<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 20, 1999
REGISTRATION NO. 333-76397
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
THE YANKEE CANDLE COMPANY, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<C> <S> <C>
MASSACHUSETTS 5947 04 259 1416
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
incorporation or organization) Number)
</TABLE>
102 CHRISTIAN LANE
WHATELY, MASSACHUSETTS 01093
(413) 665-8306
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
------------------------------
ROBERT R. SPELLMAN
THE YANKEE CANDLE COMPANY, INC.
102 CHRISTIAN LANE
WHATELY, MASSACHUSETTS 01093
(413) 665-8306
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------
COPIES TO:
LOIS HERZECA, ESQ. WINTHROP B. CONRAD, JR., ESQ.
FRIED, FRANK, HARRIS, SHRIVER & DAVIS POLK & WARDWELL
JACOBSON 450 LEXINGTON AVENUE
ONE NEW YORK PLAZA NEW YORK, NEW YORK 10017
NEW YORK, NEW YORK 10004 (212) 450-4000
(212) 859-8000
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS
PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act,
check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
EXPLANATORY NOTE
This registration statement contains two separate prospectuses. The first
prospectus relates to a public offering in the United States and Canada of an
aggregate of shares of common stock. The second prospectus relates
to a concurrent offering outside the United States and Canada of an aggregate of
shares of common stock. The prospectuses for each of the U.S. offering and
the international offering will be identical with the exception of an alternate
front cover page for the international offering. This alternate page appears in
this registration statement immediately following the complete prospectus for
the U.S. offering.
<PAGE>
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND WE AND THE SELLING STOCKHOLDERS ARE NOT SOLICITING
OFFERS TO BUY THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS
NOT PERMITTED.
<PAGE>
PROSPECTUS (SUBJECT TO COMPLETION)
ISSUED , 1999
SHARES
[LOGO]
THE YANKEE CANDLE COMPANY, INC.
COMMON STOCK
-----------------
THE YANKEE CANDLE COMPANY, INC. IS OFFERING SHARES AND THE SELLING
STOCKHOLDERS ARE OFFERING SHARES. FOR INFORMATION RELATING TO THE SELLING
STOCKHOLDERS, SEE "PRINCIPAL AND SELLING STOCKHOLDERS" ON PAGE 53. THIS IS OUR
INITIAL PUBLIC OFFERING AND NO PUBLIC MARKET CURRENTLY EXISTS FOR OUR SHARES. WE
ANTICIPATE THAT THE INITIAL PUBLIC OFFERING PRICE WILL BE BETWEEN $ AND
$ PER SHARE.
-------------------
WE HAVE APPLIED TO LIST OUR COMMON STOCK ON THE NEW YORK STOCK EXCHANGE UNDER
THE SYMBOL "YCC."
-------------------
INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON
PAGE 7.
-----------------
PRICE $ A SHARE
-------------------
<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS YANKEE CANDLE STOCKHOLDERS
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
PER SHARE....................... $ $ $ $
TOTAL........................... $ $ $ $
</TABLE>
THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS HAVE NOT
APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS PROSPECTUS IS
TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
OUR SELLING STOCKHOLDERS HAVE GRANTED THE UNDERWRITERS THE RIGHT TO PURCHASE UP
TO AN ADDITIONAL SHARES TO COVER OVER-ALLOTMENTS. MORGAN STANLEY & CO.
INCORPORATED EXPECTS TO DELIVER THE SHARES TO PURCHASERS ON , 1999.
-------------------
MORGAN STANLEY DEAN WITTER
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
, 1999
<PAGE>
[PICTURES OF PRODUCTS]
EDGAR ARTWORK DESCRIPTIONS
Outside Pull-Out of Prospectus:
Caption: A Sampling of Yankee Candle-Registered Trademark- Product Lines
Six pictures of a full line of Yankee Candle-Registered Trademark- products
featuring the Macintosh-Registered Trademark- fragrance.
Upper left hand corner:
Caption: Experience the Fragrance
- Picture showing jar candles, scented candles in decorative glass jars of
22 oz., 14.5 oz and 3.7 oz. sizes. The picture also includes a "peel and
sniff" scent label featuring Macintosh-Registered Trademark- apple
fragrance.
Upper right hand corner:
Caption: Samplers-Registered Trademark-
Picture showing an assortment of votive candles.
Middle right:
Caption: Wax Potpourri Tarts-Registered Trademark-
- Picture showing an assortment of scented wax without wicks that releases
its fragrance when melted and warmed in a potpourri pot.
Lower left hand corner:
Caption: Scented Pillars
- Picture showing three sizes of grooved scented pillars.
Lower center:
Caption Scented Tapers
- Picture showing three sizes of scented tapers.
Lower right hand corner:
Caption: Scented Tea Lights
- Picture showing an assortment of small, colored and scented candles in
clear cups.
Inside Pull-Out of Prospectus:
Caption: Yankee Candle-Registered Trademark- Retail Locations
Top:
Caption: Flagship Store, South Deerfield, Massachusetts
- View of our flagship retail store.
Middle left
- View of retail store.
Middle right:
- View of retail store.
Bottom
Caption: Yankee Candle-Registered Trademark- Vertical Display System for
Wholesale Dealers
- View of our 12-foot hutch.
Inside Front Cover of Prospectus:
Caption: Yankee Candle-Registered Trademark- Distribution Points
- Map of distribution points, indicating (1) wholesale sites, (2) current
retail sites and (3) signed/negotiated leases for new retail sites for
1999.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary............................... 1
Risk Factors..................................... 7
Use of Proceeds.................................. 11
Dividend Policy.................................. 11
Certain Information.............................. 12
Capitalization................................... 13
Dilution......................................... 14
Selected Financial and Other Data................ 15
Unaudited Pro Forma Consolidated Condensed
Financial Statements........................... 17
Management's Discussion and Analysis of Financial
Condition and Results of Operations............ 23
<CAPTION>
PAGE
-----
<S> <C>
Business of Yankee Candle........................ 33
Management....................................... 44
Principal and Selling Stockholders............... 53
Description of the Credit Agreement.............. 56
Description of Capital Stock..................... 57
Shares Eligible for Future Sale.................. 60
United States Federal Tax Considerations for
Non-United States Holders...................... 61
Underwriters..................................... 65
Legal Matters.................................... 68
Experts.......................................... 69
Where You Can Find More Information.............. 69
Index to Consolidated Financial
Statements..................................... F-1
</TABLE>
-------------------
The Yankee Candle Company, Inc. was incorporated in Massachusetts in 1976.
Our principal executive offices are located at 102 Christian Lane, Whately,
Massachusetts 01093 and our telephone number at that address is (413) 665-8306.
Our World Wide Web site address is www.yankeecandle.com. The information in the
website is not incorporated by reference.
-------------------
You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
contained in this prospectus. We and the selling stockholders are offering to
sell, and seeking offers to buy, shares of common stock only in jurisdictions
where offers and sales are permitted. The information contained in this
prospectus is accurate only as of the date of this prospectus, regardless of the
time of delivery of this prospectus or of any sale of common stock.
-------------------
Until , 1999, all dealers that buy, sell or trade Yankee Candle's
common stock, whether or not participating in this offering, may be required to
deliver a prospectus. This delivery requirement is in addition to the dealers'
obligation to deliver a prospectus when acting as underwriters and with respect
to their unsold allotments or subscriptions.
i
<PAGE>
PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS THE MOST IMPORTANT FEATURES OF THIS OFFERING AND THE
INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS. THIS SUMMARY IS NOT COMPLETE
AND DOES NOT CONTAIN ALL OF THE INFORMATION THAT YOU SHOULD CONSIDER BEFORE
INVESTING IN OUR COMMON STOCK. YOU SHOULD READ THE ENTIRE PROSPECTUS CAREFULLY,
ESPECIALLY THE RISKS OF INVESTING IN OUR COMMON STOCK DISCUSSED UNDER "RISK
FACTORS."
WE ARE OFFERING SHARES OF OUR COMMON STOCK AND THE SELLING
STOCKHOLDERS ARE OFFERING SHARES OF OUR COMMON STOCK IN THIS OFFERING.
THIS IS OUR INITIAL PUBLIC OFFERING AND WE ANTICIPATE THAT THE PRICE OF OUR
COMMON STOCK SOLD TO THE PUBLIC WILL BE BETWEEN $ AND $ PER SHARE. WE WILL
RECEIVE FROM THIS OFFERING AN ESTIMATED $ OF NET PROCEEDS, AFTER DEDUCTING
UNDERWRITING DISCOUNTS AND COMMISSIONS AND EXPENSES INCURRED IN CONNECTION WITH
THIS OFFERING. THESE NET PROCEEDS WILL BE USED TO REPAY OUTSTANDING
INDEBTEDNESS. THE SELLING STOCKHOLDERS WILL RECEIVE IN THE AGGREGATE AN
ESTIMATED $ OF NET PROCEEDS, AFTER DEDUCTING UNDERWRITING DISCOUNTS AND
COMMISSIONS.
YANKEE CANDLE
We are the leading designer, manufacturer, wholesaler and retailer of
premium scented candles in the growing giftware industry. We have a 30-year
history of offering our distinctive products and marketing them as affordable
luxuries and consumable gifts. Our current products are available in up to 150
fragrances and include a wide variety of jar candles,
Samplers-Registered Trademark-, pillars, tapers and other candle products,
marketed primarily under our trade names Housewarmer-Registered Trademark- and
Country Kitchen-Registered Trademark-, as well as a wide range of candle
accessories.
We sell our candles through our wholesale customers who have approximately
12,000 gift store locations nationwide and through our rapidly expanding retail
base of 72 company-owned and operated stores in 23 states as of May 15, 1999.
Our 90,000 square foot flagship store in South Deerfield, Massachusetts attracts
an estimated 2.5 million visitors a year. We also sell our products through our
direct mail catalogs, Internet website (www.yankeecandle.com), international
distributors and our distribution center located in the United Kingdom.
We have experienced 27% annual revenue growth over the last five years and,
in 1998, our sales reached $184.5 million. We believe our strong growth is based
on the high quality of our products, the efficiency of our manufacturing
operations and the strength of our retail and wholesale sales capabilities.
Michael Kittredge founded our business in 1969, when he was just seventeen
years old, by making his first candle in his family kitchen. He grew the
business steadily and, together with our dedicated management team, has built
Yankee Candle into a leader in the premium scented candle market. Most of our
current senior managers have been with us for 17 years. In April 1998, Yankee
Candle was recapitalized and the Forstmann Little partnerships and Yankee Candle
management became the owners of a 90% equity interest. Since the 1998
recapitalization, we have reinvested our capital to actively pursue our
wholesale and retail growth strategies. To facilitate this growth, we have added
several key employees, expanded our production capacity, upgraded our warehouse
management and information systems, and opened our distribution center in the
United Kingdom.
INDUSTRY OVERVIEW
We operate in the rapidly growing scented candle segment of the giftware
industry. Independent industry sources estimate that:
- the domestic giftware industry has grown on average 12% per year since the
early 1990's to reach $47 billion in 1997,
- the domestic market for candles has grown 10 to 15% per year since the
early 1990's to reach $2.1 billion in 1998, and
1
<PAGE>
- the scented candle segment, in which we compete, represents the fastest
growing part of the candle and home fragrancing industry.
The scented candle market is expected to continue to grow based on favorable
consumer trends including increased purchases for home decor and gifts and the
year-round usage of scented candles as an affordable luxury.
OUR COMPETITIVE STRENGTHS
WE HAVE A STRONG BRAND IDENTITY AS THE LEADING PREMIUM CANDLE COMPANY WITH A
LOYAL CUSTOMER BASE. Since 1993 we have consistently been ranked number one in
sales in the domestic candle category and in the top two for product re-orders
across all giftware categories by GiftBeat, a giftware industry newsletter. We
also had 74% of our retail customers rank us as better than other candle brands
according to Unity Marketing.
WE HAVE A WELL-ESTABLISHED, NATIONAL WHOLESALE CUSTOMER BASE. Our brand
name, the popularity and profitability of our merchandise and our successful
product display system have made us the top-selling product for many of our
wholesale customers, 65% of whom have been our customers for over five years.
WE HAVE A DEMONSTRATED ABILITY TO CARRY OUT OUR RETAIL EXPANSION. Our strong
wholesale presence and nationally recognized brand have enabled us to
successfully roll-out our retail stores. All but one of our retail stores have
been profitable beginning in their first year of operation. As of May 15, 1999,
we had 72 retail stores in 23 states. Since 1996 we have experienced 38% annual
growth in retail sales and comparable store growth of over 16%.
WE DESIGN, MANUFACTURE AND DISTRIBUTE OUR OWN PRODUCTS. This enables us to
ensure the highest quality products, prompt delivery to our wholesale customers
and retail stores and high margins, all of which give us a significant advantage
over our competitors.
OUR CHAIRMAN AND SENIOR MANAGEMENT HAVE A COMBINED 80 YEARS OF EXPERIENCE IN
THE CANDLE INDUSTRY AND OVER 90 YEARS OF EXPERIENCE IN THE RETAIL SECTOR. Three
of our top four executives have each been with Yankee Candle for 17 years and
many of our key managers in manufacturing, site selection and product
development have tenures of over 15 years with our company.
OUR GROWTH STRATEGY
WE PLAN TO RAPIDLY EXPAND OUR RETAIL STORE BASE. As of May 15, 1999, we have
opened ten stores in 1999 and we plan to open approximately 30 additional stores
by the end of the year. We believe that the transferability of our retailing
format, our proven record of successfully opening new stores, our continuing
investment in training and management information systems and our focus on high
visibility retail locations in premium malls all contribute to our ability to
rapidly and successfully expand our retail stores.
WE PLAN TO CONTINUE TO GROW OUR SALES THROUGH OUR WHOLESALE DISTRIBUTION
CHANNEL. We are committed to continuing to grow our wholesale business, which
grew by over 22% annually over the last three years. We plan to add new
locations, increase the average order size and re-order frequency of our
existing customers and invest significant capital in new promotional programs,
improved telemarketing systems and enhanced customer service.
WE PLAN TO EXPAND OUR INTERNATIONAL SALES. We currently sell our products
through international distributors and, in June 1998, we established our own
European wholesale subsidiary in order to take advantage of the $1 billion
European candle market.
WE PLAN TO EXPAND OUR DIRECT MAIL CATALOG AND INTERNET OPERATIONS. We expect
our sales to grow through our direct mail catalog and Internet website as a
result of demographic and lifestyle changes in the consumer population.
2
<PAGE>
WE PLAN TO CONTINUE TO INTRODUCE NEW PRODUCTS. As a product and market
innovator in the premium scented candle segment of the giftware industry, we
maintain a strong in-house product design and development team and plan to
introduce 12 new fragrances and several new candle lines in 1999.
THE 1998 RECAPITALIZATION AND THE REORGANIZATION IN CONNECTION WITH THIS
OFFERING
In April 1998, we completed a recapitalization of Yankee Candle. As a result
of the 1998 recapitalization and a reorganization occurring in connection with
this offering, two partnerships affiliated with Forstmann Little & Co. will own
approximately 85% of our common stock and directors, officers and employees of
Yankee Candle, including Michael Kittredge, will own the balance immediately
prior to the closing of this offering. After giving effect to this offering, the
Forstmann Little partnerships will own % of our common stock and the other
existing stockholders will own %.
3
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common stock offered by:
Yankee Candle................. shares
The selling stockholders...... shares
-------
Total....................... shares
-------
-------
Common stock to be outstanding
after the offering............ shares
Use of proceeds................. The net proceeds to Yankee Candle from the offering are
estimated to be approximately $ million. We will use the
net proceeds from the offering, together with proceeds of
$220 million from a new credit facility and available cash,
to redeem $320 million aggregate principal amount of Yankee
Candle's outstanding subordinated debentures.
Proposed NYSE symbol............ YCC
</TABLE>
-------------------
Unless we specifically state otherwise, the information in this prospectus
does not take into account the sale of up to shares of common stock which
the underwriters have the option to purchase from the selling stockholders to
cover over-allotments.
The number of shares of our common stock that will be outstanding
immediately after the offering listed above includes shares of common
stock, or shares if the over-allotment option is exercised, which are
expected to be issued in connection with the offering upon exercise of
outstanding stock options and which shares will be sold in the offering. The
number does not include shares issuable upon the exercise of additional
outstanding stock options at April 3, 1999, with a weighted average exercise
price of $ .
4
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL AND OTHER DATA
Before the recapitalization on April 27, 1998, Yankee Candle was an S
Corporation for federal and state income tax purposes. As a result, our taxable
earnings were taxed directly to our then existing sole stockholder. Since the
1998 recapitalization, Yankee Candle has been a C Corporation subject to federal
and state income taxes.
The data set forth for the following items assumes that Yankee Candle was
subject to federal and state income taxes and was taxed as a C Corporation at
the effective tax rates that would have applied for all periods:
- pro forma provision (benefit) for income taxes,
- pro forma net income (loss), and
- pro forma earnings per share (basic and diluted).
Pro forma statement of operations data, as adjusted for the 1998
recapitalization, the refinancing of the subordinated debentures and the
offering, also gives effect to the 1998 recapitalization, the refinancing and
the offering as if they had occurred on January 1, 1998. The balance sheet data,
as adjusted for the refinancing and the offering, gives effect to the
refinancing and the offering as if they had occurred on December 31, 1998.
<TABLE>
<CAPTION>
THREE THIRTEEN
YEAR ENDED DECEMBER 31, MONTHS WEEKS
------------------------------- ENDED ENDED
1996 1997 1998 MARCH 31, 1998 APRIL 3, 1999
--------- --------- --------- --------------- -------------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF OPERATIONS DATA:
Net sales........................................... $ 112,199 $ 144,103 $ 184,477 $ 35,313 $ 46,590
Cost of goods sold.................................. 53,207 62,069 79,105 16,400 20,804
--------- --------- --------- ------- -------------
Gross profit........................................ 58,992 82,034 105,372 18,913 25,786
Selling expenses.................................... 23,244 26,935 30,546 7,480 8,509
General and administrative expenses................. 21,687 27,031 19,753 4,006 6,213
Bonus related to the 1998 recapitalization.......... -- -- 61,263 -- --
--------- --------- --------- ------- -------------
Income (loss) from operations....................... 14,061 28,068 (6,190) 7,427 11,064
Interest income..................................... (165) (151) (219) (48) (290)
Interest expense.................................... 1,913 2,154 16,268 369 5,768
Other (income) expense.............................. 221 334 737 (11) (44)
--------- --------- --------- ------- -------------
Income (loss) before provision for income taxes..... 12,092 25,731 (22,976) 7,117 5,630
Provision for income taxes.......................... 410 1,360 9,656 -- 2,252
--------- --------- --------- ------- -------------
Net income (loss)................................... $ 11,682 $ 24,371 $ (32,632) $ 7,117 $ 3,378
--------- --------- --------- ------- -------------
--------- --------- --------- ------- -------------
Historical basic earnings per share.................
Historical diluted earnings per share...............
Pro forma provision (benefit) for income taxes...... 4,830 10,686 (8,731) 2,704
Pro forma net income (loss)......................... $ 7,262 $ 15,045 $ (14,245) $ 4,413
--------- --------- --------- -------
--------- --------- --------- -------
Pro forma basic earnings per share..................
Pro forma diluted earnings per share................
Weighted average basic shares outstanding...........
Weighted average diluted shares outstanding.........
PRO FORMA STATEMENT OF OPERATIONS DATA, AS ADJUSTED
FOR THE 1998 RECAPITALIZATION, THE REFINANCING AND
THE OFFERING:
Net income.......................................... $ 23,326 $ 4,351
Interest expense.................................... 16,933 4,147
Basic earnings per common share.....................
Diluted earnings per common share...................
Weighted average basic shares outstanding...........
Weighted average diluted shares outstanding.........
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
THIRTEEN
YEAR ENDED DECEMBER 31, THREE MONTHS WEEKS
------------------------------- ENDED ENDED
1996 1997 1998 MARCH 31, 1998 APRIL 3, 1999
--------- --------- --------- --------------- -------------
<S> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
OTHER DATA:
Number of retail stores (at period end)............ 34 47 62 49 67
Comparable store growth............................ 18.4% 16.4% 16.5% 15.2% 17.9%
Gross profit margin................................ 52.6% 56.9% 57.1% 53.6% 55.4%
Adjusted EBITDA margin(1)(2)(3).................... 24.5% 29.2% 32.1% 23.8% 26.7%
Depreciation and amortization...................... $ 3,094 $ 3,581 $ 4,662 $ 981 $ 1,305
Capital expenditures............................... 10,076 9,173 9,433 1,604 4,242
CASH FLOW DATA:
EBITDA(1).......................................... $ 16,934 $ 31,315 $ (2,865) $ 8,419 $ 12,209
Adjusted EBITDA(2)................................. 27,451 42,139 59,251 8,408 12,448
Net cash flows from operating activities........... 17,230 30,035 (11,578) 7,156 1,345
Net cash flows from investing activities........... (10,987) (9,961) (9,305) (1,265) (3,933)
Net cash flows from financing activities........... (9,112) (13,541) 43,917 (10,637) (271)
</TABLE>
<TABLE>
<CAPTION>
AS OF APRIL 3,
1999
AS ADJUSTED FOR
AS OF DECEMBER 31, AS OF THE REFINANCING
------------------------------- APRIL 3, AND THE
1996 1997 1998 1999 OFFERING
--------- --------- --------- --------- ---------------
<S> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
BALANCE SHEET DATA:
Cash and cash equivalents.............................. $ 844 $ 7,377 $ 30,411 $ 27,560 $ 14,560
Working capital (excluding cash and cash
equivalents)......................................... 1,817 (12,487) 493 4,079 6,237
Total assets........................................... 59,550 73,096 275,345 284,700 273,464
Total debt............................................. 12,045 25,264 320,000 320,000 220,000
Total stockholders' equity (deficit)................... 37,180 34,791 (68,591) (65,216) 23,548
- ------------------------------
<FN>
(1) EBITDA represents earnings before interest, income taxes, depreciation and amortization. For this purpose,
amortization does not include amortization of deferred financing costs of $600 in 1998 and $204 for the
thirteen weeks ended April 3, 1999, which amount is included in interest expense. EBITDA is presented because
it is a widely accepted financial indicator used by certain investors and analysts to analyze and compare
companies on the basis of operating performance. EBITDA as presented may not be comparable to similarly titled
measures reported by other companies since not all companies necessarily calculate EBITDA in an identical
manner and therefore is not necessarily an accurate means of comparison between companies. EBITDA is not
intended to represent cash flows for the period or funds available for management's discretionary use nor has
it been represented as an alternative to operating income as an indicator of operating performance and should
not be considered in isolation or as a substitute for measures of performance prepared in accordance with
generally accepted accounting principles.
(2) Adjusted EBITDA reflects adjustments to eliminate (a) the bonus of $61,263 in 1998 related to the 1998
recapitalization, (b) other (income) expense, (c) non-cash stock based compensation, and (d) compensation and
benefits, net of current annual compensation and benefits of $338, paid to the former sole stockholder of the S
Corporation of $10,296 and $10,490 for 1996 and 1997, respectively. The comparable amounts for 1994 and 1995 of
$8,354 and $7,156 are not reflected above but are included in the adjusted EBITDA calculation in "Selected
Financial and Other Data." Adjusted EBITDA does not reflect adjustments to eliminate commissions paid through
March 1998 to independent manufacturer representatives, which were replaced by a direct sales force. See
"Management's Discussion and Analysis of Financial Condition and Results of Operations" for further discussion.
(3) Adjusted EBITDA margin reflects adjusted EBITDA as a percentage of net sales.
</FN>
</TABLE>
6
<PAGE>
RISK FACTORS
INVESTING IN OUR COMMON STOCK WILL PROVIDE YOU WITH AN EQUITY OWNERSHIP
INTEREST IN YANKEE CANDLE. THE VALUE OF YOUR INVESTMENT MAY INCREASE OR
DECREASE. YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING FACTORS BEFORE DECIDING TO
INVEST IN SHARES OF OUR COMMON STOCK.
WE MAY NOT BE ABLE TO GROW OUR BUSINESS AS PLANNED.
We intend to continue to pursue a business strategy of increasing sales and
earnings by expanding our retail and wholesale operations both in the United
States and internationally. Our retail growth strategy depends in large part on
our ability to open new stores in both existing and new geographic markets.
Since we are planning to open more stores each year than we have in the past, we
may not be able to achieve our planned growth or sustain our financial
performance. Our ability to implement our growth strategy successfully will also
be dependent in part on factors beyond our control, including changes in
consumer preferences and in our competitive environment. Our ability to
anticipate changes in the candle and giftware industries, and identify industry
trends will be critical factors in our ability to remain competitive.
We expect that, as we grow, it will become more difficult to maintain our
growth rate. We cannot assure you that we will continue to grow at a rate
comparable to our historic growth rate or that our historic financial
performance will continue as we grow.
WE FACE SIGNIFICANT COMPETITION IN THE GIFTWARE INDUSTRY, WHICH COULD ADVERSELY
IMPACT US.
We compete generally for the disposable income of consumers with other
producers in the $47 billion giftware industry. The giftware industry is highly
competitive with a large number of both large and small participants. Our
products compete with other scented and unscented candle products and with other
gifts within a comparable price range, like boxes of candy, flowers, wine, fine
soap and related merchandise. Our retail stores compete with franchised candle
store chains, specialty candle stores and gift and houseware retailers. Some of
our competitors are part of large, diversified companies which have greater
financial resources and a wider range of product offerings than we do.
OUR SUCCESS DEPENDS ON OUR SENIOR EXECUTIVE OFFICERS, THE LOSS OF WHOM COULD
DISRUPT OUR BUSINESS.
Our success is substantially dependent upon the retention of our senior
executive officers. We do not have employment agreements with any of our senior
executive officers, except our Chief Financial Officer. If our senior executive
officers become unable or unwilling to participate in the business of Yankee
Candle, our future business and financial performance could be materially
affected.
BECAUSE WE ARE NOT A DIVERSIFIED COMPANY AND ARE DEPENDENT UPON ONE INDUSTRY, WE
HAVE LESS FLEXIBILITY IN REACTING TO UNFAVORABLE CONSUMER TRENDS, ADVERSE
ECONOMIC CONDITIONS OR BUSINESS CYCLES.
THE LOSS OF OUR MANUFACTURING FACILITY WOULD DISRUPT OUR OPERATIONS.
We rely exclusively on our manufacturing facility in Whately, Massachusetts
to produce our candle products. Because most of our machinery is designed or
customized by us to manufacture our products and because we have strict quality
control standards for our products, the loss of our manufacturing facility, due
to natural disaster or otherwise, would materially affect our operations.
Although our manufacturing facility is adequately insured, we believe it would
take a minimum of nine months to replace the plant and machinery to a level
equivalent to their current level of production and quality control standards.
7
<PAGE>
WE MAY EXPERIENCE A DECLINE IN OUR RETAIL COMPARABLE STORE SALES, WHICH COULD
CAUSE THE PRICE OF OUR COMMON STOCK TO DROP.
Our comparable store sales from our retail business have contributed
significantly to our overall sales growth. Our retail comparable store sales
could be adversely impacted by competition or our inability to execute our
business strategy. If our retail comparable store sales declined for any reason,
we could experience a loss in our revenues and income, which could lower the
price of our common stock.
SEASONAL AND QUARTERLY FLUCTUATIONS IN OUR BUSINESS COULD AFFECT THE MARKET FOR
OUR COMMON STOCK.
Our revenues and operating results vary from quarter to quarter. We have
historically realized higher revenues and operating income in our fourth
quarter, particularly in our retail business which is becoming a larger portion
of our sales. We believe that this has been due primarily to an increase in
giftware industry sales during the holiday season of the fourth quarter. As a
result of this seasonality, we believe that quarter to quarter comparisons of
our operating results are not necessarily meaningful and that these comparisons
cannot be relied upon as indicators of future performance. In addition, we may
also experience quarterly fluctuations in our revenues and income depending on
how many new retail stores we open in a particular quarter. These quarterly
fluctuations that we may report in the future may not match the expectations of
market analysts and investors. This could cause the trading price of our common
stock to fluctuate.
WE ARE CONTROLLED BY FORSTMANN LITTLE AND OUR MANAGEMENT, WHOSE INTERESTS MAY
CONFLICT WITH THOSE OF OTHER STOCKHOLDERS.
Following the offering, the Forstmann Little partnerships and our management
will together own approximately % of our outstanding common stock on a fully
diluted basis and will continue to control us. Accordingly, they will be able
to:
- elect our entire board of directors,
- control our management and policies, and
- determine, without the consent of our other stockholders, the outcome of
any corporate transaction or other matter submitted to our stockholders
for approval, including mergers, consolidations and the sale of all or
substantially all of our assets.
They will also be able to prevent or cause a change in control of Yankee
Candle and will be able to amend our Articles of Organization and By-Laws at any
time. The interests of the Forstmann Little partnerships and our management also
may conflict with the interests of the other holders of common stock.
OUR STOCK PRICE MAY FLUCTUATE SIGNIFICANTLY AFTER THE OFFERING AND YOU COULD
LOSE A SIGNIFICANT PART OF YOUR INVESTMENT AS A RESULT.
Prior to this offering, there has been no public market for our common
stock. We intend to list our common stock on the NYSE. We do not know how the
common stock will trade in the future. The initial public offering price will be
determined through negotiations among the underwriters, the selling stockholders
and us. You may not be able to resell your shares at or above the initial public
offering price due to fluctuations in the market price of our common stock.
These fluctuations may result from a number of factors, including:
- the perceived prospects of Yankee Candle,
- changes in our operating results,
- differences between our actual financial and operating results and those
expected by investors and research analysts,
8
<PAGE>
- changes in research analysts' recommendations or projections, and
- changes in market conditions of the candle and giftware industries.
In addition, the stock market in general has experienced extreme volatility
that often has been unrelated to the operating performance of particular
companies. These broad market and industry fluctuations may adversely affect the
trading price of our common stock, regardless of our actual operating
performance.
EXISTING STOCKHOLDERS MAY SELL THEIR COMMON STOCK, WHICH COULD ADVERSELY AFFECT
THE MARKET PRICE OF OUR COMMON STOCK.
Sales of a substantial number of shares of common stock into the public
market after this offering, or the perception that these sales could occur,
could materially and adversely affect our stock price. As of April 3, 1999 and
giving effect to the reorganization, there were shares of common stock
outstanding, excluding shares to be sold in this offering. After the offering,
persons who currently hold common stock will be entitled to register their
common stock under the Securities Act of 1933 at our expense. We have granted to
the Forstmann Little partnerships six demand rights to cause us to file a
registration statement under the Securities Act covering resales of the
shares of common stock to be held by them after this offering. These shares,
along with shares held by others who can participate in the registrations, will
represent % of our outstanding common stock following this offering. The
Forstmann Little partnerships have no present intent to exercise their demand
registration rights, although they retain the right to do so. These shares may
also be sold under Rule 144 of the Securities Act, depending on their holding
period and subject to significant restrictions in the case of shares held by
persons deemed to be affiliates of Yankee Candle.
PROVISIONS IN OUR CORPORATE DOCUMENTS AND MASSACHUSETTS LAW COULD DELAY OR
PREVENT A CHANGE IN CONTROL OF YANKEE CANDLE.
Our Articles of Organization and By-Laws may discourage, delay or prevent a
merger or acquisition involving Yankee Candle that our stockholders may consider
favorable, by:
- authorizing the issuance of preferred stock, the terms of which may be
determined at the sole discretion of the board of directors,
- providing for a classified board of directors, with staggered three-year
terms, and
- establishing advance notice requirements for nominations for election to
the board of directors or for proposing matters that can be acted on by
stockholders at meetings.
Massachusetts law may also discourage, delay or prevent someone from
acquiring or merging with us. For a description you should read "Description of
Capital Stock."
YEAR 2000 FAILURES MAY ADVERSELY IMPACT OUR OPERATIONS.
Our business could be adversely affected by information technology issues
related to the Year 2000. The Year 2000 issue is a broad business issue, whose
impact extends beyond traditional computer hardware and software to possible
failure of our plant systems, as well as to third parties. If any of our systems
are not Year 2000 compliant or if our customers or suppliers fail to achieve
Year 2000 compliance, we may experience the following adverse consequences:
- our customers may be unable to place orders with us due either to our
system failures or to those of our customers,
- we may be unable to bill our customers and maintain adequate production
scheduling, inventory cost accounting and other elements of our business
that are dependent upon computer systems, and
9
<PAGE>
- we may be unable to deliver our products on a timely basis.
The ability of third parties with whom we do business to address adequately
their Year 2000 issues is outside our control. For a description of our Year
2000 compliance efforts you should read "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Year 2000 Compliance."
PURCHASERS OF OUR COMMON STOCK WILL EXPERIENCE SUBSTANTIAL DILUTION IN THE NET
TANGIBLE BOOK VALUE PER SHARE OF THEIR INVESTMENT.
The initial public offering price per share will exceed our net tangible
book value per share. As a result of this offering, our pro forma net tangible
book value per share as of April 3, 1999 will increase to $ , resulting in
an immediate increase in net tangible book value of $ per share to existing
stockholders and an immediate dilution of $ per share to new investors
purchasing shares of common stock in this offering. You may incur additional
dilution if holders of options to purchase common stock, whether currently
outstanding or subsequently granted, exercise their options following the
offering.
THIS PROSPECTUS INCLUDES FORWARD-LOOKING STATEMENTS WHICH COULD DIFFER FROM
ACTUAL FUTURE RESULTS.
This prospectus includes forward-looking statements. Statements that are
predictive in nature, that depend upon or refer to future events or conditions
or that include the words "expects," "anticipates," "intends," "plans,"
"believes," "estimates," "thinks" and similar expressions are forward-looking
statements. These statements involve known and unknown risks, uncertainties and
other factors, including the factors described above, that may cause our actual
results and performance to be materially different from any future results or
performance expressed or implied by these forward-looking statements. Although
we believe that these statements are based upon reasonable assumptions, we
cannot assure you that our goals will be achieved. These forward-looking
statements are made as of the date of this prospectus, and we assume no
obligation to update or revise them or provide reasons why actual results may
differ.
10
<PAGE>
USE OF PROCEEDS
The net proceeds to Yankee Candle from the sale of the shares of
common stock offered, after deducting estimated expenses of $ and
underwriting discounts and commissions, are estimated to be approximately
$ million. We will use these net proceeds, together with $220 million of
bank borrowings under a new credit facility and available cash, to redeem $320
million aggregate principal amount of Yankee Candle's outstanding subordinated
debentures evidenced by its 6 3/4% Series A Debentures due May 31, 2009, 6 3/4%
Series B Debentures due May 31, 2010 and 6 3/4% Series C Debentures due May 31,
2011. After the application of the net proceeds of the offering and additional
bank borrowings, none of these subordinated debentures will remain outstanding.
The indebtedness under the subordinated debentures was incurred in
connection with the 1998 recapitalization. The sources and uses of funds in
connection with the 1998 recapitalization were as follows (in thousands):
<TABLE>
<S> <C>
Sources of funds from the 1998 recapitalization:
Proceeds to Yankee Candle from subordinated debentures........ $ 320,000
Proceeds from credit facility ($2,500 at closing)............. 10,145
---------
Total sources............................................. $ 330,145
---------
---------
Uses of funds:
Redemption of shares of common stock from Michael Kittredge... $ 200,019
Repayment of existing indebtedness to third parties........... 49,313
Special bonuses............................................... 61,263
Transaction fees and expenses................................. 19,550
---------
Total uses................................................ $ 330,145
---------
---------
</TABLE>
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and "Management--Relationships and Transactions with Yankee
Candle."
Yankee Candle will not receive any proceeds from the sale of common stock in
the offering by the selling stockholders. In connection with the offering,
approximately 22 of our directors, officers and employees are expected to
exercise stock options to purchase, in the aggregate, approximately shares of
common stock from Yankee Candle for an aggregate exercise price of approximately
$ . All of those shares are expected to be sold by selling stockholders in
the offering.
DIVIDEND POLICY
Yankee Candle does not intend to pay any cash dividends in the foreseeable
future but instead intends to retain earnings, if any, for the future operation
and expansion of the business. Any determination to pay dividends in the future
will be at the discretion of the board of directors and will be dependent upon
results of operations, financial condition, contractual restrictions,
restrictions imposed by applicable law and other factors deemed relevant by the
board of directors. In addition, Yankee Candle's new credit agreement will limit
its ability to declare or pay cash dividends on the common stock. See
"Description of the Credit Agreement." Future indebtedness may also prohibit or
restrict Yankee Candle's ability to pay dividends and make distributions to
stockholders.
11
<PAGE>
CERTAIN INFORMATION
All information in this prospectus relating to the number of shares of our
common stock or options is based upon information as of April 3, 1999, as
adjusted to reflect a reorganization in connection with this offering as
described in "Description of Capital Stock." Unless otherwise specifically
stated, all information in this prospectus assumes the issuance and sale of
common stock in the offering at an assumed initial public offering price of
$ per share.
This prospectus includes statistical data regarding the candle and giftware
industries which was obtained from industry publications, including reports
generated by Unity Marketing, Kline & Company, Inc. and GiftBeat. These industry
organizations generally indicate that they have obtained information from
sources believed to be reliable, but do not guarantee the accuracy and
completeness of their information. While we believe these industry publications
to be reliable, we have not independently verified their data.
12
<PAGE>
CAPITALIZATION
The following table sets forth our pro forma debt and capitalization as of
April 3, 1999, and as adjusted to give effect to the refinancing and this
offering.
<TABLE>
<CAPTION>
AS ADJUSTED FOR
THE REFINANCING
ACTUAL AND THE OFFERING
----------- -------------------
<S> <C> <C>
(IN THOUSANDS)
Long-term debt:
6 3/4% subordinated debentures.......................................... $ 320,000 $ --
Term loan............................................................... -- 150,000
Revolving credit loan................................................... -- 70,000
----------- ----------
Total long-term debt.................................................. 320,000 220,000
Stockholders' equity (deficit):
Common stock, $.01 par value per share, 1,000 shares authorized and
issued, 500 shares outstanding, actual; issued and outstanding, pro
forma.................................................................
Additional paid-in capital.............................................. 128,413 220,413
Treasury stock.......................................................... (212,988) (212,988)
Retained earnings....................................................... 22,524 19,288
Capital subscription receivable......................................... (815) (815)
Unearned stock compensation............................................. (2,239) (2,239)
Accumulated other comprehensive income.................................. (111) (111)
----------- ----------
Total stockholders' equity (deficit).................................. (65,216) 23,548
----------- ----------
Total capitalization.................................................. $ 254,784 $ 243,548
----------- ----------
----------- ----------
</TABLE>
Our actual capitalization as of April 3, 1999 reflects the April 27, 1998
transaction in which we were recapitalized. Pursuant to this recapitalization,
we borrowed approximately $320 million under subordinated debentures, which were
used in addition to other funds, in order to:
- redeem a portion of our common stock held by our then sole stockholder for
approximately $200 million,
- pay transaction fees and expenses, including financing fees, of
approximately $19.6 million,
- repay existing indebtedness of $49.3 million, and
- pay bonuses of $61.3 million related to this transaction to certain of our
senior employees.
The subordinated debentures are divided into three equal series, due on May
31, 2009, May 31, 2010 and May 31, 2011. The subordinated debentures provide for
an interest rate of 6 3/4% and provide for interest to be paid semi-annually.
We entered into a credit agreement with a consortium of banks at the time of
the 1998 recapitalization that provided for a $60 million revolving credit
facility. There were no borrowings under this facility at April 3, 1999.
13
<PAGE>
DILUTION
At April 3, 1999, we had a pro forma net tangible book deficit of $
million or $ per share of common stock. Pro forma net tangible book value per
share is determined by dividing our tangible net book value (total tangible
assets less total liabilities) by the total number of shares of common stock
outstanding. After giving effect to the sale of the shares of common stock
offered by us in this offering at an assumed initial public offering price of
$ per share, and after deducting estimated underwriting discounts and
commissions and offering expenses payable by us, our adjusted net tangible book
value would have been approximately $ , or $ per share of common
stock. This represents an immediate increase in net tangible book value of $
per share to existing stockholders and an immediate dilution of $ per share to
new investors purchasing shares of common stock in the offering. The following
table illustrates this dilution on a per share basis:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share................. $
Pro forma net tangible book deficit per share
before the offering.............................. $
Increase in pro forma net tangible book value per
share attributable to new investors..............
---------
Pro forma net tangible book value per share after the
offering......................................................
---------
Dilution per share to new investors............................. $
---------
---------
</TABLE>
The following table sets forth, on a pro forma basis as of April 3, 1999,
the number of shares of common stock purchased from us, the total consideration
paid and the average price per share paid by our existing stockholders and to be
paid by new investors in the offering at an assumed initial public offering
price of $ , and before deduction of estimated underwriting discounts and
commissions and offering expenses payable by us:
<TABLE>
<CAPTION>
SHARES PURCHASED (1) TOTAL CONSIDERATION AVERAGE
----------------------- ------------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
---------- ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Existing stockholders.................................. % $ % $
New investors.......................................... % %
---------- ----- ------------ -----
Total............................................ % $ %
---------- ----- ------------ -----
---------- ----- ------------ -----
- ------------------------
<FN>
(1) Does not reflect the sale of shares of common stock by the selling stockholders in the offering.
</FN>
</TABLE>
This table assumes the sale of shares of common stock by Yankee Candle
to some of the selling stockholders pursuant to existing option agreements for
an aggregate option exercise price of $ .
After giving effect to the reorganization but prior to the closing of this
offering, the total number of our stockholders will be 13.
Sales by the selling stockholders in the offering will reduce the number of
shares of common stock held by existing stockholders to or approximately
% of the total number of shares of common stock outstanding after the offering
and will increase the number of shares of common stock held by new investors to
or approximately % of the total number of shares of common stock
outstanding after the offering.
14
<PAGE>
SELECTED FINANCIAL AND OTHER DATA
You should read the selected historical financial and other data below in
conjunction with the "Consolidated Financial Statements" and the "Unaudited Pro
Forma Consolidated Condensed Financial Statements" and the accompanying notes to
each. You should also read "Management's Discussion and Analysis of Financial
Condition and Results of Operations." The historical financial data as of
December 31, 1997 and 1998 and for the years ended December 31, 1996, 1997 and
1998 have been derived from the audited consolidated financial statements and
the accompanying notes included elsewhere in this prospectus. The historical
financial data as of December 31, 1994, 1995 and 1996 and for the years ended
December 31, 1995 and 1994 have been derived from audited financial statements
for the corresponding period, which are not contained in this prospectus. The
historical financial data as of April 3, 1999 and for the three months ended
March 31, 1998 and for the thirteen weeks ended April 3, 1999 have been derived
from the unaudited interim condensed consolidated financial statements and the
accompanying notes included elsewhere in this prospectus.
Before the recapitalization on April 27, 1998, Yankee Candle was an S
Corporation for federal and state income tax purposes. As a result, our taxable
earnings were taxed directly to our then existing sole stockholder. Since the
1998 recapitalization, Yankee Candle has been a C Corporation subject to federal
and state income taxes.
The data set forth for the following items assumes that Yankee Candle was
subject to federal and state income taxes and was taxed as a C Corporation at
the effective tax rates that would have applied for all periods:
- pro forma provision (benefit) for income taxes,
- pro forma net income (loss), and
- pro forma earnings per share (basic and diluted).
EBITDA, adjusted EBITDA and adjusted EBITDA margin are defined in footnotes
(1), (2) and (3) to "Summary Consolidated Financial and Other Data."
15
<PAGE>
<TABLE>
<CAPTION>
THIRTEEN
YEAR ENDED DECEMBER 31, THREE MONTHS WEEKS
----------------------------------------------------- ENDED ENDED
1994 1995 1996 1997 1998 MARCH 31, 1998 APRIL 3, 1999
--------- --------- --------- --------- --------- --------------- -------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales......................... $ 69,848 $ 94,777 $ 112,199 $ 144,103 $ 184,477 $ 35,313 $ 46,590
Cost of goods sold................ 32,758 45,724 53,207 62,069 79,105 16,400 20,804
--------- --------- --------- --------- --------- ------- -------------
Gross profit...................... 37,090 49,053 58,992 82,034 105,372 18,913 25,786
Selling expenses.................. 14,227 19,789 23,244 26,935 30,546 7,480 8,509
General and administrative
expenses........................ 15,165 15,450 21,687 27,031 19,753 4,006 6,213
Bonus related to the 1998
recapitalization................ -- -- -- -- 61,263 -- --
--------- --------- --------- --------- --------- ------- -------------
Income (loss) from operations..... 7,698 13,814 14,061 28,068 (6,190) 7,427 11,064
Interest income................... (43) (49) (165) (151) (219) (48) (290)
Interest expense.................. 818 1,824 1,913 2,154 16,268 369 5,768
Other (income) expense............ (46) 1,168 221 334 737 (11) (44)
--------- --------- --------- --------- --------- ------- -------------
Income (loss) before provision for
income taxes.................... 6,969 10,871 12,092 25,731 (22,976) 7,117 5,630
Provision for income taxes........ 190 316 410 1,360 9,656 -- 2,252
--------- --------- --------- --------- --------- ------- -------------
Net income (loss)................. $ 6,779 $ 10,555 $ 11,682 $ 24,371 $ (32,632) $ 7,117 $ 3,378
--------- --------- --------- --------- --------- ------- -------------
--------- --------- --------- --------- --------- ------- -------------
Historical basic earnings per
share...........................
Historical diluted earnings per
share...........................
Pro forma provision (benefit) for
income taxes.................... 2,411 4,115 4,830 10,686 (8,731) 2,704
Pro forma net income (loss)....... $ 4,558 $ 6,756 $ 7,262 $ 15,045 $ (14,245) $ 4,413
--------- --------- --------- --------- --------- -------
--------- --------- --------- --------- --------- -------
Pro forma basic earnings per
share...........................
Pro forma diluted earnings per
share...........................
Weighted average basic shares
outstanding.....................
Weighted average diluted shares
outstanding.....................
OTHER DATA:
Number of retail stores (at period
end)............................ 14 26 34 47 62 49 67
Gross profit margin............... 53.1% 51.8% 52.6% 56.9% 57.1% 53.6% 55.4%
Adjusted EBITDA margin............ 24.7% 24.4% 24.5% 29.2% 32.1% 23.8% 26.7%
Depreciation and amortization..... $ 1,195 $ 2,186 $ 3,094 $ 3,581 $ 4,662 $ 981 $ 1,305
Capital expenditures.............. 13,585 10,845 10,076 9,173 9,433 1,604 4,292
CASH FLOW DATA:
EBITDA............................ $ 8,939 $ 14,832 $ 16,934 $ 31,315 $ (2,865) $ 8,419 $ 12,209
Adjusted EBITDA................... 17,247 23,156 27,451 42,139 59,251 8,408 12,448
Net cash flows from operating
activities...................... 7,664 9,298 17,230 30,035 (11,578) 7,156 1,345
Net cash flows from investing
activities...................... (13,285) (11,214) (10,987) (9,961) (9,305) (1,265) (3,933)
Net cash flows from financing
activities...................... 2,985 3,944 (9,112) (13,541) 43,917 (10,637) (271)
BALANCE SHEET DATA (AS OF END OF
PERIOD):
Cash and cash equivalents......... $ 1,684 $ 3,713 $ 844 $ 7,377 $ 30,411 $ 27,560
Working capital (excluding cash
and cash equivalents)........... 3,247 4,977 1,817 (12,487) 493 4,079
Total assets...................... 38,932 56,397 59,550 73,096 275,345 284,700
Total debt........................ 11,441 18,018 12,045 25,264 320,000 320,000
Total stockholders' equity
(deficit)....................... 19,545 28,623 37,180 34,791 (68,591) (65,216)
</TABLE>
16
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma consolidated condensed financial
statements have been derived by the application of pro forma adjustments to our
historical consolidated financial statements included elsewhere in this
prospectus. The unaudited pro forma consolidated condensed statement of
operations for the thirteen week period ended April 3, 1999 and the year ended
December 31, 1998 give effect to the 1998 recapitalization, the refinancing of
the subordinated debentures and the offering as if the transactions were
consummated on January 1, 1999 and January 1, 1998, respectively. The unaudited
pro forma consolidated condensed balance sheet as of April 3, 1999 gives effect
to the refinancing and the offering as if the transactions had occurred on April
3, 1999. The pro forma adjustments are described in the accompanying notes to
the unaudited pro forma consolidated condensed balance sheet and to the
unaudited pro forma consolidated condensed statement of operations.
The unaudited pro forma consolidated condensed financial statements should
not be considered indicative of actual results that would have been achieved had
the 1998 recapitalization, the refinancing and the offering been consummated on
the dates or for the period indicated and do not purport to indicate balance
sheet data or results of operations as of any future date or for any future
period. The unaudited pro forma consolidated condensed financial statements
should be read in conjunction with our historical consolidated financial
statements and the notes thereto included elsewhere in this prospectus.
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
ADJUSTMENTS
FOR THE 1998
RECAPITALIZATION,
THE REFINANCING
ACTUAL AND THE OFFERING PRO FORMA
----------- ------------------- -----------
<S> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Net sales.......................................................... $ 184,477 $ 184,477
Cost of sales...................................................... 79,105 79,105
----------- -----------
Gross profit..................................................... 105,372 105,372
Operating Expenses:
Selling expenses................................................. 30,546 30,546
General and administrative expenses.............................. 19,753 19,753
Bonus related to the recapitalization............................ 61,263 (61,263) (1) --
----------- ------- -----------
Income (loss) from operations...................................... (6,190) 55,073
Other (income) expense:
Interest income.................................................... (219) (219)
Interest expense................................................... 16,268 665(2) 16,933
Other expense...................................................... 737 737
----------- ------- -----------
Income (loss) before provision for income taxes.................... (22,976) 37,622
Pro forma provision (benefit) for income taxes..................... (8,731) 23,027(3) 14,296
----------- -----------
Pro forma net income (loss)........................................ $ (14,245) $ 23,326(4)
----------- -----------
----------- -----------
Pro forma basic earnings (loss) per common share................... $ $
Pro forma diluted earnings (loss) per common share................. $ $
Weighted average basic shares outstanding..........................
Weighted average diluted shares outstanding........................
</TABLE>
17
<PAGE>
The pro forma financial data shown above have been derived by the
application of pro forma adjustments to Yankee Candle's historical consolidated
statement of operations for the year ended December 31, 1998. Our pro forma
presentation reflects the 1998 recapitalization, the concurrent conversion of
Yankee Candle from an S Corporation to a C Corporation for federal income tax
purposes, the refinancing of the subordinated debentures and the offering. The
adjustments have been applied to derive the pro forma consolidated statement of
operations as if the transactions had occurred on January 1, 1998 and include
only those adjustments that were or are directly attributable to the
transactions and that are anticipated to have a continuing impact. Material
non-recurring charges that resulted directly from the 1998 recapitalization and
the refinancing have been excluded from the pro forma presentation.
<TABLE>
<S> <C> <C> <C>
<FN>
(1) To eliminate the bonus related to the 1998 recapitalizaton........................ $(61,263)
---------
---------
(2) To adjust interest expense to reflect the following:
(a) Interest expense on the 6 3/4% subordinated debentures; no such
interest expense has been included, giving effect to the repayment of
the 6 3/4% subordinated debentures with the proceeds from the
refinancing and the offering........................................... $ 0
(b) Interest expense on the $150,000 term loan and $70,000 revolving credit
loan under the new credit facility, as if the refinancing had occurred
on January 1, 1998, at an assumed weighted average interest rate of
6.6%................................................................... 14,520
(c) Interest expense on working capital borrowings......................... 569
(d) Amortization of deferred financing costs giving effect to the 1998
recapitalization and the refinancing as if they had occurred on January
1, 1998................................................................ 1,209
(e) Facility fee on the new credit facility................................ 271
---------
Pro forma interest expense............................................. 16,569
Historical interest expense (including interest on the 6 3/4%
subordinated debentures and amortization of deferred financing
costs)................................................................. (15,904)
---------
Total adjustment....................................................... $ 665
---------
---------
A 0.125% increase or decrease in the assumed weighted average interest
rate with respect to the new credit facility would change pro forma
interest expense by $275. Pro forma net income would change by $171.
(3) To adjust the pro forma provision for income taxes for the tax effect of the
above-noted pro forma adjustments, which aggregated $60,598, at the 38% effective
marginal income tax rate in effect for 1998....................................... $ 23,027
(4) Pro forma net income (loss) does not include an extraordinary loss of
approximately $3,416, representing a $5,510 non-cash charge less the associated
income tax benefit of $2,094, resulting from the write-off of deferred financing
costs related to the 6 3/4% subordinated debentures. This amount will be charged
to earnings in the quarter in which the 6 3/4% subordinated debentures are repaid.
</TABLE>
18
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
FOR THE THIRTEEN WEEKS ENDED APRIL 3, 1999
<TABLE>
<CAPTION>
ADJUSTMENTS
RELATING TO THE
REFINANCING AND THE
ACTUAL OFFERING PRO FORMA
----------- ------------------- -----------
<S> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Net sales.......................................................... $ 46,590 $ 46,590
Cost of sales...................................................... 20,804 20,804
----------- -----------
Gross profit..................................................... 25,786 25,786
Operating Expenses:
Selling expenses................................................. 8,509 8,509
General and administrative expenses.............................. 6,213 6,213
Transaction related bonuses...................................... -- --
----------- -----------
Income (loss) from operations...................................... 11,064 11,064
Other (income) expense:
Interest income.................................................. (290) (290)
Interest expense................................................. 5,768 (1,621) (1) 4,147
Other expense, net............................................... (44) (44)
----------- ------- -----------
Income (loss) before provision for income taxes.................... 5,630 7,251
Provision for income taxes......................................... 2,252 648(2) 2,900
----------- -----------
Net income (loss)................................................ $ 3,378 $ 4,351
----------- -----------
----------- -----------
Basic earnings (loss) per common share.............................
Diluted earnings (loss) per common share...........................
Weighted average basic shares outstanding..........................
Weighted average diluted shares outstanding........................
</TABLE>
The pro forma financial data shown above have been derived by the
application of pro forma adjustments to our historical consolidated statement of
operations for the thirteen weeks ended April 3, 1999. Our pro forma
presentation reflects the refinancing of the subordinated debentures and the
offering. Such adjustments have been applied to derive the pro forma
consolidated statement of operations as if such transactions occurred on January
1, 1999 and include only those adjustments that were or are directly
attributable to the transactions and that are anticipated to have a continuing
impact. Material
19
<PAGE>
non-recurring charges which resulted directly from the refinancing have been
excluded from the pro forma presentation.
<TABLE>
<S> <C> <C> <C>
(1) To adjust interest expense to reflect the following:
(a) Interest expense on the 6 3/4% subordinated debentures; no such interest
expense has been included, giving effect to the repayment of the 6 3/4%
subordinated debentures with the proceeds from the refinancing and the
offering................................................................ $ --
(b) Interest expense on the $150,000 term loan and $70,000 revolving credit
loan under the new credit facility, as if the refinancing had occurred
on January 1, 1999, at an assumed weighted average interest rate of
6.6%.................................................................... 3,630
(c) Amortization of deferred financing costs giving effect to the
refinancing as if it had occurred on January 1, 1999.................... 302
(d) Facility fee on the new credit facility................................. 75
---------
Pro forma interest expense.............................................. 4,007
Historical interest expense............................................. (5,628)
---------
Total adjustment........................................................ $ (1,621)
---------
---------
A 0.125% increase or decrease in the assumed weighted average interest
rate with respect to the new credit facility would change pro forma
interest expense by $69. Pro forma net income would change by $27.
(2) To adjust the pro forma provision for income taxes for the tax effect of the above-
noted pro forma adjustment at the 40% effective marginal income tax rate in effect
for 1999........................................................................... $ 648
(3) Pro forma net income does not include an extraordinary loss of approximately
$3,236, representing a $5,394 non-cash charge less the associated income tax
benefit of $2,158, that results from the write-off of deferred financing costs
related to the 6 3/4% subordinated debentures. This amount will be charged to
earnings in the thirteen week period in which the 6 3/4% subordinated debentures
are repaid.
</TABLE>
20
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
AS OF APRIL 3, 1999
<TABLE>
<CAPTION>
ADJUSTMENTS
FOR
THE REFINANCING
AND THE
ACTUAL OFFERING PRO FORMA
-------- --------------- ---------
<S> <C> <C> <C>
(IN THOUSANDS)
ASSETS
Current Assets:
Cash and cash equivalents................................................ $ 27,560 $(13,000)(1) $ 14,560
Accounts receivable...................................................... 10,299 10,299
Inventory................................................................ 19,688 19,688
Prepaid expenses and other current assets................................ 1,395 1,395
Deferred tax assets...................................................... 1,542 2,158(5) 3,700
-------- --------------- ---------
Total current assets................................................... 60,484 (10,842) 49,642
Property, plant and equipment (net)........................................ 51,413 51,413
Marketable securities...................................................... 618 618
Classic vehicles........................................................... 874 874
Deferred financing costs................................................... 6,362 (394)(2) 5,968
Deferred tax assets........................................................ 164,474 161,474
Other assets............................................................... 475 -- 475
-------- --------------- ---------
Total assets........................................................... $284,700 $(11,236) $273,464
-------- --------------- ---------
-------- --------------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable......................................................... $ 13,337 $ -- $ 13,337
Accrued interest......................................................... 7,398 7,398
Accrued payroll.......................................................... 4,259 4,259
Other accrued liabilities................................................ 3,851 3,851
-------- --------------- ---------
Total current liabilities.............................................. 28,845 28,845
Deferred compensation obligation........................................... 1,071 1,071
Subordinated debentures.................................................... 320,000 (320,000)(3) --
Term loan.................................................................. -- 150,000(3) 150,000
Revolving credit loan...................................................... -- 70,000(3) 70,000
-------- --------------- ---------
Total liabilities...................................................... 349,916 (100,000) 249,916
Stockholders' equity (deficit):
Common stock............................................................. -- -- --
Additional paid-in capital............................................... 128,413 92,000(4) 220,413
Treasury stock........................................................... (212,988) (212,988)
Retained earnings........................................................ 22,524 (3,236)(5) 19,288
Capital subscription receivable.......................................... (815) (815)
Unearned stock compensation.............................................. (2,239) -- (2,239)
Accumulated other comprehensive income................................... (111) (111)
-------- --------------- ---------
Total stockholders' equity (deficit)................................... (65,216) 88,764 23,548
-------- --------------- ---------
Total liabilities and stockholders' equity (deficit)................... $284,700 $(11,236) $273,464
-------- --------------- ---------
-------- --------------- ---------
</TABLE>
21
<PAGE>
<TABLE>
<S> <C> <C> <C>
The pro forma consolidated financial data shown above have been derived by the application of pro forma
adjustments to the Company's historical consolidated balance sheet as of April 3, 1999. Our pro forma presentation
reflects the refinancing of the subordinated debentures and the offering. The adjustments have been applied to the
pro forma consolidated financial statements as if the transactions had occurred on January 1, 1999 and include only
those adjustments that are directly attributable to the transactions.
(1) Sources and uses of cash from the offering are as follows:
</TABLE>
<TABLE>
<S> <C>
Sources of funds:
Proceeds to Yankee Candle from this offering.................... $ 100,000
New borrowings in connection with the refinancing:
Term loan..................................................... 150,000
Revolving credit loan......................................... 70,000
---------
Total sources............................................... $ 320,000
---------
---------
Uses of funds:
Repayment of subordinated debentures............................ $ 320,000
Deferred financing costs........................................ 5,000
Estimated offering fees and expenses............................ 8,000
---------
Total uses.................................................. 333,000
---------
---------
Net adjustment to cash...................................... $ (13,000)
---------
---------
</TABLE>
(2) To reflect the write-off of $5,394 deferred financing costs associated with
the repayment of the 6 3/4% subordinated debentures and to reflect deferred
financing costs of $5,000 related to the refinancing.
(3) To reflect the repayment of the 6 3/4% subordinated debentures with the
proceeds of the refinancing and the offering.
(4) To reflect the proceeds of the offering of $92,000, net of estimated
expenses of $8,000.
(5) To reflect the extraordinary loss of approximately $3,236, representing a
$5,394 non-cash charge less the associated tax benefit of $2,158, that
results from the write-off of deferred financing costs related to the
repayment of the 6 3/4% subordinated debentures.
22
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
We are the leading designer, manufacturer, wholesaler and retailer of
premium scented candles in the growing giftware industry. We have experienced
strong sales growth with net sales increasing to $184.5 million in 1998 from
$69.8 million in 1994, a compound annual growth rate of over 27%. The following
discussion provides further information regarding our two primary distribution
channels, performance measures and quarterly operating results.
THE WHOLESALE CHANNEL
Our wholesale distribution strategy targets small, independent,
credit-worthy gift store retailers. We distribute our products through our
extensive wholesale customer base which has approximately 12,000 gift store
locations throughout the United States. Our wholesale base is broad with no
individual buying group accounting for more than 2% of our sales. Accordingly,
there is little likelihood of a concentration of credit risk with any individual
account.
In 1997, we began our transition from a sales force of independent
manufacturer representatives to an in-house direct sales force. We completed
this process in early 1998. We believe that the conversion to an in-house sales
force has strengthened our competitive position by allowing us to communicate
directly with our customers and better serve them through enhanced inventory
management, order accuracy, response time, marketing and display programs. It
has also enabled us to reduce costs.
From 1996 to 1998, sales from our wholesale division grew from $69.3 million
to $103.3 million, a compound annual growth rate of 22%.
RETAIL STORES
Our retail stores are an important and fast growing distribution channel and
represent an increasing percentage of our total sales. We have increased our
retail locations over the past three years from 26 stores on January 1, 1996 to
62 stores on December 31, 1998, and believe that we have significant future
expansion opportunities. Prior to 1998, our store base was concentrated
primarily in the northeastern United States, and during 1998 we successfully
opened stores in eight states: Arizona, Colorado, Georgia, Florida, Kansas,
Michigan, Virginia and Texas. As of May 15, 1999, 49 of our stores were located
in malls and 23 were in non-mall locations in a total of 23 states.
Our stores, excluding the South Deerfield store, averaged 1,643 square feet
as of December 31, 1998. In 1998, our retail stores that were open for the full
year achieved average sales per square foot of over $650 and sales per selling
square foot were approximately 25% higher. Moreover, our retail stores generated
comparable store sales growth of 18.4% in 1996, 16.4% in 1997 and 16.5% in 1998.
From 1996 to 1998, sales from our retail division, which includes our retail
store, catalog and Internet operations, grew from $42.9 million to $81.2
million, a compound annual growth rate of 38%.
PERFORMANCE MEASURES
We measure the performance of our retail and wholesale segments through an
operating margin calculation, which specifically identifies not only gross
profit on the sales of products through the two channels but also costs and
expenses specifically identifiable to a given segment. Accordingly, the cost of
our in-house direct sales force, and, in the past, the cost of independent
manufacturer representatives, devoted to our wholesale channel are included in
the calculation of this channel's operating margin. In addition, the cost of
employees dedicated to retail site selection, store management, employee
training and many other retail specific activities are allocated to the retail
division.
23
<PAGE>
FLUCTUATIONS IN QUARTERLY OPERATING RESULTS
We have experienced, and may experience in the future, fluctuations in our
quarterly operating results. There are numerous factors that can contribute to
these fluctuations; however, the principal factors are seasonality and new store
openings.
SEASONALITY. We have historically realized higher revenues and operating
income in our fourth quarter, particularly in our retail business which is
becoming a larger portion of our sales. We believe that this has been due
primarily to an increase in giftware industry sales during the holiday season of
the fourth quarter. The table below shows a breakdown of our 1996, 1997 and 1998
sales by quarter. We anticipate our sales will continue to be seasonal in
nature.
<TABLE>
<CAPTION>
SALES BREAKDOWN BY QUARTER
------------------------------------------
Q1 Q2 Q3 Q4
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
1996............................. 19.2% 17.1% 24.0% 39.7%
1997............................. 18.3% 17.5% 23.9% 40.3%
1998............................. 19.1% 15.7% 23.6% 41.6%
</TABLE>
NEW STORE OPENINGS. The timing of our new store openings may also have an
impact on our quarterly results. First, we incur certain one-time expenses
related to opening each new store. These expenses, which consist primarily of
salaries, supplies and marketing costs, average approximately $15,000 per store
and are expensed as incurred. Second, most store expenses vary proportionately
with sales, but there is a fixed cost component. This typically results in lower
store profitability when a new store opens because new stores generally have
lower sales than mature stores. Due to both of these factors, during periods
when new store openings as a percentage of the base are higher, operating profit
may decline in dollars and/or as a percentage of sales. As the store base
matures, the fixed cost component of selling expenses is spread over an
increased level of sales, resulting in a decrease in selling and other expenses
as a percentage of sales.
RESULTS OF OPERATIONS
THIRTEEN WEEKS ENDED APRIL 3, 1999 COMPARED TO THREE MONTHS ENDED MARCH 31,
1998
NET SALES. Net sales increased 32.0% to $46.6 million for the thirteen
weeks ended April 3, 1999 from $35.3 million for the three months ended March
31, 1998. This growth was achieved by increasing the number of our retail stores
from 49 at March 31, 1998 to 67 at April 3, 1999, and increasing sales in
existing retail stores and to wholesale customers.
Wholesale sales increased 24.9% to $29.6 million for the thirteen weeks
ended April 3, 1999 from $23.7 million for the three months ended March 31,
1998. This growth was achieved primarily by increasing sales to existing
customers, adding new wholesale accounts and initiating sales through our new
European distribution center. We believe that wholesale sales growth has been
and will continue to be positively impacted by our increased promotional
spending, the addition of new wholesale locations and the transition from
independent manufacturer representatives to an in-house direct sales force.
Retail sales increased 46.6% to $17.0 million for the thirteen weeks ended
April 3, 1999 from $11.6 million for the three months ended March 31, 1998. This
growth was achieved through the addition of 18 new stores, and increased sales
in existing stores. Comparable store sales increased 17.9% over the first
quarter in 1998. There were 48 stores included in our comparable store base at
the end of the thirteen weeks ended April 3, 1999, and one of these stores was
included for less than the full period.
GROSS PROFIT. Gross profit increased 36.5% to $25.8 million for the
thirteen weeks ended April 3, 1999 from $18.9 million for the three months ended
March 31, 1998. This increase was primarily attributable to the increase in
sales. As a percentage of sales, gross profit increased to 55.4% for the
thirteen weeks ended April 3, 1999 from 53.5% for the three months ended March
31, 1998. We began to make significant
24
<PAGE>
investments in our manufacturing operations in 1998 and anticipate the favorable
benefits in 1999 and future years.
SELLING EXPENSES. Selling expenses increased 13.3% to $8.5 million for the
thirteen weeks ended April 3, 1999 from $7.5 million for the three months ended
March 31, 1998. These expenses are related to both our wholesale and retail
operations and consist of payroll, advertising, occupancy and other operating
costs. Excluding the commission paid to independent manufacturer
representatives, selling expenses increased 57.4% to $8.5 million for the
thirteen weeks ended April 3, 1999 from $5.4 million for the three months ended
March 31, 1998. As a percentage of sales, selling expenses excluding commissions
paid to independent manufacturer representatives were 18.2% for the thirteen
weeks ended April 3, 1999 and 15.3% for the three months ended March 31, 1998.
The increase in selling expense in dollars and as a percentage of sales was
primarily related to investment in wholesale promotional programs, costs
associated with our new European distribution center and the continued growth in
the number of retail stores we operated from 49 as of March 31, 1998 to 67 as of
April 3, 1999.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses,
which consist primarily of personnel-related costs incurred in the
administration of support functions, increased 55.0% to $6.2 million for the
thirteen weeks ended April 3, 1999 from $4.0 million for the three months ended
March 31, 1998. As a percentage of sales, general and administrative expenses
increased to 13.3% for the thirteen weeks ended April 3, 1999 from 11.3% for the
three months ended March 31, 1998. This increase was primarily caused by
investments in building our organizational infrastructure and $0.6 million of
consulting expenses.
INCOME (LOSS) FROM OPERATIONS. Income from continuing operations increased
50.0% to $11.1 million for the thirteen weeks ended April 3, 1999 from $7.4
million for the three months ended March 31, 1998. This increase was primarily
due to higher sales and the elimination of commissions paid to independent
manufacturer representatives.
OPERATING MARGINS. Operating margins for our wholesale operations were
$12.8 million or 43.2% of wholesale sales for the thirteen weeks ended April 3,
1999 compared to $8.4 million or 35.4% of wholesale sales for the three months
ended March 31, 1998. The wholesale operating margin increase was primarily
attributable to higher sales and to the elimination of commissions paid to
independent manufacturer representatives. Operating margins for retail
operations were $2.8 million or 16.5% of retail sales for the thirteen weeks
ended April 3, 1999 compared to $1.5 million or 12.9% of sales for the three
months ended March 31, 1998. The retail operating margin increase was primarily
attributable to higher sales and lower selling expenses as a percentage of
sales.
NET OTHER INCOME (EXPENSE). Net other expense was $5.4 million for the
thirteen weeks ended April 3, 1999 compared to $0.3 million for the three months
ended March 31, 1998. The primary component of the expense was interest expense
which was $5.8 million for the thirteen weeks ended April 3, 1999 and $0.4
million for the three months ended March 31, 1998. In connection with the
recapitalization, we borrowed in 1998 $320.0 million which resulted in
significantly higher interest expense in 1999.
INCOME TAXES. The income tax provision for the thirteen weeks ended April
3, 1999 was $2.3 million. For the three months ended March 31, 1998, we were an
S corporation and were only required to pay taxes at the state level. However,
we incurred a loss during that period because of our 1998 recapitalization and
were not subject to state income taxes for that period.
NET INCOME. Net income for the thirteen weeks ended April 3, 1999 was $3.4
million as compared to $7.1 million for the three months ended March 31, 1998.
If the net income for the three months ended March 31, 1998 were restated to
reflect pro forma income taxes, net income would have been $4.4 million.
Stronger sales and operating margins in the thirteen weeks ended April 3, 1999
were offset by substantial increases in comparative amounts of interest expense.
25
<PAGE>
DECEMBER 31, 1998 COMPARED TO DECEMBER 31, 1997
NET SALES. Net sales increased 28.0% to $184.5 million in 1998 from $144.1
million in 1997. This growth was achieved by increasing the number of our retail
stores, from 47 to 62, and increasing sales in existing retail stores and to
wholesale customers.
Wholesale sales increased 21.7% to $103.3 million in 1998 from $84.9 million
in 1997. This growth was achieved primarily by increasing sales to existing
customers. We believe that wholesale sales growth has been and will continue to
be positively impacted by our increased promotional spending, the addition of
new wholesale locations and the transition from independent manufacturer
representatives to an in-house direct sales force.
Retail sales increased 37.2% to $81.2 million in 1998 from $59.2 million in
1997. This growth was achieved through the addition of 15 new stores, and
increased sales in existing stores. Comparable store sales increased 16.5% over
the corresponding period in 1997. There were 47 stores included in our
comparable store base at the end of 1998, and 13 of these stores were included
for less than a full year.
GROSS PROFIT. Gross profit increased 28.5% to $105.4 million in 1998 from
$82.0 million in 1997. This increase was almost entirely attributable to the
increase in sales. As a percentage of sales, gross profit was relatively
consistent from year to year, increasing slightly to 57.1% in 1998 from 56.9% in
1997. We began to make significant investments in our manufacturing operations
in 1998 and anticipate favorable benefits from these investments in 1999 and
future years.
SELLING EXPENSES. Selling expenses increased 13.4% to $30.5 million in 1998
from $26.9 million in 1997. These expenses are related to both our wholesale and
retail operations and consist of payroll, advertising, occupancy and other
operating costs. Excluding the commission paid to independent manufacturer
representatives, selling expenses increased 44.7% to $28.5 million in 1998 from
$19.7 million in 1997 to support our direct sales efforts on the wholesale side
of our business as well as our new retail stores. As a percentage of sales,
selling expenses, excluding commissions paid to independent manufacturer
representatives, were 15.4% in 1998 and 13.7% in 1997. The increase in selling
expense in dollars and as a percentage of sales was primarily related to
investment in our in-house direct wholesale sales force and to the continued
growth in the number of our retail stores, which increased from 47 in 1997 to 62
in 1998.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses,
which consist primarily of personnel-related costs incurred in support
functions, decreased 26.7% to $19.8 million in 1998 from $27.0 million in 1997.
The decrease is entirely attributable to a decrease in compensation paid to the
former sole stockholder. Excluding this compensation, general and administrative
expenses increased 22.2% to $19.8 million, or 10.7% of sales, in 1998 from $16.2
million, or 11.2% of sales, in 1997. This increase was primarily caused by
post-recapitalization consulting expenses of $1.8 million related to our systems
and growth strategy, and to investments in building our organizational
infrastructure. We also had non-cash compensation expenses of $116,000 in 1998
related to certain share and option awards and expect to have non-cash
compensation expenses of $1.1 million and $677,000 in 1999 and 2000,
respectively.
BONUS RELATED TO 1998 RECAPITALIZATION. Bonus payments are reflected as a
separate cost within operating expenses and totaled $61.3 million. These
payments were made to selected members of management and were wholly related to
the 1998 recapitalization and are non-recurring in nature.
INCOME (LOSS) FROM OPERATIONS. Due to the non-recurring bonus charge, we
incurred a loss from operations of $6.2 million for 1998. This compares to
income from operations of $28.1 million in 1997. Excluding the non-recurring
bonus charge, we would have reported operating income of $55.1 million in 1998.
OPERATING MARGINS. Operating margins for our wholesale operations were
$45.1 million or 43.7% of wholesale sales in 1998 compared to $31.2 million or
36.7% of wholesale sales in 1997. The wholesale
26
<PAGE>
operating margin increase was primarily attributable to the expense savings
realized from the transition from independent manufacturer representatives to an
in-house direct sales force. Operating margins for retail operations were $23.3
million or 28.7% of retail sales in 1998 compared to $18.1 million or 30.6% of
retail sales in 1997. The retail operating margin decrease was primarily
attributable to the lower operating margin contribution rate of our 15 new
stores during their early maturation period.
NET OTHER INCOME (EXPENSE). Net other expense was $16.8 million in 1998
compared to $2.3 million in 1997. The primary component of this expense was
interest expense which was $16.3 million in 1998 and $2.2 million in 1997. In
connection with the 1998 recapitalization, we borrowed $320.0 million, which
resulted in significantly higher interest expense in 1998.
INCOME TAXES. The income tax provision for 1998 was $9.7 million despite
our pre-tax loss. This contrasts to a provision of $1.4 million on significant
financial statement profits in 1997. We were an S corporation until the 1998
recapitalization and were only required to pay taxes at the state level. All
other income taxes were paid directly by our sole stockholder. In 1998, we
reported a pre-tax loss because of the bonus charge described above under
"--Bonus related to 1998 recapitalization." Our sole stockholder received the
benefit of that deduction. Starting in May 1998 we were taxed as a regular
corporation. The tax provision of $9.7 million applies to pre-tax income from
the date of the 1998 recapitalization to the end of the year.
NET INCOME. The net loss for 1998 was $32.6 million, which included the
$61.3 million non-recurring bonus charge for which no tax benefit could be
realized. Excluding this charge, net income for 1998 would have been $28.7
million. If the 1997 net income of $24.4 million were restated to reflect pro
forma income tax, net income for 1997 would have been $15.0 million.
DECEMBER 31, 1997 COMPARED TO DECEMBER 31, 1996
NET SALES. Net sales increased 28.4% to $144.1 million in 1997 from $112.2
million in 1996. This growth was achieved by increasing the number of retail
stores, from 34 to 47, increasing sales in existing retail stores and to
wholesale customers and an increase in prices of approximately 2%.
Wholesale sales increased 22.5% to $84.9 million in 1997 from $69.3 million
in 1996. This growth was achieved primarily through increased sales to existing
customers. We believe that wholesale sales growth was positively impacted by a
rebound from severe weather problems in the midwestern and southern United
States in 1996 which restrained dealer retail volume in 1996, increased
marketing activities in 1997 and the decision to discontinue the services of
independent manufacturer representatives, which stimulated commission-based
sales at the end of 1997.
Retail sales increased 38.0% to $59.2 million in 1997 from $42.9 million in
1996. This growth was achieved through the addition of 13 new stores and
increased sales in existing stores. Comparable store sales increased 16.4% over
the corresponding period in 1996. There were 34 stores included in our
comparable store base at the end of 1997, and eight of these stores were
included for less than a full year.
GROSS PROFIT. Gross profit increased 39.0% to $82.0 million, or 56.9% of
sales, in 1997 from $59.0 million or 52.6% of sales in 1996. The increase in
gross profit dollars was primarily due to the increase in sales. The increase in
gross profit margin was primarily due to the increase in retail sales as a
percentage of total sales, improved manufacturing efficiency compared to 1996
and the previously mentioned increase in prices. Retail sales achieve a higher
gross profit than wholesale sales, so an increase in retail sales as a
percentage of total sales increased the gross profit dollars and margin.
SELLING EXPENSES. Selling expenses increased 15.9% to $26.9 million in 1997
from $23.2 million in 1996. These expenses are related to both our wholesale and
retail operations and consist of payroll, advertising, occupancy and other
operating costs. These expenses also included commissions paid to independent
manufacturer representatives. We commenced the transition from independent
manufacturer
27
<PAGE>
representatives to an in-house direct sales force in 1997. Excluding the
commissions paid to independent manufacturer representatives, selling expenses
increased 36.8% to $19.7 million in 1997 from $14.4 million in 1996. As a
percentage of sales, selling expenses excluding commissions paid to independent
manufacturer representatives were 13.7% in 1997 and 12.8% in 1996. The increase
in selling expense in dollars and as a percentage of sales was primarily related
to continued growth in the number of retail stores we operated from 34 in 1996
to 47 in 1997.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses,
which consist primarily of personnel-related costs incurred in support
functions, increased 24.4% to $27.0 million in 1997 from $21.7 million in 1996.
Excluding compensation paid to the former sole stockholder, general and
administrative expenses would have increased to 11.2% of sales in 1997 from 9.9%
of sales in 1996 as we continued to invest in our support infrastructure.
OPERATING MARGINS. Operating margins for our wholesale operations were
$31.2 million or 36.7% of wholesale sales in 1997 compared to $18.5 million or
26.7% of wholesale sales in 1996. The wholesale operating margin increase was
achieved due to the previously discussed increase in sales, improvement in gross
margin rate and spreading of selling expenses over a larger sales base.
Operating margins for retail operations were $18.1 million or 30.6% of retail
sales in 1997 compared to $13.2 million or 30.7% of retail sales in 1996.
NET OTHER INCOME (EXPENSE). Net other expense was $2.3 million in 1997
compared to $2.0 million in 1996. The primary component of the expense was
interest expense, which was $2.2 million in 1997 and $1.9 million in 1996.
INCOME TAX. The income tax provision for 1997 was $1.4 million compared to
a tax provision of $410,000 in 1996. Both of these amounts constitute less than
5% of pre-tax income in each year. We were an S corporation in both 1997 and
1996. Therefore, we were only taxable at the state level and there were no
federal income taxes that we had to recognize.
NET INCOME. Net income increased 108.5% to $24.4 million in 1997 from $11.7
million in 1996. This increase was due to a significant increase in revenue
combined with improved gross margin and lower selling expenses.
LIQUIDITY AND CAPITAL RESOURCES
We have consistently generated positive cash flow from operations, excluding
the $61.3 million non-recurring bonus charge in 1998. This positive cash flow
has been sufficient, in the past, to allow us to grow our business. In 1996,
1997 and the first four months of 1998, Yankee Candle was an S Corporation. Any
excess cash was distributed to the sole stockholder either in the form of
compensation or S Corporation distributions. Those outflows totaled
approximately $13.8 million in 1996, $37.6 million in 1997 and $17.5 million in
1998, with the 1998 outflows occurring in the first four months. We believe
that, in the future, the absence of those distributions will facilitate our
expansion plans as we plan to invest our free cash flow in the business.
The 1998 recapitalization resulted in a step up in basis of our assets for
tax purposes of approximately $462.0 million. This step up will reduce our
future taxes by approximately $176.0 million. On an annual basis, this results
in tax savings of approximately $11.7 million per year for the next 15 years
assuming sufficient income to realize the full benefit of this deduction.
Our capital expenditures in 1998 were $9.4 million and for the thirteen
weeks ended April 3, 1999 totalled $4.2 million. In 1998, the funds were spent
primarily to open 15 new retail stores, and invest in information systems and
new manufacturing equipment to increase our production volume and the efficiency
of our shipping operations. Our expenditures for the thirteen weeks ended April
3, 1999 related
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<PAGE>
to the opening of five new retail stores and additional expenditures related to
enhancing our manufacturing and distribution operations. The average capital
expenditure for each new retail store was approximately $250,000. Total capital
expenditures in 1996 and 1997 were relatively consistent with 1998 at $10.1
million and $9.2 million, respectively. There were 13 store openings in 1997 and
eight store openings in 1996.
We anticipate that capital expenditures in 1999 will total approximately
$22.0 million. These funds will primarily be spent to open 40 new retail stores,
open a new distribution center in the western region of the United States, to
better support our wholesale customers and expanding retail store base and to
invest in new manufacturing equipment and information systems.
In connection with the 1998 recapitalization, we borrowed $320.0 million by
issuing 6 3/4% subordinated debentures and entered into an agreement to borrow
under a $60.0 million revolving credit facility. These borrowings were used
primarily to redeem our stock and pay one-time bonuses in connection with the
1998 recapitalization. Interest payments under the subordinated debentures were
the primary reason for our increased interest expenses. At December 31, 1998 and
at April 3, 1999, there were no borrowings under the revolving credit facility.
We plan to refinance all of our existing debt with the proceeds of this
offering and approximately $220.0 million of borrowings under a new $300.0
million credit facility expected to be entered into prior to the consummation of
this offering. We will have an extraordinary loss of approximately $3.2 million,
representing a $5.4 million non-cash charge less the associated income tax
benefit of $2.2 million, that results from the write-off of deferred financing
costs related to the repayment of our 6 3/4% subordinated debentures. This
amount will be charged to earnings in the quarter in which the debt is repaid.
See "Description of the Credit Agreement."
We believe that cash flow from operations and funds available under our new
credit facility will be sufficient for our working capital needs, planned
capital expenditures and debt service obligations for at least the next twelve
months.
IMPACT OF INFLATION
We do not believe inflation has a significant impact on our operations. The
prices of our products have not varied based on the movement of the consumer
price index. The majority of our material and labor costs are not materially
affected by inflation.
FUTURE ACCOUNTING PRONOUNCEMENTS
We are required to adopt the provision of Statement of Financial Accounting
Standards No. 133 "Accounting for Derivative Instruments and Hedging Activities"
beginning January 1, 2000. This accounting standard requires us to identify
derivative financial statements according to a complex definition and account
for these instruments at fair value. We are beginning to assess the impact of
this accounting standard on our financial statements, but, at this time, we do
not expect it to have a material impact on our financial statements.
YEAR 2000 COMPLIANCE
Many existing computer programs use only two digits to identify a year in
the date field. These programs were designed and developed without considering
the impact of the upcoming change in the century. If not corrected, many
computer applications could fail or create erroneous results by or at the Year
2000. The Year 2000 issue affects virtually all companies and organizations.
29
<PAGE>
We have established a project team to coordinate and address Year 2000
issues. This team is focusing its efforts on three areas:
- information systems software and hardware,
- facilities and distribution equipment, and
- third-party relationships.
We have implemented a systematic program to identify the areas where we
believe we are exposed to Year 2000 issues. Key information systems that have
been identified as critical to our operations include:
- inventory systems, including tracking inventory through the manufacturing
process and facilitating the picking of orders;
- order entry and accounts receivable systems, which allow us to enter
orders from our customers, bill our customers and track amounts owing from
them;
- Masterpiece application systems, which control our general ledger,
purchasing and accounts payable activities;
- a catalog system, which allows us to conduct catalog operations;
- a payroll system; and
- network systems, including our internal network and office suite of
products.
Our program with regard to information systems consists of three phases:
- an assessment phase which takes inventory of all major information and
non-information systems;
- a remediation phase which fixes Year 2000 issues identified in the
assessment phase; and
- a testing phase which tests the systems on a stand-alone and integrated
basis and, where applicable, completes final remediation.
30
<PAGE>
<TABLE>
<CAPTION>
ANTICIPATED/ACTUAL
ASSESSMENT REMEDIATION ANTICIPATED
SYSTEM COMMENTS COMPLETION DATE COMPLETION TESTING COMPLETION
- ------------------------ -------------------------- ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Inventory systems New programs; written with May 1999 May 1999 September 1999
four digits or purchased
and certified by vendors
as Year 2000 compliant
Order entry and accounts
receivable Combination of new January 1999 January 1999 September 1999
programs and legacy
programs
Masterpiece applications Certified by vendor as January 1999 January 1999 August 1999
Year 2000 compliant
Catalog system In-house application January 1999 January 1999 September 1999
written in four digits
Payroll system Payroll services provided September 1998 April 1999 April 1999
by third party service
bureau that has
certified Year 2000
compliance
Network Certified by vendor as April 1999 October 1999 October 1999
Year 2000 compliant or
patches to be provided
</TABLE>
Certifications have been requested and received from all software and
hardware vendors that are integral to the above-described systems.
Year 2000 exposures have been anticipated by our information systems
department over the last five years. Over that time period, virtually all of our
internally developed systems described above have been rewritten. In addition,
new hardware has been purchased. These changes are part of our on-going program
to improve our information systems. Our information systems budget has therefore
not had a separate Year 2000 component. Rather, Year 2000 remediation has been a
part of our improvement strategy. Therefore, we have not had to defer any
information technology projects due to our Year 2000 efforts. Only in the latter
part of fiscal 1998 has a separate budget line item been identified for our Year
2000 efforts. Our identified expenditures with regard to this effort have been
less than $10,000 for the last two quarters. We anticipate incurring an
additional $150,000 in costs through year end to complete our remediation and
testing efforts. These specific costs are being expensed as incurred.
The non-information systems, which may be affected by the Year 2000 issue,
include our equipment control systems including large tank monitors and candle
making machinery as well as internal building systems. We plan to test our
facilities and manufacturing and distribution equipment during our annual
shutdown in June 1999.
We have approximately 60 vendors that are integral to our business. It is
our intention to circulate letters to these vendors and to others by the end of
June 1999, requesting that they confirm their Year 2000 compliance status.
Because we have so little concentration of sales with any one customer, there
are very few customers to whom we intend to circulate a letter.
We have not experienced any Year 2000 related problems to date; therefore,
we have not lost any revenues.
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<PAGE>
We believe that a worst case Year 2000 scenario for us would involve a
complete failure in the basic infrastructure of the United States. In
particular, should shipping services such as UPS, RPS and common carriers fail,
we would be unable to obtain raw materials to produce our products and would be
unable to ship our products to customers and retail locations. Similarly, if
utility providers failed to provide electricity and other basic services, we
would be unable to produce or sell our products.
Based on our assessment efforts to date and barring the worst case scenario
described above, we do not believe that the Year 2000 issue will have a material
adverse effect on our financial condition or results of operations. We believe
that we will have the ability to process transactions, whether they involve
paying our employees, procuring material from vendors or invoicing our
customers, using our existing data processing systems. We believe that our
manufacturing processes are not subject to substantial Year 2000 risk because,
if a piece of equipment fails because of a date dependency, alternative product
routing within our plant can be made.
Our ability to obtain raw materials is dependent on third parties. While we
do have primary vendors for our raw materials we believe that the materials
being provided are readily available from other vendors. Therefore, should a
specific vendor fail because of a Year 2000 compliance issue, the materials
being delivered by this vendor can be readily replaced. Our substantial network
of wholesale accounts and our growing number of retail locations have led us to
conclude that exposures in our ultimate sales channels are not material.
For the above reasons, no contingency plan has been developed. In the event
final testing of our information systems applications prove difficult, our
internal non-information systems fail in their June 1999 testing, or responses
from key vendors indicate significant non-compliance exposures, we will
reconsider developing a contingency plan. This plan may include increasing
production near the year end to provide additional inventory to counteract any
plant or third party-related disruptions.
Our assessment of our Year 2000 compliance is based on numerous assumptions
about future events, including third party Year 2000 compliance plans and other
factors. However, we cannot guarantee that this assessment is correct and actual
results could differ materially from those anticipated.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our market risks relate primarily to changes in interest rates. We bear this
risk in two specific ways. First, we have debt outstanding. At the end of 1998,
we had $320.0 million of debt in the form of three series of 6 3/4% subordinated
debentures. Because this borrowing had a fixed interest rate, neither our
statement of operations nor our cash flows had exposures to changes in interest
rates. Our revolving credit facility, which had average borrowings of $7.6
million during 1998 and was zero at the end of the year had a variable interest
rate, which exposed our statement of operations and cash flows to changes in
interest rates. It is our intention, through this offering and through the
proceeds of a new $300.0 million bank facility, to repay the subordinated
debentures. Because the new facility will carry a variable interest rate pegged
to market indices, our statement of operations and our cash flows will be
exposed to changes in interest rates. This facility is intended to fund
operating needs if necessary.
The second component of interest rate risk involves the short-term
investment of excess cash. This risk impacts fair values, earnings and cash
flows. Excess cash is primarily invested in overnight repurchase agreements
backed by U.S. Government securities. These are considered to be cash
equivalents and are shown that way on our balance sheet. Our average balance in
such securities was approximately $4.5 million over the past year. Earnings from
these cash equivalents totaled $173,000 for the year ended December 31, 1998.
We buy a variety of raw materials for inclusion in our products. The only
raw material that we consider to be of a commodity nature is wax. Wax is a
petroleum-based product. However, its market price has not historically
fluctuated with the movement of oil prices. Rather, over the past five years wax
prices have moved with inflation.
At this point in time, our operations outside of the United States are
immaterial. Accordingly, we are not exposed to substantial risks arising from
foreign currency exchange rates.
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<PAGE>
BUSINESS OF YANKEE CANDLE
We are the leading designer, manufacturer, wholesaler and retailer of
premium scented candles in the growing giftware industry. We have a 30-year
history of offering our distinctive products and marketing them as affordable
luxuries and consumable gifts. Our current products are available in up to 150
fragrances and include a wide variety of jar candles,
Samplers-Registered Trademark-, pillars, tapers and other candle products,
marketed primarily under our trade names Housewarmer-Registered Trademark- and
Country Kitchen-Registered Trademark-, as well as a wide range of candle
accessories.
We sell our candles through our wholesale customers who have approximately
12,000 gift store locations nationwide and through our rapidly expanding retail
base of 72 company-owned and operated stores in 23 states as of May 15, 1999.
Our 90,000 square foot flagship store in South Deerfield, Massachusetts offers a
unique retail and entertainment experience and is a major tourist destination,
attracting an estimated 2.5 million visitors a year. We also sell our products
through our direct mail catalogs, Internet website at www.yankeecandle.com,
international distributors and our distribution center located in the United
Kingdom.
We have experienced 27% annual revenue growth over the last five years and,
in 1998, our sales reached $184.5 million. We believe our strong growth is based
on the high quality of our products, the efficiency of our manufacturing
operations and the strength of our retail and wholesale sales capabilities.
Michael Kittredge founded our business in 1969 when he was just seventeen
years old, by making his first candle in his family kitchen. He grew the
business steadily and, together with our dedicated management team, has built
Yankee Candle into a leader in the premium scented candle market. Most of our
current senior managers have been with us for 17 years. In April 1998, Yankee
Candle was recapitalized and the Forstmann Little partnerships and Yankee Candle
management became the owners of a 90% equity interest. Since the 1998
recapitalization, we have reinvested our capital to actively pursue our
wholesale and retail growth strategies. To facilitate our growth, we have added
several key employees, expanded our production capacity, upgraded our warehouse
management and information systems, and opened our distribution center in the
United Kingdom.
INDUSTRY OVERVIEW
We operate in the rapidly growing scented candle segment of the giftware
industry. Unity Marketing, an independent market research firm specializing in
the giftware industry, estimates that the domestic giftware industry has grown
on average 12% per year since the early 1990's to reach $47 billion in 1997.
Unity Marketing also estimates that the domestic market for candles has grown 10
to 15% per year since the early 1990's to reach $2.1 billion in 1998. The
scented candle segment, in which we compete, represents the fastest growing part
of the candle and home fragrancing industry. Based on a report by Kline &
Company, an international consulting firm, the retail market for scented candles
in 1997 was estimated to be $1.5 billion.
The scented candle market is expected to continue to grow based on the
following positive industry factors:
- Favorable consumer trends, including the aging of baby boomers and
increased spending on home decor. Consumers are drawn to candles because
they create a relaxing home environment.
- Consumers are increasingly buying candles as an attractive gift item.
According to Unity Marketing, 77% of candle customers bought candles as
gifts in 1998.
- Consumers are increasingly burning candles year round because of their
affordable prices and broad range of scents and styles.
We believe consumers are becoming increasingly sophisticated about the
quality and fragrance of candles they purchase. According to Unity Marketing,
the prime consumer market for candles are women
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<PAGE>
between the ages of 25 and 54 with annual household incomes of over $25,000. We
believe that 85% of our candle consumers are women and that men represent a
growing and undeveloped consumer market segment.
OUR COMPETITIVE STRENGTHS
WE HAVE A STRONG BRAND IDENTITY AS THE LEADING PREMIUM CANDLE COMPANY WITH A
LOYAL CUSTOMER BASE.
We have long been recognized as the leading brand in the premium scented
candle market. We have been ranked number one in sales since 1993 in the
domestic candle category by GiftBeat, a giftware industry newsletter. We have
also been consistently ranked in the top two for product re-orders across all
giftware categories during the same period by GiftBeat. Our Country
Kitchen-Registered Trademark- and Housewarmer-Registered Trademark- lines were
introduced in 1974 and 1987, respectively, and contributed to making Yankee
Candle the leading brand in the premium scented candle market. Our high quality
products use premium fragrance oils and highly-refined paraffin wax, and create
long-lasting enjoyment and strong customer loyalty. We reinforce our brand
identity with our decorative product packaging and labeling, realistic
fragrances, clearly recognizable display cases and frequent trade advertising.
We believe that we have high consumer satisfaction, with 74% of our retail
customers ranking Yankee Candle as better than other candle brands, according to
a recent Unity Marketing study. Our customers also spend more on candles, with
over 60% of our customers purchasing more than $50 of candles in 1998 while only
18% of national customers spent that amount on candles. We believe that the
Yankee Candle brand name will continue to serve as a strong platform for
launching new product lines and product extensions.
WE HAVE A WELL-ESTABLISHED, NATIONAL WHOLESALE CUSTOMER BASE.
We distribute Yankee Candle products through our extensive wholesale
customer base which has approximately 12,000 gift store locations nationwide and
provides us with a strong presence throughout the United States. As a result of
our brand name, the popularity and profitability of our merchandise and our
successful product display system, we are the top selling product for many of
our wholesale accounts. Our wholesale customers are extremely loyal, with over
65% of them having been customers for over five years. Our wholesale base is
also broad, with no individual wholesale buying group accounting for more than
2% of our total sales. We market our wholesale products through our own direct
sales force which enhances our customer communication and enables us to better
serve our customers through superior order accuracy and response times.
WE HAVE A DEMONSTRATED ABILITY TO CARRY OUT OUR RETAIL EXPANSION.
Our strong wholesale presence and nationally recognized brand have enabled
us to successfully roll-out our own retail stores. As of May 15, 1999, we had 72
retail stores located in 23 states. We have experienced 38% annual growth in
retail sales since 1996 and, in 1998, our retail division generated over $80
million in sales. As shown below, our stores have enjoyed strong comparable
store growth of over 16% for the last three years.
<TABLE>
<CAPTION>
COMPARABLE STORE GROWTH
- -------------------------------
1996 1997 1998
- --------- --------- ---------
<S> <C> <C>
18.4% 16.4% 16.5%
</TABLE>
Our retail stores are primarily located in high-end malls and, to a lesser
extent, strip centers and tourist destinations and are designed with a
distinctive and consistent "Yankee Candle" appearance. In 1998, our retail
stores achieved average sales per square foot of over $650. All but one of our
retail stores have been profitable beginning in their first year of operation.
To support our retail stores, we have made significant investments in
infrastructure, training and information systems. As a result of these
investments,
34
<PAGE>
we opened nine stores from September 30 to December 31, 1998. This is a store
opening rate comparable to our plan to open approximately 40 new stores in 1999.
WE DESIGN, MANUFACTURE AND DISTRIBUTE OUR OWN PRODUCTS.
We design, develop and manufacture our candle products and control their
distribution. This enables us to ensure the highest quality products, prompt
delivery to our wholesale customers and retail stores and high margins. In
addition, our retail network allows us to control our brand image and
positioning and conduct extensive product testing. By first testing our products
at our retail stores, we can ensure that only our best-selling products are
distributed nationwide to our wholesale customers. We believe that our ability
to manufacture and distribute our own products provides us with a significant
advantage over our competitors.
OUR SENIOR MANAGEMENT TEAM HAS SIGNIFICANT EXPERIENCE IN THE CANDLE
INDUSTRY.
Our chairman and senior management have a combined 80 years of experience in
the candle industry and over 90 years of experience in the retail sector. Our
President and Chief Executive Officer, as well as our Senior Vice President of
Retail Operations and Senior Vice President of Wholesale Operations, have each
been with Yankee Candle for 17 years. During this time, our senior management
has established a record of strong and consistent growth in sales and operating
profit. In addition to our senior management team, our key managers in
manufacturing, site selection and product development have significant
experience in the candle industry, many with tenures of over 15 years with
Yankee Candle. We believe that the strong commitment of all our employees will
allow us to continue to execute our strategy and grow our business.
OUR GROWTH STRATEGY
WE PLAN TO RAPIDLY EXPAND OUR RETAIL STORE BASE.
We believe that we have substantial opportunities for growth by expanding
our retail store base. As of May 15, 1999, we have already opened ten new stores
and we plan to open approximately 30 additional stores by the end of the year,
which we expect will increase our retail presence to approximately 30 states. We
believe that we have a highly successful retail store format that reinforces our
brand awareness, generates strong sales per square foot and can be readily
transferred to new markets. Our distinctive store design is flexible and can be
reconfigured to accommodate a variety of location types. Once we take possession
of the premises, it generally takes 60 days to open a store. In opening new
stores, we will continue to target high visibility retail locations in premium
malls with strong demographics and high sales per square foot. We believe that
the transferability of our retailing format, our record of successfully opening
new stores and our continuing investment in training, management information
systems, distribution centers and other operating support infrastructure,
provide us with a strong foundation for rapid expansion. We plan to have 85% of
our 40 new 1999 stores open by the end of the third quarter, and we expect the
balance to open by the end of November 1999.
WE PLAN TO CONTINUE TO GROW OUR SALES THROUGH OUR WHOLESALE DISTRIBUTION
CHANNEL.
Our nationwide wholesale base of independent gift store retailers represents
a large and stable source of sales growth. Over the last three years, our
wholesale business grew by over 22% annually and, in 1998, accounted for
approximately 56% of our total sales. We are committed to continuing to grow our
wholesale business and are investing significant capital in new promotional
programs, improved telemarketing systems and enhanced customer service. We
expect to grow our wholesale sales by adding new locations, while increasing the
average order size and re-order frequency of our existing customers. We are
targeting new and underdeveloped domestic markets, particularly in the south and
west. We also believe that our existing wholesale customers are favorably
impacted by our retail expansion. By further
35
<PAGE>
increasing our brand awareness, our retail stores expand our markets and
increase overall sales of our products in both our wholesale and retail
divisions.
WE PLAN TO EXPAND OUR INTERNATIONAL SALES.
We are predominately a U.S. business but have long-term international
expansion opportunities. We currently sell our products through international
distributors. In addition, we established our own European wholesale subsidiary
in June 1998 and began product shipments in January 1999. The European candle
market is currently a $1 billion industry and presents an important opportunity
for our long-term growth.
WE PLAN TO EXPAND OUR DIRECT MAIL CATALOG AND INTERNET OPERATIONS.
We market our products through our direct mail catalogs and our Internet
website at www.yankeecandle.com. In 1998, our direct mail business, which is a
part of our retail division, grew by over 60% and generated over $2 million of
sales. Our website, which was introduced in 1996 and was upgraded for retail
transactions in 1997, began generating revenues in late 1997. We continually
upgrade our website and catalog offerings in order to provide existing and new
customers with convenient purchase options. We expect both of these businesses
to continue to grow over the next several years as a result of demographic and
lifestyle changes in the consumer population, including the aging of the baby
boomers, decreased shopping time and the need for shopping convenience.
WE PLAN TO CONTINUE TO INTRODUCE NEW PRODUCTS.
Yankee Candle has a long history as a product and market innovator in the
premium scented candle segment of the giftware industry. We have a strong
in-house product design and development team and plan to continue to invest in
new products and packaging. We are able to successfully launch new product lines
by first testing products at our retail stores. In 1999, we plan to introduce 12
new fragrances, six of which were introduced in January. In addition to new
fragrances, we recently introduced in our retail stores a FINE FRAGRANCES candle
line with frosted-glass packaging, and an aromatherapy candle line. Both of
these products are designed to appeal to existing customers and to attract new
customers. We will continue to use our strong brand name and our significant
manufacturing and distribution capabilities to successfully introduce new
products.
PRODUCTS
We develop and introduce new products and fragrances throughout the year. We
currently offer over 1,000 SKU's of Yankee Candle manufactured products. Most of
our products are marketed under the trade names
Housewarmer-Registered Trademark- and Country Kitchen-Registered Trademark- and
include the following product styles:
- Jar Candles--scented candles in decorative glass jars; available in 22
oz., 14.5 oz. and 3.7 oz. sizes.
- Samplers-Registered Trademark---votive candles for sampling different
fragrances.
- Scented Tapers--the oldest candle style, dipped more than 30 times.
- Scented Ionic-Registered Trademark-Pillars (grooved).
- Standard Pillars (smooth)--both scented and unscented.
- Wax Potpourri Tarts-Registered Trademark---scented wax without wicks that
releases its fragrance when melted and warmed in a potpourri pot.
- Scented Tea Lights--small, colored and scented candles in clear cups made
for home fragrancing.
- Tart-Registered Trademark-Warmers--white unscented candles in aluminum
cups made for potpourri pots.
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<PAGE>
- Kindle Candles-Registered Trademark---unscented wax in a paper cup for use
in a fireplace or campfire as a firestarter.
These candle products are available in a wide range of fragrances and
colors. We currently maintain approximately 150 fragrances in our retail stores,
with our 53 best-selling fragrances available nationwide to our wholesale
customers. In addition to distinctive fragrances, we promote our brand through
consistent product packaging and labeling. The Yankee Candle name is typically
embossed on the top of our glass containers and is clearly displayed on every
product label. We also package our products in attractive gift baskets and
holders for sale in our retail stores. We offer glassware accessories and other
candle-related accessories at our retail stores in a variety of sizes and
shapes.
We seek to maintain a moderate price of under $20.00 for almost all of our
products in order to reinforce our customers' perception of our products as
highly affordable. As a result, our retail prices range from $0.89 for Wax
Potpourri Tarts-Registered Trademark- to $19.50 for 22 oz. jar candles. Since
1995, we have only increased our prices, on average, by 2.1% per year. We had no
price increase in 1998 and implemented a 2.3% price increase in January 1999.
RETAIL STORES
Our retail stores are an important and fast growing distribution channel and
represent an increasing percentage of our overall sales. From 1996 to 1998,
sales from our retail division, which includes our retail stores, catalog and
Internet operations, have grown at a compound annual rate of 38% from $42.9
million in 1996 to $81.2 million in 1998 and increased from 38% to 44% of our
total sales. Moreover, Yankee Candle retail stores generated comparable store
growth of 18.4% in 1996, 16.4% in 1997 and 16.5% in 1998. In 1998, our retail
stores achieved average sales per square foot of over $650.
As of May 15, 1999, we had 72 retail stores in 23 states and expect to open
approximately 30 stores during the rest of 1999. By the end of 1999, we expect
to have a retail presence in approximately 30 states. Yankee Candle has
established a strong retail presence in the northeast and is rapidly expanding
nationwide. In opening new stores we target new retail locations in highly
visible areas in premium malls and, to a lesser extent, strip centers and
tourist destinations. Of our 72 retail stores, 49 are located in malls and 23
are located in non-malls. Since we opened our flagship retail store in 1983, we
have closed only one location, which was profitable when closed. All but one of
our retail stores have been profitable in their first year of operation.
We design each of our retail stores with a warm, home-like atmosphere to
attract customers and provide a convenient shopping experience. Each store has
candle displays sorted by color, fragrance type and product category. Our store
design uses rich wood and other traditional elements to convey a high quality
image that complements our product and company identity. The display fixtures
hold sufficient inventory to support fast turning sales at peak season. The
target size of our retail stores is 1,500 to 2,000 square feet, with an average
size of approximately 1,650 square feet. Our retail stores typically offer
Yankee Candle products in 150 fragrances, including our 53 most popular
fragrances. A typical retail store has 1,000 SKU's of candles and 350 SKU's of
candle accessories.
Superior customer service and a knowledgeable employee base are key elements
of our retail strategy. We emphasize formal employee training, particularly with
respect to product quality, candle manufacturing and the heritage of Yankee
Candle. We also have a well-developed, 14-day training program for managers and
assistant managers and an 8-hour training program for sales associates. Our high
customer service standards are an integral part of our ongoing success. Each
store is responsible for implementing and maintaining these customer service
standards.
YANKEE CANDLE'S FLAGSHIP STORE
Our flagship store is the world's largest candle and Christmas store with
over 90,000 square feet of retail and entertainment space. This store promotes
Yankee Candle's image and culture and is an
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<PAGE>
important testing ground for our new product introductions. The store carries
over 24,000 SKU's of gift items supplied by over 750 vendors, and generates
approximately 65% of its revenues from the sale of Yankee Candle products.
Located in South Deerfield, Massachusetts, this store is a major tourist
destination, attracting an estimated 2.5 million visitors annually. The store
provides visitors with a total shopping and entertainment experience and
includes the Yankee Candlemaking Museum, the Yankee Candle Car Museum and a
240-seat restaurant.
DIRECT MAIL CATALOG AND INTERNET
As part of our retail division, we market our products through our direct
mail catalogs and Internet website. We expect both businesses to grow over the
next several years as a result of demographic and lifestyle changes in the
consumer population, including the aging of baby boomers, decreased shopping
time and a need for shopping convenience. In 1998, our direct mail business grew
by over 60% and generated over $2 million of sales. Our direct mail catalog
features all wholesale products and promotes the Deerfield flagship store as a
destination. We typically send out five to six catalogs per year. We believe
there are significant opportunities to grow the catalog business by adding
additional products and accessories, increasing our telephone hours and
expanding our mailing list. Our catalog is currently only sent to our existing
customers. We have the potential to rent or purchase lists from third parties.
We introduced our website in 1996 and upgraded it for retail transactions in
1997. The website, www.yankeecandle.com, offers browsers the opportunity to
preview the Deerfield store, learn more about Yankee Candle's history and
purchase on-line the same range of products available to our wholesale accounts.
The website began generating revenues in late 1997 and is expected to grow as we
continue to invest in website design and navigation features and explore banner
advertising and cross marketing opportunities with e-commerce and giftware
Internet service providers.
WHOLESALE DISTRIBUTION
Our wholesale strategy focuses on a nationwide base of small, independent
and credit-worthy gift store retailers. The wholesale business is a critical
part of our growth strategy and lays the foundation for the successful expansion
of our retail business by establishing a national brand. From 1996 to 1998,
sales from our wholesale accounts have grown at a compound annual rate of 22%
from $69.3 million in 1996 to $103.3 million in 1998, and changed from 62% to
56% of our total sales. Our wholesale customers currently have approximately
12,000 gift store locations nationwide and are located in all 50 states. In
1998, the northeast region accounted for 30% of domestic wholesale revenues, the
midwest 35%, the south 21% and the west 14%. As a result of our strong brand
name, the popularity and profitability of our products and our emphasis on
customer service, our wholesale customers are extremely loyal with over 65% of
them having been customers for over five years. No individual wholesale buying
group accounts for more than 2% of our total sales and almost 90% of our
wholesale accounts are located in non-mall locations. We are targeting future
wholesale locations in new and underdeveloped markets, particularly in the
southern and western United States.
We have developed a successful approach to wholesale distribution which has
established Yankee Candle as the top selling brand for many of our wholesale
customers. We actively seek to increase the average size and frequency of
wholesale orders through our innovative product display system, promotional
programs, new products and telemarketing initiatives. We promote a "Shop Within
A Shop" display system to our wholesale customers which presents our products
vertically by fragrance and horizontally by color in a distinctive wood hutch.
Yankee Candle recommends that dealers invest in an 8- to 12-foot display system
which holds $5,300 to $8,000 of Yankee Candle products at suggested retail
prices. This display system maximizes sales and profitability by providing
strong visual impact, shopping and restocking ease, and optimum space
efficiency. We have also implemented a number of promotional programs to
increase the square footage dedicated to Yankee Candle products as well as the
breadth of Yankee Candle products offered by our wholesale customers. For
example, we promote a FRAGRANCE OF THE MONTH program,
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<PAGE>
with featured fragrance suggestions for each month. This program encourages
dealers to increase their re-order schedule to 12 times per year and implement a
customer promotion that has already proven successful in our retail stores. The
promotion encourages consumers to try different fragrances and return to the
stores more frequently in order to buy the FRAGRANCE OF THE MONTH. In addition
to specific promotions, we advise our wholesale customers on an ongoing basis
regarding product knowledge, display suggestions, promotional ideas and
geographical consumer preferences.
We have a selective dealer approval process, designed to create consistent
nationwide standards for all Yankee Candle dealers. As a result of our high
credit standards for dealers, we had bad debt expense of only 0.18% of wholesale
sales in 1998.
We use a dedicated in-house direct sales force to service our wholesale
accounts. In 1998, we eliminated our network of independent manufacturer
representatives and completed a major shift to a direct sales force. This has
enabled Yankee Candle to gain greater control over the sales process, to provide
customers with better and more accurate information, faster order turn-around
and improved customer service, and to create more consistent merchandising
nationwide and reduce costs.
INTERNATIONAL OPERATIONS
We intend to expand internationally. We currently sell products through
international distributors and our company-owned distribution center in the
United Kingdom. In June 1998, we established Yankee Candle Europe, our European
subsidiary, and hired the former managing director of one of the largest United
Kingdom candle manufacturers to lead our international expansion program. In
addition, we opened a new 27,000 square foot distribution center in Bristol,
England and product shipments began in January 1999. We currently sell our
products directly to stores in the United Kingdom and sell through distributors
in Austria, Benelux, Denmark, Germany, Norway, Sweden and Switzerland.
NEW PRODUCT DEVELOPMENT
We have a long history as a product and market innovator in the premium
candle segment of the giftware industry. We have a strong in-house product
design and development team comprised of artists, fragrance specialists,
designers, packagers and buyers who work collaboratively to design new products
that are attractive to customers and can be manufactured cost-effectively. New
products are typically developed in less than a year. In January 1999, we
introduced six new fragrances: Berry Bramble-TM-, Mountain Lake-TM-, Storm
Watch-TM-, Vineyard-TM-, Lemon Lime and Hydrangea. We plan to introduce six
additional new fragrances during the remainder of 1999. In addition, we recently
introduced a FINE FRAGRANCES candle line with frosted-glass packaging, and an
aromatherapy candle line. Other new product ideas include new product sizes, new
packaging and variations of existing fragrances.
PRODUCT MANUFACTURING
Approximately 90% of our sales are generated by products we manufacture at
our 294,000 square foot facility in Massachusetts. As a manufacturer, we are
able to closely monitor the quality of our products and control our production
costs. We believe this is an important competitive advantage as it enables us to
ensure high quality products and maintain affordable pricing.
Our products are manufactured using filled, molded, extruded, compressed or
dipped manufacturing methods. The majority of our products are filled products
which are produced by pouring colored, scented liquid wax into a glass container
with a wick. Pillars are made by extrusion, in which wax is pressed around a
wick through a die. Tapers are produced through a dipping process and
Tarts-Registered Trademark- and Samplers-Registered Trademark- are made by
compression.
Yankee Candle uses high quality fragrances, premium-grade, highly refined
paraffin waxes, and superior wicks and dyes to create premium products. Our
manufacturing processes are designed to ensure
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the highest quality and quantity of candle fragrance, wick quality and
placement, color, fill level, shelf life and burn rate. We are continuously
engaged in efforts to maximize our quality and minimize our costs by using
efficient production and distribution methods and technological advancements.
SUPPLIERS
We maintain strong, established relationships with our principal fragrance
and petroleum-based wax suppliers. We use the highest-quality suppliers in our
industry and maintain back-up suppliers who are able to provide services and
materials of similar quality. We have developed, jointly with our suppliers,
several proprietary fragrances, which are exclusive to Yankee Candle. Raw
materials used in the manufacturing process, including wax, glassware, hutches
and packaging materials are readily available from multiple sources at
comparable prices. In 1998, no single supplier represented 10% or more of our
total supply purchases, except for ARC International which provided us with
glassware and represented 14% of our total supply purchases.
ORDER PROCESSING AND DISTRIBUTION
We currently have two warehouse and distribution facilities located within a
four mile radius in Deerfield and Whately, Massachusetts, and one warehouse and
distribution center in Bristol, England for products shipped to Europe. We
intend to open another facility in the fall of 1999 in Salt Lake City, Utah for
the warehousing and distribution of products to our retail stores and wholesale
accounts located in the western United States. This facility is expected to be
100,000 square feet in size.
We utilize computer systems to maintain efficient order processing from the
time a product enters the system through shipping and ultimate payment
collection from customers. We implemented uniform computer and communication
software systems allowing for on-line information access between our
headquarters and retail stores. We upgraded our information systems in 1998 to
further improve order processing and enhance inventory management and accuracy.
As part of these upgrades, we adopted a software package that allows us to
forecast demand for our products and efficiently plan our production schedules.
We also implemented a pick-to-light system which allows Yankee Candle employees
at our warehouse to receive information directly from the order collection
center and quickly identify, by way of blinking lights, the products and
quantity necessary for a particular order. To accurately track shipments and
provide better service to customers, we also use handheld optical scanners and
bar coded labels. We believe this software for the processing and shipment of
orders from the warehouse greatly improves our overall customer service through
enhanced order accuracy and reduced turnaround time.
The products sold by Yankee Candle in the United States are generally
shipped by United Parcel Service, Roadway Package Systems or other freight
carriers. We also lease a fleet of four trucks primarily used to ship products
to select company-owned retail stores. Our products are usually shipped to our
retail stores twice a week during the off-season and up to five times a week
during the holiday season. In 1998, our order lead time to our wholesale
customers, from order placement to shipment of goods, was typically three
business days during the first three calendar quarters and less than five
business days during the fourth quarter. During the first three quarters of
1998, we shipped 99.5% of all orders requested complete and over 92% complete in
the fourth quarter. We believe that our timely and accurate distribution is an
important differentiating factor for our customers.
INTELLECTUAL PROPERTY
Yankee Candle has obtained 31 U.S. trademark registrations, including Yankee
Candle-Registered Trademark-, Country Kitchen-Registered Trademark-,
Housewarmer-Registered Trademark-, Samplers-Registered Trademark-, Wax Potpourri
Tarts-Registered Trademark- and Kindle Candles-Registered Trademark-, and has
pending 10 trademark applications with respect to its products. Trademark
registrations allow us to use those trademarks on an exclusive basis in
connection with our products. If we continue to use our trademarks,
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<PAGE>
and make all required filings and payments, these trademarks can continue in
perpetuity. We also register many of our trademarks in foreign countries.
We believe that our trademarks are valuable assets and we intend to maintain
and renew our trademarks and their registrations and to vigorously defend them
against trademark infringement.
COMPETITION
We compete generally for the disposable income of consumers with other
producers in the giftware industry. The giftware industry is highly competitive
with a large number of both large and small participants. Yankee Candle products
compete with other scented and unscented candle products and with other gifts
within a comparable price range, like boxes of candy, flowers, wine, fine soap
and related merchandise. Yankee Candle's competitors distribute their products
through independent gift retailers, department stores, mass market stores and
mail order houses.
The candle market overall is highly fragmented. According to Unity
Marketing, 72% of all candle companies have less than $10 million in sales.
Premium market candle manufacturers include Colonial Candles, owned by Blyth
Industries, Inc., A.I. Root and Village Candle. The most important factors
affecting sales of candles are scent, price, burn quality, packaging, color and
shape.
Yankee Candle's retail store competitors include the franchised candle
chains Wicks n' Sticks and Candleman, although these two chains are also our
wholesale customers. Our other retail competition includes specialty candle
stores, as well as gift and houseware retailers.
We believe we are the leading premium scented candle company in the United
States and the only major candle company with a strong combination of
manufacturing, wholesale and retail operations. The principal bases of
competition for candles and other comparably priced giftware include brand
loyalty, quality, perceived value, design, product display, consumer appeal,
service and price. We believe our competitive position is enhanced by a variety
of factors, including our national premium brand image, high quality reputation
among consumers and retailers, distinctive retail stores, extensive wholesale
distribution base, knowledgeable employees, effective display and product
presentation, affordable pricing, our low cost, highly automated manufacturing
operations and strong and growing presence in both wholesale and retail
segments. Some of our competitors are part of large, diversified companies
having greater financial resources and a wider range of product offerings than
Yankee Candle.
EMPLOYEES
At May 15, 1999, we employed approximately 1,300 full-time employees and 500
part-time employees. All of these employees are non-union, and we believe that
our labor relations are good. We also use between 200 and 250 seasonal workers
hired through temporary employment agencies.
LEGAL PROCEEDINGS
We are involved from time to time in ordinary routine legal proceedings
relating to our business. We believe that none of these legal proceedings will
have a material adverse impact on our results of operations, cash flow or
financial condition.
ENVIRONMENTAL MATTERS
We are subject to various federal, state, local and foreign laws and
regulations governing the generation, storage, use, emission, discharge,
transportation and disposal of hazardous materials and the health and safety of
our employees. In addition, we are subject to environmental laws which may
require investigation and cleanup of any contamination at facilities we own or
operate or at third party waste disposal sites we use. These laws could impose
liability even if we did not know of, or were not responsible for, the
contamination.
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We have in the past and will in the future incur costs to comply with
environmental laws. We are not, however, currently aware of any costs or
liabilities relating to environmental matters, including any claims or actions
under environmental laws or obligations to perform any cleanups at any of our
facilities or any third party waste disposal sites, that are expected to have a
material adverse effect on our operations, cash flow or financial condition. It
is possible, however, that material environmental costs or liabilities may arise
in the future.
FACILITIES
Yankee Candle owns facilities totaling 537,600 square feet, located on 82
acres, within a four mile radius in Deerfield and Whately, Massachusetts, as
described in the table below:
<TABLE>
<CAPTION>
TYPE OF FACILITY LOCATION SIZE
- -------------------------------------------------------------------- -------------------------- ----------------
<S> <C> <C>
Manufacturing, wholesale distribution and offices Whately, Mass. 294,000 sq. ft.
Flagship retail store, car museum and restaurant South Deerfield, Mass. 90,000 sq. ft.
Retail warehouse and distribution center South Deerfield, Mass. 60,000 sq. ft.
Retail support South Deerfield, Mass 48,000 sq. ft.
Marketing and design building Whately, Mass. 16,000 sq. ft.
Employee health and fitness center South Deerfield, Mass. 12,000 sq. ft.
Retail offices South Deerfield, Mass. 11,000 sq. ft.
Wholesale telemarketing South Deerfield, Mass. 6,600 sq. ft.
</TABLE>
In addition, we have a 27,000 square foot leased distribution facility in
Bristol, England and plan to open a new 100,000 square foot leased distribution
facility in Salt Lake City, Utah in September 1999. We currently estimate that
we will spend approximately $1.5 million in connection with the opening of the
Salt Lake City facility.
We believe that these facilities are suitable and adequate and have
sufficient capacity to meet our current needs.
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Other than the Deerfield flagship store and three smaller retail locations,
we lease our other retail stores. Initial store leases for mall locations range
from eight to ten years. For non-mall locations, most leases are five years,
with a five-year renewal option. Our retail stores are located in the following
states and cities:
ARIZONA
- -Glendale
CALIFORNIA
- -Montclair
- -Riverside
COLORADO
- -Denver
- -Littleton
CONNECTICUT
- -Avon
- -Danbury
- -Farmington
- -Manchester
- -Orange
- -Waterbury
- -Waterford
FLORIDA
- -Jacksonville
- -Orange Park
- -Orlando
- -Tampa
GEORGIA
- -Alpharetta
KANSAS
- -Overland Park
MAINE
- -Freeport
- -Kittery
MARYLAND
- -Annapolis Harbour Center
- -Baltimore
- -Gaithersburg
- -Towson
MASSACHUSETTS
- -Boston
- -Cambridge
- -Deerfield
- -Holyoke
- -Hyannis
- -Lenox
- -Lynnfield
- -Natick
- -North Attleboro
- -Pembroke
- -Shrewsbury
- -Stockbridge
- -Sturbridge
- -Taunton
MICHIGAN
- -Dearborn
- -Novi
NEVADA
- -Las Vegas
NEW HAMPSHIRE
- -Manchester
- -Nashua
- -North Conway
NEW JERSEY
- -Freehold
- -Paramus
- -Woodbridge
NEW YORK
- -Albany
- -Buffalo
- -Middletown
- -Poughkeepsie
- -Rochester
- -Saratoga
- -Staten Island
- -Syracuse
- -Westbury
- -West Nyack
OHIO
- -Beavercreek
- -Columbus
- -Dublin
PENNSYLVANIA
- -King of Prussia
- -Philadelphia (Chestnut Hill)
RHODE ISLAND
- -Cranston
- -Newport
SOUTH CAROLINA
- -Columbia
- -Myrtle Beach
TEXAS
- -Austin
VERMONT
- -Burlington
- -Manchester Center
VIRGINIA
- -Norfolk
- -Richmond
WASHINGTON
- -Seattle
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<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following sets forth information regarding the executive officers and
directors of Yankee Candle as of May 20, 1999:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
Michael J. Kittredge................................. 47 Chairman of the Board and Director (Class II)
Michael D. Parry..................................... 47 President, Chief Executive Officer and Director
(Class III)
Robert R. Spellman................................... 51 Senior Vice President of Finance and Chief Financial
Officer
Gail M. Flood........................................ 40 Senior Vice President of Retail Operations
Stephen T. Williams.................................. 48 Senior Vice President of Wholesale Operations
Theodore J. Forstmann................................ 59 Director (Class I)
Nicholas C. Forstmann................................ 52 Director (Class II)
Sandra J. Horbach.................................... 38 Director (Class III)
Steven B. Klinsky.................................... 42 Director (Class I)
Michael S. Ovitz..................................... 52 Director (Class I)
Ronald L. Sargent.................................... 43 Director (Class II)
Emily Woods.......................................... 37 Director (Class III)
</TABLE>
MICHAEL J. KITTREDGE is the Chairman of the Board. Mr. Kittredge is the
founder of Yankee Candle. He served as a Director until April 1998. Mr.
Kittredge was appointed a Director of Yankee Candle Holdings in July 1998 and
reappointed a Director of Yankee Candle in April 1999. He has been honored
several times by the United States Small Business Administration (S.B.A.), once
in 1985 as the winner of the "Entrepreneurial Success Award," and again in 1986
as the "Businessman of the Year" for Massachusetts and the New England region.
In 1996, Mr. Kittredge received USA Today's and Ernst & Young's Retail
Entrepreneur of the Year Award.
MICHAEL D. PARRY is a Director, the President and Chief Executive Officer.
Mr. Parry joined Yankee Candle in 1982 as General Manager, and was appointed
Vice President in January 1989 and President in July 1996. Mr. Parry has served
as a Director of Yankee Candle since May 1998 and a Director of Yankee Candle
Holdings since July 1998. He was promoted to his current position of Chief
Executive Officer in November 1998. Since 1989, he has been in charge of all of
our operations including general oversight of wholesale and retail activities
and manufacturing and distribution.
ROBERT R. SPELLMAN is the Senior Vice President of Finance and Chief
Financial Officer. Prior to joining Yankee Candle in November 1998, Mr. Spellman
was Senior Vice President of Finance of Staples, Inc. from 1988 through 1994,
and Chief Financial Officer of Star Markets Company, Inc. from 1994 through
1998.
GAIL M. FLOOD is the Senior Vice President of Retail Operations. Ms. Flood
joined Yankee Candle in 1982 as Retail Store Manager. Since 1988, she has been
in charge of our retail operations. She was appointed Vice President of Retail
Operations in July 1996, and promoted to her current position in November 1998.
STEPHEN T. WILLIAMS is the Senior Vice President of Wholesale Operations.
Mr. Williams joined Yankee Candle in 1982, and held a number of different
positions in a variety of areas including Production, Packaging and Shipping
prior to being appointed National Sales Manager in 1987. In July 1996, Mr.
Williams was made Vice President of Wholesale Operations, and was promoted to
Senior Vice President in November 1998. Since 1987, he has been in charge of our
wholesale operations.
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THEODORE J. FORSTMANN has served as a Director of Yankee Candle Holdings
since July 1998 and a Director of Yankee Candle since April 1999. Mr. Forstmann
has been a general partner of FLC XXIX Partnership, L.P., the general partner of
Forstmann Little & Co., since he co-founded Forstmann Little & Co. in 1978. He
is Chairman of the Board and Chief Executive Officer of Gulfstream Aerospace
Corporation. Theodore J. Forstmann and Nicholas C. Forstmann are brothers.
NICHOLAS C. FORSTMANN has been a Director of Yankee Candle Holdings since
July 1998 and a Director of Yankee Candle since April 1999. He has been a
general partner of FLC XXIX Partnership, L.P. since he co-founded Forstmann
Little & Co. in 1978. He is also a director of Gulfstream Aerospace Corporation.
SANDRA J. HORBACH has been a Director of Yankee Candle Holdings since March
1998 and a Director of Yankee Candle since May 1998. She has been a general
partner of FLC XXIX Partnership, L.P. since 1993. She is also a director of
Gulfstream Aerospace Corporation.
STEVEN B. KLINSKY has been a Director of Yankee Candle Holdings since July
1998 and a Director of Yankee Candle since April 1999. He has been a general
partner of FLC XXIX Partnership, L.P. since December 1986.
MICHAEL S. OVITZ has been a Director of Yankee Candle Holdings since
November 1998 and a Director of Yankee Candle since April 1999. He is an
independent businessman and investor, and has been active in this capacity since
December 1996. In August 1998, Mr. Ovitz co-founded Artists Management Group, a
management/production/multi-media company. From October 1995 to December 1996,
Mr. Ovitz was President of The Walt Disney Company. From 1975 to 1995, Mr. Ovitz
served as chairman of Creative Artists Agency, which he co-founded. Mr. Ovitz is
also a director of Livent, Inc. and Gulfstream Aerospace Corporation.
RONALD L. SARGENT has been a Director of Yankee Candle since May 20, 1999.
Mr. Sargent has served as President and Chief Operating Officer of Staples, Inc.
since November 1998. Prior to that time, he served in various capacities since
joining Staples, Inc. in March 1989, including President--North American
Operations from October 1997 to November 1998, President--Staples Contract &
Commercial from June 1994 to October 1997, and Vice President--Staples Direct
and Executive Vice President--Contract & Commercial from September 1991 until
June 1994.
EMILY WOODS has been a Director of Yankee Candle Holdings since July 1998
and a Director of Yankee Candle since April 1999. She is the Chairman of J. Crew
Group, Inc., which she co-founded in 1983. She is also a director of Beringer
Wine Estates.
THE BOARD OF DIRECTORS
Yankee Candle's By-Laws provide for a classified board of directors
consisting of three classes. Each class will consist, as nearly as possible, of
one-third of the total number of directors constituting the entire board. The
term of the initial Class I directors will terminate on the date of the 2000
annual meeting of stockholders; the term of the initial Class II directors will
terminate on the date of the 2001 annual meeting of stockholders; and the term
of the initial Class III directors will terminate on the date of the 2002 annual
meeting of stockholders. Beginning in 2000, at each annual meeting of
stockholders, successors to the class of directors whose term expires at that
annual meeting will be elected for a three-year term and until their respective
successors are elected and qualified. A director may only be removed with cause
by the affirmative vote of the holders of a majority of the outstanding shares
of capital stock entitled to vote in the election of directors. The Forstmann
Little partnerships have a contractual right to elect two directors until they
no longer own any shares of Yankee Candle common stock.
Directors who are neither executive officers of Yankee Candle nor general
partners in the Forstmann Little partnerships have been granted options to
purchase common stock in connection with their election to the board of Yankee
Candle Holdings. Directors do not receive any fees for serving on Yankee
Candle's
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board, but are reimbursed for their out-of-pocket expenses arising from
attendance at meetings of the board and committees. See "--Outside Director
Stock Options."
The board has three committees: Executive, Compensation and Audit. The
Executive Committee consists of Michael D. Parry, Theodore J. Forstmann and
Sandra J. Horbach. The Compensation Committee consists of Theodore J. Forstmann,
Sandra J. Horbach and Nicholas C. Forstmann. The Audit Committee consists of
Steven B. Klinsky, Ronald L. Sargent and Emily Woods.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee of Yankee Candle's Board of
Directors are Theodore J. Forstmann, Nicholas C. Forstmann and Sandra J.
Horbach, each of whom has served on the Committee since April 1999. Yankee
Candle did not have a Compensation Committee, or committee performing comparable
functions, in 1998. Since the 1998 recapitalization, all 1998 compensation
decisions for Yankee Candle executive officers were made by the Compensation
Committee of Yankee Candle Holdings Corp., consisting of Theodore J. Forstmann
and Sandra J. Horbach. Each of Theodore J. Forstmann, Nicholas C. Forstmann and
Sandra J. Horbach are general partners in partnerships affiliated with the
Forstmann Little partnerships. See "--Relationships and Transactions with Yankee
Candle" for a description of certain transactions between the Forstmann Little
partnerships and Yankee Candle in connection with the 1998 recapitalization.
None of the members of the Yankee Candle Holdings or the Yankee Candle
Compensation Committees have been officers or employees of Yankee Candle or its
subsidiaries.
EXECUTIVE COMPENSATION
The following table sets forth information with respect to compensation for
the year ended December 31, 1998 paid by us for services to each person who
served as our Chief Executive Officer during 1998 and our three other most
highly paid executive officers who were serving as executive officers at
December 31, 1998.
SUMMARY COMPENSATION TABLE (1)
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
----------------------------------------
OTHER ANNUAL ALL OTHER
BASE SALARY BONUS COMPENSATION(4) COMPENSATION
----------- ---------- --------------- -------------
<S> <C> <C> <C> <C>
Michael J. Kittredge
Chairman of the Board................................. $ 342,000 $ -- $ -- $21,016(5)
Michael D. Parry
President and Chief Executive Officer................. 216,539 76,502 -- (6)
Robert R. Spellman(2)
Senior Vice President of Finance and Chief Financial
Officer............................................... 30,962(3) 11,500(3) -- 575,173(7)
Gail M. Flood
Senior Vice President of Retail Operations............ 149,616 58,628 -- (6)
Stephen T. Williams
Senior Vice President of Wholesale Operations......... 139,616 55,000 -- (6)
</TABLE>
- ------------------------
(1) Yankee Candle does not have any executive officers other than those named in
the summary compensation table. Mr. Kittredge served as Yankee Candle's
Chief Executive Officer until November 1998.
(2) Mr. Spellman became an employee of Yankee Candle in November 1998.
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<PAGE>
(3) Reflects the portion of Mr. Spellman's annual base salary and annual bonus
that he actually earned in 1998.
(4) Unless otherwise indicated, the aggregate amount of perquisites and other
personal benefits was less than $50,000 or 10% of the total of annual salary
and bonus reported for that named executive officer.
(5) Includes premiums of $1,016 paid for life insurance, and a matching
contribution of $20,000 under the Yankee Candle Company Executive Deferred
Compensation Plan.
(6) Includes a matching contribution of $20,000 under the Yankee Candle Company
Executive Deferred Compensation Plan for each of Messrs. Parry and Williams
and Ms. Flood, and a special bonus of $9,433,962 paid in connection with the
1998 recapitalization for each of Messrs. Parry and Williams and Ms. Flood,
and premiums paid for life insurance in the amounts of $582, $313 and $132
for Messrs. Parry and Williams and Ms. Flood, respectively.
(7) Includes premiums of $173 paid for life insurance, a one-time signing bonus
of $500,000 and a one-time payment of $75,000 paid in connection with a
bonus forfeited by Mr. Spellman upon separation of his prior employment.
OPTION GRANTS
None of the executive officers named in the summary compensation table have
options to purchase common stock, but each owns shares of Yankee Candle. See
"Principal and Selling Stockholders."
EMPLOYMENT AGREEMENT
On October 22, 1998, we entered into an employment agreement with Robert R.
Spellman. The following are the key terms of his employment agreement:
- employment as Senior Vice President and Chief Financial Officer,
- base salary of $230,000 per year,
- eligibility to receive a target bonus equal to 35% of base salary under
the executive bonus plan,
- right to purchase shares of common stock, and
- a one-time signing bonus of $500,000. If Mr. Spellman leaves voluntarily
or is terminated for cause prior to May 9, 2000, he must repay this
signing bonus.
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<PAGE>
YANKEE CANDLE HOLDINGS STOCK OPTION PLAN
The Yankee Candle Holdings Corp. Employee Stock Option Plan provides for the
granting of options to purchase shares of Class A common stock of Yankee Candle
Holdings to any employee of Yankee Candle Holdings or its subsidiaries. These
options are not intended to qualify as incentive stock options. The plan is
currently administered by the Compensation Committee of the board of directors
of Yankee Candle Holdings, which committee sets the terms and conditions of the
options. Options vest over a five year period. Options to purchase a total of
1,670 shares of Class A common stock were granted during the period from April
27, 1998 to April 3, 1999 at an exercise price of $1,038.46 per share. All of
these options were granted at fair value, except for options to purchase 320
shares which were granted in 1999 at less than fair value.
In connection with the liquidation of Yankee Candle Holdings prior to the
closing of the offering, the options to acquire Yankee Candle Holdings common
stock will become options to acquire Yankee Candle common stock on the same
terms as the existing options, other than changes to the exercise price and the
number of shares subject to options to preserve the economics of the existing
options. The plan will be administered by the Compensation Committee of the
board of Yankee Candle. The plan authorizes the issuance of shares of
common stock with adjustments in the case of changes in capitalization affecting
the options. Assuming the conversion of all outstanding Yankee Candle Holdings
options into Yankee Candle options, options to purchase shares of common
stock have been granted to date under the plan. The description below assumes
that the liquidation has occurred and that the options are exercisable for
Yankee Candle common stock. See "Description of Capital Stock."
STOCK OPTION AGREEMENTS. Options are granted pursuant to stock option
agreements. One-fifth of the options generally vest and become exercisable on
each of the first, second, third, fourth and fifth anniversaries of the grant
date. Unvested options expire on the date of the optionee's termination of
employment and vested options expire after the termination of employment as
described below.
Each option expires on the earliest of:
- the tenth anniversary of the date of grant,
- if the optionee's employment is terminated for any reason, including death
or disability of the optionee, the 60(th) day following the delivery of a
notice to the optionee by Yankee Candle, during which 60-day period the
optionee may exercise the vested portion of the option, and
- the exercise in full of the option.
These options are generally exercisable only by an optionee during the
optionee's lifetime and are not transferable.
The stock option agreements provide that Yankee Candle will notify the
optionee prior to a total sale or a partial sale. A total sale includes:
(1) the merger or consolidation of Yankee Candle into another corporation,
other than a merger or consolidation in which Yankee Candle is the
surviving corporation and which does not result in a capital
reorganization, reclassification or other change in the then outstanding
common stock,
(2) the liquidation of Yankee Candle,
(3) the sale to a third party of all or substantially all of Yankee Candle's
assets, or
(4) the sale to a third party of common stock, other than through one or
more public offerings;
but only if, in the case of the events described in (1), (2) and (4), the
Forstmann Little partnerships cease to own shares of the voting stock of the
business.
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A partial sale means a sale by the Forstmann Little partnerships of all or a
portion of their shares of common stock, including through a public offering, to
a third party, other than a total sale. This offering constitutes a partial
sale.
The optionee may exercise options only for purposes of participating in the
partial sale, whether or not the options were otherwise exercisable, with
respect to the excess, if any, of:
- the number of shares with respect to which the optionee would be entitled
to participate in the partial sale under the stockholder's agreement
described below, over
- the number of shares previously issued upon exercise of the options and
not previously disposed of in a partial sale.
Upon receipt of a notice of a total sale, the optionee may exercise all or
part of the options, whether or not the options were otherwise exercisable.
In connection with a total sale, Yankee Candle may redeem the unexercised
portion of the options in lieu of permitting the optionee to exercise the
options. Any unexercised portion of an option will terminate upon the completion
of a total sale, unless Yankee Candle provides for its continuation.
In the event a total sale or partial sale is not completed, any option
exercised in connection with the sale will be exercisable only to the extent it
would have been exercisable if notice of the sale had not been given. The stock
option agreements provide that, if the Forstmann Little partnerships sell shares
of common stock in a bona fide arm's-length transaction, at the election of
Yankee Candle, an optionee may be required to
- proportionately exercise the optionee's options and to sell all of the
shares of common stock purchased under the exercise in the same
transaction and on the same terms as the shares sold by the Forstmann
Little partnerships, or, if unwilling to do so,
- forfeit the portion of the option required to be exercised.
The optionee has no independent right to require Yankee Candle to register
the shares of common stock underlying the options under the Securities Act.
The stock option agreements permit Yankee Candle to terminate all of an
optionee's options if the optionee engages in prohibited or competitive
activities.
The number and class of shares underlying, and the terms of, outstanding
options may be adjusted in the event of a merger, consolidation, stock split or
stock dividend.
STOCKHOLDER'S AGREEMENT. Upon exercise of an option under the plan, an
optionee is required to enter into a stockholder's agreement with Yankee Candle
in the form then in effect. The stockholder's agreement provides that,
generally, the shares issued upon exercise of the options may not be sold,
assigned or otherwise transferred. The description below summarizes the terms of
the form of the stockholder's agreement currently in effect.
If one or more partial sales result in the Forstmann Little partnerships
owning, in the aggregate, less than 20% of the then outstanding voting stock of
Yankee Candle, the stockholder is entitled to transfer his or her shares of
common stock free of the restrictions and rights contained in the stockholder's
agreement.
The stockholder's agreement provides that the stockholder may participate
proportionately in any sale by the Forstmann Little partnerships of all or a
portion of their shares of common stock to any person who is not a partner or
affiliate. In addition, the stockholder shall be entitled to, and may be
required to, participate proportionately in a public offering of shares of
common stock by the Forstmann Little partnerships, by selling the same
percentage of the stockholder's shares that the Forstmann Little partnerships
are selling of their shares. The sale of shares of common stock in this
transaction must be for the same price and otherwise on the same terms and
conditions as the sale by the Forstmann Little
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partnerships. If the Forstmann Little partnerships sell or exchange all or a
portion of their common stock in a bona fide arm's-length transaction, the
Forstmann Little partnerships may require the stockholder to sell a
proportionate amount of his or her shares for the same price and on the same
terms and conditions as the sale of common stock by the Forstmann Little
partnerships and, if stockholder approval of the transaction is required, to
vote his or her shares in favor of the sale or exchange.
OUTSIDE DIRECTOR STOCK OPTIONS
Three directors, Mr. Michael Ovitz, Mr. Ronald Sargent and Ms. Emily Woods,
have options which were granted pursuant to individual stock option agreements.
The date of these director option agreements and the date of grant, for Mr.
Ovitz was November 30, 1998, for Mr Sargent was , 1999 and for Ms. Woods
was June 26, 1998. Upon the liquidation of Yankee Candle Holdings prior to the
closing of this offering, these director options will become options to acquire
shares of Yankee Candle common stock on the same terms as the existing options,
other than the exercise price and number of shares subject to option which will
be adjusted to preserve the economics of the existing options. Each of the
director optionees will have options to purchase shares of common stock at
$ per share. These options are not intended to qualify as incentive stock
options and were not issued pursuant to the plan.
One-third of the options generally becomes exercisable on each of the first,
second and third anniversaries of the date of the grant. Each option expires on
the earliest of:
- the tenth anniversary of the date of grant,
- 30 days after the date the director optionee ceases to serve as a director
of Yankee Candle, and
- the exercise in full of the option.
The director optionees may not sell or otherwise transfer their options.
The director option agreements provide that Yankee Candle will notify the
director optionees prior to a total sale or a partial sale. Upon receipt of a
notice of a partial sale, a director optionee may exercise his or her options
only for purposes of participating in the partial sale, whether or not the
options were otherwise exercisable, with respect to the excess, if any, of:
- the number of shares with respect to which the director optionee would be
entitled to participate in the partial sale under the director
stockholder's agreements described below, over
- the number of shares previously issued upon exercise of the options and
not previously disposed of in a partial sale.
Upon receipt of a notice of a total sale, a director optionee may exercise
all or part of the options, whether or not the options were otherwise
exercisable.
In connection with a total sale, Yankee Candle may redeem the unexercised
portion of the director optionee's options. Any unexercised portion of a
director optionee's options will terminate upon the completion of a total sale,
unless Yankee Candle provides for continuation of the options.
In the event a total sale or partial sale is not completed, any option which
a director optionee had exercised in connection with the sale will be
exercisable after the sale only to the extent it would have been exercisable if
notice of the sale had not been given. This offering constitutes a partial sale.
The director option agreements provide that, if the Forstmann Little
partnerships sell shares of common stock in a bona fide arm's-length
transaction, at the election of Yankee Candle, a director optionee may be
required to:
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- proportionately exercise the director optionee's options and to sell all
of the shares of common stock purchased under the exercise in the same
transaction and on the same terms as the shares sold by the Forstmann
Little partnerships, or, if unwilling to do so,
- forfeit the portion of the option required to be exercised.
The director optionees have no independent right to require Yankee Candle to
register the shares of common stock underlying the options under the Securities
Act.
The number and class of shares underlying, and the terms of, outstanding
options may be adjusted in the event of a merger, consolidation, stock split or
stock dividend.
DIRECTOR STOCKHOLDER'S AGREEMENTS. Upon exercise of a director option, a
director optionee is required to enter into a director stockholder's agreement
with Yankee Candle in the form then in effect. The form of director
stockholder's agreement currently in effect is substantially the same as the
form of employee stockholder's agreement currently in effect.
STOCK AGREEMENTS
In connection with the recapitalization, 12 members of Yankee Candle
management were awarded the right to purchase, and actually purchased, stock of
Yankee Candle Holdings on April 27, 1998. In October 1998 an additional member
of management was awarded the right to purchase, and agreed to purchase, stock
of Yankee Candle Holdings. He purchased these shares in February 1999. These
members of management entered into stock agreements relating to these shares of
common stock of Yankee Candle Holdings. See "--Relationships and Transactions
with Yankee Candle."
After the liquidation of Yankee Candle Holdings prior to the closing of this
offering, the restrictions of the subscription agreements will apply to the
stockholder's ownership of Yankee Candle common stock and, in connection with
the receipt of the Yankee Candle common stock, the stockholders will enter into
new stock agreements covering the Yankee Candle common stock with the same terms
as the original agreement except for adjustments that are necessary to preserve
the economics of the original stock agreements. The description below assumes
that the new subscription agreements have been executed.
The stock agreements contain transfer provisions substantially similar to
those in the form of stockholder's agreement that the employee optionees and
director optionees must execute upon exercise of options under the plan.
Upon termination of employment, Yankee Candle has a right, at its option, to
purchase all of the unvested shares of common stock held by a stockholder. The
stock vests at a rate of 20% per year, beginning after one year. The
stockholders have no independent right to require Yankee Candle to register
their shares of common stock under the Securities Act.
THE YANKEE CANDLE 1999 STOCK OPTION AND AWARD PLAN
The board of directors of Yankee Candle adopted the 1999 Stock Option and
Award Plan on April 15, 1999, and the stockholders approved it on April , 1999.
The stock plan provides for the grant of incentive stock options intended to
qualify under Section 422 of the IRS Code and stock options which do not so
qualify, stock appreciation rights, restricted stock, performance units and
performance shares, phantom stock awards and share awards. Yankee Candle's and
its subsidiaries' eligible directors, officers, employees, including future
employees who have received written offers of employment, and consultants are
eligible to receive grants under the stock plan. The stock plan is designed to
comply with the requirements for "performance-based compensation" under Section
162(m) of the IRS Code, and the conditions for exemption from the short-swing
profit recovery rules under Rule 16b-3 under the Exchange Act.
The stock plan is administered by a committee that consists of at least two
nonemployee outside board members. The Compensation Committee of the board
currently serves as the committee. Generally, the
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committee has the right to grant options and other awards to eligible
individuals and to determine the terms and conditions of options and awards,
including the vesting schedule and exercise price of options and awards. The
stock plan authorizes the issuance of 5% of the outstanding shares of common
stock determined on a fully diluted basis as of , 1999, with adjustment
in the case of changes in capitalization affecting the options.
The stock plan provides that the term of any option may not exceed ten
years, except in the case of the death of an optionee in which event the option
may be exercised for up to one year following the date of death even if it
extends beyond ten years from the date of grant. If a participant's employment,
or service as a director, is terminated following a change in control, any
options or stock appreciation rights become immediately and fully vested at that
time and will remain outstanding until the earlier of the six-month anniversary
of termination and the expiration of the option term.
RELATIONSHIPS AND TRANSACTIONS WITH YANKEE CANDLE
On April 27 1998, Yankee Candle recapitalized. Pursuant to the 1998
recapitalization, Yankee Candle redeemed approximately 500 shares of Yankee
Candle common stock owned by Michael Kittredge for an aggregate redemption price
of approximately $200.0 million. Mr. Kittredge also sold approximately 450
shares of Yankee Candle common stock to Yankee Candle Holdings Corp., a
corporation newly formed by the Forstmann Little partnerships and a group of
executives of Yankee Candle, for approximately $180.0 million. The 1998
recapitalization and related transactions were consummated pursuant to a
recapitalization agreement, dated as of March 25, 1998, between Forstmann Little
& Co. Subordinated Debt and Equity Management Buyout Partnership-VI, L.P., which
is one of the Forstmann Little partnerships, Yankee Candle Holdings, Yankee
Candle and Michael Kittredge. At the same time and as part of the 1998
recapitalization, Chandler's Restaurant, Inc., a subsidiary of Yankee Candle,
acquired the assets of the restaurant business located at Yankee Candle's South
Deerfield flagship retail location from Mr. Kittredge.
Immediately after the 1998 recapitalization, Yankee Candle Holdings owned
90% of Yankee Candle's common stock and Mr. Kittredge owned 10% of Yankee
Candle's common stock.
Yankee Candle financed the redemption of shares from Mr. Kittredge, the
repayment of existing indebtedness, the payment of the expenses of the 1998
recapitalization and one-time employee bonuses by borrowing $2.5 million under a
$60.0 million revolving credit facility and by issuing an aggregate of $320.0
million of subordinated debentures to Forstmann Little & Co. Subordinated Debt
and Equity Management Buyout Partnership-VI, L.P. That partnership immediately
distributed the subordinated debentures to its limited partners. The
subordinated debentures are divided into three equal series, due on May 31,
2009, May 31, 2010 and May 31, 2011. The subordinated debentures provide for an
interest rate of 6 3/4% and provide for interest to be paid semi-annually. As of
April 3, 1999, Yankee Candle had paid $12.8 million in interest. The
subordinated debentures may be prepaid by Yankee Candle at any time without
premium, penalty or any charge. Yankee Candle will prepay all of the
subordinated debentures with the proceeds of this offering, the proceeds of a
new credit facility and available cash.
The principal recipients of the one-time bonus aggregating $61.3 million
were Mr. Parry, Mr. Harry Flood, Ms. Gail Flood, Mr. Williams, Ms. Nancy
Spanbauer and Ms. Ann Morrissey.
Yankee Candle Holdings purchased shares of common stock from Mr. Kittredge
for approximately $180.0 million. This purchase was financed with the proceeds
from the sale of shares of Yankee Candle Holdings common stock to the Forstmann
Little partnerships and senior management of Yankee Candle, including Mr. Parry,
Ms. Flood, Mr. Williams and nine other persons.
On September 14, 1998, January 22, 1999 and January 26, 1999, Yankee Candle
Holdings repurchased shares of Yankee Candle Holdings common stock from
employees who resigned from Yankee Candle for
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an aggregate purchase price of $750,000. To finance the repurchases, Yankee
Candle Holdings borrowed funds from Yankee Candle pursuant to intercompany
notes.
As a result of an award in October 1998 to purchase stock, Mr. Spellman on
February 3, 1999 invested approximately $1.0 million in Yankee Candle Holdings
by purchasing shares of Yankee Candle Holdings common stock. Yankee Candle lent
Mr. Spellman $750,000 to help finance his investment. The loan to Mr. Spellman
carries an interest rate of 7%. The loan provides for full recourse to Mr.
Spellman and is secured. In addition, Mr. Spellman has entered into a pledge
agreement pledging, among other things, his shares of Yankee Candle Holdings
common stock. The loan will be secured by Mr. Spellman's shares of new Yankee
Candle common stock after the offering. The loan matures five years from the
date it was made and must be prepaid in full in circumstances which include a
termination of employment. In addition, Mr. Spellman must apply his after-tax
proceeds of a sale of common stock to reduce the principal amount of, and
accrued interest on, the loan.
Yankee Candle Holdings used the proceeds of Mr. Spellman's investment to
repay all outstanding intercompany notes and used the remainder to make a
capital contribution to Yankee Candle.
Mr. Harry Flood was our Chief Financial Officer until November 1998. In
connection with the 1998 recapitalization, he received a special bonus of
$9,433,962. His aggregate compensation in 1998, excluding the special bonus, was
$236,212. He is Ms. Flood's husband.
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth information regarding the beneficial
ownership of Yankee Candle's common stock immediately prior to the consummation
of this offering, giving effect to the reorganization occurring in connection
with this offering, and as adjusted to reflect the sale of the shares of common
stock pursuant to this offering. The table includes:
- each person who is known to Yankee Candle to be the beneficial owner of
more than 5% of the outstanding common stock,
- each other director of Yankee Candle,
- each other executive officer named in the summary compensation table,
- all directors and executive officers of Yankee Candle as a group, and
- the other selling stockholders participating in the offering.
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Except as otherwise indicated, the persons or entities listed below have
sole voting and investment power with respect to all shares of common stock
beneficially owned by them, except to the extent their power may be shared with
a spouse.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO OWNED AFTER
OFFERING (1) NUMBER OF OFFERING (1)
------------------------ SHARES ------------------------
NAME NUMBER PERCENT OFFERED (1) NUMBER PERCENT
- --------------------------------------------------------------- ----------- ----------- --------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
5% STOCKHOLDERS:
Forstmann Little & Co. Equity Partnership-V, L.P.(2)...........
Forstmann Little & Co. Subordinated Debt and Equity Management
Buyout Partnership-VI, L.P.(2)...............................
Michael J. Kittredge...........................................
OTHER DIRECTORS:
Theodore J. Forstmann(2).......................................
Nicholas C. Forstmann(2).......................................
Steven B. Klinsky(2)...........................................
Sandra J. Horbach(2)...........................................
Michael D. Parry...............................................
Michael S. Ovitz...............................................
Ronald L. Sargent..............................................
Emily Woods....................................................
OTHER NAMED EXECUTIVE OFFICERS:
Gail M. Flood..................................................
Robert R. Spellman.............................................
Stephen T. Williams............................................
All Directors and Executive Officers as a Group (12 persons)...
ADDITIONAL SELLING STOCKHOLDERS:
additional selling stockholders, each of whom is selling
less than shares in the offering and will beneficially
own less than 1% of the outstanding common stock after the
offering.....................................................
</TABLE>
- ------------------------
* The percentage of shares of common stock beneficially owned does not exceed
one percent of the outstanding shares of common stock.
(1) For purposes of this table, information as to the shares of common stock
assumes that the underwriters' over-allotment option is not exercised. In
addition, a person or group of persons is deemed to have "beneficial
ownership" of any shares of common stock when the person has the right to
acquire them within 60 days after the date of this prospectus. For purposes
of computing the percentage of outstanding shares of common stock held by
each person or group of persons named above, any shares which the person has
the right to acquire within 60 days after the date of this prospectus is
deemed to be outstanding but is not deemed to be outstanding for the purpose
of computing the percentage ownership of any other person. Each selling
stockholder other than the Forstmann Little partnerships has the right to
participate with the Forstmann Little partnerships in the offering and may
participate in the offering with respect to their options regardless of
whether they beneficially own the shares subject to the options for purposes
of this table. Information about the shares being offered, beneficial
ownership after the offering and the selling stockholders is subject to
change pending final confirmation of selling stockholder participation in
the offering, prior to pricing of the offering.
(2) The general partner of Forstmann Little & Co. Equity Partnership-V, L.P., a
Delaware limited partnership ("Equity-V"), is FLC XXX Partnership, L.P., a
New York limited partnership of which
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Messrs. Theodore J. Forstmann, Nicholas C. Forstmann and Steven B. Klinsky,
Ms. Sandra J. Horbach, Messrs. Thomas H. Lister, Winston W. Hutchins and
Erskine B. Bowles are general partners. The general partner of Forstmann
Little & Co. Subordinated Debt and Equity Management Buyout Partnership-VI,
L.P., a Delaware limited partnership ("MBO-VI"), is FLC XXIX Partnership,
L.P., a New York limited partnership of which Messrs. Theodore J. Forstmann,
Nicholas C. Forstmann and Steven B. Klinsky, Ms. Sandra J. Horbach, Messrs.
Thomas H. Lister, Winston W. Hutchins and Erskine B. Bowles are general
partners. Accordingly, each of the individuals named above, other than Mr.
Lister and Mr. Bowles for the reasons described below, may be deemed the
beneficial owners of shares owned by MBO-VI and Equity-V and, for purposes
of this table, beneficial ownership is included. Mr. Lister and Mr. Bowles
do not have any voting or investment power with respect to, or any economic
interest in, the shares of common stock held by MBO-VI or Equity-V; and,
accordingly, Mr. Lister and Mr. Bowles are not deemed to be the beneficial
owners of these shares. Theodore J. Forstmann and Nicholas C. Forstmann are
brothers. FLC XXX Partnership, L.P. is a limited partner of Equity-V. None
of the other limited partners in each of MBO-VI and Equity-V is otherwise
affiliated with Yankee Candle, or Forstmann Little & Co. The address of
Equity-V and MBO-VI is c/o Forstmann Little & Co., 767 Fifth Avenue, New
York, New York 10153.
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DESCRIPTION OF THE CREDIT AGREEMENT
Concurrently with the closing of this offering, we expect to terminate our
existing revolving credit facility and enter into a new credit facility with a
syndicate of banks and other financial institutions led by The Chase Manhattan
Bank, as sole administrative agent, and Chase Securities Inc., as the sole and
exclusive lead arranger and sole book manager. The credit facility is expected
to consist of $150 million of term loans and a $150 million revolving credit
facility.
All of the term loans and the loans under the revolving credit facility will
bear interest, at our option, at either of the following rates:
(a) the highest of:
- the rate from time to time publicly announced by The Chase Manhattan
Bank in New York as its prime rate,
- the secondary market rate for three-month certificates of deposit from
time to time plus 1% and
- the federal funds rate from time to time plus 1/2 of 1%,
in each case plus an applicable margin which is
- .50% for the first six months after the closing of this offering and
- after these first six months, based on a pricing grid depending on our
leverage ratio at that time; or
(b) a Eurodollar rate plus an applicable margin which is
- 1.50% for the first six months after the closing of this offering and
- after these first six months, based on a pricing grid depending on our
leverage ratio at that time.
We will also pay a commitment fee for the daily average unused commitment
under the revolving credit facility. The commitment fee will be (a) 0.375% for
the first six months after the closing of this offering and (b) after this
period, based on a pricing grid depending on our specified leverage ratio at
that time. The commitment fee will be payable quarterly in arrears and upon the
final maturity of the revolving credit facility. In addition, we will pay fees
for each letter of credit issued under the credit facility.
Beginning , term loans under the credit facility will amortize in
annual installments. The revolving credit facility will mature five years after
the closing of this offering.
The credit facility will be subject to mandatory prepayment with the net
proceeds of asset sales and issuances of debt obligations.
The credit facility will contain covenants and provisions that restrict,
among other things, our ability to change the business we are conducting,
declare dividends, grant liens, incur additional indebtedness, exceed a
specified leverage ratio, fall below a minimum interest coverage ratio and make
capital expenditures. We expect to be in compliance with these covenants
immediately after the closing of this offering.
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DESCRIPTION OF CAPITAL STOCK
OVERVIEW
Immediately before the closing of this offering, the capital structure of
Yankee Candle will be reorganized as follows:
- Yankee Candle Holdings will transfer all of its assets, consisting of
shares of Yankee Candle common stock, no par value, to Yankee Candle in
exchange for shares of Yankee Candle common stock par value $.01 per
share, and options to purchase Yankee Candle common stock on the same
economic terms and conditions as the Yankee Candle Holdings options,
- Yankee Candle Holdings will be liquidated, and all of the shares of Yankee
Candle common stock, and all of the options to purchase Yankee Candle
common stock received from Yankee Candle will be exchanged the Yankee
Candle Holdings Class A common stockholders and option holders,
respectively, for all of the outstanding Yankee Candle Holdings Class A
common stock and all of the outstanding Yankee Candle Holdings options.
Immediately before the liquidation, all of the outstanding Yankee Candle
Holdings Class B common stock will be converted automatically into Yankee
Candle Holdings Class A common stock based on a formula set forth in the
Certificate of Incorporation of Yankee Candle Holdings, and
- the remaining outstanding shares of Yankee Candle common stock, no par
value, will be exchanged for shares of Yankee Candle common stock par
value $.01 per share.
After this reorganization, Yankee Candle's authorized capital stock will
consist of 300,000,000 shares of common stock, $.01 par value per share, and
100,000,000 shares of preferred stock, $.01 par value per share.
After the reorganization, and before the closing of this offering, based on
share information as of April 3, 1999, there will be shares of common
stock outstanding and no shares of preferred stock outstanding. Assuming the
exercise of all outstanding options, approximately 89% of these shares of common
stock would be owned by former Yankee Candle Holdings stockholders,
approximately 10% would be owned by Michael Kittredge and approximately 1% would
be owned by former Yankee Candle Holdings optionholders. After the closing of
this offering, there will be shares of common stock outstanding.
After the closing of this offering, the Forstmann Little partnerships and
our management will beneficially own approximately % of the outstanding
common stock, % on a fully diluted basis. As long as the Forstmann Little
partnerships and our management continue to own in the aggregate more than 50%
of Yankee Candle's outstanding shares of common stock, they will collectively
have the power to
- elect the entire board of directors of Yankee Candle,
- determine, without the consent of Yankee Candle's other stockholders, the
outcome of any corporate transaction or other matter submitted to the
stockholders for approval, including mergers, consolidations and the sale
of all or substantially all of Yankee Candle's assets,
- prevent or cause a change in control of Yankee Candle, and
- approve substantially all amendments to our Articles of Organization and
By-Laws.
The Forstmann Little partnerships have a contractual right to elect two
directors until such time as they no longer own any shares of Yankee Candle
common stock.
The following summary contains material information relating to provisions
of Massachusetts law and Yankee Candle's Articles of Organization and By-Laws.
The Articles of Organization and By-Laws are included as exhibits to the
registration statement of which this prospectus is a part.
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COMMON STOCK
Holders of common stock are entitled to one vote for each share held on all
matters submitted to a vote of stockholders and do not have cumulative voting
rights. Accordingly, holders of a majority of the outstanding shares of common
stock entitled to vote in any election of directors may elect all of the
directors standing for election. Holders of common stock are entitled to receive
ratably the dividends, if any, as may be declared by the board of directors out
of legally available funds. Upon the liquidation, dissolution or winding-up of
Yankee Candle, holders of common stock are entitled to receive ratably the net
assets of Yankee Candle available for distribution after the payment of all
liabilities of Yankee Candle and the payment of any required amounts to the
holders of any outstanding preferred stock. Holders of common stock have no
preemptive, subscription, redemption or conversion rights. The outstanding
shares of common stock are, and the shares sold in this offering will be, when
issued and paid for, validly issued, fully paid and nonassessable. The rights,
preferences and privileges of holders of common stock are subject to, and may be
adversely affected by, the rights of holders of shares of any series of
preferred stock that Yankee Candle may designate and issue in the future.
PREFERRED STOCK
The board of directors is authorized, subject to any limitations prescribed
by law, without further stockholder approval, to establish from time to time one
or more classes or series of preferred stock covering up to an aggregate of
100,000,000 shares of preferred stock, and to issue shares of preferred stock.
Each class or series of preferred stock will cover the number of shares and will
have the preferences, voting powers, qualifications and special or relative
rights or privileges as is determined by the board of directors, which may
include, among others, dividend rights, liquidation preferences, voting rights,
conversion rights, preemptive rights and redemption rights.
The purpose of authorizing the board of directors to establish preferred
stock is to eliminate delays associated with a stockholders vote on the creation
of a particular class or series of preferred stock. The rights of the holders of
common stock will be subject to the rights of holders of any preferred stock
issued in the future. The issuance of preferred stock, while providing desirable
flexibility in connection with possible acquisitions and other corporate
purposes, could have the effect of discouraging, delaying or preventing an
acquisition of Yankee Candle at a price which many stockholders find attractive.
These provisions could also make it more difficult for stockholders of Yankee
Candle to effect corporate actions, including the election of directors. Yankee
Candle has no present plans to issue any shares of preferred stock.
ARTICLES OF ORGANIZATION, BY-LAWS AND MASSACHUSETTS LAW
Yankee Candle's Articles of Organization and By-Laws and Massachusetts law
contain specific provisions that could be deemed to have anti-takeover effects
that discourage, delay or prevent an acquisition of Yankee Candle and make it
more difficult for stockholders of Yankee Candle to effect corporate actions,
including the election of directors.
Massachusetts law provides that stockholders may take action without a
meeting only by the unanimous written consent of all stockholders entitled to
vote. Yankee Candle's By-Laws require Yankee Candle to call a special meeting of
stockholders only at the request of stockholders holding at least 50% of the
outstanding voting stock of Yankee Candle, or a lesser percentage as may be
required by law. Any stockholder who wishes to solicit requests to call a
special meeting must comply with the procedures specified in the By-Laws.
Yankee Candle's By-Laws provide that nominations for directors may not be
made by stockholders at any annual or special meeting of stockholders unless the
stockholder intending to make a nomination notifies Yankee Candle of the
nomination a specific number of days in advance of the meeting and furnishes to
Yankee Candle detailed information regarding the stockholder and the intended
nominee.
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The By-Laws also require advance notice of any proposal to be brought by a
stockholder before any annual or special meeting of stockholders and the
provision of detailed information to Yankee Candle regarding the stockholder and
the proposal.
Yankee Candle will be subject to the provisions of Section 50A of Chapter
156B of the Massachusetts General Laws following this offering, which requires
that Yankee Candle have a classified, also called staggered, board of directors.
This statute requires that the classified board consist of three classes, as
nearly equal in size as possible, and provides that directors may be removed
only for cause, as defined in the statute. Yankee Candle's By-Laws contain
provisions that implement a classified board of directors. See
"Management--Directors and Executive Officers."
Yankee Candle will be subject to the provisions of Chapter 110F of the
Massachusetts General Laws, an anti-takeover law, following this offering. In
general, this statute prohibits Yankee Candle from engaging in a "business
combination" with an "interested stockholder" for a period of three years after
the date of the transaction in which the person becomes an interested
stockholder, unless either:
- prior to that date, the board of directors approved either the business
combination or the transaction in which the person became an interested
stockholder,
- the interested stockholder acquires, in the transaction in which that
person becomes an interested stockholder, at least 90% of the outstanding
voting stock of Yankee Candle, excluding shares held by affiliates and
employee benefit plans of Yankee Candle, or
- the business combination is approved by the board of directors and by the
holders of two-thirds of the outstanding voting stock of Yankee Candle,
excluding shares held by the interested stockholder, voting at a meeting.
In general, an "interested stockholder" is a person who owns 5%, 15% in the
case of a person eligible to file a Schedule 13G under the Securities Exchange
Act with respect to those shares, or more of the outstanding voting stock of
Yankee Candle; or who is an affiliate or associate of Yankee Candle and was the
owner of 5%, 15% in the case of a person eligible to file a Schedule 13G, or
more of the outstanding voting stock within the prior three years. A "business
combination" generally includes a merger, consolidation, stock or asset sale,
and any other transaction with the interested stockholder resulting in a
financial benefit, except proportionately as a stockholder of Yankee Candle, to
the interested stockholder. Yankee Candle may at any time amend its Articles of
Organization or By-Laws, by a vote of the holders of a majority of its voting
stock, to elect not to be governed by Chapter 110F. An amendment would not be
effective for 12 months and would not apply to a business combination with any
person who became an interested stockholder prior to the date of the amendment.
Yankee Candle's By-Laws include a provision that excludes Yankee Candle from
the applicability of Chapter 110D of the Massachusetts General Laws. In general,
this statute provides that any stockholder who acquires 20% or more of the
outstanding voting stock of a corporation subject to this statute may not vote
that stock unless the disinterested stockholders of the corporation so
authorize. In addition, the statute permits a corporation to provide in its
Articles of Organization or By-Laws that the corporation may redeem for fair
value all of the shares acquired in a control share acquisition if the
interested stockholder does not deliver a control share acquisition statement or
if the interested stockholder delivers a control share acquisition statement but
the stockholders of the corporation do not authorize voting rights for those
shares. The board of directors may amend the By-Laws at any time to subject
Yankee Candle to this statute prospectively.
Yankee Candle's Articles of Organization provide that transactions involving
the sale, lease or exchange of all or substantially all of Yankee Candle's
assets and the merger or consolidation of Yankee Candle with another corporation
may be authorized by vote of a majority of the outstanding voting stock, or if
there are two or more classes of voting stock, by a majority of each class,
rather than by two-thirds as is otherwise provided by Massachusetts law.
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Yankee Candle's Articles of Organization provide that no director of Yankee
Candle shall be personally liable for monetary damages to Yankee Candle or to
its stockholders for a breach of fiduciary duty as a director. This provision
does not eliminate or limit liability:
- for any breach of the director's duty of loyalty to Yankee Candle or its
stockholders,
- for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law,
- under Section 61 or 62 of Chapter 156B of the Massachusetts General Laws,
dealing with liability for unauthorized distributions and loans to
corporate insiders, or
- for any transaction from which the director derived an improper personal
benefit.
Yankee Candle's Articles of Organization also provide for the
indemnification of Yankee Candle's directors and officers to the fullest extent
permitted by Massachusetts law, including under circumstances in which
indemnification would otherwise be discretionary. In addition, Yankee Candle has
entered into indemnity agreements with each of its directors and officers
providing similar benefits.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock will be BankBoston,
NA, a Massachusetts banking corporation.
SHARES ELIGIBLE FOR FUTURE SALE
RULE 144 SECURITIES
Upon the consummation of the offering, Yankee Candle will have shares
of common stock outstanding. Of these shares, only the shares of
common stock sold in the offering will be freely tradable without registration
under the Securities Act and without restriction by persons other than
"affiliates" of Yankee Candle. The shares of common stock held by the
Forstmann Little partnerships and Yankee Candle's directors and executive
officers after the offering will be "restricted" securities under the meaning of
Rule 144 under the Securities Act and may not be sold in the absence of
registration under the Securities Act, unless an exemption from registration is
available, including exemptions pursuant to Rule 144 or Rule 144A under the
Securities Act.
In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this prospectus, a person who has beneficially owned shares of our
common stock for at least one year would be entitled to sell within any
three-month period a number of shares that does not exceed the greater of either
of the following:
- 1% of the number of shares of common stock then outstanding, which will
equal approximately the number of shares outstanding immediately after
this offering, or
- the average weekly trading volume of the common stock on the NYSE during
the four calendar weeks preceding the filing of a notice on Form 144 with
respect to that sale.
Sales under Rule 144 are also subject to specific manner of sale provisions
and notice requirements and to the availability of current public information
about Yankee Candle.
Under Rule 144(k), a person who is not deemed to have been one of Yankee
Candle's "affiliates" at any time during the 90 days preceding a sale, and who
has beneficially owned the shares proposed to be sold for at least two years,
including the holding period of any prior owner other than an "affiliate," is
entitled to sell its shares without complying with the manner of sale, public
information, volume limitation or notice provisions of Rule 144. Therefore,
unless otherwise restricted, "144(k) shares" may be sold immediately upon the
completion of this offering. The sale of these shares, or the perception that
sales will
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be made, could adversely effect the price of Yankee Candle's common stock after
the offering because a greater supply of shares would be, or would be perceived
to be, available for sale in the public market.
Each of Yankee Candle, the selling stockholders and our directors and
executive officers have agreed that, without the prior written consent of Morgan
Stanley & Co. Incorporated on behalf of the underwriters, it will not, during
the period ended 180 days after the date of this prospectus, sell shares of
common stock or take related actions, subject to limited exceptions, all as
described under "Underwriters."
REGISTRATION RIGHTS
Yankee Candle and the Forstmann Little partnerships have entered into a
registration rights agreement, pursuant to which Yankee Candle has granted to
the Forstmann Little partnerships six demand rights to cause Yankee Candle to
file a registration statement under the Securities Act covering resales of all
shares of common stock held by the Forstmann Little partnerships, and to cause
the registration statement to become effective. The registration rights
agreement also grants "piggyback" registration rights permitting the Forstmann
Little partnerships to include its registrable securities in a registration of
securities by Yankee Candle. Under the agreement, Yankee Candle will pay the
expenses of these registrations.
In addition, pursuant to the stockholder's and subscription agreements,
Yankee Candle is granting "piggyback" registration rights to all of its
employees and directors who have purchased shares of common stock and/or that
have been awarded options to purchase shares of common stock. These registration
rights are exercisable only upon registration by Yankee Candle of shares of
common stock held by the Forstmann Little partnerships. The holders of common
stock entitled to these registration rights are entitled to notice of any
proposal to register shares held by the Forstmann Little partnerships and to
include their shares in Yankee Candle's registration. Yankee Candle will pay the
expenses of these piggyback registrations.
UNITED STATES FEDERAL TAX CONSIDERATIONS
FOR NON-UNITED STATES HOLDERS
The following is a general discussion of material U.S. federal income and
estate tax consequences of the ownership and disposition of our common stock
applicable to Non-U.S. Holders. A "Non-U.S. Holder" is a person other than:
- an individual who is a citizen or resident of the United States,
- a corporation, partnership or other entity created or organized in the
United States or under the laws of the United States or of any state,
other than a partnership treated as foreign for U.S. federal income tax
purposes,
- an estate whose income is includible in gross income for U.S. federal
income tax purposes regardless of source, and
- a trust subject to the primary supervision of a court within the United
States and the control of one or more U.S. persons.
Generally, an individual may be treated as a resident alien, instead of a
non-resident alien, by being present in the United States for at least 31 days
in the calendar year and for a total of at least 183 days during a three-year
period ending in the current calendar year--counting for these purposes all of
the days present in the current year, one-third of the days present in the last
year, and one-sixth of the days present in the second-to-last year. Resident
aliens are subject to tax as if they were U.S. citizens.
This discussion does not consider:
- U.S. state and local or non-U.S. tax consequences,
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- facts and circumstances that may be relevant to a particular Non-U.S.
Holder, including, if it is a partnership, the consequences of some
determinations being made at the partner level,
- the tax consequences to a Non-U.S. Holder's shareholders, partners or
beneficiaries,
- special tax rules that may apply to a Non-U.S. Holder that is, for
example, a bank, an insurance company, a dealer in securities or a trader
in securities that elects mark-to-market accounting treatment, or
- special tax rules that may apply when our common stock is held as part of
a "straddle," "hedge" or "conversion transaction."
The following discussion is based on provisions of the U.S. Internal Revenue
Code of 1986, as amended, applicable Treasury regulations, and administrative
and judicial interpretations as of the date of this prospectus, all of which may
change retroactively or prospectively. The following summary is for general
information. If you are a Non-U.S. Holder, you should consult a tax advisor on
the U.S. federal tax consequences of holding and disposing of our common stock,
as well as any tax consequences under the laws of any U.S. state or local or
non-U.S. taxing jurisdiction.
DIVIDENDS
Dividends paid to a Non-U.S. Holder of common stock generally will be
subject to withholding of U.S. federal income tax at a 30% rate or a lower rate
that an applicable income tax treaty may specify. Non-U.S. Holders should
consult their tax advisors on their entitlement to benefits under a relevant
income tax treaty.
Dividends that are effectively connected with a Non-U.S. Holder's conduct of
a trade or business in the U.S. are generally subject to U.S. federal income tax
on a net income basis at regular graduated rates, but are not generally subject
to the 30% withholding tax, if the Non-U.S. Holder files the appropriate IRS
form with the payer. Any U.S. trade or business income received by a Non-U.S.
Holder that is a corporation may, under specific circumstances, be subject to an
additional "branch profits tax" at a 30% rate or a lower rate that an applicable
income tax treaty may specify.
Dividends paid prior to 2000 to an address in a foreign country are
presumed, absent actual knowledge to the contrary, to be paid to a resident of
that country for purposes of the withholding discussed above and for purposes of
determining the applicability of an income tax treaty rate. For dividends paid
after 1999:
- a Non-U.S. Holder of common stock that claims the benefit of an income tax
treaty rate generally will be required to satisfy applicable certification
and other requirements,
- in the case of common stock held by a foreign partnership, the
certification requirement will generally be applied to the partners of the
partnership, and the partnership will be required to provide a U.S.
taxpayer identification number and other information, and
- look-through rules will apply to tiered partnerships.
A Non-U.S. Holder of common stock that is eligible for a reduced rate of
U.S. withholding tax under an income tax treaty may obtain a refund or credit of
any excess amounts withheld by filing an appropriate claim for a refund with the
IRS.
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DISPOSITION OF COMMON STOCK
A Non-U.S. Holder generally will not be subject to U.S. federal income tax
in respect of gain recognized on a disposition of common stock unless:
- the gain is U.S. trade or business income, in which case the branch
profits tax described above may also apply to a corporate Non-U.S. Holder,
- the Non-U.S. Holder is an individual who holds the common stock as a
capital asset within the meaning of Section 1221 of the Internal Revenue
Code, is present in the United States for 183 or more days in the taxable
year of the disposition and meets other requirements,
- the Non-U.S. Holder is subject to tax under provisions of U.S. tax law
applicable to specific U.S. expatriates, or
- Yankee Candle is or has been a "U.S. real property holding corporation"
for U.S. federal income tax purposes at any time during the shorter of the
five-year period ending on the date of disposition and the Non-U.S.
Holder's holding period for the common stock.
The tax relating to stock in a "U.S. real property holding corporation" does
not apply to a Non-U.S. Holder whose holdings, actual and constructive, at all
times during the applicable period, amount to 5% or less of the common stock,
provided that the common stock is regularly traded on an established securities
market. Generally, a corporation is a "U.S. real property holding corporation"
if the fair market value of its "U.S. real property interests" equals or exceeds
50% of the sum of the fair market value of its worldwide real property interests
and its other assets used or held for use in a trade or business. Yankee Candle
believes that it has not been and is not, and does not anticipate becoming, a
"U.S. real property holding corporation" for U.S. federal income tax purposes.
FEDERAL ESTATES TAXES
Common stock owned or treated as owned by an individual who is a Non-U.S.
Holder at the time of death will be included in the individual's gross estate
for U.S. federal estate tax purposes and may be subject to U.S. federal estate
tax, unless an applicable estate tax treaty provides otherwise.
INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING TAX
Yankee Candle must report annually to the IRS and to each Non-U.S. Holder
the amount of the dividends paid to that holder and any tax withheld with
respect to those dividends. The information reporting requirements apply
regardless of whether withholding is required. Copies of the information returns
reporting those dividends and withholding may also be made available, under an
applicable income tax treaty or agreement, to the tax authorities in the
Non-U.S. Holder's country of residence.
Under specific circumstances, the IRS requires information reporting and
backup withholding at a rate of 31% on specific payments on common stock. Under
currently applicable law, Non-U.S. Holders of common stock generally will be
exempt from information reporting and backup withholding on dividends paid prior
to 2000 to an address outside the U.S. For dividends paid after 1999, however, a
Non-U.S. Holder of common stock that fails to certify its Non-U.S. Holder status
under applicable Treasury regulations may be subject to backup withholding at a
rate of 31% on payments of dividends.
The payment of the proceeds of the disposition of common stock by or through
the U.S. office of a broker generally will be subject to information reporting
and backup withholding at a rate of 31% unless the holder certifies its status
as a Non-U.S. Holder under penalties of perjury or otherwise establishes an
exemption. The payment of the proceeds of the disposition by a Non-U.S. Holder
of common stock by or through a non-U.S. office of a non-U.S. broker will not be
subject to backup withholding or information reporting unless the non-U.S.
broker has particular U.S. relationships that make it a "U.S. related person."
In the case of the payment of proceeds from disposition of common stock by or
through a non-U.S. office
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of a broker that is a U.S. person or a "U.S. related person," information
reporting, but not backup withholding, on the payment applies unless the broker
has documentary evidence in its files that the holder is a Non-U.S. Holder and
that specific conditions are met or that the holder otherwise is entitled to an
exemption. For this purpose, a "U.S. related person" is:
- a "controlled foreign corporation" for U.S. federal income tax purposes,
- a foreign person 50% or more of whose gross income from all sources for
the three-year period ending with the close of its taxable year preceding
the payment, or for that part of the period that the broker has been in
existence, is derived from activities that are effectively connected with
the conduct of a U.S. trade or business, or
- effective after 1999, a foreign partnership (A) at least 50% of the
capital or profits interest in which is owned by U.S. persons, or (B) that
is engaged in a U.S. trade or business.
Effective after 1999, backup withholding will apply to a payment of
disposition proceeds if the broker has actual knowledge that the holder is a
U.S. person. Non-U.S. Holders should consult their own tax advisors on the
application of information withholding and backup withholding to them.
Any amounts withheld under the backup withholding rules from a payment to a
Non-U.S. Holder will be refunded or credited against the holder's U.S. federal
income tax liability, if any, if the holder provides the required information to
the IRS.
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UNDERWRITERS
We intend to offer our common stock in the United States through a number of
U.S. underwriters as well as elsewhere through international managers. Under the
terms and subject to the conditions of the underwriting agreement dated the date
of this prospectus, the U.S. underwriters named below, for whom Morgan Stanley &
Co. Incorporated, Goldman, Sachs & Co. and Merrill Lynch, Pierce, Fenner & Smith
Incorporated are acting as U.S. representatives, and the international
underwriters named below, for whom Morgan Stanley & Co. International Limited,
Goldman Sachs International and Merrill Lynch International are acting as
international representatives, have severally agreed to purchase, and we and the
selling stockholders have severally agreed to sell to them, the respective
number of shares of our common stock set forth opposite the names of the
underwriters below:
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
- ------------------------------------------------------------------------------------------------------ ----------
<S> <C>
U.S. underwriters:
Morgan Stanley & Co. Incorporated...................................................................
Goldman, Sachs & Co.................................................................................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated..............................................................................
Subtotal........................................................................................
International underwriters:
Morgan Stanley & Co. International Limited..........................................................
Goldman Sachs International.........................................................................
Merrill Lynch International.........................................................................
Subtotal........................................................................................
Total...........................................................................................
</TABLE>
The U.S. underwriters and the international underwriters, and the U.S.
representatives and the international representatives, are collectively referred
to as the underwriters and the representatives, respectively. The underwriting
agreement provides that the obligations of the several underwriters to pay for
and accept delivery of the shares of our common stock offered hereby are subject
to the approval of specific legal matters by their counsel and to other
conditions. The underwriters are obligated to purchase all of the shares of our
common stock except those covered by the U.S. underwriters' over-allotment
option described below if any are purchased.
In the agreement between U.S. and international underwriters, each U.S.
underwriter has represented and agreed that, with specific exceptions:
- it is not purchasing any shares for the account of anyone other than a
U.S. or Canadian person, and
- it has not offered or sold, and will not offer or sell, directly or
indirectly, any shares or distribute any prospectus relating to the shares
outside the United States or Canada or to anyone other than a U.S. or
Canadian person.
In the agreement between U.S. and international underwriters, each
international underwriter has represented and agreed that, with specific
exceptions:
- it is not purchasing any shares for the account of any U.S. or Canadian
person, and
- it has not offered or sold, and will not offer or sell, directly or
indirectly, any shares or distribute any prospectus relating to the shares
in the United States or Canada or to any U.S. or Canadian person.
For any underwriter that is both a U.S. underwriter and an international
underwriter, these representations and agreements made by it in its capacity as
a U.S. underwriter apply only to it in its capacity as a U.S. underwriter and
those made by it in its capacity as an international underwriter apply only to
it in its
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capacity as an international underwriter. The limitations described above do not
apply to stabilization transactions or to other transactions specified in the
agreement between U.S. and international underwriters. As used in this
prospectus, U.S. or Canadian person means any national or resident of the United
States or Canada, or any corporation, pension, profit-sharing or other trust or
other entity organized under the laws of the United States or Canada or of any
of their political subdivisions, other than a branch located outside the United
States and Canada of any U.S. or Canadian person. U.S. or Canadian person
includes any U.S. or Canadian branch of a person who is otherwise not a U.S. or
Canadian person. All shares of common stock to be purchased by the underwriters
under the underwriting agreement are referred to as shares.
In the agreement between U.S. and international underwriters, sales of
shares may be made between the U.S. underwriters and international underwriters.
The price of any shares so sold will be the public offering price set forth on
the cover page of this prospectus, in U.S. dollars, less an amount not greater
than $ per share.
In the agreement between U.S. and international underwriters, each U.S.
underwriter has represented that it has not offered or sold, and has agreed not
to offer or sell, any shares in any province or territory of Canada or to, or
for the benefit of, any resident of any province or territory of Canada in
contravention of the securities laws of Canada. Each U.S. underwriter has
represented that any offer or sale of shares in Canada will be made only
pursuant to an exemption from the requirement to file a prospectus in the
province or territory of Canada in which the offer or sale is made. Each U.S.
underwriter has further agreed to send to any dealer who purchases from it any
of the shares a notice stating in substance that, by purchasing the shares, the
dealer agrees that any offer or sale of shares in Canada will be made only
pursuant to an exemption from the requirement to file a prospectus in the
province or territory of Canada in which the offer or sale is made. Each dealer
will deliver to any other dealer to whom it sells any of the shares a notice
containing substantially the same Canadian selling restrictions.
In the agreement between U.S. and international underwriters, each
international underwriter has represented and agreed that:
- it has not offered or sold and, prior to the date six months after the
closing date for the sale of the shares to the international underwriters,
will not offer or sell, any shares to persons in the United Kingdom except
to persons whose ordinary activities involve them in acquiring, holding,
managing or disposing of investments for the purposes of their businesses
or otherwise in circumstances which have not resulted and will not result
in an offer to the public in the United Kingdom within the meaning of the
public offers of Securities Regulations 1995,
- it has complied and will comply with all applicable provisions of the
Financial Services Act 1986, and
- it has and will distribute any document relating to the shares in the
United Kingdom only to a person who is of a kind described in Article
11(3) of the Financial Services Act 1986 (Investment Advertisements)
(Exemptions) Order 1996 (as amended) or is a person to whom the document
may otherwise lawfully be distributed.
In the agreement between U.S. and international underwriters, each
international underwriter has further represented that it has not offered or
sold, and has agreed not to offer or sell in Japan or to or for the account of
any resident of Japan, any of the shares. This limitation does not apply to
Japanese international underwriters or dealers and offers or sales pursuant to
any exemption from the registration requirements of the Securities and Exchange
Law and otherwise in compliance with applicable provisions of Japanese law. Each
international underwriter has further agreed to send to any dealer who purchases
from it any of the shares a notice stating that, by purchasing the shares, the
dealer agrees that any offer or sale of the shares in Japan will be made only to
Japanese international underwriters or dealers or under an exemption from the
registration requirements of the Securities and Exchange Law and otherwise in
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compliance with applicable provisions of Japanese law. Each dealer will send to
any other dealer to whom it sells any of the shares a notice containing
substantially the same Japanese selling restrictions.
The underwriters initially propose to offer part of the shares directly to
the public at the public offering price set forth on the cover page of this
prospectus. The underwriters may also offer the shares to securities dealers at
a price that represents a concession not in excess of $ per share under the
public offering price. Any underwriter may allow and dealers may reallow, a
concession not in excess of $ per share to other underwriters or to securities
dealers. After the initial offering of the shares, the offering price and other
selling terms may from time to time be changed by the representatives.
The selling stockholders have granted to the U.S. underwriters an option,
exercisable for 30 days from the date of this prospectus to purchase up to an
aggregate of additional shares at the public offering price set forth on the
cover page of this prospectus, less underwriting discounts and commissions. The
U.S. underwriters may exercise this option solely for the purpose of covering
over-allotments, if any, made in connection with the offering of the shares
offered pursuant to this prospectus. To the extent this option is exercised,
each U.S. underwriter will become obligated, subject to specified conditions, to
purchase about the same percentage of additional shares as the number set forth
next to the U.S. underwriter's name in the preceding table bears to the total
number of shares set forth next to the names of all U.S. underwriters in the
preceding table. If the U.S. underwriters' option is exercised in full, the
total price to the public for this offering would be $ , the total
underwriters' discounts and commissions would be $ and total proceeds to Yankee
Candle and the selling stockholders would be $ .
The underwriters have informed us and the selling stockholders that they do
not intend sales to discretionary accounts to exceed five percent of the total
number of shares offered by them.
We have applied to list our common stock on the NYSE under the symbol "YCC,"
subject to official notice of issuance. The underwriters intend to sell shares
to a minimum of beneficial owners in lots of or more so as to meet the
distribution requirements of this listing.
At our request and request of the selling stockholders, the underwriters
will reserve up to shares to be sold in the offering and offered hereby
for sale, at the initial public offering price, to our directors, officers and
employees and others, generally in the United States. This directed share
program will be administered by Morgan Stanley & Co. Incorporated. The number of
shares available for sale to the general public will be reduced to the extent
these individuals purchase the reserved shares. Any reserved shares which are
not so purchased will be offered by the underwriters to the general public on
the same basis as the other shares offered in this prospectus.
Each of Yankee Candle, the selling stockholders and all of our directors and
executive officers has agreed that, without the prior written consent of Morgan
Stanley & Co. Incorporated on behalf of the underwriters, it will not, during
the period ending 180 days after the date of this prospectus:
- offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right
or warrant to purchase, lend, or otherwise transfer or dispose of,
directly or indirectly, any shares of common stock or any securities
convertible into or exercisable or exchangeable for common stock, or
- enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of the
common stock,
whether any transaction described above is to be settled by delivery of shares
of common stock or other securities, in cash or otherwise.
The restrictions described in the previous paragraph do not apply to:
- the reorganization in connection with this offering,
- the sale of the shares to the underwriters,
67
<PAGE>
- the issuance by us of shares of common stock upon the exercise of an
option or warrant or the conversion of a security outstanding on the date
of this prospectus of which the underwriters have been advised in writing,
- the granting of stock options and/or restricted stock units pursuant to
our existing employee benefit plans and to directors in connection with
their initial appointment to the board of directors, provided that these
options, other than director options, do not become exercisable and these
units do not vest during the 180-day period, and
- transactions by any person other than us relating to shares of common
stock or other securities acquired in open market or other transactions
after the completion of the offering.
In order to facilitate the offering, the underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of the
shares of common stock. Specifically, the underwriters may agree to sell or
allot more shares than the shares of our common stock we have agreed to
sell to them. This over-allotment would create a short position in our common
stock for the underwriters' account. To cover any over-allotments or to
stabilize the price of the common stock, the underwriters may bid for, and
purchase, shares of common stock in the open market. Finally, the underwriting
syndicate may reclaim selling concessions allowed to an underwriter or a dealer
for distributing the common stock in the offering, if the syndicate repurchases
previously distributed common stock in transactions to cover syndicate short
positions, in stabilization transactions or otherwise. The underwriters have
reserved the right to reclaim selling concessions in order to encourage
underwriters and dealers to distribute the common stock for investment, rather
than for short-term profit taking. Increasing the proportion of the offering
held for investment may reduce the supply of common stock available for
short-term trading. Any of these activities may stabilize or maintain the market
price of the common stock above independent market levels. The underwriters are
not required to engage in these activities and may end any of these activities
at any time.
From time to time, some of the underwriters have provided, and may continue
to provide, investment banking services to us and the Forstmann Little
partnerships.
We, the selling stockholders and the underwriters have agreed to indemnify
each other against a variety of liabilities, including liabilities under the
Securities Act.
PRICING OF THE OFFERING
Prior to this offering, there has been no public market for the common
stock. The initial public offering price will be determined by negotiations
among us, the selling stockholders and the U.S. representatives. Among the
factors to be considered in determining the initial public offering price will
be the future prospects of our company and our industry in general, our sales,
earnings and other financial and operating information in recent periods, and
the price-earnings ratios, sales growth rates, market prices of securities and
other financial and operating information of companies engaged in activities
similar to those of our company. The estimated initial public offering price
range set forth on the cover page of this prospectus is subject to change as a
result of market conditions and other factors.
LEGAL MATTERS
The validity of the shares of common stock offered by this prospectus will
be passed upon for Yankee Candle by Fried, Frank, Harris, Shriver & Jacobson (a
partnership including professional corporations), New York, New York, and Hale
and Dorr LLP, Boston, Massachusetts as to matters of Massachusetts law and for
the underwriters by Davis Polk & Wardwell, New York, New York. Fried, Frank,
Harris, Shriver & Jacobson has in the past provided, and may continue to
provide, legal services to Forstmann Little and its affiliates.
68
<PAGE>
EXPERTS
The consolidated financial statements of The Yankee Candle Company, Inc. as
of December 31, 1998 and for the year ended December 31, 1998 included in this
prospectus and the related financial statement schedule included elsewhere in
this Registration Statement have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their reports appearing herein and elsewhere
in the registration statement, and are included in reliance upon the reports of
Deloitte & Touche LLP given upon their authority as experts in accounting and
auditing.
The financial statements and schedule of The Yankee Candle Company, Inc. at
December 31, 1997, and for the year then ended, appearing in this prospectus and
registration statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their reports thereon appearing elsewhere herein, and
are included in reliance upon the reports of Ernst & Young LLP given on the
authority of such firm as experts in accounting and auditing.
The consolidated financial statements of The Yankee Candle Company, Inc. for
the year ended December 31, 1996 included in this prospectus and the related
financial statement schedule included elsewhere in this Registration Statement
have been audited by Fisk, Bilton, Smith & Co., P.C., independent auditors, as
stated in their reports appearing herein and elsewhere in the registration
statement, and are included in reliance upon the report of Fisk, Bilton, Smith &
Co., P.C. given upon their authority as experts in accounting and auditing.
Our current auditors are Deloitte & Touche LLP, who audited our 1998
financial statements. On May 4, 1998, the Board of Directors dismissed Ernst &
Young LLP, who audited our 1997 financial statements, and appointed Deloitte &
Touche LLP. On June 13, 1997, our then sole shareholder dismissed Fisk, Bilton,
Smith & Co., P.C., who audited our 1996 financial statements, and appointed
Ernst & Young LLP.
There were no disagreements between either (a) Ernst & Young LLP and our
management at the decision-making level during the period of their engagement or
(b) Fisk, Bilton, Smith & Co., P.C. and our management at the decision-making
level during the period of their engagement, which disagreements, if not
resolved to the satisfaction of either Ernst & Young LLP or Fisk, Bilton, Smith
& Co., P.C., would have caused either to make reference to the subject matter of
the disagreements in connection with their reports. In addition, there were no
reportable events during the respective engagement periods of Ernst & Young LLP
and Fisk, Bilton, Smith & Co., P.C.
Prior to their respective appointments, neither we nor anyone on our behalf
consulted Deloitte & Touche LLP or Ernst & Young LLP regarding the application
of accounting principles to a specified transaction or the type of audit opinion
that might be rendered on our financial statements, and neither Deloitte &
Touche LLP nor Ernst & Young LLP provided a written or oral report or advice
that our management concluded was an important factor considered by us in
reaching a decision on the issue.
WHERE YOU CAN FIND MORE INFORMATION
Yankee Candle has filed with the Securities and Exchange Commission a
registration statement on Form S-1, which includes amendments, exhibits,
schedules and supplements, under the Securities Act of 1933 and the rules and
regulations under the Securities Act, for the registration of the common stock
offered by this prospectus. Although this prospectus, which forms a part of the
registration statement, contains all material information included in the
registration statement, parts of the registration statement have been omitted
from this prospectus as permitted by the rules and regulations of the
Commission. For further information with respect to Yankee Candle and the common
stock offered by this prospectus, please refer to the registration statement.
The registration statement can be inspected and copied at prescribed rates at
the public reference facilities maintained by the Commission at Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's regional
offices at Seven World Trade
69
<PAGE>
Center, 13th Floor, New York, New York 10048 and Northwestern Atrium Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. The public may obtain
information regarding the Washington, D.C. Public Reference Room by calling the
Commission at 1-800-SEC-0330. In addition, the registration statement is
publicly available through the Commission's site on the Internet's World Wide
Web, located at: http://www.sec.gov. Following the offering, Yankee Candle's
future public filings are expected to be available for inspection at the offices
of the New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005.
After the offering, we will be subject to the full informational
requirements of the Securities Exchange Act of 1934, as amended. To comply with
these requirements, we will file periodic reports, proxy statements and other
information with the Commission.
Our logo and the titles of our products mentioned in this prospectus are our
trademarks.
70
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Audited Historical Consolidated Financial Statements
Independent Auditors' Reports...................................................... F-2
Consolidated Balance Sheets as of December 31, 1997 and 1998....................... F-5
Consolidated Statement of Operations for the years ended December 31, 1996, 1997 F-6
and 1998.........................................................................
Consolidated Statements of Stockholders' Equity for the years ended December 31, F-7
1996, 1997 and 1998..............................................................
Consolidated Statements of Cash Flows for the years ended December 31, 1996, 1997 F-8
and 1998.........................................................................
Notes to Consolidated Financial Statements......................................... F-9
Unaudited Interim Condensed Consolidated Financial Statements
Unaudited Interim Condensed Consolidated Balance Sheet as of April 3, 1999......... F-20
Unaudited Interim Condensed Consolidated Statements of Operations for the three F-21
months ended March 31, 1998 and the thirteen weeks ended April 3, 1999...........
Unaudited Interim Condensed Consolidated Statements of Cash Flows for the three F-22
months ended March 31, 1998 and the thirteen weeks ended April 3, 1999...........
Notes to Unaudited Interim Condensed Consolidated Financial Statements............. F-23
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
The Yankee Candle Company, Inc.
Whately, Massachusetts
We have audited the accompanying consolidated balance sheet of The Yankee
Candle Company, Inc. and subsidiaries as of December 31, 1998 and the related
statements of operations, stockholders' equity (deficit) and cash flows for the
year then ended. 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 audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, such 1998 financial statements present fairly, in all
material respects, the financial position of The Yankee Candle Company, Inc. and
subsidiaries as of December 31, 1998, and the results of their operations and
their cash flows for the year then ended in conformity with generally accepted
accounting principles.
/s/ DELOITTE & TOUCHE LLP
Boston, Massachusetts
March 31, 1999
F-2
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
The Yankee Candle Company, Inc.
We have audited the accompanying balance sheet of The Yankee Candle Company,
Inc. as of December 31, 1997, and the related statements of operations and cash
flows for the year then ended. 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 audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of The Yankee Candle Company,
Inc. at December 31, 1997, and the results of its operations and its cash flows
for the year then ended in conformity with generally accepted accounting
principles.
/s/ Ernst & Young LLP
Boston, Massachusetts
March 6, 1998
F-3
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
The Yankee Candle Company, Inc.
We have audited the accompanying statement of operations, stockholders'
equity (deficit) and cash flows of The Yankee Candle Company, Inc. for the year
ended December 31, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the results of operations and cash flows of The Yankee Candle Company,
Inc. for the year ended December 31, 1996 in conformity with generally accepted
accounting principles.
/s/ FISK, BILTON, SMITH & CO., P.C.
West Springfield, Massachusetts
March 4, 1997
F-4
<PAGE>
THE YANKEE CANDLE COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1998
--------- ----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................................................ $ 7,377 $ 30,411
Accounts receivable, less allowance of $360 in 1997 and $450 in 1998, respectively....... 6,933 8,546
Inventory................................................................................ 10,212 12,482
Prepaid expenses and other current assets................................................ 496 855
Deferred tax assets...................................................................... 158 1,542
--------- ----------
Total current assets................................................................... 25,176 53,836
PROPERTY, PLANT AND EQUIPMENT (NET)........................................................ 43,912 48,315
MARKETABLE SECURITIES...................................................................... 386 856
CLASSIC VEHICLES........................................................................... 1,589 874
DEFERRED FINANCING COSTS................................................................... -- 6,566
NOTE RECEIVABLE--RELATED PARTY............................................................. 1,573 --
DEFERRED TAX ASSETS........................................................................ -- 164,474
OTHER ASSETS............................................................................... 460 424
--------- ----------
TOTAL ASSETS........................................................................... $ 73,096 $ 275,345
--------- ----------
--------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Bank loans............................................................................... $ 17,080 $ --
Accounts payable......................................................................... 6,275 13,287
Accrued interest......................................................................... 124 1,895
Accrued payroll.......................................................................... 3,666 4,768
Accrued income taxes..................................................................... 954 --
Other accrued liabilities................................................................ 1,313 2,982
Current portion of long-term debt........................................................ 874 --
--------- ----------
Total current liabilities.............................................................. 30,286 22,932
--------- ----------
DEFERRED COMPENSATION OBLIGATION........................................................... 540 1,004
LONG-TERM DEBT--Less current portion....................................................... 7,310 320,000
DEFERRED TAX LIABILITIES................................................................... 169 --
COMMITMENTS AND CONTINGENCIES (Notes 10 and 12)
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock, $.01, par value, 1,000 shares authorized and issued; 1,000 and 500 shares
outstanding at 1997 and 1998, respectively............................................. -- --
Additional paid-in capital............................................................... 62 127,590
Treasury stock, 500 shares at 1998....................................................... -- (212,448)
Retained earnings........................................................................ 34,729 19,048
Capital subscription receivable.......................................................... -- (1,084)
Unearned stock compensation.............................................................. -- (1,698)
Accumulated other comprehensive income................................................... -- 1
--------- ----------
Total stockholders' equity (deficit)................................................... 34,791 (68,591)
--------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)................................... $ 73,096 $ 275,345
--------- ----------
--------- ----------
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
THE YANKEE CANDLE COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1996 1997 1998
------------ ------------ --------------
<S> <C> <C> <C>
NET SALES............................................................. $ 112,199 $ 144,103 $ 184,477
COST OF SALES......................................................... 53,207 62,069 79,105
------------ ------------ --------------
Gross profit.................................................... 58,992 82,034 105,372
------------ ------------ --------------
OPERATING EXPENSES:
Selling expenses.................................................... 23,244 26,935 30,546
General and administrative expenses................................. 21,687 27,031 19,753
Bonus related to the Recapitalization............................... -- -- 61,263
------------ ------------ --------------
44,931 53,966 111,562
------------ ------------ --------------
INCOME (LOSS) FROM OPERATIONS......................................... 14,061 28,068 (6,190)
------------ ------------ --------------
OTHER (INCOME) EXPENSE:
Interest income..................................................... (165) (151) (219)
Interest expense.................................................... 1,913 2,154 16,268
Other expense....................................................... 221 334 737
------------ ------------ --------------
Total other expense............................................. 1,969 2,337 16,786
------------ ------------ --------------
INCOME (LOSS) BEFORE PROVISION FOR INCOME
TAXES............................................................... 12,092 25,731 (22,976)
PROVISION FOR INCOME TAXES............................................ 410 1,360 9,656
------------ ------------ --------------
NET INCOME (LOSS)..................................................... $ 11,682 $ 24,371 $ (32,632)
------------ ------------ --------------
------------ ------------ --------------
HISTORICAL BASIC EARNINGS (LOSS) PER SHARE............................ $ 11,682.00 $ 24,371.00 $ (49,181.61)
------------ ------------ --------------
------------ ------------ --------------
HISTORICAL DILUTED EARNINGS (LOSS) PER SHARE.......................... $ 11,682.00 $ 24,371.00 $ (49,181.61)
------------ ------------ --------------
------------ ------------ --------------
PRO FORMA INFORMATION (UNAUDITED):
HISTORICAL INCOME (LOSS) BEFORE
PROVISION (BENEFIT) FOR INCOME TAXES.............................. $ 12,092 $ 25,731 $ (22,976)
PRO FORMA PROVISION (BENEFIT) FOR INCOME TAXES...................... $ 4,830 $ 10,686 $ (8,731)
------------ ------------ --------------
PRO FORMA NET INCOME (LOSS)......................................... $ 7,262 $ 15,045 $ (14,245)
------------ ------------ --------------
------------ ------------ --------------
PRO FORMA BASIC EARNINGS (LOSS) PER SHARE........................... $ 7,262.07 $ 15,044.99 $ (21,469.48)
------------ ------------ --------------
------------ ------------ --------------
PRO FORMA DILUTED EARNINGS (LOSS) PER SHARE......................... $ 7,262.07 $ 15,044.99 $ (21,469.48)
------------ ------------ --------------
------------ ------------ --------------
WEIGHTED AVERAGE BASIC SHARES OUTSTANDING............................. 1,000 1,000 663.5
------------ ------------ --------------
------------ ------------ --------------
WEIGHTED AVERAGE DILUTED SHARES OUTSTANDING........................... 1,000 1,000 663.5
------------ ------------ --------------
------------ ------------ --------------
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
THE YANKEE CANDLE COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL CAPITAL
------------------------ PAID-IN TREASURY RETAINED SUBSCRIPTION
SHARES AMOUNT CAPITAL STOCK EARNINGS RECEIVABLE
----------- ----------- ----------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1996..................... 1,000 $ -- $ 62 $ -- $ 28,561 $ --
Distributions to stockholder............... -- -- -- -- (3,125) --
Net income/comprehensive income............ -- -- -- -- 11,682 --
----- --- ----------- ----------- ---------- ------------
BALANCE, DECEMBER 31, 1996................... 1,000 -- 62 -- 37,118 --
Distributions to stockholder............... -- -- -- -- (26,760) --
Net income/comprehensive income............ -- -- -- -- 24,371 --
----- --- ----------- ----------- ---------- ------------
BALANCE, DECEMBER 31, 1997................... 1,000 -- 62 -- 34,729 --
Distributions to stockholder............... -- -- -- -- (34,102) --
Transfer of accumulated deficit to
additional paid-in capital at termination
of S-Corporation status.................. -- -- (51,053) -- 51,053 --
Redemption of common stock................. -- -- -- (212,448) -- --
Recognition of deferred tax asset.......... -- -- 175,683 -- -- --
Capital subscription receivable............ -- -- 1,084 -- -- (1,084)
Unearned stock compensation................ -- -- 1,814 -- -- --
Amortization of unearned stock
compensation............................. -- -- -- -- -- --
Comprehensive income (loss):
Net loss................................. -- -- -- -- (32,632) --
Foreign currency translation gain........ -- -- -- -- -- --
Comprehensive income (loss)................ -- -- -- -- -- --
----- --- ----------- ----------- ---------- ------------
BALANCE, DECEMBER 31, 1998................... 1,000 $ -- $ 127,590 $ (212,448) $ 19,048 $ (1,084)
----- --- ----------- ----------- ---------- ------------
----- --- ----------- ----------- ---------- ------------
<CAPTION>
ACCUMULATED
OTHER
UNEARNED COMPREHENSIVE COMPREHENSIVE
STOCK COMPENSATION INCOME INCOME TOTAL
-------------------- ------------------- --------------- -----------
<S> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1996..................... $ -- $ -- $ 28,623
Distributions to stockholder............... -- -- (3,125)
Net income/comprehensive income............ -- -- $ 11,682 11,682
------- --- --------------- -----------
--- ---------------
BALANCE, DECEMBER 31, 1996................... -- -- 37,180
Distributions to stockholder............... -- -- (26,760)
Net income/comprehensive income............ -- -- 24,371 24,371
------- --- --------------- -----------
--- ---------------
BALANCE, DECEMBER 31, 1997................... -- -- 34,791
Distributions to stockholder............... -- -- (34,102)
Transfer of accumulated deficit to
additional paid-in capital at termination
of S-Corporation status.................. -- -- --
Redemption of common stock................. -- -- (212,448)
Recognition of deferred tax asset.......... -- -- 175,683
Capital subscription receivable............ -- -- --
Unearned stock compensation................ (1,814) -- --
Amortization of unearned stock
compensation............................. 116 -- 116
Comprehensive income (loss):
Net loss................................. -- -- (32,632) (32,632)
Foreign currency translation gain........ -- 1 1 1
--- ---------------
Comprehensive income (loss)................ -- -- $ (32,631) --
------- --- --------------- -----------
--- ---------------
BALANCE, DECEMBER 31, 1998................... $ (1,698) $ 1 $ (68,591)
------- -----------
------- -----------
</TABLE>
See notes to consolidated financial statements.
F-7
<PAGE>
THE YANKEE CANDLE COMPANY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1997 1998
---------- ---------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)........................................................... $ 11,682 $ 24,371 $ (32,632)
Adjustments to reconcile net income (loss) to net cash provided by (used in)
operating activities:
Depreciation and amortization............................................. 3,094 3,581 4,662
Provision for loss on classic vehicles.................................... 400 46 --
Unrealized gain on marketable equity securities........................... -- (37) (92)
Non-cash stock compensation............................................... -- -- 116
Deferred taxes............................................................ -- (35) 9,656
(Gain) loss on disposal of fixed assets and classic vehicles.............. (14) 460 (146)
Changes in assets and liabilities:
Accounts receivable--net................................................ (501) (983) (1,613)
Inventory............................................................... 2,450 (1,064) (2,270)
Prepaid expenses and other assets....................................... (351) 1,005 (323)
Accounts payable........................................................ (606) 1,105 7,012
Accrued expenses and other liabilities.................................. 1,076 1,586 4,052
---------- ---------- ----------
Net cash provided by (used in) operating activities................... 17,230 30,035 (11,578)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment....................................................... (10,076) (9,173) (9,433)
Acquisition of classic vehicles............................................. (327) (455) --
Acquisition of trademarks................................................... (6) (17) --
Loans to stockholder........................................................ (608) (204) --
Proceeds from sale of equipment............................................. 30 22 506
Proceeds from sale of classic vehicles...................................... -- 215 --
Purchase of marketable equity securities for deferred compensation plan..... -- (349) (378)
---------- ---------- ----------
Net cash used in investing activities................................. (10,987) (9,961) (9,305)
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) under bank credit agreements.................... (4,547) 14,080 (31,097)
Proceeds from long-term borrowings.......................................... 1,599 -- 320,000
Principal payments on long-term debt........................................ (3,038) (861) (8,183)
Deferred financing costs.................................................... -- -- (7,115)
Redemption of common stock.................................................. -- -- (212,448)
Distributions to stockholder................................................ (3,126) (26,760) (17,240)
---------- ---------- ----------
Net cash provided by (used in) financing activities................... (9,112) (13,541) 43,917
---------- ---------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.......................... (2,869) 6,533 23,034
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR.................................. 3,713 844 7,377
---------- ---------- ----------
CASH AND CASH EQUIVALENTS, END OF YEAR........................................ $ 844 $ 7,377 $ 30,411
---------- ---------- ----------
---------- ---------- ----------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest.................................................................. $ 1,968 $ 2,078 $ 14,497
---------- ---------- ----------
---------- ---------- ----------
Income taxes.............................................................. $ 352 $ 485 $ 8,730
---------- ---------- ----------
---------- ---------- ----------
Noncash distributions to sole stockholder................................... $ 16,862
----------
----------
</TABLE>
See notes to consolidated financial statements.
F-8
<PAGE>
THE YANKEE CANDLE COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1. HISTORY, RECAPITALIZATION AND FINANCING
The Yankee Candle Company, Inc. (the "Company") and its subsidiaries is a
leading designer, manufacturer, wholesaler and retailer of premium scented
candles in the growing giftware industry. The Company has a 30-year history of
offering Yankee Candle products and marketing them as affordable luxuries and
consumable gifts. The Company's current products are available in numerous
fragrances and include a wide variety of jar candles,
Samplers-Registered Trademark-, pillars, tapers and other candle products
marketed under the trade names Housewarmer-Registered Trademark- and Country
Kitchen-Registered Trademark-, as well as candle accessories. The Company sells
such products to its wholesale customers who have gift store locations
nationwide and through its retail base of 62 company-owned and operated stores
in 20 states as of December 31, 1998.
On March 25, 1998, the Company entered into a Recapitalization and Stock
Purchase Agreement with Yankee Candle Holdings Corp. ("Holdings"), Michael
Kittredge ("MK"), and affiliates of Forstmann Little & Co. ("FL&Co."). On April
27, 1998 in connection with the Recapitalization, the Company (i) redeemed (the
"Redemption") a portion of its common stock held by MK for approximately
$200,000; (ii) paid transaction fees and expenses, including financing fees, of
approximately $19,550; (iii) repaid existing indebtedness of approximately
$49,300; and (iv) paid bonuses related to the Recapitalization of approximately
$61,300. In addition, Holdings acquired shares of common stock from MK for
approximately $180,000. This purchase was financed by the issuance of Holdings'
common stock to FL&Co. and senior management (together with the Redemption, the
"Recapitalization"). Upon completion of the Recapitalization, Holdings owned 90%
of the common stock and MK retained 10% of the common stock of the Company.
The Redemption and related transactions described above were financed
through the issuance of $320,000 of subordinated debentures (the "Subordinated
Debentures"). In addition, the Company entered into a credit agreement with a
consortium of banks that provided for a $60,000 revolving credit facility. The
Company borrowed $2,500 under this revolving credit facility.
The Company incurred financing costs of approximately $7,100 which were
recorded as deferred financing costs. In addition, the Company incurred
approximately $12,450 of transaction costs related to the Recapitalization which
were charged to treasury stock.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION--The accompanying consolidated financial
statements include the accounts of the Company and its wholly owned
subsidiaries. All significant intercompany accounts and transactions have been
eliminated.
ACCOUNTING ESTIMATES--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
REVENUE RECOGNITION--The Company sells its products directly to retail
customers and through wholesale channels. Revenue from the sale of merchandise
to retail customers is recognized at the time of sale. Revenue from sales to
wholesale customers is recognized upon shipment of product. Revenue from
merchandise credits and gift certificates issued is deferred until redemption.
F-9
<PAGE>
THE YANKEE CANDLE COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CASH AND CASH EQUIVALENTS--The Company considers all short-term
interest-bearing investments with original maturities of three months or less to
be cash equivalents. Such investments are classified by the Company as "held to
maturity" securities under the provisions of Statement of Accounting Standards
No. 115, "Accounting for Certain Investments in Debt and Equity Securities"
(SFAS No. 115). These securities are stated at cost, adjusted for amortization
of discounts and premiums to maturity.
MARKETABLE SECURITIES--The Company classifies the marketable securities held
in its deferred compensation plan as "trading" securities under SFAS No. 115. In
accordance with the provisions of this statement, the investment balance is
stated at fair market value, based on quoted market prices. Unrealized gains and
losses are reflected in earnings; realized gains and losses are computed using
the specific identification method. As the assets held in the deferred
compensation plan reflect amounts due to employees, but available for general
creditors of the Company in the event the Company becomes insolvent, the Company
has recorded the investment balance as a non-current asset and has established a
corresponding other long-term liability entitled "deferred compensation
obligation" on the balance sheet.
The marketable securities held in this plan consist of investments in mutual
funds at December 31, 1997 and 1998. Unrealized gains included in earnings
during the years ended December 31, 1997 and 1998 were $37 and $92,
respectively. Gains of $9 and $30 were realized during 1997 and 1998,
respectively.
ACCOUNTS RECEIVABLE--Accounts receivable primarily represents amounts due
from wholesale customers.
INVENTORIES--Inventories are stated at the lower of cost or market on a
last-in, first-out ("LIFO") basis. In 1998, the liquidation of certain LIFO
layers decreased cost of sales by $383.
PROPERTY, PLANT AND EQUIPMENT--Property, plant and equipment are stated at
cost and are depreciated on the straight-line method based on the estimated
useful lives of the various assets. The estimated useful lives are as follows:
<TABLE>
<S> <C>
Buildings and improvements.................................... 5 to 40
years
Computer equipment............................................ 5 years
Furniture and fixtures........................................ 5 to 10
years
Equipment..................................................... 10 years
Leased vehicles............................................... 5 years
</TABLE>
Leasehold improvements are amortized using the straight-line method over the
lesser of the estimated life of the improvement or the remaining life of the
lease. Expenditures for normal maintenance and repairs are charged to expense as
incurred.
DEFERRED FINANCING COSTS--The Company amortizes deferred financing costs
using the effective interest method over the life of the related debt.
Accumulated amortization was $0 and $548 at December 31, 1997 and 1998,
respectively.
TRADEMARKS--Trademarks are recorded at cost and amortized over 15 years.
Cost of trademarks, included in other assets at December 31, 1997 and 1998, was
$227 and $231, respectively. Accumulated amortization was $54 and $69, at
December 31, 1997 and 1998, respectively.
F-10
<PAGE>
THE YANKEE CANDLE COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CLASSIC VEHICLES--The Company has invested in certain vehicles, which it
displays in its car museum. These vehicles are stated at cost, with no provision
for depreciation, since their useful lives are indeterminable and their values
fluctuate with the classic vehicle market. When management believes that a
permanent decline in value has occurred, the assets are written down to their
fair value. During the years ended December 31, 1996, 1997 and 1998, the value
of these vehicles was written down by $400, $46, and $0, respectively.
ADVERTISING--The Company expenses the costs of advertising as they are
incurred. Advertising expense was $733, $1,306 and $1,986 for the years ended
1996, 1997 and 1998, respectively.
IMPAIRMENT ACCOUNTING--The Company reviews the recoverability of its
long-lived assets when events or changes in circumstances occur that indicate
that the carrying value of the assets may not be recoverable. This review is
based on the Company's ability to recover the carrying value of the assets from
the expected undiscounted future cash flows. If an impairment is indicated, the
Company measures the loss based on the fair value of the asset using various
valuation techniques. If an impairment loss exists, the amount of the loss will
be recorded in the consolidated statements of operations. It is possible that
future events or circumstances could cause these estimates to change.
PRO FORMA ADJUSTMENTS--The Company had, until the Recapitalization, elected
to be treated as an S Corporation for federal and state income tax purposes.
Under this previous election, income for federal income tax purposes was not
taxed at the corporate level but was taxed to MK.
On April 27, 1998, the Company's tax status changed from an S Corporation to
a C Corporation. The income statement reflects a provision for income taxes for
federal and state purposes for the period the Company was a C Corporation and a
provision for state taxes for the periods the Company was an S Corporation. The
pro forma financial information shows the effect on the historical financial
statements as if the Company had been taxed as a C Corporation during 1996, 1997
and 1998 instead of an S Corporation until April 27, 1998.
INCOME TAXES--The Company accounts for income taxes under the provisions of
Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for
Income Taxes." SFAS No. 109 requires the recognition of deferred tax liabilities
and assets for the expected future tax consequences of temporary differences
between the carrying amounts and the tax basis of assets and liabilities using
enacted tax rates in effect in the years in which the differences are expected
to reverse. The provision for income taxes in the consolidated statements of
operations is the actual computed tax obligation or receivable for the period,
plus or minus the change during the period in deferred income tax assets and
liabilities.
NEWLY ISSUED ACCOUNTING STANDARDS--During 1998, SFAS No. 133, "Accounting
for Derivative Instruments and Hedging Activities," was issued by the Financial
Accounting Standards Board. This statement is effective for periods beginning
after June 15, 1999. The Company is currently evaluating the impact, if any, of
this statement.
FAIR VALUE OF FINANCIAL INSTRUMENTS--The estimated fair values of all
financial instruments, excluding the Subordinated Debentures (see Note 6),
approximate their carrying amounts in the consolidated balance sheets due to (i)
the short-term maturity of certain instruments or (ii) the floating interest
rate associated with certain instruments which have the effect of repricing such
instruments regularly.
F-11
<PAGE>
THE YANKEE CANDLE COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
In connection with the Recapitalization, the Subordinated Debentures were
issued to a partnership affiliated with FL&Co. and were immediately distributed
to its limited partners. The Subordinated Debentures can only be issued to an
affiliate of FL&Co. as part of an investment unit, are transferable in limited
circumstances and are not traded nor are they readily tradable. Pursuant to the
partnership agreement, the Subordinated Debentures (i) were sold as an
investment unit which included 37.5% of the shares of Holdings' common stock,
(ii) bear interest at a rate of one percent above the five year treasury rate
and (iii) may be prepaid without penalty or premium at any time. Based on the
five year treasury rate at December 31, 1998 and assuming repayment in three
years, the assumed date of refinancing, the Company believes that the fair value
of the Subordinated Debentures at December 31, 1998 is approximately $330
million.
EARNINGS PER SHARE--Statement of Financial Accounting Standards No. 128
"Earnings Per Share," requires two presentations of earnings per share--"basic"
and "diluted." Basic earnings per share is computed by dividing income available
to common stockholders (the numerator) by the weighted-average number of common
shares (the denominator) for the period. The computation of diluted earnings per
share is similar to basic earnings per share, except that the denominator is
increased to include the number of additional common shares that would have been
outstanding if the potentially dilutive common shares had been issued.
The denominator in the calculation is based on the following weighted
average number of common shares:
<TABLE>
<CAPTION>
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
Basic.................................................................................. 1,000 1,000 663.5
Diluted................................................................................ 1,000 1,000 663.5
</TABLE>
The Company has issued no options nor are there any other common stock
equivalents that would cause the basic and diluted share numbers to differ.
PRIOR-YEAR RECLASSIFICATIONS--Certain 1996 and 1997 amounts have been
reclassified to conform with the 1998 presentation.
3. INVENTORIES
The components of inventory were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
<S> <C> <C>
1997 1998
--------- ---------
Finished goods.......................................................... $ 7,735 $ 9,967
Work-in-process......................................................... 45 126
Raw materials and packaging............................................. 3,242 2,816
--------- ---------
11,022 12,909
Less LIFO reserve....................................................... (810) (427)
--------- ---------
$ 10,212 $ 12,482
--------- ---------
--------- ---------
</TABLE>
F-12
<PAGE>
THE YANKEE CANDLE COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
4. PROPERTY, PLANT AND EQUIPMENT
The components of property, plant and equipment were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
<S> <C> <C>
1997 1998
--------- ---------
Land and improvements.................................................... $ 3,351 $ 3,971
Buildings and improvements............................................... 33,385 36,120
Computer equipment....................................................... 3,429 4,584
Furniture and fixtures................................................... 4,037 5,471
Equipment................................................................ 9,039 9,445
Leased vehicles.......................................................... 1,836 814
Construction-in-process.................................................. 893 1,815
--------- ---------
Total.................................................................... 55,970 62,220
Less accumulated depreciation and amortization........................... (12,058) (13,905)
--------- ---------
$ 43,912 $ 48,315
--------- ---------
--------- ---------
</TABLE>
5. CONCENTRATION OF CREDIT RISK
The Company maintains cash balances at several financial institutions.
Accounts at each institution are insured by the Federal Deposit Insurance
Corporation up to $100. Uninsured balances aggregated $8,534 and $28,177 at
December 31, 1997 and 1998, respectively.
The Company extends credit to its wholesale customers. No single customer
accounted for more than 2% of total sales during any year presented nor did any
such customer account for more than 7% of the outstanding receivable balance at
either December 31, 1997 or 1998.
F-13
<PAGE>
THE YANKEE CANDLE COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
6. LONG-TERM DEBT
Long term debt is summarized as follows at December 31:
<TABLE>
<CAPTION>
1997 1998
--------- ----------
<S> <C> <C>
6 3/4% Subordinated Debentures; due 2009-2011........................... $ -- $ 320,000
Mortgage loan with interest fixed at 8% through April, 2004, converting
to prime for the remaining term, payable in a monthly installment of
$59 plus interest, with a final payment of the unpaid balance in April
2009.................................................................. 7,933 --
Term note with monthly principal and interest installments of $16 to
maturity in June 1999................................................. 251 --
--------- ----------
8,184 320,000
Less current portion.................................................... 874 --
--------- ----------
Noncurrent portion...................................................... $ 7,310 $ 320,000
--------- ----------
--------- ----------
</TABLE>
In connection with the Recapitalization, the Company issued $320,000 of
Subordinated Debentures that were distributed to limited partners of FL&Co. The
Subordinated Debentures bear interest at 6 3/4%, which is payable semiannually
in May and November commencing on November 30, 1998. The Subordinated Debentures
are payable in three equal annual installments of approximately $106,700
beginning May 31, 2009.
In April 1998, the Company entered into a credit agreement with a consortium
of banks (the "Credit Agreement"). The Credit Agreement provides for a revolving
credit facility of $60,000. A portion of the revolving credit facility, in an
amount not to exceed $15,000, may be used, to the extent available, for standby
and commercial letters of credit. The credit facility under the Credit Agreement
terminates April 27, 2002, with any outstanding amounts due on that date. There
were no borrowings at December 31, 1998. Outstanding letters of credit at
December 31, 1998 were $500.
The Company is required to pay a commitment fee on the average daily
unutilized portion of the revolving-credit facility at a rate of 3/8% per annum.
The Company may elect to set the interest rate on all or a portion of revolving
credit loans at a rate per annum equal to (a) 1% plus the greater of (i) Prime
Rate, (ii) Federal Funds Rate plus 1/2% or (iii) CD Rate plus 1% or (b) the
Eurodollar Rate plus 2%.
The Credit Agreement includes restrictions as to, among other things, the
amount of additional indebtedness, contingent obligations, liens, investments,
asset sales, capital expenditures and dividends, and requires the maintenance of
minimum levels of interest coverage. None of the restrictions contained in the
Credit Agreement are expected to have a significant effect on the ability of the
Company to operate. As of December 31, 1998, the Company was in compliance with
all financial and operating covenants under the Credit Agreement.
The mortgage loan and the term note were prepaid in April 1998 in
conjunction with the Recapitalization. In addition, the Company's short-term
borrowings under a line of credit were prepaid and the line of credit was
terminated in April 1998.
F-14
<PAGE>
THE YANKEE CANDLE COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
7. PROVISION FOR INCOME TAXES
Prior to the Recapitalization, the Company was taxed as an S Corporation for
federal and state income tax purposes. Generally, there is no federal income tax
on earnings of an S Corporation; however, some states impose a tax on taxable
earnings. There was no federal income tax provision in 1996 and 1997; but there
was a provision for state income taxes in those years.
Income tax expense consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
<S> <C> <C> <C>
1996 1997 1998
--------- --------- ---------
Federal:
Current.......................................................... $ -- $ -- $ --
Deferred......................................................... -- -- 8,894
--------- --------- ---------
Total Federal.................................................. -- -- 8,894
--------- --------- ---------
State:
Current.......................................................... 410 1,395 --
Deferred......................................................... -- (35) 762
--------- --------- ---------
Total State.................................................... 410 1,360 762
--------- --------- ---------
Total Income Tax Provision..................................... $ 410 $ 1,360 $ 9,656
--------- --------- ---------
--------- --------- ---------
</TABLE>
In connection with the Recapitalization, an election was made for federal
and state income tax purposes to value the assets and liabilities of the Company
at fair value. As a result of such election, there is a difference between the
financial reporting and tax bases of the Company's assets and liabilities. This
difference was accounted for by recording a deferred tax asset of approximately
$175,700 with a corresponding credit to additional paid-in capital. The deferred
tax asset will be realized as these differences, including tax goodwill, are
deducted, principally over a period of 15 years. In the opinion of management,
the Company will have sufficient profits in the future to realize the deferred
tax asset.
The tax effect of significant items comprising the Company's net deferred
tax assets (liabilities) as of December 31, are as follows:
<TABLE>
<CAPTION>
1997 1998
------------------------ ------------------------
<S> <C> <C> <C> <C>
CURRENT NONCURRENT CURRENT NONCURRENT
----------- ----------- ----------- -----------
Deferred tax assets:
Basis differential resulting from tax
election..................................... $ -- $ -- $ -- $ 164,204
Net operating loss carryforward................ -- -- -- 1,382
Deferred compensation arrangements............. -- -- 341 --
Employee benefits.............................. 117 -- 917 --
Other.......................................... 41 -- 284 --
Deferred tax liabilities
Fixed assets................................... -- (169) -- (1,112)
----- ----------- ----------- -----------
$ 158 $ (169) $ 1,542 $ 164,474
----- ----------- ----------- -----------
----- ----------- ----------- -----------
</TABLE>
F-15
<PAGE>
THE YANKEE CANDLE COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
7. PROVISION FOR INCOME TAXES (CONTINUED)
At December 31, 1998, the Company had $3,636 of net operating loss
carryforwards available for both federal and state purposes.
A reconciliation of the statutory federal income tax rate and the effective
rate of the provision for income taxes consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
<S> <C> <C> <C>
1996 1997 1998
--------- --------- ---------
Statutory federal income tax rate...................................... 35% 35% 35%
State income taxes--net of federal income tax benefit.................. 3 3 3
S Corporation income................................................... (35) (35) (80)
Other.................................................................. -- 2 --
--- --- ---
3% 5% (42)%
--- --- ---
--- --- ---
</TABLE>
8. PROFIT SHARING PLAN
The Company maintains a profit sharing/salary reduction plan under section
401(k) of the Internal Revenue Code. Employer contributions amounted to $111,
$137 and $347 for 1996, 1997 and 1998, respectively. The Company, at its
discretion, may also make annual profit sharing contributions to the plan. There
were no profit sharing contributions in 1996, 1997 or 1998.
9. DEFERRED COMPENSATION
The Company has a deferred compensation agreement with seven key employees,
three of whom retired during 1998. Under this agreement, the Company will match
certain elective salary deferrals of eligible employees' compensation up to a
maximum of $20. Employer contributions amounted to $68, $140 and $133 for 1996,
1997 and 1998, respectively. Benefits under the plan (which are determined based
on the value of the investments held in the employee's name by the Company) will
be paid in a lump sum upon termination of the plan or termination of employment.
10. CONTINGENCIES
The Company is engaged in various lawsuits, either as plaintiff or
defendant, involving alleged patent infringement and breaches of contract. In
the opinion of management, the ultimate outcome of these lawsuits will not have
a material adverse effect on the Company's financial condition, results of
operations, or cash flows.
11. STOCKHOLDERS' EQUITY
CAPITAL STOCK--As of December 31, 1997 and 1998, the Company had 1,000
shares of common stock (par value $.01) authorized and issued. In connection
with the 1998 recapitalization, the Company redeemed approximately 500 shares of
common stock from MK. These shares were held in treasury at December 31, 1998.
As discussed in Note 1, Holdings currently owns 90% of the outstanding
common stock of the Company. In connection with the 1998 recapitalization,
common stock of Holdings was purchased by
F-16
<PAGE>
THE YANKEE CANDLE COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
11. STOCKHOLDERS' EQUITY (CONTINUED)
management. The Company made loans to certain members of management to aid them
in the purchase of this common stock. These loans are reflected also in
Stockholders' Equity under the caption "Capital subscription receivable," carry
an interest rate of 7%, are secured by the shares and provide for full recourse
to the borrower. In addition, rights to purchase common stock of Holdings were
granted to a member of management in October 1998 and he committed to purchase
such shares in November 1998. This common stock was purchased in 1999. A
subscription receivable for this common stock is reflected in Stockholders'
Equity as "Capital subscription receivable." In addition, Holdings granted
options to purchase common stock to key employees and directors of the Company.
The options granted are "nonqualified" for tax purposes. For financial reporting
purposes, the award of the right to purchase stock and the grant of options, in
certain cases, were considered to be below the fair value of the stock at the
time of grant. The fair value was determined based on an appraisal conducted by
an independent appraisal firm as of the relevant dates. The differences between
fair value and the purchase price or the exercise price is being charged to
compensation expense over the relevant vesting period. In 1998, such expense
aggregated $116.
Options granted and outstanding represent approximately 1% of Holdings'
equity interest in the Company. A summary of the status of option grants made by
Holdings in its own stock (which would become equity interests in the Company
upon an initial public offering) as of December 31, 1998 and changes during the
period ending on that date is presented below:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
EXERCISE
PRICE
OPTIONS PER SHARE
----------- ----------
<S> <C> <C>
Outstanding at December 31, 1997........................................ -- $ --
Granted................................................................. 1,750 1,038.46
Forfeited............................................................... -- --
----------- ----------
Outstanding at December 31, 1998........................................ 1,750 $ 1,038.46
----------- ----------
----------- ----------
</TABLE>
Employee option grants were made pursuant to the Yankee Candle Holdings
Stock Option Plan (the "Plan").
Effective with the adoption of the Plan, the Company elected to use the
disclosure provisions of SFAS No. 123 "Accounting for Stock Based Compensation."
The Company accounts for employee options or share awards under the intrinsic
value method prescribed by APB Opinion No. 25 with pro forma disclosures of net
earnings and earnings per share, as if the fair value method of accounting
defined in SFAS No. 123 had been applied. SFAS No. 123 establishes a fair value
based method of accounting for stock-based employee compensation plans; however,
it also allows an entity to continue to measure compensation cost for those
plans using the intrinsic value based method of accounting prescribed by
Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued
to Employees." Under the fair value method, compensation cost is measured at the
grant date based on the value of the award and is recognized over the service
period, which is usually the vesting period. Under the intrinsic value method,
compensation cost is the excess, if any, of the quoted market price of the stock
at the grant date or other measurement date over the amount an employee must pay
to acquire the stock.
F-17
<PAGE>
THE YANKEE CANDLE COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
11. STOCKHOLDERS' EQUITY (CONTINUED)
Under SFAS No. 123, the fair value of each option grant is estimated on the
date of grant. The following weighted average assumptions were used for grants
under the Plan in 1998 to allow for the computation of pro forma results of
operations: volatility of 20%, dividend yield of 0%, risk-free interest rate of
4.54% and expected lives of 5 years. The fair value of options granted during
1998 was between $289.61 and $1,094.01 for options issued with an exercise price
of $1,038.46.
If compensation cost for stock option grants had been determined based on
the fair value on the grant dates for the year ended December 31, 1998
consistent with the method prescribed by SFAS No. 123, the Company's pro forma
net loss would have been $(13,264) or $(19,992.36) per share.
The following table summarizes information about Holdings stock options
outstanding at December 31, 1998:
<TABLE>
<CAPTION>
WEIGHTED
EXERCISE OPTIONS OPTIONS AVERAGE
PRICE OUTSTANDING EXERCISABLE REMAINING LIFE
- ---------- ------------- --------------- -----------------
<S> <C> <C> <C>
$ 1,038.46 1,750 -- 9.46
</TABLE>
12. COMMITMENTS
The Company leases most store locations and several vehicles. Most store
leases provide for base rentals plus contingent rentals thereafter, which are a
function of sales volume. In addition, the Company is required to pay real
estate taxes, maintenance and other operating expenses applicable to the leased
premises. Furthermore, several store leases contain rent escalation clauses.
The aggregate annual future minimum lease commitments under operating leases
as of December 31, 1998 are as follows:
<TABLE>
<CAPTION>
OPERATING
LEASES
-----------
<S> <C>
1999............................................................................... $ 3,355
2000............................................................................... 3,263
2001............................................................................... 3,177
2002............................................................................... 3,004
2003............................................................................... 2,732
Thereafter......................................................................... 8,551
-----------
Total minimum lease payments....................................................... $ 24,082
-----------
-----------
</TABLE>
Rent expense for the years ended December 31, 1996, 1997 and 1998 was
approximately $2,886, $3,062 and $3,997, respectively.
At December 31, 1998, the Company has purchase commitments of $306
outstanding for various capital projects related to the acquisition of new
equipment and construction of new retail stores.
F-18
<PAGE>
THE YANKEE CANDLE COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
13. SEGMENTS OF ENTERPRISE AND RELATED INFORMATION
The Company has segmented its operations in a manner that reflects how its
chief operating decision-maker (the "CEO") currently reviews the results of the
Company and its subsidiaries' businesses. The Company has two reportable
segments--retail and wholesale. The identification of these segments results
from management's recognition that while the product produced is similar, the
type of customer for the product and services and the methods used to distribute
the product are different.
The CEO evaluates both its retail and wholesale operations based on an
"operating earnings" measure. Such measure gives recognition to specifically
identifiable operating costs such as cost of sales, selling, and depreciation
and amortization charges. Administrative charges are generally not allocated to
specific operating segments and are accordingly reflected in the
unallocated/corporate/other category as are such costs relating to items such as
LIFO reserves, etc. Other components of the statement of operations which are
classified below operating income are also not allocated by segments. The
Company does not account for or report assets, capital expenditures or
depreciation and amortization by segment to the CEO.
The following are the relevant data for the years ended December 31:
<TABLE>
<CAPTION>
BALANCE PER
UNALLOCATED/ CONSOLIDATED
CORPORATE/ FINANCIAL
1996 RETAIL WHOLESALE OTHER STATEMENTS
- --------------------------------------------------------- ---------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
Net sales................................................ $ 42,909 $ 69,290 $ -- $ 112,199
Operating earnings (loss)................................ 13,156 18,508 (17,604) 14,061
Unallocated costs........................................ -- -- (1,969) (1,969)
------------
Earnings (loss) before taxes............................. -- -- -- $ 12,092
------------
------------
1997
- ---------------------------------------------------------
Net sales................................................ $ 59,227 $ 84,876 $ -- $ 144,103
Operating earnings (loss)................................ 18,118 31,188 (21,238) 28,068
Unallocated costs........................................ -- -- (2,337) (2,337)
------------
Earnings (loss) before taxes............................. -- -- -- $ 25,731
------------
------------
1998
- ---------------------------------------------------------
Net sales................................................ $ 81,210 $ 103,267 $ -- $ 184,477
Operating earnings (loss)................................ 23,343 45,102 (74,635) (6,190)
Unallocated costs........................................ -- -- (16,786) (16,786)
------------
Earnings (loss) before taxes............................. -- -- -- $ (22,976)
------------
------------
</TABLE>
F-19
<PAGE>
THE YANKEE CANDLE COMPANY, INC. AND SUBSIDIARIES
UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEET
APRIL 3, 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents....................................................... $ 27,560
Accounts receivable, less allowance of $480..................................... 10,299
Inventory....................................................................... 19,688
Prepaid expenses and other current assets....................................... 1,395
Deferred tax assets............................................................. 1,542
---------
Total current assets.......................................................... 60,484
PROPERTY, PLANT AND EQUIPMENT (NET)............................................... 51,413
MARKETABLE SECURITIES............................................................. 618
CLASSIC VEHICLES.................................................................. 874
DEFERRED FINANCING COSTS.......................................................... 6,362
DEFERRED TAX ASSETS............................................................... 164,474
OTHER ASSETS...................................................................... 475
---------
TOTAL ASSETS.................................................................. $ 284,700
---------
---------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable................................................................ $ 13,337
Accrued interest................................................................ 7,398
Accrued payroll................................................................. 4,259
Accrued income taxes............................................................ 1,634
Other accrued liabilities....................................................... 2,217
---------
Total current liabilities..................................................... 28,845
DEFERRED COMPENSATION OBLIGATION.................................................. 1,071
LONG-TERM DEBT--Less current portion.............................................. 320,000
---------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock, $.01, par value, 1,000 shares authorized and issued;
500 shares outstanding........................................................ --
Additional paid-in capital...................................................... 128,413
Treasury stock, 500 shares...................................................... (212,988)
Retained earnings............................................................... 22,524
Capital subscription receivable................................................. (815)
Unearned stock compensation..................................................... (2,239)
Accumulated other comprehensive income.......................................... (111)
---------
Total stockholders' equity (deficit).......................................... (65,216)
---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT).......................... $ 284,700
---------
---------
</TABLE>
See notes to unaudited interim condensed consolidated financial statements.
F-20
<PAGE>
THE YANKEE CANDLE COMPANY, INC. AND SUBSIDIARIES
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1998 AND THIRTEEN WEEKS ENDED APRIL 3, 1999
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1998 1999
--------- ---------
<S> <C> <C>
NET SALES................................................................................... $ 35,313 $ 46,590
COST OF SALES............................................................................... 16,400 20,804
--------- ---------
Gross Profit.............................................................................. 18,913 25,786
OPERATING EXPENSES:
Selling expenses.......................................................................... 7,480 8,509
General and administrative expenses....................................................... 4,006 6,213
--------- ---------
11,486 14,722
--------- ---------
INCOME FROM OPERATIONS...................................................................... 7,427 11,064
--------- ---------
OTHER (INCOME) EXPENSE:
Interest income........................................................................... (48) (290)
Interest expense.......................................................................... 369 5,768
Other income.............................................................................. (11) (44)
Total other expense..................................................................... 310 5,434
--------- ---------
INCOME BEFORE PROVISION FOR INCOME TAXES.................................................... 7,117 5,630
PROVISION FOR INCOME TAXES.................................................................. -- 2,252
--------- ---------
NET INCOME.................................................................................. $ 7,117 $ 3,378
--------- ---------
--------- ---------
HISTORICAL BASIC EARNINGS PER SHARE.........................................................
HISTORICAL DILUTED EARNINGS PER SHARE.......................................................
PRO FORMA INFORMATION:
HISTORICAL INCOME BEFORE PROVISION FOR INCOME TAXES....................................... $ 7,117
PRO FORMA PROVISION FOR INCOME TAXES...................................................... 2,704
---------
---------
PRO FORMA NET INCOME...................................................................... $ 4,413
---------
---------
PRO FORMA BASIC EARNINGS PER SHARE........................................................
PRO FORMA DILUTED EARNINGS PER SHARE......................................................
WEIGHTED AVERAGE BASIC SHARES OUTSTANDING...................................................
WEIGHTED AVERAGE DILUTED SHARES OUTSTANDING.................................................
</TABLE>
See notes to unaudited interim condensed consolidated financial statements.
F-21
<PAGE>
THE YANKEE CANDLE COMPANY, INC. AND SUBSIDIARIES
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1998 AND THIRTEEN WEEKS ENDED APRIL 3, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
1998 1999
---------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................................................... $ 7,117 $ 3,378
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization.......................................................... 981 1,305
Unrealized gain on marketable equity securities........................................ (3) (45)
Non-cash stock compensation............................................................ -- 282
Loss on disposal of fixed assets and classic vehicles.................................. 2 8
Changes in assets and liabilities:
Accounts receivable-net.............................................................. (1,722) (1,777)
Inventory............................................................................ (2,755) (7,279)
Prepaid expenses and other assets.................................................... (763) (607)
Accounts payable..................................................................... 3,857 46
Accrued expenses and other liabilities............................................... 442 6,034
---------- ---------
Net cash provided by operating activities.......................................... 7,156 1,345
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment.................................................................... (1,604) (4,242)
Sale of marketable equity securities..................................................... 386 410
Loans to stockholder..................................................................... (127) --
Proceeds from sale of equipment.......................................................... 80 26
Purchase of marketable equity securities for deferred compensation plan.................. -- (127)
---------- ---------
Net cash used in investing activities.................................................. (1,265) (3,933)
CASH FLOWS FROM FINANCING ACTIVITIES:
Amounts paid for capital redemption...................................................... -- (540)
Payment on capital subscription receivable............................................... -- 269
Principal payments on long-term debt..................................................... (6,807) --
Distributions to stockholder............................................................. (3,830) --
---------- ---------
Net cash used in financing activities.................................................. (10,637) (271)
EFFECT OF EXCHANGE RATE ON CASH............................................................ -- 8
NET DECREASE IN CASH AND CASH EQUIVALENTS.................................................. (4,746) (2,851)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD............................................. 7,377 30,411
---------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD................................................... $ 2,631 $ 27,560
---------- ---------
---------- ---------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest............................................................................... $ 396 $ 258
Income taxes........................................................................... -- 618
</TABLE>
See notes to unaudited interim condensed consolidated financial statements.
F-22
<PAGE>
THE YANKEE CANDLE COMPANY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1998 AND THIRTEEN WEEKS ENDED APRIL 3, 1999
1. BASIS OF PRESENTATION
The unaudited interim condensed consolidated financial statements of The
Yankee Candle Company, Inc. and its wholly-owned subsidiaries (the "Company") as
of and for the thirteen weeks and the three month periods ended April 3, 1999
and March 31, 1998, respectively, have been prepared in accordance with
generally accepted accounting principles. Effective January 1, 1999, the Company
adopted a 52/53 week fiscal year. In the opinion of management, such information
contains all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of the results for such periods. Certain prior
year amounts have been reclassified to conform to the current presentation. All
intercompany transactions and balances have been eliminated. The results of
operations for the 13 weeks ended April 3, 1999 are not necessarily indicative
of the results to be expected for the full fiscal year ending January 1, 2000.
Certain information and disclosures normally included in the notes to
consolidated financial statements have been condensed or omitted as permitted by
the rules and regulations of the Securities and Exchange Commission, although
the Company believes the disclosure is adequate to make the information
presented not misleading. The accompanying unaudited financial statements should
be read in conjunction with the financial statements of the Company for the year
ended December 31, 1998.
2. INVENTORIES
Inventory quantities are substantiated through the completion of quarter-end
physical inventory counts. Inventories are stated at the lower of cost or market
on a last-in first-out ("LIFO") basis. Because the inventory determination under
the LIFO method is based on an annual determination of inventory levels and
costs as of the final year-end, the interim LIFO calculation is based on
management's estimates of expected year-end inventory levels.
<TABLE>
<CAPTION>
AS OF APRIL
3,
1999
------------
<S> <C>
(AUDITED)
Finished goods.................................................................. $ 15,610
Work in process................................................................. 165
Raw materials................................................................... 3,913
------------
Total inventory........................................................... $ 19,688
------------
------------
</TABLE>
3. INCOME TAXES
The Company's effective tax rate in the first quarter of fiscal 1999 was
40%. The Company was taxed as an S Corporation for federal and state income tax
purposes for the quarter ended March 31, 1998, and therefore, there was no
federal income tax provision for that period. These financial statements also
contain a pro forma calculation of tax expense as if the Company had become a C
Corporation on January 1, 1998.
4. EARNINGS PER SHARE
Under SFAS No. 128, the Company provides dual presentation of earnings per
share ("EPS") on a basic and diluted basis. The computation of basic earnings
per share is based on the weighted average
F-23
<PAGE>
THE YANKEE CANDLE COMPANY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
THREE MONTHS ENDED MARCH 31, 1998 AND THIRTEEN WEEKS ENDED APRIL 3, 1999
4. EARNINGS PER SHARE (CONTINUED)
number of common shares outstanding during the period. The computation of
diluted earnings per share equals the basic earnings per share since there are
no common stock equivalents currently outstanding.
5. COMPREHENSIVE INCOME
The Company adopted SFAS 130, "Reporting Comprehensive Income" as of
December 31, 1998. Comprehensive income includes all changes in equity during
the period except those resulting from transactions with owners of the Company;
it has two components: net income and other comprehensive income. Accumulated
other comprehensive income reported on the Company's Consolidated Balance Sheets
consists of foreign currency translation adjustments. Comprehensive income, net
of related tax effects (where applicable), is as follows (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS THIRTEEN WEEKS
ENDED ENDED
MARCH 31, APRIL 3,
1998 1999
------------- ---------------
<S> <C> <C>
Net income..................................................... $ 7,117 $ 3,378
Translation adjustment......................................... -- 112
------ ------
Total comprehensive income............................... $ 7,117 $ 3,490
------ ------
------ ------
</TABLE>
6. SEGMENT INFORMATION
The Company has two reportable segments--retail and wholesale.
The following are the relevant data for the three months ended March 31,
1998 and the thirteen weeks ended April 3, 1999:
<TABLE>
<CAPTION>
BALANCE PER
UNALLOCATED/ CONSOLIDATED
CORPORATE/ FINANCIAL
1998 RETAIL WHOLESALE OTHER STATEMENTS
- ------------------------------------------- --------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Net sales.................................. $ 11,623 $ 23,690 $ -- $ 35,313
Operating earnings......................... 1,489 8,415 (2,477) 7,427
Unallocated costs.......................... -- -- 310 310
------------
Earnings before taxes...................... -- -- -- $ 7,117
------------
------------
</TABLE>
<TABLE>
<CAPTION>
BALANCE PER
UNALLOCATED/ CONSOLIDATED
CORPORATE/ FINANCIAL
1999 RETAIL WHOLESALE OTHER STATEMENTS
- ------------------------------------------- --------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Net sales.................................. $ 17,027 $ 29,563 $ -- $ 46,590
Operating earnings......................... 2,774 12,796 (4,506) 11,064
Unallocated costs.......................... -- -- 5,434 5,434
------------
Earnings before taxes...................... -- -- -- $ 5,630
------------
------------
</TABLE>
F-24
<PAGE>
[PICTURE OF PRODUCTS]
EDGAR ARTWORK DESCRIPTIONS
Inside Back Cover of Prospectus:
Caption: A Sampling of Yankee Candle-Registered Trademark- fragrances.
- Upper left hand corner: Picture showing a full line of Yankee
Candle-Registered Trademark- products with "Honeydew Melon" fragrance.
- Upper right hand corner: Picture showing a full line of Yankee
Candle-Registered Trademark- products with "Mountain Lake" fragrance.
- Lower left hand corner: Picture showing a full line of Yankee
Candle-Registered Trademark- products with "Fresh Lilac" fragrance.
- Lower right hand corner: Picture showing a full line of Yankee
Candle-Registered Trademark- products with "Gardenia" fragrance.
<PAGE>
[LOGO]
<PAGE>
[ALTERNATE INTERNATIONAL COVER]
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND WE AND THE SELLING STOCKHOLDERS ARE NOT SOLICITING
OFFERS TO BUY THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS
NOT PERMITTED.
<PAGE>
PROSPECTUS (SUBJECT TO COMPLETION)
ISSUED , 1999
SHARES
[LOGO]
THE YANKEE CANDLE COMPANY, INC.
COMMON STOCK
-----------------
THE YANKEE CANDLE COMPANY, INC. IS OFFERING SHARES AND THE SELLING
STOCKHOLDERS ARE OFFERING SHARES. FOR INFORMATION RELATING TO THE SELLING
STOCKHOLDERS, SEE "PRINCIPAL AND SELLING STOCKHOLDERS" ON PAGE 53. THIS IS OUR
INITIAL PUBLIC OFFERING AND NO PUBLIC MARKET CURRENTLY EXISTS FOR OUR SHARES. WE
ANTICIPATE THAT THE INITIAL PUBLIC OFFERING PRICE WILL BE BETWEEN $ AND
$ PER SHARE.
-------------------
WE HAVE APPLIED TO LIST OUR COMMON STOCK ON THE NEW YORK STOCK EXCHANGE UNDER
THE SYMBOL "YCC."
-------------------
INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING
ON PAGE 7.
-----------------
PRICE $ A SHARE
-------------------
<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS YANKEE CANDLE STOCKHOLDERS
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
PER SHARE....................... $ $ $ $
TOTAL........................... $ $ $ $
</TABLE>
THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS HAVE NOT
APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS PROSPECTUS IS
TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
OUR SELLING STOCKHOLDERS HAVE GRANTED THE UNDERWRITERS THE RIGHT TO PURCHASE UP
TO AN ADDITIONAL SHARES TO COVER OVER-ALLOTMENTS. MORGAN STANLEY & CO.
INCORPORATED EXPECTS TO DELIVER THE SHARES TO PURCHASERS ON , 1999.
-------------------
MORGAN STANLEY DEAN WITTER
GOLDMAN SACHS INTERNATIONAL
MERRILL LYNCH INTERNATIONAL
, 1999
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the expenses expected to be incurred in
connection with the issuance and distribution of common stock registered hereby,
all of which expenses, except for the Securities and Exchange Commission
registration fee, the National Association of Securities Dealers, Inc. filing
fee, and the New York Stock Exchange listing application fee, are estimated.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee............................. $ 55,600
National Association of Securities Dealers, Inc. filing fee..................... 20,500
New York Stock Exchange listing application fee.................................
Printing and engraving fees and expenses........................................
Legal fees and expenses.........................................................
Accounting fees and expenses....................................................
Blue Sky fees and expenses......................................................
Transfer Agent and Registrar fees and expenses.................................. 15,000
Miscellaneous expenses..........................................................
---------
Total.....................................................................
---------
---------
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Articles of Organization provide that the directors and officers of
Yankee Candle shall be indemnified by Yankee Candle to the fullest extent
authorized by Massachusetts law, as it now exists or may in the future be
amended, against all expenses and liabilities reasonably incurred in connection
with service for or on behalf of Yankee Candle, EXCEPT with respect to any
matter that such director or officer has been adjudicated not to have acted in
good faith in the reasonable belief that his action was in the best interests of
Yankee Candle or, to the extent such matter relates to service with respect to
an employee benefit plan, in the best interests of the participants or
beneficiaries of such employee benefit plan.
Yankee Candle has entered into agreements to indemnify its directors and
officers in addition to the indemnification provided for in the Articles of
Organization. These agreements, among other things, indemnify Yankee Candle's
directors and officers to the fullest extent permitted by Massachusetts law for
certain expenses (including attorneys' fees), judgments, fines, penalties and
settlement amounts incurred by such person arising out of or in connection with
such person's service as a director or officer of Yankee Candle or an affiliate
of Yankee Candle.
Policies of insurance are maintained by Yankee Candle under which its
directors and officers are insured, within the limits and subject to the
limitations of the policies, against certain expenses in connection with the
defense of, and certain liabilities which might be imposed as a result of,
actions, suits or proceedings to which they are parties by reason of being or
having been such directors or officers.
The form of Underwriting Agreement filed as Exhibit 1.1 hereto provides for
the indemnification of the registrant, its controlling persons, its directors
and certain of its officers by the underwriters against certain liabilities,
including liabilities under the Securities Act.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
During the three years preceding the filing of this registration statement,
Yankee Candle has not sold its securities without registration under the
Securities Act of 1933, except as described below.
II-1
<PAGE>
In connection with the 1998 recapitalization, Yankee Candle issued to
Forstmann Little & Co. Subordinated Debt and Equity Management Buyout
Partnership-VI, L.P. $320 million aggregate principal amount of 6 3/4% Series A
Debentures due May 31, 2009, 6 3/4% Series B Debentures due May 31, 2010 and
6 3/4% Series C Debentures due May 31, 2011. The issuance of these debentures
was not registered under the Securities Act because it did not involve a public
offering. The issuance was exempt from registration under the Securities Act
pursuant to Section 4(2).
Immediately before the closing of this offering, the capital structure of
Yankee Candle will be reorganized as follows:
- Yankee Candle Holdings will transfer all of its assets, consisting of
shares of Yankee Candle common stock, no par value, to Yankee Candle in
exchange for shares of Yankee Candle common stock par value $.01 per
share, and options to purchase Yankee Candle common stock, on the same
economic terms and conditions as the Yankee Candle Holdings options,
- Yankee Candle Holdings will be liquidated, and all of the shares of Yankee
Candle common stock, and all of the options to purchase Yankee Candle
common stock received from Yankee Candle will be exchanged by the Yankee
Candle Holdings Class A common stockholders and option holders,
respectively, for all of the outstanding Yankee Candle Holdings Class A
common stock and all of the outstanding Yankee Candle Holdings options.
Immediately before the liquidation, all of the outstanding Yankee Candle
Holdings Class B common stock will be converted automatically into Yankee
Candle Holdings Class A common stock based on a formula set forth in the
Certificate of Incorporation of Yankee Candle Holdings, and
- The remaining outstanding shares of Yankee Candle common stock, no
par value, will be exchanged for shares of Yankee Candle common
stock, par value $.01 per share.
Registration under the Securities Act will not be required for issuances of
Yankee Candle common stock pursuant to this reorganization, since the shares
will be issued to a small group of existing Yankee Candle and Yankee Candle
Holdings stockholders in a transaction not involving a public offering. These
issuances will be exempt from registration under the Securities Act pursuant to
Section 4(2).
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
The following exhibits are filed with this registration statement.
<TABLE>
<CAPTION>
NO. DESCRIPTION
- --------- ----------------------------------------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement by and among The Yankee Candle Company, Inc., the selling stockholders
named therein and the underwriters named therein.**
2.1 Recapitalization Agreement, dated as of March 25, 1998, as amended, by and among Yankee Candle Holdings
Corp., The Yankee Candle Company, Inc., Forstmann Little & Co. Subordinated Debt and Equity Management
Buyout Partnership-VI, L.P. and Michael J. Kittredge.*
2.2 Asset Purchase Agreement, dated as of April 1, 1998, by and among The Yankee Candle Company, Inc.,
Chandler's Tavern, Inc. and Michael J. Kittredge.*
2.3 Form of Agreement and Plan of Reorganization between The Yankee Candle Company, Inc. and Yankee Candle
Holdings Corp.**
2.4 Form of Share Exchange Agreement between The Yankee Candle Company, Inc. and Michael S. Kittredge.**
3.1 Form of Restated Articles of Organization of The Yankee Candle Company, Inc.**
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
NO. DESCRIPTION
- --------- ----------------------------------------------------------------------------------------------------------
<C> <S>
3.2 Form of Amended and Restated By-Laws of The Yankee Candle Company, Inc.**
4.1 Form of Common Stock Certificate.**
5.1 Opinion of Hale and Dorr LLP.**
10.1 Form of outside director Stock Option Agreement.**
10.2 Form of outside director Stockholder's Agreement.**
10.3 Form of Employee Stockholder's Agreement.**
10.4 The Yankee Candle Company, Inc. Employee Stock Option Plan and form of Stock Option Agreement.**
10.5 The Yankee Candle Company, Inc. 1999 Stock Option and Award Plan.**
10.6 Stockholder's Agreement, dated April 27, 1998, by and between The Yankee Candle Company, Inc. and Michael
J. Kittredge.*
10.7 Form of Stockholder's Agreement between The Yankee Candle Company, Inc. and employees.**
10.8 Registration Rights Agreement, dated as of May 6, 1999, among The Yankee Candle Company, Inc., Forstmann
Little & Co. Equity Partnership-V, L.P. and Forstmann Little & Co. Subordinated Debt and Equity Management
Buyout Partnership-VI, L.P.**
10.9 Form of Indemnification Agreement between The Yankee Candle Company, Inc. and its directors and executive
officers.**
10.10 Credit Agreement, dated as of , 1999, among The Yankee Candle Company, Inc., The Chase Manhattan
Bank, as sole administrative agent, and the banks and other financial institutions party thereto.***
10.11 Recourse Secured Promissory Note, dated February 3, 1999, by Robert R. Spellman and Stock Pledge
Agreement, dated as of February 3, 1999, by and between The Yankee Candle Company, Inc. and Robert R.
Spellman.*
10.12 Employment Agreement, dated as of October 22, 1998, as amended on February 9, 1999, between The Yankee
Candle Company, Inc. and Robert R. Spellman.*
10.13 Form of Management Rights Letter between The Yankee Candle Company, Inc. and the partnerships affiliated
with Forstmann Little & Co.**
16.1 Letter from Ernst & Young LLP relating to change in certifying accountants.**
16.2 Letter from Fisk, Bilton, Smith & Co., P.C. relating to change in certifying accountants.**
23.1 Consent of Hale and Dorr LLP (included in the opinion filed as Exhibit 5.1).**
23.2 Consent of Deloitte and Touche LLP.**
23.3 Consent of Ernst & Young LLP.**
23.4 Consent of Fisk, Bilton, Smith & Co., P.C.**
24.1 Power of Attorney for Michael S. Ovitz.**
24.2 Power of Attorney for Ronald L. Sargent.**
27 Financial Data Schedules.*
99.1 Report of Independent Auditors on Schedule.*
</TABLE>
- ------------------------
* Previously filed.
** Filed herewith.
*** To be filed by amendment.
II-3
<PAGE>
(b) Financial Statement Schedules
SUPPLEMENTAL SCHEDULE VALUATION AND QUALIFYING AMOUNTS
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO
BEGINNING OF COSTS AND DEDUCTIONS BALANCE AT
DESCRIPTION YEAR EXPENSES FROM RESERVES END OF YEAR
- ---------------------------------------------------------- ------------ ----------- ------------- -----------
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1996
Allowance for doubtful accounts......................... $ 367,000 $ (33,727) $ 26,273 $ 307,000
YEAR ENDED DECEMBER 31, 1997
Allowance for doubtful accounts......................... $ 307,000 $ 93,677 $ 40,677 $ 360,000
YEAR ENDED DECEMBER 31, 1998
Allowance for doubtful accounts......................... $ 360,000 $ 181,946 $ 91,946 $ 450,000
</TABLE>
All the other schedules are omitted because they are not required, are not
applicable or the information is included in the selected consolidated financial
data or notes contained in this registration statement.
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes to provide to the
underwriters at the closing specified in the underwriting agreement,
certificates in such denominations and registered in such names as required by
the underwriters to permit prompt delivery to each purchaser.
(b) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by the director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
(c) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained
in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed
to be part of this registration statement as of the time it was
declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Whately, State of Massachusetts, on the 20th day of May, 1999.
THE YANKEE CANDLE COMPANY, INC.
By: /s/ MICHAEL D. PARRY
-----------------------------------------
Michael D. Parry
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the registration statement has been signed below by the following
persons in the capacities indicated.
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
/s/ MICHAEL D. PARRY President, Chief Executive May 20, 1999
- ------------------------------ Officer and Director
Michael D. Parry (principal executive
officer)
* Senior Vice President of May 20, 1999
- ------------------------------ Finance and Chief
Robert R. Spellman Financial Officer
(principal financial and
accounting officer)
* Director May 20, 1999
- ------------------------------
Michael J. Kittredge
* Director May 20, 1999
- ------------------------------
Theodore J. Forstmann
* Director May 20, 1999
- ------------------------------
Nicholas C. Forstmann
* Director May 20, 1999
- ------------------------------
Sandra J. Horbach
* Director May 20, 1999
- ------------------------------
Steven B. Klinsky
II-5
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<S> <C> <C>
* Director May 20, 1999
- ------------------------------
Michael S. Ovitz
* Director May 20, 1999
- ------------------------------
Emily Woods
* Director May 20, 1999
- ------------------------------
Ronald L. Sargent
</TABLE>
/s/ MICHAEL D. PARRY
--------------------------------------
Michael D. Parry
*By: as Attorney-in-Fact
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
NO. DESCRIPTION PAGE
- --------- ------------------------------------------------------------------------------------------------- ---------
<C> <S> <C>
1.1 Form of Underwriting Agreement by and among The Yankee Candle Company, Inc., the selling
stockholders named therein and the underwriters named therein.**
2.1 Recapitalization Agreement, dated as of March 25, 1998, as amended, by and among Yankee Candle
Holdings Corp., The Yankee Candle Company, Inc., Forstmann Little & Co. Subordinated Debt and
Equity Management Buyout Partnership-VI, L.P. and Michael J. Kittredge.*
2.2 Asset Purchase Agreement, dated as of April 1, 1998, by and among The Yankee Candle Company,
Inc., Chandler's Tavern, Inc. and Michael J. Kittredge.*
2.3 Form of Agreement and Plan of Reorganization between The Yankee Candle Company, Inc. and Yankee
Candle Holdings Corp.**
2.4 Form of Share Exchange Agreement between The Yankee Candle Company, Inc. and Michael S.
Kittredge.**
3.1 Form of Restated Articles of Organization of The Yankee Candle Company, Inc.**
3.2 Form of Amended and Restated By-Laws of The Yankee Candle Company, Inc.**
4.1 Form of Common Stock Certificate.**
5.1 Opinion of Hale and Dorr LLP**
10.1 Form of outside director Stock Option Agreement.**
10.2 Form of outside director Stockholder's Agreement.**
10.3 Form of Employee Stockholder's Agreement.**
10.4 The Yankee Candle Company Inc. Employee Stock Option Plan and form of Stock Option Agreement.**
10.5 The Yankee Candle Company, Inc. 1999 Stock Option and Award Plan.**
10.6 Stockholder's Agreement, dated April 27, 1998, by and between The Yankee Candle Company, Inc. and
Michael J. Kittredge.*
10.7 Form of Stockholder's Agreement between The Yankee Candle Company, Inc. and employees.**
10.8 Registration Rights Agreement, dated as of May 6, 1999, among The Yankee Candle Company, Inc.,
Forstmann Little & Co. Equity Partnership-V, L.P. and Forstmann Little & Co. Subordinated Debt
and Equity Management Buyout Partnership-VI, L.P.**
10.9 Form of Indemnification Agreement between The Yankee Candle Company, Inc. and its directors and
executive officers.**
10.10 Credit Agreement, dated as of , 1999, among The Yankee Candle Company, Inc., The Chase
Manhattan Bank, as sole administrative agent, and the banks and other financial institutions
party thereto.***
10.11 Recourse Secured Promissory Note, dated February 3, 1999, by Robert R. Spellman, and Stock Pledge
Agreement, dated as of February 3, 1999, by and between The Yankee Candle Company, Inc. and
Robert R. Spellman.*
10.12 Employment Agreement, dated as of October 22, 1998, as amended on February 9, 1999, between The
Yankee Candle Company, Inc. and Robert R. Spellman.*
10.13 Form of Management Rights Letter between The Yankee Candle Company, Inc. and the partnerships
affiliated with Forstmann Little and Co.**
16.1 Letter from Ernst & Young LLP relating to change in certifying accountants.**
16.2 Letter from Fisk, Bilton, Smith & Co., P.C. relating to change in certifying accountants.**
23.1 Consent of Hale and Dorr LLP (included in the opinion filed as Exhibit 5.1).**
23.2 Consent of Deloitte and Touche LLP.**
23.3 Consent of Ernst & Young LLP.**
23.4 Consent of Fisk, Bilton, Smith & Co., P.C.**
24.1 Power of Attorney for Michael S. Ovitz.**
24.2 Power of Attorney for Ronald L. Sargent.**
27 Financial Data Schedules.*
99.1 Report of Independent Auditors on Schedule.*
</TABLE>
- ------------------------
* Previously filed.
** Filed herewith.
*** To be filed by amendment.
<PAGE>
Exhibit 1.1
SHARES
----------------
THE YANKEE CANDLE COMPANY, INC.
COMMON STOCK $.01 PAR VALUE
UNDERWRITING AGREEMENT
, 1999
- ----------
<PAGE>
, 1999
----------
Morgan Stanley & Co. Incorporated
Goldman, Sachs & Co.
Merrill Lynch, Pierce, Fenner
& Smith Incorporated
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Morgan Stanley & Co. International Limited
Goldman Sachs International
Merrill Lynch International
c/o Morgan Stanley & Co. International Limited
25 Cabot Square
Canary Wharf
London E14 4QA
England
Dear Sirs and Mesdames:
THE YANKEE CANDLE COMPANY, INC., a Massachusetts corporation (the
"COMPANY"), proposes to issue and sell to the several Underwriters (as defined
below), and certain shareholders of the Company (the "SELLING SHAREHOLDERS")
named in Schedule I hereto severally propose to sell to the several
Underwriters, an aggregate of ________________ shares of the Common Stock, $.01
par value, of the Company (the "FIRM SHARES"), of which ____________ shares are
to be issued and sold by the Company and ____________ shares are to be sold by
the Selling Shareholders, each Selling Shareholder selling the amount set forth
opposite such Selling Shareholder's name in Schedule I hereto.
It is understood that, subject to the conditions hereinafter stated,
____________ Firm Shares (the "U.S. FIRM SHARES") will be sold to the several
U.S. Underwriters named in Schedule II hereto (the "U.S. UNDERWRITERS") in
connection with the offering and sale of such U.S. Firm Shares in the United
States and Canada to United States and Canadian Persons (as such terms are
defined in the Agreement Between U.S. and International Underwriters of even
date herewith), and __________ Firm Shares (the "INTERNATIONAL SHARES") will
<PAGE>
be sold to the several International Underwriters named in Schedule III hereto
(the "INTERNATIONAL UNDERWRITERS") in connection with the offering and sale of
such International Shares outside the United States and Canada to persons other
than United States and Canadian Persons. Morgan Stanley & Co. Incorporated,
Goldman, Sachs & Co. and Merrill Lynch & Co. shall act as representatives (the
"U.S. REPRESENTATIVES") of the several U.S. Underwriters, and Morgan Stanley &
Co. International Limited, Goldman Sachs International and Merrill Lynch
International shall act as representatives (the "INTERNATIONAL REPRESENTATIVES")
of the several International Underwriters. The U.S. Underwriters and the
International Underwriters are hereinafter collectively referred to as the
Underwriters.
The Selling Shareholders also propose to sell to the several U.S.
Underwriters not more than an additional __________ shares of Common Stock, $.01
par value, of the Company (the "ADDITIONAL SHARES") if and to the extent that
the U.S. Representatives shall have determined to exercise, on behalf of the
U.S. Underwriters, the right to purchase such shares of common stock granted to
the U.S. Underwriters in Section 3 hereof. The Firm Shares and the Additional
Shares are hereinafter collectively referred to as the "SHARES." The shares of
Common Stock, $.01 par value of the Company to be outstanding after giving
effect to the sales contemplated hereby are hereinafter referred to as the
"COMMON STOCK." The Company and the Selling Shareholders are hereinafter
sometimes collectively referred to as the "SELLERS".
The Company has filed with the Securities and Exchange Commission (the
"COMMISSION") a registration statement relating to the Shares. The registration
statement contains two prospectuses to be used in connection with the offering
and sale of the Shares: the U.S. prospectus, to be used in connection with the
offering and sale of Shares in the United States and Canada to United States and
Canadian Persons, and the international prospectus, to be used in connection
with the offering and sale of Shares outside the United States and Canada to
persons other than United States and Canadian Persons. The international
prospectus is identical to the U.S. prospectus except for the outside front
cover page. The registration statement as amended at the time it becomes
effective, including the information (if any) deemed to be part of the
registration statement at the time of effectiveness pursuant to Rule 430A under
the Securities Act of 1933, as amended (the "SECURITIES ACT"), is hereinafter
referred to as the "REGISTRATION STATEMENT"; the U.S. prospectus and the
international prospectus in the respective forms first used to confirm sales of
Shares are hereinafter collectively referred to as the "PROSPECTUS." If the
Company has filed an abbreviated registration statement to register additional
shares of Common Stock pursuant to Rule 462(b) under the Securities Act (the
"RULE 462 REGISTRATION
2
<PAGE>
STATEMENT"), then any reference herein to the term "Registration Statement"
shall be deemed to include such Rule 462 Registration Statement.
Morgan Stanley & Co. Incorporated ("MORGAN STANLEY") has agreed to
reserve a portion of the Shares to be purchased by it under this Agreement for
sale to the Company's directors, officers, employees and business associates and
other parties related to the Company (collectively, "PARTICIPANTS"), as set
forth in the Prospectus under the heading "Underwriters" (the "DIRECTED SHARE
PROGRAM"). The Shares to be sold by Morgan Stanley pursuant to the Directed
Share Program are hereinafter referred to as the "DIRECTED SHARES." Any Directed
Shares not orally confirmed for purchase by any Participants by the end of the
business day on which this Agreement is executed will be offered to the public
by the Underwriters as set forth in the Prospectus.
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to and agrees with each of the Underwriters that:
(a) The Registration Statement has become effective; no stop
order suspending the effectiveness of the Registration Statement is in
effect, and no proceedings for such purpose are pending before or, to
the Company's knowledge, threatened by the Commission.
(b) (i) The Registration Statement, when it became effective,
did not contain and, as amended or supplemented, if applicable, will
not contain, as of the relevant effective date, any untrue statement of
a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading,
(ii) the Registration Statement and the Prospectus comply and, as
amended or supplemented, if applicable, will comply, as of the relevant
effective date or filing date, in all material respects with the
Securities Act and the applicable rules and regulations of the
Commission thereunder and (iii) the Prospectus does not contain and, as
amended or supplemented, if applicable, will not contain, as of the
relevant filing date, any untrue statement of a material fact or omit
to state a material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading,
except that the representations and warranties set forth in this
paragraph do not apply to statements or omissions in the Registration
Statement or the Prospectus based upon information relating to any
Underwriter furnished to the Company in writing by such Underwriter
through you expressly for use therein.
(c) The Company has been duly incorporated, is validly
existing as a corporation in good standing under the laws of the
jurisdiction of its
3
<PAGE>
incorporation, has the corporate power and authority to own its
property and to conduct its business as described in the Prospectus and
is duly qualified to transact business and is in good standing in each
jurisdiction in which the conduct of its business or its ownership or
leasing of property requires such qualification, except to the extent
that the failure to be so qualified or be in good standing would not
have a material adverse effect on the Company and its subsidiaries,
taken as a whole.
(d) The Company does not have any significant subsidiaries
within the meaning of Regulation S-X under the Securities Act.
(e) This Agreement has been duly authorized, executed and
delivered by the Company.
(f) Upon the filing of the Restated Articles of Organization
of the Company, the authorized capital stock of the Company will
conform as to legal matters to the description thereof contained in the
Prospectus under the caption "Description of Capital Stock".
(g) The shares of Common Stock (including the Shares to be
sold by the Selling Shareholders) outstanding prior to the issuance of
the Shares to be sold by the Company have been duly authorized and,
when issued, will be validly issued, fully paid and non-assessable.
(h) The Shares to be sold by the Company have been duly
authorized and, when issued and delivered against payment therefor in
accordance with the terms of this Agreement, will be validly issued,
fully paid and non-assessable, and the issuance of such Shares will not
be subject to any preemptive or similar rights.
(i) The Shares issuable upon the exercise of options to be
exercised by certain of the Selling Shareholders (the "OPTIONS") will
be issued pursuant to the Stock Option Agreements which will be entered
into by the Company and such Selling Shareholders (the "OPTION
AGREEMENTS"); the Option Agreements were duly authorized by the
Company, and will, when executed and delivered by the parties thereto,
constitute valid and binding instruments enforceable against the
Company in accordance with their terms subject, as to the enforcement,
to bankruptcy, insolvency, reorganization and other laws of general
applicability relating to or affecting creditors' rights and to general
equity principles; and the Options and the Option Agreements conform in
all material respects to the descriptions thereof in the Prospectus.
4
<PAGE>
(j) The unissued shares of Common Stock issuable upon the
exercise of the Options have been duly and validly authorized and
reserved for issuance, and at the time such Shares are to be sold by
the Selling Shareholders, such Shares will have been delivered in
accordance with the provisions of the Option Agreements and will be
duly and validly issued, fully paid and non-assessable and will conform
in all material respects to the description thereof in the Prospectus.
(k) The execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement
will not contravene any provision of applicable law or the articles of
organization or by-laws of the Company or any agreement or other
instrument binding upon the Company or any of its subsidiaries that is
material to the Company and its subsidiaries, taken as a whole, or any
judgment, order or decree of any governmental body, agency or court
having jurisdiction over the Company or any subsidiary, and no consent,
approval, authorization or order of, or qualification with, any
governmental body or agency is required for the performance by the
Company of its obligations under this Agreement, except for the filing
by the Secretary of the Commonwealth of Massachusetts of the Company's
Restated Articles of Organization (as described in the Prospectus), the
registration under the Securities Act of the Shares, the registration
of the Common Stock under the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT"), the approval for listing of the Common
Stock by the New York Stock Exchange, Inc. (the "NYSE") and such
consents, approvals, authorizations, registrations or qualifications as
may be required by the securities or Blue Sky laws of the various
states in connection with the offer and sale of the Shares.
(l) There has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the
condition, financial or otherwise, or in the earnings, business or
operations of the Company and its subsidiaries, taken as a whole, from
that set forth in the Prospectus (exclusive of any amendments or
supplements thereto subsequent to the date of this Agreement).
(m) Other than as set forth in the Registration Statement or
the Prospectus, there are no legal or governmental proceedings pending
or, to the Company's knowledge, threatened to which the Company is a
party or to which any of the properties of the Company is subject that
are required to be described in the Registration Statement or the
Prospectus and are not so described, and there are no statutes,
regulations, contracts or other documents that are required to be
described in the Registration Statement
5
<PAGE>
or the Prospectus or to be filed as exhibits to the Registration
Statement that are not described or filed as required.
(n) Each preliminary prospectus filed as part of the
registration statement as originally filed or as part of any amendment
thereto, or filed pursuant to Rule 424 under the Securities Act,
complied when so filed in all material respects with the Securities Act
and the applicable rules and regulations of the Commission thereunder.
(o) The Company is not, and after giving effect to the
offering and sale of the Shares and the application of the proceeds
thereof as described in the Prospectus, will not be required to be
registered as, an "investment company" as such term is defined in the
Investment Company Act of 1940, as amended.
(p) The Company has good and marketable title in fee simple to
all real property owned by it and good and marketable title to all
personal property owned by it which is material to the business of the
Company, in each case free and clear of all liens, encumbrances and
defects except such as are described in the Prospectus or such as do
not materially affect the value of such property and do not interfere
with the use made and proposed to be made of such property by the
Company; and any real property and buildings held under lease by the
Company are held by it under valid, subsisting and enforceable leases
with such exceptions as are not material and do not interfere with the
use made and proposed to be made of such property and buildings by the
Company, in each case except as described in or contemplated by the
Prospectus.
(q) The Company owns or possesses, or can acquire on
reasonable terms, all material patents, patent rights, licenses,
inventions, copyrights, know-how (including trade secrets and other
unpatented and/or unpatentable proprietary or confidential information,
systems or procedures), trademarks, service marks and trade names
currently employed by it in connection with the business now operated
by it, and the Company has not received any notice of infringement of
or conflict with asserted rights of others with respect to any of the
foregoing which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would result in any material
adverse change in the condition, financial or otherwise, or in the
earnings, business or operations of the Company and its subsidiaries,
taken as a whole.
6
<PAGE>
(r) No material labor dispute with the employees of the
Company exists, except as described in or contemplated by the
Prospectus, or, to the knowledge of the Company, is imminent.
(s) Except as described in or contemplated by the Prospectus,
the Company is insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as are
prudent and customary in the businesses in which it is engaged.
(t) Except as described in the Prospectus, the Company
possesses all certificates, authorizations and permits issued by the
appropriate federal, state or foreign regulatory authorities necessary
to conduct its business, and the Company has not received any notice of
proceedings relating to the revocation or modification of any such
certificate, authorization or permit which, singly or in the aggregate,
if the subject of an unfavorable decision, ruling or finding, would
result in a material adverse change in the condition, financial or
otherwise, or in the earnings, business or operations of the Company
and its subsidiaries, taken as a whole.
(u) Except as described in the Prospectus (exclusive of any
amendments or supplements thereto subsequent to the date of this
Agreement), the Company has not sold, issued or distributed any shares
of Common Stock during the six-month period preceding the date hereof,
including any sales pursuant to Rule 144A under, or Regulation D or S
of, the Securities Act, other than shares issued pursuant to employee
benefit plans, qualified stock option plans or other employee
compensation plans or pursuant to outstanding options, rights or
warrants.
(v) Deloitte & Touche LLP, Ernst & Young LLP and Fisk, Bilton,
Smith & Co., P.C., each of whom have certified certain financial
statements of the Company and its subsidiaries, are each independent
public accountants as required by the Securities Act and the rules and
regulations of the Commission thereunder.
(w) The Company and its subsidiaries (i) are in compliance
with any and all applicable foreign, federal, state and local laws and
regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("ENVIRONMENTAL LAWS"), (ii) have received all permits,
licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses and (iii) are
in compliance with all terms and conditions of any such permit, license
or approval, except where
7
<PAGE>
such noncompliance with Environmental Laws, failure to receive required
permits, licenses or other approvals or failure to comply with the
terms and conditions of such permits, licenses or approvals would not,
singly or in the aggregate, have a material adverse effect on the
Company and its subsidiaries, taken as a whole.
(x) There are no costs or liabilities associated with
Environmental Laws (including, without limitation, any capital or
operating expenditures required for clean-up, closure of properties or
compliance with Environmental Laws or any permit, license or approval,
any related constraints on operating activities and any potential
liabilities to third parties) which would, singly or in the aggregate,
have a material adverse effect on the Company and its subsidiaries,
taken as a whole.
(y) Except as described in the Prospectus, there are no
contracts, agreements or understandings between the Company and any
person granting such person the right to require the Company to file a
registration statement under the Securities Act with respect to any
securities of the Company or to require the Company to include such
securities with the Shares registered pursuant to the Registration
Statement.
(z) The Company has complied with all provisions of Section
517.075, Florida Statutes relating to doing business with the
Government of Cuba or with any person or affiliate located in Cuba.
(aa) The Company has reviewed its operations to evaluate the
extent to which the business or operations of the Company will be
affected by the "Year 2000 Problem" (that is, any significant risk that
the computer hardware or software applications used by the Company will
not, in the case of dates or time periods occurring after December 31,
1999, function at least as effectively as in the case of dates or time
periods occurring prior to January 1, 2000); as a result of such
review, the Company has no reason to believe, and does not believe,
that there are any issues related to the Company's preparedness to
address the Year 2000 Problem that are of a character required to be
described or referred to in the Registration Statement or the
Prospectus which have not been described in the Registration Statement
or the Prospectus.
(bb) The Registration Statement, the Prospectus and any
preliminary prospectus comply in all material respects, and any
amendments or supplements thereto will comply, as of the relevant
effective date or filing date, in all material respects, with any
applicable laws or regulations of any jurisdiction in which the
Prospectus or any
8
<PAGE>
preliminary prospectus, as amended or supplemented, if applicable, is
distributed in connection with the Directed Share Program.
(cc) No consent, approval, authorization, order of, or
qualification with any governmental body or agency, other than those
obtained, is required in connection with the offering of the Directed
Shares in any jurisdiction where the Directed Shares are being offered.
(dd) The Company has not offered, or caused Morgan Stanley to
offer, Shares to any person pursuant to the Directed Share Program with
the specific intent to unlawfully influence (i) a customer or supplier
of the Company to alter the customer's or supplier's level or type of
business with the Company, or (ii) a trade journalist or publication to
write or publish favorable information about the Company or its
products.
2. REPRESENTATIONS AND WARRANTIES OF THE SELLING SHAREHOLDERS. Each
of the Selling Shareholders represents and warrants to and agrees with each of
the Underwriters that:
(a) This Agreement has been duly authorized, executed and
delivered by or on behalf of such Selling Shareholder.
(b) The execution and delivery by such Selling Shareholder of,
and the performance by such Selling Shareholder of its obligations
under, this Agreement, the Custody Agreement signed by such Selling
Shareholder and BankBoston, NA, as Custodian, relating to the deposit
of the Shares to be sold by such Selling Shareholder (the "CUSTODY
AGREEMENT") and the Power of Attorney appointing certain individuals as
such Selling Shareholder's attorneys-in-fact (the "ATTORNEYS-IN-FACT")
to the extent set forth therein, relating to the transactions
contemplated hereby and by the Registration Statement (the "POWER OF
ATTORNEY") will not contravene any provision of applicable law, or the
certificate of incorporation or by-laws of such Selling Shareholder (if
such Selling Shareholder is a corporation), or the partnership
agreement or articles of partnership of such Selling Shareholder (if
such Selling Shareholder is a partnership), or any agreement or other
instrument binding upon such Selling Shareholder or any judgment, order
or decree of any governmental body, agency or court having jurisdiction
over such Selling Shareholder, and no consent, approval, authorization
or order of, or qualification with, any governmental body or agency is
required for the performance by such Selling Shareholder of its
obligations under this Agreement or the Custody Agreement or Power of
Attorney of such Selling Shareholder, except for the filing by the
Secretary of the Commonwealth of Massachusetts of the
9
<PAGE>
Company's Restated Articles of Organization (as described in the
Prospectus), the registration under the Securities Act of the Shares,
the registration of the Common Stock under the Exchange Act, the
approval for listing of the Common Stock by the NYSE and such consents,
approvals, authorizations, registrations or qualifications as may be
required by the securities or Blue Sky laws of the various states in
connection with the offer and sale of the Shares.
(c) Certificates in negotiable form representing shares of
common stock of Yankee Candle Holdings Corp. ("HOLDINGS") or shares of
common stock, no par value, of the Company, in each case, which will be
exchanged for the Shares to be sold by such Selling Shareholder
hereunder other than any such Shares to be issued upon the exercise of
Options, have been, and, with respect to each of the Selling
Shareholders who is selling Shares on the exercise of Options that duly
completed and executed irrevocable Option exercise notices, in the
forms specified by the relevant Option Agreement, with respect to all
of the Shares to be sold by such Selling Shareholder hereunder which
are not represented by certificates have been, placed in custody under
the Custody Agreement.
(d) The shares represented by the certificates or the
irrevocable Option exercise notice, in either case held in custody for
such Selling Shareholder under the Custody Agreement, are subject to
the interests of the Underwriters hereunder, and the arrangements made
by such Selling Shareholders for such custody, and the appointment by
such Selling Shareholder of the Attorneys-in-Fact by the Power of
Attorney, are to that extent irrevocable. Each of the Selling
Shareholders specifically agrees that the obligations of the Selling
Shareholders hereunder shall not be terminated by operation of law,
whether by the death or incapacity of any individual Selling
Shareholder, or, in the case of an estate or trust, by the death or
incapacity of any executor or trustee or the termination of such estate
or trust, or in the case of a partnership or corporation, by the
dissolution of such partnership or corporation, or by the occurrence of
any other event. If any individual Selling Shareholder or any such
executor or trustee should die or become incapacitated, or if any such
estate or trust should be terminated, or if any such partnership or
corporation should be dissolved, or if any other such event should
occur, before the delivery of the Shares hereunder, certificates
representing the Shares shall be delivered by or on behalf of such
Selling Shareholder in accordance with the terms and conditions of this
Agreement and of the Custody Agreement, and actions taken by the
Attorneys-in-Fact pursuant to the Power of Attorney shall be as valid
as if such death, incapacity, termination, dissolution or other event
had not occurred, regardless of
10
<PAGE>
whether or not the Custodian, the Attorneys-in-Fact, or any of them,
shall have received notice of such death, incapacity, termination,
dissolution or other event.
(e) On the Closing Date, such Selling Shareholder will have,
(i) valid title to the Shares (other than the Shares, if any, to be
issued upon exercise of Options) to be sold by such Selling
Shareholder, (ii) valid title to the Options, if any, to be exercised
in respect of the Shares to be sold by such Selling Shareholder, (iii)
assuming due issuance by the Company of any Shares to be issued upon
exercise of Options, valid title to the Shares issued upon exercise of
such Options to be sold by such Selling Shareholder and (iv) the legal
right and power, and all authorization and approval required by law, to
enter into this Agreement, the Custody Agreement and the Power of
Attorney and to sell, transfer and deliver the Shares to be sold by
such Selling Shareholder.
(f) The Custody Agreement and Power of Attorney have been duly
authorized, executed and delivered by such Selling Shareholder and are
valid and binding agreements of such Selling Shareholder.
(g) Immediately prior to the Closing, such Selling Shareholder
will have good and valid title to the Shares to be sold by such Selling
Shareholder hereunder, free and clear of all liens, encumbrances,
equities or claims, except for those arising under this Agreement, the
Custody Agreement and the Power of Attorney; and, upon payment therefor
and the delivery to the Depositary Trust Company ("DTC") or its agent
of the Shares registered in the name of Cede & Co. or such other
nominee designated by DTC, both as provided for herein, and the
crediting of the Shares to the Underwriters' accounts with DTC, Cede &
Co. or such other nominee designated by DTC will be a "protected
purchaser" of the Shares (as defined in Section 8-303 of the Uniform
Commercial Code as in effect in the State of New York (the "UCC")), the
Underwriters will acquire a valid "security entitlement" (within the
meaning of Section 8-501 of the UCC) to the Shares, and no action based
on an "adverse claim" (as defined in Section 8-102 of the UCC) may be
asserted against the Underwriters with respect to such security
entitlement (assuming that the Underwriters are without notice of any
such adverse claim);
(h) To the extent that any statements or omissions made in the
Registration Statement, any preliminary prospectus, the Prospectus or
any amendment or supplement thereto are made in reliance upon and in
conformity with written information furnished to the Company by such
Selling Shareholder expressly for use therein, such preliminary
prospectus
11
<PAGE>
and the Registration Statement did, and the Prospectus and any further
amendments or supplements to the Registration Statement and the
Prospectus, when they become effective or are filed with the
Commission, as the case may be, will conform in all material respects
to the requirements of the Securities Act and the rules and regulations
of the Commission thereunder and will not contain any untrue statement
of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading.
3. AGREEMENTS TO SELL AND PURCHASE. Each Seller, severally and not
jointly, hereby agrees to sell to the several Underwriters, and each
Underwriter, upon the basis of the representations and warranties herein
contained, but subject to the conditions hereinafter stated, agrees, severally
and not jointly, to purchase from such Seller at $_____ a share (the "PURCHASE
PRICE") the respective numbers of Firm Shares (subject to such adjustments to
eliminate fractional shares as you may determine) that bears the same proportion
to the number of Firm Shares to be sold by such Seller as the number of Firm
Shares set forth in Schedules II and III hereto.
On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, each Selling Shareholder,
severally, and not jointly, hereby agrees to sell to the U.S. Underwriters the
Additional Shares, and the U.S. Underwriters shall have a one-time right to
purchase, severally and not jointly, up to [15% of global offering] Additional
Shares at the Purchase Price. If the U.S. Representatives, on behalf of the U.S.
Underwriters, elect to exercise such option, the U.S. Representatives shall so
notify the Attorneys-in-Fact in writing not later than 30 days after the date of
this Agreement, which notice shall specify the number of Additional Shares to be
purchased by the U.S. Underwriters and the date on which such shares are to be
purchased. Such date may be the same as the Closing Date (as defined below) but
not earlier than the Closing Date nor later than ten business days after the
date of such notice. Additional Shares may be purchased as provided in Section 5
hereof solely for the purpose of covering over-allotments made in connection
with the offering of the Firm Shares. If any Additional Shares are to be
purchased, each U.S. Underwriter agrees, severally and not jointly, to purchase
the number of Additional Shares (subject to such adjustments to eliminate
fractional shares as the U.S. Representatives may determine) that bears the same
proportion to the total number of Additional Shares to be purchased as the
number of U.S. Firm Shares set forth in Schedule II hereto opposite the name of
such U.S. Underwriter bears to the total number of U.S. Firm Shares.
Each Seller hereby agrees that, without the prior written consent of
Morgan Stanley on behalf of the Underwriters, it will not, during the period
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ending 180 days after the date of the Prospectus, (i) offer, pledge, sell,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant to purchase, lend or
otherwise transfer or dispose of, directly or indirectly, any shares of Common
Stock or any securities convertible into or exercisable or exchangeable for
Common Stock or (ii) enter into any swap or other arrangement that transfers to
another, in whole or in part, any of the economic consequences of ownership of
the Common Stock, whether any such transaction described in clause (i) or (ii)
above is to be settled by delivery of Common Stock or such other securities, in
cash or otherwise. The foregoing sentence shall not apply to (A) the Shares to
be sold hereunder, (B) the issuance by the Company of shares of Common Stock
upon the exercise of an option or warrant or the conversion of a security
outstanding on the date hereof of which the Underwriters have been advised in
writing, (C) the granting of stock options and/or restricted stock units
pursuant to the Company's existing employee benefit plans and to directors in
connection with their initial appointment to the Company's Board of Directors,
provided that such options (other than options granted to directors in
connection with their initial appointment to the Company's Board of Directors)
do not become exercisable and such units do not vest during such 180-day period,
or (D) transactions by any person other than the Company relating to shares of
Common Stock or other securities acquired in open market transactions after the
completion of the offering of the Shares. In addition, each Selling Shareholder
agrees that, without the prior written consent of Morgan Stanley on behalf of
the Underwriters, it will not, during the period ending 180 days after the date
of the Prospectus, make any demand for, or exercise any right with respect to,
the registration of any shares of Common Stock, or any security convertible into
or exercisable or exchangeable for Common Stock.
4. TERMS OF PUBLIC OFFERING. The Sellers are advised by you that the
Underwriters propose to make a public offering of their respective portions of
the Shares as soon after the Registration Statement and this Agreement have
become effective as in your judgment is advisable. The Sellers are further
advised by you that the Shares are to be offered to the public initially at
U.S.$_____ a share (the "PUBLIC OFFERING PRICE") and to certain dealers selected
by you at a price that represents a concession not in excess of U.S.$____ a
share under the Public Offering Price, and that any Underwriter may allow, and
such dealers may reallow, a concession, not in excess of U.S.$____ a share, to
any Underwriter or to certain other dealers.
5. PAYMENT AND DELIVERY. Payment for the Firm Shares to be sold by
each Seller shall be made to such Seller in Federal or other funds immediately
available in New York City against delivery of such Firm Shares for the
respective accounts of the several Underwriters at 10:00 a.m., New York City
time, on [3 business days or, if the offering is priced after 4:30 p.m. Eastern
Time,
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4 business days after the date of the Underwriting Agreement] or at such other
time on the same or such other date, not later than [5 business days after
previous date] as shall be designated in writing by you. The time and date of
such payment are hereinafter referred to as the "CLOSING DATE."
Payment for any Additional Shares shall be made to the Selling
Shareholders in Federal or other funds immediately available in New York City
against delivery of such Additional Shares for the respective accounts of the
several Underwriters at 10:00 a.m., New York City time, on the date specified in
the notice described in Section 3 or at such other time on the same or on such
other date, in any event not later than [10 business days after expiration of
greenshoe option] as shall be designated in writing by the U.S. Representatives.
The time and date of such payment are hereinafter referred to as the "OPTION
CLOSING DATE."
Certificates for the Firm Shares and Additional Shares shall be in
definitive form and registered in such names and in such denominations as you
shall request in writing not later than one full business day prior to the
Closing Date or the Option Closing Date, as the case may be. The certificates
evidencing the Firm Shares and Additional Shares shall be delivered to you on
the Closing Date or the Option Closing Date, as the case may be, for the
respective accounts of the several Underwriters, with any transfer taxes payable
in connection with the transfer of the Shares to the Underwriters duly paid,
against payment of the Purchase Price therefor.
6. CONDITIONS TO THE UNDERWRITERS' OBLIGATIONS. The obligations of
the Sellers to sell the Shares to the Underwriters and the several obligations
of the Underwriters to purchase and pay for the Shares on the Closing Date are
subject to the condition that the Registration Statement shall have become
effective not later than [_______] (New York City time) on the date hereof.
The several obligations of the Underwriters are subject to the
following further conditions:
(a) Subsequent to the execution and delivery of this Agreement
and prior to the Closing Date:
(i) there shall not have occurred any downgrading,
nor shall any notice have been given of any intended or
potential downgrading or of any review for a possible change
that does not indicate the direction of the possible change,
in the rating accorded any of the Company's securities by any
"nationally recognized
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statistical rating organization," as such term is defined for
purposes of Rule 436(g)(2) under the Securities Act; and
(ii) there shall not have occurred any change, or any
development involving a prospective change, in the condition,
financial or otherwise, or in the earnings, business or
operations of the Company and its subsidiaries, taken as a
whole, from that set forth in the Prospectus (exclusive of any
amendments or supplements thereto subsequent to the date of
this Agreement) that, in your judgment, is material and
adverse and that makes it, in your judgment, impracticable to
market the Shares on the terms and in the manner contemplated
in the Prospectus.
(b) The Underwriters shall have received on the Closing Date:
(i) a certificate, dated the Closing Date and signed
by an executive officer of the Company, to the effect set
forth in clause (a)(i) above and to the effect that the
representations and warranties of the Company contained in
this Agreement are true and correct as of the Closing Date and
that the Company has complied with all of the agreements and
satisfied all of the conditions on its part to be performed or
satisfied hereunder on or before the Closing Date; and
(ii) a certificate, dated the Closing Date and signed
by each Selling Shareholder that the representations and
warranties of such Selling Shareholder contained in this
Agreement are true and correct as of the Closing Date and that
such Selling Shareholder has complied with all of the
agreements and satisfied all of the conditions on its part to
be performed or satisfied hereunder on or before the Closing
Date.
The officers signing and delivering each such certificate may
rely upon the best of his or her knowledge as to proceedings
threatened.
(c) The reorganization of the Company and liquidation of
Holdings as described under the caption "Description of Capital Stock"
in the Prospectus shall have been consummated in accordance with
applicable law; and the Company shall have entered into the Credit
Agreement described in the Prospectus on terms substantially as
described in the Prospectus.
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(d) The Underwriters shall have received on the Closing Date
an opinion of Fried, Frank, Harris, Shriver & Jacobson, special counsel
for the Company, dated the Closing Date, to the effect that:
(i) the execution and delivery by the Company of, and
the performance by the Company of its obligations under, this
Agreement will not contravene any provision of applicable law
or, to the best of such counsel's knowledge, any agreement or
other instrument binding upon the Company or any of its
subsidiaries which has been identified to such counsel in a
certificate provided by the Chief Financial Officer of the
Company as material to the Company and its subsidiaries, taken
as a whole, or, to the best of such counsel's knowledge, any
judgment, order or decree which has been identified to such
counsel in a certificate provided by the Chief Financial
Officer of the Company of any governmental body, agency or
court having jurisdiction over the Company or any subsidiary,
and no consent, approval, authorization or order of, or
qualification with, any governmental body or agency is
required for the performance by the Company of its obligations
under this Agreement, except those that have been made or
obtained, and such consents, approvals, authorizations,
registrations or qualifications as may be required by the
securities or Blue Sky laws of the various states in
connection with the offer and sale of the Shares by the U.S.
Underwriters;
(ii) the statements (A) in the Prospectus under the
caption "Description of the Credit Agreement" and (B) in the
Registration Statement in Item 15, in each case insofar as
such statements constitute summaries of the legal matters or
documents referred to therein, fairly summarize in all
material aspects the matters referred to therein;
(iii) the statements in the Prospectus under the
caption "United States Federal Tax Considerations for
Non-United States Holders" fairly summarize in all material
respects the matters referred to therein;
(iv) such counsel does not know of any legal or
governmental proceedings pending to which the Company is a
party that are required to be described in the Registration
Statement or the Prospectus and are not so described;
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<PAGE>
(v) the Company is not, and after giving effect to
the offering and sale of the Shares and the application of the
proceeds thereof as described in the Prospectus, will not be
required to register as, an "investment company" as such term
is defined in the Investment Company Act of 1940, as amended;
(vi) such counsel (A) is of the opinion that the
Registration Statement and Prospectus (except for financial
statements and schedules and other financial and statistical
data included therein as to which such counsel need not
express any opinion), as of their respective effective or
filing dates, appear on their face to be responsive as to form
in all material respects with the Securities Act and the
applicable rules and regulations of the Commission thereunder,
(B) has no reason to believe that (except for financial
statements and schedules and other financial and statistical
data as to which such counsel need not express any opinion or
belief) the Registration Statement and the Prospectus included
therein at the time the Registration Statement became
effective contained any 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 and
(C) has no reason to believe that (except for financial
statements and schedules and other financial and statistical
data as to which such counsel need not express any opinion or
belief) the Prospectus contains any untrue statement of a
material fact or omits 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;
(vii) this Agreement has been duly authorized,
executed and delivered by the Company; and
(viii) the Option Agreements constitute valid and
binding instruments enforceable against the Company in
accordance with their terms subject, as to enforcement, to (A)
applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer or other similar laws affecting creditors'
rights generally and (B) general principles of equity (whether
considered in a proceeding at law or in equity).
(e) The Underwriters shall have received on the Closing Date
an opinion of Hale and Dorr LLP, special Massachusetts counsel for the
Company, dated the Closing Date, to the effect that:
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(i) the Company has been duly incorporated, is
validly existing as a corporation in good standing under the
laws of the jurisdiction of its incorporation, has the
corporate power and authority to own its property and to
conduct its business as described in the Prospectus and is
duly qualified to transact business and is in good standing in
each jurisdiction listed on an exhibit to such opinion, which,
to such counsel's knowledge, constitute the only jurisdictions
in the United States in which the Company owns or leases real
property, except to the extent that the failure to be so
qualified or be in good standing would not have a material
adverse effect on the Company and its subsidiaries, taken as a
whole;
(ii) the Shares to be sold by the Selling
Stockholders have been duly authorized and are validly issued,
fully paid and non-assessable;
(iii) the Shares to be sold by the Company have been
duly authorized and, when issued and delivered against payment
therefor in accordance with the terms of this Agreement, will
be validly issued, fully paid and non-assessable, and the
issuance of such Shares will not be subject to any preemptive
or similar rights under Massachusetts law or the Company's
Articles of Organization or By-laws;
(iv) the execution and delivery by the Company of,
and the performance by the Company of its obligations under,
this Agreement will not contravene any provision of the
Articles of Organization or By-laws of the Company;
(v) the statements in the Prospectus under the
caption "Description of Capital Stock", insofar as such
statements constitute summaries of the documents referred to
therein, fairly summarize the documents referred to therein;
(vi) the statements in the Registration Statement in
Item 14 state the general effect of the Articles of
Organization, indemnity agreements and Underwriting Agreement
referred to therein as required in Item 702 of Regulation S-K
under the Securities Act;
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<PAGE>
(vii) the Options have been duly authorized and
granted pursuant to the Option Agreements and constitute valid
and binding obligations of the Company, and the Option
Agreements have been duly authorized, executed and delivered
by the Company;
(viii) the Shares issuable upon the exercise of the
Options have been duly and validly authorized and reserved for
issuance, and, if issued in accordance with the terms of the
Options, at the time such Shares are to be sold by the Selling
Shareholders, such Shares will be duly and validly issued,
fully paid and non-assessable; and
(ix) the authorized capital stock of the Company
conforms in all material respects as to legal matters to the
description thereof contained in the Prospectus under the
caption "Description of Capital Stock".
(f) The Underwriters shall have received on the Closing Date
an opinion of Judy Kundl, counsel to the Company, dated the Closing
Date, to the effect that:
(i) the Company has good and marketable title in fee
simple to all real property owned by it and good and
marketable title to all personal property owned by it which is
material to the business of the Company, in each case free and
clear of all liens, encumbrances and defects except such as
are described in the Prospectus or such as do not materially
affect the value of such property and do not interfere with
the use made and proposed to be made of such property by the
Company; and any real property and buildings held under lease
by the Company are held by it under valid, subsisting and
enforceable leases with such exceptions as are not material
and do not interfere with the use made and proposed to be made
of such property and buildings by the Company, in each case
except as described in or contemplated by the Prospectus; and
(ii) after due inquiry, such counsel does not know of
any legal or governmental proceedings pending or threatened to
which any of the properties of the Company is subject that are
required to be described in the Registration Statement or the
Prospectus and are not so described.
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(g) The Underwriters shall have received on the Closing Date
an opinion of Fried, Frank, Harris, Shriver & Jacobson, special counsel
for each of Forstmann Little & Co. Equity Partnership-V, L.P. and
Forstmann Little & Co. Subordinated Debt and Equity Management Buyout
Partnership-VI, L.P. (the "FL SHAREHOLDERS"), dated the Closing Date,
to the effect that:
(i) this Agreement has been duly authorized, executed
and delivered by or on behalf of each of the FL Shareholders;
(ii) the execution and delivery by each FL
Shareholder of, and the performance by such FL Shareholder of
its obligations under, this Agreement and the Custody
Agreement and Power of Attorney of such FL Shareholder will
not contravene any provision of applicable law, or the
partnership agreement of such FL Shareholder, or, to the best
of such counsel's knowledge, any agreement or other instrument
identified to such counsel in a certificate provided by a
general partner of such FL Shareholder, binding upon such FL
Shareholder or, to the best of such counsel's knowledge, any
judgment, order or decree identified to such counsel in a
certificate provided by a general partner of such FL
Shareholder, of any governmental body, agency or court having
jurisdiction over such FL Shareholder, and no consent,
approval, authorization or order of, or qualification with,
any governmental body or agency is required for the
performance by such FL Shareholder of its obligations under
this Agreement or the Custody Agreement or Power of Attorney
of such FL Shareholder, except those that have been made or
obtained, and such consents, approvals, authorizations,
registrations or qualifications as may be required by the
securities or Blue Sky laws of the various states in
connection with offer and sale of the Shares;
(iii) the Custody Agreement and the Power of Attorney
of each FL Shareholder have been duly authorized, executed and
delivered by such FL Shareholder and are valid and binding
agreements of such FL Shareholder in accordance with their
terms, subject as to enforcement, to (A) applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer or other similar laws affecting creditors' rights
generally and (B) general principles of equity (whether
considered in a proceeding at law or in equity); and
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<PAGE>
(iv) immediately prior to the Closing, the FL
Shareholders will have good and valid title to the Shares to
be sold by the FL Shareholders hereunder, free and clear of
all liens, encumbrances, equities or claims, except for those
arising under this Agreement, the Custody Agreement and the
Power of Attorney; and, upon payment therefor and the delivery
to DTC or its agent of the Shares registered in the name of
Cede & Co. or such other nominee designated by DTC, both as
provided for herein, and the crediting of the Shares to the
Underwriters' accounts with DTC, Cede & Co. or such other
nominee designated by DTC will be a "protected purchaser" of
the Shares (as defined in Section 8-303 of the UCC), the
Underwriters will acquire a valid "security entitlement"
(within the meaning of Section 8-501 of the UCC) to the
Shares, and no action based on an "adverse claim" (as defined
in Section 8-102 of the UCC) may be asserted against the
Underwriters with respect to such security entitlement
(assuming that the Underwriters are without notice of any such
adverse claim).
(h) The Underwriters shall have received on the Closing Date
an opinion of Fried, Frank, Harris, Shriver & Jacobson, special counsel
for each of the Selling Shareholders other than the FL Shareholders
(the "OTHER SHAREHOLDERS"), dated the Closing Date, to the effect that:
(i) this Agreement has been duly executed and
delivered by or on behalf of each of the Other Shareholders;
(ii) the Custody Agreement and the Power of Attorney
of each Other Shareholder have been duly executed and
delivered by such Other Shareholder and are valid and binding
agreements of such Other Shareholder in accordance with their
terms, subject as to enforcement, to (i) applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer or other similar laws affecting creditors' rights
generally and (ii) general principles of equity (whether
considered in a proceeding at law or in equity); and
(iii) immediately prior to the Closing, the Other
Shareholders will have good and valid title to the Shares to
be sold by the Other Shareholders hereunder, free and clear of
all liens, encumbrances, equities or claims, except for those
arising under this Agreement, the Custody Agreement and the
Power of Attorney; and, upon payment therefor and the delivery
to DTC or its agent of the Shares registered in the name of
Cede & Co. or
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<PAGE>
such other nominee designated by DTC, both as provided for
herein, and the crediting of the Shares to the Underwriters'
accounts with DTC, Cede & Co. or such other nominee designated
by DTC will be a "protected purchaser" of the Shares (as
defined in Section 8-303 of the UCC), the Underwriters will
acquire a valid "security entitlement" (within the meaning of
Section 8-501 of the UCC) to the Shares, and no action based
on an "adverse claim" (as defined in Section 8-102 of the UCC)
may be asserted against the Underwriters with respect to such
security entitlement (assuming that the Underwriters are
without notice of any such adverse claim).
(i) The Underwriters shall have received on the Closing Date
an opinion of Davis Polk & Wardwell, counsel for the Underwriters,
dated the Closing Date, covering the matters referred to in Sections
6(d)(ii) (but only as to the statements in the Prospectus under the
caption "Underwriters") and 6(d)(vi).
With respect to Section 6(d)(vi) above, Fried, Frank, Harris, Shriver &
Jacobson and Davis Polk & Wardwell may state that their opinion and belief are
based upon their participation in the preparation of the Registration Statement
and Prospectus and any amendments or supplements thereto and review and
discussion of the contents thereof, but are without independent check or
verification, except as specified. With respect to Sections 6(g) and 6(h) above,
Fried, Frank, Harris, Shriver & Jacobson may rely, with respect to factual
matters and to the extent such counsel deems appropriate, upon the
representations of each Selling Shareholder contained herein and in the Custody
Agreement and Power of Attorney of such Selling Shareholder and in other
documents and instruments; PROVIDED that copies of such Custody Agreements and
Power of Attorney and of any such other documents and instruments shall be
delivered to you and shall be in form and substance satisfactory to your
counsel.
The opinions described in Sections 6(d), 6(e), 6(f), 6(g) and 6(h)
above shall be rendered to the Underwriters at the request of the Company or one
or more of the Selling Shareholders, as the case may be, and shall so state
therein.
(j) The Underwriters shall have received, on each of the date
hereof and the Closing Date, a letter dated the date hereof or the
Closing Date, as the case may be, in form and substance satisfactory to
the Underwriters, from Deloitte & Touche LLP, independent public
accountants, containing statements and information of the type
ordinarily included in accountants' "comfort letters" to underwriters
with respect to the financial statements and certain financial
information contained in the
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Registration Statement and the Prospectus; PROVIDED that such letter
delivered on the Closing Date shall use a "cut-off date" not earlier
than the date hereof.
(k) The "lock-up" agreements, each substantially in the form
of Exhibit A hereto, between you and the shareholders, officers and
directors of the Company who are not selling shares of Common Stock in
the offering relating to sales and certain other dispositions of shares
of Common Stock or certain other securities, delivered to you on or
before the date hereof, shall be in full force and effect on the
Closing Date.
(l) The several obligations of the U.S. Underwriters to
purchase Additional Shares hereunder are subject to the delivery to the
U.S. Representatives on the Option Closing Date of such documents as
they may reasonably request with respect to the good standing of the
Company, the due authorization and issuance of the Additional Shares
and other matters related to the issuance of the Additional Shares.
7. COVENANTS OF THE COMPANY. In further consideration of the
agreements of the Underwriters herein contained, the Company covenants with each
Underwriter as follows:
(a) To furnish to you, without charge, four signed copies of
the Registration Statement (including exhibits thereto) and for
delivery to each other Underwriter a conformed copy of the Registration
Statement (without exhibits thereto) and to furnish to you in New York
City, without charge, prior to 10:00 a.m. New York City time on the
business day next succeeding the date of this Agreement and during the
period mentioned in Section 7(c) below, as many copies of the
Prospectus and any supplements and amendments thereto or to the
Registration Statement as you may reasonably request.
(b) Before amending or supplementing the Registration
Statement or the Prospectus, to furnish to you a copy of each such
proposed amendment or supplement and not to file any such proposed
amendment or supplement to which you reasonably object, and to file
with the Commission within the applicable period specified in Rule
424(b) under the Securities Act any prospectus required to be filed
pursuant to such Rule.
(c) If, during such period after the first date of the public
offering of the Shares as in the opinion of counsel for the
Underwriters the Prospectus is required by law to be delivered in
connection with sales by
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<PAGE>
an Underwriter or dealer, any event shall occur or condition exist as a
result of which it is necessary to amend or supplement the Prospectus
in order to make the statements therein, in light of the circumstances
when the Prospectus is delivered to a purchaser, not misleading, or if,
in the opinion of counsel for the Underwriters, it is necessary to
amend or supplement the Prospectus to comply with applicable law,
forthwith to prepare, file with the Commission and furnish, at its own
expense, to the Underwriters and to the dealers (whose names and
addresses you will furnish to the Company) to which Shares may have
been sold by you on behalf of the Underwriters and to any other dealers
upon request, either amendments or supplements to the Prospectus so
that the statements in the Prospectus as so amended or supplemented
will not, in light of the circumstances when the Prospectus is
delivered to a purchaser, be misleading or so that the Prospectus, as
amended or supplemented, will comply with law.
(d) To endeavor to qualify the Shares for offer and sale under
the securities or Blue Sky laws of such jurisdictions as you shall
reasonably request.
(e) To make generally available to the Company's security
holders and to you as soon as practicable an earning statement covering
the twelve-month period ending [date one year after the end of the
Company's fiscal quarter in which the Closing will occur] that
satisfies the provisions of Section 11(a) of the Securities Act and the
rules and regulations of the Commission thereunder.
(f) Upon delivery to the Company of the irrevocable Option
exercise notices referred to in Section 2 hereof and the receipt of the
appropriate instructions from the Attorneys-in-Fact, to issue the
Shares relating thereto in accordance with the provisions of the
applicable Option Agreement, and, notwithstanding any other provision
of such Option Agreement, to deliver the Shares to you as contemplated
in the Custody Agreement.
(g) To place stop transfer orders on any Directed Shares that
have been sold to Participants subject to the three month restriction
on sale, transfer, assignment, pledge or hypothecation imposed by NASD
Regulation, Inc. under its Interpretative Material 2110-1 on
free-riding and withholding to the extent necessary to ensure
compliance with the three month restrictions.
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<PAGE>
(h) To comply with all applicable securities and other laws,
rules and regulations in each foreign jurisdiction in which the
Directed Shares are offered in connection with the Directed Share
Program.
(i) Whether or not the transactions contemplated in this
Agreement are consummated or this Agreement is terminated, the Sellers
agree with one another and with the Underwriters that (a) the Company
will pay or cause to be paid the following: (i) the fees, disbursements
and expenses of the Company's counsel, and the Company's accountants in
connection with the registration and delivery of the Shares under the
Securities Act and all other fees or expenses in connection with the
preparation and filing of the Registration Statement, any preliminary
prospectus, the Prospectus and amendments and supplements to any of the
foregoing, including all printing costs associated therewith, and the
mailing and delivering of copies thereof to the Underwriters and
dealers, in the quantities hereinabove specified, (ii) all costs and
expenses related to the transfer and delivery of the Shares to the
Underwriters, including any transfer or other taxes payable thereon,
except as provided below, (iii) the cost of printing or producing any
Blue Sky or Legal Investment memorandum in connection with the offer
and sale of the Shares under state securities laws and all expenses in
connection with the qualification of the Shares for offer and sale
under state securities laws as provided in Section 7(d) hereof,
including filing fees and the reasonable fees and disbursements of
counsel for the Underwriters in connection with such qualification and
in connection with the Blue Sky or Legal Investment memorandum, (iv)
all filing fees and the reasonable fees and disbursements of counsel to
the Underwriters incurred in connection with the review and
qualification of the offering of the Shares by the National Association
of Securities Dealers, Inc., (v) all fees and expenses in connection
with the preparation and filing of the registration statement on Form
8-A relating to the Common Stock and all costs and expenses incident to
listing the Shares on the NYSE and other national securities exchanges
and foreign stock exchanges, (vi) the cost of printing certificates
representing the Shares, (vii) the costs and charges of any transfer
agent, registrar or depositary, (viii) the costs and expenses of the
Company relating to investor presentations on any "road show"
undertaken in connection with the marketing of the offering of the
Shares, including, without limitation, expenses associated with the
production of road show slides and graphics, fees and expenses of any
consultants engaged in connection with the road show presentations with
the prior approval of the Company, travel and lodging expenses of the
representatives and officers of the Company and any such consultants,
and the cost of any aircraft chartered in connection with the road
show, (ix) all fees and disbursements
25
<PAGE>
of counsel incurred by the Underwriters in connection with the
Directed Share Program and stamp duties, similar taxes or duties or
other taxes, if any, incurred by the Underwriters in connection with
the Directed Share Program, (x) all fees, disbursements and expenses
of one counsel for the Selling Shareholders selected by the FL
Shareholders (which counsel may be counsel to the Company), (xi) all
other costs and expenses incident to the performance of the
Company's or the Selling Shareholders' obligations hereunder for
which provision is not otherwise made in this Section 7, and (b)
each Selling Shareholder shall pay or cause to be paid any fees,
disbursements and expenses of counsel for such Selling Shareholder
other than as specified in clause (x) above. In connection with
clause (ii) of the preceding sentence, Morgan Stanley agrees to pay
New York State stock transfer tax, and the Company agrees to
reimburse Morgan Stanley for associated carrying costs if such tax
payment is not rebated on the day of payment and for any portion of
such tax payment not rebated. It is understood, however, that except
as provided in this Section, Section 8 entitled "Indemnity and
Contribution", and the last paragraph of Section 11 below, the
Underwriters will pay all of their costs and expenses, including
fees and disbursements of their counsel, stock transfer taxes
payable on resale of any of the Shares by them and any advertising
expenses connected with any offers they may make.
The provisions of this section shall not supercede or otherwise affect
any agreement that the Sellers may otherwise have for the allocation of such
expenses among themselves.
8. INDEMNITY AND CONTRIBUTION. (a) The Company agrees to indemnify
and hold harmless each Underwriter and each person, if any, who controls any
Underwriter within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act, from and against any and all losses, claims,
damages and liabilities (including, without limitation, any legal or other
expenses reasonably incurred in connection with defending or investigating any
such action or claim) caused by any untrue statement or alleged untrue statement
of a material fact contained in the Registration Statement or any amendment
thereof, any preliminary prospectus or the Prospectus (as amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto), 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 or
liabilities are caused by any such untrue statement or omission or alleged
untrue statement or omission based upon information relating to any Underwriter
furnished to the Company in writing by such Underwriter through you expressly
for use therein; PROVIDED, HOWEVER, that the foregoing indemnity agreement with
respect to any preliminary
26
<PAGE>
prospectus shall not inure to the benefit of any Underwriter from whom the
person asserting any such losses, claims, damages or liabilities purchased
Shares, or any person controlling such Underwriter, if a copy of the Prospectus
(as then amended or supplemented if the Company shall have furnished any
amendments or supplements thereto) was not sent or given by or on behalf of such
Underwriter to such person, if required by law so to have been delivered, at or
prior to the written confirmation of the sale of the Shares to such person, and
if the Prospectus (as so amended or supplemented) would have cured the defect
giving rise to such losses, claims, damages or liabilities, unless such failure
is the result of noncompliance by the Company with Sections 7(a) or 7(c) hereof.
(b) Each of the FL Shareholders, severally in proportion to the number
of Shares to be sold by such FL Shareholders hereunder, agrees to indemnify and
hold harmless each Underwriter and each person, if any, who controls any
Underwriter within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act, from and against any and all losses, claims,
damages and liabilities (including, without limitation, any legal or other
expenses reasonably incurred in connection with defending or investigating any
such action or claim) caused by any untrue statement or alleged untrue statement
of a material fact contained in the Registration Statement or any amendment
thereof, any preliminary prospectus or the Prospectus (as amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto), 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 or
liabilities are caused by any such untrue statement or omission or alleged
untrue statement or omission based upon information (i) relating to any
Underwriter furnished to the Company in writing by such Underwriter through you
expressly for use therein or (ii) furnished to the Company in writing by an
Other Shareholder for use in the preparation of the answers in the Registration
Statement or the Prospectus to Item 7 of Form S-1; PROVIDED, HOWEVER, that the
foregoing indemnity agreement with respect to any preliminary prospectus shall
not inure to the benefit of any Underwriter from whom the person asserting any
such losses, claims, damages or liabilities purchased Shares, or any person
controlling such Underwriter, if a copy of the Prospectus (as then amended for
supplemented if the Company or the Selling Shareholders shall have furnished any
amendments or supplements thereto) was not sent or given by or on behalf of such
Underwriter to such person, if required by law so to have been delivered, at or
prior to the written confirmation of the sale of the Shares to such person, and
if the Prospectus (as so amended or supplemented) would have cured the defect
giving rise to such losses, claims, damages or liabilities, unless such failure
is the result of noncompliance by the Company with Sections 7(a) or 7(c) hereof;
PROVIDED FURTHER, HOWEVER, that with respect to any amount due an indemnified
person under this paragraph (b), each
27
<PAGE>
FL Shareholder shall be liable only to the extent of the net proceeds received
by such FL Shareholder from the sale of such FL Shareholder's Shares.
(c) Each Other Shareholder agrees, severally in proportion to the
number of Shares to be sold by such Other Shareholder, to indemnify and hold
harmless each Underwriter and the Company, its directors, its officers who sign
the Registration Statement, and each person, if any, who controls the Company
and any Underwriter, as the case may be, within the meaning of either Section 15
of the Securities Act or Section 20 of the Exchange Act, from and against any
and all losses, claims, damages and liabilities (including, without limitation,
any legal or other expenses reasonably incurred in connection with defending or
investigating any such action or claim) caused by any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement or any amendment thereof, any preliminary prospectus or the Prospectus
(as amended or supplemented if the Company shall have furnished any amendments
or supplements thereto), 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, but only with reference to information
relating to such Other Shareholder furnished in writing by or on behalf of such
Other Shareholder expressly for use in the Registration Statement, any
preliminary prospectus, the Prospectus or any amendments or supplements thereto;
PROVIDED, HOWEVER, that the foregoing indemnity agreement with respect to any
preliminary prospectus shall not inure to the benefit of any Underwriter from
whom the person asserting any such losses, claims, damages or liabilities
purchased Shares, or any person controlling such Underwriter, if a copy of the
Prospectus (as then amended for supplemented if the Company or the Selling
Shareholders shall have furnished any amendments or supplements thereto) was not
sent or given by or on behalf of such Underwriter to such person, if required by
law so to have been delivered, at or prior to the written confirmation of the
sale of the Shares to such person, and if the Prospectus (as so amended or
supplemented) would have cured the defect giving ruse to such losses, claims,
damages or liabilities, unless such failure is the result of noncompliance by
the Company with Sections 7(a) or 7(c) hereof; PROVIDED FURTHER, HOWEVER, that
with respect to any amount due an indemnified person under this paragraph (c),
each Other Shareholder shall be liable only to the extent of the net proceeds
received by such Other Shareholder from the sale of such Other Shareholder's
Shares.
(d) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Company, the Selling Shareholders, the directors of the
Company, the officers of the Company who sign the Registration Statement and
each person, if any, who controls the Company or any Selling Shareholder within
the meaning of either Section 15 of the Securities Act or Section 20 of the
28
<PAGE>
Exchange Act from and against any and all losses, claims, damages and
liabilities (including, without limitation, any legal or other expenses
reasonably incurred in connection with defending or investigating any such
action or claim) caused by any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or any amendment thereof,
any preliminary prospectus or the Prospectus (as amended or supplemented if the
Company shall have furnished any amendments or supplements thereto), 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,
but only with reference to information relating to such Underwriter furnished to
the Company in writing by such Underwriter through you expressly for use in the
Registration Statement, any preliminary prospectus, the Prospectus or any
amendments or supplements thereto.
(e) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to Section 8(a), 8(b), 8(c) or 8(d), such person (the
"INDEMNIFIED PARTY") shall promptly notify the person against whom such
indemnity may be sought (the "INDEMNIFYING PARTY") in writing and the
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such proceeding and
shall pay the fees and disbursements of such counsel related to such proceeding.
In any such proceeding, any indemnified party shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the expense
of such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that the indemnifying party
shall not, in respect of the legal expenses of any indemnified party in
connection with any proceeding or related proceedings in the same jurisdiction,
be liable for (i) the fees and expenses of more than one separate firm (in
addition to any local counsel) for all Underwriters and all persons, if any, who
control any Underwriter within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act, (ii) the fees and expenses of
more than one separate firm (in addition to any local counsel) for all Selling
Shareholders and all persons, if any, who control any Selling Shareholder within
the meaning of either such section, and that all such fees and expenses shall be
reimbursed as they are incurred. In the case of any such separate firm for the
Underwriters and such control persons of any Underwriters such firm shall be
designated in writing by Morgan Stanley. In the case of any such separate firm
for the Company, and such directors, officers and control persons of the
Company, such firm shall be designated in writing by the Company. In the
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<PAGE>
case of any such separate firm for the Selling Shareholders and such control
persons of any Selling Shareholders, such firm shall be designated in writing by
the persons named as Attorneys-in-Fact for the Selling Shareholders under the
Power of Attorney. The indemnifying party shall not be liable for any settlement
of any proceeding effected without its written consent, but if settled with such
consent or if there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party from and against any loss or
liability by reason of such settlement or judgment. Notwithstanding the
foregoing sentence, if at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel as contemplated by the second and third sentences of this paragraph, the
indemnifying party agrees that it shall be liable for any settlement of any
proceeding effected without its written consent if (i) such settlement is
entered into more than 30 days after receipt by such indemnifying party of the
aforesaid request and (ii) such indemnifying party shall not have reimbursed the
indemnified party in accordance with such request prior to the date of such
settlement. No indemnifying party shall, without the prior written consent of
the indemnified party, effect any settlement of any pending or threatened
proceeding in respect of which any indemnified party is or could have been a
party and indemnity could have been sought hereunder by such indemnified party,
unless such settlement includes an unconditional release of such indemnified
party from all liability on claims that are the subject matter of such
proceeding.
(f) To the extent the indemnification provided for in Section 8(a),
8(b), 8(c) or 8(d) is unavailable to an indemnified party or insufficient in
respect of any losses, claims, damages or liabilities referred to therein, then
each indemnifying party under such paragraph, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the indemnifying party or parties on the one hand and the
indemnified party or parties on the other hand from the offering of the Shares
or (ii) if the allocation provided by clause 8(f)(i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause 8(f)(i) above but also the relative
fault of the indemnifying party or parties on the one hand and of the
indemnified party or parties on the other hand in connection with the statements
or omissions that resulted in such losses, claims, damages or liabilities, as
well as any other relevant equitable considerations. The relative benefits
received by the Company on the one hand and the Underwriters on the other hand
in connection with the offering of the Shares shall be deemed to be in the same
respective proportions as the net proceeds from the offering of the Shares
(before deducting expenses) received by the Sellers and the total underwriting
discounts and commissions received by the Underwriters, in each
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<PAGE>
case as set forth in the table on the cover of the Prospectus, bear to the
aggregate Public Offering Price of the Shares. The relative fault of the Sellers
on the one hand and the Underwriters 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 Sellers or by the Underwriters and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Underwriters' respective
obligations to contribute pursuant to this Section 8 are several in proportion
to the respective number of Shares they have purchased hereunder, and not joint.
(g) The Sellers and the Underwriters agree that it would not be just
or equitable if contribution pursuant to this Section 8 were determined by PRO
RATA allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation that does not take account of the
equitable considerations referred to in Section 8(f). The amount paid or payable
by an indemnified party as a result of the losses, claims, damages and
liabilities referred to in the immediately preceding paragraph shall be deemed
to include, subject to the limitations set forth above, any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 8, no Underwriter shall be required to contribute any
amount in excess of the amount by which the total price at which the Shares
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages that such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The remedies provided for in this Section 8 are not exclusive
and shall not limit any rights or remedies which may otherwise be available to
any indemnified party at law or in equity.
(h) The indemnity and contribution provisions contained in this
Section 8 and the representations, warranties and other statements of the
Company and the Selling Shareholders contained in this Agreement shall remain
operative and in full force and effect regardless of (i) any termination of this
Agreement, (ii) any investigation made by or on behalf of any Underwriter or any
person controlling any Underwriter, any Selling Shareholder or any person
controlling any Selling Shareholder, or by or on behalf of the Company, its
officers or directors or any person controlling the Company and (iii) acceptance
of and payment for any of the Shares.
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<PAGE>
9. DIRECTED SHARE PROGRAM INDEMNIFICATION. (a) The Company agrees to
indemnify and hold harmless Morgan Stanley and each person, if any, who controls
Morgan Stanley within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act ("MORGAN STANLEY ENTITIES"), from and against any
and all losses, claims, damages and liabilities (including, without limitation,
any legal or other expenses reasonably incurred in connection with defending or
investigating any such action or claim) (i) caused by any untrue statement or
alleged untrue statement of a material fact contained in any material prepared
by or with the consent of the Company for distribution to Participants in
connection with the Directed Share Program 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; (ii) caused by the
failure of any Participant to pay for and accept delivery of Directed Shares
that the Participant agreed to purchase; or (iii) related to, arising out of, or
in connection with the Directed Share Program, other than losses, claims,
damages or liabilities (or expenses relating thereto) that are finally
judicially determined to have resulted from the bad faith or gross negligence of
the Morgan Stanley Entities.
(b) In case any proceeding (including any governmental investigation)
shall be instituted involving any Morgan Stanley Entity in respect of which
indemnity may be sought pursuant to Section 9(a), the Morgan Stanley Entity
seeking indemnity, shall promptly notify the Company in writing and the Company,
upon request of the Morgan Stanley Entity, shall retain counsel reasonably
satisfactory to the Morgan Stanley Entity to represent the Morgan Stanley Entity
and any others the Company may designate in such proceeding and shall pay the
fees and disbursements of such counsel related to such proceeding. In any such
proceeding, any Morgan Stanley Entity shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such Morgan Stanley Entity unless (i) the Company shall have agreed to the
retention of such counsel or (ii) the named parties to any such proceeding
(including any impleaded parties) include both the Company and the Morgan
Stanley Entity and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them. The
Company shall not, in respect of the legal expenses of the Morgan Stanley
Entities in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the fees and expenses of more than one separate firm
(in addition to any local counsel) for all Morgan Stanley Entities. Any such
separate firm for the Morgan Stanley Entities shall be designated in writing by
Morgan Stanley. The Company shall not be liable for any settlement of any
proceeding effected without its written consent, but if settled with such
consent or if there be a final judgment for the plaintiff, the Company agrees to
indemnify the Morgan Stanley Entities from and against any loss or liability by
reason of such settlement or judgment. Notwithstanding the foregoing sentence,
if at any time a Morgan
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<PAGE>
Stanley Entity shall have requested the Company to reimburse it for fees and
expenses of counsel as contemplated by the second and third sentences of this
paragraph, the Company agrees that it shall be liable for any settlement of any
proceeding effected without its written consent if (i) such settlement is
entered into more than 30 days after receipt by the Company of the aforesaid
request and (ii) the Company shall not have reimbursed the Morgan Stanley Entity
in accordance with such request prior to the date of such settlement. The
Company shall not, without the prior written consent of Morgan Stanley, effect
any settlement of any pending or threatened proceeding in respect of which any
Morgan Stanley Entity is or could have been a party and indemnity could have
been sought hereunder by such Morgan Stanley Entity, unless such settlement
includes an unconditional release of the Morgan Stanley Entities from all
liability on claims that are the subject matter of such proceeding.
(c) To the extent the indemnification provided for in Section 9(a) is
unavailable to a Morgan Stanley Entity or insufficient in respect of any losses,
claims, damages or liabilities referred to therein, then the Company in lieu of
indemnifying the Morgan Stanley Entity thereunder, shall contribute to the
amount paid or payable by the Morgan Stanley Entity as a result of such losses,
claims, damages or liabilities (i) in such proportion as is appropriate to
reflect the relative benefits received by the Company on the one hand and the
Morgan Stanley Entities on the other hand from the offering of the Directed
Shares or (ii) if the allocation provided by clause 9(c)(i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause 9(c)(i) above but also the
relative fault of the Company on the one hand and of the Morgan Stanley Entities
on the other hand in connection with any statements or omissions that resulted
in such losses, claims, damages or liabilities, as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and the Morgan Stanley Entities on the other hand in connection with
the offering of the Directed Shares shall be deemed to be in the same respective
proportions as the net proceeds from the offering of the Directed Shares (before
deducting expenses) and the total underwriting discounts and commissions
received by the Morgan Stanley Entities for the Directed Shares, bear to the
aggregate Public Offering Price of the Directed Shares. If the loss, claim,
damage or liability is caused by an untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact, the
relative fault of the Company on the one hand and the Morgan Stanley Entities on
the other hand shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement or the omission or alleged omission
relates to information supplied by the Company or by the Morgan Stanley Entities
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
33
<PAGE>
(d) The Company and the Morgan Stanley Entities agree that it would not
be just or equitable if contribution pursuant to this Section 9 were determined
by PRO RATA allocation (even if the Morgan Stanley Entities were treated as one
entity for such purpose) or by any other method of allocation that does not take
account of the equitable considerations referred to in Section 9(c). The amount
paid or payable by the Morgan Stanley Entities as a result of the losses,
claims, damages and liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by the Morgan Stanley
Entities in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 9, no Morgan Stanley Entity shall
be required to contribute any amount in excess of the amount by which the total
price at which the Directed Shares distributed to the public were offered to the
public exceeds the amount of any damages that such Morgan Stanley Entity has
otherwise been required to pay. The remedies provided for in this Section 9 are
not exclusive and shall not limit any rights or remedies which may otherwise be
available to any indemnified party at law or in equity.
(e) The indemnity and contribution provisions contained in this Section
9 shall remain operative and in full force and effect regardless of (i) any
termination of this Agreement, (ii) any investigation made by or on behalf of
any Morgan Stanley Entity or the Company, its officers or directors or any
person controlling the Company and (iii) acceptance of and payment for any of
the Directed Shares.
10. TERMINATION. This Agreement shall be subject to termination by
notice given by you to the Company, if (a) after the execution and delivery of
this Agreement and prior to the Closing Date (i) trading generally shall have
been suspended or materially limited on or by, as the case may be, any of the
NYSE, the American Stock Exchange, the National Association of Securities
Dealers, Inc., the Chicago Board of Options Exchange, the Chicago Mercantile
Exchange or the Chicago Board of Trade, (ii) trading of any securities of the
Company shall have been suspended on any exchange or in any over-the-counter
market, (iii) a general moratorium on commercial banking activities in New York
shall have been declared by either Federal or New York State authorities or (iv)
there shall have occurred any outbreak or escalation of hostilities or any
change in financial markets or any calamity or crisis that, in your judgment, is
material and adverse and (b) in the case of any of the events specified in
clauses 10(a)(i) through 10(a)(iv), such event, singly or together with any
other such event, makes it, in your judgment, impracticable to market the Shares
on the terms and in the manner contemplated in the Prospectus.
11. EFFECTIVENESS; DEFAULTING UNDERWRITERS. This Agreement shall
become effective upon the execution and delivery hereof by the parties hereto.
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<PAGE>
If, on the Closing Date or the Option Closing Date, as the case may be,
any one or more of the Underwriters shall fail or refuse to purchase Shares that
it has or they have agreed to purchase hereunder on such date, and the aggregate
number of Shares which such defaulting Underwriter or Underwriters agreed but
failed or refused to purchase is not more than one-tenth of the aggregate number
of the Shares to be purchased on such date, the other Underwriters shall be
obligated severally in the proportions that the number of Firm Shares set forth
opposite their respective names in Schedule I or Schedule II bears to the
aggregate number of Firm Shares set forth opposite the names of all such
non-defaulting Underwriters, or in such other proportions as you may specify, to
purchase the Shares which such defaulting Underwriter or Underwriters agreed but
failed or refused to purchase on such date; PROVIDED that in no event shall the
number of Shares that any Underwriter has agreed to purchase pursuant to this
Agreement be increased pursuant to this Section 11 by an amount in excess of
one-ninth of such number of Shares without the written consent of such
Underwriter. If, on the Closing Date, any Underwriter or Underwriters shall fail
or refuse to purchase Firm Shares and the aggregate number of Firm Shares with
respect to which such default occurs is more than one-tenth of the aggregate
number of Firm Shares to be purchased, and arrangements satisfactory to you, the
Company and the Selling Shareholders for the purchase of such Firm Shares are
not made within 36 hours after such default, this Agreement shall terminate
without liability on the part of any non-defaulting Underwriter, the Company or
the Selling Shareholders. In any such case either you or the Company shall have
the right to postpone the Closing Date, but in no event for longer than seven
days, in order that the required changes, if any, in the Registration Statement
and in the Prospectus or in any other documents or arrangements may be effected.
If, on the Option Closing Date, any Underwriter or Underwriters shall fail or
refuse to purchase Additional Shares and the aggregate number of Additional
Shares with respect to which such default occurs is more than one-tenth of the
aggregate number of Additional Shares to be purchased, the non-defaulting
Underwriters shall have the option to (i) terminate their obligation hereunder
to purchase Additional Shares or (ii) purchase not less than the number of
Additional Shares that such non-defaulting Underwriters would have been
obligated to purchase in the absence of such default. Any action taken under
this paragraph shall not relieve any defaulting Underwriter from liability in
respect of any default of such Underwriter under this Agreement.
If this Agreement shall be terminated by the Underwriters, or any of
them, because of any failure or refusal on the part of any Seller to comply with
the terms or to fulfill any of the conditions of this Agreement, or if for any
reason any Seller shall be unable to perform its obligations under this
Agreement, the Sellers will reimburse the Underwriters or such Underwriters as
have so terminated this Agreement with respect to themselves, severally, for all
out-of-pocket expenses
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(including the fees and disbursements of their counsel) reasonably incurred by
such Underwriters in connection with this Agreement or the offering contemplated
hereunder.
12. COUNTERPARTS. This Agreement may be signed in two or more
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
13. APPLICABLE LAW. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of New York.
14. HEADINGS. The headings of the sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed a part of
this Agreement.
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Very truly yours,
THE YANKEE CANDLE
COMPANY, INC.
By:
-------------------------------
Name:
Title:
The Selling Shareholders named in
Schedule I hereto, acting severally
By:
-------------------------------
Attorney-in-Fact
Accepted as of the date hereof
MORGAN STANLEY & CO.
INCORPORATED
GOLDMAN, SACHS & CO.
MERRILL LYNCH, PIERCE, FENNER
& SMITH INCORPORATED
Acting severally on behalf of themselves and the
several U.S. Underwriters named in Schedule
II hereto.
By: Morgan Stanley & Co. Incorporated
By:
-------------------------------
Name:
Title:
37
<PAGE>
MORGAN STANLEY & CO.
INTERNATIONAL LIMITED
GOLDMAN SACHS INTERNATIONAL
MERRILL LYNCH INTERNATIONAL
Acting severally on behalf of themselves and the
several International Underwriters named in
Schedule III hereto.
By: Morgan Stanley & Co. International Limited
By:
-------------------------------
Name:
Title:
38
<PAGE>
SCHEDULE I
NUMBER OF FIRM SHARES
SELLING SHAREHOLDER TO BE SOLD
- ----------------------------------- ---------------------------
FL SELLING SHAREHOLDERS
Forstmann Little & Co. Subordinated Debt and
Equity Management Buyout Partnership-VI,
L.P.......................................
Forstmann Little & Co. Equity Partnership-V,
L.P.......................................
OTHER SELLING SHAREHOLDERS
[NAMES OF OTHER SELLING
SHAREHOLDERS].....................................
------------------------
Total.................................... ------------------------
------------------------
<PAGE>
SCHEDULE II
U.S. UNDERWRITERS
NUMBER OF FIRM SHARES
UNDERWRITER TO BE PURCHASED
- ----------------------------------- ---------------------------
Morgan Stanley & Co. Incorporated............
Goldman, Sachs & Co. .......................
Merrill Lynch, Pierce, Fenner
& Smith Incorporated...................... ---------------------------
Total U.S. Firm Shares.............. ---------------------------
---------------------------
2
<PAGE>
SCHEDULE III
INTERNATIONAL UNDERWRITERS
NUMBER OF FIRM SHARES
UNDERWRITER TO BE PURCHASED
- ----------------------------------- ---------------------------
Morgan Stanley & Co. International Limited....
Goldman Sachs International...................
Merrill Lynch International...................
----------------------------
Total International Firm Shares...... ----------------------------
----------------------------
<PAGE>
EXHIBIT A
[FORM OF LOCK-UP LETTER]
, 199
------------ -
Morgan Stanley & Co. Incorporated
Goldman, Sachs & Co.
Merrill Lynch, Pierce, Fenner
& Smith Incorporated
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, NY 10036
Morgan Stanley & Co. International Limited
Goldman Sachs International
Merrill Lynch International
c/o Morgan Stanley & Co. International Limited
25 Cabot Square
Canary Wharf
London E14 4QA
England
Dear Sirs and Mesdames:
The undersigned understands that Morgan Stanley & Co. Incorporated
("MORGAN STANLEY") and Morgan Stanley & Co. International Limited ("MSIL")
propose to enter into an Underwriting Agreement (the "UNDERWRITING AGREEMENT")
with Yankee Candle Company, Inc., a Massachusetts corporation (the "COMPANY")
providing for the public offering (the "PUBLIC OFFERING") by the several
Underwriters, including Morgan Stanley and MSIL (the "UNDERWRITERS") of ___
shares (the "SHARES") of the Common Stock, par value $.01 per Share, of the
Company (the "COMMON STOCK").
To induce the Underwriters that may participate in the Public Offering
to continue their efforts in connection with the Public Offering, the
undersigned hereby agrees that, without the prior written consent of Morgan
Stanley on behalf of the Underwriters, it will not, during the period commencing
on the date hereof and ending 180 days after the date of the final prospectus
relating to the Public Offering (the "PROSPECTUS"), (1) offer, pledge, sell,
contract to sell, sell any option
<PAGE>
or contract to purchase, purchase any option or contract to sell, grant any
option, right or warrant to purchase, lend, or otherwise transfer or dispose
of, directly or indirectly, any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock, or (2)
enter into any swap or other arrangement that transfers to another, in whole
or in part, any of the economic consequences of ownership of the Common
Stock, whether any such transaction described in clause (1) or (2) above is
to be settled by delivery of Common Stock or such other securities, in cash
or otherwise. The foregoing sentence shall not apply to (a) the sale of any
Shares to the Underwriters pursuant to the Underwriting Agreement or (b)
transactions relating to shares of Common Stock or other securities acquired
in open market transactions after the completion of the Public Offering. In
addition, the undersigned agrees that, without the prior written consent of
Morgan Stanley on behalf of the Underwriters, it will not, during the period
commencing on the date hereof and ending 180 days after the date of the
Prospectus, make any demand for or exercise any right with respect to, the
registration of any shares of Common Stock or any security convertible into
or exercisable or exchangeable for Common Stock.
Whether or not the Public Offering actually occurs depends on a number
of factors, including market conditions. Any Public Offering will only be made
pursuant to an Underwriting Agreement, the terms of which are subject to
negotiation between the Company and the Underwriters.
Very truly yours,
------------------------------------
Name
------------------------------------
Address
2
<PAGE>
Exhibit 2.3
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION, dated as of _______,
1999 (the "Reorganization Agreement"), between The Yankee Candle Company, Inc.,
a Massachusetts corporation (the "Company"), and Yankee Candle Holdings Corp., a
Delaware corporation ("Holdings").
WHEREAS, the Boards of Directors of each of the Company and
Holdings have determined that it is in the best interests of their respective
organizations that the Company and Holdings enter into an exchange whereby the
Company would issue shares of Common Stock (as defined below) in exchange for
the assets of Holdings on the terms and conditions set forth herein (the
"Exchange");
WHEREAS, in connection with the Exchange, the Company will
cancel its existing no par value common stock and authorize new common stock,
par value $.01 per share, of the Company ("Common Stock"); and
WHEREAS, the Company and Holdings desire to adopt this
Reorganization Agreement as a plan of reorganization in accordance with the
provisions of Section 368(a)(1)(D) of the Internal Revenue Code of 1986, as
amended;
NOW THEREFORE, in consideration of the premises, the mutual
benefits to be derived from this Reorganization Agreement and the covenants,
agreements and promises hereinafter set forth, the parties hereto agree as
follows:
1. THE EXCHANGE. On the business day immediately preceding the
day of the closing of the initial public offering (the "Offering") of Common
Stock registered under the Securities Act of 1933, as amended (the "Effective
Date"), on the terms and conditions set forth herein, Holdings shall sell,
transfer, convey and deliver to the Company all of its right, title and interest
in and to all of its properties and business as a going concern and goodwill and
assets of every kind, nature and description, as the same may exist as of the
Effective Date, wherever such assets are located and whether real, personal or
mixed, tangible or intangible, and whether or not any of such assets have any
value for accounting purposes or are carried or reflected on or specifically
referred to in its books or financial statements (collectively, the "Assets"),
including, without limitation, the following:
(i) Certificates representing 449.9782 shares of
common stock, no par value, of the Company, duly
endorsed in blank or with stock powers attached;
<PAGE>
(ii) All cash, including cash deposits and cash
collateral, and other cash equivalents; and
(iii) All books, records, files and data, in each case
however evidenced (including, without limitation,
by computer disk or tape);
in exchange for (i) a number of newly issued, fully paid and non-assessable
shares of Common Stock equal to (a) plus (b) the number obtained by
dividing $27.35 by the price per share to the public of the Common Stock sold
in the Offering and (ii) the issuance of options to purchase shares of
Common Stock to persons with outstanding options to purchase Holdings stock
pursuant to the Holdings Employee Stock Option Plan or director option
agreements, in exchange for the cancellation of such options. The options to
purchase Common Stock shall have the same intrinsic value as the cancelled
options. In connection with the Exchange, Holdings shall retain all of its
liabilities and no such liabilities shall be transferred to, assumed by or
otherwise become liabilities of, the Company.
2. RESTATED ARTICLES OF INCORPORATION. In connection with the
Exchange, the Company will amend and restate its Articles of Organization to
authorize 300,000,000 shares of Common Stock, and 100,000,000 shares of
preferred stock, par value $.01 per share, of the Company.
3. KITTREDGE SHARES. Simultaneously with the execution of this
Reorganization Agreement, the Company is entering into an agreement with Michael
Kittredge (the "Kittredge Agreement", attached hereto as Exhibit A) pursuant to
which Michael Kittredge will exchange his 49.9976 shares of common stock, no par
value, of the Company for shares of Common Stock, simultaneously with the
Exchange.
4. DISSOLUTION OF HOLDINGS. Immediately following the
Exchange, and as part of this Reorganization Agreement, Holdings shall dissolve
in accordance with Section 275 of the Delaware General Corporation Law. Upon
such dissolution, Holdings shall liquidate by distributing all of its assets and
liabilities to its stockholders pursuant to a plan of dissolution and
liquidation (the "Plan of Dissolution", attached hereto as Exhibit B).
5. TERMINATION. Notwithstanding approval and adoption of this
Reorganization Agreement by the stockholders of each of Holdings and the
Company, this Reorganization Agreement may be terminated, and the Exchange
abandoned, at any time prior to the Effective Date by mutual written consent of
the parties hereto.
6. ENTIRE AGREEMENT. This Reorganization Agreement, the
Kittredge
-2-
<PAGE>
Agreement and the Plan of Dissolution contain the entire agreement of the
parties with respect to the transactions contemplated hereby.
7. MODIFICATIONS. No amendment or modification of this
Reorganization Agreement shall be valid unless it is in writing and signed by or
on behalf of each of the parties hereto.
8. GOVERNING LAW. This Reorganization Agreement shall be
governed by the laws of the State of New York, without regard to the principles
of conflict of laws.
9. COUNTERPARTS. This Reorganization Agreement may be executed
in one or more counterparts, each of which shall for all purposes be an original
and all of which shall constitute the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this
Reorganization Agreement as of the date first above written.
THE YANKEE CANDLE COMPANY, INC.
By:
-------------------------------------
Name:
Title:
YANKEE CANDLE HOLDINGS CORP.
By:
-------------------------------------
Name:
Title:
-3-
<PAGE>
Exhibit A
SHARE EXCHANGE AGREEMENT
SHARE EXCHANGE AGREEMENT, dated as of __________, 1999 (the
"Agreement"), by and between The Yankee Candle Company, Inc., a Massachusetts
corporation (the "Company"), and Michael J. Kittredge ("Kittredge").
WHEREAS, in connection with the initial public offering of the
Company's securities (the "Offering"), the Company and Yankee Candle Holdings
Corp., a Delaware corporation ("Holdings"), have entered into an Agreement and
Plan of Reorganization (the "Reorganization Agreement"), dated as of the date
hereof, providing for the issuance by the Company of shares of new common stock,
par value $.01 per share ("New Common Stock"), of the Company to Holdings, in
exchange for the transfer by Holdings of all of its assets, including, without
limitation, its existing shares of common stock, no par value, of the Company
("Existing Common Stock");
WHEREAS, Kittredge is the owner of 49.9976 shares of Existing
Common Stock; and
WHEREAS, to carry out the intent of the Reorganization
Agreement, the parties hereto deem it desirable that Kittredge exchange his
shares of Existing Common Stock for shares of New Common Stock on the terms and
subject to the conditions set forth herein;
NOW THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
1. THE KITTREDGE EXCHANGE On the business day immediately
preceding the day of the closing of the Offering (the "Effective Date"), on the
terms and conditions set forth herein, Kittredge shall sell, transfer, convey
and deliver certificates representing his 49.9976 shares of Existing Common
Stock, duly endorsed in blank or with stock powers attached, to the Company in
exchange for certificates representing newly issued, fully paid and
non-assessable shares of New Common Stock (the "Kittredge Exchange"). Kittredge
represents and warrants to the Company that his shares of Existing Common Stock
are on the date hereof, and will be on the Effective Date, free of all liens,
claims and encumbrances except those created pursuant to agreements to which the
Company is a party.
2. TERMINATION. This Agreement shall automatically terminate,
and the Kittredge Exchange shall automatically be abandoned, upon the
termination of the Reorganization Agreement. This Agreement may not otherwise be
terminated without the written consent of the parties hereto and Holdings.
3. THIRD PARTY BENEFICIARY. This Agreement shall inure to the
benefit of the
<PAGE>
parties hereto and Holdings which shall be a third party beneficiary hereto.
4. ENTIRE AGREEMENT. This Agreement and the Reorganization
Agreement contain the entire agreement of the parties with respect to the
transactions contemplated hereby.
5. MODIFICATIONS. No amendment or modification of this
Agreement shall be valid unless it is in writing and signed by or on behalf of
each of the Company and Kittredge.
6. GOVERNING LAW. This Agreement shall be governed by the laws
of the State of New York, without giving effect to the principles of conflict of
laws.
7. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be an original and all of
which shall constitute the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
THE YANKEE CANDLE COMPANY, INC.
By:
-------------------------------------
Name:
Title:
MICHAEL J. KITTREDGE
-2-
<PAGE>
Exhibit B
YANKEE CANDLE HOLDINGS CORP.
PLAN OF DISSOLUTION AND LIQUIDATION
As part of the Plan of Reorganization (as defined below) and
following the adoption of this Plan of Dissolution and Liquidation (the "Plan")
by (i) holders of a majority of the outstanding stock entitled to vote thereon
and a majority of the Board of Directors of Yankee Candle Holdings Corp., a
Delaware corporation (the "Company"), or (ii) unanimous consent of all
stockholders entitled to vote thereon, and following the exchange (the
"Exchange") of all of the Company's assets for shares of common stock, par value
$.01 per share ("YCC Common Stock"), of The Yankee Candle Company, Inc., a
Massachusetts corporation ("YCC"), pursuant to that certain Agreement and Plan
of Reorganization dated as of _____, 1999 (the "Plan of Reorganization"), by and
between YCC and the Company:
1. DISSOLUTION. The appropriate officers of the Company will
file a Certificate of Dissolution with the Secretary of State of the State of
Delaware. The date of such filing shall be the effective date of dissolution of
the Company (the "Effective Date").
2. CESSATION OF BUSINESS. After the filing of the Certificate
of Dissolution, the Company will not carry on any business except as may be
necessary or incidental to the winding up of the Company's affairs.
3. PAYMENT OF DEBTS; OPTIONS. The Company will, pursuant to
the Delaware General Corporation Law, (i) pay or make reasonable provision to
pay or otherwise satisfy all claims and obligations, including any obligations
pursuant to outstanding Company stock option agreements ("Stock Option
Agreements"), and all other contingent, conditional, or unmatured contractual
claims known to the Company, (ii) make such provision as will be reasonably
likely to be sufficient to provide compensation for any claim against the
Company which is the subject of a pending action, suit or proceeding to which
the Company is a party, and (iii) make such provision as will be reasonably
likely to be sufficient to provide compensation for claims that have not been
made known to the Company or that have not arisen but that, based on facts known
to the Company, are likely to arise or to become known to the Company within 10
years of the date of dissolution. Such claims shall be paid in full and any such
provision for payment made shall be made in full if there are sufficient funds.
If there are insufficient funds, such claims and obligations shall be paid or
provided for according to their priority and, among claims of equal priority,
ratably to the extent of funds legally available therefor. Any assets remaining
following the establishment of such provisions shall be distributed to the
holders of Class A Stock (as defined below). The Company will cause each Stock
Option Agreement to be cancelled and in exchange therefor shall cause to be
delivered to each optionholder a stock option agreement for options to
<PAGE>
purchase shares of YCC Common Stock having the same intrinsic value as the
cancelled options.
4. LIQUIDATION OF ASSETS; CANCELLATION OF SHARES. The sole
assets of the Company will be shares of YCC Common Stock and options to purchase
shares of YCC Common Stock which will have been received in exchange for the
cancellation of outstanding options under the Stock Option Agreements. On the
business day immediately preceding the day of the closing of the initial public
offering of YCC Common Stock and after the Exchange, and without any action on
the part of any holder thereof, the YCC Common stock owned by the Company will
be distributed to the holders of Class A Stock as follows: (i) each outstanding
share of the Company's Class B Non-Voting Common Stock, par value $.01 per share
("Class B Stock"), will be converted into shares of the Company's Class A Common
Stock, par value $.01 per share ("Class A Stock"), at the exchange rate set
forth in Article Fourth, Section A, Subsection 4(d) of the Company's Restated
Certificate of Incorporation (the "Restated Certificate") and (ii) immediately
thereafter, each share of Class A Stock shall be exchanged for shares of YCC
Common Stock, calculated in the manner set forth in Article Fourth, Section A,
Subsection 3 of the Restated Certificate. Following the Exchange, the
certificates representing Class A Stock and Class B Stock will be cancelled. No
interest shall accrue at any time on any assets held for distribution. At the
same time, YCC will deliver to each optionholder a stock option agreement for
options to purchase shares of YCC Common Stock, which YCC options shall have the
same intrinsic value as the cancelled Company options.
5. POWER OF OFFICERS. The officers of the Company shall have
authority to do or authorize any and all acts and things as provided for in the
Plan and any and all such further acts and things as they may consider desirable
to carry out the purposes of the Plan, including the execution and filing of all
such certificates, documents, information returns, tax returns, and other
documents which may be necessary or appropriate to implement the Plan, as well
as the distribution of assets to stockholders of the Company.
-2-
<PAGE>
Exhibit 2.4
SHARE EXCHANGE AGREEMENT
SHARE EXCHANGE AGREEMENT, dated as of __________, 1999 (the
"Agreement"), by and between The Yankee Candle Company, Inc., a Massachusetts
corporation (the "Company"), and Michael J. Kittredge ("Kittredge").
WHEREAS, in connection with the initial public offering of the
Company's securities (the "Offering"), the Company and Yankee Candle Holdings
Corp., a Delaware corporation ("Holdings"), have entered into an Agreement and
Plan of Reorganization (the "Reorganization Agreement"), dated as of the date
hereof, providing for the issuance by the Company of shares of new common stock,
par value $.01 per share ("New Common Stock"), of the Company to Holdings, in
exchange for the transfer by Holdings of all of its assets, including, without
limitation, its existing shares of common stock, no par value, of the Company
("Existing Common Stock");
WHEREAS, Kittredge is the owner of 49.9976 shares of Existing
Common Stock; and
WHEREAS, to carry out the intent of the Reorganization
Agreement, the parties hereto deem it desirable that Kittredge exchange his
shares of Existing Common Stock for shares of New Common Stock on the terms and
subject to the conditions set forth herein;
NOW THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
1. THE KITTREDGE EXCHANGE On the business day immediately
preceding the day of the closing of the Offering (the "Effective Date"), on the
terms and conditions set forth herein, Kittredge shall sell, transfer, convey
and deliver certificates representing his 49.9976 shares of Existing Common
Stock, duly endorsed in blank or with stock powers attached, to the Company in
exchange for certificates representing newly issued, fully paid and
non-assessable shares of New Common Stock (the "Kittredge Exchange"). Kittredge
represents and warrants to the Company that his shares of Existing Common Stock
are on the date hereof, and will be on the Effective Date, free of all liens,
claims and encumbrances except those created pursuant to agreements to which the
Company is a party.
2. TERMINATION. This Agreement shall automatically terminate,
and the Kittredge Exchange shall automatically be abandoned, upon the
termination of the Reorganization Agreement. This Agreement may not otherwise be
terminated without the written consent of the parties hereto and Holdings.
3. THIRD PARTY BENEFICIARY. This Agreement shall inure to the
benefit of the
<PAGE>
parties hereto and Holdings which shall be a third party beneficiary hereto.
4. ENTIRE AGREEMENT. This Agreement and the Reorganization
Agreement contain the entire agreement of the parties with respect to the
transactions contemplated hereby.
5. MODIFICATIONS. No amendment or modification of this
Agreement shall be valid unless it is in writing and signed by or on behalf of
each of the Company and Kittredge.
6. GOVERNING LAW. This Agreement shall be governed by the laws
of the State of New York, without giving effect to the principles of conflict of
laws.
7. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be an original and all of
which shall constitute the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
THE YANKEE CANDLE COMPANY, INC.
By:
-------------------------------------
Name:
Title:
MICHAEL J. KITTREDGE
-2-
<PAGE>
Exhibit 3.1
FEDERAL IDENTIFICATION
NO. 04-2591416
THE COMMONWEALTH OF MASSACHUSETTS
- -----------
Examiner William Francis Galvin
Secretary of the Commonwealth
One Ashburton Place, Boston, Massachusetts 02108-1512
RESTATED ARTICLES OF ORGANIZATION
(General Laws, Chapter 156B, Section 74)
- -----------
Name
Approved
We, Michael D. Parry, "President" and Robert R. Spellman, "Clerk",
of The Yankee Candle Company, Inc.,
- --------------------------------------------------------------------------------
(Exact name of corporation)
located at 102 Christian Lane, Whately, Massachusetts 01093
- --------------------------------------------------------------------------------
(Street address of corporation Massachusetts)
do hereby certify that the following Restatement of the Articles of Organization
was duly adopted at a meeting held on _________________, 19__ by a vote of the
directors/or:
shares of Common Stock, no par value of 1,100 shares outstanding,
- --------- ----------------------------- -----
(type, class & series if any)
shares of of shares outstanding, and
- --------- ----------------------------- ----
(type, class & series if any)
shares of of shares outstanding,
- --------- ----------------------------- -----
(type, class & series if any)
being at least two-thirds of each type, class or series outstanding and entitled
to vote thereon and of each type, class or series of stock whose rights are
adversely affected thereby:
C |_|
P |_|
M |_|
R.A. |_|
ARTICLE I
The name of the corporation is:
The Yankee Candle Company, Inc.
ARTICLE II
The purpose of the corporation is to engage in the following
business activity(ies):
To engage in the business of designing, manufacturing, retailing and
wholesaling scented and unscented candles and other home fragrancing
products and to engage in any and all business activities in which a
corporation organized under M.G.L. CH 156B may engage.
<PAGE>
ARTICLE III
State the total number of shares and par value, if any, of each class of stock
which the corporation is authorized to issue:
- --------------------------------------------------------------------------------
WITHOUT PAR VALUE WITH PAR VALUE
- --------------------------------------------------------------------------------
TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE
- --------------------------------------------------------------------------------
Common: Common: 300,000,000 $.01
- --------------------------------------------------------------------------------
Preferred: Preferred: 100,000,000 $.01
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ARTICLE IV
If more than one class of stock is authorized, state a distinguishing
designation for each class. Prior to the issuance of any shares of a class, if
shares of another class are outstanding, the corporation must provide a
description of the preferences, voting powers, qualifications, and special or
relative rights or privileges of that class and of each other class of which
shares are outstanding and of each series then established within any class.
(See Attachment 4)
ARTICLE V
The restrictions, if any, imposed by the Article of Organization upon the
transfer of shares of stock of any class are:
ARTICLE VI
**Other lawful provisions, if any, for the conduct and regulation of the
business and affairs of the corporation, for its voluntary dissolution, or for
limiting, defining, or regulating the powers of the corporation, or of its
directors or stockholders, or of any class of stockholders:
(See Attachment 6)
<PAGE>
ARTICLE VII
The effective date of the restated Articles of Organization of the corporation
shall be the date approved and filed by the Secretary of the Commonwealth. If a
later effective date is desired, specify such date which shall not be more than
thirty days after the date of filing.
ARTICLE VIII
The information contained in Article VIII is not a permanent part of the
Articles of Organization.
a. The street address (post office boxes are not acceptable) of the principal
office of the corporation in Massachusetts is:
102 Christian Lane, Whately, Massachusetts 01093
b. The name, residential address and post office address of each director and
officer of the corporation is as follows:
NAME RESIDENTIAL ADDRESS POST OFFICE ADDRESS
President:
Treasurer:
Clerk: (See Attachment 8)
Directors:
c. The fiscal year (i.e., tax year) of the corporation shall end on the last day
of the month of: December
d. The name and business address of the resident agent, if any, of the
corporation is:
** We further certify that the foregoing Restated Articles of Organization
affect no amendments to the Articles of Organization of the corporation as
heretobefore amended, except amendments to the following articles. Briefly
describe amendments below:
Article III -Recapitalization
Article IV -Recapitalization
Article VI -other lawful provisions
SIGNED UNDER THE PENALTIES OF PERJURY, this _______ day of _________, 1999.
Michael D. Parry, President
Robert R. Spellman, Clerk
<PAGE>
THE COMMONWEALTH OF MASSACHUSETTS
RESTATED ARTICLES OF ORGANIZATION
(General Laws, Chapter 156B, Section 74)
=====================================================
I hereby approve the within Restated Articles of
Organization and, the filing fee in the amount of
$_________ having been paid, said articles are deemed
to have been filed with me this _________ day of
_______________, 19__.
Effective Date:______________________________________
WILLIAM FRANCIS GALVIN
Secretary of the Commonwealth
TO BE FILLED IN BY CORPORATION
Photocopy of document to be sent to:
_______________________________________________________
_______________________________________________________
_______________________________________________________
Telephone:_____________________________________________
<PAGE>
ATTACHMENT 4
The total number of shares of all classes of stock which the corporation
shall have authority to issue is 400,000,000 shares, consisting of (i)
300,000,000 shares of Common Stock, $.01 par value per share ("Common Stock"),
and (ii) 100,000,000 shares of Preferred Stock, $.01 par value per share
("Preferred Stock").
The following is a statement of the designations and the powers,
privileges and rights, and the qualifications, limitations or restrictions
thereof in respect of each class of capital stock of the corporation.
4A. COMMON STOCK.
1. General. The voting, dividend and liquidation rights of the holders of
the Common Stock are subject to and qualified by the rights of the holders of
the Preferred Stock of any series as may be designated by the Board of Directors
upon any issuance of the Preferred Stock of any series.
2. Voting. The holders of the Common Stock are entitled to one vote for
each share held at all meetings of stockholders (and written actions in lieu of
meetings). There shall be no cumulative voting.
3. Dividends. Dividends may be declared and paid on the Common Stock from
funds lawfully available therefor as and when determined by the Board of
Directors and subject to any preferential dividend rights of any then
outstanding Preferred Stock.
4. Liquidation. Upon the dissolution or liquidation of the corporation,
whether voluntary or involuntary, holders of Common Stock will be entitled to
receive all assets of the corporation available for distribution to its
stockholders, subject to any preferential rights of any then outstanding
Preferred Stock.
4B. PREFERRED STOCK.
Up to 100,000,000 shares of Preferred Stock may be issued from time to
time in one or more series, each of such series to have such terms as stated or
expressed herein and in the resolution or resolutions providing for the issue of
such series adopted by the Board of Directors as hereinafter provided. Any
shares of Preferred Stock which may be redeemed, purchased or acquired by the
corporation may be reissued except as otherwise provided by law. Different
series of Preferred Stock shall not be construed to constitute different classes
of shares for the purposes of voting by classes unless expressly provided.
-1-
<PAGE>
Authority is hereby expressly granted to the Board of Directors from time
to time to issue the Preferred Stock in one or more series, and in connection
with the creation of any such series, by resolution or resolutions providing for
the issue of the shares thereof, to determine and fix such voting powers, full
or limited, or no voting powers, and such designations, preferences and relative
participating, optional or other special rights, and qualifications, limitations
or restrictions thereof, including without limitation thereof, dividend rights,
conversion rights, redemption privileges and liquidation preferences, as shall
be stated and expressed in such resolutions, all to the full extent now or
hereafter permitted by Chapter 156B of the Massachusetts General Laws. Without
limiting the generality of the foregoing, the resolutions providing for issuance
of any series of Preferred Stock may provide that such series shall be superior
or rank equally or be junior to the Preferred Stock of any other series to the
extent permitted by law. No vote of the holders of the Preferred Stock or Common
Stock shall be a prerequisite to the issuance of any shares of any series of the
Preferred Stock authorized by and complying with the conditions of the Articles
of Organization, the right to have such vote being expressly waived by all
present and future holders of the capital stock of the corporation.
-2-
<PAGE>
ATTACHMENT 6
Other lawful provisions, if any, for the conduct and regulation of the business
and affairs of the corporation, for its voluntary dissolution, or for limiting,
defining, or regulating the powers of the corporation, or of its directors or
stockholders, or of any class of stockholders:
6A. LIMITATION OF DIRECTOR LIABILITY.
Except to the extent that Chapter 156B of the Massachusetts General Laws
prohibits the elimination or limitation of liability of directors for breaches
of fiduciary duty, no director of the corporation shall be personally liable to
the corporation or its stockholders for monetary damages for any breach of
fiduciary duty as a director, notwithstanding any provision of law imposing such
liability. No amendment to or repeal of this provision shall apply to or have
any effect on the liability or alleged liability of any director of the
corporation for or with respect to any acts or omissions of such director
occurring prior to such amendment.
6B. INDEMNIFICATION.
1. The corporation shall, to the fullest extent permitted by the
applicable provisions of Chapter 156B of the Massachusetts General Laws, as
amended from time to time, indemnify each 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, by
reason of the fact that he is or was, or has agreed to become, a director or
officer of the corporation, or is or was serving, or has agreed to serve, at the
request of the corporation, as a director or officer of, or in a similar
capacity with, another organization or in any capacity with respect to any
employee benefit plan of the corporation (all such persons being referred to
hereafter as an "Indemnitee"), or by reason of any action alleged to have been
taken or omitted in such capacity, against all expenses (including attorneys'
fees), judgments, fines, penalties and amounts paid in settlement incurred by or
on behalf of an Indemnitee in connection with such action, suit or proceeding
and any appeal therefrom, unless such Indemnitee shall be finally adjudicated in
such action, suit or proceeding not to have acted in good faith in the
reasonable belief that his action was in the best interests of the corporation
or, to the extent such matter relates to service with respect to an employee
benefit plan, in the best interests of the participants or beneficiaries of such
employee benefit plan.
2. Notwithstanding the provisions of Section 1 of this Article, in the
event that a pending or threatened action, suit or proceeding is compromised or
settled in a manner which imposes any liability or obligation upon an Indemnitee
in a matter for which such Indemnitee would otherwise be entitled to
indemnification hereunder, no indemnification
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<PAGE>
shall be provided to such Indemnitee with respect to such matter if it is
determined that such Indemnitee did not act in good faith in the reasonable
belief that his action was in the best interests of the corporation or, to the
extent such matter relates to service with respect to an employee benefit plan,
in the best interests of the participants or beneficiaries of such employee
benefit plan.
3. As a condition precedent to his right to be indemnified, the Indemnitee
must notify the corporation in writing as soon as practicable of any action,
suit, proceeding or investigation involving him for which indemnity will or
could be sought. With respect to any action, suit, proceeding or investigation
of which the corporation is so notified, the corporation will be entitled to
participate therein at its own expense and/or to assume, with legal counsel
reasonably acceptable to the Indemnitee, the defense thereof at its own expense.
4. In the event that the corporation does not assume the defense of any
action, suit, proceeding or investigation of which the corporation receives
notice under this Article, the corporation shall pay in advance of the final
disposition of such matter any expenses (including attorneys' fees) incurred by
an Indemnitee in defending a civil or criminal action, suit, proceeding or
investigation or any appeal therefrom; provided, however, that the payment of
such expenses incurred by an Indemnitee in advance of the final disposition of
such matter shall be made only upon receipt of an undertaking by or on behalf of
the Indemnitee to repay all amounts so advanced in the event that it shall
ultimately be determined that the Indemnitee is not entitled to be indemnified
by the corporation as authorized in this Article, which undertaking shall be
accepted without reference to the financial ability of the Indemnitee to make
such repayment; and further provided that no such advancement of expenses shall
be made if it is determined that the Indemnitee did not act in good faith in the
reasonable belief that his action was in the best interests of the corporation
or, to the extent such matter relates to service with respect to an employee
benefit plan, in the best interests of the participants or beneficiaries of such
employee benefit plan.
5. All determinations hereunder as to the entitlement of an Indemnitee to
indemnification or advancement of expenses shall be made by: (a) a majority vote
of a quorum of the directors of the corporation, (b) a majority vote of a quorum
of the outstanding shares of stock of all classes entitled to vote for
directors, voting as a single class, which quorum shall consist of stockholders
who are not at that time parties to the action, suit or proceeding in question,
(c) independent legal counsel (who may, to the extent permitted by law, be
regular legal counsel to the corporation), or (d) a court of competent
jurisdiction.
6. The corporation shall not indemnify an Indemnitee seeking
indemnification in connection with a proceeding (or part thereof) initiated by
such Indemnitee unless the
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<PAGE>
initiation thereof was approved by the Board of Directors of the corporation. In
addition, the corporation shall not indemnify any such Indemnitee to the extent
such Indemnitee is reimbursed from the proceeds of insurance, and, in the event
the corporation makes any indemnification payments to any such Indemnitee and
such Indemnitee is subsequently reimbursed from the proceeds of insurance, such
Indemnitee shall promptly refund such indemnification payments to the
corporation to the extent of such insurance reimbursement.
7. If Indemnitee is entitled to indemnification by the corporation for
some or a portion of the expenses, judgments, fines, penalties or amounts paid
in settlement actually and reasonably incurred by him or on his behalf, but not,
however, for the total amount thereof, the corporation shall nevertheless
indemnify Indemnitee for the portion of such expenses, judgments, fines,
penalties or amounts paid in settlement to which Indemnitee is entitled.
8. The corporation may maintain directors' and officers' liability
insurance.
9. The indemnification rights provided in this Article (i) shall not be
deemed exclusive of any other rights to which an Indemnitee may be entitled
under any law, agreement or vote of stockholders or directors or otherwise, and
(ii) shall inure to the benefit of the heirs, executors and administrators of
such Indemnitees. The corporation may, to the extent authorized from time to
time by its Board of Directors, grant indemnification rights to other employees
or agents of the corporation or other persons serving the corporation and such
rights may be equivalent to, or greater or less than, those set forth in this
Article.
6C. OTHER PROVISIONS.
1. The directors may make, amend, or repeal the by-laws in whole or in
part, except with respect to any provision of such by-laws which by law or these
Articles or the by-laws requires action by the stockholders.
2. Meetings of the stockholders of the corporation may be held anywhere in
the United States.
3. The corporation shall have the power to be a partner in any business
enterprise which this corporation would have the power to conduct by itself.
4. The corporation, by vote of a majority of the stock outstanding and
entitled to vote thereon (or if there are two or more classes of stock entitled
to vote as separate classes, then by vote of a majority of each such class of
stock outstanding), may (i) authorize any amendment to its Articles of
Organization pursuant to Section 71 of Chapter 156B of the Massachusetts General
Laws, as amended from time to time,
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<PAGE>
(ii) authorize the sale, lease or exchange of all or substantially all of its
property and assets, including its goodwill, pursuant to Section 75 of Chapter
156B of the Massachusetts General Laws, as amended from time to time, and (iii)
approve an agreement of merger or consolidation pursuant to Section 78 of
Chapter 156B of the Massachusetts General Laws, as amended from time to time.
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<PAGE>
ATTACHMENT 8
President and Chief Executive Officer: Michael D. Parry
5 Pocumtuck Drive
South Deerfield, MA 01373
Senior Vice President of Finance, Chief
Financial Officer, Clerk and Treasurer: Robert R. Spellman
89 Far Reach Road
Westwood, MA 02090
Directors: Theodore J. Forstmann
c/o Forstmann Little & Co.
767 Fifth Avenue
New York, NY 10153
Nicholas C. Forstmann
c/o Forstmann Little & Co.
767 Fifth Avenue
New York, NY 10153
Steven B. Klinsky
c/o Forstmann Little & Co.
767 Fifth Avenue
New York, NY 10153
Sandra J. Horbach
c/o Forstmann Little & Co.
767 Fifth Avenue
New York, NY 10153
Michael S. Ovitz
c/o Artists Management Group
9465 Wilshire Blvd., Suite 519
Beverly Hills, CA 90212
Emily Woods
c/o J.Crew Group, Inc.
770 Broadway
New York, NY 10003
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<PAGE>
Ronald L. Sargent
c/o Staples, Inc.
One Research Drive
Westborough, MA 01581
Michael D. Parry
5 Pocumtuck Drive
South Deerfield, MA 01373
Michael J. Kittredge
113 Juggler Meadow Road
Amherst, MA 01002
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<PAGE>
Exhibit 3.2
AMENDED AND RESTATED
BY-LAWS
OF
THE YANKEE CANDLE COMPANY, INC.
<PAGE>
Amended and Restated By-Laws
Table of Contents
Page
ARTICLE 1 - Stockholders......................................................1
1.1 Place of Meetings.............................................1
1.2 Annual Meeting................................................1
1.3 Special Meetings..............................................1
1.4 Notice of Meetings............................................3
1.5 Quorum........................................................3
1.6 Adjournments..................................................3
1.7 Voting and Proxies............................................4
1.8 Action at Meeting.............................................4
1.9 Action without Meeting........................................4
1.10 Nomination of Directors.......................................4
1.11 Notice of Business at Meetings................................5
ARTICLE 2 - Directors.........................................................6
2.1 Powers........................................................6
2.2 Number, Election and Qualification............................7
2.3 Enlargement of the Board......................................7
2.4 Tenure........................................................8
2.5 Vacancies.....................................................8
2.6 Resignation...................................................8
2.7 Removal.......................................................8
2.8 Regular Meetings..............................................9
2.9 Special Meetings..............................................9
2.10 Meetings by Telephone Conference Calls........................9
2.11 Notice of Special Meetings....................................9
2.12 Quorum........................................................9
2.13 Action at Meeting.............................................9
2.14 Action by Consent.............................................10
2.15 Committees....................................................10
2.16 Compensation of Directors.....................................10
ARTICLE 3 - Officers..........................................................10
3.1 Enumeration...................................................10
3.2 Election......................................................10
3.3 Qualification.................................................10
3.4 Tenure........................................................11
3.5 Resignation and Removal.......................................11
3.6 Vacancies.....................................................11
3.7 Chairman of the Board and Vice-Chairman of the Board..........11
3.8 President.....................................................12
3.9 Vice Presidents...............................................12
3.10 Treasurer and Assistant Treasurers............................12
3.11 Clerk and Assistant Clerks....................................12
3.12 Secretary and Assistant Secretaries...........................13
3.13 Salaries......................................................13
ARTICLE 4 - Capital Stock.....................................................13
4.1 Issue of Capital Stock........................................13
4.2 Certificate of Stock..........................................14
4.3 Transfers.....................................................14
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Page
----
4.4 Record Date...................................................14
4.5 Replacement of Certificates...................................15
ARTICLE 5 - Miscellaneous Provisions..........................................15
5.1 Fiscal Year...................................................15
5.2 Seal..........................................................15
5.3 Voting of Securities..........................................15
5.4 Corporate Records.............................................15
5.5 Evidence of Authority.........................................16
5.6 Articles of Organization......................................16
5.7 Severability..................................................16
5.8 Pronouns......................................................16
5.9 1987 Massachusetts Control Share Acquisition Act..............16
ARTICLE 6 - Amendments........................................................16
-ii-
<PAGE>
AMENDED AND RESTATED
B Y - L A W S
OF
THE YANKEE CANDLE COMPANY, INC.
ARTICLE 1 - Stockholders
1.1 Place of Meetings. All meetings of stockholders shall be held within
the Commonwealth of Massachusetts unless the Articles of Organization permit the
holding of stockholders' meetings outside Massachusetts, in which event such
meetings may be held either within or without Massachusetts. Meetings of
stockholders shall be held at the principal office of the corporation unless a
different place is fixed by the Board of Directors or the President and stated
in the notice of the meeting.
1.2 Annual Meeting. The annual meeting of stockholders shall be held
within six months after the end of each fiscal year of the corporation on a date
to be fixed by the Board of Directors or the President (which date shall not be
a legal holiday in the place where the meeting is to be held) at the time and
place to be fixed by the Board of Directors or the President and stated in the
notice of the meeting. The purposes for which the annual meeting is to be held,
in addition to those prescribed by law, by the Articles of Organization or by
these By-Laws, may be specified by the Board of Directors or the President. If
no annual meeting is held in accordance with the foregoing provisions, a special
meeting may be held in lieu of the annual meeting, and any action taken at that
special meeting shall have the same effect as if it had been taken at the annual
meeting, and in such case all references in these By-Laws to the annual meeting
of stockholders shall be deemed to refer to such special meeting.
1.3 Special Meetings. Special meetings of stockholders may be called by
the President or by the Board of Directors. In addition, upon written
application of one or more stockholders who are entitled to vote and who hold at
least the Required Percentage (as defined below) of the capital stock entitled
to vote at the meeting, special meetings shall be called by the Clerk, or in
case of the death, absence, incapacity or refusal of the Clerk, by any other
officer.
For purposes of this Section 1.3, the "Required Percentage" shall be (i)
10% at any time at which the corporation shall not have a class of voting stock
registered under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and (ii) 50% or such
<PAGE>
lesser percentage as shall constitute the maximum percentage permitted by law
for this purpose at any time at which the corporation shall have a class of
voting stock registered under the Exchange Act.
Any request for a call of a special meeting of stockholders (a "Call") by
the holders of the Required Percentage of the capital stock entitled to vote at
the meeting (the "Voting Stock") shall be governed by and subject to the
following:
(a) Any stockholder of record seeking to solicit requests for a Call
pursuant to this Section 1.3 shall so notify the Clerk of the corporation in
writing, and such written notification shall set forth the reason or reasons for
the Call and the purpose or purposes of such special meeting.
(b) No solicitation of stockholder requests for a Call (a "Call
Solicitation") may be commenced (i) before the Call Request Record Date (as
defined in paragraph (c) of this Section 1.3), or (ii) during the period of 90
days following the most recent meeting of the stockholders of the corporation.
(c) In order that the corporation may determine the stockholders
entitled to request a Call, the Board of Directors of the corporation shall fix
a record date (the "Call Request Record Date"). Any stockholder of record
seeking to solicit stockholder requests for a Call shall, with delivery to the
corporation of the written information specified in paragraph (a) of this
Section 1.3, request in writing that the Board of Directors fix the Call Request
Record Date. The Board of Directors shall, within 10 days after the date on
which such request is received, adopt a resolution fixing the Call Request
Record Date, and such Call Request Record Date shall be not more than 10 days
after the date upon which such resolution is adopted by the Board of Directors.
(d) All requests for a Call and revocations thereof shall be
delivered to the Clerk of the corporation no later than the 30th day (the
"Delivery Date") after the Call Request Record Date.
(e) Any stockholder may revoke a prior request for a Call or
opposition to a Call by an instrument in writing delivered to the Clerk of the
corporation prior to the Delivery Date.
(f) Promptly after the Delivery Date, requests for a Call and
revocations thereof shall be counted and verified by an independent party
selected by the corporation.
(g) If, in response to any Call Solicitation, the holders of record
of the Required Percentage of the Voting Stock as of the Call Request Record
Date submit valid and unrevoked requests for a Call no later than the Delivery
Date, the Board of Directors of the corporation shall fix a record date pursuant
to Section 4.4 hereof and a
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<PAGE>
date for the special meeting, provided that the date to be fixed for such
meeting shall be no earlier than 60 days or later than 90 days after the
Delivery Date, and provided further that the Board of Directors shall not be
obligated to fix a meeting date or to hold any meeting of stockholders within 60
days of the next scheduled meeting of the stockholders of the corporation.
(h) In the absence of a quorum at any special meeting called
pursuant to a Call Solicitation, such special meeting may be postponed or
adjourned from time to time only by the officer of the corporation entitled to
preside at such meeting.
(i) If a Call Solicitation does not receive the support of the
holders of record of the Required Percentage of the Voting Stock, no subsequent
Call may be made or solicited by any stockholder during a period of 90 days
after the Delivery Date.
1.4 Notice of Meetings. A written notice of each meeting of stockholders,
stating the place, date and hour thereof, and the purposes for which the meeting
is to be held, shall be given by the Clerk, Assistant Clerk or other person
calling the meeting at least seven days before the meeting to each stockholder
entitled to vote at the meeting and to each stockholder who by law, by the
Articles of Organization or by these By-Laws is entitled to such notice, by
leaving such notice with him or at his residence or usual place of business, or
by mailing it postage prepaid and addressed to him at his address as it appears
in the records of the corporation. Whenever any notice is required to be given
to a stockholder by law, by the Articles of Organization or by these By-Laws, no
such notice need be given if a written waiver of notice, executed before or
after the meeting by the stockholder or his authorized attorney, is filed with
the records of the meeting.
1.5 Quorum. Unless the Articles of Organization otherwise provide, the
holders of a majority of the number of shares of the stock issued, outstanding
and entitled to vote on any matter shall constitute a quorum with respect to
that matter, except that if two or more classes of stock are outstanding and
entitled to vote as separate classes, then in the case of each such class a
quorum shall consist of the holders of a majority of the number of shares of the
stock of that class issued, outstanding and entitled to vote. Shares owned
directly or indirectly by the corporation shall not be counted in determining
the total number of shares outstanding for this purpose.
1.6 Adjournments. Except as provided in Section 1.3 hereof, any meeting of
stockholders may be postponed or adjourned to any other time and to any other
place at which a meeting of stockholders may be held under these By-Laws by the
stockholders present or represented at the meeting, although less than a quorum,
or by any officer entitled to preside or to act as clerk of such meeting, if no
stockholder is present. It shall not be necessary to notify any stockholder of
any postponement or adjournment. Any business which could have been transacted
at any meeting of the
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<PAGE>
stockholders as originally called may be transacted at any resumption or
adjournment of the meeting.
1.7 Voting and Proxies. Each stockholder shall have one vote for each
share of stock entitled to vote held of record by such stockholder and a
proportionate vote for each fractional share so held, unless otherwise provided
by the Articles of Organization. Stockholders may vote either in person or by
written proxy dated not more than six months before the meeting named in the
proxy. Proxies shall be filed with the clerk of the meeting, or of any adjourned
meeting, before being voted. Except as otherwise limited by its terms, a proxy
shall entitle the persons named in the proxy to vote at any adjournment of such
meeting, but shall not be valid after final adjournment of such meeting. A proxy
with respect to stock held in the name of two or more persons shall be valid if
executed by any one of them, unless at or prior to exercise of the proxy the
corporation receives a specific written notice to the contrary from any one of
them. A proxy purported to be executed by or on behalf of a stockholder shall be
deemed valid unless challenged at or prior to its exercise.
1.8 Action at Meeting. When a quorum is present at any meeting, the
holders of shares of stock representing a majority of the votes cast on a matter
(or if there are two or more classes of stock entitled to vote as separate
classes, then in the case of each such class, the holders of shares of stock of
that class representing a majority of the votes cast on a matter), shall decide
any matter to be voted on by the stockholders, except when a different vote is
required by law, the Articles of Organization or these By-Laws. When a quorum is
present at any meeting, any election by stockholders shall be determined by a
plurality of the votes cast on the election. No ballot shall be required for
such election unless requested by a stockholder present or represented at the
meeting and entitled to vote in the election. The corporation shall not directly
or indirectly vote any share of its own stock.
1.9 Action without Meeting. Any action required or permitted to be taken
at any meeting of the stockholders may be taken without a meeting if all
stockholders entitled to vote on the matter consent to the action in writing and
the written consents are filed with the records of the meetings of stockholders.
Each such consent shall be treated for all purposes as a vote at a meeting.
1.10 Nomination of Directors. Only persons who are nominated in accordance
with the following procedures shall be eligible for election as directors.
Nomination for election to the board of directors of the corporation at an
annual meeting of stockholders may be made by the board of directors or by any
stockholder of the corporation entitled to vote for the election of directors at
such meeting who complies with the notice procedures set forth in this Section
1.10. Such nominations, other than those made by or on behalf of the board of
directors, shall be made by notice, in writing delivered or mailed by first
class United States mail, postage prepaid, to the Clerk of the
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<PAGE>
corporation, and received not less than 45 days nor more 60 days prior to the
anniversary of the date on which the corporation first mailed its proxy
materials for the prior year's annual meeting of stockholders; provided,
however, that if the date of such annual meeting is more than 30 days before or
after the anniversary of the prior year's annual meeting, such nomination shall
have been mailed or delivered to the Clerk not later than the close of business
on the later of (i) the date 60 days prior to the date of such meeting or (ii)
the 10th day following the date on which the notice of the meeting was mailed or
public disclosure was made, whichever occurs first. Such notice shall set forth
(a) as to each proposed nominee (i) the name, age, business address and, if
known, residence address of each such nominee, (ii) the principal occupation or
employment of each such nominee, (iii) the number of shares of stock of the
corporation which are beneficially owned by each such nominee, and (iv) any
other information concerning the nominee that must be disclosed as to nominees
in proxy solicitations pursuant to Regulation 14a under the Securities Exchange
Act of 1934, as amended (including such person's written consent to be named as
a nominee and to serve as a director if elected); (b) as to the stockholder
giving the notice (i) the name and address, as they appear on the corporation's
books, of such stockholder, and (ii) the class and number of shares of the
corporation which are beneficially owned by such stockholder; and (c) as to the
beneficial owner, if any, on whose behalf the nomination is made, (i) the name
and address of such person and (ii) the class and number of shares of the
corporation which are beneficially owned by such person.
The officer presiding at the meeting of stockholders may, if the facts
warrant, determine and declare to the meeting that a nomination was not made in
accordance with the foregoing procedure, and if he should so determine, he shall
so declare to the meeting and the defective nomination shall be disregarded.
Nothing in the foregoing provisions shall obligate the corporation or the
board of directors to include in any proxy statement or other stockholder
communication distributed on behalf of the corporation or the board of directors
information with respect to any nominee for directors submitted by a
stockholder.
1.11 Notice of Business at Meetings. At a meeting of the stockholders,
only such business shall be conducted as shall have been (a) specified in the
notice of meeting (or any supplement thereto), (b) brought before the meeting by
or at the direction of the Board of Directors, or (c) otherwise properly brought
before the meeting by a stockholder. For business to be properly brought before
an annual meeting by a stockholder, if such business relates to the election of
directors of the corporation, the procedures in Section 1.10 must be complied
with. For business to be properly brought before a special meeting by a
stockholder, and for business other than the election of directors to be
properly brought before an annual meeting by a stockholder, the stockholder must
have given timely notice thereof in writing to the Clerk of the corporation. To
be timely with respect to a special meeting, a stockholder's notice must be
delivered to or mailed and received at the principal executive offices of
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<PAGE>
the corporation not less than 60 days nor more than 90 days prior to the special
meeting; provided, however, that if less than 70 days' notice or prior public
disclosure of the date of the special meeting is given or made to stockholders,
notice by the stockholder to be timely must be delivered or mailed to the Clerk
not later than the close of business on the 10th day following the date on which
the notice of the special meeting was mailed or public disclosure was made,
whichever occurs first. To be timely with respect to an annual meeting, a
stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the corporation not less than 45 days nor more 60
days prior to the anniversary of the date on which the corporation first mailed
its proxy materials for the prior year's annual meeting of stockholders;
provided, however, that if the date of such annual meeting is more than 30 days
before or after the anniversary of the prior year's annual meeting, such
stockholder's notice shall have been mailed or delivered to the Clerk not later
than the close of business on the later of (i) the date 60 days prior to the
date of such meeting or (ii) the 10th day following the date on which the notice
of the meeting was mailed or public disclosure was made, whichever occurs first.
A stockholder's notice to the Clerk shall set forth as to each matter the
stockholder proposes to bring before the meeting (a) a brief description of the
business desired to be brought before the meeting and the reasons for conducting
such business at the meeting, (b) the name and address, as they appear on the
corporation's books, of the stockholder proposing such business, and the name
and address of the beneficial owner, if any, on whose behalf the proposal is
made, (c) the class and number of shares of the corporation which are
beneficially owned by such stockholder and such person, if any, and (d) any
material interest of the stockholder, and such person, if any, in such business.
Notwithstanding anything in these by-laws to the contrary, no business shall be
conducted at any meeting of stockholders except in accordance with the
procedures set forth in this Section 1.11 and except that any stockholder
proposal which complies with Rule 14a-8 of the proxy rules (or any successor
provision) promulgated under the Securities Exchange Act of 1934, as amended,
and is to be included in the corporation's proxy statement for an annual meeting
of stockholders shall be deemed to comply with the requirements of this Section
1.11.
The officer presiding at a meeting of stockholders shall, if the facts
warrant, determine and declare to the meeting that business was not properly
brought before the meeting in accordance with the provisions of this Section
1.11, and if he should so determine, he shall so declare to the meeting that any
such business not properly brought before the meeting shall not be transacted.
ARTICLE 2 - Directors
2.1 Powers. The business of the corporation shall be managed by a Board of
Directors, who may exercise all the powers of the corporation except as
otherwise
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<PAGE>
provided by law, by the Articles of Organization or by these By-Laws. In the
event of a vacancy in the Board of Directors, the remaining Directors, except as
otherwise provided by law, may exercise the powers of the full Board until the
vacancy is filled.
2.2 Number, Election and Qualification. The number of Directors which
shall constitute the whole Board of Directors shall be determined by vote of the
stockholders or the Board of Directors, but shall consist of not less than three
Directors (except that whenever there shall be only two stockholders the number
of Directors shall be not less than two and whenever there shall be only one
stockholder or prior to the issuance of any stock, there shall be at least one
Director). The number of Directors may be decreased at any time and from time to
time either by the stockholders or by a majority of the Directors then in
office, but only to eliminate vacancies existing by reason of the death,
resignation, removal or expiration of the term of one or more Directors. The
Directors shall be elected at the annual meeting of stockholders by such
stockholders as have the right to vote on such election. No Director need be a
stockholder of the corporation.
Notwithstanding the foregoing provisions, if the corporation is a "registered
corporation" within the meaning of Section 50A of the Massachusetts Business
Corporation Law and has not elected, pursuant to paragraph (b) of such Section
50A, to be exempt from the provisions of paragraph (a) of such Section 50A,
then:
(i) In accordance with paragraph (d), clause (iv) of such Section 50A, the
number of directors shall be fixed only by vote of the Board of Directors.
(ii) In accordance with paragraph (a) of such Section 50A, the Directors
of the corporation shall be classified with respect to the time for which they
severally hold office, into three classes, as nearly equal in number as
possible; the term of office of those of the first class ("Class I Directors")
to continue until the first annual meeting following the date the corporation
becomes subject to such paragraph (a) and until their successors are elected and
qualified; the term of office of those of the second class ("Class II
Directors") to continue until the second annual meeting following the date the
corporation becomes subject to such paragraph (a) and until their successors are
elected and qualified; and the term of office of those of the third class
("Class III Directors") to continue until the third annual meeting following the
date the corporation becomes subject to such paragraph (a) and until their
successors are elected and qualified. At each annual meeting of the corporation,
the successors to the class of Directors whose term expires at that meeting
shall be elected to hold office for a term continuing until the annual meeting
held in the third year following the year of their election and until their
successors are duly elected and qualified.
2.3 Enlargement of the Board. The number of Directors may be increased at
any time and from time to time by the stockholders or by a majority of the
Directors then in office. Notwithstanding the foregoing provisions, if the
Directors of the
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corporation are classified with respect to the time for which they severally
hold office pursuant to paragraph (a) of Section 50A of the Massachusetts
Business Corporation Law, as it may be amended from time to time, the number of
Directors may be increased at any time and from time to time only by the Board
of Directors in accordance with paragraph (d), clause (iv) of such Section 50A.
2.4 Tenure. Each Director shall hold office until the next annual meeting
of stockholders and until his successor is elected and qualified, or until his
earlier death, resignation or removal. Notwithstanding the foregoing provisions,
if the Directors of the corporation are classified with respect to the time for
which they severally hold office pursuant to paragraph (a) of Section 50A of the
Massachusetts Business Corporation Law, as it may be amended from time to time,
any director elected in accordance with paragraph (d), clause (i) of such
Section 50A shall hold office in accordance with paragraph (d), clause (ii) of
Section 50A.
2.5 Vacancies. Unless and until filled by the stockholders, any vacancy in
the Board of Directors, however occurring, including a vacancy resulting from an
enlargement of the Board, may be filled by vote of a majority of the Directors
present at any meeting of Directors at which a quorum is present. Each such
successor shall hold office for the unexpired term of his predecessor and until
his successor is chosen and qualified or until his earlier death, resignation or
removal. Notwithstanding the foregoing provision, if the Directors of the
corporation are classified with respect to the time for which they severally
hold office pursuant to paragraph (a) of Section 50A of the Massachusetts
Business Corporation Law, as it may be amended from time to time, the filling of
any vacancy in the Board of Directors, however occurring, including a vacancy
resulting from an enlargement of the Board, and the term of office of the
director elected to fill such vacancy shall be governed by paragraph (d),
clauses (i) and (ii) of Section 50A.
2.6 Resignation. Any Director may resign by delivering his written
resignation to the corporation at its principal office or to the President or
Clerk. Such resignation shall be effective upon receipt unless it is specified
to be effective at some other time or upon the happening of some other event.
2.7 Removal. A Director may be removed from office with or without cause
by vote of the holders of a majority of the shares entitled to vote in the
election of Directors. Moreover, the Directors elected by the holders of a
particular class or series of stock may be removed from office with or without
cause only by vote of the holders of a majority of the outstanding shares of
such class or series. In addition, a Director may be removed from office for
cause by vote of a majority of the Directors then in office. A Director may be
removed for cause only after reasonable notice and opportunity to be heard
before the body proposing to remove him. Notwithstanding the foregoing
provisions, if the Directors of the corporation are classified with respect to
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the time for which they severally hold office pursuant to paragraph (a) of
Section 50A of the Massachusetts Business Corporation Law, as it may be amended
from time to time, the removal of Directors shall be governed by the provisions
of paragraph (c) of such Section 50A.
2.8 Regular Meetings. Regular meetings of the Directors may be held
without call or notice at such places, within or without Massachusetts, and at
such times as the Directors may from time to time determine, provided that any
Director who is absent when such determination is made shall be given notice of
the determination. A regular meeting of the Directors may be held without a call
or notice immediately after and at the same place as the annual meeting of
stockholders.
2.9 Special Meetings. Special meetings of the Directors may be held at any
time and place, within or without Massachusetts, designated in a call by the
Chairman of the Board, President, Treasurer, two or more Directors or by one
Director in the event that there is only a single Director in office.
2.10 Meetings by Telephone Conference Calls. Directors or members of any
committee designated by the Directors may participate in a meeting of the
Directors or such committee by means of a conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other at the same time and participation by such means
shall constitute presence in person at a meeting.
2.11 Notice of Special Meetings. Notice of any special meeting of the
Directors shall be given to each Director by the Secretary or Clerk or by the
officer or one of the Directors calling the meeting. Notice shall be duly given
to each Director (i) by notice given to such Director in person or by telephone
at least 48 hours in advance of the meeting, (ii) by sending a telegram,
telecopy or telex, or by delivering written notice by hand, to his last known
business or home address at least 48 hours in advance of the meeting, or (iii)
by mailing written notice to his last known business or home address at least 72
hours in advance of the meeting. Notice need not be given to any Director if a
written waiver of notice, executed by him before or after the meeting, is filed
with the records of the meeting, or to any Director who attends the meeting
without protesting prior to the meeting or at its commencement the lack of
notice to him. A notice or waiver of notice of a Directors' meeting need not
specify the purposes of the meeting. If notice is given in person or by
telephone, an affidavit of the Secretary, Clerk, officer or Director who gives
such notice that the notice has been duly given shall, in the absence of fraud,
be conclusive evidence that such notice was duly given.
2.12 Quorum. At any meeting of the Board of Directors, a majority of the
Directors then in office shall constitute a quorum. Less than a quorum may
adjourn any meeting from time to time without further notice.
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<PAGE>
2.13 Action at Meeting. At any meeting of the Board of Directors at which
a quorum is present, the vote of a majority of those present shall be sufficient
to take any action, unless a different vote is specified by law, by the Articles
of Organization or by these By-Laws.
2.14 Action by Consent. Any action required or permitted to be taken at
any meeting of the Board of Directors may be taken without a meeting if all the
Directors consent to the action in writing and the written consents are filed
with the records of the Directors' meetings. Each such consent shall be treated
for all purposes as a vote at a meeting.
2.15 Committees. The Board of Directors may, by vote of a majority of the
Directors then in office, elect from their number an executive committee or
other committees and may by like vote delegate to committees so elected some or
all of their powers to the extent permitted by law. Except as the Board of
Directors may otherwise determine, any such committee may make rules for the
conduct of its business, but unless otherwise provided by the Directors or in
such rules, its business shall be conducted as nearly as possible in the same
manner as is provided by these By-Laws for the Directors. The Board of Directors
shall have the power at any time to fill vacancies in any such committee, to
change its membership or to discharge the committee.
2.16 Compensation of Directors. Directors may be paid such compensation
for their services and such reimbursement for expenses of attendance at meetings
as the Board of Directors may from time to time determine. No such payment shall
preclude any Director from serving the corporation in any other capacity and
receiving compensation therefor.
ARTICLE 3 - Officers
3.1 Enumeration. The officers of the corporation shall consist of a
President, a Treasurer, a Clerk and such other officers with such other titles
as the Board of Directors may determine, including, but not limited to, Chairman
of the Board, a Vice Chairman of the Board, Chief Executive Officer, a Secretary
and one or more Vice Presidents, Assistant Treasurers, Assistant Clerks and
Assistant Secretaries.
3.2 Election. The Chief Executive Officer, President, Treasurer and Clerk
shall be elected annually by the Board of Directors at their first meeting
following the annual meeting of stockholders. Other officers may be chosen or
appointed by the Board of Directors at such meeting or at any other meeting.
3.3 Qualification. No officer need be a director or stockholder. Any two
or more offices may be held by the same person. The Clerk shall be a resident of
Massachusetts unless the corporation has a resident agent appointed for the
purpose of
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service of process. Any officer may be required by the Directors to give bond
for the faithful performance of his duties to the corporation in such amount and
with such sureties as the Directors may determine. The premiums for such bonds
may be paid by the corporation.
3.4 Tenure. Except as otherwise provided by law, by the Articles of
Organization or by these By-Laws, the President, Treasurer and Clerk shall hold
office until the first meeting of the Directors following the next annual
meeting of stockholders and until their respective successors are chosen and
qualified; and all other officers shall hold office until the first meeting of
the Directors following the annual meeting of stockholders, unless a different
term is specified in the vote choosing or appointing them, or until his earlier
death, resignation or removal.
3.5 Resignation and Removal. Any officer may resign by delivering his
written resignation to the corporation at its principal office or to the
President, Clerk or Secretary. Such resignation shall be effective upon receipt
unless it is specified to be effective at some other time or upon the happening
of some other event.
Any officer may be removed at any time, with or without cause, by vote of
a majority of the entire number of Directors then in office. An officer may be
removed for cause only after reasonable notice and opportunity to be heard by
the Board of Directors prior to action thereon.
Except as the Board of Directors may otherwise determine, no officer who
resigns or is removed shall have any right to any compensation as an officer for
any period following his resignation or removal, or any right to damages on
account of such removal, whether his compensation be by the month or the year or
otherwise, unless such compensation is expressly provided in a duly authorized
written agreement with the corporation.
3.6 Vacancies. The Board of Directors may fill any vacancy occurring in
any office for any reason and may, in its discretion, leave unfilled for such
period as it may determine any offices other than those of President, Treasurer
and Clerk. Each such successor shall hold office for the unexpired term of his
predecessor and until his successor is chosen and qualified, or until he sooner
dies, resigns or is removed.
3.7 Chairman of the Board and Vice-Chairman of the Board. The Board of
Directors may appoint a Chairman of the Board and may designate him as Chief
Executive Officer. If the Board of Directors appoints a Chairman of the Board,
he shall perform such duties and possess such powers as are assigned to him by
the Board of Directors. If the Board of Directors appoints a Vice-Chairman of
the Board, he shall, in the absence or disability of the Chairman of the Board,
perform the duties and exercise the powers of the Chairman of the Board and
shall perform such other duties and
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possess such other powers as may from time to time be vested in him by the Board
of Directors.
3.8 President. The President shall, subject to the direction of the Board
of Directors, have general charge and supervision of the business of the
corporation. Unless otherwise provided by the Board of Directors, he shall
preside at all meetings of the stockholders and, if he is a Director, at all
meetings of the Board of Directors. Unless the Board of Directors has designated
the Chairman of the Board or another officer as Chief Executive Officer, the
President shall be the Chief Executive Officer of the corporation. The President
shall perform such other duties and shall possess such other powers as the Board
of Directors may from time to time prescribe.
3.9 Vice Presidents. Any Vice President shall perform such duties and
possess such powers as the Board of Directors, the Chief Executive Officer or
the President may from time to time prescribe. In the event of the absence,
inability or refusal to act of the President, the Vice President (or if there
shall be more than one, the Vice Presidents in the order determined by the Board
of Directors) shall perform the duties of the President and when so performing
shall have all the powers of and be subject to all the restrictions upon the
President. The Board of Directors may assign to any Vice President the title of
Executive Vice President, Senior Vice President or any other title selected by
the Board of Directors.
3.10 Treasurer and Assistant Treasurers. The Treasurer shall perform such
duties and shall have such powers as may from time to time be assigned to him by
the Board of Directors, the Chief Executive Officer or the President. In
addition, the Treasurer shall perform such duties and have such powers as are
incident to the office of treasurer, including without limitation the duty and
power to keep and be responsible for all funds and securities of the
corporation, to deposit funds of the corporation in depositories selected in
accordance with these By-Laws, to disburse such funds as ordered by the Board of
Directors, to make proper accounts of such funds, and to render as required by
the Board of Directors statements of all such transactions and of the financial
condition of the corporation.
The Assistant Treasurers shall perform such duties and possess such powers
as the Board of Directors, the Chief Executive Officer, the President or the
Treasurer may from time to time prescribe. In the event of the absence,
inability or refusal to act of the Treasurer, the Assistant Treasurer (or if
there shall be more than one, the Assistant Treasurers in the order determined
by the Board of Directors) shall perform the duties and exercise the powers of
the Treasurer.
3.11 Clerk and Assistant Clerks. The Clerk shall perform such duties and
shall possess such powers as the Board of Directors, the Chief Executive Officer
or the President may from time to time prescribe. In addition, the Clerk shall
perform such duties and have such powers as are incident to the office of the
clerk, including without
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limitation the duty and power to give notices of all meetings of stockholders
and special meetings of the Board of Directors, to attend all meetings of
stockholders and the Board of Directors and keep a record of the proceedings, to
maintain a stock ledger and prepare lists of stockholders and their addresses as
required, to be custodian of corporate records and the corporate seal and to
affix and attest to the same on documents.
Any Assistant Clerk shall perform such duties and possess such powers as
the Board of Directors, the Chief Executive Officer, the President or the Clerk
may from time to time prescribe. In the event of the absence, inability or
refusal to act of the Clerk, the Assistant Clerk (or if there shall be more than
one, the Assistant Clerks in the order determined by the Board of Directors)
shall perform the duties and exercise the powers of the Clerk.
In the absence of the Clerk or any Assistant Clerk at any meeting of
stockholders or Directors, the person presiding at meeting shall designate a
temporary clerk to keep a record of the meeting.
3.12 Secretary and Assistant Secretaries. If a Secretary is appointed, he
shall attend all meetings of the Board of Directors and shall keep a record of
the meetings of the Directors. He shall, when required, notify the Directors of
their meetings, and shall possess such other powers and shall perform such other
duties as the Board of Directors, the Chief Executive Officer or the President
may from time to time prescribe.
Any Assistant Secretary shall perform such duties and possess such powers
as the Board of Directors, the Chief Executive Officer, the President or the
Secretary may from time to time prescribe. In the event of the absence,
inability or refusal to act of the Secretary, the Assistant Secretary (or if
there shall be more than one, the Assistant Secretaries in the order determined
by the Board of Directors) shall perform the duties and exercise the powers of
the Secretary.
3.13 Salaries. Officers of the corporation shall be entitled to such
salaries, compensation or reimbursement as shall be fixed or allowed from time
to time by the Board of Directors.
ARTICLE 4 - Capital Stock
4.1 Issue of Capital Stock. Unless otherwise voted by the stockholders,
the whole or any part of any unissued balance of the authorized capital stock of
the corporation or the whole or any part of the capital stock of the corporation
held in its treasury may be issued or disposed of by vote of the Board of
Directors, in such manner, for such consideration and on such terms as the
Directors may determine.
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<PAGE>
4.2 Certificate of Stock. Each stockholder shall be entitled to a
certificate of the capital stock of the corporation in such form as may be
prescribed from time to time by the Directors. The certificate shall be signed
by the Chairman of the Board, the President or a Vice President, and by the
Treasurer or an Assistant Treasurer, but when a certificate is countersigned by
a transfer agent or a registrar, other than a Director, officer or employee of
the corporation, such signature may be a facsimile. In case any officer who has
signed or whose facsimile signature has been placed upon such certificate shall
have ceased to be such officer before such certificate is issued, it may be
issued by the corporation with the same effect as if he were such officer at the
time of its issue.
Every certificate for shares of stock which are subject to any restriction
on transfer pursuant to the Articles of Organization, the By-Laws, applicable
securities laws or any agreement to which the corporation is a party, shall have
conspicuously noted on the face or back of the certificate either the full text
of the restriction or a statement of the existence of such restrictions and a
statement that the corporation will furnish a copy of the restrictions to the
holder of such certificate upon written request and without charge. Every
certificate issued when the corporation is authorized to issue more than one
class or series of stock shall set forth on its face or back either the full
text of the preferences, voting powers, qualifications and special and relative
rights of the shares of each class and series authorized to be issued or a
statement of the existence of such preferences, powers, qualifications and
rights and a statement that the corporation will furnish a copy thereof to the
holder of such certificate upon written request and without charge.
4.3 Transfers. Subject to the restrictions, if any, stated or noted on the
stock certificates, shares of stock may be transferred on the books of the
corporation by the surrender to the corporation or its transfer agent of the
certificate representing such shares properly endorsed or accompanied by a
written assignment or power of attorney properly executed, and with such proof
of authority or the authenticity of signature as the corporation or its transfer
agent may reasonably require. Except as may be otherwise required by law, by the
Articles of Organization or by these By-Laws, the corporation shall be entitled
to treat the record holder of stock as shown on its books as the owner of such
stock for all purposes, including the payment of dividends and the right to vote
with respect thereto, regardless of any transfer, pledge or other disposition of
such stock until the shares have been transferred on the books of the
corporation in accordance with the requirements of these By-Laws.
It shall be the duty of each stockholder to notify the corporation of his
post office address and of his taxpayer identification number.
4.4 Record Date. The Board of Directors may fix in advance a time not more
than 60 days preceding the date of any meeting of stockholders or the date for
the payment of any dividend or the making of any distribution to stockholders or
the last
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day on which the consent or dissent of stockholders may be effectively expressed
for any purpose, as the record date for determining the stockholders having the
right to notice of and to vote at such meeting, and any adjournment, or the
right to receive such dividend or distribution or the right to give such consent
or dissent. In such case only stockholders of record on such record date shall
have such right, notwithstanding any transfer of stock on the books of the
corporation after the record date. Without fixing such record date the Directors
may for any of such purposes close the transfer books for all or any part of
such period.
If no record date is fixed and the transfer books are not closed, the
record date for determining the stockholders having the right to notice of or to
vote at a meeting of stockholders shall be at the close of business on the day
before the day on which notice is given, and the record date for determining the
stockholders for any other purpose shall be at the close of business on the day
on which the Board of Directors acts with respect to such purpose.
4.5 Replacement of Certificates. In case of the alleged loss or
destruction or the mutilation of a certificate of stock, a duplicate certificate
may be issued in place of the lost, destroyed or mutilated certificate, upon
such terms as the Directors may prescribe, including the presentation of
reasonable evidence of such loss, destruction or mutilation and the giving of
such indemnity as the Directors may require for the protection of the
corporation or any transfer agent or registrar.
ARTICLE 5 - Miscellaneous Provisions
5.1 Fiscal Year. Except as otherwise set forth in the Articles of
Organization or as otherwise determined from time to time by the Board of
Directors, the fiscal year of the corporation shall end on the Saturday
nearest to December 31 in each year.
5.2 Seal. The seal of the corporation shall, subject to alteration by the
Directors, bear its name, the word "Massachusetts" and the year of its
incorporation.
5.3 Voting of Securities. Except as the Board of Directors may otherwise
designate, the Chief Executive Officer, President or Treasurer may waive notice
of, and act as, or appoint any person or persons to act as, proxy or
attorney-in-fact for this corporation (with or without power of substitution)
at, any meeting of stockholders or shareholders of any other corporation or
organization, the securities of which may be held by this corporation.
5.4 Corporate Records. The original, or attested copies, of the Articles
of Organization, By-Laws and records of all meetings of the incorporators and
stockholders, and the stock records, which shall contain the names of all
stockholders
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and the record address and the amount of stock held by each, shall be kept in
Massachusetts at the principal office of the corporation, or at an office of its
transfer agent or of the Clerk. These copies and records need not all be kept in
the same office. They shall be available at all reasonable times for the
inspection of any stockholder for any proper purpose, but not to secure a list
of stockholders for the purpose of selling the list or copies of the list or of
using the list for a purpose other than in the interest of the applicant, as a
stockholder, relative to the affairs of the corporation.
5.5 Evidence of Authority. A certificate by the Clerk or Secretary, or an
Assistant Clerk or Assistant Secretary, or a temporary Clerk or temporary
Secretary, as to any action taken by the stockholders, Directors, any committee
or any officer or representative of the corporation shall as to all persons who
rely on the certificate in good faith be conclusive evidence of such action.
5.6 Articles of Organization. All references in these By-Laws to the
Articles of Organization shall be deemed to refer to the Articles of
Organization of the corporation, as amended and in effect from time to time.
5.7 Severability. Any determination that any provision of these By-Laws is
for any reason inapplicable, illegal or ineffective shall not affect or
invalidate any other provision of these By-Laws.
5.8 Pronouns. All pronouns used in these By-Laws shall be deemed to refer
to the masculine, feminine or neuter, singular or plural, as the identity of the
person or persons may require.
5.9 1987 Massachusetts Control Share Acquisition Act. The 1987
Massachusetts Control Share Acquisition Act, Chapter 110D of the Massachusetts
General Laws, as it may be amended from time to time, shall not apply to the
corporation.
ARTICLE 6 - Amendments
These By-Laws may be amended by vote of the holders of a majority of the
shares of each class of the capital stock at the time outstanding and entitled
to vote at any annual or special meeting of stockholders, if notice of the
substance of the proposed amendment is stated in the notice of such meeting. If
authorized by the Articles of Organization, the Directors, by a majority of
their number then in office, may also make, amend or repeal these By-Laws, in
whole or in part, except with respect to (a) the provisions of these By-Laws
governing (i) the removal of Directors and (ii) the amendment of these By-Laws,
and (b) any provision of these By-Laws which by law, the Articles of
Organization or these By-Laws requires action by the stockholders.
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Not later than the time of giving notice of the meeting of stockholders
next following the making, amending or repealing by the Directors of any By-Law,
notice stating the substance of such change shall be given to all stockholders
entitled to vote on amending the By-Laws.
Any By-Law adopted by the Directors may be amended or repealed by the
stockholders entitled to vote on amending the By-Laws.
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<PAGE>
TEMPORARY CERTIFICATE-EXCHANGEABLE FOR DEFINITIVE ENGRAVED CERTIFICATE WHEN
READY FOR DELIVERY
COMMON STOCK
YC
THE YANKEE CANDLE COMPANY, INC.
INCORPORATED UNDER THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS
SEE REVERSE FOR
CERTAIN DEFINITIONS
CUSIP 984755 10 8
THIS CERTIFICATE MAY BE PRESENTED FOR
TRANSFER IN BOSTON, MA OR NEW YORK, NY
THIS CERTIFIES THAT
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE PAR VALUE OF $.01 EACH OF THE COMMON
STOCK OF
THE YANKEE CANDLE COMPANY, INC.
transferable on the books of the Corporation by the holder hereof in person or
by duly authorized attorney upon surrender of this certificate properly
endorsed.
This certificate is not valid unless countersigned and registered by the
Transfer Agent and Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.
Dated:
SECRETARY
PRESIDENT
Countersigned and Registered:
BankBoston, N.A.
Transfer Agent
and Registrar
By
Authorized Signature.
<PAGE>
THE YANKEE CANDLE COMPANY, INC.
THE CORPORATION IS AUTHORIZED TO ISSUE MORE THAN ONE CLASS AND SERIES OF STOCK.
THE CORPORATION WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO REQUESTS
A COPY OF THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OR SERIES THEREOF, WHICH
THE CORPORATION IS AUTHORIZED TO ISSUE, AND THE QUALIFICATIONS, LIMITATIONS OR
RESTRICTIONS OF SUCH PREFERENCES AND/OR RIGHTS. ANY SUCH REQUEST MAY BE MADE TO
THE CORPORATION OR THE TRANSFER AGENT.
KEEP THIS CERTIFICATE IN A SAFE PLACE. IF IT IS LOST, STOLEN OR DESTROYED THE
COMPANY WILL REQUIRE A BOND OF INDEMNITY AS A CONDITION TO THE ISSUANCE OF A
REPLACEMENT CERTIFICATE.
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right
of survivorship and not as tenants
in common
UNIF GIFT MIN ACT- (Cust) Custodian (Minor)
under Uniform Gifts to Minors
Act
(State)
Additional abbreviations may also be used though not in the above list.
For value received, hereby sell, assign and
transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF
ASSIGNEE)
shares of the capital stock represented by the within Certificate, and do
hereby irrevocably constitute and appoint Attorney to transfer the
said stock on the books of the within named Corporation with full power of
substitution in the premises.
Dated
<PAGE>
NOTICE:
THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON
THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATSOEVER.
Signature(s) Guaranteed:
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO
S.E.C. RULE 17Ad-15.
<PAGE>
Exhibit 5.1
[LETTERHEAD OF HALE AND DORR LLP]
Counsellors at Law
60 State Street, Boston, Massachusetts 02109
617-526-6000 - fax 617-526-5000
May 20, 1999
The Yankee Candle Company, Inc.
102 Christian Lane
Whatley, MA 01093
Re: Registration Statement on Form S-1
----------------------------------
Ladies and Gentlemen:
This opinion is furnished to you in connection with a Registration
Statement on Form S-1 (File No. 333-76397) (the "Registration Statement") filed
with the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "Securities Act"), for the registration
of shares of Common Stock, $.01 par value per share, having an aggregate value
of $200,000,000 (the "Shares"), of The Yankee Candle Company, Inc., a
Massachusetts corporation (the "Company"), of which (i) Shares having an
aggregate value of up to $200,000,000 will be issued and sold by the Company and
(ii) Shares having an aggregate value of up to $200,000,000 (including Shares
issuable upon exercise of an over-allotment option granted to the Underwriters)
will be sold by certain stockholders of the Company (the "Selling
Stockholders").
The Shares are to be sold by the Company and the Selling Stockholders
pursuant to an underwriting agreement (the "Underwriting Agreement") to be
entered into by and among the Company, the Selling Stockholders and Morgan
Stanley Dean Witter, Goldman, Sachs & Co. and Merrill Lynch & Co., as
representatives of the several underwriters named in the Underwriting Agreement,
the form of which has been filed as Exhibit 1.1 to the Registration Statement.
We are acting as special counsel for the Company in connection with the
sale by the Company and the Selling Stockholders of the Shares. We have examined
signed copies of the Registration Statement as filed with the Commission. We
have also examined and relied upon the Underwriting Agreement, minutes of
meetings of the stockholders and the Board of Directors of the Company as
provided to us by the Company, stock record books of the Company as provided to
us by the Company, an opinion of the Company's general counsel, the Articles of
Organization and By-Laws of the Company, each as restated and/or amended to
date, and such other documents as we have deemed necessary for purposes of
rendering the opinions hereinafter set forth.
<PAGE>
The Yankee Candle Company, Inc.
May 20, 1999
Page 2
In our examination of the foregoing documents, we have assumed the
genuineness of all signatures, the authenticity of all documents submitted to us
as originals, the conformity to original documents of all documents submitted to
us as copies, the authenticity of the originals of such latter documents and the
legal competence of all signatories to such documents.
Our opinion in clause (ii) below, insofar as it relates to the Selling
Stockholders' shares being fully paid, is based solely on a certificate of the
Treasurer of the Company.
We express no opinion herein as to the laws of any state or
jurisdiction other than the state laws of the Commonwealth of Massachusetts and
the federal laws of the United States of America. To the extent that any other
laws govern the matters as to which we are opining herein, we have assumed that
such laws are identical to the state laws of the Commonwealth of Massachusetts,
and we are expressing no opinion herein as to whether such assumption is
reasonable or correct.
Based upon and subject to the foregoing, we are of the opinion that:
(i) upon the effectiveness of the Restated Articles of Organization of
the Company (the form of which has been filed as Exhibit 3.1 to the Registration
Statement) to be filed by the Company with the Massachusetts Secretary of State
and to take effect prior to the closing of the sale of the Shares pursuant to
the Registration Statement (the "Restated Articles"), the Shares to be issued
and sold by the Company will have been duly authorized for issuance and, when
such Shares are issued and paid for in accordance with the terms and conditions
of the Underwriting Agreement, such Shares will be validly issued, fully paid
and nonassessable; and
(ii) upon (A) the effectiveness of the Restated Articles, (B) the
consummation, to take place prior to the closing of the sale of the Shares
pursuant to the Registration Statement, of the share exchange transactions
contemplated by the Agreement and Plan of Reorganization between the Company and
Yankee Candle Holdings Corp. ("Holdings") and by the Share Exchange Agreement
between the Company and Michael J. Kittredge (the forms of which have been filed
as Exhibit 2.3 and Exhibit 2.4 to the Registration Statement) and (C) the
consummation, to take place prior to the closing of the sale of the Shares
pursuant to the Registration Statement, of the distribution of assets by
Holdings and exchange of stock options pursuant to the Plan of Dissolution and
Liquidation of Holdings (the form of which has been filed as Exhibit B to
Exhibit 2.3 to the Registration Statement), and (D) the issuance of shares of
Common Stock of the Company to certain Selling Stockholders in accordance with
the terms of stock options held by such Selling Stockholders, the Shares to be
sold by the Selling Stockholders will have been duly authorized and will be
validly issued, fully paid and nonassessable.
It is understood that this opinion is to be used only in connection
with the offer and sale of the Shares while the Registration Statement is in
effect.
Please note that we are opining only as to the matters expressly set
forth herein, and no
<PAGE>
The Yankee Candle Company, Inc.
May 20, 1999
Page 3
opinion should be inferred as to any other matters. This opinion is based upon
currently existing statutes, rules, regulations and judicial decisions, and we
disclaim any obligation to advise you of any change in any of these sources of
law or subsequent legal or factual developments which might affect any matters
or opinions set forth herein.
We hereby consent to the filing of this opinion with the Commission as
an exhibit to the Registration Statement in accordance with the requirements of
Item 601(b)(5) of Regulation S-K under the Securities Act and to the use of our
name therein and in the related Prospectus under the caption "Legal Matters." In
giving such consent, we do not hereby admit that we are in the category of
persons whose consent is required under Section 7 of the Securities Act or the
rules and regulations of the Commission.
Very truly yours,
/s/ Hale and Dorr LLP
HALE AND DORR LLP
<PAGE>
Exhibit 10.1
STOCK OPTION AGREEMENT (the "Agreement"), dated as of [_____], 1999
between The Yankee Candle Company, Inc., a Massachusetts corporation (together
with its successors, the "Company"), and < Director > (the "Optionee").
1. EXCHANGE OF OLD OPTIONS FOR NEW OPTIONS.
1.1 TERMS OF EXCHANGE. Pursuant to a Stock Option Agreement,
dated as of [________, 199_], between Yankee Candle Holdings Corp., a Delaware
corporation ("Holdings") and the Optionee (the "Old Stock Option Agreement"),
Holdings granted to the Optionee the right and option (the "Old Option") to
purchase all or any part of an aggregate of [____] whole shares of Class A
Common Stock, par value $0.01 per share, of Holdings. As a result of a
reorganization in connection with the initial public offering (the "Offering")
of shares of the Common Stock (as defined below) of the Company, effective upon
the closing of the Offering, the Old Option will be exchanged for a new option
of the Company as set forth below. Effective upon the closing of the Offering,
the Old Option and the Old Option Agreement will be of no further force and
effect, and the Optionee will have a new option (the "Option") to purchase all
or any part of an aggregate of [____] whole shares of Common Stock, par value
$.01 per share, of the Company (the "Common Stock") (such number being subject
to adjustment as provided in Section 8 hereof) on the terms and conditions set
forth in this Agreement. In consideration of the rights granted hereunder, the
Optionee waives any and all rights it may have under the Old Stock Option
Agreement, from and after the closing of the Offering.
1.2 NON-QUALIFIED OPTION. The Option is not intended to
qualify as an Incentive Stock Option within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended.
2. PURCHASE PRICE. The price at which the Optionee shall be entitled
to purchase shares of Common Stock upon the exercise of this Option shall be
[$______] per share (such price being subject to adjustment as provided in
Section 8 hereof) (the "Option Price").
3. DURATION OF OPTION. The Option shall be exercisable at any time
to the extent and in the manner provided herein for a period of 10 years from
the date of the grant of the Old Option; provided, however, that the Option may
be earlier terminated as provided in Section 4, Section 6, or Section 7 hereof.
4. EXERCISABILITY OF OPTION.
4.1 AMOUNT OF EXERCISE. Subject to the provisions of this
Agreement, the Option shall be exercisable in accordance with the following
schedule:
<PAGE>
(a) on or after [____________] but before [___________] the
Option may be exercised to acquire up to [___________] shares of
Common Stock which may be purchased pursuant to the Option as set
forth in Section 1.1 hereof, less any shares previously acquired
pursuant to the Option;
(b) on or after [__________] but before [_________] the Option
may be exercised to acquire up to [_________] shares of Common Stock
which may be purchased pursuant to the Option as set forth in
Section 1.1 hereof, less any shares previously acquired pursuant to
the Option;
(c) on or after [___________] but before the expiration of the
term of the Option, the Option may be exercised to acquire up to
100% of the aggregate number of shares of Common Stock which may be
purchased pursuant to the Option as set forth in Section 1.1 hereof,
less any shares previously acquired pursuant to the Option.
4.2 SALES OR OTHER EVENTS. The Company shall give the Optionee
10 days' notice (or, if not practicable, such shorter notice as may be
practicable) prior to the anticipated date of the consummation of a Total Sale
(as hereinafter defined) or the anticipated date of the consummation of a
Partial Sale (as hereinafter defined) (the "Sale Notice"). Upon receipt of the
Sale Notice, and for a period of five days thereafter (or such shorter period as
the Board of Directors of the Company shall determine and so notify the
Optionee), the Optionee shall be permitted to exercise the Option to the extent
provided in this Section 4.2, whether or not the Option was otherwise so
exercisable on the date the Sale Notice was given; provided, that, in the event
of a Total Sale or a Partial Sale in which the Optionee would be required to
participate pursuant to Section 2.3 or 2.4 of the Stockholder's Agreement
attached hereto as Exhibit A (the "Stockholder's Agreement") were the Optionee
then a party to such agreement, the Company may require the Optionee to exercise
the Option to the extent necessary to enable the Optionee to participate therein
or to forfeit the Option (or portion thereof, as applicable). In the case of a
Total Sale, the Option may be exercised in whole or in part for up to the full
amount of the shares of Common Stock covered thereby (less the number of shares
previously acquired by the Optionee upon exercise of the Option, if any). In the
case of a Partial Sale, the Option may be exercised in whole or in part, but not
for more than the excess, if any, of (a) the number of shares with respect to
which the Optionee would be entitled to participate in the Partial Sale pursuant
to Section 2.2 or 2.3, as applicable, of the Stockholder's
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Agreement (if the number of shares issuable pursuant to the unexercised portion
of the Option were deemed shares held by the Optionee), and will so participate,
over (b) the number of shares previously issued to the Optionee upon exercise of
the Option and not disposed of in a prior Partial Sale. In the event the Total
Sale or Partial Sale is not consummated, the Option will be deemed not to have
been exercised and shall be exercisable thereafter to the extent it would have
been exercisable if no such notice had been given. In lieu of permitting or
requiring the Optionee to exercise the Option in the event of a Total Sale, the
Board of Directors of the Company, in its sole discretion, may instead cause the
Company to redeem the unexercised portion of the Option pursuant to Section 7
hereof. In lieu of permitting the Optionee to exercise the Option in connection
with a public offering of all or a portion of the shares of Common Stock owned
by the FL & Co. Companies (an "FL Public Offering"), the Company, at its option,
may instead cause the Option and the underlying shares to be registered under
applicable securities laws or make other arrangements consistent with such laws,
so as to permit the Optionee to sell for a period of time after the FL Public
Offering the same number of shares that he or she would have been able to sell
in the FL Public Offering but for this sentence.
For purposes hereof, (a) the term "Total Sale" shall mean any
of the following events: (i) the merger or consolidation of the Company with or
into another corporation (other than a merger or consolidation in which the
Company is the surviving corporation and which does not result in any capital
reorganization or reclassification or other change of the then outstanding
shares of Common Stock), or (ii) the liquidation of the Company, or (iii) the
sale to any person who is not a partner or an affiliate of either of Forstmann
Little & Co. Equity Partnership-V, L.P., a Delaware limited partnership
("Equity-V"), or Forstmann Little & Co. Subordinated Debt and Equity Management
Buyout Partnership - VI, L.P., a Delaware limited partnership ("MBO-VI"),
(Equity-V and MBO-VI together, the "FL & Co. Companies") or an affiliate of such
partner (a "Third Party") of all or substantially all of the assets of the
Company pursuant to a plan of liquidation or otherwise, or (iv) the sale to a
Third Party of Common Stock (other than through a public offering); in each
case, provided that, as a result thereof, the FL & Co. Companies, the direct or
indirect partners of either of the FL & Co. Companies and any affiliates of any
of the foregoing cease to own, directly or indirectly, any shares of the voting
stock of the Company, and (b) the term "Partial Sale" shall mean any sale by the
FL & Co. Companies of all or a portion of their shares of Common Stock to a
Third Party, including through any public offering, which sale is not a Total
Sale.
4.3 TERMINATION OF OPTION. Subject to the provisions of
Section 7 hereof, the Option shall terminate simultaneously with the
consummation of a Total Sale to the extent that the Option has not theretofore
been exercised.
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4.4 EXERCISES UNDER MULTIPLE OPTION AGREEMENTS.
Notwithstanding anything herein to the contrary, if in connection with a Partial
Sale, the Optionee shall be entitled to acquire shares of Common Stock pursuant
to Section 4.2 hereof and pursuant to the analogous provisions of one or more
other stock option agreements between the Optionee and the Company (any such
agreement, including this Agreement, an "Option Agreement"), then the Company
shall have the right, at its option, to designate the Option Agreement or Option
Agreements pursuant to which the Optionee may exercise options for purposes of
the Optionee's participation in the Partial Sale, provided that in no event
shall any such determination reduce the aggregate number of shares that the
Optionee would otherwise be entitled to sell in connection with such Partial
Sale.
5. MANNER OF EXERCISE AND PAYMENT.
5.1 NOTICE OF EXERCISE. Subject to the terms and conditions of
this Agreement, the Option may be exercised by delivery of written notice to the
Company. Such notice shall state that the Optionee is electing to exercise the
Option, shall set forth the number of shares of Common Stock in respect of which
the Option is being exercised and shall be signed by the Optionee or, where
applicable, the guardian, executor, administrator or other legal representative
(each, a "Legal Representative") of the Optionee (all references herein to the
"Optionee" being deemed to include the Optionee's Legal Representative, if any,
unless the context otherwise requires). The Company may require proof
satisfactory to it as to the right of the Legal Representative to exercise the
Option.
5.2 DELIVERIES. The notice of exercise described in Section
5.1 hereof shall be accompanied by (a) payment of the full purchase price for
the shares in respect of which the Option is being exercised, by delivery to the
Company of a certified or bank check payable to the order of the Company or cash
by wire transfer or other immediately available funds to an account designated
by the Company, and (b) a fully executed Stockholder's Agreement (a copy of
which, in the form to be executed by the Optionee (which may differ from the
form attached hereto), will be supplied to the Optionee upon request) and the
undated stock power referred to in Section 5.12(a)(ii) of the Stockholder's
Agreement.
5.3 ISSUANCE OF SHARES. Upon receipt of notice of exercise,
full payment for the shares of Common Stock in respect of which the Option is
being exercised and a fully executed Stockholder's Agreement and stock power,
the Company shall take such action as may be necessary under applicable law to
effect the issuance to the Optionee of the number of shares of Common Stock as
to which such exercise was effected.
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<PAGE>
5.4 STOCKHOLDER RIGHTS. The Optionee shall not be deemed to be
the holder of, or to have any of the rights of a holder with respect to, any
shares of Common Stock subject to the Option until: (a) the Option shall have
been exercised in accordance with the terms of this Agreement and the Optionee
shall have paid the full purchase price for the number of shares in respect of
which the Option was exercised, (b) the Optionee shall have delivered the fully
executed Stockholder's Agreement and stock power to the Company, (c) the Company
shall have issued the shares to the Optionee, and (d) the Optionee's name shall
have been entered as a stockholder of record on the books of the Company. Upon
the occurrence of all of the foregoing events, the Optionee shall have full
ownership rights with respect to such shares, subject to the provisions of the
Stockholder's Agreement.
5.5 PARTIAL EXERCISE. In the event the initial exercise of the
Option is an exercise in part only, then, in the event of any further exercise
of the Option, the Optionee, in lieu of executing a new Stockholder's Agreement,
may, at the Company's option, re-execute the original Stockholder's Agreement,
thereby reaffirming the representations, warranties, covenants and agreements
contained in the Stockholder's Agreement as of the date of re-execution, but
with an amended Annex A completed to set forth the number of shares of Common
Stock in respect of which the Option is then being exercised and the cumulative
number of shares of Common Stock which would then be subject to the
Stockholder's Agreement. If the initial exercise of the Option is by the
Optionee and any subsequent exercise of the Option is by the Legal
Representative, then the Legal Representative shall execute, at the Company's
option, either a new Stockholder's Agreement or a counterpart of the original
Stockholder's Agreement thereby agreeing to be bound by such agreement as though
such person were an original signatory thereto and affirming the truth of the
representations and warranties contained therein with respect to such person as
of the date of such person's execution of such counterpart.
6. CERTAIN RESTRICTIONS.
6.1 NO SALE OR TRANSFER. The Optionee shall not sell,
transfer, assign, exchange, pledge, encumber or otherwise dispose of the Option
or any portion thereof, except in accordance with the provisions of this
Agreement.
6.2 TERMINATION AS A DIRECTOR. (a) If the Optionee shall cease
to serve as a director of the Company for any reason whatsoever (a
"Termination"), the Option, to the extent it is not exercisable pursuant to
Section 4.1 hereof on the date of such Termination, shall terminate and be of no
further force and effect from and after the date of such Termination.
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<PAGE>
(b) If any portion of the Option is exercisable pursuant to
Section 4.1 hereof on the date of the Optionee's Termination, (i) then the
Optionee may exercise the Option, to the extent the Option was exercisable on
the date of the Optionee's Termination, at any time within 30 days after the
date of the Termination, and (ii) the Company agrees to make available the most
recent audited financial statements of the Company for review by the Terminated
Optionee at the principal offices of the Company during such 30-day period. The
Option shall terminate and be of no further force and effect to the extent not
exercised during such 30-day period.
6.3 PROHIBITED ACTIVITIES. The Optionee agrees that (a) the Optionee
will not at any time while serving as a director of the Company (other than in
the course of his or her duties as a director), or for two years following a
Termination, directly or indirectly disclose or furnish to any other person or
use for the Optionee's own or any other person's account any confidential or
proprietary knowledge or information or any other information which is not a
matter of public knowledge obtained during the course of his or her service as a
director of, or other performance of services for, the Company or any affiliate
thereof, and the Optionee shall retain all such knowledge and information in
trust for the benefit of the Company, its affiliates and the successors and
assigns of any of them, (b) the Optionee will not at any time while serving as a
director of the Company, or for two years following a Termination, directly or
indirectly solicit for employment, including without limitation recommending to
any subsequent employer the solicitation for employment of, any employee of the
Company or any affiliate thereof, and (c) the Optionee will not breach the
provisions of Section 6.1 hereof (any activity prohibited by clause (a), (b) or
(c) of this Section 6.3 being herein referred to as a "Prohibited Activity").
6.4 RIGHT TO TERMINATE OPTION. The Optionee understands and
agrees that the Company is granting to the Optionee an option to purchase shares
of Common Stock hereunder to reward the Optionee for the Optionee's future
efforts and loyalty to the Company and its affiliates by giving the Optionee the
opportunity to participate in the potential future appreciation of the Company.
Accordingly, if, at any time during which any portion of the Option (including
the Exercisable Portion of the Option) is outstanding, the Optionee engages in
any Prohibited Activity, then, in addition to any other rights and remedies
available to the Company, the Company shall be entitled, at its option, to
terminate the Option (including the Exercisable Portion of the Option), or any
unexercised portion thereof, which shall then be of no further force and effect
and, notwithstanding anything herein to the contrary, the Optionee may not
exercise the Option. In addition, if the Optionee engages in any Competitive
Activity (as hereinafter defined), then the Company shall be entitled, at its
option, to terminate the Option (including the Exercisable Portion of the
Option), or any unexercised portion
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<PAGE>
thereof, which shall then be of no further force and effect and, notwithstanding
anything herein to the contrary, the Optionee may not exercise the Option.
The term "Competitor" shall mean any person that engages either
directly or indirectly in the candle business.
The term "Competitive Activity" shall mean engaging in any of the
following activities: (i) serving as a director of any Competitor; (ii) directly
or indirectly (X) controlling any Competitor or (Y) owning any equity or debt
interests in any Competitor (other than equity or debt interests which are
publicly traded and do not exceed 2% of the particular class of interests then
outstanding) (it being understood that, if any such interests in any Competitor
are owned by an investment vehicle or other entity in which the Optionee owns an
equity interest, a portion of the interests in such Competitor owned by such
entity shall be attributed to the Optionee, such portion determined by applying
the percentage of the equity interest in such entity owned by the Optionee to
the interests in such Competitor owned by such entity); (iii) directly or
indirectly soliciting, diverting, taking away, appropriating or otherwise
interfering with any of the customers or suppliers of the Company or any
affiliate of the Company; or (iv) employment by (including serving as an officer
or director of), or providing consulting services to, any Competitor; provided,
however, that if the Competitor has more than one discrete and readily
distinguishable part of its business, employment by or providing consulting
services to any Competitor shall be Competitive Activity only if (1) his or her
employment duties are at or involving the part of the Competitor's business that
competes with any of the businesses conducted by the Company or any of its
subsidiaries (the "Competing Operations"), including serving in a capacity where
any person at the Competing Operations reports to the Optionee, or (2) the
consulting services are provided to or involve the Competing Operations. For
purposes of this definition, the term "control" means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of any Competitor, whether through the ownership of equity or debt
interests, by contract or otherwise.
7. TOTAL SALES.
7.1 CONTINUATION OF OPTION. Upon the effective date of any
Total Sale, any unexercised portion of the Option shall terminate unless
provision shall be made in writing in connection with such Total Sale for the
continuance of such unexercised portion of the Option or for the assumption of
such unexercised portion of the Option by a successor to the Company or for the
substitution for such unexercised portion of the Option of new options covering
shares of such successor with appropriate adjustments as to number and kind of
shares and prices of shares subject to such new options, or unless the Company
shall authorize the redemption of the unexercised portion of the Option pursuant
to Section 7.2 hereof. In the event that provision in
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writing is made as aforesaid in connection with a Total Sale, the unexercised
portion of the Option or the new options substituted therefor shall continue in
the manner and under the terms provided in this Agreement and in such writing.
7.2 REDEMPTION IN CONNECTION WITH A TOTAL SALE. In connection
with a Total Sale, the Board of Directors of the Company may, in its sole
discretion, authorize the redemption of the unexercised portion of the Option
for a consideration per share of Common Stock issuable upon exercise of the
unexercised portion of the Option equal to the excess of (i) the consideration
payable per share of Common Stock in connection with such Total Sale, adjusted
as if all outstanding options and other rights to acquire equity interests in
the Company had been exercised prior to the consummation of such Total Sale and
further adjusted to take into account all other equity interests in the Company
(provided, however, that no adjustment shall be made with respect to any option
or other right to acquire equity interests in the Company if the exercise price
for such option or other right is greater than the consideration that would be
payable per share of Common Stock in connection with such Total Sale if the
adjustment were not made), over (ii) the Option Price. Any redemption pursuant
to this Section 7.2 shall occur simultaneously with the occurrence of the Total
Sale.
7.3 ALLOCABLE SHARE OF EXPENSES. In the event of a redemption
pursuant to Section 7.2 hereof, the Optionee shall be responsible for and shall
be obligated to pay a proportionate amount (determined as if the Optionee were a
holder of the number of shares of Common Stock which would have been issuable
upon exercise of the portion of the Option redeemed pursuant to Section 7.2
hereof) of the expenses, liabilities and obligations incurred or to be incurred
by the stockholders of the Company in connection with such Total Sale
(including, without limitation, the fees and expenses of investment bankers,
legal counsel and other outside advisors and experts retained by or on behalf of
the stockholders of the Company in connection with such Total Sale, amounts
payable in respect of indemnification claims, amounts paid into escrow and
amounts payable in respect of post-closing adjustments to the purchase price)
("Expenses of Sale").
7.4 POWER OF ATTORNEY. (a) The Optionee hereby irrevocably
appoints the FL & Co. Companies, and each of them (individually and
collectively, the "Representative"), the Optionee's true and lawful agent and
attorney-in-fact, with full powers of substitution, to act in the Optionee's
name, place and stead, to do or refrain from doing all such acts and things, and
to execute and deliver all such documents, in connection with this Agreement or
the Option as the Representative shall deem necessary or appropriate in
connection with any Total Sale, including, without in any way limiting the
generality of the foregoing, to receive on behalf of the Optionee any payments
made in respect of the unexercised portion of the Option (including payments
made in connection with any redemption) in connection with any Total Sale, to
hold
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back from any such payments any amount which the Representative deems necessary
to reserve against the Optionee's share of any Expenses of Sale, and to engage
in any acts in which the Representative is authorized by and on behalf of the
holders of any of the Company's capital stock to engage in connection with the
Total Sale. The Optionee hereby ratifies and confirms all that the
Representative shall do or cause to be done by virtue of its appointment as the
Optionee's Representative.
(b) In acting for the Optionee pursuant to the appointment set
forth in paragraph (a) of this Section 7.4, the Representative shall not be
responsible to the Optionee for any loss or damage the Optionee may suffer by
reason of the performance by the Representative of its duties under this
Agreement, except for loss or damage arising from willful violation of law or
gross negligence in the performance of its duties hereunder. The appointment of
the Representative shall be deemed coupled with an interest and shall be
irrevocable, and any person dealing with the Representative may conclusively and
absolutely rely, without inquiry, upon any act of the Representative as the act
of the Optionee in all matters referred to in this Section 7.4.
(c) Notwithstanding the foregoing, this power of attorney does
not empower the Representative to exercise the Option on behalf of the Optionee.
8. ADJUSTMENTS. In the event that shares of Common Stock (whether or
not issued) are changed into or exchanged for a different number or kind of
shares of stock or other securities of the Company or an affiliate, whether
through merger, consolidation, reorganization, recapitalization, stock dividend,
stock split-up or other substitution of securities of the Company, the Board of
Directors of the Company shall make appropriate adjustments to the number and
kind of shares of stock subject to the Option and the Option Price. The Board of
Directors' adjustment shall be final and binding for all purposes of this
Agreement. No adjustment provided for in this Section 8 shall require the
Company to issue a fractional share, and the total adjustment with respect to
this Agreement shall be limited accordingly.
9. CERTAIN DEFINITIONS.
9.1. AFFILIATE. The term "affiliate" of any person shall mean
any person that, directly or indirectly, controls, is controlled by, or is under
common control with, the person of which it is an affiliate.
9.2. PERSON. The term "person" shall mean an individual, a
corporation, a partnership, an association, a trust or any other entity or
organization, including a government or political subdivision or an agency or
instrumentality thereof.
10. NOTICES. All notices and other communications hereunder shall be
in writing and, unless otherwise provided herein, shall be deemed to have been
given
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when received by the party to whom such notice is to be given at its address set
forth below, or such other address for the party as shall be specified by notice
given pursuant hereto:
(a) If to the Company, to:
The Yankee Candle Company, Inc.
102 Christian Lane
Whately, MA 01093
Attention: President
with a copy to:
Forstmann Little & Co. Equity Partnership-V, L.P.
767 Fifth Avenue, 44th Floor
New York, New York 10153
Attention: Ms. Sandra Horbach
(b) If to the Optionee or Legal Representative, to such person
at the address as reflected in the records of the Company.
11. MODIFICATION OF AGREEMENT. This Agreement may be modified,
amended or supplemented by written agreement of the parties hereto; provided,
that the Company may modify, amend or supplement this Agreement in a writing
signed by the Company without any further action by the Optionee if such
modification, amendment or supplement does not adversely affect the Optionee's
rights hereunder.
12. INVALIDITY OF PROVISIONS. The invalidity or unenforceability of
any provision of this Agreement in any jurisdiction shall not affect the
validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of this Agreement, including that
provision, in any other jurisdiction. If any provision of this Agreement is held
unlawful or unenforceable in any respect, such provision shall be revised or
applied in a manner that renders it lawful and enforceable to the fullest extent
possible.
13. BINDING EFFECT. This Agreement shall inure to the benefit of and
be binding upon the parties hereto and their respective heirs, legal
representatives, successors and assigns. In addition, each of the FL & Co.
Companies shall be a third party beneficiary of this Agreement and shall be
entitled directly to enforce this Agreement.
14. HEADINGS; EXECUTION IN COUNTERPARTS. The headings and captions
contained herein are for convenience only and shall not control or affect the
meaning or
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construction of any provision hereof. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original and
which together shall constitute one and the same instrument.
15. ENTIRE AGREEMENT. This Agreement and, upon execution thereof,
the Stockholder's Agreement, constitute the entire agreement, and supersede all
prior agreements and understandings (including the Old Stock Option Agreement),
oral and written, between the parties hereto with respect to the Option granted
hereby.
16. RESOLUTION OF DISPUTES. Any dispute or disagreement which may
arise under, or as a result of, or which may in any way relate to, the
interpretation, construction or application of this Agreement shall be
determined by the Board of Directors of the Company, in good faith, whose
determination shall be final, binding and conclusive for all purposes.
17. GOVERNING LAW. This Agreement and the rights and obligations of
the parties hereto shall be governed by, and construed and enforced in
accordance with, the laws of the State of New York without giving effect to the
principles of conflicts of laws thereof.
18. CONSENT TO JURISDICTION. Each party hereby irrevocably and
unconditionally consents to submit to the exclusive jurisdiction of the courts
of the State of New York and of the United States of America, in each case
located in the County of New York, for any actions, suits or proceedings arising
out of or relating to this Agreement and the transactions contemplated hereby
("Litigation") (and agrees not to commence any Litigation except in any such
court), and further agrees that service of process, summons, notice or document
by U.S. registered mail to such party's respective address set forth in Section
10 hereof shall be effective service of process for any Litigation brought
against such party in any such court. Each party hereby irrevocably and
unconditionally waives any objection to the laying of venue of any Litigation in
the courts of the State of New York or of the United States of America, in each
case located in the County of New York, and hereby further irrevocably and
unconditionally waives and agrees not to plead or claim in any such court that
any Litigation brought in any such court has been brought in an inconvenient
forum.
19. INVESTMENT INTENT. The Optionee hereby represents that the
Optionee is acquiring the Option for his own account as principal for investment
and not with a view to resale or distribution in whole or in part.
20. SPECIFIC PERFORMANCE. The parties hereto acknowledge that there
will be no adequate remedy at law for a violation of any of the provisions of
this Agreement and that, in addition to any other remedies which may be
available, all of the
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provisions of this Agreement shall be specifically enforceable in accordance
with their respective terms.
21. WITHHOLDING. The Company shall have the right to deduct from any
amount payable under this Agreement any taxes or other amounts required by
applicable law to be withheld.
IN WITNESS WHEREOF, this Agreement has been signed by or on behalf
of each of the parties hereto, all as of the date first above written.
Optionee THE YANKEE CANDLE COMPANY, INC.
By:
- -------------------------------- -------------------------------
Name: < Name > Name:
Address: < Address1 > Title:
< Address2 >
The undersigned acknowledges that the undersigned has read the
foregoing Agreement between The Yankee Candle Company, Inc. and the
undersigned's spouse, understands that the undersigned's spouse has been granted
an option to acquire shares of Common Stock of The Yankee Candle Company, Inc.,
which option is subject to certain restrictions reflected in such Agreement and
agrees to be bound by the foregoing Agreement.
------------------------------------
Optionee's Spouse
(if applicable)
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<PAGE>
Exhibit 10.2
Exhibit A to Director Stock Option Agreement
STOCKHOLDER'S AGREEMENT, dated as of [_____], 1999, between The
Yankee Candle Company, Inc., a Massachusetts corporation (the "Company"), and
the undersigned (the "Director"), who was granted the right and option (the
"Option") to acquire shares of Common Stock, par value $0.01 per share, of the
Company pursuant to the terms and conditions of a Stock Option Agreement, dated
as of ____, 1999 between the Company and the Director (the "Option Agreement").
WHEREAS, the Director was at the time of the grant of the Option a
member of the Board of Directors of the Company;
WHEREAS, Forstmann Little & Co. Equity Partnership-V, L.P., a
Delaware limited partnership ("Equity-V"), and Forstmann Little & Co.
Subordinated Debt and Equity Management Buyout Partnership-V, L.P., a Delaware
limited partnership ("MBO-VI"), own an aggregate of [ ] shares of Common Stock,
par value $0.01 per share, of the Company;
WHEREAS, the Option Agreement requires the Director to enter into a
Stockholder's Agreement upon and as a condition to the exercise of the Option;
WHEREAS, the Director wishes to exercise the Option to acquire shares
of Common Stock; and
WHEREAS, the Director and the Company wish to provide for certain
arrangements with respect to the Director's rights to hold and dispose of the
shares of Common Stock acquired by the Director upon exercise of the Option.
NOW, THEREFORE, the parties hereto agree as follows:
1. DEFINITIONS; EXERCISE OF OPTION.
1.1 DEFINITIONS; RULES OF CONSTRUCTION.
(a) The following terms, as used herein, shall have the
following meanings:
"Act" shall mean the Securities Act of 1933, as amended.
<PAGE>
"Affiliate" shall mean, with respect to any Person, any other
Person which, directly or indirectly, is in control of, is controlled by, or is
under common control with, such Person.
"Affiliate Securities" shall mean any securities issued by an
Affiliate of the Company.
"Agreement" shall mean this Stockholder's Agreement, as amended,
supplemented or modified from time to time.
"Book Value of the Company" shall mean the sum of (x) the total
assets minus the total liabilities of the Company on a consolidated basis, plus
(y) the amount of any reduction in stockholders' equity resulting from the
application of EITF Issue Summary No. 88-16, Basis in Leveraged Buyouts, as of
the Valuation Date, plus (z) the amount of accumulated amortization of that
portion of the purchase price paid for the Company by the FL & Co. Companies
that was allocated to goodwill, excluding other acquired identified intangible
assets. For purposes of calculating the Book Value of the Company and the Book
Value Per Share, (i) all options and other rights to acquire equity interests in
the Company outstanding immediately prior to the date of the Repurchase Notice
or exercised between the Valuation Date and the date of the Repurchase Notice
shall be deemed to have been exercised on the Valuation Date, and (ii) the
number of outstanding shares on the Valuation Date shall be increased by the
number of shares subject to each such option or other right and the assets of
the Company shall be increased by the aggregate exercise price payable in
respect of the exercise of each such option or other right (with respect to
clauses (i) and (ii), in the case of any such option or other right, unless the
effect thereof would be to increase the Book Value Per Share).
"Book Value Per Share" shall mean the amount which would be
payable on the Valuation Date in respect of one share of Common Stock in the
event of a dissolution, liquidation or winding-up of the affairs of the Company
if the amount of assets available for distribution in the event of such
dissolution, liquidation or winding-up with respect to all shares of capital
stock of the Company outstanding (or deemed to be outstanding, as set forth in
the definition of "Book Value of the Company") on the Valuation Date were equal
to the Book Value of the Company. In the event there has been a Stock Dividend
after the Valuation Date and prior to the date of the Repurchase Notice, the
number of shares outstanding for purposes of determining Book Value Per Share
shall be the number of shares that would have been outstanding immediately after
the Stock Dividend on the Valuation Date had the Stock Dividend occurred on the
Valuation Date.
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"Capital Transaction" shall mean any Stock Dividend,
recapitalization (including, without limitation, any special dividend or
distribution), reclassification, spin-off, partial liquidation or similar
capital adjustments (including, without limitation, through merger or
consolidation).
"Common Stock" shall mean the Common Stock, par value $0.01 per
share, of the Company. There shall be included within the term Common Stock any
Common Stock now or hereafter authorized to be issued, and any and all
securities of any kind whatsoever of the Company which may be issued after the
date hereof in respect of, or in exchange for, shares of Common Stock pursuant
to a Capital Transaction or otherwise.
"Company" shall mean The Yankee Candle Company, Inc., a
Massachusetts corporation, and shall include any successor thereto by merger,
consolidation, acquisition of substantially all the assets thereof, or
otherwise.
"Competing Operations" shall have the meaning ascribed to such
term in the definition of Competitive Activity.
"Competitive Activity" shall mean engaging in any of the
following activities: (i) serving as a director of any Competitor; (ii) directly
or indirectly (X) controlling any Competitor or (Y) owning any equity or debt
interests in any Competitor (other than equity or debt interests which are
publicly traded and do not exceed 2% of the particular class of interests then
outstanding) (it being understood that, if any such interests in any Competitor
are owned by an investment vehicle or other entity in which the Director owns an
equity interest, a portion of the interests in such Competitor owned by such
entity shall be attributed to the Director, such portion determined by applying
the percentage of the equity interest in such entity owned by the Director to
the interests in such Competitor owned by such entity); (iii) directly or
indirectly soliciting, diverting, taking away, appropriating or otherwise
interfering with any of the customers or suppliers of the Company or any
Affiliate of the Company; or (iv) employment by (including serving as an officer
or director of), or providing consulting services to, any Competitor; provided,
however, that if the Competitor has more than one discrete and readily
distinguishable part of its business, employment by or providing consulting
services to any Competitor shall be Competitive Activity only if (1) his or her
employment duties are at or involving the part of the Competitor's business that
competes with any of the businesses conducted by the Company or any of its
subsidiaries (the "Competing Operations"), including serving in a capacity where
any person at the Competing Operations reports to the Director, or (2) the
consulting services are provided to or involve the Competing Operations. For
purposes of this definition, the term "control" means the possession, directly
or indirectly, of the power to direct or cause
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<PAGE>
the direction of the management and policies of any Competitor, whether through
the ownership of equity or debt interests, by contract or otherwise.
"Competitor" shall mean any Person that engages either directly
or indirectly in the candle business.
"Equity-V" shall have the meaning ascribed to such term in the
second "Whereas" clause hereof.
"Expenses of Sale" shall mean all expenses incurred by the FL &
Co. Companies in connection with the sale of the shares of the selling
stockholders pursuant to Section 2.2, 2.3 or 2.4 hereof to the extent that such
expenses are not paid or reimbursed by the Company.
"FL & Co. Companies" shall mean the collective reference to
Equity-V and MBO-VI.
"Legal Representative" shall mean the guardian, executor,
administrator or other legal representative of the Director. All references
herein to the Director shall be deemed to include references to the Director's
Legal Representative, if any, unless the context otherwise requires.
"Litigation" shall mean any actions, suits or proceedings
arising out of or relating to this Agreement and the transactions contemplated
hereby.
"MBO-VI" shall have the meaning ascribed to such term in the
second "Whereas" clause hereof.
"Option" and "Option Agreement" shall have the respective
meanings ascribed to such terms in the first paragraph hereof.
"Permitted Transferee" shall have the meaning ascribed to such
term in Section 2.1(b) hereof.
"Person" shall mean an individual, a corporation, a partnership,
an association, a trust or any other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.
"Prohibited Activity" shall have the meaning ascribed to such
term in Section 4.1 hereof.
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<PAGE>
"Release Date" shall mean the date on which the FL & Co.
Companies and their Affiliates shall cease to own in the aggregate directly or
indirectly at least 20 percent of the then outstanding securities of the Company
having the power to vote in the election of directors of the Company.
"Representative" shall have the meaning ascribed to such term in
Section 5.12(b).
"Repurchase Notice" shall have the meaning ascribed to such term
in Section 4.2 hereof.
"Sale Obligations" shall mean any liabilities and obligations
(including liabilities and obligations for indemnification, amounts paid into
escrow and post-closing adjustments) incurred by the selling stockholders in
connection with the sale of their shares pursuant to Section 2.2, 2.3 or 2.4
hereof.
"Section 2.2 Notice" shall have the meaning ascribed to such
term in Section 2.2(a) hereof.
"Section 2.3 Notice" shall have the meaning ascribed to such
term in Section 2.3(a) hereof.
"Stock Dividend" shall mean any stock split, stock dividend or
reverse stock split or similar transaction which changes the number of
outstanding shares of capital stock of the Company.
"Terminated" or "Termination" shall mean that the Director's
service as a director the Company shall have ceased for any reason whatsoever
(including by reason of death, permanent disability or adjudicated
incompetency).
"Third Party" shall mean any Person other than any of the FL &
Co. Companies or an Affiliate or a partner of any of the FL & Co. Companies or
an Affiliate of such partner.
"Transaction" shall mean any sale pursuant to Section 2.2, 2.3
or 2.4 hereof.
"Valuation Date" shall mean the last day of the fiscal year of
the Company immediately preceding the fiscal year in which the Director's
service with the Company as a director is Terminated.
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(b) In this Agreement, unless the context otherwise requires,
words in the singular number or in the plural number shall each include the
singular number and the plural number.
1.2. ACQUISITION OF COMMON STOCK. The Director hereby elects to
exercise the Option in respect of the shares of Common Stock set forth in Annex
A hereto. Promptly upon payment in full of the exercise price for the shares of
Common Stock in respect of which the Option is being exercised and full
compliance by the Director with the terms of the Option Agreement and Section
5.12(a)(ii) hereof, the Company shall promptly issue a stock certificate in the
name of the Director representing the shares of Common Stock in respect of which
the Option is being exercised and shall enter the Director's name on the books
of the Company as the stockholder of record of such shares of Common Stock.
2. RIGHTS AND RESTRICTIONS ON COMMON STOCK.
2.1 NO SALE OR TRANSFER.
(a) The Director shall not sell, transfer, assign, exchange,
pledge, encumber or otherwise dispose of any shares of Common Stock acquired
pursuant hereto or otherwise subject to this Agreement or grant any option or
right to purchase such shares or any legal or beneficial interest therein,
except in accordance with the provisions of this Agreement.
(b) The Director may transfer any shares of Common Stock
acquired hereunder or otherwise subject to this Agreement by will, but only to:
(i) any spouse, parent, child (whether natural or
adopted), brother or sister of the Director, or
(ii) any corporation or partnership which is controlled
by any spouse, parent, child (whether natural or
adopted), brother or sister of the Director
(the person or persons to which shares of Common Stock are transferred in
accordance with this Section 2.1(b) being herein referred to as the "Permitted
Transferee"); provided, that, for any transfer to the Permitted Transferee to be
effective hereunder, the Permitted Transferee shall agree in writing to be bound
by all the terms of this Agreement applicable to the Director (including,
without limitation, Section 5.12(b) hereof) as if the Permitted Transferee
originally had been a party hereto; and provided, further, that all of the
stockholders of any Permitted Transferee that is a corporation and
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<PAGE>
all of the partners of any Permitted Transferee that is a partnership shall
agree with the Company in writing not to transfer any shares they then own or
may hereafter acquire in the corporate Permitted Transferee or any partnership
interests they then own or may hereafter acquire in the partnership Permitted
Transferee except to a person described in paragraph (i) or (ii) above that has
made the same agreement in writing to the Company, so long as the corporate or
partnership Permitted Transferee shall own any shares of Common Stock. Any
reference herein to the Director shall also be to the Permitted Transferee from
and after the date the transfer is effected in accordance with this Section
2.1(b). Without limiting the generality of the foregoing, the provisions of
Section 4.2 hereof shall be likewise applicable to any Permitted Transferee,
commencing upon the date that such Person becomes a Permitted Transferee, for
the respective periods they would have applied to the Director.
2.2 PARTICIPATION IN SALE OF COMMON STOCK. The Director, at the
Director's option, may participate proportionately (and the FL & Co. Companies
shall allow the Director to participate proportionately) in any sale (other than
a public offering, which shall be governed by Section 2.3 hereof) of all or a
portion of the shares of Common Stock owned by either of the FL & Co. Companies
to any Third Party by selling to the Third Party the same percentage of the
Director's shares of Common Stock as the FL & Co. Companies propose to sell of
their shares to the Third Party (determined on the basis of the aggregate number
of such shares of Common Stock owned, and the aggregate number of such shares
being sold, by the FL & Co. Companies). For purposes of determining the number
of shares of Common Stock in respect of which the Director may participate in
such sale pursuant to this Section 2.2, the Director shall be deemed to own the
shares of Common Stock acquired upon exercise of the Option at any time plus (a)
if, at the time of such sale, the Director is still serving as a director of the
Company, the shares of Common Stock subject to any then unexercised portion of
the Option, if any, or (b) if, at the time of such sale, the Director has ceased
to serve as a director of the Company but has not yet exercised the Option
pursuant to Section 6.2(b) of the Option Agreement, the shares of Common Stock
issuable upon exercise of the portion of the Option that is exercisable pursuant
to Sections 6.2(b) and 4.1 of the Option Agreement, if any. The Company shall
notify the Director in writing of the FL & Co. Companies' intention to effect
such a sale to a Third Party and the nature and per share amount of
consideration to be paid by such Third Party at least 10 days, or such shorter
time as the Company deems practicable, before the closing of any such proposed
sale of shares of Common Stock (the "Section 2.2 Notice"), and the Director
shall notify the Company in writing within five days after receipt of the
Section 2.2 Notice of his or her intention to participate in such sale,
including the number of shares of Common Stock with respect to which he or she
will so participate. Any failure by the Director to so notify the Company within
such five-day period shall be deemed an election by the Director not to
participate in such sale
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<PAGE>
with respect to any of his or her shares. Any sale of shares of Common Stock by
the Director pursuant to this Section 2.2 shall be for the same consideration
per share, on the same terms and subject to the same conditions as the sale of
shares of Common Stock owned by the FL & Co. Companies. If the Director sells
any shares of Common Stock pursuant to this Section 2.2, the Director shall pay
and be responsible for the Director's proportionate share of the Expenses of
Sale and the Sale Obligations.
2.3 PUBLIC OFFERING OF COMMON STOCK.
(a) If the FL & Co. Companies propose to sell all or any
portion of the shares of Common Stock owned by the FL & Co. Companies in a
public offering, the Director shall be entitled and required to participate in
such public offering by selling in the public offering the same percentage of
the Director's shares of Common Stock as the FL & Co. Companies propose to sell
of their shares in the public offering (determined on the basis of the aggregate
number of shares of Common Stock owned, and the aggregate number of such shares
being sold, by the FL & Co. Companies). For purposes of determining the number
of shares of Common Stock in respect of which the Director may participate in
such public offering pursuant to this Section 2.3, the Director shall be deemed
to own the shares of Common Stock acquired upon exercise of the Option at any
time plus (a) if, at the time of such sale, the Director is still serving as a
director of the Company, the shares of Common Stock subject to any then
unexercised portion of the Option, if any, or (b) if, at the time of such sale,
the Director has ceased to serve as a director of the Company but has not yet
exercised the Option pursuant to Section 6.2(b) of the Option Agreement, the
shares of Common Stock issuable upon exercise of the portion of the Option that
is exercisable pursuant to Sections 6.2(b) and 4.1 of the Option Agreement, if
any. The Company shall notify the Director in writing of the FL & Co. Companies'
intention to effect such public offering at least 10 days, or such shorter time
as the Company deems practicable, before the filing with the Securities and
Exchange Commission of the registration statement relating to such public
offering (the "Section 2.3 Notice") and shall cause the Director's shares to be
sold in such public offering to be included therein. The Director shall notify
the Company in writing within five days after receipt of the Section 2.3 Notice
of his or her intention to participate in such public offering, including the
number of shares of Common Stock with respect to which he or she will so
participate. Any failure by the Director to so notify the Company within such
five-day period shall be deemed an election by the Director not to participate
in such public offering with respect to any of his or her shares. If the
Director sells any shares of Common Stock pursuant to this Section 2.3, the
Director shall pay and be responsible for the Director's proportionate share of
the Expenses of Sale and the Sale Obligations, including, without limitation,
indemnifying the underwriters of such public offering, on a proportionate basis,
to the same extent as the FL & Co. Companies are required to indemnify such
underwriters.
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(b) In connection with any proposed public offering of
securities of the Company, whether by any of the FL & Co. Companies or the
Company or otherwise, the Director agrees (i) to supply any information
reasonably requested by the Company in connection with the preparation of a
registration statement and/or any other documents relating to such public
offering, and (ii) to execute and deliver any agreements and instruments
reasonably requested by the Company to effectuate such public offering,
including, without limitation, an underwriting agreement, a custody agreement
and a "hold back" agreement pursuant to which the Director will agree not to
sell or purchase any securities of the Company (whether or not such securities
are otherwise governed by this Agreement) for the same period of time following
the public offering as is agreed to by the FL & Co. Companies with respect to
themselves. If the Company requests that the Director take any of the actions
referred to in clause (i) or (ii) of the previous sentence, the Director shall
take such action promptly but in any event within five days following the date
of such request.
2.4 REQUIRED PARTICIPATION IN SALE OF COMMON STOCK BY THE FL & CO.
Companies. Notwithstanding any other provision of this Agreement to the
contrary, if the FL & Co. Companies shall propose to sell (including by
exchange, in a business combination or otherwise) all or any portion of their
shares of Common Stock in a bona fide arm's-length transaction, the FL & Co.
Companies, at their option, may require that the Director sell the same
percentage of the Director's shares of Common Stock as the FL & Co. Companies
propose to sell of their shares in the transaction (determined on the basis of
the aggregate number of shares of Common Stock owned, and the aggregate number
of such shares then being sold, by the FL & Co. Companies) for the same
consideration per share, on the same terms and subject to the same conditions in
the same transaction and, if stockholder approval of the transaction is required
and the Director is entitled to vote thereon, that the Director vote the
Director's shares in favor thereof. For purposes of determining the number of
shares of Common Stock in respect of which the Director is to participate in
such sale pursuant to this Section 2.4, the Director shall be deemed to own the
shares of Common Stock acquired upon exercise of the Option at any time plus (a)
if, at the time of such sale, the Director is still serving as a director of the
Company, the shares of Common Stock subject to any then unexercised portion of
the Option, if any, or (b) if, at the time of such sale, the Director has ceased
to serve as a director of the Company but has not yet exercised the Option
pursuant to Section 6.2(b) of the Option Agreement, the shares of Common Stock
issuable upon exercise of the portion of the Option that is exercisable pursuant
to Sections 6.2(b) and 4.1 of the Option Agreement, if any. If the Director
sells any shares pursuant to this Section 2.4, the Director shall pay and be
responsible for the Director's proportionate share of the Expenses of Sale and
the Sale Obligations.
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2.5 TERMINATION OF RESTRICTIONS AND RIGHTS. Notwithstanding any other
provision of this Agreement to the contrary, but subject to the restrictions of
all applicable federal and state securities laws, including the restrictions in
this Agreement relating thereto, from and after the Release Date any and all
shares of Common Stock owned by the Director (a) may be sold, transferred,
assigned, exchanged, pledged, encumbered or otherwise disposed of (and the
Director may grant any option or right to purchase such shares or any legal or
beneficial interest therein, or may continue to hold such shares), free of the
restrictions contained in this Agreement and (b) shall no longer be entitled to
any of the rights contained in this Agreement. Without limiting the generality
of the foregoing, from and after the Release Date, the provisions of Articles 2
and 4 (other than this Section 2.5 and Sections 4.1(a), 4.1(b) and 4.1(c)
hereof) shall terminate and have no further force or effect.
3. STOCK CERTIFICATE LEGEND AND INVESTMENT REPRESENTATIONS; OTHER
REPRESENTATIONS.
3.1 LEGEND. All certificates representing shares of Common Stock
acquired hereunder or otherwise subject to this Agreement (unless registered
under the Act) shall bear the following legend:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or any
securities regulatory authority of any state, and may not be sold,
transferred, assigned, exchanged, pledged, encumbered or otherwise
disposed of except in compliance with all applicable securities laws
and except in accordance with the provisions of a Stockholder's
Agreement with the Company, a copy of which is available for
inspection at the offices of the Company."
3.2 REPRESENTATIONS OF THE DIRECTOR. The Director represents and
warrants that: (a) the Director understands that (i) the offer and sale of
shares of Common Stock in accordance with this Agreement have not been and will
not be registered under the Act, and it is the intention of the parties hereto
that the offer and sale of the securities be exempt from registration under the
Act and the rules promulgated thereunder by the Securities and Exchange
Commission; and (ii) the shares of Common Stock being acquired hereunder cannot
be sold, transferred, assigned, exchanged, pledged, encumbered or otherwise
disposed of unless they are registered under the Act or an exemption from
registration is available; (b) the Director is acquiring the shares of Common
Stock being acquired hereunder for investment for the Director's own account and
not with a view to the distribution thereof; (c) the Director will not, directly
or indirectly, sell, transfer, assign, exchange, pledge, encumber or
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otherwise dispose of any shares of Common Stock being acquired hereunder except
in accordance with this Agreement; (d) the Director has, or the Director
together with the Director's advisers, if any, have, such knowledge and
experience in financial and business matters that the Director is, or the
Director together with the Director's advisers, if any, are, and will be capable
of evaluating the merits and risks relating to the Director's acquisition of
shares of Common Stock under this Agreement; (e) the Director has been given the
opportunity to obtain information and documents relating to the Company and to
ask questions of and receive answers from representatives of the Company
concerning the Company and the Director's investment in the Common Stock; (f)
the Director's decision to invest in the Company has been based upon independent
investigations made by the Director and the Director's advisers, if any; (g) the
Director is able to bear the economic risk of a total loss of the Director's
investment in the Company; and (h) the Director has adequate means of providing
for the Director's current needs and foreseeable personal contingencies and has
no need for the Director's investment in the Common Stock to be liquid.
4. PROHIBITED ACTIVITIES.
4.1 PROHIBITION AGAINST CERTAIN ACTIVITIES. The Director agrees that
(a) the Director will not, at any time while serving as a director of the
Company (other than in the course of such employment) or for two years following
a Termination, directly or indirectly disclose or furnish to any other Person or
use for the Director's own or any other Person's account any confidential or
proprietary knowledge or information or any other information which is not a
matter of public knowledge and which was obtained while serving as a director
of, or otherwise performing of services for, the Company or any Affiliate
thereof, and the Director shall retain all such knowledge and information in
trust for the benefit of the Company, its Affiliates and the successors and
assigns of any of them, (b) the Director will not, at any time while serving as
a director of the Company (other than in the course of such employment) or for
two years following a Termination, directly or indirectly solicit for
employment, including without limitation recommending to any subsequent employer
the solicitation for employment of, any employee of the Company or any Affiliate
thereof, and (c) the Director will not breach the provisions of Section 2.1
hereof (any activity prohibited by clause (a), (b) or (c) of this Section 4.1
being referred to as a "Prohibited Activity").
4.2 RIGHT TO PURCHASE SHARES. The Director understands and agrees
that the Company has granted to the Director the right to acquire shares of
Common Stock to reward the Director for the Director's future efforts and
loyalty to the Company and its Affiliates by giving the Director the opportunity
to participate in the potential future appreciation of the Company. Accordingly,
if the Director engages in any Prohibited Activity, then, in addition to any
other rights and remedies available to the Company,
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the Company shall be entitled, at its option, exercisable by written notice (the
"Repurchase Notice") to the Director, to purchase all of the shares of Common
Stock then held by the Director. In addition, if, at any time during the
Director's service as a director of the Company or during the two years
following a Termination, the Director engages in any Competitive Activity, the
Company shall be entitled, at its option, exercisable by delivery of the
Repurchase Notice to the Director, to purchase all of the shares of Common Stock
then held by the Director.
4.3 PURCHASE PRICE; CLOSING. The purchase price per share of the
shares of Common Stock purchased pursuant to this Article 4 shall be equal to
the lesser of (a) $[_____] (adjusted to reflect any Capital Transaction effected
after the date hereof and prior to the date of the Repurchase Notice) and (b)
the Book Value Per Share. The closing of such purchase shall take place at the
principal office of the Company 10 days following the date of the Repurchase
Notice, except that if the Company is prohibited from repurchasing any shares of
Common Stock pursuant to this Article 4 by any contractual obligation of the
Company or any of its Affiliates or by applicable law, the closing of such
purchase shall take place on the first practicable date on which the Company is
permitted to purchase such shares. At such closing, the Director shall sell,
convey, transfer, assign and deliver to the Company all right, title and
interest in and to the shares of Common Stock being purchased by the Company,
which shall constitute (and, at the closing, the Director shall certify the same
to the Company in writing) good and unencumbered title to such shares, free and
clear of all liens, security interests, encumbrances and adverse claims of any
kind and nature (other than those in favor of the Company and the FL & Co.
Companies pursuant to this Agreement), and shall deliver to the Company the
certificates representing the shares duly endorsed for transfer, or accompanied
by appropriate stock transfer powers duly executed, and with all necessary
transfer tax stamps affixed thereto at the expense of the Director, and the
Company shall deliver to the Director, in full payment of the purchase price
payable pursuant to this Section 4.3 for the shares of Common Stock purchased, a
check payable to the order of the Director in the amount of the aggregate
purchase price for the shares purchased. Notwithstanding anything herein to the
contrary, from and after the date of the Repurchase Notice, the Director shall
not have any rights with respect to any shares of Common Stock which the
Director is required to sell to the Company pursuant to this Article 4
(including any rights pursuant to Section 2.2 or 2.3 hereof), except to receive
the purchase price therefor.
4.4 TRANSACTION PROCEEDS. Notwithstanding anything to the contrary
set forth in Section 2.2, 2.3 or 2.4 hereof, if at the time of a Transaction in
which the Director is participating, the Company is entitled to purchase the
Director's shares of Common Stock pursuant to this Article 4, and if the
purchase price per share for a purchase pursuant to this Article 4 would be less
than the proceeds per share to the
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Director from such Transaction, then the Director shall be entitled to receive
only the aggregate purchase price payable under this Article 4, with the balance
of the proceeds of sale in the Transaction being remitted to the other
stockholders of the Company participating in such Transaction pro rata in
accordance with their respective participation in such Transaction.
5. MISCELLANEOUS.
5.1 DISTRIBUTIONS. In the event of any dividend, distribution or
exchange paid or made in respect of the Common Stock consisting of Affiliate
Securities, (a) the restrictions and rights with respect to the Common Stock
that are contained in this Agreement shall be applicable to the Affiliate
Securities without further action of the parties (with the references to Common
Stock being deemed references to the Affiliate Securities and the references to
the Company being deemed references to the Affiliate), and (b) as a condition
precedent to the receipt of the Affiliate Securities by the Director, the
Director shall enter into a stockholder's agreement containing substantially
equivalent terms with respect to the Affiliate Securities (but reflecting the
economics of the dividend, distribution or exchange and the capitalization of
the Affiliate) as are contained herein. The Board of Directors of the Company,
in good faith, shall determine such terms and its determination shall be final
and binding on the Director.
5.2 FURTHER ASSURANCES. Each party hereto shall do and perform or
cause to be done and performed all further acts and things and shall execute and
deliver all other agreements, certificates, instruments, and documents as any
other party hereto reasonably may request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
5.3 GOVERNING LAW. This Agreement and the rights and obligations of
the parties hereto shall be governed by, and construed and enforced in
accordance with, the laws of the State of New York, without giving effect to the
principles of conflicts of law thereof.
5.4 SPECIFIC PERFORMANCE. The parties hereto acknowledge that there
will be no adequate remedy at law for a violation of any of the provisions of
this Agreement and that, in addition to any other remedies which may be
available, all of the provisions of this Agreement shall be specifically
enforceable in accordance with their respective terms.
5.5 INVALIDITY OF PROVISIONS. The invalidity or unenforceability of
any provision of this Agreement in any jurisdiction shall not affect the
validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or
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<PAGE>
enforceability of this Agreement, including that provision, in any other
jurisdiction. If any provision of this Agreement is held unlawful or
unenforceable in any respect, such provision shall be revised or applied in a
manner that renders it lawful and enforceable to the fullest extent possible.
5.6 NOTICE. All notices and other communications hereunder shall be
in writing and, unless otherwise provided herein, shall be deemed to have been
given when received by the party to whom such notice is to be given at its
address set forth below, or such other address for the party as shall be
specified by notice given pursuant hereto:
(a) If to the Company, to:
The Yankee Candle Company, Inc.
102 Christian Lane
Whately, MA 01093
Attention: President
with a copy to:
Forstmann Little & Co. Equity Partnership-V, L.P.
767 Fifth Avenue, 44th Floor
New York, New York 10153
Attention: Ms. Sandra J. Horbach
(b) If to the Director, to the address set forth below the
Director's signature, and if to the Legal Representative,
to such Person at the address of which the Company is
notified in accordance with this Section 5.6.
5.7 BINDING EFFECT. This Agreement shall inure to the benefit of and
shall be binding upon the parties hereto and their respective heirs, legal
representatives, successors and assigns. In addition, each of the FL & Co.
Companies shall be a third party beneficiary of this Agreement and shall be
entitled to enforce this Agreement.
5.8 AMENDMENT AND MODIFICATION. This Agreement may be amended,
modified or supplemented only by written agreement of the party against whom
enforcement of such amendment, modification or supplement is sought.
5.9 HEADINGS; EXECUTION IN COUNTERPARTS. The headings and captions
contained herein are for convenience only and shall not control or affect the
meaning or construction of any provision hereof. This Agreement may be executed
in any number
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of counterparts, each of which shall be deemed to be an original and which
together shall constitute one and the same instrument.
5.10 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement, and supersedes all prior agreements and understandings, oral and
written, between the parties hereto with respect to the subject matter hereof.
5.11 WITHHOLDING. The Company shall have the right to deduct from any
amount payable under this Agreement any taxes or other amounts required by
applicable law to be withheld. The Director agrees to indemnify the Company
against any Federal, state and local withholding taxes for which the Company may
be liable in connection with the Director's acquisition, ownership or
disposition of any Common Stock.
5.12 POSSESSION OF CERTIFICATES; POWER OF ATTORNEY.
(a) In order to provide for the safekeeping of the certificates
representing the shares of Common Stock acquired by the Director pursuant hereto
or otherwise subject to this Agreement and to facilitate the enforcement of the
terms and conditions hereof, (i) the Company shall retain physical possession of
all certificates representing shares of Common Stock issued to the Director, and
(ii) concurrently with the Director's execution and delivery to the Company of
this Agreement, the Director shall deliver to the Company an undated stock
power, duly executed in blank, for each such certificate. The Director shall be
relieved of any obligation otherwise imposed by this Agreement to deliver
certificates representing shares of Common Stock if the same are in the custody
of the Company.
(b) The Director hereby irrevocably appoints the FL & Co.
Companies, and each of them (individually and collectively, the
"Representative"), the Director's true and lawful agent and attorney-in-fact,
with full powers of substitution, to act in the Director's name, place and
stead, to do or refrain from doing all such acts and things, and to execute and
deliver all such documents, as the Representative shall deem necessary or
appropriate in connection with a public offering of securities of the Company or
a sale pursuant to Section 2.2, 2.3 or 2.4 hereof, including, without in any way
limiting the generality of the foregoing, in the case of a sale pursuant to
Section 2.2 or 2.4 hereof, to execute and deliver on behalf of the Director a
purchase and sale agreement and any other agreements and documents that the
Representative deems necessary in connection with any such sale, and in the case
of a public offering, to execute and deliver on behalf of the Director an
underwriting agreement, a "hold back" agreement, a custody agreement, and any
other agreements and documents that the Representative deems necessary in
connection with any such public offering, and in the case of any sale pursuant
to Section 2.2 or 2.4 hereof and any public offering pursuant to
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Section 2.3(a) hereof, to receive on behalf of the Director the proceeds of the
sale or public offering of the Director's shares, to hold back from any such
proceeds any amount that the Representative deems necessary to reserve against
the Director's share of any Expenses of Sale and Sale Obligations and to pay
such Expenses of Sale and Sale Obligations. The Director hereby ratifies and
confirms all that the Representative shall do or cause to be done by virtue of
its appointment as the Director's agent and attorney-in-fact. In acting for the
Director pursuant to the appointment set forth in this Section 5.12(b), the
Representative shall not be responsible to the Director for any loss or damage
the Director may suffer by reason of the performance by the Representative of
its duties under this Agreement, except for loss or damage arising from willful
violation of law or gross negligence by the Representative in the performance of
its duties hereunder. The appointment of the Representative shall be deemed
coupled with an interest and as such shall be irrevocable and shall survive the
death, incompetency, mental illness or insanity of the Director, and any person
dealing with the Representative may conclusively and absolutely rely, without
inquiry, upon any act of the Representative as the act of the Director in all
matters referred to in this Section 5.12(b).
5.13 CONSENT TO JURISDICTION. Each party hereby irrevocably and
unconditionally consents to submit to the exclusive jurisdiction of the courts
of the State of New York and of the United States of America, in each case
located in the County of New York, for any Litigation (and agrees not to
commence any Litigation except in any such court), and further agrees that
service of process, summons, notice or document by U.S. registered mail to such
party's respective address set forth in Section 5.6 hereof shall be effective
service of process for any Litigation brought against such party in any such
court. Each party hereby irrevocably and unconditionally waives any objection to
the laying of venue of any Litigation in the courts of the State of New York or
of the United States of America, in each case located in the County of New York,
and hereby further irrevocably and unconditionally waives and agrees not to
plead or claim in any such court that any Litigation brought in any such court
has been brought in an inconvenient forum.
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IN WITNESS WHEREOF, this Agreement has been signed by or on behalf of
each of the parties hereto, all as of the date first above written.
DIRECTOR THE YANKEE CANDLE
COMPANY, INC.
______________________________ By: ______________________________
Name: Name:
Address: Title:
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The undersigned hereby agree to be bound by the provisions of Sections 2.2 and
2.3 of the foregoing Agreement.
FORSTMANN LITTLE & CO. EQUITY
PARTNERSHIP-V, L.P.
By: FLC XXX Partnership,
its general partner
By: ____________________________
__________________,
a general partner
FORSTMANN LITTLE & CO. SUBORDINATED
DEBT AND EQUITY MANAGEMENT
BUYOUT PARTNERSHIP-VI, L.P.
By: FLC XXIX Partnership,
its general partner
By: ___________________________
__________________,
a general partner
The undersigned acknowledges that the undersigned has read the
foregoing Agreement between The Yankee Candle Company, Inc. and the
undersigned's spouse, understands that the undersigned's spouse has acquired
shares of Common Stock of The Yankee Candle Company, Inc. as reflected in such
Agreement and agrees to be bound by the foregoing Agreement.
---------------------------
Director's Spouse
(if applicable)
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ANNEX A
Number of Shares in Cumulative Number of
Respect of Which Option Shares Subject to the
Is Being Exercised on Stockholder's Agreement
Date the Date Indicated on the Date Indicated
- ---- ----------------------- -----------------------
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Exhibit 10.3
STOCKHOLDER'S AGREEMENT, dated as of [________], 1999, between The
Yankee Candle Company, Inc., a Massachusetts corporation (the "Company"), and
the undersigned (the "Employee"), who was granted the right and option (the
"Option") to acquire shares of Common Stock, par value $0.01 per share, of the
Company pursuant to the terms and conditions of the Company's Employee Stock
Option Plan (the "Plan") and a Stock Option Agreement, dated as of _____,____
between the Company and the Employee (the "Option Agreement").
WHEREAS, the Option Agreement requires the Employee to enter into a
Stockholder's Agreement upon and as a condition to the exercise of the Option;
WHEREAS, the Employee wishes to exercise the Option to acquire
shares of Common Stock; and
WHEREAS, the Employee and the Company wish to provide for certain
arrangements with respect to the Employee's rights to hold and dispose of the
shares of Common Stock acquired by the Employee upon exercise of the Option.
NOW, THEREFORE, the parties hereto agree as follows:
1. DEFINITIONS.
1.1 DEFINITIONS; RULES OF CONSTRUCTION.
(a) The following terms, as used herein, shall have the
following meanings:
"Act" shall mean the Securities Act of 1933, as amended.
"Affiliate" shall mean, with respect to any Person, any other
Person which, directly or indirectly, is in control of, is controlled by, or is
under common control with, such Person.
"Affiliate Securities" shall mean any securities issued by
an Affiliate of the Company.
"Agreement" shall mean this Stockholder's Agreement, as amended,
supplemented or modified from time to time.
"Book Value of the Company" shall mean the sum of (x) the total
assets minus the total liabilities of the Company on a consolidated basis, plus
(y) the
<PAGE>
amount of any reduction in stockholders' equity resulting from the application
of EITF Issue Summary No. 88-16, Basis in Leveraged Buyouts, as of the Valuation
Date, plus (z) the amount of accumulated amortization of that portion of the
purchase price paid for the Company by the FL & Co. Companies that was allocated
to goodwill, excluding other acquired identified intangible assets. For purposes
of calculating the Book Value of the Company and the Book Value Per Share, (i)
all options and other rights to acquire equity interests in the Company
outstanding immediately prior to the date of the Repurchase Notice or exercised
between the Valuation Date and the date of the Repurchase Notice shall be deemed
to have been exercised on the Valuation Date, and (ii) the number of outstanding
shares on the Valuation Date shall be increased by the number of shares subject
to each such option or other right and the assets of the Company shall be
increased by the aggregate exercise price payable in respect of the exercise of
each such option or other right (with respect to clauses (i) and (ii), in the
case of any such option or other right, unless the effect thereof would be to
increase the Book Value Per Share).
"Book Value Per Share" shall mean the amount which would be
payable on the Valuation Date in respect of one share of Common Stock in the
event of a dissolution, liquidation or winding-up of the affairs of the Company
if the amount of assets available for distribution in the event of such
dissolution, liquidation or winding-up with respect to all shares of capital
stock of the Company outstanding (or deemed to be outstanding, as set forth in
the definition of "Book Value of the Company") on the Valuation Date were equal
to the Book Value of the Company. In the event there has been a Stock Dividend
after the Valuation Date and prior to the date of the Repurchase Notice, the
number of shares outstanding for purposes of determining Book Value Per Share
shall be the number of shares that would have been outstanding immediately after
the Stock Dividend on the Valuation Date had the Stock Dividend occurred on the
Valuation Date.
"Capital Transaction" shall mean any Stock Dividend,
recapitalization (including, without limitation, any special dividend or
distribution), reclassification, spin-off, partial liquidation or similar
capital adjustments (including, without limitation, through merger or
consolidation).
"Common Stock" shall mean the Common Stock, par value $0.01 per
share, of the Company. There shall be included within the term Common Stock any
Common Stock now or hereafter authorized to be issued, and any and all
securities of any kind whatsoever of the Company which may be issued after the
date hereof in respect of, or in exchange for, shares of Common Stock pursuant
to a Capital Transaction or otherwise.
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"Company" shall mean The Yankee Candle Company, Inc., a
Massachusetts corporation, and shall include any successor thereto by merger,
consolidation, acquisition of substantially all the assets thereof, or
otherwise.
"Competing Operations" shall have the meaning ascribed to such
term in the definition of Competitive Activity.
"Competitive Activity" shall mean engaging in any of the
following activities: (i) serving as a director of any Competitor; (ii) directly
or indirectly (X) controlling any Competitor or (Y) owning any equity or debt
interests in any Competitor (other than equity or debt interests which are
publicly traded and do not exceed 2% of the particular class of interests then
outstanding) (it being understood that, if any such interests in any Competitor
are owned by an investment vehicle or other entity in which the Employee owns an
equity interest, a portion of the interests in such Competitor owned by such
entity shall be attributed to the Employee, such portion determined by applying
the percentage of the equity interest in such entity owned by the Employee to
the interests in such Competitor owned by such entity); (iii) directly or
indirectly soliciting, diverting, taking away, appropriating or otherwise
interfering with any of the customers or suppliers of the Company or any
Affiliate of the Company; or (iv) employment by (including serving as an officer
or director of), or providing consulting services to, any Competitor; provided,
however, that if the Competitor has more than one discrete and readily
distinguishable part of its business, employment by or providing consulting
services to any Competitor shall be Competitive Activity only if (1) his or her
employment duties are at or involving the part of the Competitor's business that
competes with any of the businesses conducted by the Company or any of its
subsidiaries (the "Competing Operations"), including serving in a capacity where
any person at the Competing Operations reports to the Employee, or (2) the
consulting services are provided to or involve the Competing Operations. For
purposes of this definition, the term "control" means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of any Competitor, whether through the ownership of equity or debt
interests, by contract or otherwise. Notwithstanding the foregoing, the term
"Competitive Activity" shall not include the direct or indirect ownership or
operation of, investment in, or employment or engagement by a Person that is a
Competitor solely because such Person is an independent retail gift shop or
retail garden shop, provided that (i) if such gift shop sells candles or other
home fragrancing products, such products must be manufactured solely by the
Company or its Affiliates, (ii) such gift shop is not located within a 50 mile
radius of any retail gift store owned by the Company or its Affiliates, and
(iii) such retail gift shop does not have revenues in excess of $2 million per
year.
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"Competitor" shall mean any Person that competes either directly
or indirectly with any of the businesses in which, at the time the Employee's
employment is Terminated, the Company or any of its subsidiaries is engaged.
"Expenses of Sale" shall mean all expenses incurred by the FL &
Co. Companies in connection with the sale of the shares of the selling
stockholders pursuant to Section 3.2, 3.3 or 3.4 hereof to the extent that such
expenses are not paid or reimbursed by the Company.
"FL & Co. Companies" shall mean the collective reference to
Forstmann Little & Co. Equity Partnership-V, L.P., a Delaware limited
partnership, and Forstmann Little & Co. Subordinated Debt and Equity Management
Buyout Partnership-VI, L.P., a Delaware limited partnership.
"Legal Representative" shall mean the guardian, executor,
administrator or other legal representative of the Employee. All references
herein to the Employee shall be deemed to include references to the Employee's
Legal Representative, if any, unless the context otherwise requires.
"Litigation" shall mean any actions, suits or proceedings
arising out of or relating to this Agreement and the transactions contemplated
hereby.
"Option," "Option Agreement" and "Plan" shall have the
respective meanings ascribed to such terms in the first paragraph hereof.
"Permitted Transferee" shall have the meaning ascribed to such
term in Section 3.1(b) hereof.
"Person" shall mean an individual, a corporation, a partnership,
an association, a trust or any other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.
"Prohibited Activity" shall have the meaning ascribed to such
term in Section 4.1 hereof.
"Release Date" shall mean the date on which the FL & Co.
Companies and their Affiliates shall cease to own in the aggregate directly or
indirectly at least 20 percent of the then outstanding securities of the Company
having the power to vote in the election of directors of the Company.
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"Representative" shall have the meaning ascribed to such term in
Section 6.13(b) hereof.
"Repurchase Notice" shall have the meaning ascribed to such term
in Section 4.2 hereof.
"Sale Obligations" shall mean any liabilities and obligations
(including liabilities and obligations for indemnification, amounts paid into
escrow and post-closing adjustments) incurred by the selling stockholders in
connection with the sale of their shares pursuant to Section 3.2, 3.3 or 3.4
hereof.
"Section 3.2 Notice" shall have the meaning ascribed to such
term in Section 3.2(a) hereof.
"Section 3.3 Notice" shall have the meaning ascribed to such
term in Section 3.3(a) hereof.
"Stock Dividend" shall mean any stock split, stock dividend,
reverse stock split or similar transaction which changes the number of
outstanding shares of capital stock of the Company.
"Terminated" or "Termination" shall mean that the Employee's
employment on a full-time basis by the Company and its subsidiaries shall have
ceased for any reason whatsoever (including by reason of death, permanent
disability or adjudicated incompetency).
"Third Party" shall mean any Person other than any of the FL &
Co. Companies or an Affiliate or a partner of any of the FL & Co.
Companies or an Affiliate of such partner.
"Transaction" shall mean any sale pursuant to Section 3.2,
3.3 or 3.4 hereof.
"Valuation Date" shall mean the last day of the fiscal year of
the Company immediately preceding the fiscal year in which the Employee's
employment is Terminated.
(b) In this Agreement, unless the context otherwise requires,
words in the singular number or in the plural number shall each include the
singular number and the plural number.
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2. ACQUISITION OF COMMON STOCK.
2.1 EXERCISE OF OPTION. The Employee hereby elects to exercise the
Option in respect of the shares of Common Stock set forth in Annex A hereto.
Promptly upon payment in full of the exercise price for the shares of Common
Stock in respect of which the Option is being exercised and compliance by the
Employee with the other provisions of Article 5 of the Option Agreement and
Section 6.13(a)(ii) hereof, the Company shall issue a stock certificate in the
name of the Employee representing the shares of Common Stock in respect of which
the Option is being exercised and shall enter the Employee's name on the books
of the Company as the stockholder of record of such shares of Common Stock.
3. RIGHTS AND RESTRICTIONS ON COMMON STOCK.
3.1 NO SALE OR TRANSFER.
(a) The Employee shall not sell, transfer, assign, exchange,
pledge, encumber or otherwise dispose of any shares of Common Stock acquired
hereunder or grant any option or right to purchase such shares or any legal or
beneficial interest therein, except in accordance with the provisions of this
Agreement.
(b) The Employee may transfer any shares of Common Stock
acquired hereunder by will, but only to:
(i) any spouse, parent, child (whether natural or
adopted), brother or sister of the Employee, or
(ii) any corporation or partnership which is controlled
by any spouse, parent, child (whether natural or
adopted), brother or sister of the Employee
(the person or persons to which shares of Common Stock are transferred in
accordance with this Section 3.1(b) being herein referred to as the "Permitted
Transferee"); provided, that, for any transfer to the Permitted Transferee to be
effective hereunder, the Permitted Transferee shall agree in writing to be bound
by all the terms of this Agreement applicable to the Employee (including,
without limitation, Article 4 and Section 6.13(b) hereof) as if the Permitted
Transferee originally had been a party hereto; and provided, further, that all
of the stockholders of any Permitted Transferee that is a corporation and all of
the partners of any Permitted Transferee that is a partnership shall agree in
writing not to transfer any shares they then own or may
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<PAGE>
hereafter acquire in the corporate Permitted Transferee or any partnership
interests they then own or may hereafter acquire in the partnership Permitted
Transferee except to a person described in paragraph (i) or (ii) above that has
made the same agreement in writing to the Company, so long as the corporate or
partnership Permitted Transferee shall own any shares of Common Stock. Any
reference herein to the Employee shall be to the Permitted Transferee from and
after the date the transfer is effected in accordance with this Section 3.1(b).
Without limiting the generality of the foregoing, the provisions of Section 4.2
hereof shall be likewise applicable to any Permitted Transferee, commencing upon
the date that such Person becomes a Permitted Transferee, for the respective
periods they would have applied to the Employee.
3.2 PARTICIPATION IN SALE OF COMMON STOCK. The Employee, at the
Employee's option, may participate proportionately (and the FL & Co. Companies
shall allow the Employee to participate proportionately) in any sale (other than
a public offering, which shall be governed by Section 3.3 hereof) of all or a
portion of the shares of Common Stock owned by either of the FL & Co. Companies
to any Third Party by selling in such sale the same percentage of the Employee's
shares of Common Stock as the FL & Co. Companies propose to sell of their shares
of Common Stock to the Third Party (determined on the basis of the aggregate
number of shares of Common Stock owned, and the aggregate number of such shares
being sold, by the FL & Co. Companies). For purposes of determining the number
of shares of Common Stock in respect of which the Employee may participate in
such sale pursuant to this Section 3.2, the Employee shall be deemed to own the
shares of Common Stock acquired upon exercise of the Option at any time plus the
shares of Common Stock subject to any then unexercised portion of the Option, in
each case other than any shares with respect to which any section of this
Agreement (including Section 4.3 hereof) or the Option Agreement (including
Section 6.2(c) thereof) provides that the Employee may not participate in such
sale. The Company shall notify the Employee in writing of the FL & Co.
Companies' intention to effect such a sale to a Third Party and the nature and
per share amount of consideration to be paid by such Third Party at least 10
days, or such shorter time as the Company deems practicable, before the closing
of any such proposed sale of shares of Common Stock (the "Section 3.2 Notice"),
and the Employee shall notify the Company in writing within five days after
receipt of the Section 3.2 Notice of his or her intention to participate in such
sale, including the number of shares of Common Stock with respect to which he or
she will so participate. Any failure by the Employee to so notify the Company
within such five-day period shall be deemed an election by the Employee not to
participate in such sale with respect to any of his or her shares. Any sale of
shares of Common Stock by the Employee pursuant to this Section 3.2 shall be for
the same consideration per share, on the same terms and subject to the same
conditions as the sale of shares of Common Stock owned by the FL & Co.
Companies. If the Employee sells any shares of Common Stock pursuant to this
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Section 3.2, the Employee shall pay and be responsible for the Employee's
proportionate share of the Expenses of Sale and the Sale Obligations.
3.3 PUBLIC OFFERING OF COMMON STOCK.
(a) If the FL & Co. Companies propose to sell all or any
portion of the shares of Common Stock owned by the FL & Co. Companies in a
public offering, the Employee shall be entitled and required to participate in
such public offering by selling in the public offering the same percentage of
the Employee's shares of Common Stock as the FL & Co. Companies propose to sell
of their shares in the public offering (determined on the basis of the aggregate
number of shares of Common Stock owned, and the aggregate number of such shares
being sold, by the FL & Co. Companies). For purposes of determining the number
of shares of Common Stock in respect of which the Employee may participate in
such public offering pursuant to this Section 3.3, the Employee shall be deemed
to own the shares of Common Stock acquired upon exercise of the Option at any
time plus the shares of Common Stock subject to any then unexercised portion of
the Option, in each case other than any shares with respect to which any section
of this Agreement (including Section 4.3 hereof) or the Option Agreement
(including Section 6.2(c) thereof) provides that the Employee may not
participate in such public offering. The Company shall notify the Employee in
writing of the FL & Co. Companies' intention to effect such public offering at
least 10 days, or such shorter time as the Company deems practicable, before the
filing with the Securities and Exchange Commission of the registration statement
relating to such public offering (the "Section 3.3 Notice") and shall cause the
Employee's shares to be sold in such public offering to be included therein. The
Employee shall notify the Company in writing within five days after receipt of
the Section 3.3 Notice of his or her intention to participate in such public
offering, including the number of shares of Common Stock with respect to which
he or she will so participate. Any failure by the Employee to so notify the
Company within such five-day period shall be deemed an election by the Employee
not to participate in such public offering with respect to any of his or her
shares. If the Employee sells any shares of Common Stock pursuant to this
Section 3.3, the Employee shall pay and be responsible for the Employee's
proportionate share of the Expenses of Sale and the Sale Obligations, including,
without limitation, indemnifying the underwriters of such public offering, on a
proportionate basis, to the same extent as the FL & Co. Companies are required
to indemnify such underwriters.
(b) In connection with any proposed public offering of
securities of the Company, whether by any of the FL & Co. Companies or the
Company or otherwise, the Employee agrees (i) to supply any information
reasonably requested by the Company in connection with the preparation of a
registration statement and/or any
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other documents relating to such public offering, and (ii) to execute and
deliver any agreements and instruments reasonably requested by the Company to
effectuate such public offering, including, without limitation, an underwriting
agreement, a custody agreement and a "hold back" agreement pursuant to which the
Employee will agree not to sell or purchase any securities of the Company
(whether or not such securities are otherwise governed by this Agreement) for
the same period of time following the public offering as is agreed to by the FL
& Co. Companies with respect to themselves. If the Company requests that the
Employee take any of the actions referred to in clause (i) or (ii) of the
previous sentence, the Employee shall take such action promptly but in any event
within five days following the date of such request.
3.4 REQUIRED PARTICIPATION IN SALE OF COMMON STOCK BY THE FL & CO.
COMPANIES. Notwithstanding any other provision of this Agreement to the
contrary, if the FL & Co. Companies shall propose to sell (including by
exchange, in a business combination or otherwise) all or any portion of their
shares of Common Stock in a bona fide arm's-length transaction, the FL & Co.
Companies, at their option, may require that the Employee sell the same
percentage of the Employee's shares of Common Stock as the FL & Co. Companies
propose to sell of their shares in the transaction (determined on the basis of
the aggregate number of shares of Common Stock owned, and the aggregate number
of such shares then being sold, by the FL & Co. Companies) for the same
consideration per share, on the same terms and subject to the same conditions in
the same transaction and, if stockholder approval of the transaction is required
and the Employee is entitled to vote thereon, that the Employee vote the
Employee's shares in favor thereof. For purposes of determining the number of
shares of Common Stock in respect of which the Employee is to participate in
such sale pursuant to this Section 3.4, the Employee shall be deemed to own the
shares of Common Stock acquired upon exercise of the Option at any time plus the
shares of Common Stock subject to any then unexercised portion of the Option, in
each case other than any shares with respect to which any section of this
Agreement (including Section 4.3 hereof) or the Option Agreement (including
Section 6.2(c) thereof) provides that the Employee may not participate in such
sale. If the Employee sells any shares pursuant to this Section 3.4, the
Employee shall pay and be responsible for the Employee's proportionate share of
the Expenses of Sale and the Sale Obligations.
3.5 TERMINATION OF RESTRICTIONS AND RIGHTS. Notwithstanding any other
provision of this Agreement to the contrary, but subject to the restrictions of
all applicable federal and state securities laws, including the restrictions in
this Agreement relating thereto, from and after the Release Date any and all
shares of Common Stock owned by the Employee (a) may be sold, transferred,
assigned, exchanged, pledged, encumbered or otherwise disposed of (and the
Employee may grant any option or right to purchase such shares or any legal or
beneficial interest therein, or may continue to
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hold such shares), free of the restrictions contained in this Agreement and (b)
shall no longer be entitled to any of the rights contained in this Agreement.
Without limiting the generality of the foregoing, from and after the Release
Date, the provisions of Articles 3 and 4 hereof (other than this Section 3.5 and
Sections 4.1(a), 4.1(b) and 4.1(c) hereof) shall terminate and have no further
force or effect.
4. PROHIBITED ACTIVITIES.
4.1 PROHIBITION AGAINST CERTAIN ACTIVITIES. The Employee agrees that
(a) the Employee will not, at any time during the Employee's employment (other
than in the course of such employment) with the Company or any Affiliate thereof
or after a Termination, directly or indirectly disclose or furnish to any other
Person or use for the Employee's own or any other Person's account any
confidential or proprietary knowledge or information or any other information
which is not a matter of public knowledge and which was obtained during the
Employee's employment with, or other performance of services for, the Company or
any Affiliate thereof or any predecessor of any of the foregoing, no matter from
where or in what manner the Employee may have acquired such knowledge or
information, and the Employee shall retain all such knowledge and information in
trust for the benefit of the Company, its Affiliates and the successors and
assigns of any of them, (b) if the Employee is Terminated, the Employee will not
for three years following such Termination directly or indirectly solicit for
employment, including without limitation recommending to any subsequent employer
the solicitation for employment of, any employee of the Company or any Affiliate
thereof, (c) the Employee will not, at any time during the Employee's employment
with the Company or any Affiliate thereof or after a Termination, publish any
statement or make any statement (under circumstances reasonably likely to become
public or that the Employee might reasonably expect to become public) critical
of the Company or any Affiliate of the Company, or in any way adversely
affecting or otherwise maligning the business or reputation of any of the
foregoing entities, and (d) the Employee will not breach the provisions of
Section 3.1 hereof (any activity prohibited by clause (a), (b), (c) or (d) of
this Section 4.1 being referred to as a "Prohibited Activity").
4.2 RIGHT TO PURCHASE SHARES. The Employee understands and agrees
that the Company has granted to the Employee the right to acquire shares of
Common Stock to reward the Employee for the Employee's future efforts and
loyalty to the Company and its Affiliates by giving the Employee the opportunity
to participate in the potential future appreciation of the Company. Accordingly,
(a) if the Employee engages in any Prohibited Activity, or (b) if, at any time
during the Employee's employment with the Company or any of its Affiliates or
during the three years following a Termination, the Employee engages in any
Competitive Activity, or (c) if, at any time (whether during the Employee's
employment or after any Termination thereof), the
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Employee is convicted of a crime against the Company or any of its Affiliates,
then, in addition to any other rights and remedies available to the Company, the
Company shall be entitled, at its option, exercisable by written notice (the
"Repurchase Notice") to the Employee, to purchase all of the shares of Common
Stock then held by the Employee.
4.3 PURCHASE PRICE; CLOSING. The purchase price per share of the
shares of Common Stock purchased pursuant to this Article 4 shall be equal to
the lesser of (a) $[____] (adjusted to reflect any Capital Transaction effected
after the date hereof and prior to the date of the Repurchase Notice) and (b)
the Book Value Per Share. The closing of such purchase shall take place at the
principal office of the Company 10 days following the date of the Repurchase
Notice, except that if the Company is prohibited from repurchasing any shares of
Common Stock pursuant to this Article 4 by any contractual obligation of the
Company or any of its Affiliates or by applicable law, the closing of such
purchase shall take place on the first practicable date on which the Company is
permitted to purchase such shares. At such closing, the Employee shall sell,
convey, transfer, assign and deliver to the Company all right, title and
interest in and to the shares of Common Stock being purchased by the Company,
which shall constitute (and, at the closing, the Employee shall certify the same
to the Company in writing) good and unencumbered title to such shares, free and
clear of all liens, security interests, encumbrances and adverse claims of any
kind and nature (other than those in favor of the Company and the FL & Co.
Companies pursuant to this Agreement), and shall deliver to the Company the
certificates representing the shares duly endorsed for transfer, or accompanied
by appropriate stock transfer powers duly executed, and with all necessary
transfer tax stamps affixed thereto at the expense of the Employee, and the
Company shall deliver to the Employee, in full payment of the purchase price
payable pursuant to this Section 4.3 for the shares of Common Stock purchased, a
check payable to the order of the Employee in the amount of the aggregate
purchase price for the shares purchased. Notwithstanding anything herein to the
contrary, from and after the date of the Repurchase Notice, the Employee shall
not have any rights with respect to any shares of Common Stock which the
Employee is required to sell to the Company pursuant to this Article 4
(including any rights pursuant to Section 3.2 or 3.3 hereof), except to receive
the purchase price therefor.
4.4 TRANSACTION PROCEEDS. Notwithstanding anything to the contrary
set forth in Section 3.2, 3.3 or 3.4 hereof, if at the time of a Transaction in
which the Employee is participating, the Company is entitled to purchase the
Employee's shares of Common Stock pursuant to this Article 4, and if the
purchase price per share for a purchase pursuant to this Article 4 would be less
than the proceeds per share to the Employee from such Transaction, then the
Employee shall be entitled to receive only the aggregate purchase price payable
under this Article 4, with the balance of the proceeds of sale in the
Transaction being remitted to the other stockholders of the
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Company participating in such Transaction pro rata in accordance with their
respective participation in such Transaction.
5. STOCK CERTIFICATE LEGEND AND INVESTMENT REPRESENTATIONS; OTHER
REPRESENTATIONS.
5.1 LEGEND. All certificates representing shares of Common Stock
acquired hereunder or hereafter by the Employee (unless registered under the
Act) shall bear the following legend:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or any
securities regulatory authority of any state, and may not be sold,
transferred, assigned, exchanged, pledged, encumbered or otherwise
disposed of except in compliance with all applicable securities laws
and except in accordance with the provisions of a Stockholder's
Agreement with the Company, a copy of which is available for
inspection at the offices of the Company."
5.2 REPRESENTATIONS OF THE EMPLOYEE. The Employee represents and
warrants that: (a) the Employee understands that (i) the offer and sale of
shares of Common Stock in accordance with this Agreement have not been and will
not be registered under the Act, and it is the intention of the parties hereto
that the offer and sale of the securities be exempt from registration under the
Act and the rules promulgated thereunder by the Securities and Exchange
Commission; (ii) the shares of Common Stock being acquired hereunder cannot be
sold, transferred, assigned, exchanged, pledged, encumbered or otherwise
disposed of unless they are registered under the Act or an exemption from
registration is available; and (iii) the acquisition of Common Stock hereunder
does not entitle the Employee to participate in any other equity program of the
Company, whether now existing or hereafter established; (b) the Employee is
acquiring the shares of Common Stock being acquired hereunder for investment for
the Employee's own account and not with a view to the distribution thereof; (c)
the Employee will not, directly or indirectly, sell, transfer, assign, exchange,
pledge, encumber or otherwise dispose of any shares of Common Stock being
acquired hereunder except in accordance with this Agreement; (d) the Employee
has, or the Employee together with the Employee's advisers, if any, have, such
knowledge and experience in financial and business matters that the Employee is,
or the Employee together with the Employee's advisers, if any, are, and will be
capable of evaluating the merits and risks relating to the Employee's
acquisition of shares of Common Stock under this Agreement; (e) the Employee has
been given the opportunity to obtain information and documents relating to the
Company and to ask questions of and receive
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answers from representatives of the Company concerning the Company and the
Employee's investment in the Common Stock; (f) the Employee's decision to invest
in the Company has been based upon independent investigations made by the
Employee and the Employee's advisers, if any; (g) the Employee is able to bear
the economic risk of a total loss of the Employee's investment in the Company;
and (h) the Employee has adequate means of providing for the Employee's current
needs and foreseeable personal contingencies and has no need for the Employee's
investment in the Common Stock to be liquid.
6. MISCELLANEOUS.
6.1 DISTRIBUTIONS. In the event of any dividend, distribution or
exchange paid or made in respect of the Common Stock consisting of Affiliate
Securities, (a) the restrictions and rights with respect to the Common Stock
that are contained in this Agreement shall be applicable to the Affiliate
Securities without further action of the parties (with the references to Common
Stock being deemed references to the Affiliate Securities and the references to
the Company being deemed references to the Affiliate), and (b) as a condition
precedent to the receipt of the Affiliate Securities by the Employee, the
Employee shall enter into a stockholder's agreement containing substantially
equivalent terms with respect to the Affiliate Securities (but reflecting the
economics of the dividend, distribution or exchange and the capitalization of
the Affiliate) as are contained herein. The Board of Directors of the Company,
in good faith, shall determine such terms and its determination shall be final
and binding on the Employee.
6.2 FURTHER ASSURANCES. Each party hereto shall do and perform or
cause to be done and performed all further acts and things and shall execute and
deliver all other agreements, certificates, instruments, and documents as any
other party hereto reasonably may request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
6.3 GOVERNING LAW. This Agreement and the rights and obligations of
the parties hereto shall be governed by, and construed and enforced in
accordance with, the laws of the State of New York, without giving effect to the
principles of conflicts of law thereof.
6.4 SPECIFIC PERFORMANCE. The parties hereto acknowledge that there
will be no adequate remedy at law for a violation of any of the provisions of
this Agreement and that, in addition to any other remedies which may be
available, all of the provisions of this Agreement shall be specifically
enforceable in accordance with their respective terms.
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6.5 INVALIDITY OF PROVISIONS. The invalidity or unenforceability of
any provision of this Agreement in any jurisdiction shall not affect the
validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of this Agreement, including that
provision, in any other jurisdiction. If any provision of this Agreement is held
unlawful or unenforceable in any respect, such provision shall be revised or
applied in a manner that renders it lawful and enforceable to the fullest extent
possible.
6.6 NOTICE. All notices and other communications hereunder shall be
in writing and, unless otherwise provided herein, shall be deemed to have been
given when received by the party to whom such notice is to be given at its
address set forth below, or such other address for the party as shall be
specified by notice given pursuant hereto:
(a) If to the Company, to:
The Yankee Candle Company, Inc.
102 Christian Lane
Whately, MA 01093
Attention: President
with a copy to:
Forstmann Little & Co. Equity Partnership-V, L.P.
767 Fifth Avenue, 44th Floor
New York, New York 10153
Attention: Ms. Sandra J. Horbach
(b) If to the Employee, to the address set forth below the
Employee's signature, and if to the Legal Representative,
to such Person at the address of which the Company is
notified in accordance with this Section 6.6.
6.7 BINDING EFFECT. This Agreement shall inure to the benefit of and
shall be binding upon the parties hereto and their respective heirs, legal
representatives, successors and assigns. In addition, each of the FL & Co.
Companies shall be a third party beneficiary of this Agreement and shall be
entitled to enforce this Agreement.
6.8 AMENDMENT AND MODIFICATION. This Agreement may be amended,
modified or supplemented only by written agreement of the party against whom
enforcement of such amendment, modification or supplement is sought.
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6.9 HEADINGS; EXECUTION IN COUNTERPARTS. The headings and captions
contained herein are for convenience only and shall not control or affect the
meaning or construction of any provision hereof. This Agreement may be executed
in any number of counterparts, each of which shall be deemed to be an original
and which together shall constitute one and the same instrument.
6.10 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement, and supersedes all prior agreements and understandings, oral and
written, between the parties hereto with respect to the subject matter hereof.
6.11 WITHHOLDING. The Company shall have the right to deduct from any
amount payable under this Agreement any taxes or other amounts required by
applicable law to be withheld. The Employee agrees to indemnify the Company
against any Federal, state and local withholding taxes for which the Company may
be liable in connection with the Employee's acquisition, ownership or
disposition of any Common Stock.
6.12 NO RIGHT TO CONTINUED EMPLOYMENT. This Agreement shall not
confer upon the Employee any right with respect to continuance of employment by
the Company or any Affiliate thereof, nor shall it interfere in any way with the
right of the Company or any Affiliate thereof to terminate the Employee's
employment at any time.
6.13 POSSESSION OF CERTIFICATES; POWER OF ATTORNEY.
(a) In order to provide for the safekeeping of the certificates
representing the shares of Common Stock acquired by the Employee pursuant hereto
and to facilitate the enforcement of the terms and conditions hereof, (i) the
Company shall retain physical possession of all certificates representing shares
of Common Stock issued to the Employee, and (ii) concurrently with the
Employee's execution and delivery to the Company of this Agreement, the Employee
shall deliver to the Company an undated stock power, duly executed in blank, for
each such certificate. The Employee shall be relieved of any obligation
otherwise imposed by this Agreement to deliver certificates representing shares
of Common Stock if the same are in the custody of the Company.
(b) The Employee hereby irrevocably appoints the FL & Co.
Companies, and each of them (individually and collectively, the
"Representative"), the Employee's true and lawful agent and attorney-in-fact,
with full powers of substitution, to act in the Employee's name, place and
stead, to do or refrain from doing all such acts and things, and to execute and
deliver all such documents, as the Representative shall
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deem necessary or appropriate in connection with a public offering of securities
of the Company or a sale pursuant to Section 3.2, 3.4 or 4.2 hereof, including,
without in any way limiting the generality of the foregoing, in the case of a
sale pursuant to Section 3.2 or 3.4 hereof, to execute and deliver on behalf of
the Employee a purchase and sale agreement and any other agreements and
documents that the Representative deems necessary in connection with any such
sale, and in the case of a public offering, to execute and deliver on behalf of
the Employee an underwriting agreement, a "hold back" agreement, a custody
agreement, and any other agreements and documents that the Representative deems
necessary in connection with any such public offering, and in the case of any
sale pursuant to Section 3.2 or 3.4 hereof and any public offering pursuant to
Section 3.3(a) hereof, to receive on behalf of the Employee the proceeds of the
sale or public offering of the Employee's shares, to hold back from any such
proceeds any amount that the Representative deems necessary to reserve against
the Employee's share of any Expenses of Sale and Sale Obligations and to pay
such Expenses of Sale and Sale Obligations. The Employee hereby ratifies and
confirms all that the Representative shall do or cause to be done by virtue of
its appointment as the Employee's agent and attorney-in-fact. In acting for the
Employee pursuant to the appointment set forth in this Section 6.13(b), the
Representative shall not be responsible to the Employee for any loss or damage
the Employee may suffer by reason of the performance by the Representative of
its duties under this Agreement, except for loss or damage arising from willful
violation of law or gross negligence by the Representative in the performance of
its duties hereunder. The appointment of the Representative shall be deemed
coupled with an interest and as such shall be irrevocable and shall survive the
death, incompetency, mental illness or insanity of the Employee, and any person
dealing with the Representative may conclusively and absolutely rely, without
inquiry, upon any act of the Representative as the act of the Employee in all
matters referred to in this Section 6.13(b).
6.14 CONSENT TO JURISDICTION. Each party hereby irrevocably and
unconditionally consents to submit to the exclusive jurisdiction of the courts
of the State of New York and of the United States of America, in each case
located in the County of New York, for any Litigation (and agrees not to
commence any Litigation except in any such court), and further agrees that
service of process, summons, notice or document by U.S. registered mail to such
party's respective address set forth in Section 6.6 hereof shall be effective
service of process for any Litigation brought against such party in any such
court. Each party hereby irrevocably and unconditionally waives any objection to
the laying of venue of any Litigation in the courts of the State of New York or
of the United States of America, in each case located in the County of New York,
and hereby further irrevocably and unconditionally waives and agrees not to
plead or claim in any such court that any Litigation brought in any such court
has been brought in an inconvenient forum.
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IN WITNESS WHEREOF, this Agreement has been signed by or on behalf of
each of the parties hereto, all as of the date first above written.
EMPLOYEE THE YANKEE CANDLE
COMPANY, INC.
______________________________ By: ______________________________
Name: Name:
Address: Title:
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The undersigned hereby agree to be bound by the provisions of Sections 3.2 and
3.3 of the foregoing Agreement.
FORSTMANN LITTLE & CO. EQUITY
PARTNERSHIP-V, L.P.
By: FLC XXX Partnership,
its general partner
By: ____________________________
__________________,
a general partner
FORSTMANN LITTLE & CO. SUBORDINATED
DEBT AND EQUITY MANAGEMENT
BUYOUT PARTNERSHIP-VI, L.P.
By: FLC XXIX Partnership,
its general partner
By: ____________________________
__________________,
a general partner
The undersigned acknowledges that the undersigned has read the
foregoing Agreement between The Yankee Candle Company, Inc. and the
undersigned's spouse, understands that the undersigned's spouse has acquired
shares of Common Stock of The Yankee Candle Company, Inc. as reflected in such
Agreement and agrees to be bound by the foregoing Agreement.
___________________________
Employee's Spouse
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ANNEX A
Number of Shares in Cumulative Number of
Respect of Which Option Shares Subject to the
Is Being Exercised on Stockholder's Agreement
Date the Date Indicated on the Date Indicated
- ---- ----------------------- -----------------------
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Exhibit 10.4
THE YANKEE CANDLE COMPANY, INC.
EMPLOYEE STOCK OPTION PLAN
1. BACKGROUND AND PURPOSE.
(a) Yankee Candle Holdings Corp. adopted this Employee Stock
Option Plan on May 18, 1998 pursuant to which it granted stock options (the
"Existing Options") to certain employees of The Yankee Candle Company, Inc. (the
"Company"). In connection with the Initial Public Offering (as defined herein)
of the Company, all of the Existing Options were cancelled and exchanged for
options to acquire shares of common stock of the Company. Further, in connection
with the Initial Public Offering, the Plan (as defined herein) was adopted by
the Company and amended and restated as set forth herein. Following the Initial
Public Offering all of the Existing Options shall be governed by the terms and
conditions of the Plan as amended and restated.
(b) The purpose of The Yankee Candle Company, Inc. Employee
Stock Option Plan is to provide financial incentives to employees of the Company
or its direct or indirect subsidiaries whose entrepreneurial and management
talents and commitments will contribute to the continued growth and expansion of
the Company's business.
The options granted under the Plan are not intended to qualify
as Incentive Stock Options within the meaning of Section 422 of the Code.
2. DEFINITIONS. For purposes of this Plan:
(a) "Affiliate" means any person directly or indirectly
controlling, controlled by or under common control with the person of which
it is an Affiliate.
(b) "Board" means the Board of Directors of the Company or the
Executive Committee of the Board of Directors of the Company.
<PAGE>
(c) "Common Stock" means the Common Stock, par value $0.01 per
share, of the Company and any other securities into which such shares are
changed or for which such shares are exchanged.
(d) "Code" means the Internal Revenue Code of 1986, as
amended.
(e) "Committee" means the Compensation Committee of the Board
of Directors of the Company, unless otherwise specified by the Board, in which
event the committee shall be as specified by the Board, which committee shall
administer the Plan and perform the functions set forth herein. If there is no
Compensation Committee and the Board does not specify otherwise, the Committee
shall mean the Board.
(f) "Company" means The Yankee Candle Company, Inc. a
Massachusetts corporation, and any successor to The Yankee Candle Company,
Inc. by merger, consolidation or otherwise.
(g) "Eligible Person" means any employee of the Company or any
of its direct or indirect wholly owned subsidiaries whom the Committee
designates as eligible to receive Options under the Plan.
(h) "FL & Co. Companies" means individually and collectively
Forstmann Little & Co. Equity Partnership-V, L.P., a Delaware limited
partnership, and Forstmann Little & Co. Subordinated Debt and Equity Management
Buyout Partnership-VI, L.P., a Delaware limited partnership.
(i) "Initial Public Offering" means the first Public Offering.
(j) "Legal Representative" means the guardian, executor,
administrator or other legal representative of the Optionee. All references
herein to the Optionee shall be deemed to include references to the Optionee's
Legal Representative, if any, unless the context otherwise requires.
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(k) "Option" means an option to purchase shares of Common
Stock granted under the Plan.
(l) "Optionee" means a person to whom an Option has been
granted under the Plan.
(m) "Option Price" means the price at which a share of Common
Stock can be purchased pursuant to an Option.
(n) "Plan" means The Yankee Candle Company, Inc. Employee
Stock Option Plan as set forth in this instrument and as it may be amended from
time to time.
(o) "Public Offering" means a public offering of Common Stock
registered under the Securities Act of 1933, as amended.
(p) "Stock Option Agreement" means the written agreement
between an Optionee and the Company evidencing the grant of an Option under the
Plan and setting forth the terms and conditions of that Option.
(q) "Stockholder's Agreement" means the Stockholder's
Agreement governing the rights, duties and obligations of present or former
employees of the Company with respect to shares of Common Stock granted or sold
to such persons, or issued pursuant to options granted or sold to such persons,
in the form attached hereto as Annex I or such form as is in use by the Company
at the time of exercise of the Option or any part thereof or such other form
which the Company elects to require the Optionee to execute in connection with
the Optionee's exercise of the Option. All references in any Stock Option
Agreement to sections of a Stockholder's Agreement shall be to sections of the
Stockholder's Agreement which is attached hereto or to the corresponding
sections of any Stockholder's Agreement in use by the Company at the time of
exercise of any Option or which the Company elects to require the Optionee to
execute in connection with the Optionee's exercise of the Option.
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(r) "Third Party" means any person or entity which is not any
of the FL & Co. Companies or a partner or an Affiliate of any of the FL & Co.
Companies or an Affiliate of such partner.
(s) "Total Private Sale" means any of the following events:
(i) the merger or consolidation of the Company with or into another corporation
(other than a merger or consolidation in which the Company is the surviving
corporation and which does not result in any capital reorganization or
reclassification or other change of the then outstanding shares of Common
Stock), or (ii) the liquidation of the Company, or (iii) the sale to a Third
Party of all or substantially all of the assets of the Company pursuant to a
plan of liquidation or otherwise, or (iv) the sale to a Third Party of Common
Stock (other than through a Public Offering); in each case provided that, as a
result thereof, the FL & Co. Companies, the direct and indirect partners of any
of the FL & Co. Companies and any Affiliates of any of the foregoing cease to
own, directly or indirectly, any shares of the voting stock of the Company.
3. ADMINISTRATION. The Plan shall be administered by the Committee,
which shall hold meetings when it deems necessary and shall keep minutes of its
meetings. The Committee shall have all of the powers necessary to enable it to
carry out its duties under the Plan properly, including the power and duty to
construe and interpret the Plan and to determine all questions arising under it.
The Committee's interpretations and determinations shall be conclusive and
binding upon all persons. The Committee may also establish, from time to time,
such regulations, provisions, procedures and conditions regarding the Options
and granting of Options which in its opinion may be advisable in administering
the Plan. The acts of a majority of the total membership of the Committee at any
meeting, or the acts approved in writing by all of its members, shall be the
acts of the Committee; provided, that if at any time the Committee is the Board,
the acts of a majority of the members of the Board present at any meeting, or
the acts approved in writing by all of its members, shall be the acts of the
Committee.
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4. SHARES AVAILABLE FOR OPTION.
(a) The Committee shall have the authority to issue pursuant
to the Plan the number of shares of Common Stock that are covered by the Options
into which the Existing Options were exchanged in connection with the Initial
Public Offering.
(b) In the event that an Option granted under the Plan to any
Eligible Person expires or is for any other reason terminated, those shares of
Common Stock covered by any portion of such Option that has not been exercised
prior thereto shall thereafter be available for the granting of future Options
under the Plan.
(c) The Company may, but shall not be required to, reserve out
of its authorized but unissued shares of Common Stock, or out of shares of
Common Stock held in treasury, or partly out of each, as may be determined by
the Board, shares of Common Stock for issuance upon exercise of any Option.
5. GRANTING OPTIONS.
(a) Subject to the provisions of the Plan, the Committee shall
have full and final authority to select those Eligible Persons who will receive
Options. The Committee may also grant more than one Option to a given Eligible
Person during the term of the Plan, either in addition to, or in substitution
for, one or more Options previously granted that Eligible Person. Options shall
be issued pursuant to a Stock Option Agreement, in form and substance approved
by the Committee, executed by the Company and the Optionee.
(b) The Committee, in its sole discretion, shall establish the
Option Price at the time an Option is granted.
(c) The terms of each Option granted under the Plan may differ
from those of other Options granted under the Plan at the same time, or at some
other time.
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(d) An Option shall be exercisable in such installments (which
need not be equal) and at such times as may be designated by the Committee and
set forth in the Stock Option Agreement. To the extent not exercised,
installments may accumulate and be exercisable, in whole or in part, at any time
after becoming exercisable, but not later than the date the Option expires. The
Committee may accelerate the exercisability of any Option or portion thereof at
any time. In no event shall the term of any Option granted under the Plan exceed
ten years.
(e) Options granted under the Plan shall not be transferable
by the Optionee except as approved by the Committee as reflected in the Stock
Option Agreement.
(f) Subject to the terms and conditions and within the
limitations of the Plan, the Committee may modify, extend, replace or renew
outstanding Options granted under the Plan, or accept the surrender of
outstanding Options (to the extent they have not yet been exercised) and grant
new Options in substitution for them. Notwithstanding the foregoing, however, no
modification of an Option shall adversely alter or impair any rights or
obligations under that Option without the affected Optionee's consent.
6. EXERCISE OF OPTIONS.
(a) To exercise an Option, in whole or in part, the Optionee
shall deliver to the Committee a written notice of exercise specifying the
number of shares of Common Stock in respect of which the Option is being
exercised. The Stock Option Agreement shall set forth the minimum number of
shares of Common Stock, if any, which may be purchased at any one time upon the
exercise of an Option. An Optionee shall not be deemed the holder of any shares
of Common Stock subject to the Option or have any rights of a stockholder with
respect thereto until the Option shall have been exercised in accordance with
the terms of the Stock Option Agreement, the shares of Common Stock in respect
of which the Option was exercised shall have been issued to
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such Optionee and the name of such Optionee shall have been entered as a
stockholder of record on the books of the Company. The Stock Option Agreement
may contain such other conditions to the exercise of an Option as the Committee
from time to time shall determine and may also contain provisions relating to
the ownership of the shares of Common Stock issued upon the exercise of the
Option or may require the Optionee, as a condition of exercise of the Option, to
execute a Stockholder's Agreement.
(b) Except as provided in the Stock Option Agreement, any
Options held by an Optionee shall not be exercisable after the termination of
the Optionee's employment with the Company. In addition, except as provided in
the Stock Option Agreement, Options granted under the Plan shall be exercisable
only by the Optionee or the Optionee's Legal Representative.
(c) All certificates representing shares of Common Stock
issued pursuant to the exercise of an Option shall bear the following legend:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or
any securities regulatory authority of any state, and may not
be sold, transferred, assigned, exchanged, pledged, encumbered
or otherwise disposed of except in compliance with all
applicable securities laws and except in accordance with the
provisions of a Stockholder's Agreement with the Company, a
copy of which is available for inspection at the offices of
the Company."
or such other legend to the same effect as approved by the Committee.
(d) To the extent that an Option is not exercised prior
to the expiration of its term or such shorter period of time prescribed by the
Plan and the Stock Option Agreement, the Option shall lapse and all rights of
the Optionee with respect thereto shall terminate.
7. CHANGES IN COMMON STOCK.
(a) In the event that the outstanding shares of Common Stock
are changed into or exchanged for a different number or kind of shares of stock
or other
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securities of the Company, whether through merger, consolidation,
reorganization, recapitalization, stock dividend, stock split-up or other
substitution of securities of the Company, the Committee shall make appropriate
adjustments to the maximum number and kind of shares of stock as to which
Options may be granted under the Plan and the number and kind of shares of stock
with respect to which Options have been granted under the Plan, the Option Price
for such shares and any other economic terms of the Option. The Committee's
adjustment shall be final and binding for all purposes of the Plan and each
Stock Option Agreement entered into under the Plan. No adjustment provided for
in this Section 7 shall require the Company to issue a fractional share, and
with respect to each Stock Option Agreement the total adjustment as to the
number of shares for which Options have been granted shall be effected by
rounding down to the nearest whole number of shares.
(b) Upon the effective date of any Total Private Sale, the
Plan and any unexercised Options granted under the Plan shall terminate unless
provision shall be made in writing in connection with such Total Private Sale
for the continuance of the Plan and such unexercised Options or for the
assumption of such unexercised Options by a successor to the Company or for the
substitution for such unexercised Options of new options covering shares of such
a successor with appropriate adjustments as to number and kind of shares and
prices of shares subject to such new options; provided, however, that in
connection with a Total Private Sale, the Committee may, in its discretion,
authorize the redemption of unexercised Options for a redemption price set forth
in the Stock Option Agreement. In the event that provision is made in writing as
aforesaid in connection with a Total Private Sale, the Plan and the unexercised
Options theretofore granted or the new options substituted therefor shall
continue in the manner and under the terms provided in the Plan and the Stock
Option Agreements and in such writing.
8. AMENDMENT OR TERMINATION OF PLAN. The Board shall have the right
to amend, suspend or terminate the Plan at any time. The rights of an Optionee
under any
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<PAGE>
Option granted prior to an amendment, suspension or termination of the Plan
shall not be adversely affected by any such action of the Board except upon the
consent of the Optionee; provided that an amendment to Section 4 of the Plan to
increase the number of shares of Common Stock with respect to which Options may
be granted by the Committee shall not be deemed to adversely affect any
Optionee.
9. INDEMNIFICATION OF THE COMMITTEE. The members of the Committee
shall be indemnified by the Company against all losses, claims, damages and
liabilities, joint or several (including all legal and other expenses reasonably
incurred in connection with the preparation for, or defense of, any claim,
action or proceeding, whether or not resulting in any liability), for any acts
or omissions which are within the scope of such member's duties as a member of
the Committee to the fullest extent permitted by law.
10. COMPLIANCE WITH LAW AND OTHER CONDITIONS. All Options and Stock
Option Agreements shall be governed by, and construed and enforced in accordance
with, the laws of the State of New York without giving effect to the principles
of conflicts of laws thereof, except that matters covered under the General Laws
of the State of Massachusetts shall be governed thereby, to the extent in either
case not superseded by the laws of the United States. Notwithstanding anything
herein or in any agreements pursuant to which Options are granted to the
contrary, the Company shall not be required to issue shares pursuant to the
exercise of any Option granted under the Plan unless the Company's counsel has
advised the Company that such exercise and issuance comply with all applicable
laws including, without limitation, all applicable federal and state securities
laws.
11. MISCELLANEOUS. Nothing in the Plan or in any Stock Option
Agreement shall (a) confer on any employee any right to continue in the employ
of the Company or any successor; or (b) affect the right of the Company or any
successor to terminate the employment of an employee at any time; or (c) be
deemed a waiver or
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modification of any provision contained in any agreement between the employee
and the Company or any successor.
12. EFFECTIVE DATE AND DURATION OF PLAN. The effective date of the
Plan shall be the date of its adoption by the Board, subject only to the
approval of the stockholders of the Company entitled to vote thereon. No Options
may be granted under the Plan after the date twenty years from the date the Plan
is adopted by the Board.
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<PAGE>
STOCK OPTION AGREEMENT (the "Agreement"), dated as of
[____________], 1999 between The Yankee Candle Company, Inc., a Massachusetts
corporation (together with its successors, the "Company"),
and < Employee > (the "Optionee").
1. EXCHANGE OF OLD OPTIONS FOR NEW OPTIONS.
1.1 TERMS OF EXCHANGE. Pursuant to the terms and
conditions of the Yankee Candle Holdings Corp. Employee Stock Option Plan (the
"Old Plan") and a Stock Option Agreement, dated as of [________, 199_], between
Yankee Candle Holdings Corp., a Delaware corporation ("Holdings") and the
Optionee (the "Old Stock Option Agreement"), Holdings granted to the Optionee
the right and option (the "Old Option") to purchase all or any part of an
aggregate of [____] whole shares of Class A Common Stock, par value $0.01 per
share, of Holdings. As a result of a reorganization in connection with the
initial public offering (the "Offering") of shares of the Common Stock (as
defined below) of the Company, effective upon the closing of the Offering, the
Old Option will be exchanged for a new option of the Company as set forth below.
Effective upon the closing of the Offering, the Old Plan, the Old Option and the
Old Option Agreement will be of no further force and effect, and the Optionee
will have a new option (the "Option") to purchase all or any part of an
aggregate of [____] whole shares of Common Stock, par value $.01 per share, of
the Company (the "Common Stock") (such number being subject to adjustment as
provided in Section 8 hereof) on the terms and conditions set forth in this
Agreement and in The Yankee Candle Company, Inc. Employee Stock Option Plan (the
"Plan"). A copy of the Plan is being delivered to the Optionee concurrently
herewith and is made a part hereof as if fully set forth herein. In
consideration of the rights granted hereunder, the Optionee waives any and all
rights it may have under the Old Plan and Old Stock Option Agreement, from and
after the closing of the Offering.
1.2 NON-QUALIFIED OPTION. The Option is not intended to
qualify as an Incentive Stock Option within the meaning of Section 422 of the
Code.
1.3 DEFINED TERMS. Except as otherwise defined herein,
capitalized terms used in this Agreement shall have the same definitions as set
forth in the Plan.
2. PURCHASE PRICE. The price at which the Optionee shall be entitled
to purchase shares of Common Stock upon the exercise of this Option shall be
$[_________] per share (such price being subject to adjustment as provided in
Section 8 hereof) (the "Option Price").
<PAGE>
3. DURATION OF OPTION. The Option shall be exercisable to the extent
and in the manner provided herein for a term of 10 years from the date of the
grant of the Old Option; provided, however, that the Option may be earlier
terminated as provided in Section 4, Section 6, Section 7 or Section 9 hereof.
4. EXERCISABILITY OF OPTION.
4.1 AMOUNT OF EXERCISE. Subject to the provisions of this
Agreement and the Plan, the Option shall be exercisable in accordance with the
following schedule:
(a) on or after [___________] but before [______________], the
Option may be exercised to acquire up to [____] shares of Common
Stock which may be purchased pursuant to the Option as set forth in
Section 1.1 hereof, less any shares previously acquired pursuant to
the Option;
(b) on or after [__________] but before [______________], the
Option may be exercised to acquire [____] shares of Common Stock
which may be purchased pursuant to the Option as set forth in
Section 1.1 hereof, less any shares previously acquired pursuant to
the Option;
(c) on or after on or after [__________] but before
[______________], the Option may be exercised to acquire up to
[____] shares of Common Stock which may be purchased pursuant to the
Option as set forth in Section 1.1 hereof, less any shares
previously acquired pursuant to the Option;
(d) on or after on or after [__________] but before
[______________], the Option may be exercised to acquire up to
[____] shares of Common Stock which may be purchased pursuant to the
Option as set forth in Section 1.1 hereof, less any shares
previously acquired pursuant to the Option;
(e) on or after on or after [__________] but before the
expiration of the term of the Option, the Option may be exercised to
acquire up to 100% of the aggregate number of shares of Common Stock
which may be purchased pursuant
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<PAGE>
to the Option as set forth in Section 1.1 hereof, less any shares
previously acquired pursuant to the Option.
4.2 TIMING OF EXERCISE. The Option may be exercised (to the
extent the Option is exercisable pursuant to Section 4.1 hereof at such time) at
any time.
4.3 SALES OR OTHER EVENTS. The Company shall give the Optionee
10 days' notice (or, if not practicable, such shorter notice as may be
practicable) prior to the anticipated date of the consummation of a Total Sale
(as hereinafter defined) or the anticipated date of the consummation of a
Partial Sale (as hereinafter defined) (the "Sale Notice"). Upon receipt of the
Sale Notice, and for a period of five days thereafter (or such shorter period as
the Committee shall determine and so notify the Optionee), the Optionee shall be
permitted to exercise the Option to the extent provided in this Section 4.3,
whether or not the Option was otherwise so exercisable on the date the Sale
Notice was given; provided, that, in the event of a Total Sale or a Partial Sale
in which the Optionee would be required to participate pursuant to Section 3.4
of the Stockholder's Agreement were the Optionee then a party to such agreement,
the Company may require the Optionee to exercise the Option to the extent
necessary to enable the Optionee to participate therein or to forfeit the Option
(or portion thereof, as applicable). In the case of a Total Sale, the Option may
be exercised in whole or in part for up to the full amount of the shares of
Common Stock covered thereby (less the number of shares previously acquired by
the Optionee upon exercise of the Option, if any). In the case of a Partial
Sale, the Option may be exercised in whole or in part, but not for more than the
excess, if any, of (a) the number of shares with respect to which the Optionee
would be entitled to participate in the Partial Sale pursuant to Section 3.2 or
3.3, as applicable, of the Stockholder's Agreement, and will so participate,
over (b) the number of shares previously issued to the Optionee upon exercise of
the Option and not disposed of in a prior Partial Sale. In the event the Total
Sale or Partial Sale is not consummated, the Option will be deemed not to have
been exercised and shall be exercisable thereafter to the extent it would have
been exercisable if no such notice had been given. In lieu of permitting or
requiring the Optionee to exercise the Option in the event of a Total Sale, the
Committee, in its sole discretion, may instead cause the Company to redeem the
unexercised portion of the Option pursuant to Section 9 hereof. In lieu of
permitting the Optionee to exercise the Option in connection with a public
offering of all or a portion of the shares of Common Stock owned by the FL & Co.
Companies (an "FL Public Offering"), the Company, at its option, may instead
cause the Option and the underlying shares to be registered under applicable
securities laws or make other arrangements consistent with such laws, so as to
permit the Optionee to sell for a period of time after the FL Public Offering
the same number of shares that he or she would have been able to sell in the FL
Public Offering but for this sentence.
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<PAGE>
For purposes hereof, (a) the term "Total Sale" shall mean any
of the following events: (i) the merger or consolidation of the Company with or
into another corporation (other than a merger or consolidation in which the
Company is the surviving corporation and which does not result in any capital
reorganization or reclassification or other change of the then outstanding
shares of Common Stock), or (ii) the liquidation of the Company, or (iii) the
sale to a Third Party of all or substantially all of the assets of the Company
pursuant to a plan of liquidation or otherwise, or (iv) the sale to a Third
Party of Common Stock (other than through a Public Offering); in each case,
provided that, as a result thereof, the FL & Co. Companies, the direct and
indirect partners of any of the FL & Co. Companies and any Affiliates of any of
the foregoing cease to own, directly or indirectly, any shares of the voting
stock of the Company, and (b) the term "Partial Sale" shall mean any sale by the
FL & Co. Companies of all or a portion of their shares of Common Stock to a
Third Party, including through any Public Offering, which sale is not a Total
Sale.
4.4 TERMINATION OF OPTION. Subject to the provisions of
Section 9 hereof, the Option shall terminate simultaneously with the
consummation of a Total Sale to the extent that the Option has not theretofore
been exercised.
4.5 EXERCISES UNDER MULTIPLE OPTION AGREEMENTS.
Notwithstanding anything herein to the contrary, if in connection with a Partial
Sale, the Optionee shall be entitled to acquire shares of Common Stock pursuant
to Section 4.3 hereto and pursuant to the analogous provisions of one or more
other stock option agreements between the Optionee and the Company (any such
agreement, including this Agreement, an "Option Agreement"), then the Company
shall have the right, at its option, to designate the Option Agreement or Option
Agreements pursuant to which the Optionee may exercise options for purposes of
the Optionee's participation in the Partial Sale, provided that in no event
shall any such determination reduce the aggregate number of shares that the
Optionee would otherwise be entitled to sell in connection with such Partial
Sale.
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<PAGE>
5. MANNER OF EXERCISE AND PAYMENT.
5.1 NOTICE OF EXERCISE. Subject to the terms and conditions of
this Agreement and the Plan, the Option may be exercised by delivery of written
notice to the Company. Such notice shall state that the Optionee is electing to
exercise the Option, shall set forth the number of shares of Common Stock in
respect of which the Option is being exercised and shall be signed by the
Optionee or, where applicable, by the Optionee's Legal Representative. The
Company may require proof satisfactory to it as to the right of the Legal
Representative to exercise the Option.
5.2 DELIVERIES. The notice of exercise described in Section
5.1 hereof shall be accompanied by (a) payment of the full purchase price for
the shares in respect of which the Option is being exercised, together with any
withholding taxes that may be due as a result of the exercise of the Option,
such payment to be made by delivery to the Company of a certified or bank check
payable to the order of the Company or cash by wire transfer or other
immediately available funds to an account designated by the Company, and (b) a
fully executed Stockholder's Agreement (a copy of which, in the form to be
executed by the Optionee (which may differ from the form attached to the Plan),
will be supplied to the Optionee upon request) and the undated stock power
referred to in Section 6.13(a)(ii) of the Stockholder's Agreement. Not less than
five shares of Common Stock may be purchased at any one time upon any exercise
of the Option, unless the number of shares of Common Stock so purchased
constitutes the total number of shares of Common Stock then purchasable under
the Option.
5.3 ISSUANCE OF SHARES. Upon receipt of notice of exercise,
full payment for the shares of Common Stock in respect of which the Option is
being exercised and a fully executed Stockholder's Agreement and stock power,
and subject to Section 10 of the Plan, the Company shall take such action as may
be necessary under applicable law to effect the issuance to the Optionee of the
number of shares of Common Stock as to which such exercise was effected.
5.4 STOCKHOLDER RIGHTS. The Optionee shall not be deemed to be
the holder of, or to have any of the rights of a holder with respect to, any
shares of Common Stock subject to the Option until: (a) the Option shall have
been exercised in accordance with the terms of this Agreement and the Optionee
shall have paid the full purchase price for the number of shares in respect of
which the Option was exercised and any withholding taxes due, (b) the Optionee
shall have delivered the fully executed Stockholder's Agreement and stock power
to the Company, (c) the Company shall have issued the shares to the Optionee,
and (d) the Optionee's name shall have been entered as a stockholder of record
on the books of the Company. Upon the occurrence of all of the foregoing events,
the Optionee shall have full ownership rights with respect to such shares,
subject to the provisions of the Stockholder's Agreement.
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<PAGE>
5.5 PARTIAL EXERCISE. In the event the initial exercise of the
Option is an exercise in part only, then, in the event of any further exercise
of the Option, the Optionee, in lieu of executing a new Stockholder's Agreement,
may, at the Company's option, re-execute the original Stockholder's Agreement,
thereby reaffirming the representations, warranties, covenants and agreements
contained in the Stockholder's Agreement as of the date of re-execution, but
with an amended Annex A completed to set forth the number of shares of Common
Stock in respect of which the Option is then being exercised and the cumulative
number of shares of Common Stock which would then be subject to the
Stockholder's Agreement. If the initial exercise of the Option is by the
Optionee and any subsequent exercise of the Option is by the Legal
Representative, then the Legal Representative shall execute, at the Company's
option, either a new Stockholder's Agreement or a counterpart of the original
Stockholder's Agreement thereby agreeing to be bound by such agreement as though
such person were an original signatory thereto and affirming the truth of the
representations and warranties contained therein with respect to such person as
of the date of such person's execution of such counterpart.
6. CERTAIN RESTRICTIONS.
6.1 NO SALE OR TRANSFER. The Optionee shall not sell,
transfer, assign, exchange, pledge, encumber or otherwise dispose of the Option
or any portion thereof, except in accordance with the provisions of this
Agreement.
6.2 EMPLOYMENT TERMINATION. (a) Except as may be agreed
between the Committee and the Optionee, if the Optionee shall no longer be
employed by the Company for any reason whatsoever (including by reason of death,
permanent disability or adjudicated incompetency) ("Terminated" or a
"Termination"), irrespective of whether the Optionee receives, in connection
with the Termination, any severance or other payment from the Company under any
employment agreement or otherwise (such Optionee being referred to herein as a
"Terminated Optionee"), (i) the Option, to the extent it is not exercisable
pursuant to Section 4.1 hereof at the date of such Termination, shall terminate
on and shall be of no further force and effect from and after the date of such
Termination, and (ii) the Company shall have the right, at its option,
exercisable by delivery of written notice to the Optionee within 90 days
following the date of Termination (the date of delivery of such written notice
being referred to herein as the "Election Date"), to redeem the Option to the
extent the Option is exercisable pursuant to Section 4.1 hereof immediately
prior to the date of the Optionee's Termination (the "Exercisable Portion of the
Option") or any portion thereof as determined by the Company (such portion to be
redeemed being referred to herein as the "Called Option") for the consideration
specified below.
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<PAGE>
(b) The redemption price of the Called Option (the "Redemption
Price") shall be equal to (i) the excess, if any, of (A) the amount which would
be payable on the Valuation Date (as defined below) in respect of one share of
Common Stock in the event of a dissolution, liquidation or winding-up of the
affairs of the Company if the amount of assets available for distribution in the
event of such dissolution, liquidation or winding-up with respect to all shares
of capital stock of the Company outstanding as of the Valuation Date were equal
to the Book Value of the Company (as defined below), over (B) the Option Price,
multiplied by (ii) the number of shares of Common Stock issuable upon exercise
of the Called Option. In the event there has been a stock split, stock dividend
or reverse stock split or similar transaction which changes the number of
outstanding shares of capital stock of the Company (each, a "Stock Dividend")
after the Valuation Date and prior to the Election Date, the number of shares
outstanding for purposes of determining the Redemption Price shall be the number
of shares that would have been outstanding immediately after the Stock Dividend
on the Valuation Date had the Stock Dividend occurred on the Valuation Date.
"Book Value of the Company" shall mean the sum of (x) the
total assets minus the total liabilities of the Company on a consolidated basis,
plus (y) the amount of any reduction in stockholders' equity resulting from the
application of EITF Issue Summary No. 88-16, Basis in Leveraged Buyouts, plus
(z) the amount of accumulated amortization of that portion of the purchase price
paid for the Company by the FL & Co. Companies that was allocated to goodwill,
excluding other acquired identified intangible assets, all as of the last day of
the fiscal year immediately preceding the fiscal year in which the Termination
occurred (the "Valuation Date"). For purposes of calculating the Book Value of
the Company and the Redemption Price, (i) all options and other rights to
acquire equity interests in the Company outstanding immediately prior to the
date of the Repurchase Notice or exercised between the Valuation Date and the
date of the Repurchase Notice shall be deemed to have been exercised on the
Valuation Date, and (ii) the number of outstanding shares on the Valuation Date
shall be increased by the number of shares subject to each such option or other
right and the assets of the Company shall be increased by the aggregate exercise
price payable in respect of the exercise of each such option or other right
(with respect to clauses (i) and (ii), in the case of any such option or other
right, unless the effect thereof would be to increase the Redemption Price).
If the Company exercises its right to redeem all or any
portion of the Exercisable Portion of the Option, then within 15 days following
the later of the Election Date or the date the financial statements referred to
below are available (such later date being referred to herein as the "Delivery
Date"), the Company shall deliver to the Terminated Optionee a certificate of
the chief financial officer of the Company setting forth the Redemption Price
and the calculation thereof and stating that a copy of
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the Company's consolidated financial statements as of the Valuation Date is
available to the Terminated Optionee for his or her review at the principal
office of the Company (the "Redemption Price Certificate"), and shall make
available to the Terminated Optionee, for review at the principal office of the
Company, a copy of such financial statements.
The Book Value of the Company as of the Valuation Date as
reflected in the consolidated financial statements of the Company as of the
Valuation Date and the Redemption Price and the calculation thereof as certified
by the chief financial officer of the Company in the Redemption Price
Certificate shall be final and binding on the Company and the Terminated
Optionee for purposes of this Agreement. The Optionee shall keep the Redemption
Price Certificate, the financial statements and any other documentation provided
in connection therewith confidential, shall not use any such material or any
information contained therein for any purpose other than to verify the amount
due the Optionee in respect of the redemption of the Called Option, and shall
not disclose any such material or any information contained therein to anyone
other than to the Optionee's legal or financial advisers who have agreed in
writing to the equivalent confidentiality, non-use and non-disclosure provisions
contained in this paragraph.
(c) Subject to Section 6.2(d) hereof, the closing of the
redemption of the Called Option (the "Redemption Closing") shall take place at
the principal office of the Company or such other place as may be specified by
the Company on the later of (i) 10 days after the Delivery Date and (ii) (if
applicable) 10 days after the appointment of the Optionee's Legal
Representative. At the Redemption Closing, the Company shall deliver to the
Terminated Optionee a check payable to the order of the Terminated Optionee in
the amount of the Redemption Price in full payment of the amount due the
Optionee in respect of the redemption of the Called Option. Upon payment by the
Company of the Redemption Price, if any, or, if no Redemption Price is owing,
upon delivery of the Redemption Price Certificate to the Optionee, the Called
Option shall automatically terminate and shall be of no further force or effect.
Notwithstanding anything herein to the contrary, from and after the Election
Date, the Optionee shall not have any rights with respect to the Called Option
(including any rights with respect to a Total Sale or a Partial Sale) except to
receive the Redemption Price therefor.
(d) Notwithstanding the provisions of Section 6.2(c) hereof,
if the Company exercises its option to redeem the Called Option but is
prohibited from effecting such redemption by any contractual obligation of the
Company or any of its Affiliates or by applicable law, the Redemption Closing
shall take place on the first practicable date on which the Company is permitted
to purchase the Called Option.
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(e) If the Company elects not to exercise its right to redeem
the Exercisable Portion of the Option or any portion thereof, it shall so notify
the Terminated Optionee in writing within 90 days following the date of
Termination (the date of delivery of such written notice being referred to
herein as the "Notification Date"), and the Terminated Optionee shall have the
right, at his or her option, to exercise the portion of the Exercisable Portion
of the Option not being redeemed one time at any time within 60 days after the
Notification Date, but in no event after the expiration of the term of the
Option, and, until exercised, the portion of the Exercisable Portion of the
Option not being redeemed shall continue to be subject to the terms of this
Agreement, including Section 4.3 hereof. If the Terminated Optionee does not
exercise the portion of the Exercisable Portion of the Option not being redeemed
within the 60-day exercise period provided for in this subsection (e), such
portion shall terminate and shall be of no further force and effect from and
after the final date on which the Terminated Optionee could have so exercised
the portion of the Exercisable Portion of the Option not being redeemed.
7. PROHIBITED ACTIVITIES.
7.1 PROHIBITION. The Optionee agrees that (a) the Optionee
will not at any time during his or her employment (other than in the course of
his or her employment) with the Company or any Affiliate thereof, or after a
Termination, directly or indirectly disclose or furnish to any other person or
use for the Optionee's own or any other person's account any confidential or
proprietary knowledge or information or any other information which is not a
matter of public knowledge obtained during the course of his or her employment
with, or other performance of services for, the Company or any Affiliate thereof
or any predecessor of any of the foregoing, no matter from where or in what
manner the Optionee may have acquired such knowledge or information, and the
Optionee shall retain all such knowledge and information in trust for the
benefit of the Company, its Affiliates and the successors and assigns of any of
them, (b) the Optionee will not at any time during his or her employment with
the Company or any Affiliate thereof, or for three years following a
Termination, directly or indirectly solicit for employment, including without
limitation recommending to any subsequent employer the solicitation for
employment of, any employee of the Company or any Affiliate thereof, (c) the
Optionee will not at any time during his or her employment with the Company or
any Affiliate thereof, or after a Termination, publish any statement or make any
statement (under circumstances reasonably likely to become public or that the
Optionee might reasonably expect to become public) critical of the Company or
any Affiliate of the Company, or in any way adversely affecting or otherwise
maligning the business or reputation of any of the foregoing entities, and (d)
the Optionee will not breach the provisions of Section 6.1 hereof (any activity
prohibited by clause (a), (b), (c) or (d) of this Section 7.1 being herein
referred to as a "Prohibited Activity").
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7.2 RIGHT TO TERMINATE OPTION. The Optionee understands and
agrees that the Company is granting to the Optionee an option to purchase shares
of Common Stock hereunder to reward the Optionee for the Optionee's future
efforts and loyalty to the Company and its Affiliates by giving the Optionee the
opportunity to participate in the potential future appreciation of the Company.
Accordingly, if, at any time during which any portion of the Option (including
the Exercisable Portion of the Option and the Called Option, as applicable) is
outstanding, (a) the Optionee engages in any Prohibited Activity, or (b) the
Optionee engages in any Competitive Activity (as hereinafter defined), or (c)
the Optionee is convicted of a crime against the Company or any of its
Affiliates, then, in addition to any other rights and remedies available to the
Company, the Company shall be entitled, at its option, to terminate the Option
(including the Exercisable Portion of the Option and the Called Option, as
applicable), or any unexercised portion thereof, which shall then be of no
further force and effect, and any amounts which may at the time be owing to the
Optionee pursuant to Section 6.2 hereof shall no longer be owing.
The term "Competitor" shall mean any Person that competes either
directly or indirectly with any of the businesses in which, at the time the
Optionee's employment is Terminated, the Company or any of its subsidiaries is
engaged.
The term "Competitive Activity" shall mean engaging in any of the
following activities: (i) serving as a director of any Competitor; (ii) directly
or indirectly (X) controlling any Competitor or (Y) owning any equity or debt
interests in any Competitor (other than equity or debt interests which are
publicly traded and do not exceed 2% of the particular class of interests then
outstanding) (it being understood that, if any such interests in any Competitor
are owned by an investment vehicle or other entity in which the Optionee owns an
equity interest, a portion of the interests in such Competitor owned by such
entity shall be attributed to the Optionee, such portion determined by applying
the percentage of the equity interest in such entity owned by the Optionee to
the interests in such Competitor owned by such entity); (iii) directly or
indirectly soliciting, diverting, taking away, appropriating or otherwise
interfering with any of the customers or suppliers of the Company or any
Affiliate of the Company; or (iv) employment by (including serving as an officer
or director of), or providing consulting services to, any Competitor; provided,
however, that if the Competitor has more than one discrete and readily
distinguishable part of its business, employment by or providing consulting
services to any Competitor shall be Competitive Activity only if (1) his or her
employment duties are at or involving the part of the Competitor's business that
competes with any of the businesses conducted by the Company or any of its
subsidiaries (the "Competing Operations"), including serving in a capacity where
any person at the Competing Operations reports to the Optionee, or (2) the
consulting services are provided to or involve the Competing Operations. For
purposes of this
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definition, the term "control" means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of any
Competitor, whether through the ownership of equity or debt interests, by
contract or otherwise. Notwithstanding the foregoing, the term "Competitive
Activity" shall not include the direct or indirect ownership or operation of,
investment in, or employment or engagement by a Person that is a Competitor
solely because such Person is an independent retail gift shop or retail garden
shop, provided that (i) if such gift shop sells candles or other home
fragrancing products, such products must be manufactured solely by the Company
or its Affiliates, (ii) such gift shop is not located within a 50 mile radius of
any retail gift store owned by the Company or its Affiliates, and (iii) such
retail gift shop does not have revenues in excess of $2 million per year.
8. ADJUSTMENTS. In the event that shares of Common Stock (whether or
not issued) are changed into or exchanged for a different number or kind of
shares of stock or other securities of the Company or an Affiliate, whether
through merger, consolidation, reorganization, recapitalization, stock dividend,
stock split-up or other substitution of securities of the Company or an
Affiliate, the Committee shall make appropriate adjustments to the number and
kind of shares of stock subject to the Option, the Option Price and the
Redemption Price payable pursuant to Section 6.2 hereof. The Committee's
adjustment shall be final and binding for all purposes of the Plan and this
Agreement. No adjustment provided for in this Section 8 shall require the
Company to issue a fractional share, and the total adjustment with respect to
this Agreement shall be limited accordingly.
9. TOTAL SALES.
9.1 CONTINUATION OF PLAN. Upon the effective date of any Total
Sale, any unexercised portion of the Option shall terminate unless provision
shall be made in writing in connection with such Total Sale for the continuance
of the Plan and such unexercised portion of the Option or for the assumption of
such unexercised portion of the Option by a successor to the Company or for the
substitution for such unexercised portion of the Option of new options covering
shares of such successor with appropriate adjustments as to number and kind of
shares and prices of shares subject to such new options, or unless the Committee
shall authorize the redemption of the unexercised portion of the Option pursuant
to Section 9.2 hereof. In the event that provision in writing is made as
aforesaid in connection with a Total Sale, the unexercised portion of the Option
or the new options substituted therefor shall continue in the manner and under
the terms provided in the Plan and this Agreement and in such writing.
9.2 REDEMPTION IN CONNECTION WITH A TOTAL SALE. In connection
with a Total Sale, the Committee may, in its sole discretion, authorize the
redemption of
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the unexercised portion of the Option for a consideration per share of Common
Stock issuable upon exercise of the unexercised portion of the Option equal to
the excess of (i) the consideration payable in respect of a share of Common
Stock in connection with such Total Sale, adjusted as if all outstanding options
and other rights to acquire equity interests in the Company had been exercised
prior to the consummation of such Total Sale and further adjusted to take into
account all other equity interests in the Company (provided, however, that no
adjustment shall be made with respect to any option or other right to acquire
equity interests in the Company if the exercise price for such option or other
right is greater than the consideration that would be payable per share of
Common Stock in connection with such Total Sale if the adjustment were not
made), over (ii) the Option Price. Any redemption pursuant to this Section 9.2
shall occur simultaneously with the occurrence of the Total Sale.
9.3 ALLOCABLE SHARE OF EXPENSES. In the event of a redemption
pursuant to Section 9.2 hereof, the Optionee shall be responsible for and shall
be obligated to pay a proportionate amount (determined as if the Optionee were a
holder of the number of shares of Common Stock which would have been issuable
upon exercise of the portion of the Option redeemed pursuant to Section 9.2
hereof) of the expenses, liabilities and obligations incurred or to be incurred
by the stockholders of the Company in connection with such Total Sale
(including, without limitation, the fees and expenses of investment bankers,
legal counsel and other outside advisors and experts retained by or on behalf of
the stockholders of the Company in connection with such Total Sale, amounts
payable in respect of indemnification claims, amounts paid into escrow and
amounts payable in respect of post-closing adjustments to the purchase price)
("Expenses of Sale").
9.4 POWER OF ATTORNEY. (a) The Optionee hereby irrevocably
appoints the FL & Co. Companies, and each of them (individually and
collectively, the "Representative"), the Optionee's true and lawful agent and
attorney-in-fact, with full powers of substitution, to act in the Optionee's
name, place and stead, to do or refrain from doing all such acts and things, and
to execute and deliver all such documents, in connection with this Agreement or
the Option as the Representative shall deem necessary or appropriate in
connection with any Total Sale, including, without in any way limiting the
generality of the foregoing, to receive on behalf of the Optionee any payments
made in respect of the unexercised portion of the Option (including payments
made in connection with any redemption) in connection with any Total Sale, to
hold back from any such payments any amount which the Representative deems
necessary to reserve against the Optionee's share of any Expenses of Sale, and
to engage in any acts in which the Representative is authorized by and on behalf
of the holders of any of the Company's capital stock to engage in connection
with the Total Sale. The Optionee
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hereby ratifies and confirms all that the Representative shall do or cause to be
done by virtue of its appointment as the Optionee's Representative.
(b) In acting for the Optionee pursuant to the appointment set
forth in paragraph (a) of this Section 9.4, the Representative shall not be
responsible to the Optionee for any loss or damage the Optionee may suffer by
reason of the performance by the Representative of its duties under this
Agreement, except for loss or damage arising from willful violation of law or
gross negligence in the performance of its duties hereunder. The appointment of
the Representative shall be deemed coupled with an interest and shall be
irrevocable, and any person dealing with the Representative may conclusively and
absolutely rely, without inquiry, upon any act of the Representative as the act
of the Optionee in all matters referred to in this Section 9.4.
(c) Notwithstanding the foregoing, this power of attorney does
not empower the Representative to exercise the Option on behalf of the Optionee.
10. WITHHOLDING. The Company shall have the right to deduct from any
amount payable under this Agreement any taxes or other amounts required by
applicable law to be withheld.
11. NO RIGHT TO CONTINUED EMPLOYMENT. This Agreement and the Option
shall not confer upon the Optionee any right with respect to continuance of
employment by the Company or any Affiliate thereof, nor shall it interfere in
any way with the right of the Company or any Affiliate thereof to terminate the
Optionee's employment at any time.
12. ENTIRE AGREEMENT. This Agreement and the Plan and, upon
execution thereof, the Stockholder's Agreement, constitute the entire agreement,
and supersede all prior agreements and understandings (including the Old Stock
Option Agreement and Old Plan), oral and written, between the parties hereto
with respect to the Option granted hereby.
13. MODIFICATION OF AGREEMENT. This Agreement may be modified,
amended or supplemented by written agreement of the parties hereto; provided,
that the Company may modify, amend or supplement this Agreement in a writing
signed by the Company without any further action by the Optionee if such
modification, amendment or supplement does not adversely affect the Optionee's
rights hereunder.
14. INVALIDITY OF PROVISIONS. The invalidity or unenforceability of
any provision of this Agreement in any jurisdiction shall not affect the
validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of this Agreement, including that
provision, in any other jurisdiction. If any provision of this Agreement is held
unlawful or unenforceable in any respect, such
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provision shall be revised or applied in a manner that renders it lawful and
enforceable to the fullest extent possible.
15. ACKNOWLEDGMENT. The Optionee hereby acknowledges receipt of a
copy of the Plan and agrees to be bound by all the terms and provisions thereof
as the same may be amended from time to time. The Optionee hereby acknowledges
that the Optionee has reviewed the Plan and this Agreement and understands his
or her rights and obligations thereunder and hereunder. The Optionee also
acknowledges that the Optionee has been provided with such information
concerning the Company, the Plan and this Agreement as the Optionee and his or
her advisors have requested.
16. BINDING EFFECT. This Agreement shall inure to the benefit of and
be binding upon the parties hereto and their respective heirs, legal
representatives, successors and assigns. In addition, each of the FL & Co.
Companies shall be a third party beneficiary of this Agreement and shall be
entitled directly to enforce this Agreement.
17. HEADINGS. The headings and captions contained herein are for
convenience only and shall not control or affect the meaning or construction of
any provision hereof.
18. RESOLUTION OF DISPUTES. Any dispute or disagreement which may
arise under, or as a result of, or which may in any way relate to, the
interpretation, construction or application of this Agreement shall be
determined by the Committee, in good faith, whose determination shall be final,
binding and conclusive for all purposes.
19. GOVERNING LAW. This Agreement and the rights and obligations of
the parties hereto shall be governed by, and construed and enforced in
accordance with, the laws of the State of New York without giving effect to the
principles of conflicts of laws thereof.
20. SPECIFIC PERFORMANCE. The parties hereto acknowledge that there
will be no adequate remedy at law for a violation of any of the provisions of
this Agreement and that, in addition to any other remedies which may be
available, all of the provisions of this Agreement shall be specifically
enforceable in accordance with their respective terms.
21. NOTICE. All notices and other communications hereunder shall be
in writing and, unless otherwise provided herein, shall be deemed to have been
given when received by the party to whom such notice is to be given at its
address set forth below, or such other address for the party as shall be
specified by notice given pursuant hereto:
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(a) If to the Company, to:
The Yankee Candle Company, Inc.
102 Christian Lane
Whately, MA 01093
Attention: President
with a copy to:
Forstmann Little & Co. Equity Partnership-V, L.P.
767 Fifth Avenue, 44th Floor
New York, New York 10153
Attention: Ms. Sandra Horbach
(b) If to the Optionee or Legal Representative, to such person at
the address as reflected in the records of the Company.
22. CONSENT TO JURISDICTION. Each party hereby irrevocably and
unconditionally consents to submit to the exclusive jurisdiction of the courts
of the State of New York and of the United States of America, in each case
located in the County of New York, for any actions, suits or proceedings arising
out of or relating to this Agreement, the Option or the Plan and the
transactions contemplated hereby and thereby ("Litigation") (and agrees not to
commence any Litigation except in any such court), and further agrees that
service of process, summons, notice or document by U.S. registered mail to such
party's respective address set forth in Section 21 hereof shall be effective
service of process for any Litigation brought against such party in any such
court. Each party hereby irrevocably and unconditionally waives any objection to
the laying of venue of any Litigation in the courts of the State of New York or
of the United States of America, in each case located in the County of New York,
and hereby further irrevocably and unconditionally waives and agrees not to
plead or claim in any such court that any Litigation brought in any such court
has been brought in an inconvenient forum.
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IN WITNESS WHEREOF, this Agreement has been signed by or on behalf
of each of the parties hereto, all as of the date first above written.
Optionee THE YANKEE CANDLE COMPANY, INC.
By:
- ------------------------------- -------------------------------
Name: < Name > Name:
Address: < Address1 > Title:
< Address2 >
The undersigned acknowledges that the undersigned has read the
foregoing Agreement between The Yankee Candle Company, Inc. and the
undersigned's spouse and the Yankee Candle Company, Inc. Employee Stock Option
Plan, understands that the undersigned's spouse has been granted an option to
acquire shares of Common Stock of The Yankee Candle Company, Inc., which option
is subject to certain restrictions reflected in such Agreement and such Plan and
agrees to be bound by the foregoing Agreement and such Plan.
---------------------------------
Optionee's Spouse
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Exhibit 10.5
Yankee Candle Company, Inc.
1999 STOCK OPTION AND AWARD PLAN
(As Adopted April 15, 1999)
<PAGE>
Yankee Candle Company, Inc.
1999 STOCK OPTION AND AWARD PLAN
1. PURPOSE.
The purpose of this Plan is to strengthen Yankee Candle Company,
Inc., a Massachusetts corporation (the "Company"), by providing an incentive to
its employees, officers, consultants and directors and thereby encouraging them
to devote their abilities and industry to the success of the Company's business
enterprise. It is intended that this purpose be achieved by extending to
employees (including future employees who have received a formal written offer
of employment), officers, consultants and directors of the Company and its
Subsidiaries an added long-term incentive for high levels of performance and
unusual efforts through the grant of Incentive Stock Options, Nonqualified Stock
Options, Stock Appreciation Rights, Performance Awards, Share Awards, Phantom
Stock and Restricted Stock (as each term is herein defined).
2. DEFINITIONS.
For purposes of the Plan:
2.1 "Affiliate" means any entity, directly or indirectly, controlled
by, controlling or under common control with the Company or any corporation or
other entity acquiring, directly or indirectly, all or substantially all the
assets and business of the Company, whether by operation of law or otherwise.
2.2 "Agreement" means the written agreement between the Company and
an Optionee or Grantee evidencing the grant of an Option or Award and setting
forth the terms and conditions thereof.
2.3 "Award" means a grant of Restricted Stock, Phantom Stock, a
Stock Appreciation Right, a Performance Award, a Share Award or any or all of
them.
2.4 "Board" means the Board of Directors of the Company.
2.5 "Cause" means:
(a) in the case of an Optionee or Grantee whose employment
with the Company or a Subsidiary is subject to the terms of an employment
agreement between such Optionee or Grantee and the Company or Subsidiary, which
employment agreement includes a definition of "Cause", the term "Cause" as used
in this Plan or any
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Agreement shall have the meaning set forth in such employment agreement during
the period that such employment agreement remains in effect; and
(b) in all other cases, (i) intentional failure to perform
reasonably assigned duties, (ii) dishonesty or willful misconduct in the
performance of duties, (iii) involvement in a transaction in connection with the
performance of duties to the Company or any of its Subsidiaries which
transaction is adverse to the interests of the Company or any of its
Subsidiaries and which is engaged in for personal profit or (iv) willful
violation of any law, rule or regulation in connection with the performance of
duties (other than traffic violations or similar offenses); PROVIDED, HOWEVER,
that following a Change in Control clause (i) of this Section 2.5(b) shall not
constitute "Cause".
2.6 "Change in Capitalization" means any increase or reduction in
the number of Shares, or any change (including, but not limited to, in the case
of a spin-off, dividend or other distribution in respect of Shares, a change in
value) in the Shares or exchange of Shares for a different number or kind of
shares or other securities of the Company or another corporation, by reason of a
reclassification, recapitalization, merger, consolidation, reorganization,
spin-off, split-up, issuance of warrants or rights or debentures, stock
dividend, stock split or reverse stock split, cash dividend, property dividend,
combination or exchange of shares, repurchase of shares, change in corporate
structure or otherwise.
2.7 A "Change in Control" shall mean the occurrence of any of the
following:
(a) An acquisition (other than directly from the Company) of
any voting securities of the Company (the "Voting Securities") by any "Person"
(as the term person is used for purposes of Section 13(d) or 14(d) of the
Exchange Act), other than Forstmann Little & Co. Equity Partnership - V, L.P.
and Forstmann Little & Co. Subordinated Debt and Equity Management Buyout
Partnership - VI, L.P. or any of their Affiliates, immediately after which such
Person has "Beneficial Ownership" (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of more than fifty percent (50%) of the then outstanding
Shares or the combined voting power of the Company's then outstanding Voting
Securities; PROVIDED, HOWEVER, in determining whether a Change in Control has
occurred pursuant to this Section 2.7(a), Shares or Voting Securities which are
acquired in a "Non-Control Acquisition" (as hereinafter defined) shall not
constitute an acquisition which would cause a Change in Control. A "Non-Control
Acquisition" shall mean an acquisition by (i) an employee benefit plan (or a
trust forming a part thereof) maintained by (A) the Company or (B) any
corporation or other Person of which a majority of its voting power or its
voting equity securities or equity interest is owned, directly or indirectly, by
the Company (for purposes of this definition, a "Related
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Entity"), (ii) the Company or any Related Entity, or (iii) any Person in
connection with a "Non-Control Transaction" (as hereinafter defined);
(b) The individuals who, as of April 15, 1999 are members of
the Board (the "Incumbent Board"), cease for any reason to constitute at least a
majority of the members of the Board; PROVIDED, HOWEVER, that if the election,
or nomination for election by the Company's common stockholders, of any new
director was approved by a vote of at least two-thirds of the Incumbent Board,
such new director shall, for purposes of this Plan, be considered as a member of
the Incumbent Board; PROVIDED FURTHER, HOWEVER, that no individual shall be
considered a member of the Incumbent Board if such individual initially assumed
office as a result of either an actual or threatened "Election Contest" (as
described in Rule 14a-11 promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person other
than the Board (a "Proxy Contest") including by reason of any agreement intended
to avoid or settle any Election Contest or Proxy Contest; or
(c) The consummation of:
(i) A merger, consolidation or reorganization with
or into the Company or in which securities of the Company are issued, unless
such merger, consolidation or reorganization is a "Non-Control Transaction." A
"Non-Control Transaction" shall mean a merger, consolidation or reorganization
with or into the Company or in which securities of the Company are issued where:
(A) the stockholders of the Company,
immediately before such merger, consolidation or reorganization, own directly or
indirectly immediately following such merger, consolidation or reorganization,
at least fifty percent (50%) of the combined voting power of the outstanding
voting securities of the corporation resulting from such merger or consolidation
or reorganization (the "Surviving Corporation") in substantially the same
proportion as their ownership of the Voting Securities immediately before such
merger, consolidation or reorganization,
(B) the individuals who were members of the
Incumbent Board immediately prior to the execution of the agreement providing
for such merger, consolidation or reorganization constitute at least a majority
of the members of the board of directors of the Surviving Corporation, or a
corporation beneficially directly or indirectly owning a majority of the Voting
Securities of the Surviving Corporation, and
(C) no Person other than (1) the Company, (2)
any Related Entity, (3) any employee benefit plan (or any trust forming a part
thereof) that, immediately prior to such merger, consolidation or
reorganization, was maintained by the Company or any Related Entity, or (4) any
Person who, immediately prior to such
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merger, consolidation or reorganization had Beneficial Ownership of more than
fifty percent (50%) of the then outstanding Voting Securities or Shares, has
Beneficial Ownership of more than fifty percent (50%) of the combined voting
power of the Surviving Corporation's then outstanding voting securities or its
common stock.
(ii) A complete liquidation or dissolution of the
Company; or
(iii) The sale or other disposition of all or
substantially all of the assets of the Company to any Person (other than a
transfer to a Related Entity or the distribution to the Company's stockholders
of the stock of a Related Entity or any other assets).
Notwithstanding the foregoing, a Change in Control shall not be
deemed to occur solely because any Person (the "Subject Person") acquired
Beneficial Ownership of more than the permitted amount of the then outstanding
Shares or Voting Securities as a result of the acquisition of Shares or Voting
Securities by the Company which, by reducing the number of Shares or Voting
Securities then outstanding, increases the proportional number of shares
Beneficially Owned by the Subject Persons, provided that if a Change in Control
would occur (but for the operation of this sentence) as a result of the
acquisition of Shares or Voting Securities by the Company, and after such share
acquisition by the Company, the Subject Person becomes the Beneficial Owner of
any additional Shares or Voting Securities which increases the percentage of the
then outstanding Shares or Voting Securities Beneficially Owned by the Subject
Person, then a Change in Control shall occur.
If an Eligible Individual's employment is terminated by the Company
without Cause prior to the date of a Change in Control but the Eligible
Individual reasonably demonstrates that the termination (A) was at the request
of a third party who has indicated an intention or taken steps reasonably
calculated to effect a change in control or (B) otherwise arose in connection
with, or in anticipation of, a Change in Control which has been threatened or
proposed, such termination shall be deemed to have occurred after a Change in
Control for purposes of this Plan provided a Change in Control shall actually
have occurred.
2.8 "Code" means the Internal Revenue Code of 1986, as amended.
2.9 "Committee" means a committee, as described in Section 3.1,
appointed by the Board from time to time to administer the Plan and to perform
the functions set forth herein.
2.10 "Company" means Yankee Candle Company, Inc.
2.11 "Director" means a director of the Company.
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2.12 "Disability" means:
(a) in the case of an Optionee or Grantee whose employment
with the Company or a Subsidiary is subject to the terms of an employment
agreement between such Optionee or Grantee and the Company or Subsidiary, which
employment agreement includes a definition of "Disability", the term
"Disability" as used in this Plan or any Agreement shall have the meaning set
forth in such employment agreement during the period that such employment
agreement remains in effect; or
(b) the term "Disability" as used in the Company's long-term
disability plan, if any; or
(c) in all other cases, the term "Disability" as used in this
Plan or any Agreement shall mean a physical or mental infirmity which impairs
the Optionee's or Grantee's ability to perform substantially his or her duties
for a period of one hundred eighty (180) consecutive days.
2.13 "Division" means any of the operating units or divisions of the
Company designated as a Division by the Committee.
2.14 "Dividend Equivalent Right" means a right to receive all or
some portion of the cash dividends that are or would be payable with respect to
Shares.
2.15 "Eligible Individual" means any of the following individuals
who is designated by the Committee as eligible to receive Options or Awards
subject to the conditions set forth herein: (a) any director, officer or
employee of the Company or a Subsidiary, (b) any individual to whom the Company
or a Subsidiary has extended a formal, written offer of employment, or (c) any
consultant or advisor of the Company or a Subsidiary.
2.16 "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
2.17 "Fair Market Value" on any date means the closing sales prices
of the Shares on such date on the principal national securities exchange on
which such Shares are listed or admitted to trading, or, if such Shares are not
so listed or admitted to trading, the average of the per Share closing bid price
and per Share closing asked price on such date as quoted on the National
Association of Securities Dealers Automated Quotation System or such other
market in which such prices are regularly quoted, or, if there have been no
published bid or asked quotations with respect to Shares on such date, the Fair
Market Value shall be the value established by the Board in good faith and, in
the case of an Incentive Stock Option, in accordance with Section 422 of the
Code.
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2.18 "Grantee" means a person to whom an Award has been granted
under the Plan.
2.19 "Incentive Stock Option" means an Option satisfying the
requirements of Section 422 of the Code and designated by the Committee as an
Incentive Stock Option.
2.20 "Initial Public Offering" means the consummation of the first
public offering of Shares pursuant to a registration statement (other than a
Form S-8 or successor forms) filed with, and declared effective by, the
Securities and Exchange Commission.
2.21 "Nonemployee Director" means a director of the Company who is a
"nonemployee director" within the meaning of Rule 16b-3 promulgated under the
Exchange Act.
2.22 "Nonqualified Stock Option" means an Option which is not an
Incentive Stock Option.
2.23 "Option" means a Nonqualified Stock Option, an Incentive Stock
Option, or any or all of them.
2.24 "Optionee" means a person to whom an Option has been granted
under the Plan.
2.25 "Outside Director" means a director of the Company who is an
"outside director" within the meaning of Section 162(m) of the Code and the
regulations promulgated thereunder.
2.26 "Parent" means any corporation which is a parent corporation
(within the meaning of Section 424(e) of the Code) with respect to the Company.
2.27 "Performance Awards" means Performance Units, Performance
Shares or either or both of them.
2.28 "Performance-Based Compensation" means any Option or Award that
is intended to constitute "performance based compensation" within the meaning of
Section 162(m)(4)(C) of the Code and the regulations promulgated thereunder.
2.29 "Performance Cycle" means the time period specified by the
Committee at the time Performance Awards are granted during which the
performance of the Company, a Subsidiary or a Division will be measured.
2.30 "Performance Objectives" has the meaning set forth in Section
8.
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2.31 "Performance Shares" means Shares issued or transferred to an
Eligible Individual under Section 8.
2.32 "Performance Units" means Performance Units granted to an
Eligible Individual under Section 8.
2.33 "Phantom Stock" means a right granted to an Eligible Individual
under Section 9 representing a number of hypothetical Shares.
2.34 "Plan" means the Yankee Candle Company, Inc. 1999 Stock
Option and Award Plan, as amended and restated from time to time.
2.35 "Pooling Transaction" means an acquisition of the Company in a
transaction which is intended to be treated as a "pooling of interests" under
generally accepted accounting principles.
2.36 "Restricted Stock" means Shares issued or transferred to an
Eligible Individual pursuant to Section 7.
2.37 "Share Award" means an Award of Shares granted pursuant to
Section 9.
2.38 "Shares" means the common stock, par value $0.01 per share, of
the Company.
2.39 "Stock Appreciation Right" means a right to receive all or some
portion of the increase in the value of the Shares as provided in Section 6
hereof.
2.40 "Subsidiary" means (i) except as provided in subsection (ii)
below, any corporation which is a subsidiary corporation within the meaning of
Section 424(f) of the Code with respect to the Company, and (ii) in relation to
the eligibility to receive Options or Awards other than Incentive Stock Options
and continued employment for purposes of Options and Awards (unless the
Committee determines otherwise), any entity, whether or not incorporated, in
which the Company directly or indirectly owns 50% or more of the outstanding
equity or other ownership interests.
2.41 "Successor Corporation" means a corporation, or a parent or
subsidiary thereof within the meaning of Section 424(a) of the Code, which
issues or assumes a stock option in a transaction to which Section 424(a) of the
Code applies.
2.42 "Ten-Percent Stockholder" means an Eligible Individual, who, at
the time an Incentive Stock Option is to be granted to him or her, owns (within
the meaning of Section 422(b)(6) of the Code) stock possessing more than ten
percent (10%) of the
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total combined voting power of all classes of stock of the Company, or of a
Parent or a Subsidiary.
2.43 "Transition Period" means the period beginning with an Initial
Public Offering and ending as of the earlier of (i) the date of the first annual
meeting of shareholders of the Company at which directors are to be elected that
occurs after the close of the third calendar year following the calendar year in
which the Initial Public Offering occurs, or (ii) the earlier of the "reliance
period" under Treasury Regulation ss. 1.162-27(f)(2).
3. ADMINISTRATION.
3.1 The Plan shall be administered by the Committee, which shall
hold meetings at such times as may be necessary for the proper administration of
the Plan. The Committee shall keep minutes of its meetings. If the Committee
consists of more than one (1) member, a quorum shall consist of not fewer than
two (2) members of the Committee and a majority of a quorum may authorize any
action. Any decision or determination reduced to writing and signed by a
majority of all of the members of the Committee shall be as fully effective as
if made by a majority vote at a meeting duly called and held. The Committee
shall consist of at least one (1) Director and may consist of the entire Board;
PROVIDED, HOWEVER, that from and after the date of an Initial Public Offering,
(A) if the Committee consists of less than the entire Board, then with respect
to any Option or Award to an Eligible Individual who is subject to Section 16 of
the Exchange Act, the Committee shall consist of at least two (2) Directors each
of whom shall be a Nonemployee Director and (B) to the extent necessary for any
Option or Award intended to qualify as Performance-Based Compensation to so
qualify, each member of the Committee, whether or not it consists of the entire
Board, shall be an Outside Director. For purposes of the preceding sentence, if
one or more members of the Committee is not a Nonemployee Director and an
Outside Director but recuses himself or herself or abstains from voting with
respect to a particular action taken by the Committee, then the Committee, with
respect to that action, shall be deemed to consist only of the members of the
Committee who have not recused themselves or abstained from voting. Subject to
applicable law, the Committee may delegate its authority under the Plan to any
other person or persons.
3.2 No member of the Committee shall be liable for any action,
failure to act, determination or interpretation made in good faith with respect
to this Plan or any transaction hereunder. The Company hereby agrees to
indemnify each member of the Committee for all costs and expenses and, to the
extent permitted by applicable law, any liability incurred in connection with
defending against, responding to, negotiating for the settlement of or otherwise
dealing with any claim, cause of action or dispute of any kind
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arising in connection with any actions in administering this Plan or in
authorizing or denying authorization to any transaction hereunder.
3.3 Subject to the express terms and conditions set forth herein,
the Committee shall have the power from time to time to:
(a) determine those Eligible Individuals to whom Options shall
be granted under the Plan and the number of such Options to be granted and to
prescribe the terms and conditions (which need not be identical) of each such
Option, including the exercise price per Share subject to each Option, and make
any amendment or modification to any Option Agreement consistent with the terms
of the Plan;
(b) select those Eligible Individuals to whom Awards shall be
granted under the Plan and to determine the number of Shares in respect of which
each Award is granted, the terms and conditions (which need not be identical) of
each such Award, and make any amendment or modification to any Award Agreement
consistent with the terms of the Plan;
(c) to construe and interpret the Plan and the Options and
Awards granted hereunder and to establish, amend and revoke rules and
regulations for the administration of the Plan, including, but not limited to,
correcting any defect or supplying any omission, or reconciling any
inconsistency in the Plan or in any Agreement, in the manner and to the extent
it shall deem necessary or advisable, including so that the Plan and the
operation of the Plan complies with Rule 16b-3 under the Exchange Act, the Code
to the extent applicable and other applicable law, and otherwise to make the
Plan fully effective. All decisions and determinations by the Committee in the
exercise of this power shall be final, binding and conclusive upon the Company,
its Subsidiaries, the Optionees and Grantees, and all other persons having any
interest therein;
(d) to determine the duration and purposes for leaves of
absence which may be granted to an Optionee or Grantee on an individual basis
without constituting a termination of employment or service for purposes of the
Plan;
(e) to exercise its discretion with respect to the powers and
rights granted to it as set forth in the Plan; and
(f) generally, to exercise such powers and to perform such
acts as are deemed necessary or advisable to promote the best interests of the
Company with respect to the Plan.
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4. STOCK SUBJECT TO THE PLAN; GRANT LIMITATIONS.
4.1 The maximum number of Shares that may be made the subject of
Options and Awards granted under the Plan is five percent (5%) of the Company's
outstanding Shares determined on a fully diluted basis as of the date the Plan
is adopted. The Company shall reserve for the purposes of the Plan, out of its
authorized but unissued Shares or out of Shares held in the Company's treasury,
or partly out of each, such number of Shares as shall be determined by the
Board.
4.2 Upon the granting of an Option or an Award, the number of Shares
available under Section 4.1 for the granting of further Options and Awards shall
be reduced as follows:
(a) In connection with the granting of an Option or an Award
(other than the granting of a Performance Unit denominated in dollars), the
number of Shares shall be reduced by the number of Shares in respect of which
the Option or Award is granted or denominated; PROVIDED, HOWEVER, that if any
Option is exercised by tendering Shares, either actually or by attestation, to
the Company as full or partial payment of the exercise price, the maximum number
of Shares available under Section 4.1 shall be increased by the number of Shares
so tendered.
(b) In connection with the granting of a Performance Unit
denominated in dollars, the number of Shares shall be reduced by an amount equal
to the quotient of (i) the dollar amount in which the Performance Unit is
denominated, divided by (ii) the Fair Market Value of a Share on the date the
Performance Unit is granted.
4.3 Whenever any outstanding Option or Award or portion thereof,
expires, is canceled, is settled in cash (including the settlement of tax
withholding obligations using Shares) or is otherwise terminated for any reason
without having been exercised or payment having been made in respect of the
entire Option or Award, the Shares allocable to the expired, canceled, settled
or otherwise terminated portion of the Option or Award may again be the subject
of Options or Awards granted hereunder.
5. OPTION GRANTS FOR ELIGIBLE INDIVIDUALS.
5.1 AUTHORITY OF COMMITTEE. Subject to the provisions of the Plan,
the Committee shall have full and final authority to select those Eligible
Individuals who will receive Options, and the terms and conditions of the grant
to such Eligible Individuals shall be set forth in an Agreement.
5.2 EXERCISE PRICE. The purchase price or the manner in which the
exercise price is to be determined for Shares under each Option shall be
determined by the Committee and set forth in the Agreement; PROVIDED, HOWEVER,
that the exercise price
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per Share under each Incentive Stock Option shall not be less than 100% of the
Fair Market Value of a Share on the date the Option is granted (110% in the case
of an Incentive Stock Option granted to a Ten-Percent Stockholder).
5.3 MAXIMUM DURATION. Options granted hereunder shall be for such
term as the Committee shall determine, provided that an Incentive Stock Option
shall not be exercisable after the expiration of ten (10) years from the date it
is granted (five (5) years in the case of an Incentive Stock Option granted to a
Ten-Percent Stockholder) and a Nonqualified Stock Option shall not be
exercisable after the expiration of ten (10) years from the date it is granted;
PROVIDED, HOWEVER, that unless the Committee provides otherwise, an Option
(other than an Incentive Stock Option) may, upon the death of the Optionee prior
to the expiration of the Option, be exercised for up to one (1) year following
the date of the Optionee's death even if such period extends beyond ten (10)
years from the date the Option is granted. The Committee may, subsequent to the
granting of any Option, extend the term thereof, but in no event shall the term
as so extended exceed the maximum term provided for in the preceding sentence.
5.4 VESTING. Subject to Section 5.10, each Option shall become
exercisable in such installments (which need not be equal) and at such times as
may be designated by the Committee and set forth in the Agreement. To the extent
not exercised, installments shall accumulate and be exercisable, in whole or in
part, at any time after becoming exercisable, but not later than the date the
Option expires. The Committee may accelerate the exercisability of any Option or
portion thereof at any time.
5.5 DEFERRED DELIVERY OF OPTION SHARES. The Committee may, in its
discretion permit Optionees to elect to defer the issuance of Shares upon the
exercise of one or more Nonqualified Stock Options granted pursuant to the Plan.
The terms and conditions of such deferral shall be determined at the time of the
grant of the Option or thereafter and shall be set forth in the Agreement
evidencing the Option.
5.6 LIMITATIONS ON INCENTIVE STOCK OPTIONS. To the extent that the
aggregate Fair Market Value (determined as of the date of the grant) of Shares
with respect to which Incentive Stock Options granted under the Plan and
"incentive stock options" (within the meaning of Section 422 of the Code)
granted under all other plans of the Company or its Subsidiaries (in either case
determined without regard to this Section 5.6) are exercisable by an Optionee
for the first time during any calendar year exceeds $100,000, such Incentive
Stock Options shall be treated as Nonqualified Stock Options. In applying the
limitation in the preceding sentence in the case of multiple Option grants,
Options which were intended to be Incentive Stock Options shall be treated as
Nonqualified Stock Options according to the order in which they were granted
such that the most recently granted Options are first treated as Nonqualified
Stock Options.
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5.7 NON-TRANSFERABILITY. No Option shall be transferable by the
Optionee otherwise than by will or by the laws of descent and distribution or,
in the case of an Option other than an Incentive Stock Option, pursuant to a
domestic relations order (within the meaning of Rule 16a-12 promulgated under
the Exchange Act), and an Option shall be exercisable during the lifetime of
such Optionee only by the Optionee or his or her guardian or legal
representative. Notwithstanding the foregoing, the Committee may set forth in
the Agreement evidencing an Option (other than an Incentive Stock Option) at the
time of grant or thereafter, that the Option may be transferred to members of
the Optionee's immediate family, to trusts solely for the benefit of such
immediate family members and to partnerships in which such family members and/or
trusts are the only partners, and for purposes of this Plan, a transferee of an
Option shall be deemed to be the Optionee. For this purpose, immediate family
means the Optionee's spouse, parents, children, stepchildren and grandchildren
and the spouses of such parents, children, stepchildren and grandchildren. The
terms of an Option shall be final, binding and conclusive upon the
beneficiaries, executors, administrators, heirs and successors of the Optionee.
5.8 METHOD OF EXERCISE. The exercise of an Option shall be made only
by a written notice delivered in person or by mail to the Secretary of the
Company at the Company's principal executive office, specifying the number of
Shares to be exercised and, to the extent applicable, accompanied by payment
therefor and otherwise in accordance with the Agreement pursuant to which the
Option was granted; PROVIDED, HOWEVER, that Options may not be exercised by an
Optionee for twelve months following a hardship distribution to the Optionee, to
the extent such exercise is prohibited under Treasury Regulation ss.
1.401(k)-1(d)2(iv)(B)(4). The exercise price for any Shares purchased pursuant
to the exercise of an Option shall be paid in either of the following forms (or
any combination thereof): (a) cash or (b) the transfer, either actually or by
attestation, to the Company of Shares that have been held by the Optionee for at
least six (6) months (or such lesser period as may be permitted by the
Committee) prior to the exercise of the Option, such transfer to be upon such
terms and conditions as determined by the Committee or (c) a combination of cash
and the transfer of Shares; PROVIDED, HOWEVER, that the Committee may determine
that the exercise price shall be paid only in cash. In addition, Options may be
exercised through a registered broker-dealer pursuant to such cashless exercise
procedures which are, from time to time, deemed acceptable by the Committee. Any
Shares transferred to the Company as payment of the exercise price under an
Option shall be valued at their Fair Market Value on the day of exercise of such
Option. If requested by the Committee, the Optionee shall deliver the Agreement
evidencing the Option to the Secretary of the Company who shall endorse thereon
a notation of such exercise and return such Agreement to the Optionee. No
fractional Shares (or cash in lieu thereof) shall be issued upon exercise of an
Option and the number
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of Shares that may be purchased upon exercise shall be rounded to the nearest
number of whole Shares.
5.9 RIGHTS OF OPTIONEES. No Optionee shall be deemed for any purpose
to be the owner of any Shares subject to any Option unless and until (a) the
Option shall have been exercised pursuant to the terms thereof, (b) the Company
shall have issued and delivered Shares to the Optionee, and (c) the Optionee's
name shall have been entered as a stockholder of record on the books of the
Company. Thereupon, the Optionee shall have full voting, dividend and other
ownership rights with respect to such Shares, subject to such terms and
conditions as may be set forth in the applicable Agreement.
5.10 EFFECT OF CHANGE IN CONTROL. In the event an Optionee's
employment with the Company and its Subsidiaries is terminated by the Company
without Cause following a Change in Control, or in the case of a Director who is
not an employee of the Company or any Subsidiary, his services as a Director of
the Company ceases following a Change in Control, each Option held by the
Optionee as of the date of termination of the Optionee's employment or service
shall become immediately and fully exercisable and shall, notwithstanding any
shorter period set forth in the Agreement evidencing the Option, remain
exercisable for a period ending not before the earlier of (x) the six (6) month
anniversary of the termination of the Optionee's employment or service or (y)
the expiration of the stated term of the Option. In addition, the Agreement
evidencing the grant of an Option may provide for any other treatment of the
Option in the event of a Change in Control.
6. STOCK APPRECIATION RIGHTS.
The Committee may in its discretion, either alone or in connection
with the grant of an Option, grant Stock Appreciation Rights in accordance with
the Plan, the terms and conditions of which shall be set forth in an Agreement.
If granted in connection with an Option, a Stock Appreciation Right shall cover
the same Shares covered by the Option (or such lesser number of Shares as the
Committee may determine) and shall, except as provided in this Section 6, be
subject to the same terms and conditions as the related Option.
6.1 TIME OF GRANT. A Stock Appreciation Right may be granted (a) at
any time if unrelated to an Option, or (b) if related to an Option, either at
the time of grant or at any time thereafter during the term of the Option.
6.2 STOCK APPRECIATION RIGHT RELATED TO AN OPTION.
(a) EXERCISE. A Stock Appreciation Right granted in connection
with an Option shall be exercisable at such time or times and only to the extent
that the related Options are exercisable, and will not be transferable except to
the extent the
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related Option may be transferable. A Stock Appreciation Right granted in
connection with an Incentive Stock Option shall be exercisable only if the Fair
Market Value of a Share on the date of exercise exceeds the exercise price
specified in the related Incentive Stock Option Agreement.
(b) AMOUNT PAYABLE. Upon the exercise of a Stock Appreciation
Right related to an Option, the Grantee shall be entitled to receive an amount
determined by multiplying (i) the excess of the Fair Market Value of a Share on
the date of exercise of such Stock Appreciation Right over the per Share
exercise price under the related Option, by (ii) the number of Shares as to
which such Stock Appreciation Right is being exercised. Notwithstanding the
foregoing, the Committee may limit in any manner the amount payable with respect
to any Stock Appreciation Right by including such a limit in the Agreement
evidencing the Stock Appreciation Right at the time it is granted.
(c) TREATMENT OF RELATED OPTIONS AND STOCK APPRECIATION RIGHTS
UPON EXERCISE. Upon the exercise of a Stock Appreciation Right granted in
connection with an Option, the Option shall be canceled to the extent of the
number of Shares as to which the Stock Appreciation Right is exercised, and upon
the exercise of an Option granted in connection with a Stock Appreciation Right,
the Stock Appreciation Right shall be canceled to the extent of the number of
Shares as to which the Option is exercised or surrendered.
6.3 STOCK APPRECIATION RIGHT UNRELATED TO AN OPTION. The Committee
may grant to Eligible Individuals Stock Appreciation Rights unrelated to
Options. Stock Appreciation Rights unrelated to Options shall contain such terms
and conditions as to exercisability (subject to Section 6.7), vesting and
duration as the Committee shall determine, but in no event shall they have a
term of greater than ten (10) years; provided, however, that the Committee may
provide that Stock Appreciation right may, upon the death of the Grantee, be
exercised for up to one (1) year following the date of the Grantee's death even
if such period extends beyond ten (10) years from the date the Stock
Appreciation Right is granted. Upon exercise of a Stock Appreciation Right
unrelated to an Option, the Grantee shall be entitled to receive an amount
determined by multiplying (a) the excess of the Fair Market Value of a Share on
the date of exercise of such Stock Appreciation Right over the Fair Market Value
of a Share on the date the Stock Appreciation Right was granted, by (b) the
number of Shares as to which the Stock Appreciation Right is being exercised.
Notwithstanding the foregoing, the Committee may limit in any manner the amount
payable with respect to any Stock Appreciation Right by including such a limit
in the Agreement evidencing the Stock Appreciation Right at the time it is
granted.
6.4 NON-TRANSFERABILITY. No Stock Appreciation Right shall be
transferable by the Grantee otherwise than by will or by the laws of descent and
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distribution or pursuant to a domestic relations order (within the meaning of
Rule 16a-12 promulgated under the Exchange Act), and such Stock Appreciation
Right shall be exercisable during the lifetime of such Grantee only by the
Grantee or his or her guardian or legal representative. The terms of such Stock
Appreciation Right shall be final, binding and conclusive upon the
beneficiaries, executors, administrators, heirs and successors of the Grantee.
6.5 METHOD OF EXERCISE. Stock Appreciation Rights shall be exercised
by a Grantee only by a written notice delivered in person or by mail to the
Secretary of the Company at the Company's principal executive office, specifying
the number of Shares with respect to which the Stock Appreciation Right is being
exercised. If requested by the Committee, the Grantee shall deliver the
Agreement evidencing the Stock Appreciation Right being exercised and the
Agreement evidencing any related Option to the Secretary of the Company who
shall endorse thereon a notation of such exercise and return such Agreement to
the Grantee.
6.6 FORM OF PAYMENT. Payment of the amount determined under Sections
6.2(b) or 6.3 may be made in the discretion of the Committee solely in whole
Shares in a number determined at their Fair Market Value on the date of exercise
of the Stock Appreciation Right, or solely in cash, or in a combination of cash
and Shares. If the Committee decides to make full payment in Shares and the
amount payable results in a fractional Share, payment for the fractional Share
will be made in cash.
6.7 EFFECT OF CHANGE IN CONTROL. In the event a Grantee's employment
with the Company is terminated by the Company without Cause following a Change
in Control, each Stock Appreciation Right held by the Grantee shall become
immediately and fully exercisable and shall, notwithstanding any shorter period
set forth in the Agreement evidencing the Stock Appreciation Right, remain
exercisable for a period ending not before the earlier of the six (6) month
anniversary of (x) the termination of the Grantee's employment or (y) the
expiration of the stated term of the Stock Appreciation Right. In addition, the
Agreement evidencing the grant of a Stock Appreciation Right unrelated to an
Option may provide for any other treatment of the Stock Appreciation Rights in
the event of a Change in Control.
7. RESTRICTED STOCK.
7.1 GRANT. The Committee may grant Awards to Eligible Individuals of
Restricted Stock, which shall be evidenced by an Agreement between the Company
and the Grantee. Each Agreement shall contain such restrictions, terms and
conditions as the Committee may, in its discretion, determine and (without
limiting the generality of the foregoing) such Agreements may require that an
appropriate legend be placed on Share
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certificates. Awards of Restricted Stock shall be subject to the terms and
provisions set forth below in this Section 7.
7.2 RIGHTS OF GRANTEE. Shares of Restricted Stock granted pursuant
to an Award hereunder shall be issued in the name of the Grantee as soon as
reasonably practicable after the Award is granted provided that the Grantee has
executed an Agreement evidencing the Award, the appropriate blank stock powers
and, in the discretion of the Committee, an escrow agreement and any other
documents which the Committee may require as a condition to the issuance of such
Shares. If a Grantee shall fail to execute the Agreement evidencing a Restricted
Stock Award, or any documents which the Committee may require within the time
period prescribed by the Committee at the time the Award is granted, the Award
shall be null and void. At the discretion of the Committee, Shares issued in
connection with a Restricted Stock Award shall be deposited together with the
stock powers with an escrow agent (which may be the Company) designated by the
Committee. Unless the Committee determines otherwise and as set forth in the
Agreement, upon delivery of the Shares to the escrow agent, the Grantee shall
have all of the rights of a stockholder with respect to such Shares, including
the right to vote the Shares and to receive all dividends or other distributions
paid or made with respect to the Shares.
7.3 NON-TRANSFERABILITY. Until all restrictions upon the Shares of
Restricted Stock awarded to a Grantee shall have lapsed in the manner set forth
in Section 7.4, such Shares shall not be sold, transferred or otherwise disposed
of and shall not be pledged or otherwise hypothecated.
7.4 LAPSE OF RESTRICTIONS.
(a) GENERALLY. Restrictions upon Shares of Restricted Stock
awarded hereunder shall lapse at such time or times and on such terms and
conditions as the Committee may determine. The Agreement evidencing the Award
shall set forth any such restrictions.
(b) EFFECT OF CHANGE IN CONTROL. The Committee may determine
at the time of the grant of an Award of Restricted Stock the extent to which the
restrictions upon Shares of Restricted Stock shall lapse upon a Change in
Control. The Agreement evidencing the Award shall set forth any such provisions.
7.5 TREATMENT OF DIVIDENDS. At the time an Award of Shares of
Restricted Stock is granted, the Committee may, in its discretion, determine
that the payment to the Grantee of dividends, or a specified portion thereof,
declared or paid on such Shares by the Company shall be (a) deferred until the
lapsing of the restrictions imposed upon such Shares and (b) held by the Company
for the account of the Grantee
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until such time. In the event that dividends are to be deferred, the Committee
shall determine whether such dividends are to be reinvested in Shares (which
shall be held as additional Shares of Restricted Stock) or held in cash. If
deferred dividends are to be held in cash, there may be credited at the end of
each year (or portion thereof) interest on the amount of the account at the
beginning of the year at a rate per annum as the Committee, in its discretion,
may determine. Payment of deferred dividends in respect of Shares of Restricted
Stock (whether held in cash or as additional Shares of Restricted Stock),
together with interest accrued thereon, if any, shall be made upon the lapsing
of restrictions imposed on the Shares in respect of which the deferred dividends
were paid, and any dividends deferred (together with any interest accrued
thereon) in respect of any Shares of Restricted Stock shall be forfeited upon
the forfeiture of such Shares.
7.6 DELIVERY OF SHARES. Upon the lapse of the restrictions on Shares
of Restricted Stock, the Committee shall cause a stock certificate to be
delivered to the Grantee with respect to such Shares, free of all restrictions
hereunder.
8. PERFORMANCE AWARDS.
8.1 PERFORMANCE UNITS. The Committee, in its discretion, may grant
Awards of Performance Units to Eligible Individuals, the terms and conditions of
which shall be set forth in an Agreement between the Company and the Grantee.
Performance Units may be denominated in Shares or a specified dollar amount and,
contingent upon the attainment of specified Performance Objectives within the
Performance Cycle, represent the right to receive payment as provided in Section
8.3(c) of (i) in the case of Share-denominated Performance Units, the Fair
Market Value of a Share on the date the Performance Unit was granted, the date
the Performance Unit became vested or any other date specified by the Committee,
(ii) in the case of dollar-denominated Performance Units, the specified dollar
amount or (iii) a percentage (which may be more than 100%) of the amount
described in clause (i) or (ii) depending on the level of Performance Objective
attainment; PROVIDED, HOWEVER, that, the Committee may at the time a Performance
Unit is granted specify a maximum amount payable in respect of a vested
Performance Unit. Each Agreement shall specify the number of Performance Units
to which it relates, the Performance Objectives which must be satisfied in order
for the Performance Units to vest and the Performance Cycle within which such
Performance Objectives must be satisfied.
(a) VESTING AND FORFEITURE. Subject to Sections 8.3(c) and
8.4, a Grantee shall become vested with respect to the Performance Units to the
extent that the Performance Objectives set forth in the Agreement are satisfied
for the Performance Cycle.
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(b) PAYMENT OF AWARDS. Subject to Section 8.3(c), payment to
Grantees in respect of vested Performance Units shall be made as soon as
practicable after the last day of the Performance Cycle to which such Award
relates unless the Agreement evidencing the Award provides for the deferral of
payment, in which event the terms and conditions of the deferral shall be set
forth in the Agreement. Subject to Section 8.4, such payments may be made
entirely in Shares valued at their Fair Market Value, entirely in cash, or in
such combination of Shares and cash as the Committee in its discretion shall
determine at any time prior to such payment; PROVIDED, HOWEVER, that if the
Committee in its discretion determines to make such payment entirely or
partially in Shares of Restricted Stock, the Committee must determine the extent
to which such payment will be in Shares of Restricted Stock and the terms of
such Restricted Stock at the time the Award is granted.
8.2 PERFORMANCE SHARES. The Committee, in its discretion, may grant
Awards of Performance Shares to Eligible Individuals, the terms and conditions
of which shall be set forth in an Agreement between the Company and the Grantee.
Each Agreement may require that an appropriate legend be placed on Share
certificates. Awards of Performance Shares shall be subject to the following
terms and provisions:
(a) RIGHTS OF GRANTEE. The Committee shall provide at the time
an Award of Performance Shares is made the time or times at which the actual
Shares represented by such Award shall be issued in the name of the Grantee;
PROVIDED, HOWEVER, that no Performance Shares shall be issued until the Grantee
has executed an Agreement evidencing the Award, the appropriate blank stock
powers and, in the discretion of the Committee, an escrow agreement and any
other documents which the Committee may require as a condition to the issuance
of such Performance Shares. If a Grantee shall fail to execute the Agreement
evidencing an Award of Performance Shares, the appropriate blank stock powers
and, in the discretion of the Committee, an escrow agreement and any other
documents which the Committee may require within the time period prescribed by
the Committee at the time the Award is granted, the Award shall be null and
void. At the discretion of the Committee, Shares issued in connection with an
Award of Performance Shares shall be deposited together with the stock powers
with an escrow agent (which may be the Company) designated by the Committee.
Except as restricted by the terms of the Agreement, upon delivery of the Shares
to the escrow agent, the Grantee shall have, in the discretion of the Committee,
all of the rights of a stockholder with respect to such Shares, including the
right to vote the Shares and to receive all dividends or other distributions
paid or made with respect to the Shares.
(b) NON-TRANSFERABILITY. Until any restrictions upon the
Performance Shares awarded to a Grantee shall have lapsed in the manner set
forth in Sections 8.2(c) or 8.4, such Performance Shares shall not be sold,
transferred or otherwise disposed of and shall not be pledged or otherwise
hypothecated, nor shall they be
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delivered to the Grantee. The Committee may also impose such other restrictions
and conditions on the Performance Shares, if any, as it deems appropriate.
(c) LAPSE OF RESTRICTIONS. Subject to Sections 8.3(c) and 8.4,
restrictions upon Performance Shares awarded hereunder shall lapse and such
Performance Shares shall become vested at such time or times and on such terms,
conditions and satisfaction of Performance Objectives as the Committee may, in
its discretion, determine at the time an Award is granted.
(d) TREATMENT OF DIVIDENDS. At the time the Award of
Performance Shares is granted, the Committee may, in its discretion, determine
that the payment to the Grantee of dividends, or a specified portion thereof,
declared or paid on Shares represented by such Award which have been issued by
the Company to the Grantee shall be (i) deferred until the lapsing of the
restrictions imposed upon such Performance Shares and (ii) held by the Company
for the account of the Grantee until such time. In the event that dividends are
to be deferred, the Committee shall determine whether such dividends are to be
reinvested in shares of Stock (which shall be held as additional Performance
Shares) or held in cash. If deferred dividends are to be held in cash, there may
be credited at the end of each year (or portion thereof) interest on the amount
of the account at the beginning of the year at a rate per annum as the
Committee, in its discretion, may determine. Payment of deferred dividends in
respect of Performance Shares (whether held in cash or in additional Performance
Shares), together with interest accrued thereon, if any, shall be made upon the
lapsing of restrictions imposed on the Performance Shares in respect of which
the deferred dividends were paid, and any dividends deferred (together with any
interest accrued thereon) in respect of any Performance Shares shall be
forfeited upon the forfeiture of such Performance Shares.
(e) DELIVERY OF SHARES. Upon the lapse of the restrictions on
Performance Shares awarded hereunder, the Committee shall cause a stock
certificate to be delivered to the Grantee with respect to such Shares, free of
all restrictions hereunder.
8.3 PERFORMANCE OBJECTIVES
(a) ESTABLISHMENT. Performance Objectives for Performance
Awards may be expressed in terms of (i) earnings per Share, (ii) Share price,
(iii) pre-tax profits, (iv) net earnings, (v) return on equity or assets, (vi)
sales, (vii) any combination of the foregoing or (viii) prior to the end of the
Transition Period, such other criteria as the Committee may determine.
Performance Objectives may be in respect of the performance of the Company, any
of its Subsidiaries, any of its Divisions or any combination thereof.
Performance Objectives may be absolute or relative (to prior performance of the
Company or to the performance of one or more other entities or external indices)
and may be expressed in terms of a progression within a specified range.
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The Performance Objectives with respect to a Performance Cycle shall be
established in writing by the Committee by the earlier of (x) the date on which
a quarter of the Performance Cycle has elapsed or (y) the date which is ninety
(90) days after the commencement of the Performance Cycle, and in any event
while the performance relating to the Performance Objectives remain
substantially uncertain.
(b) EFFECT OF CERTAIN EVENTS. At the time of the granting of a
Performance Award, or at any time thereafter, in either case to the extent
permitted under Section 162(m) of the Code and the regulations thereunder
without adversely affecting the treatment of the Performance Award as
Performance-Based Compensation, the Committee may provide for the manner in
which performance will be measured against the Performance Objectives (or may
adjust the Performance Objectives) to reflect the impact of specified corporate
transactions, accounting or tax law changes and other extraordinary or
nonrecurring events.
(c) DETERMINATION OF PERFORMANCE. Prior to the vesting,
payment, settlement or lapsing of any restrictions with respect to any
Performance Award that is intended to constitute Performance-Based Compensation
made to a Grantee who is subject to Section 162(m) of the Code, the Committee
shall certify in writing that the applicable Performance Objectives have been
satisfied.
8.4 EFFECT OF CHANGE IN CONTROL. The Agreements evidencing
Performance Shares and Performance Units may provide for the treatment of such
Awards (or portions thereof) in the event of a Change in Control, including, but
not limited to, provisions for the adjustment of applicable Performance
Objectives.
8.5 NON-TRANSFERABILITY. Until the vesting of Performance Units or
the lapsing of any restrictions on Performance Shares, as the case may be, such
Performance Units or Performance Shares shall not be sold, transferred or
otherwise disposed of and shall not be pledged or otherwise hypothecated.
9. OTHER SHARE BASED AWARDS.
9.1 SHARE AWARDS. The Committee may grant a Share Award to any
Eligible Individual on such terms and conditions as the Committee may determine
in its sole discretion. Share Awards may be made as additional compensation for
services rendered by the Eligible Individual or may be in lieu of cash or other
compensation to which the Eligible Individual is entitled from the Company.
9.2 PHANTOM STOCK AWARDS.
(a) GRANT. The Committee may, in its discretion, grant shares
of Phantom Stock to any Eligible Individuals. Such Phantom Stock shall be
subject to the
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terms and conditions established by the Committee and set forth in the
applicable Agreement.
(b) PAYMENT OF AWARDS. Upon the vesting of a Phantom Stock
Award, the Grantee shall be entitled to receive a cash payment in respect of
each share of Phantom Stock which shall be equal to the Fair Market Value of a
Share as of the date the Phantom Stock Award was granted, or such other date as
determined by the Committee at the time the Phantom Stock Award was granted. The
Committee may, at the time a Phantom Stock Award is granted, provide a
limitation on the amount payable in respect of each share of Phantom Stock. In
lieu of a cash payment, the Committee may settle Phantom Stock Awards with
Shares having a Fair Market Value equal to the cash payment to which the Grantee
has become entitled.
10. EFFECT OF A TERMINATION OF EMPLOYMENT.
The Agreement evidencing the grant of each Option and each Award
shall set forth the terms and conditions applicable to such Option or Award upon
a termination or change in the status of the employment of the Optionee or
Grantee by the Company, a Subsidiary or a Division (including a termination or
change by reason of the sale of a Subsidiary or a Division), which shall be as
the Committee may, in its discretion, determine at the time the Option or Award
is granted or thereafter.
11. ADJUSTMENT UPON CHANGES IN CAPITALIZATION.
(a) In the event of a Change in Capitalization, the Committee
shall conclusively determine the appropriate adjustments, if any, to (i) the
maximum number and class of Shares or other stock or securities with respect to
which Options or Awards may be granted under the Plan, (ii) the number and class
of Shares or other stock or securities which are subject to outstanding Options
or Awards granted under the Plan and the exercise price therefor, if applicable,
and (iii) the Performance Objectives.
(b) Any such adjustment in the Shares or other stock or
securities (i) subject to outstanding Incentive Stock Options (including any
adjustments in the exercise price) shall be made in such manner as not to
constitute a modification as defined by Section 424(h)(3) of the Code and only
to the extent otherwise permitted by Sections 422 and 424 of the Code, or (ii)
subject to outstanding Options or Awards that are intended to qualify as
Performance-Based Compensation shall be made in such a manner as not to
adversely affect the treatment of the Option or Award as Performance-Based
Compensation.
(c) If, by reason of a Change in Capitalization, a Grantee of
an Award shall be entitled to, or an Optionee shall be entitled to exercise an
Option with respect to, new, additional or different shares of stock or
securities of the Company or any
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other corporation, such new, additional or different shares shall thereupon be
subject to all of the conditions, restrictions and performance criteria which
were applicable to the Shares subject to the Award or Option, as the case may
be, prior to such Change in Capitalization.
12. EFFECT OF CERTAIN TRANSACTIONS.
Subject to Sections 5.10, 6.7, 7.4(b) and 8.4 or as otherwise
provided in an Agreement, in the event of (a) the liquidation or dissolution of
the Company or (b) a merger or consolidation of the Company (a "Transaction"),
the Plan and the Options and Awards issued hereunder shall continue in effect in
accordance with their respective terms, except that following a Transaction each
Optionee and Grantee shall be entitled to receive in respect of each Share
subject to any outstanding Options or Awards, as the case may be, upon exercise
of any Option or payment or transfer in respect of any Award, the same number
and kind of stock, securities, cash, property or other consideration that each
holder of a Share was entitled to receive in the Transaction in respect of a
Share; PROVIDED, HOWEVER, that such stock, securities, cash, property, or other
consideration shall remain subject to all of the conditions, restrictions and
performance criteria which were applicable to the Options and Awards prior to
such Transaction.
13. INTERPRETATION.
Following the required registration of any equity security of the
Company pursuant to Section 12 of the Exchange Act:
(a) The Plan is intended to comply with Rule 16b-3 promulgated
under the Exchange Act and the Committee shall interpret and administer the
provisions of the Plan or any Agreement in a manner consistent therewith. Any
provisions inconsistent with such Rule shall be inoperative and shall not affect
the validity of the Plan.
(b) Unless otherwise expressly stated in the relevant
Agreement, each Option, Stock Appreciation Right and Performance Award granted
under the Plan is intended to be Performance-Based Compensation. The Committee
shall not be entitled to exercise any discretion otherwise authorized hereunder
with respect to such Options or Awards if the ability to exercise such
discretion or the exercise of such discretion itself would cause the
compensation attributable to such Options or Awards to fail to qualify as
Performance-Based Compensation.
(c) To the extent that any legal requirement of Section 16 of
the Exchange Act or Section 162(m) of the Code as set forth in the Plan ceases
to be required
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under Section 16 of the Exchange Act or Section 162(m) of the Code, that Plan
provision shall cease to apply.
14. POOLING TRANSACTIONS.
Notwithstanding anything contained in the Plan or any Agreement to
the contrary, in the event of a Change in Control which is also intended to
constitute a Pooling Transaction, the Committee shall take such actions, if any,
as are specifically recommended by an independent accounting firm retained by
the Company to the extent reasonably necessary in order to assure that the
Pooling Transaction will qualify as such, including but not limited to (a)
deferring the vesting, exercise, payment, settlement or lapsing of restrictions
with respect to any Option or Award, (b) providing that the payment or
settlement in respect of any Option or Award be made in the form of cash, Shares
or securities of a successor or acquirer of the Company, or a combination of the
foregoing, and (c) providing for the extension of the term of any Option or
Award to the extent necessary to accommodate the foregoing, but not beyond the
maximum term permitted for any Option or Award.
15. TERMINATION AND AMENDMENT OF THE PLAN OR MODIFICATION OF OPTIONS AND
AWARDS.
15.1 PLAN AMENDMENT OR TERMINATION. The Plan shall terminate on the
day preceding the tenth anniversary of the date of its adoption by the Board and
no Option or Award may be granted thereafter. The Board may sooner terminate the
Plan and the Board may at any time and from time to time amend, modify or
suspend the Plan; PROVIDED, HOWEVER, that:
(a) no such amendment, modification, suspension or termination
shall impair or adversely alter any Options or Awards theretofore granted under
the Plan, except with the consent of the Optionee or Grantee, nor shall any
amendment, modification, suspension or termination deprive any Optionee or
Grantee of any Shares which he or she may have acquired through or as a result
of the Plan; and
(b) to the extent necessary under any applicable law,
regulation or exchange requirement no amendment shall be effective unless
approved by the stockholders of the Company in accordance with applicable law,
regulation or exchange requirement.
15.2 MODIFICATION OF OPTIONS AND AWARDS. No modification of an
Option or Award shall adversely alter or impair any rights or obligations under
the Option or Award without the consent of the Optionee or Grantee, as the case
may be.
16. NON-EXCLUSIVITY OF THE PLAN.
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The adoption of the Plan by the Board shall not be construed as
amending, modifying or rescinding any previously approved incentive arrangement
or as creating any limitations on the power of the Board to adopt such other
incentive arrangements as it may deem desirable, including, without limitation,
the granting of stock options otherwise than under the Plan, and such
arrangements may be either applicable generally or only in specific cases.
17. LIMITATION OF LIABILITY.
As illustrative of the limitations of liability of the Company, but
not intended to be exhaustive thereof, nothing in the Plan shall be construed
to:
(a) give any person any right to be granted an Option or Award
other than at the sole discretion of the Committee;
(b) give any person any rights whatsoever with respect to
Shares except as specifically provided in the Plan;
(c) limit in any way the right of the Company or any
Subsidiary to terminate the employment of any person at any time; or
(d) be evidence of any agreement or understanding, expressed
or implied, that the Company will employ any person at any particular rate of
compensation or for any particular period of time.
18. REGULATIONS AND OTHER APPROVALS; GOVERNING LAW.
18.1 Except as to matters of federal law, the Plan and the rights of
all persons claiming hereunder shall be construed and determined in accordance
with the laws of the State of Delaware without giving effect to conflicts of
laws principles thereof.
18.2 The obligation of the Company to sell or deliver Shares with
respect to Options and Awards granted under the Plan shall be subject to all
applicable laws, rules and regulations, including all applicable federal and
state securities laws, and the obtaining of all such approvals by governmental
agencies as may be deemed necessary or appropriate by the Committee.
18.3 The Board may make such changes as may be necessary or
appropriate to comply with the rules and regulations of any government
authority, or to obtain for Eligible Individuals granted Incentive Stock Options
the tax benefits under the applicable provisions of the Code and regulations
promulgated thereunder.
18.4 Each Option and Award is subject to the requirement that, if at
any time the Committee determines, in its discretion, that the listing,
registration or
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qualification of Shares issuable pursuant to the Plan is required by any
securities exchange or under any state or federal law, or the consent or
approval of any governmental regulatory body is necessary or desirable as a
condition of, or in connection with, the grant of an Option or Award or the
issuance of Shares, no Options or Awards shall be granted or payment made or
Shares issued, in whole or in part, unless listing, registration, qualification,
consent or approval has been effected or obtained free of any conditions as
acceptable to the Committee.
18.5 Notwithstanding anything contained in the Plan or any Agreement
to the contrary, in the event that the disposition of Shares acquired pursuant
to the Plan is not covered by a then current registration statement under the
Securities Act of 1933, as amended (the "Securities Act"), and is not otherwise
exempt from such registration, such Shares shall be restricted against transfer
to the extent required by the Securities Act and Rule 144 or other regulations
thereunder. The Committee may require any individual receiving Shares pursuant
to an Option or Award granted under the Plan, as a condition precedent to
receipt of such Shares, to represent and warrant to the Company in writing that
the Shares acquired by such individual are acquired without a view to any
distribution thereof and will not be sold or transferred other than pursuant to
an effective registration thereof under said Act or pursuant to an exemption
applicable under the Securities Act or the rules and regulations promulgated
thereunder. The certificates evidencing any of such Shares shall be
appropriately amended or have an appropriate legend placed thereon to reflect
their status as restricted securities as aforesaid.
19. MISCELLANEOUS.
19.1 MULTIPLE AGREEMENTS. The terms of each Option or Award may
differ from other Options or Awards granted under the Plan at the same time, or
at some other time. The Committee may also grant more than one Option or Award
to a given Eligible Individual during the term of the Plan, either in addition
to, or in substitution for, one or more Options or Awards previously granted to
that Eligible Individual.
19.2 WITHHOLDING OF TAXES.
(a) At such times as an Optionee or Grantee recognizes taxable
income in connection with the receipt of Shares or cash hereunder (a "Taxable
Event"), the Optionee or Grantee shall pay to the Company an amount equal to the
federal, state and local income taxes and other amounts as may be required by
law to be withheld by the Company in connection with the Taxable Event (the
"Withholding Taxes") prior to the issuance, or release from escrow, of such
Shares or the payment of such cash. The Company shall have the right to deduct
from any payment of cash to an Optionee or Grantee an amount equal to the
Withholding Taxes in satisfaction of the obligation to pay Withholding Taxes.
The Committee may provide in an Agreement evidencing an Option
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or Award at the time of grant or thereafter, that the Optionee or Grantee, in
satisfaction of the obligation to pay Withholding Taxes to the Company, may
elect to have withheld a portion of the Shares issuable to him or her pursuant
to the Option or Award having an aggregate Fair Market Value equal to the
Withholding Taxes.
(b) If an Optionee makes a disposition, within the meaning of
Section 424(c) of the Code and regulations promulgated thereunder, of any Share
or Shares issued to such Optionee pursuant to the exercise of an Incentive Stock
Option within the two-year period commencing on the day after the date of the
grant or within the one-year period commencing on the day after the date of
transfer of such Share or Shares to the Optionee pursuant to such exercise, the
Optionee shall, within ten (10) days of such disposition, notify the Company
thereof, by delivery of written notice to the Company at its principal executive
office.
19.3 EFFECTIVE DATE. The effective date of this Plan shall be as
determined by the Board, subject only to the approval by the affirmative vote of
the holders of a majority of the securities of the Company present, or
represented, and entitled to vote at a meeting of stockholders duly held in
accordance with the applicable laws within twelve (12) months of the adoption of
the Plan by the Board.
19.4 POST-TRANSITION PERIOD. Following the Transition Period, any
Option, Stock Appreciation Right or Performance Award granted under the Plan
which is intended to be Performance-Based Compensation, shall be subject to the
approval of the material terms of the Plan by a majority of the shareholders of
the Company in accordance with Section 162(m) of the Code and the regulations
promulgated thereunder.
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Exhibit 10.7
STOCKHOLDER'S AGREEMENT, dated as of [__________], 1999, between The
Yankee Candle Company, Inc., a Massachusetts corporation (the "Company"), and
< Name > (the "Employee").
WHEREAS, Forstmann Little & Co. Equity Partnership-V, L.P., a
Delaware limited partnership ("Equity-V"), and Forstmann Little & Co.
Subordinated Debt and Equity Management Buyout Partnership-V, L.P., a Delaware
limited partnership ("MBO-VI"), will own shares of Common Stock, par value $0.01
per share, of the Company.
WHEREAS, the Employee purchased shares of Class B Common Stock
("Class B Common Stock"), par value $0.01 per share, of Yankee Candle Holdings
Corp., a Delaware corporation ("Holdings"), on the terms and subject to the
conditions set forth in the Stockholder's Agreement, dated as of [_______,] 1998
(the "Old Stockholder's Agreement");
WHEREAS, in a reorganization that will occur in connection with the
initial public offering (the "Offering") of the Company, shares of Class B
Common Stock will be exchanged for shares of Common Stock, par value $0.01 per
share, of the Company;
WHEREAS, effective upon the closing of the Offering, the Employee
will own shares of Common Stock and the Old Stockholder's Agreement will be
cancelled (and all rights and obligations thereunder will be null and void); and
WHEREAS, the Employee and the Company wish to provide for certain
arrangements with respect to the Employee's rights to hold and dispose of the
shares of Common Stock.
NOW, THEREFORE, the parties hereto agree as follows:
1. DEFINITIONS
1.1 DEFINITIONS; RULES OF CONSTRUCTION.
(a) The following terms, as used herein, shall have the
following meanings:
"Act" shall mean the Securities Act of 1933, as amended.
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"Affiliate" shall mean, with respect to any Person, any other
Person which, directly or indirectly, is in control of, is controlled by, or is
under common control with, such Person.
"Affiliate Securities" shall mean any securities issued by
an Affiliate of the Company.
"Aggregate Number of Acquired Shares" shall mean the aggregate
number of shares of Common Stock acquired by the Employee pursuant hereto
(adjusted, where appropriate, to reflect any Capital Transaction).
"Aggregate Number of Shares Sold" shall mean, as at any date,
the aggregate number of shares sold by the Employee pursuant to Section 2.3, 2.4
or 2.5 hereof prior to such date, if any (adjusted, where appropriate, to
reflect any Capital Transaction effected after the date of any such sale).
"Agreement" shall mean this Stockholder's Agreement, as
amended, supplemented or modified from time to time.
"Book Value of the Company" shall mean the sum of (x) the
total assets minus the total liabilities of the Company on a consolidated basis,
plus (y) the amount of any reduction in stockholders' equity resulting from the
application of EITF Issue Summary No. 88-16, Basis in Leveraged Buyouts, as of
the Valuation Date, plus (z) the amount of accumulated amortization of that
portion of the purchase price paid for the Company by the FL & Co. Companies
that was allocated to goodwill, excluding other acquired identified intangible
assets. For purposes of calculating the Book Value of the Company and the Book
Value Per Share, (i) all options and other rights to acquire equity interests in
the Company outstanding immediately prior to the Delivery Date or exercised
between the Valuation Date and the Delivery Date shall be deemed to have been
exercised on the Valuation Date, and (ii) the number of outstanding shares on
the Valuation Date shall be increased by the number of shares subject to each
such option or other right and the assets of the Company shall be increased by
the aggregate exercise price payable in respect of the exercise of each such
option or other right (with respect to clauses (i) and (ii), in the case of any
such option or other right unless the effect thereof would be to increase the
Book Value Per Share).
"Book Value Per Share" shall mean the amount which would be
payable on the Valuation Date in respect of one share of Common Stock in the
event of a dissolution, liquidation or winding-up of the affairs of the Company
if the amount of assets available for distribution in the event of such
dissolution, liquidation or winding-up with respect to all shares of capital
stock of the Company outstanding (or deemed to be
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outstanding, as set forth above in the definition of "Book Value of the
Company") on the Valuation Date were equal to the Book Value of the Company. In
the event there has been a Stock Dividend after the Valuation Date and prior to
the Election Date, the number of shares outstanding for purposes of determining
Book Value Per Share shall be the number of shares that would have been
outstanding immediately after the Stock Dividend on the Valuation Date had the
Stock Dividend occurred on the Valuation Date.
"Call Shares" shall have the meaning ascribed to such term in
Section 2.2(d) hereof.
"Capital Transaction" shall mean any Stock Dividend,
recapitalization (including, without limitation, any special dividend or
distribution), reclassification, spin-off, partial liquidation or similar
capital adjustments (including, without limitation, through merger or
consolidation).
"Common Stock" shall mean the Common Stock, par value $0.01
per share, of the Company. There shall be included within the term Common Stock
any Common Stock now or hereafter authorized to be issued, and any and all
securities of any kind whatsoever of the Company which may be issued after the
date hereof in respect of, or in exchange for, shares of Common Stock pursuant
to a Capital Transaction or otherwise.
"Company" shall mean The Yankee Candle Company, Inc., a
Massachusetts corporation, and shall include any successor thereto by merger,
consolidation, acquisition of substantially all the assets thereof, or
otherwise.
"Competitive Activity" shall mean engaging in any of the
following activities: (i) serving as a director of any Competitor; (ii) directly
or indirectly (X) controlling any Competitor or (Y) owning any equity or debt
interests in any Competitor (other than equity or debt interests which are
publicly traded and do not exceed 2% of the particular class of interests then
outstanding) (it being understood that, if any such interests in any Competitor
are owned by an investment vehicle or other entity in which the Employee owns an
equity interest, a portion of the interests in such Competitor owned by such
entity shall be attributed to the Employee, such portion determined by applying
the percentage of the equity interest in such entity owned by the Employee to
the interests in such Competitor owned by such entity); (iii) directly or
indirectly soliciting, diverting, taking away, appropriating or otherwise
interfering with any of the customers or suppliers of the Company or any
Affiliate of the Company; or (iv) employment by (including serving as an officer
or director of), or providing consulting services to, any Competitor; provided,
however, that if the Competitor has more than one discrete and readily
distinguishable part of its business, employment by or
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providing consulting services to any Competitor shall be Competitive Activity
only if (1) his or her employment duties are at or involving the part of the
Competitor's business that competes with any of the businesses conducted by the
Company or any of its subsidiaries (the "Competing Operations"), including
serving in a capacity where any person at the Competing Operations reports to
the Employee, or (2) the consulting services are provided to or involve the
Competing Operations. For purposes of this definition, the term "control" means
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of any Competitor, whether through the
ownership of equity or debt interests, by contract or otherwise. Notwithstanding
the foregoing, the term "Competitive Activity" shall not include the direct or
indirect ownership or operation of, investment in, or employment or engagement
by a Person that is a Competitor solely because such Person is an independent
retail gift shop or retail garden shop, provided that (i) if such gift shop
sells candles or other home fragrancing products, such products must be
manufactured solely by the Company or its Affiliates, (ii) such gift shop is not
located within a 50 mile radius of any retail gift store owned by the Company or
its Affiliates, and (iii) such retail gift shop does not have revenues in excess
of $2 million per year.
"Competitor" shall mean any Person that competes either
directly or indirectly with any of the businesses in which, at the time the
Employee's employment is Terminated, the Company or any of its subsidiaries is
engaged.
"Delivery Date" shall have the meaning ascribed to such term
in Section 2.2(b) hereof.
"Election Date" shall have the meaning ascribed to such term
in Section 2.2(a) hereof.
"Equity-V" shall have the meaning ascribed to such term in the
first "Whereas" clause hereof.
"Expenses of Sale" shall mean all expenses incurred by the FL
& Co. Companies in connection with the sale of the shares of the selling
stockholders pursuant to Section 2.3, 2.4 or 2.5 hereof to the extent that such
expenses are not paid or reimbursed by the Company.
"FL & Co. Companies" shall mean the collective reference to
Equity-V and MBO-VI.
"Legal Representative" shall mean the guardian, executor,
administrator or other legal representative of the Employee. All references
herein to the
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Employee shall be deemed to include references to the Employee's Legal
Representative, if any, unless the context otherwise requires.
"Litigation" shall mean any actions, suits or proceedings
arising out of or relating to this Agreement and the transactions contemplated
hereby.
"MBO-VI" shall have the meaning ascribed to such term in the
first "Whereas" clause hereof.
"Permitted Transferee" shall have the meaning ascribed to such
term in Section 2.1 hereof.
"Person" shall mean an individual, a corporation, a
partnership, an association, a trust or any other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.
"Prohibited Activity" shall have the meaning ascribed to such
term in Section 3.1 hereof.
"Purchase Price" shall have the meaning ascribed to such term
in Section 2.2(c) hereof.
"Purchase Price Certificate" shall have the meaning ascribed
to such term in Section 2.2(b) hereof.
"Release Date" shall mean the date on which the FL & Co.
Companies and their affiliates shall cease to own in the aggregate directly or
indirectly at least 20 percent of the then outstanding securities of the Company
having the power to vote in the election of directors of the Company.
"Representative" shall have the meaning ascribed to such term
in Section 5.13(b) hereof.
"Repurchase Notice" shall have the meaning ascribed to such
term in Section 4.2 hereof.
"Sale Obligations" shall mean any liabilities and obligations
(including liabilities and obligations for indemnification, amounts paid into
escrow and post-closing adjustments) incurred by the selling stockholders in
connection with the sale of their shares pursuant to Section 2.3, 2.4 or 2.5
hereof.
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"Scheduled Closing Date" shall have the meaning ascribed to
such term in Section 3.2(d) hereof.
"Section 2.3 Notice" shall have the meaning ascribed to such
term in Section 2.3 hereof.
"Section 2.4 Notice" shall have the meaning ascribed to such
term in Section 2.4 hereof.
"Stock Dividend" shall mean any stock split, stock dividend,
reverse stock split or similar transaction which changes the number of
outstanding shares of capital stock of the Company.
"Termination" or "Terminated" shall mean that the Employee's
employment on a full-time basis by the Company and its subsidiaries shall have
ceased for any reason whatsoever (including by reason of death, permanent
disability or adjudicated incompetency).
"Third Party" shall mean any Person other than any FL & Co.
Company or an Affiliate or a partner of any of the FL & Co. Companies or an
Affiliate of such partner.
"Transaction" shall mean any sale pursuant to Section 2.3,
2.4 or 2.5 hereof.
"Unvested Shares" shall mean, as at any date, all shares of
Common Stock owned by the Employee which are not Vested Shares as of such date.
"Valuation Date" shall mean the last day of the fiscal quarter
of the Company immediately preceding the fiscal year in which the Employee's
employment is Terminated.
"Vested Shares" shall mean the number of shares of Common
Stock determined as follows: (i) if the Employee is Terminated on or before
[______________], zero; (ii) if the Employee is Terminated after
[______________] but on or before [______________], (x) 20 percent of the
Aggregate Number of Acquired Shares minus (y) the Aggregate Number of Shares
Sold; (iii) if the Employee is Terminated after [______________] but on or
before [______________], (x) 40 percent of the Aggregate Number of Acquired
Shares minus (y) the Aggregate Number of Shares Sold; (iv) if the Employee is
Terminated after [______________] but on or before [______________], (x) 60
percent of the Aggregate Number of Acquired Shares minus
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(y) the Aggregate Number of Shares Sold; (iv) if the Employee is Terminated
after [______________] but on or before [______________], (x) 80 percent of the
Aggregate Number of Acquired Shares minus (y) the Aggregate Number of Shares
Sold; and (vi) if the Employee is Terminated after [______________], (x) the
Aggregate Number of Acquired Shares minus (y) the Aggregate Number of Shares
Sold.
(b) In this Agreement, unless the context otherwise requires,
words in the singular number or in the plural number shall each include the
singular number and the plural number.
2. RIGHTS AND RESTRICTIONS ON COMMON STOCK.
2.1 EFFECTIVENESS OF AGREEMENT; NO SALE OR TRANSFER.
(a) This Agreement shall become effective as of the closing of
the Offering and shall apply to shares of Common Stock acquired in exchange for
shares of Class B Common Stock (subject to the provisions of Section 5.1).
(b) The Employee shall not sell, transfer, assign, exchange,
pledge, encumber or otherwise dispose of any shares of Common Stock or grant any
option or right to purchase such shares or any legal or beneficial interest
therein, except in accordance with the provisions of this Agreement.
(c) The Employee may transfer any shares of Common Stock by
will, but only to:
(i) any spouse, parent, child (whether natural or adopted),
brother or sister of the Employee, or
(ii) any corporation or partnership which is controlled by any
spouse, parent, child (whether natural or adopted), brother or
sister of the Employee
(the person or persons to which shares of Common Stock are transferred in
accordance with this Section 2.1(c) being herein referred to as the "Permitted
Transferee"); provided, that, for any transfer to the Permitted Transferee to be
effective hereunder, the Permitted Transferee shall agree in writing to be bound
by all the terms of this Agreement applicable to the Employee (including,
without limitation, Article 3 and Section 5.13(b) hereof) as if the Permitted
Transferee originally had been a party hereto; and provided, further, that all
of the stockholders of any Permitted Transferee that is a corporation and all of
the partners of any Permitted Transferee that is a partnership shall agree in
writing
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not to transfer any shares they then own or may hereafter acquire in the
corporate Permitted Transferee or any partnership interests they then own or may
hereafter acquire in the partnership Permitted Transferee except to a person
described in paragraph (i) or (ii) above that has made the same agreement in
writing to the Company, so long as the corporate or partnership Permitted
Transferee shall own any shares of Common Stock. Any reference herein to the
Employee shall be to the Permitted Transferee from and after the date the
transfer is effected in accordance with this Section 2.1(c). Without limiting
the generality of the foregoing, the provisions of Section 3.2 hereof shall be
likewise applicable to any Permitted Transferee, commencing upon the date that
such Person becomes a Permitted Transferee, for the respective periods they
would have applied to the Employee.
2.2 EMPLOYMENT TERMINATION.
(a) If the Employee shall be Terminated, irrespective of
whether the Employee receives, in connection with such Termination, any
severance or other payment from the Company or any of its Affiliates under any
employment agreement or otherwise, the Company shall have the right, at its
option, exercisable by delivery of written notice to the Employee within 90 days
following the date of Termination (the date of delivery of such written notice
being referred to herein as the "Election Date"), to purchase all or any portion
of the Unvested Shares held by the Employee as of the date of such Termination.
Any Vested Shares and any Unvested Shares that the Company does not elect to
repurchase pursuant to the provisions of this Section 2.2(a) shall continue to
be subject to the provisions of this Agreement (including, without limitation,
Sections 2.3, 2.4 and 2.5 and Article 3 hereof) other than this Section 2.2.
(b) If the Company exercises its purchase right pursuant to
Section 2.2(a) hereof, then, within 15 days following the later of the Election
Date or the date the financial statements referred to below are available (such
date of delivery being referred to herein as the "Delivery Date"), the Company
shall deliver to the Terminated Employee a certificate of the chief financial
officer of the Company setting forth the Purchase Price and the calculation
thereof and the Book Value of the Company and stating that a copy of the
Company's financial statements as of the Valuation Date are available for review
at the principal office of the Company (the "Purchase Price Certificate"), and
shall make available to the Employee, for review at the principal office of the
Company, a copy of the Company's financial statements as of the Valuation Date.
The calculations as set forth on the Purchase Price Certificate shall be final
and binding on the Company and the Employee for purposes of this Agreement. The
Employee shall keep the Purchase Price Certificate, the financial statements and
any other documentation provided in connection therewith confidential, shall not
use any such material or any information contained therein for any purpose other
than to verify the amounts due the Employee in respect of
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any shares owned by the Employee being purchased by the Company, and shall not
disclose any such material or any information contained therein to anyone other
than the Employee's legal or financial advisers who have agreed in writing to
the equivalent confidentiality, non-use and non-disclosure provisions contained
in this paragraph.
(c) The purchase price per share of the shares of Common Stock
purchased pursuant to Section 2.2(a) hereof (the "Purchase Price") shall be
equal to the Book Value Per Share, adjusted to reflect any Capital Transaction
between the Valuation Date and the Election Date, as if such event had occurred
as of the Valuation Date.
(d) Subject to Section 2.2(e) hereof, the closing (the
"Closing") of any purchase of shares of Common Stock which the Company has
elected to purchase pursuant to Section 2.2(a) hereof (the "Call Shares") shall
take place at the principal office of the Company on the later of (i) 10 days
after the Delivery Date (or, in the case of a First-Year Termination, 10 days
after the Election Date) and (ii) (if applicable) 10 days after the appointment
of a Legal Representative (such later date, the "Scheduled Closing Date"). At
the Closing, the Employee shall sell, convey, transfer, assign and deliver to
the Company all right, title and interest in and to the Call Shares, which shall
constitute (and, at the Closing, the Employee shall certify the same to the
Company in writing) good and unencumbered title to such shares, free and clear
of all liens, security interests, encumbrances and adverse claims of any kind
and nature (other than those in favor of the Company and the FL & Co. Companies
pursuant to this Agreement), and shall deliver to the Company a certificate
representing the shares duly endorsed for transfer, or accompanied by
appropriate stock transfer powers duly executed, and with all necessary transfer
tax stamps affixed thereto at the expense of the Employee, and the Company shall
deliver to the Employee, in full payment of the purchase price for the Call
Shares, either a wire transfer to an account designated by the Employee or a
cashier's, certified or official bank check payable to the order of the Employee
(the method of payment to be at the option of the Company), in the amount equal
to the Purchase Price multiplied by the number of Call Shares. Notwithstanding
anything herein to the contrary, from and after the Election Date, the Employee
shall not have any rights with respect to any of the Call Shares (including any
rights pursuant to Sections 2.3 and 2.4 hereof), except to receive the Purchase
Price therefor.
(e) Notwithstanding the provisions of Section 2.2(d) hereof,
if the Company exercises its option to purchase Unvested Shares pursuant to
Section 2.2(a) hereof, but is prohibited from effecting the Closing on the
Scheduled Closing Date by any contractual obligation of the Company or any of
its Affiliates or by applicable law, then the Closing shall take place on the
first practicable date on which the Company is permitted to purchase such
shares, and, at the Closing, the Company shall pay to the Employee interest on
the unpaid Purchase Price from and including the Scheduled
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Closing Date to, but not including, the date of the Closing, at the rate (as of
the Scheduled Closing Date) for a six-month certificate of deposit at The Chase
Manhattan Bank or any successor bank thereto. If at any time the prohibition
shall cease to be applicable to any portion of the shares not repurchased, then
the Company shall purchase such portion on the first practicable date on which
the Company is permitted to do so. The Company shall not declare or pay any
dividend of cash or cash equivalents, or repurchase any shares of Common Stock
or Common Stock for cash or cash equivalents, until the purchase price for all
of the Call Shares has been paid in full.
2.3 PARTICIPATION IN SALE OF COMMON STOCK. The Employee, at the
Employee's option, may participate proportionately (and the FL & Co. Companies
shall allow the Employee to participate proportionately) in any sale (other than
a public offering, which shall be governed by Section 2.4 hereof) of all or a
portion of the shares of Common Stock owned by either of the FL & Co. Companies
to any Third Party by selling in such sale the same percentage of the Employee's
shares of Common Stock as the FL & Co. Companies propose to sell of their shares
of Common Stock to the Third Party (determined on the basis of the aggregate
number of shares of Common Stock owned, and the aggregate number of such shares
being sold, by the FL & Co. Companies). The Company shall notify the Employee in
writing of the FL & Co. Companies' intention to effect such a sale to a Third
Party and the nature and per share amount of consideration to be paid by such
Third Party at least 10 days, or such shorter time as the Company deems
practicable, before the closing of any such proposed sale of shares of Common
Stock (the "Section 2.3 Notice"), and the Employee shall notify the Company in
writing within 5 days after receipt of the Section 2.3 Notice of his or her
intention to participate in such sale, including the number of shares of Common
Stock with respect to which he or she will so participate. Any failure by the
Employee to so notify the Company within such 5 day period shall be deemed an
election by the Employee not to participate in such sale with respect to any of
his or her shares. Any sale of shares of Common Stock by the Employee pursuant
to this Section 2.3 shall be for the same consideration per share, on the same
terms and subject to the same conditions as the sale of shares of Common Stock
owned by the FL & Co. Companies. If the Employee sells any shares of Common
Stock pursuant to this Section 2.3, the Employee shall pay and be responsible
for the Employee's proportionate share of the Expenses of Sale and the Sale
Obligations.
2.4 PARTICIPATION IN PUBLIC OFFERING OF COMMON STOCK.
(a) If the FL & Co. Companies propose to sell all or any
portion of the shares of Common Stock owned by the FL & Co. Companies in a
public offering, the Employee shall be entitled and required to participate in
such public offering by selling in the public offering the same percentage of
the Employee's shares of Common Stock as
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the FL & Co. Companies propose to sell of their shares in the public offering
(determined on the basis of the aggregate number of shares of Common Stock
owned, and the aggregate number of such shares being sold, by the FL & Co.
Companies). The Company shall notify the Employee in writing of the FL & Co.
Companies' intention to effect such public offering at least 10 days, or such
shorter time as the Company deems practicable, before the filing with the
Securities and Exchange Commission of the registration statement relating to
such public offering (the "Section 2.4 Notice") and shall cause the Employee's
shares to be sold in such public offering to be included therein. If the
Employee sells any shares pursuant to this Section 2.4, the Employee shall pay
and be responsible for the Employee's proportionate share of the Expenses of
Sale and the Sale Obligations, including, without limitation, indemnifying the
underwriters of such public offering, on a proportionate basis, to the same
extent as the FL & Co. Companies are required to indemnify such underwriters.
(b) In connection with any proposed public offering of
securities of the Company, whether by any of the FL & Co. Companies or the
Company or otherwise, the Employee agrees (i) to supply any information
reasonably requested by the Company in connection with the preparation of a
registration statement and/or any other documents relating to such public
offering, and (ii) to execute and deliver any agreements and instruments
reasonably requested by the Company to effectuate such public offering,
including, without limitation, an underwriting agreement, a custody agreement
and a "hold back" agreement pursuant to which the Employee will agree not to
sell or purchase any securities of the Company (whether or not such securities
are otherwise governed by this Agreement) for the same period of time following
the public offering as is agreed to by the FL & Co. Companies with respect to
themselves. If the Company requests that the Employee take any of the actions
referred to in clause (i) or (ii) of the previous sentence, the Employee shall
take such action promptly but in any event within five days following the date
of such request.
2.5 REQUIRED PARTICIPATION IN SALE OF COMMON STOCK BY THE FL & CO.
COMPANIES. Notwithstanding any other provision of this Agreement to the
contrary, if the FL & Co. Companies shall propose to sell (including by
exchange, in a business combination or otherwise) all or any portion of their
shares of Common Stock in a bona fide arm's-length transaction, the FL & Co.
Companies, at their option, may require that the Employee sell the same
percentage of the Employee's shares of Common Stock as the FL & Co. Companies
propose to sell of their shares in the transaction (determined on the basis of
the aggregate number of shares of Common Stock owned, and the aggregate number
of such shares then being sold, by the FL & Co. Companies) for the same
consideration per share, on the same terms and subject to the same conditions in
the same transaction and, if stockholder approval of the transaction is required
and the Employee is entitled to vote thereon, that the Employee vote the
Employee's shares in
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favor thereof. If the Employee sells any shares pursuant to this Section 2.5,
the Employee shall pay and be responsible for the Employee's proportionate share
of the Expenses of Sale and the Sale Obligations.
2.6 TERMINATION OF RESTRICTIONS AND RIGHTS. Notwithstanding any
other provision of this Agreement to the contrary, but subject to the
restrictions of all applicable federal and state securities laws, including the
restrictions in this Agreement relating thereto, from and after the Release Date
any and all shares of Common Stock owned by the Employee (a) may be sold,
transferred, assigned, exchanged, pledged, encumbered or otherwise disposed of
(and the Employee may grant any option or right to purchase such shares or any
legal or beneficial interest therein, or may continue to hold such shares), free
of the restrictions contained in this Agreement and (b) shall no longer be
entitled to any of the rights contained in this Agreement. Without limiting the
generality of the foregoing, from and after the Release Date, the provisions of
Articles 2 and 3 hereof (other than this Section 2.6 and Sections 3.1(a), 3.1(b)
and 3.1(c) hereof) shall terminate and have no further force or effect.
3. PROHIBITED ACTIVITIES.
3.1 PROHIBITION AGAINST CERTAIN ACTIVITIES. The Employee agrees that
(a) the Employee will not at any time during the Employee's employment (other
than in the course of such employment) with the Company or any Affiliate
thereof, or after a Termination, directly or indirectly disclose or furnish to
any other Person or use for the Employee's own or any other Person's account any
confidential or proprietary knowledge or information or any other information
which is not a matter of public knowledge and which was obtained during the
Employee's employment with, or other performance of services for, the Company or
any Affiliate thereof or any predecessor of any of the foregoing, no matter from
where or in what manner the Employee may have acquired such knowledge or
information, and the Employee shall retain all such knowledge and information in
trust for the benefit of the Company, its Affiliates and the successors and
assigns of any of them, (b) if the Employee is Terminated, the Employee will not
for three years following such Termination directly or indirectly solicit for
employment, including without limitation recommending to any subsequent employer
the solicitation for employment of, any employee of the Company, (c) the
Employee will not, at any time during the Employee's employment with the Company
or any Affiliate thereof or after a Termination, publish any statement or make
any statement (under circumstances reasonably likely to become public or that
the Employee might reasonably expect to become public) critical of the Company
or any Affiliate of the Company, or in any way adversely affecting or otherwise
maligning the business or reputation of any of the foregoing entities, and (d)
the Employee will not breach the provisions of Section 2.1
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hereof (any activity prohibited by clause (a), (b), (c) or (d) of this Section
3.1 being referred to as a "Prohibited Activity").
3.2 RIGHT TO PURCHASE SHARES. The Employee understands and agrees
that Holdings and the Company have granted to the Employee the right to purchase
equity securities to reward the Employee for the Employee's future efforts and
loyalty to the Company and its Affiliates by giving the Employee the opportunity
to participate in the potential future appreciation of the Company. Accordingly,
(a) if the Employee engages in any Prohibited Activity, or (b) if, at any time
during the Employee's employment with the Company or any of its Affiliates or
during the three years following a Termination, the Employee engages in any
Competitive Activity, or (c) if, at any time (whether during the Employee's
employment or after any Termination thereof), the Employee is convicted of a
crime against the Company or any of its Affiliates, then, in addition to any
other rights and remedies available to the Company, the Company shall be
entitled, at its option, exercisable by written notice (the "Repurchase Notice")
to the Employee, to purchase all of the shares of Common Stock then held by the
Employee.
3.3 PURCHASE PRICE; CLOSING. The purchase price per share of the
shares of Common Stock purchased pursuant to this Article 3 shall be equal to
the lesser of (a) $[____] (adjusted to reflect any Capital Transaction effected
after the Closing Date and prior to the date of the Repurchase Notice) and (b)
the Book Value Per Share (except that any reference to the Delivery Date or
Election Date shall instead be a reference to the date of the Repurchase
Notice). If such purchase price is determined pursuant to clause (b) of the
preceding sentence, then the Company shall, within 15 days following the later
of receipt of the Employee's written request therefor (which request must be
made within eight days of the date of the Repurchase Notice) and the date the
relevant financial statements are available, provide the Employee with the same
purchase price certificate as is referred to in Section 2.2(b) hereof, and the
Employee hereby agrees to the same confidentiality, non-use and non-disclosure
provisions with respect thereto as are contained in Section 2.2(b) hereof. The
calculations as set forth on such certificate shall be final and binding on the
Company and the Employee for purposes of this Agreement. The closing of such
purchase shall take place at the principal office of the Company 10 days
following the date of the Repurchase Notice or, if a written request therefor
was timely made, 10 days following the date of delivery of the aforesaid
certificate, except that if the Company is prohibited from repurchasing any
shares of Common Stock pursuant to this Article 3 by any contractual obligation
of the Company or any of its Affiliates or by applicable law, the closing of
such purchase shall take place on the first practicable date on which the
Company is permitted to purchase such shares (and the provisions of the last two
sentences of Section 2.2(e) shall likewise apply to repurchases pursuant to this
Article 3). At such closing, the Employee shall sell, convey, transfer, assign
and deliver to the Company all right, title and interest in and to the shares of
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Common Stock being purchased by the Company, which shall constitute (and, at the
closing, the Employee shall certify the same to the Company in writing) good and
unencumbered title to such shares, free and clear of all liens, security
interests, encumbrances and adverse claims of any kind and nature (other than
those in favor of the Company and the FL & Co. Companies pursuant to this
Agreement), and shall deliver to the Company a certificate representing the
shares duly endorsed for transfer, or accompanied by appropriate stock transfer
powers duly executed, and with all necessary transfer tax stamps affixed thereto
at the expense of the Employee, and the Company shall deliver to the Employee,
in full payment of the purchase price payable pursuant to this Section 3.3 for
the shares of Common Stock purchased, a check payable to the order of the
Employee, in the amount of the aggregate purchase price for the shares
purchased. Notwithstanding anything herein to the contrary, from and after the
date of the Repurchase Notice, the Employee shall not have any rights with
respect to any shares of Common Stock which the Employee is required to sell to
the Company pursuant to this Article 3 (including any rights pursuant to Section
2.3 or 2.4 hereof), except to receive the purchase price therefor.
3.4 TRANSACTION PROCEEDS. Notwithstanding anything to the contrary
set forth in Sections 2.3, 2.4 or 2.5 hereof, if at the time of a Transaction in
which the Employee is participating, the Company is entitled to purchase the
Employee's shares of Common Stock pursuant to this Article 3, and if the
purchase price per share for a purchase pursuant to this Article 3 would be less
than the proceeds per share to the Employee from such Transaction, then the
Employee shall be entitled to receive only the aggregate purchase price payable
under this Article 3, with the balance of the proceeds of sale in the
Transaction being remitted to the other stockholders of the Company
participating in such Transaction pro rata in accordance with their respective
participation in such Transaction.
4. STOCK CERTIFICATE LEGEND AND INVESTMENT REPRESENTATIONS; OTHER
REPRESENTATIONS.
4.1 LEGEND. All certificates representing shares of Common Stock
acquired hereunder or hereafter by the Employee (unless registered under the
Act) shall bear the following legend:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or any
securities regulatory authority of any state, and may not be sold,
transferred, assigned, exchanged, pledged, encumbered or otherwise
disposed of except in compliance with all applicable securities laws
and except in accordance with the provisions of a Stockholder's
Agreement with the
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Company, a copy of which is available for inspection at the offices
of the Company."
4.2 REPRESENTATIONS OF THE EMPLOYEE. The Employee represents and
warrants that: (a) the Employee understands that (i) the offer and sale of
shares of Common Stock in accordance with this Agreement have not been and will
not be registered under the Act, and it is the intention of the parties hereto
that the offer and sale of the securities be exempt from registration under the
Act and the rules promulgated thereunder by the Securities and Exchange
Commission; (ii) the shares of Common Stock being acquired hereunder cannot be
sold, transferred, assigned, exchanged, pledged, encumbered or otherwise
disposed of unless they are registered under the Act or an exemption from
registration is available; and (iii) the purchase of Common Stock hereunder does
not entitle the Employee to participate in any other equity program of the
Company, whether now existing or hereafter established; (b) the Employee is
acquiring the shares of Common Stock being acquired hereunder for investment for
the Employee's own account and not with a view to the distribution thereof; (c)
the Employee will not, directly or indirectly, sell, transfer, assign, exchange,
pledge, encumber or otherwise dispose of any shares of Common Stock being
acquired hereunder except in accordance with this Agreement; (d) the Employee
has, or the Employee together with the Employee's advisers, if any, have, such
knowledge and experience in financial and business matters that the Employee is,
or the Employee together with the Employee's advisers, if any, are, and will be
capable of evaluating the merits and risks relating to the Employee's purchase
of shares of Common Stock under this Agreement; (e) the Employee has been given
the opportunity to obtain information and documents relating to the Company and
to ask questions of and receive answers from representatives of the Company
concerning the Company and the Employee's investment in the Common Stock; (f)
the Employee's decision to invest in the Company has been based upon independent
investigations made by the Employee and the Employee's advisers, if any; (g) the
Employee is able to bear the economic risk of a total loss of the Employee's
investment in the Company; and (h) the Employee has adequate means of providing
for the Employee's current needs and foreseeable personal contingencies and has
no need for the Employee's investment in the Common Stock to be liquid.
5. MISCELLANEOUS.
5.1 DISTRIBUTIONS. In the event of any dividend, distribution or
exchange paid or made in respect of the Common Stock consisting of Affiliate
Securities, (a) the restrictions and rights with respect to the Common Stock
that are contained in this Agreement shall be applicable to the Affiliate
Securities without further action of the parties (with the references to Common
Stock being deemed references to the Affiliate
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Securities and the references to the Company being deemed references to the
Affiliate), and (b) as a condition precedent to the receipt of the Affiliate
Securities by the Employee, the Employee shall enter into a stockholder's
agreement containing substantially equivalent terms with respect to the
Affiliate Securities (but reflecting the economics of the dividend, distribution
or exchange and the capitalization of the Affiliate) as are contained herein.
The Board of Directors of the Company, in good faith, shall determine such terms
and its determination shall be final and binding on the Employee.
5.2 FURTHER ASSURANCES. Each party hereto shall do and perform or
cause to be done and performed all further acts and things and shall execute and
deliver all other agreements, certificates, instruments, and documents as any
other party hereto reasonably may request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
5.3 GOVERNING LAW. This Agreement and the rights and obligations of
the parties hereto shall be governed by, and construed and enforced in
accordance with, the laws of the State of New York, without giving effect to the
principles of conflicts of law thereof.
5.4 SPECIFIC PERFORMANCE. The parties hereto acknowledge that there
will be no adequate remedy at law for a violation of any of the provisions of
this Agreement and that, in addition to any other remedies which may be
available, all of the provisions of this Agreement shall be specifically
enforceable in accordance with their respective terms.
5.5 INVALIDITY OF PROVISIONS. The invalidity or unenforceability of
any provision of this Agreement in any jurisdiction shall not affect the
validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of this Agreement, including that
provision, in any other jurisdiction. If any provision of this Agreement is held
unlawful or unenforceable in any respect, such provision shall be revised or
applied in a manner that renders it lawful and enforceable to the fullest extent
possible.
5.6 NOTICE. All notices and other communications hereunder shall be
in writing and, unless otherwise provided herein, shall be deemed to have been
given when received by the party to whom such notice is to be given at its
address set forth below, or such other address for the party as shall be
specified by notice given pursuant hereto:
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(a) If to the Company, to:
The Yankee Candle Company, Inc.
102 Christian Lane
Whately, MA 01093
Attention: President
(b) If to the Employee, to the address set forth below the
Employee's signature, and if to the Legal Representative, to
such Person at the address of which the Company is notified in
accordance with this Section 5.6.
5.7 BINDING EFFECT. This Agreement shall inure to the benefit of and
shall be binding upon the parties hereto and their respective heirs, legal
representatives, successors and assigns. In addition, each of the FL & Co.
Companies shall be a third party beneficiary of this Agreement and shall be
entitled to enforce this Agreement.
5.8 AMENDMENT AND MODIFICATION. This Agreement may be amended,
modified or supplemented only by written agreement of the party against whom
enforcement of such amendment, modification or supplement is sought.
5.9 HEADINGS; EXECUTION IN COUNTERPARTS. The headings and captions
contained herein are for convenience only and shall not control or affect the
meaning or construction of any provision hereof. This Agreement may be executed
in any number of counterparts, each of which shall be deemed to be an original
and which together shall constitute one and the same instrument.
5.10 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement, and supersedes all prior agreements and understandings (including the
Old Stockholder's Agreement, which will be of no further force and effect from
and after the closing of the Offering), oral and written, between the parties
hereto with respect to the subject matter hereof.
5.11 WITHHOLDING. The Company shall have the right to deduct from
any amount payable under this Agreement any taxes or other amounts required by
applicable law to be withheld. The Employee agrees to indemnify the Company
against any Federal, state and local withholding taxes for which the Company may
be liable in connection with the Employee's acquisition, ownership or
disposition of any Common Stock.
5.12 NO RIGHT TO CONTINUED EMPLOYMENT. This Agreement shall not
confer upon the Employee any right with respect to continuance of employment by
the
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Company or any Affiliate thereof, nor shall it interfere in any way with the
right of the Company or any Affiliate thereof to terminate the Employee's
employment at any time.
5.13 POSSESSION OF CERTIFICATES; POWER OF ATTORNEY.
(a) In order to provide for the safekeeping of the
certificates representing the shares of Common Stock purchased by the Employee
and to facilitate the enforcement of the terms and conditions hereof, (i) the
Employee shall redeliver to the Company, and the Company shall retain physical
possession of, all certificates representing shares of Common Stock acquired by
the Employee and (ii) the Employee shall deliver to the Company an undated stock
power, duly executed in blank, for each such certificate. The Employee shall be
relieved of any obligation otherwise imposed by this Agreement to deliver
certificates representing shares of Common Stock if the same are in the custody
of the Company. After the Release Date, upon written request by the Employee
therefor, the Company shall deliver to the Employee any certificates in its
custody representing the Employee's shares of Common Stock.
(b) The Employee hereby irrevocably appoints the FL & Co.
Companies, and each of them (individually and collectively, the
"Representative"), the Employee's true and lawful agent and attorney-in-fact,
with full powers of substitution, to act in the Employee's name, place and
stead, to do or refrain from doing all such acts and things, and to execute and
deliver all such documents, as the Representative shall deem necessary or
appropriate in connection with a public offering of securities of the Company or
a sale pursuant to Section 2.3, 2.5 or 3.2 hereof, including, without in any way
limiting the generality of the foregoing, in the case of a sale pursuant to
Section 2.3 or 2.5 hereof, to execute and deliver on behalf of the Employee a
purchase and sale agreement and any other agreements and documents that the
Representative deems necessary in connection with any such sale, and in the case
of a public offering, to execute and deliver on behalf of the Employee an
underwriting agreement, a "hold back" agreement, a custody agreement, and any
other agreements and documents that the Representative deems necessary in
connection with any such public offering, and in the case of any sale pursuant
to Section 2.3 or 2.5 hereof and any public offering pursuant to Section 2.4(a)
hereof, to receive on behalf of the Employee the proceeds of the sale or public
offering of the Employee's shares, to hold back from any such proceeds any
amount that the Representative deems necessary to reserve against the Employee's
share of any Expenses of Sale and Sale Obligations and to pay such Expenses of
Sale and Sale Obligations. The Employee hereby ratifies and confirms all that
the Representative shall do or cause to be done by virtue of its appointment as
the Employee's agent and attorney-in-fact. In acting for the Employee pursuant
to the appointment set forth in this Section 5.13(b), the Representative shall
not be responsible to the Employee for any loss or damage the Employee may
suffer by reason of the performance by the Representative of
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its duties under this Agreement, except for loss or damage arising from willful
violation of law or gross negligence by the Representative in the performance of
its duties hereunder. The appointment of the Representative shall be deemed
coupled with an interest and as such shall be irrevocable and shall survive the
death, incompetency, mental illness or insanity of the Employee, and any person
dealing with the Representative may conclusively and absolutely rely, without
inquiry, upon any act of the Representative as the act of the Employee in all
matters referred to in this Section 5.13(b).
5.14 CONSENT TO JURISDICTION. Each party hereby irrevocably and
unconditionally consents to submit to the exclusive jurisdiction of the courts
of the State of New York and of the United States of America, in each case
located in the County of New York, for any Litigation (and agrees not to
commence any Litigation except in any such court), and further agrees that
service of process, summons, notice or document by U.S. registered mail to such
party's respective address set forth in Section 5.6 hereof shall be effective
service of process for any Litigation brought against such party in any such
court. Each party hereby irrevocably and unconditionally waives any objection to
the laying of venue of any Litigation in the courts of the State of New York or
of the United States of America, in each case located in the County of New York,
and hereby further irrevocably and unconditionally waives and agrees not to
plead or claim in any such court that any Litigation brought in any such court
has been brought in an inconvenient forum.
IN WITNESS WHEREOF, this Agreement has been signed by or on behalf
of each of the parties hereto, all as of the date first above written.
THE YANKEE CANDLE COMPANY, INC.
By:
-------------------------------
Name:
Title:
EMPLOYEE
----------------------------------
Name: < Name >
Address: < Address1 >
< Address2 >
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<PAGE>
The undersigned hereby agree to be bound by the provisions of Sections 2.3 and
2.4 of the foregoing Stockholder's Agreement.
FORSTMANN LITTLE & CO. EQUITY PARTNERSHIP-V,
L.P.
By: FLC XXX Partnership,
its general partner
By: ______________________________
__________________,
a general partner
FORSTMANN LITTLE & CO. SUBORDINATED DEBT AND
EQUITY MANAGEMENT BUYOUT PARTNERSHIP-VI, L.P.
By: FLC XXIX Partnership,
its general partner
By: ______________________________
__________________,
a general partner
The undersigned acknowledges that the undersigned has read the
foregoing Agreement between The Yankee Candle Company, Inc. and the
undersigned's spouse, understands that the undersigned's spouse has purchased
shares of Common Stock as reflected in such Agreement and agrees to be bound by
the foregoing Agreement.
-------------------------
Employee's Spouse
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<PAGE>
ANNEX A
Employee Number of Shares
-------- ----------------
< Name > < Shares >
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<PAGE>
Exhibit 10.8
REGISTRATION RIGHTS AGREEMENT
among
THE YANKEE CANDLE COMPANY, INC.
FORSTMANN LITTLE & CO. EQUITY PARTNERSHIP - V, L.P.,
and
FORSTMANN LITTLE & CO. SUBORDINATED DEBT
AND EQUITY MANAGEMENT BUYOUT PARTNERSHIP - VI, L.P.
May 6, 1999
<PAGE>
REGISTRATION RIGHTS AGREEMENT, dated as of May 6, 1999, among The
Yankee Candle Company, Inc., a Massachusetts corporation (the "Company"),
Forstmann Little & Co. Equity Partnership - V, L.P., a Delaware limited
partnership ("Equity-V"), and Forstmann Little & Co. Subordinated Debt and
Equity Management Buyout Partnership - VI, L.P. a Delaware limited partnership
("MBO-VI") (Equity-V and MBO-VI are individually referred to as a "Forstmann
Little Partnership" and collectively referred to as the "Forstmann Little
Partnerships").
The Forstmann Little Partnerships currently own 170,000 shares of
Class A common stock of Yankee Candle Holdings Corp., a Delaware corporation
("Holdings"). In connection with the proposed public offering of Common Stock
(as defined below), Holdings will exchange its assets for new shares of the
Company. In connection with that exchange the Company hereby grants to the
Forstmann Little Partnerships certain registration and other rights with respect
to their shares of Common Stock as more fully set forth herein.
If either of the Forstmann Little Partnerships desires to sell
shares of Common Stock, it may be necessary to register such shares under the
Securities Act (as defined below).
Accordingly, the parties hereto agree as follows:
1. DEFINITIONS. As used herein, unless the context otherwise
requires, the following terms have the following respective meanings:
"Commission" means the Securities and Exchange Commission or any
other Federal agency at the time administering the Securities Act.
"Common Stock" means any shares of common stock, par value $.01 per
share, of the Company, now or hereafter authorized to be issued, and any and all
securities of any kind whatsoever of the Company which may be exchanged for or
converted into Common Stock, any and all securities of any kind whatsoever of
the Company which may be issued on or after the date hereof in respect of, in
exchange for, or upon conversion of shares of Common Stock pursuant to a merger,
consolidation, stock split, stock dividend, recapitalization of the Company or
otherwise.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any similar Federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time. Reference
to a particular section of the Exchange Act shall include a reference to the
comparable section, if any, of any such similar Federal statute.
<PAGE>
"Other Investor" means each Person who, at the time of any
registration of Common Stock hereunder, has the right under a stockholder's
agreement or stock option agreement with the Company or any subsidiary thereof
to participate in any public offering in which all or a portion of the shares of
Common Stock owned by the Forstmann Little Partnerships are registered under the
Securities Act.
"Person" means a corporation, an association, a partnership, an
organization, a business, a trust, an individual, or any other entity or
organization, including a government or political subdivision or an
instrumentality or agency thereof.
"Registrable Securities" means (i) any shares of Common Stock now or
hereafter owned by the Forstmann Little Partnerships, (ii) any shares of Common
Stock held pursuant to the terms of a stockholder's agreement or issuable upon
exercise of an option pursuant to the terms of a stock option agreement, as the
case may be, between any Other Investor and the Company or any subsidiary
thereof, which agreement gives such Other Investor the right to participate
proportionately with the Forstmann Little Partnerships in a public offering with
respect to such shares, and (iii) any Common Stock issued with respect to the
Common Stock referred to in clauses (i) or (ii) by way of a stock dividend,
stock split or reverse stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or otherwise. As to any
particular Registrable Securities, such securities shall cease to be Registrable
Securities (a) when a registration statement with respect to the sale of such
securities shall have become effective under the Securities Act and such
securities shall have been disposed of in accordance with such registration
statement, (b) when such securities shall have been otherwise transferred, new
certificates for them not bearing a legend restricting further transfer shall
have been delivered by the Company and subsequent public distribution of them
shall not require registration of them under the Securities Act, or (c) when
such securities shall have been sold as permitted by, and in compliance with,
the Securities Act. Any certificate evidencing the Registrable Securities shall
bear a legend stating that the securities have not been registered under the
Securities Act and setting forth or referring to the restrictions on
transferability and sale of the securities.
"Registration Expenses" means all expenses incident to the
registration and disposition of the Registrable Securities pursuant to Section 2
hereof, including, without limitation, all registration, filing and applicable
national securities exchange fees, all fees and expenses of complying with state
securities or blue sky laws (including fees and disbursements of counsel to the
underwriters or the Forstmann Little Partnerships and the Other Investors in
connection with "blue sky" qualification of the Registrable Securities and
determination of their eligibility for investment under the laws of the various
jurisdictions), all word processing, duplicating and printing expenses, all
messenger and delivery expenses, the fees and disbursements of counsel for the
Company and of its independent public accountants, including the expenses of
"cold comfort" letters or any
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<PAGE>
special audits required by, or incident to, such registration, all fees and
disbursements of underwriters (other than underwriting discounts and
commissions), all transfer taxes, and the fees and expenses of counsel to the
Forstmann Little Partnerships and the Other Investors; PROVIDED, HOWEVER, that
Registration Expenses shall exclude, and the Forstmann Little Partnerships and
the Other Investors shall pay, underwriting discounts and commissions in respect
of the Registrable Securities being registered.
"Securities Act" means the Securities Act of 1933, as amended, or
any similar Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time. References to a
particular section of the Securities Act shall include a reference to the
comparable section, if any, of any such similar Federal statute.
2. REGISTRATION UNDER THE SECURITIES ACT, ETC.
2.1 REGISTRATION ON REQUEST.
(a) REQUEST. At any time or from time to time, the
Forstmann Little Partnerships, individually or jointly, shall have the right to
require the Company to effect the registration under the Securities Act of all
or part of the Registrable Securities, by delivering a written request therefor
to the Company specifying the number of shares of Registrable Securities and the
intended method of distribution. The Company shall, (i) as expeditiously as
possible (but in any event within 120 days of receipt of a written request), use
its best efforts to effect the registration under the Securities Act (including
by means of a shelf registration pursuant to Rule 415 under the Securities Act
if so requested in such request and if the Company is then eligible to use such
a registration) of the Registrable Securities which the Company has been so
requested to register by the Forstmann Little Partnerships, for distribution in
accordance with the intended method of distribution set forth in the written
request delivered by the Forstmann Little Partnerships, and (ii) if requested by
the Forstmann Little Partnerships, obtain acceleration of the effective date of
then registration statement relating to such registration.
(b) REGISTRATION OF OTHER SECURITIES. Whenever the
Company shall effect a registration pursuant to this Section 2.1 in connection
with an underwritten offering by any Forstmann Little Partnership and any Other
Investors of Registrable Securities, no securities other than Registrable
Securities shall be included among the securities covered by such registration
unless the Forstmann Little Partnership or Partnerships so registering
Registrable Securities (the "Registering Forstmann Little Partnerships") shall
have consented in writing to the inclusion therein of such other securities,
which consent may be subject to terms and conditions determined by the
Registering Forstmann Little Partnerships in their sole discretion.
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<PAGE>
(c) REGISTRATION STATEMENT FORM. Registrations
under this Section 2.1 shall be on such appropriate registration form of the
Commission as shall be selected by the Company and as shall be reasonably
acceptable to the Registering Forstmann Little Partnerships. The Company agrees
to include in any such registration statement all information which, in the
opinion of counsel to the Registering Forstmann Little Partnerships and counsel
to the Company, is necessary or desirable to be included therein.
(d) EXPENSES. The Company shall pay all Registration
Expenses in connection with any registration requested pursuant to this Section
2.1.
(e) EFFECTIVE REGISTRATION STATEMENT. A registration
requested pursuant to this Section 2.1 shall not be deemed to have been effected
(including for purposes of paragraph (h) of this Section 2.1) (i) unless a
registration statement with respect thereto has become effective and has been
kept continuously effective for a period of at least 120 days (or such shorter
period which shall terminate when all the Registrable Securities covered by such
registration statement have been sold pursuant thereto), (ii) if after it has
become effective, such registration is interfered with by any stop order,
injunction or other order or requirement of the Commission or other governmental
agency or court for any reason not attributable to the Registering Forstmann
Little Partnerships and has not thereafter become effective, or (iii) if the
conditions to closing specified in the underwriting agreement, if any, entered
into in connection with such registration are not satisfied or waived.
(f) SELECTION OF UNDERWRITERS. The underwriters of each
underwritten offering of the Registrable Securities so to be registered shall be
selected by the Registering Forstmann Little Partnerships.
(g) RIGHT TO WITHDRAW. If the managing underwriter of any
underwritten offering shall advise the Registering Forstmann Little Partnerships
that the Registrable Securities covered by the registration statement cannot be
sold in such offering within a price range acceptable to the Registering
Forstmann Little Partnerships, then the Registering Forstmann Little
Partnerships shall have the right to notify the Company in writing that they
have determined that the registration statement be abandoned or withdrawn, in
which event the Company shall abandon or withdraw such registration statement.
In the event of such abandonment or withdrawal, such request shall not be
counted for purposes of the requests for registration to which the Forstmann
Little Partnerships are entitled pursuant to this Section 2.1.
(h) LIMITATIONS ON REGISTRATION ON REQUEST. The Forstmann
Little Partnerships shall be entitled to require the Company to effect, and the
Company shall be required to effect, six registrations in the aggregate pursuant
to this Section 2.1,
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<PAGE>
PROVIDED, HOWEVER, that the aggregate offering value of the shares to be
registered pursuant to any such registration shall be at least $15,000,000
unless the Forstmann Little Partnerships then own shares with an aggregate value
less than $15,000,000 (in which case such lesser number of shares may be
registered).
(i) POSTPONEMENT. The Company shall be entitled once in
any six-month period to postpone for a reasonable period of time (but not
exceeding 90 days) (the "Postponement Period") the filing of any registration
statement required to be prepared and filed by it pursuant to this Section 2.1
if the Company determines, in its reasonable judgment, that such registration
and offering would materially interfere with any material financing, corporate
reorganization or other material transaction involving the Company or any
subsidiary, or would require premature disclosure thereof, and promptly gives
the Registering Forstmann Little Partnerships written notice of such
determination, containing a general statement of the reasons for such
postponement and an approximation of the anticipated delay. If the Company shall
so postpone the filing of a registration statement, the Forstmann Little
Partnerships shall have the right to withdraw the request for registration by
giving written notice to the Company at any time and, in the event of such
withdrawal, such request shall not be counted for purposes of the requests for
registration to which the Forstmann Little Partnerships are entitled pursuant to
this Section 2.1.
2.2 INCIDENTAL REGISTRATION.
(a) RIGHT TO INCLUDE REGISTRABLE SECURITIES. If the
Company at any time proposes to register any of its securities under the
Securities Act by registration on Form S-1, S-2 or S-3 or any successor or
similar form(s) (except registrations on any such Form or similar form(s) solely
for registration of securities in connection with an employee benefit plan or
dividend reinvestment plan or a merger or consolidation), whether or not for
sale for its own account, it will each such time give prompt written notice to
each of the Forstmann Little Partnerships of its intention to do so and of the
Forstmann Little Partnerships' rights under this Section 2.2. Upon the written
request of any of the Forstmann Little Partnerships (which request shall specify
the maximum number of Registrable Securities intended to be disposed of by the
Forstmann Little Partnerships), made as promptly as practicable and in any event
within 30 days after the receipt of any such notice (15 days if the Company
states in such written notice or gives telephonic notice to the Forstmann Little
Partnerships, with written confirmation to follow promptly thereafter, stating
that (i) such registration will be on Form S-3 and (ii) such shorter period of
time is required because of a planned filing date), the Company shall use its
best efforts to effect the registration under the Securities Act of all
Registrable Securities which the Company has been so requested to register by
the Forstmann Little Partnerships; PROVIDED, HOWEVER, that if, at any time after
giving written notice of its intention to register any securities and prior to
the effective date of
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<PAGE>
the registration statement filed in connection with such registration, the
Company shall determine for any reason not to register or to delay registration
of such securities, the Company shall give written notice of such determination
and its reasons therefor to the Forstmann Little Partnerships and (i) in the
case of a determination not to register, shall be relieved of its obligation to
register any Registrable Securities in connection with such registration (but
not from any obligation of the Company to pay the Registration Expenses in
connection therewith), without prejudice, however, to the rights of the
Forstmann Little Partnerships to request that such registration be effected as a
registration under Section 2.1 and (ii) in the case of a determination to delay
registering, shall be permitted to delay registering any Registrable Securities,
for the same period as the delay in registering such other securities. No
registration effected under this Section 2.2 shall relieve the Company of its
obligation to effect any registration upon request under Section 2.1. The
Company will pay all Registration Expenses in connection with any registration
of Registrable Securities requested pursuant to this Section 2.2.
(b) RIGHT TO WITHDRAW. The Forstmann Little Partnerships
shall have the right to withdraw their request for inclusion of its Registrable
Securities in any registration statement pursuant to this Section 2.2 at any
time prior to the execution of an underwriting agreement with respect thereto by
giving written notice to the Company of its request to withdraw.
(c) PRIORITY IN INCIDENTAL REGISTRATIONS. If the managing
underwriter of any underwritten offering shall inform the Company by letter of
its belief that the number of Registrable Securities requested to be included in
such registration, when added to the number of other securities to be offered in
such registration, would materially adversely affect such offering, then the
Company shall include in such registration, to the extent of the number and type
which the Company is so advised can be sold in (or during the time of) such
offering without so materially adversely affecting such offering (the "Section
2.2 Sale Amount"), (i) all of the securities proposed by the Company to be sold
for its own account; (ii) thereafter, to the extent the Section 2.2 Sale Amount
is not exceeded, the Registrable Securities requested by the Forstmann Little
Partnerships to be included in such registration pursuant to Section 2.2(a)
(including Registrable Securities held by Other Investors); and (iii)
thereafter, to the extent the Section 2.2 Sale Amount is not exceeded, any other
securities of the Company requested to be included in such registration by any
holder thereof, including, in the case where such registration is to be effected
as a result of the exercise by a holder of the Company's securities of such
holder's right to cause such securities to be so registered, the securities of
such holder.
(d) PLAN OF DISTRIBUTION. Any participation by holders of
Registrable Securities in a registration by the Company shall be in accordance
with the
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<PAGE>
Company's plan of distribution, provided that the Registering Forstmann
Little Partnerships shall have the right to select the co-managing underwriter.
2.3 REGISTRATION PROCEDURES. If and whenever the Company is
required to use its best efforts to effect the registration of any Registrable
Securities under the Securities Act as provided in Sections 2.1 and 2.2 hereof,
the Company shall as expeditiously as possible:
(a) prepare and file with the Commission as soon as
practicable the requisite registration statement to effect such registration
(and shall include all financial statements required by the Commission to be
filed therewith) and thereafter use its best efforts to cause such registration
statement to become effective; PROVIDED, HOWEVER, that before filing such
registration statement (including all exhibits) or any amendment or supplement
thereto or comparable statements under securities or blue sky laws of any
jurisdiction, the Company shall furnish such documents to the Registering
Forstmann Little Partnerships and each underwriter, if any, participating in the
offering of the Registrable Securities and their respective counsel, which
documents will be subject to the review and comments of the Registering
Forstmann Little Partnerships, each underwriter and their respective counsel;
and provided, further, however, that the Company may discontinue any
registration of its securities which are not Registrable Securities at any time
prior to the effective date of the registration statement relating thereto;
(b) notify the Registering Forstmann Little Partnerships
of the Commission's requests for amending or supplementing the registration
statement and the prospectus, and prepare and file with the Commission such
amendments and supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the Securities Act with
respect to the disposition of all Registrable Securities covered by such
registration statement for such period as shall be required for the disposition
of all of such Registrable Securities in accordance with the intended method of
distribution thereof; PROVIDED, that except with respect to any such
registration statement filed pursuant to Rule 415 under the Securities Act, such
period need not exceed 120 days;
(c) furnish, without charge, to the Registering Forstmann
Little Partnerships and each underwriter such number of conformed copies of such
registration statement and of each such amendment and supplement thereto (in
each case including all exhibits), such number of copies of the prospectus
contained in such registration statement (including each preliminary prospectus
and any summary prospectus) and any other prospectus filed under Rule 424 under
the Securities Act, in
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<PAGE>
conformity with the requirements of the Securities Act, and such other
documents, as the Registering Forstmann Little Partnerships and such
underwriters may reasonably request;
(d) use its best efforts (i) to register or qualify all
Registrable Securities and other securities covered by such registration
statement under such securities or blue sky laws of such States of the United
States of America where an exemption is not available and as the Registering
Forstmann Little Partnerships or any managing underwriter shall reasonably
request, (ii) to keep such registration or qualification in effect for so long
as such registration statement remains in effect, and (iii) to take any other
action which may be reasonably necessary or advisable to enable the Registering
Forstmann Little Partnerships to consummate the disposition in such
jurisdictions of the securities to be sold by the Registering Forstmann Little
Partnerships, except that the Company shall not for any such purpose be required
to qualify generally to do business as a foreign corporation in any jurisdiction
wherein it would not but for the requirements of this subsection (d) be
obligated to be so qualified or to consent to general service of process in any
such jurisdiction;
(e) use its best efforts to cause all Registrable
Securities covered by such registration statement to be registered with or
approved by such other federal or state governmental agencies or authorities as
may be necessary in the opinion of counsel to the Company and counsel to the
Registering Forstmann Little Partnerships to consummate the disposition of such
Registrable Securities;
(f) furnish to the Registering Forstmann Little
Partnerships and each underwriter, if any, participating in the offering of the
securities covered by such registration statement, a signed counterpart of (i)
an opinion of counsel for the Company, and (ii) a "comfort" letter signed by the
independent public accountants who have certified the Company's financial
statements included or incorporated by reference in such registration statement,
covering substantially the same matters with respect to such registration
statement (and the prospectus included therein) and, in the case of the
accountants' comfort letter, with respect to events subsequent to the date of
such financial statements, as are customarily covered in opinions of issuer's
counsel and in accountants' comfort letters delivered to the underwriters in
underwritten public offerings of securities (and dated the dates such opinions
and comfort letters are customarily dated) and, in the case of the legal
opinion, such other legal matters, and, in the case of the accountants' comfort
letter, such other financial matters, as the Registering Forstmann Little
Partnerships, or the underwriters, may reasonably request;
(g) promptly notify the Registering Forstmann Little
Partnerships and each managing underwriter, if any, participating in the
offering of the securities covered by such registration statement (i) when such
registration statement, any pre-effective amendment, the prospectus or any
prospectus supplement related thereto or
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<PAGE>
post-effective amendment to such registration statement has been filed, and,
with respect to such registration statement or any post-effective amendment,
when the same has become effective; (ii) of any request by the Commission for
amendments or supplements to such registration statement or the prospectus
related thereto or for additional information; (iii) of the issuance by the
Commission of any stop order suspending the effectiveness of such registration
statement or the initiation of any proceedings for that purpose; (iv) of the
receipt by the Company of any notification with respect to the suspension of the
qualification of any of the Registrable Securities for sale under the securities
or blue sky laws of any jurisdiction or the initiation of any proceeding for
such purpose; (v) at any time when a prospectus relating thereto is required to
be delivered under the Securities Act, upon discovery that, or upon the
happening of any event as a result of which, the prospectus included in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, in the light of the
circumstances under which they were made, and in the case of this clause (v), at
the request of the Registering Forstmann Little Partnerships promptly prepare
and furnish to the Registering Forstmann Little Partnerships and each managing
underwriter, if any, participating in the offering of the Registrable
Securities, a reasonable number of copies of a supplement to or an amendment of
such prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such securities, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in the
light of the circumstances under which they were made; and (vi) at any time when
the representations and warranties of the Company contemplated by Section 2.4(a)
or (b) hereof cease to be true and correct;
(h) otherwise comply with all applicable rules and
regulations of the Commission, and make available to its security holders, as
soon as reasonably practicable, an earnings statement covering the period of at
least twelve months beginning with the first full calendar month after the
effective date of such registration statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Securities Act and Rule 158
promulgated thereunder, and promptly furnish to the Registering Forstmann Little
Partnerships a copy of any amendment or supplement to such registration
statement or prospectus;
(i) provide and cause to be maintained a transfer agent
and registrar (which, in each case, may be the Company) for all Registrable
Securities covered by such registration statement from and after a date not
later than the effective date of such registration;
(j) (i) use its best efforts to cause all Registrable
Securities covered by such registration statement to be listed on the principal
securities exchange on
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<PAGE>
which similar securities issued by the Company are then listed (if any), if the
listing of such Registrable Securities is then permitted under the rules of such
exchange, or (ii) if no similar securities are then so listed, use its best
efforts to (x) cause all such Registrable Securities to be listed on a national
securities exchange or (y) failing that, secure designation of all such
Registrable Securities as a NASDAQ "national market system security" within the
meaning of Rule 11Aa2-1 of the Commission or (z) failing that, to secure NASDAQ
authorization for such shares and, without limiting the generality of the
foregoing, to arrange for at least two market makers to register as such with
respect to such shares with the National Association of Securities Dealers,
Inc.;
(k) deliver promptly to counsel to the Registering
Forstmann Little Partnerships and each underwriter, if any, participating in the
offering of the Registrable Securities, copies of all correspondence between the
Commission and the Company, its counsel or auditors and all memoranda relating
to discussions with the Commission or its staff with respect to such
registration statement;
(l) use its best efforts to obtain the withdrawal of any
order suspending the effectiveness of the registration statement;
(m) provide a CUSIP number for all Registrable
Securities, no later than the effective date of the registration statement; and
(n) make available its employees and personnel and
otherwise provide reasonable assistance to the underwriters (taking into account
the needs of the Company's business) in their marketing of Registrable
Securities.
The Company may require the Registering Forstmann Little
Partnerships to furnish the Company such information regarding the Registering
Forstmann Little Partnerships and the distribution of the Registrable Securities
as the Company may from time to time reasonably request in writing.
The Forstmann Little Partnerships agree that upon receipt of any
notice from the Company of the happening of any event of the kind described in
paragraph (g)(iii) or (v) of this Section 2.3, each of the Registering Forstmann
Little Partnerships will, to the extent appropriate, discontinue its disposition
of Registrable Securities pursuant to the registration statement relating to
such Registrable Securities until, in the case of paragraph (g)(v) of this
Section 2.3, its receipt of the copies of the supplemented or amended prospectus
contemplated by paragraph (g)(v) of this Section 2.3 and, if so directed by the
Company, will deliver to the Company (at the Company's expense) all copies,
other than permanent file copies, then in its possession, of the prospectus
relating to such Registrable Securities current at the time of receipt of such
notice. If the disposition by the Registering Forstmann Little Partnerships of
their securities is
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<PAGE>
discontinued pursuant to the foregoing sentence, the Company shall extend the
period of effectiveness of the registration statement by the number of days
during the period from and including the date of the giving of notice to and
including the date when the Registering Forstmann Little Partnerships shall have
received copies of the supplemented or amended prospectus contemplated by
paragraph (g)(v) of this Section 2.3; and, if the Company shall not so extend
such period, the Registering Forstmann Little Partnerships' request pursuant to
which such registration statement was filed shall not be counted for purposes of
the requests for registration to which the Forstmann Little Partnerships are
entitled pursuant to Section 2.1 hereof.
2.4 UNDERWRITTEN OFFERINGS.
(a) REQUESTED UNDERWRITTEN OFFERINGS. If requested by the
underwriters for any underwritten offering by the Registering Forstmann Little
Partnerships (and any Other Investors) pursuant to a registration requested
under Section 2.1, the Company shall enter into a customary underwriting
agreement with a managing underwriter or underwriters selected by the
Registering Forstmann Little Partnerships. Such underwriting agreement shall be
satisfactory in form and substance to the Registering Forstmann Little
Partnerships and shall contain such representations and warranties by, and such
other agreements on the part of, the Company and such other terms as are
generally prevailing in agreements of that type, including, without limitation,
customary provisions relating to indemnification and contribution. The
Registering Forstmann Little Partnerships shall be parties to such underwriting
agreement and may, at their option, require that any or all of the
representations and warranties by, and the other agreements on the part of, the
Company to and for the benefit of such underwriters shall also be made to and
for the benefit of the Registering Forstmann Little Partnerships and that any or
all of the conditions precedent to the obligations of such underwriters under
such underwriting agreement be conditions precedent to the obligations of the
Registering Forstmann Little Partnerships. None of the Registering Forstmann
Little Partnerships shall be required to make any representations or warranties
to or agreements with the Company or the underwriters other than
representations, warranties or agreements regarding such Registering Forstmann
Little Partnership, its ownership of and title to the Registrable Securities,
and its intended method of distribution; and any liability of any Registering
Forstmann Little Partnership to any underwriter or other person under such
underwriting agreement shall be limited to liability arising from breach of its
representations and warranties and shall be limited to an amount equal to the
proceeds (net of expenses and underwriting discounts and commissions) that it
derives from such registration.
(b) INCIDENTAL UNDERWRITTEN OFFERINGS. In the case of a
registration pursuant to Section 2.2 hereof, if the Company shall have
determined to enter into any underwriting agreements in connection therewith,
all of the Registrable
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Securities to be included in such registration shall be subject to such
underwriting agreements. The Registering Forstmann Little Partnerships may, at
their option, require that any or all of the representations and warranties by,
and the other agreements on the part of, the Company to and for the benefit of
such underwriters shall also be made to and for the benefit of the Registering
Forstmann Little Partnerships and that any or all of the conditions precedent to
the obligations of such underwriters under such underwriting agreement be
conditions precedent to the obligations of the Registering Forstmann Little
Partnerships. None of the Registering Forstmann Little Partnerships shall be
required to make any representations or warranties to or agreements with the
Company or the underwriters other than representations, warranties or agreements
regarding such Registering Forstmann Little Partnership, its ownership of and
title to the Registrable Securities, and its intended method of distribution;
and any liability of any Registering Forstmann Little Partnership to any
underwriter or other Person under such underwriting agreement shall be limited
to liability arising from breach of its representations and warranties and shall
be limited to an amount equal to the proceeds (net of expenses and underwriting
discounts and commissions) that it derives from such registration.
2.5 PREPARATION; REASONABLE INVESTIGATION. In connection with
the preparation and filing of each registration statement under the Securities
Act pursuant to this Agreement, the Company will give the Registering Forstmann
Little Partnerships, their underwriters, if any, and their respective counsel,
accountants and other representatives and agents the opportunity to participate
in the preparation of such registration statement, each prospectus included
therein or filed with the Commission, and each amendment thereof or supplement
thereto, and give each of them such access to its books and records and such
opportunities to discuss the business of the Company with its officers and
employees and the independent public accountants who have certified its
financial statements, and supply all other information reasonably requested by
each of them, as shall be necessary or appropriate, in the opinion of the
Registering Forstmann Little Partnerships and such underwriters' respective
counsel, to conduct a reasonable investigation within the meaning of the
Securities Act.
2.6 INDEMNIFICATION.
(a) INDEMNIFICATION BY THE COMPANY. The Company agrees
that in the event of any registration of any securities of the Company under the
Securities Act, the Company shall, and hereby does, indemnify and hold harmless
each Forstmann Little Partnership, its respective directors, officers, partners,
agents and affiliates and each other Person who participates as an underwriter
in the offering or sale of such securities and each other Person, if any, who
controls such Forstmann Little Partnership or any such underwriter within the
meaning of the Securities Act, against any losses, claims, damages, or
liabilities, joint or several, to which such Forstmann Little Partnership or any
such director, officer, partner, agent or affiliate or underwriter or
controlling person may
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become subject under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities, joint or several (or actions or proceedings,
whether commenced or threatened, in respect thereof), arise out of or are based
upon (i) any untrue statement or alleged untrue statement of any material fact
contained in any registration statement under which such securities were
registered under the Securities Act, any preliminary prospectus, final
prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, (ii) any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein in light of the circumstances in which they were made not misleading, or
(iii) any violation by the Company of any federal, state or common law rule or
regulation applicable to the Company and relating to action required of or
inaction by the Company in connection with any such registration, and the
Company shall reimburse such Forstmann Little Partnership and each such
director, officer, partner, agent or affiliate, underwriter and controlling
Person for any legal or any other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, liability,
action or proceeding; PROVIDED that the Company shall not be liable in any such
case to the Forstmann Little Partnerships or any such director, officer,
partner, agent, affiliate, or controlling person to the extent that any such
loss, claim, damage, liability (or action or proceeding in respect thereof) or
expense arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such registration statement,
any such preliminary prospectus, final prospectus, summary prospectus, amendment
or supplement in reliance upon and in conformity with written information
furnished to the Company through an instrument duly executed by or on behalf of
the Forstmann Little Partnerships, specifically stating that it is for use in
the preparation thereof; and PROVIDED, FURTHER, that the Company shall not be
liable to any Person who participates as an underwriter in the offering or sale
of Registrable Securities or any other Person, if any, who controls such
underwriter within the meaning of the Securities Act, in any such case to the
extent that any such loss, claim, damage, liability (or action or proceeding in
respect thereof) or expense (i) arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
such registration statement, any such preliminary prospectus, final prospectus,
summary prospectus, amendment or supplement in reliance upon and in conformity
with written information furnished to the Company through an instrument duly
executed by or on behalf of such Person or (ii) arises out of such Person's
failure to send or give a copy of the final prospectus, as the same may be then
supplemented or amended, to the Person asserting an untrue statement or alleged
untrue statement or omission or alleged omission at or prior to the written
confirmation of the sale of Registrable Securities to such Person if such
statement or omission was corrected in such final prospectus. Such indemnity
shall remain in full force regardless of any investigation made by or on behalf
of any Forstmann Little Partnership or any such director, officer, partner,
agent, affiliate,
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underwriter or controlling Person and shall survive the transfer of such
securities by such Forstmann Little Partnership.
(b) INDEMNIFICATION BY THE FORSTMANN LITTLE PARTNERSHIPS.
As a condition to including any Registrable Securities in any registration
statement, the Company shall have received an undertaking reasonably
satisfactory to it from each Registering Forstmann Little Partnership so
including any Registrable Securities to indemnify and hold harmless (in the same
manner and to the same extent as set forth in paragraph (a) of this Section 2.6)
the Company, and each director of the Company, each officer of the Company and
each other Person, if any, who controls the Company within the meaning of the
Securities Act, with respect to any statement or alleged statement in or
omission or alleged omission from such registration statement, any preliminary
prospectus, final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, but only to the extent such statement or
alleged statement or omission or alleged omission was made in reliance upon and
in conformity with written information furnished to the Company through an
instrument duly executed by such Registering Forstmann Little Partnership
specifically stating that it is for use in the preparation of such registration
statement, preliminary prospectus, final prospectus, summary prospectus,
amendment or supplement; PROVIDED, HOWEVER, that the liability of such
indemnifying party under this Section 2.6(b) shall be limited to the amount of
proceeds (net of expenses and underwriting discounts and commissions) received
by such indemnifying party in the offering giving rise to such liability. Such
indemnity shall remain in full force and effect, regardless of any investigation
made by or on behalf of the Company or any such director, officer or controlling
Person and shall survive the transfer of such securities by such Forstmann
Little Partnership.
(c) NOTICES OF CLAIMS, ETC. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in the preceding subsections of this Section 2.6,
such indemnified party shall, if a claim in respect thereof is to be made
against an indemnifying party, give written notice to the latter of the
commencement of such action or proceeding; PROVIDED, HOWEVER, that the failure
of any indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under the preceding subsections of this
Section 2.6, except to the extent that the indemnifying party is actually
prejudiced by such failure to give notice, and shall not relieve the
indemnifying party from any liability which it may have to the indemnified party
otherwise than under this Section 2.6. In case any such action or proceeding is
brought against an indemnified party, the indemnifying party shall be entitled
to participate therein and, unless in the opinion of outside counsel to the
indemnified party a conflict of interest between such indemnified and
indemnifying parties may exist in respect of such claim, to assume the defense
thereof, jointly with any other indemnifying party similarly notified to the
extent that it may wish, with counsel reasonably satisfactory to such
indemnified party; PROVIDED, HOWEVER, that if the
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defendants in any such action or proceeding include both the indemnified party
and the indemnifying party and if in the opinion of outside counsel to the
indemnified party there may be legal defenses available to such indemnified
party and/or other indemnified parties which are different from or in addition
to those available to the indemnifying party, the indemnified party or parties
shall have the right to select separate counsel to defend such action or
proceeding on behalf of such indemnified party or parties, PROVIDED, HOWEVER,
that the indemnifying party shall be obligated to pay for only one counsel for
all indemnified parties. After notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof and approval
by the indemnified party of such counsel, the indemnifying party shall not be
liable to such indemnified party for any legal expenses subsequently incurred by
the latter in connection with the defense thereof other than reasonable costs of
investigation (unless the first proviso in the preceding sentence shall be
applicable). No indemnifying party shall be liable for any settlement of any
action or proceeding effected without its written consent. No indemnifying party
shall, without the consent of the indemnified party, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such indemnified party
of a release from all liability in respect to such claim or litigation.
(d) CONTRIBUTION. If the indemnification provided for in
this Section 2.6 shall for any reason be held by a court to be unavailable to an
indemnified party under subsection (a) or (b) hereof in respect of any loss,
claim, damage or liability, or any action in respect thereof, then, in lieu of
the amount paid or payable under subsection (a) or (b) hereof, the indemnified
party and the indemnifying party under subsection (a) or (b) hereof shall
contribute to the aggregate losses, claims, damages and liabilities (including
legal or other expenses reasonably incurred in connection with investigating the
same), (i) in such proportion as is appropriate to reflect the relative fault of
the indemnifying party on the one hand, and the indemnified party on the other,
which resulted in such loss, claim, damage or liability, or action in respect
thereof, with respect to the statements or omissions which resulted in such
loss, claim, damage or liability, or action in respect thereof, as well as any
other relevant equitable considerations, or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law or if the allocation
provided in this clause (ii) provides a greater amount to the indemnified party
than clause (i) above, in such proportion as shall be appropriate to reflect not
only the relative fault but also the relative benefits received by the
indemnifying party and the indemnified party from the offering of the securities
covered by such registration statement as well as any other relevant equitable
considerations. The parties hereto agree that it would not be just and equitable
if contributions pursuant to this Section 2.6(d) were to be determined by pro
rata allocation or by any other method of allocation which does not take into
account the equitable considerations referred to in the preceding sentence of
this Section 2.6(d). No Person guilty of fraudulent misrepresentation (within
the meaning
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of Section 11(f) of the Securities Act) shall be entitled to contribution from
any Person who was not guilty of such fraudulent misrepresentation. The
Registering Forstmann Little Partnerships' obligations to contribute as provided
in this subsection (d) are several and not joint and shall be in proportion to
the relative value of their respective Registrable Securities covered by such
registration statement. In addition, no Person shall be obligated to contribute
hereunder any amounts in payment for any settlement of any action or claim
effected without such Person's consent, which consent shall not be unreasonably
withheld. Notwithstanding anything in this subsection (d) to the contrary, no
indemnifying party (other than the Company) shall be required to contribute any
amount in excess of the proceeds (net of expenses and underwriting discounts and
commissions) received by such party from the sale of the Registrable Securities
in the offering to which the losses, claims, damages or liabilities of the
indemnified parties relate.
(e) OTHER INDEMNIFICATION. Indemnification and
contribution similar to that specified in the preceding subsections of this
Section 2.6 (with appropriate modifications) shall be given by the Company and
the Registering Forstmann Little Partnerships with respect to any required
registration or other qualification of securities under any federal, state or
blue sky law or regulation of any governmental authority other than the
Securities Act. The indemnification agreements contained in this Section 2.6
shall be in addition to any other rights to indemnification or contribution
which any indemnified party may have pursuant to law or contract and shall
remain operative and in full force and effect regardless of any investigation
made by or on behalf of any indemnified party and shall survive the transfer of
any of the Registrable Securities by any of the Forstmann Little Partnerships.
(f) INDEMNIFICATION PAYMENTS. The indemnification and
contribution required by this Section 2.6 shall be made by periodic payments of
the amount thereof during the course of the investigation or defense, as and
when bills are received or expense, loss, damage or liability is incurred.
2.7 UNLEGENDED CERTIFICATES. In connection with the offering of
any Registrable Securities registered pursuant to this Section 2, the Company
shall (i) facilitate the timely preparation and delivery to the Forstmann Little
Partnerships, the Other Investors and the underwriters, if any, participating in
such offering, of unlegended certificates representing ownership of such
Registrable Securities being sold in such denominations and registered in such
names as requested by the Forstmann Little Partnerships, the Other Investors or
such underwriters and (ii) instruct any transfer agent and registrar of such
Registrable Securities to release any stop transfer orders with respect to any
such Registrable Securities.
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2.8 LIMITATION ON SALE OF SECURITIES. The Company hereby agrees
that if it shall previously have received a request for registration pursuant to
Section 2.1 or 2.2 hereof, and if such previous registration shall not have been
withdrawn or abandoned, (i) the Company shall not effect any public or private
offer, sale or distribution of its securities or effect any registration of any
of its equity securities under the Securities Act (other than a registration on
Form S-8 or any successor or similar form which is then in effect), whether or
not for sale for its own account, until a period of 90 days (or such shorter
period as the Registering Forstmann Little Partnerships shall be advised by
their managing underwriter) shall have elapsed from the effective date of such
previous registration, and the Company shall so provide in any registration
rights agreements hereafter entered into with respect to any of its securities;
and (ii) the Company shall use its best efforts to cause each holder of its
equity securities purchased from the Company at any time after the date of this
Agreement to agree not to effect any public sale or distribution of any such
securities during such period, including a sale pursuant to Rule 144 under the
Securities Act.
2.9 NO REQUIRED SALE. Nothing in this Agreement shall be deemed
to create an independent obligation on the part of any of the Forstmann Little
Partnerships to sell any Registrable Securities pursuant to any effective
registration statement.
3. RULE 144. The Company shall take all actions reasonably necessary
to enable holders of Registrable Securities to sell such securities without
registration under the Securities Act within the limitation of the exemptions
provided by (a) Rule 144, or (b) any similar rule or regulation hereafter
adopted by the Commission including, without limiting the generality of the
foregoing, filing on a timely basis all reports required to be filed by the
Exchange Act. Upon the request of a Forstmann Little Partnership, the Company
will deliver to such holder a written statement as to whether it has complied
with such requirements.
4. AMENDMENTS AND WAIVERS. This Agreement may be amended, modified
or supplemented only by written agreement of the party against whom enforcement
of such amendment, modification or supplement is sought.
5. OTHER INVESTORS. The parties hereto acknowledge and agree that no
Other Investor has any right to request registration of the Common Stock held by
such Other Investor or to participate in any registration of securities by the
Company, other than in accordance with the terms of the stockholder's agreement
or option agreement, as the case may be, between such Other Investor and the
Company or any of its subsidiaries, pursuant to which such Other Investor
generally may have the right or obligation to participate in any public offering
in which all or a portion of the shares of Common Stock owned by the Forstmann
Little Partnerships are registered under the Securities Act.
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<PAGE>
6. ADJUSTMENTS. In the event of any change in the capitalization of
the Company as a result of any stock split, stock dividend, reverse split,
combination, recapitalization, merger, consolidation, or otherwise, the
provisions of this Agreement shall be appropriately adjusted. The Company agrees
that it shall not effect or permit to occur any combination or subdivision of
shares which would adversely affect the ability of the Forstmann Little
Partnerships or the Other Investors to include any Registrable Securities in any
registration contemplated by this Agreement or the marketability of such
Registrable Securities in any such registration. The Company agrees that it will
take all reasonable steps necessary to effect a combination or subdivision of
shares if in the reasonable judgment of the Forstmann Little Partnerships such
combination or subdivision would enhance the marketability of the Registrable
Securities.
7. NOTICE. All notices and other communications hereunder shall be
in writing and, unless otherwise provided herein, shall be deemed to have been
given when received by the party to whom such notice is to be given at its
address set forth below, or such other address for the party as shall be
specified by notice given pursuant hereto:
(a) If to any of the Forstmann Little Partnerships, to it:
c/o Forstmann Little & Co.
767 Fifth Avenue, 44th Floor
New York, New York 10153
Attention: Ms. Sandra J. Horbach
With a copy to:
Fried, Frank, Harris, Shriver
& Jacobson
One New York Plaza
New York, New York 10004
Attention: Lois Herzeca, Esq.
(b) If to the Company:
The Yankee Candle Company, Inc.
102 Christian Lane
Whately, Massachusetts 01093
Attention: Chief Financial Officer
8. ASSIGNMENT; THIRD PARTY BENEFICIARIES. This Agreement shall be
binding upon and inure to the benefit of and be enforceable by the parties
hereto and their respective successors and permitted assigns; provided, however,
that the Other Investors
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shall have no rights under this Agreement. This Agreement may not be assigned by
the Company, without the prior written consent of the Forstmann Little
Partnerships. Any Forstmann Little Partnership may, at its election, at any time
or from time to time, assign its rights under this Agreement, in whole or in
part, to any purchaser of shares of Common Stock held by it.
9. REMEDIES. The parties hereto agree that money damages or other
remedy at law would not be sufficient or adequate remedy for any breach or
violation of, or a default under, this Agreement by them and that, in addition
to all other remedies available to them, each of them shall be entitled to an
injunction restraining such breach, violation or default or threatened breach,
violation or default and to any other equitable relief, including without
limitation specific performance, without bond or other security being required.
In any action or proceeding brought to enforce any provision of this Agreement
(including the indemnification provisions thereof), the successful party shall
be entitled to recover reasonable attorneys' fees in addition to its costs and
expenses and any other available remedy.
10. NO INCONSISTENT AGREEMENTS. The Company will not, on or after
the date of this Agreement, enter into any agreement with respect to its
securities which is inconsistent with the rights granted to the Forstmann Little
Partnerships in this Agreement or otherwise conflicts with the provisions
hereof. The Company has not previously entered into any agreement with respect
to its securities granting any registration rights to any Person. The rights
granted to the Forstmann Little Partnerships hereunder do not in any way
conflict with and are not inconsistent with any other agreements to which the
Company is a party or by which it is bound. The Company further agrees that if
any other registration rights agreement entered into after the date of this
Agreement with respect to any of its securities contains terms which are more
favorable to, or less restrictive on, the other party thereto than the terms and
conditions contained in this Agreement are (insofar as they are applicable) with
respect to the Forstmann Little Partnerships, then the terms and conditions of
this Agreement shall immediately be deemed to have been amended without further
action by the Company or the Forstmann Little Partnerships so that the Forstmann
Little Partnerships shall be entitled to the benefit of any such more favorable
or less restrictive terms or conditions.
11. DESCRIPTIVE HEADINGS. The descriptive headings of the several
sections and paragraphs of this Agreement are inserted for reference only and
shall not control or otherwise affect the meaning hereof.
12. GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with, and the rights and obligations of the parties hereto shall be
governed by, the laws of the State of New York, without giving effect to the
conflicts of law principles thereof. Each of the parties hereto hereby
irrevocably and unconditionally consents to
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submit to the exclusive jurisdiction of the courts of the State of New York and
the United States of America located in the County of New York for any action or
proceeding arising out of or relating to this Agreement and the transactions
contemplated hereby (and agrees not to commence any action or proceeding
relating thereto except in such courts), and further agrees that service of any
process, summons, notice or document by U.S. registered mail to its respective
address set forth in Section 7 hereof shall be effective service of process for
any action or proceeding brought against it in any such court. Each of the
parties hereto hereby irrevocably and unconditionally waives any objection to
the laying of venue of any action or proceeding arising out of this Agreement or
the transactions contemplated hereby in the courts of the State of New York or
the United States of America located in the County of New York, and hereby
further irrevocably and unconditionally waives and agrees not to plead or claim
in any such court that any such action or proceeding brought in any such court
has been brought in an inconvenient forum.
13. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all such
counterparts shall together constitute one and the same instrument.
14. INVALIDITY OF PROVISION. The invalidity or unenforceability of
any provision of this Agreement in any jurisdiction shall not affect the
validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of this Agreement, including that
provision, in any other jurisdiction. If any restriction or provision of this
Agreement is held unreasonable, unlawful or unenforceable in any respect, such
restriction or provision shall be interpreted, revised or applied in a manner
that renders it lawful and enforceable to the fullest extent possible under law.
15. FURTHER ASSURANCES. Each party hereto shall do and perform or
cause to be done and performed all further acts and things and shall execute and
deliver all other agreements, certificates, instruments, and documents as any
other party hereto reasonably may request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
16. ENTIRE AGREEMENT; EFFECTIVENESS. This Agreement constitutes the
entire agreement, and supersedes all prior agreements and understandings, oral
and written, between the parties hereto with respect to the subject matter
hereof.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their respective officers thereunto duly authorized.
THE YANKEE CANDLE COMPANY, INC.
By: /s/ Michael D. Parry
--------------------------------
Name: Michael D. Parry
Title: President and
Chief Executive Officer
FORSTMANN LITTLE & CO. EQUITY
PARTNERSHIP - V, L.P.
By: FLC XXX Partnership,
its general partner
By: /s/ Sandra J. Horbach
--------------------------------
Sandra J. Horbach,
a general partner
FORSTMANN LITTLE & CO. SUBORDINATED DEBT AND
EQUITY MANAGEMENT BUYOUT PARTNERSHIP - VI,
L.P.
By: FLC XXIX Partnership,
its general partner
By: /s/ Sandra J. Horbach
--------------------------------
Sandra J. Horbach,
a general partner
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Exhibit 10.9
INDEMNIFICATION AGREEMENT
This Agreement is made as of the _____ day of May 1999, by and between The
Yankee Candle Company, Inc., a Massachusetts corporation (the "Corporation"),
and ___________________ ("Indemnitee"), a director or officer of the
Corporation.
WHEREAS, it is essential to the Corporation to retain and attract as
directors and officers the most capable persons available, and
WHEREAS, the substantial increase in corporate litigation subjects
directors and officers to expensive litigation risks at the same time that the
availability of directors' and officers' liability insurance has been severely
limited, and
WHEREAS, it is the express policy of the Corporation to indemnify its
directors and officers so as to provide them with the maximum possible
protection permitted by law, and
WHEREAS, Indemnitee does not regard the protection available under the
Corporation's Articles of Organization and insurance as adequate in the present
circumstances, and may not be willing to serve or to continue to serve as a
director or officer without adequate protection, and
WHEREAS, the Corporation desires Indemnitee to serve or to continue to
serve as a director or officer of the Corporation.
NOW THEREFORE, the Corporation and Indemnitee do hereby agree as follows:
1. AGREEMENT TO SERVE. Indemnitee agrees to serve or continue to serve as
a director or officer of the Corporation for so long as Indemnitee is duly
elected or appointed or until such time as Indemnitee tenders his/her
resignation in writing.
2. DEFINITIONS. As used in this Agreement:
(a) The term "Proceeding" shall include any threatened, pending or
completed action, suit, or proceeding, whether brought by or in the right of the
Corporation or otherwise and whether of a civil, criminal, administrative or
investigative nature, and any appeal therefrom.
(b) The term "Corporate Status" shall mean the status of a person
who is or was a director or officer of the Corporation, or is or was serving, or
has agreed to serve, at the request of the Corporation, as a director, officer,
employee or agent of another organization or in any capacity with respect to any
employee benefit plan of the Corporation.
(c) The term "Expenses" shall include, without limitation,
attorneys' fees, retainers, court costs, transcript costs, fees of experts,
travel expenses, duplicating costs, printing and binding costs, telephone
charges, postage, delivery service fees and other disbursements or expenses of
the types customarily incurred in connection with investigations, judicial or
administrative proceedings or appeals, but shall not include the amount of
judgments, fines or penalties against Indemnitee or amounts paid in settlement
in connection with such matters.
<PAGE>
(d) References to "fines" shall include any excise tax assessed with
respect to any employee benefit plan.
3. INDEMNIFICATION. The Corporation shall indemnify Indemnitee in
accordance with the provisions of this Paragraph 3 if Indemnitee was or is a
party to or threatened to be made a party to or otherwise involved in any
Proceeding by reason of his Corporate Status or by reason of any action alleged
to have been taken or omitted in connection therewith, against all Expenses,
judgments, fines, penalties and amounts paid in settlement incurred by
Indemnitee or on his behalf in connection with such Proceeding to the fullest
extent permitted by the laws of the Commonwealth of Massachusetts in effect on
the date hereof or as such laws may from time to time hereafter be amended to
increase the scope of such permitted indemnification. Notwithstanding the
foregoing provisions of this Paragraph 3, no such indemnification shall be made
in respect of any claim, issue or matter as to which the laws of the
Commonwealth of Massachusetts expressly prohibits such indemnification by reason
of an adjudication of liability of Indemnitee to the Corporation unless and only
to the extent that the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, Indemnitee is fairly and reasonably
entitled to indemnity for such Expenses, judgments, fines, penalties and amounts
paid in settlement which the court shall deem proper.
4. EXCEPTIONS TO RIGHT OF INDEMNIFICATION. Notwithstanding anything to the
contrary in this Agreement, except as set forth in Paragraph 8, the Corporation
shall not indemnify the Indemnitee in connection with a Proceeding (or part
thereof) initiated by the Indemnitee unless the initiation thereof was approved
by the Board of Directors of the Corporation. Notwithstanding anything to the
contrary in this Agreement, the Corporation shall not indemnify the Indemnitee
to the extent the Indemnitee is reimbursed from the proceeds of insurance, and
in the event the Corporation makes any indemnification payments to the
Indemnitee and the Indemnitee is subsequently reimbursed from the proceeds of
insurance, the Indemnitee shall promptly refund such indemnification payments to
the Corporation to the extent of such insurance reimbursement.
5. NOTIFICATION AND DEFENSE OF CLAIM. As a condition precedent to his
right to be indemnified, the Indemnitee must notify the Corporation in writing
as soon as practicable of any Proceeding for which indemnity will or could be
sought by him and provide the Corporation with a copy of any summons, citation,
subpoena, complaint, indictment, information or other document relating to such
Proceeding with which he is served. With respect to any Proceeding of which the
Corporation is so notified, the Corporation will be entitled to participate
therein at its own expense and/or to assume, with legal counsel reasonably
acceptable to the Indemnitee, the defense thereof at its own expense. After
notice from the Corporation to the Indemnitee of its election so to assume such
defense, the Corporation shall not be liable to the Indemnitee for any legal or
other expenses subsequently incurred by the Indemnitee in connection with such
claim, other than as provided below in this Paragraph 5. The Indemnitee shall
have the right to employ his own counsel in connection with such claim, but the
fees and expenses of such counsel incurred after notice from the Corporation of
its assumption of the defense thereof shall be at the expense of the Indemnitee
unless (i) the employment of counsel by the Indemnitee has been authorized by
the Corporation, (ii) counsel to the Indemnitee shall have reasonably concluded
-2-
<PAGE>
that there may be a conflict of interest or position on any significant issue
between the Corporation and the Indemnitee in the conduct of the defense of such
action, or (iii) the Corporation shall not in fact have employed counsel to
assume the defense of such action, in each of which cases the fees and expenses
of counsel for the Indemnitee shall be at the expense of the Corporation, except
as otherwise expressly provided by this Agreement. The Corporation shall not be
entitled, without the consent of the Indemnitee, to assume the defense of any
claim brought by or in the right of the Corporation or as to which counsel for
the Indemnitee shall have reasonably made the conclusion provided for in clause
(ii) above.
6. ADVANCEMENT OF EXPENSES. Subject to the provisions of Paragraph 7
below, in the event that the Corporation does not assume the defense pursuant to
Paragraph 5 of this Agreement of any Proceeding to which Indemnitee was or is a
party or is threatened to be made a party by reason of his Corporate Status or
by reason of any action alleged to have been taken or omitted in connection
therewith and of which the Corporation receives notice under this Agreement, any
Expenses incurred by the Indemnitee in defending such Proceeding shall be paid
by the Corporation in advance of the final disposition of such matter; PROVIDED,
HOWEVER, that the payment of such Expenses incurred by the Indemnitee in advance
of the final disposition of such matter shall be made only upon receipt of an
undertaking by or on behalf of the Indemnitee to repay all amounts so advanced
in the event that it shall ultimately be determined that the Indemnitee is not
entitled to be indemnified by the Corporation as authorized in this Agreement.
Such undertaking shall be accepted without reference to the financial ability of
the Indemnitee to make repayment.
7. PROCEDURE FOR INDEMNIFICATION. In order to obtain indemnification or
advancement of Expenses pursuant to Paragraphs 3 or 6 of this Agreement,
Indemnitee shall submit to the Corporation a written request, including in such
request such documentation and information as is reasonably available to
Indemnitee and is reasonably necessary to determine whether and to what extent
Indemnitee is entitled to indemnification or advancement of Expenses. Any such
indemnification or advancement of Expenses shall be made promptly, and in any
event within 60 days after receipt by the Corporation of the written request of
the Indemnitee, unless the Corporation determines within such 60-day period that
such Indemnitee did not meet the applicable standard of conduct set forth in
Paragraph 3 or 6. Such determination shall be made in each instance by (a) a
majority vote of a quorum of the directors of the Corporation, (b) a majority
vote of a quorum of the outstanding shares of stock of all classes entitled to
vote for directors, voting as a single class, which quorum shall consist of
shareholders who are not at that time parties to the Proceeding, (c) independent
legal counsel (who may, to the extent permitted by law, be regular legal counsel
to the Corporation), or (d) a court of competent jurisdiction.
8. REMEDIES. The right to indemnification or advancement of Expenses as
provided by this Agreement shall be enforceable by the Indemnitee in any court
of competent jurisdiction if the Corporation denies such request, in whole or in
part, or if no disposition thereof is made within the 60-day period referred to
above in Paragraph 7. Unless otherwise required by law, the burden of proving
that indemnification is not appropriate shall be on the Corporation. Neither the
failure of the Corporation to have made a determination prior to the
commencement of such action that indemnification is proper in the circumstances
because Indemnitee has met the applicable standard of conduct, nor an actual
determination by the Corporation pursuant to
-3-
<PAGE>
Paragraph 7 that Indemnitee has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that Indemnitee has not
met the applicable standard of conduct. Indemnitee's expenses (of the type
described in the definition of "Expenses" in Paragraph 2(c)) reasonably incurred
in connection with successfully establishing his right to indemnification, in
whole or in part, in any such Proceeding shall also be indemnified by the
Corporation.
9. PARTIAL INDEMNIFICATION. If Indemnitee is entitled under any provision
of this Agreement to indemnification by the Corporation for some or a portion of
the Expenses, judgments, fines, penalties or amounts paid in settlement actually
and reasonably incurred by him or on his behalf in connection with any
Proceeding but not, however, for the total amount thereof, the Corporation shall
nevertheless indemnify Indemnitee for the portion of such Expenses, judgments,
fines, penalties and amounts paid in settlement to which Indemnitee is entitled.
10. MAINTENANCE OF D&O INSURANCE.
(a) The Corporation hereby covenants and agrees with Indemnitee
that, so long as Indemnitee shall continue to serve as a director or officer of
the Corporation and thereafter so long as Indemnitee shall be subject to any
possible claim or threatened, pending or completed Proceeding, whether civil,
criminal or investigative, by reason of Indemnitee's Corporate Status, the
Corporation shall maintain in full force and effect (i) the directors' and
officers' liability insurance issued by the insurer and having the policy amount
and deductible as currently in effect with respect to directors and officers of
the Corporation, and (ii) any replacement or substitute policies issued by one
or more reputable insurers providing in all respects coverage at least
comparable to and in the same amount as that currently provided under such
existing policy (collectively, "D&O Insurance").
(b) In all policies of D&O Insurance, Indemnitee shall be named as
an insured in such a manner as to provide Indemnitee the same rights and
benefits, subject to the same limitations, as are accorded to the Corporation's
directors or officers most favorably insured by such policy.
(c) Notwithstanding anything to the contrary set forth in (a) above,
the Corporation shall have no obligation to maintain D&O Insurance if the
Corporation determines in good faith that such insurance is not reasonably
available, the premium cost for such insurance is disproportionate to the amount
of coverage provided or the coverage provided by such insurance is limited by
exclusions so as to provide an insufficient benefit.
11. NO DUPLICATIVE PAYMENT. The Corporation shall not be liable under this
Agreement to make any payment of amounts otherwise indemnifiable hereunder if
and to the extent that Indemnitee has otherwise actually received such payment
(net of Expenses incurred in collecting such payment) under any insurance
policy, contract, agreement or otherwise.
12. SUBROGATION. In the event of any payment under this Agreement, the
Corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of Indemnitee,
-4-
<PAGE>
who shall execute all papers required and take all action necessary to secure
such rights, including execution of such documents as are necessary to enable
the Corporation to bring suit to enforce such rights.
13. TERM OF AGREEMENT. This Agreement shall continue until and terminate
upon the later of (a) six years after the date that Indemnitee shall have ceased
to serve as a director or officer of the Corporation or, at the request of the
Corporation, as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, or (b) the final
termination of all Proceedings pending on the date set forth in clause (a) in
respect of which Indemnitee is granted rights of indemnification or advancement
of Expenses hereunder and of any proceeding commenced by Indemnitee pursuant to
Paragraph 8 of this Agreement relating thereto.
14. INDEMNIFICATION HEREUNDER NOT EXCLUSIVE. The indemnification and
advancement of Expenses provided by this Agreement shall not be deemed exclusive
of any other rights to which Indemnitee may be entitled under the Articles of
Organization, the By-Laws, any agreement, any vote of shareholders or directors,
the Massachusetts Business Corporation Law, any other law (common or statutory),
or otherwise, both as to action in his official capacity and as to action in
another capacity while holding office for the Corporation. To the extent
Indemnitee would be prejudiced thereby, no amendment, alteration, rescission or
replacement of this Agreement or any provision hereof shall be effective as to
Indemnitee with respect to any action taken or omitted by such Indemnitee in
Indemnitee's position with the Corporation or any other entity which Indemnitee
is or was serving at the request of the Corporation prior to such amendment,
alteration, rescission or replacement.
15. ENTIRE AGREEMENT. Subject to the provisions of Section 14 hereof, this
Agreement constitutes the entire understanding between the parties and
supersedes all proposals, commitments, writings, negotiations and
understandings, oral and written, and all other communications between the
parties relating to the subject matter hereof.
16. NO SPECIAL RIGHTS. Nothing contained herein shall confer upon
Indemnitee any right to continue to serve as an officer or director of the
Corporation for any period of time, or at any particular rate of compensation.
17. SAVINGS CLAUSE. If this Agreement or any portion thereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify Indemnitee as to Expenses, judgments,
fines, penalties and amounts paid in settlement with respect to any Proceeding
to the full extent permitted by any applicable portion of this Agreement that
shall not have been invalidated and to the fullest extent permitted by
applicable law.
18. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall constitute the original.
-5-
<PAGE>
19. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
Corporation and its successors and assigns and shall inure to the benefit of the
estate, heirs, executors, administrators and personal representatives of
Indemnitee.
20. HEADINGS. The headings of the paragraphs of this Agreement are
inserted for convenience only and shall not be deemed to constitute part of this
Agreement or to affect the construction thereof.
21. MODIFICATION AND WAIVER. No supplement, modification or amendment of
this Agreement shall be binding unless executed in writing by both of the
parties hereto. No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provision hereof nor shall any
such waiver constitute a continuing waiver.
22. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been given (i) when
delivered by hand or (ii) if mailed by certified or registered mail with postage
prepaid, on the third day after the date on which it is so mailed:
(a) if to the Indemnitee, to the address appearing on the
signature page of this Agreement.
with a copy to:
(b) if to the Corporation, to:
The Yankee Candle Company, Inc.
102 Christian Lane
Whately, MA 01093
Attention: President
with a copy to:
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, NY 10004
Attention: Lois Herzeca, Esq.
or to such other address as may have been furnished to Indemnitee by the
Corporation or to the Corporation by Indemnitee, as the case may be.
23. APPLICABLE LAW. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts.
-6-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
or caused this Agreement to be duly executed as of the day and year first above
written.
THE YANKEE CANDLE COMPANY, INC.
Attest: By:
-------------------------------
By: Name:
--------------------------- -----------------------------
Name: Title:
------------------------- ----------------------------
INDEMNITEE:
-----------------------------------
Name:
------------------------------
Address:
---------------------------
---------------------------
-7-
<PAGE>
Exhibit 10.13
________, 1999
Forstmann Little & Co. Subordinated Debt and Equity
Management Buyout Partnership - VI, L.P.
767 Fifth Avenue, 44th Floor
New York, New York 10153
Dear Sirs:
This letter will confirm our agreement that in connection with and in
consideration for your participation in the proposed liquidation of Yankee
Candle Holdings Corp. and public offering of common stock of The Yankee Candle
Company, Inc. (the "Company"), Forstmann Little & Co. Subordinated Debt and
Equity Management Buyout Partnership - VI, L.P. ("Investor"), will be entitled
to the following contractual management rights relating to the Company so long
as Investor shall own any voting securities of the Company (collectively, the
"Management Rights"):
(1) Investor shall be entitled to consult with and advise management of the
Company on significant business issues, including management's proposed
annual operating plans, and management will meet with representatives of
Investor (the "Representatives") at the Company's facilities at mutually
agreeable times for such consultation and advice, including to review
progress in achieving said plans. The Company shall give Investor
reasonable advance written notice of any significant new initiatives or
material changes to existing operating plans and shall afford Investor
adequate time to meet with management to consult on such initiatives or
changes prior to implementation. The Company agrees to give due
consideration to the advice given and any proposals made by Investor;
(2) Investor may inspect all contracts, books, records, personnel, offices and
other facilities and properties of the Company and, to the extent
available to the Company after the Company uses reasonable efforts to
obtain them, the records of its legal advisors and accountants, including
the accountants' work papers, and Investor may make such copies and
inspections thereof as Investor may reasonably request. The Company shall
furnish Investor with such financial and operating data and other
information with respect to the business and properties of the Company as
the Investor may request. The Company shall permit the Representatives to
discuss the affairs, finances and accounts of the Company with, and to
make proposals and furnish advice with respect thereto, the principal
officers of the Company;
<PAGE>
(3) Investor shall have the following rights regarding the appointment of a
representative to the Company's Board of Directors (the "Board"). Investor
shall provide to the Board, a reasonable period of time before the Board
or the Company distributes to stockholders a proxy statement or other
materials in connection with the election of directors, the name of
Investor's nominee as director (the "Nominee"), as well as any other
information regarding the Nominee as the Company may reasonably request.
The selection by Investor of the Nominee shall be made after consultation
with the Company, and Investor shall not designate a Nominee who is
unsatisfactory to the existing directors. The Board and/or the Company
shall include the Nominee as one of the persons recommended by the Board
for election as a director of the Company, solicit proxies from
stockholders in favor of the election of the Nominee as a director, and
otherwise use all reasonable efforts to cause the Nominee to be elected as
a director of the Company. In the event the Nominee elected to the Board
shall cease to serve as a director for any reason, the Board shall fill
the vacancy resulting therefrom with another Nominee. If the Company has a
classified Board of Directors, Investor shall only be required to
designate a Nominee, and the Company shall only be required to take steps
to cause the Nominee to be elected, in the year in which the Nominee's
class of directors is up for election. The Board shall not be required to
fulfill its obligations under this paragraph to the extent that doing so
would be in contravention of its fiduciary duties to the Company's
stockholders; and
(4) At any time during which Investor does not have a representative on the
Board, the Company shall, after receiving notice from Investor as to the
identity of any Representative, (i) permit a Representative to attend all
Board meetings and all committees thereof as an observer; (ii) provide the
Representative advance notice of each such meeting, including such
meeting's time and place, at the same time and in the same manner as such
notice is provided to the members of the Board (or such committee thereof)
and copies of all materials distributed to the members of the Board (or
such committee thereof) at the same time as such materials are distributed
to such Board (or such committee thereof) and shall permit the
Representative to have the same access to information concerning the
business and operations of the Company; and (iii) permit the
Representative to discuss the affairs, finances and accounts of the
Company with, and to make proposals and furnish advice with respect
thereto to, the Board, without voting, and the Board and the Company's
officers shall take such proposals or advice seriously and give due
consideration thereto. Reasonable costs and expenses incurred by the
Representative for the purposes of attending Board (or committee) meetings
and conducting other Company business will be paid by the Company.
-2-
<PAGE>
Investor agrees, and shall cause each of its Representatives to agree, to
hold in confidence and trust and not use or disclose any confidential
information provided to or learned by it in connection with the exercise of
Investor's Management Rights under this letter agreement, unless otherwise
required by law or unless such confidential information otherwise becomes
publicly available or available to it other than through this letter agreement.
Very truly yours,
THE YANKEE CANDLE COMPANY, INC.
By:
-------------------------------
Name:
Title:
AGREED AND ACCEPTED THIS
__ day of _____, 1999
FORSTMANN LITTLE & CO. SUBORDINATED DEBT AND EQUITY MANAGEMENT BUYOUT
PARTNERSHIP - VI, L.P.
By: FLC XXIX Partnership,
its General Partner
By:
----------------------------------------
, a General Partner
-3-
<PAGE>
________, 1999
Forstmann Little & Co. Equity Partnership - V, L.P.
767 Fifth Avenue, 44th Floor
New York, New York 10153
Dear Sirs:
This letter will confirm our agreement that in connection with and in
consideration for your participation in the proposed liquidation of Yankee
Candle Holdings Corp. and public offering of common stock of The Yankee Candle
Company, Inc. (the "Company"), Forstmann Little & Co. Equity Partnership - V,
L.P. ("Investor"), will be entitled to the following contractual management
rights relating to the Company so long as Investor shall own any voting
securities of the Company (collectively, the "Management Rights"):
(1) Investor shall be entitled to consult with and advise management of the
Company on significant business issues, including management's proposed
annual operating plans, and management will meet with representatives of
Investor (the "Representatives") at the Company's facilities at mutually
agreeable times for such consultation and advice, including to review
progress in achieving said plans. The Company shall give Investor
reasonable advance written notice of any significant new initiatives or
material changes to existing operating plans and shall afford Investor
adequate time to meet with management to consult on such initiatives or
changes prior to implementation. The Company agrees to give due
consideration to the advice given and any proposals made by Investor;
(2) Investor may inspect all contracts, books, records, personnel, offices and
other facilities and properties of the Company and, to the extent
available to the Company after the Company uses reasonable efforts to
obtain them, the records of its legal advisors and accountants, including
the accountants' work papers, and Investor may make such copies and
inspections thereof as Investor may reasonably request. The Company shall
furnish Investor with such financial and operating data and other
information with respect to the business and properties of the Company as
the Investor may request. The Company shall permit the Representatives to
discuss the affairs, finances and accounts of the Company with, and to
make proposals and furnish advice with respect thereto, the principal
officers of the Company;
<PAGE>
(3) Investor shall have the following rights regarding the appointment of a
representative to the Company's Board of Directors (the "Board"). Investor
shall provide to the Board, a reasonable period of time before the Board
or the Company distributes to stockholders a proxy statement or other
materials in connection with the election of directors, the name of
Investor's nominee as director (the "Nominee"), as well as any other
information regarding the Nominee as the Company may reasonably request.
The selection by Investor of the Nominee shall be made after consultation
with the Company, and Investor shall not designate a Nominee who is
unsatisfactory to the existing directors. The Board and/or the Company
shall include the Nominee as one of the persons recommended by the Board
for election as a director of the Company, solicit proxies from
stockholders in favor of the election of the Nominee as a director, and
otherwise use all reasonable efforts to cause the Nominee to be elected as
a director of the Company. In the event the Nominee elected to the Board
shall cease to serve as a director for any reason, the Board shall fill
the vacancy resulting therefrom with another Nominee. If the Company has a
classified Board of Directors, Investor shall only be required to
designate a Nominee, and the Company shall only be required to take steps
to cause the Nominee to be elected, in the year in which the Nominee's
class of directors is up for election. The Board shall not be required to
fulfill its obligations under this paragraph to the extent that doing so
would be in contravention of its fiduciary duties to the Company's
stockholders; and
(4) At any time during which Investor does not have a representative on the
Board, the Company shall, after receiving notice from Investor as to the
identity of any Representative, (i) permit a Representative to attend all
Board meetings and all committees thereof as an observer; (ii) provide the
Representative advance notice of each such meeting, including such
meeting's time and place, at the same time and in the same manner as such
notice is provided to the members of the Board (or such committee thereof)
and copies of all materials distributed to the members of the Board (or
such committee thereof) at the same time as such materials are distributed
to such Board (or such committee thereof) and shall permit the
Representative to have the same access to information concerning the
business and operations of the Company; and (iii) permit the
Representative to discuss the affairs, finances and accounts of the
Company with, and to make proposals and furnish advice with respect
thereto to, the Board, without voting, and the Board and the Company's
officers shall take such proposals or advice seriously and give due
consideration thereto. Reasonable costs and expenses incurred by the
Representative for the purposes of attending Board (or committee) meetings
and conducting other Company business will be paid by the Company.
-2-
<PAGE>
Investor agrees, and shall cause each of its Representatives to agree, to
hold in confidence and trust and not use or disclose any confidential
information provided to or learned by it in connection with the exercise of
Investor's Management Rights under this letter agreement, unless otherwise
required by law or unless such confidential information otherwise becomes
publicly available or available to it other than through this letter agreement.
Very truly yours,
THE YANKEE CANDLE COMPANY, INC.
By:
-------------------------------
Name:
Title:
AGREED AND ACCEPTED THIS
__ day of _____, 1999
FORSTMANN LITTLE & CO. EQUITY PARTNERSHIP - V, L.P.
By: FLC XXIX Partnership,
its General Partner
By:
---------------------------------------
, a General Partner
-3-
<PAGE>
EXHIBIT 16.1
May 20, 1999
Securities and Exchange Commission
Mail Stop 9-5
450 5th Street, N.W.
Washington, D.C. 20549
Dear Sirs/Madams:
We have read the Form S-1 dated May 20, 1999, of The Yankee Candle Company, Inc.
and are in agreement with the statements contained in the paragraphs under the
"Experts" heading on page 69 therein. We have no basis to agree or disagree with
the other statements of the registrant contained therein.
Yours truly,
/s/ Ernst & Young LLP
<PAGE>
EXHIBIT 16.2
May 19, 1999
Securities and Exchange Commission
Mail Stop 9-5
450 5th Street, N.W.
Washington, D.C. 20549
Dear Sirs/Madams:
We have read and agree with the comments concerning the termination of our
relationship with the Company which appear under the "Experts" heading of
Amendment No. 1 to Form S-1 of The Yankee Candle Company, Inc. dated on or about
May 19, 1999.
Yours truly,
/s/ Fisk, Bilton, Smith & Co., P.C.
Fisk, Bilton, Smith & Co., P.C.
West Springfield, MA 01089
<PAGE>
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT AND REPORT ON SCHEDULE
Board of Directors and Stockholders
The Yankee Candle Company, Inc. and subsidiaries
We consent to the use in this Amendment No. 1 to Registration Statement No.
333-76397 of The Yankee Candle Company, Inc. and subsidiaries ("Company") on
Form S-1 of our report dated March 31, 1999 relating to the financial statements
of the Company as of and for the year ending December 31, 1998, appearing in the
Prospectus, which is a part of this Registration Statement, and to the reference
to us under the heading "Experts" in such Prospectus.
Our audit of the financial statements referred to in our aforementioned report
also included the financial statement schedule of the Company for the year ended
December 31, 1998, included in Item 16(b). This financial statement schedule is
the responsibility of the Company's management. Our responsibility is to express
an opinion based on our audit. In our opinion, such financial statement
schedule, when considered in relation to the basic financial statements taken as
a whole, presents fairly in all material respects the information set forth
therein.
/s/ DELOITTE & TOUCHE LLP
Boston, Massachusetts
May 19, 1999
<PAGE>
EXHIBIT 23.3
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our reports dated March 6, 1998, in this Amendment No. 1 to Registration
Statement No. 333-76397 and related Prospectus of The Yankee Candle Company,
Inc. for the registration of shares of its common stock.
/s/ Ernst & Young LLP
Boston, Massachusetts
May 19, 1999
<PAGE>
EXHIBIT 23.4
INDEPENDENT AUDITORS' CONSENT AND REPORT ON SCHEDULES
Board of Directors and Stockholders
The Yankee Candle Company, Inc. and subsidiaries
We consent to the use in this Amendment No. 1 to Registration Statement No.
333-76397 of The Yankee Candle Company, Inc. and subsidiaries ("Company") on
Form S-1 of our report dated March 4, 1997 relating to the financial statements
of the Company for the year ending December 31, 1996, appearing in the
Prospectus, which is a part of this Registration Statement, and to the
references to us under the heading "Experts" in such Prospectus.
Our audit of the financial statements referred to in our aforementioned report
also included the financial statements schedule of the Company relating to the
year ending December 31, 1996, listed in Item 16(b). This financial statement
schedule is the responsibility of the Company's management. Our responsibility
is to express an opinion based on our audit. In our opinion, such financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, present fairly in all material respects the
information set forth therein.
/s/ Fisk, Bilton, Smith & Co., P.C.
West Springfield, Massachusetts
May 19, 1999
<PAGE>
EXHIBIT 24.1
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Michael D. Parry, Robert R. Spellman and Sandra
J. Horbach his or her true and lawful attorneys-in-fact and agents, each acting
alone, with full powers of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign any or all amendments
to this registration statement, including post-effective amendments and a
registration statement registering additional securities pursuant to Rule 462
(b) under the Securities Act of 1933, and to file the same, with all exhibits
thereto, and to other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, and hereby ratifies and confirms all
his said attorneys-in-fact and agents, each acting alone, or his substitute or
substitutes may lawfully do or cause to be done by virtue thereof.
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ MICHAEL S. OVITZ
- ------------------------------ Director April 16, 1999
Michael S. Ovitz
</TABLE>
<PAGE>
EXHIBIT 24.2
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Michael D. Parry, Robert R. Spellman and Sandra
J. Horbach his or her true and lawful attorneys-in-fact and agents, each acting
alone, with full powers of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign any or all amendments
to this registration statement, including post-effective amendments and a
registration statement registering additional securities pursuant to Rule 462
(b) under the Securities Act of 1933, and to file the same, with all exhibits
thereto, and to other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, and hereby ratifies and confirms all
his said attorneys-in-fact and agents, each acting alone, or his substitute or
substitutes may lawfully do or cause to be done by virtue thereof.
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ RONALD L. SARGENT
- ------------------------------ Director May 17, 1999
Ronald L. Sargent
</TABLE>
