may obtain a copy of the Indenture and
Registration Rights Agreement without charge by writing to the Company at 3900
Steve Reynolds Boulevard, Norcross, Georgia 30093, Attention: Chief Financial
Officer.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as
any other capitalized terms used herein for which no definition is provided.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, and (ii)
Indebtedness secured by a Lien encumbering any asset acquired by such specified
Person or assumed in connection with the acquisition of any asset used or
useful in a Permitted Business acquired by such specified Person; provided that
such Indebtedness was not incurred in connection with, or in contemplation of,
such other Person merging with or into or becoming a Subsidiary of such
specified Person, or such acquisition, as the case may be.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall
mean the possession, directly or indirectly, of the power to direct or cause
the direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control.
"Asset Sale" means (i) the sale, lease (other than an operating lease
entered into in the ordinary course of business), conveyance or other
disposition of any assets or rights (including, without limitation, by way of a
sale and leaseback) other than sales of inventory in the ordinary course of
business consistent with past practices (provided that the sale, lease,
conveyance or other disposition of all or substantially all of the assets of
the Company and its Restricted Subsidiaries taken as a whole will be governed
by the provisions of the Indenture described above under the caption "--
Certain Covenants -- Change of Control" and/or the provisions described above
under the caption "-- Certain Covenants -- Merger, Consolidation or Sale of
Assets" and not by the provisions of the covenant described under the caption
"-- Certain Covenants -- Asset Sales"), and (ii) the sale by the Company and
the issue or sale by any of the Restricted Subsidiaries of the Company of
Equity Interests of any of the Company's Subsidiaries, in the case of either
clause (i) or (ii), whether in a single transaction or a series of related
transactions that have a fair market value (as determined in good faith by the
Board of Directors) in excess of $1.0 million or for net cash proceeds in
excess of $1.0 million. Notwithstanding the foregoing, the following shall not
be deemed to be Asset Sales: (i) a transfer of assets by the Company to a
Wholly Owned Restricted Subsidiary of the Company or by a Wholly Owned
Restricted Subsidiary of the Company to the Company or to a Wholly Owned
Restricted Subsidiary of the Company, (ii) an issuance of Equity Interests by a
Restricted Subsidiary of the Company to the Company or to a Wholly Owned
Restricted Subsidiary of the Company, (iii) a Restricted Payment that is
permitted by the covenant described above under the caption "-- Certain
Covenants -- Restricted Payments," (iv) the sale and leaseback of any assets
within 90 days of the acquisition of such assets, provided that the sale price
of such assets is not materially less than the acquisition price of such
assets, and (v) the periodic clearance of aged, obsolete or discontinued
inventory.
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"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that
would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or limited) and
(iv) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of,
the issuing Person.
"Cash Equivalents" means (i) securities issued or unconditionally and fully
guaranteed or insured by the full faith and credit of the United States
government or any agency or instrumentality thereof having maturities of not
more than one year from the date of acquisition, (ii) obligations issued or
fully guaranteed by any state of the United States of America or any political
subdivision of any such state or any public instrumentality thereof maturing
within one year from the date of acquisition thereof and, at the time of
acquisition, having one of the two highest ratings obtainable from either
Standard & Poor's Ratings Group ("S&P") or Moody's Investors Service, Inc.
("Moody's"), (iii) certificates of deposit and eurodollar time deposits with
maturities of one year or less from the date of acquisition, bankers'
acceptances with maturities not exceeding one year and overnight bank deposits,
in each case with any lender party to the Credit Facilities or with any
domestic commercial bank having capital and surplus in excess of $250.0
million, (iv) repurchase obligations with a term of not more than seven days
for underlying securities of the types described in clauses (i) and (iii),
above entered into with any financial institution meeting the qualifications
specified in clause (iii) above, (v) commercial paper having one of the two of
the highest ratings obtainable from either Moody's or S&P and in each case
maturing within one year after the date of acquisition and (vi) investments in
funds investing exclusively in investments of the types described in clauses
(i) through (v) above.
"Change of Control" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Subsidiaries taken as a
whole to any "person" (as such term is used in Section 13(d)(3) of the Exchange
Act), other than the Principals and their Related Parties, (ii) the adoption of
a plan relating to the liquidation or dissolution of the Company, (iii) the
consummation of any transaction (including, without limitation, any merger or
consolidation) the result of which is that (A) any "person" (as defined above),
other than the Principals and their Related Parties, becomes the "beneficial
owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange
Act), directly or indirectly, of 40% or more of the Voting Stock of the Company
(measured by voting power rather than number of shares) and (B) the Principals
and their Related Parties beneficially own, directly or indirectly, in the
aggregate a lesser percentage of the Voting Stock of the Company than such
other "person", (iv) the first day on which a majority of the members of the
Board of Directors of the Company are not Continuing Directors or (v) the
Company consolidates with, or merges with or into, any Person, or any Person
consolidates with, or merges with or into, the Company, in any such event
pursuant to a transaction in which any of the outstanding Voting Stock of the
Company is converted into or exchanged for cash, securities or other property,
other than any such transaction where (A) the Voting Stock of the Company
outstanding immediately prior to such transaction is converted into or
exchanged for Voting Stock (other than Disqualified Stock) of the surviving or
transferee Person and (B) either (1) the "beneficial owners" (as defined above)
of the Voting Stock of the Company immediately prior to such transaction own,
directly or indirectly through one or more subsidiaries, not less than a
majority of the total Voting Stock of the surviving or transferee corporation
immediately after such transaction or (2) if, immediately prior to such
transaction the Company is a direct or indirect subsidiary of any other Person
(such other Person, the "Holding Company"), then the "beneficial owners" (as
defined above) of the Voting Stock of such Holding Company immediately prior to
such transaction own, directly or indirectly through one or more subsidiaries,
not less than a majority of the Voting Stock of the surviving or transferee
corporation immediately after such transaction.
"Consolidated EBITDA" means, with respect to any Person for any period, the
Consolidated Net Income of such Person for such period plus (i) an amount equal
to any extraordinary loss plus any net loss realized in connection with an
Asset Sale (to the extent such losses were deducted in computing such
Consolidated Net Income of such Person and its Restricted Subsidiaries), plus
(ii) (A) if such Person is an S corporation or
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substantially similar pass-through entity for U.S. federal income tax purposes,
the amount of all Permitted Quarterly Tax Distributions for such period
(whether or not such Permitted Quarterly Tax Distributions have actually been
distributed), as adjusted for any True-up Amount determined for such period,
plus any provision for taxes based on income or profits of such Person and its
Restricted Subsidiaries for such period, to the extent that such provision for
taxes was included in computing such Consolidated Net Income, and (B) if such
Person is not an S corporation or substantially similar pass-through entity for
U.S. federal income tax purposes, any provision for taxes based on income or
profits of such Person and its Restricted Subsidiaries for such period, to the
extent that such provision for taxes was included in computing such
Consolidated Net Income, plus (iii) consolidated interest expense of such
Person and its Restricted Subsidiaries for such period, whether paid or accrued
and whether or not capitalized (including, without limitation, amortization of
debt issuance costs and original issue discount, non-cash interest payments,
the interest component of any deferred payment obligations, the interest
component of all payments associated with Capital Lease Obligations,
commissions, discounts and other fees and charges incurred in respect of letter
of credit or bankers' acceptance financings, and net payments (if any) pursuant
to Hedging Obligations), to the extent that any such expense was deducted in
computing such Consolidated Net Income, plus (iv) depreciation and amortization
(including amortization of goodwill and other intangibles but excluding
amortization of prepaid cash expenses that were paid in a prior period) and
other non-cash charges (excluding any such non-cash charge to the extent that
it represents an accrual of or reserve for cash charges in any future period or
amortization of a prepaid cash charge that was paid in a prior period) of such
Person and its Subsidiaries for such period to the extent that such
depreciation, amortization and other non-cash charges were deducted in
computing such Consolidated Net Income, minus (v) non-cash items increasing
such Consolidated Net Income for such period, in each case, on a consolidated
basis and determined in accordance with GAAP. Notwithstanding the foregoing,
the provision for taxes based on the income or profits of, and the depreciation
and amortization and other noncash charges of, a Restricted Subsidiary of a
Person shall be added to Consolidated Net Income to compute Consolidated EBITDA
only to the extent (and in the same proportion) that the Net Income of such
Restricted Subsidiary was included in calculating the Consolidated Net Income
of such Person.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Subsidiaries for such
period, on a consolidated basis, determined in accordance with GAAP and reduced
by the amount of Permitted Quarterly Tax Distributions for such period (whether
or not such Permitted Quarterly Tax Distributions have actually been
distributed), as adjusted for any True-up Amount determined for such period;
provided that (i) the Net Income (but not loss) of any Person that is not a
Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Restricted Subsidiary
thereof, (ii) the Net Income of any Restricted Subsidiary shall be excluded to
the extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that Net Income is not at the
date of determination permitted without any prior governmental approval (that
has not been obtained) or, directly or indirectly, by operation of the terms of
its charter or any agreement, instrument, judgment, decree, order, statute,
rule or governmental regulation applicable to that Restricted Subsidiary or its
shareholders, (iii) the Net Income of any Person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition
shall be excluded, and (iv) the cumulative effect of a change in accounting
principles shall be excluded.
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of the Company who (i) was a member of such Board of
Directors on the date of the Indenture immediately after consummation of the
Offering or (ii) was nominated for election or elected to such Board of
Directors with the approval of a majority of the Continuing Directors who were
either members of such Board at the time of such nomination or election or are
successor Continuing Directors appointed by such Continuing Directors (or their
successors).
"Credit Facilities" means, with respect to the Company or the Subsidiary
Guarantors, one or more debt facilities or commercial paper facilities with
banks or other institutional lenders providing for revolving credit loans, term
loans, receivables financing (including through the sale of receivables to such
lenders or to special purpose entities formed to borrow from such lenders
against such receivables) or letters of credit, in each case, as amended,
restated, modified, renewed, refunded, replaced or refinanced in whole or in
part from time to time.
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Indebtedness under Credit Facilities outstanding on the Issue Date shall be
deemed to have been incurred on such date in reliance on the exceptions
provided by clause (i) of the definition of Permitted Debt.
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"Designated Senior Debt" means (i) any Senior Debt outstanding under the
Credit Facilities and (ii) any other Senior Debt permitted under the Indenture
the principal amount of which is $25.0 million or more and that has been
designated by the Company as "Designated Senior Debt."
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable at the option of the holder thereof), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or redeemable at the option of the Holder thereof, in
whole or in part, on or prior to the date that is 91 days after the date on
which the Notes mature; provided, however, that a class of Capital Stock shall
not be Disqualified Stock hereunder solely as the result of any maturity or
redemption that is conditioned upon, and subject to, compliance with the
covenant described above under the caption "-- Certain Covenants -- Restricted
Payments;" and provided further, that Capital Stock issued to any plan for the
benefit of employees of the Company or its subsidiaries or by any such plan to
such employees shall not constitute Disqualified Stock solely because it may be
required to be repurchased by the Company in order to satisfy applicable
statutory or regulatory obligations.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Equity Offering" means an offering of common stock (other than
Disqualified Stock) of the Company, pursuant to an effective registration
statement filed with the Commission in accordance with the Securities Act,
other than an offering pursuant to Form S-8 (or any successor thereto).
"Estimation Period" means the period for which a shareholder who is an
individual is required to estimate for federal income tax purposes his
allocation of taxable income from a calendar year in connection with
determining his estimated federal income tax liability for such period.
"Fixed Charges" means, with respect to any Person for any period, the sum,
without duplication, of (i) the consolidated interest expense of such Person
and its Restricted Subsidiaries for such period, whether paid or accrued
(including, without limitation, amortization of debt issuance costs and
original issue discount, non-cash interest payments, the interest component of
any deferred payment obligations, the interest component of all payments
associated with Capital Lease Obligations, commissions, discounts and other
fees and charges incurred in respect of letter of credit or bankers' acceptance
financings, and net payments (if any) pursuant to Hedging Obligations;
provided, however, that in no event shall any amortization of deferred
financing costs incurred in connection with the Offering be included in Fixed
Charges), (ii) the consolidated interest expense of such Person and its
Restricted Subsidiaries that was capitalized during such period, and (iii) any
interest expense on Indebtedness of another Person that is Guaranteed by such
Person or one of its Restricted Subsidiaries or secured by a Lien on assets of
such Person or one of its Restricted Subsidiaries (whether or not such
Guarantee or Lien is called upon) and (iv) the product of (a) (without
duplication) (1) all dividends paid or accrued in respect of Disqualified Stock
which are not treated as interest for tax purposes for such period and (2) all
cash dividend payments on any series of preferred stock of such Person or any
of its Restricted Subsidiaries, other than dividend payments on Equity
Interests payable solely in Equity Interests (other than Disqualified Stock) of
the Company, times (b) a fraction, the numerator of which is one and the
denominator of which is one minus the then current combined federal, state and
local statutory tax rate of such Person, expressed as a decimal, in each case,
on a consolidated basis and in accordance with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated EBITDA of such Person and its Restricted
Subsidiaries for such period to the Fixed Charges of such Person and its
Restricted Subsidiaries for such period. In the event that the Company or any
of its Restricted Subsidiaries incurs, assumes, Guarantees, repays or redeems
any Indebtedness (other than revolving credit borrowings) or
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issues or redeems preferred stock subsequent to the commencement of the period
for which the Fixed Charge Coverage Ratio is being calculated but prior to the
date on which the event for which the calculation of the Fixed Charge Coverage
Ratio is made (the "Calculation Date"), then the Fixed Charge Coverage Ratio
shall be calculated giving pro forma effect to such incurrence, assumption,
Guarantee, repayment or redemption of Indebtedness, or such issuance or
redemption of preferred stock, as if the same had occurred at the beginning of
the applicable four-quarter reference period. In addition, for purposes of
making the computation referred to above, (i) acquisitions that have been made
by the Company or any of its Restricted Subsidiaries, including through mergers
or consolidations and including any related financing transactions, during the
four-quarter reference period or subsequent to such reference period and on or
prior to the Calculation Date shall be deemed to have occurred on the first day
of the four-quarter reference period and Consolidated EBITDA for such reference
period shall be calculated without giving effect to clause (iii) of the proviso
set forth in the definition of Consolidated Net Income and shall reflect any
pro forma expense and cost reductions attributable to such acquisitions (to the
extent such expense and cost reduction would be permitted by the Commission
under Article 11 of Regulation S-X to be reflected in pro forma financial
statements included in a registration statement filed with the Commission),
(ii) the Consolidated EBITDA attributable to discontinued operations, as
determined in accordance with GAAP, and operations or businesses disposed of
prior to the Calculation Date, shall be excluded and Consolidated EBITDA shall
reflect any pro forma expense or cost reductions relating to such
discontinuance or disposition (to the extent such expense or cost reductions
would be permitted by the Commission to be reflected in pro forma financial
statements included in a registration statement filed with the Commission),
(iii) the Fixed Charges attributable to discontinued operations, as determined
in accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded, but only to the extent that the
obligations giving rise to such Fixed Charges will not be obligations of the
referent Person or any of its Subsidiaries following the Calculation Date and
(iv) to the extent included in Consolidated EBITDA, all items which are either
extraordinary (as determined in accordance with GAAP) or nonrecurring
(including any gain from the sale or disposition of assets outside the ordinary
course of business or from the issuance or sale of any Equity Interests, other
than Disqualified Stock) shall be excluded.
"Foreign Subsidiary" means any Restricted Subsidiary organized or
incorporated in a jurisdiction outside of the United States.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the date of the Indenture provided, however,
that all reports and other financial information provided by the Company to the
Holders, the Trustee and/or the Commission shall be prepared in accordance with
GAAP, as in effect on the date of such report or other financial information.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates, the value of foreign currencies, or the price of raw materials.
"Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of
the purchase price of any property or representing any Hedging Obligations,
except any such balance that constitutes an accrued expense or trade payable,
if and to the extent any of the foregoing indebtedness (other than letters of
credit and Hedging Obligations) would appear as a liability upon a balance
sheet of such Person prepared in accordance with GAAP, as well as all
indebtedness of others secured by a Lien on any asset of such Person (whether
or not such indebtedness is assumed by such
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Person) and, to the extent not otherwise included, the Guarantee by such Person
of any indebtedness of any other Person. The amount of any Indebtedness
outstanding as of any date shall be (i) the accreted value thereof, in the case
of any Indebtedness that does not require current payments of interest, and
(ii) the principal amount thereof in the case of any other Indebtedness.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If the Company or any Restricted Subsidiary of the Company sells or otherwise
disposes of any Equity Interests of any direct or indirect Restricted
Subsidiary of the Company such that, after giving effect to any such sale or
disposition, such Person is no longer a Restricted Subsidiary of the Company,
the Company shall be deemed to have made an Investment on the date of any such
sale or disposition equal to the fair market value of the Equity Interests of
such Restricted Subsidiary not sold or disposed of in an amount determined as
provided in the final paragraph of the covenant described above under the
caption "-- Certain Covenants -- Restricted Payments."
"Issue Date" means the date on which Notes are first issued and
authenticated under the Indenture.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease
in the nature thereof, and any option or other agreement to sell or give a
security interest therein).
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or (b)
the extinguishment of any Indebtedness of such Person or any of its
Subsidiaries and (ii) any extraordinary or nonrecurring gain (but not loss),
together with any related provision for taxes on such extraordinary or
nonrecurring gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by the Company or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof (after
taking into account any available tax credits or deductions and any tax sharing
arrangements), amounts required to be applied to the repayment of Indebtedness
(other than Indebtedness under the Credit Facilities) secured by a Lien on the
asset or assets that were the subject of such Asset Sale and any reserve for
adjustment in respect of the sale price of such asset or assets established in
accordance with GAAP.
"Non-Recourse Debt" means Indebtedness (i) as to which neither the Company
nor any of its Restricted Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), or (b) is directly or indirectly liable (as a Subsidiary
Guarantor or otherwise) and (ii) as to which the lenders have been notified in
writing that they will not have any recourse to the stock or assets of the
Company or any of its Restricted Subsidiaries, including the stock of such
Restricted Subsidiary.
"Obligations" means, with respect to any Indebtedness, any principal,
interest, penalties, fees, indemnifications, reimbursements, damages and other
liabilities payable under the documentation governing any Indebtedness.
"Pari Passu Indebtedness" means Indebtedness that ranks pari passu in right
of payment to the Notes.
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"Paying Agent" means the depository and paying agent designated as such by
the Company in connection with a Change of Control Offer.
"Permitted Business" means the design, manufacture, distribution,
marketing, licensing and sale of framing-related products and supplies and
other interior accessories and furnishing products and related services.
"Permitted Investments" means (a) any Investment in the Company or in a
Subsidiary Guarantor or a Wholly Owned Foreign Subsidiary that is engaged in a
Permitted Business; (b) any Investment in Cash and Cash Equivalents; (c) any
Investment by the Company or any Restricted Subsidiary in a Person, if as a
result of such Investment (i) such Person becomes a Subsidiary Guarantor or a
Wholly Owned Foreign Subsidiary that is engaged in a Permitted Business or (ii)
such Person is merged, consolidated or amalgamated with or into, or transfers
or conveys substantially all of its assets to, or is liquidated into, the
Company or a Subsidiary Guarantor or a Wholly Owned Foreign Subsidiary that is
engaged in a Permitted Business; (d) any Restricted Investment made as a result
of the receipt of non-cash consideration from an Asset Sale that was made
pursuant to and in compliance with the covenant described above under the
caption "-- Certain Covenants -- Asset Sales" or any transaction not
constituting an Asset Sale by reason of the $1.0 million threshold contained in
the definition thereof; (e) any acquisition of assets solely in exchange for
the issuance of Equity Interests (other than Disqualified Stock) of the
Company; (f) Hedging Obligations entered into in the ordinary course of the
Company's or its Restricted Subsidiaries' Businesses and otherwise in
compliance with the Indenture; (g) additional Investments not to exceed $5.0
million at any one time outstanding; and (h) Investments in securities of trade
creditors or customers received in settlement of obligations or pursuant to any
plan of reorganization or similar arrangement upon the bankruptcy or insolvency
of such trade creditors or customers.
"Permitted Junior Securities" means Equity Interests in the Company or debt
securities that are subordinated to all Senior Debt (and any debt securities
issued in exchange for Senior Debt) to substantially the same extent as, or to
a greater extent than, the Notes are subordinated to Senior Debt pursuant to
Article 10 of the Indenture, that have a final maturity date and a weighted
average life to maturity which is the same as or greater than the Notes and
that are not secured by any collateral.
"Permitted Liens" means (i) Liens existing as of the Issue Date to the
extent and in the manner such Liens are in effect on the Issue Date (other than
Liens to be extinguished in connection with the application of the proceeds of
the Offering); (ii) Liens securing Senior Debt and Liens on assets of
Restricted Subsidiaries securing Guarantees of Senior Debt permitted to be
incurred under the Indenture; (iii) Liens securing the Notes and the Subsidiary
Guarantees; (iv) Liens of the Company or a Wholly Owned Restricted Subsidiary
on assets of any Restricted Subsidiary of the Company; (v) Liens securing
Permitted Refinancing Indebtedness which is incurred to refinance any
Indebtedness which has been secured by a Lien permitted under the Indenture and
which has been incurred in accordance with the provisions of the Indenture;
provided, however, that such Liens (A) are not materially less favorable to
Holders and are not materially more favorable to the lienholders with respect
to such Liens than the Liens in respect of the Indebtedness being refinanced
and (B) do not extend to or cover any property or assets of the Company or any
of its Restricted Subsidiaries not securing the Indebtedness so refinanced;
(vi) Liens for taxes, assessments or governmental charges or claims that are
either (A) not delinquent or (B) being contested in good faith by appropriate
proceedings and as to which the Company or its Restricted Subsidiaries shall
have set aside on its books such reserves as may be required pursuant to GAAP;
(vii) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, supplies, materialmen, repairmen and other Liens imposed by law
incurred in the ordinary course of business for sums not yet delinquent for a
period of more than 60 days or being contested in good faith, if such reserve
or other appropriate provision, if any, as shall be required by GAAP shall have
been made in respect thereof; (viii) Liens incurred or deposits made in the
ordinary course of business in connection with workers' compensation,
unemployment insurance and other types of social security or similar
obligations, including any Lien securing letters of credit issued in the
ordinary course of business consistent with past practice in connection
therewith, or to secure the performance of tenders, statutory obligations,
surety and appeal bonds, bids, leases, government contracts, performance and
return-of-money bonds and other similar obligations (exclusive of obligations
for the payment of borrowed money); (ix) judgment Liens not giving rise to an
Event of Default so long as such Lien is adequately bonded and any appropriate
legal proceedings which may have been duly initiated for the review of such
judgment shall not have been finally terminated or the period within which such
proceedings may be initiated shall not have expired; (x) easements,
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rights-of-way, zoning restrictions and other similar charges or encumbrances in
respect of real property not interfering in any material respect with the
ordinary conduct of the business of the Company or any of its Restricted
Subsidiaries; (xi) any interest or title of a lessor under any lease, whether
or not characterized as capital or operating; provided that such Liens do not
extend to any property or assets which is not leased property subject to such
lease; (xii) Liens securing Capital Lease Obligations and purchase money
Indebtedness incurred in accordance with the covenant described under "--
Certain Covenants -- Incurrence of Indebtedness and Issuance of Preferred
Stock;" provided, however, that (A) the Indebtedness shall not exceed the cost
of such property or assets being acquired or constructed and shall not be
secured by any property or assets of the Company or any Restricted Subsidiary
of the Company other than the property or assets of the Company or any
Restricted Subsidiary of the Company other than the property and assets being
acquired or constructed and (B) the Lien securing such Indebtedness shall be
created within 90 days of such acquisition or construction; (xiii) Liens upon
specific items of inventory or other goods and proceeds of any Person securing
such Person's obligations in respect of bankers' acceptances issued or created
for the account of such Person to facilitate the purchase, shipment or storage
of such inventory or other goods; (xiv) Liens securing reimbursement
obligations with respect to letters of credit which encumber documents and
other property relating to such letters of credit and products and proceeds
thereof; (xv) Liens encumbering deposits made to secure obligations arising
from statutory, regulatory, contractual, or warranty requirements of the
Company or any of its Restricted Subsidiaries, including rights of set-off;
(xvi) Liens securing Hedging Obligations which Hedging Obligations relate to
Indebtedness that is otherwise permitted under the Indenture; (xvii) Liens
securing Acquired Debt incurred in accordance with the covenant described under
"-- Certain Covenants -- Incurrence of Indebtedness and Issuance of Preferred
Stock"; provided that (A) such Liens secured such Acquired Debt at the time of
and prior to the incurrence of such Acquired Debt by the Company or a
Restricted Subsidiary of the Company and were not granted in connection with,
or in anticipation of, the incurrence of such Acquired Debt by the Company or a
Restricted Subsidiary of the Company and (B) such Liens do not extend to or
cover any property or assets of the Company or any of its Restricted
Subsidiaries other than the property or assets that secured the Acquired Debt
prior to the time such Indebtedness became Acquired Debt of the Company or a
Restricted Subsidiary of the Company and are not more favorable to the
lienholders than those securing the Acquired Debt prior to the incurrence of
such Acquired Debt by the Company or a Restricted Subsidiary of the Company;
(xviii) leases or subleases granted to others not interfering in any material
respect with the business of the Company or its Restricted Subsidiaries and
(xix) Liens securing Indebtedness of Foreign Subsidiaries incurred in
accordance with the provisions of the covenant entitled "Incurrence of
Indebtedness and Issuance of Preferred Stock," provided that such Liens relate
solely to the assets of the Foreign Subsidiaries that incurred such
Indebtedness.
"Permitted Quarterly Tax Distributions" means quarterly distributions of
Tax Amounts determined on the basis of the estimated taxable income of the
Company for the related Estimation Period, provided however, that (A) prior to
any distributions of Tax Amounts the Company shall deliver an Officers'
Certificate certifying that the Tax Amounts to be distributed were determined
pursuant to the terms of the Indenture and stating to the effect that the
Company qualifies as an S corporation or substantially similar pass-through
entity for federal income tax purposes and (B) at the time of such
distributions, the most recent audited financial statements of the Company
reflect that the Company was treated as an S corporation or substantially
similar pass-through entity for federal income tax purposes for the period
covered by such financial statements.
"Permitted Refinancing Indebtedness" means any Indebtedness of the Company
or any of its Subsidiaries issued in exchange for, or the net proceeds of which
are used to extend, refinance, prepay, retire, renew, replace, defease or refund
Indebtedness of the Company or any of its Subsidiaries (other than such
Indebtedness described in clauses (i), (vi), (vii), (viii), (ix), (xi) and (xii)
of the covenant described above under the caption "-- Certain Covenants --
Incurrence of Indebtedness and Issuance of Preferred Stock"); provided that: (i)
the principal amount (or accreted value, if applicable) of such Permitted
Refinancing Indebtedness does not exceed the principal amount of (or accreted
value, if applicable), plus accrued interest on, the Indebtedness so extended,
refinanced, renewed, prepaid, retired, replaced, defeased or refunded (plus the
amount of reasonable expenses incurred in connection therewith including
premiums paid, if any, to the holders thereof), such principal amount to be
calculated as to Foreign Subsidiaries on an aggregate consolidated basis in the
case of a consolidated refinancing of Indebtedness of Foreign Subsidiaries; (ii)
such Permitted Refinancing Indebtedness has a final maturity date at or later
than the final maturity date of, and has a Weighted Average Life to Maturity
equal to or greater than the Weighted Average Life to Maturity of, the
Indebtedness being extended, refinanced, renewed, prepaid, retired,
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replaced, defeased or refunded; (iii) if the Indebtedness being extended,
refinanced, renewed, prepaid, retired, replaced, defeased or refunded is
subordinated in right of payment to the Notes, such Permitted Refinancing
Indebtedness has a final maturity date later than the final maturity date of,
and is subordinated in right of payment to, the Notes on terms at least as
favorable to the Holders of Notes as those contained in the documentation
governing the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; and (iv) such Indebtedness either is incurred by the
Company or is incurred by the Restricted Subsidiary who is the obligor on (or,
in the case of a consolidated refinancing of the Indebtedness of the Foreign
Subsidiaries, by all of the Foreign Subsidiaries which are obligors on) the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded. In the case of Permitted Refinancing Indebtedness incurred by the
Company under a revolving credit facility or facilities to refinance, refund or
replace Indebtedness of Foreign Subsidiaries, and any successive Permitted
Refinancing Indebtedness incurred with respect thereto, (x) such Permitted
Refinancing Indebtedness shall include all successive readvances, reborrowings
and other Indebtedness thereafter incurred under such facility or facilities up
to the original principal amount of such Permitted Refinancing Indebtedness, and
(y) such Indebtedness being refinanced shall be deemed to have been outstanding
on the Issue Date so long as the aggregate amount thereof at the time of the
refinancing does not exceed the aggregate amount of Indebtedness of Foreign
Subsidiaries outstanding on the Issue Date.
"Person" means any individual, partnership, corporation, limited liability
company, unincorporated organization, trust or joint venture, or a governmental
agency or political subdivision thereof.
"Principals" means Craig A. Ponzio and June R. Ponzio.
"Qualified Proceeds" means any of the following or any combination of the
following: (i) cash, (ii) Cash Equivalents, (iii) long-term assets that are
used or useful in a Permitted Business and (iv) the Capital Stock of any Person
engaged primarily in a Permitted Business if, in connection with the receipt by
the Company or any Restricted Subsidiary of the Company of such Capital Stock,
(a) such Person becomes a Wholly Owned Restricted Subsidiary and a Subsidiary
Guarantor or (b) such Person is merged, consolidated or amalgamated with or
into, or transfers or conveys substantially all of its assets to, or is
liquidated into, the Company or any Wholly Owned Restricted Subsidiary of the
Company that is a Subsidiary Guarantor.
"Quarterly Payment Period" means the period commencing on the first day of
each month in which federal individual tax payments are due and ending on and
including the day of such month on which such payments are due (provided that
payments in respect of estimated state income taxes due in January may instead,
at the option of the Company, be paid during the last five days of the
immediately preceding December).
"Related Party" with respect to any Principal means (A) any controlling
shareholder or a majority (or more) owned Subsidiary of such Principal or, in
the case of an individual, any spouse or immediate family member of such
Principal, or (B) any trust, corporation, partnership or other entity, the
beneficiaries, shareholders, partners, owners or Persons beneficially holding a
majority (or more) controlling interest of which consist of such Principal
and/or such other Persons referred to in the immediately preceding clause (A).
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" means any Subsidiary of the Company other than an
Unrestricted Subsidiary.
"Senior Debt" means (i) all Indebtedness of the Company or any Subsidiary
Guarantor outstanding under Credit Facilities and all Hedging Obligations with
respect thereto, (ii) other Indebtedness of the Company or any of its
Subsidiary Guarantors permitted to be incurred under the terms of the
Indenture, unless the instrument under which such Indebtedness is incurred
expressly provides that it is on a parity with or subordinated in right of
payment to the Notes and (iii) all Obligations with respect to the foregoing.
Notwithstanding anything to the contrary in the foregoing, Senior Debt will not
include (w) any liability for federal, state, local or other taxes owed or
owing by the Company, (x) any Indebtedness of the Company to any of its
Subsidiaries or other Affiliates, (y) any trade payables or (z) that portion of
any Indebtedness that is incurred in violation of the Indenture.
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"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Act, as such Regulation is in effect on the date of the
Indenture.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations
to repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total Voting
Stock thereof is at the time owned or controlled, directly or indirectly, by
such Person or one or more of the other Subsidiaries of that Person (or a
combination thereof) and (ii) any partnership (a) the sole general partner or
the managing general partner of which is such Person or a Subsidiary of such
Person or (b) the only general partners of which are such Person or of one or
more Subsidiaries of such Person (or any combination thereof).
"Subsidiary Guarantors" means, initially, each Subsidiary of the Company
(other than Foreign Subsidiaries and Unrestricted Subsidiaries) on the Issue
Date and thereafter each of the Subsidiaries of the Company that executes a
Subsidiary Guarantee in accordance with the provisions of the Indenture, and
their respective successors and assigns.
"Tax Amounts" with respect to any taxable period shall not exceed an amount
equal to (A) the product of (x) the taxable income of the Company for such
period (or as such amount may be subsequently adjusted based upon a
redetermination agreed upon with applicable tax authorities) as determined by
the Tax CPA and (y) the Tax Percentage, plus (B) the amount of any interest and
penalties assessed in connection with such a redetermination, reduced by (C) to
the extent not previously taken into account, any income tax benefit
attributable to the Company which could be realized (without regard to actual
realization) by its shareholders in the current or any prior taxable year, or
portion thereof, commencing on or after the date of the Indenture (including
any tax losses or tax credits), computed at the applicable Tax Percentage for
the year that such benefit is taken into account for purposes of this
computation.
"Tax CPA" means a nationally recognized certified public accounting firm.
"Tax Percentage" means, for a particular taxable year, the highest
effective marginal combined rate of U.S. federal and state and local income
tax, imposed on an individual taxpayer, as certified by the Tax CPA in a
certificate filed with the Trustee. The rate of state and local income tax to
be taken into account for purposes of determining the Tax Percentage for a
particular taxable year shall be deemed to be the highest state and local
marginal tax rate applicable to any shareholder.
"True-up Amount" means, in respect of a particular taxable year, an amount
determined by the Tax CPA equal to the difference between (i) the aggregate
Permitted Quarterly Tax Distributions actually distributed in respect of such
taxable year and (ii) the actual Tax Amounts for such year. The amount equal to
the excess, if any, of the amount described in clause (i) over the amount
described in clause (ii) above shall be referred to as the "True-up Amount due
to the Company" and the excess, if any, of the amount described in clause (ii)
over the amount described in clause (i) above shall be referred to as the
"True-up Amount due to the shareholders."
"True-up Determination Date" means the date on which the Tax CPA delivers a
statement to the Trustee indicating the True-up Amount.
"Unrestricted Subsidiary" means (i) HBA L.L.C. and HBA-MS Inc. and (ii) any
Subsidiary (other than the Subsidiary Guarantors as of the date of the
Indenture or any successor to any of them) of the Company that is designated by
the board of directors of the Company as an Unrestricted Subsidiary pursuant to
a board resolution, but only to the extent that such Subsidiary: (a) has no
Indebtedness other than Non-Recourse Debt; (b) is not party to any agreement,
contract, arrangement or understanding with the Company or any Restricted
Subsidiary unless the terms of any such agreement, contract, arrangement or
understanding are no less favorable to the Company or
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such Restricted Subsidiary than those that might be obtained at the time from
Persons who are not Affiliates of the Company; (c) is a Person with respect to
which neither the Company nor any of its Restricted Subsidiaries has any direct
or indirect obligation (x) to subscribe for additional Equity Interests or (y)
to maintain or preserve such Person's financial condition or to cause such
Person to achieve any specified levels of operating results; and (d) has not
guaranteed or otherwise directly or indirectly provided credit support for any
Indebtedness of the Company or any of its Restricted Subsidiaries. Any such
designation by the Board of Directors shall be evidenced to the Trustee by
filing with the Trustee a certified copy of the board resolution giving effect
to such designation and an officers' certificate certifying that such
designation complied with the foregoing conditions and was permitted by the
covenant described above under the caption "-- Certain Covenants -- Restricted
Payments." If, at any time, any Unrestricted Subsidiary would fail to meet the
foregoing requirements as an Unrestricted Subsidiary, it shall thereafter cease
to be an Unrestricted Subsidiary for purposes of the Indenture and any
Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted
Subsidiary of the Company as of such date. The Board of Directors of the
Company may at any time designate any Unrestricted Subsidiary to be a
Restricted Subsidiary; provided that such designation shall be deemed to be an
incurrence of Indebtedness and issuance of preferred stock by a Restricted
Subsidiary of the Company of any outstanding Indebtedness or outstanding issue
of preferred stock of such Unrestricted Subsidiary and such designation shall
only be permitted if (i) such Indebtedness and preferred stock is permitted
under the covenant described under the caption "-- Certain Covenants --
Incurrence of Indebtedness and Issuance of Preferred Stock" calculated on a pro
forma basis as if such designation had occurred at the beginning of the four
quarter reference period, (ii) such Subsidiary becomes a Subsidiary Guarantor,
and (iii) no Default or Event of Default would exist following such
designation.
"Voting Stock" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (ii) the then outstanding
principal amount of such Indebtedness.
"Wholly Owned Foreign Subsidiary" of any Person means a Foreign Subsidiary
of such Person all of the outstanding Capital Stock or other ownership
interests of which (other than directors' qualifying shares or shares required
to be owned by foreign nationals by applicable law) shall at the time be owned
by such Person or by one or more Wholly Owned Foreign Subsidiaries of such
Person or by such Person and one or more Wholly Owned Restricted Subsidiaries
of such Person.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares or shares
required to be owned by foreign nationals by applicable law) shall at the time
be owned by such Person or by one or more Wholly Owned Restricted Subsidiaries
of such Person or by such Person and one or more Wholly Owned Restricted
Subsidiaries of such Person.
76
<PAGE> 83
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a general summary of certain United States federal income
tax consequences of the ownership and disposition of the New Notes. This
summary is based on the Internal Revenue Code of 1986, as amended (the "Code"),
regulations, rulings and decisions as in effect on the date of this Prospectus,
all of which are subject to change (possibly with retroactive effect) and to
differing interpretations. This summary deals only with holders that will
acquire their New Notes at original issuance and will hold New Notes as capital
assets, and does not address tax considerations applicable to investors that
may be subject to special tax rules, such as banks, tax-exempt entities,
insurance companies or dealers in securities or currencies, persons that will
hold New Notes as a position in a "straddle" or conversion transaction, or as
part of a "synthetic security" or other integrated financial transaction, or
persons that have a "functional currency" other than the U.S. dollar.
As used herein, the term "United States holder" means a beneficial owner of
a New Note that is a United States person or that otherwise is subject to
United States federal income taxation on a net income basis in respect of the
New Notes because such person is engaged in a trade or business in the United
States and income and gain received in respect of the New Notes is effectively
connected with the conduct of such trade or business. The term "United States
person" means a holder of a New Note who is a citizen or resident alien
individual of the United States, or that is a corporation, partnership or other
entity created or organized in or under the laws of the United States or any
political subdivision thereof, an estate the income of which is subject to
United States federal income taxation regardless of its source, or a trust if:
(i) a U.S. court is able to exercise primary supervision over the trust's
administration and (ii) one or more United States persons have the authority to
control all of the trust's substantial decisions. The term "United States"
means the United States of America (including the States and the District of
Columbia), its possessions, territories and other areas subject to its
jurisdiction.
Investors should consult their own tax advisors in determining the specific
tax consequences to them of holding and disposing of New Notes, including the
application to their particular situation of the United States federal income
tax considerations discussed below, as well as the application of state, local,
foreign and other tax laws.
The exchange of Old Notes for New Notes (the "Exchange") pursuant to the
Exchange Offer will not be a taxable event for U.S. federal income tax
purposes. As a result, no material U.S. federal income tax consequences will
result to United States holders exchanging Old Notes for New Notes. A tendering
holder's tax basis in the New Notes will be the same as such holder's tax basis
in its Old Notes. A tendering holder's holding period for the New Notes
received pursuant to the Exchange Offer will include its holding period for the
Old Notes surrendered therefor.
UNITED STATES HOLDERS
PAYMENTS OF INTEREST
Payments of interest on a Note will be taxable to a United States holder as
ordinary interest income at the time that such payments are accrued or are
received (in accordance with the United States holder's method of tax
accounting).
LIQUIDATED DAMAGES
Any Liquidated Damages (described herein under "Description of the Notes --
Registration Rights; Liquidated Damages") will be taxable to a United States
holder as ordinary income in accordance with such United States holder's method
of tax accounting.
INFORMATION REPORTING AND BACKUP WITHHOLDING
A noncorporate United States holder may be subject to information reporting
and to backup withholding at a rate of 31 percent with respect to payments of
principal and interest made on a Note, or on proceeds of disposition of a Note
before maturity, unless such United States holder provides proof of an
applicable exemption or a correct
77
<PAGE> 84
taxpayer identification number, and otherwise complies with applicable
requirements of the information reporting and backup withholding rules.
Any amounts withheld under the backup withholding rules will be allowed as
a refund or credit against the United States person's United States federal
income tax liability provided the required information is furnished to the
Internal Revenue Service ("IRS").
NON-UNITED STATES HOLDERS
Under current United States federal income tax law: (i) payments of
interest and principal to a holder who is not a United States holder (a
"non-United States holder") will not be subject to withholding of United States
federal income tax, provided that (a) the holder does not actually or
constructively (under the applicable attribution rules of the Code) own 10
percent or more of the total combined voting power of all classes of stock of
the Company entitled to vote, is not a bank receiving interest on the Notes in
the ordinary course of its banking business as described in Section
881(c)(3)(A) of the Code and is not a controlled foreign corporation for
federal income tax purposes related directly or indirectly to the Company
through stock ownership and (b) the beneficial owner provides to the Company or
a paying agent a statement signed under penalties of perjury that includes its
name and address and certifies that it is a non-United States holder in
compliance with applicable requirements or, with respect to payments made after
December 31, 1999, satisfies certain documentary evidence requirements for
establishing that it is a non-United States holder; and (ii) a non-United
States holder will not be subject to United States federal income tax on gain
realized on the disposition of a Note. Notwithstanding the above, a non-United
States holder that is subject to United States federal income taxation on a net
income basis with respect to its income from a Note generally will be subject
to the same rules to which a United States holder is subject with respect to
the accrual of interest on a Note and with respect to gain or loss realized or
recognized on the disposition of a Note. Such a non-United States holder that
is a foreign corporation may also be subject to a branch profits tax at the
rate of 30 percent (or such lower rate as may be specified by an applicable
income tax treaty) on its effectively connected earnings and profits for the
taxable year, subject to various adjustments. For this purpose, interest and
gain received in respect of a Note will be included in the effectively
connected earnings and profits of such non-United States holder if such
interest or gain is effectively connected with the conduct by such holder of a
trade or business in the United States. Moreover, a non-United States holder
who is an individual but who is not otherwise subject to United States federal
income taxation on a net basis with respect to a Note will nonetheless be
subject to a 30 percent withholding tax on any gain (other than that
attributable to accrued interest) realized upon the sale, exchange or
retirement of a Note if such individual is present in the United States for a
period or periods aggregating 183 days or more during the calendar year (or
taxable year if one has been established) in which such disposition occurs, and
either (i) such individual has a "tax home" (as defined in Section 911(d)(3) of
the Code) in the United States (unless such gain is attributable to an office
or other fixed place of business in a foreign country maintained by such
individual and has been subject to a foreign tax of at least 10 percent, or (b)
the gain is attributable to an office or other fixed place of business in the
United States. Special rules might also apply to a non-United States holder
that is a qualified resident of a country with which the United States has an
income tax treaty. A Note held by an individual holder who at the time of death
was a non-resident alien will not be subject to United States federal estate
tax so long as at the time of death such individual did not own actually or
constructively (under the applicable attribution rules of the Code) 10 percent
or more of the total combined voting power of all classes of stock of the
Company entitled to vote and was not subject to United States federal income
taxation on a net income basis with respect to its income from the Note.
INFORMATION REPORTING AND BACKUP WITHHOLDING
United States information reporting requirements and backup withholding tax
will not apply to payments on, or proceeds from the disposition of, a Note held
by a non-United States holder if the beneficial owner certifies its non-United
States status under penalties of perjury (or, with respect to payments made
after December 31, 1999, satisfies certain documentary evidence requirements
for establishing that it is a non-United States holder) or otherwise
establishes an exemption; provided that neither the Company nor its payment
agent has actual knowledge that the person is a United States person or that
the conditions of any other exemption are not in fact satisfied.
78
<PAGE> 85
Any amounts withheld under the backup withholding rules will be allowed as
a refund or credit against the non-United States person's United States federal
income tax liability, provided that the required information is furnished to
the IRS.
On October 7, 1997, the U.S. Treasury Department issued final Treasury
regulations (and subsequently released guidance regarding the effective date of
such Treasury regulations) (the "Treasury Regulations") governing information
reporting and the certification procedures regarding withholding and backup
withholding on certain amounts paid to non-United States persons after December
31, 1999. Such regulations, among other things, may change the certification
procedures relating to the receipt by intermediaries of payments on behalf of a
beneficial owner of a Note. Furthermore, with respect to payments made after
December 31, 1999, for purposes of applying the rules set forth in this and the
two preceding paragraphs to an entity that is treated as fiscally transparent
(e.g., a partnership or certain trusts) for United States federal income
taxation purposes, the beneficial owner means each of the ultimate beneficial
owners of the entity. Prospective investors should consult their tax advisors
regarding the effect, if any, of such new Treasury Regulations on an investment
in the Notes.
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus meeting
the requirements of the Securities Act in connection with any resale of such
New Notes. This Prospectus, as it may be amended or supplemented from time to
time, may be used by a broker-dealer in connection with resales of New Notes
received in exchange for Old Notes where such Old Notes were acquired as a
result of market-making activities or other trading activities. The Company has
agreed that it will make this Prospectus available to any Participating
Broker-Dealer for a period of time not to exceed one year after the date on
which the Exchange Offer is consummated for use in connection with any such
resale. In addition, until such date, all broker-dealers effecting transactions
in the New Notes may be required to deliver a prospectus.
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the New Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at prices
related to such prevailing market prices or negotiated prices. Any such resale
may be made directly to purchasers or to or through brokers or dealers who may
receive compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such New Notes. Any broker-dealer
that resells New Notes that were received by it for its own account pursuant to
the Exchange Offer and any broker or dealer that participates in a distribution
of such New Notes may be deemed to be an "underwriter" within the meaning of
the Securities Act and any profit on any such resale of New Notes and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
Starting on the Expiration Date, the Company will promptly send additional
copies of this Prospectus and any amendment or supplement to this Prospectus to
any broker-dealer that requests such documents in the Letter of Transmittal.
The Company has agreed to pay all expenses incident to the Exchange Offer
(including the expenses of one counsel for the holders of the Old Notes) other
than commissions or concessions of any brokers or dealers and will indemnify
the holders of the Old Notes (including any broker-dealers) against certain
liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
The validity of the New Notes offered hereby will be passed upon for the
Company by Nelson Mullins Riley & Scarborough, L.L.P., Atlanta, Georgia.
79
<PAGE> 86
EXPERTS
The consolidated financial statements included in this Prospectus have been
audited by Arthur Andersen LLP, independent public accountants, as set forth in
their report. In that report, that firm states that with respect to Larson-Juhl
Netherlands B.V. its opinion is based on the report of other independent public
accountants, BDO CampsObers. The financial statements referred to above have
been included herein in reliance upon the authority of those firms as experts in
giving said reports.
80
<PAGE> 87
ALBECCA INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Consolidated Financial Statements:
Report of Independent Public Accountants-- Arthur Andersen LLP....................... F-2
Report of the Auditors-- BDO CampsObers.............................................. F-3
Consolidated Balance Sheets as of August 31, 1997 and August 30, 1998................ F-4
Consolidated Statements of Operations for each of the three years in the period
ended August 30, 1998............................................................ F-5
Consolidated Statements of Shareholders' Equity (Deficit) for each of the three
years in the period ended August 30, 1998........................................ F-6
Consolidated Statements of Cash Flows for each of the three years in the period
ended August 30, 1998............................................................ F-7
Notes to Consolidated Financial Statements........................................... F-8
</TABLE>
F-1
<PAGE> 88
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Albecca Inc.:
We have audited the accompanying consolidated balance sheets of ALBECCA INC. (a
Georgia corporation) and subsidiaries as of August 30, 1998 and August 31, 1997
and the related consolidated statements of operations, shareholders' equity
(deficit), and cash flows for each of the three years in the period ended
August 30, 1998. 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 did not audit the financial
statements of Larson-Juhl Netherlands B.V. and subsidiaries, which statements
reflect total assets of 6% and 5% at August 30, 1998 and August 31, 1997,
respectively, and total revenues of 5%, 6%, and 7% for each of the three years
in the period ended August 30, 1998. Those statements were audited by other
auditors whose report has been furnished to us, and our opinion, insofar as it
relates to the amounts included for that entity, is based solely on the report
of other auditors.
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, based on our audits and the report of other auditors, the
financial statements referred to above present fairly, in all material
respects, the financial position of Albecca Inc. and subsidiaries as of August
30, 1998 and August 31, 1997 and the results of their operations and their cash
flows for each of the three years in the period ended August 30, 1998 in
conformity with generally accepted accounting principles.
Arthur Andersen LLP
Atlanta, Georgia
November 6, 1998
F-2
<PAGE> 89
LARSON-JUHL NETHERLANDS B.V.
REPORT OF THE AUDITORS
To the shareholders of Larson-Juhl Netherlands B.V.:
We have audited the financial statements of Larson-Juhl Netherlands
B.V. at Barneveld, the Netherlands for the three years ended August 30, 1998.
The company's management is responsible for the preparation of these
financial statements. It is our responsibility to form an independent opinion,
based on our audit, on those statements and to report our opinion to you.
We conducted our audit in accordance with auditing standards generally
accepted in the Netherlands. The results of the audit would not have been
materially different had the audit been conducted in accordance with generally
accepted auditing standards in the United States. The standards in the
Netherlands 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
accessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion the financial statements for the period September 1,
1997 up to and including August 30, 1998 and including those for the fiscal
year 1996 (for the period August 28, 1995 up to and including August 25, 1996)
and the fiscal year 1997 (for the period August 26, 1996 up to and including
August 31, 1997) as previously audited by us, give a true and fair view of the
state of the Company's affairs at August 30, 1998 and of the results of its
operations for the three years ended August 30, 1998 and have been properly
prepared in accordance with accounting principles generally accepted in The
Netherlands and comply with the financial reporting requirements included in
Part 9, Book 2 of the Dutch Civil Code.
Arnhem, October 6, 1998
/s/ BDO CampsObers
BDO CampsObers
Registered accountants
F-3
<PAGE> 90
ALBECCA INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
AUGUST 31, AUGUST 30,
1997 1998
---------- ----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ............................................................. $ 5,301 $ 54,884
Accounts receivable, less allowances for doubtful accounts of $5,378 and $5,859, at
August 31, 1997 and August 30, 1998 ............................................. 49,270 50,785
Inventories ........................................................................... 68,209 75,819
Other current assets .................................................................. 4,879 7,024
--------- ---------
Total current assets ......................................................... 127,659 188,512
PROPERTY, PLANT, AND EQUIPMENT, NET ...................................................... 52,675 61,758
OTHER LONG-TERM ASSETS ................................................................... 28,355 55,652
--------- ---------
$ 208,689 $ 305,922
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Current maturities of long-term debt .................................................. $ 28,079 $ 35,205
Accounts payable ...................................................................... 28,296 28,165
Accrued liabilities ................................................................... 27,982 27,992
--------- ---------
Total current liabilities .................................................... 84,357 91,362
--------- ---------
LONG-TERM DEBT, LESS CURRENT MATURITIES (NOTE 4) ......................................... 80,647 227,564
--------- ---------
OTHER LONG-TERM LIABILITIES .............................................................. 6,372 12,640
--------- ---------
COMMITMENTS AND CONTINGENCIES (NOTE 8)
SHAREHOLDERS' EQUITY (DEFICIT)(NOTES 6 AND 12):
Preferred stock, $0.01 par value; no shares authorized and outstanding at August 31,
1997, 50,000,000 shares authorized and no shares issued and outstanding at
August 30, 1998 .................................................................... -- --
Common stock, $0.01 par value; 20,000,000 shares authorized, 17,000,000 shares
issued and outstanding at August 31, 1997 and no shares issued and outstanding at
August 30, 1998 .................................................................... 170 --
Class A common stock, $0.01 par value; no shares authorized and outstanding at
August 31, 1997, 250,000,000 shares authorized, 374,000 shares issued and
outstanding at August 30, 1998 ..................................................... -- 4
Class B common stock, $0.01 par value; no shares authorized and outstanding at
August 31, 1997, 100,000,000 shares authorized, 16,626,000 shares issued and
outstanding at August 30, 1998 ..................................................... -- 166
Additional paid-in capital ............................................................ 582 7,326
Accumulated earnings (deficit) ........................................................ 42,408 (24,029)
Cumulative foreign currency translation adjustment .................................... (5,847) (9,111)
--------- ---------
Total shareholders' equity (deficit) ......................................... 37,313 (25,644)
--------- ---------
$ 208,689 $ 305,922
========= =========
</TABLE>
The accompanying notes are an integral part of these
consolidated balance sheets.
F-4
<PAGE> 91
ALBECCA INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
-----------------------------------------
AUGUST 25, AUGUST 31, AUGUST 30,
1996 1997 1998
--------- -------- ----------
<S> <C> <C> <C>
Net sales .................................................. $300,788 $354,058 $381,137
Cost of sales .............................................. 173,964 200,750 216,081
-------- -------- --------
Gross profit ............................................ 126,824 153,308 165,056
Operating expenses ......................................... 96,595 117,707 130,833
Restructuring charges (Note 13) ............................ -- -- 2,262
-------- -------- --------
Operating income ........................................ 30,229 35,601 31,961
Costs of cancelled initial public equity offering (Note 13) -- -- 1,273
Interest income ............................................ -- -- (116)
Interest expense ........................................... 6,846 9,722 11,949
-------- -------- --------
Income before provision for income taxes and minority
interest .............................................. 23,383 25,879 18,855
Provision for income taxes ................................. 3,679 3,243 4,021
Minority interest .......................................... 300 146 471
-------- -------- --------
Net income ................................................. $ 19,404 $ 22,490 $ 14,363
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-5
<PAGE> 92
ALBECCA INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
CLASS A CLASS B
COMMON STOCK COMMON STOCK COMMON STOCK
------------------------ -------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------------ ------ ------ ------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, AUGUST 27, 1995 ........... 17,000,000 $ 170 -- $ -- -- $ --
Net income ...................... -- -- -- -- -- --
Distributions to shareholders ... -- -- -- -- -- --
Currency translation adjustment.. -- -- -- -- -- --
----------- ----- -------- ---- ----------- ----
BALANCE, AUGUST 25, 1996 ........... 17,000,000 170 -- -- -- --
Capital contributions ........... -- -- -- -- -- --
Net income ...................... -- -- -- -- -- --
Distributions to shareholders ... -- -- -- -- -- --
Currency translation adjustment.. -- -- -- -- -- --
----------- ----- -------- ---- ----------- ----
BALANCE, AUGUST 31, 1997 ........... 17,000,000 170 -- -- -- --
Compensation related to
nonqualified stock options ... -- -- -- -- -- --
Conversion of common stock
for Class A and Class B
common stock ................. (17,000,000) (170) 374,000 4 16,626,000 166
Capital contributions (Note 11).. -- -- -- -- -- --
Net income ...................... -- -- -- -- -- --
Distributions to shareholders ... -- -- -- -- -- --
Currency translation adjustment.. -- -- -- -- -- --
----------- ----- -------- ---- ----------- ----
BALANCE, AUGUST 30, 1998 ..... -- $ -- 374,000 $ 4 16,626,000 $166
=========== ===== ======== ==== =========== ====
<CAPTION>
CUMULATIVE
FOREIGN
ADDITIONAL ACCUMULATED CURRENCY
PAID-IN EARNINGS TRANSLATION
CAPITAL (DEFICIT) ADJUSTMENT TOTAL
----------- ----------- ----------- --------
<S> <C> <C> <C> <C>
BALANCE, AUGUST 27, 1995 ........... $ 566 $ 28,848 $ (478) $ 29,106
Net income ...................... -- 19,404 -- 19,404
Distributions to shareholders ... -- (12,250) -- (12,250)
Currency translation adjustment.. -- -- (917) (917)
------- -------- -------- --------
BALANCE, AUGUST 25, 1996 ........... 566 36,002 (1,395) 35,343
Capital contributions ........... 16 -- -- 16
Net income ...................... -- 22,490 -- 22,490
Distributions to shareholders ... -- (16,084) -- (16,084)
Currency translation adjustment.. -- -- (4,452) (4,452)
------- -------- -------- --------
BALANCE, AUGUST 31, 1997 ........... 582 42,408 (5,847) 37,313
Compensation related to
nonqualified stock options ... 244 -- -- 244
Conversion of common stock
for Class A and Class B
common stock ................. -- -- -- --
Capital contributions (Note 11).. 6,500 -- -- 6,500
Net income ...................... -- 14,363 -- 14,363
Distributions to shareholders ... -- (80,800) -- (80,800)
Currency translation adjustment.. -- -- (3,264) (3,264)
------- -------- -------- --------
BALANCE, AUGUST 30, 1998 ........... $ 7,326 $(24,029) $ (9,111) $(25,644)
======= ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-6
<PAGE> 93
ALBECCA INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
AUGUST 25, AUGUST 31, AUGUST 30,
1996 1997 1998
---------- ---------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income .......................................................... $ 19,404 $ 22,490 $ 14,363
Adjustments to reconcile net income to net cash provided by operating
activities:
Minority interest ................................................ 300 146 471
Depreciation and amortization .................................... 5,302 6,885 8,213
Loss on disposal of property, plant and equipment ................ 199 393 32
Changes in operating assets and liabilities:
Accounts receivable ........................................... (568) 1,227 2,088
Inventories ................................................... 2,138 (1,218) 348
Other current assets .......................................... 1,155 (337) (870)
Accounts payable .............................................. 6,403 (1,909) (2,436)
Accrued liabilities ........................................... (5,703) (2,846) (4,226)
Other ......................................................... 2,010 (2,681) (2,393)
-------- --------- ----------
Net cash provided by operating activities .................. 30,640 22,150 15,590
-------- --------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment .......................... (5,461) (7,746) (8,378)
Acquisitions of businesses .......................................... (34,062) (18,408) (28,065)
Proceeds from sales of property, plant and equipment ................ 658 3,455 509
Changes in other long-term assets ................................... 766 185 1,919
-------- --------- ----------
Net cash used in investing activities ...................... (38,099) (22,514) (34,015)
-------- --------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issue of senior subordinated notes, net of debt
issue costs....................................................... -- -- 193,241
Proceeds from revolving credit facilities ........................... 76,849 68,249 109,861
Repayments of revolving credit facilities ........................... (68,005) (52,951) (134,707)
Proceeds from long-term debt ........................................ 19,706 11,171 15,676
Repayments of long-term debt ........................................ (8,018) (8,897) (42,113)
Capital contribution ................................................ -- 16 244
Repayments of notes payable to shareholders ......................... -- -- (4,000)
Distributions to shareholders ....................................... (12,250) (16,084) (70,300)
-------- --------- ----------
Net cash provided by financing activities .................. 8,282 1,504 67,902
-------- --------- ----------
EFFECT OF EXCHANGE RATE ON CASH ........................................ 164 (202) 106
-------- --------- ----------
NET INCREASE IN CASH ................................................... 987 938 49,583
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD ......................... 3,376 4,363 5,301
-------- --------- ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD ............................... $ 4,363 $ 5,301 $ 54,884
======== ========= ==========
SUPPLEMENTAL INFORMATION:
Interest paid ....................................................... $ 7,144 $ 9,282 $ 10,983
======== ========= ==========
Income taxes paid ................................................... $ 2,378 $ 3,858 $ 3,520
======== ========= ==========
Details of acquisitions (Note 2):
Fair value of assets acquired .................................... $(49,814) $ (35,611) $ (46,995)
Liabilities assumed .............................................. 12,205 17,149 18,029
-------- --------- ----------
Cash paid ........................................................ (37,609) (18,462) (28,966)
Less cash acquired ............................................... 3,547 54 901
-------- --------- ----------
Net cash paid for acquisitions ............................. $(34,062) $ (18,408) $ (28,065)
======== ========= ==========
NON-CASH FINANCING ACTIVITIES:
Issuance of notes payable for shareholder distributions (Note 11) ... $ -- $ -- $ 10,500
======== ========= ==========
Capital contribution of shareholder notes payable (Note 11) ......... $ -- $ -- $ 6,500
======== ========= ==========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-7
<PAGE> 94
ALBECCA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
Albecca Inc. (the "Company," formerly Larson-Juhl Inc.) primarily does
business under the Larson-Juhl name. The Company designs, manufactures and
distributes a complete line of branded custom framing products. The Company
operates in 20 countries, primarily in North America and Europe.
FISCAL PERIOD
The Company ends its fiscal year on the last Sunday in August. The
Company's fiscal years ended August 25, 1996 and August 30, 1998 were 52-week
years. The fiscal year ended August 31, 1997 was a 53-week year.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts
of Albecca Inc. and its subsidiaries. All significant intercompany transactions
are eliminated. Minority interest represents minority shareholders' interest in
certain majority-owned subsidiaries.
USE OF ESTIMATES
The preparation of the consolidated financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from these
estimates.
CASH AND CASH EQUIVALENTS
The Company considers all investments with an original maturity of
three months or less to be cash equivalents.
INVENTORIES
Inventories consist primarily of finished goods and are stated at the
lower of cost or market. Cost is determined by using the last-in, first-out
method for inventories within the United States (approximately 28.9% and 32.2%
of total inventories at August 31, 1997 and August 30, 1998, respectively) and
the first-in, first-out method for inventories within foreign countries.
Additionally, cost includes material, direct and indirect labor and
capitalizable overhead. If the first-in, first-out method of valuing inventories
had been used exclusively, inventories of the Company would have been $3,608,000
and $3,169,000 higher at August 31, 1997 and August 30, 1998, respectively.
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
AUGUST 31, AUGUST 30,
1997 1998
----------- -----------
<S> <C> <C>
Raw materials .......................... $ 11,991 $ 17,019
Work in process ........................ 3,028 2,774
Finished goods ......................... 53,190 56,026
-------- --------
$ 68,209 $ 75,819
======== ========
</TABLE>
F-8
<PAGE> 95
ALBECCA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment are recorded at cost. Depreciation is
provided over the estimated useful lives of the assets (buildings--15-35 years,
machinery and equipment--7-15 years, and furniture and fixtures--3-7 years)
using primarily the straight-line method.
Property, plant, and equipment consist of the following (in thousands):
<TABLE>
<CAPTION>
AUGUST 31, AUGUST 30,
1997 1998
----------- -----------
<S> <C> <C>
Land and buildings $ 29,251 $ 39,743
Machinery and equipment.......................................... 31,433 33,586
Furniture and fixtures........................................... 8,402 9,581
--------- ---------
69,086 82,910
Less accumulated depreciation.................................... 16,411 21,152
--------- ---------
$ 52,675 $ 61,758
========= =========
</TABLE>
Depreciation expense included in the accompanying statements of
operations for the years ended August 25, 1996, August 31, 1997, and August 30,
1998 was approximately $4,744,000, $5,900,000, and $6,762,000, respectively.
OTHER LONG-TERM ASSETS
Goodwill is amortized over 40 years using the straight-line method.
Trademarks, trade names, customer lists, and other intangible assets are stated
at cost, less accumulated amortization, and are amortized over 10 to 15 years
using the straight-line method. Bond issuance costs are amortized over the life
of the senior subordinated notes (10 years) using the effective interest method.
On a periodic basis, the Company reviews long-term assets for
impairment based primarily upon an analysis of undiscounted cash flows.
Other long-term assets consist of the following (in thousands):
<TABLE>
<CAPTION>
AUGUST 31, AUGUST 30,
1997 1998
----------- -----------
<S> <C> <C>
Goodwill................................................... $ 23,584 $ 44,056
Trademarks, trade names and customer lists................. 5,880 6,065
Bond issuance costs........................................ -- 6,759
Other .................................................... 936 2,244
--------- ---------
30,400 59,124
Less accumulated amortization.............................. 2,045 3,472
--------- ---------
$ 28,355 $ 55,652
========= =========
</TABLE>
INCOME TAXES
Albecca Inc. is an S corporation and two of its subsidiaries,
Larson-Juhl U.S. L.L.C., and Larson-Juhl International L.L.C., are limited
liability companies. Each is treated as a pass-through entity under the Internal
Revenue Code. They are not subject to federal and certain state income taxes. As
a result, the related taxable
F-9
<PAGE> 96
ALBECCA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
income is included in the tax returns of the shareholders and members of the
respective companies. The Company makes distributions to shareholders to pay
their income tax obligations as a result of the Company's status as an S
corporation. The provision for income taxes included in the accompanying
financial statements primarily relates to certain state and foreign income
taxes.
FOREIGN CURRENCY TRANSLATION AND EXPOSURE
The asset and liability accounts of foreign subsidiaries have been
translated into U.S. dollars at the rate of exchange in effect at each balance
sheet date. Shareholders' equity is translated at historical rates. All the
accounts of foreign subsidiaries' statements of operations are translated at
average exchange rates during the year. Resulting translation adjustments
arising from these translations are reflected as a separate component in
shareholders' equity. Gains or losses on foreign currency transactions are
included in income as incurred and are not material to the Company's statements
of operations for the years presented. The denomination of foreign subsidiaries'
account balances in their local currency exposes the Company to certain foreign
exchange rate risks. The Company addresses the exposure by financing most
working capital needs in the applicable foreign currencies. Management does not
believe the remaining risks to be significant.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of the Company's long-term debt is estimated based on
current rates offered for debt of similar terms and maturities. Under this
method, the Company's fair value of long-term debt was not significantly
different than the stated value at August 31, 1997 and August 30, 1998.
REVENUE RECOGNITION
The Company recognizes revenue at the time of shipment of products or
the performance of services.
ADVERTISING
All costs associated with advertising and promoting products are
expensed in the period incurred.
RECENT ACCOUNTING PRONOUNCEMENTS
In July 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income" ("SFAS No. 130"), which establishes standards for
reporting and display of "comprehensive income," which is the total of net
income and all other non-owner changes in shareholders' equity, and its
components. The Company is in the process of evaluating SFAS No. 130 and its
impact and will adopt the standard for its 1999 fiscal year.
In July 1997, the FASB issued SFAS No. 131, "Disclosures About Segments
of an Enterprise and Related Information" ("SFAS No. 131"). SFAS No. 131, which
supersedes SFAS Nos. 14, 18, 24, and 30, establishes new standards for segment
reporting, using the "management approach," in which reportable segments are
based on the same criteria on which management desegregates a business for
making operating decisions and assessing performance. The Company is in the
process of evaluating SFAS No. 131 and its impact and will adopt the standard
for its 1999 fiscal year.
RECLASSIFICATIONS
Certain prior period amounts have been reclassified to conform to the
current period presentation.
F-10
<PAGE> 97
ALBECCA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. ACQUISITIONS
The following acquisitions were accounted for under the purchase method
of accounting, applying the provisions of Accounting Principles Board ("APB")
Opinion No. 16, and as a result, the Company has recorded the tangible and
identifiable intangible assets and liabilities of the acquired businesses at
their estimated fair values with the excess of the purchase price over these
amounts being recorded as goodwill which is amortized over 40 years. The
acquisitions were primarily financed with borrowings under the Company's
revolving credit facility and other debt instruments (Note 4). The accompanying
financial statements reflect the operations of the acquired businesses for the
periods after their respective date of acquisition.
During fiscal year 1998, the Company acquired all of the outstanding
stock of a U.S. distributor of custom framing products for approximately
$9,900,000 in cash. Goodwill and other intangible assets of approximately
$8,400,000 were recorded in connection with the acquisition.
Additionally, during fiscal year 1998, the Company acquired all of the
outstanding stock of a distributor of custom framing products for approximately
$8,000,000 in cash. Goodwill and other intangible assets of approximately
$5,500,000 were recorded in connection with the acquisition. The Company also
acquired, during fiscal year 1998, the outstanding stock of four U.S. and
international manufacturers and distributors of custom framing products for
aggregate consideration of approximately $11,100,000 in cash, resulting in
goodwill and other intangible assets of approximately $7,400,000.
During fiscal year 1997, the Company acquired all of the outstanding
stock of an international distributor of custom framing products for
approximately $9,600,000 in cash. Goodwill and intangible assets of
approximately $5,200,000 were recorded in connection with this acquisition. The
Company also acquired, during fiscal year 1997, the outstanding stock of five
international manufacturers and distributors of custom framing products for
aggregate consideration of approximately $8,800,000 in cash, resulting in
goodwill and other intangible assets of approximately $4,600,000.
The following unaudited pro forma summary results of operations are
presented assuming that the acquisitions completed during the years ended August
31, 1997 and August 30, 1998 had been consummated on August 26, 1996. The pro
forma information is presented for informational purposes only and is not
necessarily indicative of the results of operations which would have actually
been obtained. Pro forma adjustments were recorded to include increased
depreciation and amortization of fixed assets and intangible assets and
additional interest expense on financing required for the acquisitions (in
thousands).
<TABLE>
<CAPTION>
YEARS ENDED
----------------------------
AUGUST 31, AUGUST 30,
1997 1998
----------- -----------
<S> <C> <C>
Pro forma net sales........................... $ 409,316 $ 394,856
========= =========
Pro forma net income.......................... $ 20,983 $ 13,268
========= =========
</TABLE>
During fiscal year 1996, the Company acquired all of the outstanding
stock of a French manufacturer and distributor of custom framing products for
approximately $6,600,000 in cash. No goodwill resulted from this acquisition.
During fiscal year 1996, the Company acquired all of the outstanding stock of a
United Kingdom manufacturer and distributor of custom framing products for
approximately $13,300,000 in cash. Goodwill and other intangible assets of
approximately $4,700,000 were recorded in connection with this acquisition. The
Company also acquired, during fiscal year 1996, the outstanding stock or
substantially all of the operating assets and liabilities of eight international
manufacturers and distributors of custom framing products for aggregate
consideration of approximately $17,700,000 in cash, resulting in goodwill and
other intangible assets of
F-11
<PAGE> 98
ALBECCA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
approximately $7,400,000. The acquisitions during fiscal year 1996
individually and in the aggregate did not have a material pro forma impact on
the Company's results of operations.
3. ACCRUED LIABILITIES AND OTHER LONG-TERM LIABILITIES
Accrued liabilities consist of the following (in thousands):
<TABLE>
<CAPTION>
AUGUST 31, AUGUST 30,
1997 1998
------------ -------------
<S> <C> <C>
Accrued operating expenses................................. $ 9,495 $ 6,833
Accrued payroll and benefits............................... 12,606 12,224
Accrued income taxes....................................... 627 1,128
Accrued interest........................................... 532 1,498
Accrued taxes (other than income).......................... 1,257 1,410
Other...................................................... 3,465 4,899
------------ ------------
$ 27,982 $ 27,992
============ ============
</TABLE>
During May 1998, the Company amended certain bonus arrangements with
shareholders and certain members of management whereby the payment of accrued
amounts aggregating $7,028,000 would be deferred and paid in varying increments
through fiscal year 2005. Accruals related to these compensation arrangements of
approximately $2,608,000 and $4,420,000 as of August 30, 1998 are included as a
component of accrued payroll and benefits and other long-term liabilities,
respectively.
F-12
<PAGE> 99
ALBECCA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
AUGUST 31, AUGUST 30,
1997 1998
----------- ----------
<S> <C> <C>
10.75% senior subordinated notes, due August 2008, interest paid
semi-annually in arrears on February 15 and August 15 of each
year commencing February 15, 1999............................... $ -- $ 200,000
Revolving credit facility (the "Credit Facility"), as amended, due
September 1999, payable in U.S. dollars, British Pounds,
Deutsche Marks, and Australian dollars, interest paid
periodically at rates ranging from LIBOR plus .75% to the prime
rate less .50%.................................................. 49,507 --
Demand note payable in French Francs, interest paid quarterly at a
rate of 3.6% to 4.0%, secured by a standby letter of credit..... 3,446 3,562
Mortgage note due September 2017, payable in Deutsche Marks,
principal paid semi-annually in equal installments, interest
paid quarterly at a rate of 5.2%, secured by certain property... -- 3,185
Demand note payable in British Pounds, interest paid quarterly at a
base rate plus 2.0% (9.0% as of August 30, 1998), secured by
certain accounts receivable, inventory and equipment............ 3,374 2,942
Demand note payable in Dutch Guilders, interest paid quarterly at a
base rate plus 1.25% (4.75% as of August 30, 1998) secured by
certain accounts receivable, inventory and property............. 3,521 3,018
Other long-term notes, interest payable at a weighted average rate
of 7.34%, maturing at various dates through 2010, no individual
note exceeding $2,500........................................... 48,878 50,062
------------ ---------
108,726 262,769
Less current maturities............................................. 28,079 35,205
------------ ---------
Long-term portion................................................... $ 80,647 $ 227,564
============ =========
</TABLE>
Certain of the above facilities are subject to certain financial
covenants related to adjusted tangible net worth and cash flow (as defined).
Certain revolving facilities provide the Company with additional borrowings of
up to $17,402,000 as of August 30, 1998. The Company had outstanding letters of
credit totaling $3,867,000 as of August 30, 1998.
On August 11, 1998, the Company issued $200,000,000 of 10.75% senior
subordinated notes (the "Notes"). The Notes are subject to certain redemption
and repurchase terms, as defined. In addition, the Notes contain certain
covenants that limit, among other things, the ability of the Company and its
subsidiaries to (i) pay dividends, redeem capital stock, or make certain other
restricted payments or investments; (ii) incur additional indebtedness or issue
preferred equity interests; (iii) merge, consolidate, or sell all or
substantially all of its assets; (iv) create lines on assets, and; (v) enter
into certain transactions with affiliates.
The net proceeds to the Company from the sale of the Notes (the
"Sale"), after deducting commissions and other expenses of the issuance of
approximately $6,800,000, were used to repay and retire the Credit Facility,
F-13
<PAGE> 100
ALBECCA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
which had an outstanding balance of approximately $82,300,000 at the closing of
the Sale, and to fund the distribution of approximately $60,000,000 of
previously undistributed S corporation earnings to the Company's shareholders.
The remainder of the net proceeds of approximately $50,900,000 will be used for
general corporate purposes, which may include future acquisitions.
The Credit Facility included borrowings denominated in foreign
currencies in the aggregate amount of $26,180,000 as of August 31, 1997. Other
long-term notes included borrowings denominated in foreign currencies in the
aggregate amounts of $35,402,000 and $46,979,000 as of August 31, 1997 and
August 30, 1998.
Aggregate maturities of long-term debt as of August 30, 1998 are as
follows: 1999, $35,205,000; 2000, $6,820,000; 2001, $6,468,000; 2002,
$4,073,000; 2003, $2,637,000; thereafter, $207,566,000.
5. GEOGRAPHIC INFORMATION
The following table presents information regarding the Company's
different geographical regions based on the historical operations of the Company
(in thousands):
<TABLE>
<CAPTION>
YEARS ENDED
-----------------------------------------------
AUGUST 25, AUGUST 31, AUGUST 30,
1996 1997 1998
------------ ------------ -----------
<S> <C> <C> <C>
Revenue:
United States $ 162,429 $ 165,514 $ 185,696
Canada 19,186 19,973 23,498
United Kingdom 25,021 47,806 46,968
France 41,937 37,698 36,267
Other International 52,215 83,067 88,708
----------- ---------- ---------
$ 300,788 $ 354,058 $ 381,137
=========== ========== =========
Operating income:
United States $ 21,022 $ 24,425 $ 25,428
Canada 2,632 2,386 3,929
United Kingdom 880 4,227 1,353
France 2,948 2,391 595
Other International 2,747 2,172 656
----------- ---------- ---------
$ 30,229 $ 35,601 $ 31,961
=========== ========== =========
</TABLE>
F-14
<PAGE> 101
ALBECCA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Assets by geographical region consist of the following (in thousands):
<TABLE>
<CAPTION>
AUGUST 31, AUGUST 30,
1997 1998
----------- -----------
<S> <C> <C>
United States........................................................ $ 37,518 $ 123,458
Canada............................................................... 14,808 11,928
United Kingdom....................................................... 45,166 44,498
France............................................................... 37,686 36,765
Other International.................................................. 73,511 89,273
---------- ----------
$ 208,689 $ 305,922
========== ==========
</TABLE>
6. SHAREHOLDERS' EQUITY (DEFICIT)
STOCK SPLIT
On April 27, 1998, the Company effected a 1.7-for-1 stock split of its
common stock. The accompanying financial statements and notes hereof reflect
this stock split as if it had occurred at the beginning of each period.
STOCK OPTIONS
In July 1990, the Company's sole shareholder granted an option to a key
employee to acquire 170,000 shares of common stock from the shareholder for
$0.76 per share. As a result of this grant, the Company recorded a compensation
charge of $455,000 representing the difference between the exercise price and
the fair value, based on management's estimate at the date of grant. This option
was exercised in January 1995.
In November 1995, the Company's majority shareholder established a
stock performance program whereby a certain key employee could receive annually
an option to acquire 0.2% of the then outstanding shares of Albecca Inc.'s
common stock and 0.2% of member interest in Larson-Juhl International L.L.C.
from the Company's majority shareholder for $300,000, contingent upon the
Company achieving its performance goals, including, sales, profits, asset
management, and future positioning, for each fiscal year through fiscal year
2000. In November 1996, the key employee was awarded the option to acquire
34,000 shares of Albecca Inc.'s common stock and 0.2% of member interest in
Larson-Juhl International L.L.C. from the Company's majority shareholder for
$300,000. No compensation expense was recognized for this award, as the exercise
price, in the opinion of management, exceeded its fair value at the date of
grant. On April 17, 1998, this option was exercised. No award was earned or
granted to the key employee for fiscal year 1997. The Company's majority
shareholder extended the program through fiscal year 2001 under the same terms
and conditions as the original stock performance program. Compensation expense
related to this program will be recorded as a component of expenses.
In November 1996, the Company's majority shareholder granted another
key employee the right to acquire 42,500 shares of Albecca Inc.'s common stock
and .25% of member interest in Larson-Juhl International L.L.C. from the
Company's majority shareholder for $200,000, representing, in management's
opinion, the fair value at the date of grant. On April 19, 1997, this right was
exercised. On December 1, 1997, this key employee acquired 85,000 shares of
Albecca Inc.'s common stock and 0.5% of member interest in Larson-Juhl
International L.L.C. from the Company's majority shareholder for $300,000. The
Company recorded a compensation charge of $100,000, representing the difference
between the exercise price and the fair value, based on management's estimate,
at the date of grant. On January 5, 1998, the Company's majority shareholder
granted this key employee the right to acquire 42,500 shares of Albecca Inc.'s
common stock and .25% of member interest in Larson-Juhl International L.L.C.
from the Company's majority shareholder for $500,000, representing, in
management's opinion, the fair value at the date of grant. On April 17, 1998,
this right was exercised.
F-15
<PAGE> 102
ALBECCA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On May 1, 1998, the Company adopted the Albecca Inc. 1998 Stock Option
Plan (the "Stock Option Plan") for which 2,600,000 shares of common stock were
authorized for issuance in connection with stock options granted under such
plan. The Stock Option Plan provides for nonqualified and incentive stock
options. Additionally, as of May 1, 1998, the provisions of the stock
performance program discussed above were amended whereby any option grant under
such program would be granted by the Company under the Stock Option Plan. On May
1, 1998, the Company granted to a certain key employee, under the stock
performance program, a nonqualified option to acquire 34,062 shares of common
stock at $8.80 per share, expiring May 1, 2003. As a result of this grant, the
Company recorded a compensation charge of $144,000 in the third quarter of
fiscal year 1998 representing the difference between the exercise price and the
fair value, based on management's estimate, at the date of grant.
SFAS No. 123, "Accounting for Stock-Based Compensation," defines a fair
value-based method of accounting for an employee stock option plan or similar
equity instrument and allows an entity to continue to measure compensation cost
for those plans using the method of accounting prescribed by APB Opinion No. 25,
"Accounting for Stock Issued to Employees." Entities electing to remain with the
accounting in APB Opinion No. 25 must make pro forma disclosures of net income
and, if presented, earnings per share, as if the fair value-based method of
accounting defined in the statement had been applied.
The Company has elected to account for its stock-based compensation
plans under APB Opinion No. 25, however, the Company has computed for pro forma
disclosure purposes the value of all options granted during the years ended
August 31, 1997 and August 30, 1998 using the minimum value method as prescribed
by SFAS No. 123 using the following assumptions:
<TABLE>
<S> <C>
Risk-free interest rate...................................................... 6%
Expected dividend yield...................................................... --
Expected lives............................................................... Five years
Expected volatility.......................................................... --
</TABLE>
If the Company had accounted for these grants in accordance with SFAS
No. 123, the Company's reported pro forma net income for the years ended August
31, 1997 and August 30, 1998 would have decreased to the following pro forma
amount (in thousands):
<TABLE>
<CAPTION>
AUGUST 31, AUGUST 30,
1997 1998
---------- ----------
<S> <C> <C>
Net income:
As reported in the financial statements....................... $ 22,490 $ 14,363
========== ==========
Pro forma in accordance with SFAS No. 123..................... $ 22,438 $ 14,158
========== ==========
</TABLE>
7. RELATED PARTY TRANSACTIONS
The Company's principal executive offices are located in a 65,000
square-foot office building located in Norcross, Georgia owned by L-J Properties
Inc., a company owned by the existing shareholders of the Company. The Company's
lease for this facility terminates in August 2001. The total rent payments for
the years ended August 25, 1996, August 31, 1997, and August 30, 1998 were
approximately $642,000, $661,000, and $680,000, respectively.
F-16
<PAGE> 103
ALBECCA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
The Company leases certain operating facilities and equipment under
operating leases. Future minimum annual rentals under noncancelable leases as of
August 30, 1998 are as follows: 1999--$8,145,000; 2000--$6,707,000;
2001--$5,086,000; 2002--$3,282,000; 2003--$1,631,000; and
thereafter--$1,094,000.
The total rent payments for the years ended August 25, 1996, August 31,
1997, and August 30, 1998 were approximately $6,462,000, $7,368,000, and
$8,531,000, respectively.
LITIGATION
The Company is involved in certain litigation arising in the ordinary
course of business. In the opinion of management, the ultimate resolution of
these matters will not have a material adverse effect on the Company's financial
position or results of operations.
9. BENEFIT PLANS
The Company sponsors a defined contribution 401(k) retirement
investment plan (the "Plan") for all of its U.S. employees with more than one
year of service. The Company makes discretionary contributions to the Plan,
including a 50% matching contribution. Under the terms of the Plan, a
participant is 100% vested in the Company's matching and discretionary
contributions after six years of service. Discretionary contributions made by
the Company for the years ended August 25, 1996, August 31, 1997, and August 30,
1998 were approximately $409,000, $419,000, and $408,000, respectively.
10. QUARTERLY DATA (UNAUDITED)
The following table presents quarterly information regarding the
Company's historical operations for each quarter for each of the three years in
the period ended August 30, 1998 (in thousands):
<TABLE>
<CAPTION>
FOR THE QUARTERS ENDED
-------------------------------------------------------------------------------------------------------
NOVEMBER 24, FEBRUARY 23, MAY 25, AUGUST 31, NOVEMBER 30, MARCH 1, MAY 31, AUGUST 30,
1996 1997 1997 1997 1997 1998 1998 1998
----------- ------------ -------- ---------- ------------ -------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales ............... $93,217 $ 92,799 $80,679 $87,363 $102,985 $96,829 $93,055 $ 88,268
Cost of sales ........... 54,275 54,126 44,213 48,136 58,976 54,492 52,349 50,264
------- -------- ------- ------- -------- ------- ------- --------
Gross profit ............ 38,942 38,673 36,466 39,227 44,009 42,337 40,706 38,004
Operating expenses ...... 28,395 29,909 28,601 30,802 33,236 34,756 32,019 30,822
Restructuring charges ... -- -- -- -- -- -- -- 2,262
------- -------- ------- ------- -------- ------- ------- --------
Operating income ........ 10,547 8,764 7,865 8,425 10,773 7,581 8,687 4,920
Costs of cancelled
initial public
equity offering ...... -- -- -- -- -- -- -- 1,273
Interest income ......... -- -- -- -- -- -- -- (116)
Interest expense ........ 2,262 2,466 2,323 2,671 2,343 2,370 2,759 4,477
------- -------- ------- ------- -------- ------- ------- --------
Income (loss) before
provision for
income taxes and
minority interest .... 8,285 6,298 5,542 5,754 8,430 5,211 5,928 (714)
Provision for income
taxes................. 922 735 537 1,049 896 814 865 1,446
Minority interest ....... 57 (23) 69 43 166 192 19 94
------- -------- ------- ------- -------- ------- ------- --------
Net income (loss) ....... $ 7,306 $ 5,586 $ 4,936 $ 4,662 $ 7,368 $ 4,205 $ 5,044 $ (2,254)
======= ======== ======= ======= ======== ======= ======= ========
</TABLE>
11. OTHER
On May 1, 1998, Albecca Inc. made a partial distribution of previously
undistributed S corporation earnings to its shareholders in the form of demand
promissory notes payable to its shareholders in the aggregate amount of
$10,500,000, bearing interest at a rate of 11% per annum (the "S Corp Notes").
On June 10, 1998,
F-17
<PAGE> 104
ALBECCA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Albecca Inc. repaid $4,000,000 of the S Corp Notes, plus accrued interest. On
June 24, 1998, the holders of the S Corp Notes contributed the remaining balance
of the S Corp Notes to Larson-Juhl International L.L.C., a related company under
common ownership (Note 12). Albecca Inc. repaid the remaining balance of
$6,500,000 to Larson-Juhl International L.L.C. on June 24, 1998.
12. COMBINATION AND REORGANIZATION
Through June 25, 1998, Albecca Inc. and Larson-Juhl International
L.L.C. were owned and controlled by the same shareholders. Effective June 26,
1998, the members of Larson-Juhl International L.L.C. contributed their
respective equity interests to Albecca Inc., whereby Larson-Juhl International
L.L.C. became a wholly owned subsidiary of the Company. The combination has been
treated in a manner similar to a pooling-of-interests, and as such, the
accompanying financial statements have been restated to include the results of
Larson-Juhl International L.L.C. for all periods presented.
13. NON-RECURRING ITEMS
RESTRUCTURING CHARGES
In June 1998, the Company initiated a plan to close its plastic
moulding manufacturing facility located in the United Kingdom and recorded a
charge to operations of approximately $1,800,000. This charge included $230,000
related to severance and other termination benefits, $450,000 of lease
termination and exit costs, $790,000 for the write-down of non-current assets to
estimated realizable value and additional reserves for uncollectable accounts
receivable of $330,000. The charge related to the additional reserves for
uncollectable accounts receivable has been included in operating expenses in the
accompanying statement of operations for the year ended August 30, 1998.
During the fourth quarter of 1998, the Company initiated a plan to
close its operations in Greece and recorded a charge to operations of
approximately $700,000. This charge included severance of $80,000, write-off of
goodwill of $330,000, additional reserves for uncollectable accounts receivable
of $178,000 and other exit costs of approximately $110,000. The charge related
to the additional reserves for uncollectable accounts receivable has been
included in operating expenses in the accompanying statement of operations for
the year ended August 30, 1998.
Additionally, during the fourth quarter, the Company initiated a plan
to close two duplicate facilities existing as a result of recent acquisitions
and recorded a charge to operations of approximately $276,000 related to these
closures, primarily consisting of $234,000 of severance and other termination
benefits. The Company expects to incur an additional $300,000 in restructuring
related costs during the first quarter of 1999 for inventory relocation and
facility closing costs.
Revenue and net operating results from the activities that will not be
continued are not significant to the overall operations of the Company.
CANCELLED INITIAL PUBLIC EQUITY OFFERING
In July 1998, the Company cancelled a planned initial public equity
offering of its common stock. As a result of the decision not to complete the
offering, the Company wrote off the associated expenses incurred of
approximately $1,273,000, which are included as "costs of cancelled initial
public equity offering" in the accompanying consolidated statements of
operations.
F-18
<PAGE> 105
ALBECCA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
14. SUBSEQUENT EVENT
On September 11, 1998, the Company made a cash distribution of
$2,700,000, pursuant to the terms and conditions of the Notes, to its
shareholders to pay their estimated income tax obligations as a result of the
Company's status as an S corporation.
15. GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
These condensed consolidating financial statements reflect Albecca Inc.
and Subsidiary Guarantors, which consist of all of the Company's Restricted
Subsidiaries other than the Foreign Subsidiaries, as defined under the Indenture
dated August 11, 1998. These nonguarantor Foreign Subsidiaries are herein
referred to as "Subsidiary Nonguarantors." The subsidiary guarantee of each
Subsidiary Guarantor will be subordinated to the prior payment in full of all
senior debt of such Subsidiary Guarantor. Separate financial statements of the
Subsidiary Guarantors are not presented because the Subsidiary Guarantors are
jointly, severally and unconditionally liable under the guarantee, and the
Company believes the condensed consolidating financial statements presented are
more meaningful in understanding the financial position of the Subsidiary
Guarantors and the separate financial statements are deemed not material to
investors.
F-19
<PAGE> 106
ALBECCA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
15. GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS (CONTINUED)
ALBECCA INC.
CONDENSED CONSOLIDATING BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
August 30, 1998
---------------------------------------------------------------
Albecca Inc. Consolidated
and Subsidiary Subsidiary Elimination Consolidated
Guarantors Nonguarantors Entries Total
-------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents...................... $ 49,206 $ 5,678 $ -- $ 54,884
Accounts receivable, net....................... 17,451 33,334 -- 50,785
Intercompany accounts receivable............... 7,397 539 (7,936) --
Inventories.................................... 28,322 47,497 -- 75,819
Other current assets........................... 2,254 4,770 -- 7,024
--------- --------- --------- --------
Total current assets......................... 104,630 91,818 (7,936) 188,512
PROPERTY, PLANT AND EQUIPMENT, NET................ 9,487 52,271 -- 61,758
OTHER LONG-TERM ASSETS............................ 24,018 31,634 -- 55,652
INVESTMENT IN SUBSIDIARIES........................ 43,453 3,580 (47,033) --
INTERCOMPANY LOANS RECEIVABLE..................... 84,941 1,623 (86,564) --
--------- --------- --------- --------
Total assets $ 266,529 $ 180,926 $(141,533) $305,922
========= ========= ========= ========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Current maturities of long-term debt........... $ 1,519 $ 33,686 $ -- $ 35,205
Accounts payable............................... 6,470 21,695 -- 28,165
Intercompany accounts payable.................. 1,042 6,894 (7,936) --
Accrued liabilities............................ 18,261 9,731 -- 27,992
--------- --------- --------- --------
Total current liabilities.................... 27,292 72,006 (7,936) 91,362
--------- --------- --------- --------
LONG-TERM DEBT, LESS CURRENT MATURITIES........... 203,083 24,481 -- 227,564
--------- --------- --------- --------
INTERCOMPANY LOANS PAYABLE........................ 1,623 84,941 (86,564) --
--------- --------- --------- --------
OTHER LONG-TERM LIABILITIES....................... 4,443 8,197 -- 12,640
--------- --------- --------- --------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY (DEFICIT):
Preferred stock, $0.01 par value;
50,000,000 shares authorized and no
shares issued and outstanding at
August 30, 1998.......................... -- -- -- --
Class A common stock, $0.01 par value;
250,000,000 shares authorized, 374,000
shares issued and outstanding at
August 30, 1998.......................... 4 -- -- 4
Class B common stock, $0.01 par value;
100,000,000 shares authorized,
16,626,000 shares issued and outstanding
at August 30, 1998....................... 166 -- -- 166
Additional paid-in capital................. 46,432 7,927 (47,033) 7,326
Accumulated earnings (deficit)............. (16,710) (7,319) -- (24,029)
Cumulative foreign currency translation
adjustment............................... 196 (9,307) -- (9,111)
--------- --------- --------- --------
Total shareholders' equity (deficit)........ 30,088 (8,699) (47,033) (25,644)
--------- --------- --------- --------
$ 266,529 $ 180,926 $(141,533) $305,922
========= ========= ========= ========
</TABLE>
F-20
<PAGE> 107
ALBECCA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
15. GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS (CONTINUED)
ALBECCA INC.
CONDENSED CONSOLIDATING BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
August 31, 1997
--------------------------------------------------------------
Albecca Inc. Consolidated
and Subsidiary Subsidiary Elimination Consolidated
Guarantors Nonguarantors Entries Total
-------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ...................... $ 532 $ 4,769 $ -- $ 5,301
Accounts receivable, net ....................... 14,904 34,366 -- 49,270
Intercompany accounts receivable ............... 429 1,731 (2,160) --
Inventories .................................... 20,926 47,283 -- 68,209
Other current assets ........................... 1,794 3,085 -- 4,879
-------- --------- --------- ---------
Total current assets ......................... 38,585 91,234 (2,160) 127,659
PROPERTY, PLANT AND EQUIPMENT, NET ................ 7,416 45,259 -- 52,675
OTHER LONG-TERM ASSETS ............................ 418 27,937 -- 28,355
INVESTMENT IN SUBSIDIARIES ........................ 2,587 700 (3,287) --
INTERCOMPANY LOANS RECEIVABLE ..................... 37,063 5,279 (42,342) --
-------- --------- --------- ---------
Total assets ................................. $ 86,069 $ 170,409 $ (47,789) $ 208,689
======== ========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Current maturities of long-term debt ........... $ 1,807 $ 26,272 $ -- $ 28,079
Accounts payable ............................... 3,925 24,371 -- 28,296
Intercompany accounts payable .................. 1,980 180 (2,160) --
Accrued liabilities ............................ 17,156 10,826 -- 27,982
-------- --------- --------- ---------
Total current liabilities .................... 24,868 61,649 (2,160) 84,357
-------- --------- --------- ---------
LONG-TERM DEBT, LESS CURRENT MATURITIES ........... 12,387 68,260 -- 80,647
-------- --------- --------- ---------
INTERCOMPANY LOANS PAYABLE ........................ 5,279 37,063 (42,342) --
-------- --------- --------- ---------
OTHER LONG-TERM LIABILITIES ....................... 30 6,342 -- 6,372
-------- --------- --------- ---------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY (DEFICIT):
Common stock, $0.01 par value; 20,000,000
shares authorized, 17,000,000 shares
issued and outstanding at August 31, 1997 .... 170 -- -- 170
Additional paid-in capital ..................... 2,442 1,427 (3,287) 582
Accumulated earnings ........................... 40,818 1,590 -- 42,408
Cumulative foreign currency translation
adjustment ................................... 75 (5,922) -- (5,847)
-------- --------- --------- ---------
Total shareholders' equity (deficit) ............ 43,505 (2,905) (3,287) 37,313
-------- --------- --------- ---------
$ 86,069 $ 170,409 $ (47,789) $ 208,689
======== ========= ========= =========
</TABLE>
F-21
<PAGE> 108
ALBECCA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
15. GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS (CONTINUED)
ALBECCA INC.
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Year Ended
August 30, 1998
-----------------------------------------------------------------
Albecca Inc. Consolidated
and Subsidiary Subsidiary Elimination Consolidated
Guarantors Nonguarantors Entries Total
-------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net sales .......................................... $193,575 $ 193,218 $ (5,656) $ 381,137
Cost of sales ...................................... 105,203 116,534 (5,656) 216,081
-------- --------- --------- ---------
Gross profit .................................... 88,372 76,684 -- 165,056
Operating expenses ................................. 61,501 69,332 -- 130,833
Restructuring charges .............................. 276 1,986 -- 2,262
-------- --------- --------- ---------
Operating income ................................ 26,595 5,366 -- 31,961
Costs of cancelled initial public equity offering .. 1,273 -- -- 1,273
Interest income .................................... (116) -- -- (116)
Interest expense ................................... 1,278 10,671 -- 11,949
-------- --------- --------- ---------
Income (loss) before provision for income
taxes and minority interest ................... 24,160 (5,305) -- 18,855
Provision for income taxes ......................... 888 3,133 -- 4,021
Minority interest .................................. -- 471 -- 471
Equity in earnings of subsidiaries ................. 16,044 -- (16,044) --
-------- --------- --------- ---------
Net income (loss) .................................. $ 39,316 $ (8,909) $ (16,044) $ 14,363
======== ========= ========= =========
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES ...................................... $ 19,098 $ (3,508) $ -- $ 15,590
-------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment ...... (1,017) (7,361) -- (8,378)
Acquisitions of businesses ...................... (20,989) (7,076) -- (28,065)
Proceeds from sales of property, plant and
equipment ..................................... 91 418 -- 509
Changes in other long-term assets ............... -- 1,919 -- 1,919
-------- --------- --------- ---------
Net cash used in investing activities ......... (21,915) (12,100) -- (34,015)
-------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issue of senior subordinated
notes, net of debt issue costs ................ 193,241 -- -- 193,241
Changes in intercompany loan balances ........... (57,045) 57,045 -- --
Proceeds from revolving credit facilities ....... 88,012 21,849 -- 109,861
Repayments of revolving credit facilities ....... (92,649) (42,058) -- (134,707)
Proceeds from long-term debt .................... 3,418 12,258 -- 15,676
Repayments of long-term debt .................... (9,272) (32,841) -- (42,113)
Capital contribution ............................ 244 -- -- 244
Repayments of notes payable to shareholders ..... (4,000) -- -- (4,000)
Distributions to shareholders ................... (70,300) -- -- (70,300)
-------- --------- --------- ---------
Net cash provided by financing activities ..... 51,649 16,253 -- 67,902
-------- --------- --------- ---------
EFFECT OF EXCHANGE RATE OF CASH .................... (158) 264 -- 106
-------- --------- --------- ---------
NET INCREASE IN CASH ............................... 48,674 909 -- 49,583
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD ..... 532 4,769 -- 5,301
-------- --------- --------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD ........... $ 49,206 $ 5,678 $ -- $ 54,884
======== ========= ========= =========
</TABLE>
F-22
<PAGE> 109
ALBECCA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
15. GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS (CONTINUED)
ALBECCA INC.
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Year Ended
August 31, 1997
-----------------------------------------------------------------
Albecca Inc. Consolidated
and Subsidiary Subsidiary Elimination Consolidated
Guarantors Nonguarantors Entries Total
-------------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Net sales ............................................ $174,635 $ 183,788 $ (4,365) $ 354,058
Cost of sales ........................................ 93,540 111,575 (4,365) 200,750
-------- --------- --------- ---------
Gross profit ...................................... 81,095 72,213 -- 153,308
Operating expenses ................................... 55,963 61,744 -- 117,707
-------- --------- --------- ---------
Operating income .................................. 25,132 10,469 -- 35,601
Interest expense ..................................... 1,351 8,371 -- 9,722
-------- --------- --------- ---------
Income before provision for income taxes and
minority interest ............................... 23,781 2,098 -- 25,879
Provision for income taxes ........................... 843 2,400 -- 3,243
Minority interest .................................... -- 146 -- 146
-------- --------- --------- ---------
Net income (loss) .................................... $ 22,938 $ (448) $ -- $ 22,490
======== ========= ========= =========
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
NET CASH PROVIDED BY OPERATING ACTIVITIES ............ $ 21,759 $ 391 $ -- $ 22,150
-------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment ........ (1,102) (6,644) -- (7,746)
Acquisitions of businesses ........................ -- (18,408) -- (18,408)
Proceeds from sales of property, plant and
equipment ....................................... 1,649 1,806 -- 3,455
Changes in other long-term assets ................. 99 86 -- 185
-------- --------- --------- ---------
Net cash provided by (used in) investing
activities .................................... 646 (23,160) -- (22,514)
-------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Changes in intercompany loan balances ............. (16,587) 16,587 -- --
Proceeds from revolving credit facilities ......... 56,961 11,288 -- 68,249
Repayments of revolving credit facilities ......... (52,401) (550) -- (52,951)
Proceeds from long-term debt ...................... 8,211 2,960 -- 11,171
Repayments of long-term debt ...................... (2,404) (6,493) -- (8,897)
Capital contribution .............................. 16 -- -- 16
Distributions to shareholders ..................... (16,084) -- -- (16,084)
-------- --------- --------- ---------
Net cash (used in) provided by financing
activities .................................... (22,288) 23,792 -- 1,504
-------- --------- --------- ---------
EFFECT OF EXCHANGE RATE OF CASH ...................... (9) (193) -- (202)
-------- --------- --------- ---------
NET INCREASE IN CASH ................................. 108 830 -- 938
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD ....... 424 3,939 -- 4,363
-------- --------- --------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD ............. $ 532 $ 4,769 $ -- $ 5,301
======== ========= ========= =========
</TABLE>
F-23
<PAGE> 110
ALBECCA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
15. GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS (CONTINUED)
ALBECCA INC.
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Year Ended
August 25, 1996
---------------------------------------------------------------
Albecca Inc. Consolidated
and Subsidiary Subsidiary Elimination Consolidated
Guarantors Nonguarantors Entries Total
-------------- ------------- -------------- ------------
<S> <C> <C> <C> <C>
Net sales ............................................ $171,360 $ 133,898 $ (4,470) $ 300,788
Cost of sales ........................................ 96,070 82,364 (4,470) 173,964
-------- --------- --------- ---------
Gross profit ...................................... 75,290 51,534 -- 126,824
Operating expenses ................................... 52,513 44,082 -- 96,595
-------- --------- --------- ---------
Operating income .................................. 22,777 7,452 -- 30,229
Interest expense ..................................... 1,871 4,975 -- 6,846
-------- --------- --------- ---------
Income before provision for income taxes and
minority interest ............................... 20,906 2,477 -- 23,383
Provision for income taxes ........................... 768 2,911 -- 3,679
Minority interest .................................... -- 300 -- 300
-------- --------- --------- ---------
Net income (loss) .................................... $ 20,138 $ (734) $ -- $ 19,404
======== ========= ========= =========
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES ........................................ $ 30,770 $ (130) $ -- $ 30,640
-------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment ........ 23,142 (28,603) -- (5,461)
Acquisitions of businesses ........................ (34,062) -- -- (34,062)
Proceeds from sales of property, plant and
equipment ....................................... 184 474 -- 658
Changes in other long-term assets ................. 13,311 (12,545) -- 766
-------- --------- --------- ---------
Net cash provided by (used in) investing
activities .................................... 2,575 (40,674) -- (38,099)
-------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Changes in intercompany loan balances ............. 1,311 (1,311) -- --
Proceeds from revolving credit facilities ......... 52,026 24,823 -- 76,849
Repayments of revolving credit facilities ......... (68,005) -- -- (68,005)
Proceeds from long-term debt ...................... (4,378) 24,084 -- 19,706
Repayments of long-term debt ...................... (1,897) (6,121) -- (8,018)
Distributions to shareholders ..................... (12,250) -- -- (12,250)
-------- --------- --------- ---------
Net cash provided by (used in) financing
activities .................................... (33,193) 41,475 -- 8,282
-------- --------- --------- ---------
EFFECT OF EXCHANGE RATE OF CASH ...................... (28) 192 -- 164
-------- --------- --------- ---------
NET INCREASE IN CASH ................................. 124 863 -- 987
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD ....... 300 3,076 -- 3,376
-------- --------- --------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD ............. $ 424 $ 3,939 $ -- $ 4,363
======== ========= ========= =========
</TABLE>
F-24
<PAGE> 111
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS AND THE ACCOMPANYING LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE EXCHANGE AGENT. NEITHER THIS PROSPECTUS NOR THE
ACCOMPANYING LETTER OF TRANSMITTAL, OR BOTH TOGETHER, CONSTITUTE AN OFFER TO
SELL OR THE SOLICITATION OF AN OFFER TO BUY SECURITIES IN ANY JURISDICTION TO
ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS, NOR THE ACCOMPANYING LETTER OF TRANSMITTAL, OR
BOTH TOGETHER, NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE
COMPANY SINCE THE DATE HEREOF OR THEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AT ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THEREOF.
--------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary................................................................................... 1
Risk Factors.............................................................................. 7
Use of Proceeds........................................................................... 15
Capitalization............................................................................ 15
Selected Consolidated Financial Data...................................................... 16
Management's Discussion and Analysis of Financial Condition and Results of Operations..... 17
Business.................................................................................. 23
Management................................................................................ 33
Principal Shareholders.................................................................... 36
Certain Relationships and Related Transactions............................................ 36
Description of Certain Indebtedness....................................................... 37
The Exchange Offer........................................................................ 38
Description of the Notes.................................................................. 45
Certain United States Federal Income Tax Considerations................................... 77
Plan of Distribution...................................................................... 79
Legal Matters............................................................................. 79
Experts................................................................................... 80
Index to Consolidated Financial Statements................................................ F-1
</TABLE>
--------------------
UNTIL _________________, 1998 (___ DAYS AFTER THE DATE OF THIS
PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE NEW NOTES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
ALBECCA INC.
OFFER TO EXCHANGE
10 3/4% SENIOR SUBORDINATED NOTES DUE 2008,
WHICH HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED,
FOR ANY AND ALL OUTSTANDING
10 3/4% SENIOR SUBORDINATED NOTES DUE 2008
--------------------
PROSPECTUS
--------------------
_______________, 1998
<PAGE> 112
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Articles of Incorporation eliminate, subject to certain
limited exceptions, the personal liability of a director to the Company or its
shareholders for monetary damage for any breach of duty as a director. There is
no elimination of liability for (i) a breach of duty involving appropriation of
a business opportunity of the Company; (ii) an act or omission which involves
intentional misconduct or a knowing violation of law; (iii) any transaction from
which the director derives an improper personal benefit; or (iv) as to any
payments of a dividend or any other type of distribution that is illegal under
Section 14-2-832 of the Georgia Business Corporation Code (the "Code"). In
addition, if at any time the Code is amended to authorize further elimination or
limitation of the personal liability of a director, then the liability of each
director of the Company shall be eliminated or limited to the fullest extent
permitted by such provisions, as so amended, without further action by the
shareholders, unless the provisions of the Code require such action. The
provision does not limit the right of the Company or its shareholders to seek
injunctive or other equitable relief not involving payments in the nature of
monetary damages.
The Company's bylaws contain certain provisions which provide
indemnification to directors of the Company that is broader than the protection
expressly mandated in Sections 14-2-852 and 14-2-857 of the Code. To the extent
that a director or officer of the Company has been successful, on the merits or
otherwise, in the defense of any action or proceeding brought by reason of the
fact that such person was a director or officer of the Company, Sections
14-2-852 and 14-2-857 of the Code would require the Company to indemnify such
persons against expenses (including attorney's fees) actually and reasonably
incurred in connection therewith. The Code expressly allows the Company to
provide for greater indemnification rights to its officers and directors,
subject to shareholder approval.
The indemnification provisions in the Company's bylaws require the
Company to indemnify and hold harmless any director 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
(including any action or suit by or in the right of the Company) because he or
she is or was a director of the Company, against expenses (including, but not
limited to, attorney's fees and disbursements, court costs and expert witness
fees), and against judgments, fines, penalties, and amounts paid in settlement
incurred by him or her in connection with the action, suit or proceeding.
Indemnification would be disallowed under any circumstances where
indemnification may not be authorized by action of the Board of Directors, the
shareholders or otherwise. The Board of Directors of the Company also has the
authority to extend to officers, employees and agents the same indemnification
rights held by directors, subject to all the accompanying conditions and
obligations. Indemnified persons would also be entitled to have the Company
advance expenses prior to the final disposition of the proceeding. If it is
ultimately determined that they are not entitled to indemnification, however,
such amounts would be repaid. Insofar as indemnification for liability arising
under the Securities Act may be permitted to officers and directors of the
Company pursuant to the foregoing provisions, the Company has been informed 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.
There is no pending litigation or proceeding involving a director,
officer, employee or other agent of the Company as to which indemnification is
being sought, nor is the Company aware of any pending or threatened litigation
that may result in claims for indemnification by any director, officer, employee
or other agent.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits.
<TABLE>
<CAPTION>
NO. DESCRIPTION
- --- -----------
<S> <C> <C>
3.1 -- Amended and Restated Articles of Incorporation of the Company
3.2 -- Amended and Restated Bylaws of the Company
4.1 -- Indenture dated August 11, 1998, among Albecca Inc. and State Street Bank & Trust, as
trustee, relating to the Notes (the "Indenture")
</TABLE>
II-1
<PAGE> 113
<TABLE>
<S> <C> <C>
4.2 -- Form of 10 3/4% Senior Note due 2008 of Albecca Inc. (the "New Notes")(included as Exhibit A
of the Indenture filed as Exhibit 4.1)
4.3 -- Subsidiary Guaranty
4.4 -- Registration Rights Agreement, dated as of August 11, 1998, among Albecca Inc. Donaldson
Lufkin Jenrette Securities Corporation and Morgan Stanley & Co. Incorporated
5.1 -- Opinion of Nelson Mullins Riley & Scarborough, L.L.P.*
10.1 -- Amended and Restated 1998 Stock Option Plan*
10.2 -- Lease Agreement, dated August 8, 1991, by and between L-J Properties Inc. and Larson-Juhl
Inc.
10.3 -- Amendment No. 1 to Lease Agreement dated October 26, 1993, by and between L-J Properties
Inc. and Larson-Juhl Inc.
10.4 -- Form of S Corp Note issued by the Company in favor of its existing shareholders
12.1 -- Computation of Ratio of Earnings to Fixed Charges
21.1 -- Subsidiaries of the Company
23.1 -- Consent of Arthur Andersen LLP
23.2 -- Consent of BDO CampsObers
23.3 -- Consent of Nelson Mullins Riley & Scarborough, L.L.P. (filed as part of Exhibit 5.1)*
24.1 -- Power of Attorney (included in the signature pages to the Registration Statement)
25.1 -- Form T-1 with respect to the eligibility of State Street Bank and Trust Company with respect
to the Indenture
27.1 -- Financial Data Schedule
99.1 -- Form of Letter of Transmittal
99.2 -- Form of Notice of Guaranteed Delivery
99.3 -- Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and other Nominees
99.4 -- Form of Letter to Client
99.5 -- Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9
</TABLE>
- - To be filed by amendment
(b) Financial Statement Schedules.
Schedule II - Valuation and Qualifying Accounts.
ITEM 22. UNDERTAKINGS.
The Company hereby undertakes to provide to the underwriter at the
closing specified in the underwriting agreement, certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Company pursuant to the foregoing provisions, or otherwise, the Company has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Company 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 Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The Company hereby undertakes that:
(1) For purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of
prospectus filed as part of this registration statement in reliance
upon Rule 430A and contained in a form of prospectus filed by the
Company 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 of 1933, each post-effective amendment that contains a
form of prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
II-2
<PAGE> 114
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT HAS
DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF ATLANTA, STATE OF
GEORGIA, ON NOVEMBER 25, 1998.
Albecca Inc.
By: /s/ Craig A. Ponzio
------------------------------------
Name: Craig A. Ponzio
Title: Chairman, President and Chief
Executive Officer
KNOW ALL MEN BY THESE PRESENTS that each of the undersigned officers
and directors of Albecca Inc. (the "Company"), a Georgia corporation, for
himself and not for one another, does hereby constitute and appoint Craig A.
Ponzio, a true and lawful attorney in his name, place and stead, and any and all
capacities, to sign his name to any and all amendments, including post-effective
amendments, to this Registration Statement, and to sign a Registration Statement
pursuant to Section 462(b) of the Securities Act of 1933, and to cause the same
(together with all Exhibits thereto) to be filed with the Securities and
Exchange Commission, granting unto said attorney full power and authority to do
and perform any act and thing necessary and proper to be done in the premises,
as fully to all intents and purposes as the undersigned could do if personally
present, and the undersigned for himself hereby ratifies and confirms all that
said attorney shall lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities listed and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ CRAIG A. PONZIO Chairman of the Board, President, November 25, 1998
- ------------------------------------- Chief Executive Officer and
Craig A. Ponzio Director (Principal Executive Officer)
/s/ JUNE R. PONZIO Vice Chairman of the Board November 25, 1998
- ------------------------------------- and Director
June R. Ponzio
Director
- -------------------------------------
/s/ STEPHEN M. SCHEPPMANN Senior Vice President, Chief November 25, 1998
- ------------------------------------- Financial Officer (Principal
Stephen M. Scheppmann Financial and Accounting Officer)
/s/ WILLIAM P. TRIMARCO President, U.S. Operations November 25, 1998
- -----------------------------------
William P. Trimarco
</TABLE>
II-3
<PAGE> 115
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To Albecca Inc.:
We have audited, in accordance with generally auditing standards, the
consolidated financial statements of ALBECCA INC. (a Georgia corporation)
included in this registration statement and have issued our report thereon dated
November 6, 1998. Our audits were made for the purpose of forming an opinion on
the basic financial statements taken as a whole. Item 16(b) of the Registration
Statement is the responsibility of the Company's management and presented for
purposes of complying with the Securities and Exchange Commission 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 states in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
ARTHUR ANDERSEN LLP
/s/ Arthur Andersen LLP
Atlanta, Georgia
November 6, 1998
<PAGE> 116
SCHEDULE II
ALBECCA
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS AND AT END
OF YEAR EXPENSES DEDUCTIONS* OTHER** OF YEAR
----------- ---------- ---------- ------ ---------
<S> <C> <C> <C> <C> <C>
For the fiscal year ended:
August 25, 1996: Allowance
for doubtful accounts $2,791,000 $2,643,000 $1,825,000 $282,000 $3,891,000
---------- ---------- ---------- -------- ----------
August 31, 1997: Allowance
for doubtful accounts $3,891,000 $4,526,000 $3,149,000 $110,000 $5,378,000
---------- ---------- ---------- -------- ----------
August 30, 1998: Allowance
for doubtful accounts $5,378,000 $3,756,000 $3,444,000 $169,000 $5,859,000
---------- ---------- ---------- -------- ----------
</TABLE>
* Principally charges for which reserves were provided, net of recoveries.
** Acquired through acquisition of businesses.
<PAGE> 117
EXHIBIT INDEX
<TABLE>
<CAPTION>
NO. DESCRIPTION
- --- -----------
<S> <C> <C>
3.1 -- Amended and Restated Articles of Incorporation of the Company
3.2 -- Amended and Restated Bylaws of the Company
4.1 -- Indenture dated August 11, 1998, among Albecca Inc. and State Street Bank & Trust, as
trustee, relating to the Notes (the "Indenture")
4.2 -- Form of 103/4% Senior Note due 2008 of Albecca Inc. (the "New Notes")(included as Exhibit A
of the Indenture filed as Exhibit 4.1)
4.3 -- Subsidiary Guaranty
4.4 -- Registration Rights Agreement, dated as of August 11, 1998, among Albecca Inc. Donaldson
Lufkin Jenrette Securities Corporation and Morgan Stanley & Co. Incorporated
5.1 -- Opinion of Nelson Mullins Riley & Scarborough, L.L.P.*
10.1 -- Amended and Restated 1998 Stock Option Plan*
10.2 -- Lease Agreement, dated August 8, 1991, by and between L-J Properties Inc. and Larson-Juhl
Inc.
10.3 -- Amendment No. 1 to Lease Agreement dated October 26, 1993, by and between L-J Properties
Inc. and Larson-Juhl Inc.
10.4 -- Form of S Corp Note issued by the Company in favor of its existing shareholders
12.1 -- Computation of Ratio of Earnings to Fixed Charges
21.1 -- Subsidiaries of the Company
23.1 -- Consent of Arthur Andersen LLP
23.2 -- Consent of BDO CampsObers
23.3 -- Consent of Nelson Mullins Riley & Scarborough, L.L.P. (filed as part of Exhibit 5.1)*
24.1 -- Power of Attorney (included in the signature pages to the Registration Statement)
25.1 -- Form T-1 with respect to the eligibility of State Street Bank and Trust Company with respect
to the Indenture
27.1 -- Financial Data Schedule
99.1 -- Form of Letter of Transmittal
99.2 -- Form of Notice of Guaranteed Delivery
99.3 -- Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and other Nominees
99.4 -- Form of Letter to Client
99.5 -- Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9
</TABLE>
* To be filed by amendment
<PAGE> 1
EXHIBIT 3.1
ALBECCA INC.
AMENDED AND RESTATED ARTICLES OF
INCORPORATION
I.
The name of the Corporation is ALBECCA INC.
II.
The Corporation is organized pursuant to the provisions of the Georgia
Business Corporation Code (the "Code").
III.
A. The Corporation is authorized to issue an aggregate of 400,000,000
shares of capital stock, par value $0.01 per share, consisting of three
classes: 250,000,000 shares of "Class A Common Stock", 100,000,000 shares of
"Class B Common Stock", and 50,000,000 shares of "Preferred Stock". All or any
part of the shares of the capital stock may be issued by the Corporation from
time to time and for such consideration as may be determined and fixed by the
Board of Directors as provided by law; and when such consideration has been
received by the Corporation, such shares shall be deemed fully paid and
non-assessable.
B. Except to the extent otherwise provided herein, the holders of Class
A Common Stock ("Class A Holders") and the holders of Class B Common Stock
("Class B Holders") shall have the same powers, designations, preferences and
participation rights and privileges. The Class A Holders and the Class B
Holders shall have the following specific powers, designations, preferences,
and relative participation rights and privileges:
(1) Each Class A Holder shall be entitled to one (1) vote per share of
Class A Common Stock standing in his name on the transfer books of the
Corporation, and each Class B Holder shall be entitled to ten (10) votes per
share of Class B Common Stock standing in his name on the transfer books of the
Corporation, with respect to each matter to be voted upon.
(2) The Class A Holders and the Class B Holders shall have the right to
vote, but not as separate classes except to the extent required by law or as
otherwise provided in subsection (3) below, upon all matters submitted to the
shareholders of the Corporation. A quorum shall be present when the majority of
all votes eligible to be cast by the Class A Holders and the Class B Holders
taken as a whole is present in person or by proxy.
<PAGE> 2
(3) (a) In addition to any other vote required by law wherein holders
of the Class A Common Stock and the Class B Holders are entitled to vote as
separate voting groups, the Corporation may not alter or change, by increase,
diminution or otherwise, the relative rights, preferences, privileges,
restrictions, dividend rights, voting power or other powers given to the Class
A Holders or the Class B Holders pursuant to this Article III other than by the
affirmative vote of not less than sixty-six and two thirds percent (66 2/3%) of
all the votes entitled to be voted by the holders of each class of stock to be
adversely affected thereby voting as a separate class. Notwithstanding anything
to the contrary contained anywhere herein, the Corporation may increase the
total number of authorized shares of Class A Common Stock that may be issued by
the Corporation by the affirmative vote of a majority of all the votes entitled
to be cast by the Class A Holders and the Class B Holders voting together as a
single class, and without the approval of the Class A Holders and Class B
Holders voting as separate classes. In the event that the Board of Directors
declares a dividend or other distribution payable in the shares of capital
stock of the Corporation and there are an insufficient number of authorized
shares of Class B Common Stock available to be distributed in accordance with
Section (4)(b) below, then the Class B Holders may vote on an amendment to
these Articles of Incorporation to increase the number of authorized shares of
such class to such number that is sufficient to permit the issuance of the
stock dividend or other distribution, without submitting such matter to a vote
of the Class A Holders.
(b) In the event the Corporation proposes to engage in any business
transaction including a merger, sale of substantially all of its assets, tender
or exchange offer, or other similar business combination, or proposes to adopt
a plan of liquidation, dissolution or reorganization, or entertain any proposal
for acquisition of a substantial equity interest in the Corporation (any such
event or combination of events being herein referred to as a "Proposal") and
the Proposal is to be submitted to a vote of the Corporation's shareholders,
and either (i) the consideration per share proposed to be paid to the holders
of the Class A Common Stock is less than or otherwise different in any respect
from the consideration per share proposed to be paid to the holders of the
Class B Common Stock, or (ii) the respective rights of the Class A Common Stock
is proposed to be diminished or otherwise adversely altered relative to the
respective rights of the Class B Common Stock, then the approval of the
consummation of the Proposal shall also require the affirmative vote of a
majority of the outstanding shares of each of such classes voting as separate
voting groups.
(4) Class A Holders and Class B Holders shall be entitled to receive
such dividends and other distributions in cash, stock or property of the
Corporation as may be declared thereon by the Board of Directors from time to
time out of assets or funds of the Corporation legally available therefor;
provided, however, that:
(a) No dividend may be declared and paid on the Class B Common
Stock unless a dividend of an equal amount per share has been declared and paid
on the Class A Common Stock, and no dividend may be declared and paid on the
Class A Common Stock unless a dividend of an equal amount per share has been
declared and paid on the Class B Common Stock.
(b) In the case of dividends or other distributions payable in
shares of capital stock of the Corporation, including a distribution pursuant
to any stock split or division, which
2
<PAGE> 3
occur after the initial issuance of Class B Common Stock by the Corporation,
only shares of Class A Common Stock shall be distributed with respect to Class
A Common Stock and only shares of Class B Common Stock shall be distributed
with respect to Class B Common Stock. Such a dividend or other distribution
shall be deemed equal for purposes of Article III.B(4)(a) if the number of
shares of Class A Common Stock distributed per share of Class A Common Stock is
equal to the number of shares of Class B Common Stock distributed per share of
Class B Common Stock.
(c) In the case of any combination, reclassification or
recapitalization of the Class A Common Stock, the shares of Class B Common
Stock shall also be combined, reclassified or recapitalized so that the number
of shares of Class B Common Stock outstanding immediately following such
combination, reclassification or recapitalization shall bear the same
relationship to the number of shares of Class B Common Stock outstanding
immediately prior to such combination, reclassification or recapitalization as
the number of shares of Class A Common Stock outstanding immediately following
such combination, reclassification or recapitalization bears to the number of
shares of Class A Common Stock outstanding immediately prior to such
combination, reclassification or recapitalization.
(d) In the case of any combination, reclassification or
recapitalization of the Class B Common Stock, the shares of Class A Common
Stock shall also be combined, reclassified or recapitalized so that the number
of shares of Class A Common Stock outstanding immediately following such
combination, reclassification or recapitalization shall bear the same
relationship to the number of shares of Class A Common Stock outstanding
immediately prior to such combination, reclassification or recapitalization as
the number of shares of Class B Common Stock outstanding immediately following
such combination, reclassification or recapitalization bears to the number of
shares of Class B Common Stock outstanding immediately prior to such
combination, reclassification or recapitalization.
(e) Shares of Class B Common Stock outstanding at any time shall
not be reverse split or combined, whether by reclassification, recapitalization
or otherwise, so as to decrease the number of shares thereof issued and
outstanding unless at the same time the shares of Class A Common Stock are
reverse split or combined so that the number of shares of Class A Common Stock
outstanding immediately following such reclassification or recapitalization
shall bear the same relationship to the number of shares of Class A Common
Stock outstanding immediately prior to such reclassification or
recapitalization as the number of shares of Class B Common Stock outstanding
immediately following such reclassification or recapitalization bears to the
number of shares of Class B Common Stock outstanding immediately prior to such
reclassification or recapitalization.
(f) Shares of Class A Common Stock outstanding at any time shall
not be reverse split or combined, whether by reclassification, recapitalization
or otherwise, so as to decrease the number of shares thereof issued and
outstanding unless at the same time the shares of Class B Common Stock are
reverse split or combined so that the number of shares of Class B Common Stock
outstanding immediately following such reclassification or recapitalization
shall bear the same relationship to the number of shares of Class B Common
Stock outstanding immediately prior to such reclassification or
recapitalization as the number of shares of Class A Common Stock outstanding
immediately following such reclassification or recapitalization bears
3
<PAGE> 4
to the number of shares of Class A Common Stock outstanding immediately prior
to such reclassification or recapitalization.
(5) Any outstanding shares of Class B Common Stock shall be convertible
into fully paid and non-assessable shares of Class A Common Stock at the option
of the holder thereof at any time on a one-share-for-one-share basis. In order
for a shareholder to effect any such conversion, such shareholder must furnish
the Corporation with a written notice of the request for conversion, which
notice shall be addressed to the principal office of the Corporation or to the
Corporation's designated transfer agent, shall state the number of shares of
Class B Common Stock to be converted into Class A Common Stock, shall state the
name of the person(s) in whose name(s) the shares of Class A Common Stock are
to be registered and shall be accompanied by a certificate or certificates
representing such shares, properly endorsed and ready for transfer. A
conversion shall be deemed to be made (and the holder of such shares shall be
deemed to be the holder of record of a equal number of shares of Class A Common
Stock) at the close of business on the date when the Corporation or transfer
agent has received the prescribed written notice and required certificate or
certificates, properly endorsed for transfer. The Corporation hereby reserves
and shall at all times reserve and keep available out of its authorized and
unissued shares of Class A Common Stock, for the purposes of effecting
conversion, such number of duly authorized shares of Class A Common Stock as
shall from time to time be sufficient to effect such a conversion of all
outstanding shares of Class B Common Stock.
C. (1) Except as permitted under Section B(4) above, the Corporation
shall not issue, either from its authorized, unissued shares or from its
treasury, any additional shares of Class B Common Stock after the initial
issuance of shares of Class B Common Stock to Craig A. Ponzio. Subsequent
transfers of such Class B Common Stock and dividends and distributions payable
in Class B Common Stock of the Corporation shall be subject to the rights and
limitations set forth in this Article III. Thereafter, no other person or
entity other than a Permitted Transferee (as hereinafter defined) may hold or
own shares of Class B Common Stock of record or beneficially, and a Class B
Holder may not transfer, and the Corporation shall not register the transfer
of, such shares of Class B Common Stock, whether by sale, assignment, gift,
bequest, appointment or otherwise, except to a Permitted Transferee (as
hereinafter defined). Shares of Class B Common Stock transferred to any party
other than a Permitted Transferee (as hereinafter defined) thereupon shall be
converted into shares of Class A Common Stock as provided by subsection (4) of
this Section C. "Permitted Transferee" shall mean, with respect to each person
from time to time shown as the record and beneficial holder of shares of Class
B Common Stock:
(a) In the case of Craig A. Ponzio or June R. Ponzio (wife of Craig A.
Ponzio):
(i) Craig A. Ponzio, individually or in any capacity in which he is
deemed under law to represent the property of June R. Ponzio upon her death or
disability; or
(ii) June R. Ponzio, individually or in any capacity in which she
is deemed under law to represent the property of Craig A. Ponzio upon his death
or disability; or
4
<PAGE> 5
(iii) Craig A. Ponzio, as the trustee of a trust (including a
voting trust) exclusively for the benefit of one or more of the Permitted
Transferees described in each subclause of this clause (a), or exclusively for
the benefit of one or more "Family Trust Beneficiaries", meaning the parents,
grandparents, brothers, sisters, children, grandchildren, aunts, uncles, and
first cousins of Craig A. Ponzio or June R. Ponzio; or
(iv) June R. Ponzio, as the trustee of a trust (including a
voting trust) exclusively for the benefit of one or more of the Permitted
Transferees described in each subclause of this clause (a), or exclusively for
the benefit of one or more Family Trust Beneficiaries; or
(v) (A) A corporation, if and only if more than 50% of the
outstanding shares of capital stock of such corporation that are entitled to
vote for the election of directors are owned by, (B) a partnership if more than
50% of the partners are, and more than 50% of the beneficial interests in the
partnership are owned by, or (C) a limited liability company, if and only if
more than 50% of the membership interests of such limited liability company are
owned by, a Permitted Transferee determined in accordance with this clause (a),
provided that, if by reason of any change in the ownership of such stock,
partnership interests or membership interests, such corporation, partnership or
limited liability company would no longer qualify as a Permitted Transferee,
all shares of Class B Common Stock then held by such corporation, partnership
or limited liability company shall, without further act be converted into a
like number of shares of Class A Common Stock, and stock certificates formerly
representing such shares of Class B Common Stock shall thereupon and thereafter
be deemed to represent the like number of shares of Class A Common Stock; or
(vi) The estate of Craig A. Ponzio, if June R. Ponzio is the
executrix of the estate or occupies a similar office or position with respect
to the estate; or
(vii) The estate of June R. Ponzio, if Craig A. Ponzio is the
executor of the estate or occupies a similar office or position with respect to
the estate; or
(b) In the case of a Class B Holder which is a partnership, corporation
or limited liability company that acquired record and beneficial ownership of
the shares of Class B Common Stock in question as a Permitted Transferee under
Section 5C(i)(a)(v), any Permitted Transferee of Craig A. Ponzio or June R.
Ponzio determined in accordance with clause (a) above.
(2) Notwithstanding anything to the contrary set forth herein, any
Class B Holder may pledge such Class B Holder's shares of Class B Common Stock
to a pledgee pursuant to a bona fide pledge of such shares as collateral
security for indebtedness due to the pledgee, provided that such shares shall
not be transferred to or registered in the name of the pledgee and shall remain
subject to the provisions of this Section C. In the event of foreclosure or
other similar action by the pledgee, such pledged shares of Class B Common
Stock may only be transferred to a Permitted Transferee of the pledgor or
converted into shares of Class A Common Stock, as the pledgee may elect.
5
<PAGE> 6
(3) For purposes of this Section C each reference to a corporation or
limited liability company shall include any successor entity (corporation or
limited liability company) resulting from merger or consolidation.
(4) Upon any transfer of shares of Class B Common Stock of record or
beneficially to any person or entity other than to a Permitted Transferee, the
shares of Class B Common Stock so transferred shall convert without further
action into an equal number of shares of Class A Common Stock, effective as of
the date on which certificates representing such transferred shares are
presented for transfer on the books of the Corporation, or the date of death of
the Class B Holder (other than in the circumstances noted in subclauses (vi)
and (vii) of clause (a) of subsection C(1) above), as the case may be. The
Corporation may, in connection with preparing or verifying a list of
shareholders entitled to vote at any meeting of shareholders, or as a condition
to the transfer or the registration of shares of Class B Common Stock on the
Corporation's books, require the furnishing of such affidavits or other proof
as it deems necessary to confirm that conversion of any Class B shares to Class
A shares is not required under these Articles prior to such vote, transfer or
registration.
(5) The shares of Class B Common Stock shall be registered only in the
names of Craig A. Ponzio or a Permitted Transferee as the record and beneficial
owner thereof and not in "street" or "nominee" name. For this purpose, a
"beneficial owner" of any shares shall mean a person who or an entity which
possesses the power, either singly or jointly, to direct the voting or
disposition of such shares. The Corporation shall note on the certificates for
shares of Class B Common Stock that there are restrictions on the transfer and
registration imposed by these Articles of Incorporation.
IV.
Pursuant to ss. 14-2-602 of the Code, the Board of Directors may
determine, in whole or in part, the preferences, limitations, and relative
rights of one or more series of any class of shares of the Corporation, and
designate the number of shares within that series, before the issuance of any
shares of that series. Each such series of shares shall be given a
distinguishing designation. All shares of each series must have preferences,
limitations, and relative rights identical with those of other shares of the
same series and, except to the extent otherwise provided in the description of
the series, with those of other series in the same class; provided, however,
that any of the voting powers, preferences, designations, rights,
qualifications, limitations, or restrictions of or on the series of shares, or
the holders thereof, may be dependent upon facts ascertainable outside these
Articles of Incorporation if the manner in which the facts shall operate upon
voting powers, designations, preferences, rights, qualifications, limitations,
or restrictions of or on the shares, or the holders thereof, is clearly and
expressly set forth in the Articles of Incorporation. Before issuing any shares
of a series created under this Section, the Corporation must deliver to the
Secretary of State for filing articles of amendment, which shall be effective
without shareholder action, that set forth:
(1) the name of the Corporation;
6
<PAGE> 7
(2) the text of the amendment determining the terms of the series
of shares;
(3) the date the amendment was adopted; and
(4) a statement that the amendment was duly adopted by the Board of
Directors.
After a series of shares is established, the Board of Directors at any
time and from time to time may increase or decrease the number of shares
contained in a series, but not below the number of shares then issued, by
filing articles of amendment, which are effective without shareholder action,
in the manner provided in O.C.G.A. ss. 14-2-602.
V.
No director of the Corporation shall be personally liable to the
Corporation or its shareholders for monetary damages for breach of the duty of
care or any other duty as a director, except that such liability shall not be
eliminated for:
(i) any appropriation, in violation of the director's duties, of any
business opportunity of the Corporation;
(ii) acts or omissions that involve intentional misconduct or a knowing
violation of law;
(iii) liability under O.C.G.A. ss. 14-2-832 (or any successor provision
or redesignation thereof); and
(iv) any transaction from which the director received an improper
personal benefit.
If at any time the Code shall have been amended to authorize the
further elimination or limitation of the liability of a director, then the
liability of each director of the Corporation shall be eliminated or limited to
the fullest extent permitted by the Code, as so amended, without further action
by the shareholders, unless the provisions of the Code, as amended, require
further action by the shareholders.
Any repeal or modification of the foregoing provisions of this Article
VIII shall not adversely affect the elimination or limitation of liability or
alleged liability pursuant hereto of any director of the Corporation for or
with respect to any alleged act or omission of the director occurring prior to
such repeal or modification.
VI.
In discharging the duties of their respective positions and in
determining what is believed to be in the best interests of the Corporation,
the Board of Directors, committees of the Board of Directors, and individual
directors, in addition to considering the effects of any action on the
7
<PAGE> 8
Corporation or its shareholders, may consider the interests of the employees,
customers, suppliers and creditors of the Corporation and its subsidiaries, the
communities in which offices or other establishments of the Corporation and its
subsidiaries are located, and all other factors such directors consider
pertinent. This provision solely grants discretionary authority to the
directors and shall not be deemed to provide to any other constituency any
right to be considered.
VII.
Any action as to which all Class A Holders and all Class B Holders vote
together as one voting group, required by or permitted under the Code to be
taken at a meeting of the shareholders of the Corporation, may be taken without
a meeting if written consent, setting forth the action so taken, shall be
signed by persons who would be entitled to vote at a meeting those shares
having voting power to cast 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 were present and voted. Notice shall be given within
ten days of the taking of corporate action without a meeting by less than
unanimous written consent to those shareholders on the record date whose shares
were not represented on the written consent. For purposes of written consent by
the shareholders, the record date shall be determined in accordance with the
bylaws. No consent shall be effective as approval of a plan of merger or plan
of consolidation unless the requirements for the effectiveness of such consent
set forth in the Code have been met.
8
<PAGE> 9
ARTICLES OF RESTATEMENT
OF LARSON-JUHL INC.
The undersigned, as Assistant Secretary of Larson-Juhl Inc., a Georgia
corporation (the "Corporation"), does hereby certify pursuant to Section
14-2-1007(d) of the Official Code of Georgia Annotated (the "Code") the
following:
1. The name of the Corporation is Larson-Juhl Inc., and the
accompanying Amended and Restated Articles of Incorporation (the "Amended and
Restated Articles") effect a change of the name of the Corporation to "Albecca
Inc."
2. The Amended and Restated Articles were adopted by the Corporation in
the manner prescribed by the Georgia Business Corporation Code. The Amended and
Restated Articles accurately restate the Articles of Incorporation of the
Corporation and amendments existing immediately prior to the adoption of the
accompanying Amended and Restated Articles and further amend the Corporation's
articles as indicated therein.
3. The shareholders and the sole director of the Corporation approved
and adopted the Amended and Restated Articles on May 20, 1998 in accordance
with the provisions of Code Section 14-2-1003.
4. Immediately prior to the effectiveness of the amendments to be
effected by the Amended and Restated Articles, there were 17,000,000 shares of
Common Stock, par value $.01, outstanding (the "Outstanding Old Common Stock").
Upon the effectiveness of the Amended and Restated Articles, the 16,626,000
shares of Outstanding Old Common Stock held by the shareholder holding
16,626,000 shares of Outstanding Old Common Stock shall be converted into no
shares of Class A Common Stock and 16,626,000 shares of Class B Common Stock,
the 204,000 shares of Outstanding Old Common Stock held by the shareholder
holding 204,000 shares of Outstanding Old Common Stock shall be converted into
204,000 shares of Class A Common Stock and no shares of Class B Common Stock,
and the 170,000 shares of Outstanding Old Common Stock held by the shareholder
holding 170,000 shares of Outstanding Old Common Stock shall be converted into
170,000 shares of Class A Common Stock and no shares of Class B Common Stock,
all as such reclassification is described more fully in resolutions adopted by
the shareholders and the board of directors of the Corporation on May 20, 1998.
IN WITNESS WHEREOF, the undersigned has executed this Certificate as of
May 21, 1998.
/s/ Philip H. Moise
------------------------------------
Philip H. Moise, Assistant Secretary
9
<PAGE> 1
EXHIBIT 3.2
AMENDED AND RESTATED
BYLAWS
OF
ALBECCA INC.
As of May 21, 1998
unless otherwise noted
<PAGE> 2
AMENDED AND RESTATED
BYLAWS
OF
ALBECCA INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE ONE Office............................................................. 1
1.1 Registered Office and Agent............................................ 1
1.2 Principal Office ...................................................... 1
1.3 Other Offices ......................................................... 1
ARTICLE TWO Shareholders' Meetings............................................. 1
2.1 Place of Meetings...................................................... 1
2.2 Annual Meeting ........................................................ 2
2.3 Special Meetings ...................................................... 2
2.4 Notice of Meetings .................................................... 2
2.5 Waiver of Notice ...................................................... 2
2.6 Voting Group; Quorum; Vote Required to Act ............................ 3
2.7 Proxies ............................................................... 3
2.8 Presiding Officer ..................................................... 3
2.9 Adjournments .......................................................... 4
2.10 Conduct of the Meeting ................................................ 4
2.11 Action of Shareholders Without a Meeting .............................. 4
ARTICLE THREE Board of Directors............................................... 4
3.1 General Powers......................................................... 4
3.2 Number, Election and Term of Office ................................... 4
3.3 Removal of Directors .................................................. 5
3.4 Vacancies ............................................................. 5
3.5 Compensation .......................................................... 5
3.6 Committees of the Board of Directors .................................. 5
3.7 Qualification of Directors ............................................ 6
ARTICLE FOUR Meetings of the Board of Directors................................ 6
4.1 Regular Meetings....................................................... 6
4.2 Special Meetings ...................................................... 6
4.3 Place of Meetings ..................................................... 6
4.4 Notice of Meetings .................................................... 6
4.5 Quorum ................................................................ 6
4.6 Vote Required for Action .............................................. 6
4.7 Participation by Conference Telephone ................................. 6
4.8 Action by Directors Without a Meeting ................................. 7
4.9 Adjournments .......................................................... 7
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
4.10 Waiver of Notice ...................................................... 7
ARTICLE FIVE Officers.......................................................... 7
5.1 Officers .............................................................. 7
5.2 Term .................................................................. 8
5.3 Compensation .......................................................... 8
5.4 Removal ............................................................... 8
5.5 Chairman of the Board ................................................. 8
5.6 Vice Chairman of the Board ............................................ 8
5.7 Chief Executive Officer ............................................... 8
5.8 President ............................................................. 9
5.9 Vice Presidents ....................................................... 9
5.10 Secretary ............................................................. 9
5.11 Treasurer ............................................................. 9
ARTICLE SIX Distributions and Dividends........................................ 9
ARTICLE SEVEN Shares .......................................................... 10
7.1 Share Certificates..................................................... 10
7.2 Rights of Corporation with Respect to Registered Owners ............... 10
7.3 Transfers of Shares ................................................... 10
7.4 Duty of Corporation to Register Transfer .............................. 10
7.5 Lost, Stolen, or Destroyed Certificates ............................... 11
7.6 Fixing of Record Date ................................................. 11
7.7 Record Date if None Fixed ............................................. 11
ARTICLE EIGHT Indemnification.................................................. 11
8.1 Indemnification of Directors........................................... 11
8.2 Indemnification of Others ............................................. 12
8.3 Other Organizations ................................................... 12
8.4 Advances .............................................................. 12
8.5 Non-Exclusivity ....................................................... 12
8.6 Insurance ............................................................. 13
8.7 Notice ................................................................ 13
8.8 Security .............................................................. 13
8.9 Amendment ............................................................. 13
8.10 Agreements ............................................................ 13
8.11 Continuing Benefits ................................................... 14
8.12 Successors ............................................................ 14
8.13 Severability .......................................................... 14
8.14 Additional Indemnification ............................................ 14
ARTICLE NINE Miscellaneous..................................................... 14
9.1 Inspection of Books and Records........................................ 14
9.2 Fiscal Year ........................................................... 15
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C>
9.3 Corporate Seal ........................................................ 15
9.4 Annual Statements ..................................................... 15
9.5 Notice ................................................................ 15
ARTICLE TEN Amendments......................................................... 16
ARTICLE ELEVEN Business Combinations With Interested Shareholders ............. 16
ARTICLE TWELVE Fair Price Requirements ........................................ 16
</TABLE>
<PAGE> 5
AMENDED AND RESTATED
BYLAWS
OF
ALBECCA INC.
References in these Bylaws to "Articles of Incorporation" are to the
Articles of Incorporation of Albecca Inc., a Georgia corporation (the
"Corporation"), as amended and restated from time to time.
All of these Bylaws are subject to contrary provisions, if any, of the
Articles of Incorporation (including provisions designating the preferences,
limitations, and relative rights of any class or series of shares), the Georgia
Business Corporation Code (the "Code"), and other applicable law, as in effect
on and after the effective date of these Bylaws. References in these Bylaws to
"Sections" shall refer to sections of the Bylaws, unless otherwise indicated.
ARTICLE ONE
OFFICE
1.1 REGISTERED OFFICE AND AGENT. The Corporation shall maintain a
registered office and shall have a registered agent whose business office is
the same as the registered office.
1.2 PRINCIPAL OFFICE. The principal office of the Corporation shall be
at the place designated in the Corporation's annual registration with the
Georgia Secretary of State.
1.3 OTHER OFFICES. In addition to its registered office and principal
office, the Corporation may have offices at other locations either in or
outside the State of Georgia.
ARTICLE TWO
SHAREHOLDERS' MEETINGS
2.1 PLACE OF MEETINGS. Meetings of the Corporation's shareholders may
be held at any location inside or outside the State of Georgia designated by
the Chairman of the Board, the President or the Chief Executive Officer, or any
other person or persons who properly call the meeting, or if a location is not
designated, at the Corporation's principal office.
<PAGE> 6
2.2 ANNUAL MEETING. The Corporation shall hold an annual meeting of
shareholders, at a time determined by the Chairman of the Board or the Chief
Executive Officer, to elect directors and to transact any business that
properly may come before the meeting. The annual meeting may be combined with
any other meeting of shareholders, whether annual or special.
2.3 SPECIAL MEETINGS. Special meetings of shareholders of one or more
classes or series of the Corporation's shares may be called at any time by the
Chairman of the Board or the Chief Executive Officer, and shall be called by
the Corporation upon the written request (in compliance with applicable
requirements of the Code), of the holders of shares representing two-thirds
(2/3) or more of the votes entitled to be cast on each issue proposed to be
considered at the special meeting. The business that may be transacted at any
special meeting of shareholders shall be limited to that proposed in the notice
of the special meeting given in accordance with Section 2.4 (including related
or incidental matters that may be necessary or appropriate to effectuate the
proposed business.)
2.4 NOTICE OF MEETINGS. In accordance with Section 9.5 and subject to
waiver by a shareholder pursuant to Section 2.5, the Corporation shall give
written notice of the date, time, and place of each annual and special
shareholders' meeting no fewer than 10 days nor more than 60 days before the
meeting date to each shareholder of record entitled to vote at the meeting. The
notice of an annual meeting need not state the purpose of the meeting unless
these Bylaws require otherwise. The notice of a special meeting shall state the
purpose for which the meeting is called. If an annual or special shareholders'
meeting is adjourned to a different date, time or location, the Corporation
shall give shareholders notice of the new date, time or location of the
adjourned meeting, unless a quorum of shareholders was present at the meeting
and information regarding the adjournment was announced before the meeting was
adjourned; provided, however, that if a new record date is or must be fixed in
accordance with Section 7.6, the Corporation must give notice of the adjourned
meeting to all shareholders of record as of the new record date who are
entitled to vote at the adjourned meeting.
2.5 WAIVER OF NOTICE. A shareholder may waive any notice required by
the Code, the Articles of Incorporation or these Bylaws, before or after the
date and time of the matter to which the notice relates, by delivering to the
Corporation (for inclusion in the minutes or filing with the corporate records)
a written waiver of notice signed by the shareholder entitled to the notice. In
addition, a shareholder's attendance at a meeting shall be (a) a waiver of
objection to lack of notice or defective notice of the meeting unless the
shareholder at the beginning of the meeting objects to holding the meeting or
transacting business at the meeting, and (b) a waiver of objection to
consideration of a particular matter at the meeting that is not within the
purpose stated in the meeting notice, unless the shareholder objects to
considering the matter when it is presented. Except as otherwise required by
the Code, neither the purpose of nor the business transacted at the meeting
need be specified in any waiver.
2
<PAGE> 7
2.6 VOTING GROUP; QUORUM; VOTE REQUIRED TO ACT.
(a) Unless otherwise required by the Code or the Articles of
Incorporation, all classes or series of the Corporation's shares entitled to
vote generally on a matter shall for that purpose be considered a single voting
group (a "Voting Group"). If either the Articles of Incorporation or the Code
requires separate voting by two or more Voting Groups on a matter, action on
that matter is taken only when voted upon by each such Voting Group separately.
At all meetings of shareholders, any Voting Group entitled to vote on a matter
may take action on the matter only if a quorum of that Voting Group exists at
the meeting; and if a quorum exists, the Voting Group may take action on the
matter notwithstanding the absence of a quorum of any other Voting Group that
may be entitled to vote separately on the matter. Unless the Articles of
Incorporation, these Bylaws, or the Code provides otherwise, the presence (in
person or by proxy) of shares representing a majority of votes entitled to be
cast on a matter by a Voting Group shall constitute a quorum of that Voting
Group with regard to that matter. Once a share is present at any meeting (other
than solely to object to holding the meeting or transacting business at the
meeting), the share shall be deemed present for quorum purposes for the
remainder of the meeting and for any adjournments of that meeting, unless a new
record date for the adjourned meeting is or must be set pursuant to Section 7.6
of these Bylaws.
(b) Except as provided in Section 3.4, if a quorum exists, action
on a matter by a Voting Group is approved by that Voting Group if the votes
cast within the Voting Group favoring the action exceed the votes cast opposing
the action, unless the Articles of Incorporation, a provision of these Bylaws
that has been adopted pursuant to Section 14-2-1021 of the Code (or any
successor provision), or the Code requires a greater number of affirmative
votes.
2.7 PROXIES. A shareholder entitled to vote on a matter may vote in
person, or by proxy pursuant to an appointment executed in writing by the
shareholder or by his or her attorney-in-fact. An appointment of a proxy shall
be valid for 11 months from the date of its execution, unless a longer or
shorter period is expressly stated in the proxy.
2.8 PRESIDING OFFICER. Except as otherwise provided in this Section
2.8, the Chairman of the Board, and in his or her absence or disability the
Vice Chairman of the Board, and in his or her absence or disability the Chief
Executive Officer, shall preside at every shareholders' meeting (and any
adjournment thereof) as its chairman, if either of them is present and willing
to serve. If neither the Chairman of the Board, the Vice Chairman of the Board,
nor the Chief Executive Officer is present and willing to serve as chairman of
the meeting, and if the Chairman of the Board or the Vice Chairman of the Board
has not designated another person who is present and willing to serve, then a
majority of the Corporation's directors present at the meeting shall be
entitled to designate a person to serve as chairman. If no director of the
Corporation is present at the meeting or if a majority of the directors who are
present cannot be established, then a chairman of the meeting shall be selected
by a majority vote of (a) the shares present at the meeting that would be
entitled to vote in an election of directors, or (b) if no such shares are
present at the meeting, then the
3
<PAGE> 8
shares present at the meeting comprising the Voting Group with the largest
number of shares present at the meeting and entitled to vote on a matter
properly proposed to be considered at the meeting. The chairman of the meeting
may designate other persons to assist with the meeting.
2.9 ADJOURNMENTS. At any meeting of shareholders (including an
adjourned meeting), a majority of shares of any Voting Group present and
entitled to vote at the meeting (whether or not those shares constitute a
quorum) may adjourn the meeting, but only with respect to that Voting Group, to
reconvene at a specific time and place. If more than one Voting Group is
present and entitled to vote on a matter at the meeting, then the meeting may
be continued with respect to any such Voting Group that does not vote to
adjourn as provided above, and such Voting Group may proceed to vote on any
matter to which it is otherwise entitled to do so; provided, however, that if
(a) more than one Voting Group is required to take action on a matter at the
meeting and (b) any one of those Voting Group votes to adjourn the meeting (in
accordance with the preceding sentence), then the action shall not be deemed to
have been taken until the requisite vote of any adjourned Voting Group is
obtained at its reconvened meeting. The only business that may be transacted at
any reconvened meeting is business that could have been transacted at the
meeting that was adjourned, unless further notice of the adjourned meeting has
been given in compliance with the requirements for a special meeting that
specifies the additional purpose or purposes for which the meeting is called.
Nothing contained in this Section 2.10 shall be deemed or otherwise construed
to limit any lawful authority of the chairman of a meeting to adjourn the
meeting.
2.10 CONDUCT OF THE MEETING. At any meeting of shareholders, the
chairman of the meeting shall be entitled to establish the rules of order
governing the conduct of business at the meeting.
2.11 ACTION OF SHAREHOLDERS WITHOUT A MEETING. Action required or
permitted to be taken at a meeting of shareholders may be taken without a
meeting in accordance with Article VII of the Corporation's Articles of
Incorporation.
ARTICLE THREE
BOARD OF DIRECTORS
3.1 GENERAL POWERS. All corporate powers shall be exercised by or
under the authority of, and the business and affairs of the Corporation shall
be managed by, the Board of Directors, subject to any limitation set forth in
the Articles of Incorporation, in bylaws approved by the shareholders, or in
agreements among all the shareholders that are otherwise lawful.
3.2 NUMBER, ELECTION AND TERM OF OFFICE. The number of directors of
the Corporation shall be fixed by resolution of the Board of Directors or of
the shareholders from time to time; provided, however, that no decrease in the
number of directors shall have the
4
<PAGE> 9
effect of shortening the term of an incumbent director. Except as provided
elsewhere in this Section 3.2 and in Section 3.4, the directors shall be
elected at each annual meeting of shareholders, or at a special meeting of
shareholders called for purposes that include the election of directors, by a
plurality of the votes cast by the shares entitled to vote and present at the
meeting. Except in case of death, resignation, disqualification or removal, the
term of each director shall expire at the next succeeding annual meeting of
shareholders. Despite the expiration of a director's term, he or she shall
continue to serve until his or her successor has been elected and has
qualified, unless the Board of Directors or the shareholders have resolved that
there will be no successor to such director.
3.3 REMOVAL OF DIRECTORS. The entire Board of Directors or any
individual director may be removed, with or without cause, by the shareholders,
provided that directors elected by a particular Voting Group, if any, may be
removed only by the shareholders in that Voting Group. Removal action may be
taken only at a shareholders' meeting for which notice of the removal action
has been given. A removed director's successor, if any, may be elected at the
same meeting to serve the unexpired term.
3.4 VACANCIES. A vacancy occurring in the Board of Directors may be
filled for the unexpired term, unless the shareholders have elected a
successor, by the affirmative vote of a majority of the remaining directors,
whether or not the remaining directors constitute a quorum; provided, however,
that if the vacant office was held by a director elected by a particular Voting
Group, only the holders of shares of that Voting Group or the remaining
directors elected by that Voting Group shall be entitled to fill the vacancy;
provided further, however, that if the vacant office was held by a director
elected by a particular Voting Group and there is no remaining director elected
by that Voting Group, the other remaining directors or director (elected by
another Voting Group or Groups) may fill the vacancy during an interim period
before the shareholders of the vacated director's or directors' Voting Group
act to fill the vacancy. A vacancy or vacancies in the Board of Directors may
result from the death, resignation, disqualification, or removal of any
director, or from an increase in the number of directors.
3.5 COMPENSATION. Directors may receive such compensation for their
services as directors as may be fixed by the Board of Directors from time to
time. A director may also serve the Corporation in one or more capacities other
than that of director and receive compensation for services rendered in those
other capacities.
3.6 COMMITTEES OF THE BOARD OF DIRECTORS. The Board of Directors may
designate from among its members an executive committee or one or more other
standing or ad hoc committees, each consisting of one or more directors, who
shall serve at the pleasure of the Board of Directors. Subject to any
limitations imposed by the Code, each committee shall have the authority set
forth in the resolution establishing the committee or in any other resolution
of the Board of Directors specifying, enlarging or limiting the authority of
the committee.
5
<PAGE> 10
3.7 QUALIFICATION OF DIRECTORS. No person elected to serve as a
director of the Corporation shall assume office and begin serving unless and
until duly qualified to serve, as determined by reference to the Code, the
Articles of Incorporation, and any further eligibility requirements established
in these Bylaws.
ARTICLE FOUR
MEETINGS OF THE BOARD OF DIRECTORS
4.1 REGULAR MEETINGS. A regular meeting of the Board of Directors
shall be held in conjunction with each annual meeting of shareholders. In
addition, the Board of Directors may, by prior resolution, hold regular
meetings at other times.
4.2 SPECIAL MEETINGS. Special meetings of the Board of Directors may
be called by or at the request of the Chairman of the Board or the Chief
Executive Officer.
4.3 PLACE OF MEETINGS. Directors may hold their meetings at any place
in or outside the State of Georgia that the Chairman of the Board or the Chief
Executive Officer may establish from time to time.
4.4 NOTICE OF MEETINGS. Directors need not be provided with notice of
any regular meeting of the Board of Directors. Unless waived in accordance with
Section 4.10, the Corporation shall give at least two days' notice to each
director of the date, time and place of each special meeting. Notice of a
meeting shall be deemed to have been given to any director in attendance at any
prior meeting at which the date, time and place of the subsequent meeting was
announced.
4.5 QUORUM. At meetings of the Board of Directors, the majority of the
directors then in office shall constitute a quorum for the transaction of
business.
4.6 VOTE REQUIRED FOR ACTION. If a quorum is present when a vote is
taken, the vote of a majority of the directors present at the time of the vote
will be the act of the Board of Directors, unless the vote of a greater number
is required by the Code, the Articles of Incorporation or these Bylaws. A
director who is present at a meeting of the Board of Directors when corporate
action is taken is deemed to have assented to the action taken unless (a) he or
she objects at the beginning of the meeting (or promptly upon his or her
arrival) to holding the meeting or transacting business at it; (b) his or her
dissent or abstention from the action taken is entered in the minutes of the
meeting; or (c) he or she delivers written notice of dissent or abstention to
the presiding officer of the meeting before its adjournment or to the
Corporation immediately after adjournment of the meeting. The right of dissent
or abstention is not available to a director who votes in favor of the action
taken.
4.7 PARTICIPATION BY CONFERENCE TELEPHONE. Members of the Board of
Directors may participate in a meeting of the Board by means of conference
telephone or similar
6
<PAGE> 11
communications equipment through which all persons participating may hear and
speak to each other. Participation in a meeting pursuant to this Section 4.7
shall constitute presence in person at the meeting.
4.8 ACTION BY DIRECTORS WITHOUT A MEETING. Any action required or
permitted to be taken at any meeting of the Board of Directors may be taken
without a meeting if a written consent, describing the action taken, is signed
by each director and delivered to the Corporation for inclusion in the minutes
or filing with the corporate records. The consent may be executed in
counterparts, and shall have the same force and effect as a unanimous vote of
the Board of Directors at a duly convened meeting.
4.9 ADJOURNMENTS. A meeting of the Board of Directors, whether or not
a quorum is present, may be adjourned by a majority of the directors present to
reconvene at a specific time and place. It shall not be necessary to give
notice to the directors of the reconvened meeting or of the business to be
transacted, other than by announcement at the meeting that was adjourned,
unless a quorum was not present at the meeting that was adjourned, in which
case notice shall be given to directors in the same manner as for a special
meeting. At any such reconvened meeting at which a quorum is present, any
business may be transacted that could have been transacted at the meeting that
was adjourned.
4.10 WAIVER OF NOTICE. A director may waive any notice required by the
Code, the Articles of Incorporation or these Bylaws, before or after the date
and time of the matter to which the notice relates, by delivering to the
Corporation (for inclusion in the minutes or filing with the corporate records)
a written waiver notice signed by the director entitled to the notice.
Attendance by a director at a meeting shall constitute waiver of notice of the
meeting, except where a director at the beginning of the meeting (or promptly
upon his or her arrival) objects to holding the meeting or to transacting
business at the meeting and does not thereafter vote for or assent to action
taken at the meeting.
ARTICLE FIVE
OFFICERS
5.1 OFFICERS. The officers of the Corporation shall consist of a Chief
Executive Officer, a President, a Secretary and a Treasurer each of whom shall
be elected or appointed by the Board of Directors. The Board of Directors shall
also elect or appoint a Chairman of the Board and a Vice Chairman of the Board
from among its members. The Board of Directors from time to time may, or may
authorize the Chairman of the Board or the Chief Executive Officer, or both,
to, create and establish the duties of other offices and may, or may authorize
the Chairman of the Board or the Chief Executive Officer, or both, to, elect or
appoint, or authorize specific senior officers to appoint, the persons who
shall hold such other offices, including one or more Vice Presidents (including
Executive Vice Presidents, Senior Vice Presidents, Assistant Vice Presidents,
and the like), one or more Assistant Secretaries, and one or more Assistant
Treasurers. Whether or not so provided by the Board of Directors,
7
<PAGE> 12
the Chairman of the Board and the Chief Executive Officer each may appoint one
or more Assistant Secretaries, and one or more Assistant Treasurers. Any two or
more offices may be held by the same person.
5.2 TERM. Each officer shall serve at the pleasure of the Board of
Directors (or, if appointed by the Chairman of the Board or the Chief Executive
Officer or a senior officer pursuant to Section 5.1, at the pleasure of the
Board of Directors, the Chairman of the Board, the Chief Executive Officer, or
the senior officer authorized to have appointed the officer) until his or her
death, resignation or removal, or until his or her replacement is elected or
appointed in accordance with this Article Five.
5.3 COMPENSATION. The compensation of all officers of the Corporation
shall be fixed by the Board of Directors or by a committee or officer appointed
by the Board of Directors. Officers may serve without compensation.
5.4 REMOVAL. All officers (regardless of how elected or appointed) may
be removed, with or without cause, by the Board of Directors, and any officer
appointed by the Chairman of the Board, the Chief Executive Officer or another
senior officer may also be removed, with or without cause, by the Chairman of
the Board, the Chief Executive Officer or by any senior officer authorized to
have appointed the officer to be removed.
5.5 CHAIRMAN OF THE BOARD. The Chairman of the Board shall preside at
and serve as chairman of meetings of the shareholders and of the Board of
Directors (unless another person is selected under Section 2.8 to act as
chairman). If there shall be no separate Chief Executive Officer of the
Corporation, then the Chairman of the Board shall be the chief executive
officer of the Corporation and shall have all the duties and authority given
under these Bylaws to the Chief Executive Officer. In the absence or disability
of the Chief Executive Officer, the Chairman of the Board shall perform the
duties and exercise the powers of the Chief Executive Officer. The Chairman of
the Board shall perform other duties and have other authority as may from time
to time be delegated by the Board of Directors.
5.6 VICE CHAIRMAN OF THE BOARD. The Vice Chairman of the Board shall
at the request of, or in the absence or disability of the Chairman of the
Board, perform the duties and exercise the powers of the Chairman of the Board,
whether the duties and powers are specified in these Bylaws or otherwise.
5.7 CHIEF EXECUTIVE OFFICER. The Chief Executive Officer shall be
charged with the general and active management of the Corporation, shall see
that all orders and resolutions of the Board of Directors are carried into
effect, shall have the authority to select and appoint employees and agents of
the Corporation, and shall, in the absence or disability of the Chairman of the
Board and the Vice Chairman of the Board, perform the duties and exercise the
powers of the Chairman of the Board. The Chief Executive Officer shall perform
any other duties and have any other authority as may be delegated from time to
time by the Board of Directors, and shall be subject to the limitations fixed
from time to time by the Board of Directors.
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5.8 PRESIDENT. The President shall be the chief operating officer of
the Corporation and shall, subject to the authority of the Chief Executive
Officer, have responsibility for the conduct and general supervision of the
business operations of the Corporation. The President shall perform such other
duties and have such other authority as may from time to time be delegated by
the Board of Directors or by the Chief Executive Officer.
5.9 VICE PRESIDENTS. The Vice President (if there be one) shall, in
the absence or disability of the President, perform the duties and exercise the
powers of the President, whether the duties and powers are specified in these
Bylaws or otherwise. If the Corporation has more than one Vice President, the
one designated by the Board of Directors or the Chief Executive Officer (in
that order of precedence) shall act in the event of the absence or disability
of the President. Vice Presidents shall perform any other duties and have any
other authority as from time to time may be delegated by the Board of Directors
or the Chief Executive Officer.
5.10 SECRETARY. The Secretary shall be responsible for preparing
minutes of the meetings of shareholders, directors and committees of directors,
and for authenticating records of the Corporation. The Secretary or any
Assistant Secretary shall have authority to give all notices required by law or
these Bylaws. The Secretary shall be responsible for the custody of the
corporate books, records, contracts, and other documents. The Secretary or any
Assistant Secretary may affix the corporate seal to any lawfully executed
documents requiring it, may attest to the signature of any officer of the
Corporation, and shall sign any instrument that requires the Secretary's
signature. The Secretary or any Assistant Secretary shall perform any other
duties and have any other authority as from time to time may be delegated by
the Board of Directors or the Chief Executive Officer.
5.11 TREASURER. Unless otherwise provided by the Board of Directors,
the Treasurer shall be responsible for the custody of all funds and securities
belonging to the Corporation and for the receipt, deposit, or disbursement of
these funds and securities under the direction of the Board of Directors. The
Treasurer shall cause full and true accounts of all receipts and disbursements
to be maintained and shall make reports of these receipts and disbursements to
the Board of Directors and the Chief Executive Officer upon request. The
Treasurer or Assistant Treasurer shall perform any other duties and have any
other authority as from time to time may be delegated by the Board of Directors
or the Chief Executive Officer.
ARTICLE SIX
DISTRIBUTIONS AND DIVIDENDS
Unless the Articles of Incorporation provide otherwise, the Board of
Directors, from time to time in its discretion, may authorize or declare
distributions of share dividends in accordance with the Code.
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<PAGE> 14
ARTICLE SEVEN
SHARES
7.1 SHARE CERTIFICATES. The interest of each shareholder in the
Corporation shall be evidenced by a certificate or certificates representing
shares of the Corporation, which shall be in such form as the Board of
Directors from time to time may adopt in accordance with the Code. Share
certificates shall be in registered form and shall indicate the date of issue,
the name of the Corporation, that the Corporation is organized under the laws
of the State of Georgia, the name of the shareholder, and the number and class
of shares and designation of the series, if any, represented by the
certificate. Each certificate shall be signed by the Chairman of the Board or
Chief Executive Officer (or by another officer of the Corporation expressly
authorized by the Chairman of the Board or Chief Executive Officer to sign
certificates), and may be signed by the Secretary or an Assistant Secretary;
provided, however, that where the certificate is signed (either manually or by
facsimile) by a transfer agent, or registered by a registrar, the signatures of
those officers may be facsimiles.
7.2 RIGHTS OF CORPORATION WITH RESPECT TO REGISTERED OWNERS. Prior to
due presentation for transfer or registration of its shares, the Corporation
may treat the registered owner of the shares (or the beneficial owner of the
shares to the extent of any rights granted by a nominee certificate on file
with the Corporation pursuant to any procedure that may be established by the
Corporation in accordance with the Code) as the person exclusively entitled to
vote the shares, to receive any dividend or other distribution with respect to
the shares, and for all other purposes; and the Corporation shall not be bound
to recognize any equitable or other claim to or interest in the shares on the
part of any other person, whether or not it has express or other notice of such
a claim or interest, except as otherwise provided by law.
7.3 TRANSFERS OF SHARES. Transfers of shares shall be made upon the
books of the Corporation kept by the Corporation or by the transfer agent
designated to transfer the shares, only upon direction of the person named in
the certificate or by an attorney lawfully constituted in writing. Before a new
certificate is issued, the old certificate shall be surrendered for
cancellation or, in the case of a certificate alleged to have been lost, stolen
or destroyed, the provisions of Section 7.5 of these Bylaws shall have been
complied with.
7.4 DUTY OF CORPORATION TO REGISTER TRANSFER. Notwithstanding any of
the provisions of Section 7.3 of these Bylaws, the Corporation is under a duty
to register the transfer of its shares only if: (a) the share certificate is
endorsed by the appropriate person or persons; (b) reasonable assurance is
given that each required endorsement is genuine and effective; (c) the
Corporation has no duty to inquire into adverse claims or has discharged any
such duty; (d) any applicable law relating to the collection of taxes has been
complied with; (e) the transfer is in fact rightful or is to a bona fide
purchaser; and (f) the transfer is in compliance with applicable provisions of
any transfer restrictions of which the Corporation shall have notice, including
but not limited to restrictions under applicable federal or state securities
laws.
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<PAGE> 15
7.5 LOST, STOLEN, OR DESTROYED CERTIFICATES. Any person claiming a
share certificate to be lost, stolen or destroyed shall make an affidavit or
affirmation of this claim in such a manner as the Corporation may require and
shall, if the Corporation requires, give the Corporation a bond of indemnity in
form and amount, and with one or more sureties satisfactory to the Corporation,
as the Corporation may require, whereupon an appropriate new certificate may be
issued in lieu of the one alleged to have been lost, stolen or destroyed.
7.6 FIXING OF RECORD DATE. For the purpose of determining shareholders
(a) entitled to notice of or to vote at any meeting of shareholders or, if
necessary, any adjournment thereof, (b) entitled to receive payment of any
distribution or dividend, or (c) for any other proper purpose, the Board of
Directors may fix in advance a date as the record date. The record date may not
be more than 70 days (and, in the case of a notice to shareholders of a
shareholders' meeting, not less than 10 days) prior to the date on which the
particular action, requiring the determination of shareholders, is to be taken.
A separate record date may be established for each Voting Group entitled to
vote separately on a matter at a meeting. A determination of shareholders of
record entitled to notice of or to vote at a meeting of shareholders shall
apply to any adjournment of the meeting, unless the Board of Directors shall
fix a new record date for the reconvened meeting, which it must do if the
meeting is adjourned to a date more than 120 days after the date fixed for the
original meeting.
7.7 RECORD DATE IF NONE FIXED. If no record date is fixed as provided
in Section 7.6, then the record date for any determination of shareholders that
may be proper or required by law shall be, as appropriate, the date on which
notice of a shareholders' meeting is mailed, the date on which the Board of
Directors adopts a resolution declaring a dividend or authorizing a
distribution, or the date on which any other action is taken that requires a
determination of shareholders.
ARTICLE EIGHT
INDEMNIFICATION
8.1 INDEMNIFICATION OF DIRECTORS. The Corporation shall indemnify and
hold harmless any director of the Corporation (an "Indemnified Person") who was
or is a party, or is threatened to be made a party, to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, whether formal or informal, including any
action or suit by or in the right of the Corporation (for purposes of this
Article Eight, collectively, a "Proceeding") because he or she is or was a
director, officer, employee or agent of the Corporation, against any judgment,
settlement, penalty, fine or reasonable expenses (including, but not limited
to, attorneys' fees and disbursements, court costs and expert witness fees)
incurred with respect to the Proceeding (for purposes of this Article Eight, a
"Liability"); provided, however, that no indemnification shall be made for (a)
any appropriation by a director, in violation of the directors' duties, of any
business opportunity of the corporation, (b) any acts or omissions of a
director that involve intentional
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misconduct or a knowing violation of law, (c) the types of liability set forth
in Code Section 14-2-832, or (d) any transaction from which the director
received an improper personal benefit.
8.2 INDEMNIFICATION OF OTHERS. The Board of Directors shall have the
power to cause the Corporation to provide to officers, employees and agents of
the Corporation all or any part of the right to indemnification permitted for
such persons by appropriate provisions of the Code. Persons to be indemnified
may be identified by position or name, and the right of indemnification may
(but need not) be different for each of the persons identified. Each officer,
employee or agent of the Corporation so identified shall be an "Indemnified
Person" for purposes of the provisions of this Article Eight.
8.3 OTHER ORGANIZATIONS. The Corporation shall provide to each
director, and the Board of Directors shall have the power to cause the
Corporation to provide to any officer, employee or agent, of the Corporation
who is or was serving as a director, officer, partner, trustee, employee or
agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise, all or any part of the right to
indemnification and other rights of the type provided under Sections 8.1, 8.2,
8.4 and 8.10 of this Article Eight (subject to the conditions, limitations and
obligations specified in those Sections) permitted for such persons by
appropriate provisions of the Code. Persons to be indemnified may be identified
by position or name, and the right of indemnification may (but need not) be
different for each of the persons identified. Each person so identified shall
be an "Indemnified Person" for purposes of the provisions of this Article
Eight.
8.4 ADVANCES. Expenses (including, but not limited to, attorneys' fees
and disbursements, court costs and expert witness fees) incurred by an
Indemnified Person in defending any Proceeding of the kind described in
Sections 8.1 or 8.3, as to an Indemnified Person who is a director of the
Corporation, or in Sections 8.2 or 8.3, as to another Indemnified Person (if
the Board of Directors has specified that advancement of expenses be made
available to such other Indemnified Person), shall be paid by the Corporation
in advance of the final disposition of such Proceeding as set forth herein. The
Corporation shall promptly pay the amount of such expenses to the Indemnified
Person, but in no event later than 10 days following the Indemnified Person's
delivery to the Corporation of a written request for an advance pursuant to
this Section 8.4, together with a reasonable accounting of such expenses;
provided, however, that the Indemnified Person shall furnish the Corporation a
written affirmation of his or her good faith belief that he or she has met the
applicable standard of conduct and a written undertaking and agreement to repay
to the Corporation any advances made pursuant to this Section 8.4 if it shall
be determined that the Indemnified Person is not entitled to be indemnified by
the Corporation for such amounts. The Corporation may make the advances
contemplated by this Section 8.4 regardless of the Indemnified Person's
financial ability to make repayment. Any advances and undertakings to repay
pursuant to this Section 8.4 may be unsecured and interest-free.
8.5 NON-EXCLUSIVITY. Subject to any applicable limitation imposed by
the Code or the Articles of Incorporation, the indemnification and advancement
of expenses provided by or
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granted pursuant to this Article Eight shall not be exclusive of any other
rights to which a person seeking indemnification or advancement of expenses may
be entitled under any provision of the Articles of Incorporation, or any Bylaw,
resolution or agreement specifically or in general terms approved or ratified
by the affirmative vote of holders of a majority of the shares entitled to be
voted thereon.
8.6 INSURANCE. The 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 who, while serving in such a capacity,
is also or was also serving at the request of the Corporation as a director,
officer, trustee, partner, employee or agent of any corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise, against any
Liability that may be asserted against or incurred by him or her in any such
capacity, or arising out of his or her status as such, whether or not the
Corporation would have the power to indemnify him or her against such liability
under the provisions of this Article Eight.
8.7 NOTICE. If the Corporation indemnifies or advances expenses to a
director under any of Sections 14-2-851 through 14-2-854 of the Code in
connection with a Proceeding by or in the right of the Corporation, the
Corporation shall, to the extent required by Section 14-2-1621 or any other
applicable provision of the Code, report the indemnification or advance in
writing to the shareholders with or before the notice of the next shareholders'
meeting.
8.8 SECURITY. The Corporation may designate certain of its assets as
collateral, provide self-insurance, establish one or more indemnification
trusts, or otherwise secure or facilitate its ability to meet its obligations
under this Article Eight, or under any indemnification agreement or plan of
indemnification adopted and entered into in accordance with the provisions of
this Article Eight, as the Board of Directors deems appropriate.
8.9 AMENDMENT. Any amendment to this Article Eight that limits or
otherwise adversely affects the right of indemnification, advancement of
expenses, or other rights of any Indemnified Person hereunder shall, as to such
Indemnified Person, apply only to Proceedings based on actions, events or
omissions (collectively, "Post Amendment Events") occurring after such
amendment and after delivery of notice of such amendment to the Indemnified
Person so affected. Any Indemnified Person shall, as to any Proceeding based on
actions, events or omissions occurring prior to the date of receipt of such
notice, be entitled to the right of indemnification, advancement of expenses,
and other rights under this Article Eight to the same extent as if such
provisions had continued as part of the Bylaws of the Corporation without such
amendment. This Section 8.9 cannot be altered, amended or repealed in a manner
effective as to any Indemnified Person (except as to Post Amendment Events)
without the prior written consent of such Indemnified Person.
8.10 AGREEMENTS. The provisions of this Article Eight shall be deemed
to constitute an agreement between the Corporation and each Indemnified Person
hereunder. In addition to the rights provided in this Article Eight, the
Corporation shall have the power, upon authorization by the Board of Directors,
to enter into an agreement or agreements providing to
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<PAGE> 18
any Indemnified Person indemnification rights substantially similar to those
provided in this Article Eight.
8.11 CONTINUING BENEFITS. The rights of indemnification and
advancement of expenses permitted or authorized by this Article Eight shall,
unless otherwise provided when such rights are granted or conferred, 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
person.
8.12 SUCCESSORS. For purposes of this Article Eight, the term
"Corporation" shall include any corporation, joint venture, trust, partnership
or unincorporated business association that is the successor to all or
substantially all of the business or assets of this Corporation, as a result of
merger, consolidation, sale, liquidation or otherwise, and any such successor
shall be liable to the persons indemnified under this Article Eight on the same
terms and conditions and to the same extent as this Corporation.
8.13 SEVERABILITY. Each of the Sections of this Article Eight, and
each of the clauses set forth herein, shall be deemed separate and independent,
and should any part of any such Section or clause be declared invalid or
unenforceable by any court of competent jurisdiction, such invalidity or
unenforceability shall in no way render invalid or unenforceable any other part
thereof or any separate Section or clause of this Article Eight that is not
declared invalid or unenforceable.
8.14 ADDITIONAL INDEMNIFICATION. In addition to the specific
indemnification rights set forth herein, the Corporation shall indemnify each
of its directors and such of its officers as have been designed by the Board of
Directors to the full extent permitted by action of the Board of Directors
without shareholder approval under the Code or other laws of the State of
Georgia as in effect from time to time.
ARTICLE NINE
MISCELLANEOUS
9.1 INSPECTION OF BOOKS AND RECORDS. The Board of Directors shall have
the power to determine which accounts, books and records of the Corporation
shall be available for shareholders to inspect or copy, except for those books
and records required by the Code to be made available upon compliance by the
shareholder with applicable requirements, and shall have the power to fix
reasonable rules and regulations (including confidentiality restrictions and
procedures) not in conflict with applicable law for the inspection and copying
of accounts, books and records that by law or by determination of the Board of
Directors are made available. Unless required by the Code or otherwise provided
by the Board of Directors, a shareholder of the Corporation holding less than
two percent of the total shares of the Corporation then outstanding shall have
no right to inspect the books and records of the Corporation.
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9.2 FISCAL YEAR. The Board of Directors is authorized to fix the
fiscal year of the Corporation and to change the fiscal year from time to time
as it deems appropriate.
9.3 CORPORATE SEAL. The Corporation may adopt a form of corporate seal
and, if adopted, the corporate seal will be in such form as the Board of
Directors may from time to time determine. The Board of Directors may authorize
the use of one or more facsimile forms of the corporate seal. The corporate
seal need not be used unless its use is required by law, by these Bylaws, or by
the Articles of Incorporation.
9.4 ANNUAL STATEMENTS. Not later than four months after the close of
each fiscal year, and in any case prior to the next annual meeting of
shareholders, the Corporation shall prepare (a) a balance sheet showing in
reasonable detail the financial condition of the Corporation as of the close of
its fiscal year, and (b) a profit and loss statement showing the results of its
operations during its fiscal year. Upon receipt of written request, the
Corporation promptly shall mail to any shareholder of record a copy of the most
recent such balance sheet and profit and loss statement, in such form and with
such information as the Code may require.
9.5 NOTICE.
(a) Whenever these Bylaws require notice to be given to any
shareholder or to any director, the notice may be given by mail, in person, by
courier delivery, by telephone, or by fax, telex, or similar electronic means.
Whenever notice is given to a shareholder or director by mail, the notice shall
be sent by depositing the notice in a post office or letter box in a
postage-prepaid, sealed envelope addressed to the shareholder or director at
his or her address as it appears on the books of the Corporation. Any such
written notice given by mail shall be effective: (i) if given to shareholders,
at the time the same is deposited in the United States mail; and (ii) in all
other cases, at the earliest of (x) when received or when delivered, properly
addressed, to the addressee's last known principal place of business or
residence, (y) five days after its deposit in the mail, as evidenced by the
postmark, if mailed with first-class postage prepaid and correctly addressed,
or (z) on the date shown on the return receipt, if sent by registered or
certified mail, return receipt requested, and the receipt is signed by or on
behalf of the addressee. Whenever notice is given to a shareholder or director
by any means other than mail, the notice shall be deemed given when received.
Subject to any provision of the Code, the Articles of Incorporation or any
other article of these Bylaws requiring written notice, oral notice may be
given to a shareholder or a director if reasonable under the circumstances, and
such oral notice shall be effective when communicated if communicated in a
comprehensible manner.
(b) In calculating time periods for notice, when a period of time
measured in days, weeks, months, years or other measurement of time is
prescribed for the exercise of any privilege or the discharge of any duty, the
first day shall not be counted but the last day shall be counted.
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ARTICLE TEN
AMENDMENTS
Except as otherwise provided under the Code, and subject to the last
sentence of this Article Ten, the Board of Directors shall have the power to
alter, amend or repeal these Bylaws or adopt new Bylaws. Any Bylaws adopted by
the Board of Directors may be altered, amended or repealed, and new Bylaws
adopted, by the shareholders. The shareholders may prescribe in adopting any
Bylaw or Bylaws that the Bylaw or Bylaws so adopted shall not be altered,
amended or repealed by the Board of Directors.
ARTICLE ELEVEN
BUSINESS COMBINATIONS WITH INTERESTED SHAREHOLDERS
In addition to any other provisions of law as may be applicable,
notwithstanding any other provisions of these Bylaws or the Corporation's
Articles of Incorporation to the contrary, the provisions of Sections 14-2-1131
through 14-2-1133 of the GBCC, as the same may be amended or supplemented from
time to time, shall apply to and govern those transactions of the Corporation
which constitute "business combinations" (as that term is defined in Section
14-2-1131 of the GBCC). The provisions of this Article Eleven of the Bylaws may
not be repealed except in the manner set forth in Section 14-2-1133 of the
GBCC.
ARTICLE TWELVE
FAIR PRICE REQUIREMENTS
In addition to any other provisions of law as may be applicable,
notwithstanding any other provisions of these Bylaws or the Corporation's
Articles of Incorporation to the contrary, the provisions of Sections 14-2-1110
through 14-2-1113 of the GBCC, as the same may be amended or supplemented from
time to time, shall apply to and govern those transactions of the Corporation
which constitute "business combinations" (as that term is defined in Section
14-2-1110 of the GBCC). The provisions of this Article Twelve of the Bylaws may
not be repealed except in the manner set forth in Section 14-2-1113 of the
GBCC.
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<PAGE> 1
EXHIBIT 4.1
Execution Version
ALBECCA INC.
AS ISSUER
AND
THE SUBSIDIARY GUARANTORS
NAMED HEREIN
-----------------------------------
10 3/4% SENIOR SUBORDINATED NOTES DUE 2008
-----------------------------------
INDENTURE
DATED AS OF AUGUST 11, 1998
----------------
STATE STREET BANK AND TRUST COMPANY
TRUSTEE
-----------------------------------
<PAGE> 2
Indenture, dated as of August 11, 1998 among Albecca Inc., a Georgia
corporation (the "Company"), as issuer, each of Larson-Juhl U.S. L.L.C., a
Georgia limited liability company, Larson-Juhl International L.L.C, a Georgia
limited liability company, Art Materials, Frames and Moulding Company, Inc., an
Alabama corporation, Robert F. De Castro, Inc., a Louisiana corporation, Glass
Corporation of America, Inc., a Louisiana corporation, Art West, Inc., an
Arizona corporation, Eastern Moulding, Inc., a Maryland corporation, Eastern
Mouldings, Inc., a New Jersey corporation, Larson-Juhl Australia L.L.C., a
Georgia limited liability company, Larson-Juhl France, L.L.C., a Georgia limited
liability company, Larson-Juhl South Africa L.L.C., a Georgia limited liability
company, Larson-Juhl Korea L.L.C., a Georgia limited liability company,
Larson-Juhl Seoul L.L.C., a Georgia limited liability company, and Larson-Juhl
Netherlands L.L.C., a Georgia limited liability company, as guarantors (each a
"Subsidiary Guarantor") and together with any subsidiary that executes a
Subsidiary Guarantee substantially in the form of Exhibit D attached hereto (the
"Subsidiary Guarantors") and State Street Bank and Trust Company, as trustee
(the "Trustee").
The Company, the Subsidiary Guarantors and the Trustee agree as follows
for the benefit of each other and for the equal and ratable benefit of the
holders of the Company's 10 3/4% Senior Subordinated Notes due 2008 (the "Senior
Subordinated Notes") and the exchange 10 3/4% Senior Subordinated Notes due 2008
(the "Exchange Senior Subordinated Notes" and, together with the Senior
Subordinated Notes, the "Notes"):
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
SECTION 1.01. DEFINITIONS
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, and (ii)
Indebtedness secured by a Lien encumbering any asset acquired by such specified
Person or assumed in connection with the acquisition of any asset used or useful
in a Permitted Business acquired by such specified Person; provided that such
Indebtedness was not incurred in connection with, or in contemplation of, such
other Person merging with or into or becoming a Subsidiary of such specified
Person, or such acquisition, as the case may be.
"Additional Notes" means additional Notes which may be issued after the
Issue Date pursuant to this Indenture (other than pursuant to an Exchange Offer
or otherwise in exchange for or in replacement of outstanding Notes). All
references herein to "Notes" shall be deemed to include Additional Notes.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative
<PAGE> 3
meanings, the terms "controlling," "controlled by" and "under common control
with"), as used with respect to any Person, shall mean the possession, directly
or indirectly, of the power to direct or cause the direction of the management
or policies of such Person, whether through the ownership of voting securities,
by agreement or otherwise; provided that beneficial ownership of 10% or more of
the voting securities of a Person shall be deemed to be control.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Applicable Procedures" means, with respect to any transfer or exchange
of beneficial interests in a Global Note, the rules and procedures of the
Depositary that apply to such transfer and exchange.
"Asset Sale" means (i) the sale, lease (other than an operating lease
entered into in the ordinary course of business), conveyance or other
disposition of any assets or rights (including, without limitation, by way of a
sale and leaseback) other than sales of inventory in the ordinary course of
business consistent with past practices (provided that the sale, lease,
conveyance or other disposition of all or substantially all of the assets of the
Company and its Restricted Subsidiaries taken as a whole will be governed by
Section 4.13 and/or Section 5.01 and not by the provisions of Section 4.10), and
(ii) the sale by the Company and the issue or sale by any of the Restricted
Subsidiaries of the Company of Equity Interests of any of the Company's
Subsidiaries, in the case of either clause (i) or (ii), whether in a single
transaction or a series of related transactions that have a fair market value
(as determined in good faith by the Board of Directors) in excess of $1,000,000
or for net cash proceeds in excess of $1,000,000. Notwithstanding the foregoing,
the following shall not be deemed to be Asset Sales: (i) a transfer of assets by
the Company to a Wholly Owned Restricted Subsidiary of the Company or by a
Wholly Owned Restricted Subsidiary of the Company to the Company or to a Wholly
Owned Restricted Subsidiary of the Company, (ii) an issuance of Equity Interests
by a Restricted Subsidiary of the Company to the Company or to a Wholly Owned
Restricted Subsidiary of the Company, (iii) a Restricted Payment that is
permitted by Section 4.07, (iv) the sale and leaseback of any assets within 90
days of the acquisition of such assets, provided that the sale price of such
assets is not materially less than the acquisition price of such assets, and (v)
the periodic clearance of aged, obsolete or discontinued inventory.
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal or
state law for the relief of debtors.
"Board of Directors" with respect to any Person means, for a
corporation, the board of directors of the such Person or any authorized
committee of such board of directors, for a limited liability company, the
manager, managers or managing members, and for other types of entities, any
other similar governing committee, manager or board of such Person.
"Business Day" means any day other than a Legal Holiday.
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<PAGE> 4
"Capital Lease Obligation" means, at the time any determination thereof
is to be made, the amount of the liability in respect of a capital lease that
would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate
stock, (ii) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership or limited
liability company, partnership or membership interests (whether general or
limited) and (iv) any other interest or participation that confers on a Person
the right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"Cash Equivalents" means (i) securities issued or unconditionally and
fully guaranteed or insured by the full faith and credit of the United States
government or any agency or instrumentality thereof having maturities of not
more than one year from the date of acquisition, (ii) obligations issued or
fully guaranteed by any state of the United States of America or any political
subdivision of any such state or any public instrumentality thereof maturing
within one year from the date of acquisition thereof and, at the time of
acquisition, having one of the two highest ratings obtainable from either
Standard & Poor's Ratings Group ("S&P") or Moody's Investors Service, Inc.
("Moody's"), (iii) certificates of deposit and eurodollar time deposits with
maturities of one year or less from the date of acquisition, bankers'
acceptances with maturities not exceeding one year and overnight bank deposits,
in each case with any lender party to the Credit Facilities or with any domestic
commercial bank having capital and surplus in excess of $250,000,000, (iv)
repurchase obligations with a term of not more than seven days for underlying
securities of the types described in clauses (i) and (iii), above entered into
with any financial institution meeting the qualifications specified in clause
(iii) above, (v) commercial paper having one of the two of the highest ratings
obtainable from either Moody's or S&P and in each case maturing within one year
after the date of acquisition and (vi) investments in funds investing
exclusively in investments of the types described in clauses (i) through (v)
above.
"Cedel" means Cedel Bank, societe anonyme.
"Change of Control" means the occurrence of any of the following: (i)
the sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Subsidiaries taken as a
whole to any "person" (as such term is used in Section 13(d)(3) of the Exchange
Act), other than the Principals and their Related Parties, (ii) the adoption of
a plan relating to the liquidation or dissolution of the Company, (iii) the
consummation of any transaction (including, without limitation, any merger or
consolidation) the result of which is that (A) any "person" (as defined above),
other than the Principals and their Related Parties, becomes the "beneficial
owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange
Act), directly or indirectly, of 40% or more of the Voting Stock of the Company
(measured by voting
3
<PAGE> 5
power rather than number of shares) and (B) the Principals and their Related
Parties beneficially own, directly or indirectly, in the aggregate a lesser
percentage of the Voting Stock of the Company than such other "person", (iv) the
first day on which a majority of the members of the Board of Directors of the
Company are not Continuing Directors or (v) the Company consolidates with, or
merges with or into, any Person, or any Person consolidates with, or merges with
or into, the Company, in any such event pursuant to a transaction in which any
of the outstanding Voting Stock of the Company is converted into or exchanged
for cash, securities or other property, other than any such transaction where
(A) the Voting Stock of the Company outstanding immediately prior to such
transaction is converted into or exchanged for Voting Stock (other than
Disqualified Stock) of the surviving or transferee Person and (B) either (1) the
"beneficial owners" (as defined above) of the Voting Stock of the Company
immediately prior to such transaction own, directly or indirectly through one or
more subsidiaries, not less than a majority of the total Voting Stock of the
surviving or transferee corporation immediately after such transaction or (2)
if, immediately prior to such transaction the Company is a direct or indirect
subsidiary of any other Person (such other Person, the "Holding Company"), then
the "beneficial owners" (as defined above) of the Voting Stock of such Holding
Company immediately prior to such transaction own, directly or indirectly
through one or more subsidiaries, not less than a majority of the Voting Stock
of the surviving or transferee corporation immediately after such transaction.
"Commission" means the Securities and Exchange Commission.
"Company" means Albecca Inc., a Georgia corporation, and its permitted
successors.
"Consolidated EBITDA" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus (i) an amount
equal to any extraordinary loss plus any net loss realized in connection with an
Asset Sale (to the extent such losses were deducted in computing such
Consolidated Net Income of such Person and its Restricted Subsidiaries), plus
(ii) (A) if such Person is an S corporation or substantially similar
pass-through entity for U.S. federal income tax purposes, the amount of all
Permitted Quarterly Tax Distributions for such period (whether or not such
Permitted Quarterly Tax Distributions have actually been distributed), as
adjusted for any True-up Amount determined for such period, plus any provision
for taxes based on income or profits of such Person and its Restricted
Subsidiaries for such period, to the extent that such provision for taxes was
included in computing such Consolidated Net Income, and (B) if such Person is
not an S corporation or substantially similar pass-through entity for U.S.
federal income tax purposes, any provision for taxes based on income or profits
of such Person and its Restricted Subsidiaries for such period, to the extent
that such provision for taxes was included in computing such Consolidated Net
Income, plus (iii) consolidated interest expense of such Person and its
Restricted Subsidiaries for such period, whether paid or accrued and whether or
not capitalized (including, without limitation, amortization of debt issuance
costs and original issue discount, non-cash interest payments, the interest
component of any deferred payment
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obligations, the interest component of all payments associated with Capital
Lease Obligations, commissions, discounts and other fees and charges incurred in
respect of letter of credit or bankers' acceptance financings, and net payments
(if any) pursuant to Hedging Obligations), to the extent that any such expense
was deducted in computing such Consolidated Net Income, plus (iv) depreciation
and amortization (including amortization of goodwill and other intangibles but
excluding amortization of prepaid cash expenses that were paid in a prior
period) and other non-cash charges (excluding any such non-cash charge to the
extent that it represents an accrual of or reserve for cash charges in any
future period or amortization of a prepaid cash charge that was paid in a prior
period) of such Person and its Subsidiaries for such period to the extent that
such depreciation, amortization and other non-cash charges were deducted in
computing such Consolidated Net Income, minus (v) non-cash items increasing such
Consolidated Net Income for such period, in each case, on a consolidated basis
and determined in accordance with GAAP. Notwithstanding the foregoing, the
provision for taxes based on the income or profits of, and the depreciation and
amortization and other noncash charges of, a Restricted Subsidiary of a Person
shall be added to Consolidated Net Income to compute Consolidated EBITDA only to
the extent (and in the same proportion) that the Net Income of such Restricted
Subsidiary was included in calculating the Consolidated Net Income of such
Person.
"Consolidated Net Income" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its Subsidiaries for
such period, on a consolidated basis, determined in accordance with GAAP and
reduced by the amount of Permitted Quarterly Tax Distributions for such period
(whether or not such Permitted Quarterly Tax Distributions have actually been
distributed), as adjusted for any True-up Amount determined for such period;
provided that (i) the Net Income (but not loss) of any Person that is not a
Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Restricted Subsidiary
thereof, (ii) the Net Income of any Restricted Subsidiary shall be excluded to
the extent that the declaration or payment of dividends or similar distributions
by that Restricted Subsidiary of that Net Income is not at the date of
determination permitted without any prior governmental approval (that has not
been obtained) or, directly or indirectly, by operation of the terms of its
charter or any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to that Restricted Subsidiary or its
shareholders, (iii) the Net Income of any Person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition shall
be excluded, and (iv) the cumulative effect of a change in accounting principles
shall be excluded.
"Continuing Directors" means, as of any date of determination, any
member of the Board of Directors of the Company who (i) was a member of such
Board of Directors on the Issue Date immediately after consummation of the
Offering or (ii) was nominated for election or elected to such Board of
Directors with the approval of a majority of the Continuing Directors who were
either members of such Board at the time of such
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<PAGE> 7
nomination or election or are successor Continuing Directors appointed by such
Continuing Directors (or their successors).
"Corporate Trust Office of the Trustee" shall be at the address of the
Trustee specified in Section 13.02 hereof or such other address as to which the
Trustee may give notice to the Company.
"Credit Agent" means the administrative agent for the lenders party to
the Credit Facilities or any successor thereto or any person otherwise
appointed.
"Credit Facilities" means, with respect to the Company or the
Subsidiary Guarantors, one or more debt facilities or commercial paper
facilities with banks or other institutional lenders providing for revolving
credit loans, term loans, receivables financing (including through the sale of
receivables to such lenders or to special purpose entities formed to borrow from
such lenders against such receivables) or letters of credit, in each case, as
amended, restated, modified, renewed, refunded, replaced or refinanced in whole
or in part from time to time. Indebtedness under Credit Facilities outstanding
on the Issue Date shall be deemed to have been incurred on such date in reliance
on the exceptions provided by clause (i) of the definition of Permitted Debt.
"Default" means any event that is or with the passage of time or the
giving of notice or both would be an Event of Default.
"Definitive Notes" means Notes that are in the form of EXHIBIT A-1
attached hereto (but without including the text referred to in footnotes 1 and 3
thereto).
"Depositary" means, with respect to the Notes issuable or issued in
whole or in part in global form, the Person specified in Section 2.03 hereof as
the Depositary with respect to the Notes, until a successor shall have been
appointed and become such pursuant to Section 2.06 of this Indenture, and,
thereafter, "Depositary" shall mean or include such successor.
"Designated Senior Debt" means (i) any Senior Debt outstanding under
the Credit Facilities and (ii) any other Senior Debt permitted under the
Indenture the principal amount of which is $25,000,000 or more and that has been
designated by the Company as "Designated Senior Debt."
"Disqualified Stock" means any Capital Stock that, by its terms (or by
the terms of any security into which it is convertible or for which it is
exchangeable at the option of the holder thereof), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or redeemable at the option of the holder thereof, in
whole or in part, on or prior to the date that is 91 days after the date on
which the Notes mature; provided, however, that a class of Capital Stock shall
not be Disqualified Stock hereunder solely as the result of any maturity or
redemption that is conditioned upon, and subject to, compliance with Section
4.07; and provided further, that Capital Stock issued to any plan for the
benefit of employees of the
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<PAGE> 8
Company or its subsidiaries or by any such plan to such employees shall not
constitute Disqualified Stock solely because it may be required to be
repurchased by the Company in order to satisfy applicable statutory or
regulatory obligations.
"DLJ" means Donaldson, Lufkin & Jenrette Securities Corporation.
"Equity Interests" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Equity Offering" means an offering of common stock (other than
Disqualified Stock) of the Company, pursuant to an effective registration
statement filed with the Commission in accordance with the Securities Act, other
than an offering pursuant to Form S-8 (or any successor thereto).
"Estimation Period" means the period for which a shareholder who is an
individual is required to estimate for federal income tax purposes his
allocation of taxable income from a calendar year in connection with determining
his estimated federal income tax liability for such period.
"Euroclear" means Morgan Guaranty Trust Company of New York, the
Brussels office, as operator of the Euroclear system.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Offer" means the offer by the Company to Holders to exchange
Senior Subordinated Notes for Exchange Senior Subordinated Notes.
"Exchange Offer Registration Statement" has the meaning set forth in
the Registration Rights Agreement.
"Exchange Senior Subordinated Notes" means the Company's 10 3/4% Senior
Subordinated Notes due 2008, which will be issued in exchange for the Company's
Senior Subordinated Notes.
"Fixed Charges" means, with respect to any Person for any period, the
sum, without duplication, of (i) the consolidated interest expense of such
Person and its Restricted Subsidiaries for such period, whether paid or accrued
(including, without limitation, amortization of debt issuance costs and original
issue discount, non-cash interest payments, the interest component of any
deferred payment obligations, the interest component of all payments associated
with Capital Lease Obligations, commissions, discounts and other fees and
charges incurred in respect of letter of credit or bankers' acceptance
financings, and net payments (if any) pursuant to Hedging Obligations; provided,
however, that in no event shall any amortization of deferred financing costs
incurred in connection with the Offering be included in Fixed Charges), (ii) the
consolidated interest expense of such Person and its Restricted Subsidiaries
that
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<PAGE> 9
was capitalized during such period, and (iii) any interest expense on
Indebtedness of another Person that is Guaranteed by such Person or one of its
Restricted Subsidiaries or secured by a Lien on assets of such Person or one of
its Restricted Subsidiaries (whether or not such Guarantee or Lien is called
upon) and (iv) the product of (a) (without duplication) (1) all dividends paid
or accrued in respect of Disqualified Stock which are not treated as interest
for tax purposes for such period and (2) all cash dividend payments on any
series of preferred stock of such Person or any of its Restricted Subsidiaries,
other than dividend payments on Equity Interests payable solely in Equity
Interests (other than Disqualified Stock) of the Company, times (b) a fraction,
the numerator of which is one and the denominator of which is one minus the then
current combined federal, state and local statutory tax rate of such Person,
expressed as a decimal, in each case, on a consolidated basis and in accordance
with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated EBITDA of such Person and its Restricted
Subsidiaries for such period to the Fixed Charges of such Person and its
Restricted Subsidiaries for such period. In the event that the Company or any of
its Restricted Subsidiaries incurs, assumes, Guarantees, repays or redeems any
Indebtedness (other than revolving credit borrowings) or issues or redeems
preferred stock subsequent to the commencement of the period for which the Fixed
Charge Coverage Ratio is being calculated but prior to the date on which the
event for which the calculation of the Fixed Charge Coverage Ratio is made (the
"Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated
giving pro forma effect to such incurrence, assumption, Guarantee, repayment or
redemption of Indebtedness, or such issuance or redemption of preferred stock,
as if the same had occurred at the beginning of the applicable four-quarter
reference period. In addition, for purposes of making the computation referred
to above, (i) acquisitions that have been made by the Company or any of its
Restricted Subsidiaries, including through mergers or consolidations and
including any related financing transactions, during the four-quarter reference
period or subsequent to such reference period and on or prior to the Calculation
Date shall be deemed to have occurred on the first day of the four-quarter
reference period and Consolidated EBITDA for such reference period shall be
calculated without giving effect to clause (iii) of the proviso set forth in the
definition of Consolidated Net Income and shall reflect any pro forma expense
and cost reductions attributable to such acquisitions (to the extent such
expense and cost reduction would be permitted by the Commission under Article 11
of Regulation S-X to be reflected in pro forma financial statements included in
a registration statement filed with the Commission), (ii) the Consolidated
EBITDA attributable to discontinued operations, as determined in accordance with
GAAP, and operations or businesses disposed of prior to the Calculation Date,
shall be excluded and Consolidated EBITDA shall reflect any pro forma expense or
cost reductions relating to such discontinuance or disposition (to the extent
such expense or cost reductions would be permitted by the Commission to be
reflected in pro forma financial statements included in a registration statement
filed with the Commission), (iii) the Fixed Charges attributable to discontinued
operations, as determined in accordance with GAAP, and operations or businesses
disposed of prior to the Calculation Date, shall
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<PAGE> 10
be excluded, but only to the extent that the obligations giving rise to such
Fixed Charges will not be obligations of the referent Person or any of its
Subsidiaries following the Calculation Date and (iv) to the extent included in
Consolidated EBITDA, all items which are either extraordinary (as determined in
accordance with GAAP) or nonrecurring (including any gain from the sale or
disposition of assets outside the ordinary course of business or from the
issuance or sale of any Equity Interests, other than Disqualified Stock) shall
be excluded.
"Foreign Subsidiary" means (i) Larson-Juhl Canada Ltd., a corporation
organized in Canada; Multico Manufacturing, Inc., a corporation organized in
Canada; Larson-Juhl Wels GmbH, an corporation organized in Austria; Nottling
Larson-Juhl GmbH, an corporation organized in Austria; Larson-Juhl Germany GmbH,
a corporation organized in Germany; Larson-Juhl Rahman GmbH & Co. Handels-KG, a
corporation organized in Germany; Larson-Juhl Rahman GmbH, a corporation
organized in Germany; Mersch Design GmbH, a corporation organized in Germany;
Larson-Juhl SA, a corporation organized in France; Mersch France SA, a
corporation organized in France; Senelar Larson-Juhl SA, a corporation organized
in France; Larson-Juhl France S.A.R.L., a corporation organized in France;
Larson-Juhl Hellas Picture Frames S.A., a corporation organized in Greece;
LAC-ART Larson-Juhl Single Partner L.L.C., a corporation organized in Greece;
Larson-Juhl Netherlands B.V., a corporation organized in the Netherlands; Dutch
Frame Company B.V., a corporation organized in the Netherlands; Styling Design
Barneveld B.V., a corporation organized in the Netherlands; Lever's
Lijstenfabrieck B.V., a corporation organized in the Netherlands; Lever
Onroerond Goed Opperduit B.V., a corporation organized in the Netherlands;
Larson-Juhl Training and Equipment B.V., a corporation organized in the
Netherlands; Erijko Beheer Exploitatiernaatschappij B.V., a corporation
organized in the Netherlands; Barth Lijsten Beheer B.V., a corporation organized
in the Netherlands; Erijko Lijsten B.V., a corporation organized in the
Netherlands; Barth Lijsten Boxtel B.V., a corporation organized in the
Netherlands; Barth Lijsten Nederland B.V., a corporation organized in the
Netherlands; Larson-Juhl Korea Limited, a corporation organized in Korea; Lira,
A.S., a corporation organized in the Czech Republic; The Moulding Group Limited,
a corporation organized in the United Kingdom; Northampton Acquisition Limited,
a corporation organized in the United Kingdom; Magnolia Group Limited, a
corporation organized in the United Kingdom; ARQ-DM Limited, a corporation
organized in the United Kingdom; Arquati U.K. Limited, a corporation organized
in the United Kingdom; Larson-Juhl (UK) Limited, a corporation organized in the
United Kingdom; IMALC (Pty.) Ltd., a corporation organized in South Africa;
Supreme Larson-Juhl (Pty.) Ltd., a corporation organized in South Africa;
Larson-Juhl Sweden A.B., a corporation organized in Sweden; Guldlist Larson-Juhl
AB, a corporation organized in Sweden; AB Edenholms Guldlistfabrik, a
corporation organized in Sweden; G. Lundrens Effr A.B., a corporation organized
in Sweden; Tranaslist, A.B., a corporation organized in Sweden; Heinonsalo
Larson-Juhl Oy, a corporation organized in Finland; Dekotukku Oy, a corporation
organized in Finland; Larson-Juhl Russia, a corporation organized in Russia;
Larson-Juhl Baltic, a corporation organized in Latvia; Halvorsens Larson-Juhl,
A.S., a corporation organized in Norway; Larson-Juhl (NZ) Limited, a corporation
organized in
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New Zealand; Larson-Juhl Nippon Corporation, a corporation organized in Japan;
Larson-Juhl Italia s.r.l., a corporation organized in Italy; Arcobalegno s.r.l.,
a corporation organized in Italy; Larson-Juhl Australia Pty Ltd., a corporation
organized in Australia; and (ii) any other Restricted Subsidiary organized or
incorporated in a jurisdiction outside of the United States.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the Issue Date provided, however, that all
reports and other financial information provided by the Company to the Holders,
the Trustee and/or the Commission shall be prepared in accordance with GAAP, as
in effect on the date of such report or other financial information.
"Global Notes" means the Rule 144A Global Notes, the Regulation S
Temporary Global Notes and the Regulation S Permanent Global Notes and any Notes
exchanged for any of the foregoing in the Exchange Offer.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements and (ii) other
agreements or arrangements designed to protect such Person against fluctuations
in interest rates, the value of foreign currencies or the price of raw
materials.
"Holder" means a Person in whose name a Note is registered.
"Indebtedness" means, with respect to any Person, any indebtedness of
such Person, whether or not contingent, in respect of borrowed money or
evidenced by bonds, notes, debentures or similar instruments or letters of
credit (or reimbursement agreements in respect thereof) or banker's acceptances
or representing Capital Lease Obligations or the balance deferred and unpaid of
the purchase price of any property or representing any Hedging Obligations,
except any such balance that constitutes an accrued expense or trade payable, if
and to the extent any of the foregoing indebtedness (other than letters of
credit and Hedging Obligations) would appear as a liability upon a balance sheet
of such Person prepared in accordance with GAAP, as well as all indebtedness of
others secured by a Lien on any asset of such Person (whether or not such
indebtedness is assumed by such Person) and, to the extent not otherwise
included, the Guarantee by such Person of any indebtedness of any other Person.
The amount of any Indebtedness outstanding as of any date shall be (i) the
accreted value thereof, in the
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case of any Indebtedness that does not require current payments of interest, and
(ii) the principal amount thereof in the case of any other Indebtedness.
"Indenture" means this Indenture, as amended or supplemented from time
to time.
"Indirect Participant" means a Person who holds an interest through a
Participant.
"Initial Purchasers" means DLJ, Morgan Stanley & Co. Incorporated and
SunTrust Equitable Securities Corporation.
"Insolvency or Liquidation Proceedings" means (i) any insolvency or
bankruptcy case or proceeding, or any receivership, liquidation, reorganization
or other similar case or proceeding, relative to the Company or to the creditors
of the Company, as such, or to the assets of the Company or (ii) any
liquidation, dissolution, reorganization or winding up of the Company, whether
voluntary or involuntary and involving insolvency or bankruptcy, or (iii) any
assignment for the benefit of creditors or any other marshalling of assets and
liabilities of the Company.
"Institutional Accredited Investor" means an "accredited investor" as
defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act.
"Investments" means, with respect to any Person, all investments by
such Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If the Company or any Restricted Subsidiary of the Company sells or otherwise
disposes of any Equity Interests of any direct or indirect Restricted Subsidiary
of the Company such that, after giving effect to any such sale or disposition,
such Person is no longer a Restricted Subsidiary of the Company, the Company
shall be deemed to have made an Investment on the date of any such sale or
disposition equal to the fair market value of the Equity Interests of such
Restricted Subsidiary not sold or disposed of in an amount determined as
provided in the final paragraph of Section 4.07.
"Issue Date" means the date on which Notes are first issued and
authenticated under the Indenture.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York, the city in which the principal Corporate
Trust Office of the Trustee is located or at a place of payment are authorized
by law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday at a
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place of payment, payment shall be made at that place on the next succeeding day
that is not a Legal Holiday, and no interest shall accrue for the intervening
period.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, and any option or other agreement to sell or give a security
interest therein).
"Liquidated Damages" means all liquidated damages then owing pursuant
to Section 5 of the Registration Rights Agreement.
"Net Income" means, with respect to any Person, the net income (loss)
of such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or (b) the
extinguishment of any Indebtedness of such Person or any of its Subsidiaries and
(ii) any extraordinary or nonrecurring gain (but not loss), together with any
related provision for taxes on such extraordinary or nonrecurring gain (but not
loss).
"Net Proceeds" means the aggregate cash proceeds received by the
Company or any of its Restricted Subsidiaries in respect of any Asset Sale
(including, without limitation, any cash received upon the sale or other
disposition of any non-cash consideration received in any Asset Sale), net of
the direct costs relating to such Asset Sale (including, without limitation,
legal, accounting and investment banking fees, and sales commissions) and any
relocation expenses incurred as a result thereof, taxes paid or payable as a
result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements), amounts required to be applied to
the repayment of Indebtedness (other than Indebtedness under the Credit
Facilities) secured by a Lien on the asset or assets that were the subject of
such Asset Sale and any reserve for adjustment in respect of the sale price of
such asset or assets established in accordance with GAAP.
"Non-Recourse Debt" means Indebtedness (i) as to which neither the
Company nor any of its Restricted Subsidiaries (a) provides credit support of
any kind (including any undertaking, agreement or instrument that would
constitute Indebtedness), or (b) is directly or indirectly liable (as a
Subsidiary Guarantor or otherwise) and (ii) as to which the lenders have been
notified in writing that they will not have any recourse to the stock or assets
of the Company or any of its Restricted Subsidiaries, including the stock of the
Unrestricted Subsidiary that incurred such Indebtedness.
"Note Custodian" means the Trustee when serving as custodian for the
Depositary with respect to the Notes in global form, or any successor entity
thereto.
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"Obligations" means, with respect to any Indebtedness, any principal,
interest, penalties, fees, indemnifications, reimbursements, damages and other
liabilities payable under the documentation governing any Indebtedness.
"Offering" means the offer and sale of the Notes of the Company.
"Officer" means, with respect to any Person, the Chairman of the Board,
the Chief Executive Officer, the President, the Chief Operating Officer, the
Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller,
the Secretary or any Vice-President of such Person, or for purposes of a Person
who is a limited liability company, any manager or managing member of such
Person, or any individual serving in a substantially similar capacity for a
Foreign Subsidiary.
"Officers' Certificate" means a certificate signed on behalf of the
Company by two Officers of the Company, one of whom must be the principal
executive officer, the principal financial officer, the treasurer or the
principal accounting officer of the Company, that meets the requirements of
Sections 13.04 and 13.05 hereof.
"Opinion of Counsel" means an opinion from legal counsel who is
reasonably acceptable to the Trustee, that meets the requirements of Sections
13.04 and 13.05 hereof. The counsel may be an employee of or counsel to the
Company, any Subsidiary of the Company or the Trustee.
"Pari Passu Indebtedness" means Indebtedness that ranks pari passu in
right of payment to the Notes.
"Participant" means, with respect to DTC, Euroclear or Cedel, a Person
who has an account with DTC, Euroclear or Cedel, respectively (and, with respect
to DTC, shall include Euroclear and Cedel).
"Paying Agent" means the depository and paying agent designated as such
by the Company in connection with a Change of Control Offer.
"Permitted Business" means the design, manufacture, distribution,
marketing, licensing and sale of framing-related products and supplies and other
interior accessories and furnishing products and related services.
"Permitted Investments" means (a) any Investment in the Company or in a
Subsidiary Guarantor or a Wholly Owned Foreign Subsidiary that is engaged in a
Permitted Business; (b) any Investment in Cash and Cash Equivalents; (c) any
Investment by the Company or any Restricted Subsidiary in a Person, if as a
result of such Investment (i) such Person becomes a Subsidiary Guarantor or a
Wholly Owned Foreign Subsidiary that is engaged in a Permitted Business or (ii)
such Person is merged, consolidated or amalgamated with or into, or transfers or
conveys substantially all of its assets to, or is liquidated into, the Company
or a Subsidiary Guarantor or a Wholly Owned Foreign Subsidiary that is engaged
in a Permitted Business; (d) any Restricted
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Investment made as a result of the receipt of non-cash consideration from an
Asset Sale that was made pursuant to and in compliance with Section 4.10 or any
transaction not constituting an Asset Sale by reason of the $1,000,000 threshold
contained in the definition thereof; (e) any acquisition of assets solely in
exchange for the issuance of Equity Interests (other than Disqualified Stock) of
the Company; (f) Hedging Obligations entered into in the ordinary course of the
Company's or its Restricted Subsidiaries' Businesses and otherwise in compliance
with the Indenture; (g) additional Investments not to exceed $5,000,000 at any
one time outstanding; and (h) Investments in securities of trade creditors or
customers received in settlement of obligations or pursuant to any plan of
reorganization or similar arrangement upon the bankruptcy or insolvency of such
trade creditors or customers.
"Permitted Junior Securities" means Equity Interests in the Company or
debt securities that are subordinated to all Senior Debt (and any debt
securities issued in exchange for Senior Debt) to substantially the same extent
as, or to a greater extent than, the Notes are subordinated to Senior Debt
pursuant to Article 10 of the Indenture, that have a final maturity date and a
weighted average life to maturity which is the same as or greater than the Notes
and that are not secured by any collateral.
"Permitted Liens" means (i) Liens existing as of the Issue Date to the
extent and in the manner such Liens are in effect on the Issue Date (other than
Liens to be extinguished in connection with the application of the proceeds of
the Offering); (ii) Liens securing Senior Debt and Liens on assets of Restricted
Subsidiaries securing Guarantees of Senior Debt permitted to be incurred under
the Indenture; (iii) Liens securing the Notes and the Subsidiary Guarantees;
(iv) Liens of the Company or a Wholly Owned Restricted Subsidiary on assets of
any Restricted Subsidiary of the Company; (v) Liens securing Permitted
Refinancing Indebtedness which is incurred to refinance any Indebtedness which
has been secured by a Lien permitted under the Indenture and which has been
incurred in accordance with the provisions of the Indenture; provided, however,
that such Liens (A) are not materially less favorable to Holders and are not
materially more favorable to the lienholders with respect to such Liens than the
Liens in respect of the Indebtedness being refinanced and (B) do not extend to
or cover any property or assets of the Company or any of its Restricted
Subsidiaries not securing the Indebtedness so refinanced; (vi) Liens for taxes,
assessments or governmental charges or claims that are either (A) not delinquent
or (B) being contested in good faith by appropriate proceedings and as to which
the Company or its Restricted Subsidiaries shall have set aside on its books
such reserves as may be required pursuant to GAAP; (vii) statutory Liens of
landlords and Liens of carriers, warehousemen, mechanics, supplies, materialmen,
repairmen and other Liens imposed by law incurred in the ordinary course of
business for sums not yet delinquent for a period of more than 60 days or being
contested in good faith, if such reserve or other appropriate provision, if any,
as shall be required by GAAP shall have been made in respect thereof; (viii)
Liens incurred or deposits made in the ordinary course of business in connection
with workers' compensation, unemployment insurance and other types of social
security or similar obligations, including any Lien securing letters of credit
issued
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<PAGE> 16
in the ordinary course of business consistent with past practice in connection
therewith, or to secure the performance of tenders, statutory obligations,
surety and appeal bonds, bids, leases, government contracts, performance and
return-of-money bonds and other similar obligations (exclusive of obligations
for the payment of borrowed money); (ix) judgment Liens not giving rise to an
Event of Default so long as such Lien is adequately bonded and any appropriate
legal proceedings which may have been duly initiated for the review of such
judgment shall not have been finally terminated or the period within which such
proceedings may be initiated shall not have expired; (x) easements,
rights-of-way, zoning restrictions and other similar charges or encumbrances in
respect of real property not interfering in any material respect with the
ordinary conduct of the business of the Company or any of its Restricted
Subsidiaries; (xi) any interest or title of a lessor under any lease, whether or
not characterized as capital or operating; provided that such Liens do not
extend to any property or assets which is not leased property subject to such
lease; (xii) Liens securing Capital Lease Obligations and purchase money
Indebtedness incurred in accordance with Section 4.09; provided, however, that
(A) the Indebtedness shall not exceed the cost of such property or assets being
acquired or constructed and shall not be secured by any property or assets of
the Company or any Restricted Subsidiary of the Company other than the property
or assets of the Company or any Restricted Subsidiary of the Company other than
the property and assets being acquired or constructed and (B) the Lien securing
such Indebtedness shall be created within 90 days of such acquisition or
construction; (xiii) Liens upon specific items of inventory or other goods and
proceeds of any Person securing such Person's obligations in respect of bankers'
acceptances issued or created for the account of such Person to facilitate the
purchase, shipment or storage of such inventory or other goods; (xiv) Liens
securing reimbursement obligations with respect to letters of credit which
encumber documents and other property relating to such letters of credit and
products and proceeds thereof; (xv) Liens encumbering deposits made to secure
obligations arising from statutory, regulatory, contractual, or warranty
requirements of the Company or any of its Restricted Subsidiaries, including
rights of setoff; (xvi) Liens securing Hedging Obligations which Hedging
Obligations relate to Indebtedness that is otherwise permitted under the
Indenture; (xvii) Liens securing Acquired Debt incurred in accordance with
Section 4.09; provided that (A) such Liens secured such Acquired Debt at the
time of and prior to the incurrence of such Acquired Debt by the Company or a
Restricted Subsidiary of the Company and were not granted in connection with, or
in anticipation of, the incurrence of such Acquired Debt by the Company or a
Restricted Subsidiary of the Company and (B) such Liens do not extend to or
cover any property or assets of the Company or any of its Restricted
Subsidiaries other than the property or assets that secured the Acquired Debt
prior to the time such Indebtedness became Acquired Debt of the Company or a
Restricted Subsidiary of the Company and are not more favorable to the
lienholders than those securing the Acquired Debt prior to the incurrence of
such Acquired Debt by the Company or a Restricted Subsidiary of the Company;
(xviii) leases or subleases granted to others not interfering in any material
respect with the business of the Company or its Restricted Subsidiaries; (xix)
Liens securing Indebtedness of Foreign Subsidiaries incurred in accordance with
the provisions of Section 4.09, provided that such Liens relate solely to the
assets of the Foreign Subsidiaries that incurred such Indebtedness; and (xx)
Liens in favor of the Trustee arising under this Indenture.
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<PAGE> 17
"Permitted Quarterly Tax Distributions" means quarterly distributions
of Tax Amounts determined on the basis of the estimated taxable income of the
Company for the related Estimation Period, provided however, that (A) prior to
any distributions of Tax Amounts the Company shall deliver an Officers'
Certificate certifying that the Tax Amounts to be distributed were determined
pursuant to the terms of the Indenture and stating to the effect that the
Company qualifies as an S corporation or substantially similar pass-through
entity for federal income tax purposes and (B) at the time of such
distributions, the most recent audited financial statements of the Company
reflect that the Company was treated as an S corporation or substantially
similar pass-through entity for federal income tax purposes for the period
covered by such financial statements.
"Permitted Refinancing Indebtedness" means any Indebtedness of the
Company or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, prepay, retire, renew, replace,
defease or refund Indebtedness of the Company or any of its Subsidiaries (other
than such Indebtedness described in clauses (i), (vi), (vii), (viii), (ix), (xi)
and (xii) of Section 4.09); provided that: (i) the principal amount (or accreted
value, if applicable) of such Permitted Refinancing Indebtedness does not exceed
the principal amount of (or accreted value, if applicable), plus accrued
interest on, the Indebtedness so extended, refinanced, renewed, prepaid,
retired, replaced, defeased or refunded (plus the amount of reasonable expenses
incurred in connection therewith including premiums paid, if any, to the holders
thereof), such principal amount to be calculated as to Foreign Subsidiaries on
an aggregate consolidated basis in the case of a consolidated refinancing of
Indebtedness of Foreign Subsidiaries; (ii) such Permitted Refinancing
Indebtedness has a final maturity date at or later than the final maturity date
of, and has a Weighted Average Life to Maturity equal to or greater than the
Weighted Average Life to Maturity of, the Indebtedness being extended,
refinanced, renewed, prepaid, retired, replaced, defeased or refunded; (iii) if
the Indebtedness being extended, refinanced, renewed, prepaid, retired,
replaced, defeased or refunded is subordinated in right of payment to the Notes,
such Permitted Refinancing Indebtedness has a final maturity date later than the
final maturity date of, and is subordinated in right of payment to, the Notes on
terms at least as favorable to the Holders of Notes as those contained in the
documentation governing the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; and (iv) such Indebtedness either is incurred by
the Company or is incurred by the Restricted Subsidiary who is the obligor on
(or, in the case of a consolidated refinancing of the Indebtedness of the
Foreign Subsidiaries, by all of the Foreign Subsidiaries which are obligors on)
the Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded. In the case of Permitted Refinancing Indebtedness incurred by the
Company under a revolving credit facility or facilities to refinance, refund or
replace Indebtedness of Foreign Subsidiaries, and any successive Permitted
Refinancing Indebtedness incurred with respect thereto, (x) such Permitted
Refinancing Indebtedness shall include all successive readvances, reborrowings
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<PAGE> 18
and other Indebtedness thereafter incurred under such facility or facilities up
to the original principal amount of such Permitted Refinancing Indebtedness, and
(y) such Indebtedness being refinanced shall be deemed to have been outstanding
on the Issue Date so long as the aggregate amount thereof at the time of the
refinancing does not exceed the aggregate amount of Indebtedness of Foreign
Subsidiaries outstanding on the Issue Date.
"Person" means any individual, partnership, corporation, limited
liability company, unincorporated organization, trust or joint venture, or a
governmental agency or political subdivision thereof.
"Principals" means Craig A. Ponzio and June R. Ponzio.
"Private Placement Legend" means the legend initially set forth on the
Notes in the form set forth in Section 2.06(g) hereof.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A
under the Securities Act.
"Qualified Proceeds" means any of the following or any combination of
the following: (i) cash, (ii) Cash Equivalents, (iii) long-term assets that are
used or useful in a Permitted Business and (iv) the Capital Stock of any Person
engaged primarily in a Permitted Business if, in connection with the receipt by
the Company or any Restricted Subsidiary of the Company of such Capital Stock,
(a) such Person becomes a Wholly Owned Restricted Subsidiary and a Subsidiary
Guarantor or (b) such Person is merged, consolidated or amalgamated with or
into, or transfers or conveys substantially all of its assets to, or is
liquidated into, the Company or any Wholly Owned Restricted Subsidiary of the
Company that is a Subsidiary Guarantor.
"Quarterly Payment Period" means the period commencing on the first day
of each month in which federal individual tax payments are due and ending on and
including the day of such month on which such payments are due (provided that
payments in respect of estimated state income taxes due in January may instead,
at the option of the Company, be paid during the last five days of the
immediately preceding December).
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the date hereof, among the Company, the Subsidiary
Guarantors and the Initial Purchasers.
"Regulation S" means Regulation S promulgated under the Securities Act.
"Regulation S Global Notes" means the Regulation S Temporary Global
Notes or the Regulation S Permanent Global Notes as applicable.
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<PAGE> 19
"Regulation S Permanent Global Notes" means the permanent global notes
that do not contain the paragraphs referred to in footnote 1 to the form of Note
attached hereto as EXHIBIT A-2 and that are deposited with and registered in the
name of the Depositary or its nominee, representing a series of Notes sold in
reliance on Regulation S.
"Regulation S Temporary Global Notes" means the temporary global notes
that contain the paragraphs referred to in footnote 1 to the form of Note
attached hereto as EXHIBIT A-2 and that are deposited with and registered in the
name of the Depositary or its nominee, representing a series of Notes sold in
reliance on Regulation S.
"Related Party" with respect to any Principal means (A) any controlling
shareholder or a majority (or more) owned Subsidiary of such Principal or, in
the case of an individual, any spouse or immediate family member of such
Principal, or (B) any trust, corporation, partnership or other entity, the
beneficiaries, shareholders, partners, owners or Persons beneficially holding a
majority (or more) controlling interest of which consist of such Principal
and/or such other Persons referred to in the immediately preceding clause (A).
"Responsible Officer" when used with respect to the Trustee, means any
officer within the Corporate Trust Administration of the Trustee (or any
successor group of the Trustee) or any other officer of the trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
"Restricted Beneficial Interest" means any beneficial interest of a
Participant or Indirect Participant in the Rule 144A Global Note or the
Regulation S Global Note.
"Restricted Broker Dealer" has the meaning set forth in the
Registration Rights Agreement.
"Restricted Global Notes" means the Rule 144A Global Notes and the
Regulation S Global Notes, all of which shall bear the Private Placement Legend.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" means any Subsidiary of the Company other than
an Unrestricted Subsidiary.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
"Rule 144A Global Notes" means the permanent global notes that contain
the paragraph referred to in footnote 1 and the additional schedule referred to
in footnote 3 to the form of the Note attached hereto as EXHIBIT A-1, and that
is deposited with and
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<PAGE> 20
registered in the name of the Depositary or its nominee, representing a series
of Notes sold in reliance on Rule 144A.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Debt" means (i) all Indebtedness of the Company or any
Subsidiary Guarantor outstanding under Credit Facilities and all Hedging
Obligations with respect thereto, (ii) other Indebtedness of the Company or any
of its Subsidiary Guarantors permitted to be incurred under the terms of the
Indenture, unless the instrument under which such Indebtedness is incurred
expressly provides that it is on a parity with or subordinated in right of
payment to the Notes and (iii) all Obligations with respect to the foregoing.
Notwithstanding anything to the contrary in the foregoing, Senior Debt will not
include (w) any liability for federal, state, local or other taxes owed or owing
by the Company, (x) any Indebtedness of the Company to any of its Subsidiaries
or other Affiliates, (y) any trade payables or (z) that portion of any
Indebtedness that is incurred in violation of the Indenture.
"Shelf Registration Statement" means the Shelf Registration Statement
as defined in the Registration Rights Agreement.
"Significant Subsidiary" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Act, as such Regulation is in effect on the date
hereof.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total Voting
Stock thereof is at the time owned or controlled, directly or indirectly, by
such Person or one or more of the other Subsidiaries of that Person (or a
combination thereof) and (ii) any partnership (a) the sole general partner or
the managing general partner of which is such Person or a Subsidiary of such
Person or (b) the only general partners of which are such Person or of one or
more Subsidiaries of such Person (or any combination thereof).
"Subsidiary Guarantors" means, initially, each Subsidiary of the
Company (other than Foreign Subsidiaries and Unrestricted Subsidiaries) on the
Issue Date and thereafter each of the Subsidiaries of the Company that executes
a Subsidiary Guarantee in accordance with the provisions of the Indenture, and
their respective successors and assigns.
"Tax Amounts" with respect to any taxable period shall not exceed an
amount equal to (A) the product of (x) the taxable income of the Company for
such period (or as
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<PAGE> 21
such amount may be subsequently adjusted based upon a redetermination agreed
upon with applicable tax authorities) as determined by the Tax CPA and (y) the
Tax Percentage, plus (B) the amount of any interest and penalties assessed in
connection with such a redetermination, reduced by (C) to the extent not
previously taken into account, any income tax benefit attributable to the
Company which could be realized (without regard to actual realization) by its
shareholders in the current or any prior taxable year, or portion thereof,
commencing on or after the Issue Date (including any tax losses or tax credits),
computed at the applicable Tax Percentage for the year that such benefit is
taken into account for purposes of this computation.
"Tax CPA" means a nationally recognized certified public accounting
firm.
"Tax Percentage" means, for a particular taxable year, the highest
effective marginal combined rate of U.S. federal and state and local income tax,
imposed on an individual taxpayer, as certified by the Tax CPA in a certificate
filed with the Trustee. The rate of state and local income tax to be taken into
account for purposes of determining the Tax Percentage for a particular taxable
year shall be deemed to be the highest state and local marginal tax rate
applicable to any shareholder.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code ss.ss.
77aaa-77bbbb), as amended, as in effect on the date hereof.
"Transfer Restricted Securities" means Notes or beneficial interests
therein that bear or are required to bear the Private Placement Legend.
"True-up Amount" means, in respect of a particular taxable year, an
amount determined by the Tax CPA equal to the difference between (i) the
aggregate Permitted Quarterly Tax Distributions actually distributed in respect
of such taxable year and (ii) the actual Tax Amounts for such year. The amount
equal to the excess, if any, of the amount described in clause (i) over the
amount described in clause (ii) above shall be referred to as the "True-up
Amount due to the Company" and the excess, if any, of the amount described in
clause (ii) over the amount described in clause (i) above shall be referred to
as the "True-up Amount due to the shareholders."
"True-up Determination Date" means the date on which the Tax CPA
delivers a statement to the Trustee indicating the True-up Amount.
"Trustee" means State Street Bank and Trust Company until a successor
replaces it in accordance with the applicable provisions of this Indenture, and
thereafter means the successor.
"Unrestricted Global Notes" means one or more Global Notes that do not
and are not required to bear the Private Placement Legend.
"Unrestricted Subsidiary" means (i) HBA L.L.C. and HBA-MS Inc. and (ii)
any Subsidiary (other than the Subsidiary Guarantors as of the Issue Date or any
successor to
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<PAGE> 22
any of them) of the Company that is designated by the board of directors of the
Company as an Unrestricted Subsidiary pursuant to a board resolution, but only
to the extent that such Subsidiary: (a) has no Indebtedness other than
Non-Recourse Debt; (b) is not party to any agreement, contract, arrangement or
understanding with the Company or any Restricted Subsidiary unless the terms of
any such agreement, contract, arrangement or understanding are no less favorable
to the Company or such Restricted Subsidiary than those that might be obtained
at the time from Persons who are not Affiliates of the Company; (c) is a Person
with respect to which neither the Company nor any of its Restricted Subsidiaries
has any direct or indirect obligation (x) to subscribe for additional Equity
Interests or (y) to maintain or preserve such Person's financial condition or to
cause such Person to achieve any specified levels of operating results; and (d)
has not guaranteed or otherwise directly or indirectly provided credit support
for any Indebtedness of the Company or any of its Restricted Subsidiaries. Any
such designation by the Board of Directors shall be evidenced to the Trustee by
filing with the Trustee a certified copy of the board resolution giving effect
to such designation and an officers' certificate certifying that such
designation complied with the foregoing conditions and was permitted by Section
4.07. If, at any time, any Unrestricted Subsidiary would fail to meet the
foregoing requirements as an Unrestricted Subsidiary, it shall thereafter cease
to be an Unrestricted Subsidiary for purposes of the Indenture and any
Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted
Subsidiary of the Company as of such date. The Board of Directors of the Company
may at any time designate any Unrestricted Subsidiary to be a Restricted
Subsidiary; provided that such designation shall be deemed to be an incurrence
of Indebtedness and issuance of preferred stock by a Restricted Subsidiary of
the Company of any outstanding Indebtedness or outstanding issue of preferred
stock of such Unrestricted Subsidiary and such designation shall only be
permitted if (i) such Indebtedness and preferred stock is permitted under
Section 4.09 calculated on a pro forma basis as if such designation had occurred
at the beginning of the four quarter reference period, (ii) such Subsidiary
becomes a Subsidiary Guarantor, and (iii) no Default or Event of Default would
exist following such designation.
"Voting Stock" of any Person as of any date means the Capital Stock of
such Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the sum
of the products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"Wholly Owned Foreign Subsidiary" of any Person means a Foreign
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which
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<PAGE> 23
(other than directors' qualifying shares or shares required to be owned by
foreign nationals by applicable law) shall at the time be owned by such Person
or by one or more Wholly Owned Foreign Subsidiaries of such Person or by such
Person and one or more Wholly Owned Restricted Subsidiaries of such Person.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares or shares
required to be owned by foreign nationals by applicable law) shall at the time
be owned by such Person or by one or more Wholly Owned Restricted Subsidiaries
of such Person or by such Person and one or more Wholly Owned Restricted
Subsidiaries of such Person.
SECTION 1.02. OTHER DEFINITIONS
<TABLE>
<CAPTION>
DEFINED IN
TERM SECTION
---- -------
<S> <C>
"Affiliate Transaction"................................................. 4.11
"Asset Sale Offer"...................................................... 4.10
"Asset Sale Offer Triggering Event"..................................... 4.10
"Change of Control Offer"............................................... 4.13
"Change of Control Payment"............................................. 4.13
"Change of Control Payment Date"........................................ 4.13
"Covenant Defeasance"................................................... 8.03
"Custodian"............................................................. 6.01
"DTC"................................................................... 2.03
"Electronic Message".................................................... 2.02
"Event of Default"...................................................... 6.01
"Excess Proceeds"....................................................... 4.10
"Guaranteed Debt"....................................................... 4.17
"incur"................................................................. 4.09
"Legal Defeasance"...................................................... 8.02
"Offer Amount".......................................................... 3.09
"Offer Period".......................................................... 3.09
"Paying Agent".......................................................... 2.03
"Payment Blockage Notice" .............................................. 10.03
"Payment Default"....................................................... 6.01
"Permitted Debt"........................................................ 4.09
"Repurchase Date"....................................................... 3.09
"Registrar"............................................................. 2.03
"Representative" ....................................................... 10.05
"Repurchase Offer"...................................................... 3.09
"Restricted Payments"................................................... 4.07
"Subsidiary Guarantee" ................................................. 11.01
</TABLE>
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<PAGE> 24
SECTION 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT
Whenever this Indenture refers to a provision of the TIA, the provision
is incorporated by reference in, and made a part of, this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Notes;
"indenture security holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee;
"obligor" on the Notes means the Company, each Subsidiary Guarantor and
any successor obligor upon the Notes.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by the Commission rule
under the TIA have the meanings so assigned to them therein.
SECTION 1.04. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it herein;
(2) an accounting term not otherwise defined herein has
the meaning assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the
plural include the singular;
(5) provisions apply to successive events and
transactions; and
(6) references to sections of or rules under the
Securities Act shall be deemed to include substitute, replacement or
successor sections or rules adopted by the Commission from time to
time.
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<PAGE> 25
ARTICLE 2
THE NOTES
SECTION 2.01. FORM AND DATING.
The Notes and the Trustee's certificate of authentication shall be
substantially in the form of EXHIBIT A-1 or EXHIBIT A-2 attached hereto. The
Notes may have notations, legends or endorsements required by law, stock
exchange rule or usage. Each Note shall be dated the date of its authentication.
The Notes initially shall be issued in denominations of $1,000 and integral
multiples thereof.
The terms and provisions contained in the Notes shall constitute, and
are hereby expressly made, a part of this Indenture and the Company, the
Subsidiary Guarantors and the Trustee, by their execution and delivery of this
Indenture, expressly agree to such terms and provisions and to be bound thereby.
(a) Global Notes. Notes offered and sold to QIBs in reliance on Rule
144A shall be issued initially in the form of Rule 144A Global Notes, which
shall be deposited on behalf of the purchasers of the Notes represented thereby
with a custodian of the Depositary, and registered in the name of the Depositary
or a nominee of the Depositary, duly executed by the Company and authenticated
by the Trustee as hereinafter provided. The aggregate principal amount of the
Rule 144A Global Notes may from time to time be increased or decreased by
adjustments made on the records of the Trustee and the Depositary or its nominee
as hereinafter provided.
Notes offered and sold in reliance on Regulation S shall be issued
initially in the form of the Regulation S Temporary Global Note, which shall be
deposited on behalf of the purchasers of the Notes represented thereby with the
Trustee, as custodian for the Depositary, and registered in the name of the
Depositary or the nominee of the Depositary for the accounts of designated
agents holding on behalf of Euroclear or Cedel, duly executed by the Company and
authenticated by the Trustee as hereinafter provided. The "40-day restricted
period" (as defined in Regulation S) shall be terminated upon the receipt by the
Trustee of (i) a written certificate from the Depositary, together with copies
of certificates from Euroclear and Cedel certifying that they have received
certification of non-United States beneficial ownership of 100% of the aggregate
principal amount of the Regulation S Temporary Global Notes (except to the
extent of any beneficial owners thereof who acquired an interest therein
pursuant to another exemption from registration under the Securities Act and who
will take delivery of a beneficial ownership interest in a Rule 144A Global
Note, all as contemplated by Section 2.06(a)(ii) hereof), and (ii) an Officers'
Certificate from the Company certifying as to the same matters covered in clause
(i) above. Following the termination of the 40-day restricted period, beneficial
interests in the Regulation S Temporary Global Note shall be exchanged for
beneficial interests in Regulation S Permanent Global Notes pursuant to the
Applicable Procedures. Simultaneously with the authentication of Regulation S
Permanent Global Notes, the Trustee shall cancel the Regulation S
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<PAGE> 26
Temporary Global Notes. The aggregate principal amount of the Regulation S
Temporary Global Notes and the Regulation S Permanent Global Notes may from time
to time be increased or decreased by adjustments made on the records of the
Trustee and the Depositary or its nominee, as the case may be, in connection
with transfers of interest as hereinafter provided.
Each Global Note shall represent such of the outstanding Notes as shall
be specified therein and each shall provide that it shall represent the
aggregate amount of outstanding Notes from time to time endorsed thereon and
that the aggregate amount of outstanding Notes represented thereby may from time
to time be reduced or increased, as appropriate, to reflect exchanges,
redemptions and transfers of interests. Any endorsement of a Global Note to
reflect the amount of any increase or decrease in the amount of outstanding
Notes represented thereby shall be made by the Trustee or the Note Custodian, at
the direction of the Trustee, in accordance with instructions given by the
Holder thereof as required by Section 2.06 hereof.
The provisions of the "Operating Procedures of the Euroclear System"
and "Terms and Conditions Governing Use of Euroclear" and the "Management
Regulations" and "Instructions to Participants" of Cedel shall be applicable to
interests in the Regulation S Temporary Global Notes and the Regulation S
Permanent Global Notes that are held by Participants through Euroclear or Cedel.
The Trustee shall have no obligation to notify Holders of any such procedures or
to monitor or enforce compliance with the same.
Except as set forth in Section 2.06 hereof, the Global Notes may be
transferred, in whole and not in part, only to another nominee of the Depositary
or to a successor of the Depositary or its nominee.
(b) Book-Entry Provisions. This Section 2.01(b) shall apply only to
Rule 144A Global Notes and Regulation S Permanent Global Notes deposited with or
on behalf of the Depositary.
The Company shall execute and the Trustee shall, in accordance with
this Section 2.01(b) and Section 2.02, authenticate and deliver the Global Notes
that (i) shall be registered in the name of the Depositary or the nominee of the
Depositary and (ii) shall be delivered by the Trustee to the Depositary or
pursuant to the Depositary's instructions or held by the Trustee as custodian
for the Depositary.
Participants shall have no rights either under this Indenture with
respect to any Global Note held on their behalf by the Depositary or by the Note
Custodian as custodian for the Depositary or under such Global Note, and the
Depositary may be treated by the Company, the Trustee and any agent of the
Company or the Trustee as the absolute owner of such Global Note for all
purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent
the Company, the Trustee or any agent of the Company or the Trustee from giving
effect to any written certification, proxy or other authorization furnished by
the Depositary or impair, as between the Depositary and its
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Participants, the operation of customary practices of such Depositary governing
the exercise of the rights of an owner of a beneficial interest in any Global
Note.
(c) Definitive Notes. Notes issued in certificated form shall be
substantially in the form of EXHIBIT A-1 attached hereto (but without including
the text referred to in footnotes 1 and 2 thereto).
SECTION 2.02. EXECUTION AND AUTHENTICATION.
Two Officers of the Company shall sign the Notes for the Company by
manual or facsimile signature. The Company's seal shall be reproduced on the
Notes and may be in facsimile form.
If an Officer of the Company whose signature is on a Note no longer
holds that office at the time the Note is authenticated, the Note shall
nevertheless be valid.
A Note shall not be valid until authenticated by the manual signature
of the Trustee. The signature of the Trustee shall be conclusive evidence that
the Note has been authenticated under this Indenture. The form of Trustee's
certificate of authentication to be borne by the Notes shall be substantially as
set forth in EXHIBIT A-1 OR EXHIBIT A-2 hereto.
The Trustee shall, upon a written order of the Company signed by two
Officers of the Company, authenticate Notes for issuance up to the aggregate
principal amount stated in such order; provided that (i) Notes authenticated for
issuance on the Issue Date shall not exceed $200,000,000 in aggregate principal
amount, and (ii) Additional Notes authenticated for issuance shall not exceed
$100,000,000 in aggregate principal amount and may only be issued if such
Additional Notes have been placed, purchased or underwritten by Donaldson,
Lufkin & Jenrette Securities Corporation acting as lead placement agent, initial
purchaser or underwriter. The aggregate principal amount of Notes outstanding at
any time may not exceed $300,000,000, except as provided in Section 2.07 hereof.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Notes. Unless limited by the terms of such appointment,
an authenticating agent may authenticate Notes whenever the Trustee may do so.
Each reference in this Indenture to authentication by the Trustee includes
authentication by such agent. An authenticating agent has the same rights as an
Agent to deal with the Company or an Affiliate of the Company.
SECTION 2.03. REGISTRAR AND PAYING AGENT.
The Company shall maintain in the Borough of Manhattan, in the City of
New York, State of New York and in such other locations as it shall determine,
(i) an office or agency where Notes may be presented for registration of
transfer or for exchange ("Registrar") and (ii) an office or agency where Notes
may be presented for payment
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("Paying Agent"). The Registrar shall keep a register of the Notes and of their
transfer and exchange. The Company may appoint one or more additional paying
agents. The term "Paying Agent" includes any additional paying agent. The
Company may change any Paying Agent or Registrar without notice to any Holder.
The Company shall notify the Trustee in writing of the name and address of any
Agent not a party to this Indenture. If the Company fails to appoint or maintain
another entity as Registrar or Paying Agent, the Trustee shall act as such. The
Company or any of its Subsidiaries may act as Paying Agent or Registrar.
The Company initially appoints The Depository Trust Company ("DTC") to
act as Depositary with respect to the Global Notes.
The Company initially appoints the Trustee to act as the Registrar and
Paying Agent and to act as Note Custodian with respect to the Global Notes. The
Company initially appoints the Trustee to act as the Registrar and Paying Agent
with respect to the Definitive Notes.
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST.
The Company shall require each Paying Agent other than the Trustee to
agree in writing that the Paying Agent shall hold in trust for the benefit of
Holders or the Trustee all money held by the Paying Agent for the payment of
principal, premium or Liquidated Damages, if any, or interest on the Notes, and
shall notify the Trustee of any default by the Company in making any such
payment. While any such default continues, the Trustee may require a Paying
Agent to pay all money held by it to the Trustee. The Company at any time may
require a Paying Agent to pay all money held by it to the Trustee. Upon payment
over to the Trustee, the Paying Agent (if other than the Company or a
Subsidiary) shall have no further liability for the money. If the Company or a
Subsidiary acts as Paying Agent, it shall segregate and hold in a separate trust
fund for the benefit of the Holders all money held by it as Paying Agent. Upon
the occurrence of events specified in Section 6.01(viii) or (ix) hereof, the
Trustee shall serve as Paying Agent for the Notes.
SECTION 2.05. HOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise comply with TIA ss. 312(a). If the Trustee is
not the Registrar, the Company and the Subsidiary Guarantors shall furnish to
the Trustee at least seven (7) Business Days before each interest payment date
and at such other times as the Trustee may request in writing, a list in such
form and as of such date as the Trustee may reasonably require of the names and
addresses of the Holders of Notes and the Company shall otherwise comply with
TIA ss. 312(a).
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SECTION 2.06. TRANSFER AND EXCHANGE.
(a) Transfer and Exchange of Global Notes. The transfer and
exchange of Global Notes or beneficial interests therein shall be effected
through the Depositary, in accordance with this Indenture and the procedures of
the Depositary therefor, which shall include restrictions on transfer comparable
to those set forth herein to the extent required by the Securities Act.
Beneficial interests in a Global Note may be transferred to Persons who take
delivery thereof in the form of a beneficial interest in the same Global Note in
accordance with the transfer restrictions set forth in the legend in subsection
(g) of this Section 2.06. Transfers of beneficial interests in the Global Notes
to Persons required to take delivery thereof in the form of an interest in
another Global Note shall be permitted as follows:
(i) Rule 144A Global Note to Regulation S Global Note. If, at
any time, an owner of a beneficial interest in a Rule 144A Global Note deposited
with the Depositary (or the Trustee as custodian for the Depositary) wishes to
transfer its beneficial interest in such Rule 144A Global Note to a Person who
is required or permitted to take delivery thereof in the form of an interest in
a Regulation S Global Note, such owner shall, subject to the Applicable
Procedures, exchange or cause the exchange of such interest for an equivalent
beneficial interest in a Regulation S Global Note as provided in this Section
2.06(a)(i). Upon receipt by the Trustee of (1) instructions given in accordance
with the Applicable Procedures from a Participant directing the Trustee to
credit or cause to be credited a beneficial interest in the Regulation S Global
Note in an amount equal to the beneficial interest in the Rule 144A Global Note
to be exchanged, (2) a written order given in accordance with the Applicable
Procedures containing information regarding the Participant account of the
Depositary and the Euroclear or Cedel account to be credited with such increase,
and (3) a certificate in the form of Exhibit B-1 hereto given by the owner of
such beneficial interest stating that the transfer of such interest has been
made in compliance with the transfer restrictions applicable to the Global Notes
and pursuant to and in accordance with Rule 903 or Rule 904 of Regulation S,
then the Trustee, as Registrar, shall instruct the Depositary to reduce or cause
to be reduced the aggregate principal amount at maturity of the applicable Rule
144A Global Note and to increase or cause to be increased the aggregate
principal amount at maturity of the applicable Regulation S Global Note by the
principal amount at maturity of the beneficial interest in the Rule 144A Global
Note to be exchanged or transferred, to credit or cause to be credited to the
account of the Person specified in such instructions, a beneficial interest in
the Regulation S Global Note equal to the reduction in the aggregate principal
amount at maturity of the Rule 144A Global Note, and to debit, or cause to be
debited, from the account of the Person making such exchange or transfer the
beneficial interest in the Rule 144A Global Note that is being exchanged or
transferred.
(ii) Regulation S Global Note to Rule 144A Global Note. If, at
any time, after the expiration of the 40-day restricted period, an owner of a
beneficial interest in a Regulation S Global Note deposited with the Depositary
or with the Trustee as
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custodian for the Depositary wishes to transfer its beneficial interest in such
Regulation S Global Note to a Person who is required or permitted to take
delivery thereof in the form of an interest in a Rule 144A Global Note, such
owner shall, subject to the Applicable Procedures, exchange or cause the
exchange of such interest for an equivalent beneficial interest in a Rule 144A
Global Note as provided in this Section 2.06(a)(ii). Upon receipt by the Trustee
of (1) instructions from Euroclear or Cedel, if applicable, and the Depositary,
directing the Trustee, as Registrar, to credit or cause to be credited a
beneficial interest in the Rule 144A Global Note equal to the beneficial
interest in the Regulation S Global Note to be exchanged, such instructions to
contain information regarding the Participant account with the Depositary to be
credited with such increase, (2) a written order given in accordance with the
Applicable Procedures containing information regarding the participant account
of the Depositary and (3) a certificate in the form of Exhibit B-2 attached
hereto given by the owner of such beneficial interest stating (A) if the
transfer is pursuant to Rule 144A, that the Person transferring such interest in
a Regulation S Global Note reasonably believes that the Person acquiring such
interest in a Rule 144A Global Note is a QIB and is obtaining such beneficial
interest in a transaction meeting the requirements of Rule 144A and any
applicable blue sky or securities laws of any state of the United States, (B)
that the transfer complies with the requirements of Rule 144 under the
Securities Act, (C) if the transfer is to an Institutional Accredited Investor
that such transfer is in compliance with the Securities Act and a certificate in
the form of Exhibit C attached hereto and, if such transfer is in respect of an
aggregate principal amount of less than $250,000, an Opinion of Counsel
acceptable to the Company that such transfer is in compliance with the
Securities Act or (D) if the transfer is pursuant to any other exemption from
the registration requirements of the Securities Act, that the transfer of such
interest has been made in compliance with the transfer restrictions applicable
to the Global Notes and pursuant to and in accordance with the requirements of
the exemption claimed, such statement to be supported by an Opinion of Counsel
from the transferee or the transferor in form reasonably acceptable to the
Company and to the Registrar and in each case, in accordance with any applicable
securities laws of any state of the United States or any other applicable
jurisdiction, then the Trustee, as Registrar, shall instruct the Depositary to
reduce or cause to be reduced the aggregate principal amount at maturity of such
Regulation S Global Note and to increase or cause to be increased the aggregate
principal amount at maturity of the applicable Rule 144A Global Note by the
principal amount at maturity of the beneficial interest in the Regulation S
Global Note to be exchanged or transferred, and the Trustee, as Registrar, shall
instruct the Depositary, concurrently with such reduction, to credit or cause to
be credited to the account of the Person specified in such instructions a
beneficial interest in the applicable Rule 144A Global Note equal to the
reduction in the aggregate principal amount at maturity of such Regulation S
Global Note and to debit or cause to be debited from the account of the Person
making such transfer the beneficial interest in the Regulation S Global Note
that is being exchanged or transferred.
(b) Transfer and Exchange of Definitive Notes. When Definitive Notes
are presented by a Holder to the Registrar with a request to register the
transfer of the
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Definitive Notes or to exchange such Definitive Notes for an equal principal
amount of Definitive Notes of other authorized denominations, the Registrar
shall register the transfer or make the exchange as requested only if the
Definitive Notes are presented or surrendered for registration of transfer or
exchange, are endorsed and contain a signature guarantee or accompanied by a
written instrument of transfer in form satisfactory to the Registrar duly
executed by such Holder or by his attorney and contains a signature guarantee,
duly authorized in writing and the Registrar received the following
documentation (all of which may be submitted by facsimile):
(i) in the case of Definitive Notes that are Transfer
Restricted Securities, such request shall be accompanied by the following
additional information and documents, as applicable:
(A) if such Transfer Restricted Security is being
delivered to the Registrar by a Holder for registration in the name of such
Holder, without transfer, or such Transfer Restricted Security is being
transferred to the Company or any of its Subsidiaries, a certification to that
effect from such Holder (in substantially the form of Exhibit B-3 hereto); or
(B) if such Transfer Restricted Security is being
transferred to a QIB in accordance with Rule 144A under the Securities Act or
pursuant to an exemption from registration in accordance with Rule 144 under the
Securities Act or pursuant to an effective registration statement under the
Securities Act, a certification to that effect from such Holder (in
substantially the form of Exhibit B-3 hereto); or
(C) if such Transfer Restricted Security is being
transferred to a Non-U.S. Person in an offshore transaction in accordance with
Rule 904 under the Securities Act, a certification to that effect from such
Holder (in substantially the form of Exhibit B-3 hereto);
(D) if such Transfer Restricted Security is being
transferred to an Institutional Accredited Investor in reliance on an exemption
from the registration requirements of the Securities Act other than those listed
in subparagraphs (B) and (C) above, a certification to that effect from such
Holder (in substantially the form of Exhibit B-3 hereto), a certification
substantially in the form of Exhibit C hereto, and, if such transfer is in
respect of an aggregate principal amount of Notes of less than $250,000, an
Opinion of Counsel reasonably acceptable to the Company that such transfer is in
compliance with the Securities Act; or
(E) if such Transfer Restricted Security is being
transferred in reliance on any other exemption from the registration
requirements of the Securities Act, a certification to that effect from such
Holder (in substantially the form of Exhibit B-3 hereto) and an Opinion of
Counsel from such Holder or the transferee reasonably acceptable to the Company
and to the Registrar to the effect that such transfer is in compliance with the
Securities Act.
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(c) Transfer of a Beneficial Interest in a Rule 144A Global Note
or Regulation S Permanent Global Note for a Definitive Note.
(i) Any Person having a beneficial interest in a Rule 144A
Global Note or Regulation S Permanent Global Note may upon request, subject to
the Applicable Procedures, exchange such beneficial interest for a Definitive
Note. Upon receipt by the Trustee of written instructions or such other form of
instructions as is customary for the Depositary (or Euroclear or Cedel, if
applicable), from the Depositary or its nominee on behalf of any Person having a
beneficial interest in a Rule 144A Global Note or Regulation S Permanent Global
Note, and, in the case of a Transfer Restricted Security, the following
additional information and documents (all of which may be submitted by
facsimile):
(A) if such beneficial interest is being transferred to
the Person designated by the Depositary as being the beneficial owner, a
certification to that effect from such Person (in substantially the form of
Exhibit B-4 hereto);
(B) if such beneficial interest is being transferred
to a QIB in accordance with Rule 144A under the Securities Act or pursuant to an
exemption from registration in accordance with Rule 144 under the Securities Act
or pursuant to an effective registration statement under the Securities Act, a
certification to that effect from the transferor (in substantially the form of
Exhibit B-4 hereto);
(C) if such beneficial interest is being transferred
to an Institutional Accredited Investor, pursuant to a private placement
exemption from the registration requirements of the Securities Act (and based on
an opinion of counsel if the Company so requests), a certification to that
effect from such Holder (in substantially the form of Exhibit B-4 hereto) and a
certificate from the applicable transferee (in substantially the form of Exhibit
C hereto); or
(D) if such beneficial interest is being transferred in
reliance on any other exemption from the registration requirements of the
Securities Act, a certification to that effect from the transferor (in
substantially the form of Exhibit B-4 hereto) and an Opinion of Counsel from the
transferee or the transferor reasonably acceptable to the Company and to the
Registrar to the effect that such transfer is in compliance with the Securities
Act, in which case the Trustee or the Note Custodian, at the direction of the
Trustee, shall, in accordance with the standing instructions and procedures
existing between the Depositary and the Note Custodian, cause the aggregate
principal amount of Rule 144A Global Notes or Regulation S Permanent Global
Notes, as applicable, to be reduced accordingly and, following such reduction,
the Company shall execute and, the Trustee shall authenticate and deliver to the
transferee a Definitive Note in the appropriate principal amount.
(ii) Definitive Notes issued in exchange for a beneficial
interest in a Rule 144A Global Note or Regulation S Permanent Global Note, as
applicable, pursuant to this Section 2.06(c) shall be registered in such names
and in such authorized
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denominations as the Depositary, pursuant to instructions from its Participants
or Indirect Participants or otherwise, shall instruct the Trustee. The Trustee
shall deliver such Definitive Notes to the Persons in whose names such Notes are
so registered. Following any such issuance of Definitive Notes, the Trustee, as
Registrar, shall instruct the Depositary to reduce or cause to be reduced the
aggregate principal amount at maturity of the applicable Global Note to reflect
the transfer.
(d) Restrictions on Transfer and Exchange of Global Notes.
Notwithstanding any other provision of this Indenture (other than the provisions
set forth in subsection (g) of this Section 2.06), a Global Note may not be
transferred as a whole except by the Depositary to a nominee of the Depositary
or by a nominee of the Depositary to the Depositary or another nominee of the
Depositary or by the Depositary or any such nominee to a successor Depositary or
a nominee of such successor Depositary.
(e) Transfer and Exchange of a Definitive Note for a Beneficial
Interest in a Global Note. A Definitive Note may not be transferred or exchanged
for a beneficial interest in a Global Note.
(f) Authentication of Definitive Notes in Absence of Depositary.
If at any time:
(i) the Depositary for the Notes notifies the Company that
the Depositary is unwilling or unable to continue as Depositary for the Global
Notes and a successor Depositary for the Global Notes is not appointed by the
Company within 90 days after delivery of such notice; or
(ii) the Company, at its sole discretion, notifies the Trustee
in writing that it elects to cause the issuance of Definitive Notes under this
Indenture,
then the Company shall execute, and the Trustee shall, upon receipt of an
authentication order in accordance with Section 2.02 hereof, authenticate and
deliver, Definitive Notes in an aggregate principal amount equal to the
principal amount of the Global Notes in exchange for such Global Notes.
(g) Legends.
(i) Except as permitted by the following paragraphs (ii),
(iii) and (iv), each Note certificate evidencing Global Notes and Definitive
Notes (and all Notes issued in exchange therefor or substitution thereof) shall
bear the legend (the "Private Placement Legend") in substantially the following
form:
"THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER
THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
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TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE NEXT SENTENCE. BY
ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER:
(2) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB"), (B) IT HAS
ACQUIRED THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH
REGULATION S UNDER THE SECURITIES ACT OR (C) IT IS AN INSTITUTIONAL
"ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A) (1), (2). (3) OR (7)
OR REGULATION D UNDER THE SECURITIES ACT (AN "IAI"), (3) AGREES THAT IT
WILL NOT RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE
COMPANY OR ANY OF ITS SUBSIDIARIES, (B) TO A PERSON WHOM THE SELLER
REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A, (C) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE
903 OR 904 OF THE SECURITIES ACT, (D) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (E) TO AN IAI THAT,
PRIOR TO SUCH TRANSFER, FURNISHES THE TRUSTEE A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
TRANSFER OF THIS NOTE (the form of which can be obtained from the
Trustee) AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL
AMOUNT OF NOTES LESS THAN $250,000, AN OPINION OF COUNSEL ACCEPTABLE TO
THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES
ACT, (F) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF
COUNSEL ACCEPTABLE TO THE COMPANY) OR (G) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY
OTHER APPLICABLE JURISDICTION AND (4) AGREES THAT IT WILL DELIVER TO
EACH PERSON TO WHOM THIS NOTE OR AN INTEREST HEREIN IS TRANSFERRED A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE
TERMS "OFFSHORE TRANSACTION" AND "UNITED STATES" HAVE THE MEANINGS
GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE SECURITIES ACT. THE
INDENTURE CONTAINS A PROVISION REQUIRING THE
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TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF
THE FOREGOING."
(ii) Upon any sale or transfer of a Transfer Restricted
Security (including any Transfer Restricted Security represented by a Global
Note) pursuant to Rule 144 under the Securities Act or pursuant to an effective
registration statement under the Securities Act:
(A) in the case of any Transfer Restricted Security that
is a Definitive Note, the Registrar shall permit the Holder thereof to exchange
such Transfer Restricted Security for a Definitive Note that does not bear the
legend set forth in (i) above and rescind any restriction on the transfer of
such Transfer Restricted Security upon receipt of a certification from the
transferring holder substantially in the form of Exhibit B-4 hereto; and
(B) in the case of any Transfer Restricted Security
represented by a Global Note, such Transfer Restricted Security shall not be
required to bear the legend set forth in (i) above, but shall continue to be
subject to the provisions of Section 2.06(a) and (b) hereof; provided, however,
that with respect to any request for an exchange of a Transfer Restricted
Security that is represented by a Global Note for a Definitive Note that does
not bear the legend set forth in (i) above, which request is made in reliance
upon Rule 144, the Holder thereof shall certify in writing to the Registrar that
such request is being made pursuant to Rule 144 (such certification to be
substantially in the form of Exhibit B-4 hereto).
(iii) Upon any sale or transfer of a Transfer Restricted
Security (including any Transfer Restricted Security represented by a Global
Note) in reliance on any exemption from the registration requirements of the
Securities Act (other than exemptions pursuant to Rule 144A or Rule 144 under
the Securities Act) in which the Holder or the transferee provides an Opinion of
Counsel to the Company and the Registrar in form and substance reasonably
acceptable to the Company and the Registrar (which Opinion of Counsel shall also
state that the transfer restrictions contained in the legend are no longer
applicable):
(A) in the case of any Transfer Restricted Security
that is a Definitive Note, the Registrar shall permit the Holder thereof to
exchange such Transfer Restricted Security for a Definitive Note that does not
bear the legend set forth in (i) above and rescind any restriction on the
transfer of such Transfer Restricted Security; and
(B) in the case of any Transfer Restricted Security
represented by a Global Note, such Transfer Restricted Security shall not be
required to bear the legend set forth in (i) above, but shall continue to be
subject to the provisions of Section 2.06(a) and (b) hereof.
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(iv) Notwithstanding the foregoing, upon the consummation of
the Exchange Offer in accordance with the Registration Rights Agreement, the
Company shall issue and, upon receipt of an authentication order in accordance
with Section 2.02 hereof, the Trustee shall authenticate (i) one or more
Unrestricted Global Notes in aggregate principal amount equal to the principal
amount of the Restricted Beneficial Interests tendered for acceptance by persons
that are not (x) broker-dealers, (y) Persons participating in the distribution
of the Notes or (z) Persons who are affiliates (as defined in Rule 144) of the
Company and accepted for exchange in the Exchange Offer and (ii) Definitive
Notes that do not bear the Private Placement Legend in an aggregate principal
amount equal to the principal amount of the Definitive Notes accepted for
exchange in the Exchange Offer. The Trustee shall be entitled to rely upon the
authentication order when authenticating the Notes without any obligation to
verify that the restrictions in the preceding sentence have been complied with.
Concurrently with the issuance of such Notes, the Trustee shall cause the
aggregate principal amount of the applicable Restricted Global Notes to be
reduced accordingly and the Company shall execute and the Trustee shall
authenticate and deliver to the Persons designated by the Holders of Definitive
Notes so accepted Definitive Notes in the appropriate principal amount.
(h) Cancellation and/or Adjustment of Global Notes. At such time as all
beneficial interests in Global Notes have been exchanged for Definitive Notes,
redeemed, repurchased or canceled, all Global Notes shall be returned to or
retained and canceled by the Trustee in accordance with Section 2.11 hereof. At
any time prior to such cancellation, if any beneficial interest in a Global Note
is exchanged for Definitive Notes, redeemed, repurchased or canceled, the
principal amount of Notes represented by such Global Note shall be reduced
accordingly and an endorsement may be made on such Global Note, by the Trustee
or the Notes Custodian, at the direction of the Trustee, to reflect such
reduction but any failure to make such an endorsement shall not affect the
reductions.
(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the
Company shall execute and the Trustee shall authenticate Global Notes and
Definitive Notes at the Registrar's request.
(ii) No service charge shall be made to a Holder for any
registration of transfer or exchange, but the Company may require payment of a
sum sufficient to cover any stamp or transfer tax or similar governmental charge
payable in connection therewith (other than any such stamp or transfer taxes or
similar governmental charge payable upon exchange or transfer pursuant to
Sections 2.10, 3.06, 4.10, 4.13 and 9.05 hereto).
(iii) All Global Notes and Definitive Notes issued upon any
registration of transfer or exchange of Global Notes or Definitive Notes shall
be the valid
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obligations of the Company, evidencing the same debt, and entitled to the same
benefits under this Indenture, as the Global Notes or Definitive Notes
surrendered upon such registration of transfer or exchange.
(iv) The Registrar shall not be required: (A) to issue, to
register the transfer of or to exchange Notes during a period beginning at the
opening of fifteen (15) Business Days before the day of any selection of Notes
for redemption under Section 3.02 hereof and ending at the close of business on
the day of selection, (B) to register the transfer of or to exchange any Note so
selected for redemption in whole or in part, except the unredeemed portion of
any Note being redeemed in part, or (C) to register the transfer of or to
exchange a Note between a record date and the next succeeding interest payment
date.
(v) Prior to due presentment for the registration of a
transfer of any Note, the Trustee, any Agent and the Company may deem and treat
the Person in whose name any Note is registered as the absolute owner of such
Note for the purpose of receiving payment of principal of and interest on such
Notes and for all other purposes, and neither the Trustee, any Agent nor the
Company shall be affected by notice to the contrary.
(vi) The Trustee shall authenticate Global Notes and
Definitive Notes in accordance with the provisions of Section 2.02 hereof.
SECTION 2.07. REPLACEMENT NOTES.
If any mutilated Note is surrendered to the Trustee, or the Company and
the Trustee receives evidence to their satisfaction of the destruction, loss or
theft of any Note, the Company shall issue and the Trustee, upon the written
order of the Company signed by an Officer of the Company, shall authenticate a
replacement Note if the Trustee's requirements are met. If required by the
Trustee or the Company, an indemnity bond must be supplied by the Holder that is
sufficient in the judgment of the Trustee and the Company to protect the
Company, the Trustee, any Agent and any authenticating agent from any loss that
any of them may suffer if a Note is replaced. The Company and the Trustee may
charge for their expenses in replacing a Note.
Every replacement Note is an additional obligation of the Company and
shall be entitled to all of the benefits of this Indenture equally and
proportionately with all other Notes duly issued hereunder.
SECTION 2.08. OUTSTANDING NOTES.
The Notes outstanding at any time are all the Notes authenticated by
the Trustee except for those canceled by it, those delivered to it for
cancellation, those reductions in the interest in a Global Note effected by the
Trustee in accordance with the provisions hereof, and those described in this
Section 2.08 as not outstanding. Except as set forth in
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Section 2.09 hereof, a Note does not cease to be outstanding because the Company
or an Affiliate of the Company or any Subsidiary Guarantor holds the Note.
If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser.
If the principal amount of any Note is considered paid under Section
4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue.
If the Paying Agent (other than the Company, a Subsidiary or an
Affiliate of any thereof) holds, on a redemption date or maturity date, money
sufficient to pay Notes payable on that date, then on and after that date such
Notes shall be deemed to be no longer outstanding and shall cease to accrue
interest.
SECTION 2.09. TREASURY NOTES.
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver or consent, Notes owned by the
Company or any Subsidiary Guarantor, or by any Affiliate of the Company or any
Subsidiary Guarantor shall be considered as though not outstanding, except that
for the purposes of determining whether the Trustee shall be protected in
relying on any such direction, waiver or consent, only Notes shown on the
Trustee's register as being owned shall be so disregarded. Notwithstanding the
foregoing, Notes that are to be acquired by the Company or any Subsidiary
Guarantor or an Affiliate of the Company or any Subsidiary Guarantor pursuant to
an exchange offer, tender offer or other agreement shall not be deemed to be
owned by such entity until legal title to such Notes passes to such entity.
SECTION 2.10. TEMPORARY NOTES.
Until Definitive Notes are ready for delivery, the Company may prepare
and the Trustee shall authenticate temporary Notes upon a written order of the
Company signed by an Officer of the Company. Temporary Notes shall be
substantially in the form of Definitive Notes but may have variations that the
Company considers appropriate for temporary Notes. Without unreasonable delay,
the Company shall prepare and the Trustee shall upon receipt of a written order
of the Company signed by an Officer authenticate Definitive Notes in exchange
for temporary Notes.
Holders of temporary Notes shall be entitled to all of the benefits of
this Indenture.
SECTION 2.11. CANCELLATION.
The Company at any time may deliver to the Trustee for cancellation any
Notes previously authenticated and delivered hereunder and which the Company may
have acquired in any manner whatsoever, and all Notes so delivered shall be
promptly
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canceled by the Trustee. All Notes surrendered for registration of transfer,
exchange or payment, if surrendered to any Person other than the Trustee, shall
be delivered to the Trustee. The Trustee and no one else shall cancel all Notes
surrendered for registration of transfer, exchange, payment, replacement or
cancellation. Subject to Section 2.07 hereof, the Company may not issue new
Notes to replace Notes that it has redeemed or paid or that have been delivered
to the Trustee for cancellation. All canceled Notes held by the Trustee shall be
destroyed and certification of their destruction delivered to the Company,
unless by a written order, signed by an Officer of the Company, the Company
shall direct that canceled Notes be returned to it.
SECTION 2.12. DEFAULTED INTEREST.
If the Company defaults in a payment of interest on the Notes, it shall
pay the defaulted interest in any lawful manner plus, to the extent lawful,
interest payable on the defaulted interest, to the Persons who are Holders on a
subsequent special record date, which date shall be at the earliest practicable
date but in all events at least five (5) Business Days prior to the payment
date, in each case at the rate provided in the Notes and in Section 4.01 hereof.
The Company shall fix or cause to be fixed each such special record date and
payment date, and shall promptly thereafter, notify the Trustee of any such
date. At least fifteen (15) days before the special record date, the Company (or
the Trustee, in the name and at the expense of the Company) shall mail or cause
to be mailed to Holders a notice that states the special record date, the
related payment date and the amount of such interest to be paid.
SECTION 2.13. RECORD DATE.
The record date for purposes of determining the identity of Holders of
Notes entitled to vote or consent to any action by vote or consent authorized or
permitted under this Indenture shall be determined as provided for in TIA ss.
316 (c).
SECTION 2.14. COMPUTATION OF INTEREST.
Interest on the Notes shall be computed on the basis of a 360-day year
comprised of twelve 30-day months.
SECTION 2.15. CUSIP NUMBER.
The Company in issuing the Notes may use a "CUSIP" number, and if it
does so, the Trustee shall use the CUSIP number in notices of redemption or
exchange as a convenience to Holders; provided that any such notice may state
that no representation is made as to the correctness or accuracy of the CUSIP
number printed in the notice or on the Notes and that reliance may be placed
only on the other identification numbers printed on the Notes. The Company shall
promptly notify the Trustee of any change in the CUSIP number.
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ARTICLE 3
REDEMPTION AND PREPAYMENT
SECTION 3.01. NOTICES TO TRUSTEE.
If the Company elects to redeem Notes pursuant to the optional
redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee,
at least 45 days but not more than 60 days before a redemption date (unless a
shorter period is acceptable to the Trustee), an Officers' Certificate setting
forth (i) the Section of this Indenture pursuant to which the redemption shall
occur, (ii) the redemption date, (iii) the principal amount of Notes to be
redeemed and (iv) the redemption price.
If the Company is required to make an offer to repurchase Notes
pursuant to Section 4.10 or 4.13 hereof, it shall furnish to the Trustee, at
least 45 days before the scheduled purchase date, an Officers' Certificate
setting forth (i) the section of this Indenture pursuant to which the offer to
purchase shall occur, (ii) the terms of the offer, (iii) the principal amount of
Notes to be repurchased, (iv) the repurchase price, (v) the repurchase date and
(vi) and further setting forth a statement to the effect that (a) the Company or
one its Subsidiaries has affected an Asset Sale and there are Excess Proceeds
aggregating more than $10,000,000 or (b) a Change of Control has occurred, as
applicable.
SECTION 3.02. SELECTION OF NOTES TO BE REDEEMED
If less than all of the Notes are to be redeemed, selection of Notes
for redemption or repurchase will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which the
Notes are listed, or, if the Notes are not so listed, on a pro rata basis, by
lot or by such other method as the Trustee shall deem fair and appropriate;
provided that Notes to be redeemed with the proceeds of an Equity Offering shall
be selected on a pro rata basis; provided further that no Notes of $1,000 or
less shall be redeemed in part. Notices of redemption shall be mailed by first
class mail at least 30 but not more than 60 days before the redemption date to
each Holder of Notes to be redeemed at its registered address. Notices of
redemption may not be conditional. If any Note is to be redeemed in part only,
the notice of redemption that relates to such Note shall state the portion of
the principal amount thereof to be redeemed. A new Note in principal amount
equal to the unredeemed portion thereof will be issued in the name of the Holder
thereof upon cancellation of the original Note. Notes called for redemption
become due on the date fixed for redemption. On and after the redemption date,
interest and Liquidated Damages shall cease to accrue on Notes or portions of
them called for redemption unless the Company defaults in making the redemption
payment.
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SECTION 3.03. NOTICE OF REDEMPTION.
At least 30 days but not more than 60 days before a redemption date,
the Company shall mail or cause to be mailed by first class mail, a notice of
redemption to each Holder whose Notes are to be redeemed.
The notice shall identify the Notes to be redeemed and shall state:
(1) the redemption date;
(2) the redemption price for the Notes and accrued
interest, and Liquidated Damages, if any;
(3) if any Note is being redeemed in part, the portion of the
principal amount of such Notes to be redeemed and that, after the
redemption date, upon surrender of such Note, a new Note or Notes in
principal amount equal to the unredeemed portion shall be issued upon
surrender of the original Note;
(4) the name and address of the Paying Agent;
(5) that Notes called for redemption must be surrendered
to the Paying Agent to collect the redemption price;
(6) that, unless the Company defaults in making such
redemption payment, interest and Liquidated Damages, if any, on Notes
called for redemption ceases to accrue on and after the redemption
date;
(7) the paragraph of the Notes and/or Section of this
Indenture pursuant to which the Notes called for redemption are being
redeemed; and
(8) that no representation is made as to the correctness
or accuracy of the CUSIP number, if any, listed in such notice or
printed on the Notes.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense; provided,
however, that the Company shall have delivered to the Trustee, at least 45 days
prior to the redemption date (or such shorter period as shall be acceptable to
the Trustee), an Officers' Certificate requesting that the Trustee give such
notice and setting forth the information to be stated in the notice as provided
in the preceding paragraph. The notice mailed in the manner herein provided
shall be conclusively presumed to have been duly given whether or not the Holder
receives such notice. In any case, failure to give such notice by mail or any
defect in the notice to the Holder of any Note shall not affect the validity of
the proceeding for the redemption of any other Note.
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SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with Section 3.03
hereof, Notes called for redemption become irrevocably due and payable on the
redemption date at the redemption price plus accrued and unpaid interest and
Liquidated Damages, if any, to such date. A notice of redemption may not be
conditional.
SECTION 3.05. DEPOSIT OF REDEMPTION OR REPURCHASE PRICE.
On or before 10:00 a.m. (New York City time) on each redemption date,
the Company shall deposit with the Trustee or with the Paying Agent money
sufficient to pay the redemption price, and accrued and unpaid interest and
Liquidated Damages, if any, on all Notes to be redeemed on that date. The
Trustee or the Paying Agent shall promptly return to the Company upon its
written request any money deposited with the Trustee or the Paying Agent by the
Company in excess of the amounts necessary to pay the redemption price
(including any applicable premium), accrued interest and Liquidated Damages, if
any, on all Notes to be redeemed.
If Notes called for redemption or tendered in an Asset Sale Offer or
Change of Control Offer are paid or if the Company has deposited with the
Trustee or Paying Agent money sufficient to pay the redemption price, unpaid and
accrued interest and Liquidated Damages, if any, on all Notes to be redeemed or
repurchased, on and after the redemption or repurchase date, interest and
Liquidated Damages, if any, shall cease to accrue on the Notes or the portions
of Notes called for redemption or tendered and not withdrawn in an Asset Sale
Offer or Change of Control Offer (regardless of whether certificates for such
securities are actually surrendered). If a Note is redeemed or repurchased on or
after an interest record date but on or prior to the related interest payment
date, then any accrued and unpaid interest and Liquidated Damages, if any, shall
be paid to the Person in whose name such Note was registered at the close of
business on such record date. If any Note called for redemption or repurchase
shall not be so paid upon surrender (which surrender has not been withdrawn) for
redemption or tender for repurchase of the Notes pursuant to an Asset Sales
Offer or Change of Control Offer because of the failure of the Company to comply
with the preceding paragraph, interest shall be paid on the unpaid principal and
Liquidated Damages, if any, from the redemption or repurchase date until such
principal and Liquidated Damages, if any, is paid, and to the extent lawful on
any interest not paid on such unpaid principal, in each case, at the rate
provided in the Notes and in Section 4.01 hereof.
SECTION 3.06. NOTES REDEEMED IN PART.
Upon surrender of a Note that is redeemed in part, the Company shall
issue and, upon the Company's written request, the Trustee shall authenticate
for the Holder at the expense of the Company a new Note equal in principal
amount to the unredeemed portion of the Note surrendered.
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SECTION 3.07. OPTIONAL REDEMPTION.
(a) Except as set forth in the next paragraph, the Notes will not be
redeemable at the Company's option prior to August 15, 2003. Thereafter, the
Notes will be subject to redemption at any time at the option of the Company, in
whole or in part, upon not less than 30 nor more than 60 days' notice, at the
redemption prices (expressed as percentages of principal amount) set forth below
plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the
applicable redemption date, if redeemed during the twelve-month period beginning
on August 15 of the years indicated below:
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
---- ----------------
<S> <C>
2003............................................. 105.375%
2004............................................. 103.583%
2005............................................. 101.792%
2006 and thereafter.............................. 100.000%
</TABLE>
(b) Notwithstanding the foregoing, at any time on or prior to August
15, 2001, the Company may (but shall not have the obligation to) redeem, on one
or more occasions, up to an aggregate of 35% of the principal amount of Notes
originally issued at a redemption price equal to 110.75% of the principal amount
thereof plus accrued and unpaid interest and Liquidated Damages, if any, thereon
to the redemption date, with the net cash proceeds of one or more Equity
Offerings; provided that at least 65% in aggregate principal amount of the Notes
originally issued remains outstanding immediately after the occurrence of such
redemption; and provided further, that such redemption shall occur within 90
days of the date of the closing of such Equity Offering.
SECTION 3.08. MANDATORY REDEMPTION.
The Company shall not be required to make mandatory redemption or
sinking fund payments with respect to the Notes.
SECTION 3.09. REPURCHASE OFFERS.
In the event that the Company shall be required to commence an offer to
all Holders to repurchase Notes (a "Repurchase Offer") pursuant to Section 4.10
hereof, an "Asset Sale," or pursuant to Section 4.13 hereof, a "Change of
Control Offer," the Company shall follow the procedures specified below.
A Repurchase Offer shall commence no earlier than 30 days and no later
than 60 days after a Change of Control (unless the Company is not required to
make such offer pursuant to the last paragraph of Section 4.13 hereof) or an
Asset Sale Offer Triggering Event (as defined below), as the case may be, and
remain open for a period of twenty (20) Business Days following its commencement
and no longer, except to the extent that a longer period is required by
applicable law (the "Offer Period"). No later than five (5) Business Days after
the termination of the Offer Period (the "Repurchase Date"), the
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Company shall purchase the principal amount of Notes required to be purchased
pursuant to Section 4.10 hereof, in the case of an Asset Sale Offer, or 4.13
hereof, in the case of a Change of Control Offer (the "Offer Amount") or, if
less than the Offer Amount has been tendered, all Notes tendered in response to
the Repurchase Offer. Payment for any Notes so purchased shall be made in the
same manner as interest payments are made.
If the Repurchase Date is on or after an interest record date and on or
before the related interest payment date, any accrued and unpaid interest and
Liquidated Damages, if any, shall be paid to the Person in whose name a Note is
registered at the close of business on such record date, and no additional
interest or Liquidated Damages, if any, shall be payable to Holders who tender
Notes pursuant to the Repurchase Offer.
Upon the commencement of a Repurchase Offer, the Company shall send, by
first class mail, a notice to the Trustee (pursuant to Section 3.01 hereof) and
each of the Holders (pursuant to Section 3.02 hereof), with a copy to the
Trustee. The notice shall contain all instructions and materials necessary to
enable such Holders to tender Notes pursuant to such Repurchase Offer. The
Repurchase Offer shall be made to all Holders. The notice, which shall govern
the terms of the Repurchase Offer, shall describe the transaction or
transactions that constitute the Change of Control or Asset Sale as the case may
be and shall state:
(a) that the Repurchase Offer is being made pursuant to this Section
3.09 and Section 4.10 or 4.13 hereof, as the case may be, and the length of time
the Repurchase Offer shall remain open;
(b) the Offer Amount, the repurchase price and the Repurchase Date;
(c) that any Note not tendered or accepted for payment shall continue
to accrue interest;
(d) that, unless the Company defaults in making such payment, any Note
accepted for payment pursuant to the Repurchase Offer shall cease to accrue
interest and Liquidated Damages, if any, after the Repurchase Date;
(e) that Holders electing to have a Note repurchased pursuant to a
Repurchase Offer shall be required to surrender the Note, with the form entitled
"Option of Holder to Elect Repurchase" on the reverse of the Note, duly
completed, or transfer by book-entry transfer, to the Company, the Depositary,
or the Paying Agent at the address specified in the notice not later than the
close of business on the last day of the Offer Period;
(f) that Holders shall be entitled to withdraw their election if the
Company, the Depositary or the Paying Agent, as the case may be, receives, not
later than the expiration of the Offer Period, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of the Note the Holder delivered for
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repurchase and a statement that such Holder is withdrawing his election to have
such Note repurchased;
(g) that, if the aggregate principal amount of Notes surrendered by
Holders exceeds the Offer Amount, the Company shall select the Notes to be
repurchased on a pro rata basis (with such adjustments as may be deemed
appropriate by the Company so that only Notes in denominations of $1,000, or
integral multiples thereof, shall be repurchased); and
(h) that Holders whose Notes were repurchased only in part shall be
issued new Notes equal in principal amount to the unpurchased portion of the
Notes surrendered (or transferred by book-entry transfer).
On or before 10:00 a.m. (New York City time) on each Repurchase Date,
the Company shall irrevocably deposit with the Trustee or Paying Agent in
immediately available funds the aggregate purchase price with respect to a
principal amount of Notes equal to the Offer Amount, together with accrued and
unpaid interest and Liquidated Damages, if any, thereon, to be held for payment
in accordance with the terms of this Section 3.09. On the Repurchase Date, the
Company shall, to the extent lawful, (i) accept for payment, on a pro rata basis
to the extent necessary, the Offer Amount of Notes or portions thereof tendered
pursuant to the Repurchase Offer, or if less than the Offer Amount has been
tendered, all Notes tendered, (ii) deliver or cause the Paying Agent or
depository, as the case may be, to deliver to the Trustee Notes so accepted and
(iii) deliver to the Trustee an Officers' Certificate stating that such Notes or
portions thereof were accepted for payment by the Company in accordance with the
terms of this Section 3.09. The Company, the Depositary or the Paying Agent, as
the case may be, shall promptly (but in any case not later than three (3)
Business Days after the Repurchase Date) mail or deliver to each tendering
Holder an amount equal to the repurchase price of the Notes tendered by such
Holder and accepted by the Company for repurchase, plus any accrued and unpaid
interest and Liquidated Damages, if any, thereon to the Repurchase Date, and the
Company shall promptly issue a new Note, and the Trustee, shall authenticate and
mail or deliver such new Note, to such Holder, equal in principal amount to any
unrepurchased portion of such Holder's Notes surrendered. Any Note not so
accepted shall be promptly mailed or delivered by the Company to the Holder
thereof. The Company shall publicly announce in a newspaper of general
circulation or in a press release provided to a nationally recognized financial
wire service the results of the Repurchase Offer on the Repurchase Date.
ARTICLE 4
COVENANTS
SECTION 4.01. PAYMENT OF NOTES.
The Company shall pay or cause to be paid the principal of, premium, if
any, and interest on the Notes on the dates and in the manner provided in the
Notes. The Company shall pay all Liquidated Damages, if any, in the same manner
on the dates and
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in the amounts set forth in the Registration Rights Agreement. Principal,
premium and Liquidated Damages, if any, and interest, shall be considered paid
for all purposes hereunder on the date the Paying Agent if other than the
Company or a Subsidiary thereof holds, as of 10:00 a.m. (New York City time)
money deposited by the Company in immediately available funds and designated for
and sufficient to pay all such principal, premium and Liquidated Damages, if
any, and interest, then due.
The Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal, until such principal
is paid, at the rate equal to 1% per annum in excess of the then applicable
interest rate on the Notes to the extent lawful; it shall pay interest
(including post-petition interest in any proceeding under any Bankruptcy Law) on
overdue installments of interest and Liquidated Damages (without regard to any
applicable grace period), until such installment is paid, at the same rate to
the extent lawful.
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain in the Borough of Manhattan, the City of New
York an office or agency (which may be an office of the Trustee or an affiliate
of the Trustee or Registrar) where Notes may be surrendered for registration of
transfer or for exchange and where notices and demands to or upon the Company in
respect of the Notes and this Indenture may be served. The Company shall give
prompt written notice to the Trustee of the location, and any change in the
location, of such office or agency. If at any time the Company shall fail to
maintain any such required office or agency or shall fail to furnish the Trustee
with the address thereof, such presentations, surrenders, notices and demands
may be made or served at the Corporate Trust Office of the Trustee.
The Company may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations; provided,
however, that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in the Borough of
Manhattan, the City of New York for such purposes. The Company shall give prompt
written notice to the Trustee of any such designation or rescission and of any
change in the location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of the Trustee
as one such office or agency of the Company in accordance with Section 2.03
hereof.
SECTION 4.03. COMMISSION REPORTS.
From and after the date hereof, whether or not required by the rules
and regulations of the Commission, so long as any Notes are outstanding, the
Company shall furnish to the Holders of Notes (i) all quarterly and annual
financial information that would be required to be contained in a filing with
the Commission on Forms 10-Q and
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<PAGE> 47
10-K if the Company were required to file such Forms, including a "Management's
Discussion and Analysis of Financial Condition and Results of Operations" that
describes the financial condition and results of operations of the Company and
its consolidated Subsidiaries and, with respect to the annual information only,
a report thereon by the Company's certified independent accountants and (ii) all
current reports that would be required to be filed with the Commission on Form
8-K if the Company were required to file such reports, in each case within the
time periods set forth in the Commission's rules and regulations. In addition,
whether or not required by the rules and regulations of the Commission, at any
time after the consummation of the Exchange Offer contemplated by the
Registration Right Agreement (or, if the Exchange Offer is not consummated,
after the effectiveness of the Shelf Registration Statement), the Company shall
file a copy of all such information and reports with the Commission for public
availability within the time periods set forth in the Commission's rules and
regulations, (unless the Commission will not accept such a filing) and make such
information available to securities analysts and prospective investors upon
request. In addition, at all times that the Commission does not accept the
filings provided for in the preceding sentence, the Company and the Subsidiary
Guarantors shall, for so long as any Notes remain outstanding, furnish to the
Holders and to securities analysts and prospective investors, upon their
request, the information required to be delivered pursuant to Rule 144A(d)(4)
under the Securities Act.
The financial information to be distributed to Holders of Notes shall
be filed with the Trustee and mailed to the Holders at their addresses appearing
in the register of Notes maintained by the Registrar, within 90 days after the
end of the Company's fiscal years and within 45 days after the end of each of
the first three quarters of each such fiscal year.
The Company shall provide the Trustee with a sufficient number of
copies of all reports and other documents and information and, if requested by
the Company and at the Company's expense, the Trustee will deliver such reports
to the Holders under this Section 4.03.
SECTION 4.04. COMPLIANCE CERTIFICATE.
The Company shall deliver to the Trustee, within 90 days after the end
of each fiscal year, an Officers' Certificate stating that a review of the
activities of the Company and its Subsidiaries during the preceding fiscal year
has been made under the supervision of the signing Officers with a view to
determining whether each has kept, observed, performed and fulfilled its
obligations under this Indenture (including, with respect to any Restricted
Payments made during such year, the basis upon which the calculations required
by Section 4.07 hereof were computed, which calculations may be based on the
Company's latest available financial statements), to the extent the Company and
its Subsidiaries have not been released from such obligations under Section
8.03, and further stating, as to each such Officer signing such certificate,
that, to the best of his or her knowledge, each entity has kept, observed,
performed and fulfilled each and every
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covenant contained in this Indenture (except to the extent released under
Section 8.03) and is not in default in the performance or observance of any of
the terms, provisions and conditions of this Indenture (or, if a Default or
Event of Default shall have occurred, describing all such Defaults or Events of
Default of which he or she may have knowledge and what action the Company is
taking or proposes to take with respect thereto) and that, to the best of his or
her knowledge, no event has occurred and remains in existence by reason of which
payments on account of the principal of, premium or Liquidated Damages, if any,
or interest on the Notes is prohibited or if such event has occurred, a
description of the event and what action the Company is taking or proposes to
take with respect thereto.
So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, in connection with the
year-end financial statements delivered pursuant to Section 4.03 hereof, the
Company shall use its best efforts to deliver a written statement of the
Company's independent public accountants (who shall be a firm of established
national reputation) that in making the examination necessary for certification
of such financial statements, nothing has come to their attention that would
lead them to believe that the Company has violated any provisions of Article
Four or Section 5.01 hereof (except to the extent the Company and its
Subsidiaries have been released from such provisions under Section 8.03) or, if
any such violation has occurred, specifying the nature and period of existence
thereof, it being understood that such accountants shall not be liable directly
or indirectly to any Person for any failure to obtain knowledge of any such
violation. In the event that such written statement of the Company's independent
public accountants cannot be obtained, the Company shall deliver an Officers'
Certificate certifying that it has used its best efforts to obtain such
statements and was unable to do so.
The Company shall, so long as any of the Notes are outstanding, deliver
to the Trustee, forthwith upon any Officer becoming aware of any Default or
Event of Default, an Officers' Certificate specifying such Default or Event of
Default and what action the Company is taking or proposes to take with respect
thereto.
SECTION 4.05. TAXES.
The Company shall pay, and shall cause each of its Subsidiaries to pay,
prior to delinquency all material taxes, assessments and governmental levies,
except such as are contested in good faith and by appropriate proceedings and
with respect to which appropriate reserves have been taken in accordance with
GAAP.
SECTION 4.06. STAY, EXTENSION AND USURY LAWS.
The Company and each Subsidiary Guarantor covenants (to the extent that
it may lawfully do so) that it shall not at any time insist upon, plead, or in
any manner whatsoever claim or take the benefit or advantage of, any stay,
extension or usury law wherever enacted, now or at any time hereafter in force,
that may affect the covenants or the performance of this Indenture; and the
Company and each Subsidiary Guarantor (to
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the extent that it may lawfully do so) hereby expressly waives all benefit or
advantage of any such law, and covenants that it shall not, by resort to any
such law, hinder, delay or impede the execution of any power herein granted to
the Trustee, but shall suffer and permit the execution of every such power as
though no such law has been enacted.
SECTION 4.07. RESTRICTED PAYMENTS.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or make
any other payment or distribution on account of the Company's or any of its
Restricted Subsidiaries' Equity Interests (including, without limitation, any
such dividend, distribution or other payment made in connection with any merger
or consolidation involving the Company or any of its Restricted Subsidiaries),
other than dividends or distributions payable in Equity Interests (other than
Disqualified Stock) of the Company or dividends or distributions payable to the
Company or any Wholly Owned Subsidiary of the Company; (ii) purchase, redeem or
otherwise acquire or retire for value (including, without limitation, any such
purchase, redemption, or other acquisition or retirement for value made as a
payment in connection with any merger or consolidation involving the Company)
any Equity Interests of the Company or any Restricted Subsidiary (other than any
such Equity Interests owned by the Company or any Restricted Subsidiary of the
Company); (iii) make any payment on or with respect to, or purchase, redeem,
defease or otherwise acquire or retire for value, any Indebtedness that is
subordinated to the Notes, except a payment of interest or a payment of
principal at Stated Maturity; or (iv) make any Restricted Investment (all such
payments and other actions set forth in clauses (i) through (iv) above being
collectively referred to as "Restricted Payments"), unless, at the time of and
immediately after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing; and
(b) the Company would, at the time of such Restricted Payment, and
after giving pro forma effect thereto as if any Indebtedness incurred in order
to make such Restricted Payment had been incurred at the beginning of the
applicable four quarter period, have been permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set
forth in the first paragraph of the covenant described below under caption "--
Incurrence of Indebtedness and Issuance of Preferred Stock;" and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Restricted Subsidiaries
after the Issue Date (excluding Restricted Payments permitted by clauses (ii)
and (iii) of the next succeeding paragraph and excluding Restricted Payments
made to the Company or any Wholly-Owned Restricted Subsidiary permitted by
clause (iv) of the next succeeding paragraph), is less than the sum (without
duplication) of (i) 50% of the Consolidated Net Income of the Company for the
period (taken as one accounting period) from the
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beginning of the first fiscal quarter commencing after the Issue Date to the end
of the Company's most recently ended fiscal quarter for which internal financial
statements are available at the time of such Restricted Payment (or, if such
Consolidated Net Income for such period is a deficit, less 100% of such
deficit), plus (ii) 100% of the aggregate Qualified Proceeds received by the
Company from contributions to the Company's capital or the issue or sale
subsequent to the Issue Date of Equity Interests of the Company (other than
Disqualified Stock) or of Disqualified Stock or debt securities of the Company
that have been converted into such Equity Interests (other than Equity Interests
(or Disqualified Stock or convertible debt securities) sold to a Subsidiary of
the Company and other than Disqualified Stock or convertible debt securities
that have been converted into Disqualified Stock), plus (iii) to the extent that
any Restricted Investment that was made after the Issue Date is sold for
Qualified Proceeds or otherwise liquidated or repaid in whole or in part
(including, without limitation, by way of a dividend or other distribution, a
repayment of a loan or advance or other transfer of assets), the lesser of (A)
the Qualified Proceeds with respect to such Restricted Investment (less the cost
of disposition, if any) and (B) the initial amount of such Restricted
Investment, plus (iv) upon the redesignation of an Unrestricted Subsidiary as a
Restricted Subsidiary, the lesser of (x) the fair market value of such
Subsidiary or (y) the aggregate amount of all Investments made in such
Subsidiary subsequent to the Issue Date by the Company and its Restricted
Subsidiaries, plus (v) $1,000,000.
The foregoing provisions will not prohibit (i) the payment of any
dividend within 60 days after the date of declaration thereof, if at said date
of declaration such payment would have complied with the provisions of the
Indenture; (ii) the redemption, repurchase, retirement, defeasance or other
acquisition of any subordinated Indebtedness or Equity Interests of the Company
or any Subsidiary Guarantor in exchange for, or out of the net cash proceeds of
the substantially concurrent sale (other than to a Restricted Subsidiary of the
Company) of, other Equity Interests of the Company (other than any Disqualified
Stock); provided that the amount of any such net cash proceeds that are utilized
for any such redemption, repurchase, retirement, defeasance or other acquisition
shall be excluded from clause (c)(ii) of the preceding paragraph; (iii) the
defeasance, redemption, repurchase, retirement or other acquisition of
subordinated Indebtedness in exchange for, or with the net cash proceeds from,
an incurrence of Permitted Refinancing Indebtedness; (iv) the payment of any
dividend (or the making of a similar distribution or redemption) by a Restricted
Subsidiary of the Company to the holders of its common Equity Interests on a pro
rata basis; (v) so long as no Default or Event of Default shall have occurred
and is continuing, the repurchase, redemption or other acquisition or retirement
for value of any Equity Interests of the Company or any Restricted Subsidiary of
the Company, held by any member of the Company's (or any of its Subsidiaries')
management, employees or consultants pursuant to any management, employee or
consultant equity subscription agreement or plan or stock option agreement or
stock plan; provided that the aggregate price paid for all such repurchased,
redeemed, acquired or retired Equity Interests shall not exceed (1) $1,000,000
in any twelve-month period and (2) in the aggregate, the sum of (A) $5,000,000
and (B) the aggregate cash proceeds received by the Company from any reissuance
of Equity Interests by the
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Company to members of management of the Company and its Subsidiaries (provided
that the cash proceeds referred to in this clause (B) shall be excluded from
clause (c)(ii) of the preceding paragraph) and (vi) the payment of Permitted
Quarterly Tax Distributions to the holders of Capital Stock of the Company as
described below.
For so long as the Company is an S corporation or a substantially
similar pass-through entity for federal income tax purposes, the Company may
make distributions to its shareholders, during each Quarterly Payment Period, in
an aggregate amount not to exceed the Permitted Quarterly Tax Distribution in
respect of the related Estimation Period. If any portion of a Permitted
Quarterly Tax Distribution is not distributed during such Quarterly Payment
Period, subsequent Permitted Quarterly Tax Distributions shall be increased by
such undistributed portion.
Within 30 days following the Company's filing of Internal Revenue
Service Form 1120S for the immediately preceding taxable year (or within 30 days
of a redetermination of the taxable income of the Company as a result of a final
agreement with a tax authority), the Tax CPA shall file with the Trustee a
written statement indicating in reasonable detail the calculation of the True-up
Amount. In the case of a True-up Amount due to the shareholders, the Permitted
Quarterly Tax Distribution payable during the immediately following Quarterly
Payment Period shall be increased by such True-up Amount. In the case of a
True-up Amount due to the Company, the Permitted Quarterly Tax Distribution
payable during the immediately following Quarterly Payment Period shall be
reduced by such True-up Amount and the excess, if any, of such True-up Amount
over such Permitted Quarterly Tax Distribution shall be applied to reduce the
immediately following Permitted Quarterly Tax Distributions until such True-up
Amount is entirely offset.
The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if such designation would not cause a Default or an
Event of Default. For purposes of making such determination, all outstanding
Investments by the Company and its Restricted Subsidiaries (except to the extent
repaid in cash) in the Subsidiary so designated shall be deemed to be Restricted
Payments at the time of such designation and shall reduce the amount available
for Restricted Payments under the first paragraph of this covenant. All such
outstanding Investments shall be deemed to constitute Investments in an amount
equal to the greater of (i) the net book value of such Investments at the time
of such designation and (ii) the fair market value of such Investments at the
time of such designation. Such designation shall only be permitted if such
Restricted Payment would be permitted at such time and if such Restricted
Subsidiary otherwise meets the definition of an Unrestricted Subsidiary.
The amount of all (i) Restricted Payments (other than cash) shall be
the fair market value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued by the Company or such
Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment
and (ii) Qualified Proceeds (other than cash) shall be the fair market value on
the date of receipt thereof by the Company of such
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Qualified Proceeds. The fair market value of any non-cash Restricted Payment and
Qualified Proceeds shall be determined by the Board of Directors whose
resolution with respect thereto shall be delivered to the Trustee, such
determination to be supported by an opinion or appraisal issued by an
accounting, appraisal or investment banking firm of national standing, if such
fair market value exceeds $1,000,000. Not later than the date of making any
Restricted Payment, the Company shall deliver to the Trustee an Officers'
Certificate stating that such Restricted Payment is permitted and setting forth
the basis upon which the calculations required by the covenant "-- Restricted
Payments" were computed, together with a copy of any fairness opinion or
appraisal required by the Indenture.
SECTION 4.08. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED
SUBSIDIARIES.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to (i)(a) pay dividends or make any other distributions to
the Company or any of its Restricted Subsidiaries (1) on its Capital Stock or
(2) with respect to any other interest or participation in, or measured by, its
profits, or (b) pay any Indebtedness owed to the Company or any of its
Restricted Subsidiaries, (ii) make loans or advances to the Company or any of
its Restricted Subsidiaries; (iii) guarantee any Indebtedness of the Company or
any Restricted Subsidiary of the Company (provided that this clause (iii) shall
apply only to Restricted Subsidiaries that are Subsidiary Guarantors); or (iv)
transfer any of its properties or assets to the Company or any of its Restricted
Subsidiaries, except for such encumbrances or restrictions existing under or by
reason of (a) loan agreements and credit facilities as in effect as of the Issue
Date, and any amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacements or refinancings thereof, provided that
such amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings, taken as a whole, are no more
restrictive with respect to such dividend and other payment restrictions than
those contained in such loan agreements and credit facilities as in effect on
the Issue Date, (b) the Indenture and the Notes, (c) applicable law or any
applicable rule, regulation or order, (d) any agreement or instrument governing
Indebtedness or Capital Stock of a Person acquired by the Company or any of its
Restricted Subsidiaries as in effect at the time of such acquisition (except to
the extent such agreement or instrument was created or entered into in
connection with or in contemplation of such acquisition), which encumbrance or
restriction is not applicable to any Person, or the properties or assets of any
Person, other than the Person, or the property or assets of the Person, so
acquired, provided that, in the case of Indebtedness, such Indebtedness was
permitted to be incurred under the terms of the Indenture, (e) customary
non-assignment provisions in leases, licenses, encumbrances, contracts or
similar assets entered into in the ordinary course of business and consistent
with past practices, (f) purchase money obligations for property acquired in the
ordinary course of business that impose restrictions of the nature described in
clause (iv) above on the
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property so acquired, (g) Permitted Refinancing Indebtedness, provided that the
restrictions contained in the agreements governing such Permitted Refinancing
Indebtedness are no more restrictive than those contained in the agreements
governing the Indebtedness being refinanced and (h) contracts for the sale of
assets containing customary restrictions with respect to a Subsidiary pursuant
to an agreement that has been entered into for the sale or disposition of all or
substantially all of the Capital Stock or assets of such Subsidiary.
SECTION 4.09. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable, contingently or otherwise,
with respect to (collectively "incur") any Indebtedness (including Acquired
Debt); neither the Company nor any Subsidiary Guarantor shall issue any
Disqualified Stock; and the Company shall not permit any of its Restricted
Subsidiaries that are not Subsidiary Guarantors to issue any shares of preferred
stock; provided, however, that the Company or any Restricted Subsidiary may
incur Indebtedness (including Acquired Debt) or issue shares of Disqualified
Stock if the Fixed Charge Coverage Ratio for the Company's most recently ended
four full fiscal quarters for which internal financial statements are available
immediately preceding the date on which such additional Indebtedness is incurred
or such Disqualified Stock is issued would have been at least 2.0 to 1.0,
determined on a pro forma basis (including a pro forma application of the net
proceeds therefrom), as if the additional Indebtedness had been incurred, or the
Disqualified Stock had been issued, as the case may be, at the beginning of such
four-quarter period.
The provisions of the first paragraph of this covenant shall not apply to
the incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt"):
(i) the incurrence by the Company and the Subsidiary Guarantors of
Indebtedness under Credit Facilities (and the Guarantee of such Company
Indebtedness by the Subsidiary Guarantors) to the extent that the aggregate
principal amount of all Indebtedness (with letters of credit being deemed to
have a principal amount equal to the maximum potential liability of the
Company and the Subsidiary Guarantors thereunder) outstanding under this
clause (i) after giving effect to such incurrence, including all
Indebtedness incurred to refund, refinance or replace any Indebtedness
incurred pursuant to this clause (i), does not exceed an amount equal to
$65,000,000 less the aggregate amount of all principal repayments (optional
and mandatory) thereunder constituting permanent reductions of such
Indebtedness pursuant to and in accordance with Section 4.10;
(ii) the incurrence by the Company and the Subsidiary Guarantors of
Indebtedness represented by the Notes and the Subsidiary Guarantees;
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(iii) the incurrence by the Company or any of the Restricted
Subsidiaries of Indebtedness represented by Capital Lease Obligations,
mortgage financings or purchase money obligations, in each case incurred for
the purpose of financing all or any part of the purchase price of property,
plant or equipment or the cost of construction or improvements of property
used in the business of the Company or such Restricted Subsidiary to the
extent the aggregate principal amount does not exceed $7,500,000 at any time
outstanding;
(iv) other Indebtedness of the Company and its Restricted Subsidiaries
outstanding on the Issue Date;
(v) the incurrence by the Company or any of its Restricted
Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or
the net proceeds of which are used to refund, refinance or replace
Indebtedness (other than intercompany Indebtedness) that was permitted by
the Indenture to exist or be incurred;
(vi) the incurrence of intercompany Indebtedness (A) between or among
the Company and any Wholly Owned Restricted Subsidiaries of the Company or
(B) by a Restricted Subsidiary that is not a Wholly Owned Restricted
Subsidiary to the Company or a Wholly Owned Restricted Subsidiary; provided,
however, that (i) if the Company is the obligor on such Indebtedness, such
Indebtedness is expressly subordinated to the prior payment in full in cash
of all Obligations with respect to the Notes, and if a Subsidiary Guarantor
incurs such Indebtedness to a Restricted Subsidiary that is not a Subsidiary
Guarantor, such Indebtedness is subordinate in right of payment to the
Subsidiary Guarantee of such Subsidiary Guarantor; and (ii)(A) any
subsequent issuance or transfer of Equity Interests that results in any such
Indebtedness being held by a Person other than the Company or a Wholly Owned
Restricted Subsidiary of the Company and (B) any sale or other transfer of
any such Indebtedness to a Person that is not either the Company or a Wholly
Owned Restricted Subsidiary of the Company shall be deemed, in each case, to
constitute an incurrence of such Indebtedness by the Company or such
Subsidiary, as the case may be, not permitted by this clause (vi);
(vii) the incurrence by the Company or any of the Restricted
Subsidiaries of Hedging Obligations that are incurred for the purpose of
fixing or hedging (i) interest rate risk with respect to any floating rate
Indebtedness that is permitted by the terms of this Indenture to be
outstanding, (ii) the value of foreign currencies purchased or received by
the Company in the ordinary course of business or (iii) the price of raw
materials used by the Company or its Restricted Subsidiaries in a Permitted
Business;
(viii) Indebtedness arising from agreements of the Company or a
Restricted Subsidiary providing for indemnification, adjustment of purchase
price or similar obligations, in each case, incurred or assumed in
connection with the disposition of any business or assets, or Capital Stock
of a Restricted Subsidiary, to the extent that
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the amount of any such Indebtedness does not exceed 25% of the gross
proceeds of such disposition;
(ix) the guarantee by the Company or any of the Restricted Subsidiaries
of Indebtedness of the Company or a Restricted Subsidiary that was permitted
to be incurred by another provision of this covenant;
(x) the incurrence by the Company or any of its Restricted
Subsidiaries of Acquired Debt in an aggregate principal amount at any time
outstanding not to exceed $10,000,000;
(xi) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument inadvertently
(except in the case of daylight overdrafts) drawn against insufficient funds
in the ordinary course of business; provided, however, that such
Indebtedness is extinguished within five business days of incurrence; and
(xii) the incurrence by the Company or any Restricted Subsidiary of
additional Indebtedness (which may be Indebtedness under Credit Facilities)
in an aggregate principal amount (or accreted value, as applicable) at any
time outstanding, including all Indebtedness incurred to refund, refinance
or replace any Indebtedness incurred pursuant to this clause (xii), not to
exceed $20,000,000.
For purposes of determining compliance with this covenant, in the event
that an item of Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (i) through (xii) above or is
entitled to be incurred pursuant to the first paragraph of this covenant, the
Company shall, in its sole discretion, classify such item of Indebtedness in any
manner that complies with this covenant and such item of Indebtedness shall be
treated as having been incurred pursuant to only one of such clauses or pursuant
to the first paragraph hereof. Accrual of interest, the accretion of accreted
value and the payment of interest in the form of additional Indebtedness shall
not be deemed to be an incurrence of Indebtedness for purposes of this covenant.
SECTION 4.10. ASSET SALES.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless (i) the Company (or the
Restricted Subsidiary, as the case may be) receives consideration at the time of
such Asset Sale at least equal to the fair market value (evidenced by a
resolution of the Board of Directors set forth in an Officers' Certificate
delivered to the Trustee) of the assets or Equity Interests issued or sold or
otherwise disposed of and (ii) at least 75% of the consideration therefor
received by the Company or such Restricted Subsidiary is in the form of cash or
Cash Equivalents, provided that the amount of (x) any liabilities (as shown on
the Company's or such Restricted Subsidiary's most recent balance sheet) of the
Company or any Restricted Subsidiary (other than contingent liabilities and
liabilities that are by their
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terms subordinated to the Notes or any guarantee thereof) that are assumed by
the transferee of any such assets pursuant to a customary novation agreement
that releases the Company or such Restricted Subsidiary from further liability
and (y) any securities, notes or other obligations received by the Company or
any such Restricted Subsidiary from such transferee that are converted by the
Company or such Restricted Subsidiary into cash (to extent of the cash received)
within 180 days following the closing of such Asset Sale, shall be deemed to be
cash for purposes of this provision.
Within 360 days after the receipt of any Net Proceeds from an Asset
Sale, the Company or the Restricted Subsidiaries may apply such Net Proceeds, at
its option, (a) to permanently repay or retire Senior Debt, or (b) to the
investment in, or the making of a capital expenditure or the acquisition of
other long-term assets, in each case used or useable in a Permitted Business,
from a party other than the Company or a Restricted Subsidiary, or (c) the
acquisition of Capital Stock of any Person primarily engaged in a Permitted
Business if, as a result of the acquisition by the Company or any Restricted
Subsidiary thereof, such Person becomes a Restricted Subsidiary, or (d) a
combination of the uses described in clauses (a), (b) and (c). Pending the final
application of any such Net Proceeds, the Company or its Restricted Subsidiaries
may temporarily reduce Senior Debt or otherwise invest such Net Proceeds in any
manner that is not prohibited by the Indenture. Any Net Proceeds from Asset
Sales that are not applied or invested as provided in the first sentence of this
paragraph shall be deemed to constitute "Excess Proceeds." When the aggregate
amount of Excess Proceeds exceeds $10,000,000 (an "Asset Sale Offer Triggering
Event"), the Company shall be required to make an offer to all Holders of Notes
and, to the extent required by the terms of any Pari Passu Indebtedness, all
holders of such Pari Passu Indebtedness (an "Asset Sale Offer"), to purchase the
maximum principal amount of Notes and any such Pari Passu Indebtedness that may
be purchased out of the Excess Proceeds, at an offer price in cash in an amount
equal to 100% of the principal amount thereof plus accrued and unpaid interest
and Liquidated Damages thereon, if any, to the date of purchase, in accordance
with the procedures set forth in the Indenture or such Pari Passu Indebtedness,
as applicable. To the extent any Excess Proceeds remain after consummation of
the Asset Sale Offer, the Company may use such Excess Proceeds for any purpose
not otherwise prohibited by the Indenture. If the aggregate principal amount of
Notes and any such Pari Passu Indebtedness tendered pursuant to an Asset Sale
Offer exceeds the amount of Excess Proceeds, the Trustee shall select the Notes
to be purchased on a pro rata basis. Upon completion of such Asset Sale Offer,
the amount of Excess Proceeds shall be reset at zero.
SECTION 4.11. TRANSACTIONS WITH AFFILIATES.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, make any payment to or Investment in, or sell, lease, transfer
or otherwise dispose of any of its properties or assets to, or purchase any
property or assets from, or enter into or make or amend any transaction,
contract, agreement, understanding, loan, advance or guarantee with, or for the
benefit of, any Affiliate (each of the foregoing, an "Affiliate
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Transaction"), unless (i) such Affiliate Transaction is on terms that are no
less favorable to the Company or the relevant Restricted Subsidiary than those
that would have been obtained in a comparable transaction by the Company or such
Restricted Subsidiary with an unrelated Person and (ii) the Company delivers to
the Trustee (a) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of
$2,000,000, a resolution of the Board of Directors set forth in an Officers'
Certificate certifying that such Affiliate Transaction complies with clause (i)
above and that such Affiliate Transaction has been approved by a majority of the
disinterested members of the Board of Directors and (b) with respect to any
Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $10,000,000, an opinion as to the fairness
to the Holders of such Affiliate Transaction from a financial point of view
issued by an accounting, appraisal or investment banking firm of national
standing; provided that the following shall not be deemed to be Affiliate
Transactions: (1) any employment agreements, stock option or other compensation
agreements or plans (and the payment of amounts or the issuance of securities
thereunder) and other reasonable fees, compensation, benefits and indemnities
paid or entered into by the Company or any of its Restricted Subsidiaries in the
ordinary course of business of the Company or such Restricted Subsidiary to or
with the officers, directors or employees of the Company or its Restricted
Subsidiaries (other than (x) any increase in excess of 10% in any fiscal year in
the aggregate amount of base annual compensation paid to Craig A. Ponzio,
including stock options and other employee benefits and (y) any bonus or bonuses
payable to Craig A. Ponzio with respect to any fiscal year aggregating in excess
of two times the aggregate amount of Mr. Ponzio's base annual salary in effect
on the Issue Date),(2) transactions between or among the Company and/or its
Restricted Subsidiaries, (3) Restricted Payments (other than Restricted
Investments) that are permitted by the provisions of the Indenture described
above under the caption "-- Restricted Payments," (4) transactions with
suppliers or customers, in each case in the ordinary course of business
(including, without limitation, pursuant to joint venture agreements) and
otherwise in accordance with the terms of the Indenture, which are fair to the
Company in the good faith determination of the Board of Directors of the Company
and are on terms at least as favorable as might reasonably have been obtained at
such time from an unaffiliated party and (5) the current lease on the Company's
Atlanta headquarters, any payments thereunder, and any change or modification to
such lease to the extent that such change or modification satisfies the tests
set forth in subsection (i) above.
SECTION 4.12. LIENS.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist any Lien securing Indebtedness or trade payables on any asset now owned or
hereafter acquired, or any income or profits therefrom or assign or convey any
right to receive income therefrom for purposes of security, except Permitted
Liens unless the Notes are secured by such Lien on an equal and ratable basis.
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SECTION 4.13. OFFER TO REPURCHASE UPON CHANGE OF CONTROL.
Upon the occurrence of a Change of Control, each Holder of Notes shall
have the right to require the Company to repurchase all or any part (equal to
$1,000 or an integral multiple thereof) of such Holder's Notes pursuant to the
offer described below (the "Change of Control Offer") at an offer price in cash
equal to 101% of the aggregate principal amount thereof plus accrued and unpaid
interest and Liquidated Damages, if any, thereon to the date of repurchase (the
"Change of Control Payment"). Within 30 days following any Change of Control,
the Company shall mail a notice to each Holder describing the transaction or
transactions that constitute the Change of Control and offering to repurchase
Notes on the date specified in such notice, which date shall be no earlier than
30 days (or such shorter time period as may be permitted under applicable law,
rules and regulations) and no later than 60 days from the date such notice is
mailed (the "Change of Control Payment Date"), pursuant to the procedures
required by Section 3.09 hereof and described in such notice. The Company shall
comply with the requirements of Rule 14e-1 under the Exchange Act and any other
securities laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the repurchase of the Notes as a
result of a Change of Control. To the extent that the provisions of any
securities laws or regulations conflict with the provisions hereof relating to
such Change of Control Offer, the Company shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations described herein by virtue thereof.
On the Change of Control Payment Date, the Company shall, to the extent
lawful, (1) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer, (2) deposit with the Paying Agent an
amount equal to the Change of Control Payment in respect of all Notes or
portions thereof so tendered and (3) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating the
aggregate principal amount of Notes or portions thereof being purchased by the
Company. The Paying Agent shall promptly mail to each Holder of Notes so
tendered the Change of Control Payment for such Notes, and the Trustee shall
promptly authenticate and mail (or cause to be transferred by book entry) to
each Holder a new Note equal in principal amount to any unrepurchased portion of
the Notes surrendered, if any; provided that each such new Note shall be in a
principal amount of $1,000 or an integral multiple thereof. Prior to complying
with the provisions of this covenant, but in any event within 90 days following
a Change of Control, the Company shall either repay all outstanding Senior Debt
or obtain the requisite consents, if any, under all agreements governing
outstanding Senior Debt to permit the repurchase of Notes required by this
covenant. The Company shall not be required to purchase any Notes until it has
complied with the preceding sentence, but failure to comply with the preceding
sentence shall constitute an Event of Default. The Company shall publicly
announce the results of the Change of Control Offer on or as soon as practicable
after the Change of Control Payment Date in accordance with Section 3.09 hereof.
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The Change of Control provisions described above shall be applicable
whether or not any other provisions of this Indenture are applicable. Except as
described above with respect to a Change of Control, this Indenture does not
contain provisions that permit the Holders of Notes to require that the Company
repurchase or redeem the Notes in the event of a takeover, recapitalization or
similar transaction.
The Company shall not be required to make a Change of Control Offer
upon a Change of Control if a third party makes the Change of Control Offer in
the manner, at the times and otherwise in compliance with the requirements set
forth herein applicable to a Change of Control Offer made by the Company and
purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
SECTION 4.14. CORPORATE EXISTENCE.
Subject to Section 4.13 and Article 5 hereof, as the case may be, the
Company and each Subsidiary Guarantor shall do or cause to be done all things
necessary to preserve and keep in full force and effect its corporate existence
and the corporate, partnership or other existence of each of its Restricted
Subsidiaries in accordance with the respective organizational documents (as the
same may be amended from time to time) of the Company or any such Subsidiary and
the rights (charter and statutory), licenses and franchises of the Company and
its Subsidiaries; provided that the Company shall not be required to preserve
any such right, license or franchise, or the corporate, partnership or other
existence of any of its Subsidiaries, if the Board of Directors of the Company
shall determine that the preservation thereof is no longer desirable in the
conduct of the business of the Company and its Subsidiaries, taken as a whole,
and that the loss thereof is not adverse in any material respect to the Holders
of Notes.
SECTION 4.15. BUSINESS ACTIVITIES.
The Company shall not, and shall not permit any Restricted Subsidiary
to, engage in any business other than Permitted Businesses.
SECTION 4.16. SENIOR SUBORDINATED DEBT.
The Company shall not incur, create, issue, assume, guarantee or
otherwise become liable for any Indebtedness that is subordinate or junior in
right of payment to any Senior Debt and senior in any respect in right of
payment to the Notes. No Subsidiary Guarantor shall incur, create, issue,
assume, guarantee or otherwise become liable for any Indebtedness that is
subordinate or junior in right of payment to Senior Debt of such Subsidiary
Guarantor and senior in any respect in right of payment to such Subsidiary
Guarantor's Subsidiary Guarantee.
SECTION 4.17. ADDITIONAL SUBSIDIARY GUARANTORS.
The Company shall not permit any Restricted Subsidiary (other than a
Foreign Subsidiary) to guarantee the payment of any Indebtedness of the Company
or any
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Indebtedness of any other Restricted Subsidiary (in each case, the "Guaranteed
Debt"), unless (i) if such Restricted Subsidiary is not a Subsidiary Guarantor,
such Restricted Subsidiary simultaneously executes and delivers a supplemental
indenture to the Indenture providing for a Subsidiary Guarantee of payment of
the Notes by such Restricted Subsidiary, (ii) if the Notes or the Subsidiary
Guarantee (if any) of such Restricted Subsidiary are subordinated in right of
payment to the Guaranteed Debt, the Subsidiary Guarantee under the supplemental
indenture shall be subordinated to such Restricted Subsidiary's guarantee with
respect to the Guaranteed Debt substantially to the same extent as the Notes or
the Subsidiary Guarantee are subordinated to the Guaranteed Debt under the
Indenture, (iii) if the Guaranteed Debt is by its express terms subordinated in
right of payment to the Notes or the Subsidiary Guarantee (if any) of such
Restricted Subsidiary, any such guarantee of such Restricted Subsidiary with
respect to the Guaranteed Debt shall be subordinated in right of payment to such
Restricted Subsidiary's Subsidiary Guarantee with respect to the Notes
substantially to the same extent as the Guaranteed Debt is subordinated to the
Notes or the Subsidiary Guarantee (if any) of such Restricted Subsidiary, (iv)
such Restricted Subsidiary subordinates rights of reimbursement, indemnity or
subrogation or any other rights against the Company or any other Restricted
Subsidiary to its obligation under its Subsidiary Guarantee, and (v) such
Restricted Subsidiary shall deliver to the Trustee an opinion of counsel
substantially to the effect that (A) such Subsidiary Guarantee of the Notes has
been duly authorized, executed and delivered, and (B) such Subsidiary Guarantee
of the Notes constitutes a valid, binding and enforceable obligation of such
Restricted Subsidiary, except insofar as enforcement thereof may be limited by
bankruptcy, insolvency or similar laws (including, without limitation, all laws
relating to fraudulent transfers) and except insofar as enforcement thereof is
subject to general principles of equity.
ARTICLE 5
SUCCESSORS
SECTION 5.01. MERGER, CONSOLIDATION OF SALE OF ASSETS.
The Company shall not consolidate or merge with or into (whether or not
the Company is the surviving corporation), or sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of its properties or
assets in one or more related transactions, to another Person unless (i) the
Company is the surviving corporation or the Person formed by or surviving any
such consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation or limited liability company organized or existing under
the laws of the United States, any state thereof or the District of Columbia;
(ii) the Person formed by or surviving any such consolidation or merger (if
other than the Company) or the Person to which such sale, assignment, transfer,
lease, conveyance or other disposition shall have been made assumes all the
obligations of the Company under the Notes and this Indenture pursuant to a
supplemental indenture in a form reasonably satisfactory to the Trustee; (iii)
immediately after such transaction no
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Default or Event of Default exists; and (iv) except in the case of a merger of
the Company with or into a Wholly Owned Restricted Subsidiary of the Company,
the Company or the entity or Person formed by or surviving any such
consolidation or merger (if other than the Company), or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made shall, at the time of such transaction and after giving pro forma effect
thereto as if such transaction had occurred at the beginning of the applicable
four-quarter period, be permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the
first paragraph of Section 4.09 hereof.
For purposes of this Section 5.01, the sale, lease, conveyance,
assignment, transfer, or other disposition of all or substantially all of the
properties and assets of one or more Subsidiaries of the Company, which
properties and assets, if held by the Company instead of such Subsidiaries,
would constitute all or substantially all of the properties and assets of the
Company on a consolidated basis, shall be deemed to be the transfer of all or
substantially all of the properties and assets of the Company. Clause (iv) of
the preceding paragraph shall not prohibit a merger between the Company and a
Wholly Owned Restricted Subsidiary of the Company so long as the amount of
Indebtedness of the Company and its Restricted Subsidiaries is not increased
thereby.
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation or merger, or any sale, assignment, transfer,
lease, conveyance or other disposition of all or substantially all of the assets
of the Company in accordance with Section 5.01 hereof, the successor corporation
formed by such consolidation or into or with which the Company is merged or to
which such sale, assignment, transfer, lease, conveyance or other disposition is
made shall succeed to, and be substituted for (so that from and after the date
of such consolidation, merger, sale, lease, conveyance or other disposition, the
provisions of this Indenture referring to the "Company" shall refer instead to
the successor corporation and not to the Company), and shall exercise every
right and power of the Company under this Indenture with the same effect as if
such successor Person had been named as the Company herein; provided, that, (i)
solely for the purposes of computing Consolidated Net Income for purposes of
clause (b) of the first paragraph of Section 4.07 hereof, the Consolidated Net
Income of any person other than the Company and its Subsidiaries shall be
included only for periods subsequent to the effective time of such merger,
consolidation, combination or transfer of assets; and (ii) in the case of any
sale, assignment, transfer, lease, conveyance, or other disposition of less than
all of the assets of the predecessor Company, the predecessor Company shall not
be released or discharged from the obligation to pay the principal of or
interest and Liquidated Damages, if any, on the Notes.
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ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT.
Each of the following constitutes an "Event of Default":
(i) default for 30 days in the payment when due of interest
on, or Liquidated Damages, if any, with respect to, the Notes (whether or not
prohibited by Articles 10 or 12 hereof);
(ii) default in payment when due of the principal of, or
premium, if any, on, the Notes (whether or not prohibited by Articles 10 or 12
hereof);
(iii) failure by the Company or any of its Restricted
Subsidiaries for 30 days after notice by the Trustee or by the Holders of at
least 25% in principal amount of Notes then outstanding to comply with the
provisions described under Sections 4.07, 4.09, 4.10 or 4.13;
(iv) failure by the Company or any of its Restricted
Subsidiaries for 60 days after notice by the Trustee or by the Holders of at
least 25% in principal amount of Notes then outstanding to comply with any of
its other agreements in this Indenture or the Notes;
(v) default under any mortgage, indenture or instrument
under which there may be issued or by which there may be secured or evidenced
any Indebtedness for money borrowed by the Company or any of its Restricted
Subsidiaries (or the payment of which is guaranteed by the Company or any of its
Restricted Subsidiaries) whether such Indebtedness or Guarantee now exists, or
is created after the date hereof, which default (a) is caused by a failure to
pay principal of such Indebtedness after giving effect to any grace period
provided in such Indebtedness (a "Payment Default") or (b) results in the
acceleration of such Indebtedness prior to its stated maturity and, in each
case, the principal amount of any such Indebtedness, together with the principal
amount of any other such Indebtedness under which there has been a Payment
Default or the maturity of which has been so accelerated, aggregates $7,500,000
or more;
(vi) failure by the Company or any of its Subsidiaries to
pay final judgments aggregating in excess of $7,500,000 (net of any amounts with
respect to which a reputable and creditworthy insurance company has acknowledged
liability in writing), which judgments are not paid, discharged or stayed for a
period of 60 days;
(vii) except as permitted herein, any Subsidiary Guarantee
shall be held in any judicial proceeding to be unenforceable or invalid or shall
cease for any reason to be in full force and effect or any Subsidiary Guarantor,
or any Person acting on behalf of any Subsidiary Guarantor, shall deny or
disaffirm its obligations under its Subsidiary Guarantee;
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(viii) the Company or any of its Significant Subsidiaries or
any group of Subsidiaries that, taken as a whole would constitute a Significant
Subsidiary, pursuant to or within the meaning of any Bankruptcy Law:
(a) commences a voluntary case,
(b) consents to the entry of an order for relief
against it in an involuntary case,
(c) consents to the appointment of a Custodian of
it or for all or substantially all of
its property,
(d) makes a general assignment for the benefit
of its creditors, or
(e) generally is not paying its debts as they
become due; or
(ix) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law
that:
(a) is for relief against the Company or any
of its Significant Subsidiaries or any group of
Subsidiaries that, taken as a whole, would constitute
a Significant Subsidiary in an involuntary case;
(b) appoints a Custodian of the Company or
any of its Significant Subsidiaries or any group of
Subsidiaries that, taken as a whole, would constitute
a Significant Subsidiary or for all or substantially
all of the property of the Company or any of its
Significant Subsidiaries or any group of Subsidiaries
that, taken as a whole, would constitute a Significant
Subsidiary; or
(c) orders the liquidation of the Company or
any of its Significant Subsidiaries or any group of
Subsidiaries that, taken as a whole, would constitute
a Significant Subsidiary;
and the order or decree remains unstayed and in effect
for 60 consecutive days.
The term "Custodian" means any receiver, trustee, assignee, liquidator
or similar official under any Bankruptcy Law.
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SECTION 6.02. ACCELERATION.
If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Notes may
declare all the Notes to be due and payable immediately. Notwithstanding the
foregoing, in the case of an Event of Default as described in clause (viii) or
(ix) of Section 6.01 hereof, all outstanding Notes shall become due and payable
without further action or notice. Upon such acceleration, all principal of and
accrued interest and Liquidated Damages, if any, on the Notes shall be due and
payable immediately. Holders of Notes may not enforce this Indenture or the
Notes except as provided in this Indenture. The Trustee may withhold from
Holders of Notes notice of any continuing Default or Event of Default (except a
Default or Event of Default relating to the payment of principal or interest)
if it determines that withholding notice is in their interest. In the event of
a declaration of acceleration of the Notes because an Event of Default has
occurred and is continuing as a result of the acceleration of any Indebtedness
described in clause (v) of Section 6.01 hereof, the declaration of acceleration
of the Notes shall be automatically annulled if the holders of any Indebtedness
described in clause (v) of Section 6.01 hereof have rescinded the declaration
of acceleration in respect of such Indebtedness within 30 days of the date of
such declaration and if (a) the annulment of the acceleration of the Notes
would not conflict with any judgment or decree of a court of competent
jurisdiction and (b) all existing Events of Default, except nonpayment of
principal or interest on the Notes that became due solely because of the
acceleration of the Notes, have been cured or waived.
SECTION 6.03. OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available lawful remedy to collect the payment of principal,
premium, if any, interest and Liquidated Damages, if any, on the Notes or to
enforce the performance of any provision of the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder of a Note in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy
or constitute a waiver of or acquiescence in the Event of Default. All remedies
are cumulative to the extent permitted by law.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with this Indenture, and the Company is required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
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SECTION 6.04. WAIVER OF PAST DEFAULTS.
The Holders of a majority in aggregate principal amount of the Notes
then outstanding by notice to the Trustee may on behalf of the Holders of all
of the Notes waive any existing Default or Event of Default and its
consequences under this Indenture (including any acceleration (other than an
automatic acceleration resulting from an Event of Default under clause (viii)
or (xix) of Section 6.01 hereof) except a continuing Default or Event of
Default in the payment of interest on, or the principal of, the Notes (other
than as a result of an acceleration), which shall require the consent of all of
the Holders of the Notes then outstanding.
SECTION 6.05. CONTROL BY MAJORITY.
The Holders of a majority in principal amount of the then outstanding
Notes may direct the time, method and place of conducting any proceeding for
exercising any remedy available to the Trustee or exercising any trust power
conferred on it. However, (i) the Trustee may refuse to follow any direction
that conflicts with law or this Indenture, that the Trustee determines may be
unduly prejudicial to the rights of other Holders of Notes or that may involve
the Trustee in personal liability, and (ii) the Trustee may take any other
action deemed proper by the Trustee which is not inconsistent with such
direction. In case an Event of Default shall occur (which shall not be cured),
the Trustee shall be required, in the exercise of its power, to use the degree
of care of a prudent man in the conduct of his own affairs. Notwithstanding any
provision to the contrary in this Indenture, the Trustee is under no obligation
to exercise any of its rights or powers under this Indenture at the request of
any Holder of Notes, unless such Holder shall offer to the Trustee security and
indemnity satisfactory to it against any loss, liability or expense.
SECTION 6.06. LIMITATION ON SUITS.
A Holder of a Note may pursue a remedy with respect to this Indenture,
the Subsidiary Guarantees or the Notes only if:
(a) the Holder of a Note gives to the Trustee written notice of a
continuing Event of Default or the Trustee receives such notice from the
Company;
(b) the Holders of at least 25% in principal amount of the then
outstanding Notes make a written request to the Trustee to pursue the remedy;
(c) such Holder of a Note or Holders of Notes offer and, if
requested, provide to the Trustee indemnity satisfactory to the Trustee against
any loss, liability or expense;
(d) the Trustee does not comply with the request within 60 days
after receipt of the request and the offer and, if requested, the provision of
indemnity; and
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(e) during such 60-day period the Holders of a majority in
principal amount of the then outstanding Notes do not give the Trustee a
direction inconsistent with the request.
A Holder of a Note may not use this Indenture to prejudice the rights
of another Holder of a Note or to obtain a preference or priority over another
Holder of a Note.
SECTION 6.07. RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of
any Holder of a Note to receive payment of principal, premium, if any,
interest, and Liquidated Damages, if any, on the Note, on or after the
respective due dates expressed in such Note (including in connection with an
offer to purchase), or to bring suit for the enforcement of any such payment on
or after such respective dates, shall not be impaired or affected without the
consent of such Holder.
SECTION 6.08. COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 6.01(i) or (ii) hereof
occurs and is continuing, the Trustee is authorized to recover judgment in its
own name and as trustee of an express trust against the Company for the whole
amount of principal of, premium and Liquidated Damages, if any, and interest
remaining unpaid on the Notes and interest on overdue principal and, to the
extent lawful, interest and such further amount as shall be sufficient to cover
the costs and expenses of collection, including the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel.
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee is authorized to file such proofs of claim and other
papers or documents as may be necessary or advisable in order to have the
claims of the Trustee (including any claim for the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel)
and the Holders of the Notes allowed in any judicial proceedings relative to
the Company (or any other obligor upon the Notes), its creditors or its
property and shall be entitled and empowered to collect, receive and distribute
any money or other securities or property payable or deliverable upon the
conversion or exchange of the Notes or on any such claims and any Custodian in
any such judicial proceeding is hereby authorized by each Holder to make such
payments to the Trustee, and in the event that the Trustee shall consent to the
making of such payments directly to the Holders, to pay to the Trustee any
amount due to it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, and any other amounts due the
Trustee under Section 7.07 hereof. To the extent that the payment of any such
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 7.07 hereof
out of the estate in any such proceeding, shall be denied for any reason,
payment of the same shall be secured by a Lien on, and shall be paid out of,
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any and all distributions, dividends, money, securities and other properties
that the Holders may be entitled to receive in such proceeding whether in
liquidation or under any plan of reorganization or arrangement or otherwise.
Nothing herein contained shall be deemed to authorize the Trustee to authorize
or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Holder, or to authorize the Trustee to vote in respect of the
claim of any Holder in any such proceeding.
SECTION 6.10. PRIORITIES.
If the Trustee collects any money pursuant to this Article 6, it shall
pay out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts
due under Section 7.07 hereof, including payment of all compensation, expense
and liabilities incurred, and all advances made, by the Trustee and the costs
and expenses of collection;
Second: to Holders of Notes for amounts due and unpaid on the
Notes for principal, premium, if any, interest, and Liquidated Damages, if any,
ratably, without preference or priority of any kind, according to the amounts
due and payable on the Notes for principal, premium, if any, interest, and
Liquidated Damages, if any, respectively;
Third: without duplication, to the Holders for any other
Obligations owing to the Holders under this Indenture and the Notes; and
Fourth: to the Company or to such party as a court of
competent jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders of Notes pursuant to this Section 6.10.
SECTION 6.11. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, in each case having
due regard to the merits and good faith of the claims or defenses made by the
party litigant. This Section 6.11 does not apply to a suit by the Trustee, a
suit by a Holder of a Note pursuant to Section 6.07 hereof, or a suit by
Holders of more than 10% in principal amount of the then outstanding Notes.
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ARTICLE 7
TRUSTEE
SECTION 7.01. DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing of
which a Responsible Officer of the Trustee has knowledge, the Trustee shall
exercise such of the rights and powers vested in it by this Indenture and use
the same degree of care and skill in its exercise, as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely
by the express provisions of this Indenture or the TIA and the Trustee need
perform only those duties that are specifically set forth in this Indenture or
the TIA and no others, and no implied covenants or obligations shall be read
into this Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee
may conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to the
Trustee and conforming to the requirements of this Indenture. However, the
Trustee shall examine the certificates and opinions to determine whether or not
they conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liabilities for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of
paragraph (b) of this Section 7.01;
(ii) the Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer, unless it is proved that
the Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 6.05 hereof.
(d) Whether or not therein expressly so provided, every provision
of this Indenture that in any way relates to the Trustee is subject to
paragraphs (a), (b), (c), (e) and (f) of this Section 7.01 and Section 7.02.
(e) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or incur any liability. The Trustee shall be under
no obligation to exercise
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any of its rights and powers under this Indenture at the request of any
Holders, unless such Holder shall have offered to the Trustee security and
indemnity satisfactory to it against any loss, liability or expense.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by law.
SECTION 7.02. RIGHTS OF TRUSTEE.
(a) The Trustee may conclusively rely on the truth of the
statements and correctness of the opinions contained in, and shall be protected
from acting or refraining from acting upon, any document believed by it to be
genuine and to have been signed or presented by the proper Person. The Trustee
need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel or both. The Trustee
shall not be liable for any action it takes or omits to take in good faith in
reliance on such Officers' Certificate or Opinion of Counsel. Prior to taking,
suffering or admitting any action, the Trustee may consult with counsel of the
Trustee's own choosing and the written advice of such counsel or any Opinion of
Counsel shall be full and complete authorization and protection from liability
in respect of any action taken, suffered or omitted by it hereunder in good
faith and in reliance thereon.
(c) The Trustee may act through its attorneys and agents and
shall not be responsible for the misconduct or negligence of any agent
appointed with due care.
(d) The Trustee shall not be liable for any action it takes or
omits to take in good faith that it believes to be authorized or within the
rights or powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Company or any Subsidiary
Guarantor shall be sufficient if signed by an Officer of the Company or
Subsidiary Guarantor, as applicable.
(f) The Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Indenture at the request or direction
of any of the Holders unless such Holders shall have offered to the Trustee
reasonable security or indemnity satisfactory to the Trustee against the costs,
expenses and liabilities that might be incurred by it in compliance with such
request or direction.
(g) Except with respect to Section 4.01 hereof, the Trustee shall
have no duty to inquire as the performance of the covenants in Article 4
hereof. In addition, the Trustee shall not be deemed to have knowledge of any
Default or Event of Default except (i) any Event of Default occurring pursuant
to Sections 6.01(i), 6.01(ii) and 4.01
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or (ii) any Default or Event of Default of which the Trustee shall have
received written notification or obtained actual knowledge.
(h) The Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other paper or document, but
the Trustee may, in its discretion, make such further inquiry or investigation
into such facts or matters as it may see fit and if the Trustee shall determine
to make such further inquiry or investigation, it shall be entitled to examine
the books, records and premises of the Company personally or by agent or
attorney.
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the
owner of Notes and may otherwise deal with the Company, the Subsidiary
Guarantors or any Affiliate of the Company or any Subsidiary Guarantor with the
same rights it would have if it were not Trustee. However, in the event that
the Trustee acquires any conflicting interest it must eliminate such conflict
within 90 days, apply to the Commission for permission to continue as Trustee
or resign. Any Agent may do the same with like rights and duties. The Trustee
is also subject to Sections 7.10 and 7.11 hereof.
SECTION 7.04. TRUSTEE'S DISCLAIMER.
The Trustee shall not be responsible for and makes no representation
as to the validity or adequacy of this Indenture, the Subsidiary Guarantees or
the Notes, it shall not be accountable for the Company's use of the proceeds
from the Notes or any money paid to the Company or upon the Company's direction
under any provision of this Indenture, it shall not be responsible for the use
or application of any money received by any Paying Agent other than the
Trustee, and it shall not be responsible for any statement or recital herein or
any statement in the Notes or any other document in connection with the sale of
the Notes or pursuant to this Indenture other than its certificate of
authentication.
SECTION 7.05. NOTICE OF DEFAULTS.
If a Default or Event of Default occurs and is continuing and if it is
known to a Responsible Officer of the Trustee, the Trustee shall mail to
Holders of Notes a notice of the Default or Event of Default within 90 days
after it occurs. Except in the case of a Default or Event of Default in payment
on any Note pursuant to Section 6.01(i) or (ii) hereof, the Trustee may
withhold the notice if and so long as a committee of its Responsible Officers
in good faith determines that withholding the notice is in the interests of the
Holders of the Notes.
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SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES.
Within 60 days after each May 15 beginning with the May 15 following
the date of this Indenture, and for so long as Notes remain outstanding, the
Trustee shall mail to the Holders of the Notes a brief report dated as of such
reporting date that complies with TIA ss. 313(a) (but if no event described in
TIA ss. 313(a) has occurred within the twelve months preceding the reporting
date, no report need be transmitted). The Trustee also shall comply with TIA
ss. 313(b). The Trustee shall also transmit by mail all reports as required by
TIA ss. 313(c).
A copy of each report at the time of its mailing to the Holders of
Notes shall be mailed to the Company and filed with the Commission and each
stock exchange on which the Company has informed the Trustee in writing the
Notes are listed in accordance with TIA ss. 313(d). The Company shall promptly
notify the Trustee when the Notes are listed on any stock exchange and of any
delisting thereof.
SECTION 7.07. COMPENSATION AND INDEMNITY.
The Company and the Subsidiary Guarantors shall pay to the Trustee
from time to time reasonable compensation for its acceptance of this Indenture
and services hereunder. To the extent permitted by law, the Trustee's
compensation shall not be limited by any law on compensation of a trustee of an
express trust. The Company and the Subsidiary Guarantors shall reimburse the
Trustee promptly upon request for all reasonable disbursements, advances and
expenses incurred or made by it in addition to the compensation for its
services. Such expenses shall include the reasonable compensation,
disbursements and expenses of the Trustee's agents and counsel.
The Company and the Subsidiary Guarantors shall indemnify the Trustee
against any and all losses, liabilities or expenses incurred by it arising out
of or in connection with the acceptance or administration of its duties under
this Indenture, including the costs and expenses of enforcing this Indenture
against the Company and the Subsidiary Guarantors (including this Section 7.07)
and defending itself against any claim (whether asserted by the Company and the
Subsidiary Guarantors or any Holder or any other person) or liability in
connection with the exercise or performance of any of its powers or duties
hereunder except to the extent any such loss, liability or expense may be
attributable to its negligence or bad faith. The Trustee shall notify the
Company and the Subsidiary Guarantors promptly of any claim for which it may
seek indemnity. Failure by the Trustee to so notify the Company and the
Subsidiary Guarantors shall not relieve the Company of its obligations
hereunder. The Company and the Subsidiary Guarantors shall defend the claim and
the Trustee shall cooperate in the defense. The Trustee may have separate
counsel and the Company and the Subsidiary Guarantors shall pay the reasonable
fees and expenses of such counsel. The Company and the Subsidiary Guarantors
need not pay for any settlement made without their consent, which consent shall
not be unreasonably withheld.
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The obligations of the Company and the Subsidiary Guarantors under
this Section 7.07 shall survive the satisfaction and discharge of this
Indenture.
To secure the Company's and the Subsidiary Guarantors payment
obligations in this Section 7.07, the Trustee shall have a Lien prior to the
Notes on all money or property held or collected by the Trustee, except that
held in trust to pay principal, interest and Liquidated Damages, if any, on
particular Notes. Such Lien shall survive the satisfaction and discharge of
this Indenture and the resignation or removal of the Trustee.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(viii) or (ix) hereof occurs, the expenses and
the compensation for the services (including the fees and expenses of its
agents and counsel) are intended to constitute expenses of administration under
any Bankruptcy Law.
The Trustee shall comply with the provisions of TIA ss. 313(b)(2) to
the extent applicable.
SECTION 7.08. REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section 7.08.
The Trustee may resign in writing at any time and be discharged from
the trust hereby created by so notifying the Company. The Holders of a majority
in principal amount of the then outstanding Notes may remove the Trustee by so
notifying the Trustee and the Company in writing. The Company may remove the
Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or an
order for relief is entered with respect to the Trustee under any Bankruptcy
Law;
(c) a Custodian or public officer takes charge of the Trustee or
its property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a
successor Trustee. Within one year after the successor Trustee takes office,
the Holders of a majority in principal amount of the then outstanding Notes may
appoint a successor Trustee to replace the successor Trustee appointed by the
Company.
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If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company, or
the Holders of at least 10% in principal amount of the then outstanding Notes
may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee, after written request by any Holder of a Note who has
been a Holder of a Note for at least six months, fails to comply with Section
7.10 hereof, such Holder of a Note may petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a successor
Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and the duties of the
Trustee under this Indenture. The successor Trustee shall mail a notice of its
succession to the Holders of the Notes. The retiring Trustee shall promptly
transfer all property held by it as Trustee to the successor Trustee, provided
that all sums owing to the Trustee hereunder have been paid and subject to the
Lien provided for in Section 7.07 hereof. Notwithstanding replacement of the
Trustee pursuant to this Section 7.08, the Company's obligations under Section
7.07 hereof shall continue for the benefit of the retiring Trustee.
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee or any Agent consolidates, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation, the successor corporation without any further act shall be the
successor Trustee or any Agent, as applicable.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.
There shall at all times be a Trustee hereunder that is a corporation
organized and doing business under the laws of the United States of America or
of any state thereof that is authorized under such laws to exercise corporate
trustee power, that is subject to supervision or examination by federal or
state authorities. The Trustee and its direct parent shall at all times have a
combined capital surplus of at least $50,000,000 as set forth in its most
recent annual report of condition.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA ss. 310(a)(1), (2) and (5). The Trustee is subject to
TIA ss. 310(b).
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST THE COMPANY.
The Trustee is subject to TIA ss. 311(a), excluding any creditor
relationship listed in TIA ss. 311(b). A Trustee who has resigned or been
removed shall be subject to TIA ss. 311(a) to the extent indicated therein.
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ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.01. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE.
The Company may, at the option of its Board of Directors evidenced by
a resolution set forth in an Officers' Certificate, at any time, elect to have
either Section 8.02 or Section 8.03 hereof be applied to all Notes and
Subsidiary Guarantees then outstanding upon compliance with the conditions set
forth below in this Article 8.
SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.02, the Company and each Subsidiary Guarantor
shall, subject to the satisfaction of the conditions set forth in Section 8.04
hereof, be deemed to have been discharged from their respective obligations
with respect to all Notes and Subsidiary Guarantees then outstanding on the
date the conditions set forth below are satisfied ("Legal Defeasance"). For
this purpose, Legal Defeasance means that the Company shall be deemed to have
paid and discharged the entire Indebtedness represented by the Notes
outstanding, which shall thereafter be deemed to be "outstanding" only for the
purposes of Section 8.05 and the other Sections of this Indenture referred to
in (a) and (b) below, and to have satisfied all their respective other
obligations under such Notes and Subsidiary Guarantees and this Indenture (and
the Trustee, on demand of and at the expense of the Company, shall execute
proper instruments acknowledging the same), except for the following provisions
which shall survive until otherwise terminated or discharged hereunder: (a) the
rights of Holders of outstanding Notes to receive payments in respect of the
principal amount, premium, if any, and interest and Liquidated Damages, if any,
on such Notes when such payments are due from the trust referred to in Section
8.04(a); (b) the Company's obligations with respect to such Notes under
Sections 2.03, 2.04, 2.05, 2.06, 2.07, 2.10, 4.02 and 4.03 hereof; (c) the
rights, powers, trusts, duties and immunities of the Trustee and the Company's
obligations in connection therewith; and (d) the provisions of this Section
8.02.
SECTION 8.03. COVENANT DEFEASANCE.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.03, the Company and each Subsidiary Guarantor
shall, subject to the satisfaction of the conditions set forth in Section 8.04
hereof, be released from its obligations under the covenants contained in
Article 5 and in Sections 4.03, 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.15,
4.16, 4.17, 5.01 and 11.01 hereof with respect to the outstanding Notes and
Subsidiary Guarantees on and after the date the conditions set forth below are
satisfied (hereinafter, "Covenant Defeasance"), and the Notes and Subsidiary
Guarantees shall thereafter be deemed not "outstanding" for the purposes of any
direction, waiver, consent or declaration or act of Holders (and the
consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "outstanding" for all other purposes hereunder (it being
understood that such Notes shall
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not be deemed outstanding for accounting purposes). For this purpose, Covenant
Defeasance means that, with respect to the outstanding Notes and Subsidiary
Guarantees, the Company or any of its Subsidiaries may omit to comply with and
shall have no liability in respect of any term, condition or limitation set
forth in any such covenant, whether directly or indirectly, by reason of any
reference elsewhere herein to any such covenant or by reason of any reference
in any such covenant to any other provision herein or in any other document and
such omission to comply shall not constitute a Default or an Event of Default
under Section 6.01 hereof, but, except as specified above, the remainder of
this Indenture and such Notes and Subsidiary Guarantees shall be unaffected
thereby. In addition, upon the Company's exercise under Section 8.01 hereof of
the option applicable to this Section 8.03, subject to the satisfaction of the
conditions set forth in Section 8.04 hereof, Sections 6.01(iii) through 6.01(v)
hereof shall not constitute Events of Default.
SECTION 8.04. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.
The following shall be the conditions to the application of either
Section 8.02 or Section 8.03 hereof to the outstanding Notes and Subsidiary
Guarantees:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Company must irrevocably deposit with the Trustee, in
trust, for the benefit of the Holders of the Notes, cash in U.S. dollars,
non-callable Government Securities, or a combination thereof, in such amounts
as shall be sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay the principal amount, premium, if any,
and interest and Liquidated Damages, if any, on the outstanding Notes on the
stated maturity or on the applicable redemption date, as the case may be, and
the Company must specify whether the Notes are being defeased to maturity or to
a particular redemption date;
(b) in the case of Legal Defeasance, the Company shall have
delivered to the Trustee an opinion of counsel in the United States reasonably
acceptable to the Trustee confirming that (A) the Company has received from, or
there has been published by, the Internal Revenue Service a ruling or (B) since
the date hereof, there has been a change in the applicable federal income tax
law, in either case to the effect that, and based thereon such opinion of
counsel shall confirm that, subject to customary assumptions and exclusions,
the Holders of the outstanding Notes shall not recognize income, gain or loss
for federal income tax purposes as a result of such Legal Defeasance and shall
be subject to federal income tax on the same amounts, in the same manner and at
the same times as would have been the case if such Legal Defeasance had not
occurred;
(c) in the case of Covenant Defeasance, the Company shall have
delivered to the Trustee an opinion of counsel in the United States reasonably
acceptable to the Trustee confirming that, subject to customary assumptions and
exclusions, the Holders of the outstanding Notes shall not recognize income,
gain or loss for federal income tax
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purposes as a result of such Covenant Defeasance and shall be subject to
federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Covenant Defeasance had not occurred;
(d) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of
Default resulting from the financing of amounts to be applied to such deposit)
or insofar as Events of Default from bankruptcy or insolvency events are
concerned, at any time in the period ending on the 91st day after the date of
deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not result
in a breach or violation of, or constitute a default under, any material
agreement or instrument (other than this Indenture) to which the Company or any
of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound;
(f) the Company shall have delivered to the Trustee an opinion of
counsel to the effect that, subject to customary assumptions and exclusions
(which assumptions and exclusions shall not relate to the operation of Section
547 of the United States Bankruptcy Code or any analogous New York State law
provision), after the 91st day following the deposit, the trust funds shall not
be subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally;
(g) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the
intent of preferring the Holders of Notes over the other creditors of the
Company with the intent of defeating, hindering, delaying or defrauding
creditors of the Company or others; and
(h) the Company shall have delivered to the Trustee an Officers'
Certificate and an opinion of counsel, each stating that all conditions
precedent provided for relating to the Legal Defeasance or the Covenant
Defeasance have been complied with.
SECTION 8.05. DEPOSITED MONEY AND U.S. GOVERNMENT SECURITIES TO BE HELD IN
TRUST; OTHER MISCELLANEOUS PROVISIONS.
Subject to Section 8.06 hereof, all money and non-callable Government
Securities (including the proceeds thereof) deposited with the Trustee (or
other qualifying trustee, collectively for purposes of this Section 8.05, the
"Trustee") pursuant to Section 8.04 hereof in respect of the then outstanding
Notes shall be held in trust and applied by the Trustee, in accordance with the
provisions of such Notes and this Indenture, to the payment, either directly or
through any Paying Agent (including the Company acting as Paying Agent) as the
Trustee may determine, to the Holders of such Notes of all sums due and to
become due thereon in respect of principal, premium, if any, interest and
Liquidated Damages, if any, but such money need not be segregated from other
funds except to the extent required by law.
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The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the cash or non-callable
Government Securities deposited pursuant to Section 8.04 hereof or the
principal and interest received in respect thereof other than any such tax, fee
or other charge which by law is for the account of the Holders of the
outstanding Notes.
Anything in this Article 8 to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time at the Company's
written request and be relieved of all liability with respect to any money or
non-callable Government Securities held by it as provided in Section 8.04
hereof which, in the opinion of a nationally recognized firm of independent
public accountants expressed in a written certification thereof delivered to
the Trustee (which may be the opinion delivered under Section 8.04(a) hereof),
are in excess of the amount thereof that would then be required to be deposited
to effect an equivalent Legal Defeasance or Covenant Defeasance.
SECTION 8.06. REPAYMENT TO THE COMPANY.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of, premium, if any,
interest or Liquidated Damages, if any, on any Note and remaining unclaimed for
one year after such principal, and premium, if any, or interest, if any, or
Liquidated Damages, if any, have become due and payable shall be paid to the
Company on its written request or (if then held by the Company) shall be
discharged from such trust; and the Holder of such Note shall thereafter, as an
unsecured general creditor, look only to the Company for payment thereof, and
all liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Company as trustee thereof, shall thereupon
cease; provided, however, that the Trustee or such Paying Agent, before being
required to make any such repayment, may at the expense of the Company cause to
be published once, in the New York Times and The Wall Street Journal (national
edition), notice that such money remains unclaimed and that, after a date
specified therein, which shall not be less than 30 days from the date of such
notification or publication, any unclaimed balance of such money then remaining
shall be repaid to the Company.
SECTION 8.07. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any United States
dollars or non-callable Government Securities in accordance with Section 8.02
hereof or Section 8.03 hereof, as the case may be, by reason of any order or
judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, then the obligations of the Company and
the Subsidiary Guarantors under this Indenture, and the Notes and the
Subsidiary Guarantees shall be revived and reinstated as though no deposit had
occurred pursuant to Section 8.02 hereof or Section 8.03 hereof, as the case
may be, until such time as the Trustee or Paying Agent is permitted to apply
all such money in accordance with Section 8.02 hereof or Section 8.03 hereof,
as the case may be; provided, however, that, if the Company makes
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any payment of principal of, premium, if any, interest or Liquidated Damages,
if any, on any Note following the reinstatement of its obligations, the Company
shall be subrogated to the rights of the Holders of such Notes to receive such
payment from the money held by the Trustee or Paying Agent.
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.01. WITHOUT CONSENT OF HOLDERS OF THE NOTES.
Notwithstanding Section 9.02 of this Indenture, without the consent of
any Holder of Notes the Company and the Trustee may amend or supplement this
Indenture, the Notes or the Subsidiary Guarantees:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or in
place of certificated Notes;
(c) to provide for the assumption of the Company's or a
Subsidiary Guarantor's obligations to the Holders of Notes in the case of a
merger, or consolidation pursuant to Article 5 or Article 11 hereof, as
applicable;
(d) to make any change that would provide any additional rights
or benefits to the Holders of Notes or that does not adversely affect the legal
rights hereunder of any such Holder;
(e) to comply with requirements of the Commission in order to
effect or maintain the qualification of this Indenture under the TIA; or
(f) to allow any Restricted Subsidiary to Guarantee the Notes.
Upon the written request of the Company accompanied by a resolution of
its Board of Directors of the Company authorizing the execution of any such
amended or supplemental indenture, and upon receipt by the Trustee of the
documents described in Section 9.06 hereof, the Trustee shall join with the
Company or the Subsidiary Guarantors in the execution of any amended or
supplemental indenture authorized or permitted by the terms of this Indenture
and to make any further appropriate agreements and stipulations that may be
therein contained, but the Trustee shall not be obligated to enter into such
amended or supplemental indenture that affects its own rights, duties or
immunities under this Indenture or otherwise.
SECTION 9.02. WITH CONSENT OF HOLDERS OF NOTES.
Except as provided below in this Section 9.02 or as provided in
Section 10.13 or Section 12.13 of this Indenture, this Indenture, the Notes and
the Subsidiary Guarantees
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may be amended or supplemented with the consent of the Holders of at least a
majority in principal amount at maturity of the Notes then outstanding
(including, without limitation, consents obtained in connection with a purchase
of, or a tender offer or exchange offer for Notes), and any existing default or
compliance with any provision of this Indenture, the Notes or the Subsidiary
Guarantees may be waived with the consent of the Holders of a majority in
principal amount of the then outstanding Notes (including, without limitation,
consents obtained in connection with a purchase of or a tender offer or
exchange offer for the Notes).
Upon the request of the Company accompanied by a resolution of its
Board of Directors authorizing the execution of any such amended or
supplemental indenture, and upon the filing with the Trustee of evidence
satisfactory to the Trustee of the consent of the Holders of Notes as
aforesaid, and upon receipt by the Trustee of an Officers' Certificate and an
Opinion of Counsel, the Trustee shall join with the Company and the Subsidiary
Guarantors in the execution of such amended or supplemental indenture unless
such amended or supplemental indenture affects the Trustee's own rights, duties
or immunities under this Indenture or otherwise, in which case the Trustee may,
but shall not be obligated to, enter into such amended or supplemental
indenture.
It shall not be necessary for the consent of the Holders of Notes
under this Section 9.02 to approve the particular form of any proposed
amendment or waiver, but it shall be sufficient if such consent approves the
substance thereof. After an amendment, supplement or waiver under this Section
9.02 becomes effective, the Company shall mail to the Holders of each Note
affected thereby a notice briefly describing the amendment, supplement or
waiver. Any failure of the Company to mail such notice, or any defect therein,
shall not, however, in any way impair or affect the validity of any such
amended or supplemental indenture or waiver.
Subject to Sections 6.04 and 6.07 hereof, the Holders of a majority in
aggregate principal amount of the Notes then outstanding may amend or waive
compliance in a particular instance by the Company or the Subsidiary Guarantors
with any provision of this Indenture or the Notes or the Subsidiary Guarantees.
However, without the consent of each Holder affected, an amendment, or waiver
may not (with respect to any Note held by a non-consenting Holder):
(a) reduce the principal amount of Notes whose Holders must
consent to an amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of any
Notes or alter the provisions with respect to the redemption of the Notes
(other than provisions relating to Sections 3.09, 4.10 and 4.13 hereof);
(c) reduce the rate of or change the time for payment of interest
on any Note;
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(d) waive a Default or Event of Default in the payment of
principal of or premium, if any, or interest on the Notes (except a rescission
of acceleration of the Notes by the Holders of at least a majority in aggregate
principal amount at maturity of the Notes and a waiver of the payment default
that resulted from such acceleration);
(e) make any Note payable in money other than that stated in the
Notes;
(f) make any change in Section 6.04 or 6.07 hereof;
(g) waive a redemption payment with respect to any Note (other
than a payment described in Section 4.10 or 4.13 hereof); or
(h) make any change in the amendment and waiver provisions of
this Article 9.
SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment or supplement to this Indenture, the Subsidiary
Guarantees or the Notes shall be set forth in an amended or supplemental
indenture that complies with the TIA as then in effect.
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, supplement or waiver becomes effective, a consent
to it by a Holder of a Note is a continuing consent by the Holder and every
subsequent Holder of a Note or portion of a Note that evidences the same debt
as the consenting Holder's Note, even if notation of the consent is not made on
any Note. However, any such Holder or subsequent Holder of a Note may revoke
the consent as to its Note if the Trustee receives written notice of revocation
before the date the waiver, supplement or amendment becomes effective. When an
amendment, supplement or waiver becomes effective in accordance with its terms,
it thereafter binds every Holder.
SECTION 9.05. NOTATION ON OR EXCHANGE OF NOTES.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Note thereafter authenticated. The Company in
exchange for all Notes may issue and the Trustee shall authenticate new Notes
that reflect the amendment, supplement or waiver.
Failure to make the appropriate notation or issue a new Note shall not
affect the validity and effect of such amendment, supplement or waiver.
SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amended or supplemental indenture
authorized pursuant to this Article 9 if the amendment or supplement does not
adversely affect the
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rights, duties, liabilities or immunities of the Trustee. The Company and the
Subsidiary Guarantors may not sign an amendment or supplemental indenture until
their respective Boards of Directors approve it. In signing or refusing to sign
any amended or supplemental indenture the Trustee shall be entitled to receive
and (subject to Section 7.01 hereof) shall be fully protected in relying upon
an Officers' Certificate and an Opinion of Counsel stating that the execution
of such amended or supplemental indenture is authorized or permitted by this
Indenture, that it is not inconsistent herewith, and that it will be valid and
binding upon the Company and the Subsidiary Guarantors in accordance with its
terms.
ARTICLE 10
SUBORDINATION
SECTION 10.01 AGREEMENT TO SUBORDINATE.
The Company agrees, and each Holder of Notes by accepting a Note
agrees, that the Indebtedness evidenced by the Note is subordinated in right of
payment, to the extent and in the manner provided in this Article, to the prior
payment in full of all Senior Debt (whether outstanding on the date hereof or
hereafter created, incurred, assumed or guaranteed), and that the subordination
is for the benefit of the holders of Senior Debt.
SECTION 10.02 LIQUIDATION; DISSOLUTION; BANKRUPTCY.
Upon any payment or distribution to creditors of the Company of any
kind, whether in cash, property or securities in a liquidation or dissolution
of the Company or in a bankruptcy, reorganization, insolvency, receivership or
similar proceeding relating to the Company or its property, an assignment for
the benefit of creditors or any marshalling of the Company's assets and
liabilities, whether voluntary or involuntary, the holders of Senior Debt of
the Company will be entitled to receive payment in full in cash of all
Obligations due in respect of such Senior Debt (including interest after the
commencement of any such proceeding at the rate specified in the applicable
Senior Debt whether or not allowable as a claim in any such proceeding) before
the Holders of Notes will be entitled to receive any payment or distribution of
any kind with respect to the Notes, and until all Obligations with respect to
Senior Debt are paid in full, any payment or distribution to which the Holders
of Notes would be entitled shall be made to the holders of Senior Debt (except
that Holders of Notes may receive and retain Permitted Junior Securities and
payments made from the trust described under Sections 8.02 and 8.03).
SECTION 10.03 DEFAULT ON DESIGNATED SENIOR DEBT.
The Company also shall not make any payment upon or in respect of the
Notes (except in Permitted Junior Securities or from the trust described under
Sections 8.02 and 8.03) if (i) a default in the payment of the principal of,
premium, if any, or interest on Designated Senior Debt occurs and is continuing
or (ii) any other default occurs and is continuing with respect to Designated
Senior Debt that permits holders of the
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Designated Senior Debt as to which such default relates to accelerate its
maturity, and, in the case of this clause (ii) only, the Trustee receives a
notice of such default invoking the provisions described in this paragraph (a
"Payment Blockage Notice") from the holders of any Designated Senior Debt or
any agent or trustee therefor. Payments on the Notes may and shall be resumed
(a) in the case of a payment default, upon the date on which such default is
cured or waived and (b) in case of any other default, the earlier of the date
on which such other default is cured or waived or 179 days after the date on
which the applicable Payment Blockage Notice is received, unless a payment
default has occurred and is continuing (as a result of the non-payment of a
scheduled principal repayment upon Designated Senior Debt, nonpayment of
principal upon the stated maturity of any Designated Senior Debt or the
acceleration of the maturity of any Designated Senior Debt). No new period of
payment blockage (other than for a payment default) may be commenced unless and
until 360 days have elapsed since the effectiveness of the immediately prior
Payment Blockage Notice. No other default that existed or was continuing on the
date of delivery of any Payment Blockage Notice to the Trustee shall be, or be
made, the basis for a subsequent Payment Blockage Notice unless such default
shall have been cured or waived for a period of not less than 90 days.
Whenever the Company is prohibited from making any payment in respect
of the Notes, the Company also shall be prohibited from making, directly or
indirectly, any payment of any kind on account of the purchase or other
acquisition of the Notes. If any Holder receives any payment or distribution
that such Holder is not entitled to receive with respect to the Notes, such
Holder shall be required to pay the same over to the holders of Senior Debt.
SECTION 10.04. ACCELERATION OF NOTES.
If payment of the Notes is accelerated because of an Event of Default,
the Company shall promptly notify holders of its Senior Debt of the
acceleration.
SECTION 10.05. WHEN DISTRIBUTION MUST BE PAID OVER.
In the event that the Trustee or any Holder of a Note receives any
payment of any Obligations with respect to the Notes at a time when such
payment is prohibited by Section 10.03 hereof, such payment shall be held by
the Trustee or such Holder, in trust for the benefit of, and shall be paid
forthwith over and delivered, upon written request, to, the holders of Senior
Debt as their interests may appear or to their representative under the
indenture or other agreement (if any) pursuant to which Senior Debt may have
been issued (a "Representative"), as their respective interests may appear, for
application to the payment of all Obligations with respect to Senior Debt
remaining unpaid to the extent necessary to pay such Obligations in full in
accordance with their terms, after giving effect to any concurrent payment or
distribution to or for the holders of Senior Debt.
With respect to the holders of Senior Debt, the Trustee undertakes to
perform only such obligations on the part of the Trustee as are specifically
set forth in this Article
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10, and no implied covenants or obligations with respect to the holders of
Senior Debt shall be read into this Indenture against the Trustee. The Trustee
shall not be deemed to owe any fiduciary duty to the holders of Senior Debt,
and shall not be liable to any such holders if the Trustee shall pay over or
distribute to or on behalf of Holders of the Notes or the Company or any other
Person money or assets to which any holders of Senior Debt shall be entitled by
virtue of this Article 10, except if such payment is made as a result of the
willful misconduct or gross negligence of the Trustee.
SECTION 10.06. NOTICE BY THE COMPANY.
The Company shall promptly notify the Trustee and the Paying Agent of
any facts known to the Company that would cause a payment of any Obligations
with respect to the Notes to violate this Article, which notice shall
specifically refer to this Article 10, but failure to give such notice shall
not affect the subordination of the Notes to the Senior Debt as provided in
this Article.
SECTION 10.07. SUBROGATION.
Until all Senior Debt is paid in full and until the Notes are paid in
full, Holders of Notes shall be subrogated (equally and ratably with all other
pari passu indebtedness) to the rights of holders of Senior Debt to receive
distributions applicable to Senior Debt to the extent that distributions
otherwise payable to the Holders of the Notes have been applied to the payment
of Senior Debt. A distribution made under this Article to holders of Senior
Debt that otherwise would have been made to Holders of the Notes is not, as
between the Company and Holders of the Notes, a payment by the Company on the
Notes.
SECTION 10.08. RELATIVE RIGHTS.
This Article defines the relative rights of Holders of Notes and
holders of Senior Debt. Nothing in this Indenture shall:
(1) impair, as between the Company and Holders of Notes,
the obligations of the Company, which are absolute and unconditional,
to pay principal of and interest on the Notes in accordance with their
terms;
(2) affect the relative rights of Holders of Notes and
creditors of the Company other than their rights in relation to
holders of Senior Debt; or
(3) prevent the Trustee or any Holder of Notes from
exercising its available remedies upon a Default or Event of Default,
subject to the rights of holders and owners of Senior Debt to receive
distributions and payments otherwise payable to Holders of Notes.
If the Company fails because of this Article to pay principal of or
interest on a Note on the due date, the failure is still a Default or Event of
Default.
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SECTION 10.09. SUBORDINATION MAY NOT BE IMPAIRED BY THE COMPANY.
No right of any holder of Senior Debt to enforce the subordination of
the Indebtedness evidenced by the Notes shall be impaired by any act or failure
to act by the Company or any Holder or by the failure of the Company or any
Holder to comply with this Indenture.
Without in any way limiting the generality of the foregoing paragraph,
the holders of Senior Debt, or any of them, may, at any time and from time to
time, without the consent of or notice to the Holders of the Notes, without
incurring any liabilities to any Holder of any Notes and without impairing or
releasing the subordination and other benefits provided in this Indenture or
the obligations of the Holders of the Notes to the holders of the Senior Debt,
even if any right of reimbursement or subrogation or other right or remedy of
any Holder of Notes is affected, impaired or extinguished thereby, do any one
or more of the following:
(1) change the manner, place or terms of payment or
change or extend the time of payment of, or renew, exchange, amend,
increase or alter, the terms of any Senior Debt, any security therefor
or guaranty thereof or any liability of any obligor thereon (including
any guarantor) to such holder, or any liability incurred directly or
indirectly in respect thereof or otherwise amend, renew, exchange,
extend, modify, increase or supplement in any manner any Senior Debt
or any instrument evidencing or guaranteeing or securing the same or
any agreement under which Senior Debt is outstanding;
(2) sell, exchange, release, surrender, realize upon,
enforce or otherwise deal with in any manner and in any order any
property pledged, mortgaged or otherwise securing Senior Debt or any
liability of any obligor thereon, to such holder, or any liability
incurred directly or indirectly in respect thereof;
(3) settle or compromise any Senior Debt or any other
liability of any obligor of the Senior Debt to such holder or any
security therefor or any liability incurred directly or indirectly in
respect thereof and apply any sums by whomsoever paid and however
realized to any liability (including, without limitation, Senior Debt)
in any manner or order; and
(4) fail to take or to record or to otherwise perfect,
for any reason or for no reason, any lien or security interest
securing Senior Debt by whomsoever granted, exercise or delay in or
refrain from exercising any right or remedy against any obligor or any
guarantor or any other person, elect any remedy and otherwise deal
freely with any obligor and any security for the Senior Debt or any
liability of any obligor to such holder or any liability incurred
directly or indirectly in respect thereof.
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SECTION 10.10. DISTRIBUTION OR NOTICE TO REPRESENTATIVE.
Whenever a distribution is to be made or a notice given to a holder of
Senior Debt, the distribution may be made and the notice given to its
Representative.
Upon any payment or distribution of assets of the Company referred to
in this Article 10, the Trustee and the Holders of the Notes shall be entitled
to rely upon any order or decree made by any court of competent jurisdiction or
upon any certificate of such Representative or of the liquidating trustee or
agent or other Person making any distribution to the Trustee or to the Holders
of Notes for the purpose of ascertaining the Persons entitled to participate in
such distribution, the holders of the Senior Debt and other Indebtedness of the
Company, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article
10.
SECTION 10.11. RIGHTS OF TRUSTEE AND PAYING AGENT.
Notwithstanding the provisions of this Article 10 or any other
provision of this Indenture, the Trustee shall not be charged with knowledge of
the existence of any facts that would prohibit the making of any payment or
distribution by the Trustee, and the Trustee and the Paying Agent may continue
to make payments on the Notes, unless the Trustee shall have received at its
Corporate Trust Office at least three Business Days prior to the date of such
payment written notice of facts that would cause the payment of any Obligations
with respect to the Notes to violate this Article, which notice shall
specifically refer to this Article 10. Only the Company or a Representative may
give the notice. Nothing in this Article 10 shall impair the claims of, or
payments to, the Trustee under or pursuant to Section 7.07 hereof.
The Trustee in its individual or any other capacity may hold Senior
Debt with the same rights it would have if it were not Trustee. Any Agent may
do the same with like rights.
SECTION 10.12. AUTHORIZATION TO EFFECT SUBORDINATION.
Each Holder of a Note by the Holder's acceptance thereof authorizes
and directs the Trustee on the Holder's behalf to take such action as may be
necessary or appropriate to effectuate the subordination as provided in this
Article 10, and appoints the Trustee to act as the Holder's attorney-in-fact
for any and all such purposes, including without limitation the timely filing
of a claim for the unpaid balance of the Notes held by such Holder in the form
required in any Insolvency or Liquidation Proceeding and causing such claim to
be approved. If the Trustee does not file a proper proof of claim or proof of
debt in the form required in any proceeding referred to in Section 6.09 hereof
at least 30 days before the expiration of the time of such claim, the
Representatives of the Designated Senior Debt, including the Credit Agent, are
hereby authorized to file an appropriate claim for and on behalf of the Holders
of the Notes.
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ARTICLE 11
SUBSIDIARY GUARANTEES
SECTION 11.01. SUBSIDIARY GUARANTEES.
Subject to Section 11.06 hereof, each of the Subsidiary Guarantors
hereby, jointly and severally, unconditionally guarantees (a "Subsidiary
Guarantee") to each Holder of a Note authenticated and delivered by the Trustee
and to the Trustee and its successors and assigns, irrespective of the validity
and enforceability of this Indenture, the Notes and the Obligations of the
Company hereunder and thereunder, that: (a) the principal of, premium, if any,
interest and Liquidated Damages, if any, on the Notes will be promptly paid in
full when due, subject to any applicable grace period, whether at maturity, by
acceleration, redemption or otherwise, and interest on the overdue principal,
premium, if any, (to the extent permitted by law) interest on any interest, if
any, and Liquidated Damages, if any, on the Notes, and all other payment
Obligations of the Company to the Holders or the Trustee hereunder or
thereunder will be promptly paid in full and performed, all in accordance with
the terms hereof and thereof; and (b) in case of any extension of time of
payment or renewal of any Notes or any of such other Obligations, the same will
be promptly paid in full when due or performed in accordance with the terms of
the extension or renewal, subject to any applicable grace period, whether at
stated maturity, by acceleration, redemption or otherwise. Failing payment when
so due of any amount so guaranteed for whatever reason the Subsidiary
Guarantors will be jointly and severally obligated to pay the same immediately.
An Event of Default under this Indenture or the Notes shall constitute an event
of default under the Subsidiary Guarantees, and shall entitle the Holders to
accelerate the Obligations of the Subsidiary Guarantors hereunder in the same
manner and to the same extent as the Obligations of the Company. The Subsidiary
Guarantors hereby agree that their Obligations hereunder shall be
unconditional, irrespective of the validity, regularity or enforceability of
the Notes or this Indenture, the absence of any action to enforce the same, any
waiver or consent by any Holder with respect to any provisions hereof or
thereof, the recovery of any judgment against the Company, any action to
enforce the same or any other circumstance which might otherwise constitute a
legal or equitable discharge or defense of a Subsidiary Guarantor. Each
Subsidiary Guarantor hereby waives diligence, presentment, demand of payment,
filing of claims with a court in the event of insolvency or bankruptcy of the
Company, any right to require a proceeding first against the Company, protest,
notice and all demands whatsoever and covenants that this Subsidiary Guarantee
will not be discharged except by complete performance of the Obligations
contained in the Notes and this Indenture. If any Holder or the Trustee is
required by any court or otherwise to return to the Company, the Subsidiary
Guarantors, or any Note Custodian, Trustee, liquidator or other similar
official acting in relation to either the Company or the Subsidiary Guarantors,
any amount paid by either to the Trustee or such Holder, this Subsidiary
Guarantee, to the extent theretofore discharged, shall be reinstated in full
force and effect. Each Subsidiary Guarantor agrees that it shall
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not be entitled to, and hereby waives, any right of subrogation in relation to
the Holders in respect of any Obligations guaranteed hereby. Each Subsidiary
Guarantor further agrees that, as between the Subsidiary Guarantors, on the one
hand, and the Holders and the Trustee, on the other hand, (x) the maturity of
the Obligations guaranteed hereby may be accelerated as provided in Article 6
for the purposes of this Subsidiary Guarantee, notwithstanding any stay,
injunction or other prohibition preventing such acceleration in respect of the
Obligations guaranteed hereby, and (y) in the event of any declaration of
acceleration of such Obligations as provided in Article 6 hereof, such
Obligations (whether or not due and payable) shall forthwith become due and
payable by the Subsidiary Guarantors for the purpose of this Subsidiary
Guarantee. The Subsidiary Guarantors shall have the right to seek contribution
from any non-paying Subsidiary Guarantor so long as the exercise of such right
does not impair the rights of the Holders under the Subsidiary Guarantees.
SECTION 11.02. EXECUTION AND DELIVERY OF SUBSIDIARY GUARANTEE.
To evidence its Subsidiary Guarantee set forth in Section 11.01, each
Subsidiary Guarantor hereby agrees that a notation of such Subsidiary Guarantee
substantially in the form of Exhibit D shall be endorsed, by manual or
facsimile signature, by an Officer of such Subsidiary Guarantor on each Note
authenticated and delivered by the Trustee and that this Indenture shall be
executed on behalf of such Subsidiary Guarantor, by manual or facsimile
signature, by an Officer of such Subsidiary Guarantor .
Each Subsidiary Guarantor hereby agrees that its Subsidiary Guarantee
set forth in Section 11.01 shall remain in full force and effect
notwithstanding any failure to endorse on each Note a notation of such
Subsidiary Guarantee.
If an Officer whose signature is on this Indenture or on the
Subsidiary Guarantee no longer holds that office at the time the Trustee
authenticates the Note on which a Subsidiary Guarantee is endorsed, the
Subsidiary Guarantee shall be valid nevertheless.
The delivery of any Note by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of the Subsidiary Guarantee
set forth in this Indenture on behalf of the Subsidiary Guarantors.
SECTION 11.03. SUBSIDIARY GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN
TERMS
(a) Except as set forth in Articles 4 and 5 hereof, nothing
contained in this Indenture shall prohibit a merger between a Subsidiary
Guarantor and another Subsidiary Guarantor or a merger between a Subsidiary
Guarantor and the Company.
(b) Subject to Section 11.04 hereof, no Subsidiary Guarantor may
consolidate with or merge with or into (whether or not such Subsidiary
Guarantor is the surviving Person), another corporation, Person or entity
whether or not affiliated with such Subsidiary Guarantor unless, subject to the
provisions of the following paragraph,
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(i) the Person formed by or surviving any such consolidation or merger (if
other than such Subsidiary Guarantor) assumes all the obligations of such
Subsidiary Guarantor pursuant to a supplemental indenture in form and substance
reasonably satisfactory to the Trustee, under this Indenture and the Subsidiary
Guarantees; and (ii) immediately after giving effect to such transaction, no
Default or Event of Default exists.
(c) In the case of any such consolidation, merger, sale or
conveyance and upon the assumption by the successor Person, by supplemental
indenture, executed and delivered to the Trustee and substantially in the form
of Exhibit E hereto, of the Subsidiary Guarantee endorsed upon the Notes and
the due and punctual performance of all of the covenants and conditions of this
Indenture to be performed by the Subsidiary Guarantor, such successor Person
shall succeed to and be substituted for the Subsidiary Guarantor with the same
effect as if it had been named herein as a Subsidiary Guarantor; provided that,
solely for purposes of computing Consolidated Net Income for purposes of clause
(b) of the first paragraph of Section 4.07 hereof, the Consolidated Net Income
of any Person other than the Company and its Restricted Subsidiaries shall only
be included for periods subsequent to the effective time of such merger,
consolidation, combination or transfer of assets. Such successor Person
thereupon may cause to be signed any or all of the Subsidiary Guarantees to be
endorsed upon all of the Notes issuable hereunder which theretofore shall not
have been signed by the Company and delivered to the Trustee. All of the
Subsidiary Guarantees so issued shall in all respects have the same legal rank
and benefit under this Indenture as the Subsidiary Guarantees theretofore and
thereafter issued in accordance with the terms of this Indenture as though all
of such Subsidiary Guarantees had been issued at the date of the execution
hereof.
SECTION 11.04. RELEASES FOLLOWING SALE OF ASSETS, MERGER, SALE OF CAPITAL
STOCK ETC.
In the event (a) of a sale or other disposition of all of the assets
of any Subsidiary Guarantor, by way of merger, consolidation or otherwise, or a
sale or other disposition of all of the capital stock of any Subsidiary
Guarantor, or (b) that the Company designates a Subsidiary Guarantor that is a
Restricted Subsidiary to be an Unrestricted Subsidiary, or such Subsidiary
Guarantor ceases to be a Subsidiary of the Company, then such Subsidiary
Guarantor (in the event of a sale or other disposition, by way of such a
merger, consolidation or otherwise, of all of the capital stock of such
Subsidiary Guarantor or any such designation or cessation) or the entity
acquiring the property (in the event of a sale or other disposition of all of
the assets of such Subsidiary Guarantor) shall be released and relieved of any
obligations under its Subsidiary Guarantee. In the case of a sale, assignment,
lease, transfer, conveyance or other disposition of all or substantially all of
the assets of a Subsidiary Guarantor, upon the assumption provided for in
clause (i) of Section 11.03(b) hereof, such Subsidiary Guarantor shall be
discharged from all further liability and obligation under this Indenture. Upon
delivery by the Company to the Trustee of an Officers' Certificate to the
effect of the foregoing, the Trustee shall execute any documents reasonably
required in order to evidence the release of any Subsidiary Guarantor from its
Obligation under its Subsidiary Guarantee.
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Any Subsidiary Guarantor not released from its Obligations under its Subsidiary
Guarantee shall remain liable for the full amount of principal of, premium, if
any, interest and Liquidated Damages, if any, on the Notes and for the other
Obligations of such Subsidiary Guarantor under the Indenture as provided in
this Article 11.
SECTION 11.05. ADDITIONAL SUBSIDIARY GUARANTORS.
Any Person that was not a Subsidiary Guarantor on the date of this
Indenture may become a Subsidiary Guarantor by executing and delivering to the
Trustee (a) a supplemental indenture in substantially the form of Exhibit E,
and (b) an Opinion of Counsel to the effect that such supplemental indenture
has been duly authorized and executed by such Person and constitutes the legal,
valid, binding and enforceable obligation of such Person (subject to such
customary exceptions concerning creditors rights', fraudulent transfers, public
policy and equitable principles as may be acceptable to the Trustee in its
discretion).
SECTION 11.06. LIMITATION ON SUBSIDIARY GUARANTOR LIABILITY.
For purposes hereof, each Subsidiary Guarantor's liability shall be
limited to the lesser of (i) the aggregate amount of the Obligations of the
Company under the Notes and this Indenture and (ii) the amount, if any, which
would not have (A) rendered such Subsidiary Guarantor "insolvent" (as such term
is defined in the United States Bankruptcy Code and in the Debtor and Creditor
Law of the State of New York) or (B) left such Subsidiary Guarantor with
unreasonably small capital at the time its Subsidiary Guarantee of the Notes
was entered into; provided that, it will be a presumption in any lawsuit or
other proceeding in which a Subsidiary Guarantor is a party that the amount
guaranteed pursuant to the Subsidiary Guarantee is the amount set forth in
clause (i) above unless any creditor, or representative of creditors of such
Subsidiary Guarantor, or debtor in possession or trustee in bankruptcy of the
Subsidiary Guarantor, otherwise proves in such a lawsuit that the aggregate
liability of the Subsidiary Guarantor is the amount set forth in clause (ii)
above. In making any determination as to solvency or sufficiency of capital of
a Subsidiary Guarantor in accordance with the previous sentence, the right of
such Subsidiary Guarantor to contribution from other Subsidiary Guarantors, and
any other rights such Subsidiary Guarantor may have, contractual or otherwise,
shall be taken into account.
SECTION 11.07. "TRUSTEE" TO INCLUDE PAYING AGENT.
In case at any time any Paying Agent other than the Trustee shall have
been appointed by the Company and be then acting hereunder, the term "Trustee"
as used in this Article 11 shall in each case (unless the context shall
otherwise require) be construed as extending to and including such Paying Agent
within its meaning as fully and for all intents and purposes as if such Paying
Agent were named in this Article 11 in place of the Trustee.
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ARTICLE 12
SUBORDINATION OF SUBSIDIARY GUARANTEE
SECTION 12.01. AGREEMENT TO SUBORDINATE.
The Subsidiary Guarantors agree, and each Holder of Notes by accepting
a Note agrees, that the Indebtedness evidenced by the each Subsidiary Guarantee
is subordinated in right of payment, to the extent and in the manner provided
in this Article, to the prior payment in full of all Senior Debt (whether
outstanding on the date hereof or hereafter created, incurred, assumed or
guaranteed), and that the subordination is for the benefit of the holders of
Senior Debt.
SECTION 12.02. LIQUIDATION; DISSOLUTION; BANKRUPTCY.
Upon any payment or distribution to creditors of the Subsidiary
Guarantors of any kind, whether in cash, property or securities in a
liquidation or dissolution of the Subsidiary Guarantors or in a bankruptcy,
reorganization, insolvency, receivership or similar proceeding relating to any
Subsidiary Guarantor or its property, an assignment for the benefit of
creditors or any marshalling of such Subsidiary Guarantor's assets and
liabilities, whether voluntary or involuntary, the holders of Senior Debt will
be entitled to receive payment in full in cash of all Obligations due in
respect of such Senior Debt (including interest after the commencement of any
such proceeding at the rate specified in the applicable Senior Debt whether or
not allowable as a claim in any such proceeding) before the Holders of Notes
will be entitled to receive any payment or distribution of any kind with
respect to the Notes or the Subsidiary Guarantees, and until all Obligations
with respect to Senior Debt are paid in full, any payment or distribution to
which the Holders of Notes would be entitled shall be made to the holders of
Senior Debt (except that Holders of Notes may receive and retain Permitted
Junior Securities and payments made from the trust described under Sections
8.02 and 8.03).
SECTION 12.03. DEFAULT ON DESIGNATED SENIOR DEBT.
The Subsidiary Guarantors also shall not make any payment upon or in
respect of the Notes or the Subsidiary Guarantees (except in Permitted Junior
securities or from the trust described under Sections 8.02 and 8.03) if (i) a
default in the payment of the principal of premium, if any, or interest on
Designated Senior Debt occurs and is continuing or (ii) any other default
occurs and is continuing with respect to Designated Senior Debt that permits
holders of the Designated Senior Debt as to which such default relates to
accelerate its maturity, and, in the case of this clause (ii) only, and the
Trustee receives a Payment Blockage Notice invoking the provisions described in
this paragraph from the holders of any Designated Senior Debt or any agent or
trustee therefor. Payments on the Notes or under the Subsidiary Guarantees may
and shall be resumed (a) in the case of a payment default, upon the date on
which such default is cured or waived and (b) in case of any other default, the
earlier of the date on which such other default is cured or waived or 179 days
after the date on which the applicable Payment Blockage Notice is received,
unless a payment default has occurred and is continuing (as a result
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of the non-payment of a scheduled principal repayment upon Designated Senior
Debt, non-payment of principal upon the stated maturity of any Designated
Senior Debt or the acceleration of the maturity of any Designated Senior Debt).
No new period of payment blockage (other than for a payment default) may be
commenced unless and until 360 days have elapsed since the effectiveness of the
immediately prior Payment Blockage Notice. No other default that existed or was
continuing on the date of delivery of any Payment Blockage Notice to the
Trustee shall be, or be made, the basis for a subsequent Payment Blockage
Notice unless such default shall have been cured or waived for a period of not
less than 90 days.
Whenever a Subsidiary Guarantor is prohibited from making any payment
in respect of the Notes or a Subsidiary Guarantee, the Subsidiary Guarantor
also shall be prohibited from making, directly or indirectly, any payment of
any kind on account of the purchase or other acquisition of the Notes. If any
Holder receives any payment or distribution that such Holder is not entitled to
receive with respect to the Notes or a Subsidiary Guarantee, such Holder shall
be required to pay the same over to the holders of Senior Debt.
SECTION 12.04. ACCELERATION OF NOTES.
If payment of the Notes is accelerated because of an Event of Default,
the Subsidiary Guarantors shall promptly notify holders of their Senior Debt of
the acceleration.
SECTION 12.05. WHEN DISTRIBUTION MUST BE PAID OVER.
In the event that the Trustee or any Holder of a Note receives any
payment of any Obligations with respect to the Notes or a Subsidiary Guarantee
at a time when such payment is prohibited by Section 12.03 hereof, such payment
shall be held by the Trustee or such Holder, in trust for the benefit of, and
shall be paid forthwith over and delivered, upon written request, to, the
holders of Senior Debt as their interests may appear or their Representative
under the indenture or other agreement (if any) pursuant to which Senior Debt
may have been issued, as their respective interests may appear, for application
to the payment of all Obligations with respect to Senior Debt remaining unpaid
to the extent necessary to pay such Obligations in full in accordance with
their terms, after giving effect to any concurrent payment or distribution to
or for the holders of Senior Debt.
With respect to the holders of Senior Debt, the Trustee undertakes to
perform only such obligations on the part of the Trustee as are specifically
set forth in this Article 12, and no implied covenants or obligations with
respect to the holders of Senior Debt shall be read into this Indenture against
the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Debt, and shall not be liable to any such holders if the
Trustee shall pay over or distribute to or on behalf of Holders of the Notes or
the Subsidiary Guarantors or any other Person money or assets to which any
holders
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of Senior Debt shall be entitled by virtue of this Article 12, except if such
payment is made as a result of the willful misconduct or gross negligence of
the Trustee.
SECTION 12.06. NOTICE BY SUBSIDIARY GUARANTOR
The Subsidiary Guarantors shall promptly notify the Trustee and the
Paying Agent of any facts known to the Subsidiary Guarantors that would cause a
payment of any Obligations with respect to the Notes or the Subsidiary
Guarantees to violate this Article, which notice shall specifically refer to
this Article 12, but failure to give such notice shall not affect the
subordination of the Notes and the Subsidiary Guarantees to the Senior Debt as
provided in this Article.
SECTION 12.07. SUBROGATION.
After all Senior Debt is paid in full and until the Notes are paid in
full, Holders of the Notes shall be subrogated (equally and ratably with all
other pari passu indebtedness) to the rights of holders of Senior Debt to
receive distributions applicable to Senior Debt to the extent that
distributions otherwise payable to the Holders of the Notes have been applied
to the payment of Senior Debt. A distribution made under this Article to
holders of Senior Debt that otherwise would have been made to Holders of the
Notes is not, as between the Subsidiary Guarantor and Holders of the Notes, a
payment by the Subsidiary Guarantors on the Notes.
SECTION 12.08. RELATIVE RIGHTS.
This Article defines the relative rights of Holders of the Notes and
holders of Senior Debt. Nothing in this Indenture shall:
(1) impair, as between the Subsidiary Guarantors and
Holders of the Notes, the obligations of the Subsidiary Guarantors,
which are absolute and unconditional, to pay principal of and interest
on the Notes in accordance with the terms of the Subsidiary Guarantees
as provided in Article 11;
(2) affect the relative rights of Holders of the Notes
and creditors of the Subsidiary Guarantors other than their rights in
relation to holders of Senior Debt; or
(3) prevent the Trustee or any Holder of the Notes from
exercising its available remedies upon a Default or Event of Default,
subject to the rights of holders and owners of Senior Debt to receive
distributions and payments otherwise payable to Holders of the Notes.
If the Subsidiary Guarantors fail because of this Article to pay
principal of or interest on a Note on the due date, the failure is still a
Default or Event of Default.
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SECTION 12.09. SUBORDINATION MAY NOT BE IMPAIRED BY THE SUBSIDIARY
GUARANTORS.
No right of any holder of Senior Debt to enforce the subordination of
the Indebtedness evidenced by the Notes or a Subsidiary Guarantee shall be
impaired by any act or failure to act by any Subsidiary Guarantor or any Holder
or by the failure of any Subsidiary Guarantor or any Holder to comply with this
Indenture.
Without in any way limiting the generality of the foregoing paragraph,
the holders of Senior Debt, or any of them, may, at any time and from time to
time, without the consent of or notice to the Holders of the Notes, without
incurring any liabilities to any Holder of any Notes and without impairing or
releasing the subordination and other benefits provided in this Indenture or
the obligations of the Holders of the Notes to the holders of the Senior Debt,
even if any right of reimbursement or subrogation or other right or remedy of
any Holder of Notes is affected, impaired or extinguished thereby, do any one
or more of the following:
(1) change the manner, place or terms of payment or
change or extend the time of payment of, or renew, exchange, amend,
increase or alter, the terms of any Senior Debt, any security therefor
or guaranty thereof or any liability of any obligor thereon (including
any guarantor) to such holder, or any liability incurred directly or
indirectly in respect thereof or otherwise amend, renew, exchange,
extend, modify, increase or supplement in any manner any Senior Debt
or any instrument evidencing or guaranteeing or securing the same or
any agreement under which Senior Debt is outstanding;
(2) sell, exchange, release, surrender, realize upon,
enforce or otherwise deal with in any manner and in any order any
property pledged, mortgaged or otherwise securing Senior Debt or any
liability of any obligor thereon, to such holder, or any liability
incurred directly or indirectly in respect thereof;
(3) settle or compromise any Senior Debt or any other
liability of any obligor of the Senior Debt to such holder or any
security therefor or any liability incurred directly or indirectly in
respect thereof and apply any sums by whomsoever paid and however
realized to any liability (including, without limitation, Senior Debt)
in any manner or order; and
(4) fail to take or to record or to otherwise perfect,
for any reason or for no reason, any lien or security interest
securing Senior Debt by whomsoever granted, exercise or delay in or
refrain from exercising any right or remedy against any obligor or any
guarantor or any other person, elect any remedy and otherwise deal
freely with any obligor and any security for the Senior Debt or any
liability of any obligor to such holder or any liability incurred
directly or indirectly in respect thereof.
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SECTION 12.10. DISTRIBUTION OR NOTICE TO REPRESENTATIVE.
Whenever a distribution is to be made or a notice given to holders of
Senior Debt, the distribution may be made and the notice given to their
Representative.
Upon any payment or distribution of assets of any Subsidiary Guarantor
referred to in this Article 12, the Trustee and the Holders of the Notes shall
be entitled to rely upon any order or decree made by any court of competent
jurisdiction or upon any certificate of such Representative or of the
liquidating trustee or agent or other Person making any distribution to the
Trustee or to the Holders of the Notes for the purpose of ascertaining the
Persons entitled to participate in such distribution, the holders of the Senior
Debt and other Indebtedness of the Subsidiary Guarantor, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all
other facts pertinent thereto or to this Article 12.
SECTION 12.11. RIGHTS OF TRUSTEE AND PAYING AGENT.
Notwithstanding the provisions of this Article 12 or any other
provision of this Indenture, the Trustee shall not be charged with knowledge of
the existence of any facts that would prohibit the making of any payment or
distribution by the Trustee, and the Trustee and the Paying Agent may continue
to make payments on the Notes, unless the Trustee shall have received at its
Corporate Trust Office at least three Business Days prior to the date of such
payment written notice of facts that would cause the payment of any Obligations
with respect to the Notes to violate this Article, which notice shall
specifically refer to this Article 12. Only a Subsidiary Guarantor or a
Representative may give the notice. Nothing in this Article 12 shall impair the
claims of, or payments to, the Trustee under or pursuant to Section 7.07
hereof.
The Trustee in its individual or any other capacity may hold Senior
Debt with the same rights it would have if it were not Trustee. Any Agent may
do the same with like rights.
SECTION 12.12. AUTHORIZATION TO EFFECT SUBORDINATION.
Each Holder of a Note by the Holder's acceptance thereof authorizes
and directs the Trustee on the Holder's behalf to take such action as may be
necessary or appropriate to effectuate the subordination as provided in this
Article 12, and appoints the Trustee to act as the Holder's attorney-in-fact
for any and all such purposes, including without limitation the timely filing
of a claim for the unpaid balance of the Notes held by such Holder in the form
required in any Insolvency or Liquidation Proceeding and causing such claim to
be approved. If the Trustee does not file a proper proof of claim or proof of
debt in the form required in any proceeding referred to in Section 6.09 hereof
at least 30 days before the expiration of the time of such claim, the
Representatives of the Designated Senior Debt, including the Credit Agent, are
hereby authorized to file an appropriate claim for and on behalf of the Holders
of Notes.
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ARTICLE 13
MISCELLANEOUS
SECTION 13.01. TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies or conflicts with
the duties imposed by TIA ss.318(c), the imposed duties shall control.
SECTION 13.02. NOTICES.
Any notice or communication by the Company, the Subsidiary Guarantors
or the Trustee to the others is duly given if in writing and delivered in
Person or mailed by first class mail (registered or certified, return receipt
requested), fax or overnight air courier guaranteeing next day delivery, to the
others' address:
If to the Company:
Albecca Inc.
3900 Steve Reynolds Boulevard
Norcross, GA 30093
Fax No.: (770) 564-1555
Attention: Chief Executive Officer
If to the Trustee:
State Street Bank and Trust Company
225 Asylum Street, Goodwin Square, 23rd Floor
Hartford, Connecticut 06103
Fax No.: (860) 244-1897
Attention: Elizabeth Hammer
The Company or the Trustee, by notice to the others may designate
additional or different addresses for subsequent notices or communications.
All notices and communications (other than those sent to Holders)
shall be deemed to have been duly given: at the time delivered by hand, if
personally delivered; five Business Days after being deposited in the mail,
postage prepaid, if mailed; when receipt acknowledged, if faxed; and the next
Business Day after timely delivery to the courier, if sent by overnight air
courier promising next Business Day delivery.
Any notice or communication to a Holder shall be mailed by first class
mail or by overnight air courier promising next Business Day delivery to its
address shown on the register kept by the Registrar. Any notice or
communication shall also be so mailed to any Person described in TIA ss.
313(c), to the extent required by the TIA. Failure to
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<PAGE> 96
mail a notice or communication to a Holder or any defect in it shall not affect
its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company mails a notice or communication to Holders, it shall
mail a copy to the Trustee and each Agent at the same time. If the Trustee
mails a notice or communication to Holders, it shall mail a copy to the Company
at the same time.
SECTION 13.03. COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF
NOTES.
Holders may communicate pursuant to TIA ss. 312(b) with other Holders
with respect to their rights under this Indenture or the Notes. The Company,
the Trustee, the Registrar and anyone else shall have the protection of TIA ss.
312(c).
SECTION 13.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company or the Subsidiary
Guarantors to the Trustee to take any action under this Indenture (other than
the initial issuance of the Notes), the Company or Subsidiary Guarantor shall
furnish to the Trustee upon request:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth in
Section 13.05 hereof) stating that, in the opinion of the signers, all
conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth in
Section 13.05 hereof) stating that, in the opinion of such counsel, all such
conditions precedent and covenants have been satisfied.
SECTION 13.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than a certificate
provided pursuant to TIA ss. 314(a)(4)) shall comply with the provisions of
TIA ss. 314(e) and shall include:
(a) a statement that the Person making such certificate or
opinion has read such covenant or condition;
(b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions contained in
such certificate or opinion are based;
95
<PAGE> 97
(c) a statement that, in the opinion of such Person, he or she
has made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition has
been satisfied; and
(d) a statement as to whether or not, in the opinion of such
Person, such condition or covenant has been satisfied.
SECTION 13.06. RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
SECTION 13.07. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND
STOCKHOLDERS.
No director, officer, employee, agent, incorporator or stockholder of
the Company or the Subsidiary Guarantors, as such, shall have any liability for
any obligations of the Company or any Subsidiary Guarantor under the Notes,
this Indenture, the Subsidiary Guarantees or for any claim based on, in respect
of, or by reason of, such obligations or their creation. Each Holder of Notes
by accepting a Note waives and releases all such liability. The waiver and
release are part of the consideration for issuance of the Notes.
SECTION 13.08. GOVERNING LAW.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THIS INDENTURE, THE NOTES AND THE SUBSIDIARY GUARANTEES.
SECTION 13.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret any other indenture, loan
or debt agreement of the Company or its Subsidiaries or of any other Person.
Any such indenture, loan or debt agreement may not be used to interpret this
Indenture.
SECTION 13.10. SUCCESSORS.
All agreements of the Company and the Subsidiary Guarantors in this
Indenture, the Notes and the Subsidiary Guarantees shall bind their respective
successors and assigns. All agreements of the Trustee in this Indenture shall
bind its successors and assigns.
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<PAGE> 98
SECTION 13.11. SEVERABILITY.
In case any provision in this Indenture or in the Notes shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 13.12. COUNTERPART ORIGINALS.
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
SECTION 13.13. TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table and Headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part of this Indenture and shall in
no way modify or restrict any of the terms or provisions hereof.
[SIGNATURES ON FOLLOWING PAGE]
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<PAGE> 99
SIGNATURES
ALBECCA INC.
LARSON-JUHL U.S., L.L.C.
LARSON-JUHL INTERNATIONAL, L.L.C.
ART MATERIALS, FRAMES AND
MOULDING COMPANY, INC.
ROBERT F. DE CASTRO, INC.
GLASS CORPORATION OF AMERICA, INC.
ART WEST, INC.
EASTERN MOULDING, INC.
EASTERN MOULDINGS, INC.
LARSON-JUHL AUSTRALIA L.L.C.
LARSON-JUHL FRANCE L.L.C.
LARSON-JUHL SOUTH AFRICA L.L.C.
LARSON-JUHL KOREA, L.L.C.
LARSON-JUHL SEOUL L.L.C.
LARSON-JUHL NETHERLANDS L.L.C.
By: /s/ Craig A. Ponzio
-----------------------------------
Craig A. Ponzio, as:
Chairman, President and CEO of:
ALBECCA INC.
LARSON-JUHL INTERNATIONAL, L.L.C.
Chairman and CEO of LARSON-JUHL
U.S., L.L.C.
President of:
ART MATERIALS, FRAMES AND
MOULDING COMPANY, INC.
ROBERT F. DE CASTRO, INC.
GLASS CORPORATION OF AMERICA, INC.
ART WEST, INC.
EASTERN MOULDING, INC.
EASTERN MOULDINGS, INC.
Manager of:
LARSON-JUHL AUSTRALIA L.L.C.
LARSON-JUHL FRANCE L.L.C.
LARSON-JUHL SOUTH AFRICA L.L.C.
LARSON-JUHL KOREA, L.L.C.
LARSON-JUHL SEOUL L.L.C.
LARSON-JUHL NETHERLANDS L.L.C.
STATE STREET BANK AND TRUST COMPANY,
as Trustee
By: /s/ Susan T. Keller
---------------------------------
Susan T. Keller,
Vice President
S-1
<PAGE> 100
Exhibit A-1
(Face of note)
10 3/4% Senior Subordinated Notes due 2008
No. ____ $______________
CUSIP NO.______________________
ALBECCA INC.
promises to pay to _________________ or registered assigns, the principal sum
of ________________________ ($_________________________ ) on August 15, 2008.
Interest Payment Dates: February 15 and August 15
Record Dates: February 1 and August 1
ALBECCA INC.
By:
-------------------------------
Name:
Title:
By:
-------------------------------
Name:
Title:
This is one of the 10 3/4% Senior Subordinated Notes due
2008 referred to in the within-mentioned
Indenture:
Dated:
--------------------------
STATE STREET BANK AND TRUST
COMPANY,
as Trustee
By:
-----------------------------
A-1-1
<PAGE> 101
(Back of Note)
10 3/4% SENIOR SUBORDINATED
NOTES DUE 2008
[UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE
FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A
NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY
OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE
TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS
THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) ("DTC"), TO THE ISSUER OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME
AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS
MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL IN AS MUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.](1)/
[THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY,
MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED
STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET
FORTH IN THE NEXT SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL
INTEREST HEREIN, THE HOLDER: (4) REPRESENTS THAT (A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A
"QIB"), (B) IT HAS ACQUIRED THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE
WITH REGULATION S UNDER THE SECURITIES ACT OR (C) IT IS AN INSTITUTIONAL
"ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A) (1), (2). (3) OR (7) OR
REGULATION D UNDER THE SECURITIES ACT (AN "IAI"), (5) AGREES THAT IT WILL NOT
RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY OF ITS
SUBSIDIARIES, (B) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QIB
PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A, (C) IN AN OFFSHORE TRANSACTION MEETING
THE REQUIREMENTS OF RULE 903 OR 904 OF THE SECURITIES ACT, (D) IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144
- -------------------------
(1) This paragraph should be included only if the Note is issued in global
form
A-1-2
<PAGE> 102
UNDER THE SECURITIES ACT, (E) TO AN IAI THAT, PRIOR TO SUCH TRANSFER, FURNISHES
THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
RELATING TO THE TRANSFER OF THIS NOTE (THE FORM OF WHICH CAN BE OBTAINED FROM
THE TRUSTEE) AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL
AMOUNT OF NOTES LESS THAN $250,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE
COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (F) IN
ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY)
OR (G) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN
ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES OR ANY OTHER APPLICABLE JURISDICTION AND (6) AGREES THAT IT WILL DELIVER
TO EACH PERSON TO WHOM THIS NOTE OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION" AND "UNITED STATES" HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF
REGULATION S UNDER THE SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION
REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN
VIOLATION OF THE FOREGOING.](2)/
- ----------------------------
(2) This paragraph should be removed upon the exchange of Senior
Subordinated Notes for New Senior Subordinated Notes in the Exchange
Offer or upon the registration of the Senior Subordinated Notes
pursuant to the terms of the Registration Rights Agreement.
A-1-3
<PAGE> 103
Capitalized terms used herein shall have the meanings assigned to them
in the Indenture referred to below unless otherwise indicated.
1. INTEREST. Albecca Inc., a Georgia corporation, or its
successor (the "Company"), promises to pay interest on the principal amount of
this Note at the rate of 10 3/4% per annum and shall pay the Liquidated
Damages, if any, payable pursuant to Section 5 of the Registration Rights
Agreement referred to below. The Company will pay interest and Liquidated
Damages, if any, in United States dollars (except as otherwise provided herein)
semi-annually in arrears on February 15 and August 15, commencing on February
15, 1999, or if any such day is not a Business Day, on the next succeeding
Business Day (each an "Interest Payment Date"). Interest on the Notes shall
accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from August 11, 1998; provided that if there is no
existing Default or Event of Default in the payment of interest, and if this
Note is authenticated between a record date referred to on the face hereof and
the next succeeding Interest Payment Date, interest shall accrue from such next
succeeding Interest Payment Date, except in the case of the original issuance
of Notes, in which case interest shall accrue from August 11, 1998. The Company
shall pay interest (including post-petition interest in any proceeding under
any Bankruptcy Law) on overdue principal, until such principal is paid, at the
rate equal to 1% per annum in excess of the then applicable interest rate on
the Notes to the extent lawful; it shall pay interest (including post-petition
interest in any proceeding under any Bankruptcy Law) on overdue installments of
interest and Liquidated Damages (without regard to any applicable grace
period), until such installment is paid, at the same rate to the extent lawful.
Interest shall be computed on the basis of a 360-day year comprised of twelve
30-day months.
2. METHOD OF PAYMENT. The Company will pay interest on the Notes
(except defaulted interest) and Liquidated Damages, if any, on the applicable
Interest Payment Date to the Persons who are registered Holders of Notes at the
close of business on the February 1 or August 1 next preceding the Interest
Payment Date, even if such Notes are canceled after such record date and on or
before such Interest Payment Date, except as provided in Section 2.12 of the
Indenture with respect to defaulted interest. The Notes shall be payable as to
principal, premium and Liquidated Damages, if any, and interest at the office
or agency of the Company maintained for such purpose within or without the City
and State of New York, or, at the option of the Company, payment of interest
and Liquidated Damages, if any, may be made by check mailed to the Holders at
their addresses set forth in the register of Holders; provided that payment by
wire transfer of immediately available funds shall be required with respect to
principal of, premium and Liquidated Damages, if any, and interest on, all
Global Notes. Such payment shall be in such coin or currency of the United
States of America as at the time of payment is legal tender for payment of
public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, State Street Bank and
Trust Company, the Trustee under the Indenture, shall act as Paying Agent and
Registrar. The Company may change any Paying Agent or Registrar without notice
to any Holder. The Company or any of its Subsidiaries may act in any such
capacity.
A-1-4
<PAGE> 104
4. INDENTURE. The Company issued the Notes under an Indenture,
dated as of August 11, 1998 ("Indenture"), among the Company, the Subsidiary
Guarantors and the Trustee. The terms of the Notes include those stated in the
Indenture and those made a part of the Indenture by reference to the Trust
Indenture Act of 1939, as amended (15 U.S. Code ss.ss. 77aaa-77bbbb) (the
"TIA"). The Notes are subject to all such terms, and Holders are referred to
the Indenture and such Act for a statement of such terms.
5. OPTIONAL REDEMPTION.
Except as set forth in the next paragraph, the Notes shall not be
redeemable at the Company's option prior to August 15, 2003. Thereafter, the
Notes shall be subject to redemption at the option of the Company, in whole or
in part, upon not less than 30 nor more than 60 days' notice, at the redemption
prices (expressed as percentages of principal amount) set forth below together
with accrued and unpaid interest and any Liquidated Damages, if any, thereon to
the applicable redemption date, if redeemed during the twelve-month period
beginning on August 15 of the years indicated below:
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
---- ----------------
<S> <C>
2003........................................... 105.375%
2004........................................... 103.583%
2005........................................... 101.792%
2006 and thereafter............................ 100.000%
</TABLE>
Notwithstanding the foregoing, at any time prior to August 15, 2001,
the Company may (but shall not have the obligation to) redeem, on one or more
occasions, up to an aggregate of 35% of the principal amount of the Notes
originally issued at a redemption price equal to 110.75% of the principal
amount thereof, plus accrued and unpaid interest and Liquidated Damages, if
any, thereon to the redemption date, with the net proceeds of one or more
Equity Offerings; provided that at least 65% of the aggregate principal amount
of the Notes originally issued remains outstanding immediately after the
occurrence of such redemption; and provided, further, that such redemption
shall occur within 90 days of the date of the closing of such Equity Offering.
6. MANDATORY REDEMPTION.
Except as set forth in paragraph 7 below, the Company shall not be
required to make mandatory redemption or sinking fund payments with respect to
the Notes.
7. CHANGE OF CONTROL AND ASSET SALES.
(a) Upon the occurrence of a Change of Control,
each Holder of Notes will have the right to require the Company to repurchase
all or any part (equal to $1,000 or an integral multiple thereof) of such
Holder's Notes pursuant to the
A-1-5
<PAGE> 105
offer described below (the "Change of Control Offer") at an offer price in cash
equal to 101% of the aggregate principal amount thereof plus accrued and unpaid
interest and Liquidated Damages, if any, thereon, to the date of purchase.
Within 30 days following any Change of Control, the Company will mail a notice
to each Holder describing the transaction or transactions that constitute the
Change of Control setting forth the procedures governing the Change of Control
Offer required by the Indenture.
(b) When the aggregate amount of Excess Proceeds from
Asset Sales exceeds $10,000,000, the Company will be required to make an offer
to all Holders of Notes and, to the extent required by the terms of any Pari
Passu Indebtedness, all holders of such Pari Passu Indebtedness (an "Asset Sale
Offer") to purchase the maximum principal amount of Notes and any such Pari
Passu Indebtedness that may be purchased out of the Excess Proceeds, at an
offer price in cash in an amount equal to 100% of the principal amount thereof
plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the
date of repurchase, in accordance with the procedures set forth in the
Indenture or such Pari Passu Indebtedness. To the extent that any Excess
Proceeds remain after consummation of the Asset Sale Offer, the Company may use
any such Excess Proceeds for any purposes not otherwise prohibited by this
Indenture. If the aggregate principal amount of Notes and any Pari Passu
Indebtedness tendered pursuant to an Asset Sale Offer exceeds the amount of
Excess Proceeds, the Trustee shall select the Notes to be purchased on a pro
rata basis. Upon completion of such Asset Sale Offer, the amount of Excess
Proceeds shall be reset at zero.
(c) Holders of the Notes that are the subject of an
offer to purchase will receive a notice relating to the Change of Control Offer
or Asset Sale Offer from the Company prior to any related purchase date and may
elect to have such Notes purchased by completing the form titled "Option of
Holder to Elect Purchase" appearing below.
8. NOTICE OF REDEMPTION. Notice of redemption shall be mailed at
least 30 days but not more than 60 days before the redemption date to each
Holder whose Notes are to be redeemed at its registered address. Notes in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000, unless all of the Notes held by a Holder are to be
redeemed. On and after the redemption date, interest and Liquidated Damages, if
any, cease to accrue on the Notes or portions thereof called for redemption
unless the Company defaults in making the redemption payment.
9. SUBORDINATION. The Notes are subordinated to Senior Debt (as
defined in the Indenture), which is Indebtedness outstanding under Credit
Facilities and all Hedging Obligations with respect thereto, and all other
Indebtedness permitted to be incurred under the terms of the Indenture unless
the instrument under which such Indebtedness is incurred expressly provides
that it is on parity with or subordinated in right of payment to the Notes. To
the extent provided in the Indenture, Senior Debt must be paid before the Notes
may be paid. The Company agrees, and each Holder by accepting a Note agrees, to
the subordination and authorizes the Trustee to give it effect.
A-1-6
<PAGE> 106
10. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in
registered form without coupons in initial denominations of $1,000 and integral
multiples of $1,000. The transfer of the Notes may be registered and the Notes
may be exchanged as provided in the Indenture. The Registrar and the Trustee
may require a Holder, among other things, to furnish appropriate endorsements
and transfer documents and the Company may require a Holder to pay any taxes
and fees required by law or permitted by the Indenture. The Company need not
exchange or register the transfer of any Note or portion of a Note selected for
redemption, except for the unredeemed portion of any Note being redeemed in
part. Also, it need not exchange or register the transfer of any Notes for a
period of 15 days before a selection of Notes to be redeemed or during the
period between a record date and the corresponding Interest Payment Date.
11. PERSONS DEEMED OWNERS. The registered Holder of a Note may be
treated as its owner for all purposes.
12. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to the following
paragraphs and the provisions of the Indenture, the Indenture, the Notes and
the Subsidiary Guarantees may be amended or supplemented with the consent of
the Holders of at least a majority in principal amount of the Notes then
outstanding (including, without limitation, consents obtained in connection
with a purchase of or, tender offer or exchange offer for Notes), and any
existing Default or Event of Default or compliance with any provision of the
Indenture, the Notes and the Subsidiary Guarantees may be waived with the
consent of the Holders of a majority in principal amount of the then
outstanding Notes (including consents obtained in connection with a tender
offer or exchange offer for Notes). Without the consent of any Holder of Notes,
the Company and the Trustee may amend or supplement the Indenture, the Notes or
the Subsidiary Guarantees to cure any ambiguity, defect or inconsistency, to
provide for uncertificated Notes in addition to or in place of certificated
Notes, to provide for the assumption of the Company's obligations to Holders of
Notes in the case of a merger or consolidation, to make any change that would
provide any additional rights or benefits to the Holders of Notes or that does
not adversely affect the legal rights under the Indenture of any such Holder,
to comply with requirements of the Commission in order to effect or maintain
the qualification of the Indenture under the Trust Indenture Act or to allow
any Subsidiary to guarantee the Notes.
13. DEFAULTS AND REMEDIES. Events of Default include: (i) default
for 30 days in the payment when due of interest on, or Liquidated Damages, if
any, with respect to, the Notes; (ii) default in payment when due of the
principal of, or premium, if any, on, the Notes; (iii) failure by the Company
or any Restricted Subsidiary for 30 days after notice from the Trustee or by
the Holders of at least 25% in principal amount of Notes then outstanding to
comply with the provisions described in Sections 4.07, 4.09, 4.10 or 4.13 of
the Indenture; (iv) failure by the Company or any of its Restricted
Subsidiaries for 60 days after notice from the Trustee or by the Holders of at
least 25% in principal amount of Notes then outstanding to comply with its
other agreements in the Indenture
A-1-7
<PAGE> 107
or the Notes; (v) default under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its Restricted
Subsidiaries (or the payment of which is guaranteed by the Company or any of
its Restricted Subsidiaries) whether such Indebtedness or guarantee now exists,
or is created after the Issue Date, which default (a) is caused by a failure to
pay principal of such Indebtedness after giving effect to any grace period
provided in such Indebtedness (a "Payment Default") or (b) results in the
acceleration of such Indebtedness prior to its stated maturity and, in each
case, the principal amount of any such Indebtedness, together with the
principal amount of any other such Indebtedness under which there has been a
Payment Default or the maturity of which has been so accelerated, aggregates
$7,500,000 or more; (vi) failure by the Company or any of its Restricted
Subsidiaries to pay final judgments aggregating in excess of $7,500,000 million
(net of any amounts with respect to which a reputable and creditworthy
insurance company has acknowledged liability in writing), which judgments are
not paid, discharged or stayed for a period of 60 days; (vii) except as
permitted by the Indenture, any Subsidiary Guarantee shall be held in any
judicial proceeding to be unenforceable or invalid or shall cease for any
reason to be in full force and effect or any Subsidiary Guarantor, or any
Person acting on behalf of any Subsidiary Guarantor, shall deny or disaffirm
its obligations under its Subsidiary Guarantee; and (viii) certain events of
bankruptcy or insolvency with respect to the Company or any of its Significant
Subsidiaries
If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Notes may
declare all the Notes to be due and payable immediately. Notwithstanding the
foregoing, in the case of an Event of Default arising from certain events of
bankruptcy or insolvency with respect to the Company or any Significant
Subsidiary, all outstanding Notes will become due and payable without further
action or notice. Upon any acceleration of maturity of the Notes, all principal
of and accrued interest and Liquidated Damages, if any, on the Notes shall be
due and payable immediately. Holders of Notes may not enforce the Indenture or
the Notes except as provided in the Indenture. Subject to certain limitations,
Holders of a majority in principal amount of the then outstanding Notes may
direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Holders of the Notes notice of any continuing Default or Event of
Default (except a Default or Event of Default relating to the payment of
principal or interest) if it determines that withholding notice is in their
interest. In the event of a declaration of acceleration of the Notes because an
Event of Default has occurred and is continuing as a result of the acceleration
of any Indebtedness described in clause (v) of the preceding paragraph, the
declaration of acceleration of the Notes shall be automatically annulled if the
holders of any Indebtedness described in clause (v) of the preceding paragraph
have rescinded the declaration of acceleration in respect of such Indebtedness
within 30 days of the date of such declaration and if (a) the annulment of the
acceleration of Notes would not conflict with any judgment or decree of a court
of competent jurisdiction and (b) all existing Events of Default, except
nonpayment of principal or interest on the Notes that became due solely because
of the acceleration of the Notes, have been cured or waived.
A-1-8
<PAGE> 108
14. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual
or any other capacity, may make loans to, accept deposits from, and perform
services for the Company, the Subsidiary Guarantors or their respective
Affiliates, and may otherwise deal with the Company, the Subsidiary Guarantors
or their respective Affiliates, as if it were not the Trustee.
15. NO RECOURSE AGAINST OTHERS. No director, officer, employee,
agent, incorporator or stockholder, of the Company or any Subsidiary Guarantor
as such, shall have any liability for any obligations of the Company or any
Subsidiary Guarantor under the Notes, the Indenture or the Subsidiary
Guarantees or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder of Notes by accepting a Note waives
and releases all such liability. The waiver and release are part of the
consideration for the issuance of the Notes.
16. GOVERNING LAW. THE INTERNAL LAW OF THE STATE OF NEW YORK
SHALL GOVERN AND BE USED TO CONSTRUE THE NOTES AND THE SUBSIDIARY GUARANTEES.
17. AUTHENTICATION. This Note shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating
agent.
18. ABBREVIATIONS. Customary abbreviations may be used in the
name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN
ENT (= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A
(= Uniform Gifts to Minors Act).
19. ADDITIONAL RIGHTS OF HOLDERS OF TRANSFER RESTRICTED
SECURITIES. In addition to the rights provided to Holders of the Notes under
the Indenture, Holders of Transfer Restricted Securities (as defined in the
Registration Rights Agreement) shall have all the rights set forth in the
Registration Rights Agreement, dated as of the date hereof, among the Company,
the Subsidiary Guarantors and the Initial Purchasers.
20. CUSIP NUMBERS. Pursuant to a recommendation promulgated by
the Committee on Uniform Security Identification Procedures, the Company has
caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP
numbers in notices of redemption as a convenience to the Holders. No
representation is made as to the accuracy of such numbers either as printed on
the Notes or as contained in any notice of redemption and reliance may be
placed only on the other identification numbers placed thereon.
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<PAGE> 109
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and
transfer this Note to
- ------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint to transfer this Note on the books of the Company. The
agent may substitute another to act for him.
Date: Your Signature:
--------------------------- ---------------------------
(Sign exactly as your name appears on the
face of this Note)
Signature Guarantee:
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<PAGE> 110
Option of Holder to Elect Purchase
If you want to elect to have this Note purchased by the Company pursuant to
Section 4.10 or 4.13 of the Indenture, check the box below:
[ ] Section 4.10 [ ] Section 4.13
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.10 or Section 4.13 of the Indenture, state the
amount you elect to have purchased: $___________
Date: Your Signature:
--------------------- ---------------------------------
(Sign exactly as your name appears on the Note)
Tax Identification No.:
-------------------------
Signature Guarantee:
A-1-11
<PAGE> 111
SCHEDULE OF EXCHANGES OF NOTES (3)
THE FOLLOWING EXCHANGES OF A PART OF THIS GLOBAL NOTE FOR OTHER NOTES HAVE BEEN
MADE:
<TABLE>
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Principal Amount of this
Amount of decrease in Amount of increase in Global Note following Signature of authorized
Principal Amount of this Principal Amount of this such decrease (or officer of Trustee or
Date of Exchange Global Note Global Note increase) Note Custodian
</TABLE>
- ---------------------
(33) This should be included only if the Note is issued in global form.
A-1-12
<PAGE> 112
EXHIBIT A-2
-----------
(FACE OF REGULATION S TEMPORARY GLOBAL NOTE)
Senior Subordinated Notes due 2008
No._______ $____________
- ------------------------------------------------------
CUSIP NO.______________
promises to pay to _________________ or registered assigns, the principal sum
of __________________________________________ ($_________________________) on
August 15, 2008.
Interest Payment Dates: February 15 and August 15
Record Dates: February 1 and August 1
By:
--------------------------------
Name:
Title:
By:
--------------------------------
Name:
Title:
This is one of the Senior Subordinated Notes
referred to in the within-mentioned Indenture:
Dated: ____________________
STATE STREET BANK AND TRUST
COMPANY,
as Trustee
By:
----------------------------------------
A-2-1
<PAGE> 113
(BACK OF REGULATION S TEMPORARY GLOBAL NOTE)
10 3/4% SENIOR SUBORDINATED NOTES DUE 2008
[THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL
NOTE, AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR DEFINITIVE
SENIOR SUBORDINATED NOTES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED
HEREIN).](1)
[UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR
NOTES IN DEFINITIVE FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY
THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY
TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR
ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR
DEPOSITARY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW
YORK) ("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR SUCH OTHER NAME AS MAY BE REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER
ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL IN AS MUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.](2)
[THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER
THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN
THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT
AS SET FORTH IN THE NEXT SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL
INTEREST HEREIN, THE HOLDER: (7) REPRESENTS THAT (A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A
"QIB"), (B) IT HAS ACQUIRED THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE
WITH REGULATION S UNDER THE SECURITIES ACT OR (C) IT IS AN INSTITUTIONAL
"ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A) (1), (2). (3) OR (7) OR
REGULATION D UNDER THE SECURITIES ACT (AN "IAI"), (8) AGREES THAT IT WILL NOT
RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY OF ITS
SUBSIDIARIES, (B) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QIB
PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A, (C) IN AN OFFSHORE TRANSACTION MEETING
THE REQUIREMENTS OF RULE 903 OR 904 OF THE
- --------------
(1) These paragraphs should be removed upon the exchange of Regulation S
Temporary Global Notes for Regulation S Permanent Global Notes pursuant
to the terms of the Indenture.
(2) This paragraph should be included only if the Note is issued in global
form.
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<PAGE> 114
SECURITIES ACT, (D) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER
THE SECURITIES ACT, (E) TO AN IAI THAT, PRIOR TO SUCH TRANSFER, FURNISHES THE
TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
RELATING TO THE TRANSFER OF THIS NOTE (THE FORM OF WHICH CAN BE OBTAINED FROM
THE TRUSTEE) AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL
AMOUNT OF NOTES LESS THAN $250,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE
COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (F) IN
ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY)
OR (G) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN
ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES OR ANY OTHER APPLICABLE JURISDICTION AND (9) AGREES THAT IT WILL DELIVER
TO EACH PERSON TO WHOM THIS NOTE OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION" AND "UNITED STATES" HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF
REGULATION S UNDER THE SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION
REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN
VIOLATION OF THE FOREGOING.](3)
Until this Regulation S Temporary Global Note is exchanged
for Regulation S Permanent Global Notes, the Holder hereof shall not be
entitled to receive payments of interest or Liquidated Damages, if any, hereon
although interest and Liquidated Damages, if any, will continue to accrue;
until so exchanged in full, this Regulation S Temporary Global Note shall in
all other respects be entitled to the same benefits as other Senior
Subordinated Notes under the Indenture.
This Regulation S Temporary Global Note is exchangeable in
whole or in part for one or more Regulation S Permanent Global Notes or Rule
144A Global Notes only (i) on or after the termination of the 40-day restricted
period (as defined in Regulation S) and (ii) upon presentation of certificates
(accompanied by an Opinion of Counsel, if applicable) required by Article 2 of
the Indenture. Upon exchange of this Regulation S Temporary Global Note for one
or more Regulation S Permanent Global Notes or Rule 144A Global Notes, the
Trustee shall cancel this Regulation S Temporary Global Note.
This Regulation S Temporary Global Note shall not become
valid or obligatory until the certificate of authentication hereon shall have
been duly manually signed by the Trustee in accordance with the Indenture. This
Regulation S Temporary Global Note shall be governed by and construed in
accordance with the laws of the State of the New York. All references to "$,"
"Dollars," "dollars" or "U.S. $" are to such coin or currency of the United
States of America as at the time shall be legal tender for the payment of
public and private debts therein.
- ---------------
(3) This paragraph should be removed upon the exchange of Notes for
Exchange Notes in the Exchange Offer or upon the registration of the
Notes pursuant to the terms of the Registration Rights Agreement.
A-2-3
<PAGE> 115
Capitalized terms used herein shall have the meanings
assigned to them in the Indenture referred to below unless otherwise indicated.
1. INTEREST. Albecca Inc., a Georgia corporation, or its
successor (the "Company"), promises to pay interest on the principal amount of
this Note at the rate of 10 3/4% per annum and shall pay the Liquidated
Damages, if any, payable pursuant to Section 5 of the Registration Rights
Agreement referred to below. The Company will pay interest and Liquidated
Damages, if any, in United States dollars (except as otherwise provided herein)
semi-annually in arrears on February 15 and August 15, commencing on February
15, 1999, or if any such day is not a Business Day, on the next succeeding
Business Day (each an "Interest Payment Date"). Interest on the Notes shall
accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from April 11, 1998; provided that if there is no
existing Default or Event of Default in the payment of interest, and if this
Note is authenticated between a record date referred to on the face hereof and
the next succeeding Interest Payment Date, interest shall accrue from such next
succeeding Interest Payment Date, except in the case of the original issuance
of Notes, in which case interest shall accrue from August 11, 1998. The Company
shall pay interest (including post-petition interest in any proceeding under
any Bankruptcy Law) on overdue principal, until such principal is paid, at the
rate equal to 1% per annum in excess of the then applicable interest rate on
the Notes to the extent lawful; it shall pay interest (including post-petition
interest in any proceeding under any Bankruptcy Law) on overdue installments of
interest and Liquidated Damages (without regard to any applicable grace
period), until such installment is paid, at the same rate to the extent lawful.
Interest shall be computed on the basis of a 360-day year comprised of twelve
30-day months.
2. METHOD OF PAYMENT. The Company will pay interest on
the Notes (except defaulted interest) and Liquidated Damages, if any, on the
applicable Interest Payment Date to the Persons who are registered Holders of
Notes at the close of business on the February 1 or August 1 next preceding the
Interest Payment Date, even if such Notes are canceled after such record date
and on or before such Interest Payment Date, except as provided in Section 2.12
of the Indenture with respect to defaulted interest. The Notes shall be payable
as to principal, premium and Liquidated Damages, if any, and interest at the
office or agency of the Company maintained for such purpose within or without
the City and State of New York, or, at the option of the Company, payment of
interest and Liquidated Damages, if any, may be made by check mailed to the
Holders at their addresses set forth in the register of Holders; provided that
payment by wire transfer of immediately available funds shall be required with
respect to principal of, premium and Liquidated Damages, if any, and interest
on, all Global Notes. Such payment shall be in such coin or currency of the
United States of America as at the time of payment is legal tender for payment
of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, State Street
Bank and Trust Company, the Trustee under the Indenture, shall act as Paying
Agent and Registrar. The Company may change any Paying Agent or Registrar
without notice to any Holder. The Company or any of its Subsidiaries may act in
any such capacity.
4. INDENTURE. The Company issued the Notes under an
Indenture, dated as of August 11, 1998 ("Indenture"), among the Company, the
Subsidiary Guarantors and the Trustee. The terms of the Notes include those
stated in the Indenture and those made a part of the Indenture by reference to
the Trust Indenture Act of 1939, as amended (15
A-2-4
<PAGE> 116
U.S. Code ss.ss. 77aaa-77bbbb) (the "TIA"). The Notes are subject to all such
terms, and Holders are referred to the Indenture and such Act for a statement
of such terms.
5. OPTIONAL REDEMPTION.
Except as set forth in the next paragraph, the Notes
shall not be redeemable at the Company's option prior to August 15, 2003.
Thereafter, the Notes shall be subject to redemption at the option of the
Company, in whole or in part, upon not less than 30 nor more than 60 days'
notice, at the redemption prices (expressed as percentages of principal amount)
set forth below together with accrued and unpaid interest and any Liquidated
Damages, if any, thereon to the applicable redemption date, if redeemed during
the twelve-month period beginning on August 15 of the years indicated below:
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
- ---- ----------------
<S> <C>
2003............................................................................................... 105.375%
2004............................................................................................... 103.583%
2005............................................................................................... 101.792%
2006 and thereafter................................................................................ 100.000%
</TABLE>
Notwithstanding the foregoing, at any time prior to
August 15, 2001, the Company m ay (but shall not have the obligation to)
redeem, on one or more occasions, up to an aggregate of 35% of the principal
amount of the Notes originally issued at a redemption price equal to 110.75% of
the principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages, if any, thereon to the redemption date, with the net proceeds of one
or more Equity Offerings; provided that at least 65% of the aggregate principal
amount of the Notes originally issued remain outstanding immediately after the
occurrence of such redemption; and provided, further, that such redemption
shall occur within 90 days of the date of the closing of such Equity Offering.
6. MANDATORY REDEMPTION.
Except as set forth in paragraph 7 below, the Company
shall not be required to make mandatory redemption or sinking fund payments
with respect to the Notes.
7. CHANGE OF CONTROL AND ASSET SALES.
(a) Upon the occurrence of a Change of
Control, each Holder of Notes will have the right to require the Company to
repurchase all or any part (equal to $1,000 or an integral multiple thereof) of
such Holder's Notes pursuant to the offer described below (the "Change of
Control Offer") at an offer price in cash equal to 101% of the aggregate
principal amount thereof plus accrued and unpaid interest and Liquidated
Damages, if any, thereon, to the date of purchase. Within 30 days following any
Change of Control, the Company will mail a notice to each Holder describing the
transaction or transactions that constitute the Change of Control setting forth
the procedures governing the Change of Control Offer required by the Indenture.
(b) When the aggregate amount of Excess
Proceeds from Asset Sales exceeds $10,000,000, the Company will be required to
make an offer to all Holders of Notes and, to the extent required by the terms
of any Pari Passu Indebtedness, all holders of such Pari Passu Indebtedness (an
"Asset Sale Offer") to purchase the maximum principal amount of Notes and any
such Pari Passu Indebtedness that may be
A-2-5
<PAGE> 117
purchased out of the Excess Proceeds, at an offer price in cash in an amount
equal to 100% of the principal amount thereof plus accrued and unpaid interest
and Liquidated Damages, if any, thereon to the date of repurchase, in
accordance with the procedures set forth in the Indenture or such Pari Passu
Indebtedness. To the extent that any Excess Proceeds remain after consummation
of the Asset Sale, the Company may use such Excess Proceeds for any purposes
not otherwise prohibited by this Indenture. If the aggregate principal amount
of Notes and any Pari Passu Indebtedness tendered pursuant to an Asset Sale
Offer exceeds the amount of Excess Proceeds, the Trustee shall select the Notes
to be purchased on a pro rata basis. Upon completion of such Asset Sale Offer,
the amount of Excess Proceeds shall be reset at zero.
(c) Holders of the Notes that are the
subject of an offer to purchase will receive a notice relating to the Change of
Control Offer or Asset Sale Offer from the Company prior to any related
purchase date and may elect to have such Notes purchased by completing the form
titled "Option of Holder to Elect Purchase" appearing below.
8. NOTICE OF REDEMPTION. Notice of redemption shall be
mailed at least 30 days but not more than 60 days before the redemption date to
each Holder whose Notes are to be redeemed at its registered address. Notes in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000, unless all of the Notes held by a Holder are to be
redeemed. On and after the redemption date, interest and Liquidated Damages, if
any, cease to accrue on the Notes or portions thereof called for redemption
unless the Company defaults in making the redemption payment.
9. SUBORDINATION. The Notes are subordinated to Senior
Debt (as defined in the Indenture), which is Indebtedness outstanding under
Credit Facilities and all Hedging Obligations with respect thereto, and all
other Indebtedness permitted to be incurred under the terms of the Indenture
unless the instrument under which such Indebtedness is incurred expressly
provides that it is on parity with or subordinated in right of payment to the
Notes. To the extent provided in the Indenture, Senior Debt must be paid before
the Notes may be paid. The Company agrees, and each Holder by accepting a Note
agrees, to the subordination and authorizes the Trustee to give it effect.
10. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in
registered form without coupons in initial denominations of $1,000 and integral
multiples of $1,000. The transfer of the Notes may be registered and the Notes
may be exchanged as provided in the Indenture. The Registrar and the Trustee
may require a Holder, among other things, to furnish appropriate endorsements
and transfer documents and the Company may require a Holder to pay any taxes
and fees required by law or permitted by the Indenture. The Company need not
exchange or register the transfer of any Note or portion of a Note selected for
redemption, except for the unredeemed portion of any Note being redeemed in
part. Also, it need not exchange or register the transfer of any Notes for a
period of 15 days before a selection of Notes to be redeemed or during the
period between a record date and the corresponding Interest Payment Date.
11. PERSONS DEEMED OWNERS. The registered Holder of a
Note may be treated as its owner for all purposes.
12. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to the
following paragraphs and to the provisions of the Indenture, the Indenture, the
Notes and the
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<PAGE> 118
Subsidiary Guarantees may be amended or supplemented with the consent of the
Holders of at least a majority in principal amount of the Notes then
outstanding (including, without limitation, consents obtained in connection
with a purchase of or, tender offer or exchange offer for Notes), and any
existing Default or Event of Default or compliance with any provision of the
Indenture, the Notes and the Subsidiary Guarantees may be waived with the
consent of the Holders of a majority in principal amount of the then
outstanding Notes (including consents obtained in connection with a tender
offer or exchange offer for Notes). Without the consent of any Holder of Notes,
the Company and the Trustee may amend or supplement the Indenture, the Notes or
the Subsidiary Guarantees to cure any ambiguity, defect or inconsistency, to
provide for uncertificated Notes in addition to or in place of certificated
Notes, to provide for the assumption of the Company's obligations to Holders of
Notes in the case of a merger or consolidation, to make any change that would
provide any additional rights or benefits to the Holders of Notes or that does
not adversely affect the legal rights under the Indenture of any such Holder,
to comply with requirements of the Commission in order to effect or maintain
the qualification of the Indenture under the Trust Indenture Act or to allow
any Subsidiary to guarantee the Notes.
13. DEFAULTS AND REMEDIES. Events of Default include:
(i) default for 30 days in the payment when due of interest on, or Liquidated
Damages, if any, with respect to, the Notes; (ii) default in payment when due
of the principal of, or premium, if any, on, the Notes; (iii) failure by the
Company or any Restricted Subsidiary for 30 days after notice from the Trustee
or at least 25% in principal amount of the Notes then outstanding to comply
with the provisions described in Sections 4.07, 4.09, 4.10 or 4.13 of the
Indenture; (iv) failure by the Company or any of its Restricted Subsidiaries
for 60 days after notice from the Trustee or by the Holders of at least 25% in
principal amount of Notes then outstanding to comply with its other agreements
in the Indenture or the Notes; (v) default under any mortgage, indenture or
instrument under which there may be issued or by which there may be secured or
evidenced any Indebtedness for money borrowed by the Company or any of its
Restricted Subsidiaries (or the payment of which is guaranteed by the Company
or any of its Restricted Subsidiaries) whether such Indebtedness or guarantee
now exists, or is created after the Issue Date, which default (a) is caused by
a failure to pay principal of such Indebtedness after giving effect to any
grace period provided in such Indebtedness (a "Payment Default") or (b) results
in the acceleration of such Indebtedness prior to its stated maturity and, in
each case, the principal amount of any such Indebtedness, together with the
principal amount of any other such Indebtedness under which there has been a
Payment Default or the maturity of which has been so accelerated, aggregates
$7,500,000 or more; (vi) failure by the Company or any of its Subsidiaries to
pay final judgments aggregating in excess of $7,500,000 (net of any amounts
with respect to which a reputable and creditworthy insurance company has
acknowledged liability in writing), which judgments are not paid, discharged or
stayed for a period of 60 days; (vii) except as permitted by the Indenture, any
Subsidiary Guarantee shall be held in any judicial proceeding to be
unenforceable or invalid or shall cease for any reason to be in full force and
effect or any Subsidiary Guarantor, or any Person acting on behalf of any
Subsidiary Guarantor, shall deny or disaffirm its obligations under its
Subsidiary Guarantee; and (viii) certain events of bankruptcy or insolvency
with respect to the Company or any of its Significant Subsidiaries. If any
Event of Default occurs and is continuing, the Trustee or the Holders of at
least 25% in principal amount of the then outstanding Notes may declare all the
Notes to be due and payable immediately. Notwithstanding the foregoing, in the
case of an Event of Default arising from certain events of bankruptcy or
insolvency, with respect
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<PAGE> 119
to the Company or any Significant Subsidiary, all outstanding Notes will become
due and payable without further action or notice. Upon any acceleration of
maturity of the Notes, all principal of and accrued interest and Liquidated
Damages, if any, on the Notes shall be due and payable immediately. Holders of
the Notes may not enforce the Indenture or the Notes except as provided in the
Indenture. Subject to certain limitations, Holders of a majority in principal
amount of the then outstanding Notes may direct the Trustee in its exercise of
any trust or power. The Trustee may withhold from Holders of Notes notice of
any continuing Default or Event of Default (except a Default or Event of
Default relating to the payment of principal or interest) if it determines that
withholding notice is in their interest. In the event of a declaration of
acceleration of the Notes because an Event of Default has occurred and is
continuing as a result of the acceleration of any Indebtedness described in
clause (v) of the preceding paragraph, the declaration of acceleration of the
Notes shall be automatically annulled if the holders of any Indebtedness
described in clause (v) of the preceding paragraph have rescinded the
declaration of acceleration in respect of such Indebtedness within 30 days of
the date of such declaration and if (a) the annulment of the acceleration of
Notes would not conflict with any judgment or decree of a court of competent
jurisdiction and (b) all existing Events of Default, except nonpayment of
principal or interest on the Notes that became due solely because of the
acceleration of the Notes, have been cured or waived.
14. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its
individual or any other capacity, may make loans to, accept deposits from, and
perform services for the Company, the Subsidiary Guarantors or their respective
Affiliates, and may otherwise deal with the Company, the Subsidiary Guarantors
or their respective Affiliates, as if it were not the Trustee.
15. NO RECOURSE AGAINST OTHERS. No director, officer,
employee, agent, incorporator or stockholder, of the Company or any Subsidiary
Guarantor, as such, shall have any liability for any obligations of the Company
or any Subsidiary Guarantor under the Notes or the Indenture or for any claim
based on, in respect of, or by reason of, such obligations or their creation.
Each Holder of Notes by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the
issuance of the Notes.
16. GOVERNING LAW. THE INTERNAL LAW OF THE STATE OF NEW
YORK SHALL GOVERN AND BE USED TO CONSTRUE THE NOTES AND THE SUBSIDIARY
GUARANTEES.
17. AUTHENTICATION. This Note shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating
agent.
18. ABBREVIATIONS. Customary abbreviations may be used in
the name of a Holder or an assignee, such as: TEN COM (= tenants in common),
TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A
(= Uniform Gifts to Minors Act).
19. ADDITIONAL RIGHTS OF HOLDERS OF TRANSFER RESTRICTED
SECURITIES. In addition to the rights provided to Holders of the Notes under
the Indenture, Holders of Transfer Restricted Securities (as defined in the
Registration Rights Agreement) shall have all the rights set forth in the
Registration Rights Agreement, dated as of the date hereof, among the Company,
the Subsidiary Guarantors and the Initial Purchasers.
A-2-8
<PAGE> 120
20. CUSIP NUMBERS. Pursuant to a recommendation
promulgated by the Committee on Uniform Security Identification Procedures, the
Company has caused CUSIP numbers to be printed on the Notes and the Trustee may
use CUSIP numbers in notices of redemption as a convenience to the Holders. No
representation is made as to the accuracy of such numbers either as printed on
the Notes or as contained in any notice of redemption and reliance may be
placed only on the other identification numbers placed thereon.
A-2-9
<PAGE> 121
EXHIBIT B-1
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF
TRANSFER
FROM RULE 144A GLOBAL NOTE TO REGULATION S GLOBAL NOTE
(Pursuant to Section 2.06(a)(1) of the Indenture)
State Street Bank and Trust Company
225 Asylum Street, Goodwin Square, 23rd Floor
Hartford, Connecticut 06103
Re: 10 3/4% Senior Subordinated Notes due 2008 of Albecca Inc.
Reference is hereby made to the Indenture, dated as of August
11, 1998 (the "Indenture"), between Albecca Inc., a Georgia corporation (the
"Company"), the Subsidiary Guarantors named therein, together with any other
subsidiary that executes a Subsidiary Guarantee and State Street Bank and Trust
Company as trustee (the "Trustee"). Capitalized terms used but not defined
herein shall have the meanings given to them in the Indenture.
This letter relates to $ _______________ principal amount of
Notes which are evidenced by one or more Rule 144A Global Notes and held with
the Depositary in the name of ________________ (the "Transferor"). The
Transferor has requested a transfer of such beneficial interest in the Notes to
a Person who will take delivery thereof in the form of an equal principal
amount of Notes evidenced by one or more Regulation S Global Notes, which
amount, immediately after such transfer, is to be held with the Depositary
through Euroclear or Cedel or both.
In connection with such request and in respect of such Notes,
the Transferor hereby certifies that such transfer has been effected in
compliance with the transfer restrictions applicable to the Global Notes and
pursuant to and in accordance with Rule 903 or Rule 904 under the United States
Securities Act of 1933, as amended (the "Securities Act"), and accordingly the
Transferor hereby further certifies that:
(1) The offer of the Notes was not made to a person in the
United States;
(2) either:
(a) at the time the buy order was originated,
the transferee was outside the United States
or the Transferor and any person acting on
its behalf reasonably believed and believes
that the transferee was outside the United
States; or
(b) the transaction was executed in, on or
through the facilities of a designated
offshore securities market and neither the
Transferor nor any person acting on its
behalf knows that the transaction was
prearranged with a buyer in the United
States;
(3) no directed selling efforts have been made
in contravention of the requirements of Rule
904(b) of Regulation S;
B-1-1
<PAGE> 122
(4) the transaction is not part of a plan or
scheme to evade the registration provisions
of the Securities Act; and
(5) upon completion of the transaction, the
beneficial interest being transferred as
described above is to be held with the
Depositary through Euroclear or Cedel or
both.
Upon giving effect to this request to exchange a beneficial
interest in a Rule 144A Global Note for a beneficial interest in a Regulation S
Global Note, the resulting beneficial interest shall be subject to the
restrictions on transfer applicable to Regulation S Global Notes pursuant to
the Indenture and the Securities Act and, if such transfer occurs prior to the
end of the 40-day restricted period associated with the initial offering of
Notes, the additional restrictions applicable to transfers of interest in the
Regulation S Temporary Global Note.
This certificate and the statements contained herein are made
for your benefit and the benefit of the Company and Donaldson, Lufkin &
Jenrette Securities Corporation, Morgan Stanley & Co. Incorporated and SunTrust
Equitable Securities Corporation, the initial purchasers of such Notes being
transferred. Terms used in this certificate and not otherwise defined in the
Indenture have the meanings set forth in Regulation S under the Securities Act.
[Insert Name of Transferor]
By:
------------------------------------
Name:
Title:
Dated:
cc:
Donaldson, Lufkin & Jenrette Securities Corporation
Morgan Stanley & Co. Incorporated
SunTrust Equitable Securities Corporation
B-1-2
<PAGE> 123
Exhibit B-2
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF
TRANSFER
FROM REGULATION S GLOBAL NOTE TO RULE 144A GLOBAL NOTE
(Pursuant to Section 2.06(a)(ii) of the Indenture)
State Street Bank and Trust Company
225 Asylum Street, Goodwin Square, 23rd Floor
Hartford, Connecticut 06103
Re: 10 3/4% Senior Subordinated Notes due 2008 of Albecca Inc.
Reference is hereby made to the Indenture, dated as of August 11, 1998
(the "Indenture"), between Albecca Inc., a Georgia corporation (the "Company"),
the Subsidiary Guarantors named therein, together with any other subsidiary that
executes a Subsidiary Guarantee and State Street Bank and Trust Company as
trustee (the "Trustee"). Capitalized terms used but not defined herein shall
have the meanings given to them in the Indenture.
This letter relates to $_________ principal amount at maturity of Notes
which are evidenced by one or more Regulation S Global Notes and held with the
Depositary through Euroclear or Cedel in the name of ______________ (the
"Transferor"). The Transferor has requested a transfer of such beneficial
interest in the Notes to a Person who will take delivery thereof in the form of
an equal principal amount of the Notes evidenced by one or more Rule 144A Global
Notes, to be held with the Depositary.
In connection with such request and in respect of such Notes, the
Transferor hereby certifies that:
[CHECK ONE]
" such transfer is being effected pursuant to and in
accordance with Rule 144A under the United States
Securities Act of 1933, as amended (the "Securities
Act"), and, accordingly, the Transferor hereby
further certifies that the Notes are being
transferred to a Person that the Transferor
reasonably believes is purchasing the Notes for its
own account, or for one or more accounts with respect
to which such Person exercises sole investment
discretion, and such Person and each such account is
a "qualified institutional buyer" within the meaning
of Rule 144A in a transaction meeting the
requirements of Rule 144A;
or
" such transfer is being effected pursuant to and in
accordance with Rule 144 under the Securities Act;
or
" such transfer is being effected pursuant to an
exemption under the Securities Act other than Rule
144A, Rule 144 or Rule 904 and the
B-2-1
<PAGE> 124
Transferor further certifies that the Transfer
complies with the transfer restrictions applicable to
beneficial interests in Global Notes and Definitive
Notes bearing the Private Placement Legend and the
requirements of the exemption claimed, which
certification is supported by (x) if such transfer is
in respect of a principal amount of Notes at the time
of Transfer of $250,000 or more, a certificate
executed by the Transferee in the form of Exhibit C
to the Indenture, or (y) if such Transfer is in
respect of a principal amount of Notes at the time of
transfer of less than $250,000, (1) a certificate
executed in the form of Exhibit C to the Indenture
and (2) an Opinion of Counsel provided by the
Transferor or the Transferee (a copy of which the
Transferor has attached to this certification), to
the effect that (1) such Transfer is in compliance
with the Securities Act and (2) such Transfer
complies with any applicable blue sky securities laws
of any state of the United States;
or
" such transfer is being effected pursuant to an
effective registration statement under the Securities
Act;
or
" such transfer is being effected pursuant to an
exemption from the registration requirements of the
Securities Act other than Rule 144A or Rule 144, and
the Transferor hereby further certifies that the
Notes are being transferred in compliance with the
transfer restrictions applicable to the Global Notes
and in accordance with the requirements of the
exemption claimed, which certification is supported
by an Opinion of Counsel, provided by the transferor
or the transferee (a copy of which the Transferor has
attached to this certification) in form reasonably
acceptable to the Company and to the Registrar, to
the effect that such transfer is in compliance with
the Securities Act;
and such Notes are being transferred in compliance with any applicable blue sky
securities laws of any state of the United States.
Upon giving effect to this request to exchange a beneficial interest in
Regulation S Global Notes for a beneficial interest in 144A Global Notes, the
resulting beneficial interest shall be subject to the restrictions on transfer
applicable to Rule 144A Global Notes pursuant to the Indenture and the
Securities Act.
B-2-2
<PAGE> 125
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company and Donaldson, Lufkin & Jenrette
Securities Corporation, Morgan Stanley & Co. Incorporated and SunTrust Equitable
Securities Corporation, collectively the initial purchasers of such Notes being
transferred. Terms used in this certificate and not otherwise defined in the
Indenture have the meanings set forth in Regulation S under the Securities Act.
[Insert Name of Transferor]
By:
----------------------------
Name:
Title:
Dated:
cc: Albecca Inc.
Donaldson, Lufkin & Jenrette Securities Corporation
Morgan Stanley & Co. Incorporated
SunTrust Equitable Securities Corporation
B-2-3
<PAGE> 126
Exhibit B-3
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF
TRANSFER
OF DEFINITIVE NOTES
(Pursuant to Section 2.06(b) of the Indenture)
State Street Bank and Trust Company
225 Asylum Street, Goodwin Square, 23rd Floor
Hartford, Connecticut 06103
Re: 10 3/4% Senior Subordinated Notes due 2008 of Albecca Inc.
Reference is hereby made to the Indenture, dated as of August 11, 1998
(the "Indenture"), between Albecca Inc., a Georgia corporation (the "Company"),
the Subsidiary Guarantors named therein, together with any other subsidiary that
executes a Subsidiary Guarantee and State Street Bank and Trust Company, as
trustee (the "Trustee"). Capitalized terms used but not defined herein shall
have the meanings given to them in the Indenture.
This relates to $___________ principal amount of Notes which are
evidenced by one or more Definitive Notes in the name of ___________ (the
"Transferor"). The Transferor has requested an exchange or transfer of such
Definitive Note(s) in the form of an equal principal amount of Notes evidenced
by one or more Definitive Notes, to be delivered to the Transferor or, in the
case of a transfer of such Notes, to such Person as the Transferor instructs the
Trustee.
In connection with such request and in respect of the Notes surrendered
to the Trustee herewith for exchange (the "Surrendered Notes"), the Holder of
such Surrendered Notes hereby certifies that:
[CHECK ONE]
" the Surrendered Notes are being acquired for the Transferor's own
account, without transfer;
or
" the Surrendered Notes are being transferred to the Company;
or
" the Surrendered Notes are being transferred pursuant to and in
accordance with Rule 144A under the United States Securities Act of 1933,
as amended (the "Securities Act"), and, accordingly, the Transferor
hereby further certifies that the Surrendered Notes are being transferred
to a Person that the Transferor reasonably believes is purchasing the
Surrendered Notes for its own account, or for one or more accounts with
respect to which such Person exercises sole investment discretion, and
such Person and each such account is a "qualified institutional buyer"
within the meaning of Rule 144A, in each case in a transaction meeting
the requirements of Rule 144A;
B-3-1
<PAGE> 127
or
" the Surrendered Notes are being transferred in a transaction
permitted by Rule 144 under the Securities Act;
or
" the Surrendered Notes are being transferred pursuant to an
exemption under the Securities Act other than Rule 144A, Rule 144 or Rule
904 and the Transferor further certifies that the Transfer complies with
the transfer restrictions applicable to beneficial interests in Global
Notes and Definitive Notes bearing the Private Placement Legend and the
requirements of the exemption claimed, which certification is supported
by (x) if such transfer is in respect of a principal amount of Notes at
the time of Transfer of $100,000 or more, a certificate executed by the
Transferee in the form of Exhibit C to the Indenture, or (y) if such
Transfer is in respect of a principal amount of Notes at the time of
transfer of less than $100,000, (1) a certificate executed in the form of
Exhibit C to the Indenture and (2) an Opinion of Counsel provided by the
Transferor or the Transferee (a copy of which the Transferor has attached
to this certification), to the effect that (1) such Transfer is in
compliance with the Securities Act and (2) such Transfer complies with
any applicable blue sky securities laws of any state of the United
States;
or
" the Surrendered Notes are being transferred pursuant to an
effective registration statement under the Securities Act;
or
" such transfer is being effected pursuant to an exemption from the
registration requirements of the Securities Act other than Rule 144A or
Rule 144, and the Transferor hereby further certifies that the Notes are
being transferred in compliance with the transfer restrictions applicable
to the Global Notes and in accordance with the requirements of the
exemption claimed, which certification is supported by an Opinion of
Counsel, provided by the transferor or the transferee (a copy of which
the Transferor has attached to this certification) in form reasonably
acceptable to the Company and to the Registrar, to the effect that such
transfer is in compliance with the Securities Act;
and the Surrendered Notes are being transferred in compliance with any
applicable blue sky securities laws of any state of the United States.
B-3-2
<PAGE> 128
This certificate and the statements contained herein are made for your benefit
and the benefit of the Company and Donaldson, Lufkin & Jenrette Securities
Corporation, Morgan Stanley & Co. Incorporated and SunTrust Equitable
Securities Corporation, the initial purchasers of such Notes being transferred.
Terms used in this certificate and not otherwise defined in the Indenture have
the meanings set forth in Regulation S under the Securities Act.
[Insert Name of Transferor]
By:
-----------------------
Name:
Title:
Dated:
Dated:
cc: Albecca Inc.
Donaldson, Lufkin & Jenrette Securities Corporation
Morgan Stanley & Co. Incorporated
SunTrust Equitable Securities Corporation
B-3-3
<PAGE> 129
Exhibit B-4
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF
TRANSFER
FROM RULE 144A GLOBAL NOTE OR REGULATION S
PERMANENT GLOBAL NOTE
TO DEFINITIVE NOTE
(Pursuant to Section 2.06(c) of the Indenture)
State Street Bank and Trust Company
225 Asylum Street, Goodwin Square, 23rd Floor
Hartford, Connecticut 06103
Re: 10 3/4% Senior Subordinated Notes due 2008 of Albecca Inc.
Reference is hereby made to the Indenture, dated as of August 11, 1998
(the "Indenture"), between Albecca Inc., a Georgia corporation (the "Company"),
the Subsidiary Guarantors named therein, together with any subsidiary that
executes a Subsidiary Guarantee and State Street Bank and Trust Company, as
trustee (the "Trustee"). Capitalized terms used but not defined herein shall
have the meanings given to them in the Indenture.
This letter relates to $__________ principal amount of Notes which are
evidenced by a beneficial interest in one or more Rule 144A Global Notes or
Regulation S Permanent Global Notes in the name of ________________________
(the "Transferor"). The Transferor has requested an exchange or transfer of such
beneficial interest in the form of an equal principal amount of Notes evidenced
by one or more Definitive Notes, to be delivered to the Transferor or, in the
case of a transfer of such Notes, to such Person as the Transferor instructs
the Trustee.
In connection with such request and in respect of the Notes surrendered to the
Trustee herewith for exchange (the "Surrendered Notes"), the Holder of such
Surrendered Notes hereby certifies that:
[CHECK ONE]
" the Surrendered Notes are being transferred to the beneficial
owner of such Notes;
or
" the Surrendered Notes are being transferred pursuant to and in
accordance with Rule 144A under the United States Securities Act
of 1933, as amended (the "Securities Act"), and, accordingly, the
Transferor hereby further certifies that the Surrendered Notes are
being transferred to a Person that the Transferor reasonably
believes is purchasing the Surrendered Notes for its own account,
or for one or more accounts with respect to which such Person
exercises sole investment discretion, and such Person and each
such account is a "qualified institutional buyer" within the
meaning of Rule 144A, in each case in a transaction meeting they
requirements of Rule 144A;
or
B-4-1
<PAGE> 130
" the Surrendered Notes are being transferred in a transaction
permitted by Rule 144 under the Securities Act;
or
" the Surrendered Notes are being transferred pursuant to an
effective registration statement under the Securities Act;
or
" the Surrendered Notes are being transferred pursuant to an
exemption under the Securities Act other than Rule 144A, Rule 144 or Rule
904 and the Transferor further certifies that the Transfer complies with
the transfer restrictions applicable to beneficial interests in Global
Notes and Definitive Notes bearing the Private Placement Legend and the
requirements of the exemption claimed, which certification is supported
by (x) if such transfer is in respect of a principal amount of Notes at
the time of Transfer of $250,000 or more, a certificate executed by the
Transferee in the form of Exhibit C to the Indenture, or (y) if such
Transfer is in respect of a principal amount of Notes at the time of
transfer of less than $250,000, (1) a certificate executed in the form of
Exhibit C to the Indenture and (2) an Opinion of Counsel provided by the
Transferor or the Transferee (a copy of which the Transferor has attached
to this certification), to the effect that (1) such Transfer is in
compliance with the Securities Act and (2) such Transfer complies with
any applicable blue sky securities laws of any state of the United
States;
or
" such transfer is being effected pursuant to an exemption from the
registration requirements of the Securities Act other than Rule 144A or
Rule 144, and the Transferor hereby further certifies that the Notes are
being transferred in compliance with the transfer restrictions applicable
to the Global Notes and in accordance with the requirements of the
exemption claimed, which certification is supported by an Opinion of
Counsel, provided by the transferor or the transferee (a copy of which
the Transferor has attached to this certification) in form reasonably
acceptable to the Company and to the Registrar, to the effect that such
transfer is in compliance with the Securities Act;
and the Surrendered Notes are being transferred in compliance with any
applicable blue sky securities laws of any state of the United States.
B-4-2
<PAGE> 131
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company and Donaldson, Lufkin & Jenrette
Securities Corporation, Morgan Stanley & Co. Incorporated and SunTrust Equitable
Securities Corporation, the initial purchasers of such Notes being transferred.
Terms used in this certificate and not otherwise defined in the Indenture have
the meanings set forth in Regulation S under the Securities Act.
[Insert Name of Transferor]
By:
-----------------------
Name:
Title:
Dated:
Dated:
cc: Albecca Inc.
Donaldson, Lufkin & Jenrette Securities Corporation
Morgan Stanley & Co. Incorporated
SunTrust Equitable Securities Corporation
B-4-3
<PAGE> 132
Exhibit C
FORM OF CERTIFICATE FROM ACQUIRING
INSTITUTIONAL ACCREDITED INVESTOR
State Street Bank and Trust Company
225 Asylum Street, Goodwin Square, 23rd Floor
Hartford, Connecticut 06103
Re: 10 3/4% Senior Subordinated Notes due 2008 of Albecca Inc.
Reference is hereby made to the Indenture, dated as of August 11, 1998
(the "Indenture"), between Albecca Inc., a Georgia corporation (the "Company"),
the Subsidiary Guarantors named therein, together with any subsidiary that
executes a Subsidiary Guarantee and State Street Bank and Trust Company, as
trustee (the "Trustee"). Capitalized terms used but not defined herein shall
have the meanings given to them in the Indenture.
In connection with our proposed purchase of $__________ aggregate
principal amount of:
(a) [ ] Beneficial interests, or
(b) [ ] Definitive Notes,
we confirm that:
1. We understand that any subsequent transfer of the Notes of any
interest therein is subject to certain restrictions and conditions set forth in
the Indenture and the undersigned agrees to be bound by, and not to resell,
pledge or otherwise transfer the Notes or any interest therein except in
compliance with, such restrictions and conditions and the Securities Act of
1933, as amended (the "Securities Act").
2. We understand that the offer and sale of the Notes have not been
registered under the Securities Act, and that the Notes and any interest therein
may not be offered or sold except as permitted in the following sentence. We
agree, on our own behalf and on behalf of any accounts for which we are acting
as hereinafter stated, that if we should sell the Notes or any interest therein,
(A) we will do so only (1)(a) to a person who the Seller reasonably believes is
a qualified institutional buyer (as defined in Rule 144A under the Securities
Act) in a transaction meeting the requirements of 144A, (b) in a transaction
meeting the requirements of Rule 144 under the Securities Act, (c) outside the
United States to a foreign person in a transaction meeting the requirements of
Rule 904 of the Securities Act, or (d) in accordance with another exemption from
the registration requirements of the Securities Act (and based upon an opinion
of counsel), (2) to the Company or any of its subsidiaries or (3) pursuant to an
effective registration statement and, in each case, in accordance with any
applicable securities laws of any State of the United States or any other
applicable jurisdiction and (B) we will, and each subsequent holder will be
required to, notify any purchaser from it of the security evidenced hereby of
the resale restrictions set forth in (A) above."
C-1
<PAGE> 133
3. We understand that, on any proposed resale of the Notes or
beneficial interests, we will be required to furnish to you and the Company such
certifications, legal opinions and other information as you and the Company may
reasonably require to confirm that the proposed sale complies with the foregoing
restrictions. We further understand that the Notes purchased by us will bear a
legend to the foregoing effect.
4. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of our investment in the Notes, and we and
any accounts for which we are acting are each able to bear the economic risk of
our or its investment.
5. We are acquiring the Notes or beneficial interests therein
purchased by us for our own account or for one or more accounts (each of which
is an institutional "accredited investor") as to each of which we exercise sole
investment discretion.
6. We are not acquiring the Notes with a view to any distribution
thereof that would violate the Securities Act or the securities laws of any
State of the United States.
C-2
<PAGE> 134
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby.
--------------------------------
[Insert Name of Accredited
Investor]
By:
------------------------------
Name:
Title
Dated: ,
------------ ----
C-3
<PAGE> 135
Exhibit D
FORM OF Subsidiary Guarantee
Subject to Section 11.06 of the Indenture, each Subsidiary Guarantor
hereby, jointly and severally, unconditionally guarantees to each Holder of a
Note authenticated and delivered by the Trustee and to the Trustee and its
successors and assigns, irrespective of the validity and enforceability of the
Indenture, the Notes and the Obligations of the Company under the Notes or under
the Indenture, that: (a) the principal of, premium, if any, interest and
Liquidated Damages, if any, on the Notes will be promptly paid in full when due,
subject to any applicable grace period, whether at maturity, by acceleration,
redemption or otherwise, and interest on overdue principal, premium, if any, (to
the extent permitted by law) interest on any interest, if any, and Liquidated
Damages, if any, on the Notes and all other payment Obligations of the Company
to the Holders or the Trustee under the Indenture or under the Notes will be
promptly paid in full and performed, all in accordance with the terms thereof;
and (b) in case of any extension of time of payment or renewal of any Notes or
any of such other payment Obligations, the same will be promptly paid in full
when due or performed in accordance with the terms of the extension or renewal,
subject to any applicable grace period, whether at stated maturity, by
acceleration, redemption or otherwise. Failing payment when so due of any amount
so guaranteed for whatever reason, the Subsidiary Guarantors will be jointly and
severally obligated to pay the same immediately.
The obligations of the Subsidiary Guarantor to the Holders and to the
Trustee pursuant to this Subsidiary Guarantee and the Indenture are expressly
set forth in Article 11 of the Indenture, and reference is hereby made to such
Indenture for the precise terms of this Subsidiary Guarantee. The terms of
Article 11 of the Indenture are incorporated herein by reference. This
Subsidiary Guarantee is subject to release as and to the extent provided in
Section 11.04 of the Indenture.
This is a continuing Guarantee and shall remain in full force and effect
and shall be binding upon each Subsidiary Guarantor and its respective
successors and assigns to the extent set forth in the Indenture until full and
final payment of all of the Company's Obligations under the Notes and the
Indenture and shall inure to the benefit of the successors and assigns of the
Trustee and the Holders and, in the event of any transfer or assignment of
rights by any Holder or the Trustee, the rights and privileges herein conferred
upon that party shall automatically extend to and be vested in such transferee
or assignee, all subject to the terms and conditions hereof. This is a
Subsidiary Guarantee of payment and not a guarantee of collection.
This Subsidiary Guarantee shall not be valid or obligatory for any
purpose until the certificate of authentication on the Note to which this
Subsidiary Guarantee relates shall have been executed by the Trustee under the
Indenture by the manual signature of one of its authorized officers.
For purposes hereof, each Subsidiary Guarantor's liability shall be
limited to the lesser of (i) the aggregate amount of the Obligations of the
Company under the Notes and the Indenture and (ii) the amount, if any, which
would not have (A) rendered such Subsidiary Guarantor "insolvent" (as such term
is defined in the Bankruptcy Law and in the Debtor and Creditor Law of the State
of New York) or (B) left such Subsidiary Guarantor with unreasonably small
capital at the time its Subsidiary Guarantee of the Notes
D-1
<PAGE> 136
was entered into; provided that, it will be a presumption in any lawsuit
or other proceeding in which a Subsidiary Guarantor is a party that the amount
guaranteed pursuant to the Subsidiary Guarantee is the amount set forth in
clause (i) above unless any creditor, or representative of creditors of such
Subsidiary Guarantor, or debtor in possession or trustee in bankruptcy of such
Subsidiary Guarantor, otherwise proves in such a lawsuit that the aggregate
liability of the Subsidiary Guarantor is limited to the amount set forth in
clause (ii) above. In making any determination as to the solvency or sufficiency
of capital of a Subsidiary Guarantor in accordance with the previous sentence,
the right of such Subsidiary Guarantors to contribution from other Subsidiary
Guarantors and any other rights such Subsidiary Guarantors may have, contractual
or otherwise, shall be taken into account.
Capitalized terms used herein have the same meanings given in the
Indenture unless otherwise indicated.
LARSON-JUHL U.S., L.L.C.
LARSON-JUHL INTERNATIONAL, L.L.C.
ART MATERIALS, FRAMES AND
MOULDING COMPANY, INC.
ROBERT F. DE CASTRO, INC.
GLASS CORPORATION OF AMERICA, INC.
ART WEST, INC.
EASTERN MOULDING, INC.
EASTERN MOULDINGS, INC.
LARSON-JUHL AUSTRALIA L.L.C.
LARSON-JUHL FRANCE L.L.C.
LARSON-JUHL SOUTH AFRICA L.L.C.
LARSON-JUHL KOREA, L.L.C.
LARSON-JUHL SEOUL L.L.C.
LARSON-JUHL NETHERLANDS L.L.C.
By:
------------------------------------
Craig A. Ponzio, as:
Chairman, President and CEO of:
LARSON-JUHL INTERNATIONAL, L.L.C.
Chairman and CEO of
LARSON-JUHL U.S., L.L.C.
President of:
ART MATERIALS, FRAMES AND
MOULDING COMPANY, INC.
ROBERT F. DE CASTRO, INC.
GLASS CORPORATION OF AMERICA, INC.
ART WEST, INC.
EASTERN MOULDING, INC.
EASTERN MOULDINGS, INC.
Manager of:
LARSON-JUHL AUSTRALIA L.L.C.
LARSON-JUHL FRANCE L.L.C.
LARSON-JUHL SOUTH AFRICA L.L.C.
LARSON-JUHL KOREA, L.L.C.
LARSON-JUHL SEOUL L.L.C.
LARSON-JUHL NETHERLANDS L.L.C.
D-2
<PAGE> 137
Exhibit E
FORM OF SUPPLEMENTAL INDENTURE
Supplemental Indenture (this "Supplemental Indenture"), dated as of
___________, between Subsidiary Guarantor (the "New Subsidiary Guarantor"), a
subsidiary of Albecca Inc., a Georgia corporation (the "Company"), and State
Street Bank and Trust Company, as trustee under the indenture referred to below
(the "Trustee"). Capitalized terms used herein and not defined herein shall have
the meaning ascribed to them in the Indenture (as defined below).
W I T N E S S E T H
WHEREAS, the Company has heretofore executed and delivered to the Trustee
an indenture (the "Indenture"), dated as of August 11, 1998, providing for the
issuance of 10 3/4% Senior Subordinated Notes due 2008 (the "Notes");
WHEREAS, Section 11.05 of the Indenture provides that under certain
circumstances the Company may cause, and Section 11.03 of the Indenture provides
that under certain circumstances the Company must cause, certain of its
subsidiaries to execute and deliver to the Trustee a supplemental indenture
pursuant to which such subsidiaries shall unconditionally guarantee all of the
Company's Obligations under the Notes pursuant to a Subsidiary Guarantee on the
terms and conditions set forth herein; and
WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is
authorized to execute and deliver this Supplemental Indenture.
NOW THEREFORE, in consideration of the foregoing and for other
good and valuable consideration, the receipt of which is hereby acknowledged,
the New Subsidiary Guarantor and the Trustee mutually covenant and agree for the
equal and ratable benefit of the Holders of the Notes as follows:
1. CAPITALIZED TERMS. Capitalized terms used herein without
definition shall have the meanings assigned to them in the Indenture.
2. AGREEMENT TO SUBSIDIARY GUARANTEE. The New Subsidiary Guarantor
hereby agrees, jointly and severally with all other Subsidiary Guarantors, to
guarantee the Company's Obligations under the Notes and the Indenture on the
terms and subject to the conditions set forth in Article 11 of the Indenture and
to be bound by all other applicable provisions of the Indenture.
3. NO RECOURSE AGAINST OTHERS. No past, present or future director,
officer, employee, incorporator, shareholder or agent of any Subsidiary
Guarantor, as such, shall have any liability for any obligations of the Company
or any Subsidiary Guarantor under the Notes, any Subsidiary Guarantees, the
Indenture or this Supplemental Indenture or for any claim based on, in respect
of, or by reason of, such obligations or their creation. Each Holder by
accepting a Note waives and releases all such liability. The waiver and release
are part of the consideration for issuance of the Notes.
4. NEW YORK LAW TO GOVERN. The internal law of the State of New York
shall govern and be used to construe this Supplemental Indenture.
E-1
<PAGE> 138
5. COUNTERPARTS. The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
6. EFFECT OF HEADINGS. The Section headings herein are for
convenience only and shall not affect the construction hereof.
7. THE TRUSTEE. The Trustee shall not be responsible in any manner
whatsoever for or in respect of the validity or sufficiency of this Supplemental
Indenture or for or in respect of the correctness of the recitals of fact
contained herein, all of which recitals are made solely by the New Subsidiary
Guarantor.
E-2
<PAGE> 139
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture
to be duly executed and attested, all as of the date first above written.
Dated: [NAME OF NEW GUARANTOR]
----------------
By:
---------------------------------
Name:
Title:
Dated: STATE STREET BANK AND TRUST COMPANY
----------------- as Trustee
By:
---------------------------------
Name:
Title:
E-3
<PAGE> 140
TABLE OF CONTENTS
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
<TABLE>
<S> <C> <C> <C>
Section 1.01. Definitions......................................................1
Section 1.02. Other Definitions...............................................22
Section 1.03. Incorporation by Reference of Trust Indenture Act...............23
Section 1.04. Rules of Construction...........................................23
ARTICLE 2
THE NOTES
Section 2.01. Form and Dating.................................................24
Section 2.02. Execution and Authentication....................................26
Section 2.03. Registrar and Paying Agent......................................26
Section 2.04. Paying Agent to Hold Money in Trust.............................27
Section 2.05. Holder Lists....................................................27
Section 2.06. Transfer and Exchange...........................................28
Section 2.07. Replacement Notes...............................................36
Section 2.08. Outstanding Notes...............................................36
Section 2.09. Treasury Notes..................................................37
Section 2.10. Temporary Notes.................................................37
Section 2.11. Cancellation....................................................37
Section 2.12. Defaulted Interest..............................................38
Section 2.13. Record Date.....................................................38
Section 2.14. Computation of Interest.........................................38
Section 2.15. CUSIP Number....................................................38
ARTICLE 3
REDEMPTION AND PREPAYMENT
Section 3.01. Notices to Trustee..............................................39
Section 3.02. Selection of Notes to be Redeemed...............................39
Section 3.03. Notice of Redemption............................................40
Section 3.04. Effect of Notice of Redemption..................................41
Section 3.05. Deposit of Redemption Or Repurchase Price.......................41
Section 3.06. Notes Redeemed in Part..........................................41
Section 3.07. Optional Redemption.............................................42
Section 3.08. Mandatory Redemption............................................42
Section 3.09. Repurchase Offers...............................................42
</TABLE>
i
<PAGE> 141
ARTICLE 4
COVENANTS
<TABLE>
<S> <C> <C> <C>
Section 4.01. Payment of Notes................................................44
Section 4.02. Maintenance of Office or Agency.................................45
Section 4.03. Commission Reports..............................................45
Section 4.04. Compliance Certificate..........................................46
Section 4.05. Taxes...........................................................47
Section 4.06. Stay, Extension and Usury Laws..................................47
Section 4.07. Restricted Payments.............................................48
Section 4.08. Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries....................................................51
Section 4.09. Incurrence of Indebtedness and Issuance of Preferred Stock......52
Section 4.10. Asset Sales.....................................................54
Section 4.11. Transactions With Affiliates....................................55
Section 4.12. Liens...........................................................56
Section 4.13. Offer to Repurchase Upon Change of Control......................57
Section 4.14. Corporate Existence.............................................58
Section 4.15. Business Activities.............................................58
Section 4.16. Senior Subordinated Debt........................................58
Section 4.17. Additional Subsidiary Guarantors................................58
ARTICLE 5
SUCCESSORS
Section 5.01. Merger, Consolidation of Sale of Assets.........................59
Section 5.02. Successor Corporation Substituted...............................60
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default...............................................61
Section 6.02. Acceleration....................................................63
Section 6.03. Other Remedies..................................................63
Section 6.04. Waiver of Past Defaults.........................................64
Section 6.05. Control by Majority.............................................64
Section 6.06. Limitation on Suits.............................................64
Section 6.07. Rights of Holders of Notes to Receive Payment...................65
Section 6.08. Collection Suit by Trustee......................................65
Section 6.09. Trustee May File Proofs of Claim................................65
Section 6.10. Priorities......................................................66
Section 6.11. Undertaking for Costs...........................................66
</TABLE>
ii
<PAGE> 142
ARTICLE 7
TRUSTEE
<TABLE>
<S> <C> <C> <C>
Section 7.01. Duties of Trustee...............................................67
Section 7.02. Rights of Trustee...............................................68
Section 7.03. Individual Rights of Trustee....................................69
Section 7.04. Trustee's Disclaimer............................................69
Section 7.05. Notice of Defaults..............................................69
Section 7.06. Reports by Trustee to Holders of the Notes......................70
Section 7.07. Compensation and Indemnity......................................70
Section 7.08. Replacement of Trustee..........................................71
Section 7.09. Successor Trustee by Merger, etc................................72
Section 7.10. Eligibility; Disqualification...................................72
Section 7.11. Preferential Collection of Claims Against the Company...........72
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance........73
Section 8.02. Legal Defeasance and Discharge..................................73
Section 8.03. Covenant Defeasance.............................................73
Section 8.04. Conditions to Legal or Covenant Defeasance......................74
Section 8.05. Deposited Money and U.S. Government Securities
to be Held in Trust; Other Miscellaneous Provisions.............75
Section 8.06. Repayment to the Company........................................76
Section 8.07. Reinstatement...................................................76
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01. Without Consent of Holders of the Notes.........................77
Section 9.02. With Consent of Holders of Notes................................77
Section 9.03. Compliance with Trust Indenture Act.............................79
Section 9.04. Revocation and Effect of Consents...............................79
Section 9.05. Notation on or Exchange of Notes................................79
Section 9.06. Trustee to Sign Amendments, etc.................................79
ARTICLE 10
SUBORDINATION
Section 10.01 Agreement to Subordinate.......................................80
Section 10.02 Liquidation; Dissolution; Bankruptcy...........................80
Section 10.03 Default on Designated Senior Debt..............................80
Section 10.04. Acceleration of Notes..........................................81
Section 10.05. When Distribution Must Be Paid Over............................81
Section 10.06. Notice by the Company..........................................82
Section 10.07. Subrogation....................................................82
</TABLE>
iii
<PAGE> 143
<TABLE>
<S> <C> <C> <C>
Section 10.08. Relative Rights................................................82
Section 10.09. Subordination May Not Be Impaired by the Company...............83
Section 10.10. Distribution or Notice to Representative.......................84
Section 10.11. Rights of Trustee and Paying Agent.............................84
Section 10.12. Authorization to Effect Subordination..........................84
ARTICLE 11
SUBSIDIARY GUARANTEES
Section 11.01. subsidiary Guarantees..........................................85
Section 11.02. Execution and Delivery of Subsidiary Guarantee.................86
Section 11.03. Subsidiary Guarantors May Consolidate, etc.,
on Certain Terms...............................................86
Section 11.04. Releases Following Sale of Assets, Merger,
Sale of Capital Stock Etc......................................87
Section 11.05. Additional Subsidiary Guarantors...............................88
Section 11.06. Limitation on Subsidiary Guarantor Liability...................88
Section 11.07. "Trustee"to Include Paying Agent...............................88
ARTICLE 12
SUBORDINATION OF SUBSIDIARY GUARANTEE
Section 12.01. Agreement to Subordinate.......................................89
Section 12.02. Liquidation; Dissolution; Bankruptcy...........................89
Section 12.03. Default on Designated Senior Debt..............................89
Section 12.04. Acceleration of Notes..........................................90
Section 12.05. When Distribution Must Be Paid Over............................90
Section 12.06. Notice by Subsidiary Guarantor.................................91
Section 12.07. Subrogation....................................................91
Section 12.08. Relative Rights................................................91
Section 12.09. Subordination May Not Be Impaired by the
Subsidiary Guarantors..........................................92
Section 12.10. Distribution or Notice to Representative.......................93
Section 12.11. Rights of Trustee and Paying Agent.............................93
Section 12.12. Authorization to Effect Subordination..........................93
ARTICLE 13
MISCELLANEOUS
Section 13.01. Trust Indenture Act Controls...................................94
Section 13.02. Notices........................................................94
Section 13.03. Communication by Holders of Notes with Other
Holders of Notes...............................................95
Section 13.04. Certificate and Opinion as to Conditions Precedent.............95
Section 13.05. Statements Required in Certificate or Opinion..................95
Section 13.06. Rules by Trustee and Agents....................................96
</TABLE>
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<PAGE> 144
<TABLE>
<S> <C> <C> <C>
Section 13.07. No Personal Liability of Directors, Officers, Employees
and Stockholders...............................................96
Section 13.08. Governing Law..................................................96
Section 13.09. No Adverse Interpretation of Other Agreements..................96
Section 13.10. Successors.....................................................96
Section 13.11. Severability...................................................97
Section 13.12. Counterpart Originals..........................................97
Section 13.13. Table of Contents, Headings, etc...............................97
EXHIBITS
FORM OF NOTE........................................................EXHIBIT A-1
FORM OF REGULATION S TEMPORARY GLOBAL NOTE..........................EXHIBIT A-2
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION
OF TRANSFER FROM RULE 144A GLOBAL NOTE TO
REGULATION S GLOBAL NOTE..........................................EXHIBIT B-1
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION
OF TRANSFER FROM REGULATION S GLOBAL NOTE TO
RULE 144A GLOBAL NOTE ............................................EXHIBIT B-2
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF
TRANSFER OF DEFINITIVE NOTES......................................EXHIBIT B-3
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF
TRANSFER FROM 144A GLOBAL NOTE OR REGULATION S
PERMANENT GLOBAL NOTE TO DEFINITIVE NOTE..........................EXHIBIT B-4
FORM OF CERTIFICATE FROM ACQUIRING INSTITUTIONAL
ACCREDITED INVESTOR.................................................EXHIBIT C
FORM OF SUBSIDIARY GUARANTEE..........................................EXHIBIT D
FORM OF SUPPLEMENTAL INDENTURE........................................EXHIBIT E
</TABLE>
v
<PAGE> 1
EXHIBIT 4.3
SUBSIDIARY GUARANTEE
Subject to Section 11.06 of the Indenture, each Subsidiary Guarantor
hereby, jointly and severally, unconditionally guarantees to each Holder of a
Note authenticated and delivered by the Trustee and to the Trustee and its
successors and assigns, irrespective of the validity and enforceability of the
Indenture, the Notes and the Obligations of the Company under the Notes or under
the Indenture, that: (a) the principal of, premium, if any, interest and
Liquidated Damages, if any, on the Notes will be promptly paid in full when due,
subject to any applicable grace period, whether at maturity, by acceleration,
redemption or otherwise, and interest on overdue principal, premium, if any, (to
the extent permitted by law) interest on any interest, if any, and Liquidated
Damages, if any, on the Notes and all other payment Obligations of the Company
to the Holders or the Trustee under the Indenture or under the Notes will be
promptly paid in full and performed, all in accordance with the terms thereof;
and (b) in case of any extension of time of payment or renewal of any Notes or
any of such other payment Obligations, the same will be promptly paid in full
when due or performed in accordance with the terms of the extension or renewal,
subject to any applicable grace period, whether at stated maturity, by
acceleration, redemption or otherwise. Failing payment when so due of any amount
so guaranteed for whatever reason, the Subsidiary Guarantors will be jointly and
severally obligated to pay the same immediately.
The obligations of the Subsidiary Guarantor to the Holders and to the
Trustee pursuant to this Subsidiary Guarantee and the Indenture are expressly
set forth in Article 11 of the Indenture, and reference is hereby made to such
Indenture for the precise terms of this Subsidiary Guarantee. The terms of
Article 11 of the Indenture are incorporated herein by reference. This
Subsidiary Guarantee is subject to release as and to the extent provided in
Section 11.04 of the Indenture.
This is a continuing Guarantee and shall remain in full force and
effect and shall be binding upon each Subsidiary Guarantor and its respective
successors and assigns to the extent set forth in the Indenture until full and
final payment of all of the Company's Obligations under the Notes and the
Indenture and shall inure to the benefit of the successors and assigns of the
Trustee and the Holders and, in the event of any transfer or assignment of
rights by any Holder or the Trustee, the rights and privileges herein conferred
upon that party shall automatically extend to and be vested in such transferee
or assignee, all subject to the terms and conditions hereof. This is a
Subsidiary Guarantee of payment and not a guarantee of collection.
This Subsidiary Guarantee shall not be valid or obligatory for any
purpose until the certificate of authentication on the Note to which this
Subsidiary Guarantee relates shall have been executed by the Trustee under the
Indenture by the manual signature of one of its authorized officers.
For purposes hereof, each Subsidiary Guarantor's liability shall be
limited to the lesser of (i) the aggregate amount of the Obligations of the
Company under the Notes and the
<PAGE> 2
Indenture and (ii) the amount, if any, which would not have (A) rendered such
Subsidiary Guarantor "insolvent" (as such term is defined in the Bankruptcy Law
and in the Debtor and Creditor Law of the State of New York) or (B) left such
Subsidiary Guarantor with unreasonably small capital at the time its Subsidiary
Guarantee of the Notes was entered into; provided that, it will be a presumption
in any lawsuit or other proceeding in which a Subsidiary Guarantor is a party
that the amount guaranteed pursuant to the Subsidiary Guarantee is the amount
set forth in clause (i) above unless any creditor, or representative of
creditors of such Subsidiary Guarantor, or debtor in possession or trustee in
bankruptcy of such Subsidiary Guarantor, otherwise proves in such a lawsuit that
the aggregate liability of the Subsidiary Guarantor is limited to the amount set
forth in clause (ii) above. In making any determination as to the solvency or
sufficiency of capital of a Subsidiary Guarantor in accordance with the previous
sentence, the right of such Subsidiary Guarantors to contribution from other
Subsidiary Guarantors and any other rights such Subsidiary Guarantors may have,
contractual or otherwise, shall be taken into account.
-2-
<PAGE> 3
Capitalized terms used herein have the same meanings given in the
Indenture unless otherwise indicated.
LARSON-JUHL US LLC
LARSON-JUHL INTERNATIONAL L.L.C.
ART MATERIALS, FRAMES AND
MOULDING COMPANY, INC.
ROBERT F. DE CASTRO, INC.
GLASS CORPORATION OF AMERICA, INC.
ART WEST, INC.
EASTERN MOULDING, INC.
EASTERN MOULDINGS, INC.
LARSON-JUHL AUSTRALIA L.L.C.
LARSON-JUHL FRANCE L.L.C.
LARSON-JUHL SOUTH AFRICA L.L.C.
LARSON-JUHL KOREA L.L.C.
LARSON-JUHL SEOUL L.L.C.
LARSON-JUHL NETHERLANDS L.L.C.
By: /s/ Craig A. Ponzio
---------------------------------------
Craig A. Ponzio, as:
Chairman, President and CEO of:
LARSON-JUHL INTERNATIONAL L.L.C.
Chairman and CEO of
LARSON-JUHL U.S., L.L.C.
President of:
ART MATERIALS, FRAMES AND
MOULDING COMPANY, INC.
ROBERT F. DE CASTRO, INC.
GLASS CORPORATION OF AMERICA, INC.
ART WEST, INC.
EASTERN MOULDING, INC.
EASTERN MOULDINGS, INC.
Manager of:
LARSON-JUHL AUSTRALIA L.L.C.
LARSON-JUHL FRANCE L.L.C.
LARSON-JUHL SOUTH AFRICA L.L.C.
LARSON-JUHL KOREA L.L.C.
LARSON-JUHL SEOUL L.L.C.
LARSON-JUHL NETHERLANDS L.L.C.
-3-
<PAGE> 1
EXHIBIT 4.4
- -------------------------------------------------------------------------------
A/B EXCHANGE
REGISTRATION RIGHTS AGREEMENT
DATED AS OF AUGUST 11, 1998
BY AND AMONG ALBECCA INC.,
THE GUARANTORS (DEFINED HEREIN)
AND
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION,
MORGAN STANLEY & CO. INCORPORATED
AND
SUNTRUST EQUITABLE SECURITIES CORPORATION
- -------------------------------------------------------------------------------
<PAGE> 2
This Registration Rights Agreement (this "AGREEMENT") is made and
entered into as of August 11, 1998, by and among Albecca Inc., a Georgia
corporation (the "COMPANY"), the Subsidiary Guarantors (as defined in the
Indenture) (each a "GUARANTOR" and, collectively, the "GUARANTORS"), and
Donaldson, Lufkin & Jenrette Securities Corporation, Morgan Stanley & Co.
Incorporated and SunTrust Equitable Securities Corporation (each an "INITIAL
PURCHASER" and, collectively, the "INITIAL PURCHASERS"), each of whom has
agreed to purchase the Company's 10 3/4% Series A Senior Subordinated Notes due
2008 (the "SENIOR SUBORDINATED NOTES") pursuant to the Purchase Agreement (as
defined below).
This Agreement is made pursuant to the Purchase Agreement, dated
August 6, 1998, (the "PURCHASE Agreement"), by and among the Company, the
Guarantors and the Initial Purchasers. In order to induce the Initial
Purchasers to purchase the Senior Subordinated Notes, the Company and has
agreed to provide the registration rights set forth in this Agreement. The
execution delivery of this Agreement is a condition to the obligations of the
Initial Purchasers set forth in Section 2 of the Purchase Agreement.
Capitalized terms used herein and not otherwise defined shall have the meaning
assigned to them in the Indenture, dated as of August 11, 1998, between the
Company, the Guarantors and State Street Bank and Trust Company, as Trustee,
relating to the Senior Subordinated Notes (as defined below) and the Exchange
Notes (the "INDENTURE").
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have
the following meanings:
ACT: The Securities Act of 1933, as amended.
AFFILIATE: As defined in Rule 144 of the Act.
BROKER-DEALER: Any broker or dealer registered under the Exchange Act.
CERTIFICATED SECURITIES: Definitive Notes, as defined in the
Indenture.
CLOSING DATE: The date hereof.
COMMISSION: The Securities and Exchange Commission.
CONSUMMATE: An Exchange Offer shall be deemed "Consummated" for
purposes of this Agreement upon the occurrence of (a) the filing and
effectiveness under the Act of the Exchange Offer Registration Statement
relating to the Exchange Notes to be issued in the Exchange Offer, (b) the
maintenance of such Exchange Offer Registration Statement continuously
effective and the keeping of the Exchange Offer open for a period not less than
the period required pursuant to Section 3(b) hereof and (c) the delivery by the
Company to the
<PAGE> 3
Registrar under the Indenture of Exchange Notes in the same aggregate principal
amount as the aggregate principal amount of Senior Subordinated Notes tendered
by Holders thereof pursuant to the Exchange Offer.
CONSUMMATION DEADLINE: As defined in Section 3(b) hereof.
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended.
EXCHANGE EFFECTIVENESS DEADLINE: As defined in Section 3(a) hereof.
EXCHANGE FILING DEADLINE: As defined in Section 3(a) hereof.
EXCHANGE NOTES: The Company's 10 3/4% Senior Subordinated Notes due
2008 to be issued pursuant to the Indenture: (i) in the Exchange Offer or (ii)
as contemplated by Section 4 hereof.
EXCHANGE OFFER: The exchange and issuance by the Company of a
principal amount of Exchange Notes (which shall be registered pursuant to the
Exchange Offer Registration Statement) equal to the outstanding principal
amount of Senior Subordinated Notes that are tendered by such Holders in
connection with such exchange and issuance.
EXCHANGE OFFER REGISTRATION STATEMENT: The Registration Statement
relating to the Exchange Offer, including the related Prospectus.
EXEMPT RESALES: The transactions in which the Initial Purchasers
propose to sell the Senior Subordinated Notes to certain "qualified
institutional buyers," as such term is defined in Rule 144A under the Act and
pursuant to Regulation S under the Act.
HOLDERS: As defined in Section 2 hereof.
PROSPECTUS: The prospectus included in a Registration Statement at the
time such Registration Statement is declared effective, as amended or
supplemented by any prospectus supplement and by all other amendments thereto,
including post-effective amendments, and all material incorporated by reference
into such Prospectus.
RECOMMENCEMENT DATE: As defined in Section 6(d) hereof.
REGISTRATION DEFAULT: As defined in Section 5 hereof.
REGISTRATION STATEMENT: Any registration statement of the Company and
the Guarantors relating to (a) an offering of Exchange Notes pursuant to an
Exchange Offer or (b) the registration for resale of Transfer Restricted
Securities pursuant to the Shelf Registration Statement, in each case, (i) that
is filed pursuant to the provisions of this Agreement and (ii)
3
<PAGE> 4
including the Prospectus included therein, all amendments and supplements
thereto (including post-effective amendments) and all exhibits and material
incorporated by reference therein.
REGULATION S: Regulation S promulgated under the Act.
RULE 144: Rule 144 promulgated under the Act.
SHELF EFFECTIVENESS DEADLINE: As defined in Section 4(a) hereof.
SHELF FILING DEADLINE: As defined in Section 4(a) hereof.
SHELF REGISTRATION STATEMENT: As defined in Section 4 hereof.
SUSPENSION NODE: As defined in Section 6(d) hereof.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb)
as in effect on the date of the Indenture.
TRANSFER RESTRICTED SECURITIES: Each (A) Senior Subordinated Note,
until the earliest to occur of (i) the date on which such Senior Subordinated
Note is exchanged in the Exchange Offer for a Exchange Note which is entitled
to be resold to the public by the Holder thereof without complying with the
prospectus delivery requirements of the Act, (ii) the date on which such Senior
Subordinated Note has been disposed of in accordance with a Shelf Registration
Statement (and the purchasers thereof have been issued Exchange Notes), or
(iii) the date on which such Senior Subordinated Note is distributed to the
public pursuant to Rule 144 under the Act, and (B) Exchange Note held by a
Broker Dealer until the date on which such Exchange Note is disposed of by a
Broker-Dealer pursuant to the "Plan of Distribution" contemplated by the
Exchange Offer Registration Statement (including the delivery of the Prospectus
contained therein).
SECTION 2. HOLDERS
A Person is deemed to be a holder of Transfer Restricted Securities
(each, a "HOLDER" whenever such Person owns Transfer Restricted Securities.
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permitted by applicable federal law
(after the procedures set forth in Section 6(a)(i) below have been complied
with), the Company and the Guarantors shall (i) cause the Exchange Offer
Registration Statement to be filed with the Commission as soon as practicable
after the Closing Date, but in no event later than 120 days after the Closing
Date (such 120th day being the "EXCHANGE FILING DEADLINE"), (ii) use its best
efforts to cause such Exchange Offer Registration Statement to become effective
at the earliest possible time, but in no event later than 180 days after the
Closing Date (such 180th
4
<PAGE> 5
day being the "EXCHANGE EFFECTIVENESS DEADLINE"), (iii) in connection with the
foregoing, (A) file all pre-effective amendments to such Exchange Offer
Registration Statement as may be necessary in order to cause it to become
effective, (B) file, if applicable, a post-effective amendment to such Exchange
Offer Registration Statement pursuant to Rule 430A under the Act and (C) cause
all necessary filings, if any, in connection with the registration and
qualification of the Exchange Notes to be made under the Blue Sky laws of such
jurisdictions as are necessary to permit Consummation of the Exchange Offer,
and (iv) upon the effectiveness of such Exchange Offer Registration Statement,
commence and Consummate the Exchange Offer. The Exchange Offer shall be on the
appropriate form permitting (i) registration of the Exchange Notes to be
offered in exchange for the Senior Subordinated Notes that are Transfer
Restricted Securities and (ii) resales of Exchange Notes by Broker-Dealers that
tendered into the Exchange Offer Senior Subordinated Notes that such
Broker-Dealer acquired for its own account as a result of market making
activities or other trading activities (other than Senior Subordinated Notes
acquired directly from the Company or any of its Affiliates) as contemplated by
Section 3(c) below.
(b) The Company and the Guarantors shall use their respective best efforts
to cause the Exchange Offer Registration Statement to be effective
continuously, and shall keep the Exchange Offer open for a period of not less
than the minimum period required under applicable federal and state securities
laws to Consummate the Exchange Offer; provided, however, that in no event
shall such period be less than 20 Business Days. The Company and the Guarantors
shall cause the Exchange Offer to comply with all applicable federal and state
securities laws. No securities other than the Exchange Notes shall be included
in the Exchange Offer Registration Statement. The Company and the Guarantors
shall use their respective best efforts to cause the Exchange Offer to be
Consummated on the earliest practicable date after the Exchange Offer
Registration Statement has become effective, but in no event later than 30 days
thereafter (such 30th day being the "Consummation Deadline").
(c) The Company shall include a "Plan of Distribution" section in the
Prospectus contained in the Exchange Offer Registration Statement and indicate
therein that any Broker-Dealer who holds Transfer Restricted Securities that
were acquired for the account of such Broker-Dealer as a result of
market-making activities or other trading activities (other than Senior
Subordinated Notes acquired directly from the Company or any Affiliate of the
Company), may exchange such Transfer Restricted Securities pursuant to the
Exchange Offer. Such "Plan of Distribution" section shall also contain all
other information with respect to such sales by such Broker-Dealers that the
Commission may require in order to permit such sales pursuant thereto, but such
"Plan of Distribution" shall not name any such Broker-Dealer or disclose the
amount of Transfer Restricted Securities held by any such Broker-Dealer, except
to the extent required by the Commission as a result of a change in policy,
rules or regulations after the date of this Agreement. See the Shearman &
Sterling no-action letter (available July 2, 1993).
(d) Because such, Broker-Dealer may be deemed to be an "underwriter" within
the meaning of the Act and must, therefore, deliver a prospectus meeting the
requirements of the
5
<PAGE> 6
Act in connection with its initial sale of any Exchange Notes received by such
Broker-Dealer in the Exchange Offer, the Company and Guarantors shall permit
the use of the Prospectus contained in the Exchange Offer Registration
Statement by such Broker-Dealer to satisfy such prospectus delivery
requirement. To the extent necessary to ensure that the prospectus contained in
the Exchange Offer Registration Statement is available for sales of Exchange
Notes by Broker-Dealers, the Company and the Guarantors agree to use their
respective best efforts to keep the Exchange Offer Registration Statement
continuously effective, supplemented, amended and current as required by and
subject to the provisions of Section 6(a) and (c) hereof and in conformity with
the requirements of this Agreement, the Act and the policies, rules and
regulations of the Commission as announced from time to time, for a period of
one year from the Consummation Deadline or such shorter period as will
terminate when all Transfer Restricted Securities covered by such Registration
Statement have been sold pursuant thereto. The Company and the Guarantors shall
provide sufficient copies of the latest version of such Prospectus to such
Broker-Dealers, promptly upon request, and in no event later than one day after
such request, at any time during such period.
SECTION 4. SHELF REGISTRATION
(a) Shelf Registration. If (i) the Company is not permitted to Consummate
the Exchange Offer because the Exchange Offer is not permitted by applicable
law or Commission policy (after the Company and the Guarantors have complied
with the procedures set forth in Section 6(a)(i) below) or (ii) any Holder of
Transfer Restricted Securities shall notify the Company within 20 Business Days
following the Consummation Deadline that (A) such Holder was prohibited by law
or Commission policy from participating in the Exchange Offer (other than due
solely to the status of such Holder as an Affiliate of the Company) or (B) such
Holder may not resell the Exchange Notes acquired by it in the Exchange Offer
to the public without delivering a prospectus and the Prospectus contained in
the Exchange Offer Registration Statement is not appropriate or available for
such resales by such Holder or (C) such Holder is a Broker-Dealer and owns
Senior Subordinated Notes acquired directly from the Company or any of its
Affiliates, then the Company and the Guarantors shall:
(x) cause to be filed, on or prior to 75 days after the earlier of (i)
the date, on which the Company determines that the Exchange Offer Registration
Statement cannot be filed as a result of clause (a)(i) above and (ii) the date
on which the Company receives the notice specified in clause (a)(ii) above,
(such earlier date, the "SHELF FILING DEADLINE"), a Shelf Registration
Statement pursuant to Rule 415 under the Act (which may be an amendment to the
Exchange Offer Registration Statement (the "SHELF REGISTRATION STATEMENT")),
relating to all Transfer Restricted Securities, and
(y) use their respective best efforts to cause such Shelf Registration
Statement to become effective on or prior to 75 days after the Shelf Filing
Deadline (such 75th day the "SHELF EFFECTIVENESS DEADLINE").
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<PAGE> 7
If, after the Company has filed an Exchange Offer Registration
Statement that satisfies the requirements of Section 3(a) above, the Company is
required to file and make effective a Shelf Registration Statement solely
because the Exchange Offer is not permitted under applicable federal law (i.e.,
clause (a)(i) above), then the filing of the Exchange Offer Registration
Statement shall be deemed to satisfy the requirements of clause (x) above;
provided that, in such event, the Company shall remain obligated to meet the
Effectiveness Deadline set forth in clause (y) above.
To the extent necessary to ensure that the Shelf Registration
Statement is available for sales of Transfer Restricted Securities by the
Holders thereof entitled to the benefit of this Section 4(a) and the other
securities required to be registered therein pursuant to Section 6(b)(ii)
hereof, the Company and the Guarantors shall use their respective best efforts
to keep any Shelf Registration Statement required by this Section 4(a)
continuously effective, supplemented, amended and current as required by and
subject to the provisions of Sections 6(b) and (c) hereof and in conformity
with the requirements of this Agreement, the Act and the policies, rules and
regulations of the Commission as announced from time to time, for a period of
at least two years (as extended pursuant to Section 6(c)(i)) following the
Closing Date, or such shorter period as will terminate when all Transfer
Restricted Securities covered by such Shelf Registration Statement have been
sold pursuant thereto.
(b) Provision by Holders of Certain Information in Connection with the
Shelf Registration Statement. No Holder of Transfer Restricted Securities may
include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Company in writing, within 20 days after receipt of a request therefor, the
information specified in Item 507 or 508 of Regulation S-K, as applicable, of
the Act for use in connection with any Shelf Registration Statement or
Prospectus or preliminary Prospectus included therein. No Holder of Transfer
Restricted Securities shall be entitled to liquidated damages pursuant to
Section 5 hereof unless and until such Holder shall have provided all such
information. Each selling Holder agrees to promptly furnish additional
information required to be disclosed in order to make the information
previously furnished to the Company by such Holder not materially misleading.
SECTION 5. LIQUIDATED DAMAGES
If (i) any Registration Statement required by this Agreement is not
filed with the Commission on or prior to the applicable Exchange Filing
Deadline or Shelf Filing Deadline, as the case may be, (ii) any such
Registration Statement has not been declared effective by the Commission on or
prior to the applicable Exchange Effectiveness Deadline or Shelf Effectiveness
Deadline, as the case may be, (iii) the Exchange Offer has not been Consummated
on or prior to the Consummation Deadline or (iv) any Registration Statement
required by this Agreement is filed and declared effective but shall thereafter
cease to be effective or fail to be usable for its intended purpose without
being succeeded within 2 days by a post-effective amendment to such
Registration Statement that cures such failure and that is itself declared
effective within 5 days of filing such post-effective amendment to such
7
<PAGE> 8
Registration Statement (each such event referred to in the foregoing clauses
(i) through (iv), a "REGISTRATION DEFAULT"), then the Company and the
Guarantors hereby jointly and severally agree to pay to each Holder of Transfer
Restricted Securities affected thereby liquidated damages in an amount equal to
$.05 per week per $1,000 in principal amount of Transfer Restricted Securities
held by such Holder for each week or portion thereof that the Registration
Default continues for the first 90-day period immediately following the
occurrence of such Registration Default. The amount of the liquidated damages
shall increase by an additional $.05 per week per $1,000 in principal amount of
Transfer Restricted Securities with respect to each subsequent 90-day period
until all Registration Defaults have been cured, up to a maximum amount of
liquidated damages of $.30 per week per $1,000 in principal amount of Transfer
Restricted Securities; provided that the Company and the Guarantors shall in no
event be required to pay liquidated damages for more than one Registration
Default at any given time. Notwithstanding anything to the contrary set forth
herein, (1) upon filing of the Exchange Offer Registration Statement (and/or,
if applicable, the Shelf Registration Statement), in the case of (i) above, (2)
upon the effectiveness of the Exchange Offer Registration Statement (and/or, if
applicable, the Shelf Registration Statement), in the case of (ii) above, (3)
upon Consummation of the Exchange Offer, in the case of (iii) above, or (4)
upon the filing of a post-effective amendment to the Registration Statement or
an additional Registration Statement that causes the Exchange Offer
Registration Statement (and/or, if applicable, the Shelf Registration
Statement) to again be declared effective or made usable in the case of (iv)
above, the liquidated damages payable with respect to the Transfer Restricted
Securities as a result of such clause (i), (ii), (iii) or (iv), as applicable,
shall cease.
All accrued liquidated damages shall be paid to the Holders entitled
thereto, in the manner provided for the payment of interest in the Indenture,
on each Interest Payment Date, as more fully set forth in the Indenture and the
Notes. Notwithstanding the fact that any securities for which liquidated
damages are due cease to be Transfer Restricted Securities, all obligations of
the Company and the Guarantors to pay liquidated damages with respect to
securities shall survive until such time as such obligations with respect to
such securities shall have been satisfied in full.
SECTION 6. REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In connection with the
Exchange Offer, the Company and the Guarantors shall (x) comply with all
applicable provisions of Section 6(c) below, (y) use their respective best
efforts to effect such exchange and to permit the resale of Exchange Notes by
Broker-Dealers that tendered in the Exchange Offer Senior Subordinated Notes
that such Broker-Dealer acquired for its own account as a result of its market
making activities or other trading activities (other than Senior Subordinated
Notes acquired directly from the Company or any of its Affiliates) being sold
in accordance with the intended method or methods of distribution thereof, and
(z) comply with all of the following provisions:
(i) If, following the date hereof there has been announced a change
in Commission policy with respect to exchange offers such as the
Exchange Offer, that in
8
<PAGE> 9
the reasonable opinion of counsel to the Company raises a substantial
question as to whether the Exchange Offer is permitted by applicable
federal law, the Company and the Guarantors hereby agree to seek a
no-action letter or other favorable decision from the Commission
allowing the Company and the Guarantors to Consummate an Exchange Offer
for such Transfer Restricted Securities. The Company and the Guarantors
hereby agree to pursue the issuance of such a decision to the
Commission staff level. In connection with the foregoing, the Company
and the Guarantors hereby agree to take all such other actions as may
be requested by the Commission or otherwise required in connection with
the issuance of such decision, including without limitation (A)
participating in telephonic conferences with the Commission, (B)
delivering to the Commission staff an analysis prepared by counsel to
the Company setting forth the legal bases, if any, upon which such
counsel has concluded that such an Exchange Offer should be permitted
and (C) diligently pursuing a resolution (which need not be favorable)
by the Commission staff.
(ii) As a condition to its participation in the Exchange Offer,
each Holder of Transfer Restricted Securities (including, without
limitation, any Holder who is a Broker Dealer) shall finish, upon the
request of the Company, prior to the Consummation of the Exchange
Offer, a written representation to the Company and the Guarantor(s)
(which may be contained in the letter of transmittal contemplated by
the Exchange Offer Registration Statement) to the effect that (A) it is
not an Affiliate of the Company, (B) it is not engaged in, and does not
intend to engage in, and has no arrangement or understanding with any
person to participate in, a distribution of the Exchange Notes to be
issued in the Exchange Offer and (C) it is acquiring the Exchange Notes
in its ordinary course of business. As a condition to its participation
in the Exchange Offer each Holder using the Exchange Offer to
participate in a distribution of the Exchange Notes shall acknowledge
and agree that, if the resales are of Exchange Notes obtained by such
Holder in exchange for Senior Subordinated Notes acquired directly from
the Company or an Affiliate thereof, it (1) could not, under Commission
policy as in effect on the date of this Agreement, rely on the position
of the Commission enunciated in Morgan Stanley and Co., Inc. (available
June 5, 1991) and Exxon Capital Holdings Corporation (available May 13,
1988), as interpreted in the Commission's letter to Shearman & Sterling
dated July 2, 1993, and similar no-action letters (including, if
applicable, any no-action letter obtained pursuant to clause (i)
above), and (2) must comply with the registration and prospectus
delivery requirements of the Act in connection with a secondary resale
transaction and that such a secondary resale transaction must be
covered by an effective registration statement containing the selling
security holder information required by Item 507 or 508, as applicable,
of Regulation S-K.
(iii) Prior to effectiveness of the Exchange Offer Registration
Statement, the Company and the Guarantors shall provide a supplemental
letter to the Commission (A) stating that the Company and the
Guarantors are registering the Exchange Offer in reliance on the
position of the Commission enunciated in Exxon Capital Holdings
9
<PAGE> 10
Corporation (available May 13, 1988), Morgan Stanley and Co., Inc.
(available June 5, 1991) as interpreted in the Commission' s letter to
Shearman & Sterling dated July 2, 1993, and, if applicable, any
no-action letter obtained pursuant to clause (i) above, (B) including a
representation that neither the Company nor any Guarantor has entered
into any arrangement or understanding with any Person to distribute the
Exchange Notes to be received in the Exchange Offer and that, to the
best of the Company's and each Guarantors information and belief, each
Holder participating in the Exchange Offer is acquiring the Exchange
Notes in its ordinary course of business and has no arrangement or
understanding with any Person to participate in the distribution of the
Exchange Notes received in the Exchange Offer and (C) any other
undertaking or representation required by the Commission as set forth
in any no-action letter obtained pursuant to clause (i) above, if
applicable.
(b) Shelf Registration Statement. In connection with the Shelf
Registration Statement, the Company and the Guarantors shall
(i) comply with all the provisions of Section 6(c) below and use
their respective best efforts to effect such registration to permit the
sale of the Transfer Restricted Securities being sold in accordance
with the intended method or methods of distribution thereof (as
indicated in the information furnished to the Company pursuant to
Section 4(b) hereof), and pursuant thereto the Company and the
Guarantors will prepare and file with the Commission a Registration
Statement relating to the registration on any appropriate form under
the Act, which form shall be available for the sale of the Transfer
Restricted Securities in accordance with the intended method or methods
of distribution thereof within the time periods and otherwise in
accordance with the provisions hereof, and
(ii) issue, upon the request of any Holder or purchaser of Senior
Subordinated Notes covered by any Shelf Registration Statement
contemplated by this Agreement, Exchange Notes having an aggregate
principal amount equal to the aggregate principal amount of Senior
Subordinated Notes sold pursuant to the Shelf Registration Statement
and surrendered to the Company for cancellation; the Company shall
register Exchange Notes on the Shelf Registration Statement for this
purpose and issue the Exchange Notes to the purchaser(s) of securities
subject to the Shelf Registration Statement in the names as such
purchaser(s) shall designate.
(c) General Provision. In connection with any Registration Statement
and any related Prospectus required by this Agreement, the Company and the
Guarantors shall:
(i) use their respective best efforts to keep such Registration
Statement continuously effective and provide all requisite financial
statements for the period specified in Section 3 or 4 of this
Agreement, as applicable. Upon the occurrence of any event that would
cause any such Registration Statement or the Prospectus contained
therein (A) to contain an untrue statement of material fact or omit to
state any material
10
<PAGE> 11
fact necessary to make the statements therein not misleading or (B) not
to be effective and usable for resale of Transfer Restricted Securities
during the period required by this Agreement, the Company and the
Guarantors shall file promptly an appropriate amendment to such
Registration Statement curing such defect, and, if Commission review is
required, use their respective best efforts to cause such amendment to
be declared effective as soon as practicable thereafter.
(ii) prepare and file with the Commission such amendments and
post-effective amendments to the applicable Registration Statement as
may be necessary to keep such Registration Statement effective for the
applicable period set forth in Section 3 or 4 hereof, as the case may
be, or such shorter period as will terminate upon the earlier of the
following (A) when all Transfer Restricted Securities covered by such
Registration Statement have been sold and (B) when, in the opinion of
counsel to the Company, all outstanding Transfer Restricted Securities
may be resold without registration under the Act pursuant to Rule
144(k) under the Act or any successor provision thereto; cause the
Prospectus to be supplemented by any required Prospectus supplement,
and as so supplemented to be filed pursuant to Rule 424 under the Act,
and to comply fully with Rules 424, 430A and 462, as applicable, under
the Act in a timely mariner; and comply with the provisions of the Act
with respect to the disposition of all securities covered by such
Registration Statement during the applicable period in accordance with
the intended method or methods of distribution by the sellers thereof
set forth in such Registration Statement or supplement to the
Prospectus;
(iii) advise each Holder promptly and, if requested by such Holder,
confirm such advice in writing, (A) when the Prospectus or any
Prospectus supplement or post-effective amendment has been filed, and,
with respect to any applicable Registration Statement or any
post-effective amendment thereto, when the same has become effective,
(B) of any request by the Commission for amendments to the Registration
Statement or amendments or supplements to the Prospectus or for
additional information relating thereto, (C) of the issuance by the
Commission of any stop order suspending the effectiveness of the
Registration Statement under the Act or of the suspension by any state
securities commission of the qualification of the Transfer Restricted
Securities for offering or sale in any jurisdiction, or the initiation
of any proceeding for any of the preceding purposes, (D) of the
existence of any fact or the happening of any event that makes any
statement of a material fact made in the Registration Statement, the
Prospectus, any amendment or supplement thereto or any document
incorporated by reference therein untrue, or that requires the making
of any additions to or changes in the Registration Statement in order
to make the statements therein not misleading, or that requires the
making of any additions to or changes in the Prospectus in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading. If at any time the Commission
shall issue any stop order suspending the effectiveness of the
Registration Statement, or any state securities commission or other
regulatory authority shall issue an order suspending the qualification
or exemption from qualification of the Transfer Restricted Securities
under
11
<PAGE> 12
state securities or Blue Sky laws, the Company and the Guarantors shall
use their respective best efforts to obtain the withdrawal or lifting
of such order at the earliest possible time;
(iv) subject to Section 6(c)(i), if any fact or event contemplated
by Section 6(c)(iii)(D) above shall exist or have occurred, prepare a
supplement or post-effective amendment to the Registration Statement or
related Prospectus or any document incorporated therein by reference or
file any other required document so that, as thereafter delivered to
the purchasers of Transfer Restricted Securities, the Prospectus will
not contain an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading;
(v) furnish to each Holder in connection with such exchange or
sale, if any, before filing with the Commission, copies of any
Registration Statement or any Prospectus included therein or any
amendments or supplements to any such Registration Statement or
Prospectus (including all documents incorporated by reference after the
initial filing of such Registration Statement), which documents will be
subject to the review and comment of such Holders in connection with
such sale, if any, for a period of at least five Business Days, and the
Company will not file any such Registration Statement or Prospectus or
any amendment or supplement to any such Registration Statement or
Prospectus (including all such documents incorporated by reference) to
which such Holders shall reasonably object within five Business Days
after the receipt thereof. A Holder shall be deemed to have reasonably
objected to such filing if such Registration Statement, amendment,
Prospectus or supplement as applicable, as proposed to be filed,
contains an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein not misleading
or fails to comply with the applicable requirements of the Act;
(vi) promptly prior to the filing of any document that is to be
incorporated by reference into a Registration Statement or Prospectus,
provide copies of such document to each Holder in connection with such
exchange or sale, if any, make the Company's and the Guarantors'
representatives available for discussion of such document and other
customary due diligence matters, and include such information in such
document prior to the filing thereof as such Holders may reasonably
request;
(vii) make available, at reasonable times, for inspection by each
Holder and any attorney or accountant retained by such Holders, all
financial and other records, pertinent corporate documents of the
Company and the Guarantors and cause the Company's and the Guarantors'
officers, directors and employees to supply all information reasonably
requested by any such Holder, attorney or accountant in connection with
such Registration Statement or any post-effective amendment thereto
subsequent to the filing thereof and prior to its effectiveness;
12
<PAGE> 13
(viii) if requested by any Holders in connection with such exchange
or sale, promptly include in any Registration Statement or Prospectus,
pursuant to a supplement or post-effective amendment if necessary, such
information as such Holders may reasonably request to have included
therein, including, without limitation, information relating to the
"Plan of Distribution" of the Transfer Restricted Securities and make
all required filings of such Prospectus supplement or post-effective
amendment as soon as practicable after the Company is notified of the
matters to be included in such Prospectus supplement or post-effective
amendment;
(ix) furnish to each Holder in connection with such exchange or
sale without charge, at least one copy of the Registration Statement,
as first filed with the Commission, and of each amendment thereto,
including all documents incorporated by reference therein and all
exhibits (including exhibits incorporated therein by reference);
(x) deliver to each Holder without charge, as many copies of the
Prospectus (including each preliminary prospectus) and any amendment or
supplement thereto as such Persons reasonably may request; the Company
and the Guarantors hereby consent to the use (in accordance with law)
of the Prospectus and any amendment or supplement thereto by each
selling Holder in connection with the offering and the sale of the
Transfer Restricted Securities covered by the Prospectus or any
amendment or supplement thereto;
(xi) upon the request of any Holder, enter into such agreements
(including underwriting agreements) and make such representations and
warranties and take all such other actions in connection therewith in
order to expedite or facilitate the disposition of the Transfer
Restricted Securities pursuant to any applicable Registration Statement
contemplated by this Agreement as may be reasonably requested by any
Holder in connection with any sale or, resale pursuant to any
applicable Registration Statement. In such connection, the Company and
the Guarantors shall:
(A) upon request of any Holder, furnish (or in the
case of paragraphs (2) and (3), use its best efforts to cause
to be furnished) to each Holder, upon Consummation of the
Exchange Offer or upon the effectiveness of the Shelf
Registration Statement, as the case may be:
(1) a certificate, dated such date, signed
on behalf of the Company and each Guarantor by (x)
the President or any Vice President and (y) a
principal financial or accounting officer of the
Company and such Guarantor, confirming, as of the
date thereof, the matters set forth in Sections
6(x), 9(a) and 9(b) of the Purchase Agreement and
such other similar matters as such Holders may
reasonably request;
(2) an opinion, dated the date of
Consummation of the Exchange Offer or the date of
effectiveness of the Shelf Registration
13
<PAGE> 14
Statement, as the case may be, of counsel for the
Company and the Guarantors covering matters similar
to those set forth in paragraph (e) of Section 9 of
the Purchase Agreement and such other matters as
such Holder may reasonably request, and in any event
including a statement to the effect that such
counsel has participated in conferences with
officers and other representatives of the Company
and the Guarantors, representatives of the
independent public accountants for the Company and
the Guarantors and have considered the matters
required to be stated therein and the statements
contained therein, although such counsel has not
independently verified the accuracy, completeness or
fairness of such statements; and that such counsel
advises that, on the basis of the foregoing (relying
as to materiality to the extent such counsel deems
appropriate upon the statements of officers and
other representatives of the Company and the
Guarantors) and without independent check or
verification, no facts came to such counsel's
attention that caused such counsel to believe that
the applicable Registration Statement, at the time
such Registration Statement or any post-effective
amendment thereto became effective and, in the case
of the Exchange Offer Registration Statement, as of
the date of Consummation of the Exchange Offer,
contained an untrue statement of a material fact or
omitted to state a material fact required to be
stated therein or necessary to make the statements
therein not misleading, or that the Prospectus
contained in such Registration Statement as of its
date and, in the case of the opinion dated the date
of Consummation of the Exchange Offer, as of the
date of Consummation, contained an untrue statement
of a material fact or omitted to state a material
fact necessary in order to make the statements
therein, in the light of the circumstances under
which they were made, not misleading. Without
limiting the foregoing, such counsel may state
further that such counsel assumes no responsibility
for, and has not independently verified, the
accuracy, completeness or fairness of the financial
statements, notes and schedules and other financial
data included in any Registration Statement
contemplated by this Agreement or the related
Prospectus; and
(3) a customary comfort letter, dated the
date of Consummation of the Exchange Offer, or as of
the date of effectiveness of the Shelf Registration
Statement, as the case may be, from the Company's
independent accountants, in the customary form and
covering matters of the type customarily covered in
comfort letters to underwriters in connection with
underwritten offerings, and affirming the matters
set forth in the comfort letters delivered pursuant
to Section 9(g) of the Purchase Agreement; and
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<PAGE> 15
(B) deliver such other documents and certificates as
may be reasonably requested by the selling Holders to
evidence compliance with the matters covered in clause (A)
above and with any customary conditions contained in any
agreement entered into by the Company and the Guarantors
pursuant to this clause (xi);
(xii) prior to any public offering of Transfer Restricted
Securities, cooperate with the selling Holders and their counsel in
connection with the registration and qualification of the Transfer
Restricted Securities under the securities or Blue Sky laws of such
jurisdictions as the selling Holders may request and do any and all
other acts or things necessary or advisable to enable the disposition
in such jurisdictions of the Transfer Restricted Securities covered by
the applicable Registration Statement; provided, however, that neither
the Company nor any Guarantor shall be required to register or qualify
as a foreign corporation where it is not now so qualified or to take
any action that would subject it to the service of process in suits or
to taxation, other than as to matters and transactions relating to the
Registration Statement, in any jurisdiction where it is not now so
subject;
(xiii) in connection with any sale of Transfer Restricted
Securities that will result in such securities no longer being Transfer
Restricted Securities, cooperate with the Holders to facilitate the
timely preparation and delivery of certificates representing Transfer
Restricted Securities to be sold and not bearing any restrictive
legends; and to register such Transfer Restricted Securities in such
denominations and such names as the selling Holders may request at
least two Business Days prior to such sale of Transfer Restricted
Securities;
(xiv) use their respective best efforts to cause the
disposition of the Transfer Restricted Securities covered by the
Registration Statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to enable the
seller or sellers thereof to consummate the disposition of such
Transfer Restricted Securities, subject to the proviso contained in
clause (xii) above;
(xv) provide a CUSIP number for all Transfer Restricted
Securities not later than the effective date of a Registration
Statement covering such Transfer Restricted Securities and provide the
Trustee under the Indenture with printed certificates for the Transfer
Restricted Securities which are in a form eligible for deposit with the
Depository Trust Company;
(xvi) otherwise use their respective best efforts to comply
with all applicable rules and regulations of the Commission, and make
generally available to its security holders with regard to any
applicable Registration Statement, as soon as practicable, a
consolidated earnings statement meeting the requirements of Rule 158
(which need not be audited) covering a twelve-month period beginning
after the effective date of the
15
<PAGE> 16
Registration Statement (as such term is defined in paragraph (c) of
Rule 158 under the Act);
(xvii) cause the Indenture to be qualified under the TIA not
later than the effective date of the first Registration Statement
required by this Agreement and, in connection therewith, cooperate with
the Trustee and the Holders to effect such changes to the Indenture as
may be required for such Indenture to be so qualified in accordance
with the terms of the TIA; and execute and use its best efforts to
cause the Trustee to execute, all documents that may be required to
effect such changes and all other f filed with the Commission to enable
such Indenture to be so qualified in a timely manner; and
(xviii) provide promptly to each Holder, upon request, each
document filed with the Commission pursuant to the requirements of
Section 13 or Section 15(d) of the Exchange Act.
(d) Restrictions on Holders. Each Holder agrees by acquisition of a
Transfer Restricted Security that, upon receipt of the notice referred to in
Section 6(c)(iii)(C) or any notice from the Company of the existence of any
fact of the kind described in Section 6(c)(iii)(D) hereof (in each case, a
"SUSPENSION NOTICE"), such Holder will forthwith discontinue disposition of
Transfer Restricted Securities pursuant to the applicable Registration
Statement until (i) such Holder has received copies of the supplemented or
amended Prospectus contemplated by Section 6(c)(iv) hereof, or (ii) such Holder
is advised in writing by the Company that the use of the Prospectus may be
resumed, and has received copies of any additional or supplemental filings that
are incorporated by reference in the Prospectus (in each case, the
"RECOMMENCEMENT DATE"). Each Holder receiving a Suspension Notice hereby agrees
that it will either (i) destroy any Prospectuses, other than permanent file
copies, then in such Holder's possession which have been replaced by the
Company with more recently dated Prospectuses or (ii) deliver to the Company
(at the Company's expense) all copies, other than permanent file copies, then
in such Holder's possession of the Prospectus covering such Transfer Restricted
Securities that was current at the time of receipt of the Suspension Notice.
The time period regarding the effectiveness of such Registration Statement set
forth in Section 3 or 4 hereof, as applicable, shall be extended by a number of
days equal to the number of days in the period from and including the date of
delivery of the Suspension Notice to the date of delivery of the Recommencement
Date.
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to the Company's and the Guarantors'
performance of or compliance with this Agreement will be borne by the Company,
regardless of whether a Registration Statement becomes effective, including
without limitation: (i) all registration and filing fees and expenses; (ii) all
fees and expenses of compliance with federal securities and state Blue Sky or
securities laws; (iii) all expenses of printing (including printing
certificates for the Exchange Notes to be issued in the Exchange Offer and
printing of Prospectuses
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whether for exchanges, sales or otherwise), messenger and delivery services and
telephone; (iv) all fees and disbursements of counsel for the Company, the
Guarantors and the Holders of Transfer Restricted Securities; (v) all
application and filing fees in connection with listing the Exchange Notes on a
national securities exchange or automated quotation system pursuant to the
requirements hereof; and (vi) all fees and disbursements of independent
certified public accountants of the Company and the Guarantors (including the
expenses of any special audit and comfort letters required by or incident to
such performance).
The Company will, in any event, bear its and the Guarantors' internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expenses of
any annual audit and the fees and expenses of any Person, including special
experts, retained by the Company or the Guarantors.
(b) In connection with any Registration Statement required by this
Agreement (including, without limitation, the Exchange Offer Registration
Statement and the Shelf Registration Statement). the Company and the Guarantors
will reimburse the Initial Purchasers and the Holders of Transfer Restricted
Securities who are tendering Senior Subordinated Notes into in the Exchange
offer and/or selling or reselling Senior Subordinated Notes or Exchange Notes
pursuant to the "Plan of Distribution" contained in the Exchange Offer
Registration Statement or the Shelf Registration Statement, as applicable, for
the reasonable fees and disbursements of not more than one counsel, who shall
be Jones, Day, Reavis & Pogue, unless another firm shall be chosen by the
Holders of a majority in principal amount of the Transfer Restricted Securities
for whose benefit such Registration Statement is being prepared.
SECTION 8. INDEMNIFICATION
(a) The Company and the Guarantors agree, jointly and severally, to
indemnify and hold harmless each Holder, its directors, officers and each
Person, if any, who controls such Holder (within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act), from and against any and all
losses, claims, damages, liabilities, judgments, (including without limitation,
any legal or other expenses incurred in connection with investigating or
defending any matter, including any action that could give rise to any such
losses, claims, damages, liabilities or judgments) caused by any untrue
statement or alleged untrue statement of a material fact contained in any
Registration Statement, preliminary prospectus or Prospectus (or any amendment
or supplement thereto) provided by the Company to any Holder or any prospective
purchaser of Exchange Notes or registered Senior Subordinated Notes, or caused
by any omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, except insofar as such losses, claims, damages, liabilities or
judgments are caused by an untrue statement or omission or alleged untrue
statement or omission that is based upon information relating to any of the
Holders furnished in writing to the Company by any of the Holders.
(b) Each Holder of Transfer Restricted Securities agrees, severally and
not jointly, to indemnify and hold harmless the Company and the Guarantors, and
their respective
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<PAGE> 18
directors and officers, and each person, if any, who controls (within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act) the
Company, or the Guarantors to the same extent as the foregoing indemnity from
the Company and the Guarantors set forth in section (a) above, but only with
reference to information relating to such Holder furnished in writing to the
Company by such Holder expressly for use in any Registration Statement. In no
event shall any Holder, its directors, officers or any Person who controls such
Holder be liable or responsible for any amount in excess of the amount by which
the total amount received by such Holder with respect to its sale of Transfer
Restricted Securities pursuant to a Registration Statement exceeds (i) the
amount paid by such Holder for such Transfer Restricted Securities and (ii) the
amount of any damages that such Holder, its directors, officers or any Person
who controls such Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission.
(c) In case any action shall be commenced involving any person in
respect of which indemnity may be sought pursuant to Section 8(a) or 8(b) (the
"INDEMNIFIED PARTY"), the indemnified party shall promptly notify the person
against whom such indemnity may be sought (the "INDEMNIFYING PARTY") in writing
and the indemnifying party shall assume the defense of such action, including
the employment of counsel reasonably satisfactory to the indemnified party and
the payment of all fees and expenses of such counsel, as incurred (except that
in the case of any action in respect of which indemnity may be sought pursuant
to both Sections 8(a) and 8(b), a Holder shall not be required to assume the
defense of such action pursuant to this Section 8(c), but may employ separate
counsel and participate in the defense thereof, but the fees and expenses of
such counsel, except as provided below, shall be at the expense of the Holder).
Any indemnified party shall have the right to employ separate counsel in any
such action and participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of the indemnified party unless (i) the
employment of such counsel shall have been specifically authorized in writing
by the indemnifying party, (ii) the indemnifying party shall have failed to
assume the defense of such action or employ counsel reasonably satisfactory to
the indemnified party or (iii) the named parties to any such action (including
any impleaded parties) include both the indemnified party and the indemnifying
party, and the indemnified party shall have been advised by such counsel that
there may be one or more legal defenses available to it which are different
from or additional to those available to the indemnifying party (in which case
the indemnifying party shall not have the right to assume the defense of such
action on behalf of the indemnified party). In any such case, the indemnifying
party shall not, in connection with any one action or separate but
substantially similar or related actions in the same jurisdiction arising out
of the same general allegations or circumstances, be liable for the fees and
expenses of more than one separate firm of attorneys (in addition to any local
counsel) for all indemnified parties and all such fees and expenses shall be
reimbursed as they are incurred. Such firm shall be designated in writing by a
majority of the Holders, in the case of the parties indemnified pursuant to
Section 8(a), and by the Company and Guarantors, in the case of parties
indemnified pursuant to Section 8(b). The indemnifying party shall indemnify
and hold harmless the indemnified party from and against any and all losses,
claims, damages, liabilities and judgments by reason of any settlement of any
action (i) effected with its written consent or (ii) effected without its
written consent if the
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<PAGE> 19
settlement is entered into more than twenty business days after the
indemnifying party shall have received a request from the indemnified party for
reimbursement for the fees and expenses of counsel (in any case where such fees
and expenses are at the expense of the indemnifying party) and, prior to the
date of such settlement, the indemnifying party shall have failed to comply
with such reimbursement request. No indemnifying party shall, without the prior
written consent of the indemnified party, effect any settlement or compromise
of, or consent to the entry of judgment with respect to, any pending or
threatened action in respect of which the indemnified party is or could have
been a party and indemnity or contribution may be or could have been sought
hereunder by the indemnified party, unless such settlement, compromise or
judgment (i) includes an unconditional release of the indemnified party from
all liability on claims that are or could have been the subject matter of such
action and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act, by or on behalf of the indemnified party.
(d) To the extent that the indemnification provided for in this Section
8 is unavailable to an indemnified party in respect of any losses, claims,
damages, liabilities or judgments referred to therein, then each indemnifying
party, in lieu of indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages, liabilities or judgments (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company and the
Guarantors, on the one hand, and the Holders, on the other hand, from their
sale of Transfer Restricted Securities or (ii) if the allocation provided by
clause 8(d)(i) is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause
8(d)(i) above but also the relative fault of the Company and the Guarantors, on
the one hand, and of the Holder, on the other hand, in connection with the
statements or omissions which resulted in such losses, claims, damages,
liabilities or judgments, as well as any other relevant equitable
considerations. The relative fault of the Company and the Guarantors, on the
one hand, and of the Holder, on the other hand, shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company or such Guarantor,
on the one hand, or by the Holder, on the other hand, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The amount paid or payable by a party as a result
of the losses, claims, damages, liabilities and judgments referred to above
shall be deemed to include, subject to the limitations set forth in the second
paragraph of Section 8(a), any legal or other fees or expenses reasonably
incurred by such party in connection with investigating or defending any action
or claim.
The Company, the Guarantors and each Holder agree that it would not be
just and equitable if contribution pursuant to this Section 8(d) were
determined by pro rata allocation (even if the Holders were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages, liabilities or judgments referred to in
the immediately
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<PAGE> 20
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any matter,
including any action that could have given rise to such losses, claims,
damages, liabilities or judgments. Notwithstanding the provisions of this
Section 8, no Holder, its directors, its officers or any Person, if any, who
controls such Holder shall be required to contribute, in the aggregate, any
amount in excess of the amount by which the total received by such Holder with
respect to the sale of Transfer Restricted Securities pursuant to a
Registration Statement exceeds (i) the amount paid by such Holder for such
Transfer Restricted Securities and (ii) the amount of any damages which such
Holding has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Holders' obligations to contribute pursuant
to this Section 8(c) are several in proportion to the respective principal
amount of Transfer Restricted Securities held by each Holder hereunder and not
joint.
SECTION 9. RULE 144A AND RULE 144
The Company and each Guarantor agrees with each Holder, for so long as
any Transfer Restricted Securities remain outstanding and during any period in
which the Company or such Guarantor (i) is not subject to Section 13 or 15(d)
of the Exchange Act, to make available, upon request of any Holder, to such
Holder or beneficial owner of Transfer Restricted Securities in connection with
any sale thereof and any prospective purchaser of such Transfer Restricted
Securities designated by such Holder or beneficial owner, the information
required by Rule 144A(d)(4) under the Act in order to permit resales of such
Transfer Restricted Securities pursuant to Rule 144A, and (ii) is subject to
Section 13 or 15 (d) of the Exchange Act, to make all filings required thereby
in a timely manner in order to permit sales of such Transfer Restricted
Securities pursuant to Rule 144.
SECTION 10. MISCELLANEOUS
(a) Remedies. The Company and the Guarantors acknowledge and agree that
any failure by the Company and/or the Guarantors to comply with their
respective obligations under Sections 3 and 4 hereof may result in material
irreparable injury to the Initial Purchasers or the Holders for which there is
no adequate remedy at law, that it will not be possible to measure damages for
such injuries precisely and that, in the event of any such failure, the
Initial Purchasers or any Holder may obtain such relief as may be required to
specifically enforce the Company's and the Guarantors' obligations under
Sections 3 and 4 hereof The Company and the Guarantors further agree to waive
the defense in any action for specific performance that a remedy at law would
be adequate.
(b) No Inconsistent Agreements. Neither the Company nor any Guarantor
will, on or after the date of this Agreement, enter into any agreement with
respect to its securities that is inconsistent with the rights granted to the
Holders in this Agreement or otherwise conflicts
20
<PAGE> 21
with the provisions hereof. Neither the Company nor any Guarantor has
previously entered into any agreement granting any registration rights with
respect to its securities to any Person. The rights granted to the Holders
hereunder do not in any way conflict with and are not inconsistent with the
rights granted to the holders of the Company's and the Guarantors' securities
under any agreement in effect on the date hereof.
(c) Amendments and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to or departures
from the provisions hereof may not be given unless (i) in the case of Section 5
hereof and this Section 10(c)(i), the Company has obtained the written consent
of Holders of all outstanding Transfer Restricted Securities and (ii) in the
case of all other provisions hereof, the Company has obtained the written
consent of Holders of a majority of the outstanding principal amount of
Transfer Restricted Securities (excluding Transfer Restricted Securities held
by the Company or its Affiliates). Notwithstanding the foregoing, a waiver or
consent to departure from the provisions hereof that relates exclusively to the
rights of Holders whose Transfer Restricted Securities are being tendered
pursuant to the Exchange Offer, and that does not affect directly or indirectly
the rights of other Holders whose Transfer Restricted Securities are not being
tendered pursuant to such Exchange Offer, may be given by the Holders of a
majority of the outstanding principal amount of Transfer Restricted Securities
subject to such Exchange Offer.
(d) Third Party Beneficiary. The Holders shall be third party
beneficiaries to the agreements made hereunder between the Company and the
Guarantors, on the one hand, and the Initial Purchasers, on the other hand, and
shall have the right to enforce such agreements directly to the extent they may
deem such enforcement necessary or advisable to protect its rights or the
rights of Holders hereunder.
(e) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, fax, or air courier
guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of
the Registrar under the Indenture, with a copy to the Registrar under
the Indenture; and
(ii) if to the Company or the Guarantors:
Albecca Inc.
3900 Steve Reynolds Boulevard
Norcross, Georgia 30093
Telecopier No.: (770) 564-1555
Attention: Craig A. Ponzio, Chief Executive Officer
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<PAGE> 22
With a copy to:
Nelson Mullins Riley & Scarborough, L.L.P.
First Union Plaza, Suite 1400
999 Peachtree Street, N.E.
Atlanta, Georgia 30309
Telecopier No.: (404) 817-6050
Attention: Philip H. Moise, Esq.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when
receipt acknowledged, if faxed; and on the next business day, if timely
delivered to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
(f) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties,
including without limitation and without the need for an express assignment,
subsequent Holders; provided that nothing herein shall be deemed to permit any
assignment, transfer or other disposition of Transfer Restricted Securities in
violation of the terms hereof or of the Purchase Agreement or the Indenture. If
any transferee of any Holder shall acquire Transfer Restricted Securities in
any manner, whether by operation of law or otherwise, such Transfer Restricted
Securities shall be held subject to all of the terms of this Agreement, and by
taking and holding such Transfer Restricted Securities such Person shall be
conclusively deemed to have agreed to be bound by and to perform all of the
terms and provisions of this Agreement, including the restrictions on resale
set forth in this Agreement and, if applicable, the Purchase Agreement, and
such Person shall be entitled to receive the benefits hereof.
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
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<PAGE> 23
(j) Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(k) Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect
of the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted with respect to the Transfer
Restricted Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
ALBECCA INC.
By: /s/ Craig A. Ponzio
------------------------------------------
Name: Craig A. Ponzio
Title: Chairman, President and
Chief Executive Officer
[Signatures continued on following pages]
23
<PAGE> 24
LARSON-JUHL US LLC
LARSON-JUHL INTERNATIONAL L.L.C.
ART MATERIALS, FRAMES AND
MOULDING COMPANY, INC.
ROBERT F. DE CASTRO, INC.
GLASS CORPORATION OF AMERICA, INC.
ART WEST, INC.
EASTERN MOULDING, INC.
EASTERN MOULDINGS, INC.
LARSON-JUHL AUSTRALIA L.L.C.
LARSON-JUHL FRANCE L.L.C.
LARSON-JUHL SOUTH AFRICA L.L.C.
LARSON-JUHL KOREA L.L.C.
LARSON-JUHL SEOUL L.L.C.
LARSON-JUHL NETHERLANDS L.L.C.
By: /s/ Craig A. Ponzio
-------------------------------------
Craig A. Ponzio, as:
Chairman, President and CEO of:
LARSON-JUHL INTERNATIONAL L.L.C.
Chairman and CEO of
LARSON-JUHL US LLC
President of:
ART MATERIALS, FRAMES AND
MOULDING COMPANY, INC.
ROBERT F. DE CASTRO, INC.
GLASS CORPORATION OF AMERICA, INC.
ART WEST, INC.
EASTERN MOULDING, INC.
EASTERN MOULDINGS, INC.
Manager of:
LARSON-JUHL AUSTRALIA L.L.C.
LARSON-JUHL FRANCE L.L.C.
LARSON-JUHL SOUTH AFRICA L.L.C
LARSON-JUHL KOREA L.L.C.
LARSON-JUHL SEOUL L.L.C.
LARSON-JUHL NETHERLANDS LLC
24
<PAGE> 25
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ James A. D'Aquila
-------------------------------
Name: James A. D'Aquila
Title: Managing Director
MORGAN STANLEY & CO. INCORPORATED
By: /s/ William A. Maner IV
-------------------------------
Name: William A. Maner IV
Title: Principal
SUNTRUST EQUITABLE SECURITIES CORPORATION
By: /s/ James J. Stathis
-------------------------------
Name: James J. Stathis
Title: Managing Director
25
<PAGE> 1
EXHIBIT 10.2
STATE OF GEORGIA
GWINNETT COUNTY
THIS LEASE AGREEMENT, made this 8th day of August, 1991, by and between
L-J Properties Inc., hereinafter referred to as "Landlord," and Larson-Juhl
Inc., hereinafter referred to as "Tenant;"
WITNESSETH:
1.01 Landlord hereby leases to Tenant, and Tenant hereby leases from
Landlord, the property hereinafter referred to as the LEASED PREMISES, described
as: 65,801 sq. ft. at 3900 Steve Reynolds Blvd., Norcross 30093, in Gwinnett
County, Georgia, and property as shown in Exhibit "A".
TERM
2.01 TO HAVE AND TO HOLD said Leased Premises for a term of ten (10)
years, commencing August 8, 1991.
RENTAL
3.01 As rental for the Leased Premises, Tenant agrees to pay to L-J
PROPERTIES INC., for the account of Landlord, the sum of Five-Hundred Twenty
Three Thousand Two Hundred Dollars ($523,200) per year, payable in monthly
installments ("Monthly Base Rent") each in the amount of Forty-Three Thousand
Six Hundred Dollars ($43,600) on or before the first day of each calendar month
beginning on the date determined in Paragraph 2.01 and thereafter for the
remainder of the term, together with any other additional rental as hereinafter
set forth. Monthly Base Rent hereunder shall be adjusted annually, after written
notice from the Landlord. The annual Monthly Base Rent adjustment shall be the
greater of four and one-half percent (4.5%) or the proportional increase, if
any, in the United States Consumer Price index (all items Atlanta, Georgia area,
of the U.S. Bureau of Labor Statistics), from the first month of the lease year
to the last month of the lease year previous to the lease year for which the
Monthly Base Rent adjustment is computed. Tenant shall pay interest at a rate of
twelve percent (12%) per annum on all payments more than 10 days past due. If
the Lease shall end on any date, other than the last day of a calendar month,
rent for such month shall be prorated.
Tenant has deposited with Landlord, upon delivery of this Lease Agreement, an
amount equal to Eighty Seven Thousand Two Hundred Dollars ($87,200), half of
which, or Forty-Three Thousand Six Hundred Dollars ($43,600), is to be applied
as last month's rental, the other half, or Forty-Three Thousand Six Hundred
Dollars ($43,600), shall be held as a refundable security deposit.
<PAGE> 2
Any other adjustments to Monthly Base Rent shall be agreed upon by Landlord and
Tenant. Notwithstanding anything contained in this Lease Agreement, any increase
to Monthly Base Rent that has occurred on or before such assignment shall not
survive an assignment of this Lease Agreement by Landlord.
3.02 In addition to the Monthly Base Rent called for herein, Tenant
shall contract for landscape maintenance service.
3.03 Tenant consents to pay as additional rent to Landlord, any utility
surcharges, or any other costs levied, assessed or imposed by, or at the
direction of, or resulting from statutes or regulations, or interpretations
thereof, promulgated by any Federal, State, Municipal or local governmental
authorities in connection with the use or occupancy of the Leased Premises.
DELAY IN DELIVERY OF POSSESSION
4.01 If Landlord, for any reason whatsoever, cannot deliver possession
of the Leased Premises to Tenant at the commencement of the term of this Lease,
this Lease shall not be void or voidable, nor shall Landlord be liable to Tenant
for any loss or damage resulting therefrom, but in that event there shall be a
proportionate reduction of rent covering the period between the commencement of
the term and the time when Landlord can deliver possession. If delay is longer
than three (3) months, Landlord will provide Tenant such space (not exceeding in
area the Leased Premises) as Landlord may have available, until the Leased
Premises can be completed, at no charge to Tenant. The term of this Lease shall
be extended by such delay.
USE OF LEASED PREMISES
5.01 The Leased Premises may be used and occupied for manufacturing and
assembly, testing, warehousing and distribution, showroom and offices, other
such purposes which relate to Tenant's business and for no other purpose or
purposes, without Landlord's consent. Tenant shall promptly comply with all
laws, ordinances, orders, and regulations affecting the Leased Premises and
their cleanliness, safety, occupation and use. Tenant shall comply fully with
all environmental laws and regulations, and all other legal requirements,
applicable to Tenant's operations at, on or within, or to Tenant's use and
occupancy of, the Leased Premises.
5.02 Tenant shall not (either with or without negligence) cause or
permit the escape, disposal or release of any biologically or chemically active
or other hazardous substances, or materials. Tenant shall not allow the storage
or use in quantities which would violate any applicable federal, state or local
environmental laws and regulations of such substances or materials in any manner
not sanctioned by law for the storage and use of such substances or materials,
nor allow to be brought into the Project any such materials or substances except
to use in the ordinary course of Tenant's business. Without limitation,
hazardous substances and materials shall include those described in the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, 42 U.S.C. Section 9601 et seq., the Resource Conservation and Recovery
Act, as amended, 42 U.S.C. Section 6901 et seq., any
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<PAGE> 3
applicable state or local laws and the regulations adopted under these acts. If
any lender or governmental agency shall ever require testing to ascertain
whether or not there has been any release of hazardous materials, then the
reasonable costs thereof shall be reimbursed by Tenant to Landlord as additional
charges if such requirement applies to the Leased Premises. In addition, Tenant
may execute affidavits, representations, and the like from time to time
concerning Tenant's best actual knowledge and belief regarding the presence of
hazardous substances or materials on the Leased Premises. In all events, Tenant
shall indemnify Landlord in the manner elsewhere provided in this lease from any
release of hazardous materials on the Leased Premises occurring while Tenant is
in possession, or elsewhere if caused by Tenant or persons acting under Tenant.
The covenants within shall survive the expiration or earlier termination of the
lease term only for matters discussed herein occurring while Tenant is in
possession.
UTILITIES
6.01 Landlord shall not be liable in the event of any interruption in
the supply of any utilities. Tenant agrees that ft will not install any
equipment which will exceed or overload the capacity of any utility facilities
and that if any equipment installed by Tenant shall require additional utility
facilities, the same shall be installed by Tenant at Tenant's expense in
accordance with plans and specifications approved by Landlord. Tenant shall be
solely responsible for and shall pay all charges for use or consumption of
sanitary sewer, water, gas, electricity and any other utility services.
ACCEPTANCE OF LEASED PREMISES
7.01 By entry hereunder, Tenant acknowledges that it has examined the
Leased Premises and accepts the same as being in the condition called for by
this Lease, and as suited for the uses intended by Tenant.
ALTERATIONS, MECHANICS' LIENS
8.01 Tenant may install trade fixtures, machinery or other trade
equipment in conformance with applicable laws, statutes, ordinances, rules,
regulations, and the same may be removed upon the termination of this Lease
provided Tenant shall not be in default under any of the terms and conditions of
this Lease, and the Leased Premises are not damaged by such removal. Tenant
shall return the Leased Premises on the termination of this Lease in the same
condition as when rented to Tenant, reasonable wear and tear excepted. Tenant
shall keep the Leased Premises, the building and property in which the Leased
Premises are situated free from any liens arising out of any work performed for,
materials furnished to, or obligations incurred by Tenant.
FIRE INSURANCE, HAZARDS
9.01 Tenant shall, at its sole cost and expense, comply with any and
all requirements pertaining to the Leased Premises necessary for the maintenance
of reasonable fire and public liability insurance, covering the Leased Premises,
building and appurtenances.
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<PAGE> 4
INDEMNIFICATION BY TENANT
10.01 Tenant shall indemnify and hold harmless Landlord against and
from any and all claims arising from Tenant's use of the Leased Premises (other
than those arising from negligence of Landlord or its agents or employees), or
the conduct of its business or from any activity, work, or thing done, permitted
or suffered by the Tenant in or about the Leased Premises, and shall further
indemnify and hold harmless Landlord against and from any and all claims arising
from any breach or default in the performance of any obligation on Tenant's part
to be performed under the terms of this Lease, or arising from any act, neglect,
fault or omission of the Tenant, or of its agents or employees, and from and
against all costs, attorney's fees, expenses and liabilities incurred in or
about such claim or any action or proceeding brought relative thereto and in
case any action or proceeding be brought against Landlord shall defend the same
at Tenant's expense by counsel, chosen by Tenant. The obligations of Tenant
under this section arising by reason of any occurrence taking place during the
term of this Lease shall survive any termination of this Lease.
WAIVER OF CLAIMS
11.01 Tenant, as part of the consideration to be rendered to Landlord,
hereby waives all claims against Landlord for damages to goods, wares and
merchandise in, upon or about the Leased Premises and for injury to Tenant, its
agents, employees, invitees, or third persons in or about the Leased Premises
from any cause arising at any time, other than the negligence of Landlord, its
agents and employees.
REPAIRS
12.01 Provided Landlord agrees to pursue all remedies related to
construction defects and warranties, tenant shall, at its sole cost, keep and
maintain the Leased Premises and appurtenances and every part thereof including
by way of illustration and not by way of limitation the foundation, structure,
roof, parking and drives, all windows, and skylights, doors, and store front and
the interior of the Leased Premises, including all plumbing, heating, air
conditioning, sewer, electrical systems and all fixtures and all other similar
equipment serving the Leased Premises in good and sanitary order, condition, and
repair. Tenant shall be responsible for all pest control within the Leased
Premises. Tenant shall, at its sole cost, keep and maintain all utilities,
fixtures and mechanical equipment, used by Tenant. In the event Tenant fails to
maintain the Leased Premises as required herein in the opinion of Landlord,
after reasonable diligence, determines that the repairs are required on an
emergency basis and Tenant will not commence repairs within a reasonable
timeframe with respect to the emergency, or in such other circumstances where no
emergency exists, tenant fails to commence repairs (requested by Landlord in
writing) within thirty (30) days after such request, or fails diligently to
proceed thereafter to complete such repairs, Landlord shall have the right in
order to preserve the Leased Premises or portion thereof, and/or the appearance
thereof, to make such repairs or have a contractor make such repairs and charge
Tenant for the cost thereof as additional rent.
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NON-DISTURBANCE
13.01 Tenant acknowledges that Landlord may assign this Lease. Landlord
agrees that a condition of the assignment will be the assignee's acknowledgment
that the lease shall not be terminated, nor shall Tenant's use, possession, or
enjoyment of the Leased Premises be interfered with, nor shall the leasehold
estate granted by the Lease be affected in any other manner, other than as is
described in the Landlord's assignment, by exercising the assignment.
ENTRY BY LANDLORD
14.01 Tenant shall permit Landlord and Landlord's agents to enter the
Leased Premises at all reasonable times and not disruptive to Tenant's business
for the purpose of inspecting the same or for the purpose of maintaining the
building, or for the purpose of making repairs, alterations, or additions to any
portion of the building, including the erection and maintenance of such
scaffolding, canopies, fences and props as may be required, or for the purpose
of posting notices of non-responsibility for alterations, additions, or repairs.
If the Tenant defaults under the terms of this Lease, after notice, the Landlord
will be permitted to show the Leased Premises to prospective tenants, or place
upon the building any usual or ordinary "for sale" signs, without any rebate of
rent and without any liability to Tenant for any loss of occupation or quiet
enjoyment of the Leased Premises thereby occasioned; and shall permit Landlord
at any time within thirty (30) days prior to the expiration of this Lease, to
place upon the Leased Premises any usual or ordinary "to let" or "to lease"
signs. For each of the aforesaid purposes, Landlord shall at all times have and
retain a key with which to unlock all of the exterior doors about the Leased
Premises.
TAXES
15.01 (a) Tenant shall pay and discharge, on or before the last day on
which the same may be paid without penalty, "all taxes", (as hereinafter
defined) which shall or may during the term be levied, assessed or imposed on or
become a lien upon or grow due or payable out of or for or by reason of the
Leased Premises or any part thereof, or the Landlord's interest in the real
property described on Exhibit "A" hereto. For the purposes hereof "taxes" means
all taxes at any time imposed by the United States of America or by any state,
city, county or other political or taxing subdivision thereof upon or against
this Lease, the Leased Premises, the use or occupancy thereof, the buildings,
improvements or personalty thereon, and all assessments imposed subsequent to
the execution and delivery of this lease by both Landlord and Tenant (including
assessments for benefits from public works or improvements, whether commenced or
completed prior to the commencement of the term hereof and whether or not to be
completed within said term), levies, license fees, permit fees, water rents and
charges, sewer rents, excises, franchises, imposts, interest, costs, penalties
and charges, general and special, ordinary and extraordinary, of whatever name,
nature and kind, and whether or not within the contemplation of the parties
hereto, which are now or may hereafter be levied, assessed, charged or imposed
upon or against this Lease, the Leased Premises, the use or occupancy thereof,
or the building, improvements or personal property thereon or which are or may
become a lien on any thereof. Notwithstanding anything hereinabove to the
contrary, "taxes" shall not include any penalties or
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interest imposed or incurred because of Landlord's dilatory payment, unless the
delay in payment is due to Tenant's breach of its obligations under this Section
15.
(b) All assessments imposed upon the Leased Premises during the final
year of the term of this Lease for public improvements which shall benefit the
Leased Premises after the expiration of this Lease shall be equitably pro rated,
so that only the portion of such assessments properly allocable to the term of
this Lease shall be included in determining Tenant's share of "taxes" in
accordance with Section 15.01 (a) above.
15.02 Tenant shall pay all taxes, other than income taxes, upon or
measured by the rent payable hereunder, whether as a sales tax, transaction
privilege excise tax, or otherwise.
15.03 Joint Assessment. If the Leased Premises are not separately
assessed, Tenant's liability shall be an equitable proportion of the real
property taxes for all of the land and improvements included with the tax parcel
assessed, such proportion to be determined by Landlord from the respective
valuations assigned in the assessor's work sheets or such other information as
may be reasonably available. Landlord's reasonable determination thereof, in
good faith, shall be conclusive.
15.04 Personal Property Taxes. Tenant shall pay prior to delinquency
all taxes assessed against and levied upon trade fixtures, furnishings,
equipment and all other personal property of Tenant contained in the Leased
Premises or elsewhere.
INSURANCE
16.01 Liability Insurance. Tenant, at its own expense, shall provide
and keep in force public liability insurance for the benefit of Landlord and
Tenant jointly against liability for bodily injury and property damage in the
amount of not less than Three Million Dollars ($3,000,000.00) in respect to
injuries to or death of more than one person in any one occurrence, in the
amount of not less than One Million Dollars ($1,000,000.00) in respect to
injuries to or death of any one person, and in the amount of not less than One
Million Dollars ($1,000,000.00) per occurrence in respect to damage to property,
such limits to be for any greater amounts as may be reasonably indicated by
circumstances from time to time existing. Tenant, upon written request by
Landlord, shall furnish Landlord with a certificate of such policy within sixty
(60) days of the commencement date of this Lease and whenever required, through
written notice, shall satisfy Landlord that such policy is in full force and
effect. Such policy shall name Landlord or other parties designated by Landlord
as additional insureds and shall be primary and non-contributing with any
insurance carried by Landlord. The policy shall further provide that it shall
not be canceled or altered without twenty (20) days prior notice to Landlord.
The limits of said insurance shall not, however, limit the liability of Tenant
hereunder. If Tenant shall fall to procure and maintain said insurance Landlord
may, but shall not be required to procure and maintain the same but at the
expense of Tenant.
16.02 Property Insurance. (a) Tenant shall maintain in full force and
effect on all of its fixtures and equipment in the Leased Premises a policy or
policies of fire and extended coverage
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insurance with standard coverage endorsement. During the term of this Lease the
proceeds from any such policy or policies of insurance shall be used for the
repair or replacement of the fixtures. Landlord will not carry insurance on
Tenant's possessions. Tenant, upon written request by Landlord, shall furnish
Landlord with a certificate of such policy within sixty (60) days of the
commencement of this Lease, and whenever required through written notice, shall
satisfy Landlord that such policy is in full force and effect.
(b) Tenant shall obtain and keep in force during the term of this Lease
a policy or policies of insurance covering loss or damage to the Leased
Premises, in the amount of the full replacement value, as agreed upon in writing
by Landlord and Tenant, thereof, as the same may exist from time to time,
against perils included within the classification of fire, extended coverage,
vandalism, malicious mischief, special extended perils (all risk) and sprinkler
leakage. Such policy shall name Landlord or other parties designated by Landlord
as additional insureds and shall be primary and noncontributing with any
insurance carried by Landlord.
(c) All policies of insurance shall provide that the insurers waive any
right of subrogation against Landlord or Tenant.
DESTRUCTION
17.01 In the event of (a) a partial destruction of the Leased Premises
or the building of which the Leased Premises are a part (hereinafter called the
"building") during the lease term which requires repairs to either the Leased
Premises or the building, or (b) the Leased Premises or the building being
declared unsafe or unfit for occupancy by any authorized public authority for
any reason other than Tenant's act, use or occupation which declaration requires
repairs to either the Leased Premises or the building, Landlord shall forthwith
make repairs, provided repairs can be made within three-hundred sixty (360) days
under the laws and regulations of authorized public authorities, but partial
destruction (including any destruction necessary in order to make repairs
required by any declaration) shall in no way annul or void this Lease. In making
repairs Landlord shall be obligated to replace only such glazing as shall have
been damaged by fire and other damaged glazing shall be replaced by Tenant. If
repairs cannot be made within three-hundred sixty (360) days, Landlord may, at
its option, make same within a reasonable time, this Lease continuing in full
force and effect. In the event that Landlord does not so elect to make repairs,
or which repairs cannot be made within three-hundred sixty (360) days, or
repairs cannot be made under current laws and regulations, this Lease may be
terminated at the option of either party after the three-hundred sixty (360) day
period. In the event of any dispute between Landlord and Tenant relative to the
provisions of this paragraph, they may each select an arbitrator, the two
arbitrators so selected shall select a third arbitrator and the three
arbitrators so selected shall hear and determine the controversy and their
decision thereon shall be final and binding on both Landlord and Tenant who
shall bear the cost of such arbitration equally between them. Landlord shall not
be required to repair any property installed in the Leased Premises by Tenant.
Tenant waives any right under applicable laws inconsistent with the terms of
this paragraph.
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ASSIGNMENT AND SUBLETTING
18.01 Landlord shall have the right to transfer and assign, in whole or
in part its rights and obligations in the building and property that are the
subject of this Lease. Tenant may assign this Lease to a related party. In the
event of any assignment or subletting, Tenant shall nevertheless at all times,
remain fully responsible and liable for the payment of the rent and for
compliance with all of its other obligations under the terms, provisions and
covenants of this Lease. Upon the occurrence of an "Event of Default" as defined
below, if all or any part or the Leased Premises are then assigned or sublet,
Landlord, in addition to any other remedies provided by this Lease or provided
by law, may at its option, collect directly from the assignee or subtenant all
rents becoming due to Tenant by reason of the assignment or sublease, and
Landlord shall have a security interest in all properties on the Leased Premises
to secure payment of such sums. Any collection directly by Landlord from the
assignee or subtenant shall not be construed to constitute a novation or a
release of Tenant from the further performance of Its obligations under this
Lease.
INSOLVENCY OF TENANT
19.01 Either (a) the appointment of a receiver to take possession of
all or substantially all of the assets of Tenant, or (b) a general assignment by
Tenant for the benefit of creditors, shall, if any such appointments,
assignments or action continues for a period of sixty (60) days, constitute a
breach of this Lease by Tenant, and Landlord may at its election with notice,
terminate this Lease and in that event be entitled to immediate possession of
the Leased Premises and damages as provided below.
BREACH BY TENANT
20.01 In the Event of a Default, if not cured by Tenant within thirty
(30) days of notice received from Landlord or if Tenant is not diligently
pursuing remedies of the Event of Default, Landlord in addition to remedies that
it may have hereunder, at law or in equity shall have the right to either
terminate this Lease or from time to time, without terminating this Lease relet
the Leased Premises or any part thereof for the account and in the name of
Tenant or otherwise, for any such term or terms and conditions as Landlord may
deem advisable with the right to make reasonable alterations and repairs to the
Leased Premises. Tenant shall pay to Landlord the reasonable costs and
reasonable expenses incurred and paid by Landlord in such reletting or in making
such reasonable alterations and repairs. Should such rentals received from time
to time from such reletting during any month be less than that agreed to be paid
during that month by Tenant hereunder, the Tenant shall pay such deficiency to
Landlord. Such deficiency shall be calculated and paid monthly.
20.02 No such reletting of the Leased Premises by Landlord shall be
construed as an election on its part to terminate this Lease unless a written
notice of such intention be given to Tenant or unless the termination thereof be
decreed by a court of competent jurisdiction. Should Landlord at any time
terminate this Lease for any breach, in addition to any other remedy it may
have, it may recover from Tenant all damages it may incur by reason of such
breach, including the cost of recovering the Leased Premises, and including (1)
all amounts that would have fallen
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<PAGE> 9
due as rent between the time of termination of this Lease and the time of
judgment, or other award, less the avails of all relettings and attornments.
ATTORNEY'S FEES
21.01 If Landlord and Tenant litigate any provision of this Lease or
the subject matter of this Lease, the unsuccessful litigant will pay to the
successful litigant all reasonable costs and reasonable expenses actually paid,
including reasonable attorneys' fees and reasonable court costs actually paid,
incurred by the successful litigant at trial and on any appeal. If, without
fault, either Landlord or Tenant is made a party to any litigation instituted by
or against the other, the other will indemnify the faultless one against all
loss, liability, and expense, including reasonable attorneys' fees and
reasonable court costs actually paid, incurred by it in connection with such
litigation.
CONDEMNATION
22.01 If, at any time during the term of this Lease, title to the
entire Leased Premises should become vested in a public or quasi-public
authority by virtue of the exercise of expropriation, appropriation,
condemnation or other power in the nature of eminent domain, or by voluntary
transfer from the owner of the Leased Premises under threat of such a taking
then this Lease shall terminate as of the time of such vesting of title, after
which neither party shall be further obligated to the other except for
occurrence antedating such taking. The same results shall follow if less than
the entire Leased Premises be thus taken, or transferred in lieu of such a
taking, but to such extent that it would be legally and commercially impossible
for Tenant to occupy the portion of the Leased Premises remaining, and
impossible for Tenant to reasonably conduct his trade or business therein.
22.02 Should there be such a partial taking or transfer in lieu
thereof, but not to such an extent as to make such continued occupancy and
operation by Tenant an impossibility, then this Lease shall continue on all of
its same terms and conditions subject only to an equitable reduction in rent
proportionate to such taking.
22.03 In the event of any such taking or transfer, whether of the
entire Leased Premises, or a portion thereof, it is expressly agreed and
understood that, with the exception of those sums awarded for the purpose of
paying Tenant's moving and business interruption expense, all sums awarded,
allowed or received in connection therewith shall belong to Landlord, and any
rights otherwise vested in Tenant are hereby assigned to Landlord, and Tenant
shall have no interest in or claim to any such sums or any portion thereof,
whether the same be for the taking of the property or for damages, or otherwise.
NOTICES
23.01 All notices, requests, demands and other communications required
or permitted hereunder excluding consents shall be in writing and shall be
deemed to have been duly given when delivered by postage pre-paid certified or
registered mail, return receipt requested (the
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<PAGE> 10
return receipt constituting prima facie evidence of the giving of such notice,
request, demand or other communication) to the following address or such other
address of which a party subsequently may give notice to all the other parties:
To: L-J Properties Inc.
3900 Steve Reynolds Blvd.
Norcross, Georgia 30093
Attention: Craig A. Ponzio
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<PAGE> 11
with copies to: Trotter Smith & Jacobs
400 Colony Square
Suite 2200
1201 Peachtree Street, NE
Atlanta, Georgia 30361
Attention: Philip H. Moise
and
Craig A. Ponzio
320 Dashing Wave Lane
Alpharetta, Georgia 30202
To: Larson-Juhl Inc.
3900 Steve Reynolds Blvd.
Norcross, Georgia 30093
Attention: Craig A. Ponzio
with copies to: Trotter Smith & Jacobs
400 Colony Square
Suite 2200
1201 Peachtree Street, NE
Atlanta, Georgia 30361
Attention: Philip H. Moise
WAIVER
24.01 The waiver by Landlord of any breach of any term, covenant, or
condition herein contained shall not be deemed to be a waiver of such term,
covenant, or condition or any subsequent breach of the same or any other term,
covenant, or condition herein contained. The subsequent acceptance of rent
hereunder by Landlord shall not be deemed to be a waiver of any preceding breach
by Tenant of any term, covenant or condition of this Lease, other than the
failure of Tenant to pay the particular rental so accepted, regardless of
Landlord's knowledge of such preceding breach at the time of acceptance of such
rent.
EFFECT OF HOLDING OVER
25.01 If Tenant should remain in possession of the Leased Premises
after the expiration of the lease term and without executing a new lease, then
such holding over shall be construed as a tenancy from month to month, subject
to all the conditions, provisions, and obligations of this Lease insofar as the
same are applicable to a month to month tenancy.
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<PAGE> 12
SUBORDINATION
26.01 This Lease, at Landlord's option, shall be subordinate to any
ground lease, first priority mortgage, first priority deed of trust, or first
priority security deed now or hereafter placed upon the real property of which
the Leased Premises are a part and to any and all advances made on the security
thereof and to all renewals, modifications, consolidations, replacements and
extensions thereof.
26.02 Tenant agrees to execute any documents required to effectuate
such subordination or to make this Lease prior to the lien of any such ground
lease, mortgage, deed of trust, or security deed, as the case may be. If
requested to do so, Tenant agrees to attorn to any person or other entity that
acquires title to the real property encompassing the Leased Premises, whether
through judicial foreclosure, sale under power, or otherwise, and to any
assignee of such person or other entity.
ESTOPPEL CERTIFICATE
27.01 Upon thirty (30) days notice from Landlord to Tenant, Tenant
shall deliver a certificate dated as of the first day of the calendar month in
which such notice is received, executed by an appropriate officer, partner or
individual, in the form as Landlord may require and stating to the best of its
actual knowledge but not limited to the following: (i) the commencement date of
this Lease; (ii) the space occupied by Tenant hereunder; (iii) the expiration
date hereof; (iv) a description of any renewal or expansion options; (vi) the
amount of rental currently and actually paid by Tenant under this Lease; (v) the
nature of any default or claimed default hereunder by Landlord and (vii) that
Tenant is not in default hereunder nor has any event occurred which with the
passage of time or the giving of notice would become a default by Tenant
hereunder.
MORTGAGE PROTECTION
28.01 In the event of any default on the part of Landlord, Tenant will
give notice by registered or certified mail to any beneficiary of a deed or
trust or holder of a security deed or mortgage covering the Leased Premises
whose address shall have been furnished it, and shall offer such beneficiary or
holder a reasonable opportunity to cure the default, including time to obtain
possession of the Leased Premises by power of sale or a judicial foreclosure, if
such should prove necessary to effect a cure.
OPTION TO RE-LEASE PREMISES
29.01 Provided Tenant is not in default of its obligations under this
lease, Tenant shall have two, thirty-six (36) month options to renew this Lease
in "as is" condition on the same terms and conditions herein except the Monthly
Base Rent shall be adjusted to a market rate or a rate agreed upon by Landlord
and Tenant.
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<PAGE> 13
MISCELLANEOUS PROVISIONS
A. Whenever the singular number is used in this Lease and when required
by the context, the same shall include the plural, and the masculine gender
shall include the feminine and neuter genders, and the word "persons" shall
include corporations, firm or association. If there be more than one tenant, the
obligations imposed upon Tenant under this Lease shall be joint and several.
B. The headings or titles to paragraphs of this Lease are not a part of
this Lease and shall have no effect upon the construction or interpretation of
any part of this Lease.
C. This instrument contains all of the agreements and conditions made
between the parties to this Lease and may not be modified orally or in any other
manner than by agreement in writing signed by all parties to this Lease.
D. Except as otherwise expressly stated, each payment required to be
made by Tenant shall be in addition to and not in substitution for other
payments to be made by Tenant.
E. Subject to paragraph 18, the terms and provisions of this Lease
shall be binding upon and inure to the benefit of the heirs, executors,
administrators, successors, and assigns of Landlord and Tenant.
F. All covenants and agreements to be performed by Tenant under any of
the terms of this Lease shall be performed by Tenant at Tenant's sole cost and
expense and without any abatement of rent.
G. Where the consent of a party is required, such consent will not be
reasonably withheld.
H. This Lease shall create the relationship of Landlord and Tenant
between Landlord and Tenant; no estate shall pass out of Landlord; Tenant has
only a usufruct, not subject to levy and/or sale and not assignable by Tenant
except as provided in paragraph 18.01 hereof.
I. Tenant acknowledges and agrees that Landlord shall not provide
guards or other security protection for the Leased Premises and that any and all
security protection shall be the sole responsibility of Tenant.
J. This Lease shall be governed by Georgia Law.
K. Tenant shall not record this Lease or a memorandum thereof without
the written consent of Landlord. Upon the request of Landlord, Tenant shall join
in the execution of a memorandum or so-called "short form" of this Lease for the
purpose of recordation. Said memorandum or short form of this Lease shall
describe the parties, the Leased Premises and the lease term, and shall
incorporate this Lease by reference.
L. Landlord's liability for performance of its obligations under the
terms of this Lease shall be limited to its interest in the Leased Premises.
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<PAGE> 14
IN WITNESS WHEREOF, the parties hereto who are individuals have set
their hands and seals, and the parties who are corporations have caused this
instrument to be duly executed by its proper officers and its corporate seal to
be affixed, as of the day and year first above written.
LANDLORD
L-J Properties Inc.
--------------------------------------
By: /s/ Patty G. Kauppi
-----------------------------------
Name: Patty G. Kauppi
Its: Assistant Secretary
TENANT
Larson-Juhl Inc.
--------------------------------------
By: /s/ Steve M. Scheppmann
-----------------------------------
Name: Steve M. Scheppmann
Its: V.P. - Finance
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<PAGE> 15
EXHIBIT "A"
Legal Description (Boundary)
All that tract or parcel of land lying and being in Land Lot 202 of the 6th
District of Gwinnett County, Georgia and being more particularly described as
follows:
BEGINNING at the point of intersection of the easterly right-of-way line of
Steve Reynolds Boulevard, a variable width right-of-way formerly know as
Franklin Road, with the southerly mitered right-of-way line of Pavilion Place,
an 80-foot right-of-way, thence along said right-of-way miter of Pavilion Place
north 79 degrees 03 minutes 23 seconds east a distance of 30.10 feet to an iron
pin found; thence continuing along said right-of-way south 55 degrees 56 minutes
37 seconds east a distance of 145.88 feet to the point of curvature of a curve
to the left having a radius of 612.96 feet, a chord bearing of south 62 degrees
46 minutes 51 seconds east and a chord distance of 145.94 feet; thence
continuing along said right-of-way and curve an arc distance of 146.29 feet to a
point; thence continuing along said right-of-way south 69 degrees 37 minutes 05
seconds east a distance of 115.80 feet to the point of curvature of a curve to
the right having a radius of 25.00 feet, and a chord bearing of south 49 degrees
33 minutes 30 seconds east and a chord distance of 17.15 feet; thence continuing
along said right-of-way and curve an arc distance of 17.51 feet to the point of
curvature of a curve to the left having a radius of 60.00 feet, a chord bearing
of south 84 degrees 23 minutes 05 seconds east and a chord distance of 98.16
feet; thence continuing along said right-of-way and curve and arc distance of
114.95 feet to an iron pin found; thence departing said right-of-way south 49
degrees 16 minutes 13 seconds east a distance of 19.94 feet to an iron pin
found; thence south 59 degrees 55 minutes 01 seconds east a distance of 71.94
feet to an iron pin found; thence south 11 degrees 20 minutes 22 seconds east a
distance of 104.60 feet to an iron pin found; thence south 34 degrees 00 minutes
47 seconds west a distance of 173.06 feet to an iron pin set; thence south 55
degrees 59 minutes 13 seconds east a distance of 257.65 feet to an iron pin set
on the land lot line common to Land Lots 183 and 202, aforesaid county and
district; thence along said land lot line south 59 degrees 38 minutes 47 seconds
west a distance of 530.75 feet to an iron pin found; thence continuing along
said land lot line south 59 degrees 35 minutes 15 seconds west a distance of
263.31 feet to a point in the centerline of Bromolow Creek (hereinafter referred
to as "Point A"); thence departing said land lot line and thence in a generally
northwesterly direction along the centerline of Bromolow Creek, and following
the meanderings thereof, 659.24 feet, more or less, to a point on the easterly
right-of-way line of Steve Reynolds Boulevard (hereinafter referred to as "Point
B") (the aforesaid Point A and Point B being connected by traverse lines
commencing at Point A and terminating at Point B as follows: north 37 degrees 03
minutes 02 seconds west a distance of 21.68 feet; north 31 degrees 18 minutes 01
seconds west a distance of 149.78 feet; north 32 degrees 51 minutes 51 seconds
west a distance of 70.59 feet; north 34 degrees 13 minutes 53 seconds west a
distance of 77.11 feet; north 28 degrees 08 minutes 06 seconds west a distance
of 43.89 feet; north 39 degrees 59 minutes 51 seconds west a distance of 48.51
feet; north 25 degrees 25 minutes 13 seconds west a distance of 31.68 feet;
north 32 degrees 34 minutes 59 seconds west a distance of 45-09 feet; north 25
degrees 18 minutes 03 seconds west a distance of 54.12 feet; north 40 degrees 31
minutes 41 seconds west a distance of 46.85 feet; and north 56 degrees 21
minutes 28
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seconds west a distance of 69.94 feet to said Point B; thence along said
easterly right-of-way line of Steve Reynolds Boulevard north 34 degrees 03
minutes 23 seconds east a distance of 616.09 feet to a point being the POINT OF
BEGINNING.
Said Property being shown as Tracts 1 and 2, containing a total of 13.946 acres
of land on that certain survey for L-J Properties Inc., Weeks Super Partnership,
Ltd., A.R. Weeks & Associates, Inc., The First National Bank of Atlanta and
Ticor Title Insurance Company of California, dated September 24, 1990, prepared
by Pinion & McGaughey Land Surveyors, Inc. and bearing the seal and
certification of George H. Pinion, G.R.L.S. No. 1606, said property being all of
Lot 4, Block A, of Unit III of Gwinnett Pavilion Subdivision; a portion of Lot
3, Block A of Unit III of Gwinnett Pavilion Subdivision and a portion of lot 1,
Block D of Unit 1 of Gwinnett Pavilion Subdivision as presently platted and
recorded in Plat Book 46, page 224 and Plat Book 51, page 4 of Gwinnett County,
Georgia Records.
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<PAGE> 1
EXHIBIT 10.3
STATE OF GEORGIA
GWINNETT COUNTY
AMENDMENT NO. 1
THIS AMENDMENT NO. 1 to the Lease Agreement (the "Lease") dated the 8th
day of August, 1997, by and between L-J Properties, Inc. ("Landlord") and
Larson-Juhl Inc. ("Tenant"), made this 26th day of October 1993.
WITNESSETH
Whereas, Landlord leases to Tenant, and Tenant leases from Landlord
"Leased Premises" (as defined in the Lease);
Whereas, Tenant desires to lease from Landlord that certain tract or
parcel of land adjacent to the Leased Premises, as shown in Exhibit "A" (the
"Adjacent Property"); whereas, the Landlord desires to lease to Tenant that
certain tract or parcel of land adjacent to the Leased Premises;
Now, therefore, for and in consideration of the premises, the mutual
covenants and agreements herein contained and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Landlord and Tenant hereby covenant and agree as follows:
1. Landlord and Tenant reaffirm that the Lease Agreement dated the 8th
day of August, 1991 by and between Landlord and Tenant is in full
force and effect.
2. Landlord hereby leases to Tenant, and Tenant hereby leases from
Landlord the Adjacent Property.
3. Term - to have and hold said Adjacent Property for a term coterminus
with the Lease Agreement (Section 2.01 and Section 29.01),
commencing October 26, 1993.
4. Rental - As rental for the Adjacent Property, Tenant agrees to pay
L-J Properties, Inc., for the account of Landlord, the sum of
Thirty-six Thousand Four Hundred Eighty Dollars ($36,480) per year,
payable in monthly installments ("Monthly Base Rent - Adjacent
Property") each in the amount of Three Thousand Forty Dollars
($3,040) on or before the first day of each calendar month beginning
on November 1, 1993 and thereafter for the remainder of the term,
together with any other additional rental as hereinafter
<PAGE> 2
set forth. Monthly Base Rent - Adjacent Property hereunder shall be
adjusted annually, after written notice from the Landlord. The
annual Monthly Base Rent - Adjacent Property adjustment shall be the
greater of four and one-half percent (4.5%) or the proportional
increase, if any, in the United States Consumer Price Index (all
items Atlanta, Georgia area, of the U.S. Bureau of Labor
Statistics), from the first month of the lease year to the last
month of the lease year previous to the lese year for which the
Monthly Base Rent - Adjacent Property adjustment is computed. Tenant
shall pay interest at a rate of twelve percent (12%) per annum on
all payments more than 10 days past due. If the Lease shall end on
any date, other than the last day of a calendar month, rent for such
month shall be prorated.
IN WITNESS WHEREOF, the parties hereto who are individuals have set their hands
and seals, and the parties who are corporations have caused this instrument to
be duly executed by its proper officers and its corporate seal to be affixed, as
of the day and year first above written.
Landlord
L-J PROPERTIES INC.
By: /s/ Patty G. Kauppi
---------------------------------------
Name: Patty G. Kauppi
Its: Assistant Secretary
Tenant
LARSON-JUHL INC.
By: /s/ Steve M. Scheppmann, VP-Finance
----------------------------------------
Name: Stephen M. Scheppmann
Its: VP - Finance
2
<PAGE> 3
EXHIBIT "A"
(ADJACENT PROPERTY)
LEGAL DESCRIPTION
ALL THAT TRACT or parcel of land lying and being in Land Lot 202 and 2203 of the
Sixth District of Gwinnett County, Georgia, and being more fully described as
follows:
To find the true point of beginning, begin at the point of intersection of the
easterly right of way of Steve Reynolds Boulevard (formerly known as Franklin
Road), a right of way of varying widths beings determined by measuring 50 feet
from the centerline of the existing pavement at this point, with the southerly
mitered right of way of Pavilion Place, an 80 foot right of way, thence along
said right of way miter of Pavilion Place north 79 degrees 03 minutes 23 seconds
east a distance of 30.10 feet to an iron pin found, thence continuing along said
right of way south 55 degrees 56 minutes 37 seconds east a distance of 245.88
feet to a point, thence along a curve to the left, having a radius of 612.96
feet, an arc distance of 146.29 feet to a point, said arc being subtended by a
chord having a chord bearing and distance of south 62 degrees 46 minutes 51
seconds east, 145.94 feet; thence continuing along said right of way south 69
degrees 37 minutes 05 seconds east a distance of 115.80 feet to a point, thence
continuing along said right of way along a curve to the right, making a radius
of 25.00 feet, an arc distance of 17.51 feet to a point, said arc being
subtended by a chord having a chord bearing and distance of south 49 degrees 33
minutes 30 seconds east, 17.15 feet; thence continuing along said right of way
along a curve to the left, having a radius of 60.00 feet, an arc distance of
114.95 feet to an iron pin set and being the true point of beginning, said arc
being subtended by a chord having a chord bearing and distance of south 84
degrees 23 minutes, 05 seconds east 98.16 feet;
Thence from the true point of beginning continuing along the right of way of
Pavilion Place along a curve to the left, having a radius of 60.00 feet, an arc
distance of 63.33 feet to a 1/2" rebar found, said arc being subtended by a
chord having a chord bearing and distance of north 10 degrees 29 minutes 42
seconds east, 60.43 feet; thence leaving said right of way south 86 degrees 11
minutes 36 seconds east a distance of 141.74 feet to an iron pin set; thence
south 31 degrees 14 minutes 13 seconds west a distance 65.98 feet to an iron pin
set; thence south 58 degrees 45 minutes 47 seconds east a distance of 386.99
feet to an iron pin set; thence south 31 degrees 19 minutes 08 seconds west a
distance of 172.49 feet a 1 1/2" hollow top pipe found on the land lot line
common to Land Lots 183 and 202; thence along said land lot line south 59
degrees 38 minutes 47 seconds west a distance of 167.75 feet to an iron pin set;
thence leaving said land lot line and running north 55 degrees 59 minutes 13
seconds west a distance of 257.65 feet to a 1//3" rebar found thence north 34
degrees 00 minutes 47 seconds east a distance of 173.06 feet to a 1/2" rebar
found; thence north 11 degrees 20 minutes 22 seconds west a distance of 104.60
feet to a 1/2" rebar found; thence north 59 degrees 55 minutes 01 seconds west a
distance of 71.94 feet to a 1/2" rebar found; thence north 49 degrees 16 minutes
13 seconds west a distance of 19.94 feet to an iron pin set, and being the true
point of
3
<PAGE> 4
beginning. Said property being Lot 3, Block "A", Unit 111 of Pavilion Place and
containing 2.643 acres.
4
<PAGE> 1
EXHIBIT 10.4
PROMISSORY NOTE
$___________ _________, 1998
Norcross, Georgia
FOR VALUE RECEIVED, LARSON-JUHL INC., a Georgia corporation (the
"Company"), promises to pay to the order of ____________________ ("Holder"), at
3900 Steve Reynolds Boulevard, Norcross, Georgia 30093, or at such other place
as Holder may designate in writing, the principal sum
____________________________________________ ($___________) in full on demand.
Unpaid principal hereunder shall bear interest at 11.0% per annum (the "Interest
Rate"). Interest shall accrue from the date hereof and shall be paid quarterly
in arrears on the 1st day of each August, November, February and May of each
year until the principal balance hereof shall have been paid in full. Interest
shall be computed on the outstanding principal amount hereunder on the basis of
the actual number of days elapsed over a year of 365 days.
Whenever any payment hereunder shall become due, or otherwise would
occur, on a day that is not a business day, such payment may be made on the next
succeeding business day (and such extension of time shall in such case be
included in the computation of interest). Payments made pursuant to the terms
hereof shall first be credited to interest then accrued and the remainder shall
be credited to outstanding principal. Prepayment of principal and interest in
whole or in part may be made at any time and from time to time without penalty.
All past due principal and, to the extent provided by applicable law,
past due interest, under this Note shall bear interest at the Interest Rate plus
3% per annum until all past due amounts of principal and interest shall have
been paid in full; provided that in no event shall the applicable interest rate
exceed the maximum rate of interest allowed by applicable law.
If any of the following events shall occur and be continuing for any
reason whatsoever, then this Note shall immediately become due and payable
without any further notice or demand of any kind whatsoever, all of which are
hereby expressly waived: the Company defaults in the payment of principal or
interest on this Note when and as the same shall become due and payable and such
default continues for five days after the Company receives notice from Holder of
such default; or the Company makes an assignment for the benefit of creditors or
admits in writing its inability to pay its debts generally as they become due;
or an order, judgment or decree is entered adjudicating the Company bankrupt or
insolvent; or the Company petitions or applies to any tribunal for the
appointment of a trustee or receiver of the Company, or of any substantial part
of the assets of the Company, or commences any proceedings relating to the
Company under any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution or liquidation law of any jurisdiction,
whether now or hereafter in effect; or any such petition or application is
filed, or any such proceedings are commenced, against the Company, and the
Company by any act indicates its approval thereof, consent thereto, or
acquiescence therein, or an order is entered appointing any such trustee or
receiver, or approving the petition in any such proceedings, and such order
remains unstayed and in effect for more than ninety days.
<PAGE> 2
The Company (i) promises to pay all expenses, including reasonable
attorneys' fees, actually incurred in the enforcement or collection of this
Note; (ii) agrees that no delay, failure to act or failure to exercise any right
or remedy on the part of Holder of this Note shall in any way affect or impair
the obligations of the Company; and (iii) waives presentment, protest and notice
of dishonor, and further waives its rights to all other notices or demands that
might otherwise be required by law.
Holder is acquiring this Note for his own account and not for
distribution.
The provisions of this Note are to be governed by and construed
according to the laws of the State of Georgia.
IN WITNESS WHEREOF, the Company has executed this Note under seal on
the day and year first written above.
LARSON-JUHL INC.
By:
----------------------------------------
Craig A. Ponzio
Chairman and Chief Executive Officer
<PAGE> 1
EXHIBIT 12.1
ALBECCA INC.
Ratio of Earnings to Fixed Charges
<TABLE>
<CAPTION>
Fiscal Year
----------------------------
(in thousands)
1994 1995 1996 1997 1998
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Earnings
Operating Income 15,534 22,471 30,229 35,601 31,961
Restructuring Charges -- -- -- -- 2,262
Accounts Receivable
Written Off -- -- -- -- 508
Other Non-Recurring
Costs -- -- -- -- 3,460
====== ====== ====== ====== ======
Total Earnings (A) 15,534 22,471 30,229 35,601 38,199
Interest Expense (B) 1,034 4,008 6,846 9,722 11,949
====== ====== ====== ====== ======
Ratio of Earnings to Fixed
Charges (A/B) 15.0 5.6 4.4 3.7 3.2
</TABLE>
<PAGE> 1
EXHIBIT 21.1
<TABLE>
<CAPTION>
SUBSIDIARY JURISDICTION
- --------------------------------------------------------------------------
<S> <C>
Larson-Juhl US LLC Georgia
- --------------------------------------------------------------------------
Larson-Juhl International, L.L.C. Georgia
- --------------------------------------------------------------------------
Art Materials, Frames and Moulding Company, Inc. Alabama
- --------------------------------------------------------------------------
Robert F. de Castro, Inc. Louisiana
- --------------------------------------------------------------------------
Glass Corporation of America, Inc. Louisiana
- --------------------------------------------------------------------------
Art West, Inc. Arizona
- --------------------------------------------------------------------------
Eastern Moulding, Inc. Maryland
- --------------------------------------------------------------------------
Eastern Mouldings, Inc. New Jersey
- --------------------------------------------------------------------------
LJ Holdings, L.L.C. Georgia
- --------------------------------------------------------------------------
Larson-Juhl Canada Ltd. Canada
- --------------------------------------------------------------------------
Multico Manufacturing, Inc. Canada
- --------------------------------------------------------------------------
Larson-Juhl Wels Gesellschaft mbH Austria
- --------------------------------------------------------------------------
Nottling Larson-Juhl GmbH Austria
- --------------------------------------------------------------------------
Larson-Juhl Germany GmbH Germany
- --------------------------------------------------------------------------
Larson-Juhl Rahmen GmbH & Co. Handels-KG Germany
- --------------------------------------------------------------------------
Larson-Juhl Rahmen GmbH Germany
- --------------------------------------------------------------------------
Mersch Design GmbH Germany
- --------------------------------------------------------------------------
Larson-Juhl France, L.L.C. Georgia
- --------------------------------------------------------------------------
Larson-Juhl SA France
- --------------------------------------------------------------------------
SM S.A.R.L. France
- --------------------------------------------------------------------------
SAB SA France
- --------------------------------------------------------------------------
Larson-Juhl France S.A.R.L. France
- --------------------------------------------------------------------------
Senelar Larson-Juhl SA France
- --------------------------------------------------------------------------
Frimpex SA France
- --------------------------------------------------------------------------
ARCAD SA France
- --------------------------------------------------------------------------
Mersch France SA France
- --------------------------------------------------------------------------
Brio SA France
- --------------------------------------------------------------------------
Larson-Juhl Hellas Picture Frames S.A. Greece
- --------------------------------------------------------------------------
LAC-ART Larson-Juhl Single Partner L.L.C. Greece
- --------------------------------------------------------------------------
Larson-Juhl Netherlands, L.L.C. Georgia
- --------------------------------------------------------------------------
Larson-Juhl Netherlands B.V. Netherlands
- --------------------------------------------------------------------------
Dutch Frame Company B.V. Netherlands
- --------------------------------------------------------------------------
Styling Design Barneveld B.V. Netherlands
- --------------------------------------------------------------------------
Lever's Lijstenfabriek B.V. Netherlands
- --------------------------------------------------------------------------
Lever Onroerend Goed Opperduit B.V. Netherlands
- --------------------------------------------------------------------------
Larson-Juhl Training and Equipment B.V. Netherlands
- --------------------------------------------------------------------------
ERIJKO Beheer en Exploitatiernaatschappij B.V. Netherlands
- --------------------------------------------------------------------------
Barth Lijsten Beheer B.V. Netherlands
- --------------------------------------------------------------------------
ERIJKO Lijsten B.V. Netherlands
- --------------------------------------------------------------------------
Barth Lijsten Boxtel B.V. Netherlands
- --------------------------------------------------------------------------
Barth Lijsten Nederland B.V. Netherlands
- --------------------------------------------------------------------------
Larson-Juhl Seoul, L.L.C. Georgia
- --------------------------------------------------------------------------
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
SUBSIDIARY JURISDICTION
- -------------------------------------------------------------------------
<S> <C>
Larson-Juhl Korea, L.L.C. Georgia
- -------------------------------------------------------------------------
Larson-Juhl Korea Limited Korea
- -------------------------------------------------------------------------
Lira, A.S. Czech Republic
- -------------------------------------------------------------------------
The Moulding Group Limited U.K.
- -------------------------------------------------------------------------
Northampton Acquisition Limited ` U.K.
- -------------------------------------------------------------------------
Magnolia Group Limited U.K.
- -------------------------------------------------------------------------
ARQ-DM Limited U.K.
- -------------------------------------------------------------------------
Arquati U.K. Limited U.K.
- -------------------------------------------------------------------------
Larson-Juhl (UK) Limited U.K.
- -------------------------------------------------------------------------
Larson-Juhl South Africa L.L.C. Georgia
- -------------------------------------------------------------------------
IMALC (Proprietary) Ltd. South Africa
- -------------------------------------------------------------------------
Atlanta Mouldings Company (Proprietary) Ltd. South Africa
- -------------------------------------------------------------------------
Supreme Larson-Juhl (Proprietary) Ltd. South Africa
- -------------------------------------------------------------------------
Larson-Juhl Sweden A.B. Sweden
- -------------------------------------------------------------------------
Guldlist Larson-Juhl AB Sweden
- -------------------------------------------------------------------------
AB Edenholms Guldlistfabrik A.B. Sweden
- -------------------------------------------------------------------------
G. Lundgrens Eftr A.B. Sweden
- -------------------------------------------------------------------------
Tranaslist, A.B. Sweden
- -------------------------------------------------------------------------
Heinonsalo Larson-Juhl Oy Finland
- -------------------------------------------------------------------------
Dekotukku Oy Finland
- -------------------------------------------------------------------------
Larson-Juhl Russia Russia
- -------------------------------------------------------------------------
Larson-Juhl Baltic Latvia
- -------------------------------------------------------------------------
Halvorsens Larson-Juhl, A.S. Norway
- -------------------------------------------------------------------------
Larson-Juhl Nippon Corporation Japan
- -------------------------------------------------------------------------
Larson-Juhl Italia s.r.l. Italy
- -------------------------------------------------------------------------
Arcobalegno s.r.l. Italy
- -------------------------------------------------------------------------
Larson-Juhl Australia, L.L.C. Georgia
- -------------------------------------------------------------------------
Larson-Juhl Australia Pty. Ltd. Australia
- -------------------------------------------------------------------------
Larson-Juhl (NZ) Limited New Zealand
- -------------------------------------------------------------------------
</TABLE>
- 2 -
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
(and to all references to our firm) included in or made part of this
Registration Statement.
/s/ ARTHUR ANDERSEN LLP
- -----------------------------
Atlanta, Georgia
November 18, 1998
<PAGE> 1
EXHIBIT 23.2
November 18, 1998
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting a part of this
Registration Statement on Form S-4 of our report dated October 6, 1998 on the
financial statements of Larson-Juhl Netherlands B.V. for the year September 1,
1997 up to and including August 30, 1998 as well as our reports on the
financial statements of Larson-Juhl Netherlands B.V. for the fiscal years 1996
(for the period August 28, 1995 up to and including August 25, 1996) and 1997
(for the period August 26, 1996 up to and including August 31, 1997).
/s/ BDO CampsObers
- --------------------------------
BDO CampsObers
Registeraccountants
M. Van Roekel RA
<PAGE> 1
EXHIBIT 25.1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM T-1
--------
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
Check if an Application to Determine Eligibility
of a Trustee Pursuant to Section 305(b)(2)
STATE STREET BANK AND TRUST COMPANY
(Exact name of trustee as specified in its charter)
Massachusetts 04-1867445
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Identification No.)
225 Franklin Street, Boston, Massachusetts 02110
(Address of principal executive offices) (Zip Code)
Maureen Scannell Bateman, Esq. Executive Vice President and General Counsel
225 Franklin Street, Boston, Massachusetts 02110
(617) 654-3253
(Name, address and telephone number of agent for service)
ALBECCA INC.
(Exact name of obligor as specified in its charter)
GEORGIA 39-1389732
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3900 STEVE REYNOLDS BOULEVARD, NORCROSS, GEORGIA 30093
(Address of principal executive offices) (Zip Code)
10 3/4% SENIOR SUBORDINATED NOTES DUE 2008
(Title of indenture securities)
<PAGE> 2
GENERAL
ITEM 1. GENERAL INFORMATION.
FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISORY AUTHORITY TO
WHICH IT IS SUBJECT.
Department of Banking and Insurance of The Commonwealth of
Massachusetts, 100 Cambridge Street, Boston, Massachusetts.
Board of Governors of the Federal Reserve System, Washington,
D.C., Federal Deposit Insurance Corporation, Washington, D.C.
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
The obligor is not an affiliate of the trustee or of its
parent, State Street Corporation.
(See note on page 2.)
ITEM 3. THROUGH ITEM 15. NOT APPLICABLE.
ITEM 16. LIST OF EXHIBITS.
LIST BELOW ALL EXHIBITS FILED AS PART OF THIS STATEMENT OF ELIGIBILITY.
1. A COPY OF THE ARTICLES OF ASSOCIATION OF THE TRUSTEE AS NOW IN
EFFECT.
A copy of the Articles of Association of the trustee, as now
in effect, is on file with the Securities and Exchange
Commission as Exhibit 1 to Amendment No. 1 to the Statement of
Eligibility and Qualification of Trustee (Form T-1) filed with
the Registration Statement of Morse Shoe, Inc. (File No.
22-17940) and is incorporated herein by reference thereto.
2. A COPY OF THE CERTIFICATE OF AUTHORITY OF THE TRUSTEE TO COMMENCE
BUSINESS, IF NOT CONTAINED IN THE ARTICLES OF ASSOCIATION.
A copy of a Statement from the Commissioner of Banks of
Massachusetts that no certificate of authority for the trustee
to commence business was necessary or issued is on file with
the Securities and Exchange Commission as Exhibit 2 to
Amendment No. 1 to the Statement of Eligibility and
Qualification of Trustee (Form T-1) filed with the
Registration Statement of Morse Shoe, Inc. (File No. 22-17940)
and is incorporated herein by reference thereto.
3. A COPY OF THE AUTHORIZATION OF THE TRUSTEE TO EXERCISE CORPORATE
TRUST POWERS, IF SUCH AUTHORIZATION IS NOT CONTAINED IN THE DOCUMENTS
SPECIFIED IN PARAGRAPH (1) OR (2), ABOVE.
A copy of the authorization of the trustee to exercise
corporate trust powers is on file with the Securities and
Exchange Commission as Exhibit 3 to Amendment No. 1 to the
Statement of Eligibility and Qualification of Trustee (Form
T-1) filed with the Registration Statement of Morse Shoe, Inc.
(File No. 22-17940) and is incorporated herein by reference
thereto.
4. A COPY OF THE EXISTING BY-LAWS OF THE TRUSTEE, OR INSTRUMENTS
CORRESPONDING THERETO.
A copy of the by-laws of the trustee, as now in effect, is on
file with the Securities and Exchange Commission as Exhibit 4
to the Statement of Eligibility and Qualification of Trustee
(Form T-1) filed with the Registration Statement of Eastern
Edison Company (File No. 33-37823) and is incorporated herein
by reference thereto.
2
<PAGE> 3
5. A COPY OF EACH INDENTURE REFERRED TO IN ITEM 4. IF THE OBLIGOR IS IN
DEFAULT.
Not applicable.
6. THE CONSENTS OF UNITED STATES INSTITUTIONAL TRUSTEES REQUIRED BY
SECTION 321(B) OF THE ACT.
The consent of the trustee required by Section 321(b) of the
Act is annexed hereto as Exhibit 6 and made a part hereof.
7. A COPY OF THE LATEST REPORT OF CONDITION OF THE TRUSTEE PUBLISHED
PURSUANT TO LAW OR THE REQUIREMENTS OF ITS SUPERVISING OR EXAMINING
AUTHORITY.
A copy of the latest report of condition of the trustee
published pursuant to law or the requirements of its
supervising or examining authority is annexed hereto as
Exhibit 7 and made a part hereof.
NOTES
In answering any item of this Statement of Eligibility which relates to
matters peculiarly within the knowledge of the obligor or any underwriter for
the obligor, the trustee has relied upon information furnished to it by the
obligor and the underwriters, and the trustee disclaims responsibility for the
accuracy or completeness of such information.
The answer furnished to Item 2. of this statement will be amended, if
necessary, to reflect any facts which differ from those stated and which would
have been required to be stated if known at the date hereof.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, State Street Bank and Trust Company, a corporation
organized and existing under the laws of The Commonwealth of Massachusetts, has
duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of Hartford and the
State of Connecticut, on the 12th day of November, 1998.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Elizabeth C. Hammer
---------------------------------
ELIZABETH C. HAMMER
VICE PRESIDENT
3
<PAGE> 4
EXHIBIT 6
CONSENT OF THE TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture
Act of 1939, as amended, in connection with the proposed issuance by ALBECCA
INC.. of its 10 3/4% SENIOR NOTES DUE 2008, we hereby consent that reports of
examination by Federal, State, Territorial or District authorities may be
furnished by such authorities to the Securities and Exchange Commission upon
request therefor.
STATE STREET BANK AND TRUST COMPANY
By:/s/ Elizabeth C. Hammer
-------------------------------------
Elizabeth C. Hammer
Vice President
DATED: NOVEMBER 12, 1998
4
<PAGE> 5
EXHIBIT 7
Consolidated Report of Condition of State Street Bank and Trust Company,
Massachusetts and foreign and domestic subsidiaries, a state banking institution
organized and operating under the banking laws of this commonwealth and a member
of the Federal Reserve System, at the close of business June 30, 1998, published
in accordance with a call made by the Federal Reserve Bank of this District
pursuant to the provisions of the Federal Reserve Act and in accordance with a
call made by the Commissioner of Banks under General Laws, Chapter 172, Section
22(a).
<TABLE>
<CAPTION>
Thousands of
ASSETS Dollars
<S> <C> <C> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin ....................$ 1,553,703
Interest-bearing balances.............................................. 12,440,716
Securities ..................................................................... 9,436,138
Federal funds sold and securities purchased
under agreements to resell in domestic offices
of the bank and its Edge subsidiary ................................... 8,785,353
Loans and lease financing receivables:
Loans and leases, net of unearned income ............ 6,633,608
Allowance for loan and lease losses ................. 92,999
Allocated transfer risk reserve...................... 0
Loans and leases, net of unearned income and allowances ............... 6,540,609
Assets held in trading accounts................................................. 1,267,679
Premises and fixed assets....................................................... 491,928
Other real estate owned......................................................... 100
Investments in unconsolidated subsidiaries...................................... 1,278
Customers' liability to this bank on acceptances outstanding ................... 68,312
Intangible assets............................................................... 231,294
Other assets.................................................................... 1,667,282
----------
Total assets....................................................................$42,484,392
===========
LIABILITIES
Deposits:
In domestic offices ...................................................$12,553,371
Noninterest-bearing ........................ 10,204,405
Interest-bearing ........................... 2,348,966
In foreign offices and Edge subsidiary ................................ 16,961,571
Noninterest-bearing ........................ 154,792
Interest-bearing ........................... 16,806,779
Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of
the bank and of its Edge subsidiary ................................... 8,182,794
Demand notes issued to the U.S. Treasury and Trading Liabilities .............. 0
Trading liabilities............................................................. 883,096
Other borrowed money ........................................................... 361,141
Subordinated notes and debentures............................................... 0
Bank's liability on acceptances executed and outstanding ....................... 68,289
Other liabilities............................................................... 1,017,284
Total liabilities............................................................... 40,027,546
----------
EQUITY CAPITAL
Perpetual preferred stock and related surplus................................... 0
Common stock.................................................................... 29,931
Surplus......................................................................... 455,288
Undivided profits and capital reserves/Net unrealized holding gains (losses).... 1,964,924
Net unrealized holding gains (losses) on available-for-sale securities.......... 15,557
Cumulative foreign currency translation adjustments ............................ (8,854)
Total equity capital............................................................ 2,456,846
----------
Total liabilities and equity capital............................................$42,484,392
===========
</TABLE>
5
<PAGE> 6
I, Rex S. Schuette, Senior Vice President and Comptroller of the above named
bank do hereby declare that this Report of Condition has been prepared in
conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.
Rex S. Schuette
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
David A. Spina
Marshall N. Carter
Truman S. Casner
6
3
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF ALBECCA INC. FOR THE YEAR ENDED AUGUST 30, 1998 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-30-1998
<PERIOD-END> AUG-30-1998
<CASH> 54,884
<SECURITIES> 0
<RECEIVABLES> 56,644
<ALLOWANCES> 5,859
<INVENTORY> 75,819
<CURRENT-ASSETS> 188,512
<PP&E> 82,910
<DEPRECIATION> 21,152
<TOTAL-ASSETS> 305,922
<CURRENT-LIABILITIES> 91,362
<BONDS> 262,769
0
0
<COMMON> 170
<OTHER-SE> (25,814)
<TOTAL-LIABILITY-AND-EQUITY> 305,922
<SALES> 381,137
<TOTAL-REVENUES> 381,137
<CGS> 216,081
<TOTAL-COSTS> 216,081
<OTHER-EXPENSES> 133,095
<LOSS-PROVISION> 3,756
<INTEREST-EXPENSE> 11,833
<INCOME-PRETAX> 18,855
<INCOME-TAX> 4,021
<INCOME-CONTINUING> 14,363
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,363
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<PAGE> 1
EXHIBIT 99.1
LETTER OF TRANSMITTAL
for Tender of all Outstanding
10 3/4% Senior Subordinated Notes Due 2008
in Exchange for
10 3/4% Senior Subordinated Notes Due 2008
of
ALBECCA INC.
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON _____________, 1999 (the "EXPIRATION DATE"),
UNLESS EXTENDED BY ALBECCA INC.
- --------------------------------------------------------------------------------
The Exchange Agent for the Exchange Offer is:
STATE STREET BANK AND TRUST COMPANY
<TABLE>
<S> <C> <C>
By Registered or Certified Mail: By Overnight or Hand Delivery: By Facsimile:
Corporate Trust Department Corporate Trust Department Corporate Trust Department
P.O. Box 778 Two International Place, 4th Floor (617) 664-5290
Boston, Massachusetts 02102-0078 Boston, Massachusetts 02110 Attention: Kellie Mullen
Attention: Kellie Mullen Attention: Kellie Mullen
</TABLE>
For Information Call:
(617) 664-5587
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN
AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TRANSMISSION
TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
The undersigned acknowledges receipt of the Prospectus dated _________,
1999 (the "Prospectus") of Albecca Inc. ("Albecca") which, together with this
Letter of Transmittal (the "Letter of Transmittal"), constitutes Albecca's offer
(the "Exchange Offer") to exchange $1,000 in principal amount of new 10 3/4%
Senior Subordinated Notes Due 2008 (the "New Notes") of Albecca for each $1,000
in principal amount of outstanding 10 3/4% Senior Subordinated Notes Due 2008
(the "Old Notes") of Albecca. The terms of the New Notes are identical in all
material respects (including principal amount, interest rate and maturity) to
the terms of the Old Notes for which they may be exchanged pursuant to the
Exchange Offer, except that the New Notes will have been registered under the
Securities Act of 1933, as amended (the "Securities Act"), and, therefore, will
not bear legends restricting, the transfer thereof.
The Exchange Offer is being made pursuant to the Registration Rights
Agreement dated as of August 11, 1998 (the "Registration Rights Agreement"), and
all Old Notes validly tendered will be accepted for exchange. Any Old Notes not
tendered will remain outstanding and continue to accrue interest, but will not
retain any rights under the Registration Rights Agreement. Holders electing to
have Old Notes exchanged pursuant to the Exchange Offer will be required to
surrender such Old Notes, together with this Letter of Transmittal, to the
Exchange Agent at the address specified herein prior to the close of business on
the Expiration Date. Holders will be entitled to withdraw their election at any
time prior to 5:00 p.m., New York City time, on the Expiration Date by sending
to the Exchange Agent at the address specified herein a facsimile transmission
or letter setting forth the name of
<PAGE> 2
such Holder, the principal amount of Old Notes delivered for exchange and a
statement that such Holder is withdrawing this election to have such Old Notes
exchanged.
The undersigned has checked the appropriate boxes below and signed this
Letter of Transmittal to indicate the action the undersigned desires to take
with respect to the Exchange Offer.
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS CAREFULLY
BEFORE CHECKING ANY BOX BELOW. THE INSTRUCTIONS INCLUDED WITH THIS LETTER OF
TRANSMITTAL MUST BE FOLLOWED. QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR
ADDITIONAL COPIES OF THE PROSPECTUS AND THIS LETTER OF TRANSMITTAL MAY BE
DIRECTED TO THE EXCHANGE AGENT.
<PAGE> 3
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING:
Name of Registered Holder(s):
------------------------------------------
Name of Eligible Institution that Guaranteed Delivery:
----------------
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name:
-------------------------------------------------------------------
Address:
----------------------------------------------------------------
List below the Old Notes to which this Letter of Transmittal relates. If
the space provided below is inadequate, the Certificate Numbers and Principal
Amounts should be listed on a separate signed schedule affixed hereto.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF OLD NOTES TENDERED HEREWITH
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Name(s) and Addresses Aggregate Principal
of Registered Holder(s) Certificate Amount Represented Principal Amount
(Please fill in) Number(s) by Notes Tendered
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
<S> <C> <C> <C>
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Total
- ----------------------------------------------------------------------------------------------------------------------
* Unless otherwise indicated, the holder will be deemed to have tendered the full aggregate principal amount
represented by the Old Notes. See Instruction 2.
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
This Letter of Transmittal is to be used if certificates for Old Notes
are to be forwarded herewith. Unless the context requires otherwise, the term
"Holder" for purposes of this Letter of Transmittal means any person in whose
name Old Notes are registered or any other person who has obtained a properly
completed bond power and any other required documents from the registered
holder.
Holders whose Old Notes are not immediately available or who cannot
deliver their Old Notes and all other documents required hereby to the Exchange
Agent on or prior to the Expiration Date may tender their Old Notes according to
the guaranteed delivery procedure set forth in the Prospectus under the captions
"The Exchange Offer - Terms of the Exchange Offer - Procedures for Tendering Old
Notes" and "The Exchange Offer - Terms of the Exchange Offer - Guaranteed
Delivery Procedures."
<PAGE> 4
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to Albecca the above-described principal amount of
Old Notes. Subject to, and effective upon, the acceptance for exchange of the
Old Notes tendered herewith, the undersigned hereby exchanges, assigns and
transfers to, or upon the order of, Albecca all right, title and interest in and
to such Old Notes. The undersigned hereby irrevocably constitutes and appoints
the Exchange Agent as the true and lawful agent and attorney-in-fact of the
undersigned (with full knowledge that said Exchange Agent acts as the agent of
the undersigned in connection with the Exchange Offer) to cause the Old Notes to
be assigned, transferred and exchanged. The undersigned represents and warrants
that it has full power and authority to tender, exchange, assign and transfer
the Old Notes and to acquire New Notes issuable upon the exchange of such
tendered Old Notes, and that, when the same are accepted for exchange, Albecca
will acquire good and unencumbered title to the tendered Old Notes, free and
clear of all liens, restrictions, charges and encumbrances and not subject to
any adverse claim. The undersigned also warrants that it will, upon request,
execute and deliver any additional documents deemed by Albecca to be necessary
or desirable to complete the exchange, assignment and transfer of tendered Old
Notes.
The Exchange Offer is subject to certain conditions as set forth in the
Prospectus under the caption "The Exchange Offer - Conditions of the Exchange
Offer." The undersigned recognizes that as a result of these conditions (which
may be waived, in whole or in part, by Albecca) as more particularly set forth
in the Prospectus, Albecca may not be required to exchange any of the Old Notes
tendered hereby and, in such event, the Old Notes not exchanged will be returned
to the undersigned at the address shown below the signature of the undersigned.
By tendering, each Holder of Old Notes represents to Albecca that: (i)
the New Notes acquired pursuant to the Exchange Offer are being obtained in the
ordinary course of business of the person receiving such New Notes, whether or
not such person is such Holder; (ii) neither the Holder of Old Notes nor any
such other person has an arrangement or understanding with any person to
participate in the distribution of such New Notes; (iii) if the Holder is not a
broker-dealer or is a broker-dealer but will not receive New Notes for its own
account in exchange for Old Notes, neither the Holder nor any such other person
is engaged in or intends to participate in a distribution of the New Notes; and
(iv) neither the Holder nor any such other person is an "affiliate" of Albecca
within the meaning of Rule 405 under the Securities Act or, if such Holder is an
"affiliate," such Holder will comply with the registration and prospectus
delivery requirements of the Securities Act to the extent applicable. If the
tendering Holder is a broker-dealer (whether or not it is also an "affiliate" of
Albecca within the meaning of Rule 405 under the Securities Act) that will
receive New Notes for its own account in exchange for Old Notes, it acknowledges
that it will deliver a prospectus meeting the requirements of the Securities Act
in connection with any resale of such New Notes. By acknowledging that it will
deliver and by delivering a prospectus meeting the requirements of the
Securities Act in connection with any resale of such New Notes, the undersigned
is not deemed to admit that it is an "underwriter" within the meaning of the
Securities Act.
All authority herein conferred or agreed to be conferred shall survive
the death, bankruptcy or incapacity of the undersigned, and every obligation of
the undersigned hereunder shall be binding upon the heirs, personal
representatives, executors, administrators, successors, assigns, trustees in
bankruptcy and other legal representatives of the undersigned. Tendered Old
Notes may be withdrawn at any. time prior to 5:00 p.m., New York City time, on
the Expiration Date by following the procedures set forth herein.
Certificates for all New Notes delivered in exchange for tendered Old
Notes and any Old Notes delivered herewith but not exchanged, in each case
registered in the name of the undersigned, shall be delivered to the undersigned
at the address shown below the signature of the undersigned.
<PAGE> 5
TENDERING HOLDER(S) SIGN HERE
--------------------------------------------
--------------------------------------------
Signature(s) of Holder(s)
Date: , 1999
----------------------
(Must be signed by registered Holder(s) exactly as name(s) appear(s) on
certificate(s) for Old Notes or by any person(s) authorized to become registered
Holder(s) by endorsements and documents transmitted herewith. If signature by a
trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
please set forth the full title of such person.) See Instruction 3.
Name(s):
---------------------------
---------------------------
(Please Print)
Capacity
(full title):
-------------------------------------------------------------
Address:
-------------------------------------------------------------
(Including Zip Code)
Area Code and
Telephone No.:
-------------------------------------------------------------
Tax Id. No.:
-------------------------------------------------------------
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED - SEE INSTRUCTION 3)
Authorized Signature:
----------------------------------------------------------
Name:
------------------------------------------------------------------------
Title:
-------------------------------------------------------------------------
Address:
-----------------------------------------------------------------------
Name of Firm:
------------------------------------------------------------------
Area Code and
Telephone No.:
-----------------------------------------------------------------
Dated: , 1999
------------------------------
<PAGE> 6
- --------------------------------------------------------------------------------
PAYOR'S NAME: ALBECCA INC.
- --------------------------------------------------------------------------------
SUBSTITUTE Name (If joint times, list first and circle the
FORM W-9 name of the person or entity whose number
you enter in Part I below.)
-----------------------------------------------------
Address
Department of
the Treasury
-----------------------------------------------------
Internal Revenue City, state and zip code
Service
-----------------------------------------------------
Part I - PLEASE PROVIDE YOUR Social Security Number
TAXPAYER IDENTIFICATION or Employer
NUMBER ("TIN") IN THE BOX AT Identification Number
RIGHT AND CERTIFY BY SIGNING
AND DATING BELOW
-----------------------------------------------------
Part H - If exempt from backup
withholding, check the box to
the right. Also provide your TIN
in Part I and sign and date this
form in Part III. [ ]
-----------------------------------------------------
PART III - Under penalties of perjury, I
certify that:
1. The number shown on this form is my correct
taxpayer identification number (or I am
waiting for a number to be issued to me), AND
2. I am not subject to backup withholding: (a) I
am exempt from backup withholding; or (b) I
have not been notified by the Internal
Revenue Service that I am subject to backup
withholding as a result of a failure to
report all interest or dividends; or (c) the
IRS has notified me that I am no longer
subject to backup withholding.
-----------------------------------------------------
CERTIFICATION INSTRUCTIONS. You must cross out item
2 above if you have been notified by the IRS that
you are currently subject to backup withholding
because of underreporting interest or dividends on
your tax return.
-------------------------- ---------------------
Signature Date:
- --------------------------------------------------------------------------------
Note: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE EXCHANGE OFFER. PLEASE
REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
<PAGE> 7
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES.
Certificates for all physically delivered Old Notes, as well as a properly
completed and duly executed copy of this Letter of Transmittal or facsimile
thereof, and any other documents required by this Letter of Transmittal, must be
received by the Exchange Agent at any of its addresses set forth herein on or
prior to the Expiration Date.
THE METHOD OF DELIVERY OF OLD NOTES, THIS LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF
THE HOLDER AND, EXCEPT AS OTHERWISE PROVIDED BELOW, THE DELIVERY WILL BE DEEMED
MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE AGENT. INSTEAD OF DELIVERY BY
MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN OVERNIGHT OR HAND DELIVERY SERVICE.
Holders whose Old Notes are not immediately available or who cannot
deliver their Old Notes and all other required documents to the Exchange Agent
on or prior to the Expiration Date may tender their Old Notes pursuant to the
guaranteed delivery procedure set forth in the Prospectus under "The Exchange
Offer - Terms of the Exchange Offer - Guaranteed Delivery Procedures." Pursuant
to such procedure: (i) such tender must be made by or through an Eligible
Institution (as defined in Instruction 3); (ii) on or prior to the Expiration
Date, the Exchange Agent must have received from such Eligible Institution a
letter or facsimile transmission setting forth the name and address of the
tendering Holder, the name(s) in which such Old Notes are registered and the
certificate number(s) of the Old Notes to be tendered; and (iii) all tendered
Old Notes as well as this Letter of Transmittal and all other documents required
by this Letter of Transmittal must be received by the Exchange Agent within
three New York Stock Exchange trading days after the date of execution of such
letter or facsimile transmission, all as provided in the Prospectus under the
caption "The Exchange Offer - Terms of the Exchange Offer - Guaranteed Delivery
Procedures."
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering Holders, by execution of this Letter of Transmittal (or
facsimile thereof), shall waive any right to receive notice of the acceptance of
the Old Notes for exchange.
2. PARTIAL TENDERS; WITHDRAWALS. Tenders of Old Notes will be
accepted in denominations of $1,000 and integral multiples in excess thereof. If
less than the entire principal amount of Old Notes evidenced by a submitted
certificate is tendered, the tendering Holder must fill in the principal amount
tendered in the column entitled "Principal Amount Tendered." A newly issued
certificate for the principal amount of Old Notes submitted but not tendered
will be sent to such Holder as soon as practicable after the Expiration Date.
All Old Notes delivered to the Exchange Agent will be deemed to have been
tendered unless otherwise indicated. To withdraw a tender of Old Notes in the
Exchange Offer, a written or facsimile transmission notice of withdrawal must be
received by the Exchange Agent at its address set forth herein prior to 5:00
p.m., New York City time, on the Expiration Date. Any such notice of withdrawal
must: (i) specify the name of the person having deposited the Old Notes to be
withdrawn (the "Depositor"); (ii) identify the Old Notes to be withdrawn
(including the certificate number or numbers and principal amount of such Old
Notes); (iii) contain a statement that such holder is withdrawing its election
to have such Old Notes exchanged; (iv) be signed by the Holder in the same
manner as the original signature on the Letter of Transmittal by which such Old
Notes were tendered (including any required signature guarantees) or be
accompanied by documents of transfer sufficient to have the Trustee with respect
to the Old Notes register the transfer of such Old Notes in the name of the
person withdrawing the tender; and (v) specify the name in which any such Old
Notes are to be registered, if different from that of the Depositor. If Old
Notes have been tendered pursuant to the procedure for book-entry transfer, any
notice of withdrawal must specify the name and number of the account at the
book-entry transfer facility. All questions as to the validity, form and
eligibility (including time of receipt) of such notices will be determined by
Albecca, whose determination shall be final and binding on all parties. Any Old
Notes so withdrawn will be deemed not to have
<PAGE> 8
been validly tendered for purposes of the Exchange Offer, and no New Notes will
be issued with respect thereto unless the Old Notes so withdrawn are validly
retendered. Any Old Notes which have been tendered but which am not accepted for
exchange will be returned to the Holder thereof without cost to such Holder as
soon as practicable after withdrawal, rejection of tender or termination of the
Exchange Offer. Properly withdrawn Old Notes may be retendered by following one
of the procedures described herein at any time prior to the business day prior
to the Expiration Date.
3. SIGNATURE ON THIS LETTER OF TRANSMITTAL; WRITTEN INSTRUMENTS AND
ENDORSEMENTS; GUARANTEE OF SIGNATURES. If this Letter of Transmittal is signed
by the registered Holder(s) of the Old Notes tendered hereby, the signature must
correspond with the name(s) as written on the face of certificates without
alteration, enlargement or any change whatsoever.
If tendered Old Notes are registered in the name of the signer of the
Letter of Transmittal and the New Notes to be issued in exchange therefor are to
be issued (and any untendered Old Notes are to be reissued) in the name of the
registered holder (including any participant in The Depository Trust Company
(also referred to as a book-entry facility) whose name appears on a security
listing as the owner of Old Notes), the signature of such signer need not be
guaranteed. In any other case, the tendered Old Notes must be endorsed or
accompanied by written instruments of transfer in form satisfactory to Albecca
and duly executed by the registered holder and the signature on the endorsement
or instrument of transfer must be guaranteed by a member firm of a registered
national securities exchange or of the National Association of Securities
Dealers, Inc., a commercial bank or trust company having an office or
correspondent in the United States or an "eligible guarantor institution" as
defined by Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended
(any of the foregoing hereinafter referred to as an "Eligible Institution").
If the New Notes or Old Notes not exchanged are to be delivered to an
address other than that of the registered holder appearing on the note register
for the Old Notes, the signature in the Letter of Transmittal must be guaranteed
by an Eligible Institution.
Endorsements on certificates or signatures on separate written
instruments of transfer or exchange required by this Instruction 3 must be
guaranteed by an Eligible Institution.
If any of the Old Notes tendered hereby arc owned of record by two or
more joint owners, all such owners must sign this Letter of Transmittal.
If a number of Old Notes registered in different names are tendered, it
will be necessary to complete, sign and submit as many separate copies of this
Letter of Transmittal as there are different registrations of Old Notes.
When this Letter of Transmittal is signed by the registered Holder or
Holders of Old Notes listed and tendered hereby, no endorsements of certificates
or separate written instruments of transfer or exchange are required.
If this Letter of Transmittal is signed by a person other than the
registered Holder or Holders of the Old Notes listed, such Old Notes must be
endorsed or accompanied by separate written instruments of transfer or exchange
in form satisfactory to Albecca and duly executed by the registered Holder or
Holders, in either case signed exactly as the name or names of the registered
Holder or Holders appear(s) on the Old Notes.
If this Letter of Transmittal, any certificates or separate written
instruments of transfer or exchange are signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity, such persons should so
indicate when signing, and, unless waived by Albecca, proper evidence
satisfactory to Albecca of their authority so to act must be submitted.
4. TRANSFER TAXES. Albecca shall pay all transfer taxes, if any,
applicable to the exchange of Old Notes pursuant to the Exchange Offer. If,
however, certificates representing New Notes, or Old Notes for
<PAGE> 9
principal amounts not tendered or accepted for exchange, are to be delivered to,
or are to be issued in the name of, any person other than the registered Holder
of the Old Notes tendered hereby, or if a transfer tax is imposed for any reason
other than the exchange of Old Notes pursuant to the Exchange Offer, then the
amount of any such transfer taxes (whether imposed on the registered Holder or
any other person) will be payable by the tendering Holder. If satisfactory
evidence of payment of such taxes or exemption therefrom is not submitted
herewith, the amount of such transfer taxes will be billed directly to such
tendering Holder.
Except as provided in this Instruction 4, it will not be necessary for
transfer tax stamps to be affixed to the Old Notes listed in this Letter of
Transmittal.
5. WAIVER OF CONDITIONS. Albecca reserves the absolute right to
waive, in whole or in part, any of the conditions to the Exchange Offer set
forth in the Prospectus.
6. MUTILATED, LOST, STOLEN OR DESTROYED NOTES. Any Holder whose Old
Notes have been mutilated, lost, stolen or destroyed should contact the Exchange
Agent at the address indicated above for further instructions.
7. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions relating
to the procedure for tendering and other questions relating to the Exchange
Offer, as well as requests for assistance or additional copies of the Prospectus
and this Letter of Transmittal, may be directed to the Exchange Agent at the
address and telephone number set forth above and in the Prospectus.
8. IRREGULARITIES. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance of Letters of Transmittal
or Old Notes will be resolved by Albecca, whose determination will be final and
binding. Albecca reserves the absolute right to reject any or all Letters of
Transmittal or tenders that are not in proper form or the acceptance of which
would, in the opinion of Albecca's counsel, be unlawful. Albecca also reserves
the right to waive any irregularities or conditions of tender as to the
particular Old Notes covered by any Letter of Transmittal or tendered pursuant
to such Letter of Transmittal. None of Albecca, the Exchange Agent or any other
person will be under any duty to give notification of any defects or
irregularities in tenders or incur any liability for failure to give any such
notification. Albecca's interpretation of the terms and conditions of the
Exchange Offer shall be final -and binding.
9. DEFINITIONS. Capitalized terms used in this Letter of Transmittal
and not otherwise defined have the meanings given in the Prospectus.
10. TAX IDENTIFICATION NUMBER. Federal income tax law requires that a
holder of any Old Notes which are accepted for exchange must provide Albecca (as
payor) with its correct taxpayer identification number ("TIN"), which, in the
case of a holder who is an individual, is his or her social security number. If
Albecca is not provided with the correct TIN, the holder may be subject to a $50
penalty imposed by the Internal Revenue Service. (if withholding results in an
overpayment of taxes, a refund may be obtained.) Certain holders (including,
among others, all corporations and certain foreign individuals) are not subject
to these backup withholding and reporting requirements; however, these holders
still must submit the Substitute Form W-9. See the enclosed "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9" for
additional instructions.
To prevent backup withholding, each tendering holder must provide such
holder's correct TIN by completing the Substitute Form W-9 set forth herein,
certifying that the TIN provided is correct (or that such holder is awaiting a
TIN), and that (i) the holder has not been notified by the Internal Revenue
Service that such holder is subject to backup withholding as a result of failure
to report all interest or dividends or (ii) the Internal Revenue Service has
notified the holder that such holder is no longer subject to backup withholding.
The Form must be signed, even if the holder is exempt from backup withholding.
If the Old Notes are registered in more than one name or are not in the name of
the actual owner, consult the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for information on which TIN to
report.
<PAGE> 10
Albecca reserves the right in its sole discretion to take whatever steps
are necessary to comply with its obligation regarding backup withholding.
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE THEREOF (TOGETHER WITH
CERTIFICATES FOR OLD NOTES AND ALL OTHER REQUIRED DOCUMENTS) OR A NOTICE OF
GUARANTEED DELIVERY MUST BE RECEIVED BY THE EXCHANGE AGENT ON OR PRIOR TO THE
EXPIRATION DATE.
<PAGE> 1
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
for
Tender of all Outstanding
10 3/4% Senior Subordinated Notes Due 2008
in Exchange for 10 3/4% Senior Subordinated Notes Due 2008
of
ALBECCA INC.
(Not To Be Used For Signature Guarantees)
Registered holders of outstanding 10 3/4% Senior Subordinated Notes Due
2008 (the "Old Notes") of Albecca Inc. ("Albecca") who wish to tender their Old
Notes in exchange for a like principal amount of 10 3/4% Senior Subordinated
Notes Due 2008 (the "New Notes") of Albecca and, in each case, whose Old Notes
are not immediately available or who cannot deliver their Old Notes and Letter
of Transmittal (and any other documents required by the Letter of Transmittal)
to State Street Bank and Trust Company (the "Exchange Agent") prior to the
Expiration Date may use this Notice of Guarantee Delivery or one substantially
equivalent hereto. This Notice of Guaranteed Delivery may be delivered by hand
or sent by facsimile transmission (receipt confirmed by telephone and an
original delivered by guaranteed overnight delivery) or mailed to the Exchange
Agent. See "The Exchange Offer -- Terms of the Exchange Offer -- Guarantee
Delivery Procedures" in the Prospectus.
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON ____________, 1999 (the "EXPIRATION DATE"),
UNLESS EXTENDED BY ALBECCA, INC.
- --------------------------------------------------------------------------------
The Exchange Agent for the Exchange Offer is:
STATE STREET BANK AND TRUST COMPANY
<TABLE>
<S> <C> <C>
By Registered or Certified Mail: By Overnight or Hand Delivery: By Facsimile:
Corporate Trust Department Corporate Trust Department Corporate Trust Department
P.O. Box 778 Two International Place, 4th Floor (617) 664-5290
Boston, Massachusetts 02102-0078 Boston, Massachusetts 02110 Attention: Kellie Mullen
Attention: Kellie Mullen Attention: Kellie Mullen
</TABLE>
For Information Call:
(617) 664-5587
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN
AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TRANSMISSION
TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an Eligible Institute, such signature guarantee must appear in the
applicable space provided on the Letter of Transmittal for Guarantee of
Signatures.
<PAGE> 2
Ladies & Gentlemen:
The undersigned hereby tender(s) to Albecca upon the terms and subject to
the conditions set forth in the Exchange Offer and the Letter of Transmittal,
receipt of which is hereby acknowledged, the aggregate principal amount of Old
Notes set forth below pursuant to the guaranteed delivery procedures set forth
in the Prospectus.
The undersigned understands that tenders of Old Notes will be accepted
only in principal amounts equal to $1,000 or integral multiples thereof. Tenders
of Old Notes may also be withdrawn if the Exchange Offer is terminated without
any such Old Notes being exchange thereunder or as otherwise provided in the
Prospectus.
All authority herein conferred or agreed to be conferred by this Notice
of Guaranteed Delivery shall survive the death, bankruptcy or incapacity of the
undersigned and every obligation of the undersigned under this Notice of
Guaranteed Delivery shall be binding upon the heirs, personal representatives,
executors, administrators, successors, assigns, trustees in bankruptcy and other
legal representatives of the undersigned.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
PLEASE SIGN AND COMPLETE
- ------------------------------------------------------------ --------------------------
<S> <C>
Signature(s) of Registered Owner(s) or Name(s) of Registered Holder(s):
Authorized Signatory:
-------------------------- ------------------------------
- ----------------------------------------------- ------------------------------
Principal Amount of Old Notes Tendered: Address(es):
-----------------------
- ----------------------------------------------- ------------------------------------
Certificate No(s). of Old Notes (if available): Area Code and Telephone No.:
- ----------------------------------------------- ------------------------------------
Date:
- ----------------------------------------------- ------------------------------
- ---------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
This Notice of Guaranteed Delivery must be signed by the registered
holder(s) of Old Notes exactly as its (their) name(s) appears on certificates
for Old Notes or on a security position listing the owners of Old Notes, or by
person(s) authorized to become registered Holder(s) by endorsements and
documents transmitted with this Notice of Guaranteed Delivery. If signature is
by a trustee, executor, administrator, guardian, attorney-in-fact, officer or
other person acting in a fiduciary or representative capacity, such person must
provide the following information.
PLEASE PRINT NAME(S) AND ADDRESS(ES)
Name(s):
------------------------------------------------------------------
------------------------------------------------------------------
Capacity:
------------------------------------------------------------------
Address(es):
------------------------------------------------------------------
------------------------------------------------------------------
DO NOT SEND OLD NOTES WITH THIS FORM. OLD NOTES SHOULD BE SENT TO THE
EXCHANGE AGENT TOGETHER WITH A PROPERLY COMPLETED AND DULY EXECUTED
LETTER OF TRANSMITTAL.
- --------------------------------------------------------------------------------
2
<PAGE> 3
- --------------------------------------------------------------------------------
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or correspondent in the United
States or an "eligible guarantor institution" as defined by Rule 17Ad-15 under
the Securities Exchange Act of 1934, as amended (the "Exchange Act") (any of the
foregoing hereinafter referred to as an "Eligible Institution"), hereby (a)
represents that each holder of Old Notes on whose behalf this tender is being
made "own(s)" the Old Notes covered hereby within the meaning of Rule 14e-4
under the Exchange Act, (b) represents that such tender of Old Notes complies
with such Rule 14e-4 under the Exchange Act, and (c) guarantees that, within
three New York Stock Exchange trading days from the date of this Notice of
Guaranteed Delivery, certifies representing the Old Notes covered hereby in
property form for transfer or confirmation of book-entry transfer of such Old
Notes into the Exchange Agent's account at The Depository Trust Company, in each
case with delivery of a Letter of Transmittal (or a facsimile thereof) properly
completed and duly executed, with any required signature guarantees, or Agent's
Message, in the case of book-entry delivery, and any other required documents
will be deposited by the undersigned with the Exchange Agent.
THE UNDERSIGNED ACKNOWLEDGES THAT IT MUST DELIVER THE LETTER OF
TRANSMITTAL AND OLD NOTES TENDERED HEREBY TO THE EXCHANGE AGENT WITHIN THE TIME
SET FORTH ABOVE AND THAT FAILURE TO DO SO COULD RESULT IN FINANCIAL LOSS TO THE
UNDERSIGNED.
Name of Firm: Authorized Signature:
-----------------------------
Address:
---------------------------------- ----------------------------------
Name:
---------------------------------- -----------------------------
Area Code and Telephone No.: Title:
-------------- ----------------------------
Date:
-----------------------------
- --------------------------------------------------------------------------------
3
<PAGE> 1
EXHIBIT 99.3
ALBECCA INC.
Offer to Exchange
its
10 3/4% Senior Subordinated Notes Due 2008
for any and all of its Outstanding
10 3/4% Senior Subordinated Notes Due 2008
TO: BROKERS, DEALERS, COMMERCIAL BANKS,
TRUST COMPANIES AND OTHER NOMINEES:
Albecca Inc. (the "Company") is offering to exchange (the "Exchange
Offer"), upon and subject to the terms and conditions set forth in the
Prospectus dated _________, 1999 (the "Prospectus") and the enclosed Letter of
Transmittal (the "Letter of Transmittal"), its registered 10 3/4% Senior
Subordinated Notes Due 2008 (the "New Notes") for any and all of its outstanding
10 3/4% Senior Subordinated Notes Due 2008 (the "Old Notes"). The Exchange Offer
is being made in order to satisfy certain obligations of the Company contained
in the Registration Rights Agreement dated as of August 1, 1998 between the
Company and the other signatories thereto.
We are requesting that you contact your clients for whom you hold Old
Notes regarding the Exchange Offer. For your information and for forwarding to
your clients for whom you hold Old Notes registered in your name or in the name
of your nominee, or who hold Old Notes registered in their own names, we are
enclosing the following documents:
1. Prospectus dated ____________, 1999;
2. The Letter of Transmittal for your use and for the information of
your clients;
3. Notice of Guaranteed Delivery to be used to accept the Exchange
Offer if certificates for Old Notes are not immediately available
or time will not permit all required documents to reach the
Exchange Agent prior to the Expiration Date (as defined below) or
if the procedure for book-entry transfer cannot be completed on a
timely basis;
4. A form of letter which may be sent to your clients for whose
account you hold Old Notes registered in your name or the name of
your nominee, with space provided for obtaining such clients'
instructions with regard to the Exchange Offer;
5. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9; and
6. Return envelopes addressed to State Street Bank and Trust Company,
the Exchange Agent, for the Old Notes.
YOUR PROMPT ACTION IS REQUESTED. THE EXCHANGE OFFER WILL EXPIRE AT 5:00
P.M., NEW YORK CITY TIME, ON _______________, 1999 (THE "EXPIRATION DATE"),
UNLESS EXTENDED BY THE COMPANY. THE OLD NOTES TENDERED PURSUANT TO THE EXCHANGE
OFFER MAY BE WITHDRAWN AT ANY TIME BEFORE 5:00 P.M., NEW YORK CITY TIME, ON THE
EXPIRATION DATE IN ACCORDANCE WITH THE INSTRUCTIONS SET FORTH IN THE LETTER OF
TRANSMITTAL.
<PAGE> 2
To participate in the Exchange Offer, a duly executed and properly
completed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees and any other required documents, should be sent to the
Exchange Agent and certificates representing the Old Notes should be delivered
to the Exchange Agent, all in accordance with the instructions set forth in the
Letter of Transmittal and Prospectus.
If holders of Old Notes wish to tender, but it is impracticable for them
to forward their certificates for Old Notes prior to the expiration of the
Exchange Offer or to comply with the book-entry transfer procedures on a timely
basis, a tender may be effected by following the guaranteed delivery procedures
described in the Prospectus under "The Exchange Offer - Terms of the Exchange
Offer - Guaranteed Delivery Procedures."
The Company will, upon request, reimburse brokers, dealers, commercial
banks and trust companies for reasonable and necessary costs and expenses
incurred by them in forwarding the Prospectus and the related documents to the
beneficial owners of Old Notes held by them as nominee or in a fiduciary
capacity. The Company will pay or cause to be paid all stock transfer taxes
applicable to the exchange of Old Notes pursuant to the Exchange Offer, except
as set forth in Instruction 4 of the Letter of Transmittal.
Any inquiries you may have with respect to the Exchange Offer, or
requests for additional copies of the enclosed materials, should be directed to
the Exchange Agent for the Old Notes, at its address and telephone number set
forth on the front of the Letter of Transmittal.
Very truly yours,
ALBECCA INC.
NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY OTHER
PERSON AS AN AGENT OF THE COMPANY OR THE EXCHANGE AGENT, OR AUTHORIZE YOU OR ANY
OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENTS ON BEHALF OF EITHER OF
THEM WITH RESPECT TO THE EXCHANGE OFFER, EXCEPT FOR STATEMENTS EXPRESSLY MADE IN
THE PROSPECTUS OR THE LETTER OF TRANSMITTAL.
Enclosures
<PAGE> 1
EXHIBIT 99.4
ALBECCA INC.
Offer to Exchange
its
10 3/4% Senior Subordinated Notes Due 2008
for any and all of its Outstanding
10 3/4% Senior Subordinated Notes Due 2008
To Our Clients:
Enclosed for your consideration are the Prospectus dated ___________,
1999 (the "Prospectus") and the related Letter of Transmittal (which together
with the Prospectus constitute the "Exchange Offer") in connection with the
offer by Albecca Inc., a Delaware corporation (the "Company"), to exchange its
10 3/4% Senior Subordinated Notes due 2008 (the "New Notes") for any and all of
its outstanding 10 3/4% Senior Subordinated Notes due 2008 (the "Old Notes"),
upon the terms and subject to the conditions set forth in the Exchange Offer.
We are the registered holder of Old Notes held for your account. An
exchange of the Old Notes can be made only by us as the registered holder and
pursuant to your instructions. The Letter of Transmittal is furnished to you for
your information only and cannot be used by you to exchange the Old Notes held
by us for your account. The Exchange Offer provides a procedure for holders to
tender by means of guaranteed delivery.
We request information as to whether you wish us to exchange any or all
of the Old Notes held by us for your account upon the terms and subject to the
conditions of the Exchange Offer.
Your attention is directed to the following:
1. The New Notes will be exchanged for the Old Notes at the rate of
$1,000 principal amount of New Notes for each $1,000 principal amount of Old
Notes. The New Notes will bear interest (as do the Old Notes) at a rate equal to
10 3/4% per annum from their date of issuance. Interest on the New Notes is
payable semi-annually on February 15 and August 15, commencing February 15,
1999. Holders of Old Notes that are accepted for exchange will receive, in cash,
accrued interest thereon to, but not including, the date of issuance of the New
Notes. Such interest will be paid with the first interest payment on the New
Notes. Interest on the Old Notes accepted for exchange will cease to accrue on
the day prior to the issuance of the New Notes. The form and terms of the New
Notes are the same in all material respects as the form and terms of the Old
Notes (which they replace) except that the New Notes have been registered under
the Securities Act of 1933, as amended (the "Securities Act").
2. Based on interpretations by the staff of the Securities and
Exchange Commission (the "SEC"), New Notes issued pursuant to the Exchange Offer
in exchange for Old Notes may be offered for resale, resold and otherwise
transferred by holders thereof (other than any such holder which is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act or a "broker" or "dealer" registered under the Securities Exchange Act of
1934, as amended (the "Exchange Act")) without compliance with the registration
and prospectus delivery provisions of the Securities Act provided that such New
Notes are acquired in the ordinary course of such holders' business and such
holders have no arrangement with any person to participate in the distribution
of such New Notes.
3. The Exchange Offer is not conditioned on any minimum principal
amount of Old Notes being tendered.
<PAGE> 2
4. Notwithstanding any other term of the Exchange Offer, or any
extension of the Exchange Offer, the Company will not be required to accept for
exchange, or exchange New Notes for, any Old Notes not already accepted for
exchange, and may terminate or amend the Exchange Offer before the acceptance of
such Old Notes, if any of the conditions described in the Prospectus under "The
Exchange Offer - Conditions of the Exchange Offer" exist.
5. Tendered Old Notes may be withdrawn at any time prior to 5:00
p.m., New York City time, on ____________, 1999 by following the procedures set
forth in the Letter of Transmittal.
6. Any transfer taxes applicable to the exchange of the Old Notes
pursuant to the Exchange Offer will be paid by the Company, except as otherwise
provided in Instruction 4 of the Letter of Transmittal.
If you wish to have us tender any or all of your Old Notes, please so
instruct us by completing, detaching and returning to us the instruction form
attached hereto. An envelope to return your instructions is enclosed. If you
authorize a tender of your Old Notes, the entire principal amount of Old Notes
held for your account will be tendered unless otherwise specified on the
instruction form. Your instructions should be forwarded to us in ample time to
permit us to submit a tender on your behalf by the Expiration Date.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL TENDERS BE ACCEPTED
FROM OR ON BEHALF OF, HOLDERS OF THE OLD NOTES IN ANY JURISDICTION IN WHICH THE
MAKING OF THE EXCHANGE OFFER OR ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE
WITH THE LAWS OF SUCH JURISDICTION OR WOULD OTHERWISE NOT BE IN COMPLIANCE WITH
ANY PROVISION OF ANY APPLICABLE SECURITIES LAW.
<PAGE> 3
ALBECCA INC.
Offer to Exchange
its
10 3/4% Senior Subordinated Notes Due 2008
for any and all of its Outstanding
10 3/4% Senior Subordinated Notes Due 2008
INSTRUCTION TO REGISTERED HOLDER FROM BENEFICIAL OWNER
The undersigned acknowledge(s) receipt of your letter and the enclosed
Prospectus and the related Letter of Transmittal in connection with the Exchange
Offer by the Company to exchange New Notes for Old Notes.
This will instruct you to tender the principal amount of Old Notes
indicated below held by you for the account of the undersigned, upon the terms
and subject to the conditions set forth in the Prospectus and the related Letter
of Transmittal.
The undersigned represents that: (i) the New Notes acquired pursuant to
the Exchange Offer are being obtained in the ordinary course of its business;
(ii) it is not participating, does not intend to participate, and has no
arrangement or understanding with any person to participate, in the distribution
of such New Notes; and (iii) it is not an "affiliate," as defined under Rule 405
of the Securities Act, of the Company or, if it is an affiliate, that it will
comply with the registration and prospectus delivery requirements of the
Securities Act to the extent applicable.
If the undersigned is a "broker" or "dealer" registered under the
Exchange Act that acquired Old Notes for its own account pursuant to its
market-making or other trading activities (other than Old Notes acquired
directly from the Company), the undersigned understands and acknowledges that it
may be deemed to be an "underwriter" within the meaning of the Securities Act
and, therefore, must deliver a prospectus relating to the New Notes meeting the
requirements of the Securities Act in connection with any resales by it of New
Notes acquired for its own account in the Exchange Offer. Notwithstanding the
foregoing, the undersigned does not thereby admit that it is an "underwriter"
within the meaning of the Securities Act.
You are hereby instructed to tender all Old Notes held for the account of
the undersigned unless otherwise indicated below:
[ ] Do not tender any Old Notes.
[ ] Tender Old Notes in the principal amount of .
-------------------
SIGNATURE:
-------------------------------------------
Name of Beneficial Owner (please print)
By:
----------------------------------------
Signature
----------------------------------------
Address
----------------------------------------
Zip Code
----------------------------------------
Area Code and Telephone Number
Dated: , 1999
----------------------------
<PAGE> 1
EXHIBIT 99.5
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER. Social Security numbers have nine digits separated by two hyphens (i.e.,
000-00-0000). Employer identification numbers have nine digits separated by only
one hyphen (i.e., 00-0000000). The table below will help determine the number to
give the payer.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
FOR THIS TYPE OF ACCOUNT GIVE THE
SOCIAL SECURITY OR EMPLOYER IDENTIFICATION
NUMBER OF
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. An individual's account.......................... The individual
2. Two or more individuals (joint account) ......... The actual owner of the account or, if combined funds,
any one of the individuals(l)
3. Husband and wife (joint account)................. The actual owner of the account or, if joint funds,
either person(l)
4. Custodian account of a minor (Uniform Gift to The minor(2)
Minors Act)......................................
5. Adult and minor (Joint account).................. The adult or, if the minor is the only contributor, the
minor(l)
6. Account in the name of guardian or committee for The ward, minor or incompetent person(3)
a designated ward, minor or incompetent person
7. a. The usual revocable savings trust account
(grantor is also trustee)..................... The grantor-trustee(l)
b. So-called trust account that is not a legal or The actual owner(l)
valid trust under state law....................
8. Sole proprietorship account...................... The owner(4)
9. A valid trust, estate or pension trust........... The legal entity(5) (Do not furnish the identifying
number of the personal representative or trustee unless
the legal entity itself is not designated in the
account title.)
10. Corporate account................................ The corporation
11. Religious, charitable or educational organization The organization
account.......................................
12. Partnership account.............................. The partnership
13. Association, club or other tax-exempt ........... The organization
organization..................................
14. A broker or registered nominee The broker or nominee
15. Account with the Department of Agriculture in the The public entity
name of a public entity (such as a state or local
government, school district or prison) that receives
agricultural program payments..................
- ------------------------------------------------------------ ---------------------------------------------------------
</TABLE>
- -------------------
(1) List first and circle the name of the person whose number you furnish. (2)
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish
such person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate or pension
trust.
Note: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
2
<PAGE> 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for A Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments
include the following:
- A corporation.
- A financial institution.
- An organization exempt from tax under Section 501(a) of the
Internal Revenue Code or an individual retirement plan.
- The United States or any agency or instrumentality thereof.
- A State, the District of Columbia, a possession of the United
States or any subdivision or instrumentality thereof.
- A foreign government, a political subdivision of a foreign
government or any agency or instrumentality thereof.
- An international organization or any agency or instrumentality
thereof.
- A dealer in securities or commodities required to register in the
United States or a possession of the United States.
- A real estate investment trust.
- A common trust fund operated by a bank under Section 584(a) of the
Internal Revenue Code.
- An exempt charitable remainder trust or a non-exempt trust
described in Section 4947(a)(1) of the Internal Revenue Code.
- An entity registered at all times under the Investment Company Act
of 1940.
- A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to
backup withholding include the following:
- Payments to nonresident aliens subject to withholding under
Section 1441 of the Internal Revenue Code.
- Payments to partnerships not engaged in a trade or business in the
United States and which have at least one nonresident partner.
- Payments of patronage dividends where the amount renewed is not
paid in money.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
Payments of interest not generally subject to backup withholding include
the following:
- Payments of interest on obligations issued by individuals. Note:
You may be subject to backup withholding if this interest is $600
or more and is paid in the course of the payer's trade or business
and you have not provided your correct taxpayer identification
number to the payer.
3
<PAGE> 3
- Payments of tax-exempt interest (including exempt-interest
dividends under Section 852 of the Internal Revenue Code).
- Payments described in Section 6049(b)(5) of the Internal Revenue
Code to non-resident aliens.
- Payments on tax-free covenant bonds under Section 1451 of the
Internal Revenue Code.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
Exempt payees described above must still complete the Substitute Form W-9
enclosed herewith to avoid possible erroneous backup withholding. FILE THIS FORM
WITH THE PAYER, FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE EXEMPT ON THE
FACE OF THE FORM, AND RETURN IT TO THE PAYER. IF THE PAYMENTS ARE INTEREST,
DIVIDENDS OR PATRONAGE DIVIDENDS, ALSO SIGN AND DATE THE FORM.
Certain payments, other than interest, dividends and patronage dividends,
that are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under Sections 6041, 6041A(a),
6042, 6044, 6045, 6049, 6050A and 605ON of the Internal Revenue Code.
PRIVACY ACT NOTICE. Section 6109 of the Internal Revenue Code requires
most recipients of dividend, interest, or other payments to give taxpayer
identification numbers to payers who must report the payments to the Internal
Revenue Service. The Internal Revenue Service uses the numbers for
identification purposes and to help verify the accuracy of the recipient's tax
return. Payers must be given the numbers whether or not recipients are required
to file tax returns. Payers must generally withhold 31% of taxable interest,
dividend and certain other payments to a payee who does not furnish a taxpayer
identification number to a payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. If
you fail to furnish your taxpayer identification number to a payer, you are
subject to a penalty of $50 for each such failure which is due to reasonable
cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.
If you make a false statement with no reasonable basis which results in no
imposition of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. Falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL
REVENUE SERVICE.
4
