<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 28, 2000
REGISTRATION NO.
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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O'SULLIVAN INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
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DELAWARE 2511 43-0923022
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of Industrial Identification Number)
incorporation or organization) Classification Code Number)
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1900 GULF STREET
LAMAR MISSOURI 64759
(417) 682-3322
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
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C/O ROWLAND H. GEDDIE III
1900 GULF STREET
LAMAR MISSOURI 64759
(417) 682-3322
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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COPY TO:
LANCE C. BALK
KIRKLAND & ELLIS
153 EAST 53RD STREET
NEW YORK, NEW YORK 10022-4675
TELEPHONE: (212) 446-4800
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
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CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED NOTE(1) PRICE (1) REGISTRATION FEE
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13 3/8% Senior Subordinated Notes due
2009.................................. $94,569,000 $945.69 $94,569,000 $24,967
Guarantees.............................. N/A N/A N/A N/A
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(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(f)(2) based upon the book value of the securities
as of February 25, 2000.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON ANY 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 THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON THE DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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O'SULLIVAN INDUSTRIES - VIRGINIA, INC.
(Exact name of registrant as specified in its charter)
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VIRGINIA 2511 75-2214237
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of Industrial Identification Number)
incorporation or organization) Classification Code Number)
</TABLE>
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<PAGE>
PROSPECTUS
FEBRUARY , 2000
O'SULLIVAN INDUSTRIES, INC.
EXCHANGE OFFER FOR ALL OUTSTANDING 13 3/8% SENIOR SUBORDINATED NOTES DUE
2009
IN AGGREGATE PRINCIPAL AMOUNT OF $100,000,000
IN EXCHANGE FOR 13 3/8% SERIES B SENIOR SUBORDINATED NOTES DUE 2009
THIS EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON [ ,]
2000
UNLESS EXTENDED.
TERMS OF EXCHANGE NOTES
MATURITY:
- - October 15, 2009.
REDEMPTION:
- - We may redeem the exchange notes at any time on or after October 15, 2004.
- - Before October 15, 2002, we may be able to redeem up to 25% of the exchange
notes with the proceeds of certain equity offerings.
- - We may redeem all or part of the exchange notes upon the occurence of a
change of control.
MANDATORY OFFER TO REPURCHASE:
- - If we sell all or substantially all of our assets or experience specific
kinds of changes in control, we may be required to repurchase the exchange
notes.
SECURITY:
- - The exchange notes and the guarantees by our guarantor subsidiaries are
unsecured.
GUARANTEES:
- - If we cannot make payments on the exchange notes when due, our guarantor
subsidiaries must make them instead.
RANKING:
- - These exchange notes and the subsidiary guarantees rank:
1. behind all of our and our guarantor subsidiaries' current and future
senior indebtedness, other than our trade payables and any debt that
expressly provides it is not senior to these exchange notes, and
2. equal with all of our and our guarantor subsidiaries' other current
and future senior subordinated indebtedness.
INTEREST:
- - Fixed annual rate of 13 3/8%.
- - Paid every six months on April 15 and October 15.
TRADING FORMAT:
- - There is no public market for the old notes or the exchange notes.
- - The old notes and the exchange notes may be traded in the portal market or
directly with qualified buyers.
THIS INVESTMENT INVOLVES RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 9.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE EXCHANGE NOTES OR DETERMINED IF
THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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TABLE OF CONTENTS
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PAGE
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Prospectus Summary.......................................... 1
Risk Factors................................................ 9
The Recapitalization Transactions........................... 16
Use of Proceeds............................................. 18
Capitalization.............................................. 19
Selected Consolidated Historical Financial Information...... 20
Unaudited Pro Forma Condensed Consolidated Statements of
Operations................................................ 22
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 26
Business.................................................... 35
Management.................................................. 46
Security Ownership of Certain Beneficial Owners and
Management................................................ 48
Certain Relationships and Related Transactions.............. 51
Description of Indebtedness................................. 55
Description of Exchange Notes............................... 57
Exchange Offer.............................................. 92
United States Federal Income Tax Considerations............. 99
Plan of Distribution........................................ 100
Legal Matters............................................... 101
Experts..................................................... 101
Available Information....................................... 101
Index to Financial Statements............................... F-1
</TABLE>
REFERENCES TO THE WORDS "WE," "OUR," AND "US" REFER ONLY TO O'SULLIVAN
INDUSTRIES, INC., ITS PREDECESSORS AND ITS SUBSIDIARIES AND NOT TO LEHMAN
BROTHERS. REFERENCES TO "O'SULLIVAN HOLDINGS" REFER ONLY TO O'SULLIVAN
INDUSTRIES HOLDINGS, INC., OUR PARENT HOLDING COMPANY. REFERENCES TO "O'SULLIVAN
INDUSTRIES" REFER ONLY TO O'SULLIVAN INDUSTRIES, INC. THE FOLLOWING SUMMARY
HIGHLIGHTS SELECTED INFORMATION FROM THIS PROSPECTUS AND DOES NOT CONTAIN ALL OF
THE INFORMATION THAT IS IMPORTANT TO YOU. THIS PROSPECTUS INCLUDES SPECIFIC
TERMS OF THE UNITS WE ARE OFFERING AS WELL AS INFORMATION REGARDING OUR BUSINESS
AND DETAILED FINANCIAL DATA. FOR A MORE COMPLETE UNDERSTANDING OF THIS OFFERING,
WE ENCOURAGE YOU TO READ THIS PROSPECTUS IN ITS ENTIRETY.
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY CONTAINS BASIC INFORMATION ABOUT THIS EXCHANGE
OFFER AND HIGHLIGHTS THE MOST IMPORTANT FEATURES OF THIS EXCHANGE OFFER. FOR A
MORE COMPLETE UNDERSTANDING OF THIS EXCHANGE OFFER, WE ENCOURAGE YOU TO READ
THIS ENTIRE DOCUMENT AND THE DOCUMENTS WE HAVE REFERRED YOU TO.
IN ADDITION, OUR MANAGEMENT HAS ESTIMATED THE MARKET SHARE PERCENTAGES
PROVIDED IN THIS PROSPECTUS. WE BELIEVE THESE ESTIMATES TO BE RELIABLE, BUT
THESE NUMBERS HAVE NOT BEEN VERIFIED BY AN INDEPENDENT SOURCE.
THE OLD NOTE OFFERING
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Old Notes............................ We sold the old notes in conjunction with the issuance by
our parent corporation, O'Sullivan Industries Holdings,
Inc., of warrants to purchase common and Series B junior
preferred stock of O'Sullivan Industries Holdings, Inc., to
Lehman Brothers, the initial purchaser, on November 30,
1999. Lehman Brothers subsequently resold the old notes and
warrants to qualified institutional buyers under Rule 144A
of the Securities Act of 1933. The price to the public of
the old notes and warrants was 98.046% of the principal
amount of the old notes.
Exchange and Registration Rights
Agreement.......................... We, O'Sullivan Industries - Virginia, Inc. (as guarantor)
and Lehman Brothers entered into a registration rights
agreement on November 30, 1999. The registration rights
agreement granted Lehman Brothers and any subsequent holders
of the old notes exchange and registration rights. We intend
that this exchange offer satisfy those exchange and
registration rights. The exchange and registration rights we
granted will terminate upon the consummation of our exchange
offer.
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THE EXCHANGE OFFER
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Securities Offered................... Up to $100,000,000 of 13 3/8% Series B senior subordinated
notes due 2009. The terms of the exchange notes and old
notes are identical in all material respects, except for
transfer restrictions and registration rights relating to
the old notes.
The Exchange Offer................... We are offering to exchange the old notes for a principal
amount equal to the principal amount of exchange notes. Old
notes may be exchanged only in integral principal multiples
of $1,000.
Expiration Date; Withdrawal of
Tender............................. Our exchange offer will expire 5:00 p.m. New York City time,
on [ ], 2000, or a later date and time if we choose to
extend this exchange offer. You may withdraw your tender of
old notes at any time prior to the expiration date. We will
return any old notes not accepted by us for exchange for any
reason at our expense as promptly as possible after the
expiration or termination of our exchange offer.
Conditions to the Exchange Offer..... Based on an interpretation by the staff of the Securities
and Exchange Commission in no-action letters issued to third
parties, we believe that you may offer for resale, resell or
otherwise transfer the exchange notes without complying with
the registration and prospectus delivery provisions of the
Securities Act of 1933, provided that:
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1
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- you do not intend to participate and have no arrangement
or understanding with any person to participate in the
distribution of the exchange notes and
- you are not our "affiliate" within the meeting of Rule
405 under the Securities Act of 1933.
Our obligation to accept for exchange, or to issue the
exchange notes in exchange for, any old notes is subject to:
- customary conditions relating to compliance with any
applicable law,
- any applicable interpretation by any staff of the
Securities and Exchange Commission, or
- any order of any governmental agency or court of law.
We currently expect that each of the conditions will be
satisfied and that no waivers will be necessary. See "The
Exchange Offer--Conditions."
Procedures for Tendering Old Notes... Each holder of old notes wishing to accept the exchange
offer must complete, sign and date the Letter of
Transmittal, or a facsimile. The holder must mail or
otherwise deliver the Letter of Transmittal, or facsimile,
together with the old notes and any other required
documentation, to the exchange agent at the address in the
section "The Exchange Offer" under the heading "Procedures
for Tendering Old Notes."
Use of Proceeds...................... We will not receive any proceeds from the exchange of notes.
Exchange Agent....................... Norwest Bank Minnesota, N.A. is serving as the exchange
agent in connection with our exchange offer.
Federal Income Tax Consequences...... O'Sullivan has received an opinion from Kirkland & Ellis
that the exchange of old notes in accordance with the terms
of this exchange offer will not be a taxable event to you
for federal income tax purposes. See "United States Federal
Income Tax Considerations."
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THE EXCHANGE NOTES
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<S> <C>
Issuer............................... O'Sullivan Industries, Inc.
Securities Offered................... $100,000,000 in aggregate principal amount of 13 3/8% Series
B Senior Subordinated Notes due 2009.
Maturity............................. October 15, 2009.
Interest Payments.................... Payment frequency--every six months on April 15 and October
15. First payment April 15, 2000.
Subsidiary Guarantors................ The exchange notes will be guaranteed by each of our current
and future domestic subsidiaries. If we cannot make payments
on the exchange notes when they are due, the guarantor
subsidiaries must make them instead.
Optional Redemption.................. On or after October 15, 2004, we may redeem some or all of
the exchange notes at any time at the redemption prices
listed in the section "Description of Notes" under the
heading "Optional Redemption."
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2
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Before October 15, 2002, we may redeem up to 25% of the
exchange notes issued under the indenture with the proceeds
of certain offerings of equity at 113.375% of the principal
amount thereof, plus accrued and unpaid interest. See
"Optional Redemption" in the section "Description of Notes."
Before October 15, 2004, we may redeem some or all of the
exchange notes upon the occurrence of a change of control at
the redemption price listed in the section "Description of
Notes" under the heading "Optional Redemption."
Change of Control Offer and Asset
Sale Offer......................... If we experience specific kinds of changes of control, we
must offer to repurchase the exchange notes at the price
listed in the Description of Notes. If we sell certain
assets, under certain circumstances we must offer to
repurchase the exchange notes at the price listed in the
Description of Notes. See "Repurchase at the Option of
Holders--Change of Control" and "--Asset Sales" in the
section "Description of Notes."
Ranking.............................. These exchange notes and the subsidiary guarantees are
senior subordinated debts.
They rank behind all of our and our guarantor subsidiaries'
existing and future senior indebtedness and all other
indebtedness, other than our trade payables and any
indebtedness that expressly provides that it is not senior
to these exchange notes and the subsidiary guarantees. They
rank equally with all of our existing and future senior
subordinated indebtedness, and that of our guarantor
subsidiaries.
Assuming we had completed this offering on December 31, 1999
and applied the proceeds as intended, these exchange notes
and the subsidiary guarantees would have been subordinated
to approximately $149.0 million of senior indebtedness.
Basic Covenants of Indenture......... We will issue the exchange notes under an indenture among
us, the subsidiary guarantors and Norwest Bank Minnesota,
National Association, as trustee. The indenture, among other
things, contains covenants that restrict our ability and the
ability of our restricted subsidiaries to:
- borrow money;
- pay dividends on or purchase our stock or our restricted
subsidiaries' stock;
- make investments;
- create liens;
- sell certain assets or merge with or into other
companies; and
- enter into transactions with affiliates.
These covenants limited our additional borrowing capacity at
December 31, 1999 to $23.2 million under the senior credit
facilities. Some of our future subsidiaries may not be
subject to the covenants in the indenture. For more details,
see the section "Description of Notes--Certain Covenants."
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RISK FACTORS
See "Risk Factors" beginning on page 9 and the other information in this
prospectus prior to deciding to invest in the exchange notes.
3
<PAGE>
O'SULLIVAN INDUSTRIES HOLDINGS, INC.
O'Sullivan Holdings is a holding company which owns all the capital stock
of O'Sullivan Industries. O'Sullivan Holdings has no operations and is dependent
on O'Sullivan Industries to fund the interest cost on $15.0 million of debt and
dividends on mandatorily redeemable preferred stock (liquidation value of
$24.6 million) issued in connection with the merger and recapitalization.
O'Sullivan Holdings also has an intercompany payable to O'Sullivan Industries.
O'SULLIVAN INDUSTRIES, INC.
We are a leading designer, manufacturer and distributor of
ready-to-assemble furniture products, with over 45 years of experience. We sell
primarily to the rapidly growing home office and home entertainment markets. We
manufacture approximately 450 stock keeping units of ready-to-assemble furniture
at retail price points from $20 to $999. Our product offerings include
ready-to-assemble desks, computer workcenters, home entertainment centers, audio
equipment racks, pantries and microwave oven carts. We also manufacture a
variety of other ready-to-assemble furniture for home office, home entertainment
and other uses. We design our products to provide the consumer high quality,
value and ease of assembly using straight-forward diagramed instructions.
We distribute our products primarily through office superstores,
including OfficeMax, Office Depot and Staples, discount mass merchants,
including Wal-Mart, Target and Kmart, as well as through other retail channels.
We own three modern manufacturing facilities totaling over 2.1 million square
feet that are strategically located across the United States. This network of
manufacturing facilities positions us closer to our customers and reduces
freight costs, which represent a significant portion of total product cost.
The $3.3 billion ready-to-assemble segment of the North American
furniture market grew at a compound annual growth rate of 11.6% from 1990
through 1998. This was significantly faster than the 5.1% compound annual growth
rate of the total $57.9 billion domestic residential furniture market from 1990
to 1998. The market for residential furniture, which includes upholstered
furniture and wood furniture shipped fully assembled by the manufacturer, is
influenced by a variety of factors, including home sales, housing starts and
general economic conditions. We believe the faster growth of ready-to-assemble
furniture products is the result of changes in the needs of consumers, expansion
of certain retail distribution channels and improvements in product quality.
- CHANGES IN THE NEEDS OF CONSUMERS. Consumer demand for personal
computers, which has been accelerating due in part to the rapid
growth of the Internet, and for larger screen televisions and related
equipment has driven the demand for more sophisticated
ready-to-assemble home office and home entertainment furniture. We
expect these trends to continue as the number of households owning
personal computers, home theaters and other audio and video equipment
expands;
- EXPANSION OF CERTAIN RETAIL DISTRIBUTION CHANNELS. Office superstores
and discount mass merchants have altered the way many products are
sold in the United States. The ready-to-assemble furniture segment
has been positively impacted by the rapid growth and increased market
share of these retailers. These distribution channels accounted for
over 50% of the domestic sales of ready-to-assemble furniture in
1997; and
- IMPROVEMENTS IN PRODUCT QUALITY. Improvements in equipment, software
and manufacturing processes have enabled the ready-to-assemble
furniture industry to produce higher quality, more durable products.
As a result of these improvements, ready-to-assemble furniture has
become more comparable in quality and durability to wood furniture
shipped assembled by the manufacturer but remains relatively less
expensive.
We believe that these trends will continue to drive the growth of the
ready-to-assemble segment of the retail furniture market.
4
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COMPETITIVE STRENGTHS
We believe that we are able to compete effectively due to the following
strengths:
LEADING MARKET SHARE POSITION. We are the second largest North American
ready-to-assemble furniture manufacturer in terms of domestic sales, a position
that we have held for the last ten years. In calendar year 1998, our estimated
share of the ready-to-assemble furniture market was approximately 16%. Many of
our largest customers, including office superstores and discount mass merchants,
have substantial purchasing requirements across the country. We are able to
satisfy these requirements due to our large scale manufacturing capacity and our
innovative, high quality products.
LEADER IN PRODUCT QUALITY, INNOVATION AND DESIGN. We believe that we are
recognized as a leader in product quality, innovation and design in the
ready-to-assemble furniture industry. Our computer-aided design software and our
modern manufacturing processes enable us to develop more than 150 new products
per year. Consequently, about one-third of our products are new each year. Our
ability to innovate allows us to keep pace with changes in retailer and consumer
tastes and demands.
WELL-ESTABLISHED CUSTOMER RELATIONSHIPS. We have well-established
relationships with many of the largest retailers of ready-to-assemble furniture
in the United States. These include office superstores like OfficeMax, Office
Depot and Staples and national discount mass merchants, like Wal-Mart, Target
and Kmart. Over the past two years, we have also established relationships with
leading electronic superstores like Best Buy and Circuit City. We believe we
have a long history as a trusted vendor and have earned a reputation for product
quality and innovation, customer responsiveness and manufacturing flexibility.
RECENT CAPACITY EXPANSION AND SYSTEM UPGRADES POSITION US FOR GROWTH. We
recently completed a $20 million capacity expansion program in our Virginia
plant. This expansion increased our total manufacturing capacity by
approximately 15%. We also recently completed a $13 million manufacturing
equipment upgrade in our Missouri plant. In addition, we have finished an
upgrade of our management information systems, which included a corporate-wide
conversion to JD Edwards software. We also installed new point-of-sale
analytical software that allows our sales force to better analyze sales trends
and consumer preferences. In addition, we installed Pro-engineering, a
computer-aided design software package. This software enhances our product
design capabilities and reduces the time before newly conceived products reach
the market.
LOW-COST, GEOGRAPHICALLY DIVERSIFIED MANUFACTURING OPERATIONS. We
believe that we are a low-cost ready-to-assemble furniture producer due to our
large scale, modern facilities and efficient manufacturing processes. We are the
only major ready-to-assemble furniture manufacturer with a plant in each of the
eastern, central and western regions of the United States. This allows our
plants to receive particleboard and fiberboard from the manufacturers located
nearest to them. Our network of manufacturing facilities positions us closer to
our customers and reduces shipping costs, which represent a significant portion
of product cost. We are the only major ready-to-assemble furniture manufacturer
with a manufacturing facility in the western United States, the fastest growing
region of the nation for ready-to-assemble furniture sales.
EXPERIENCED MANAGEMENT TEAM WITH SIGNIFICANT EQUITY OWNERSHIP. Our
senior management team has extensive experience in the ready-to-assemble
furniture industry. Our top twelve executives have been with us for an average
of over 17 years. In addition, we have broadened our management's expertise by
hiring executives from other leading manufacturers. In connection with our
recapitalization and merger, members of our senior management will retain equity
in O'Sullivan Holdings, valued at a total of $13.7 million. This retained equity
includes an interest in O'Sullivan Holdings' outstanding common stock of about
27.1%. As a result of its substantial equity interest, we believe our senior
management will have significant incentive to continue to increase our sales and
profitability.
5
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GROWTH STRATEGY
Sales of ready-to-assemble furniture, although expanding more rapidly
than sales of traditional casegood furniture, still represented only about 5.7%
of the overall domestic residential furniture market in 1998. As the quality of
ready-to-assemble furniture continues to improve, and office superstores and
discount mass merchants continue to expand, we expect ready-to-assemble
furniture to gain additional market share. The key elements of our growth
strategy are as follows:
CONTINUE TO DEVELOP A BROAD RANGE OF INNOVATIVE, HIGH QUALITY
PRODUCTS. We are dedicated to offering a broad range of high quality products
over a wide range of retail price points. We believe that by maintaining a broad
product line, we can appeal to a greater number of consumers and penetrate a
larger number of distribution channels. We seek to drive demand for our products
and maintain profitability in an otherwise price-rigid environment by providing
a steady supply of high quality product introductions. In fiscal year 1999, we
introduced approximately 150 new products.
FURTHER PENETRATE EXISTING AND NEW, GROWING DISTRIBUTION CHANNELS. Sales
to office superstores and discount mass merchants, our core distribution
channels, have grown at a compound annual growth rate of 14.6% since fiscal year
1995 to over $250.0 million in fiscal year 1999. To increase sales to our
existing customer base, we have developed several initiatives, including
dedicated product lines, enhanced customer service and tailored marketing
programs. We have also focused on increasing sales to other growing distribution
channels, such as electronic specialty retailers and home improvement centers.
Many of these retailers are increasing the ready-to-assemble furniture component
of their product mix.
LOWER PRODUCTION COSTS. Producing ready-to-assemble furniture cost
effectively is vital to our competitive position. This belief was the premise
for our recently completed capital expansion and management information systems
upgrade. Our capital investments have increased our total manufacturing capacity
and we are currently standardizing selected manufacturing processes to further
reduce set-up downtime. New equipment and employee training have also improved
our inventory management, order fulfillment rates and production efficiency. In
addition, our JD Edwards and Pro-engineering software have improved our customer
responsiveness and product design capability. We believe that we have not yet
fully realized the benefits of our capital expansion and management information
systems upgrade.
REMAIN COMMITTED TO CUSTOMER SERVICE. We are committed to providing
superior customer service to maintain strong relationships with our customers.
We strive to develop marketing strategies that are consistent with our
customers' needs and their position in the marketplace. The recent investments
we have made to improve our management information systems and increase our
manufacturing capacity should enable us to provide a higher level of customer
responsiveness, improve the look and quality of our products and enhance our
ability to forecast orders.
THE RECENT MERGER AND RECAPITALIZATION
On May 17, 1999, O'Sullivan Holdings entered into an agreement and plan
of merger with OSI Acquisition, Inc., a company formed by principals of
Bruckmann, Rosser, Sherrill & Co., LLC ("BRS"), a private equity firm. Under the
merger agreement, as amended, OSI was merged with and into O'Sullivan Holdings,
with O'Sullivan Holdings as the surviving corporation. OSI did not survive the
merger. O'Sullivan Holdings is a holding company which owns all the capital
stock of O'Sullivan Industries. O'Sullivan Holdings has no operations and is
dependent on O'Sullivan Industries to fund the interest cost on $15.0 million of
debt and dividends on mandatorily redeemable preferred stock (liquidation value
of $24.6 million) issued in connection with the merger and recapitalization.
O'Sullivan Holdings also has an intercompany payable to O'Sullivan Industries.
Twenty-nine members of our management, five of our directors, and an affiliate
of a director of O'Sullivan Holdings participated with BRS in the
recapitalization and merger of O'Sullivan Holdings. Management now owns a total
of 27.1% of the outstanding common stock of O'Sullivan Holdings. Affiliates of
BRS own the balance.
6
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The total amount of funds necessary to fund the merger and related
transactions was approximately $357.0 million. These funds came primarily from
the following sources:
- an equity investment by an affiliate of BRS of approximately
$45.3 million in cash in the common stock and Series B junior
preferred stock of O'Sullivan Holdings;
- an equity investment in O'Sullivan Holdings by the management
participants in the recapitalization and merger in the amount of
approximately $13.7 million. This investment consisted of the
exchange by the management participants of common stock of O'Sullivan
Holdings with a value of $6.9 million, options to acquire common
stock of O'Sullivan Holdings with an intrinsic value of $6.1 million
and cash of $0.7 million for shares of common stock, shares of
Series B junior preferred stock and options to acquire shares of
Series A junior preferred stock, each of O'Sullivan Holdings;
- the issuance by O'Sullivan Holdings of senior preferred stock with a
total liquidation value of $24.6 million to the existing stockholders
of O'Sullivan Holdings;
- the issuance by O'Sullivan Holdings of $15.0 million of senior notes
and warrants exercisable in aggregate into 6.0% of O'Sullivan
Holdings' common stock and 6.0% of O'Sullivan Holdings' Series B
junior preferred stock on a fully diluted basis as of the date of the
issuance of the warrants;
- the issuance by O'Sullivan Industries, Inc. of the old notes together
with additional warrants issued by O'Sullivan Holdings exercisable in
aggregate into 6.0% of O'Sullivan Holdings common stock and 6.0% of
O'Sullivan Holdings Series B junior preferred stock on a fully
diluted basis as of the date of issuance of the warrants;
- borrowings by O'Sullivan Industries totaling approximately
$139.0 million under the senior credit facilities; and
- $9.4 million of cash from O'Sullivan Industries.
Also included in the funds used to consummate the merger and
recapitalization were $10.0 million of variable rate industrial revenue bonds
which remain outstanding following the recapitalization transactions. Each of
these transactions is described more fully below.
The merger was approved by the board of directors of O'Sullivan Holdings,
the board of directors of OSI and a majority of the stockholders of O'Sullivan
Holdings. The merger and recapitalization and the transactions described above
are collectively referred to in this prospectus as the "recapitalization
transactions." We expect the merger to qualify for recapitalization accounting.
Under this method, the historical basis of our assets and liabilities will not
be affected.
7
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Our corporate structure after the recapitalization transactions is as
follows:
[LOGO]
- ------------------------
(1) O'Sullivan Industries International, Ltd. is not a subsidiary guarantor of
the notes.
THE EQUITY SPONSOR
The merger and recapitalization was sponsored by BRS. BRS is a private
equity firm formed in 1995 that specializes in leveraged acquisitions. BRS seeks
to acquire quality businesses with proven operating management. BRS
professionals currently manage two funds, with total committed capital of more
than $1.2 billion. Since BRS' formation, BRS has completed more than 15
acquisitions in the manufacturing and retailing industries. From the mid-1980's
until BRS' formation in 1995, the principals of BRS worked together as senior
officers of Citicorp Venture Capital. While at Citicorp Venture Capital, the
principals of BRS completed 25 acquisitions, including the furniture companies
Chromcraft Revington, Inc. and CORT Business Services Corporation.
8
<PAGE>
RISK FACTORS
An investment in the exchange notes is subject to a number of risks. You
should carefully consider the following factors, as well as the more detailed
descriptions cross-referenced to the body of this prospectus and the other
matters described in this prospectus.
SUBSTANTIAL LEVERAGE--OUR SUBSTANTIAL INDEBTEDNESS COULD ADVERSELY AFFECT OUR
FINANCIAL HEALTH AND PREVENT US FROM FULFILLING OUR OBLIGATIONS UNDER THESE
EXCHANGE NOTES.
We have a significant amount of indebtedness. The following chart is
presented as of December 31, 1999:
<TABLE>
<CAPTION>
DECEMBER 31, 1999
-----------------------
(DOLLARS IN MILLIONS)
<S> <C>
Total indebtedness.......................................... $ 249.0
Indebtedness senior to the exchange notes................... $ 149.0
Stockholder's deficit....................................... $ (12.5)
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA
FOR THE SIX MONTHS
ENDED DECEMBER 31, 1999
-----------------------
<S> <C>
Ratio of earnings to fixed charges.......................... 1.3x
</TABLE>
Our substantial indebtedness could have important consequences to you.
For example, it could:
- make it more difficult for us to satisfy our obligations with respect
to these exchange notes;
- increase our vulnerability to general adverse economic and industry
conditions;
- limit our ability to fund future working capital, capital
expenditures, and other general corporate requirements;
- require a substantial portion of our cash flow from operations for
debt payments;
- limit our flexibility to plan for, or react to, changes in our
business and the industry in which we operate;
- place us at a competitive disadvantage compared to our competitors
that are less leveraged;
- limit our ability to borrow additional funds; and
- expose us to fluctuations in interest rates because some of our new
debt has a variable rate of interest.
Any of the above listed factors could materially adversely affect us. See
"Description of Notes--Repurchase at Option of Holders--Change of Control" and
"Description of Other Indebtedness--Senior Credit Facilities."
ABILITY TO SERVICE DEBT--TO SERVICE OUR INDEBTEDNESS, WE WILL REQUIRE A
SIGNIFICANT AMOUNT OF CASH. OUR ABILITY TO GENERATE CASH DEPENDS ON MANY FACTORS
BEYOND OUR CONTROL.
Our ability to make payments on and to refinance our indebtedness,
including these exchange notes and to pay dividends to O'Sullivan Holdings in an
amount necessary to allow them to make cash payments on their senior notes due
2009, to fund planned capital expenditures and to make tax payments and payments
to O'Sullivan Holdings, and ultimately, Tandy Corporation under the tax sharing
and tax benefit reimbursement agreement will depend on our ability to generate
cash in the future and, with respect to our ability to pay dividends, on
restrictions contained in the senior credit facilities and the indenture for the
exchange notes and the securities purchase agreement for O'Sullivan Holdings
senior notes. This, to some extent, is subject to general economic, financial,
competitive, legislative, regulatory and other factors that are beyond our
control.
9
<PAGE>
Based on our current level of operations and anticipated cost savings and
operating improvements, we believe our cash flow from operations, available cash
and available borrowings under our senior credit facilities should be adequate
to meet our liquidity needs for the foreseeable future.
We cannot assure you, however, that our business will generate sufficient
cash flow from operations, that we will realize operating improvements on
schedule or that future borrowings will be available to us under our senior
credit facilities in an amount sufficient to enable us to service our
indebtedness, including these exchange notes, or to fund our other liquidity
needs. We may need to refinance all or a portion of our indebtedness, including
the senior credit facilities, these exchange notes or O'Sullivan Holdings'
senior notes, on or before maturity. We might not be able to refinance any of
our indebtedness on commercially reasonable terms or at all.
SUBORDINATION--YOUR RIGHT TO RECEIVE PAYMENTS ON THESE NOTES IS JUNIOR TO MOST
OF OUR EXISTING INDEBTEDNESS AND POSSIBLY MOST OF OUR FUTURE BORROWINGS.
FURTHER, THE GUARANTEES OF THESE EXCHANGE NOTES ARE JUNIOR TO MOST OF OUR
SUBSIDIARY GUARANTORS' EXISTING INDEBTEDNESS AND POSSIBLY TO ALL THEIR FUTURE
BORROWINGS.
These exchange notes and the subsidiary guarantees rank behind all of our
and the subsidiary guarantors' existing indebtedness (other than trade
payables), including borrowings under the senior credit facilities, and all of
our and their future borrowings, except any future indebtedness that expressly
provides that it ranks equal with, or behind, the exchange notes and the
guarantees. As a result, upon any distribution to our creditors or the creditors
of the guarantors in a bankruptcy or similar proceeding relating to us or the
guarantors, the holders of our and the guarantors' senior debt will be entitled
to be paid in full in cash before any payment may be made with respect to these
exchange notes or the subsidiary guarantees. Moreover, the senior credit
facilities will mature prior to these exchange notes.
In addition, all payments on the exchange notes and the guarantees will
be blocked in the event of a payment default on our senior debt and may be
prohibited for up to 179 days each year in the event of some non-payment
defaults on senior debt.
In the event of a bankruptcy, liquidation or reorganization or similar
proceeding relating to us or the guarantors, holders of the exchange notes will
participate with all other holders of our and the guarantors' subordinated
indebtedness in the assets remaining after we and the guarantors have paid all
of the senior debt. Because our senior debt must be paid first, you may receive
proportionately less than trade creditors in any such proceeding. In any of
these cases, we and the guarantors may not have sufficient funds to pay all of
our creditors. Therefore, holders of these exchange notes may receive ratably
less than trade creditors.
RESTRICTIONS IMPOSED BY OUR DEBT--THE SENIOR CREDIT FACILITIES, THESE EXCHANGE
NOTES AND O'SULLIVAN HOLDINGS' SENIOR NOTES WILL LIMIT OUR ACTIVITY IN CERTAIN
SIGNIFICANT RESPECTS.
Our senior credit facilities, these exchange notes and O'Sullivan
Holdings' senior notes restrict our ability to:
- incur additional indebtedness;
- pay dividends and make distributions;
- issue common and preferred stock of subsidiaries;
- make certain investments;
- repurchase stock;
- create liens;
- enter into transactions with affiliates;
- enter into sale and leaseback transactions;
- merge or consolidate; and
- transfer and sell assets other than in the ordinary course of
business.
10
<PAGE>
In addition, we must maintain minimum debt service and maximum leverage
ratios under the senior credit facilities. A failure to comply with the
restrictions contained in the senior credit facilities could lead to an event of
default, which could result in an acceleration of such indebtedness. Such an
acceleration would also constitute an event of default under the indenture
relating to these exchange notes and the securities purchase agreement relating
to O'Sullivan Holdings' senior notes. See "Description of Other
Indebtedness--Senior Credit Facilities."
ADDITIONAL BORROWINGS AVAILABLE--DESPITE OUR CURRENT LEVELS OF DEBT, WE MAY
STILL INCUR MORE DEBT AND POTENTIALLY EXACERBATE THE RISKS DESCRIBED ABOVE.
We and our subsidiaries may be able to incur significant additional
indebtedness in the future. Neither these exchange notes nor O'Sullivan
Holdings' senior notes completely prohibit us or our subsidiaries from doing so.
The revolving credit facility of the senior credit facilities permit additional
borrowings of up to $23.2 million at December 31, 1999. These additional
borrowings would be senior to the exchange notes and the subsidiary guarantees
of the exchange notes. If we or our subsidiaries add new debt to our current
debt levels, the related risks that we and they now face could intensify. See
"Capitalization," "Selected Consolidated Historical Financial Information,"
"Description of Exchange Notes," and "Description of Other Indebtedness--Senior
Credit Facilities."
COST OF RAW MATERIALS--OUR PROFITS WOULD BE REDUCED IF THE PRICES OUR SUPPLIERS
CHARGE US FOR RAW MATERIALS INCREASE.
We purchase large quantities of raw materials, including particleboard
and fiberboard. We are dependent on outside suppliers for all of our raw
material needs. Therefore, we are subject to changes in the prices charged by
our suppliers. In the past, our profits have been reduced by price increases in
the prices of particleboard and fiberboard. The following developments could
affect future results of operations:
- In the fourth quarter of fiscal year 1999, some of our particleboard
suppliers increased their prices by approximately 3%. In recent
months, most of these suppliers increased their prices by
approximately an additional 3.5%. In fiscal year 1999, we spent
approximately $85 million on these products.
- Also in fiscal year 1999, the price of corrugated cartons we
purchased decreased by approximately 8% between July 1998 and
March 1999. However, in March 1999, some of our corrugated carton
suppliers increased the price of corrugated cartons by approximately
8%. Certain corrugated carton suppliers are proposing additional
price increases which we have not yet accepted. In fiscal year 1999,
we spent approximately $15 million on corrugated cartons.
We anticipate that these price increases may be partially offset by other
factors. These factors include price decreases of other raw materials, savings
from our value engineering program designed to reduce costs without compromising
product quality or appearance, increased productivity in our manufacturing
operations and higher selling prices for new products at the retail level. There
can be no assurance, however, that these efforts will reduce the effect of the
price increases already implemented or any future price increases.
RISK OF LOSS OF MATERIAL CUSTOMERS--BECAUSE WE SELL PRODUCTS TO A SMALL NUMBER
OF CUSTOMERS, OUR NET SALES WOULD BE REDUCED IF ONE OF OUR CUSTOMERS
SIGNIFICANTLY REDUCED ITS PURCHASES OF OUR PRODUCTS OR WERE UNABLE TO FULFILL
ITS FINANCIAL OBLIGATIONS TO US.
Similar to other large ready-to-assemble furniture manufacturers, our
sales are concentrated among a relatively small number of customers. During
fiscal year 1999, our two largest customers accounted for approximately 34.0% of
our sales: OfficeMax accounted for 20.9% and Office Depot accounted for 13.1%.
Consistent with industry practice, we do not have long term contracts with any
of our customers. Consequently, our sales depend on our continuing ability to
deliver attractive products at reasonable prices. We cannot assure you that we
will be able to sell to these or other customers on an economically advantageous
basis in the future or that these or other customers will continue to buy our
products.
11
<PAGE>
For fiscal year 1999, our largest five customer accounts receivable
balances comprised approximately 62% of our trade receivables balance. In
March 1999, one of our customers, Service Merchandise Co., filed for bankruptcy
protection. Service Merchandise has announced that it plans to reorganize and
continue its operations. We cannot assure you, however, that it will be able to
do so.
On February 22, 2000, Service Merchandise announced that, as a part of
its bankruptcy reorganization plan, it would no longer sell a number of product
lines, including indoor furniture. Service Merchandise, however, has informed us
that it plans to continue to sell kitchen furniture. We expect this decision
will substantially reduce or eliminate our sales to Service Merchandise in
fiscal 2001 and thereafter.
Montgomery Ward & Co., another customer, also filed for bankruptcy
protection in July 1997 and emerged from bankruptcy in August 1999. In fiscal
year 1999, sales to Service Merchandise were approximately 7% of our gross
annual sales, and sales to Montgomery Ward were approximately 3% of our gross
annual sales. Sales to Montgomery Ward may also decline or cease altogether, and
we cannot assure you that we will be able to replace sales to Service
Merchandise or Montgomery Wards. We are currently shipping to Service
Merchandise while it operates under Chapter 11 bankruptcy court protection,
which gives certain priority claims to vendors in the event of liquidation. Our
outstanding accounts receivable balances, under court protection with respect to
Service Merchandise, at December 31, 1999 for Service Merchandise and Montgomery
Ward were $1.7 million and $900,000, respectively. We cannot assure you that our
other customers will not experience similar financial difficulties in the
future. Because our sales are concentrated among a small number of customers,
our revenues could decrease significantly if this occurs.
TANDY TAX SHARING AND TAX BENEFIT REIMBURSEMENT AGREEMENT--OUR PAYMENTS TO TANDY
MAY BE SIGNIFICANTLY HIGHER THAN WE CURRENTLY ANTICIPATE IF TANDY'S
INTERPRETATION OF THE TAX SHARING AND TAX BENEFIT REIMBURSEMENT AGREEMENT WITH
TANDY IS ACCEPTED OVER OUR INTERPRETATION OF THE AGREEMENT.
On June 29, 1999, Tandy filed suit in a Texas court against us. The suit
relates to a potential reduction in our tax benefit payments to Tandy resulting
from our increased interest expense following completion of the merger. Tandy
claims that this reduction would violate the tax sharing and tax benefit
reimbursement agreement entered into at the time of our initial public offering.
Although we believe that our interpretation of the tax sharing agreement will
ultimately prevail over Tandy's interpretation, we cannot assure you of this. If
Tandy were to prevail, our increased interest expense following the merger and
certain expenses incurred to consummate the merger would not be taken into
account in determining our annual payments to Tandy. For example, based on
current estimates, our payments to Tandy would be approximately $5.5 million
greater than we currently anticipate for fiscal years 2000 and 2001 combined.
However, if our earnings are significantly less than current estimates, then the
difference between the amount we believe we would owe to Tandy and the amount
Tandy believes we would owe under the tax sharing agreement would be
significantly greater. If necessary, we would fund these increased payment
obligations from cash flow from operations, borrowing under the revolving credit
agreement, or other sources of capital, if available. See
"Business--Litigation."
RELIANCE ON RETAIL ENVIRONMENT--REDUCTIONS IN RETAIL SALES COULD REDUCE OUR
SALES, ESPECIALLY IF THE REDUCTIONS OCCUR IN THE INDUSTRIES THAT WE BELIEVE ARE
CONTRIBUTING TO THE GROWTH OF THE READY-TO-ASSEMBLE FURNITURE INDUSTRY.
Most of our sales are to major retail chains. If there is a reduction in
the overall level of retail sales, our sales could also decline. We believe that
the increase in sales of ready-to-assemble furniture over the last several years
has occurred in part because there has been an increase in sales of personal
computers and home entertainment electronic equipment. If the level of sales of
these types of electronic equipment decreases, our sales could also decrease.
COMPETITION--WE OPERATE IN THE HIGHLY COMPETITIVE READY-TO-ASSEMBLE FURNITURE
INDUSTRY.
The industry in which we operate is highly competitive. Some of our
competitors are significantly larger and have greater financial, marketing and
other resources than we do.
12
<PAGE>
Along with some of our competitors, we have continued to increase
production capacity significantly as the market for ready-to-assemble furniture
has grown. In fiscal year 1996, these capacity increases created a surplus in
production capacity in the ready-to-assemble furniture industry. This extra
capacity heightened competition in the industry. This increased competition put
pressure on us to reduce our prices and consequently reduced our profits.
Increases in the industry's production capacity could again cause excess
capacity and heightened competition if industry sales do not increase as much as
expected. We cannot assure you that we will be able to compete successfully in
the future or that competitive pressure will not reduce our profits in the
future.
ORIGINAL ISSUE DISCOUNT
The exchange notes will bear a discount from their stated principal
amount at maturity. If a bankruptcy case is commenced by or against O'Sullivan
Industries under the U.S. Bankruptcy Code after the issuance of the exchange
notes, the claim of a holder of exchange notes with respect to the principal
amount thereof would likely be limited to an amount equal to the sum of (1) the
initial offering price and (2) the portion of the OID that is not deemed to
constitute "unmatured interest" for purposes of the U.S. Bankruptcy Code. Any
OID that was not accrued as of any such bankruptcy filing would constitute
"unmatured interest."
PRODUCT LIABILITY AND INSURANCE--WE ARE AT RISK THAT USERS OF OUR PRODUCTS WILL
SUE US FOR PRODUCT LIABILITY. IF WE WERE UNABLE TO DEFEND OURSELVES AGAINST SOME
PRODUCT LIABILITY LAWSUITS, OUR SUCCESS COULD BE NEGATIVELY AFFECTED.
All of our products are designed for use by consumers. Like other
manufacturers of similar products, we are subject to product liability claims
and could be subject to class action litigation with respect to our products. We
maintain liability insurance at levels that we believe are adequate for our
needs. We cannot assure you, however, that we will be fully insured against any
particular lawsuit.
We are party to various pending product liability legal actions arising
in the ordinary operation of our business. We do not believe that any of these
actions, either individually or collectively will have a significant negative
effect on our operating results and financial condition.
ENVIRONMENTAL MATTERS--WE MAY BE LIABLE FOR PENALTIES UNDER ENVIRONMENTAL LAWS,
RULES AND REGULATIONS. THIS COULD NEGATIVELY AFFECT OUR SUCCESS.
Our operations are subject to many federal, state and local environmental
laws, regulations and ordinances. Some of our operations require permits, which
are subject to revocation, modification and renewal by governmental authorities.
Governmental authorities have the power to enforce compliance with their
regulations, and violators may be subject to fines, injunction or both. We
expect increased federal and state environmental regulations affecting us as a
manufacturer, particularly regarding emissions and the use of various materials
in our production process. In particular, regulations to be issued under the
Clean Air Act Amendments of 1990 could subject us to new standards regulating
emissions of some air pollutants from our wood furniture manufacturing
operations. We are currently unable to estimate the cost of compliance with
these new standards.
Our manufacturing facilities ship waste products to various disposal
sites. To the extent that these waste products include hazardous substances that
could be discharged into the environment at these disposal sites or elsewhere,
we are potentially subject to laws that provide for responses to, and liability
for, releases of hazardous substances into the environment and liability for
natural resource damages. One example of these laws is the federal Comprehensive
Environmental Response, Compensation and Liability Act. Generally, liability
under this act is joint and several and is determined without regard to fault.
In addition to the Comprehensive Environmental Response, Compensation and
Liability Act, similar state or other laws and regulations may impose the same
or even broader liability for releases of hazardous substances. Because these
laws could subject us to liability even if we are not at fault, it is difficult
for us to estimate the cost of complying with them.
13
<PAGE>
CONTROL BY PRINCIPAL STOCKHOLDERS--THE INTERESTS OF OUR PRINCIPAL STOCKHOLDERS
MAY NOT BE ALIGNED WITH THE INTERESTS OF THE HOLDERS OF THE SECURITIES.
Following the recapitalization and merger, affiliates of BRS own
securities representing approximately 72.9% of the voting power of the
outstanding common stock of O'Sullivan Holdings. By reason of their ownership,
they control our affairs and policies. There may be circumstances in which the
interests of BRS and its affiliates could be in conflict with the interests of
the holders of the securities. For example, BRS and its affiliates may have an
interest in pursuing transactions that, in their judgment, could enhance their
equity investment, even though such transactions might involve risks to the
holders of the exchange notes. See "Management," "Security Ownership of Certain
Beneficial Owners and Management" and "Certain Relationships and Related
Transactions."
DEPENDENCE ON KEY PERSONNEL AND MANAGEMENT--OUR SUCCESS COULD BE NEGATIVELY
AFFECTED IF OUR KEY PERSONNEL LEAVE.
Our continued success is dependent, to a certain extent, upon our ability
to attract and retain qualified personnel in all areas of our business,
including management positions and key sales positions, especially those
positions servicing our major customers. Members of the O'Sullivan family in
particular have been instrumental in the development of our business and the
implementation of our corporate strategy. There can be no assurance either that
we will be able to keep existing personnel, including O'Sullivan family members,
or that we will be able to attract qualified new personnel. Our inability to do
so could have a negative effect on us.
FRAUDULENT CONVEYANCE MATTERS--FEDERAL AND STATE STATUTES ALLOW COURTS TO VOID
GUARANTEES, SUBORDINATE CLAIMS IN RESPECT OF THE EXCHANGE NOTES AND REQUIRE
EXCHANGE NOTEHOLDERS TO RETURN PAYMENTS RECEIVED FROM GUARANTORS.
Under the federal bankruptcy law and comparable provisions of state
fraudulent transfer laws, a court could void a guarantee or claims related to
the exchange notes or subordinate a guarantee to all of our other debts or all
other debts of a guarantor if, among other things, we or the guarantor, at the
time it incurred the indebtedness connected with its guarantee:
- received less than reasonably equivalent value or fair consideration
for the issuance of such guarantee; and
- we were or the guarantor was insolvent or rendered insolvent by such
incurrence; or
- we were or the guarantor was engaged in a business or transaction for
which our or the guarantor's remaining assets constituted
unreasonably small capital; or
- we or the guarantor intended to incur or believed that we or it would
incur debts beyond our or its ability to pay such debts as they
mature.
In addition, a court could void any payment by us or the guarantor
related to its guarantee and require that payment to be returned to us or the
guarantor, or to a fund for the benefit of our creditors or the creditors of the
guarantor.
The measures of insolvency for purposes of these fraudulent transfer laws
will vary depending upon the law applied. Generally, a guarantor would be
considered insolvent if:
- the sum of its debts, including contingent liabilities, were greater
than the fair saleable value of all of its assets; or
- the present fair saleable value of its assets were less than the
amount that would be required to pay its probable liability on its
existing debts, including contingent liabilities, as they became
absolute and mature; or
- it could not pay its debts as they became due.
14
<PAGE>
On the basis of historical financial information, recent operating
history and other factors, we believe that we and each guarantor, after giving
effect to its guarantee of these exchange notes, will not be insolvent, will not
have unreasonably small capital for the business in which we are or it is
engaged and will not have incurred debts beyond our or its ability to pay such
debts as they mature. There can be no assurance, however, as to what standard a
court would apply in making such determinations or that a court would agree with
our conclusions.
FINANCING CHANGE OF CONTROL OFFER--WE MAY NOT HAVE THE ABILITY TO RAISE THE
FUNDS NECESSARY TO FINANCE A CHANGE OF CONTROL OFFER REQUIRED BY THE INDENTURE.
Upon certain change of control events, we will be required to offer to
repurchase all outstanding exchange notes. However, it is possible that we will
not have sufficient funds at the time of a change of control to make the
required repurchase of exchange notes or that restrictions in our senior credit
facilities and any future credit agreements will not allow such repurchases. In
addition, some kinds of corporate events, such as a leveraged recapitalization,
would increase the level of our indebtedness but would not necessarily
constitute a "Change of Control" under the indenture and would therefore not
require us to repurchase the exchange notes. See "Description of Exchange
Notes--Repurchase at the Option of Holders."
NO PRIOR MARKET FOR EXCHANGE NOTES--IF ACTIVE TRADING MARKETS DO NOT DEVELOP FOR
THE EXCHANGE NOTES, YOU MAY NOT BE ABLE TO RESELL THEM. PRIOR TO THIS OFFERING,
THERE WAS NO PUBLIC MARKET FOR THE EXCHANGE NOTES.
Lehman Brothers, the initial purchaser of the old notes, has informed us
that it intends to make a market in these exchange notes after this offering is
completed. However, Lehman Brothers may cease its market-making at any time. In
addition, the liquidity of the trading market in these exchange notes, and the
market price quoted for these exchange notes, may be adversely affected by
changes in the overall market for high yield securities and by changes in our
financial performance or prospects or in the prospects for companies in our
industry generally. As a result, you cannot be sure that an active trading
market will develop for these exchange notes.
FORWARD LOOKING STATEMENTS--OUR ACTUAL OPERATING RESULTS MAY DIFFER FROM THE
RESULTS DESCRIBED IN THIS EXCHANGE OFFER.
This prospectus includes "forward-looking statements" including, in
particular, the statements about our plans, strategies and prospects under the
headings "Exchange Offer Summary," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business," and in the
Unaudited Pro Forma Financial Information and the related notes thereto.
Although we believe that our plans, intentions and expectations reflected in or
suggested by such forward-looking statements are reasonable, we can give no
assurance that such plans, intentions or expectations will be achieved.
Important factors that could cause actual results to differ materially from the
forward-looking statements we make in this prospectus are set forth in this
prospectus, including under the headings "Risk Factors," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business." All forward-looking statements attributable to us or persons acting
on our behalf are expressly qualified in their entirety by the cautionary
statements and risk factors contained throughout this prospectus.
15
<PAGE>
THE RECAPITALIZATION TRANSACTIONS
THE RECAPITALIZATION AND MERGER
On May 17, 1999, O'Sullivan Holdings entered into an agreement and plan
of merger with OSI, a company formed by principals of BRS. Under the merger
agreement, as amended, OSI was merged with and into O'Sullivan Holdings and
O'Sullivan Holdings is the surviving corporation. OSI did not survive the
merger. O'Sullivan Holdings is a holding company and does not have any
operations or assets other than its ownership of all of the capital stock and an
intercompany receivable of O'Sullivan Industries. Twenty-nine members of our
management, four of our then directors and an affiliate of a director of
O'Sullivan Holdings participated with BRS in the recapitalization and merger of
O'Sullivan Holdings. Management participants now own a total of 27.1% of the
outstanding common stock of O'Sullivan Holdings. Affiliates of BRS own the
balance. O'Sullivan Industries and O'Sullivan Holdings have incurred gross debt
of $249.0 million and $15.0 million, respectively, and net debt of
$243.5 million and $11.5 million, respectively, net of original issue discount
and the value attributed to the warrants. All of this debt was used to finance
the recapitalization and merger. The total amount of funds necessary to fund the
merger and related transactions was approximately $357.0 million. These funds
came from the following sources:
- an equity investment by an affiliate of BRS of approximately
$45.3 million in cash in the common stock and Series B junior
preferred stock of O'Sullivan Holdings;
- an equity investment in O'Sullivan Holdings by the management
participants of approximately $13.7 million. This investment
consisted of the exchange by the management participants of common
stock of O'Sullivan Holdings with a value of $6.9 million, options to
acquire common stock of O'Sullivan Holdings with an intrinsic value
of $6.1 million and cash of $0.7 million for shares of common stock,
shares of Series B junior preferred stock and options to acquire
shares of Series A junior preferred stock, each of O'Sullivan
Holdings;
- the issuance by O'Sullivan Holdings of senior preferred stock with a
total liquidation value of about $24.6 million to its existing
stockholders;
- the issuance by O'Sullivan Holdings of $15.0 million of senior notes
and warrants exercisable in aggregate into 6.0% of O'Sullivan
Holdings' common stock and 6.0% of O'Sullivan Holdings' Series B
junior preferred stock on a fully diluted basis as of the date of the
issuance of the warrants;
- the issuance by O'Sullivan Industries of the old notes together with
additional warrants issued by O'Sullivan Holdings exercisable into an
aggregate of 6.0% of O'Sullivan Holdings common stock and 6.0% of
O'Sullivan Holdings Series B junior preferred stock on a fully
diluted basis as of the date of issuance of the warrants;
- borrowings by O'Sullivan Industries totaling $139.0 million under the
senior credit facilities; and
- $9.4 million in cash from O'Sullivan Industries.
Also included in the funds used to consummate the merger and
recapitalization were $10.0 million of variable rate industrial revenue bonds
which remain outstanding following the recapitalization transactions. Each of
these transactions is described more fully below.
The merger was approved by the board of directors of O'Sullivan Holdings,
the board of directors of OSI and a majority of the stockholders of O'Sullivan
Holdings. We expect the merger to qualify for recapitalization accounting. Under
this method, the historical basis of our assets and liabilities will not be
affected.
The merger agreement contained various other provisions customary for
transactions of this size and type, including representations and warranties
with respect to the condition and operations of the business,
16
<PAGE>
covenants with respect to the conduct of the business prior to the closing of
the merger and various closing conditions, including:
- holders of no more than five percent of the outstanding shares of
common stock of O'Sullivan Holdings demanding appraisal rights;
- approval of the merger by our stockholders;
- obtaining financing; and
- no material adverse change in our financial condition, operations or
ability to consummate the merger.
SENIOR CREDIT FACILITIES
As part of the recapitalization transactions, we entered into a credit
agreement, referred to throughout this document as the "senior credit
facilities," with a syndicate of financial institutions for which an affiliate
of Lehman Brothers served as arranger, lender and agent. The senior credit
facilities consist of:
- a term loan facility of $135.0 million, consisting of a
$35.0 million six-year tranche A term loan facility and a
$100.0 million seven-and-one-half-year tranche B term loan facility,
a portion of which has been used to provide some of the funds
necessary to finance the merger; and
- a six-year revolving credit facility of up to $40.0 million,
including a swing line sub-facility of $5.0 million and a letter of
credit sub-facility of $15.0 million. Upon the completion of the
recapitalization and merger, letters of credit of approximately
$12.8 million were issued and approximately $4.0 million of
borrowings were drawn on the revolving credit facility.
O'Sullivan Industries distributed a portion of its borrowings under the
term loan facility to O'Sullivan Holdings, which used the borrowings to pay a
portion of the cash consideration to O'Sullivan Holdings' existing stockholders
in exchange for their shares of common stock in the merger. The revolving credit
facility will provide financing for future working capital, capital
expenditures, acquisitions and other general corporate purposes. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" and "Description of Other
Indebtedness--Senior Credit Facilities."
OFFERING OF O'SULLIVAN INDUSTRIES NOTES
As part of the recapitalization transaction, O'Sullivan Industries issued
$100.0 million of the old notes. O'Sullivan Industries distributed the cash
proceeds from the sale of these notes to O'Sullivan Holdings, which used the
proceeds to pay a portion of the cash consideration to its existing stockholders
in exchange for their shares of common stock in the merger. The old notes were
issued together with the additional warrants issued by O'Sullivan Holdings to
purchase an aggregate of 93,273 shares of O'Sullivan Holdings common stock and
39,273 shares of O'Sullivan Holdings Series B junior preferred stock.
O'SULLIVAN HOLDINGS NOTES AND WARRANTS
As part of the recapitalization transactions, O'Sullivan Holdings issued
$15.0 million of senior notes due 2009 and issued warrants to purchase an
aggregate of 93,273 shares of its common stock and warrants to purchase an
aggregate of 39,273 shares of its Series B junior preferred stock. O'Sullivan
Holdings used the proceeds from the issuance of the senior notes and warrants to
pay a portion of the cash consideration to its existing stockholders in exchange
for their shares of capital stock in the merger.
EQUITY FINANCING
ISSUANCE OF SENIOR PREFERRED STOCK. O'Sullivan Holdings issued shares of
senior preferred stock with a total liquidation value of about $24.6 million.
These shares of senior preferred stock were issued to the current
17
<PAGE>
stockholders of O'Sullivan Holdings as part of the consideration for the
exchange of their shares of common stock in the merger. The senior preferred
stock has a liquidation preference of $1.50 per share. Dividends accrue on the
senior preferred stock at a rate of 12.0% per annum. The senior preferred stock
may be redeemed by O'Sullivan Holdings at any time and must be redeemed on the
12th anniversary of the date of issuance or in the event that some types of
changes in the control of O'Sullivan Holdings occur.
ROLLOVER EQUITY. The management participants made an investment in the
amount of approximately $13.7 million in the equity of O'Sullivan Holdings and
OSI. These managers, directors and an affiliate of a director exchanged shares
of common stock of O'Sullivan Holdings with a value of $6.9 million and options
to acquire shares of common stock of O'Sullivan Holdings with an intrinsic value
of $6.1 million for common stock, Series B junior preferred stock, and options
to acquire shares of Series A junior preferred stock, each of O'Sullivan
Holdings. The management participants also made a cash investment of
$0.7 million in the common stock of OSI. These shares of OSI common stock were
converted into shares of common stock of O'Sullivan Holdings in the merger.
O'Sullivan Holdings used the proceeds of this cash equity investment to pay a
portion of the cash consideration to its current stockholders in exchange for
their shares of common stock. In the merger, O'Sullivan Holdings issued options
to purchase its Series A junior preferred stock in exchange for certain options
held by management participants in the buyout. The agreements for the options
provide for a special accrual at the rate of 14% per annum on the difference
between the liquidation value of the stock ($150.00 per share) and the exercise
price of the option ($50.00 per share). The special accrual accrues at the same
time and in the same manner as the 14% dividend on the Series A preferred stock
would if such stock were issued and outstanding. The special acrrual is not
payable until the exercise of the option. Payment is further subject to the
terms of any debt agreement of O'Sullivan Holdings and O'Sullivan. When made,
payment of the special accrual may be made in cash or by a reduction in the
exercise price of the option, at O'Sullivan Holdings' discretion. The special
accruals are reflected as compensation expense in the accompanying unaudited
consolidated statement of operations.
BRS EQUITY INVESTMENT. An affiliate of BRS made an investment of
approximately $45.3 million in the common stock and junior preferred stock of
OSI. These securities were converted into shares of common stock and Series B
junior preferred stock of O'Sullivan Holdings in the merger. O'Sullivan Holdings
used the cash proceeds from BRS' equity investment to pay a portion of the cash
consideration to its current stockholders in exchange for their shares of common
stock.
USE OF PROCEEDS
O'Sullivan Industries, Inc. will not receive any proceeds from this
exchange offer.
18
<PAGE>
CAPITALIZATION
The following table sets forth as of December 31, 1999 our historical
capitalization. This table should be read in conjunction with the "Summary
Consolidated Historical Financial Information," the "Selected Consolidated
Historical Financial Information," the "Unaudited Pro Forma Condensed
Consolidated Financial Statements" and the historical financial statements and
the related notes thereto included elsewhere in this prospectus. See also
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
<TABLE>
<CAPTION>
(DOLLARS IN MILLIONS)
<S> <C>
Cash and cash equivalents................................... $ 15.6
======
TOTAL DEBT:
Senior credit facilities (A).............................. 139.0
Senior subordinated Series B notes offered hereby (B)..... 94.6
8.01% senior notes........................................ --
Industrial revenue bonds (C).............................. 10.0
------
Total debt............................................ 243.6
------
STOCKHOLDER'S EQUITY (DEFICIT):
Common stock.............................................. --
Additional paid-in capital................................ --
Accumulated other comprehensive income.................... 0.1
Retained earnings (deficit)............................... (13.0)
------
Total stockholder's equity (deficit).................. (12.9)
------
Total capitalization.................................. $230.7
======
</TABLE>
- ------------------------
(a) Letters of credit of approximately $12.8 million were issued and borrowings
of $4.0 million were drawn under the revolving credit facility. See
"Description of Other Indebtedness--Senior Credit Facilities."
(b) The Series B notes are recorded at a discount of approximately $5.5 million
to the face amount to reflect the original issue discount on the notes of
approximately $2.0 million and the value attributable to the warrants issued
with the previously offered old senior subordinated notes of approximately
$3.5 million which has been recorded as an increase to stockholder's equity.
(c) Obligations of O'Sullivan Industries - Virginia, Inc., a wholly owned
subsidiary of O'Sullivan Industries.
19
<PAGE>
SELECTED CONSOLIDATED HISTORICAL FINANCIAL INFORMATION
The following table sets forth our selected consolidated historical
financial data as of the dates and for the periods indicated. The selected
statement of operations and balance sheet data for the years ended and at
June 30, 1995 through 1999 were derived from our audited consolidated financial
statements. The selected statement of operations and balance sheet data for the
six months ended and at December 31, 1998 and 1999 were derived from, and should
be read in conjunction with, our unaudited consolidated financial statements.
You should read the data presented below together with, and qualified by
reference to, our consolidated financial statements and related notes for the
three years ended June 30, 1999 and our unaudited consolidated financial
statements for the six months ended December 31, 1998 and December 31, 1999 and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," each of which is included herein.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JUNE 30, DECEMBER 31,
---------------------------------------------------- -------------------
1995 1996 1997 1998 1999 1998 1999
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales............................. $269,306 $291,766 $321,490 $339,407 $379,632 $185,459 $213,015
Costs and expenses:
Cost of sales..................... 208,176 229,262 230,578 244,086 267,630 132,467 149,448
Selling, marketing and
administrative.................. 44,799 52,691 61,388 68,463 74,213 37,707 43,086
Compensation expense associated
with stock options.............. 690 -- 749 749 749 374 10,697
Loss on settlement of interest
rate swap....................... -- -- -- -- -- -- 408
Restructuring charge (A).......... -- 5,212 -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Total costs and expenses.............. 253,665 287,165 292,715 313,298 342,592 170,548 203,639
Operating income...................... 15,641 4,601 28,775 26,109 37,040 14,911 9,376
Interest expense, net................. 2,382 3,831 2,327 2,468 2,844 1,711 3,091
-------- -------- -------- -------- -------- -------- --------
Income before income tax provision and
extraordinary item.................. 13,259 770 26,448 23,641 34,196 13,200 6,285
Income tax provision.................. 5,038 433 10,050 8,742 12,311 4,753 2,263
-------- -------- -------- -------- -------- -------- --------
Income before extraordinary item...... 8,221 337 16,398 14,899 21,885 8,447 4,022
Extraordinary loss from early
extinguishment of debt................ -- -- -- -- -- -- (305)
-------- -------- -------- -------- -------- -------- --------
Net income.............................. $ 8,221 $ 337 $ 16,398 $ 14,899 $ 21,885 $ 8,447 $ 3,717
======== ======== ======== ======== ======== ======== ========
OTHER DATA:
Ratio of earnings to fixed charges
(B)................................. 6.2x 1.2x 11.1x 9.2x 11.2x 7.8x 2.9x
Cash flow provided (used) by:
Operating activities.............. $ 13,188 $ 25,345 $ 23,512 $ 27,164 $ 25,297 $ 12,593 $ 28,123
Investing activities.............. (30,355) (4,403) (15,825) (28,359) (15,779) (11,296) (5,742)
Financing activities.............. 17,334 (21,000) (1,218) (3,970) (7,588) 1,032 (10,488)
BALANCE SHEET DATA (AT PERIOD END):
Working capital....................... $ 86,058 $ 71,136 $ 82,045 $ 72,893 $ 85,262 $ 77,809 $ 92,057
Total assets.......................... 228,477 212,317 232,607 250,314 266,967 263,752 297,426
Long-term debt........................ 51,000 30,000 30,000 30,000 22,000 32,000 237,569
Stockholder's equity.................. 103,627 103,982 120,375 135,225 157,103 171,117 (12,854)
</TABLE>
20
<PAGE>
(a) In March 1996, we adopted a business restructuring plan to cut costs and
better utilize working capital. The plan included the discontinuance of
certain product lines which had received marginal acceptance in the
marketplace ($4.2 million), costs associated with the initial training of
terminated employees at our Utah facility ($0.4 million), write-off of
certain machinery that was used to manufacture the discontinued product
lines ($0.2 million) and the modification of the business structure of an
international division ($0.4 million). The above restructuring plan resulted
in a pre-tax charge of $5.2 million, which was recognized in the third
quarter of fiscal 1996. Proceeds from the disposal of discontinued products
approximated $1.5 million and were received in fiscal 1997.
(b) Earnings used in computing the ratio of earnings to fixed charges consist of
pre-tax earnings and fixed charges. Fixed charges are defined as interest
expense related to debt, amortization expense related to deferred financing
costs and a portion of rental charges.
21
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
O'SULLIVAN INDUSTRIES, INC.
The following tables show selected consolidated financial data reflecting
the merger that we refer to as "pro forma" information. They are based on
adjustments to the historical consolidated financial statements to give effect
to the merger using recapitalization accounting and to the financing of the
merger including the old note offering and the application of the net proceeds
therefrom. The pro forma information, while helpful in illustrating the
financial characteristics of O'Sullivan Industries after the merger under one
set of assumptions, does not attempt to predict or suggest future results. The
pro forma information also does not attempt to show how we would actually have
performed had the merger been effective throughout these periods.
The pro forma statement of operations data for the fiscal year ended on
June 30, 1999 and the six months ended December 31, 1999 give effect to the
merger as if it was completed on the first day of the respective period. This
data should be read in conjunction with our consolidated financial statements
and related notes, the interim consolidated financial data and the related notes
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this prospectus. The pro forma financial
information is based on assumptions which we believe are reasonable.
O'SULLIVAN INDUSTRIES, INC. AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF O'SULLIVAN INDUSTRIES HOLDINGS, INC.)
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Net sales................................................... $379,632 $ -- $379,632
Costs and expenses:
Cost of sales............................................. 267,630 -- 267,630
Selling, marketing and administrative..................... 74,213 510 (A) 74,723
Compensation expense associated with stock options........ 749 874 (B) 1,623
-------- -------- --------
Total costs and expenses.................................... 342,592 1,384 343,976
-------- -------- --------
Operating income............................................ 37,040 (1,384) 35,656
Interest expense, net....................................... 2,844 26,443 (C) 29,287
-------- -------- --------
Income before income tax provision.......................... 34,196 (27,827) 6,369
Income tax provision........................................ 12,311 (10,018)(D) 2,293
-------- -------- --------
Net income.................................................. $ 21,885 $(17,809)(E) $ 4,076
======== ======== ========
OTHER DATA:
Ratio of earnings to fixed charges (F)...................... 11.2x -- 1.2x
</TABLE>
See notes to the unaudited pro forma condensed consolidated statements of
operations.
22
<PAGE>
O'SULLIVAN INDUSTRIES, INC. AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF O'SULLIVAN INDUSTRIES O'SULLIVAN HOLDINGS, INC.)
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
SIX MONTHS ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Net sales................................................... $213,015 $ -- $213,015
Costs and expenses:
Cost of sales............................................. 149,448 -- 149,448
Selling, marketing and administrative..................... 43,086 291 (A) 43,377
Compensation expense associated with stock options.......... 10,697 (10,259)(B) 438
Loss on settlement of interest rate swap.................... 408 (408)(C) --
-------- ----------- --------
Total costs and expenses.................................... 203,639 (10,376) 193,263
-------- ----------- --------
Operating income............................................ 9,376 10,376 19,752
Interest expense, net....................................... 3,091 11,553 (C) 14,644
-------- ----------- --------
Income before income tax provision and extraordinary item... 6,285 (1,177) 5,108
Income tax provision........................................ 2,263 (424)(D) 1,839
-------- ----------- --------
Income before extraordinary item............................ 4,022 (753) 3,269
======== =========== ========
OTHER DATA:
Ratio of earnings to fixed charges (F)...................... 2.9x -- 1.3x
</TABLE>
See notes to the unaudited pro forma condensed consolidated statements of
operations
23
<PAGE>
O'SULLIVAN INDUSTRIES, INC. AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF O'SULLIVAN INDUSTRIES HOLDINGS, INC.)
NOTES TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(a) After completion of the merger, O'Sullivan Industries entered into a
management services agreement with BRS. In exchange for specified services,
BRS will receive an annual fee equal to the greater of (1) 1.0% of
O'Sullivan Industries' annual consolidated earnings before interest, taxes,
depreciation and amortization, or (2) $300,000. See "Certain Relationships
and Related Transactions--Management Services Agreement."
(b) For the year ended June 30, 1999, the adjustment reflects the compensation
expense recognized in connection with the special accrual on the options to
purchase Series A junior preferred stock of O'Sullivan Holdings. For the six
months ended December 31, 1999, the adjustment represents the reversal of
the non-recurring compensation expense charge of $10,627 directly associated
with the merger, partially offset by the additional special accrual amount
of $341,000 not already recognized in the historical financial statements.
(c) Reflects the interest expense related to the existing variable rate
industrial revenue bonds, the new senior credit facilities and the old
senior subordinated notes after taking into account repayment of
O'Sullivan's existing long-term debt, as follows:
<TABLE>
<CAPTION>
PRINCIPAL ASSUMED YEAR ENDED SIX MONTHS ENDED
AMOUNT INTEREST RATE JUNE 30, 1999 DECEMBER 31, 1999
--------- ------------- ------------- ------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Existing variable rate industrial revenue bonds.... $ 10,000 8.50% $ 850 $ 425
Senior credit facilities:
Revolving line of credit........................... 4,000 9.25% 370 185
Term loan A.................................... 35,000 9.25% 3,238 1,619
Term loan B.................................... 100,000 9.75% 9,750 4,875
Commitment and letter of credit fees........... 200 100
Old senior subordinated notes...................... 100,000 13.38% 13,375 6,688
Discount amortization.............................. 278 139
Amortization of debt issue costs................... -- 1,226 613
-------- ------- -------
Total.............................................. $249,000 29,287 14,644
========
Historical interest expense........................ (2,844) (3,091)
------- -------
Pro forma adjustment........................... $26,443 $11,553
======= =======
</TABLE>
(d) Reflects the statutory tax rate applied to notes (a) and (b) above for all
periods presented.
We believe that our interest expense associated with merger-related debt, and
certain other expenses incurred to consummate the merger, are deductible for
federal and state income tax purposes. We also believe that such expenses
are deductible in determining the benefit payment payable to Tandy under the
tax sharing and tax benefit reimbursement agreement. Whether such expenses
are or are not deductible in determining the benefit payment to Tandy has no
impact on our tax provision, it merely impacts the timing of when payments
will be made to Tandy under the tax sharing agreement. O'Sullivan
Industries' cash flow after completion of the merger will be unfavorably
impacted if Tandy prevails in its position that such expenses are not
deductible in determining the amount payable to Tandy under the tax sharing
agreement. See "Risk Factors--Tandy Tax Sharing and Tax Benefit
Reimbursement Agreement" and "Business--Litigation."
(e) Excluded from "net income (loss)" are one-time, non-recurring charges which
do not affect future results of operations. The charges reflect the
prepayment penalty associated with the old New York Life debt, the
termination of the interest rate swap with NationsBank, compensation charges
associated with the exercise
24
<PAGE>
O'SULLIVAN INDUSTRIES, INC. AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF O'SULLIVAN INDUSTRIES HOLDINGS, INC.)
NOTES TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(CONTINUED)
of stock options and fees which do not affect future periods. The amounts
below represent the approximate charge as of December 31, 1999:
<TABLE>
<CAPTION>
(DOLLARS IN
THOUSANDS)
<S> <C>
Prepayment penalty.......................................... $ 476
Interest rate swap.......................................... 408
Compensation expense for stock options...................... 10,627
-------
Total................................................... $11,511
=======
</TABLE>
(f) Earnings used in computing the ratio of earnings to fixed charges consist of
pre-tax earnings and fixed charges. Fixed charges are defined as interest
expense related to debt, amortization expense related to deferred financing
costs and a portion of rental charges.
25
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH "RISK
FACTORS," AS WELL AS THE MORE DETAILED INFORMATION IN THE HISTORICAL FINANCIAL
STATEMENTS AND UNAUDITED PRO FORMA FINANCIAL INFORMATION, INCLUDING THE RELATED
NOTES THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS.
OVERVIEW
The domestic ready-to-assemble furniture market has experienced
significant growth over the past several years and has emerged as a key
component of the overall U.S. home and office furnishings industry. We are the
second largest ready-to-assemble furniture manufacturer in the United States in
terms of domestic sales with over 45 years of experience. We design, manufacture
and distribute a broad range of ready-to-assemble furniture products--bookcases,
cabinets, computer workcenters, desks, entertainment centers and stereo racks--
with retail prices ranging from $20 to $999. In recent years, we have committed
substantial resources to the development and implementation of a diversified
sales, marketing and product strategy in order to capitalize on growth
opportunities presented by emerging retail channels of distribution and changes
in consumer demographics and preferences. We have structured our business to
offer a wide variety of ready-to-assemble furniture products through
increasingly popular retail distribution channels, including office superstores,
discount mass merchants, electronic superstores, department stores, home
improvement centers and home furnishings retailers. We continue to strive
towards building long-term relationships with quality retailers in existing and
emerging high growth distribution channels to develop and sustain our future
growth.
In order to provide superior products and service to our demanding
customer base and maintain margin integrity, we have adopted the following three
pronged strategy:
- We introduce innovative products that redefine categories such as
entertainment centers and computer workcenters, thereby allowing us
to replace our existing retail footprint with new products that
enable us to maintain or improve gross margins. Examples of such
innovative products include our Cockpit-Registered Trademark-
computer workcenters and Xpressions-TM- Mini-Audio Stand.
- We have developed an upscale brand, Intelligent
Designs-Registered Trademark-, that has allowed us to penetrate the
upper end of the ready-to-assemble furniture market. Intelligent
Designs products generally capture higher price points and generate
better gross margins.
- We strive continuously to improve our manufacturing systems and
generate higher productivity in order to lower costs and maintain or
improve margins.
In fiscal 1998 and 1999, we implemented several strategic business
initiatives including a $20 million capacity expansion program in our Virginia
plant, which increased our total manufacturing capacity by approximately 15%,
and a $13 million manufacturing equipment upgrade in our Missouri plant. In
addition, we completed an upgrade of our management information systems, which
included a corporate-wide conversion to JD Edwards software, the installation of
new point-of-sale analytical software that allows our sales force to analyze
sales trends and consumer preferences more accurately and the installation of
Pro-engineering, a computer-aided design software package which enhances our
product design capabilities and reduces the time before newly conceived products
reach the market. We believe that we have not yet fully realized the benefits of
our capital expansion and management information systems upgrade.
We purchase large quantities of raw materials including particleboard and
fiberboard. We are dependent on our outside suppliers for all of these raw
materials. Therefore, we are subject to changes in the prices charged by our
suppliers. In the past, our profits have been reduced by price increases of
these commodities.
In the fourth quarter of fiscal 1999, certain key commodity suppliers
announced price increases. We were able to minimize the effect of initial
increases during the first quarter of fiscal 2000 through our value analysis
26
<PAGE>
program and productivity gains in manufacturing. Additional price increases
became effective during the second quarter of fiscal 2000. We were able to
partially offset the effect of these price increases through the programs
mentioned above combined with increased operating leverage from higher sales
levels. We currently estimate these increases will reduce our gross margin by
approximately $2.2 million during the last six months of fiscal 2000. In the
third quarter of fiscal 2000, corrugated carton suppliers requested price
increases to which we have not yet agreed. We believe that we can continue to
partially offset the effect of such increases through the programs mentioned
above and through the eventual inclusion of the higher costs in the selling
price of our products. However, there can be no assurance that we will be
successful in offsetting these potential price increases, nor can we assure you
that there will be no additional price increases.
On March 24, 1999, O'Sullivan Holdings announced that members of its
senior management team, in conjunction with a financial buyer, had made a
proposal to O'Sullivan Holdings' Board of Directors to acquire O'Sullivan
Holdings, subject to requisite financing. On May 18, 1999, O'Sullivan Holdings
announced that it had entered into a definitive merger agreement with OSI
Acquisition, Inc. Investors in OSI Acquisition, Inc. included members of
O'Sullivan's senior management and Bruckmann, Rosser, Sherrill Co., II, L.P. The
merger agreement was amended and restated on October 18, 1999.
On November 30, 1999, OSI Acquisition, Inc. was merged into O'Sullivan
Holdings in a recapitalization transaction approved by O'Sullivan Holdings' on
November 22, 1999. As a result of the merger, all of O'Sullivan Holdings'
outstanding common stock is held by members of O'Sullivan's senior management
and BRS and its affiliates. The management participants in the buyout own a
total of 27.1% of the outstanding common stock of O'Sullivan Holdings. BRS and
its affiliates own the balance.
Each share of O'Sullivan Holdings' outstanding common stock was exchanged
for $16.75 in cash and one share of O'Sullivan Holdings' senior preferred stock
with a liquidation value of $1.50 per share. Unpaid dividends accrue at the rate
of 12.0% per annum and if not paid, will be accumulated and compounded at the
same rate during the period that the senior preferred stock is outstanding. Some
of the shares of O'Sullivan Holdings' common stock and options held by the
management participants in the buyout were exchanged for common stock, junior
preferred stock and options to acquire junior preferred stock of O'Sullivan
Holdings.
O'Sullivan Holdings' required approximately $357.0 million to complete
the merger and pay related fees and expenses of which approximately
$264.0 million was funded via debt proceeds. We borrowed $239 million of this
amount. We paid a dividend of approximately $186.8 million to O'Sullivan
Holdings and repaid an intercompany balance of about $28.5 million to finance
the repurchase of stock. The remainder of the borrowings was used to refinance
our existing debt and for debt issuance costs.
27
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth the approximate percentage of items
included in the Consolidated Statement of Operations and EBITDA relative to net
sales for the periods indicated:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JUNE 30, DECEMBER 31,
------------------------------------------ -------------------------
1997 1998 1999 1998 1999
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net sales..................................... 100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== =====
Cost of sales................................. 71.7% 71.9% 70.5% 71.4% 70.2%
Gross margin.................................. 28.3% 28.1% 29.5% 28.6% 29.8%
Selling, marketing and administrative
expenses.................................... 19.1% 20.2% 19.5% 20.3% 20.2%
Compensation expense associated with stock
options..................................... 0.2% 0.2% 0.2% 0.2% 5.0%
Loss on settlement of interest rate swap...... 0.0% 0.0% 0.0% 0.0% 0.2%
Operating income.............................. 9.0% 7.7% 9.8% 8.1% 4.4%
Interest expense, net......................... 0.7% 0.7% 0.7% 0.9% 1.5%
Income tax expense............................ 3.1% 2.6% 3.2% 2.6% 0.9%
Net income (loss) before extraordinary item... 5.1% 4.4% 5.8% 4.6% 2.0%
Extraordinary item............................ 0.0% 0.0% 0.0% 0.0% 0.1%
Net income (loss)............................. 5.1% 4.4% 5.8% 4.6% 1.9%
Depreciation and amortization................. 3.1% 3.4% 3.7% 3.6% 3.5%
</TABLE>
SIX MONTHS ENDED DECEMBER 31, 1999 COMPARED TO THE SIX MONTHS ENDED
DECEMBER 31, 1998
RESULTS OF OPERATIONS
NET SALES. For the six-month period ended December 31, 1999, sales
increased $27.6 million, or 14.8%, to $213.0 million from $185.5 million. Strong
increases in the office superstore, home improvement and speciality retailer
channels accounted for nearly all of the sales increase for the quarter. For the
six-month period, these channels and the discount mass merchant channel
accounted for the sales increase. For the six-month period ended December 31,
1999, sales increased principally due to higher unit volume, while the average
sales price increased slightly.
In March 1999, Service Merchandise Co., one of our largest customers,
filed for bankruptcy protection under Chapter 11. We are currently shipping to
Service Merchandise while it operates under Chapter 11 bankruptcy protection,
which gives certain priority claims to vendors in the event of liquidation. On
February 22, 2000, Service Merchandise announced that, as a part of its
bankruptcy reorganization plan, it would no longer sell a number of product
lines, including indoor furniture. Service Merchandise, however, has informed us
that it plans to continue to sell kitchen furniture. We expect this decision
will substantially reduce or eliminate our sales to Service Merchandise in
fiscal 2001 and thereafter.
GROSS PROFIT. For the six months ended December 31, 1999 gross profit
increased to $63.6 million, or 29.8% of sales, from $53.0 million or 28.6% of
sales. The higher gross margin was due to the higher sales levels as well as
increased productivity in our manufacturing operations as compared to the second
quarter of fiscal 1999. In the prior year we incurred higher labor and overhead
costs associated with the implementation of new manufacturing equipment and
related adaptation of manufacturing processes.
In the fourth quarter of fiscal 1999, certain key commodity suppliers
announced price increases. We were able to minimize the effect of initial
increases during the first quarter of fiscal 2000 through our value analysis
program and productivity gains in manufacturing. Additional price increases
became effective during the second quarter of fiscal 2000. We were able to
partially offset the effect of these price increases through the programs
mentioned above combined with increased operating leverage from higher sales
levels. We currently estimate these increases will reduce our gross margin by
approximately $2.2 million during the last six months of fiscal 2000. We believe
that we can continue to partially offset the effect of such increases through
the programs
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mentioned above and through the eventual inclusion of the higher costs in the
selling price of our products. However, there can be no assurance that we will
be successful in offsetting these potential price increases.
SELLING, MARKETING AND ADMINISTRATIVE EXPENSES. For the six-month period
ended December 31, 1999, selling, marketing and administrative expenses
increased $5.0 million, to $43.1 million from $38.1 million in fiscal 1999. The
majority of the increase in selling, marketing and administrative expenses was
due to increased sales levels. Advertising and out-bound freight expense
increased due to a change in customer mix combined with the increase in sales
activity.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expenses
increased $644,000, or 19.4% to $7.4 million from $6.7 million. The year-to-date
increase in depreciation and amortization expense was due primarily to the $18.0
million expansion of our South Boston, Virginia manufacturing facility, which
was completed during the second quarter of fiscal 1999.
OPERATING INCOME. Operating income, including charges for compensation
expense associated with stock options and the loss on the interest rate swap,
decreased $5.5 million. The decrease was due to the special charges incurred
which totaled $11.1 million for both the second quarter and the first half of
fiscal 2000.
Excluding these special charges, operating income increased $5.6 million
or 37.6% to $20.5 million from $14.9 million in the comparable prior year
period.
NET INTEREST EXPENSE. Interest expense increased due to the higher level
of borrowings associated with the financing of the merger. Because of these
borrowings, our future interest expense will increase substantially. The merger
closed on November 30, 1999, so only one month of increased interest expense is
reflected in the quarter ended December 31, 1999.
EXTRAORDINARY ITEM. We repaid private placement notes with a principal
amount of $16.0 million for $16.5 million on November 30, 1999. The $476,000
prepayment fee has been recognized an extraordinary loss of $305,000, net of the
related tax benefit.
YEAR ENDED JUNE 30, 1999 COMPARED TO THE YEAR ENDED JUNE 30, 1998
NET SALES. Net sales increased by $40.2 million, or 11.9%, to
$379.6 million in fiscal 1999, up from $339.4 million in fiscal 1998. The
increase in net sales was primarily driven by a 10.9% increase in the number of
units sold and, to a lesser extent, a 1.0% increase in the average selling
price. Strong increases in net sales to the national discount mass merchant,
electronic specialty retailer and office superstore channels accounted for
approximately $44.3 million of the sales increase, offset by a $4.1 million
decline in sales to the regional mass merchant, department store/catalog
showroom, home improvement, original equipment manufacturer and export channels.
Consumer demand for our products was driven by market growth fueled by the
robust growth of the sub-$1,000 computer market, sales efforts targeted toward
specific rapidly growing customers, the success of new product introductions,
additional floor space and resources provided by retailers for ready-to-assemble
furniture and new store openings by certain retailers.
In March 1999, Service Merchandise Co., one of our largest customers,
filed for bankruptcy protection under Chapter 11. In addition, Montgomery
Ward & Co. recently exited Chapter 11 on August 2, 1999. If Service Merchandise,
Montgomery Ward or another major customer liquidates or ceases or substantially
reduces its purchases of products from us, we cannot assure you that we will be
able to replace these sales.
GROSS PROFIT. Our gross profit for fiscal year 1999 was $112.0 million,
an increase of $16.7 million, or 17.5%, from $95.3 million in fiscal 1998. This
increase was attributable to higher net sales and an improvement in the gross
profit margin, which increased by 140 basis points to 29.5% in fiscal 1999 from
28.1% in fiscal 1998. The increase in gross margin was primarily attributable to
increased unit sales and, to some extent, lower material costs due to our
on-going value-engineering program and improved manufacturing productivity.
These
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increases were somewhat offset by the increase in net sales to discount mass
merchants which normally have lower gross profit margins.
SELLING, MARKETING AND ADMINISTRATIVE EXPENSES. Selling, marketing and
administrative expenses increased by $5.8 million, or 8.3%, to $75.0 million in
fiscal 1999, from $69.2 million in fiscal 1998. The increase in selling,
marketing and administrative expenses was due primarily to $3.2 million of
higher advertising and out-bound freight expense directly associated with higher
net sales levels and customer mix and $2.3 million in higher profit sharing and
incentive compensation costs resulting from our improved financial results.
These increases were partially offset by lower commission expense resulting from
management's emphasis on reducing costs, and to some extent lower bad debt
expense related to the purchase and initiation of credit insurance during fiscal
1999. As a percentage of sales, selling, marketing and administrative expenses
decreased by 70 basis points to 19.7% of sales in fiscal 1999 from 20.4% of
sales in fiscal 1998 primarily from improved economies of scale.
DEPRECIATION AND AMORTIZATION. Our depreciation and amortization
expenses increased $2.4 million, or 20.7%, to $14.0 million in fiscal 1999 from
$11.6 million in fiscal 1998. The increase in depreciation and amortization
expense was due to capital additions of $15.8 million in fiscal 1999 and
$28.4 million in fiscal 1998. The expenditures were primarily for capacity
expansion in our Virginia plant and upgrading manufacturing equipment in our
Missouri plant.
OPERATING INCOME. Operating income increased by $10.9 million, or 41.9%,
to $37.0 million in fiscal 1999 from $26.1 million in fiscal 1998.
NET INTEREST EXPENSE. Net interest expense increased by $0.4 million to
$2.8 million in fiscal 1999. The increase was due largely to the refinancing of
our $10.0 million of industrial revenue bonds in the second quarter of this
fiscal year, which triggered a one-time charge of $0.3 million to pay the call
premium.
INCOME TAX EXPENSE. Income tax expense increased by $3.6 million, or
41.4%, to $12.3 million in fiscal 1999 from $8.7 million in fiscal 1998. Our
effective tax rate for fiscal 1999 was 36.0%, down slightly from 37.0% in fiscal
1998.
NET INCOME. As a result of the above factors, net income increased by
$7.0 million to $21.9 million for fiscal 1999 up from $14.9 million in fiscal
1998.
YEAR ENDED JUNE 30, 1998 COMPARED TO THE YEAR ENDED JUNE 30, 1997
NET SALES. Net sales increased $17.9 million, or 5.6%, to
$339.4 million in fiscal year 1998, up from $321.5 million in fiscal 1997. The
average selling price per unit increased 13.1% in fiscal 1998, while the number
of units sold decreased by 5.9%, reflecting the growth in the office superstore
channel, which sells products with higher average price points. Sales decreases
in the national discount mass merchant, department store/catalog showroom, home
improvement, and original equipment manufacturer channels were more than offset
by increased sales through the office superstore, regional mass merchant,
electronic specialty retailer and export channels. These sales increases were
the result of targeted sales efforts toward the regional retail chains, the
addition of new customers in the electronics channel, and the continued success
of products in the office superstore channels.
The decrease in the national discount mass merchant channel was due to
the volatile order pattern of one major mass merchant in the fourth quarter of
fiscal 1997 and the first half of fiscal 1998. The decrease in the department
store/catalog showroom channel reflected the bankruptcy and subsequent
liquidation of Best Products Co., Inc. in September 1996. Lower sales through
the home improvement channel were a result of the largest home improvement
company's discontinuance of ready-to-assemble furniture products other than
storage products for the home. Original equipment manufacturer sales continued a
decline that began in fiscal 1995 because of a decreased emphasis on this lower
margin business.
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In September 1996, one of our then-largest customers, Best Products
Co., Inc., filed for bankruptcy protection under Chapter 11 of the United States
Bankruptcy Code. Best Products Co., Inc. subsequently liquidated its assets and
ceased doing business. Sales to Best Products were zero in fiscal 1998 and
$6.0 million in fiscal 1997.
In July 1997, another of our large customers, Montgomery Ward & Co.,
filed for bankruptcy protection under Chapter 11. Sales to Montgomery Ward were
down slightly overall in fiscal 1998 compared to fiscal 1997. Montgomery Ward
exited bankruptcy protection on August 2, 1999.
GROSS PROFIT. Our gross profit increased to $95.3 million in fiscal 1998
from $90.9 million in fiscal 1997 but decreased slightly as a percentage of
sales, to 28.1% from 28.3%. A change in customer mix favoring the office
superstore market over the national discount mass merchant channel provided
higher margins, which were offset by lost efficiencies from the installation of
new manufacturing software systems and the installation of new equipment,
including the related training of employees and adaptation of manufacturing
processes.
SELLING, MARKETING AND ADMINISTRATIVE EXPENSES. Selling, marketing and
administrative expenses were $69.2 million, or 20.4% of sales, in fiscal 1998,
compared with $62.1 million, or 19.3% of sales, in fiscal 1997. The increase was
due primarily to the higher advertising costs associated with our promotional
efforts with certain customers and higher outbound freight costs resulting from
a change in the freight program of a large customer. Fiscal 1997 expenses also
included bad debt expenses for the bankruptcies of Montgomery Ward & Co. and
Best Products Co., Inc.
DEPRECIATION AND AMORTIZATION. Our depreciation and amortization
expenses increased to $11.6 million in fiscal 1998 from $10.0 million in fiscal
1997. The increased expense resulted from capital additions of $28.4 million in
fiscal 1998 and $11.2 million during the second half of fiscal 1997. The
expenditures were primarily for manufacturing capacity expansion and increased
capabilities, as well as a major software system implementation.
OPERATING INCOME. Operating income decreased by $2.7 million to
$26.1 million in fiscal 1998. The decrease was due primarily to manufacturing
inefficiencies associated with the installation of new manufacturing equipment,
training of employees on the new equipment, software systems installation, and
the related adaptation of manufacturing processes. Additionally, operating
income was reduced by higher advertising costs from promotional efforts with
certain customers and higher outbound freight costs due to a change in the
freight program of a large customer.
NET INTEREST EXPENSE. Net interest expense increased by $0.2 million to
$2.5 million in fiscal 1998. The increase was due primarily to lower cash
balances from increased capital expenditures and our stock repurchase program.
INCOME TAX EXPENSE. Our effective tax rate for fiscal 1998 was 37.0%,
down slightly from 38.0% in fiscal 1997.
NET INCOME. Net income decreased by $1.5 million to $14.9 million in
fiscal 1998. The decrease was due primarily to lost manufacturing efficiencies
discussed above with respect to cost of sales and gross margin, as well as
higher promotional costs and increased outbound freight costs.
BACKLOG
Our business is characterized by short-term order and shipment schedules
of generally less than two weeks. Accordingly, we do not consider backlog at any
given date to be indicative of future sales.
LIQUIDITY AND CAPITAL RESOURCES
Prior to November 30, 1999, our primary sources of liquidity were cash
flows from operations and borrowings under our old credit facility. Our current
sources of liquidity are cash flows from operations and
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borrowings under our senior secured credit facility, which is discussed below.
Our primary liquidity requirements will be to pay our debt, including interest
expense under the senior credit facilities and the exchange notes, payments to
Tandy and to provide for working capital and capital expenditures.
WORKING CAPITAL. As of December 31, 1999, we had cash and cash
equivalents of $15.6 million. Net working capital was $92.0 million at
December 31, 1999 compared to $77.8 million at December 31, 1998. The increase
in working capital is primarily attributable to the increased cash balance and
higher inventory levels over the prior year.
OPERATING ACTIVITIES. Net cash provided by operating activities for the
six months ended December 31, 1999, was $28.1 million compared to $12.6 million
for the six months ended December 31, 1998. The increase of $15.5 million in
cash flows from operations was due to increases in our accounts payable, accrued
liabilities and income taxes payable over the prior year amounts as well as the
non-cash portion of the compensation expense related to stock options.
INVESTING ACTIVITIES. We invested $5.7 million for capital expenditures
for the six months ended December 31, 1999 compared to $11.3 million for the
prior year six-month period. We estimate that the total capital expenditure
requirements for the remainder of the fiscal year will be approximately
$6.0 million, which we expect to fund from cash flow from operations or
borrowings under our line of credit. Our ability to make future capital
expenditures is subject to certain restrictions under our senior credit
facilities.
FINANCING ACTIVITIES. On November 30, 1999 O'Sullivan Holdings completed
its merger and recapitalization. Our consolidated indebtedness at December 31,
1999 was $249.0 million, consisting of:
- $100.0 million in 13 3/8% senior subordinated notes due 2009 issued
together with additional warrants issued by O'Sullivan Holdings to
purchase an aggregate of 6.0% of O'Sullivan Holdings common stock and
6.0% of O'Sullivan Holdings Series B junior preferred stock on a
fully diluted basis. These warrants were recorded at their fair value
of $3.5 million. These notes were issued at a price of 98.046%
providing $98.0 million in cash proceeds before expenses related to
the issuance,
- $139.0 million in senior secured credit facilities consisting of a
six year $35.0 million term loan, a seven and one-half year
$100.0 million term loan and $4.0 million in borrowings under a
$40.0 million revolving line of credit. The revolving line of credit
has a $15.0 million sub-limit for letters of credit, of which we are
currently utilizing approximately $12.8 million, and
- $10.0 million in variable rate industrial revenue bonds.
Expenses related to the issuance of debt financing were approximately
$12.4 million. The credit facilities and notes are subject to certain financial
and operational covenants and other restrictions, including among others, a
requirement to maintain certain financial ratios and restrictions on our ability
to incur additional indebtedness. These covenants limited our additional
borrowing capacity at December 31, 1999 to $23.2 million under the senior credit
facilities. In addition, the agreements prohibit the payment of dividends on our
stock.
From time to time we may use derivative financial instruments to reduce
interest rate risks. We do not hold or issue derivative financial instruments
for trading purposes. During fiscal 1997, we entered into a forward interest
rate swap agreement with a notional principal amount of $10.0 million. The
effective date of the agreement was October 1, 1998, and the termination date is
October 1, 2008. We contracted to pay a fixed rate of 7.13% and receive a
floating interest rate during the duration of the swap agreement. On
November 30, 1999, we terminated this swap as required by the counter-party,
incurring a loss of $408,000, as part of the merger and recapitalization.
Under the senior credit facilities we are required to hedge at least
one-half of our term loans under the facility for three years by February 28,
2000.
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We repaid our private placement notes with a principal amount of
$16.0 million for $16.5 million on November 30, 1999. The $476,000 prepayment
fee is recorded as a $305,000 extraordinary item, net of taxes.
TAX SHARING AGREEMENT. For the six months ended December 31, 1999,
O'Sullivan paid Tandy Corporation $2.5 million pursuant to the Tax Sharing and
Tax Reimbursement Agreement between us. The effect of the merger upon our
payments to Tandy under this agreement is the subject of an arbitration
proceeding. See Note 12 to the audited consolidated financial statements and
Note 11 to the unaudited consolidated financial statements included in this
prospectus. If the ruling in the arbitration proceeding were in Tandy's favor,
our liability under the tax sharing agreement for the six months ended
December 31, 1999, would have been approximately $2.0 million higher.
RETIREMENT CHARGE
In October 1998, Mr. Daniel F. O'Sullivan, Chairman of the Board of
Directors and former Chief Executive Officer of O'Sullivan Holdings, completed
negotiations of a retirement and consulting agreement with O'Sullivan Holdings
contingent upon our hiring his successor. In May 1999, the original retirement
agreement was amended, removing a contingency relating to the hiring of his
successor. The retirement agreement contains standard noncompetition provisions.
The present value of all future payments under this agreement of approximately
$1.9 million has been capitalized and recorded as an intangible asset. The asset
recorded to reflect the noncompete covenant will be recognized on a straight
line basis over the term of the agreement with Mr. O'Sullivan commencing on the
earlier of his retirement or March 31, 2000. Based on a retirement date of
March 31, 2000, the amortization period would be approximately 6.3 years.
Payments under this agreement will total approximately $2.2 million over the
contract period.
YEAR 2000 COMPLIANCE
O'Sullivan computers and computerized equipment experienced only two
minor problems at the start of calendar 2000. We discovered the problems testing
our systems on January 1, 2000. Both problems were fixed in less than one day
and caused no interruption of production, sales or shipments. Further, we know
of no supplier or customer whose ability to sell us raw materials or to purchase
finished goods has been materially affected by Year 2000 compliance problems.
We spent approximately $110,000 in connection with our Year 2000 program.
MARKET RISK
Our market risk is affected by changes in interest rates, foreign
currency exchange rates, and certain commodity prices. Under our policies, we
may use natural hedging techniques and derivative financial instruments to
reduce the impact of adverse changes in market prices. We do not hold or issue
derivative instruments for trading purposes, and we have no material sensitivity
to changes in market rates and prices on our derivative financial instrument
positions.
We have market risk in interest rate exposure, primarily in the United
States. We manage interest rate exposure through our mix of fixed and floating
rate debt. Interest rate swaps may be used to adjust interest rate exposures
when appropriate based on market conditions. For qualifying hedges, the interest
differential of swaps is included in interest expense. We believe our foreign
exchange risk is not material.
Due to the nature of our product lines, we have material sensitivity to
some commodities. We manage commodity price exposures primarily through the
duration and terms of our vendor contracts. A one percent change in these
commodity prices would affect our earnings by approximately $700,000 annually.
As noted above in fiscal 2000 we have encountered price increases in
certain commodities, which increases are expected to reduce our gross margin by
about $2.2 million during the last six months of fiscal 2000. We cannot
guarantee that there will not be further price increases in these or other
commodities.
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SEASONALITY
Historically, we have generally experienced a somewhat higher level of
sales in the second and third quarters of our fiscal year in anticipation of and
following the holiday selling season.
INFLATION
Except as noted above, we do not believe that inflation has had a
material effect on the results of operations presented in these financials.
INCOME TAXES
Prior to O'Sullivan Holdings' initial public offering in 1994, we were
owned by Tandy Corporation. As part of the initial public offering, O'Sullivan
Holdings entered into a tax sharing and tax benefit reimbursement agreement with
Tandy. The structure of the public offering increased our basis in our assets
for tax purposes. This basis increase raises our tax deductions for depreciation
and amortization each year. This reduces the amount of income taxes we pay to
the IRS. Under the tax agreement, O'Sullivan Holdings agreed to pay Tandy nearly
all of any benefit we receive from the increased depreciation and amortization
which reduces our taxable income, as determined after taking into account all of
our other deductible expenses. This agreement remains in effect after the
merger.
Since the initial public offering, in determining the benefit payment to
Tandy under the tax agreement, we have deducted our interest expense. We will
incur a significant increase in interest expense associated with our higher debt
levels in connection with the financing of the merger. We believe that our
increased interest expense, and certain expenses incurred to consummate the
merger, should be taken into account in determining the payments that we are
required to make to Tandy.
Tandy has filed suit in a Texas state court against O'Sullivan Holdings
claiming that any reduction in our tax benefit payments resulting from such
expenses in connection with the merger would violate the tax agreement. The
court has ordered the dispute to be submitted to arbitration pursuant to the tax
sharing agreement. O'Sullivan Holdings is and expects to continue to be in full
compliance with the tax agreement. O'Sullivan Holdings believes Tandy's lawsuit
is without merit and intend to defend itself vigorously. Although we believe
O'Sullivan Holdings' interpretation of the tax agreement will ultimately prevail
over Tandy's interpretation, we cannot assure you of this. If Tandy's
interpretation prevails over O'Sullivan Holdings' and such expenses are not
allowable in determining our payment to Tandy, payments to Tandy are estimated
to be $5.5 million greater than we currently anticipate for fiscal years 2000
and 2001 combined. See "Risk Factors--Tandy Tax Sharing and Tax Benefit
Reimbursement Agreement" and "Business--Litigation."
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BUSINESS
We are a leading designer, manufacturer and distributor of
ready-to-assemble furniture products, with over 45 years of experience. We sell
primarily to the rapidly growing home office and home entertainment markets. We
manufacture approximately 450 stock keeping units of ready-to-assemble furniture
at retail price points from $20 to $999. Our product offerings include
ready-to-assemble desks, computer workcenters, home entertainment centers, audio
equipment racks, pantries and microwave oven carts. We also manufacture a
variety of other ready-to-assemble furniture for home office, home entertainment
and other uses. We design our products to provide the consumer high quality,
value and ease of assembly using straight-forward diagramed instructions.
We distribute our products primarily through office superstores,
including OfficeMax, Office Depot and Staples, discount mass merchants including
Wal-Mart, Target and Kmart, as well as through other retail channels. We own
three modern manufacturing facilities totaling over 2.1 million square feet that
are strategically located across the United States. This network of
manufacturing facilities positions us closer to our customers and reduces
freight costs, which represent a significant portion of total product cost.
The $3.3 billion ready-to-assemble segment of the North American
furniture market grew at a compound annual growth rate of 11.6% from 1990
through 1998. This was significantly faster than the 5.1% compound annual growth
rate of the total $57.9 billion domestic residential furniture market from 1990
to 1998. The market for residential furniture, which includes upholstered
furniture and wood furniture shipped fully assembled by the manufacturer, is
influenced by a variety of factors, including home sales, housing starts and
general economic conditions. We believe the faster growth of ready-to-assemble
furniture products is the result of changes in the needs of consumers, expansion
of certain retail distribution channels and improvements in product quality.
- CHANGES IN THE NEEDS OF CONSUMERS. Consumer demand for personal
computers, which has been accelerating due in part to the rapid
growth of the Internet, and for larger screen televisions and related
equipment, has driven the demand for more sophisticated
ready-to-assemble home office and home entertainment furniture. We
expect these trends to continue as the number of households owning
personal computers, home theaters and other audio and video equipment
expands;
- EXPANSION OF CERTAIN RETAIL DISTRIBUTION CHANNELS. Office superstores
and discount mass merchants have altered the way many products are
sold in the United States. The ready-to-assemble furniture segment
has been positively impacted by the rapid growth and increased market
share of these retailers. These distribution channels accounted for
over 50% of the domestic sales of ready-to-assemble furniture in
1997; and
- IMPROVEMENTS IN PRODUCT QUALITY. Improvements in equipment, software
and manufacturing processes have enabled the ready-to-assemble
furniture industry to produce higher quality, more durable products.
As a result of these improvements, ready-to-assemble furniture has
become more comparable in quality and durability to wood furniture
shipped assembled by the manufacturer but remains relatively less
expensive.
We believe that these trends will continue to drive the growth of the
ready-to-assemble segment of the retail furniture market.
COMPETITIVE STRENGTHS
We believe that we are able to compete effectively due to the following
strengths:
LEADING MARKET SHARE POSITION. We are the second largest North American
ready-to-assemble furniture manufacturer in terms of domestic sales, a position
that we have held for the last 10 years. In calendar year 1998, our estimated
share of the ready-to-assemble furniture market was approximately 16%. Many of
our largest
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customers, including office superstores and discount mass merchants, have
substantial purchasing requirements across the country. We are able to satisfy
these requirements because of our large manufacturing capacity and our
innovative, high quality products.
LEADER IN PRODUCT QUALITY, INNOVATION AND DESIGN. We believe that we are
recognized as a leader in product quality, innovation and design in the
ready-to-assemble furniture industry. Our computer-aided design software and our
modern manufacturing processes enable us to develop more than 150 new products
per year. Consequently, about one-third of our products are new each year. Our
ability to innovate allows us to keep pace with changes in retailer and consumer
tastes and demands.
WELL-ESTABLISHED CUSTOMER RELATIONSHIPS. We have well-established
relationships with many of the largest retailers of ready-to-assemble furniture
in the United States. These include office superstores like OfficeMax, Office
Depot and Staples and national discount mass merchants, like Wal-Mart, Target
and Kmart. Over the past two years, we have also established relationships with
leading electronic superstores like Best Buy and Circuit City. We believe we
have a long history as a trusted vendor and have earned a reputation for product
quality and innovation, customer responsiveness and manufacturing flexibility.
RECENT CAPACITY EXPANSION AND SYSTEM UPGRADES POSITION US FOR GROWTH. We
recently completed a $20 million capacity expansion program in our Virginia
plant. This expansion increased our total manufacturing capacity by
approximately 15%. We also recently completed a $13 million manufacturing
equipment upgrade in our Missouri plant. In addition, we have finished an
upgrade of our management information systems, which included a corporate-wide
conversion to JD Edwards software. We also installed new point-of-sale
analytical software that allows our sales force to better analyze sales trends
and consumer preferences. In addition, we installed Pro-engineering, a
computer-aided design software package. This software enhances our product
design capabilities and reduces the time before newly conceived products reach
the market.
LOW-COST, GEOGRAPHICALLY DIVERSIFIED MANUFACTURING OPERATIONS. We
believe that we are a low-cost ready-to-assemble furniture producer due to our
large scale, modern facilities and efficient manufacturing processes. We are the
only major ready-to-assemble furniture manufacturer with a plant in each of the
eastern, central and western regions of the United States. This allows our
plants to receive particleboard and fiberboard from the manufacturers located
nearest to them. Our network of manufacturing facilities positions us closer to
our customers and reduces shipping costs, which represent a significant
proportion of product cost. We are the only major ready-to-assemble furniture
manufacturer with a manufacturing facility in the western United States, the
fastest growing region of the nation for ready-to-assemble furniture sales.
EXPERIENCED MANAGEMENT TEAM WITH SIGNIFICANT EQUITY OWNERSHIP. Our
senior management team has extensive experience in the ready-to-assemble
furniture industry. Our top twelve executives have been with us for an average
of over 17 years. In addition, we have broadened our management's expertise by
hiring executives from other leading manufacturers. In connection with our
recapitalization and merger, members of our senior management retained equity in
O'Sullivan Holdings valued at a total of $13.7 million. This retained equity
includes an interest in O'Sullivan Holdings' common stock of about 27.1%. As a
result of its substantial equity interest, we believe our senior management will
have significant incentive to continue to increase our sales and profitability.
GROWTH STRATEGY
Sales of ready-to-assemble furniture, although expanding more rapidly
than sales of traditional casegood furniture, still represented only about 5.7%
of the overall domestic residential furniture market in 1988. As the quality of
ready-to-assemble furniture continues to improve, and office superstores and
discount mass merchants
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continue to expand, we expect ready-to-assemble furniture to gain additional
market share. The key elements of our growth strategy are as follows:
CONTINUE TO DEVELOP A BROAD RANGE OF INNOVATIVE, HIGH QUALITY
PRODUCTS. We are dedicated to offering a broad range of high quality products
over a wide range of retail price points. We believe that by maintaining a broad
product line, we can appeal to a greater number of consumers and penetrate a
larger number of distribution channels. We seek to drive demand for our products
and maintain profitability in an otherwise price-rigid environment by providing
a steady supply of high quality product introductions. In fiscal year 1999, we
introduced approximately 150 new products.
FURTHER PENETRATE EXISTING AND NEW, GROWING DISTRIBUTION CHANNELS. Sales
to office superstores and discount mass merchants, our core distribution
channels, have grown at a compound annual growth rate of 14.6% since fiscal year
1995 to over $250.0 million in fiscal year 1999. To increase sales to our
existing customer base, we have developed several initiatives, including
dedicated product lines, enhanced customer service and tailored marketing
programs. We have also focused on increasing sales to other growing distribution
channels, such as electronic specialty retailers and home improvement centers.
Many of these retailers are increasing the ready-to-assemble furniture component
of their product mix.
LOWER PRODUCTION COSTS. Producing ready-to-assemble furniture cost
effectively is vital to our competitive position. This belief was the premise
for our recently completed capital expansion and management information systems
upgrade. Our capital investments have increased our total manufacturing capacity
and we are currently standardizing selected manufacturing processes to further
reduce set-up downtime. New equipment and employee training have also improved
our inventory management, order fulfillment rates and production efficiency. In
addition, our JD Edwards and Pro-engineering software have improved our customer
responsiveness and product design capability. We believe that we have not yet
fully realized the benefits of our capital expansion and management information
systems upgrade.
REMAIN COMMITTED TO CUSTOMER SERVICE. We are committed to providing
superior customer service to maintain strong relationships with our customers.
We strive to develop marketing strategies that are consistent with our
customers' needs and their position in the marketplace. The recent investments
we have made to improve our management information systems and increase our
manufacturing capacity should enable us to provide a higher level of customer
responsiveness, improve the look and quality of our products and enhance our
ability to forecast orders.
INDUSTRY OVERVIEW
GENERAL. The $3.3 billion ready-to-assemble segment of the North
American furniture market is comprised of all sales of prefinished, or
unfinished, non-upholstered furniture purchased in component form and then
assembled by the consumer. Domestic ready-to-assemble furniture is generally
made from particleboard or fiberboard laminated to replicate the appearance of
different types of wood or other surfaces. Through improvements in product
quality, innovation and assembly, ready-to-assemble furniture manufacturers
today can offer a broad array of products ranging from $20 television and video
cassette recorder stands to $999 computer workcenters. Although technological
advances allow ready-to-assemble furniture manufacturers to imitate the look and
durability of casegood furniture, ready-to-assemble furniture manufacturers are
generally able to sell at lower prices due to lower raw material, manufacturing
and transportation costs.
The ready-to-assemble segment of the North American furniture market has
grown at an 11.6% compound annual growth rate from 1990 to 1998, compared to the
compound annual growth rate of the United States gross domestic product of 5.0%
over the same period before adjusting for inflation. We believe the growing
popularity of ready-to-assemble furniture products is the result of improvements
in product quality, basic structural changes in retail distribution channels and
increased demand created by changes in the needs of consumers.
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IMPROVEMENTS IN PRODUCT QUALITY. During the past ten years,
ready-to-assemble furniture has evolved and improved dramatically. Industry
studies and publications indicate that consumers' attitudes regarding
ready-to-assemble furniture have followed suit to a large extent. Due to
improvements in the ready-to-assemble furniture manufacturing process, the
quality of ready-to-assemble furniture is now more comparable to that of wood
furniture shipped assembled by the manufacturer although it remains lower in
cost. Ready-to-assemble furniture manufacturers are able to provide additional
competitive advantages relative to assembled wood furniture. These advantages
include a broader range of surfaces and colors, enhanced design to support the
most recent home office/entertainment equipment and immediate product
availability.
EXPANSION OF KEY CUSTOMERS. The growth in the office superstore and mass
merchant retail channels has fueled the growth of ready-to-assemble furniture in
the United States. These channels currently accounted for over 50% of all
ready-to-assemble furniture sales in 1997. Some mass merchants and office
superstores have announced that they will open new North American stores in
2000. These include about 75 stores for OfficeMax, 75 stores for Office Depot,
125 stores for Wal-Mart, 90 stores for Target and 150 stores for Staples. We
anticipate having our products included in the majority of these new stores.
GROWTH IN HOME OFFICE FURNITURE. In 1998, sales of ready-to-assemble
home office furniture accounted for a majority of home office furniture sales in
the United States. As the number of home office households and households owning
one or more personal computers continues to increase, we expect the demand for
home office furniture to increase as well. Home office households are projected
to grow at a compound annual growth rate of 7.4% from 1997 to 2002. Home office
households with personal computers are projected to grow at a compound annual
growth rate of 11.0%, reaching 37.8 million by 2002. Additionally, as the price
of lower-end personal computers has steadily declined below $1,000 in the past
three years, we believe that computer ownership in median and lower income
households has increased. Personal computer shipments in 1998 increased to an
estimated 12.8 million units, up 16.4% from 11.0 million units in 1997. The
penetration rate of personal computers in U.S. households due to declining
prices and increased use of the Internet is expected to increase from 43% in
1997 to 51% in 2001.
CONTINUING GROWTH AND INNOVATION IN THE HOME ENTERTAINMENT MARKET. The
demand for larger television sets and related audio and video equipment has
increased demand for ready-to-assemble furniture. In 1998, an estimated
22.2 million televisions were sold in the United States. In 1998, television
sales increased 1.6%, to $6.1 billion from $6.0 billion in 1997. During this
period, the market for large screen televisions, defined as 32 inches or larger,
increased 57% from $2.1 billion in 1997 to $3.3 billion in 1998. Sales of large
screen televisions for the first half of 1999 were 16% higher than the same
period in 1998. The surge in sales of large screen televisions has occurred in
part due to a general price decline. For example, prices for 32-inch screen
televisions dropped approximately 16% from 1997 to 1998. Many entertainment
centers sold over the past decade accommodate televisions with a maximum screen
size of 27 inches. These entertainment centers need to be replaced by new
furniture products to accommodate larger screen televisions.
PRODUCT OVERVIEW
We group our product offerings into three distinct categories:
- furniture for the home office, including desks, computer work
centers, bookcases, filing cabinets and computer storage racks;
- electronics display furniture, including home entertainment centers,
home theater systems, television and stereo tables and cabinets, and
audio and video storage racks; and
- home decor furniture, including microwave oven carts, pantries,
living room and recreation room furniture and bedroom pieces,
including dressers, night stands and wardrobes.
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<PAGE>
The following is a description of some of our products:
<TABLE>
<CAPTION>
PRODUCT LINE DESCRIPTION KEY CUSTOMERS
- ------------------------ ------------------------------------------------ --------------------------------------
<S> <C> <C>
Living Dimensions Contemporary small office/home office and OfficeMax, Office Depot, Best Buy,
entertainment furniture. Upscale features Office World, Circuit City, Service
include Armortop-Registered Trademark- laminates Merchandise
and Quikfit-TM- fastener system.
Ovations Transition style entertainment furniture Best Buy, Circuit City, Montgomery
collection in medium Mystique Maple and light Ward
Snow Maple finish.
Scandinavian Contemporary small office/home office and Office Depot, OfficeMax, Ames, Target,
entertainment furniture collection in medium Best Buy
Alder finish.
Xpressions-TM- Generation X targeted home office and Wal-Mart, Circuit City, Meijer, Ames,
entertainment furniture collection. Features Staples, Montgomery Ward
include mini-stereo system compatibility, lavish
media storage and youthful high contrast,
two-tone finish.
French Gardens Country French style collection with antique OfficeMax, Shopko, Montgomery Ward
Odessa Pine finish. Both home office and
entertainment products.
Carmel Transition style home office and entertainment Ames, Montgomery Ward, Service
Valley-Registered Trademark- furniture collection in medium oak finish. Merchandise, Best Buy
</TABLE>
PRODUCT DESIGN AND DEVELOPMENT
We believe we are an industry leader in product quality and innovation.
We are committed to the continuing development of unique furniture that meets
consumer needs. With over 50% of our sales to the home office market, we believe
we are recognized as one of the industry's premier producers of contemporary
home office ready-to-assemble furniture. As evidence of our commitment to
quality and innovation, in the past three years we have introduced an average of
over 150 new products per year. In the ready-to-assemble furniture industry, a
new product can be a variation in color or styling of an existing product. By
providing a continuous supply of new product introductions, we are able to drive
demand for our products, which we believe will allow us to maintain our profit
margins in an otherwise price-rigid environment.
We maintain an in-house product design staff that collaborates with our
marketing personnel and customers to develop new products based on demographic
and consumer information. The product design professionals then work with our
engineering division to produce full-scale prototypes. The engineering staff
uses computer-aided design Pro-engineering software, which provides the latest
three-dimensional graphics capabilities. Pro-engineering software allows a
design engineer to accelerate the time-to-completion for a new product design.
This allows us to reduce the time before newly conceived products reach the
market. We then show our prototypes to our customers to gauge interest. If
initial indications of product appeal are favorable, we usually can commence
production within 12 weeks.
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<PAGE>
CUSTOMERS
Ready-to-assemble furniture is sold through a broad array of distribution
channels, as shown in the chart set forth below. While the ready-to-assemble
furniture segment historically has been dominated by discount mass merchants
like Wal-Mart, Target and Kmart, office superstores have quickly become the
second largest distribution channel. The office superstores are the fastest
growing channel.
We have a leading market share position in both of the two major
distribution channels and longstanding relationships with key customers. Similar
to other large ready-to-assemble furniture manufacturers, our sales are fairly
concentrated. See "Risk Factors."
INDUSTRY WIDE SALES BY DISTRIBUTION CHANNEL
[LOGO]
SALES AND MARKETING
We manage our customer relationships both through our in-house sales
force and a network of independent sales representatives. Key accounts like
OfficeMax and Office Depot are called on jointly by our sales force and
independent sales representatives. Smaller customers are serviced mainly by
independent sales representatives, whose activities are reviewed by our in-house
sales force. As of June 30, 1999, we employed 15 people in our sales department
and 14 people in our marketing department.
We work extensively with our customers to meet their specific
merchandising needs. Through customer presentations and other direct feedback
from the customer and consumers, we identify the consumer tastes and profiles of
a particular retailer. With this information, we make product recommendations to
our customers. We maintain a close dialogue with customers to ensure that the
design and functional requirements of our products are fulfilled.
Our products are promoted by our customers to the public under
cooperative and other advertising agreements. Under these agreements, our
products are advertised in newspaper inserts and catalogs, among other
publications. We generally cover a portion of the customer's advertising
expenses if the customer places approved advertisements mentioning us and our
products by name. We may also provide support to some advertising programs. We
generally do not advertise directly to consumers. We do, however, advertise in
trade publications to promote us as a producer of high quality ready-to-assemble
furniture.
We provide extensive service support to our customers. This support
includes designing and installing in-store product displays, educating
retailers' sales forces and maintaining floor displays. We have been recognized
for our commitment to our retail partners and have earned several awards in
recent years. These
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<PAGE>
awards include the 1998 Vendor of the Year award in the ready-to-assemble
furniture category from both Kmart and Shopko.
We participate in the eight-day furniture markets held in High Point,
North Carolina in April and October of each year. High Point is the principal
international market in the furniture industry. It attracts buyers from the
United States and abroad. We maintain over 16,000 square feet of leased showroom
space at High Point. We also maintain two other showrooms to market our product
lines. In addition, we participate in other trade shows, including the
international furniture show in Cologne, Germany.
MANUFACTURING
We operate three modern manufacturing facilities, which are described
more fully below. They are located in Lamar, Missouri, South Boston, Virginia
and Cedar City, Utah. In total, our facilities have over 2.1 million square
feet.
- LAMAR, MISSOURI: Opened in 1965, this facility has about 1.1 million
square feet. It is the largest of our three facilities and has the
capability to produce our entire product offering. This facility also
serves as our corporate headquarters.
- SOUTH BOSTON, VIRGINIA: Opened in 1989, our South Boston facility has
been expanded to approximately 480,000 square feet. This includes a
100,000 square foot expansion in 1993 and an additional 30,000 square
foot expansion in 1998. The South Boston facility has the capability
to manufacture substantially all of our products. As a part of our
expansion in 1998, we added a strip line, a laminator, a combi-former
machine and a new wrap line to the facility.
- CEDAR CITY, UTAH: This facility was opened in the spring of 1995. Our
newest plant encompasses about 530,000 square feet. It has about 25%
of the production capacity of our Lamar facility. We opened this
facility in Utah to be closer to western customers and particleboard
suppliers in order to reduce transportation costs. The building in
Cedar City is now utilizing approximately 50% of its available
manufacturing space. Consequently, it could accommodate substantial
capacity expansion.
We have invested over $60.1 million in capital improvements to expand
production capacity, increase manufacturing efficiency and install a new
corporate-wide JD Edwards management information system since the beginning of
fiscal year 1997. These efforts have provided significant production
improvements, including:
- IMPROVED PRODUCT STYLING AND EFFICIENCY: We were one of the first
ready-to-assemble furniture manufacturers to utilize combi-former
machines. This fall, we expect to install our fourth combi-former
machine. These machines provide a significant advantage in product
styling by creating rounded and other curved edges on furniture
parts.
- IMPROVED MANUFACTURING EFFICIENCY: Our new equipment is highly
automated and efficient. However, it is also complex and requires
extensive training. As our employees have become more familiar with
the new equipment, their productivity has improved. We expect these
improvements to continue.
- INCREASED MANUFACTURING FLEXIBILITY: The new equipment installed at
our South Boston, Virginia plant has provided expanded capacity and
manufacturing flexibility. As a result, the South Boston facility is
now capable of manufacturing a broader spectrum of parts. Some of
these parts were formerly manufactured only in our Lamar plant. We
believe that our expanded manufacturing capacity will increase
manufacturing flexibility, reduce freight costs and allow us to
better serve East Coast markets.
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RAW MATERIALS
The materials used in our manufacturing operations include particleboard,
fiberboard, coated paper laminates, glass, furniture hardware and packaging
materials. Our largest raw material cost is particleboard. We purchase all of
our raw material needs from outside suppliers. We buy our particleboard and
fiberboard at market-based prices from several independent wood product
suppliers. We purchase other raw materials from a limited number of vendors.
These raw materials are generally available from other suppliers, although the
cost from alternate suppliers might be higher.
As is customary in the ready-to-assemble furniture industry, we do not
maintain long-term supply contracts with our suppliers. We do, however, have
long standing relationships with all of our key suppliers and encourage supplier
partnerships. Our supplier base is sufficiently diversified so that the loss of
any one supplier in any given commodity should not have a material adverse
effect on our operations. We have never been unable to secure needed raw
materials. However, there could be adverse effects on our operations and
financial condition if we are unable to secure necessary raw materials like
particleboard and fiberboard.
Because we purchase all of our raw materials from outside suppliers, we
are subject to fluctuations in prices of raw materials. For example, our results
of operations were significantly affected in fiscal year 1995 by higher
particleboard and fiberboard prices. Future increases in the price of raw
materials could again affect our results of operations. See "Risk Factors."
COMPETITION
The residential furniture market is very competitive and includes a large
number of both domestic and foreign manufacturers. Our competitors include
manufacturers of both ready-to-assemble furniture and assembled furniture.
Although a large number of companies manufacture ready-to-assemble furniture,
the top five ready-to-assemble furniture manufacturers accounted for an
estimated 76% of the domestic ready-to-assemble furniture market in 1998. Our
top five competitors in terms of market share of the ready-to-assemble furniture
segment are Sauder Woodworking, Inc., Bush Industries, Inc., Dorel
Industries, Inc., Mill's Pride, and Creative Interiors. Some of our competitors
have greater sales volume and financial resources than us.
We, along with some of our competitors, have continued to increase
production capacity significantly as the market for ready-to-assemble furniture
has grown. In fiscal year 1996, these increases in capacity created some surplus
in production capacity in the ready-to-assemble furniture industry. The current
increases in production capacity could again cause excess capacity and increased
competition if anticipated sales increases do not materialize. This could
adversely affect our margins and results of operations. See "Risk Factors."
PATENTS AND TRADEMARKS
We have a United States trademark registration and international
trademark registrations or applications for the use of the
O'Sullivan-Registered Trademark- name on furniture. We believe that the
O'Sullivan name and trademark are well-recognized and associated with high
quality by both our customers and consumers and are important to the success of
our business. Our products are sold under a variety of trademarks in addition to
O'Sullivan. Some of these names are registered trademarks. We do not believe
that the other trademarks we own enjoy the same level of recognition as the
O'Sullivan trademark. We also do not believe that the loss of the right to use
any one of these other trademarks would be material to our business. We hold a
number of patents and licenses. None of these patents and licenses are
individually considered by us to be material to our business.
SHIPPING
We offer customers the choice of paying their own freight costs or having
us absorb freight costs. If we absorb the freight costs, our product prices are
adjusted accordingly. When we pay freight costs, we use independent trucking
companies with whom we have negotiated competitive transportation rates.
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<PAGE>
BACKLOG
Our business is characterized by short-term order and shipment schedules
of generally less than two weeks. Accordingly, we do not consider backlog at any
given date to be indicative of future sales.
SEASONALITY
We generally experience a somewhat higher level of sales in the second
and third quarters of our fiscal year in anticipation of and following the
holiday selling seasons.
PROPERTIES
We own our three manufacturing facilities. We also lease distribution
warehouses in Lamar, Missouri and South Boston, Virginia. We utilize space in
bonded warehouses in Markham, Ontario for our Canadian operations and in
Oxfordshire, United Kingdom to serve our European customers.
INSURANCE
We maintain liability insurance at levels that we believe are adequate
for our needs. We believe these levels are comparable to the level of insurance
maintained by other companies in the furniture manufacturing business.
EMPLOYEES
As of June 30, 1999, we had approximately 2,500 employees. Sixty-four
percent of these employees are located in Lamar. None of our employees are
represented by a labor union. We believe that we have good relations with our
employees.
LITIGATION
Prior to O'Sullivan Holdings' initial public offering in 1994, we were
owned by Tandy Corporation. As part of the initial public offering, O'Sullivan
Holdings entered into a tax sharing and tax benefit reimbursement agreement with
Tandy. The structure of the public offering increased the basis in our assets
for tax purposes. This basis increase reduces the amount of gain we recognize
upon sales of our assets and increases our annual tax deductions for
depreciation and amortization. This increase in deductions reduces the amount of
income taxes that we pay. Under the tax sharing agreement, O'Sullivan Holdings
agreed to pay Tandy nearly all of any benefit we receive from this reduction in
our taxable income. Our taxable income is determined after taking into account
all of our other deductible expenses. The annual payment to Tandy under the tax
sharing agreement was $9.7 million for fiscal 1999, $11.7 million for fiscal
1998 and $6.0 million for fiscal 1997. This agreement will remain in effect
until 2033. However, under the terms of the tax sharing agreement, O'Sullivan
Holdings and Tandy are expected to negotiate a final payment and termination
date of the agreement in 2009.
Since the initial public offering, in determining the benefit payment to
Tandy under the tax sharing agreement, we have deducted our interest expense. We
will incur a significant increase in interest expense associated with our higher
debt levels in connection with the financing of the merger. We believe that this
increased interest expense, and certain expenses incurred to consummate the
merger, should be taken into account in determining the payments which
O'Sullivan Holdings is required to make to Tandy under the tax sharing
agreement, and Tandy does not. Under the tax sharing agreement, disputes between
the parties must be referred to the chief executive officers. If they are unable
to resolve the dispute, it is to be resolved by a public accounting firm or a
law firm reasonably satisfactory to Tandy and us.
On June 29, 1999, Tandy filed a complaint against us in the District
Court of Texas in Tarrant County. Tandy's complaint sought a court order
compelling us to submit to a dispute resolution process. Alternatively, the
complaint sought a declaratory judgment that after the merger we must continue
to make tax-sharing payments to Tandy as if the merger had not occurred.
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On September 9, 1999, Tandy filed a motion for summary judgment in its
lawsuit against us. On October 8, 1999, Tandy's motion was denied, as was all
other relief sought by Tandy, except that O'Sullivan Holdings was directed to
commence dispute resolution procedures before an arbitrator, according to the
terms of the tax sharing agreement. Arbitrators are now being selected to hear
the dispute.
To support its motion for summary judgment, Tandy referred to a letter it
received from its independent outside auditors, PricewaterhouseCoopers LLP.
PricewaterhouseCoopers audits both Tandy's financial statements and our
financial statements. The PricewaterhouseCoopers letter advised Tandy on how
PricewaterhouseCoopers expected the tax sharing agreement would operate, if
certain assumptions were valid. On its face, the letter made clear that it was
not expressing an "opinion" on how the actual dispute between Tandy and
O'Sullivan Holdings would in fact be resolved, and the letter addressed
assumptions that PricewaterhouseCoopers had been given by Tandy.
O'Sullivan Holdings' annual report to stockholders on SEC Form 10-K
disclosed these facts, and expressed management's view, based on an opinion of
our outside counsel, Blackwell Sanders Peper Martin LLP, that Tandy's position
in its suit was without merit. Because PricewaterhouseCoopers both wrote its
letter to Tandy but did not object to the inclusion of our management's view in
the Form 10-K on the merits of Tandy's lawsuit, the SEC Staff has asked
O'Sullivan Holdings to clarify "whether PricewaterhouseCoopers has a reasonable
basis to doubt management's view that Tandy's lawsuit has no merit." In our
view, PricewaterhouseCoopers had a perfectly reasonable basis for its
acquiescence in the footnote disclosure in the Form 10-K that Tandy's position
was without merit. First, O'Sullivan Holdings received an opinion from Blackwell
Sanders Peper Martin LLP that supports our view that Tandy's position in the
litigation was without merit. That opinion was made available to
PricewaterhouseCoopers in connection with its annual audit, and clearly supports
the decision not to object to the inclusion of that footnote in O'Sullivan
Holdings' financial statements. Second, PricewaterhouseCoopers also has advised
O'Sullivan Holdings that its letter was predicated on assumptions it now
understands are not relevant to the merger as presently structured, and
therefore, PricewaterhouseCoopers has reaffirmed that its original letter did
not attempt to offer an expert opinion to Tandy on the merger or predict the
actual outcome of the litigation between Tandy and us. Neither
PricewaterhouseCoopers nor we believe there is any inconsistency between
PricewaterhouseCoopers' original letter and its non-objection to the inclusion
of that footnote disclosure in the Form 10-K. In light of
PricewaterhouseCoopers' response, the PricewaterhouseCoopers letter had no
relevance to the merger. However, we have included this discussion of the
PricewaterhouseCoopers letter because the SEC requested that it be included in
the proxy statement relating to the merger.
Finally, the Staff suggests that its concerns about this situation could
be eliminated if PricewaterhouseCoopers were to withdraw the letter to Tandy.
But, since the letter is not an expert opinion on any pending matter, a position
PricewaterhouseCoopers has since reaffirmed to us, we do not believe there is
any reason for PricewaterhouseCoopers formally to withdraw its letter.
O'Sullivan Holdings is now, and expects to continue to be, in full
compliance with the tax sharing agreement. O'Sullivan Holdings believes that
Tandy's position is without merit and intends to defend ourselves vigorously.
However, if Tandy's interpretation prevails over O'Sullivan Holdings' and our
increased interest and other merger-related expenses are not allowable in
determining our payment to Tandy, payments to Tandy are estimated to be $5.5
million higher than we currently anticipate for fiscal years 2000 and 2001
combined. See "Risk Factors--Tax Sharing and Tax Benefit Reimbursement
Agreement."
On May 18, 1999, five lawsuits were filed as class actions by
stockholders in the Delaware Court of Chancery seeking to enjoin the merger or,
in the alternative, to rescind the merger and recover monetary damages. The
complaints name as defendants O'Sullivan Holdings, all of its directors and, in
some cases, BRS. The complaints allege that O'Sullivan Holdings' directors
breached their fiduciary duties by approving the merger. The complaints also
allege that the price terms of the merger are inadequate and unfair to
O'Sullivan Holdings' stockholders. In addition, the complaints allege that the
management participants in the buyout have conflicts of interest that have
prevented them from acting in the best interests of O'Sullivan Holdings'
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<PAGE>
stockholders and that make it inherently unfair for BRS and the management
participants in the buyout to acquire 100% of O'Sullivan Holdings' stock. In the
cases naming BRS as a defendant, BRS is alleged to have aided and abetted the
alleged breaches of fiduciary duties. The defendants do not have to respond to
the lawsuits until after the plaintiffs have combined their complaints into one
complaint. The court issued an order on July 22, 1999 requiring the plaintiffs
to consolidate their complaints into one complaint. However, no date has been
set by which the defendants must move or answer in response to the consolidated
complaint. We believe that the claims are without merit and intend to defend the
lawsuits vigorously.
In addition, we are a party to various pending legal actions arising in
the ordinary operation of our business. These include product liability claims,
employment disputes and general business disputes. We believe that these actions
will not have a significant negative effect on our operating results and
financial condition.
ENVIRONMENTAL AND SAFETY REGULATIONS
Our operations are subject to extensive federal, state and local
environmental laws, regulations and ordinances. Some of our operations require
permits. These permits are subject to revocation, modification and renewal by
governmental authorities.
Governmental authorities have the power to enforce compliance with their
regulations. Violators may be subject to fines, injunction or both. Compliance
with these regulations has not in the past had a significant effect on our
earnings, capital expenditures or competitive position. We anticipate increased
federal and state environmental regulations affecting us as a manufacturer,
particularly regarding emissions and the use of various materials in our
production process. In particular, regulations to be issued under the Clean Air
Act Amendments of 1990 could subject us to new standards regulating emissions of
some air pollutants from our wood furniture manufacturing operations. We cannot
at this time estimate the impact of these new standards on our operations,
future capital expenditure requirements or the cost of compliance. We have
applied for air emission permits under Title V of the Clean Air Act Amendments
of 1990.
Our manufacturing process creates by-products, including sawdust and
particleboard flats. At the South Boston facility, this material is given to a
recycler or disposed of in landfills. At the Lamar facility, the material has
been sent to a recycler and off-site disposal sites. Wood by-products generated
at the Cedar City facility are shipped to a local landfill. Our by-product
disposal costs were $1.8 million for fiscal 1999, $1.2 million for fiscal 1998
and $1.0 million for fiscal 1997.
Our manufacturing facilities ship waste products to various disposal
sites. If our waste products include hazardous substances and are discharged
into the environment, we are potentially liable under various laws. These laws
may impose liability for releases of hazardous substances into the environment.
These laws may also provide for liability for damage to natural resources. One
example of these laws is the federal Comprehensive Environmental Response,
Compensation and Liability Act. Generally, liability under this act is joint and
several and is determined without regard to fault. In addition to the
Comprehensive Environmental Response, Compensation and Liability Act, similar
state or other laws and regulations may impose the same or even broader
liability for releases of hazardous substances.
We have been designated as a potentially responsible party under the
Arkansas Remedial Action Trust Fund Act for the cost of cleaning up a disposal
site in Diaz, Arkansas. We entered into a DE MINIMIS buyout agreement with some
of the other potentially responsible parties and have contributed $2,000 to date
toward cleanup costs under this agreement. The agreement subjects potentially
responsible parties to an equitable share of any additional contributions if
cleanup costs exceed $9 million. In this event, we would be liable for our share
of the excess. Cleanup expenses have approached $9 million. The state has
approved a plan providing that groundwater at the site be monitored. No further
remediation activity is necessary unless further problems are discovered. The
monitoring activities should not require the potentially responsible parties to
make additional payments. We believe that the amounts we may be required to pay
in the future, if any, relating to this site will be immaterial.
Our operations also are governed by laws and regulations relating to
workplace safety and worker health, principally the Occupational Safety and
Health Act and related regulations. Additionally, some of our products must
comply with the requirements and standards of the United States Consumer
Products Safety Commission. We believe that we are in substantial compliance
with all of these laws and regulations.
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MANAGEMENT
Set forth below are the names, ages and brief accounts of the business
experience of each person that is a director or executive officer of O'Sullivan
Industries, Inc., O'Sullivan Industries O'Sullivan Holdings, Inc. and O'Sullivan
Industries-Virginia, Inc.:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------------ -------- ------------------------------------------------
<S> <C> <C>
Daniel F. O'Sullivan............................ 58 Chairman of the Board
Richard D. Davidson............................. 51 President, Chief Executive Officer and Director
Tyrone E. Riegel................................ 57 Executive Vice President
Phillip J. Pacey................................ 35 Senior Vice President and Chief Financial
Officer
Thomas M. O'Sullivan, Jr. ...................... 45 Senior Vice President-Sales
Michael P. O'Sullivan........................... 40 Senior Vice President-Marketing
Rowland H. Geddie, III.......................... 46 Vice President, General Counsel and Secretary
E. Thomas Riegel................................ 56 Vice President-Strategic Operations
James C. Hillman................................ 55 Vice President-Human Resources
Tommy W. Thieman................................ 48 Vice President-Manufacturing-Lamar
Stuart D. Schotte............................... 38 Vice President-Supply Chain Management
Stephen F. Edwards.............................. 36 Director of O'Sullivan Holdings
Harold O. Rosser................................ 51 Director of O'Sullivan Holdings
</TABLE>
DANIEL F. O'SULLIVAN was named President, Chief Executive Officer and a
director of O'Sullivan Holdings in November 1993 and became Chairman of the
Board in December 1993. He relinquished the position of President of O'Sullivan
Holdings in July 1996, and resigned as Chief Executive Officer in October 1998.
He served as President of O'Sullivan Industries from 1986 until July 1996, and
was appointed Chairman of the Board and Chief Executive Officer in 1994. He also
serves as Chairman of the Board and Chief Executive Officer of O'Sullivan
Industries - Virginia. Mr. O'Sullivan has been employed by O'Sullivan Industries
since September 1962. Under the terms of his retirement and consulting agreement
with O'Sullivan Holdings, Mr. O'Sullivan will retire as Chairman and will
relinquish all his other executive positions of O'Sullivan Industries,
O'Sullivan Holdings and O'Sullivan Industries - Virginia in March 2000.
RICHARD D. DAVIDSON was promoted to President and Chief Executive Officer
of O'Sullivan Holdings, O'Sullivan Industries and O'Sullivan Industries -
Virginia in January 2000. He was named President and Chief Operating Officer of
O'Sullivan Holdings, O'Sullivan Industries and O'Sullivan Industries - Virginia
in July 1996. He was named a Director of O'Sullivan Industries and O'Sullivan
Industries - Virginia in July 1996 and of O'Sullivan Holdings in August 1996.
For more than five years prior to October 1995, he served as a Senior Vice
President of Sunbeam Corporation and as President of Sunbeam's Outdoor Products
Division.
TYRONE E. RIEGEL has been Executive Vice President of O'Sullivan
Industries since July 1986 and served as a Director from 1994 through November
1999. He was appointed as Executive Vice President and a Director of O'Sullivan
Holdings in November 1993. His service as a director of O'Sullivan Holdings
ended in November 1999. Mr. Riegel also serves as Executive Vice President of
O'Sullivan Industries - Virginia. Mr. Riegel has been employed by O'Sullivan
Industries since January 1964.
PHILLIP J. PACEY was appointed Senior Vice President and Chief Financial
Officer of O'Sullivan Holdings, O'Sullivan Industries and O'Sullivan Industries
- -Virginia in January 2000. From July 1999 to January 2000, he was Vice
President-Finance and Treasurer for these companies. From November 1995 until
July 1999, he served as Treasurer of O'Sullivan Holdings, O'Sullivan Industries
and O'Sullivan Industries - Virginia. From 1994 until November 1995, Mr. Pacey
served as Corporate Tax Manager of Savannah Foods & Industries, Inc., a sugar
refiner and marketer.
THOMAS M. O'SULLIVAN, JR. was promoted to Senior Vice President-Sales of
O'Sullivan Holdings, O'Sullivan Industries and O'Sullivan Industries - Virginia
in January 2000. From 1993 to 2000, he was Vice President-Sales of these
companies. Prior to his appointment as Vice President-Sales, Mr. O'Sullivan was
the
46
<PAGE>
National Sales Manager for O'Sullivan Industries and O'Sullivan Industries -
Virginia. Mr. O'Sullivan has been employed by O'Sullivan Industries since
June 1979.
MICHAEL P. O'SULLIVAN was named Senior Vice President-Marketing of
O'Sullivan Holdings, O'Sullivan Industries and O'Sullivan Industries - Virginia
in January 2000. From November 1995 to January, 2000 he served as Vice
President-Marketing of these companies. Mr. O'Sullivan was National Sales
Manager of O'Sullivan Holdings, O'Sullivan Industries and O'Sullivan Industries
- -Virginia from July 1993 until November 1995. Mr. O'Sullivan has been employed
by O'Sullivan Industries since 1984.
ROWLAND H. GEDDIE, III has been Vice President, General Counsel and
Secretary of O'Sullivan Holdings, O'Sullivan Industries and O'Sullivan
Industries - Virginia since December 1993. He served as a Director of O'Sullivan
Industries and O'Sullivan Industries - Virginia from March 1994 through November
1997.
E. THOMAS RIEGELhas been Vice President-Strategic Operations of
O'Sullivan Holdings, O'Sullivan Industries and O'Sullivan Industries - Virginia
since November 1995. From June 1993 until November 1995, he was Vice
President-Marketing of O'Sullivan Holdings, O'Sullivan Industries and O'Sullivan
Industries - Virginia. Mr. Riegel has been employed by O'Sullivan Industries
since May 1971.
JAMES C. HILLMAN has been Vice President-Human Resources of O'Sullivan
Holdings since November 1993 and of O'Sullivan Industries since 1980. He also
serves as Vice President-Human Resources of O'Sullivan Industries - Virginia.
Mr. Hillman has been employed by O'Sullivan Industries since 1971.
TOMMY W. THIEMAN was appointed Vice President-Manufacturing-Lamar in
July 1999 for O'Sullivan Holdings and O'Sullivan Industries. Since 1987, he has
served as the Plant Manager in Lamar. Mr. Thieman has been employed by
O'Sullivan Industries since 1972.
STUART D. SCHOTTE was appointed Vice President-Supply Chain Management in
July 1999 for O'Sullivan Holdings, O'Sullivan Industries and O'Sullivan
Industries - Virginia. From February 1998 until July 1999, he served as
Controller of O'Sullivan Holdings, O'Sullivan Industries and O'Sullivan
Industries - Virginia. From July 1996 until February 1998, Mr. Schotte served as
Director of Financial Analysis and Planning for Fast Food Merchandisers, Inc.
From October 1994 to July 1996, he was a certified public accountant. From
March 1993 to October 1994, he served as Corporate Controller for Savannah
Foods & Industries, Inc.
STEPHEN F. EDWARDS was appointed a director of O'Sullivan Holdings in
connection with the merger. Mr. Edwards is a principal of BRS. Mr. Edwards was
an officer of Citicorp Venture Capital from 1993 through 1994. From 1988 through
1991, he was an associate at Citicorp Venture Capital. Prior to joining Citicorp
Venture Capital, Mr. Edwards worked with Citicorp/Citibank in various corporate
finance positions. Mr. Edwards is a director of Town Sports
International, Inc., Anvil Knitwear, Inc., and American Paper Group, Inc.
HAROLD O. ROSSER was appointed a director of O'Sullivan Holdings in
connection with the merger. Mr. Rosser is a principal of BRS. Mr. Rosser was an
officer of Citicorp Venture Capital from 1987 through 1994. Previously, he spent
12 years with Citicorp/Citibank in various management and corporate finance
positions. He is a director of B&G Foods, Inc., California Pizza Kitchen, Inc.,
American Paper Group, Inc., Jitney-Jungle Stores of America, Inc., Acapulco
Restaurants, Inc. and Penhall International, Inc. Mr. Rosser is also Chairman of
the Board of Trustees of Hope Church in Wilton, Connecticut.
FAMILY RELATIONSHIPS
Daniel F. O'Sullivan, Thomas M. O'Sullivan, Jr. and Michael P. O'Sullivan
are brothers. Tommy W. Thieman is a brother-in-law of Daniel F. O'Sullivan,
Thomas M. O'Sullivan, Jr. and Michael P. O'Sullivan. Tyrone E. Riegel and James
C. Hillman were, prior to the deaths of their respective spouses,
brothers-in-law of Daniel F. O'Sullivan, Thomas M. O'Sullivan, Jr. and Michael
P. O'Sullivan. Tyrone E. Riegel and E. Thomas Riegel are brothers.
47
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of the securities
of O'Sullivan Holdings. These amounts do not include the options to acquire
common stock which may be granted to our employees or the warrants to purchase
an aggregate of 186,546 shares of common stock and 78,546 shares of Series B
junior preferred stock of O'Sullivan Holdings issued pursuant to the offering of
old senior subordinated notes and in connection with the issuance of the
O'Sullivan Holdings senior notes. The investment of BRS includes shares held by
employees and affiliates of BRS.
<TABLE>
<CAPTION>
OPTIONS TO
PURCHASE
PERCENTAGE SHARES
SHARES OF OF OF SERIES A SHARES OF SERIES
COMMON COMMON SHARES OF SENIOR JUNIOR PREFERRED B JUNIOR
NAME OF BENEFICIAL OWNER STOCK STOCK PREFERRED STOCK STOCK PREFERRED STOCK
- ------------------------ --------- ---------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
BRS(1)..................................... 996,600 72.85% -- -- 442,933
Richard D. Davidson........................ 83,379 6.10% 14,819 10,929 21,523
Daniel F. O'Sullivan....................... 9,972 0.73% 197,681 4,432 --
Tyrone E. Riegel........................... 21,265 1.55% 101,939 3,378 3,644
O'Sullivan Properties, Inc. (affiliate of
Thomas M. O'Sullivan, Sr.)............... 21,735 1.59% 112,958 -- 9,660
Michael P. O'Sullivan...................... 31,305 2.29% 5,080 6,176 5,117
Thomas M. O'Sullivan, Jr................... 34,151 2.50% 6,664 5,996 6,561
James C. Hillman........................... 27,251 1.99% 8,067 5,995 4,124
Rowland H. Geddie, III..................... 24,759 1.81% 5,420 6,375 2,636
E. Thomas Riegel........................... 19,816 1.45% 20,711 4,390 2,425
Tommy W. Thieman........................... 17,635 1.29% 7,858 2,563 3,282
Phillip J. Pacey........................... 11,749 0.86% 10,677 1,411 1,722
Stuart D. Schotte.......................... 11,209 0.82% 216 493 2,496
Management participants in the buyout as a
group (35 persons)....................... 371,400 27.15% 668,596 60,319 72,748
BancBoston Investments, Inc................ 93,273 (2) 6.38% -- -- 39,273 (2)
</TABLE>
- --------------------------
(1) The principles of BRS's parent are Bruce C. Bruckmann, Harold O. Rossen,
Stephen C. Sherrill, Stephen F. Edwards and Paul D. Kaminsky, each of whom
could be deemed to own the shares of O'Sullivan Holdings held by BRS.
(2) BancBoston Investments, Inc. holds warrants to purchase these shares.
Each management participant has a business address at 1900 Gulf Street,
Lamar, Missouri 64759-1899. O'Sullivan Properties, Inc. has a business address
at 1101 Gulf Street, Lamar, Missouri 64759. While Mr. Thomas M. O'Sullivan, Sr.
participated in the recapitalization and merger through O'Sullivan Properties,
we are treating him as if he had been a management participant in the
recapitalization and merger for purposes of this document. BRS' address is 126
East 56th Street, 29th Floor, New York, New York 10022. BancBoston Investments,
Inc.'s address is 175 Federal Street, 10(th) Floor, Boston, Massachusetts 02110.
48
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table reflects the cash and non-cash compensation for the
chief executive officer of O'Sullivan and the four next most highly compensated
executive officers at June 30, 1999.
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION (1) COMPENSATION
------------------- ----------------
SECURITIES ALL OTHER
FISCAL SALARY BONUS UNDERLYING STOCK COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) OPTIONS(#)(2) ($)(3)
- --------------------------- -------- -------- -------- ---------------- ------------
<S> <C> <C> <C> <C> <C>
Daniel F. O'Sullivan............................. 1999 275,000 229,279 -- 44,107
Chairman of the Board 1998 273,269 74,856 80,000 35,939
1997 229,807 210,849 136,000 21,096
Richard D. Davidson.............................. 1999 225,000 174,263 -- 37,104
President and Chief Executive Officer 1998 224,423 56,942 65,000 31,760
1997 205,961 178,809 100,000 18,119
Tyrone E. Riegel................................. 1999 195,000 116,276 -- 35,009
Executive Vice President 1998 194,615 38,062 28,000 35,441
1997 184,856 121,268 84,500 26,503
Terry L. Crump (4)............................... 1999 160,000 95,460 -- 28,576
Executive Vice President and Chief Financial 1998 159,423 31,284 28,000 27,366
Officer 1997 144,904 85,531 61,750 20,710
Thomas M. O'Sullivan, Jr......................... 1999 130,000 54,422 -- 24,222
Senior Vice President-Sales 1998 129,615 17,922 12,000 23,660
1997 119,904 55,226 41,000 20,915
</TABLE>
- ------------------------
(1) For the years shown, the named officers did not receive any annual
compensation not properly categorized as salary or bonus, except for certain
perquisites and other personal benefits. The amounts for perquisites and
other personal benefits for the named officers are not shown because the
aggregate amount of such compensation, if any, for each of the Named
Officers during the fiscal year shown does not exceed the lesser of $50,000
or 10% of total salary and bonus reported for such officer.
(2) Includes all options granted during fiscal years shown the O'Sullivan
Industries Holdings, Inc. Amended and Restated 1994 Incentive Stock Plan. No
stock appreciation rights were granted with any options.
(3) In fiscal 1999, other compensation for the named officers consisted of the
following:
<TABLE>
<CAPTION>
STOCK DEFERRED
SPSP PURCHASE COMPENSATION
GROUP MATCHING PROGRAM PLAN
LIFE AND PROFIT ("SPP") MATCHING AND
INSURANCE AUTO SHARING MATCHING PROFIT SHARING
NAME PREMIUMS ALLOWANCE CONTRIBUTIONS CONTRIBUTIONS CONTRIBUTIONS
- ---- --------- --------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Daniel F. O'Sullivan................. $3,150 $ --* $11,474 $8,747 $20,737
Richard D. Davidson.................. $2,016 $8,500 $11,474 $5,639 $ 9,495
Tyrone E. Riegel..................... $3,150 $8,154 $11,474 $5,827 $ 6,405
Terry L. Crump....................... $1,218 $8,154 $11,474 $3,826 $ 3,904
Thomas M. O'Sullivan, Jr............. $ 490 $7,827 $10,909 $3,698 $ 1,656
</TABLE>
- ------------------------
* Mr. Daniel F. O'Sullivan has the use of a company-owned automobile as a
perquisite.
The table does not include amounts payable in the event of a Change in
Control. See "Change in Control Protections".
(4) Mr. Crump resigned as an officer of O'Sullivan on August 31, 1999.
49
<PAGE>
OPTION GRANTS IN THE LAST YEAR
During the fiscal year ended June 30, 1999, no options were granted to
the named officers.
OPTION EXERCISES IN THE LAST YEAR
AND YEAR-END OPTION VALUES
The following table summarizes information on outstanding options to
purchase O'Sullivan Holdings common stock held by the named officers as of
June 30, 1999. No options were exercised by officers or directors during the
fiscal year ended June 30, 1999.
<TABLE>
<CAPTION>
VALUE OF VALUE OF
SHARES SHARES EXERCISABLE UNEXERCISABLE
EXERCISABLE UNEXERCISABLE OPTIONS OPTIONS
NAME @ 6/30/99 @ 6/30/99 @ 6/30/99 @ 6/30/99
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Daniel F. O'Sullivan................................ 139,248 124,052 $1,100,853 $601,479
Richard D. Davidson................................. 78,657 86,343 644,122 398,882
Tyrone E. Riegel.................................... 94,030 54,470 784,092 341,565
Terry L. Crump...................................... 64,215 42,455 549,398 264,846
Thomas M. O'Sullivan, Jr............................ 48,563 22,437 351,016 142,046
</TABLE>
In connection with the merger and recapitalization, on November 30, 1999,
all outstanding options issued by O'Sullivan Holdings were either
- converted into options to purchase shares of O'Sullivan Holdings
Series A junior preferred stock; or
- converted into the right to receive shares of O'Sullivan Holdings
senior preferred stock and cash, with each option share becoming
entitled to receive one share of senior preferred stock and an amount
equal to the difference between the exercise price of the option
share and $16.75.
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
The members of the O'Sullivan Holdings Compensation Committee during
fiscal 1999 were William C. Bousquette, Stewart M. Kasen and Ronald G. Stegall.
No member of the Compensation Committee was an officer or employee of O'Sullivan
Holdings or its subsidiaries during the fiscal year ended June 30, 1999. None
was formerly an officer of O'Sullivan or any of its subsidiaries, except that
Mr. Bousquette was a Vice President of O'Sullivan Industries from July 12, 1991
until February 7, 1994. In addition, no executive officer of O'Sullivan serves
on the board of directors or the compensation committee of another entity where
a committee member is employed. The service of Messrs. Bousquette, Kasen and
Stegall as Directors and as members of the Compensation Committee ended upon the
effectiveness of the merger.
50
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
AGREEMENTS RELATING TO THE EQUITY OF O'SULLIVAN HOLDINGS
BRS, its affiliates and the management participants in the
recapitalization and merger entered into agreements relating to their investment
in the surviving corporation. These agreements do not impose any restrictions on
the voting rights of the management participants in the recapitalization and
merger other than voting for the election of directors of the surviving
corporation. These agreements provide for:
- restrictions on transfer;
- the right of BRS to require the management participants to sell their
interests in O'Sullivan Holdings if BRS decides to sell its interest
in O'Sullivan Holdings;
- the right of management participants to sell their interests in
O'Sullivan Holdings on the same terms as BRS or any of its affiliates
if BRS or any of its affiliates sells its interests in O'Sullivan
Holdings;
- the right to register securities of O'Sullivan Holdings under the
Securities Act;
- the right of management participants to purchase additional shares to
retain their percentage interest in O'Sullivan Holdings if O'Sullivan
Holdings issues additional securities to BRS or any of its
affiliates; and
- the right of O'Sullivan Holdings or BRS to repurchase the common
stock interest of a management participant if that person is no
longer employed by O'Sullivan Holdings.
CHANGE IN CONTROL PROTECTIONS
O'Sullivan Holdings has termination agreements with its executive
officers and certain members of management of O'Sullivan Industries. If the
employment of a protected employee is terminated by us within a period of up to
24 months after a change in control of O'Sullivan Holdings, the employee will be
entitled to receive various benefits. The completion of the merger is a change
of control for purposes of these agreements. These benefits include:
1. a cash payment equal to the current base salary and highest bonus
received in the previous years;
2. a cash payment equal to the bonus earned by the employee in the year
of termination, calculated on a pro rated basis on the date of
termination;
3. a cash payment equal to accrued and unpaid vacation pay;
4. a cash payment for an automobile allowance of 12 months;
5. continued life and health insurance coverage for up to 12 months;
6. a lump sum payment, adjusted for taxes, to the employee in an amount
equal to the protected employee's unvested profit sharing account in
the Savings and Profit Sharing Plan;
7. a cash payment based on the amount that the protected employee would
have received under our Deferred Compensation Plan had he continued to
work for O'Sullivan until he attained the age of 65;
8. all outstanding stock options vest and become immediately exercisable;
9. O'Sullivan will be required to purchase for cash any shares of
unrestricted common stock and options for shares at the fair market
value;
10. one year of outplacement services;
11. for certain executive officers, if the protected employee moves more
than 20 miles from his primary residence in order to accept permanent
employment within 36 months after leaving O'Sullivan, we will
repurchase employee's primary residence; and
12. if the executive officer is required to pay an excise tax under
Section 4999 of the Internal Revenue code of 1986, we will pay the
employee an additional amount to offset the effect of the tax.
51
<PAGE>
The agreements for certain executive officers also provide for cash
payments in lieu of matching payments under the Stock Purchase Program and the
Savings and Profit Sharing Plan. The agreements for certain executive officers
also provide that, in some circumstances, they may voluntarily leave the
employment of O'Sullivan after a change in control and receive the benefits
under the protection agreements. These circumstances include:
- an adverse change in the executive's status, title or duties;
- a reduction in the executive's salary or bonus;
- relocation of the executive's office to a site which is more than 20
miles from its present location;
- a reduction in the executive's benefit levels;
- the insolvency or bankruptcy of O'Sullivan; or
- the executive leaves the employment of O'Sullivan for any reason
during the 60-day period beginning on the first anniversary of the
change in control.
However, for purposes of the merger, each of the executive officers who
is a management participant in the buyout has waived his right to receive
benefits under the protection agreements in these circumstances, other than a
reduction in his salary or bonus.
TERMINATION PROTECTION AGREEMENTS
The table below sets forth the total payments that may be received by
each of the executive officers and all persons having protection agreements as a
group if these persons are terminated following the merger. The values of
non-cash benefits have been included on the basis of their estimated fair value.
These amounts do not include any payments for shares of O'Sullivan Holdings
common stock, preferred stock or options to acquire O'Sullivan Holdings Series A
junior preferred stock. These amounts also do not include payments which we
would be required to make to offset the effect of excise taxes or to purchase
any executive officer's home. For the purposes of this table we have assumed
that the merger was completed on January 31, 1999.
<TABLE>
<CAPTION>
OFFICER AMOUNT
- ------- ----------
<S> <C>
Richard D. Davidson......................................... $ 683,000
President and Chief Executive Officer
Tyrone E. Riegel............................................ $ 494,000
Executive Vice President
Phillip J. Pacey............................................ $ 217,000
Senior Vice President and Chief Financial Officer
Thomas M. O'Sullivan, Jr.................................... $ 292,000
Senior Vice President-Sales
Michael P. O'Sullivan....................................... $ 273,000
Senior Vice President-Marketing
Rowland H. Geddie, III...................................... $ 282,000
General Counsel, Vice President and Secretary
E. Thomas Riegel............................................ $ 282,000
Vice President-Strategic Operations
James C. Hillman............................................ $ 248,000
Vice President-Human Resources
Tommy W. Thieman............................................ $ 202,000
Vice President-Manufacturing-Lamar
Stuart D. Schotte........................................... $ 202,000
Vice President-Supply Chain Management
All persons having a protection agreement (32 persons)...... $4,838,000
</TABLE>
52
<PAGE>
BRS TRANSACTION FEES
BRS provided various advisory services to us related to the merger. These
services included arranging and negotiating the financing of the merger,
arranging and structuring the transaction, including forming OSI, planning its
capital structure, planning our capital structure and the capital structure of
O'Sullivan Holdings and related services. For these services, BRS received a
transaction fee of $4.0 million plus $62,000 in expenses upon completion of the
merger.
BRS also provided $15.0 million of financing pursuant to a securites
purchase agreement with O'Sullivan Holdings. BRS received a transaction fee of
$300,000 in connection with its provision of this financing. BRS subsequently
sold this note to BancBoston Investments, Inc.
MANAGEMENT SERVICES AGREEMENT
In connection with the merger, O'Sullivan Industries entered into a
management services agreement with BRS pursuant to which BRS provides:
- general management services;
- assistance with the negotiation and analysis of financial
alternatives; and
- other services agreed upon by BRS.
In exchange for such services, BRS will earn an annual fee equal to the
greater of:
- 1.0% of O'Sullivan Industries' annual consolidated earnings before
interest, taxes, depreciation and amortization; or
- $300,000.
In addition to certain restrictions on the payment of the management fee
contained in the senior credit facilities, the management services agreement
contains certain restrictions on the payment of that fee. The management
services agreement, among other things, provides that no cash payment of the
management fee will be made unless the Fixed Charge Coverage Ratio for our most
recently ended four full fiscal quarters for which internal financial statements
are available to management immediately preceding the date on which such
management fee is to be paid is at least 2.0 to 1. The management services
agreement also provides that the payment of all fees and other obligations under
the management services agreement will be subordinated to the prior payment in
full in cash of all interest, principal and other obligations on the exchange
notes in the event of a bankruptcy, liquidation or winding-up of O'Sullivan
Industries.
SEVERANCE AGREEMENTS
In October 1998, O'Sullivan Holdings entered into a Retirement and
Consulting Agreement, Release and Waiver of Claims with Daniel F. O'Sullivan.
Under the retirement agreement, as amended in May 1999, Mr. O'Sullivan resigned
as Chief Executive Officer in October 1998 and is to retire as Chairman of the
Board in March 2000. Upon his retirement, O'Sullivan Holdings has agreed to pay
Mr. O'Sullivan $42,160 per month for 36 months and then to pay him $11,458 per
month until he reaches age 65. Payments under Mr. O'Sullivan's retirement and
consulting agreement amount to an aggregate of $2.2 million and a present value
of approximately $1.9 million. During this period, Mr. O'Sullivan will provide
consulting, marketing and promotional services with respect to our manufacturing
activities and relations with major customers as requested by us from time to
time. Mr. O'Sullivan has agreed not to compete with us during the period he is a
consultant. O'Sullivan Holdings will also provide Mr. O'Sullivan with health
insurance during the term of the agreement and thereafter until he becomes
eligible for Medicare and life insurance during the term of the agreement. Upon
his retirement, Mr. O'Sullivan's unvested stock options will vest and be
exercisable for five years after his retirement or one year after his death,
whichever is earlier. The value associated with acceleration of vesting of
unvested options and the extension of the exercise period for his stock options
is approximately $160,000.
53
<PAGE>
In August 1999, O'Sullivan Holdings entered into a severance agreement
with Terry Crump, our Executive Vice President and Chief Financial Officer at
the time. Pursuant to the agreement, Mr. Crump resigned as an officer of
O'Sullivan Holdings and O'Sullivan Industries effective August 31, 1999,
although he remained an employee until January 2000. Under Mr. Crump's severance
agreement, O'Sullivan Holdings paid Mr. Crump approximately $325,000 in January
2000. This amount has been recorded as a non-current asset and is being
amortized over the life of the non-compete agreement. The $325,000 payment did
not include payment for shares of O'Sullivan Holdings' common stock or stock
options held by Mr. Crump.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
During fiscal 1999, Casey O'Sullivan, a son of Daniel F. O'Sullivan,
worked as a salesman successively for companies that provide O'Sullivan
Industries corrugated boxes for its products. Sun Container provided O'Sullivan
Industries with corrugated boxes with a sales price aggregating $401,000 during
fiscal 1999, of which $55,000 was supplied during the time Casey O'Sullivan was
employed by Sun. Bennett Packaging has long been one of O'Sullivan Industries'
suppliers; O'Sullivan Industries paid Bennett $5,790,000 during fiscal 1999, of
which $2,936,000 was paid during the six months Casey O'Sullivan was an employee
of Bennett. O'Sullivan Industries has followed the practice of awarding purchase
orders for cartons for a model to the lowest bidder for the carton.
O'Sullivan Industries has in the past rented storage and office space
from O'Sullivan Properties, Inc. O'Sullivan Properties is controlled by Thomas
M. O'Sullivan, Sr. During fiscal 1999, O'Sullivan Industries did not rent any
space from O'Sullivan Properties, but it paid O'Sullivan Properties $12,000
during fiscal 1999 in connection with the termination of a lease.
54
<PAGE>
DESCRIPTION OF INDEBTEDNESS
SENIOR CREDIT FACILITIES
Under an agreement entered into on November 30, 1999, Lehman Commercial
Paper Inc. and Lehman Brothers agreed to provide O'Sullivan Industries with
senior credit facilities in an aggregate amount of $175.0 million. The senior
credit facilities are comprised of the following:
- a $35.0 million tranche A term loan facility repayable in 24
consecutive quarterly installments;
- a $100.0 million tranche B term loan facility repayable in 26
consecutive quarterly installments, beginning 15 months after the
completion of the recapitalization transactions; and
- a $40.0 million revolving credit facility maturing six years after
the closing of the recapitalization transactions with a
$15.0 million letter of credit sub-facility. Upon completion of the
recapitalization and merger, letters of credit of approximately
$12.8 million were issued and borrowings of approximately
$4.0 million had been drawn under the revolving credit facility.
O'Sullivan Industries is the borrower under the senior credit facilities.
All present and future domestic subsidiaries of O'Sullivan Industries are
guarantors of the senior credit facilities. In addition, the senior credit
facilities are secured by the following:
- substantially all of the assets of O'Sullivan Industries and its
domestic subsidiaries; and
- a pledge of all of the capital stock of O'Sullivan Industries and its
present and future domestic subsidiaries and two-thirds of the
capital stock of O'Sullivan Industries' present and future foreign
subsidiaries.
Loans under the senior credit facilities bear interest, at O'Sullivan
Industries' option, at either:
- the base rate plus an applicable margin; or
- the eurodollar rate plus an applicable margin.
The base rate is defined as the highest of the following:
- the rate of interest publicly announced by Deutsche Bank as its prime
rate in effect at its principal office in New York City;
- the secondary market rate for three-month certificates of deposit, as
adjusted for statutory reserve requirements, plus 1%; or
- the federal funds effective rate from time to time plus 0.5%.
The eurodollar rate is defined as the rate, as adjusted for statutory
reserve requirements for eurocurrency liabilities, at which eurodollar deposits
for one, two, three or six months, as selected by O'Sullivan Industries, are
offered in the interbank eurodollar market. The initial applicable margins for
the tranche A term loans and the loans under the revolving credit facility for
the first two quarters are fixed. After the first two quarters, the applicable
margin for the tranche A term loans and the revolving credit loans will vary
within three levels, from 1.50% to 3.25%, based upon the leverage ratio of
O'Sullivan Industries. The applicable margin for the tranche B loan will be
fixed at 2.75% or 3.75% (depending upon whether it is base rate or eurodollar)
for the life of the loan.
The documents for the senior credit facilities contain affirmative,
negative and financial covenants and events of default customary for credit
facilities of a size and type similar to the senior credit facilities.
INDUSTRIAL REVENUE BONDS
Following the recapitalization transactions, approximately $10.0 million
of previous indebtedness remains outstanding. This indebtedness consists of
variable rate industrial revenue bonds maturing in 2008 payable by
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O'Sullivan Industries - Virginia. As of December 31, 1999, the interest cost on
the variable rate industrial revenue bonds was approximately 8.5%.
O'SULLIVAN HOLDINGS' SENIOR NOTES AND WARRANTS
In connection with the recapitalization transactions, O'Sullivan Holdings
issued $15.0 million of senior notes due 2009 to BRS pursuant to a securities
purchase agreement. Pursuant to the securities purchase agreement, BRS received
senior notes due 2009 in the principal amount of $15.0 million and warrants to
receive 93,273 shares of common stock and 39,273 shares of Series B junior
preferred stock of O'Sullivan Holdings. The O'Sullivan Holdings' senior notes
bear interest at a rate of 12.0% per annum and may be paid in cash or additional
notes at the option of O'Sullivan Holdings.
As of January 31, 2000, BRS sold these senior notes and warrants to
BancBoston Investments, Inc.
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DESCRIPTION OF EXCHANGE NOTES
You can find the definitions of certain terms used in this description
under the subheading "Certain Definitions." In this description, the word
"O'Sullivan" refers only to O'Sullivan Industries, Inc. and not to any of its
subsidiaries.
We will issue the exchange notes under the terms of the indenture dated
as of November 30, 1999 between O'Sullivan Industries, Inc., as the issuer, the
Guarantors and Norwest Bank Minnesota, National Association, as trustee. The
terms of the exchange notes include those stated in the indenture and those made
part of the indenture by reference to the Trust Indenture Act of 1939.
The form and terms of the Series B senior subordinated notes due 2009 are
the same as the form and terms of the old notes except that
(1) the exchange notes will have been registered under the Securities Act of
1933 and thus will not bear restrictive legends restricting their transfer
under the Securities Act of 1933 and
(2) holders of exchange notes will not be entitled to rights of holders of the
old notes under the registration rights agreement which terminate upon the
consummation of the exchange offer.
The following description is a summary of the material provisions of the
indenture and the Registration Rights Agreement. It does not restate those
agreements in their entirety. We urge you to read the indenture and the
Registration Rights Agreement because they, and not this description, define
your rights as Holders of these exchange notes. Copies of the proposed form of
indenture and Registration Rights Agreement are available as set forth below
under the subheading "Additional Information."
BRIEF DESCRIPTION OF THE EXCHANGE NOTES AND THE SUBSIDIARY GUARANTEES
THE NOTES
These exchange notes:
- are general unsecured obligations of O'Sullivan;
- are subordinated in right of payment to payment in full in cash of
all Senior Debt of O'Sullivan;
- are senior or PARI PASSU in right of payment to all existing and
future subordinated Indebtedness of O'Sullivan; and
- are unconditionally guaranteed by the Guarantors.
THE SUBSIDIARY GUARANTEES
These exchange notes are guaranteed by each Domestic Restricted
Subsidiary of O'Sullivan.
The Subsidiary Guarantees of these exchange notes:
- are general unsecured obligations of each Guarantor;
- are subordinated in right of payment to all Senior Debt of each
Guarantor; and
- are senior or PARI PASSU in right of payment to all existing and
future subordinated Indebtedness of each Guarantor.
O'Sullivan and the Guarantors had total Senior Debt of approximately
$149.0 million as of December 31, 1999. As indicated above and as discussed in
detail below under the subheading "Subordination," payments on the exchange
notes and under the Subsidiary Guarantees will be subordinated to the payment of
Senior Debt. The indenture will permit us and the Guarantors to incur additional
Senior Debt.
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As of the date of the indenture, all of our subsidiaries will be
"Restricted Subsidiaries." However, under the circumstances described below
under the subheading "Certain Covenants--Designation of Restricted and
Unrestricted Subsidiaries," we will be permitted to designate certain of our
subsidiaries as "Unrestricted Subsidiaries." Unrestricted Subsidiaries will not
be subject to many of the restrictive covenants in the indenture. Unrestricted
Subsidiaries will not guarantee the exchange notes.
PRINCIPAL, MATURITY AND INTEREST
O'Sullivan will issue notes with a maximum aggregate principal amount of
$200.0 million, of which $100.0 million will be issued in this offering.
O'Sullivan will issue notes in denominations of $1,000 and integral multiples of
$1,000. The exchange notes will mature on October 15, 2009.
Interest on the exchange notes will be payable semi-annually at the rate
of 13.375% per annum in cash in arrears on April 15 and October 15, commencing
on April 15, 2000. O'Sullivan will make each interest payment to the Holders of
record of these exchange notes on the immediately preceding April 1 and
October 1.
Interest on the exchange notes will accrue from the date of original
issuance or, if interest has already been paid, from the date it was most
recently paid. Additional notes may be issued from time to time after this
Offering, subject to the provisions of the indenture described below under the
caption "--Certain Covenants--Incurrence of Indebtedness and Issuance of
Preferred Stock." The exchange notes offered hereby and any additional notes
subsequently issued under the indenture would be treated as a single class for
all purposes under the indenture, including, without limitation, waivers,
amendments, redemptions and offers to purchase. Interest will be computed on the
basis of a 360-day year comprised of twelve 30-day months.
METHODS OF RECEIVING PAYMENTS ON THE EXCHANGE NOTES
If a Holder has given wire transfer instructions to O'Sullivan,
O'Sullivan will make all principal, premium and interest payments including
Liquidated Damages, if any, on those exchange notes in accordance with those
instructions. All other payments on these exchange notes will be made at the
office or agency of the paying agent and registrar within the City and State of
New York unless O'Sullivan elects to make interest payments by check mailed to
the Holders at their address set forth in the register of Holders.
PAYING AGENTS AND REGISTRAR FOR THE EXCHANGE NOTES
The trustee will initially act as paying agent and registrar. O'Sullivan
may change the paying agent or registrar without prior notice to the Holders of
the notes, and O'Sullivan or any of its Subsidiaries may act as paying agent or
registrar.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange notes in accordance with the indenture.
The registrar and the trustee may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and O'Sullivan may
require a Holder to pay any taxes and fees required by law or permitted by the
indenture. O'Sullivan is not required to transfer or exchange any note selected
for redemption. Also, O'Sullivan is not required to transfer or exchange any
note for a period of 15 days before a selection of notes to be redeemed.
The registered Holder of a note will be treated as the owner of it for
all purposes.
SUBSIDIARY GUARANTEES
The Guarantors will jointly and severally guarantee, on a senior
subordinated basis, O'Sullivan's obligations under these exchange notes. Each
Subsidiary Guarantee will be subordinated to the prior payment in full of all
Senior Debt of that Guarantor. The obligations of each Guarantor under its
Subsidiary Guarantee will be limited as necessary to prevent that Subsidiary
Guarantee from constituting a fraudulent conveyance under applicable law. See
"Risk Factors--Fraudulent Conveyance Matters."
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A Guarantor may not sell or otherwise dispose of all or substantially all
of its assets, or consolidate with or merge with or into (whether or not such
Guarantor is the surviving Person), another Person, other than O'Sullivan or
another Guarantor, unless:
(1) immediately after giving effect to that transaction, no Default or Event of
Default exists; and
(2) either:
(a) the Person acquiring the property in any such sale or disposition or
the Person formed by or surviving any such consolidation or merger
assumes all the obligations of that Guarantor pursuant to a
supplemental indenture satisfactory to the trustee; or
(b) the Net Proceeds of such sale or other disposition are applied in
accordance with the "Asset Sale" provisions of the indenture.
The Subsidiary Guarantee of a Guarantor will be released:
(1) in connection with any sale or other disposition of all or substantially all
of the assets of that Guarantor (including by way of merger or
consolidation) to a Person that is not (either before or after giving effect
to such transaction) a subsidiary of O'Sullivan, if the Guarantor applies
the Net Proceeds of that sale or other disposition, in accordance with the
"Asset Sale" provisions of the indenture; or
(2) in connection with the sale of all of the capital stock of a Guarantor to a
Person that is not (either before or after giving effect to such
transaction) a subsidiary of O'Sullivan, if the Guarantor applies the Net
Proceeds of that sale, in accordance with the "Asset Sale" provisions of the
indenture; or
(3) if O'Sullivan properly designates any Restricted Subsidiary that is a
Guarantor as an Unrestricted Subsidiary.
See "Repurchase at Option of Holders--Asset Sales."
SUBORDINATION
The payment of all Obligations in respect of the exchange notes will be
subordinated to the prior payment in full in cash of all Senior Debt of
O'Sullivan, including Senior Debt incurred after the date of the indenture.
The holders of Senior Debt will be entitled to receive payment in full in
cash of all Obligations due in respect of Senior Debt (including interest after
the commencement of any bankruptcy proceeding at the rate specified in the
applicable Senior Debt) and all outstanding letters of credit under Credit
Facilities shall either have been terminated or cash collateralized in
accordance with the terms thereof before the Holders of exchange notes will be
entitled to receive any payment on, or distribution with respect to, the
exchange notes (except that Holders of notes may receive and retain Permitted
Junior Securities and payments made from the trust described under "--Legal
Defeasance and Covenant Defeasance"), in the event of any distribution to
creditors of O'Sullivan:
(1) in a liquidation or dissolution of O'Sullivan;
(2) in a bankruptcy, reorganization, insolvency, receivership or similar
proceeding relating to O'Sullivan or its property;
(3) in an assignment for the benefit of creditors; or
(4) in any marshaling of O'Sullivan's assets and liabilities.
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O'Sullivan also may not make any payment on, or distribution with respect
to the exchange notes (except in Permitted Junior Securities or from the trust
described under "--Legal Defeasance and Covenant Defeasance") if:
(1) a payment default on Designated Senior Debt occurs and is continuing beyond
any applicable grace period; or
(2) any other default occurs and is continuing on any series of Designated
Senior Debt that permits holders of that series of Designated Senior Debt to
accelerate its maturity and the trustee receives a notice of such default (a
"Payment Blockage Notice") from the Credit Agent or any holder of any
Designated Senior Debt.
Payments on the exchange notes may and shall be resumed:
(1) in the case of a payment default, upon the date on which such default is
cured or waived; and
(2) in case of a nonpayment default, the earlier of the date on which such
nonpayment default is cured or waived or 179 days after the date on which
the applicable Payment Blockage Notice is received, unless the maturity of
any Designated Senior Debt has been accelerated.
No new Payment Blockage Notice may be delivered unless and until
360 days have elapsed since the delivery of the immediately prior Payment
Blockage Notice.
No nonpayment default that existed or was continuing on the date of
delivery of any Payment Blockage Notice to the trustee shall be, or be made, the
basis for a subsequent Payment Blockage Notice unless such default shall have
been cured or waived for a period of not less than 90 days.
If the trustee or any Holder of the exchange notes receives a payment in
respect of the exchange notes (except in Permitted Junior Securities or from the
trust described under "--Legal Defeasance and Covenant Defeasance") when the
payment is prohibited by these subordination provisions, the trustee or the
Holder, as the case may be, shall hold the payment in trust for the benefit of
the holders of Senior Debt and shall immediately deliver the amounts in trust to
the holders of Senior Debt or their proper representative in the form received
with any necessary or requested endorsement.
O'Sullivan must promptly notify holders of Senior Debt if payment of the
exchange notes is accelerated because of an Event of Default.
As a result of the subordination provisions described above, in the event
of a bankruptcy, liquidation or reorganization of O'Sullivan, Holders of
exchange notes may recover less ratably than creditors of O'Sullivan who are
holders of Senior Debt. See "Risk Factors--Subordination."
OPTIONAL REDEMPTION
At any time prior to October 15, 2002, O'Sullivan may on any one or more
occasions redeem up to 25% of the aggregate principal amount of exchange notes
issued under the indenture at a redemption price of 113.375% of the principal
amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any,
to the redemption date, with the net cash proceeds of one or more Equity
Offerings by O'Sullivan or a contribution to the common equity capital of
O'Sullivan made with the net cash proceeds of a concurrent Equity Offering by
O'Sullivan's direct parent; provided that:
(1) at least $75.0 million in aggregate principal amount of exchange notes
issued under the indenture remains outstanding immediately after the
occurrence of such redemption (excluding notes held by O'Sullivan and its
Subsidiaries); and
(2) the redemption must occur within 90 days of the date of the closing of such
Equity Offering.
At any time prior to October 15, 2004, O'Sullivan may also redeem all or
a part of the exchange notes upon the occurrence of a Change of Control, upon
not less than 30 nor more than 60 days' prior notice (but in no event may any
such redemption occur more than 90 days after the occurrence of such Change of
Control)
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mailed by first-class mail to each Holder's registered address, at a redemption
price equal to 100% of the principal amount thereof plus the Applicable Premium
as of, and accrued and unpaid interest and Liquidated Damages, if any, to, the
date of redemption (the "Redemption Date").
Except pursuant to the preceding two paragraphs, the exchange notes will
not be redeemable at O'Sullivan's option prior to October 15, 2004.
On and after October 15, 2004, O'Sullivan may redeem all or a part of
these exchange notes, upon not less than 30 nor more than 60 days' notice, at
the redemption prices (expressed as percentages of principal amount) set forth
below plus accrued and unpaid interest and Liquidated Damages, if any, thereon,
to the applicable redemption date, if redeemed during the twelve-month period
beginning on October 15 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---- ----------
<S> <C>
2004........................................................ 106.6875%
2005........................................................ 105.0156%
2006........................................................ 103.3438%
2007........................................................ 101.6719%
--------
2008 and thereafter......................................... 100.0000%
========
</TABLE>
SELECTION AND NOTICE
If less than all of the exchange notes are to be redeemed at any time,
the trustee will select exchange notes for redemption in compliance with the
requirements of the principal national securities exchange on which the exchange
notes are listed.
No exchange notes of $1,000 or less shall be redeemed in part. Notices of
redemption shall be mailed by first class mail at least 30 but not more than
60 days before the redemption date to each Holder of exchange notes to be
redeemed at its registered address. Notices of redemption may not be
conditional.
If any exchange note is to be redeemed in part only, the notice of
redemption that relates to that exchange note shall state the portion of the
principal amount thereof to be redeemed. A new exchange note in principal amount
equal to the unredeemed portion of the original exchange note will be issued in
the name of the Holder thereof upon cancellation of the original exchange note.
Exchange notes called for redemption become due on the date fixed for
redemption. On and after the redemption date, interest ceases to accrue on
exchange notes or portions of them called for redemption.
MANDATORY REDEMPTION
Except as set forth below under "--Repurchase at the Option of Holders,"
O'Sullivan is not required to make mandatory redemption or sinking fund payments
with respect to the exchange notes.
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL
If a Change of Control occurs, each Holder of exchange notes will have
the right to require O'Sullivan to repurchase all or any part (equal to $1,000
or an integral multiple thereof) of that Holder's exchange notes pursuant to the
Change of Control Offer. In the Change of Control Offer, O'Sullivan will offer a
change of control payment in cash equal to 101% of the aggregate principal
amount of exchange notes repurchased plus accrued and unpaid interest and
Liquidated Damages, if any, thereon, to the date of purchase. Within 60 days
following any Change of Control, O'Sullivan will mail a notice to each Holder
describing the transaction or transactions that constitute the Change of Control
and offering to repurchase exchange notes on the change of control payment date
specified in such notice, which date shall be no earlier than 30 days and no
later than
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60 days from the date such notice is mailed, pursuant to the procedures required
by the indenture and described in such notice. O'Sullivan will comply with the
requirements of Rule 14e-1 under the Exchange Act and any other securities laws
and regulations thereunder to the extent such laws and regulations are
applicable to the repurchase of the exchange notes as a result of a Change of
Control. To the extent that any securities law or regulation conflicts with the
provisions of the indenture relating to such Change of Control Offer, O'Sullivan
will comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations described in the indenture by virtue
thereof.
On the change of control payment date, O'Sullivan will, to the extent
lawful:
(1) accept for payment all exchange notes or portions thereof properly tendered
pursuant to the Change of Control Offer;
(2) deposit with the paying agent an amount equal to the change of control
payment in respect of all exchange notes or portions thereof so tendered;
and
(3) deliver or cause to be delivered to the trustee the exchange notes so
accepted together with an Officers' Certificate stating the aggregate
principal amount of exchange notes or portions thereof being purchased by
O'Sullivan.
The paying agent will promptly mail to each Holder of exchange notes so
tendered the change of control payment for such exchange notes, and the trustee
will promptly authenticate and mail (or cause to be transferred by book entry)
to each Holder a new note equal in principal amount to any unpurchased portion
of the exchange notes surrendered, if any; provided that each such new note will
be in a principal amount of $1,000 or an integral multiple thereof.
Prior to complying with any of the provisions of this "Change of Control"
covenant, but in any event within 90 days after a Change of Control, O'Sullivan
will either repay all outstanding Senior Debt in cash or obtain the requisite
consents, if any, under all agreements governing outstanding Senior Debt to
permit the repurchase of exchange notes required by this covenant.
O'Sullivan will publicly announce the results of the Change of Control
Offer on or as soon as practicable after the change of control payment date.
The provisions described above that require O'Sullivan to make a Change
of Control Offer following a Change of Control will be applicable regardless of
whether or not any other provisions of the indenture are applicable. Except as
described above with respect to a Change of Control, the indenture does not
contain provisions that permit the Holders of the exchange notes to require that
O'Sullivan repurchase or redeem the exchange notes in the event of a takeover,
recapitalization or similar transaction.
O'Sullivan's outstanding Senior Debt currently prohibits O'Sullivan from
purchasing any exchange notes, and also provides that certain change of control
events with respect to O'Sullivan would constitute a default under the
agreements governing the Senior Debt. Any future credit agreements or other
agreements relating to Senior Debt to which O'Sullivan becomes a party may
contain similar restrictions and provisions. In the event a Change of Control
occurs at a time when O'Sullivan is prohibited from purchasing exchange notes,
O'Sullivan could seek the consent of its senior lenders to the purchase of
exchange notes or could attempt to refinance the borrowings that contain such
prohibition. If O'Sullivan does not obtain such a consent or repay such
borrowings, O'Sullivan will remain prohibited from purchasing exchange notes. In
such case, O'Sullivan's failure to purchase tendered exchange notes would
constitute an Event of Default under the indenture which would, in turn,
constitute a default under such Senior Debt. In such circumstances, the
subordination provisions in the indenture would likely restrict payments to the
Holders of exchange notes.
O'Sullivan will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the indenture applicable to a Change of Control Offer made by O'Sullivan and
purchases all exchange notes validly tendered and not withdrawn under such
Change of Control Offer.
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The definition of Change of Control includes a phrase relating to the
sale, lease, transfer, conveyance or other disposition of "all or substantially
all" of the assets of O'Sullivan and its Subsidiaries taken as a whole. Although
there is a limited body of case law interpreting the phrase "substantially all,"
there is no precise established definition of the phrase under applicable law.
Accordingly, the ability of a Holder of exchange notes to require O'Sullivan to
repurchase such exchange notes as a result of a sale, lease, transfer,
conveyance or other disposition of less than all of the assets of O'Sullivan and
its Subsidiaries taken as a whole to another Person or group may be uncertain.
ASSET SALES
O'Sullivan will not, and will not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless:
(1) O'Sullivan (or the Restricted Subsidiary, as the case may be) receives
consideration at the time of such Asset Sale at least equal to the fair
market value of the assets or Equity Interests issued or sold or otherwise
disposed of;
(2) such fair market value is determined by O'Sullivan's Board of Directors and
evidenced by a resolution of the Board of Directors set forth in an
Officers' Certificate delivered to the trustee; and
(3) at least 75% of the consideration therefor received by O'Sullivan or such
Restricted Subsidiary is in the form of cash or Cash Equivalents. For
purposes of this provision, each of the following shall be deemed to be
cash:
(a) any liabilities (as shown on O'Sullivan's or the Restricted
Subsidiary's most recent balance sheet) of O'Sullivan or any Restricted
Subsidiary that are assumed by the transferee of any such assets
pursuant to a customary novation agreement that releases O'Sullivan or
such Restricted Subsidiary from further liability (except liabilities
that are by their terms subordinated to the notes);
(b) any securities, notes or other obligations received by O'Sullivan or
any such Restricted Subsidiary from such transferee that are converted
by O'Sullivan or such Restricted Subsidiary into cash or Cash
Equivalents within 90 days after the closing of such Asset Sale (to the
extent of the cash or Cash Equivalents received in that conversion);
and
(c) any long-term assets that are to be used in a Permitted Business.
The 75% limitation referred to in clause (3) above will not apply to any
Asset Sale in which the cash or Cash Equivalents portion of the consideration
received therefrom, determined in accordance with the preceding proviso, is
equal to or greater than what the after-tax proceeds would have been had such
Asset Sale complied with the aforementioned 75% limitation.
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Within 365 days after the receipt of any Net Proceeds from an Asset Sale,
O'Sullivan or any such Restricted Subsidiary may apply such Net Proceeds, at its
option:
(1) to repay or repurchase Senior Debt of O'Sullivan or any Restricted
Subsidiary and to correspondingly permanently reduce the commitments with
respect thereto;
(2) to acquire a controlling interest in another Permitted Business;
(3) to make capital expenditures in a Permitted Business; or
(4) to acquire other long-term assets that are to be used in a Permitted
Business.
Pending the final application of any such Net Proceeds, O'Sullivan may
temporarily reduce revolving Indebtedness under Credit Facilities or otherwise
invest such Net Proceeds in any manner that is not prohibited by the indenture.
Any Net Proceeds from Asset Sales that are not applied or invested as
provided in the preceding paragraph will constitute Excess Proceeds. When the
aggregate amount of Excess Proceeds exceeds $10.0 million, O'Sullivan will be
required to make an offer to all Holders of exchange notes and to all holders of
other Indebtedness that ranks equally with the exchange notes containing
provisions similar to those set forth in the indenture with respect to offers to
purchase or redeem with the proceeds from sales of assets (an "Asset Sale
Offer") to purchase the maximum principal amount of exchange notes and such
other PARI PASSU Indebtedness that may be purchased out of the Excess Proceeds.
The offer price in any Asset Sale Offer will be equal to 100% of principal
amount plus accrued and unpaid interest and Liquidated Damages, if any, to the
date of purchase, and will be payable in cash. If any Excess Proceeds remain
after consummation of an Asset Sale Offer, O'Sullivan may use such Excess
Proceeds for general corporate purposes or any other purpose not prohibited by
the indenture. If the aggregate principal amount of exchange notes and such
other PARI PASSU Indebtedness tendered into such Asset Sale Offer exceeds the
amount of Excess Proceeds, the trustee shall select the exchange notes and such
other PARI PASSU Indebtedness to be purchased on a pro rata basis based on the
principal amount of exchange notes and such other PARI PASSU Indebtedness
tendered. Upon completion of each Asset Sale Offer, the amount of Excess
Proceeds shall be reset at zero.
CERTAIN COVENANTS
RESTRICTED PAYMENTS
O'Sullivan will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly:
(1) declare or pay any dividend or make any other payment or distribution on
account of O'Sullivan's or any of its Restricted Subsidiaries' Equity
Interests (including, without limitation, any payment on such Equity
Interests in connection with any merger or consolidation involving
O'Sullivan) or to the direct or indirect Holders of O'Sullivan's or any of
its Restricted Subsidiaries' Equity Interests in their capacity as such
(other than dividends or distributions payable in Equity Interests (other
than Disqualified Stock) of O'Sullivan);
(2) purchase, redeem or otherwise acquire or retire for value (including without
limitation, in connection with any merger or consolidation involving
O'Sullivan) any Equity Interests of O'Sullivan or any direct or indirect
parent of O'Sullivan (other than any such Equity Interests owned by
O'Sullivan or any Restricted Subsidiary of O'Sullivan);
(3) make any payment on or with respect to, or purchase, redeem, defease or
otherwise acquire or retire for value any Indebtedness that is subordinated
to the exchange notes or the Subsidiary Guarantees, except for
(i) scheduled payments of interest or principal at Stated Maturity thereof
or (ii) in anticipation of satisfying a sinking fund obligation, principal
installment or final maturity, in each case due within one year of the date
of purchase, redemption, acquisition or retirement; or
(4) make any Restricted Investment (all such payments and other actions set
forth in clauses (1) through (4) above being collectively referred to as
"Restricted Payments"),
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unless, at the time of and after giving effect to such Restricted Payment:
(1) no Default or Event of Default shall have occurred and be continuing or
would occur as a consequence thereof;
(2) O'Sullivan would, after giving pro forma effect thereto as if such
Restricted Payment had been made at the beginning of the applicable
four-quarter period, have been permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set
forth in the first paragraph of the covenant described below under the
caption "--Incurrence of Indebtedness and Issuance of Preferred Stock;" and
(3) such Restricted Payment, together with the aggregate amount of all other
Restricted Payments made by O'Sullivan and its Restricted Subsidiaries after
the date of the indenture (excluding Restricted Payments permitted by
clauses (2), (3), (6), (8), (10) and (11) of the next succeeding paragraph
and without duplication), is less than the sum, without duplication, of:
(a) 50% of the Consolidated Net Income of O'Sullivan for the period (taken
as one accounting period) from the beginning of the first full fiscal
quarter commencing after the date of the indenture to the end of
O'Sullivan's most recently ended fiscal quarter for which internal
financial statements are available to management at the time of such
Restricted Payment (or, if such Consolidated Net Income for such period
is a deficit, less 100% of such deficit), plus
(b) 100% of the aggregate net cash proceeds (plus the fair market value of
any Permitted Business contributed to the common or preferred equity
(other than Disqualified Stock) capital of O'Sullivan with such fair
market value being determined as described below) received by
O'Sullivan as a contribution to O'Sullivan's capital or received by
O'Sullivan from the issue or sale since the date of the indenture of
Equity Interests of O'Sullivan (other than Disqualified Stock) or of
Disqualified Stock or debt securities of O'Sullivan that have been
converted into such Equity Interests (other than Equity Interests (or
Disqualified Stock or debt securities) sold to a Restricted Subsidiary
of O'Sullivan and other than Disqualified Stock or convertible debt
securities that have been converted into Disqualified Stock), provided
that O'Sullivan shall only be entitled to use up to one-third of the
net cash proceeds from any Equity Offering in any twelve-month period
to make Restricted Payments, plus
(c) to the extent that any Restricted Investment that was made after the
date of the indenture is sold for cash or otherwise liquidated or
repaid for cash, the lesser of (i) the cash return of capital with
respect to such Restricted Investment (less the cost of disposition, if
any) and (ii) the initial amount of such Restricted Investment, plus
(d) if any Unrestricted Subsidiary (i) is properly redesignated as a
Restricted Subsidiary, the fair market value of such redesignated
Subsidiary (as determined in good faith by the Board of Directors) as
of the date of its redesignation or (ii) pays any cash dividends or
cash distributions to O'Sullivan or any of its Restricted Subsidiaries,
100% of any such cash dividends or cash distributions made after the
date of the indenture, minus
(e) 100% of any Excess Tandy Payments.
The preceding provisions will not prohibit:
(1) the payment of any dividend within 60 days after the date of declaration
thereof, if at said date of declaration such payment would have complied
with the provisions of the indenture;
(2) the redemption, repurchase, retirement, defeasance or other acquisition of
any subordinated Indebtedness or Equity Interests of O'Sullivan or any
Restricted Subsidiary in exchange for, or out of the net cash proceeds of
the substantially concurrent sale or issuance (other than to a Restricted
Subsidiary of O'Sullivan) of, other Equity Interests of O'Sullivan (other
than Disqualified Stock); provided that the amount of any such
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net cash proceeds that are utilized for any such redemption, repurchase,
retirement, defeasance or other acquisition shall be excluded from
clause (3)(b) of the preceding paragraph;
(3) the defeasance, redemption, repurchase or other acquisition of subordinated
Indebtedness of O'Sullivan or any Restricted Subsidiary with the net cash
proceeds from an incurrence of Permitted Refinancing Indebtedness;
(4) the payment of any dividend by a Restricted Subsidiary of O'Sullivan to the
holders of its Equity Interests on a pro rata basis;
(5) the payment of dividends by O'Sullivan to O'Sullivan Holdings for the
purpose of permitting the repurchase, redemption or other acquisition or
retirement for value of any Equity Interests of O'Sullivan Holdings held by
any member or former member of O'Sullivan's (or any of their Restricted
Subsidiaries') management pursuant to any management equity subscription
agreement, stockholders agreement or stock option agreement or other similar
agreements; provided that the aggregate price paid for all such repurchased,
redeemed, acquired or retired Equity Interests pursuant to this clause (5)
shall not exceed $2.5 million in any calendar year (with unused amounts in
any calendar year being carried over to succeeding calendar years subject to
a maximum (without giving effect to the following proviso) of $5.0 million
in any calendar year); provided further that such amount in any calendar
year may be increased by an amount not to exceed the aggregate cash proceeds
received by O'Sullivan from any issuance or reissuance of Equity Interests
to members of management of O'Sullivan and its Restricted Subsidiaries and
the proceeds to O'Sullivan of any "key man" life insurance policies;
provided further that the cancellation of Indebtedness owing to O'Sullivan
from members of management of O'Sullivan or any Restricted Subsidiary in
connection with such repurchase of Equity Interests will not be deemed to be
a Restricted Payment;
(6) the payment by O'Sullivan of dividends to O'Sullivan Holdings for the
purpose of (a) permitting O'Sullivan Holdings to satisfy tax obligations
that are actually due and owing, in accordance with the Tax Sharing
Agreement as in effect on the date of the indenture; provided that such
amounts do not exceed the amounts that, without recognizing any tax loss
carryforwards or carrybacks or other tax attributes, such as alternative
minimum tax carryforwards, would otherwise be due and owing if O'Sullivan
and its Restricted Subsidiaries were an independent, individual taxpayer and
(b) permitting O'Sullivan Holdings to pay the necessary fees and expenses to
maintain its corporate existence and good standing and other general and
administrative expenses (which amount shall not exceed $500,000 per annum);
(7) so long as no Default or Event of Default has occurred and is continuing,
the declaration and payment of dividends on Disqualified Stock, the
incurrence of which satisfied the covenant set forth in "--Incurrence of
Indebtedness and Issuance of Preferred Stock" below;
(8) repurchases of Equity Interests deemed to occur upon the exercise of stock
options if such Equity Interests represent a portion of the exercise price
thereof;
(9) cash payments to O'Sullivan Holdings from and after the fifth anniversary of
the date of the indenture to enable O'Sullivan Holdings to make interest
payments on the senior notes of O'Sullivan Holdings in amounts not to exceed
12% per annum on the senior notes of O'Sullivan Holdings issued on the date
of the indenture plus interest at the same rate on senior notes issued to
pay interest thereon; provided that, in each case, such cash payments are
used within 30 days of such payment to make interest payments on such senior
notes; provided further that such payments will only be permitted if (i) no
Default or Event of Default shall have occurred and be continuing and
(ii) O'Sullivan would be permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in
the first paragraph of the covenant described above under the caption
"--Incurrence of Indebtedness and Issuance of Preferred Stock;"
(10) other Restricted Payments in an aggregate amount not to exceed
$2.5 million; and
(11) distributions to fund the Recapitalization.
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The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued by O'Sullivan or such Subsidiary, as the
case may be, pursuant to the Restricted Payment. The fair market value of any
non-cash Restricted Payment shall be determined in good faith by the Board of
Directors whose resolution with respect thereto shall be delivered to the
trustee. The Board of Directors' determination must be based upon an opinion or
appraisal issued by an accounting, appraisal or investment banking firm of
national standing if such fair market value exceeds $15.0 million. The fair
market value of any Permitted Business contributed to the common or preferred
equity (other than Disqualified Stock) capital of O'Sullivan shall be determined
in good faith by the Board of Directors whose resolution with respect thereto
shall be delivered to the trustee if such fair market value is in excess of
$2.0 million; provided that such determination must be based upon an opinion or
appraisal issued by an accounting, appraisal or investment banking firm of
national standing if such fair market value exceeds $10.0 million.
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK
O'Sullivan will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable, contingently or otherwise,
with respect to (collectively, "incur") any Indebtedness (including Acquired
Debt) and O'Sullivan will not issue any Disqualified Stock and will not permit
any of its Restricted Subsidiaries to issue any shares of preferred stock;
provided, however, that O'Sullivan or any of the Guarantors may incur
Indebtedness (including Acquired Debt) or issue Disqualified Stock or preferred
stock if the Fixed Charge Coverage Ratio for O'Sullivan's most recently ended
four full fiscal quarters for which internal financial statements are available
to management immediately preceding the date on which such additional
Indebtedness is incurred or such Disqualified Stock or preferred stock is issued
would have been at least 2.0 to 1 if the incurrence or issuance occurs on or
before the second anniversary of the date of the indenture and at least 2.25 to
1 if the incurrence or issuance occurs at any time thereafter, in each case
determined on a pro forma basis (including a pro forma application of the net
proceeds therefrom), as if the additional Indebtedness had been incurred, or the
Disqualified Stock had been issued, as the case may be, at the beginning of such
four-quarter period.
The first paragraph of this covenant will not prohibit the incurrence of
any of the following items of Indebtedness (collectively, "Permitted Debt"):
(1) the incurrence by O'Sullivan of Indebtedness and letters of credit pursuant
to Credit Facilities; provided that the aggregate amount of all Indebtedness
then classified as having been incurred in reliance upon this clause (1)
that remains outstanding under Credit Facilities after giving effect to such
incurrence does not exceed an amount equal to $175.0 million less the
aggregate amount of all Net Proceeds of Asset Sales that have been applied
by O'Sullivan or any of its Restricted Subsidiaries since the date of the
indenture to repay any Indebtedness under a Credit Facility (and to reduce
commitments with respect thereto in the case of any such Indebtedness that
is revolving credit Indebtedness) pursuant to the covenant described above
under the caption "--Repurchase at Option of Holders--Asset Sales;"
(2) the incurrence by O'Sullivan and its Restricted Subsidiaries of Existing
Indebtedness;
(3) the incurrence by O'Sullivan and the Guarantors of Indebtedness represented
by the notes and the Subsidiary Guarantees to be issued on the date of the
indenture and the New Notes on the related Subsidiary Guarantees to be
issued pursuant to the Registration Rights Agreement;
(4) the incurrence by O'Sullivan or any of its Restricted Subsidiaries of
Indebtedness represented by Capital Lease Obligations, mortgage financings
or purchase money obligations, in each case incurred for the purpose of
financing all or any part of the purchase price or cost of construction or
improvement of property, plant or equipment used in the business of
O'Sullivan or such Restricted Subsidiary (whether through the direct
purchase of assets or the Capital Stock of any Person owning such Assets),
in an aggregate principal amount or accreted value, as applicable, including
all Permitted Refinancing
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Indebtedness issued to refund, replace or refinance any Indebtedness
incurred pursuant to this clause (4), not to exceed 5.0% of O'Sullivan's
Total Assets;
(5) the incurrence by O'Sullivan or any of its Restricted Subsidiaries of
Permitted Refinancing Indebtedness in exchange for, or the net proceeds of
which are used to refund, refinance or replace Indebtedness that was
permitted by the indenture to be incurred under the first paragraph of this
covenant or clauses (2), (3), (4) and (12) of this paragraph;
(6) the incurrence by O'Sullivan or any of its Restricted Subsidiaries of
intercompany Indebtedness between or among O'Sullivan and any of its
Restricted Subsidiaries; provided, however, that:
(a) if O'Sullivan or any Guarantor is the obligor on such Indebtedness,
such Indebtedness must be expressly subordinated to the prior payment
in full in cash of all Obligations with respect to the exchange notes,
in the case of O'Sullivan, or the Subsidiary Guarantee of such
Guarantor, in the case of a Guarantor; and
(b) (i) any subsequent issuance or transfer of Equity Interests that
results in any such Indebtedness being held by a Person other than
O'Sullivan or a Restricted Subsidiary and (ii) any sale or other
transfer of any such Indebtedness to a Person that is not either
O'Sullivan or a Restricted Subsidiary shall be deemed, in each case, to
constitute an incurrence of such Indebtedness by O'Sullivan or such
Restricted Subsidiary, as the case may be;
(7) the incurrence by O'Sullivan or its Restricted Subsidiaries of Hedging
Obligations that are incurred for the purpose of fixing or hedging:
(a) interest rate risk with respect to any floating rate Indebtedness that
is permitted by the terms of this indenture to be outstanding;
(b) commodities risk relating to commodities agreements, entered into in
the ordinary course of business, for the purchase of raw material used
by O'Sullivan and its Restricted Subsidiaries; or
(c) exchange rate risk with respect to any agreement or Indebtedness of
such Person payable in a currency other than U.S. dollars; or
(8) the Guarantee by O'Sullivan or any of its Restricted Subsidiaries of
Indebtedness of O'Sullivan or a Restricted Subsidiary of O'Sullivan that was
permitted to be incurred by another provision of this covenant;
(9) the incurrence by O'Sullivan's Unrestricted Subsidiaries of Non-Recourse
Debt; provided, however, that if any such Indebtedness ceases to be
Non-Recourse Debt of an Unrestricted Subsidiary, such event shall be deemed
to constitute an incurrence of Indebtedness by a Restricted Subsidiary of
O'Sullivan;
(10) Indebtedness incurred by O'Sullivan or any of its Restricted Subsidiaries
constituting reimbursement obligations with respect to letters of credit
issued in the ordinary course of business, including without limitation, to
letters of credit in respect to workers' compensation claims or
self-insurance, or other Indebtedness with respect to reimbursement type
obligations regarding workers' compensation claims; provided, however, that
upon the drawing of such letters of credit or the incurrence of such
Indebtedness, such obligations are reimbursed within 30 days following such
drawing or incurrence;
(11) obligations in respect of performance and surety bonds and completion
guarantees provided by O'Sullivan or any Restricted Subsidiary in the
ordinary course of business; and
(12) the incurrence by O'Sullivan or any of its Restricted Subsidiaries of
additional Indebtedness, including all Permitted Refinancing Indebtedness
incurred to refund, refinance or replace any other Indebtedness incurred
pursuant to this clause (12), not to exceed $25.0 million.
For purposes of determining compliance with this "Incurrence of
Indebtedness and Issuance of Preferred Stock" covenant, in the event that an
item of proposed Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (1) through (12) above or is
entitled to be incurred pursuant to
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the first paragraph of this covenant, O'Sullivan will be permitted to classify
such item of Indebtedness on the date of its incurrence in any manner that
complies with this covenant. In addition, O'Sullivan may, at any time, change
the classification of an item of Indebtedness (or any portion thereof) to any
other clause or to the first paragraph of this covenant provided that O'Sullivan
would be permitted to incur such item of Indebtedness (or portion thereof)
pursuant to such other clause or the first paragraph of this covenant, as the
case may be, at such time of reclassification. Accrual of interest, accretion or
amortization of original issue discount and the accretion of accreted value will
not be deemed to be an incurrence of Indebtedness for purposes of this covenant.
LIENS
O'Sullivan will not, and will not permit any of its Restricted
Subsidiaries to, create, incur, assume or otherwise cause or suffer to exist or
become effective any Lien of any kind securing trade payables or Indebtedness
that does not constitute Senior Debt (other than Permitted Liens) upon any of
their property or assets, now owned or hereafter acquired unless:
(1) in the case of Liens securing Indebtedness that is expressly subordinated or
junior in right of payment to the exchange notes, the notes are secured on a
senior basis to the obligations so secured until such time as such
obligations are no longer secured by a Lien; and
(2) in all other cases, the exchange notes are secured on an equal and ratable
basis with the obligations so secured until such time as such obligations
are no longer secured by a Lien.
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED SUBSIDIARIES
O'Sullivan will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or permit to exist or become
effective any encumbrance or restriction on the ability of any Restricted
Subsidiary to:
(1) (a) pay dividends or make any other distributions to O'Sullivan or any of
its Restricted Subsidiaries (i) on its Capital Stock or (ii) with
respect to any other interest or participation in, or measured by, its
profits; or
(b) pay any Indebtedness owed to O'Sullivan or any of its Restricted
Subsidiaries;
(2) make loans or advances to O'Sullivan or any of its Restricted Subsidiaries;
or
(3) transfer any of its properties or assets to O'Sullivan or any of its
Restricted Subsidiaries.
However, the preceding restrictions will not apply to encumbrances or
restrictions existing under or by reason of:
(1) Existing Indebtedness as in effect on the date of the indenture, and any
amendments, modifications, restatements, renewals, increases, supplements,
refundings, restructurings, replacements or refinancings thereof, provided
that such amendments, modifications, restatements, renewals, increases,
supplements, refundings, restructurings, replacements or refinancings are no
more restrictive, taken as a whole (as determined in the good faith judgment
of O'Sullivan's Board of Directors), with respect to such dividend and other
payment restrictions than those contained in such Existing Indebtedness as
in effect on the date of the indenture;
(2) the Credit Facilities as in effect as of the date of the indenture, and any
amendments, modifications, restatements, renewals, increases, supplements,
refundings, restructurings, replacements or refinancings thereof, provided
that such amendments, modifications, restatements, renewals, increases,
supplements, refundings, restructurings, replacements or refinancings are no
more restrictive, taken as a whole (as determined in the good faith judgment
of O'Sullivan's Board of Directors), with respect to such dividend
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and other payment restrictions than those contained in the Credit Facilities
as in effect on the date of the indenture;
(3) the indenture, the exchange notes and the Subsidiary Guarantees;
(4) any applicable law, rule, regulation or order;
(5) any instrument of a Person acquired by O'Sullivan or any of its Restricted
Subsidiaries as in effect at the time of such acquisition (except to the
extent incurred in connection with or in contemplation of such acquisition),
which encumbrance or restriction is not applicable to any Person, or the
properties or assets of any Person, other than the Person, or the property
or assets of the Person, so acquired, provided that, in the case of
Indebtedness, such Indebtedness was permitted by the terms of the indenture
to be incurred;
(6) customary non-assignment provisions in leases entered into in the ordinary
course of business and consistent with past practices;
(7) purchase money obligations for property acquired in the ordinary course of
business that impose restrictions on the property so acquired of the nature
described in clause (3) of the preceding paragraph;
(8) Permitted Refinancing Indebtedness, provided that the material restrictions
contained in the agreements governing such Permitted Refinancing
Indebtedness are no more restrictive, in the good faith judgment of
O'Sullivan's Board of Directors, taken as a whole, to the Holders of notes
than those contained in the agreements governing the Indebtedness being
refinanced;
(9) contracts for the sale of assets, including without limitation customary
restrictions with respect to a Subsidiary pursuant to an agreement that has
been entered into for the sale or disposition of all or substantially all of
the Capital Stock or assets of such Subsidiary; and
(10) restrictions on cash or other deposits or net worth imposed by customers
under contracts entered into in the ordinary course of business.
MERGER, CONSOLIDATION, OR SALE OF ASSETS
O'Sullivan may not: (1) consolidate or merge with or into another Person
(whether or not O'Sullivan is the surviving corporation); or (2) sell, assign,
transfer, convey or otherwise dispose of all or substantially all of its
properties or assets, in one or more related transactions, to another Person
unless:
(1) either: (a) O'Sullivan is the surviving corporation; or (b) the Person
formed by or surviving any such consolidation or merger (if other than
O'Sullivan) or to which such sale, assignment, transfer, conveyance or other
disposition shall have been made is a corporation organized or existing
under the laws of the United States, any state thereof or the District of
Columbia;
(2) the entity or Person formed by or surviving any such consolidation or merger
(if other than O'Sullivan) or the entity or Person to which such sale,
assignment, transfer, conveyance or other disposition shall have been made
assumes all the obligations of O'Sullivan under the exchange notes and the
indenture pursuant to a supplemental indenture in a form reasonably
satisfactory to the trustee;
(3) immediately after such transaction no Default or Event of Default exists;
and
(4) except in the case of a merger entered into solely for the purpose of
reincorporating O'Sullivan in another jurisdiction, O'Sullivan or the entity
or Person formed by or surviving any such consolidation or merger (if other
than O'Sullivan), or to which such sale, assignment, transfer, conveyance or
other disposition shall have been made:
(a) will, after giving pro forma effect thereto as if such transaction had
occurred at the beginning of the applicable four-quarter period, be
permitted to incur at least $1.00 of additional Indebtedness pursuant
to the Fixed Charge Coverage Ratio test set forth in the first
paragraph of the covenant
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described above under the caption "--Incurrence of Indebtedness and
Issuance of Preferred Stock;" or
(b) would (together with its Restricted Subsidiaries) have a higher Fixed
Charge Coverage Ratio immediately after such transaction (after giving
pro forma effect thereto as if such transaction had occurred at the
beginning of the applicable four-quarter period) than the Fixed Charge
Coverage Ratio of O'Sullivan and its subsidiaries immediately prior to
the transaction.
The preceding clause (4) will not prohibit a merger between O'Sullivan
and a Wholly Owned Subsidiary so long as the amount of Indebtedness of
O'Sullivan and its Restricted Subsidiaries is not increased thereby.
In addition, O'Sullivan may not, directly or indirectly, lease all or
substantially all of its properties or assets, in one or more related
transactions, to any other Person. This "Merger, Consolidation, or Sale of
Assets" covenant will not be applicable to a sale, assignment, transfer,
conveyance or other disposition of assets between or among O'Sullivan and any of
its Wholly Owned Restricted Subsidiaries.
TRANSACTIONS WITH AFFILIATES
O'Sullivan will not, and will not permit any of its Restricted
Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any transaction, contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate (each, an "Affiliate Transaction"), unless:
(1) such Affiliate Transaction is on terms that are no less favorable to
O'Sullivan or the relevant Restricted Subsidiary than those that would have
been obtained in a comparable transaction by O'Sullivan or such Restricted
Subsidiary with an unrelated Person; and
(2) O'Sullivan delivers to the trustee:
(a) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of
$2.0 million, a resolution of the Board of Directors set forth in an
Officers' Certificate certifying that such Affiliate Transaction
complies with clause (1) above and that such Affiliate Transaction has
been approved by a majority of the disinterested members of the Board
of Directors; and
(b) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of
$10.0 million, an opinion as to the fairness to the Holders of such
Affiliate Transaction from a financial point of view issued by an
accounting, appraisal or investment banking firm of national standing.
The following items shall not be deemed to be Affiliate Transactions and,
therefore, will not be subject to the provisions of the prior paragraph:
(1) customary directors' fees, indemnification or similar arrangements or any
employment agreement or other compensation plan or arrangement entered into
by O'Sullivan or any of its Restricted Subsidiaries in the ordinary course
of business and consistent with the past practice of O'Sullivan or such
Restricted Subsidiary;
(2) transactions between or among O'Sullivan and/or its Restricted Subsidiaries;
(3) Restricted Payments that are permitted by the provisions of the indenture
described above under the caption "--Restricted Payments;"
(4) customary loans, advances, fees and compensation paid to, and indemnity
provided on behalf of, officers, directors, employees or consultants of
O'Sullivan or any of its Restricted Subsidiaries;
(5) transactions pursuant to any contract or agreement in effect on the date of
the indenture as the same may be amended, modified or replaced from time to
time so long as any such amendment, modification or
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replacement is no less favorable to O'Sullivan and its Restricted
Subsidiaries than the contract or agreement as in effect on the date of the
indenture;
(6) management or similar fees payable to BRS or an Affiliate thereof pursuant
to the Management Services Agreement as in effect on the date of the
indenture, all as described above in the section of this prospectus entitled
"Certain Relationships and Related Transactions;" and
(7) payments in connection with the Recapitalization (including the payment of
fees and expenses with respect thereto).
DESIGNATION OF RESTRICTED AND UNRESTRICTED SUBSIDIARIES
The Board of Directors may designate any Restricted Subsidiary that is
not a Significant Subsidiary to be an Unrestricted Subsidiary if that
designation would not cause a Default. If a Restricted Subsidiary is designated
as an Unrestricted Subsidiary, all outstanding Investments owned by O'Sullivan
and its Restricted Subsidiaries (except to the extent repaid in cash) in the
Subsidiary so designated will be deemed to be Restricted Payments at the time of
such designation (to the extent not designated a Permitted Investment) and will
reduce the amount available for Restricted Payments under the first paragraph of
the covenant described above under the caption "--Restricted Payments." All such
outstanding Investments will be valued at their fair market value at the time of
such designation, as determined in good faith by the Board of Directors. That
designation will only be permitted if such Restricted Payment would be permitted
at that time and if such Restricted Subsidiary otherwise meets the definition of
an Unrestricted Subsidiary.
ANTI-LAYERING
O'Sullivan will not incur, create, issue, assume, guarantee or otherwise
become liable for any Indebtedness that is both:
(1) subordinate or junior in right of payment to any Senior Debt; and
(2) senior in any respect in right of payment to the exchange notes.
No Guarantor will incur, create, issue, assume, guarantee or otherwise
become liable for any Indebtedness that is both:
(1) subordinate or junior in right of payment to any Senior Debt of such
Guarantor; and
(2) senior in any respect in right of payment to the Subsidiary Guarantees.
SALE AND LEASEBACK TRANSACTIONS
O'Sullivan will not, and will not permit any of its Restricted
Subsidiaries to, enter into any sale and leaseback transaction; provided that
O'Sullivan or any Restricted Subsidiary may enter into a sale and leaseback
transaction if:
(1) O'Sullivan or such Restricted Subsidiary could have (a) incurred
Indebtedness in an amount equal to the Attributable Debt relating to such
sale and leaseback transaction pursuant to the covenant described above
under the caption "--Incurrence of Indebtedness and Issuance of Preferred
Stock" and (b) incurred a Lien to secure such Indebtedness pursuant to the
covenant described above under the caption "--Liens;"
(2) the gross cash proceeds of that sale and leaseback transaction are at least
equal to the fair market value, as determined in good faith by the Board of
Directors and set forth in an Officers' Certificate delivered to the
trustee, of the property that is the subject of such sale and leaseback
transaction; and
(3) the transfer of assets in such sale and leaseback transaction is permitted
by, and O'Sullivan or such Restricted Subsidiary applies the proceeds of
such transaction in compliance with, the covenant described above under the
caption "--Asset Sales."
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ADDITIONAL GUARANTEES
If O'Sullivan shall acquire or create a Domestic Restricted Subsidiary
after the date of the indenture, or if any Subsidiary of O'Sullivan becomes a
Domestic Restricted Subsidiary of O'Sullivan after the date of the indenture,
then such newly acquired or created Domestic Restricted Subsidiary shall become
a Guarantor and execute a supplemental indenture and deliver an opinion of
counsel, in accordance with the terms of the indenture.
BUSINESS ACTIVITIES
O'Sullivan will not, and will not permit any Restricted Subsidiary to,
engage in any business other than a Permitted Business, except to such extent as
would not be material to O'Sullivan and its Restricted Subsidiaries taken as a
whole.
REPORTS
Whether or not required by the Commission, so long as any exchange notes
are outstanding, O'Sullivan will furnish to the Holders of exchange notes,
within the time periods specified in the Commission's rules and regulations:
(1) all quarterly and annual financial information that would be required to be
contained in a filing with the Commission on Forms 10-Q and 10-K if
O'Sullivan were required to file such Forms, including a "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
and, with respect to the annual information only, a report on the annual
financial statements by O'Sullivan's certified independent accountants; and
(2) all current reports that would be required to be filed with the Commission
on Form 8-K if O'Sullivan were required to file such reports.
In addition, following the consummation of this exchange offer, whether
or not required by the Commission, O'Sullivan will file a copy of all the
information and reports referred to in clauses (1) and (2) above with the
Commission for public availability within the time periods specified in the
Commission's rules and regulations (unless the Commission will not accept such a
filing) and make such information available to securities analysts and
prospective investors upon request. In addition, O'Sullivan has agreed that, for
so long as any exchange notes remain outstanding, it will furnish to the Holders
and to securities analysts and prospective investors, upon their request, the
information required to be delivered pursuant to Rule 144(d)(4) under the
Securities Act.
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EVENTS OF DEFAULT AND REMEDIES
Each of the following is an Event of Default:
(1) default for 30 days in the payment when due of interest on, or Liquidated
Damages with respect to, the exchange notes whether or not prohibited by the
subordination provisions of the indenture;
(2) default in the payment when due of the principal of or premium, if any, on
the exchange notes, whether or not prohibited by the subordination
provisions of the indenture;
(3) failure by O'Sullivan to comply with the provisions described under the
caption "--Repurchase at Option of Holders--Change of Control" or "--Merger,
Consolidation, or Sale of Assets;"
(4) failure by O'Sullivan for 60 days after notice from the trustee or Holders
of at least 25% in principal amount of the exchange notes then outstanding
to comply with the provisions described under the captions "--Asset Sales,"
"--Restricted Payments" or "--Incurrence of Indebtedness and Issuance of
Preferred Stock" or with any of its other agreements in the indenture or the
exchange notes;
(5) default under any mortgage, indenture or instrument under which there may be
issued or by which there may be secured or evidenced any Indebtedness for
money borrowed by O'Sullivan or any of its Restricted Subsidiaries (or the
payment of which is guaranteed by O'Sullivan or any of its Restricted
Subsidiaries) whether such Indebtedness or Guarantee now exists, or is
created after the date of the indenture, if that default:
(a) is caused by a failure to pay principal on such Indebtedness at final
maturity (a "Payment Default"); or
(b) results in the acceleration of such Indebtedness prior to its express
maturity,
and, in each case, the principal amount of any such Indebtedness, together
with the principal amount of any other such Indebtedness under which there
has been a Payment Default or the maturity of which has been so accelerated,
aggregates $7.5 million or more;
(6) failure by O'Sullivan or any of its Restricted Subsidiaries to pay final
judgments aggregating in excess of $7.5 million, which judgments are not
paid, discharged or stayed for a period of 60 days;
(7) except as permitted by the indenture, any Subsidiary Guarantee shall be held
in any judicial proceeding to be unenforceable or invalid or shall cease for
any reason to be in full force and effect or any Guarantor shall deny or
disaffirm its obligations under its Subsidiary Guarantee; and
(8) certain events of bankruptcy or insolvency with respect to O'Sullivan or any
of its Restricted Subsidiaries that are Significant Subsidiaries.
In the event of a declaration of acceleration of the exchange notes
because an Event of Default has occurred and is continuing as a result of the
acceleration of any Indebtedness described in clause (5) of the preceding
paragraph, the declaration of acceleration of the exchange notes shall be
automatically annulled if the holders of any Indebtedness described in
clause (5) of the preceding paragraph have rescinded the declaration of
acceleration in respect of such Indebtedness within 30 days of the date of such
declaration and if:
(1) the annulment of the acceleration of exchange notes would not conflict with
any judgment or decree of a court of competent jurisdiction; and
(2) all existing Events of Default, except nonpayment of principal or interest
or other amounts on the exchange notes that became due solely because of the
acceleration of the exchange notes, have been cured or waived.
If any Event of Default occurs and is continuing, the trustee or the
Holders of at least 25% in principal amount of the then outstanding exchange
notes may declare all the exchange notes to be due and payable immediately;
provided, that so long as any Obligations pursuant to the Senior Credit
Facilities shall be
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outstanding or the commitments thereunder shall not have expired or been
terminated, such acceleration shall not be effective until the earlier of:
(1) an acceleration of any such Indebtedness under the Senior Credit Facilities,
or
(2) five business days after receipt by O'Sullivan and the Credit Agent of
written notice of such acceleration.
Notwithstanding the preceding paragraph, in the case of an Event of
Default arising from certain events of bankruptcy or insolvency, with respect to
O'Sullivan or any of its Restricted Subsidiaries that are Significant
Subsidiaries, all outstanding exchange notes will become due and payable without
further action or notice.
Holders of the exchange notes may not enforce the indenture or the
exchange notes except as provided in the indenture. Subject to certain
limitations, Holders of a majority in principal amount of the then outstanding
exchange notes may direct the trustee in its exercise of any trust or power. The
trustee may withhold from Holders of the exchange notes notice of any continuing
Default or Event of Default (except a Default or Event of Default relating to
the payment of principal or interest or Liquidated Damages) if it determines
that withholding notice is in their interest.
In the case of any Event of Default occurring by reason of any willful
action or inaction taken or not taken by or on behalf of O'Sullivan with the
intention of avoiding payment of the premium that O'Sullivan would have had to
pay if O'Sullivan then had elected to redeem the exchange notes pursuant to the
optional redemption provisions of the indenture, an equivalent premium shall
also become and be immediately due and payable to the extent permitted by law
upon the acceleration of the exchange notes. If an Event of Default occurs prior
to October 15, 2004 by reason of any willful action (or inaction) taken (or not
taken) by or on behalf of O'Sullivan with the intention of avoiding the
prohibition on redemption of the exchange notes prior to October 15, 2004, then
the Applicable Premium shall also become immediately due and payable to the
extent permitted by law upon the acceleration of the exchange notes.
The Holders of a majority in aggregate principal amount of the exchange
notes then outstanding by notice to the trustee may on behalf of the Holders of
all of the exchange notes waive any existing Default or Event of Default and its
consequences under the indenture except a continuing Default or Event of Default
in the payment of interest or Liquidated Damages on, or the principal of, the
exchange notes.
O'Sullivan is required to deliver to the trustee annually a statement
regarding compliance with the indenture. Upon becoming aware of any Default or
Event of Default, O'Sullivan is required to deliver to the trustee a statement
specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of
O'Sullivan, or any Guarantor, as such, shall have any liability for any
obligations of O'Sullivan or the Guarantors under the exchange notes, the
indenture, the Subsidiary Guarantees or for any claim based on, in respect of,
or by reason of, such obligations or their creation. Each Holder of exchange
notes by accepting an exchange note waives and releases all such liability. The
waiver and release are part of the consideration for issuance of the exchange
notes. The waiver may not be effective to waive liabilities under the federal
securities laws.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
O'Sullivan may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding exchange notes and all
obligations of the Guarantors discharged with respect to their Subsidiary
Guarantees ("Legal Defeasance") except for:
(1) the rights of Holders of outstanding exchange notes to receive payments in
respect of the principal of, or interest or premium and Liquidated Damages,
if any, on such exchange notes when such payments are due from the trust
referred to below;
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(2) O'Sullivan's obligations with respect to the exchange notes concerning
issuing temporary exchange notes, registration of exchange notes, mutilated,
destroyed, lost or stolen exchange notes and the maintenance of an office or
agency for payment and money for security payments held in trust;
(3) the rights, powers, trusts, duties and immunities of the trustee, and
O'Sullivan's obligations in connection therewith; and
(4) the Legal Defeasance provisions of the indenture.
In addition, O'Sullivan may, at its option and at any time, elect to have
the obligations of O'Sullivan and the Guarantors released with respect to
certain covenants that are described in the indenture ("Covenant Defeasance")
and thereafter any omission to comply with those covenants shall not constitute
a Default or Event of Default with respect to the exchange notes. In the event
Covenant Defeasance occurs, certain events (not including non-payment,
bankruptcy, receivership, rehabilitation and insolvency events) described under
"Events of Default" will no longer constitute an Event of Default with respect
to the exchange notes.
In order to exercise either Legal Defeasance or Covenant Defeasance:
(1) O'Sullivan must irrevocably deposit with the trustee, in trust, for the
benefit of the Holders of the exchange notes, cash in U.S. dollars,
non-callable Government Securities, or a combination thereof, in such
amounts as will be sufficient, in the opinion of a nationally recognized
firm of independent public accountants, to pay the principal of, or interest
and premium and Liquidated Damages, if any, on the outstanding exchange
notes on the stated maturity or on the applicable redemption date, as the
case may be, and O'Sullivan must specify whether the exchange notes are
being defeased to maturity or to a particular redemption date;
(2) in the case of Legal Defeasance, O'Sullivan shall have delivered to the
trustee an opinion of counsel in the United States reasonably acceptable to
the trustee confirming that (a) O'Sullivan has received from, or there has
been published by, the Internal Revenue Service a ruling or (b) since the
date of the indenture, there has been a change in the applicable federal
income tax law, in either case to the effect that, and based thereon such
opinion of counsel shall confirm that, subject to customary assumptions and
exclusions, the Holders of the outstanding exchange notes will not recognize
income, gain or loss for federal income tax purposes as a result of such
Legal Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the
case if such Legal Defeasance had not occurred;
(3) in the case of Covenant Defeasance, O'Sullivan shall have delivered to the
trustee an opinion of counsel in the United States reasonably acceptable to
the trustee confirming that, subject to customary assumptions and
exclusions, the Holders of the outstanding exchange notes will not recognize
income, gain or loss for federal income tax purposes as a result of such
Covenant Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the
case if such Covenant Defeasance had not occurred;
(4) no Default or Event of Default shall have occurred and be continuing on the
date of such deposit (other than a Default or Event of Default resulting
from the borrowing of funds to be applied to such deposit);
(5) such Legal Defeasance or Covenant Defeasance will not result in a breach or
violation of, or constitute a default under any material agreement or
instrument (other than the indenture) to which O'Sullivan or any of its
Subsidiaries is a party or by which O'Sullivan or any of its Subsidiaries is
bound;
(6) O'Sullivan must deliver to the trustee an Officers' Certificate stating that
the deposit was not made by O'Sullivan with the intent of preferring the
Holders of exchange notes over the other creditors of O'Sullivan with the
intent of defeating, hindering, delaying or defrauding creditors of
O'Sullivan or others; and
(7) O'Sullivan must deliver to the trustee an Officers' Certificate and an
opinion of counsel, which opinion may be subject to customary assumptions
and exclusions, each stating that all conditions precedent relating to the
Legal Defeasance or the Covenant Defeasance have been complied with.
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AMENDMENT, SUPPLEMENT AND WAIVER
With the consent of the Holders of not less than a majority in principal
amount of the exchange notes at the time outstanding, O'Sullivan and the trustee
are permitted to amend or supplement the indenture or any supplemental indenture
or modify the rights of the Holders; provided that without the consent of each
Holder affected, no amendment, supplement, modification or waiver may (with
respect to any exchange notes held by a non-consenting Holder):
(1) reduce the principal amount of exchange notes whose Holders must consent to
an amendment, supplement or waiver;
(2) reduce the principal of or change the fixed maturity of any exchange note or
alter the provisions with respect to the redemption of the exchange notes
(other than provisions relating to the covenants described above under the
caption "--Repurchase at the Option of Holders");
(3) reduce the rate of or change the time for payment of interest on any
exchange note;
(4) waive a Default or Event of Default in the payment of principal of, or
interest or premium, or Liquidated Damages, if any, on the exchange notes
(except a rescission of acceleration of the exchange notes by the Holders of
at least a majority in aggregate principal amount of the exchange notes and
a waiver of the payment default that resulted from such acceleration);
(5) make any exchange note payable in money other than that stated in the
exchange notes;
(6) make any change in the provisions of the indenture relating to waivers of
past Defaults or the rights of Holders of exchange notes to receive payments
of principal of, or interest or premium, or Liquidated Damages, if any, on
the exchange notes;
(7) waive a redemption payment with respect to any exchange note (other than a
payment required by one of the covenants described above under the caption
"--Repurchase at the Option of Holders");
(8) make any change in the preceding amendment and waiver provisions; or
(9) release any guarantor from any of its obligations under its guarantee of the
exchange notes or the indenture, except in accordance with the terms of the
indenture.
In addition, any amendment to, or waiver of the provisions of Article 10
of the indenture relating to subordination that adversely affects the rights of
the Holders of the exchange notes will require the consent of the Holders of at
least 75% in aggregate principal amount of the exchange notes then outstanding.
Notwithstanding the preceding, without the consent of any Holder of
exchange notes, O'Sullivan and the trustee may amend or supplement the indenture
or the exchange notes:
(1) to cure any ambiguity, defect or inconsistency;
(2) to provide for uncertificated exchange notes in addition to or in place of
certificated notes;
(3) to provide for the assumption of O'Sullivan's obligations to Holders of
exchange notes in the case of a merger or consolidation or the sale of all
or substantially all of O'Sullivan's assets;
(4) to make any change that would provide any additional rights or benefits to
the Holders of exchange notes or that does not adversely affect the legal
rights under the indenture of any such Holder; or
(5) to comply with requirements of the Commission in order to effect or maintain
the qualification of the indenture under the Trust Indenture Act, to provide
for the issuance of Additional Notes in accordance with the limitations set
forth in the indenture or to allow any Subsidiary to guarantee the exchange
notes.
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SATISFACTION AND DISCHARGE
The indenture will be discharged and will cease to be of further effect
as to all exchange notes issued thereunder, when:
(1) either:
(a) all exchange notes that have been authenticated (except lost, stolen
or destroyed exchange notes that have been replaced or paid and
exchange notes for whose payment money has theretofore been deposited
in trust and thereafter repaid to O'Sullivan) have been delivered to
the trustee for cancellation; or
(b) all exchange notes that have not been delivered to the trustee for
cancellation have become due and payable by reason of the making of a
notice of redemption or otherwise or will become due and payable within
one year and O'Sullivan or any Guarantor has irrevocably deposited or
caused to be deposited with the trustee as trust funds in trust solely
for the benefit of the Holders, cash in U.S. dollars, non-callable
Government Securities, or a combination thereof, in such amounts as
will be sufficient without consideration of any reinvestment of
interest, to pay and discharge the entire indebtedness on the exchange
notes not delivered to the trustee for cancellation for principal,
premium and Liquidated Damages, if any, and accrued interest to the
date of maturity or redemption;
(2) no Default or Event of Default shall have occurred and be continuing on the
date of such deposit or shall occur as a result of such deposit and such
deposit will not result in a breach or violation of, or constitute a default
under, any other instrument to which O'Sullivan or any Guarantor is a party
or by which O'Sullivan or any Guarantor is bound;
(3) O'Sullivan or any Guarantor has paid or caused to be paid all sums payable
by it under the indenture; and
(4) O'Sullivan has delivered irrevocable instructions to the trustee under the
indenture to apply the deposited money toward the payment of the exchange
notes at maturity or the redemption date, as the case may be.
In addition, O'Sullivan must deliver an Officers' Certificate and an
opinion of counsel to the trustee stating that all conditions precedent to
satisfaction and discharge have been satisfied.
CONCERNING THE TRUSTEE
If the trustee becomes a creditor of O'Sullivan or any Guarantor, the
indenture limits the trustee's right to obtain payment of claims in certain
cases, or to realize on certain property received in respect of any such claim
as security or otherwise. The trustee will be permitted to engage in other
transactions; however, if it acquires any conflicting interest it must eliminate
such conflict within 90 days, apply to the Commission for permission to continue
or resign.
The Holders of a majority in principal amount of the then outstanding
exchange notes will have the right to direct the time, method and place of
conducting any proceeding for exercising any remedy available to the trustee,
subject to certain exceptions. The indenture provides that in case an Event of
Default shall occur and be continuing, the trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the conduct
of his own affairs. Subject to such provisions, the trustee will be under no
obligation to exercise any of its rights or powers under the indenture at the
request of any Holder of exchange notes, unless such Holder shall have offered
to the trustee security and indemnity satisfactory to it against any loss,
liability or expense.
ADDITIONAL INFORMATION
Anyone who receives this prospectus may obtain a copy of the indenture
and Registration Rights Agreement without charge by writing to O'Sullivan
Industries, Inc., 1900 Gulf Street, Lamar, Missouri 64759; Attention: Vice
President, General Counsel and Secretary.
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CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the indenture.
Reference is made to the indenture for a full disclosure of all such terms, as
well as any other capitalized terms used herein for which no definition is
provided.
"144A GLOBAL NOTE" means a permanent global note that is deposited with
and registered in the name of the Depositary or its nominee, representing a
series of notes sold in reliance on Rule 144A.
"ACQUIRED DEBT" means, with respect to any specified Person:
(1) Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, whether
or not such Indebtedness is incurred in connection with, or in contemplation
of, such other Person merging with or into, or becoming a Subsidiary of such
specified Person, and
(2) Indebtedness secured by a Lien encumbering any asset acquired by such
specified Person.
"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "CONTROL,"
as used with respect to any Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting securities, by
agreement or otherwise. For purposes of this definition, the terms
"controlling," "controlled by" and "under common control with" shall have
correlative meanings.
"APPLICABLE PREMIUM" means, with respect to any note on any date (the
"calculation date"), the greater of:
(1) 1.0% of the principal amount of such note; or
(2) the excess of:
(A) the present value at such calculation date of:
(1) the redemption price of such note at October 15, 2004 (such
redemption price being set forth in the table above under the caption
"Optional Redemption") plus
(2) all required interest payments due on such note through October 15,
2004 (excluding accrued but unpaid interest),
computed using a discount rate equal to the Treasury Rate plus 50 basis
points over
(B) the principal amount of such note, if greater.
"ASSET SALE" means:
(1) the sale, lease, conveyance or other disposition (a "Disposition") of any
assets or rights (including, without limitation, by way of a sale and
leaseback) (provided that the sale, lease, conveyance or other disposition
of all or substantially all of the assets of O'Sullivan and its Restricted
Subsidiaries taken as a whole will be governed by the provisions of the
indenture described above under the caption "--Change of Control" and/or the
provisions described above under the caption "--Merger, Consolidation or
Sale of Assets" and not by the provisions of the Asset Sale covenant); and
(2) the issue or sale by O'Sullivan or any of its Restricted Subsidiaries of
Equity Interests of any of O'Sullivan's Restricted Subsidiaries, in the case
of either clause (1) or (2), whether in a single transaction or a series of
related transactions:
(a) that have a fair market value in excess of $5.0 million, or
(b) for net proceeds in excess of $5.0 million.
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Notwithstanding the preceding, the following items shall not be deemed to
be Asset Sales:
(1) a disposition of assets by O'Sullivan to a Restricted Subsidiary or by a
Restricted Subsidiary to O'Sullivan or to another Restricted Subsidiary;
(2) an issuance of Equity Interests by a Restricted Subsidiary to O'Sullivan or
to another Restricted Subsidiary;
(3) a Restricted Payment that is permitted by the covenant described above under
the caption "--Restricted Payments;"
(4) a disposition in the ordinary course of business;
(5) the sale and leaseback of any assets within 90 days of the acquisition
thereof;
(6) foreclosures on assets; and
(7) the licensing of intellectual property.
"ATTRIBUTABLE DEBT" in respect of a sale and leaseback transaction means,
at the time of determination, the present value of the obligation of the lessee
for net rental payments during the remaining term of the lease included in such
sale and leaseback transaction including any period for which such lease has
been extended or may, at the option of the lessor, be extended. Such present
value shall be calculated using a discount rate equal to the rate of interest
implicit in such transaction, determined in accordance with GAAP.
"BENEFICIAL OWNER" has the meaning assigned to such term in Rule 13d-3
and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial
ownership of any particular "person" (as that term is used in Section 13(d)(3)
of the Exchange Act), such "person" shall be deemed to have beneficial ownership
of all securities that such "person" has the right to acquire by conversion or
exercise of other securities, whether such right is currently exercisable or is
exercisable only upon the occurrence of a subsequent condition. The terms
"Beneficially Owns" and "Beneficially Owned" shall have a corresponding meaning.
"BRS" means Bruckmann, Rosser, Sherrill & Co., L.L.C., a Delaware limited
liability company.
"CAPITAL LEASE OBLIGATION" means, at the time any determination thereof
is to be made, the amount of the liability in respect of a capital lease that
would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"CAPITAL STOCK" means:
(1) in the case of a corporation, corporate stock;
(2) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated)
of corporate stock;
(3) in the case of a partnership or limited liability company, partnership or
membership interests (whether general or limited); and
(4) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of,
the issuing Person.
"CASH EQUIVALENTS" means:
(1) United States dollars;
(2) Government Securities having maturities of not more than six months from the
date of acquisition;
(3) certificates of deposit and eurodollar time deposits with maturities of six
months or less from the date of acquisition, bankers' acceptances with
maturities not exceeding six months and overnight bank deposits, in each
case with any lender party to the Senior Credit Facilities or with any
domestic commercial bank having capital and surplus in excess of
$500 million and a Thompson Bank Watch Rating of "B" or better;
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(4) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (2) and (3) above
entered into with any financial institution meeting the qualifications
specified in clause (3) above;
(5) commercial paper having the rating of "P-2" (or higher) from Moody's
Investors Service, Inc. or "A-3" (or higher) from Standard & Poor's
Corporation and in each case maturing within six months after the date of
acquisition; and
(6) any fund investing exclusively in investments of which constitute Cash
Equivalents of the kinds described in clauses (1) through (5) of this
definition.
"CHANGE OF CONTROL" means the occurrence of any of the following:
(1) the sale, lease, transfer, conveyance or other disposition (other than by
way of merger or consolidation), in one or a series of related transactions,
of all or substantially all of the assets of O'Sullivan and its Subsidiaries
taken as a whole to any "person" (as such term is used in Section 13(d)(3)
of the Exchange Act) other than a Principal or a Related Party of a
Principal;
(2) the adoption of a plan relating to the liquidation or dissolution of
O'Sullivan;
(3) the consummation of any transaction the result of which is that any "person"
(as such term is defined in Sections 13(d) and 14(d) of the Exchange Act),
other than one or more Principals or their Related Parties or a Permitted
Group becomes the Beneficial Owner, directly or indirectly, of more than 50%
of the Voting Stock of O'Sullivan Holdings, provided, that the Principals
and Related Parties Beneficially Own, directly or indirectly, in the
aggregate a lesser percentage of the total voting power of the Voting Stock
of O'Sullivan Holdings than such other person and do not have the right or
ability by voting power, contract or otherwise, to elect or designate for
election a majority of the Board of Directors of O'Sullivan Holdings;
(4) the first day on which a majority of the members of the Board of Directors
of O'Sullivan Holdings are not Continuing Directors; or
(5) the first day on which O'Sullivan ceases to be a Wholly Owned Restricted
Subsidiary of O'Sullivan Holdings.
"CONSOLIDATED CASH FLOW" means, with respect to any Person for any
period, the Consolidated Net Income of such Person for such period, plus:
(1) an amount equal to any extraordinary loss plus any net loss realized in
connection with an Asset Sale, to the extent such losses were deducted in
computing such Consolidated Net Income; plus
(2) provision for taxes based on income or profits of such Person and its
Subsidiaries for such period, to the extent that such provision for taxes
was deducted in computing such Consolidated Net Income; plus
(3) consolidated interest expense of such Person and its Subsidiaries for such
period, whether paid or accrued and whether or not capitalized (including,
without limitation, amortization of debt issuance costs and original issue
discount, non-cash interest payments, the interest component of any deferred
payment obligations, the interest component of all payments associated with
Capital Lease Obligations, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance financings,
and net payments, if any, pursuant to Hedging Obligations), to the extent
that any such expense was deducted in computing such Consolidated Net
Income; plus
(4) depreciation, amortization (including amortization of goodwill and other
intangibles but excluding amortization of prepaid cash expenses that were
paid in a prior period) and other non-cash charges (excluding any such
non-cash charge to the extent that it represents an accrual of or reserve
for cash expenses in any future period or amortization of a prepaid cash
expense that was paid in a prior period) of
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such Person and its Subsidiaries for such period to the extent that such
depreciation, amortization and other non-cash expenses were deducted in
computing such Consolidated Net Income; plus
(5) expenses and charges of O'Sullivan related to the Recapitalization which are
incurred within 90 days of the consummation of the Recapitalization, plus
(6) any extraordinary charges, as defined by GAAP, for such period to the extent
that such charges were deducted in computing such Consolidated Net Income,
plus
(7) amounts accrued pursuant to the Management Services Agreement to the extent
such amounts were deducted in computing Consolidated Net Income but were not
paid in cash; minus
(8) the amount of any cash payments made pursuant to the Management Services
Agreement whether or not such amount was deducted in computing Consolidated
Net Income; minus
(9) any tax payments to Tandy or any of its Affiliates in respect of such period
to the extent such payments exceed the provision for taxes for such period.
"CONSOLIDATED INTEREST EXPENSE" means, with respect to any Person for any
period, the sum of, without duplication:
(1) the interest expense of such Person and its Restricted Subsidiaries for such
period, on a consolidated basis, determined in accordance with GAAP
(including amortization of original issue discount, non-cash interest
payments, the interest component of all payments associated with Capital
Lease Obligations, imputed interest with respect to Attributable Debt,
commissions, discounts and other fees and charges incurred in respect of
letter of credit or bankers' acceptance financings, and net payments, if
any, pursuant to Hedging Obligations; provided that in no event shall any
amortization of deferred financing costs be included in Consolidated
Interest Expense); plus
(2) the consolidated capitalized interest of such Person and its Restricted
Subsidiaries for such period, whether paid or accrued.
Notwithstanding the preceding, the Consolidated Interest Expense with respect to
any Restricted Subsidiary that is not a Wholly Owned Restricted Subsidiary shall
be included only to the extent (and in the same proportion) that the net income
of such Restricted Subsidiary was included in calculating Consolidated Net
Income.
"CONSOLIDATED NET INCOME" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided that
(1) the Net Income (but not loss) of any Person that is not a Restricted
Subsidiary or that is accounted for by the equity method of accounting shall
be included only to the extent of the amount of dividends or distributions
paid in cash to the referent Person or a Restricted Subsidiary thereof;
(2) the Net Income of any Restricted Subsidiary shall be excluded to the extent
that the declaration or payment of dividends or similar distributions by
that Restricted Subsidiary of that Net Income is not at the date of
determination permitted without any prior governmental approval (that has
not been obtained) or, directly or indirectly, by operation of the terms of
its charter or any agreement, instrument, judgment, decree, order, statute,
rule or governmental regulation applicable to that Subsidiary or its
stockholders;
(3) the Net Income of any Person acquired in a pooling of interests transaction
for any period prior to the date of such acquisition shall be excluded;
(4) the cumulative effect of a change in accounting principles shall be
excluded; and
(5) the Net Income of any Unrestricted Subsidiary shall be excluded, whether or
not distributed to O'Sullivan or one of its Restricted Subsidiaries, for
purposes of the covenant described under the caption "Incurrence of
Indebtedness and Issuance of Preferred Stock" and shall be included for
purposes of the covenant described under the caption "Restricted Payments"
only to the extent of the amount of dividends or distributions paid in cash
to O'Sullivan or one of its Restricted Subsidiaries.
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"CONTINUING DIRECTORS" means, as of any date of determination, any member
of the Board of Directors of O'Sullivan who:
(1) was a member of such Board of Directors on the date of the indenture;
(2) was nominated for election or elected to such Board of Directors with the
approval of a majority of the Continuing Directors who were members of such
Board at the time of such nomination or election; or
(3) was nominated by the Principals pursuant to the Stockholders Agreement.
"CREDIT AGENT" means Lehman Commercial Paper Inc., in its capacity as
Administrative Agent for the lenders party to the Senior Credit Facilities, or
any successor thereto or any person otherwise appointed.
"CREDIT FACILITIES" means, the Senior Credit Facilities and/or one or
more debt facilities or commercial paper facilities, in each case with banks or
other institutional lenders providing for revolving credit loans, term loans,
receivables financing (including through the sale of receivables to such lenders
or to special purpose entities formed to borrow from such lenders against such
receivables) or letters of credit, in each case, as amended, restated, modified,
renewed, refunded, replaced, restructured or refinanced in whole or in part from
time to time.
"DEFAULT" means any event that is, or with the passage of time or the
giving of notice or both would be, an Event of Default.
"DESIGNATED SENIOR DEBT" means:
(1) any Indebtedness outstanding under the Senior Credit Facilities; and
(2) after payment in full of all Obligations under the Senior Credit Facilities,
any other Senior Debt permitted under the indenture the principal amount of
which is $25.0 million or more and that has been designated by O'Sullivan as
"Designated Senior Debt."
"DISQUALIFIED STOCK" means any Capital Stock that, by its terms (or by
the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the Holder thereof, in whole or in part, on or prior to the date
that is 91 days after the date on which the notes mature. Notwithstanding the
preceding sentence, any Capital Stock that would not qualify as Disqualified
Stock but for change of control or asset sale provisions shall not constitute
Disqualified Stock if the provisions are not more favorable to the Holders of
such Capital Stock than the provisions described under "--Change of Control" and
"--Asset Sales."
"DOMESTIC RESTRICTED SUBSIDIARY" means, with respect to O'Sullivan, any
Wholly Owned Subsidiary of O'Sullivan that was formed under the laws of the
United States of America.
"EQUITY INTERESTS" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"EQUITY OFFERING" means an offering of the Equity Interests (other than
Disqualified Stock) of O'Sullivan or O'Sullivan Holdings that results in net
proceeds to O'Sullivan, or a contribution to the common equity capital of
O'Sullivan, of at least $25,000,000.
"EXCESS TANDY PAYMENTS" means the aggregate amount of all payments made
to Tandy after the date of the indenture in excess of the amount that would have
been payable to Tandy had the increase in interest expense resulting from the
recapitalization and merger been taken into account in determining our annual
payments to Tandy.
"EXISTING INDEBTEDNESS" means Indebtedness of O'Sullivan and its
Subsidiaries (other than Indebtedness under the Senior Credit Facilities) in
existence on the date of the indenture, until such amounts are repaid.
"FIXED CHARGES" means, with respect to any Person for any period, the
sum, without duplication, of:
(1) the Consolidated Interest Expense of such Person for such period;
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(2) any interest expense on Indebtedness of another Person that is Guaranteed by
such Person or one of its Restricted Subsidiaries or secured by a Lien on
assets of such Person or one of its Restricted Subsidiaries, whether or not
such Guarantee or Lien is called upon;
(3) the product of (a) all dividend payments, whether or not in cash, on any
series of preferred stock of such Person or any of its Restricted
Subsidiaries, other than dividend payments on Equity Interests payable
solely in Equity Interests of O'Sullivan (other than Disqualified Stock) and
other than accruals of dividends on Equity Interests that are not
Disqualified Stock that are added to the liquidation preference of such
Equity Interests and are not required to be paid in cash, times (b) a
fraction, the numerator of which is one and the denominator of which is one
minus the then current combined federal, state and local statutory tax rate
of such Person, expressed as a decimal, in each case, on a consolidated
basis and in accordance with GAAP.
"FIXED CHARGE COVERAGE RATIO" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person for such period. In the event that
O'Sullivan or any of its Restricted Subsidiaries incurs, assumes, Guarantees or
redeems any Indebtedness (other than revolving credit borrowings) or issues
preferred stock subsequent to the commencement of the period for which the Fixed
Charge Coverage Ratio is being calculated but prior to the date on which the
event for which the calculation of the Fixed Charge Coverage Ratio is made (the
"Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated
giving pro forma effect to such incurrence, assumption, Guarantee or redemption
of Indebtedness, or such issuance or redemption of preferred stock, as if the
same had occurred at the beginning of the applicable four-quarter reference
period.
In addition, for purposes of calculating the Fixed Charge Coverage Ratio:
(1) acquisitions that have been made by O'Sullivan or any of its Restricted
Subsidiaries, including through mergers or consolidations and including any
related financing transactions, during the four-quarter reference period or
subsequent to such reference period and on or prior to the Calculation Date
shall be calculated to include the Consolidated Cash Flow of the acquired
entities on a pro forma basis (to be calculated in accordance with
Article 11-02 of Regulation S-X, as in effect on the date of the indenture)
after giving effect to cost savings resulting from employee terminations,
facilities consolidations and closings, standardization of employee benefits
and compensation policies, consolidation of property, casualty and other
insurance coverage and policies, standardization of sales and distribution
methods, reductions in taxes other than income taxes and other cost savings
reasonably expected to be realized from such acquisition, shall be deemed to
have occurred on the first day of the four-quarter reference period and
Consolidated Cash Flow for such reference period shall be calculated without
giving effect to clause (3) of the proviso set forth in the definition of
Consolidated Net Income;
(2) the Consolidated Cash Flow attributable to discontinued operations, as
determined in accordance with GAAP, and operations or businesses disposed of
prior to the Calculation Date, shall be excluded; and
(3) the Fixed Charges attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded, but only to the extent that the
obligations giving rise to such Fixed Charges will not be obligations of the
specified Person or any of its Restricted Subsidiaries following the
Calculation Date.
"FOREIGN SUBSIDIARY" means any Subsidiary of O'Sullivan that is not
organized under the laws of a state or territory of the United States or the
District of Columbia.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the date of the indenture, except that
calculations made for purposes of determining compliance with the terms of the
covenants and with other provisions of the indenture shall be made without
giving effect to depreciation, amortization or other expenses recorded as a
result of the application of purchase accounting in accordance with Accounting
Principles Board Opinion Nos. 16 and 17.
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"GLOBAL NOTES" means, individually and collectively, each of the
Restricted Global Notes and the Unrestricted Global Notes, issued in accordance
with certain sections of the indenture.
"GOVERNMENT SECURITIES" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which guarantee
or obligations the full faith and credit of the United States is pledged.
"GUARANTEE" means a guarantee other than by endorsement of negotiable
instruments for collection in the ordinary course of business, direct or
indirect, in any manner including, without limitation, letters of credit and
reimbursement agreements in respect thereof, of all or any part of any
Indebtedness.
"GUARANTORS" means each of:
(1) O'Sullivan Industries--Virginia, Inc.; and
(2) any other Subsidiary of O'Sullivan that executes a Subsidiary Guarantee in
accordance with the provisions of the indenture, and their respective
successors and assigns.
"HEDGING OBLIGATIONS" means, with respect to any Person, the obligations
of such Person under:
(1) interest rate swap agreements, interest rate cap agreements and interest
rate collar agreements; and
(2) other agreements or arrangements designed to protect such Person against
fluctuations in interest rates or currency exchange rates or commodity
prices.
"INDEBTEDNESS" means, with respect to any specified Person, any
indebtedness of such Person, in respect of:
(1) borrowed money;
(2) evidenced by bonds, notes, debentures or similar instruments or letters of
credit (or reimbursement agreements in respect thereof);
(3) bankers' acceptances;
(4) representing Capital Lease Obligations; or
(5) the balance deferred and unpaid of the purchase price of any property or
representing any Hedging Obligations, except any such balance that
constitutes an accrued expense or trade payable,
if and to the extent any of the preceding items (other than letters of credit
and Hedging Obligations) would appear as a liability upon a balance sheet of the
specified Person prepared in accordance with GAAP. In addition, the term
"Indebtedness" includes all Indebtedness of others secured by a Lien on any
asset of the specified Person (whether or not such Indebtedness is assumed by
the specified Person) and, to the extent not otherwise included, the Guarantee
by such Person of any indebtedness of any other Person; provided that
Indebtedness shall not include the pledge by O'Sullivan of the Capital Stock of
an Unrestricted Subsidiary of O'Sullivan to secure Non-Recourse Debt of such
Unrestricted Subsidiary.
The amount of any Indebtedness outstanding as of any date shall be:
(1) the accreted value thereof, in the case of any Indebtedness that does not
require current payments of interest; and
(2) the principal amount thereof, together with any interest thereon that is
more than 30 days past due, in the case of any other Indebtedness.
"INVESTMENTS" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of
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Indebtedness, Equity Interests or other securities, together with all items that
are or would be classified as investments on a balance sheet prepared in
accordance with GAAP. If O'Sullivan or any Restricted Subsidiary of O'Sullivan
sells or otherwise disposes of any Equity Interests of any direct or indirect
Restricted Subsidiary of O'Sullivan such that, after giving effect to any such
sale or disposition, such Person is no longer a Restricted Subsidiary of
O'Sullivan, O'Sullivan shall be deemed to have made an Investment on the date of
any such sale or disposition equal to the fair market value of the Equity
Interests of such Restricted Subsidiary not sold or disposed of in an amount
determined as provided in the final paragraph of the covenant described above
under the caption "--Restricted Payments."
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction.
"MANAGEMENT SERVICES AGREEMENT" means the Management Services Agreement,
dated as of the date of the indenture, between O'Sullivan and BRS as in effect
on the date of the indenture.
"NET INCOME" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however:
(1) any gain (but not loss), together with any related provision for taxes on
such gain (but not loss), realized in connection with:
(a) any Asset Sale; or (b) the disposition of any securities by such
Person or any of its Restricted Subsidiaries or the extinguishment of
any Indebtedness of such Person or any of its Restricted Subsidiaries;
and
(2) any extraordinary or nonrecurring gain (but not loss), together with any
related provision for taxes on such extraordinary or nonrecurring gain (but
not loss).
"NET PROCEEDS" means the aggregate cash proceeds received by O'Sullivan
or any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof (after
taking into account any available tax credits or deductions and any tax sharing
arrangements), the amounts required to be applied to the payment of Indebtedness
(other than Indebtedness incurred pursuant to the Senior Credit Facilities)
secured by a Lien on the asset or assets that were the subject of the Asset
Sale, and any reserve for adjustment in respect of the sale price of such asset
or assets established in accordance with GAAP.
"NON-RECOURSE DEBT" means Indebtedness:
(1) as to which neither O'Sullivan nor any of its Restricted Subsidiaries:
(a) provides credit support of any kind (including any undertaking,
agreement or instrument that would constitute Indebtedness), (b) is
directly or indirectly liable as a guarantor or otherwise, or
(c) constitutes the lender;
(2) no default with respect to which (including any rights that the Holders
thereof may have to take enforcement action against an Unrestricted
Subsidiary) would permit upon notice, lapse of time or both any Holder of
any other Indebtedness (other than the notes) of O'Sullivan or any of its
Restricted Subsidiaries to declare a default on such other Indebtedness or
cause the payment thereof to be accelerated or payable prior to its stated
maturity; and
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(3) as to which the lenders have been notified in writing that they will not
have any recourse to the stock (other than stock of an Unrestricted
Subsidiary pledged by O'Sullivan to secure debt of such Unrestricted
Subsidiary) or assets of O'Sullivan or any of its Restricted Subsidiaries.
"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities and obligations
payable under the documentation governing any Indebtedness, including, without
limitation, interest after the commencement of any bankruptcy proceeding at the
rate specified in the applicable instrument governing or evidencing Senior Debt.
"PERMITTED BUSINESS" means any business in which O'Sullivan and its
Restricted Subsidiaries are engaged on the date of the indenture or any business
reasonably related, incidental or ancillary thereto.
"PERMITTED GROUP" means any group of investors that is deemed to be a
"person" (as that term is used in Section 13(d)(3) of the Exchange Act) at any
time prior to O'Sullivan's initial public offering of common stock, by virtue of
the Stockholders Agreement, as the same may be amended, modified or supplemented
from time to time, provided that no single Person (other than the Principals and
their Related Parties) Beneficially Owns (together with its Affiliates) more of
the Voting Stock of O'Sullivan that is Beneficially Owned by such group of
investors than is then collectively Beneficially Owned by the Principals and
their Related Parties in the aggregate.
"PERMITTED INVESTMENTS" means:
(1) any Investment in O'Sullivan or in a Restricted Subsidiary of O'Sullivan;
(2) any Investment in Cash Equivalents;
(3) any Investment by O'Sullivan or any Restricted Subsidiary of O'Sullivan in a
Person, if as a result of such Investment:
(a) such Person becomes a Restricted Subsidiary of O'Sullivan; or
(b) such Person is merged, consolidated or amalgamated with or into, or
transfers or conveys substantially all of its assets to, or is
liquidated into, O'Sullivan or a Restricted Subsidiary of O'Sullivan;
(4) Hedging Obligations;
(5) any Restricted Investment made as a result of the receipt of non-cash
consideration from an Asset Sale that was made pursuant to and in compliance
with the covenant described above under the caption "--Repurchase at the
Option of Holders--Asset Sales;"
(6) any acquisition of assets solely in exchange for the issuance of Equity
Interests (other than Disqualified Stock) of O'Sullivan; and
(7) other Investments made after the date of the indenture in any Person engaged
in a Permitted Business having an aggregate fair market value (measured on
the date each such Investment was made and without giving effect to
subsequent changes in value), when taken together with all other Investments
made pursuant to this clause (7) since the date of the indenture, not to
exceed $7.5 million.
"PERMITTED JUNIOR SECURITIES" means:
(1) common Equity Interests in O'Sullivan or any Guarantor; or
(2) debt or preferred equity securities of O'Sullivan or any Guarantor issued
pursuant to a plan of reorganization consented to by each class of Senior
Debt; provided that any such debt securities are subordinated to all Senior
Debt and any debt securities issued in exchange for Senior Debt to
substantially the same extent as, or to a greater extent than, the notes and
the Subsidiary Guarantees are subordinated to Senior Debt under the
indenture.
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"PERMITTED LIENS" means:
(1) Liens securing Senior Debt (including, without limitation, Indebtedness
under the Senior Credit Facilities) permitted by the terms of the indenture
to be incurred or other Indebtedness allowed to be incurred under
clause (1) of the second paragraph of the covenant described above under the
caption "--Incurrence of Indebtedness and Issuance of Preferred Stock;"
(2) Liens in favor of O'Sullivan or any Restricted Subsidiary;
(3) Liens to secure the performance of statutory obligations, surety or appeal
bonds, performance bonds or other obligations of a like nature incurred in
the ordinary course of business;
(4) Liens existing on the date of the indenture;
(5) Liens to secure Indebtedness (including Capital Lease Obligations) permitted
by clause (4) of the second paragraph of the covenant entitled "Incurrence
of Indebtedness and Issuance of Preferred Stock;"
(6) Liens securing Permitted Refinancing Indebtedness where the Liens securing
the Indebtedness being refinanced were permitted under the indenture;
(7) Liens incurred in the ordinary course of business of O'Sullivan or any
Restricted Subsidiary of O'Sullivan with respect to obligations that do not
exceed $7.5 million at any one time outstanding and that: (a) are not
incurred in connection with the borrowing of money or the obtaining of
advances or credit (other than trade credit in the ordinary course of
business) and (b) do not in the aggregate materially detract from the value
of the property or materially impair the use thereof in the operation of
business by O'Sullivan or such Restricted Subsidiary; and
(8) Liens securing reimbursement obligations with respect to commercial letters
of credit which encumber documents and other property relating to such
letters of credit and products and proceeds thereof;
(9) Liens on property of a Person existing at the time such Person is merged
into or consolidated with O'Sullivan or any Restricted Subsidiary of
O'Sullivan, provided that such Liens were not incurred in contemplation of
such merger or consolidation and do not extend to any assets other than
those of the Person merged into or consolidated with O'Sullivan or any
Restricted Subsidiary;
(10) Liens on property existing at the time of acquisition thereof by O'Sullivan
or any Restricted Subsidiary of O'Sullivan, provided such Liens were not
incurred in contemplation of such acquisition; and
(11) Liens secured Hedging Obligations which Hedging Obligations relate to
Indebtedness that is otherwise permitted under the indenture;
"PERMITTED REFINANCING INDEBTEDNESS" means any Indebtedness of O'Sullivan
or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of O'Sullivan or any of its Restricted Subsidiaries;
provided that:
(1) the principal amount (or accreted value, if applicable) of such Permitted
Refinancing Indebtedness does not exceed the principal amount of (or
accreted value, if applicable), plus accrued interest on, the Indebtedness
so extended, refinanced, renewed, replaced, defeased or refunded (plus the
amount of reasonable expenses incurred in connection therewith) except, in
the case of the Senior Credit Facilities, the principal amount of such
Permitted Refinancing Indebtedness does not exceed the greater of (i) the
principal amount of Indebtedness permitted (whether or not borrowed) under
clause (1) of the covenant described above under the caption "Incurrence of
Indebtedness and Issuance of Preferred Stock" or (ii) the amount actually
borrowed under the Senior Credit Facilities;
(2) such Permitted Refinancing Indebtedness has a final maturity date no earlier
than the final maturity date of, and has a Weighted Average Life to Maturity
equal to or greater than the Weighted Average Life to Maturity of, the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded; and
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(3) if the Indebtedness being extended, refinanced, renewed, replaced, defeased
or refunded is subordinated in right of payment to the notes, such Permitted
Refinancing Indebtedness has a final maturity date later than the final
maturity date of, and is subordinated in right of payment to, the notes on
terms at least as favorable to the Holders of notes as those contained in
the documentation governing the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded.
"PRINCIPALS" means BRS and its affiliates.
"RECAPITALIZATION" means the transactions described under the caption
"The Recapitalization Transactions" or related thereto.
"RELATED PARTY" with respect to any Principal means:
(1) any controlling stockholder or partner, 80% (or more) owned Subsidiary, or
spouse or immediate family member (in the case of an individual) of such
Principal; or
(2) any trust, corporation, partnership or other entity, the beneficiaries,
stockholders, partners, owners or Persons beneficially holding a 51% or more
controlling interest of which consist of such Principal and/or such other
Persons referred to in the immediately preceding clause (1).
"REPRESENTATIVE" means the trustee, agent or representative for any
Senior Debt.
"RESTRICTED INVESTMENT" means an Investment other than a Permitted
Investment.
"RESTRICTED SUBSIDIARY" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"RULE 144A" means Rule 144A promulgated under the Securities Act.
"SENIOR CREDIT FACILITIES" means the Credit Agreement dated as of or
around the date of the indenture among O'Sullivan, O'Sullivan Holdings, Lehman
Commercial Paper Inc., as Arranger, syndication agent and administrative agent,
and the other entities from time to time parties thereto providing for revolving
credit borrowings and term loans, including any related notes, guarantees,
collateral documents, instruments and agreements executed in connection
therewith, and in each case as amended, modified, renewed, refunded,
restructured, replaced or refinanced from time to time including increases in
principal amount (whether the same are provided by the original Credit Agent and
lenders under such Senior Credit Facilities or a successor agent or other
lenders).
"SENIOR DEBT" means:
(1) all Indebtedness of O'Sullivan, O'Sullivan Holdings or any Guarantor
outstanding under Credit Facilities and all Hedging Obligations with respect
thereto;
(2) any other Indebtedness of O'Sullivan or any Guarantor permitted to be
incurred under the terms of the indenture, unless the instrument under which
such Indebtedness is incurred expressly provides that it is on a parity with
or subordinated in right of payment to the notes or any Subsidiary
Guarantee; and
(3) all Obligations with respect to the items listed in the preceding clauses
(1) and (2).
Notwithstanding anything to the contrary in the preceding, Senior Debt
will not include:
(1) any liability for federal, state, local or other taxes owed or owing by
O'Sullivan;
(2) any Indebtedness of O'Sullivan to any of its Subsidiaries or other
Affiliates;
(3) any trade payables; or
(4) the portion of any Indebtedness that is incurred in violation of the
indenture; provided that Indebtedness under a Credit Facility will not cease
to be Senior Debt under this clause (4) if the lenders obtained a
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certificate from an executive officer of O'Sullivan as of the date of the
incurrence of such Indebtedness to the effect that such Indebtedness was
permitted to be incurred by the indenture.
"SIGNIFICANT SUBSIDIARY" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Act, as such Regulation is in effect on the date
hereof.
"STATED MATURITY" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"STOCKHOLDERS AGREEMENT" means that certain Stockholders Agreement, dated
as of November 30, 1999, by and among O'Sullivan Holdings, BRS and the other
signatories party thereto, as in effect on the date of the indenture.
"SUBSIDIARY" means, with respect to any Person:
(1) any corporation, association or other business entity of which more than 50%
of the total voting power of shares of Capital Stock entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by such Person or one or more of the other
Subsidiaries of that Person (or a combination thereof); and
(2) any partnership or limited liability company (a) the sole general partner or
the managing general partner or managing member of which is such Person or a
Subsidiary of such Person or (b) the only general partners of which are such
Person or one or more Subsidiaries of such Person (or any combination
thereof).
"TAX SHARING AGREEMENT" means that certain Tax Sharing Agreement, dated
as of November 30, 1999, by and between O'Sullivan and O'Sullivan Holdings.
"TOTAL ASSETS" means the total consolidated assets of O'Sullivan and its
Restricted Subsidiaries, as set forth on O'Sullivan's most recent consolidated
balance sheet.
"TREASURY RATE" means, as of any calculation date, the yield to maturity
as of such calculation date of United States Treasury securities with a constant
maturity (as compiled and published in the most recent Federal Reserve
Statistical Release H.15 (519) that has become publicly available at least two
Business Days prior to the calculation date (or, if such Statistical Release is
no longer published, any publicly available source of similar market data)) most
nearly equal to the period from the calculation date to October 15, 2004;
provided, however, that if the period from the calculation date to October 15,
2004 is less than one year, the weekly average yield on actually traded United
States Treasury securities adjusted to a constant maturity of one year shall be
used.
"UNRESTRICTED SUBSIDIARY" means any Subsidiary that is designated by the
Board of Directors as an Unrestricted Subsidiary pursuant to a Board Resolution,
but only to the extent that such Subsidiary:
(1) has no Indebtedness other than Non-Recourse Debt;
(2) is not party to any agreement, contract, arrangement or understanding with
O'Sullivan or any Restricted Subsidiary of O'Sullivan unless the terms of
any such agreement, contract, arrangement or understanding are no less
favorable to O'Sullivan or such Restricted Subsidiary than those that might
be obtained at the time from Persons who are not Affiliates of O'Sullivan;
(3) is a Person with respect to which neither O'Sullivan nor any of its
Restricted Subsidiaries has any direct or indirect obligation (a) to
subscribe for additional Equity Interests or (b) to maintain or preserve
such Person's financial condition or to cause such Person to achieve any
specified levels of operating results; and
(4) has not guaranteed or otherwise directly or indirectly provided credit
support for any Indebtedness of O'Sullivan or any of its Restricted
Subsidiaries.
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Any designation of a Subsidiary of O'Sullivan as an Unrestricted
Subsidiary shall be evidenced to the trustee by filing with the trustee a
certified copy of the Board Resolution giving effect to such designation and an
Officers' Certificate certifying that such designation complied with the
preceding conditions and was permitted by the covenant described above under the
caption "Certain Covenants--Restricted Payments." If, at any time, any
Unrestricted Subsidiary would fail to meet the preceding requirements as an
Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted
Subsidiary for purposes of the indenture and any Indebtedness of such Subsidiary
shall be deemed to be incurred by a Restricted Subsidiary of O'Sullivan as of
such date and, if such Indebtedness is not permitted to be incurred as of such
date under the covenant described under the caption "Incurrence of Indebtedness
and Issuance of Preferred Stock," O'Sullivan shall be in default of such
covenant. The Board of Directors of O'Sullivan may at any time designate any
Unrestricted Subsidiary to be a Restricted Subsidiary; provided that such
designation shall be deemed to be an incurrence of Indebtedness by a Restricted
Subsidiary of O'Sullivan of any outstanding Indebtedness of such Unrestricted
Subsidiary and such designation shall be permitted only if: (1) such
Indebtedness is permitted under the covenant described under the caption
"Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock,"
and (2) no Default or Event of Default would be in existence following such
designation.
"VOTING STOCK" of any Person as of any date means the Capital Stock of
such Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing:
(1) the sum of the products obtained by multiplying: (a) the amount of each then
remaining installment, sinking fund, serial maturity or other required
payments of principal, including payment at final maturity, in respect
thereof, by (b) the number of years (calculated to the nearest one-twelfth)
that will elapse between such date and the making of such payment, by
(2) the then outstanding principal amount of such Indebtedness.
"WHOLLY OWNED RESTRICTED SUBSIDIARY" of any specified Person means any
Wholly Owned Subsidiary of such Person which at the time of determination is a
Restricted Subsidiary.
"WHOLLY OWNED SUBSIDIARY" of any Person means a Subsidiary of such Person
all of the outstanding Capital Stock or other ownership interests of which
(other than directors' qualifying shares) shall at the time be owned by such
Person and/or by one or more Wholly Owned Subsidiaries of such Person.
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EXCHANGE OFFER
TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING OLD NOTES
Upon the terms and subject to the conditions in this prospectus and in
the letter of transmittal, we will accept any and all notes validly tendered and
not withdrawn prior to 5:00 p.m., New York City time, on the expiration date. We
will issue $1,000 principal amount of exchange notes in exchange for each $1,000
principal amount of outstanding notes accepted in the exchange offer. Holders
may tender some or all of their notes pursuant to the exchange offer. However,
notes may be tendered only in integral multiples of $1,000.
The form and terms of the exchange notes are the same as the form and
terms of the notes except that:
(1) the exchange notes have been registered under the Securities Act of 1933 and
hence will not bear legends restricting their transfer thereof; and
(2) the holders of the exchange notes will not be entitled to rights under the
registration rights agreement. These rights include the provisions for an
increase in the interest rate on the notes in some circumstances relating to
the timing of the exchange offer. All of these rights will terminate when
the exchange offer is terminated. The exchange notes will evidence the same
debt as the notes. Holders of exchange notes will be entitled to the
benefits of the indenture.
As of the date of this prospectus, $100.0 million aggregate principal
amount of notes was outstanding. We have fixed the close of business on
[ ], 2000 as the record date for the exchange offer for purposes of
determining the persons to whom this prospectus and the letter of transmittal
will be mailed initially.
We intend to conduct the exchange offer in accordance with the applicable
requirements of the Securities Exchange Act of 1934 and the rules and
regulations of the Securities and Exchange Commission under the Securities
Exchange Act of 1934.
We shall be deemed to have accepted validly tendered notes when, as and
if we have given oral or written notice to the exchange agent. The exchange
agent will act as agent for the tendering holders for the purpose of receiving
the exchange notes from the issuers.
If any tendered notes are not accepted for exchange because of an invalid
tender, the occurrence of other events in this prospectus or otherwise, we will
return the certificates for any unaccepted notes, at our expense, to the
tendering holder as promptly as practicable after the expiration date.
Holders who tender notes in the exchange offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the letter
of transmittal, transfer taxes with respect to the exchange of notes. We will
pay all charges and expenses, other than transfer taxes in some circumstances,
in connection with the exchange offer as described under the subheading "--Fees
and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "expiration date" shall mean 5:00 p.m., New York City time, on
[ ], 2000, unless we extend the exchange offer. In that case, the
term "expiration date" shall mean the latest date and time to which the exchange
offer is extended. Notwithstanding the foregoing, we will not extend the
expiration date beyond [ ], 2000.
In order to extend the exchange offer, prior to 9:00 a.m., New York City
time, on the next business day after the previously scheduled expiration date,
we will:
(1) notify the exchange agent of any extension by oral or written notice and
(2) mail to the registered holders an announcement of any extension.
We reserve the right, in our sole discretion,
(1) if any of the conditions below under the heading "Conditions" shall not have
been satisfied,
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(A) to delay accepting any notes,
(B) to extend the exchange offer or
(C) to terminate the exchange offer, or
(2) to amend the terms of the exchange offer in any manner.
Any delay in acceptance, extension, termination or amendment will be followed as
promptly as practicable by oral or written notice of delay to the registered
holders. We will give oral or written notice of any delay, extension or
termination to the exchange agent.
INTEREST ON THE EXCHANGE NOTES
The exchange notes will bear interest from their date of issuance.
Holders of notes that are accepted for exchange will receive, in cash, accrued
interest on the exchange notes to, but not including, the date of issuance of
the exchange notes. We will make the first interest payment on the exchange
notes on [ ], 2000. Interest on the notes accepted for exchange will
cease to accrue upon issuance of the exchange notes.
Interest on the exchange notes is payable semi-annually on each April 15
and October 15, commencing on April 15, 2000.
PROCEDURES FOR TENDERING OLD NOTES
Only a holder of notes may tender notes in the exchange offer. To tender
in the exchange offer, a holder must
- complete, sign and date the letter of transmittal, or a facsimile of
the letter of transmittal,
- have the signatures guaranteed if required by the letter of
transmittal, and
- mail or otherwise deliver the letter of transmittal or such
facsimile, together with the notes and any other required documents,
to the exchange agent prior to 5:00 p.m., New York City time, on the
expiration date.
To tender notes effectively, the holder must complete the letter of transmittal
and other required documents and the exchange agent must receive all the
documents prior to 5:00 p.m., New York City time, on the expiration date.
Delivery of the notes may be made by book-entry transfer in accordance with the
procedures described below. The exchange agent must receive confirmation of
book-entry transfer prior to the expiration date.
The tender by a holder and the acceptance of the tender by us will
constitute agreement between the holder and us under the terms and subject to
the conditions in this prospectus and in the letter of transmittal.
THE METHOD OF DELIVERY OF NOTES AND THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND SOLE RISK
OF THE HOLDER. AS AN ALTERNATIVE TO DELIVERY BY MAIL, HOLDERS MAY WISH TO
CONSIDER OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION
DATE. NO LETTER OF TRANSMITTAL OR NOTES SHOULD BE SENT TO US. HOLDERS MAY
REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR
NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner whose notes are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee and who wishes to tender
should promptly instruct the registered holder to tender on the beneficial
owner's behalf. See "Instruction to Registered Holder and/or Book-Entry Transfer
Facility Participant from Owner" included with the letter of transmittal.
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An institution that is a member firm of the Medallion system must
guarantee signatures on a letter of transmittal or a notice of withdrawal unless
the notes are tendered:
(1) by a registered holder who has not completed the box entitled "Special
Registration Instructions" or "Special Delivery Instructions" on the letter
of transmittal; or
(2) for the account of member firm of the Medallion system.
If the letter of transmittal is signed by a person other than the
registered holder of any notes listed in that letter of transmittal, the notes
must be endorsed or accompanied by a properly completed bond power, signed by
the registered holder as the registered holder's name appears on the notes. An
institution that is a member firm of the Medallion System must guarantee the
signature.
Trustees, executors, administrators, guardians, attorneys-in-fact,
offices of corporations or others acting in a fiduciary or representative
capacity should indicate their capacities when signing the letter of transmittal
or any notes or bond powers. Evidence satisfactory to us of their authority to
so act must be submitted with the letter of transmittal.
We understand that the exchange agent will make a request promptly after
the date of this prospectus to establish accounts with respect to the notes at
the book-entry transfer facility, The Depository Trust Company, for the purpose
of facilitating the exchange offer. Subject to the establishment of the
accounts, any financial institution that is a participant in The Depository
Trust Company's system may make book-entry delivery of notes. To do so, the
financial institution should cause the book-entry transfer facility to transfer
the notes into the exchange agent's account with respect to the notes following
the book-entry transfer facility's procedures for transfer. Delivery of the
notes may be effected through book-entry transfer into the exchange agent's
account at the book-entry transfer facility. However, the holder must transmit
and the exchange agent must receive or confirm an appropriate letter of
transmittal properly completed and duly executed with any required signature
guarantee and all other required documents on or prior to the expiration date,
or, if the guaranteed delivery procedures described below are complied with,
within the time period provided under such procedures. Delivery of documents to
the book-entry transfer facility does not constitute delivery to the exchange
agent.
The Depositary and The Depository Trust Company have confirmed that the
exchange offer is eligible for The Depository Trust Company Automated Tender
Offer Program. Accordingly, The Depository Trust Company participants may
electronically transmit their acceptance of the exchange offer by causing The
Depository Trust Company to transfer notes to the depositary in accordance with
The Depository Trust Company's Automated Tender Offer Program procedures for
transfer. The Depository Trust Company will then send an "agent's message" to
the Depositary.
The term "agent's message" means a message transmitted by The Depository
Trust Company, received by the Depositary and forming part of the confirmation
of a book-entry transfer, which states that
(1) The Depository Trust Company has received an express acknowledgment from the
participant in The Depository Trust Company tendering notes subject of the
book-entry confirmation,
(2) the participant has received and agrees to be bound by the terms of the
letter of transmittal and
(3) we may enforce such agreement against such participant.
In the case of an agent's message relating to guaranteed delivery, the term
means a message transmitted by The Depository Trust Company and received by the
Depositary, which states that The Depository Trust Company has received an
express acknowledgment from the participant in The Depository Trust Company
tendering notes that such participant has received and agrees to be bound by the
notice of guaranteed delivery.
Notwithstanding the foregoing, in order to validly tender in the exchange
offer with respect to securities transferred through the Automated Tender Offer
Program, a The Depository Trust Company participant using Automated Tender Offer
Program must also properly complete and duly execute the applicable letter of
transmittal and deliver it to the Depositary.
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By the authority granted by The Depository Trust Company, any The
Depository Trust Company participant which has notes credited to The Depository
Trust Company account at any time (and held of record by The Depository Trust
Company's nominee) may directly provide a tender as though it were the
registered holder by completing, executing and delivering the applicable letter
of transmittal to the Depositary. DELIVERY OF DOCUMENTS TO THE DEPOSITORY TRUST
COMPANY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
All questions as to the
- validity,
- form,
- eligibility (including time of receipt),
- acceptance of tendered notes and
- withdrawal of tendered notes
will be determined by us in our sole discretion. Our determination will be final
and binding. We reserve the absolute right to reject any and all notes not
properly tendered. We reserve the absolute right to reject any notes which would
be unlawful if accepted, in the opinion of our counsel. We also reserve the
right in our sole discretion to waive any defects, irregularities or conditions
of tender as to particular notes. Our interpretation of the terms and conditions
of the exchange offer, including the instructions in the letter of transmittal,
will be final and binding on all parties. Unless waived, any defects or
irregularities in connection with tenders of notes must be cured within such
time as we shall determine. We intend to notify holders of defects or
irregularities with respect to tenders of notes. However, neither we, the
exchange agent nor any other person shall incur any liability for failure to
give such notification. Tenders of notes will not be deemed to have been made
until such defects or irregularities have been cured or waived. Any notes
received by the exchange agent that are not properly tendered and as to which
the defects or irregularities have not been cured or waived will be returned by
the exchange agent to the tendering holders, unless otherwise provided in the
letter of transmittal, as soon as practicable following the expiration date.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their notes and:
(1) whose notes are not immediately available;
(2) who cannot deliver their notes, the letter of transmittal or any other
required documents to the exchange agent; or
(3) who cannot complete the procedures for book-entry transfer, prior to the
expiration date
may effect a tender if:
(1) they tender through an institution that is a member firm of the Medallion
system;
(2) prior to the expiration date, the exchange agent receives from an
institution that is a member firm of the Medallion system a properly
completed and duly executed notice of guaranteed delivery (by facsimile
transmission, mail or hand delivery) setting forth the name and address of
the holder, the certificate number(s) of such notes and the principal amount
of notes tendered, stating that the tender is being made and guaranteeing
that, within five New York Stock Exchange trading days after the expiration
date, the letter of transmittal (or facsimile thereof) together with the
certificate(s) representing the notes (or a confirmation of book-entry
transfer of such notes into the exchange agent's account at the book-entry
transfer facility), and any other documents required by the letter of
transmittal will be deposited by the firm with the exchange agent; and
(3) the exchange agent receives
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(A) such properly completed and executed letter of transmittal (of
facsimile thereof),
(B) the certificate(s) representing all tendered notes in proper form for
transfer (or a confirmation of book-entry transfer of such notes into
the exchange agent's account at the book-entry transfer facility), and
(C) all other documents required by the letter of transmittal
upon five New York Stock Exchange trading days after the expiration date.
Upon request to the exchange agent, we will send a notice of guaranteed
delivery to holders who wish to tender their notes according to the guaranteed
delivery procedures described above.
WITHDRAWAL OF TENDERS
Except as otherwise provided in this prospectus, holders may withdraw
tenders of notes at any time prior to 5:00 p.m., New York City time, on the
expiration date. To withdraw a tender of notes in the exchange offer, the
exchange agent must receive a telegram, telex, letter or facsimile transmission
notice of withdrawal at its address in this prospectus prior to 5:00 p.m., New
York City time, on the expiration date. Any such notice of withdrawal must:
(1) specify the name of the person having deposited the notes to be withdrawn;
(2) identify the notes to be withdrawn (including the certificate number(s) and
principal amount of such notes, or, in the case of notes transferred by
book-entry transfer, the name and number of the account at the book-entry
transfer facility to be credited);
(3) be signed by the holder in the same manner as the original signature on the
letter of transmittal by which such notes were tendered (including any
required signature guarantees) or be accompanied by documents of transfer
sufficient to have the trustee with respect to the notes register the
transfer of notes into the name of the person withdrawing the tender; and
(4) specify the name in which any notes are to be registered, if different from
that of the person who deposited the notes.
We will determine all questions as to the validity, form and eligibility,
including time of receipt, of such notices. Our determination shall be final and
binding on all parties. We will not deem notes so withdrawn to have been validly
tendered for purposes of the exchange offer. We will not issue exchange notes
for withdrawn notes unless you validly retender the withdrawn notes. We will
return any notes which have been tendered but which are not accepted for
exchange to the holder of the notes at our cost as soon as practicable after
withdrawal, rejection of tender or termination of the exchange offer. You may
retender properly withdrawn notes by following one of the procedures described
above under the heading "Procedures for Tendering Old Notes" at any time prior
to the expiration date.
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CONDITIONS
Notwithstanding any other term of the exchange offer, we shall not be
required to accept for exchange, or exchange notes for, any notes, and may
terminate or amend the exchange offer as provided in this prospectus before the
acceptance of the notes, if:
(1) any action or proceeding is instituted or threatened in any court or by or
before any governmental agency with respect to the exchange offer which, in
our sole judgment, might materially impair our ability to proceed with the
exchange offer or any development has occurred in any existing action or
proceeding which may be harmful to us or any of our subsidiaries; or
(2) any law, statute, rule, regulation or interpretation by the staff of the
Securities and Exchange Commission is proposed, adopted or enacted, which,
in our sole judgment, might impair our ability to proceed with the exchange
offer or impair the contemplated benefits of the exchange offer to us; or
(3) any governmental approval has not been obtained, which we believe, in our
sole discretion, is necessary for the consummation of the exchange offer as
outlined in this prospectus.
If we determine in our sole discretion that any of the conditions are not
satisfied, we may:
(1) refuse to accept any notes and return all tendered notes to the tendering
holders;
(2) extend the exchange offer and retain all notes tendered prior to the
expiration of the exchange offer, subject, however, to the rights of holders
to withdraw their notes; or
(3) waive such unsatisfied conditions of the exchange offer and accept all
properly tendered notes which have not been withdrawn.
EXCHANGE AGENT
Norwest Bank of Minnesota, National Association has been appointed as the
exchange agent for the exchange offer. You should direct all
- executed letters of transmittal,
- questions,
- requests for assistance,
- requests for additional copies of this prospectus or of the letter of
transmittal and
- requests for Notices of Guaranteed Delivery
to the exchange agent addressed as follows:
<TABLE>
<S> <C> <C>
BY REGULAR MAIL OR BY HAND: BY REGISTERED OR
OVERNIGHT COURIER: CERTIFIED MAIL:
Norwest Bank Minnesota, NA Norwest Bank Minnesota, NA Norwest Bank Minnesota, NA
Corporate Trust Operation 12th Floor--NorthStar East Corporate Trust Operations
MAC N9303-121 Building MAC N9303-111
Sixth & Marquette Avenue Corporate Trust Services P.O. Box 1517
Minneapolis, Minnesota 55479 608 Second Avenue South Minneapolis, Minnesota 55480
Minneapolis, Minnesota
BY FACSIMILE
(FOR ELIGIBLE INSTITUTIONS
ONLY):
(612) 667-4927
CONFIRM BY PHONE:
(612) 667-9764
</TABLE>
DELIVERY OTHER THAN THOSE ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
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FEES AND EXPENSES
We will bear the expenses of soliciting tenders. We are mailing the
principal solicitation. However, our officers and regular employees and those of
our affiliates may make additional solicitation by telegraph, telecopy,
telephone or in person.
We have not retained any dealer-manager in connection with the exchange
offer. We will not make any payments to brokers, dealers, or others soliciting
acceptances of the exchange offer. However, we will pay the exchange agent
reasonable and customary fees for its services. We will reimburse the exchange
agent for its reasonable out-of-pocket expenses.
We will pay the cash expenses incurred in connection with the exchange
offer. These expenses include fees and expenses of the exchange agent and
trustee, accounting and legal fees and printing costs, among others.
ACCOUNTING TREATMENT
The exchange notes will be recorded at the same carrying value as the old
notes on the date of exchange. The carrying value is 94.569% of face value at
December 31, 1999. Accordingly, we will recognize no gain or loss for accounting
purposes. The expenses of the exchange offer will be expensed.
TRANSFER TAXES
Holders who tender their old notes for exchange will not be obligated to
pay any transfer taxes in connection with the exchange. However, holders who
instruct us to register exchange notes in the name of, or request that old notes
not tendered or not accepted in the exchange offer be returned to, a person
other than the registered tendering holder will be responsible for the payment
of any applicable transfer tax on that transfer.
CONSEQUENCES OF FAILURE TO EXCHANGE; RESALES OF EXCHANGE NOTES
The notes that are not exchanged for exchange notes under the exchange
offer will remain restricted securities. Accordingly, those notes may be resold
only:
(1) to us (upon redemption of the notes or otherwise);
(2) so long as the notes are eligible for resale pursuant to Rule 144A, to a
person inside the United States who is a qualified institutional buyer
according to Rule 144A under the Securities Act of 1933 or pursuant to
another exemption from the registration requirements of the Securities Act
of 1933, based upon an opinion of counsel reasonably acceptable to us;
(3) outside the United States to a foreign person in a transaction meeting the
requirements of Rule 904 under the Securities Act of 1933; or
(4) under an effective registration statement under the Securities Act of 1933
in each case in accordance with any applicable securities laws of any state of
the United States.
RESALES OF THE EXCHANGE NOTES
Based on interpretations by the staff of the Securities and Exchange
Commission in no-action letters issued to third parties, we believe that a
holder or other person who receives exchange notes will be allowed to resell the
exchange notes to the public without further registration under the Securities
Act of 1933 and without delivering a prospectus that satisfies the requirements
of Section 10 of the Securities Act of 1933. The holder (other than a person
that is our "affiliate" within the meaning of Rule 405 under the Securities Act
of 1933) who receives exchange notes in exchange for notes in the ordinary
course of business and who is not participating, need not intend to participate
or have an arrangement or understanding with any person to participate in the
distribution of the exchange notes. However, if any holder acquires exchange
notes in the exchange offer for the
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purpose of distributing or participating in a distribution of the exchange
notes, the holder cannot rely on the position of the staff of the Securities and
Exchange Commission enunciated in the no-action letters or any similar
interpretive letters. A holder who acquires exchange notes in order to
distribute them must comply with the registration and prospectus delivery
requirements of the Securities Act of 1933 in connection with any resale
transaction, unless an exemption from registration is otherwise available.
Further, each broker-dealer that receives exchange notes for its own account in
exchange for notes as a result of market-making activities or other trading
activities must acknowledge that it will deliver a prospectus in connection with
any resale of such exchange notes.
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following discussion, including the opinion of counsel described
below, is based upon current provisions of the Internal Revenue Code of 1986, as
amended, applicable Treasury regulations, judicial authority and administrative
rulings and practice. The Internal Revenue Service may take a contrary view, and
no ruling from the Service has been or will be sought. Legislative, judicial or
administrative changes or interpretations may be forthcoming that could alter or
modify the following statements and conditions. Any changes or interpretations
may or may not be retroactive and could affect the tax consequences to holders.
Some holders, including insurance companies, tax-exempt organizations, financial
institutions, broker-dealers, foreign corporations and persons who are not
citizens or residents of the United States, may be subject to special rules not
discussed below. We recommend that each holder consult the holder's own tax
advisor as to the particular tax consequences of exchanging that holder's old
notes for exchange notes, including the applicability and effect of any state,
local or foreign tax laws.
Kirkland & Ellis has advised us that in its opinion, the exchange of the
old notes for exchange notes pursuant to the exchange offer will not be treated
as an "exchange" for federal income tax purposes because the exchange notes will
not be considered to differ materially in kind or extent from the old notes.
Rather, the exchange notes received by a holder will be treated as a
continuation of the old notes in the hands of such holder. As a result, there
will be no federal income tax consequences to holders solely as a result of the
exchange of the old notes for exchange notes pursuant to the exchange offer.
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PLAN OF DISTRIBUTION
Each broker-dealer that receives exchange notes for its own account under
the exchange offer must acknowledge that it will deliver a prospectus in
connection with any resale of exchange notes.
This prospectus, as it may be amended or supplemented from time to time,
may be used by a broker-dealer in connection with resales of exchange notes
received in exchange for old notes if the old senior subordinated notes were
acquired as a result of market-making activities or other trading activities.
We and our guarantor subsidiaries have agreed to make this prospectus, as
amended or supplemented, available to any broker-dealer to use in connection
with any such resale for a period of at least 90 days after the expiration date.
In addition, until [ ], 2000, all dealers effecting transactions in
the exchange notes may be required to deliver a prospectus.
Neither we nor our guarantor subsidiaries will receive any proceeds from
any sale of exchange notes by broker-dealers. Exchange notes received by
broker-dealers for their own accounts under the exchange offer may be sold from
time to time in one or more transactions
- in the over-the-counter market,
- in negotiated transactions,
- through the writing of options on the exchange notes or a combination
of such methods of resale,
- at market prices prevailing at the time of resale,
- at prices related to such prevailing market prices or
- at negotiated prices.
Any resale may be made directly to purchasers or to or through brokers or
dealers. Brokers or dealers may receive compensation in the form of commissions
or concessions from any broker-dealer or the purchasers of any such exchange
notes. An "underwriter" within the meaning of the Securities Act of 1933
includes
(1) any broker-dealer that resells exchange notes that were received by it for
its own account pursuant to the exchange offer or
(2) any broker or dealer that participates in a distribution of such exchange
notes.
Any profit on any resale of exchange notes and any commissions or concessions
received by any persons may be deemed to be underwriting compensation under the
Securities Act of 1933. The letter of transmittal states that, by acknowledging
that it will deliver and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act of 1933.
Based on interpretations by the staff of the Securities and Exchange
Commission in no-action letters issued to third parties, we believe that a
holder or other person who receives exchange notes will be allowed to resell the
exchange notes to the public without further registration under the Securities
Act of 1933 and without delivering to the purchasers of the exchange notes a
prospectus that satisfies the requirements of Section 10 of the Securities Act
of 1933. The holder (other than a person that is an "affiliate" of O'Sullivan
Industries, Inc. within the meaning of Rule 405 under the Securities Act of
1933) who receives exchange notes in exchange for old notes in the ordinary
course of business and who is not participating, need not intend to participate
or have an arrangement or understanding with person to participate in the
distribution of the exchange notes.
However, if any holder acquires exchange notes in the exchange offer for
the purpose of distributing or participating in a distribution of the exchange
notes, the holder cannot rely on the position of the staff of the Securities and
Exchange Commission enunciated in such no-action letters or any similar
interpretive letters. The holder must comply with the registration and
prospectus delivery requirements of the Securities Act of 1933 in connection
with any resale transaction. A secondary resale transaction should be covered by
an effective registration statement containing the selling security holder
information required by Item 507 or 508, as
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applicable, of Regulation S-K under the Securities Act of 1933, unless an
exemption from registration is otherwise available.
Further, each broker-dealer that receives exchange notes for its own
account in exchange for old notes, where the old notes were acquired by such
participating broker-dealer as a result of market-making activities or other
trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of any exchange notes. We and each of our guarantor
subsidiaries have agreed, for a period of not less than 90 days from the
consummation of the exchange offer, to make this prospectus available to any
broker-dealer for use in connection with any such resale.
For a period of not less than 90 days after the expiration date we will
promptly send additional copies of this prospectus and any amendment or
supplement to this prospectus to any broker-dealer that requests those documents
in the letter of transmittal. We and each of our guarantor subsidiaries have
jointly and severally agreed to pay all expenses incident to the exchange offer,
including the expenses of one counsel for the holders of the old notes, other
than commissions or concessions of any brokers or dealers. We will indemnify the
holders of the old notes against liabilities under the Securities Act of 1933,
including any broker-dealers.
LEGAL MATTERS
Certain legal matters with respect to the validity of the notes offered
hereby will be passed upon for O'Sullivan Industries, Inc. by Kirkland & Ellis,
New York, New York.
EXPERTS
The consolidated financial statements as of June 30, 1999 and 1998 and
for each of the three years in the period ended June 30, 1999 included in this
prospectus have been so included in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
AVAILABLE INFORMATION
We and our guarantor subsidiaries have filed with the Securities and
Exchange Commission a Registration Statement on Form S-4, the "Exchange Offer
Registration Statement," which term shall encompass all amendments, exhibits,
annexes and schedules thereto, pursuant to the Securities Act of 1933, and the
rules and regulations promulgated thereunder, covering the exchange notes being
offered. This prospectus does not contain all the information in the exchange
offer registration statement. For further information with respect to O'Sullivan
Industries, Inc. and O'Sullivan Industries - Virginia, Inc., and the exchange
offer, reference is made to the exchange offer registration statement.
Statements made in this prospectus as to the contents of any contract, agreement
or other document referred to are not necessarily complete. For a more complete
understanding and description of each contract, agreement or other document
filed as an exhibit to the exchange offer registration statement, we encourage
you to read the documents contained in the exhibits.
The exchange offer registration statement, including the exhibits
thereto, can be inspected and copied at the public reference facilities
maintained by the Securities and Exchange Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Regional Offices of the
Securities and Exchange Commission at Seven World Trade Center, Suite 1300, New
York, New York 10048 and at 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such materials can be obtained from the Public
Reference Section of the Securities and Exchange Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates. In addition, the Securities
and Exchange Commission maintains a Web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Securities and Exchange Commission. The address of such
Web site is: http://www.sec.gov.
Our parent corporation, O'Sullivan Holdings, is currently and following
completion of this exchange offer we will also be subject to the informational
requirements of the Securities Exchange Act of 1934, and in
101
<PAGE>
accordance therewith will be required to file periodic reports and other
information with the Securities and Exchange Commission. Our obligation to file
periodic reports and other information with the Securities and Exchange
Commission will be suspended if the exchange notes are held of record by fewer
than 300 holders as of the beginning of our fiscal year other than the fiscal
year in which the exchange offer registration statement is declared effective.
We will nevertheless be required to continue to file reports with the
Securities and Exchange Commission if the exchange notes are listed on a
national securities exchange. In the event we cease to be subject to the
informational requirements of the Securities Exchange Act of 1934, we will be
required under the indenture to continue to file with the Securities and
Exchange Commission the annual and quarterly reports, information, documents or
other reports, including reports on Forms 10-K, 10-Q and 8-K, which would be
required pursuant to the informational requirements of the Securities Exchange
Act of 1934.
Under the indenture, we shall file with the trustee annual, quarterly and
other reports after it files such reports with the Securities and Exchange
Commission. Annual reports delivered to the trustee and the holders of exchange
notes will contain financial information that has been examined and reported
upon, with an opinion expressed by an independent public accountant. We will
also furnish such other reports as may be required by law.
Information contained in this prospectus contains "forward-looking
statements" which can be identified by the use of forward-looking terminology
such as "believes," "expects," "may," "will," "should," or "anticipates" or the
negative thereof or other similar terminology, or by discussions of strategy.
Our actual results could differ materially from those anticipated by any such
forward-looking statements as a result of factors described in the "Risk
Factors" beginning on page 11 and elsewhere in this prospectus.
The market and industry data presented in this prospectus are based upon
third-party data. While we believe that such estimates are reasonable and
reliable, estimates cannot always be verified by information available from
independent sources. Accordingly, readers are cautioned not to place undue
reliance on such market share data.
102
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
O'SULLIVAN INDUSTRIES, INC. AND SUBSIDIARIES
AUDITED CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Accountants......................... F-2
Consolidated Balance Sheets............................... F-3
Consolidated Statements of Operations..................... F-4
Consolidated Statements of Cash Flows..................... F-5
Consolidated Statement of Changes in Stockholder's
Equity.................................................. F-6
Notes to Consolidated Financial Statements................ F-7
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Unaudited Consolidated Balance Sheets..................... F-22
Unaudited Consolidated Statements of Operations........... F-23
Unaudited Consolidated Statements of Cash Flows........... F-24
Unaudited Consolidated Statement of Changes in
Stockholder's Equity.................................... F-25
Notes to Unaudited Consolidated Financial Statements...... F-26
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholder of
O'Sullivan Industries, Inc.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of cash flows and of changes in
stockholder's equity present fairly, in all material respects, the financial
position of O'Sullivan Industries, Inc. (a wholly-owned subsidiary of O'Sullivan
Industries Holdings, Inc.) and its subsidiaries (the "Company") at June 30, 1999
and 1998, and the results of their operations and their cash flows for each of
the three years in the period ended June 30, 1999, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Fort Worth, Texas
August 4, 1999, except as
to Note 3 and paragraphs
one through five of Note 12
which are as of October 28, 1999
F-2
<PAGE>
O'SULLIVAN INDUSTRIES, INC. AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF O'SULLIVAN INDUSTRIES HOLDINGS, INC.)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30,
-----------------------
1999 1998
-------- --------
(DOLLARS IN THOUSANDS,
EXCEPT FOR SHARE DATA)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 3,740 $ 1,810
Trade receivables, net of allowance for doubtful
accounts of $2,416 and $2,289, respectively............. 63,268 61,548
Inventories, net.......................................... 56,134 46,727
Prepaid expenses and other current assets................. 3,810 3,762
-------- --------
TOTAL CURRENT ASSETS.................................. 126,952 113,847
Property, plant and equipment, net.......................... 96,684 93,378
Other assets................................................ 1,909 --
Goodwill, net of accumulated amortization................... 41,422 43,089
-------- --------
TOTAL ASSETS.......................................... $266,967 $250,314
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable.......................................... $ 11,416 $ 14,031
Current portion of long-term debt......................... 4,000 4,000
Accrued liabilities....................................... 24,695 22,613
Income taxes payable...................................... 1,579 310
-------- --------
TOTAL CURRENT LIABILITIES............................. 41,690 40,954
Long-term debt, less current portion........................ 22,000 30,000
Other non-current liabilities............................... 1,909 --
Deferred income taxes....................................... 16,232 15,690
Intercompany payable........................................ 28,033 28,445
-------- --------
TOTAL LIABILITIES..................................... 109,864 115,089
Commitments and contingent liabilities (Note 12)
Stockholder's equity:
Common stock; $1.00 par value, 100 shares authorized,
issued and outstanding.................................. -- --
Additional paid-in capital................................ 66,944 66,944
Retained earnings......................................... 90,202 68,317
Accumulated other comprehensive loss...................... (43) (36)
-------- --------
TOTAL STOCKHOLDER'S EQUITY............................ 157,103 135,225
-------- --------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY............ $266,967 $250,314
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
O'SULLIVAN INDUSTRIES, INC. AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF O'SULLIVAN INDUSTRIES HOLDINGS, INC.)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED JUNE 30,
------------------------------
1999 1998 1997
-------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Net sales................................................... $379,632 $339,407 $321,490
Costs and expenses:
Cost of sales............................................. 267,630 244,086 230,578
Selling, marketing and administrative..................... 74,962 69,212 62,137
-------- -------- --------
Total costs and expenses.................................... 342,592 313,298 292,715
-------- -------- --------
Operating income.......................................... 37,040 26,109 28,775
Other income (expense):
Interest expense.......................................... (3,110) (2,847) (2,642)
Interest income........................................... 266 379 315
-------- -------- --------
Income before income tax provision.......................... 34,196 23,641 26,448
Income tax provision........................................ 12,311 8,742 10,050
-------- -------- --------
Net income.................................................. 21,885 14,899 16,398
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
O'SULLIVAN INDUSTRIES, INC. AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF O'SULLIVAN INDUSTRIES HOLDINGS, INC.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED JUNE 30,
------------------------------------
1999 1998 1997
-------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income................................................ $21,885 $14,899 $16,398
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization........................... 13,962 11,560 9,960
Bad debt expense........................................ 524 1,581 3,178
Loss on disposal of assets.............................. 223 11 599
Deferred income taxes................................... 481 414 1,000
Employee option amortization............................ 749 749 749
Retirement charge....................................... 160 -- --
Changes in current assets and liabilities:
Trade receivables....................................... (2,244) (4,468) (8,269)
Inventories............................................. (9,407) (2,569) (2,677)
Other assets............................................ 13 (335) (792)
Accounts payable, income taxes payable and other
liabilities........................................... (1,049) 5,322 3,366
------- ------- -------
Net cash flows provided by operating activities....... 25,297 27,164 23,512
------- ------- -------
Cash flows used for investing activities:
Capital expenditures.................................... (15,779) (28,359) (15,825)
------- ------- -------
Cash flows used for financing activities:
Repayment of long-term debt............................. (14,000) -- --
Borrowings on long-term debt............................ 10,000 -- --
Net addition to (repayment of) revolver................. (4,000) 4,000 --
Advances (repayment) on intercompany debt............... 412 (7,970) (1,218)
------- ------- -------
Net cash flows used for financing activities.......... (7,588) (3,970) (1,218)
------- ------- -------
Net increase (decrease) in cash and cash equivalents........ 1,930 (5,165) 6,469
Cash and cash equivalents, beginning of year................ 1,810 6,975 506
------- ------- -------
Cash and cash equivalents, end of year...................... $ 3,740 $ 1,810 $ 6,975
======= ======= =======
Supplemental cash flow information:
Interest paid........................................... $ 3,110 $ 2,847 $ 2,631
Income taxes paid....................................... 10,150 11,650 5,983
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
O'SULLIVAN INDUSTRIES, INC. AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF O'SULLIVAN INDUSTRIES HOLDINGS, INC.)
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
ACCUMULATED
ADDITIONAL OTHER TOTAL
PAID-IN RETAINED COMPREHENSIVE STOCKHOLDER'S COMPREHENSIVE
CAPITAL EARNINGS INCOME (LOSS) EQUITY INCOME
---------- --------- ------------- ------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balance, June 30, 1996......................... $66,944 $ 37,020 $ 18 $103,982
Net income................................... 16,398 16,398 $16,398
Other comprehensive income................... (5) (5) (5)
------- --------- -------- -------- -------
Balance, June 30, 1997......................... 66,944 53,418 13 120,375 $16,393
=======
Net income................................... 14,899 14,899 $14,899
Other comprehensive income................... (49) (49) (49)
------- --------- -------- -------- -------
Balance, June 30, 1998......................... 66,944 68,317 (36) 135,225 $14,850
=======
Net income................................... 21,885 21,885 $21,885
Other comprehensive income................... (7) (7) (7)
------- --------- -------- -------- -------
Balance, June 30, 1999......................... $66,944 $ 90,202 $ (43) $157,103 $21,878
======= ========= ======== ======== =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
O'SULLIVAN INDUSTRIES, INC.
(A WHOLLY-OWNED SUBSIDIARY OF O'SULLIVAN INDUSTRIES HOLDINGS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1--GENERAL INFORMATION.
O'Sullivan Industries, Inc. ("O'Sullivan"), a wholly-owned subsidiary of
O'Sullivan Industries Holdings, Inc. ("O'Sullivan Holdings") is a Delaware
corporation, and a domestic producer of ready-to-assemble ("RTA") furniture.
O'Sullivan's RTA furniture includes desks, computer tables, cabinets, home
entertainment centers, audio equipment racks, microwave oven carts and a wide
variety of other RTA furniture for use in the home, office and home office. The
products are distributed primarily through office superstores, discount mass
merchants, mass merchants (department stores and catalog showrooms), home
centers, electronics retailers, furniture stores, OEM and internationally.
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
BASIS OF PRESENTATION: The accompanying consolidated financial
statements include the accounts of O'Sullivan and its wholly owned subsidiaries.
They are presented as if the Company had existed as a corporation separate from
O' Sullivan Holdings during the periods presented and include the historical
assets, liabilities, revenues and expenses that are directly related to the
Company's operations. All material intercompany transactions have been
eliminated. O'Sullivan Holdings has no assets other than the stock of O'Sullivan
and an intercompany receivable from O'Sullivan. Expenses incurred by O'Sulivan
Holdings for the benefit of O'Sullivan are paid by O'Sullivan.
The financial information included in the financial statements may not
necessarily reflect what the financial position, results of operations or cash
flows would have been if the Company had been a separate, stand-alone company
during the periods presented.
PERVASIVENESS OF ESTIMATES: The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities, and related revenues and expenses, and disclosure of gain and loss
contingencies at the date of the financial statements. Actual results could
differ from those estimates.
CASH AND CASH EQUIVALENTS: Cash and cash equivalents include cash on
hand and all highly liquid investments with original maturities of three months
or less.
BUSINESS AND CREDIT RISK CONCENTRATIONS: The largest five customer
accounts receivable balances accounted for approximately 62% and 56% of the
trade receivable balance at June 30, 1999 and 1998, respectively. Credit is
extended to customers based on evaluation of the customer's financial condition,
generally without requiring collateral. Exposure to losses on receivables is
dependent on each customer's financial condition. Therefore, O'Sullivan would be
exposed to a large loss if one of its major customers were not able to fulfill
its financial obligations. O'Sullivan maintains certain limited credit insurance
which helps reduce, but not eliminate, exposure to potential credit losses. In
addition, O'Sullivan monitors its exposure for credit losses and maintains
allowances for anticipated losses.
REVENUES: Revenue is recognized at the date product is shipped to
customers.
INVENTORIES: Inventories are stated at the lower of cost, determined on
a first-in, first-out (FIFO) basis, or market.
PROPERTY, PLANT AND EQUIPMENT: Depreciation and amortization of
property, plant and equipment is calculated using the straight-line method,
which amortizes the cost of the assets over their estimated useful lives. The
ranges of estimated useful lives are: buildings--30 to 40 years; machinery and
equipment--3 to 10 years; leasehold improvements--the lesser of the life of the
lease or asset. Maintenance and repairs are charged to expense as incurred.
Renewals and betterments which materially prolong the useful lives of the assets
are
F-7
<PAGE>
O'SULLIVAN INDUSTRIES, INC.
(A WHOLLY-OWNED SUBSIDIARY OF O'SULLIVAN INDUSTRIES HOLDINGS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. (CONTINUED)
capitalized. The cost and related accumulated depreciation of property retired
or sold are removed from the accounts, and gains or losses on disposal are
recognized in the statement of operations.
AMORTIZATION OF EXCESS PURCHASE PRICE OVER NET TANGIBLE ASSETS OF
BUSINESSES ACQUIRED: Cost in excess of net assets acquired is amortized over a
40-year period using the straight-line method. Accumulated amortization at
June 30, 1999 and 1998 approximated $26,419,000 and $24,752,000, respectively.
IMPAIRMENT OF LONG-LIVED ASSETS: Long-lived assets (I.E., property,
plant and equipment and goodwill) held and used are reviewed for possible
impairment whenever events or changes in circumstances indicate that the net
book value of the asset may not be recoverable. O'Sullivan recognizes an
impairment loss if the sum of the expected future cash flows (undiscounted and
before interest) from the use of the asset is less than the net book value of
the asset. The amount of the impairment loss is measured as the difference
between the net book value of the assets and the estimated fair value of the
related assets.
FAIR VALUE OF FINANCIAL INSTRUMENTS: The fair value of financial
instruments is determined by reference to various market data and other
valuation techniques, as appropriate. Unless otherwise disclosed, the fair value
of financial instruments approximates their recorded values due primarily to the
short-term nature of their maturities.
DERIVATIVES: O'Sullivan utilizes derivative financial instruments to
reduce interest rate risks. O'Sullivan does not hold or issue derivative
financial instruments for trading purposes. Amounts to be paid or received under
the agreement are accrued as interest rates change and are recognized over the
life of the agreement as adjustments to interest expense.
ADVERTISING COSTS: Advertising costs are expensed the first time the
advertising takes place. Cooperative advertising costs are accrued and expensed
when the related revenues are recognized. Advertising expense for fiscal 1999,
1998 and 1997 was $21,147,000, $19,625,000 and $15,248,000, respectively.
INCOME TAXES: Deferred taxes are provided on the liability method
whereby deferred tax assets are recognized for deductible temporary differences
and operating loss carryforwards and deferred tax liabilities for taxable
temporary differences. Temporary differences are the differences between the
reported amounts of assets and liabilities and their tax bases. Deferred tax
assets are reduced by a valuation allowance when it is more likely than not that
some portion or all of the deferred tax assets will not be realized. Deferred
tax assets and liabilities are adjusted for the effects of changes in tax laws
and rates on the date of enactment.
ENVIRONMENTAL REMEDIATION AND COMPLIANCE: Environmental remediation and
compliance expenditures that relate to current operations are expensed or
capitalized, as appropriate. Expenditures that relate to an existing condition
caused by past operations and that do not contribute to current or future
revenue generation are expensed. Liabilities are recognized when environmental
assessments and/or remedial efforts are probable and the costs can be reasonably
estimated. Generally, the timing of these accruals coincides with completion of
a feasibility study or O'Sullivan's commitment to a formal plan of action. To
date, environmental expenditures have not been material, and management is not
aware of any material environmental related contingencies.
SIGNIFICANT FOURTH QUARTER ADJUSTMENTS: During the fourth quarter of
fiscal 1997, bad debt charges approximating $700,000, net of tax, were recorded
due to the bankruptcy filing of a major customer.
ACCOUNTING FOR STOCK-BASED COMPENSATION: O'Sullivan accounts for stock
based compensation pursuant to the intrinsic value based method of accounting as
prescribed by Accounting Principles Board Opinion No. 25,
F-8
<PAGE>
O'SULLIVAN INDUSTRIES, INC.
(A WHOLLY-OWNED SUBSIDIARY OF O'SULLIVAN INDUSTRIES HOLDINGS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. (CONTINUED)
ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES. Employees of O'Sullivan have been
granted stock options to purchase O'Sullivan Holdings common stock. O'Sullivan
has made pro forma disclosures of net income and earnings per share as if the
fair value based method of accounting defined in Statement of Financial
Accounting Standards ("SFAS") No. 123 ACCOUNTING FOR STOCK-BASED COMPENSATION:
("SFAS 123") had been applied. See Note 9.
COMPREHENSIVE INCOME: Effective July 1, 1998, O'Sullivan adopted SFAS
No. 130, REPORTING COMPREHENSIVE INCOME. O'Sullivan has reported the components
of comprehensive income in the accompanying consolidated statement of changes in
stockholder's equity. Comprehensive income is defined as the change in equity
(net assets) of a business enterprise during a period from transactions and
other events and circumstances from non-owner sources. It includes all changes
in equity during a period except those resulting from investments by owners and
distributions to owners. For O'Sullivan, other comprehensive income consists of
foreign currency translation adjustments. The tax benefit related to other
comprehensive loss approximated $4,000, $31,000 and $3,000 for the years ended
June 30, 1999, 1998 and 1997, respectively.
IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS: In June 1999, the FASB issued
SFAS No. 138, which delayed the effective date of SFAS No. 133, ACCOUNTING FOR
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. Accordingly, O'Sullivan will
adopt SFAS No. 133 effective July 1, 2000. This new accounting standard will
require that derivative instruments be measured at fair value and recognized in
the balance sheet as either assets or liabilities, as the case may be. The
treatment of changes in the fair value of a derivative (I.E., gains and losses)
will depend on its use and designation. O'Sullivan will initially report gains
and losses on derivatives designated as hedges against the cash flow effect of a
forecasted transaction as a component of other comprehensive income and,
subsequently, reclassify the gains and losses into earnings when the forecasted
transaction affects earnings. If SFAS 133 had been adopted on July 1, 1998, the
net change in the interest swap would reduce other accumulated comprehensive
income at June 30, 1999 by $336,000 (a current period increase to comprehensive
income of $267,000 offset by an accumulated loss at June 30, 1998 of $603,000).
Management has no intention of retiring the swap prior to the retirement of the
variable rate industrial revenue bonds.
RECLASSIFICATIONS: Certain items on the prior years financial statements
have been reclassified to conform with the current years presentation.
NOTE 3--PENDING MERGER.
On March 24, 1999, O'Sullivan Holdings announced that members of its
senior management team, in conjunction with a financial buyer, had made a
proposal to O'Sullivan Holdings' Board of Directors to acquire O'Sullivan
Holdings, subject to requisite financing. On May 18, 1999, O'Sullivan Holdings
announced that it had entered into a definitive merger agreement with an
investment group that includes members of O'Sullivan's senior management and
Bruckmann, Rosser, Sherrill & Co., LLC ("BRS"). The merger agreement was
subsequently amended on October 18, 1999.
Under the amended merger agreement, O'Sullivan Holdings will be the
surviving entity after the merger. Certain directors and members of senior
management are participating with BRS in the buyout of existing O'Sullivan
Holdings stockholders. After the completion of the merger, the management
participants in the buyout will own a total of approximately 27.1% of the common
stock of the surviving corporation. BRS and its affiliates will own the balance.
The amended merger agreement stipulates that each share of outstanding
common stock of O'Sullivan Holdings will be exchanged for $16.75 in cash and one
share of O'Sullivan Holdings' senior preferred stock with a liquidation value of
$1.50 per share. Unpaid dividends, accruing at the stated rate of 12.0% per
annum, will be
F-9
<PAGE>
O'SULLIVAN INDUSTRIES, INC.
(A WHOLLY-OWNED SUBSIDIARY OF O'SULLIVAN INDUSTRIES HOLDINGS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 3--PENDING MERGER. (CONTINUED)
accumulated and compounded at the same rate during the period that the
O'Sullivan Holdings' senior preferred stock is outstanding. Some of the shares
of O'Sullivan Holdings common stock and options held by the management
participants in the buyout will be exchanged for O'Sullivan Holdings' common
stock, O'Sullivan Holdings' junior preferred stock and options to acquire junior
preferred stock of O'Sullivan Holdings.
O'Sullivan Holdings will require approximately $357.0 million to complete
the merger and pay related fees and expenses, of which approximately $270.0
million will be funded via debt proceeds from borrowings of both O'Sullivan
Holdings and O'Sullivan. The completion of the merger is subject to stockholder
approval, obtaining suitable financing and the absence of material adverse
changes in O'Sullivan Holdings and O'Sullivan's business.
NOTE 4--INVENTORY.
Inventory consists of the following:
<TABLE>
<CAPTION>
JUNE 30,
-------------------
1999 1998
-------- --------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Finished goods.............................................. $39,623 $26,892
Work in process............................................. 6,263 6,835
Raw materials............................................... 10,248 13,000
------- -------
$56,134 $46,727
======= =======
</TABLE>
NOTE 5--PROPERTY, PLANT & EQUIPMENT.
Property, plant, and equipment consists of the following:
<TABLE>
<CAPTION>
JUNE 30,
-------------------------
1999 1998
-------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Land........................................................ $ 1,034 $ 1,034
Buildings and improvements.................................. 42,289 41,216
Machinery and equipment..................................... 111,505 92,950
Construction in progress.................................... 3,068 10,466
------- -------
157,896 145,666
Less: Accumulated depreciation.............................. (61,212) (52,288)
------- -------
$96,684 $93,378
======= =======
</TABLE>
Depreciation and amortization expense was $12,295,000, $9,893,000 and
$8,293,000 for fiscal 1999, 1998, and 1997, respectively, of which $9,912,000,
$8,200,000, and $7,309,000 respectively, was included in cost of sales.
In fiscal 1999, equipment with a net book value of $273,000 was disposed
of for $50,000. In fiscal 1997, machinery and tooling with a net book value of
$743,000 was disposed of for $46,000 and a note receivable of $98,000. The
losses are classified as costs of sales in the accompanying consolidated
statement of operations.
F-10
<PAGE>
O'SULLIVAN INDUSTRIES, INC.
(A WHOLLY-OWNED SUBSIDIARY OF O'SULLIVAN INDUSTRIES HOLDINGS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 6--ACCRUED LIABILITIES.
Accrued liabilities consists of the following:
<TABLE>
<CAPTION>
JUNE 30,
-------------------------
1999 1998
-------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Accrued employee compensation............................... $14,591 $11,467
Accrued advertising......................................... 9,055 9,402
Other current liabilities................................... 1,049 1,744
------- -------
$24,695 $22,613
======= =======
</TABLE>
NOTE 7--LONG-TERM DEBT AND OTHER BORROWING ARRANGEMENTS.
<TABLE>
<CAPTION>
JUNE 30,
-------------------------
1999 1998
-------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Revolving credit agreement.................................. $ -- $ 4,000
Senior notes................................................ 16,000 20,000
Industrial revenue bonds.................................... 10,000 10,000
------- -------
Total debt.................................................. 26,000 34,000
Less current portion of senior notes........................ (4,000) (4,000)
------- -------
Total long-term debt........................................ $22,000 $30,000
======= =======
</TABLE>
Aggregate annual principal payments subsequent to June 30, 1999 are
summarized as follows:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C>
2000........................... $ 4,000
2001........................... 4,000
2002........................... 4,000
2003........................... 4,000
2004........................... --
Thereafter..................... 10,000
-------
$26,000
=======
</TABLE>
REVOLVING CREDIT AGREEMENT--O'Sullivan has a variable-rate, unsecured
$25.0 million revolving credit facility with a bank that expires on
February 28, 2001. As of June 30, 1999 there were no borrowings outstanding
under this facility.
SENIOR NOTES--O'Sullivan issued $20.0 million of 8.01% notes in a 1995
private placement to certain insurance companies. These notes are payable in
annual $4.0 million increments from fiscal 1999 to fiscal 2003. The first
$4.0 million payment on the notes was made in May 1999. Of the $16.0 million
remaining on these notes, $12.0 million is classified as long-term and
$4.0 million is classified as the current portion of long-term debt.
Under the terms of the Note Purchase Agreements, O'Sullivan is required
to meet certain financial ratios, including a funded debt-to-earnings ratio
requirement, a minimum net worth requirement and an earnings to fixed charges
ratio requirement. The agreements also contain a prepayment penalty.
INDUSTRIAL REVENUE BONDS--A subsidiary of O'Sullivan was the obligor on
$10.0 million of 8.25% industrial revenue bonds ("IRB's") that were to mature on
October 1, 2008. On October 1, 1998, O'Sullivan Industries - Virginia, Inc.
refinanced these bonds with new, ten year variable interest rate IRB's. The
$300,000 premium on the early retirement of the bonds was recognized as a loss
in the second quarter of fiscal 1999 and
F-11
<PAGE>
O'SULLIVAN INDUSTRIES, INC.
(A WHOLLY-OWNED SUBSIDIARY OF O'SULLIVAN INDUSTRIES HOLDINGS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7--LONG-TERM DEBT AND OTHER BORROWING ARRANGEMENTS. (CONTINUED)
is included in interest expense in the accompanying consolidated statement of
operations. Interest on the IRB's is paid quarterly. The loan is secured by a
$10.3 million standby letter of credit under the revolving credit facility.
Effective October 1, 1998, O'Sullivan entered into a forward starting
interest rate swap agreement with a notional principal amount of $10.0 million
which terminates October 1, 2008. Pursuant to the agreement, O'Sullivan pays a
fixed rate of 7.13% and receives a floating interest rate for the duration of
the swap agreement (5.0% at June 30, 1999). The swap has the effect of hedging
O'Sullivan's exposure to an increase in interest rates under the refinanced
IRB's discussed above. O'Sullivan has designated the swap as a hedge against
future cash flow exposure. The fair value of this interest rate swap at
June 30, 1999 was approximately $525,000. This amount represents the amount
O'Sullivan would have to pay to terminate the swap. This amount has not been
recognized in the accompanying consolidated financial statements since it is
accounted for as a hedge.
NOTE 8--INCOME TAXES.
The income tax provision consists of the following:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED JUNE 30,
------------------------------
1999 1998 1997
-------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal................................................. $11,282 $7,886 $ 9,955
State................................................... 548 442 473
------- ------ -------
11,830 8,328 10,428
Deferred.................................................... 481 414 (378)
------- ------ -------
$12,311 $8,742 $10,050
======= ====== =======
</TABLE>
The following table reconciles O'Sullivan's federal corporate statutory
rate and its effective income tax rate:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
JUNE 30,
--------------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Statutory rate.............................................. 35.0% 35.0% 35.0%
State income taxes, net of federal benefit.................. 1.6 1.7 1.7
Goodwill amortization....................................... 1.1 1.3 1.2
Other, net.................................................. (1.7) (1.0) 0.1
---- ---- ----
Effective tax rate.......................................... 36.0% 37.0% 38.0%
==== ==== ====
</TABLE>
F-12
<PAGE>
O'SULLIVAN INDUSTRIES, INC.
(A WHOLLY-OWNED SUBSIDIARY OF O'SULLIVAN INDUSTRIES HOLDINGS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 8--INCOME TAXES. (CONTINUED)
Deferred tax assets and liabilities consist of the following:
<TABLE>
<CAPTION>
JUNE 30,
-----------------------
1999 1998
---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Bad debt reserve.......................................... $ 895 $ 847
Insurance reserves........................................ 592 755
Accrued compensation...................................... 1,184 898
Other..................................................... 154 93
-------- --------
Total deferred tax assets............................... 2,825 2,593
-------- --------
Deferred tax liabilities:
Depreciation and amortization............................. (16,318) (15,690)
Inventories............................................... (98) (39)
Other..................................................... (372) (346)
-------- --------
Total deferred tax liabilities.......................... (16,788) (16,075)
-------- --------
Net deferred tax liability.............................. $(13,963) $(13,482)
======== ========
Reported as:
Current assets (included in prepaid expenses and other
current assets)........................................... $ 2,269 $ 2,208
Noncurrent liabilities-deferred income taxes................ (16,232) (15,690)
-------- --------
Net deferred tax liability.............................. $(13,963) $(13,482)
======== ========
</TABLE>
FAS 109 provides that the allocation of current and deferred tax expense
to each member of a consolidated group should be made on a systematic, rational
method. The tax provision and the deferred tax assets/liabilities presented in
the accompanying consolidated financial statements have been determined on a
stand-alone basis as allowed pursuant to FAS 109. O'Sullivan does not file a
consolidated tax return with O'Sullivan Holdings.
In connection with the 1994 initial public offerings of O'Sullivan
Holdings' common stock, Tandy, TE Electronics Inc. and O'Sullivan Holdings
entered into a Tax Sharing and Tax Benefit Reimbursement Agreement. Pursuant to
the tax agreement, Tandy is primarily responsible for all U.S. federal income
taxes, state income taxes and foreign income taxes with respect to O'Sullivan
Holdings for all periods ending on or prior to the date of consummation of the
Offerings and for audit adjustments to such federal income and foreign income
taxes. O'Sullivan Holdings is responsible for all other taxes owing with respect
to O'Sullivan Holdings, including audit adjustments to state and local income
and for franchise taxes.
O'Sullivan Holdings and Tandy made an election under Sections 338(g) and
338(h)(10) of the Internal Revenue Code with the effect that the tax basis of
O'Sullivan Holdings' and O'Sullivans' assets was increased to the deemed
purchase price of the assets. This additional tax basis results in increased
income tax deductions and, accordingly, reduced income taxes payable by
O'Sullivan Holdings. Pursuant to the tax agreement, O'Sullivan Holdings pays
Tandy nearly all of the federal tax benefit expected to be realized with respect
to such additional basis. Amounts payable to Tandy pursuant to the tax agreement
are recorded as current federal income tax expense in the accompanying
consolidated statements of operations. Income tax expense thus approximates the
amount which would be recognized by O'Sullivan Holdings in the absence of the
tax agreement. Although the
F-13
<PAGE>
O'SULLIVAN INDUSTRIES, INC.
(A WHOLLY-OWNED SUBSIDIARY OF O'SULLIVAN INDUSTRIES HOLDINGS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 8--INCOME TAXES. (CONTINUED)
amount of the payment required to be made in a particular year under the tax
agreement may differ somewhat from the difference in that tax year between
O'Sullivan Holdings' actual taxes and the taxes that O'Sullivan Holdings would
have owed had the increase in basis not occurred, the aggregate amount of
payments required to be made by O'Sullivan Holdings to Tandy over the life of
the tax agreement will not differ materially from the difference over the life
of the tax agreement between O'Sullivan Holdings' actual taxes and the amount of
taxes that O'Sullivan Holdings would have owed had the increase in basis not
occurred. Consequently, such payments should have no effect on O'Sullivan
Holdings' earnings and should not have a material effect on its cash flow. The
tax agreement provides for adjustments to the amount of tax benefit payable in
the event of certain material transactions, such as a business combination or
significant disposition of assets. During fiscal 1999, 1998 and 1997,
$9.7 million, $11.7 million and $6.0 million, respectively, were paid to
O'Sullivan Holdings and ultimately, Tandy pursuant to this agreement. O'Sullivan
is responsible for, and must pay O'Sullivan Holdings for, any taxes due with
respect to Tandy Corporation ("Tandy") pursuant to a tax sharing agreement
between Tandy and O'Sullivan Holdings. See Note 12.
NOTE 9--STOCK OPTIONS.
Under O'Sullivan Holdings' Amended and Restated 1994 Incentive Stock
Plan, designated officers, employees, employee directors and consultants of
O'Sullivan Holdings and its subsidiaries are eligible to receive awards in the
form of incentive stock options, nonqualified stock options, stock appreciation
rights, restricted stock grants or performance awards. The purchase price of
common stock subject to an option shall not be less than the market value of the
stock on the date of the grant and for a term not to exceed ten years. An
aggregate of 2,000,000 shares of common stock have been reserved for issuance
under the Plan, no more than 300,000 of which may be awarded as restricted stock
or performance awards. In fiscal 1994, O'Sullivan Holdings awarded restricted
shares of common stock totaling 19,950 shares. The restrictions on these shares
lapsed in fiscal 1999.
In July 1996, the compensation committee granted, subject to stockholder
approval, options to purchase 625,250 shares of O'Sullivan Holdings common stock
to O'Sullivan's officers and other key employees. Depending on whether certain
performance objectives were met, the options would become exercisable in
one-third increments on each of the first three anniversaries of the date of the
grant and would expire ten years after the date of the grant. To the extent
performance objectives were not met, the options would become exercisable on
August 10, 2003 and would expire September 10, 2003. As a result of O'Sullivan's
performance in fiscal 1997, the options became exercisable over three years
through fiscal 1999 and will expire in July 2006. The stockholders approved the
grants in November 1996; accordingly, O'Sullivan recognized compensation expense
of approximately $2.2 million over the three year vesting period, which amount
was based on the difference between the exercise price and the fair market value
of common stock on the date of stockholder approval. O'Sullivan recognized
compensation expense of $749,000 in each of fiscal 1999, fiscal 1998 and fiscal
1997 related to the granting of these options.
Additionally, during fiscal 1997, the Board of Directors granted options
to purchase 284,150 shares of O'Sullivan Holdings common stock that were not
based on performance objectives. Full vesting terms ranged from three to five
years with the options expiring ten years from the date of the grant. The
exercise prices for these options were equal to the fair market value on the
respective dates of grant; therefore, no compensation expense was recognized.
F-14
<PAGE>
O'SULLIVAN INDUSTRIES, INC.
(A WHOLLY-OWNED SUBSIDIARY OF O'SULLIVAN INDUSTRIES HOLDINGS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 9--STOCK OPTIONS. (CONTINUED)
SUMMARY OF STOCK OPTION TRANSACTIONS
<TABLE>
<CAPTION>
JUNE 30, 1999 JUNE 30, 1998 JUNE 30, 1997
------------------- ------------------- -------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
-------- -------- -------- -------- -------- --------
(SHARE AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year.......................... 1,529 $ 9.77 1,210 $ 7.61 324 $ 9.14
Grants.................................................... 81 $10.60 368 $ 15.9 904 $ 7.31
Exercised................................................. (14) $ 7.23 (38) $ 7.13 (1) $ 7.5
Canceled.................................................. (28) $10.00 (11) $ 9.32 (17) $ 8.02
----- ----- -----
Outstanding at end of year................................ 1,568 $ 9.84 1,529 $ 9.77 1,210 $ 7.61
===== ===== =====
Exercisable at end of year................................ 928 $ 8.82 500 $ 8.45 145 $10.04
===== ===== =====
Weighted average fair value of options granted during the
year.................................................... $5.38 $7.95 $6.53
</TABLE>
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------------------------- -------------------------
WEIGHTED
SHARES AVERAGE WEIGHTED SHARES WEIGHTED
OUTSTANDING AT REMAINING AVERAGE EXERCISABLE AT AVERAGE
RANGE OF EXERCISE JUNE 30, 1999 CONTRACTUAL EXERCISE JUNE 30, 1999 EXERCISE
PRICES (IN THOUSANDS) LIFE PRICE (IN THOUSANDS) PRICE
- --------------------------------------------------- -------------- ----------- -------- -------------- --------
<S> <C> <C> <C> <C> <C>
$6.18 - $7.59..................................... 1,001 6.9 years $ 7.21 704 $ 7.24
$7.60 - $9.49..................................... 4 6.7 years $ 8.65 4 $ 8.49
$9.50 - $11.39..................................... 79 9.4 years $ 10.6 -- --
$11.40 - $13.29.................................... 138 5.9 years $12.52 123 $12.54
$15.20 - $16.10.................................... 346 8.0 years $16.09 91 $16.09
----- ---
$6.18 - $16.10..................................... 1,568 7.2 years $ 9.84 922 $ 8.82
===== ===
</TABLE>
O'Sullivan has adopted the disclosure-only provisions of SFAS 123.
Accordingly, no compensation cost has been recognized for options granted except
as mentioned above. Had compensation cost for stock option plans been determined
based on the fair value at the grant date for awards in fiscal 1999, 1998 and
fiscal 1997 in accordance with the provisions of SFAS 123, O'Sullivan's net
income and net income per share would have been reduced to the pro forma amounts
indicated below (in thousands, except per share amounts):
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------
1999 1998 1997
-------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Net income.................................................. As reported $21,885 $14,899 $16,398
Pro forma 19,825 13,789 15,581
</TABLE>
F-15
<PAGE>
O'SULLIVAN INDUSTRIES, INC.
(A WHOLLY-OWNED SUBSIDIARY OF O'SULLIVAN INDUSTRIES HOLDINGS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 9--STOCK OPTIONS. (CONTINUED)
We estimate the fair value of each option grant on the date of grant
using the Black-Scholes option-pricing model based upon the following weighted
average assumptions:
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Risk-free interest rate............................... 5.10% 6.24% 6.70%
Dividend yield........................................ None None None
Volatility factor..................................... 42.57% 37.56% 47.84%
Weighted average expected life (years)................ 6.0 6.6 6.8
</TABLE>
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the vesting period. The effects of applying
SFAS 123 in this pro forma disclosure are not indicative of the impact on future
years as the pro forma amounts above do not include the impact of stock option
awards granted prior to fiscal 1996.
NOTE 10--EMPLOYEE BENEFIT PLANS.
O'Sullivan Holdings maintains a stock purchase program that is available
to most employees of O'Sullivan. The stock purchase program (the "SPP"), as
amended, allows a maximum employee contribution of 5%, while O'Sullivan's
matching contribution is 25%, 40% or 50% of the employee's contribution,
depending on the length of the employee's participation in the program. The
matching contributions to the stock purchase program were $700,000, $700,000 and
$600,000 in fiscal years 1999, 1998 and 1997, respectively.
O'Sullivan Holdings also has a Savings and Profit Sharing Plan in which
most O'Sullivan employees are eligible to participate. Under the savings or
Section 401(k) portion of the plan, employees may contribute from 1% to 15% of
their compensation (subject to certain limitations imposed by the Internal
Revenue Code), and O'Sullivan makes matching contributions equal to 50% of the
first 5% of eligible employee contributions. Under the profit sharing portion of
the plan, O'Sullivan Holdings may contribute annually an amount up to 7.5% of
O'Sullivan Holdings' pre-tax earnings, subject to Board approval. Employer
matching contributions are invested in O'Sullivan Holdings common stock.
Employer matching contributions vest immediately, while profit sharing
contributions vest 100% when the employee has five years of service with
O'Sullivan. For fiscal 1999, 1998 and 1997, O'Sullivan accrued approximately
$2.5 million, $1.7 million and $2.0 million, respectively, for the profit
sharing portion of the plan. The matching contributions to the savings portion
of the plan were $800,000, $700,000 and $600,000 in fiscal year 1999, 1998 and
1997 respectively.
Employees can direct the voting of O'Sullivan Holdings common stock
attributable to their Stock Purchase Program and Savings and Profit Sharing Plan
accounts.
Effective July 1, 1997, O'Sullivan implemented its Deferred Compensation
Plan. This plan is available to employees of O'Sullivan deemed to be "highly
compensated employees" pursuant to the Internal Revenue Code. O'Sullivan will
make certain matching and profit sharing accruals to the accounts of
participants. All amounts deferred or accrued under the terms of the plan
represent unsecured obligations of O'Sullivan to the participants. Matching and
profit sharing accruals under the this plan were not material in fiscal 1999 or
fiscal 1998.
NOTE 11--TERMINATION PROTECTION AGREEMENTS.
O'Sullivan Holdings has entered into Termination Protection Agreements
with most of O'Sullivan's officers. These Termination Protection Agreements, all
of which are substantially similar, have initial terms of two years which
automatically extend to successive one-year periods unless terminated by either
party. If the
F-16
<PAGE>
O'SULLIVAN INDUSTRIES, INC.
(A WHOLLY-OWNED SUBSIDIARY OF O'SULLIVAN INDUSTRIES HOLDINGS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 11--TERMINATION PROTECTION AGREEMENTS. (CONTINUED)
employment of any of these officers is terminated, with certain exceptions,
within 24 months following a change in control, the officers are entitled to
receive certain cash payments, as well as the continuation of fringe benefits
for a period of up to twelve months. Additionally, all benefits under the
Savings and Profit Sharing Plan and the Deferred Compensation Plan vest, all
restrictions on any outstanding incentive awards or shares of restricted common
stock will lapse and such awards or shares will become fully vested, all
outstanding stock options will become fully vested and immediately exercisable,
and O'Sullivan Holdings will be required to purchase for cash, on demand made
within 60 days following a change in control, any shares of unrestricted common
stock and options for shares at the then current per-share fair market value.
The agreements as amended in February 1996 also provide one year of outplacement
services for the officer and that, if the officer moves more than 20 miles from
his primary residence in order to accept permanent employment within 36 months
after leaving O'Sullivan Holdings, O'Sullivan Holdings will, upon request,
repurchase the officer's primary residence at a price determined in accordance
with the agreement.
In March 1999, O'Sullivan Holdings entered into 24 Termination Protection
Agreements with O'Sullivan's director-level managers, three of whom were
promoted to officers in July 1999. The Termination Protection Agreements (all of
which are substantially similar) have initial terms of two years which
automatically extend for successive one-year periods unless terminated by either
party. If the employment of any of these employees is terminated (with certain
exceptions) within twelve months following a "Change in Control," or in certain
other instances in connection with a Change in Control, the employees are
entitled to receive a cash payment equal to the total of six months salary and
one-half of their respective annual bonus (twelve months salary and an annual
bonus amount in certain instances). The employees would also be entitled to the
continuation of certain insurance benefits (life insurance, disability, medical,
dental and hospitalization benefits) for a period of up to six (or twelve)
months. The agreements also provide for outplacement services for the employee.
Under the Termination Protection Agreements, a "Change in Control" will
be deemed to have occurred if either (i) any person or group acquires beneficial
ownership of 15% of the voting securities of O'Sullivan Holdings, (ii) there is
a change in the composition of a majority of the Board of Directors within any
two-year period which is not approved by certain of the directors who were
directors at the beginning of the two-year period; (iii) the stockholders of
O'Sullivan Holdings approve a merger, consolidation or reorganization involving
O'Sullivan Holdings; (iv) there is a complete liquidation or reorganization
involving O'Sullivan Holdings; or (v) O'Sullivan Holdings enters into an
agreement for the sale or other disposition of all or substantially all of the
consolidated assets of O'Sullivan Holdings.
However, for purposes of the merger discussed in Note 3 above, each of
the executive officers who is a management participant in the recapitalization
and merger has waived his right to receive benefits under the protection
agreements under any circumstances except for a reduction in his salary or
bonus.
NOTE 12--COMMITMENTS AND CONTINGENCIES.
TANDY LITIGATION On June 29, 1999, Tandy Corporation filed a complaint
against O'Sullivan Holdings in the District Court of Texas in Tarrant County.
The complaint relates to a potential reduction in O'Sullivan Holdings' tax
benefit payments to Tandy that would result from increased interest expense
after the completion of the merger. Tandy claims that this reduction would
violate the tax sharing and tax reimbursement agreement. The complaint sought a
court order compelling O'Sullivan Holdings to submit to a dispute resolution
process. Alternatively, the complaint sought a declaratory judgment that after
the merger O'Sullivan Holdings must continue to make tax-sharing payments to
Tandy as if the merger had not occurred.
F-17
<PAGE>
O'SULLIVAN INDUSTRIES, INC.
(A WHOLLY-OWNED SUBSIDIARY OF O'SULLIVAN INDUSTRIES HOLDINGS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 12--COMMITMENTS AND CONTINGENCIES. (CONTINUED)
On September 9, 1999, Tandy filed a motion for summary judgment in its
lawsuit against O'Sullivan Holdings. On October 8, 1999, Tandy's motion was
denied, as was all other relief sought by Tandy, except that O'Sullivan Holdings
was directed to commence dispute resolution procedures before an arbitrator,
according to the terms of the tax sharing agreement. To support its motion for
summary judgment, Tandy referred to a letter it received from its independent
outside auditors, PricewaterhouseCoopers LLP ("PricewaterhouseCoopers").
PricewaterhouseCoopers audits both Tandy's financial statements and O'Sullivan's
financial statements. The PricewaterhouseCoopers letter advised Tandy on how
PricewaterhouseCoopers expected the tax sharing agreement would operate, if
certain assumptions were valid. On its face, the letter made clear that it was
not expressing an "opinion" on how the actual dispute between Tandy and
O'Sullivan Holdings would in fact be resolved, and the letter addressed
assumptions that PricewaterhouseCoopers had been given by Tandy.
O'Sullivan Holdings' annual report to stockholders on SEC Form 10-K
disclosed these facts, and expressed management's view, BASED ON AN OPINION OF
OUR OUTSIDE COUNSEL, Blackwell Sanders Peper Martin LLP, that Tandy's position
in its suit was without merit. Because PricewaterhouseCoopers both wrote its
letter to Tandy but did not object to the inclusion of management's view in the
Form 10-K on the merits of Tandy's lawsuit, the SEC Staff has asked O'Sullivan
Holdings to clarify "whether PricewaterhouseCoopers has a reasonable basis to
doubt management's view that Tandy's lawsuit has no merit." In management's
view, PricewaterhouseCoopers had a perfectly reasonable basis for its
acquiescence in the footnote disclosure in the Form 10-K that Tandy's position
was without merit. First, O'Sullivan Holdings received an opinion from Blackwell
Sanders Peper Martin LLP that supports management's view that Tandy's position
in the litigation was without merit. That opinion was made available to
PricewaterhouseCoopers in connection with its annual audit, and clearly supports
the decision not to object to the inclusion of that footnote in O'Sullivan's
financial statements. Second, PricewaterhouseCoopers also has advised O'Sullivan
that its letter was predicated on assumptions it now understands are not
relevant to the merger as presently structured, and therefore,
PricewaterhouseCoopers has reaffirmed that its original letter did not attempt
to offer an expert opinion to Tandy on the merger or predict the actual outcome
of the litigation between Tandy and O'Sullivan. Neither PricewaterhouseCoopers
nor O'Sullivan believe there is any inconsistency between
PricewaterhouseCoopers' original letter, and its non-objection to the inclusion
of that footnote disclosure in the Form 10-K. In light of
PricewaterhouseCoopers' response, the PricewaterhouseCoopers letter has no
relevance to the merger. At the SEC Staff's request, however, we have included
this discussion of PricewaterhouseCoopers' letter.
Finally, the Staff suggests that its concerns about this situation could
be eliminated if PricewaterhouseCoopers were to withdraw the letter to Tandy.
But, since the letter is not an expert opinion on any pending matter, a position
PricewaterhouseCoopers has since reaffirmed to us, management does not believe
there is any reason for PricewaterhouseCoopers formally to withdraw its letter.
We are now and, after completion of the merger, expect to continue to be
in full compliance with the tax sharing agreement. O'Sullivan believes that
Tandy's position is without merit and intends to defend itself vigorously.
OTHER LITIGATION In addition, O'Sullivan is a party to various legal
actions arising in the ordinary course of its business. O'Sullivan does not
believe that any such pending actions will have a material adverse effect on its
results of operations or financial position. O'Sullivan maintains liability
insurance at levels which it believes are adequate for its needs.
O'Sullivan's operations are subject to extensive federal, state and local
laws, regulations and ordinances relating to the generation, storage, handling,
emission, transportation and discharge of certain materials,
F-18
<PAGE>
O'SULLIVAN INDUSTRIES, INC.
(A WHOLLY-OWNED SUBSIDIARY OF O'SULLIVAN INDUSTRIES HOLDINGS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 12--COMMITMENTS AND CONTINGENCIES. (CONTINUED)
substances and waste into the environment. Permits are required for certain of
O'Sullivan's operations and are subject to revocation, modification and renewal
by governmental authorities. In general, compliance with air emission
regulations is not expected to have a material adverse effect on O'Sullivan's
business, results of operations or financial condition.
O'Sullivan's manufacturing facilities ship waste product to various
disposal sites. O'Sullivan has been designated as a potentially responsible
party under the Arkansas Remedial Action Trust Fund Act in connection with the
cost of cleaning up one site in Diaz, Arkansas and has entered into a DE MINIMIS
buyout agreement with certain other potentially responsible parties, pursuant to
which it has contributed $2,000 to date toward cleanup costs. O'Sullivan
believes that amounts it may be required to pay in the future, if any, will be
immaterial.
RETIREMENT BENEFITS In October 1998, Mr. Daniel F. O'Sullivan, Chairman
of the Board of Directors and Chief Executive Officer, completed negotiations of
a retirement and consulting agreement with O'Sullivan Holdings contingent upon
the hiring of his successor. In May 1999, the original retirement agreement was
amended, removing a contingency relating to the hiring of his successor. The
retirement agreement contains standard noncompetition provisions. The present
value of all future payments to Mr. O'Sullivan under this agreement have been
capitalized and recorded as an intangible asset. The noncompetition asset will
be amortized on a straight line basis over the term of the agreement with
Mr. O'Sullivan commencing on the earlier of his retirement or March 31, 2000.
Based on a retirement date of March 31, 2000, the amortization period would be
approximately 6.3 years. The noncompetition asset of $1.9 million, which
represents the present value of the future payments to be paid pursuant to the
agreement, and the corresponding liability of $1.9 million, are included in the
accompanying consolidated balance sheet.
During fiscal 1999, O'Sullivan also recorded compensation expense equal
to the intrinsic value of Mr. O'Sullivan's outstanding options in conjunction
with the acceleration of the vesting of Mr. O'Sullivan's unvested options and
the extension of the exercise period for all of Mr. O'Sullivan's options. The
compensatory charge related to the options, combined with the associated legal
and other costs, approximated $235,000.
OPERATING LEASES O'Sullivan leases warehouse space, computers and
certain other equipment under operating leases. As of June 30, 1999, minimum
future lease payments for all noncancellable lease agreements were as follows:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C>
2000....................................... $1,611
2001....................................... 1,102
2002....................................... 753
2003....................................... 515
2004....................................... 338
Thereafter................................. 66
------
Total...................................... $4,385
======
</TABLE>
Amounts incurred by O'Sullivan under operating leases (including
renewable monthly leases) were $1,679,000, $1,367,000 and $936,000 in 1999, 1998
and 1997, respectively.
F-19
<PAGE>
O'SULLIVAN INDUSTRIES, INC.
(A WHOLLY-OWNED SUBSIDIARY OF O'SULLIVAN INDUSTRIES HOLDINGS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 13--MAJOR CUSTOMERS AND INTERNATIONAL OPERATIONS.
Sales to three customers exceeded 10% of net sales in at least one of the
prior three fiscal years. Sales to such customers as a percentage of net sales
were:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Customer A......................................... 20.9% 20.1% 17.1%
Customer B......................................... 13.1% 11.6% 12.3%
Customer C......................................... 7.6% 9.7% 12.0%
</TABLE>
There are no material foreign operations or export sales.
NOTE 14--QUARTERLY OPERATING RESULTS--UNAUDITED
<TABLE>
<CAPTION>
FISCAL 1999 (BY QUARTER)
---------------------------------------------
1 2 3 4
--------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Net sales...................................... $87,673 $97,786 $108,529 $85,644
Gross profit................................... 24,893 28,099 32,809 26,201
Net income..................................... 3,715 4,733 7,732 5,705
</TABLE>
<TABLE>
<CAPTION>
FISCAL 1998 (BY QUARTER)
---------------------------------------------
1 2 3 4
--------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Net sales...................................... $77,141 $85,524 $ 92,325 $84,417
Gross profit................................... 22,738 23,386 24,653 24,544
Net income..................................... 3,603 3,424 3,814 4,058
</TABLE>
NOTE 15--SUBSIDIARY FINANCIAL INFORMATION
The following summarized financial information for O'Sullivan
Industries--Virginia, Inc. ("Virginia") is presented as if Virginia had existed
as a corporation separate from O'Sullivan during the periods presented and
include the historical assets, liabilities, revenues and expenses that are
directly related to each Virginia's operations. All material intercompany
transactions have been eliminated. For the periods presented, certain expenses
reflected in the combined financial statements included allocations of corporate
expenses from O'Sullivan to Virginia. These allocations include expenses for
general management, management information systems, treasury, legal, benefits
administration, insurance, tax compliance and other miscellaneous services. The
allocation of expenses was generally based on actual costs incurred, and such
costs were apportioned to Virginia using varying methods including volume of
sales and number of employees. In addition, Virginia sells all customer trade
receivables to O'Sullivan immediately after consummation of the sale.
Management believes that the foregoing allocations were made on a
reasonable basis; however, the allocations of costs and expenses do not
necessarily indicate the costs that would have been incurred by Virginia on a
stand-alone basis. Also, the financial information included in accompanying
consolidated financial statements may not necessarily reflect what the financial
position, results of operations and cash flows of the
F-20
<PAGE>
O'SULLIVAN INDUSTRIES, INC.
(A WHOLLY-OWNED SUBSIDIARY OF O'SULLIVAN INDUSTRIES HOLDINGS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 15--SUBSIDIARY FINANCIAL INFORMATION (CONTINUED)
consolidated entity would have been had O'Sullivan and Virginia been separate,
stand-alone companies during the periods presented.
STATEMENT OF OPERATIONS DATA
<TABLE>
<CAPTION>
FOR THE YEAR ENDED JUNE 30,
------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Net sales................................................... 71,282 63,138 55,722
Gross profit................................................ 14,112 15,460 13,234
Operating income............................................ 5,161 6,680 5,882
Net income (loss)........................................... 2,682 3,705 3,173
</TABLE>
BALANCE SHEET DATA
<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
1999 1998
-------- --------
<S> <C> <C> <C>
BALANCE SHEET DATA
Current assets............................................ 12,061 8,632
Noncurrent assets......................................... 26,658 21,046
Current liabilities....................................... 2,831 2,736
Noncurrent liabilities.................................... 10,403 5,646
</TABLE>
F-21
<PAGE>
O'SULLIVAN INDUSTRIES, INC. AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF O'SULLIVAN INDUSTRIES HOLDINGS, INC.)
UNAUDITED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
1999
------------
(DOLLARS IN
THOUSANDS,
EXCEPT FOR
SHARE DATA)
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 15,633
Trade receivables, net of allowance for doubtful
accounts of $2,265...................................... 69,622
Inventories, net.......................................... 54,524
Prepaid expenses and other current assets................. 5,823
--------
TOTAL CURRENT ASSETS.................................. 145,602
Property, plant and equipment, net.......................... 95,819
Other assets................................................ 14,903
Intercompany receivable..................................... 514
Goodwill, net of accumulated amortization................... 40,588
--------
TOTAL ASSETS.......................................... $297,426
========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable.......................................... $ 15,614
Current portion of long-term debt......................... 6,000
Accrued liabilities....................................... 30,397
Income taxes payable...................................... 1,534
--------
TOTAL CURRENT LIABILITIES............................. 53,545
Long-term debt, less current portion........................ 237,569
Other non-current liabilities............................... 1,909
Deferred income taxes....................................... 17,257
--------
TOTAL LIABILITIES..................................... 310,280
Commitments and contingent liabilities (Note 11)
Stockholder's equity:
Common stock; $1.00 par value, 100 shares authorized,
issued and outstanding.................................. --
Additional paid-in capital................................ --
Retained earnings......................................... (12,982)
Accumulated other comprehensive loss...................... 128
--------
TOTAL STOCKHOLDER'S EQUITY............................ (12,854)
--------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY............ $297,426
========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-22
<PAGE>
O'SULLIVAN INDUSTRIES, INC. AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF O'SULLIVAN INDUSTRIES HOLDINGS, INC.)
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS
ENDED
DECEMBER 31,
-----------------------
1999 1998
---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Net sales................................................... $213,015 $185,459
Costs and expenses:
Cost of sales............................................. 149,448 132,467
Selling, marketing and administrative..................... 43,086 37,707
-------- --------
Compensation expense associated with stock options........ 10,697 374
Loss on settlement of interest rate swap.................. 408 --
-------- --------
Total costs and expenses.................................... 203,639 170,548
-------- --------
Operating income.......................................... 9,376 14,911
Other income (expense):
Interest expense.......................................... (3,331) (1,858)
Interest income........................................... 240 147
-------- --------
Income before income tax provision and extraordinary item... 6,285 13,200
Income tax provision........................................ 2,263 4,753
-------- --------
Income before extraordinary item............................ 4,022 8,447
Extraordinary loss from early extinguishment of debt, net of
income tax benefit of $171................................ (305) --
-------- --------
Net income.................................................. $ 3,717 $ 8,447
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-23
<PAGE>
O'SULLIVAN INDUSTRIES, INC. AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF O'SULLIVAN INDUSTRIES HOLDINGS, INC.)
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED
DECEMBER 31,
----------------------
1999 1998
---------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 3,717 8,447
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization........................... 7,364 6,720
Bad debt expense........................................ 546 193
Loss on disposal of assets.............................. 77 35
Deferred income taxes................................... 1,025 --
Employee option amortization............................ 70 374
Compensation expense associated with stock options...... 10,627 --
Changes in current assets and liabilities:
Trade receivables....................................... (6,900) (6,270)
Inventories............................................. 1,610 (551)
Other assets............................................ (2,153) 28
Accounts payable, income taxes payable and other
liabilities............................................ 12,140 3,617
--------- -------
Net cash flows provided by operating activities....... 28,123 12,593
--------- -------
Cash flows used for investing activities:
Capital expenditures.................................... (5,742) (11,296)
--------- -------
Cash flows used for financing activities:
Repayment of long-term debt............................. (16,000) --
Proceeds from borrowings................................ 233,569 --
Dividend to parent...................................... (186,827) --
Employee loan........................................... (260) --
Debt issuance costs..................................... (12,423) --
Net addition to (repayment of) revolver................. -- 2,000
Advances (repayment) on intercompany debt............... (28,547) (968)
--------- -------
Net cash flows provided (used) for financing
activities........................................... (10,488) 1,032
--------- -------
Net increase (decrease) in cash and cash equivalents........ 11,893 2,329
Cash and cash equivalents, beginning of year................ 3,740 1,810
--------- -------
Cash and cash equivalents, end of year...................... $ 15,633 $ 4,139
========= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-24
<PAGE>
O'SULLIVAN INDUSTRIES, INC. AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF O'SULLIVAN INDUSTRIES O'SULLIVAN HOLDINGS, INC.)
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
ACCUMULATED
ADDITIONAL OTHER TOTAL
PAID-IN RETAINED COMPREHENSIVE STOCKHOLDER'S COMPREHENSIVE
CAPITAL EARNINGS INCOME (LOSS) EQUITY INCOME
---------- --------- ------------- ------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balance, June 30, 1999......................... 66,944 90,202 (43) 157,103
Net income................................... 3,717 3,717 $ 3,717
Other comprehensive income................... 171 171 171
Compensation expense associated with stock
options.................................... 12,982 12,982
Dividend to parent........................... (79,926) (106,901) (186,827)
------- --------- -------- -------- -------
Balance, December 31, 1999..................... $ -- $ (12,982) $ 128 $(12,854) $ 3,888
======= ========= ======== ======== =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-25
<PAGE>
O'SULLIVAN INDUSTRIES, INC.
(A WHOLLY-OWNED SUBSIDIARY OF O'SULLIVAN INDUSTRIES HOLDINGS, INC.)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1--BASIS OF PRESENTATION
The unaudited consolidated financial statements included herein have been
prepared by O'Sullivan Industries, Inc. and subsidiaries ("O'Sullivan"), which
is a wholly-owned subsidiary of O'Sullivan Industries Holdings, Inc.
("O'Sullivan Holdings"), in accordance with generally accepted accounting
principles for interim financial information and with instructions to Form 10-Q
and Article 10 of Regulation S-X. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. The financial statements should be read in conjunction with the
audited financial statements and notes thereto included in this prospectus. The
interim results are not necessarily indicative of the results that may be
expected for a full year.
NOTE 2--MERGER
On March 24, 1999, O'Sullivan Holdings announced that members of its
senior management team, in conjunction with a financial buyer, had made a
proposal to Holding's Board of Directors to acquire O'Sullivan Holdings, subject
to requisite financing. On May 18, 1999, O'Sullivan Holdings announced that it
had entered into a definitive merger agreement with OSI Acquisition, Inc.
Investors in OSI Acquisition, Inc. included members of O'Sullivan's senior
management and Bruckmann, Rosser, Sherill & Co., II, L.P. ("BRS"). The merger
agreement was amended and restated on October 18, 1999.
On November 30, 1999, OSI Acquisition, Inc. was merged into O'Sullivan
Holdings in a recapitalization transaction approved by O'Sullivan Holdings'
stockholders on November 22, 1999. As a result of the merger, all of O'Sullivan
Holdings' outstanding common stock is held by members of O'Sullivan's senior
management and BRS and its affiliates. The management participants in the buyout
own a total of 27.1% of the outstanding common stock of O'Sullivan Holdings. BRS
and its affiliates own the balance.
Each share of common stock of O'Sullivan Holdings outstanding before the
merger was exchanged for $16.75 in cash and one share of senior preferred stock
with a liquidation value of $1.50 per share. Unpaid dividends accrue at the rate
of 12.0% per annum and, if not paid, will be accumulated and compounded at the
same rate during the period that the senior preferred stock is outstanding. Some
of the shares of O'Sullivan Holdings common stock and options held by the
management participants in the buyout were exchanged for common stock, junior
preferred stock and options to acquire junior preferred stock of O'Sullivan
Holdings.
O'Sullivan Holdings' Series B junior preferred stock was issued to BRS,
its affiliates and the management participants in the buyout in exchange for
cash or shares of O'Sullivan Holdings common stock. The liquidation value of the
Series B junior preferred stock is $100.00 per share. Dividends accrue at the
rate of 14.0% annum and, if not paid, will be accumulated and compounded at the
same rate during the period the Series B junior preferred stock is outstanding.
In the merger, O'Sullivan Holdings issued options to purchase its Series
A preferred stock in exchange for certain options held by management
participants in the buyout. The agreements for the options to purchase
O'Sullivan Holdings' Series A junior preferred stock provide for a special
accrual at the rate of 14% per annum on the difference between the liquidation
value of the stock ($150.00 per share) and the exercise price of the option
($50.00 per share). The special accrual accrues at the same time and in the same
manner as would issued and outstanding Series A junior preferred stock. No
amount is payable until the exercise of the option, and payment is further
subject to the terms of any debt agreement of O'Sullivan Holdings. When made,
payment of
F-26
<PAGE>
O'SULLIVAN INDUSTRIES, INC.
(A WHOLLY-OWNED SUBSIDIARY OF O'SULLIVAN INDUSTRIES HOLDINGS, INC.)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2--MERGER (CONTINUED)
the special accrual may be made in cash or by a reduction in the option price
for the option. The special accruals are included in compensation expense.
O'Sullivan Holdings required approximately $357.0 million to complete the
merger and pay related fees and expenses of which approximately $264.0 million
was funded via debt proceeds. O'Sullivan borrowed $239 million of this amount.
O'Sullivan paid a dividend of approximately $186.8 million to O'Sullivan
Holdings and repaid an intercompany balance of about $28.5 million to finance
the repurchase of stock. The remainder of the borrowings was used to refinance
existing debt and for debt issuance costs.
NOTE 3--DERIVATIVE FINANCIAL INSTRUMENTS
Effective October 1, 1998, O'Sullivan had a forward starting interest
rate swap agreement with a notional principal amount of $10.0 million, which was
to terminate on October 1, 2008. Pursuant to the agreement, O'Sullivan paid a
fixed rate of 7.13% and received a floating interest rate during the duration of
the swap agreement. On November 30, 1999, O'Sullivan terminated the swap as
required by the counter-party due to the merger and recapitalization, incurring
a loss of $408,000.
O'Sullivan called its existing $10.0 million of 8.25% industrial
development revenue bonds on October 1, 1998 at a redemption price of 103%. The
$300,000 premium on the early retirement of the bonds was recognized as a loss
in O'Sullivan's second quarter of fiscal 1999 and was included in interest
expense. O'Sullivan refinanced these bonds with new, ten-year industrial revenue
bonds with a tax-exempt variable interest rate, which is reset weekly. Interest
on the bonds is paid monthly. The bonds mature on October 1, 2008.
NOTE 4--NEW ACCOUNTING STANDARDS
In June 1999, the FASB issued SFAS No. 138, which delayed the effective
date of SFAS No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING
ACTIVITIES. Accordingly, O'Sullivan will adopt SFAS No. 133 effective July 1,
2000. This new accounting standard will require that derivative instruments be
measured at fair value and recognized in the balance sheet as either assets or
liabilities, as the case may be. The treatment of changes in the fair value of a
derivative (I.E., gains and losses) will depend on its use and designation.
O'Sullivan will initially report gains and losses on derivatives designated as
hedges against the cash flow effect of a forecasted transaction as a component
of other comprehensive income and, subsequently, reclassify the gains and losses
into earnings when the forecasted transaction affects earnings. If SFAS 133 had
been adopted on July 1, 1999, the net change in the interest swap would reduce
other accumulated comprehensive income by $261,000 (a current period increase to
comprehensive income of $75,000 offset by an accumulated loss at the beginning
of the period of $336,000).
NOTE 5--COMPENSATION EXPENSE ASSOCIATED WITH OPTIONS
O'Sullivan incurred approximately $10.7 million in compensation expense
associated with stock options as part of the merger. Of this amount,
$6.0 million was exchanged for options to purchase 60,319 shares of O'Sullivan
Holdings Series A junior preferred stock, $5.9 million in cash was paid and
$1.1 million in liquidation value of senior preferred stock was distributed to
the option holders. O'Sullivan had previously incurred approximately
$2.3 million in compensation expense prior to the merger. The compensation
expense on the options has been included as a separate line item in the
accompanying consolidated statement of operations.
F-27
<PAGE>
O'SULLIVAN INDUSTRIES, INC.
(A WHOLLY-OWNED SUBSIDIARY OF O'SULLIVAN INDUSTRIES HOLDINGS, INC.)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 5--COMPENSATION EXPENSE ASSOCIATED WITH OPTIONS (CONTINUED)
During the quarter ended December 31, 1999, O'Sullivan incurred
compensation expense of approximately $70,000 related to the special accruals on
the options to purchase O'Sullivan Holdings Series A junior preferred stock.
NOTE 6--EXTRAORDINARY ITEM
O'Sullivan repaid private placement notes held with a principal amount of
$16.0 million for $16.5 million on November 30, 1999. The $476,000 prepayment
fee has been recognized as a $305,000 extraordinary loss, net of related tax
benefit.
NOTE 7--INVENTORY
Inventory consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1999 1998
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Finished goods.............................................. $36,415 $39,623
Work in process............................................. 5,869 6,263
Raw materials............................................... 12,240 10,248
------- -------
$54,524 $56,134
======= =======
</TABLE>
NOTE 8--LONG-TERM DEBT AND OTHER BORROWING ARRANGEMENTS
Long-term debt consisted of the following at December 31, 1999 and
June 30, 1999:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1999 1999
------------ --------
(IN THOUSANDS)
<S> <C> <C>
Senior term notes, trance A................................. $ 35,000 $ --
Senior term notes, tranche B................................ 100,000 --
Revolving credit agreement.................................. 4,000 4,000
Senior notes................................................ -- 12,000
Industrial revenue bonds.................................... 10,000 10,000
Senior subordinated notes--face value of $100.0 million
discounted at 98.046% and net of $3.5 million original
issue discount arising from issuance by O'Sullivan
Holdings of warrants to buy common and Series B junior
preferred stock........................................... 94,569 --
-------- -------
Total debt.................................................. 243,569 26,000
Less current maturities..................................... (6,000) (4,000)
-------- -------
$237,569 $22,000
======== =======
</TABLE>
F-28
<PAGE>
O'SULLIVAN INDUSTRIES, INC.
(A WHOLLY-OWNED SUBSIDIARY OF O'SULLIVAN INDUSTRIES HOLDINGS, INC.)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 8--LONG-TERM DEBT AND OTHER BORROWING ARRANGEMENTS (CONTINUED)
O'Sullivan is the obligor under a senior secured credit facility totaling
$175.0 million and $100.0 million of senior subordinated notes. O'Sullivan
Industries - Virginia, Inc., a subsidiary of O'Sullivan, is the obligor for
$10.0 million of variable rate industrial revenue bonds.
The senior secured credit facility is comprised of the of the following:
- a $35.0 million term loan facility payable in 24 quarterly
installments beginning March 31, 2000.
- a $100.0 million term loan facility repayable in 26 quarterly
installments beginning March 31, 2001; and
- a $40.0 million revolving credit facility due November 30, 2005,
which includes a $15.0 million letter of credit subfacility and a
$5.0 million swing line subfacility. At December 31, 1999 the Company
had $4.0 million outstanding on the credit facility and approximately
$12.8 million of letters of credit outstanding.
O'Sullivan's obligations under the senior secured facility are secured by
first priority liens and security interests in the stock of O'Sullivan and
O'Sullivan Industries - Virginia, Inc. and substantially all of the assets of
O'Sullivan and O'Sullivan Industries - Virginia, Inc.
At O'Sullivan's option, borrowings under the senior secured credit
facility accrue interest at varying rates based on (a) a Eurodollar rate plus an
applicable margin or (b) an applicable margin plus the highest of a bank's prime
rate, the federal funds effective rate plus 0.5% or three-month certificates of
deposit secondary market rates as adjusted for statutory reserves plus 1.0%.
Until June 30, 2000, the applicable margins for the $35.0 million term loan and
the revolving credit facility are fixed at 3.25% for Eurodollar loans and 2.25%
for base rate loans. After June 30, 2000, the applicable margins vary based upon
O'Sullivan Industries, Inc.'s leverage ratio. The applicable margins for the
$100.0 million term loan are 3.75% for Eurodollar loans and 2.75% for base rate
loans for the life of the loan. O'Sullivan also pays a quarterly fee equal to
0.5% of the unused commitment under the senior secured credit facility. The
weighted averaged interest rate at December 31, 1999 was approximately 9.8%.
O'Sullivan is subject to various covenants associated with the
$175.0 million senior secured credit facility such as leverage and coverage
ratios and other customary covenants. These covenants limited our additional
borrowing capacity at December 31, 1999 to $23.2 million under the senior credit
facilities. In addition, O'Sullivan has certain restrictions on its ability to
incur additional debt, make capital expenditures, pay dividends, sell its
assets, issue securities, engage in acquisitions, and other restrictions. At
December 31, 1999, O'Sullivan was in compliance with all debt covenants.
The senior subordinated notes totaling $100.0 million bear interest at
the rate of 13.375% per annum and are due in 2009. Interest is payable
semiannually on April 15 and October 15. The senior subordinated notes contain
various covenants including restrictions on additional indebtedness based upon
EBITDA coverage. In connection with these notes, O'Sullivan Holdings issued
warrants to purchase 93,273 shares of O'Sullivan Holdings common stock at an
exercise price of $0.01 per shares and 39,273 shares of O'Sullivan Holdings
Series B junior preferred stock at an exercise price of $0.01 per share. The
warrants were recorded at their fair value of $3.5 million.
The original issue discount and the warrants are amortized over the life
of the notes using the effective interest rate method.
F-29
<PAGE>
O'SULLIVAN INDUSTRIES, INC.
(A WHOLLY-OWNED SUBSIDIARY OF O'SULLIVAN INDUSTRIES HOLDINGS, INC.)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 8--LONG-TERM DEBT AND OTHER BORROWING ARRANGEMENTS (CONTINUED)
Expenses related to the issuance of the debt financing were approximately
$12.4 million and have been capitalized as other assets. Of this amount,
$1.0 million was paid to BRS.
NOTE 10--RELATED PARTY TRANSACTIONS
BRS provided various advisory services to O'Sullivan Holdings related to
the merger. These services included arranging and negotiating the financing of
the merger, arranging and structuring the transaction, planning O'Sullivan
Holdings' capital structure and related services. BRS received a transaction fee
of $4.0 million from O'Sullivan Holdings and expenses of $62,000 for these
services. Of the $4.0 million transaction fee, $3.0 million was recognized as a
merger related expense by O'Sullivan Holdings and $1.0 million was capitalized
into loan fees at O'Sullivan.
BRS also provided $15.0 million in financing pursuant to a securities
purchase agreement with O'Sullivan Holdings. BRS received a transaction fee of
$300,000 in connection with this financing. BRS later sold this note and the
related warrants to an unrelated third party.
O'Sullivan entered into a management services agreement with BRS for
strategic and financial advisory services on November 30, 1999. The annual fee
for such services are the greater of (a) 1% of O'Sullivan's consolidated
earnings before interest, taxes, depreciation, and amortization or (b) $300,000.
Under the management services agreement, BRS can also receive reimbursement for
expenses which are limited to $50,000 a year under the senior credit facility
agreement. The accrued management fee for the period ended December 31, 1999 was
$50,000 and is included in accounts payable
The senior credit facilities and the management services agreement both
contain certain restrictions on the payment of the management fee. The
management services agreement provides that no cash payment for the management
fee can be made unless the fixed charge coverage ratio for O'Sullivan's most
recently ended four full fiscal quarters would have been at least 2.0 to 1.0.
All fees and expenses under the management services agreement are subordinated
to the senior subordinated notes.
At December 31, 1999, O'Sullivan held a note receivable with a balance of
approximately $260,000 from an officer of O'Sullivan. O'Sullivan loaned the
officer money to purchase common stock and series B junior preferred stock of
O'Sullivan in the merger. The note bears interest at the rate of 9% per annum
and matures on November 30, 2009, or earlier if there is a change of control.
The receivable is recorded on the balance sheet in other assets.
NOTE 11--COMMITMENTS AND CONTINGENCIES
TANDY LITIGATION
On June 29, 1999, Tandy Corporation filed a complaint against O'Sullivan
Holdings in a District Court of Texas in Tarrant County. The complaint relates
to a potential reduction in O'Sullivan Holdings' tax benefit payments to Tandy
that would result from increased interest expense after the completion of the
merger, and certain expenses incurred to consummate the merger. Tandy claims
that this reduction would violate the tax sharing and tax reimbursement
agreement. The complaint sought a court order compelling O'Sullivan Holdings to
submit to a dispute resolution process. Alternatively, the complaint sought a
declaratory judgment that after the merger O'Sullivan Holdings must continue to
make tax-sharing payments to Tandy as if the merger had not occurred.
F-30
<PAGE>
O'SULLIVAN INDUSTRIES, INC.
(A WHOLLY-OWNED SUBSIDIARY OF O'SULLIVAN INDUSTRIES HOLDINGS, INC.)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 11--COMMITMENTS AND CONTINGENCIES (CONTINUED)
On September 9, 1999, Tandy filed a motion for summary judgment in its
lawsuit against O'Sullivan Holdings. The motion argued that Tandy was entitled
to a court order requiring O'Sullivan Holdings to commence dispute resolution
procedures under the tax sharing agreement. Because O'Sullivan Holdings has made
all payments required under the tax sharing agreement and because no merger had
occurred, O'Sullivan Holdings believed that Tandy's lawsuit was premature since
there could not be a dispute under the tax sharing agreement with respect to the
increased interest resulting from the merger before the merger was completed.
Alternatively, Tandy argued that it was entitled to a court order preventing
O'Sullivan Holdings from deducting the interest expense related to the merger
from O'Sullivan Holdings' tax-sharing payments to Tandy.
On October 8, 1999, the District Court ruled on Tandy's motion for
summary judgment. It found that the dispute resolution provision of the tax
sharing agreement was triggered, and ordered that O'Sullivan Holdings begin the
dispute resolution process according to the terms of the tax sharing agreement.
The District Court denied all other relief sought by Tandy. Pursuant to the
dispute resolution provisions, Tandy and O'Sullivan Holdings representatives
have discussed the issues in the dispute but did not reach a resolution.
Accordingly, Tandy and O'Sullivan O'Sullivan Holdings are in the process of
selecting the law firms or accounting firms to act as arbitrators in the
dispute.
For the six months ended December 31, 1999, O'Sullivan Holdings paid
Tandy $2.5 million under the agreement. If the arbitration ruling is in Tandy's
favor, O'Sullivan Holdings' liability would be about $2.0 million higher.
O'Sullivan Holdings believes that Tandy's position is without merit and intends
to defend itself vigorously.
LITIGATION CHALLENGING THE MERGER
On May 18, 1999, five lawsuits were filed as class actions in the
Delaware Court of Chancery seeking to enjoin the merger or, in the alternative,
to rescind the merger and recover monetary damages. The complaints name as
defendants O'Sullivan Holdings, all of its directors and, in some cases, BRS.
The complaints allege that our directors breached their fiduciary duties by
approving the merger. The complaints also allege that the price terms of the
merger were inadequate and unfair to O'Sullivan Holdings' stockholders. In
addition, the complaints allege that the management participants in the buyout
have conflicts of interest that have prevented them from acting in the best
interests of O'Sullivan Holdings stockholders and that make it inherently unfair
for BRS and the management participants in the buyout to acquire 100% of the
O'Sullivan Holdings stock. In the cases naming BRS as a defendant, BRS is
alleged to have aided and abetted the alleged breaches of fiduciary duties. The
defendants do not have to respond to the lawsuits until after the plaintiffs
have combined their complaints into one complaint. A consolidation order was
signed on July 22, 1999 by the court. This order requires the plaintiffs to
combine their complaints into one complaint. However, no date has been set by
which the defendants must move or answer in response to the combined complaint.
O'Sullivan believes that the claims are without merit and intends to defend the
lawsuits vigorously.
F-31
<PAGE>
$100,000,000
[LOGO]
100,000 UNITS CONSISTING OF
13 3/8% SERIES B SENIOR SUBORDINATED NOTES
DUE 2009 OF O'SULLIVAN INDUSTRIES, INC.
-------------------------------
PROSPECTUS
, 2000
---------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
O'Sullivan Industries Holdings, Inc. is a corporation organized under the
laws of the State of Delaware. Article VIII of O'Sullivan Industries
Holdings, Inc.'s Amended Restated Certificate of Incorporation provides that:
A. GENERAL
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of NOLO CONTENDERE or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
B. DERIVATIVE ACTIONS.
Furthermore, the Corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that he is or was a director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Corporation, provided that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the Corporation unless and only to the extent that
the Court of Chancery of the State of Delaware or the court in which such action
or suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses which
the Court of Chancery or such other court shall deem proper.
C. INDEMNIFICATION IN CERTAIN CASES.
To the extent that a present or former director, officer, employee or
agent of the Corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in Sections A and B of
this Article VIII, or in defense of any claim, issue or matter therein, he shall
he indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
D. PROCEDURE.
Any indemnification under Sections A and B of this Article VIII (unless
ordered by a court) shall be made by the Corporation only as authorized in the
specific case upon a determination that indemnification of the present or former
director, officer, employee or agent is proper in the circumstances because he
has met the
II-1
<PAGE>
applicable standard of conduct set forth in such Sections A and B. Such
determination shall be made (a) by the Board of Directors by a majority vote of
a quorum consisting of directors who were not parties to such action, suit or
proceeding, or (b) if such a quorum is not obtainable, or even if obtainable, a
quorum of disinterested directors so directs, by independent legal counsel in a
written opinion, or (c) by the stockholders.
E. ADVANCES FOR EXPENSES.
Expenses incurred in defending a civil or criminal action, suit or
proceeding shall be paid by the Corporation in advance of the final disposition
of such action, suit or proceeding upon receipt of an undertaking by or on
behalf of the present or former director, officer, employee or agent to repay
such amount if it shall be ultimately determined that he is not entitled to be
indemnified by the Corporation as authorized in this Article VIII.
F. RIGHTS NOT EXCLUSIVE.
The indemnification and advancement of expenses provided by, or granted
pursuant to, the other subsections of this Article VIII shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any law, by-law, agreement, vote
of stockholders or disinterested directors or otherwise, both as to action in
his official capacity and as to action in another capacity while holding such
office.
O'Sullivan Industries, Inc. is a corporation organized under the laws of
the State of Delaware. Article XI of O'Sullivan Industries, Inc.'s Certificate
of Incorporation, as amended pursuant to an amendment filed on November 30,
1987, provides as follows:
ELEVENTH: The personal liability of the directors of the
Corporation is hereby eliminated to the fullest extent permitted
by paragraph (7) of subsection (b) of Section 102 of the General
Corporation Law of the State of Delaware, as the same may be
amended and supplemented. No amendment to or repeal of this
Article ELEVENTH 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 omission of such director
occurring prior to such amendment or repeal.
O'Sullivan Industries - Virginia, Inc. is a corporation organized under
the laws of the State of Virginia. Article VI of O'Sullivan Industries -
Virginia, Inc.'s Articles of Incorporation provides as follows:
In any proceeding brought by a shareholder in the right of the
corporation or brought by or on behalf of shareholders of the
corporation, the officers and directors of the corporation shall
not be liable for monetary damages in any amount arising out of
any omission, act, transaction, occurrence or course of conduct
and such liability is eliminated to the fullest extent permitted
by the Virginia Stock Corporation Act, Section 13.1-692.1 of the
Code of Virginia, as the same may be amended and supplemented. No
amendment to or repeal of this ARTICLE SIXTH shall apply to or
have any effect on the liability or alleged liability of any
officer or director of the corporation for or with respect to any
omissions, acts, transactions, occurrences or course of conduct of
such officers and directors occurring prior to such amendment or
repeal.
Section 3.14 of O'Sullivan Industries - Virginia, Inc.'s By-Laws provide
as follows:
The Board of Directors shall authorize the corporation to pay
expenses incurred by, or to satisfy a judgment or fine rendered or
levied against present or former Directors, officers, or employees
of this corporation as provided by the Virginia Stock Corporation
Act, Sections 13.1-698 and 13.1-702 of the Code of Virginia.
II-2
<PAGE>
O'Sullivan maintains directors' and officers' liability insurance which
provides for payment, on behalf of the directors and officers thereof and its
subsidiaries, of certain losses of such persons (other than matters uninsurable
under law) arising from claims, including claims arising under the Securities
Act of 1933, as amended, for acts or omissions by such persons while acting as
directors or officers thereof and/or its subsidiaries, as the case may be.
O'Sullivan has also entered into Indemnification Agreements with each of
its officers and directors. The agreements contractually obligate O'Sullivan
Holdings to indemnify the officers and directors to the fullest extent of
applicable law and address certain procedural issues related to such
indemnification.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits.
See Exhibit Index.
(b) Financial Statement Schedules.
All schedules have been omitted because they are not applicable or
because the required information is shown in the financial statements or notes
thereto.
ITEM 22. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement;
(A) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(B) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which individually or in the
aggregate, represent a fundamental change in the information in the
registration statement;
(C) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
(2) That, for the purpose of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at the time shall be deemed to be the initial
BONA FIDE offering thereof;
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of
the offering.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Securities Act") may be permitted to directors, officers and
controlling persons of the registrant pursuant to the provisions described under
Item 20 or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
II-3
<PAGE>
The undersigned registrant hereby undertakes that:
(4) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<C> <S>
1.1 Purchase Agreement dated as of November 30, 1999 by and
among O'Sullivan Industries, Inc., O'Sullivan Industries
Holdings, Inc., O'Sullivan Industries-Virginia, Inc. and
Lehman Brothers
2.1 Amended and Restated Agreement of Merger dated as of
October 18, 1999 by and among OSI Acquisition, Inc. and
O'Sullivan Industries Holdings, Inc., (incorporated by
reference to Appendix A to Proxy Statement / Prospectus
included in Registration Statement on Form S-4 (File No.
333-81631))
3.1 O'Sullivan Industries, Inc. Certificate of Incorporation
3.2 O'Sullivan Industries-Virginia, Inc. Articles of
Incorporation
3.3 By-laws of O'Sullivan Industries, Inc.
3.4 By-laws of O'Sullivan Industries-Virginia, Inc.
4.1 Indenture dated as of November 30, 1999 by and among
O'Sullivan Industries, Inc., O'Sullivan Industries -
Virginia, Inc. as Guarantor and the Norwest Bank of
Minnesota, National Association, as Trustee (incorporated by
reference to Exhibit 4.4 to Quarterly Report on Form 10-Q of
O'Sullivan Industries Holdings, Inc. for this quarter ended
December 31, 1999 (File No. 0-28493))
4.2 Warrant Agreement dated as of November 30, 1999 between
O'Sullivan Industries Holdings, Inc. and Norwest Bank
Minnesota, National Association, as Warrant Agent, relating
to warrants to purchase 39,273 shares of O'Sullivan
Industries Holdings, Inc. Series B junior preferred stock,
including form of warrant certificate (incorporated by
reference to Exhibit 4.5 to Quarterly Report Form 10-Q of
O'Sullivan Industries Holdings, Inc. for the quarter ended
December 31, 1999 (File No. 0-28493))
4.3 Warrant Agreement dated as of November 30, 1999 between
O'Sullivan Industries Holdings, Inc. and Norwest Bank
Minnesota, National Association, as Warrant Agent, relating
to warrants to purchase 93,273 shares of O'Sullivan
Industries Holdings, Inc. common stock, including form of
warrant certificate (incorporated by reference to Exhibit
4.6 to Quarterly Report Form 10-Q of O'Sullivan Industries
Holdings, Inc. for the quarter ended December 31, 1999 (File
No. 0-28493))
4.4 Amended and Restated Warrant Agreement dated as of
January 31, 2000 between O'Sullivan Industries Holdings,
Inc. and the holder thereof relating to warrants to purchase
39,273 shares of O'Sullivan Industries Holdings', Inc.
Series B junior preferred stock, including form of warrant
certificate (incorporated by reference to Exhibit 4.7 to
Quarterly Report Form 10-Q of O'Sullivan Industries
Holdings, Inc. for the quarter ended December 31, 1999 (File
No. 0-28493))
4.5 Amended and Restated Warrant Agreement dated as of
January 31, 2000 between O'Sullivan Industries Holdings,
Inc. and the holder thereof relating to warrants to purchase
93,273 shares of O'Sullivan Industries Holdings, Inc. common
stock, including form of warrant certificate (incorporated
by reference to Exhibit 4.8 to Quarterly Report Form 10-Q of
O'Sullivan Industries Holdings, Inc. for the quarter ended
December 31, 1999 (File No. 0-28493))
5 Opinion of Kirkland & Ellis.
8 Opinion of Kirkland & Ellis with respect to federal tax
consequences.
9 Stockholders Agreement dated November 30, 1999 by and among
O'Sullivan Industries Holdings, Inc., Bruckmann, Rosser,
Sherrill & Co. II L.P., each of the persons executing and
investor or executive signature page thereto and each of the
warrant holders executing a warrant holder signature page
attached thereto and such other persons acquiring a warrant
after the date thereof. (incorporated by reference to
Exhibit 10.5 to Quarterly Report Form 10-Q of O'Sullivan
Industries Holdings, Inc. for the quarter ended
December 31, 1999 (File No. 0-028493))
</TABLE>
II-5
<PAGE>
<TABLE>
<C> <S>
10.1 Debt Registration Rights Agreement dated as of November 30,
1999 by and among O'Sullivan Industries, Inc., Lehman
Brothers and O'Sullivan Industries-Virginia, Inc. as
guarantor
10.2 Stock Purchase Agreement dated as of November 30, 1999 by
and among Bruckmann, Rosser, Sherrill & Co. II, L.P. and the
individuals whose names appear on the signature pages
attached thereto
10.3 Unit Agreement dated as of November 30, 1999 by and among
O'Sullivan Industries, Inc., O'Sullivan Industries Holdings,
Inc., O'Sullivan Industries-Virginia, Inc. and National Bank
of Minnesota, National Association
10.4 Credit Agreement dated as of November 30, 1999 by and among
O'Sullivan Industries, Inc., O'Sullivan Industries Holdings,
Inc., Lehman Brothers Inc. and Lehman Commercial Paper, Inc.
(incorporated by reference to Exhibit 10.1 to Quarterly
Report on Form 10-Q of O'Sullivan Industries Holdings, Inc.
for the quarter ended December 31, 1999 (File No. 0-02843))
10.5 Deed of Trust, Assignment of Leases and Rents, Security
Agreement and Fixture Filing dated as of November 30, 1999
from O'Sullivan Industries, Inc. to the trustee named
therein for the benefit of Lehman Brothers Inc., Lehman
Commercial Paper, Inc. and the several lenders and financial
institutions which become parties thereto from time to time
10.6 Guarantee and Collateral Agreement dated as of November 30,
1999 by and among O'Sullivan Industries, Inc., O'Sullivan
Industries Holdings, Inc., O'Sullivan Industries - Virginia,
Inc., and Lehman Commercial Paper, Inc.
10.7 Intellectual Property Security Agreement dated as of
November 30, 1999 by and among O'Sullivan Industries, Inc.
and Lehman Commercial Paper, Inc.
10.8 Intercompany Subordinated Demand Promissory Note dated as of
November 30, 1999 by and among O'Sullivan Industries, Inc.
and O'Sullivan Industries - Virginia, Inc.
10.9 Management Stock Agreement dated November 30, 1999 by and
among O'Sullivan Holdings, Inc., Bruckmann, Rosser, Sherrill
& Co. II, L.P., and the individuals whose signatures appear
on the signature pages thereto (incorporated by reference to
Exhibit 10.7 to Quarterly Report on Form 10-Q of O'Sullivan
Industries Holdings, Inc. for the quarter ended
December 31, 1999 (File No. 0-28493))
10.10 Subscription Agreement dated November 30, 1999 by and among
OSI Acquisition, Inc., Bruckmann, Rosser, Sherrill & Co. II,
L.P. and the individuals whose signatures appear on the
signature pages thereto
10.11 O'Sullivan Industries Holdings, Inc. Common Stock Option
Plan
10.12 O'Sullivan Industries Holdings, Inc. Preferred Stock Option
Plan (incorporated by reference to Exhibit 10.3 to Quarterly
Report on Form 10-Q of O'Sullivan Industries Holdings, Inc.
for the quarter ended December 31, 1999 (File No. 0-28493))
10.13 Form of Preferred Stock Option Agreement dated November 30,
1999 by and among O'Sullivan Industries Holdings, Inc.
(incorporated by reference to Exhibit 10.4 to Quarterly
Report on Form 10-Q of O'Sullivan Industries Holdings, Inc.
for the quarter ended December 31, 1999 (File No. 0-28493))
10.14 Registration Rights Agreement dated November 30, 1999 by and
among O'Sullivan Industries Holdings, Inc., Bruckmann,
Rosser, Sherrill & Co. II, L.P. and the individuals who
executed executive signature pages or warrant holder
signature pages or acquired warrants after execution of the
signature pages attached thereto (incorporated by reference
to Exhibit 10.6 to Quarterly Report on Form 10-Q of
O'Sullivan Industries Holdings, Inc. for the quarter ended
December 31, 1999 (File No. 0-28493))
10.15 Agreement and Acknowledgement of Optionee dated
November 30, 1999 by and among O'Sullivan Industries
Holdings, Inc. and each of the individuals who executed an
individual signature page thereto
</TABLE>
II-6
<PAGE>
<TABLE>
<C> <S>
10.16 Form of Election to Roll Shares dated November 30, 1999 by
and among O'Sullivan Industries Holdings, Inc. and each of
the individuals who executed an individual signature page
thereto
10.17 Management Services Agreement dated November 30, 1999 by and
among O'Sullivan Industries Holdings Inc. and Bruckmann,
Rosser, Sherrill & Co. II, L.P. (incorporated by reference
to Exhibit 10.2 to Quarterly Report on Form 10-Q of
O'Sullivan Industries Holdings, Inc. for the quarter ended
December 31, 1999 (File No. 0-28493))
10.18 Form of Amended and Restated Termination Protection
Agreement between O'Sullivan Holdings and certain members of
management (incorporated by reference to Exhibit 10.2 to
Quarterly Report on Form 10-Q for the quarter ended
March 31, 1996 (File No. 1-12754))
10.19 Form of Termination Protection Agreement between O'Sullivan
and certain members of management (incorporated by reference
to Exhibit 10.3 to Annual Report on Form 10-K for the year
ended June 30, 1999 (File No. 1-12754))
10.20 O'Sullivan Industries Holdings, Inc. Deferred Compensation
Plan (the "DCP") (incorporated by reference to Exhibit 10.2
to Quarterly Report on Form 10-Q for the quarter ended
March 31, 1997 (File No. 1-12754))
10.20a First Amendment to the DCP (incorporated by reference to
Exhibit 10.4a to Annual Report on Form 10-K for the year
ended June 30, 1997 (File No. 1-12754))
10.20b Second Amendment to the DCP
10.21 Amended and Restated Tax Sharing and Tax Reimbursement
Agreement dated as of June 19, 1997 between O'Sullivan
Holdings and Tandy Corporation and TE Electronics Inc.
(incorporated by reference to Exhibit 10.5 to Annual Report
on Form 10-K for the year ended June 30, 1997 (File
No. 1-12754))
10.22 Form of Indemnity Agreement between O'Sullivan Holdings and
certain directors and officers (incorporated by reference to
Exhibit 10.7 to Amendment No. 1 to Registration Statement on
Form S-1 (File No. 33-72120))
10.23 Retirement and Consulting Agreement, Release and Waiver of
Claims between O'Sullivan Holdings and Daniel F. O'Sullivan
dated October 16, 1998 (incorporated by reference to
Exhibit 10 to Quarterly Report on Form 10-Q for the quarter
ended September 30, 1998 (File No. 1-12754))
10.23a Amendment to Retirement Agreement dated as of May 16, 1999
between O'Sullivan Holdings and Daniel F. O'Sullivan
(incorporated by reference to Exhibit 10.9a to Annual Report
on Form 10-K for the year ended June 30, 1999 (File
No. 1-12754))
10.24 Description of O'Sullivan's incentive plan (incorporated by
reference to Exhibit 10.13 to Annual Report on Form 10-K for
the year ended June 30, 1999 (File No. 1-12754))
12 Statement of Ratio of Earnings to Fixed Charges
</TABLE>
II-7
<PAGE>
<TABLE>
<C> <S>
21 Subsidiaries of the Registrant
23.1 Consent of PricewaterhouseCoopers LLP
23.2 Consent of Kirkland & Ellis (included in Exhibit 5.1)
23.3 Consent of Blackwell Sanders Peper Martin LLP
24 Powers of Attorney (included in signature pages)
25 Statement of Eligibility of Trustee on Form T-1
27.1 Financial Data Schedule for the fiscal year ended June 30,
1999
27.2 Financial Data Schedule for the six months ended December
31, 1999
99.1 Form of Letter of Transmittal
99.2 Form of Letter of Notice of Guaranteed Delivery
99.3 Form of Tender Instructions
</TABLE>
II-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Lamar, State of Missouri on February 28, 2000.
<TABLE>
<S> <C> <C>
O'SULLIVAN INDUSTRIES, INC.
By: /s/ RICHARD D. DAVIDSON
--------------------------------------------------
Richard D. Davidson
PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of Daniel F. O'Sullivan,
Richard D. Davidson, and Phillip J. Pacey, whose signatures appear below
constitute and appoint Phillip J. Pacey and Rowland H. Geddie, III as true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities (including his capacity as a director and/or officer of O'Sullivan
Industries, Inc.), to sign any or all amendments (including post-effective
amendments) to this registration statement and any subsequent registration
statement filed pursuant to Rule 462(b) under the Securities Act of 1933, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto each said
attorney-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, hereby ratifying and confirming all that each said attorney-in-fact and
agent, or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed by the following persons in
the capacities indicated on February 28, 2000.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
--------- --------
<S> <C>
/s/ DANIEL F. O'SULLIVAN
------------------------------------------- Chairman of the Board of Directors
Daniel F. O'Sullivan
/s/ RICHARD D. DAVIDSON
------------------------------------------- President and Chief Executive Officer
Richard D. Davidson (Principal Executive Officer)
/s/ PHILLIP J. PACEY
------------------------------------------- Senior Vice President and Chief Financial Officer
Phillip J. Pacey (Principal Financial and Accounting Officer)
</TABLE>
II-9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Lamar, State of Missouri on February 28, 2000.
<TABLE>
<S> <C> <C>
O'SULLIVAN INDUSTRIES, INC.
By: /s/ STEPHEN F. EDWARDS
--------------------------------------------------
Stephen F. Edwards
DIRECTOR
</TABLE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Stephen F. Edwards as true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities (including
his capacity as a director and/or officer of O'Sullivan Industries, Inc.), to
sign any or all amendments (including post-effective amendments) to this
registration statement and any subsequent registration statement filed pursuant
to Rule 462(b) under the Securities Act of 1933, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-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, hereby ratifying and
confirming all that said attorney-in-fact and agent, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed by the following persons in
the capacities indicated on February 28, 2000.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
--------- --------
<S> <C>
/s/ STEPHEN F. EDWARDS
------------------------------------------- Director
Stpehen F. Edwards
/s/ HAROLD O. ROSSER
------------------------------------------- Director
Harold O. Rosser
</TABLE>
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Lamar, State of Missouri on February 28, 1999.
<TABLE>
<S> <C> <C>
O'SULLIVAN INDUSTRIES - VIRGINIA, INC.
By: /s/ RICHARD D. DAVIDSON
--------------------------------------------------
Richard D. Davidson
PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of Daniel F. O'Sullivan,
Richard D. Davidson, and Phillip J. Pacey, whose signatures appear below
constitute and appoint Rowland H. Geddie, III and Phillip J. Pacey as true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities (including his capacity as a director and/or officer of O'Sullivan
Industries - Virginia, Inc.), to sign any or all amendments (including
post-effective amendments) to this registration statement and any subsequent
registration statement filed pursuant to Rule 462(b) under the Securities Act of
1933, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
each said attorney-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, hereby ratifying and confirming all that each said attorney-in-fact and
agent, or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed by the following persons in
the capacities indicated on February 28, 1999.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
--------- --------
<S> <C>
/s/ DANIEL F. O'SULLIVAN
------------------------------------------- Chairman
Daniel F. O'Sullivan
/s/ RICHARD D. DAVIDSON
------------------------------------------- President and Chief Executive Officer
Richard D. Davidson (Principal Executive Officer)
/s/ PHILLIP J. PACEY
------------------------------------------- Senior Vice President and Chief Financial Officer
Phillip J. Pacey (Principal Financial and Accounting Officer)
</TABLE>
II-11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Lamar, State of Missouri on February 28, 2000.
<TABLE>
<S> <C> <C>
O'SULLIVAN INDUSTRIES - VIRGINIA, INC.
By: /s/ STEPHEN F. EDWARDS
--------------------------------------------------
Stephen F. Edwards
DIRECTOR
</TABLE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Stephen F. Edwards as true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities (including
his capacity as a director and/or officer of O'Sullivan Industries - Virginia,
Inc.), to sign any or all amendments (including post-effective amendments) to
this registration statement and any subsequent registration statement filed
pursuant to Rule 462(b) under the Securities Act of 1933, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-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, hereby ratifying and
confirming all that said attorney-in-fact and agent, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed by the following persons in
the capacities indicated on February 28, 2000.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
--------- --------
<S> <C>
/s/ STEPHEN F. EDWARDS
------------------------------------------- Director
Stpehen F. Edwards
/s/ HAROLD O. ROSSER
------------------------------------------- Director
Harold O. Rosser
</TABLE>
II-12
<PAGE>
Exhibit 1.1
EXECUTION COPY
O'SULLIVAN INDUSTRIES, INC.
O'SULLIVAN INDUSTRIES HOLDINGS, INC.
as Issuers
O'SULLIVAN INDUSTRIES - VIRGINIA, INC.
as Guarantor
$100,000,000
100,000 UNITS CONSISTING OF
133/8% SENIOR SUBORDINATED NOTES DUE 2009
OF O'SULLIVAN INDUSTRIES, INC. AND
WARRANTS TO PURCHASE CAPITAL STOCK OF
O'SULLIVAN INDUSTRIES HOLDINGS, INC.
PURCHASE AGREEMENT
November 23, 1999
LEHMAN BROTHERS INC.
Three World Financial Center
New York, New York 10285
Dear Sirs:
O'Sullivan Industries, Inc., a Delaware corporation (the "COMPANY") and
O'Sullivan Industries Holdings, Inc., a Delaware corporation ("HOLDINGS" and,
together with the Company, the "ISSUERS"), propose to issue and sell to Lehman
Brothers Inc. (the "INITIAL PURCHASER"), upon the terms and considerations set
forth in this agreement ("AGREEMENT"), 100,000 Units (the "UNITS"), each
consisting of $1,000 principal amount of the Company's 133/8% Senior
Subordinated Notes due 2009 (the "SERIES A NOTES") and one warrant
(collectively, the "COMMON WARRANTS") to purchase 0.9327 shares of common stock
of Holdings (the "COMMON STOCK") and one warrant (collectively, the "PREFERRED
WARRANTS" and, together with the Common Warrants, the "WARRANTS") to purchase
0.3927 shares of series B junior preferred stock of Holdings (the "PREFERRED
STOCK"), in each case with a par value of $0.01 per share, and each at an
exercise price of $0.01 per share. Shares of Common Stock and Preferred Stock
issuable upon exercise of the Warrants are collectively referred to herein as
the "WARRANT SHARES." The Units, the Notes (as defined herein), the Warrants and
the Warrant Shares are collectively referred to herein as the "SECURITIES." The
Securities will have terms and provisions which are summarized in the Offering
Memorandum dated as of the date hereof. The Series A Notes are to be issued
pursuant to an indenture (the "INDENTURE") to be entered into among the Company,
the Guarantor (as defined below) and Norwest Bank Minnesota, NA, as trustee (the
"TRUSTEE"). The Series A Notes and the Exchange Notes (as defined herein)
issuable in exchange therefor
<PAGE>
are collectively referred to as the "NOTES." The Notes will be guaranteed (the
"SUBSIDIARY GUARANTEE") by O'Sullivan Industries - Virginia, Inc. (the
"GUARANTOR"). The Common Warrants and the Preferred Warrants are to be issued
pursuant to separate warrant agreements, each to be dated the Closing Date
(collectively, the "WARRANT AGREEMENTS"), between Holdings and Norwest Bank
Minnesota, NA, as warrant agent (the "WARRANT AGENT"). The Units are to be
issued pursuant to a unit agreement to be dated the Closing Date (the "UNIT
AGREEMENT") among the Issuers, the Guarantor and Norwest Bank Minnesota, NA, as
unit agent (the "UNIT AGENT"). This is to confirm the agreement concerning the
purchase of the Units from the Issuers by the Initial Purchaser. Capitalized
terms used but not defined herein shall have the meanings given to such terms in
the Indenture.
Proceeds from the offering of the Securities will be used in connection
with the recapitalization (the "RECAPITALIZATION") pursuant to the terms of an
Amended and Restated Agreement and Plan of Merger, dated as of October 18, 1999
(the "AGREEMENT AND PLAN OF MERGER"), between OSI Acquisition, Inc. ("OSI") and
Holdings. As part of the Agreement and Plan of Merger, OSI shall be merged with
and into Holdings, with Holdings being the surviving corporation. The Agreement
and Plan of Merger, the related agreements governing the terms of the
Recapitalization and all closing documents relating to the closing of the
Recapitalization are herein referred to as the "RECAPITALIZATION DOCUMENTS."
The Units will be offered and sold to the Initial Purchaser pursuant to
an exemption from the registration requirements under the Securities Act of
1933, as amended (the "SECURITIES ACT"). The Company and the Guarantor have
prepared a preliminary offering memorandum, dated October 29, 1999 (the
"PRELIMINARY OFFERING MEMORANDUM"), setting forth information regarding the
Company, the Guarantor, the Notes and the Subsidiary Guarantee and the Issuers
and the Guarantor have prepared an offering memorandum, dated November 23, 1999
(the "OFFERING MEMORANDUM"), setting forth information regarding the Issuers,
the Guarantor, the Securities and the Subsidiary Guarantee. Any references
herein to the Preliminary Offering Memorandum and the Offering Memorandum shall
be deemed to include all documents incorporated by reference and all amendments
and supplements thereto. The Issuers and the Guarantor hereby confirm that they
have authorized the use of the Preliminary Offering Memorandum and the Offering
Memorandum in connection with the offering and resale of the Units by the
Initial Purchaser.
It is understood and acknowledged that upon original issuance thereof,
and until such time as the same is no longer required under the applicable
requirements of the Securities Act, the Units (and all securities issued in
exchange therefor or in substitution thereof) shall bear the following legend:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
(THE "SECURITIES ACT"), AND THIS SECURITY MAY NOT BE OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT OR IN ACCORDANCE WITH AN APPLICABLE EXEMPTION
FROM THE REGISTRATION
2
<PAGE>
REQUIREMENTS OF THE SECURITIES ACT (SUBJECT TO THE DELIVERY OF SUCH
EVIDENCE, IF ANY, REQUIRED UNDER THE [INDENTURE] [WARRANT AGREEMENT]
PURSUANT TO WHICH THIS SECURITY IS ISSUED) AND IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY
OTHER JURISDICTION. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS
HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM
THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE
144A THEREUNDER OR ANOTHER EXEMPTION UNDER THE SECURITIES ACT. THE
HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE
COMPANY THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED, ONLY (1)(a) TO A PERSON WHO THE SELLER REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144
UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A FOREIGN
PURCHASER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER
THE SECURITIES ACT OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN
OPINION OF COUNSEL IF THE COMPANY SO REQUESTS), (2) TO THE COMPANY OR
(3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE,
IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER
WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER
FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS
SET FORTH IN (A) ABOVE."
You have advised the Issuers that you will make offers (the "EXEMPT
RESALES") of the Units purchased by you hereunder on the terms set forth in the
Offering Memorandum, as amended or supplemented, solely (i) to persons whom you
reasonably believe to be "qualified institutional buyers" as defined in Rule
144A under the Securities Act ("QIBS") and (ii) outside the United States to
certain persons in offshore transactions in reliance on Regulation S
("REGULATION S") under the Securities Act (the persons specified in clauses (i)
and (ii) being referred to herein as the "ELIGIBLE PURCHASERS"). As used herein,
the terms "offshore transaction," "United States" and "U.S. person" have the
respective meanings given to them in Regulation S. You will offer the Units to
Eligible Purchasers initially at a price equal to $980.46 per Unit. Such price
may be changed at any time without notice.
3
<PAGE>
Holders (including subsequent transferees) of the Series A Notes will
have the registration rights described in the Offering Memorandum, which will be
set forth in the registration rights agreement related thereto (the "DEBT
REGISTRATION RIGHTS AGREEMENT"), to be dated the Closing Date, in form and
substance reasonably satisfactory to the Initial Purchaser, for so long as such
Series A Notes constitute "TRANSFER RESTRICTED SECURITIES" (as defined in the
Registration Rights Agreements). Holders (including subsequent transferees) of
the Warrants and Warrant Shares will have the registration rights described in
the Offering Memorandum, which will be set forth in the registration rights
agreement (the "EQUITY REGISTRATION RIGHTS AGREEMENT" and, together with the
Debt Registration Rights Agreement, the "REGISTRATION RIGHTS AGREEMENTS"), to be
dated the Closing Date, in form and substance reasonably satisfactory to the
Initial Purchaser, for so long as such Warrants and Warrant Shares constitute
Transfer Restricted Securities.
Pursuant to the Debt Registration Rights Agreement, the Company and the
Guarantor will agree to file with the Securities and Exchange Commission (the
"COMMISSION") under the circumstances set forth therein, (i) a registration
statement under the Securities Act (the "EXCHANGE OFFER REGISTRATION STATEMENT")
relating to the Company's 133/8% Senior Subordinated Notes due 2009 (the
"EXCHANGE NOTES"), to be offered in exchange for the Series A Notes (such offer
to exchange being referred to as the "EXCHANGE OFFER") and the Subsidiary
Guarantee thereof and, if necessary, (ii) a shelf registration statement
pursuant to Rule 415 under the Securities Act (the "SHELF REGISTRATION
STATEMENT" and, together with the Exchange Offer Registration Statement, the
"DEBT REGISTRATION STATEMENTS") relating to the resale by certain holders of the
Series A Notes and to use their commercially reasonable best efforts to cause
such Debt Registration Statements to be declared and remain effective and usable
for the periods specified in the Debt Registration Rights Agreement and to
consummate the Exchange Offer.
Pursuant to the Equity Registration Rights Agreement, Holdings will
agree to file a registration statement upon exercise of certain demand and
"piggy-back" registration rights of the holders of the Warrants (an "EQUITY
REGISTRATION STATEMENT") covering the resale of the Warrants and the resale of
the shares of Common Stock and Preferred Stock issuable upon exercise of the
Warrants by the holder thereof and to use all commercially reasonable best
efforts to cause such Equity Registration Statement to be declared effective and
to remain effective for the period specified in the Equity Registration Rights
Agreement. In addition, pursuant to a stockholders agreement (the "STOCKHOLDERS
AGREEMENT"), dated as of the Closing Date, among Holdings, Bruckmann, Rosser,
Sherrill & Co., II, L.P. ("BRS"), the BRS Investors (as defined therein), the
Executives (as defined therein) and the Initial Purchaser, holders of the
Warrants and shares of Common Stock and Preferred Stock issuable upon exercise
of the Warrants shall also have certain "tag-along" rights and will be subject
to certain "drag-along" rights with respect to sales of Holdings' capital stock
by BRS and its affiliates to third parties.
Holders of Warrants will be required to deliver certain information to
be used in connection with the Equity Registration Statement within the time
periods specified in the Equity Registration Rights Agreement in order to have
their Warrants or related shares of capital stock included in the Equity
Registration Statement.
4
<PAGE>
This Agreement, the Indenture, the Notes, the Subsidiary Guarantee, the
Warrant Agreements, the Warrants, the Unit Agreement, the Units, the
Registration Rights Agreements and the Senior Credit Facilities (as defined in
the Offering Memorandum) are hereinafter sometimes referred to collectively as
the "OPERATIVE DOCUMENTS."
1. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE ISSUERS AND THE
GUARANTOR. The Issuers and the Guarantor represent, warrant and agree that:
(a) The Preliminary Offering Memorandum with respect to the
Notes and Offering Memorandum with respect to the Units have been prepared by
the Issuers and the Guarantor for use by the Initial Purchaser in connection
with the Exempt Resales. No order or decree preventing the use of the
Preliminary Offering Memorandum or the Offering Memorandum (or any supplement or
amendment thereto), or any order asserting that the transactions contemplated by
this Agreement are subject to the registration requirements of the Securities
Act has been issued and no proceeding for that purpose has commenced or is
pending or, to the knowledge of any Issuer or the Guarantor, is contemplated.
(b) The Preliminary Offering Memorandum and the Offering
Memorandum as of their respective dates and the Offering Memorandum as of the
Closing Date (together with any supplement or amendment thereto), did not and
will not contain an untrue statement of a material fact or omit to state a
material fact necessary, in order to make the statements, in light of the
circumstances under which they were made, not misleading, except that this
representation and warranty does not apply to statements in or omissions from
the Preliminary Offering Memorandum and the Offering Memorandum (or any
supplement or amendment thereto) made in reliance upon and in conformity with
information relating to the Initial Purchaser furnished to the Issuers in
writing by or on behalf of the Initial Purchaser expressly for use therein.
(c) The market-related and customer-related data and estimates
included in the Preliminary Offering Memorandum and the Offering Memorandum (or
any supplement or amendment thereto) are based on or derived from sources which
the Issuers believe to be reliable and accurate.
(d) Each of the Issuers and their subsidiaries (as defined in
Section 14 hereof) have been and, after giving effect to the Recapitalization in
accordance with the terms of the Recapitalization Documents, will be duly
incorporated and are and, after giving effect to the Recapitalization in
accordance with the terms of the Recapitalization Documents, will be validly
existing as corporations in good standing under the laws of their respective
jurisdictions of incorporation, duly qualified to do business and in good
standing as foreign corporations in each jurisdiction in which their respective
ownership or lease of property or the conduct of their respective businesses
requires such qualification, except where the failure to so register or qualify
or to be in good standing would not be reasonably expected, singly or in the
aggregate, to have a material adverse effect on the condition (financial or
otherwise), results of operation, assets, liabilities, management, prospects or
value of the Issuers and their subsidiaries, taken as a whole (a "MATERIAL
ADVERSE EFFECT"), and have and, after giving effect to the Recapitalization
5
<PAGE>
in accordance with the terms of the Recapitalization Documents, will have all
power and authority necessary to own or hold their respective properties and to
conduct the businesses in which they are engaged.
(e) Each of the Issuers has an authorized capitalization as
set forth in the Offering Memorandum, and all of the issued shares of capital
stock of each of the Issuers have been and, after giving effect to the
Recapitalization in accordance with the terms of the Recapitalization Documents,
will be duly and validly authorized and issued, are and, after giving effect to
the Recapitalization in accordance with the terms of the Recapitalization
Documents, will be fully paid and non-assessable and conform and, after giving
effect to the Recapitalization in accordance with the terms of the
Recapitalization Documents, will conform to the description thereof contained in
the Offering Memorandum; and all of the issued shares of capital stock of each
subsidiary of the Issuers have been and, after giving effect to the
Recapitalization in accordance with the terms of the Recapitalization Documents,
will be duly and validly authorized and issued and are and, after giving effect
to the Recapitalization in accordance with the terms of the Recapitalization
Documents, will be fully paid and non-assessable and (except for directors'
qualifying shares) are and, after giving effect to the Recapitalization in
accordance with the terms of the Recapitalization Documents, will be owned
directly or indirectly by the Issuers, free and clear of all liens,
encumbrances, equities or claims, except pursuant to the Senior Credit
Facilities.
(f) The Warrants, when issued on the Closing Date, will
provide for the right to purchase 6.0% of the fully-diluted Common Stock and
6.0% of the fully-diluted junior preferred stock of Holdings.
(g) Each of the Issuers and the Guarantor has all requisite
power and authority to execute, deliver and perform its obligations under the
Operative Documents.
(h) This Agreement has been duly authorized, executed and
delivered by the Issuers and the Guarantor.
(i) The Indenture has been duly and validly authorized by the
Company and the Guarantor and upon its due execution and delivery and, assuming
due authorization, execution and delivery by the Trustee, will constitute the
valid and binding agreement of the Company and the Guarantor, enforceable
against the Company and the Guarantor in accordance with its terms, subject to
the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally and general equitable principles (whether considered in a proceeding
in equity or at law). On the Closing Date, the Indenture will conform in all
material respects to the requirements of the Trust Indenture Act of 1939, as
amended (the "TIA"), and the rules and regulations of the Commission applicable
to an indenture which is qualified thereunder. The Offering Memorandum contains
an accurate summary, in all material respects, of the terms of the Indenture.
(j) Each of the Issuers has duly and validly authorized the
issuance of the Series A Notes and the Warrants as a Unit. When the Units are
issued and delivered to and
6
<PAGE>
paid for by the Initial Purchaser in accordance with the terms of this
Agreement, the Units will be valid and binding obligations of the Issuers,
enforceable against the Issuers in accordance with their terms, subject to the
effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally and general equitable principles (whether considered in a proceeding
in equity or at law). The Offering Memorandum contains an accurate summary, in
all material respects, of the terms of the Units.
(k) The Series A Notes have been duly and validly authorized
by the Company and when duly executed by the Company in accordance with the
terms of the Indenture and, assuming due authentication of the Notes by the
Trustee, upon delivery to the Initial Purchaser against payment therefor in
accordance with the terms hereof, will have been validly issued and delivered,
and will constitute valid and binding obligations of the Company entitled to the
benefits of the Indenture, and enforceable against the Company in accordance
with their terms, subject to the effects of bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally and general equitable principles (whether
considered in a proceeding in equity or at law). On the Closing Date, the Series
A Notes will conform, in all material respects, to the description thereof
contained in the Offering Memorandum.
(l) The Exchange Notes have been duly and validly authorized
by the Company and if and when duly issued and authenticated in accordance with
the terms of the Indenture and delivered in accordance with the Exchange Offer
provided for in the Debt Registration Rights Agreement, will constitute valid
and binding obligations of the Company entitled to the benefits of the
Indenture, enforceable against the Company in accordance with their terms,
subject to the effects of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally and general equitable principles (whether considered
in a proceeding in equity or at law).
(m) The Warrants have been duly authorized by Holdings, and
will have been validly delivered by Holdings as of the Closing Date. When the
Warrants are issued, the Warrants will be the valid and binding obligations of
Holdings, enforceable against Holdings in accordance with their terms, subject
to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally and general equitable principles (whether considered in a proceeding
in equity or at law). The Offering Memorandum contains an accurate summary, in
all material respects, of the terms of the Warrants.
(n) The Stockholders Agreement has been duly and validly
authorized by Holdings, and when duly executed and delivered by each of
Holdings, BRS, the BRS Investors and the Executives (assuming due execution and
delivery by the Initial Purchaser) will be the valid and binding obligation of
each of Holdings, BRS, the BRS Investors and the Executives, enforceable against
each of Holdings, BRS, the BRS Investors and the Executives in accordance with
its terms, subject to the effects of bankruptcy, insolvency, fraudulent
7
<PAGE>
conveyance, reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally and general equitable principles (whether
considered in a proceeding in equity or at law). The Offering Memorandum
contains an accurate summary, in all material respects, of the terms of the
Stockholders Agreement.
(o) The Warrant Shares have been duly and validly authorized
for issuance by Holdings, and when issued in accordance with the terms of the
Warrant Agreements will be fully paid and nonassessable and will not be subject
to any preemptive or similar rights. The Offering Memorandum contains an
accurate summary, in all material respects, of the terms of the Warrant Shares.
(p) The Subsidiary Guarantee to be endorsed on the Series A
Notes by the Guarantor has been duly and validly authorized by the Guarantor and
when duly executed and delivered by the Guarantor in accordance with the terms
of the Indenture and upon the due execution, authentication and delivery of the
Series A Notes in accordance with the Indenture and the issuance of the Series A
Notes in the sale to the Initial Purchaser contemplated by this Agreement, will
constitute valid and binding obligations of the Guarantor, enforceable against
the Guarantor in accordance with its terms, subject to the effects of
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally and
general equitable principles (whether considered in a proceeding in equity or at
law). The Offering Memorandum contains an accurate summary, in all material
respects, of the terms of the Subsidiary Guarantee to be endorsed on the Series
A Notes by the Guarantor.
(q) The Subsidiary Guarantee to be endorsed on the Exchange
Notes by the Guarantor has been duly and validly authorized by the Guarantor and
if and when duly executed and delivered by the Guarantor in accordance with the
terms of the Indenture and upon the due execution, authentication and delivery
of the Exchange Notes in accordance with the Indenture and the issuance of the
Exchange Notes in the Exchange Offer contemplated by the Debt Registration
Rights Agreement, will constitute valid and binding obligations of the
Guarantor, enforceable against the Guarantor in accordance with its terms,
subject to the effects of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally and general equitable principles (whether considered
in a proceeding in equity or at law). The Offering Memorandum contains an
accurate summary, in all material respects, of the terms of the Subsidiary
Guarantee to be endorsed on the Exchange Notes by the Guarantor.
(r) Each of the Warrant Agreements has been duly and validly
authorized by Holdings, and when duly executed and delivered by Holdings, and
(assuming due execution and delivery by the Warrant Agent) will be the valid and
binding obligation of Holdings, enforceable against Holdings in accordance with
its terms, subject to the effects of bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally and general equitable principles (whether
considered in a proceeding in equity or at law). The Offering Memorandum
contains an accurate summary, in all material respects, of the terms of the
Warrant Agreements.
8
<PAGE>
(s) The Equity Registration Rights Agreement has been duly
authorized by Holdings and, when executed by each of Holdings, BRS, the BRS
Investors and the Executives in accordance with the terms hereof, will be
validly executed and delivered and (assuming the due execution and delivery
thereof by the Initial Purchaser) will be the valid and binding obligation of
each of Holdings, BRS, the BRS Investors and the Executives, enforceable against
each of Holdings, BRS, the BRS Investors and the Executives in accordance with
its terms, subject to the effects of bankruptcy, fraudulent conveyance,
insolvency, reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally and general equitable principles (whether
considered in a proceeding in equity or at law), and as to rights of
indemnification, by Federal or state securities laws or principles of public
policy. The Offering Memorandum contains an accurate summary, in all material
respects, of the terms of the Equity Registration Rights Agreement.
(t) The Debt Registration Rights Agreement has been duly
authorized by the Company and the Guarantor and, when executed by the Company
and the Guarantor in accordance with the terms hereof, will be validly executed
and delivered and (assuming the due execution and delivery thereof by the
Initial Purchaser) will be the valid and binding obligation of the Company and
the Guarantor, enforceable against the Company and the Guarantor in accordance
with its terms, subject to the effects of bankruptcy, fraudulent conveyance,
insolvency, reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally and general equitable principles (whether
considered in a proceeding in equity or at law). The Offering Memorandum
contains an accurate summary, in all material respects, of the terms of the Debt
Registration Rights Agreement.
(u) The Unit Agreement has been duly and validly authorized by
the Issuers and the Guarantor, and when duly executed and delivered by the
Issuers and the Guarantor, and (assuming due execution and delivery by the Unit
Agent) will be the valid and binding obligation of the Issuers and the
Guarantor, enforceable against the Issuers and the Guarantor in accordance with
its terms, subject to the effects of bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally and general equitable principles (whether
considered in a proceeding in equity or at law), and as to rights of
indemnification, by Federal or state securities laws or principles of public
policy. The Offering Memorandum contains an accurate summary, in all material
respects, of the terms of the Unit Agreement.
(v) The Agreement and Plan of Merger has been duly and validly
authorized executed and delivered by Holdings and OSI and is the valid and
binding obligation of Holdings and OSI enforceable against Holdings and OSI in
accordance with its terms, subject to the effects of bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally and general equitable
principles (whether considered in a proceeding in equity or at law). The
Offering Memorandum contains an accurate summary, in all material respects, of
the terms of the Agreement and Plan of Merger.
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(w) The Senior Credit Facilities have been duly and validly
authorized by the Issuers, and when duly executed and delivered by the Issuers,
and (assuming due execution and delivery by the other parties thereto) will be
the valid and binding obligation of each of the Issuers, enforceable against the
Issuers in accordance with its terms, subject to the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally and general equitable
principles (whether considered in a proceeding in equity or at law). The
Offering Memorandum contains an accurate summary, in all material respects, of
the terms of the Senior Credit Facilities.
(x) Neither of the Issuers nor any of their subsidiaries is
or, after giving effect to the Recapitalization in accordance with the terms of
the Recapitalization Documents, will be (i) in violation of its charter or
by-laws or other organizational document, as the case may be, (ii) in default in
any material respect, and no event has occurred which, with notice or lapse of
time or both, would constitute such a default, in the due performance or
observance of any term, covenant or condition contained in any indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument to
which it is a party or by which it is bound or to which any of its properties or
assets is subject or (iii) in violation of any law, ordinance, governmental
rule, regulation or court decree to which it or its property or assets may be
subject or has failed to obtain any material license, permit, certificate,
franchise or other governmental authorization or permit necessary to the
ownership of its property or to the conduct of its business except, in the case
of clauses (ii) and (iii) for such defaults which would not, singly or in the
aggregate, have a Material Adverse Effect.
(y) The execution, delivery and performance of this Agreement,
the other Operative Documents and the Agreement and Plan of Merger by the
Issuers and the Guarantor (as applicable), compliance by the Issuers and the
Guarantor (as applicable) with all provisions hereof and thereof and the
consummation of the transactions contemplated hereby and thereby and the
consummation of the Recapitalization will not (i) conflict with or result in a
breach or violation of any of the terms or provisions of, or a constitute a
default under, any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which any Issuer or any of their subsidiaries is a
party or by which any Issuer or any of their subsidiaries is bound or to which
any of the property or assets of the Issuers or any of their subsidiaries is
subject, that would have, singly or in the aggregate, a Material Adverse Effect,
(ii) result in any violation of the provisions of the charter or by-laws of the
Issuers or any of their subsidiaries, (iii) result in the violation of any
statute or any order, rule or regulation of any court or governmental agency or
body having jurisdiction over any Issuer or any of their subsidiaries or any of
their respective properties or assets, that would have, singly or in the
aggregate, a Material Adverse Effect, (iv) result in the imposition of or
creation of (or the obligation to create or impose) a lien, encumbrance, equity
or claim under, any agreement or instrument to which any Issuer or any of their
subsidiaries is a party or by which any Issuer or any of their subsidiaries or
any of their respective property is bound, except where such lien, encumbrance,
equity or claim would not have a Material Adverse Effect or (v) result in the
termination, suspension or revocation of any Authorization (as defined below) of
the Issuers or any of their subsidiaries or result in any other impairment of
the rights of the holder of any such Authorization; and except as and as have
been or will be obtained by the Closing Date and as
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may be required in connection with the registration of the Exchange Notes under
the Securities Act, qualification of the Indenture under the TIA and compliance
with the securities and Blue Sky laws of various jurisdictions, no consent,
approval, authorization or order of, or filing or registration with, any such
court or governmental agency or body is required for the execution, delivery and
performance of this Agreement, the other Operative Documents and the Agreement
and Plan of Merger by the Issuers and the Guarantor (as applicable), compliance
by the Issuers and Guarantors (as applicable) with all provisions hereof and
thereof and the consummation of the transactions contemplated hereby and thereby
and the consummation of the Recapitalization.
(z) Except as described in the Offering Memorandum, there are
and, immediately after giving effect to the Recapitalization in accordance with
the terms of the Recapitalization Documents, will be no legal or governmental
proceedings pending or to the knowledge of the Issuers threatened to which any
Issuer or any of their subsidiaries is or to the knowledge of the Issuers could
be a party or of which any property or assets of the Issuers or any of their
subsidiaries is or could be the subject which, if determined adversely to the
Issuers or any of their subsidiaries, would, singly or in the aggregate, have a
Material Adverse Effect; and to the best of the Issuers' knowledge, no such
proceedings are and, after giving effect to the Recapitalization in accordance
with the terms of the Recapitalization Documents, will be threatened or
contemplated by governmental authorities or threatened by others.
(aa) Except as would not, singly or in the aggregate, have a
Material Adverse Effect, there has and, immediately after giving effect to the
Recapitalization in accordance with the terms of the Recapitalization Documents,
and will have been no storage, disposal, generation, manufacture, refinement,
transportation, handling or treatment of toxic wastes, medical wastes, hazardous
wastes or hazardous substances by the Issuers or any of their subsidiaries (or,
to the knowledge of the Issuers, any of their predecessors in interest) at, upon
or from any of the property now or previously owned or leased by the Issuers or
their subsidiaries in violation of any applicable law, ordinance, rule,
regulation, order, judgment, decree or permit or which would require remedial
action under any applicable law, ordinance, rule, regulation, order, judgment,
decree or permit, except for any violation or remedial action which would not
have, or could not be reasonably likely to have, singly or in the aggregate with
all such violations and remedial actions, a Material Adverse Effect; there has
and, immediately after giving effect to the Recapitalization in accordance with
the terms of the Recapitalization Documents, and will have been no material
spill, discharge, leak, emission, injection, escape, dumping or release of any
kind onto such property or into the environment surrounding such property of any
toxic wastes, medical wastes, solid wastes, hazardous wastes or hazardous
substances due to or caused by the Issuers or any of their subsidiaries or with
respect to which the Issuers or any of their subsidiaries has knowledge, except
for any such spill, discharge, leak, emission, injection, escape, dumping or
release which would not have or would not be reasonably likely to have, singly
or in the aggregate with all such spills, discharges, leaks, emissions,
injections, escapes, dumpings and releases, a Material Adverse Effect; and the
terms "hazardous wastes," "toxic wastes," "hazardous substances" and "medical
wastes" shall have the meanings specified in any applicable local, state,
federal and foreign laws or regulations with respect to environmental
protection.
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(bb) The Issuers are and, immediately after giving effect to
the Recapitalization in accordance with the terms of the Recapitalization
Documents, and will be in compliance in all material respects with all presently
applicable provisions of the Employee Retirement Income Security Act of 1974, as
amended, including the regulations and published interpretations thereunder
("ERISA"); no "reportable event" (as defined in ERISA) has and, immediately
after giving effect to the Recapitalization in accordance with the terms of the
Recapitalization Documents, and will have occurred with respect to any "pension
plan" (as defined in ERISA) for which the Issuers would have any liability; the
Issuers have and, immediately after giving effect to the Recapitalization in
accordance with the terms of the Recapitalization Documents, and will have not
incurred and do not expect to incur liability under (i) Title IV of ERISA with
respect to termination of, or withdrawal from, any "pension plan" or (ii)
Sections 412 or 4971 of the Internal Revenue Code of 1986, as amended, including
the regulations and published interpretations thereunder (the "CODE"); and each
"pension plan" for which the Issuers would have any liability that is intended
to be qualified under Section 401(a) of the Code is and, immediately after
giving effect to the Recapitalization in accordance with the terms of the
Recapitalization Documents, and will be so qualified in all material respects
and nothing has or will have occurred, whether by action or by failure to act,
which would cause the loss of such qualification.
(cc) Each of the Issuers and their subsidiaries has and, after
giving effect to the Recapitalization in accordance with the terms of the
Recapitalization Documents, will have such permits, licenses, consents,
exemptions, franchises, authorizations and other approvals (each, an
"AUTHORIZATION") of, and has and, after giving effect to the Recapitalization in
accordance with the terms of the Recapitalization Documents, will have made all
filings with and notices to, all governmental or regulatory authorities and
self-regulatory organizations and all courts and other tribunals, including
without limitation, under any applicable environmental laws, as are necessary to
own, lease, license and operate its respective properties and to conduct its
business, except where the failure to have any such Authorization or to make any
such filing or notice would not, singly or in the aggregate, have a Material
Adverse Effect. Each such Authorization is and, after giving effect to the
Recapitalization in accordance with the terms of the Recapitalization Documents,
will be valid and in full force and effect, and each of the Issuers and their
subsidiaries is and, after giving effect to the Recapitalization in accordance
with the terms of the Recapitalization Documents, will be in compliance with all
the terms and conditions thereof and with the rules and regulations of the
authorities and governing bodies having jurisdiction with respect thereto; and
no event has occurred (including, without limitation, the receipt of any notice
from any authority or governing body) which allows or, after notice or lapse of
time or both, would allow, revocation, suspension or termination of any such
Authorization or results or, after notice or lapse of time or both, would result
in any other impairment of the rights of the holder of any such Authorization;
and such Authorizations contain and, after giving effect to the Recapitalization
in accordance with the terms of the Recapitalization Documents, will contain, no
restrictions that are burdensome to the Issuers or any of their subsidiaries;
except where such failure to be valid and in full force and effect or to be in
compliance, the occurrence of any such event or the presence of any such
restriction would not, singly or in the aggregate, have a Material Adverse
Effect.
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(dd) Each of the Issuers and their subsidiaries has and, after
giving effect to the Recapitalization in accordance with the terms of the
Recapitalization Documents, will have good and marketable title in fee simple to
all real property and good and marketable title to all personal property owned
by them, in each case free and clear of all liens, encumbrances and defects,
except such as are described in the Offering Memorandum, such as are in favor of
the lenders under the Senior Credit Facilities, or such as would not, singly or
in the aggregate, have a Material Adverse Effect; and all the real property and
buildings held under lease by the Issuers and their subsidiaries are and, after
giving effect to the Recapitalization in accordance with the terms of the
Recapitalization Documents, will be held by them under valid, subsisting and
enforceable leases, with only such exceptions as would not, singly or in the
aggregate, have a Material Adverse Effect.
(ee) Each of the Issuers and their subsidiaries owns or
possesses and, after giving effect to the Recapitalization in accordance with
the terms of the Recapitalization Documents, will own and possess adequate
rights to use all material patents, patent applications, trademarks, service
marks, trade names, trademark registrations, service mark registrations,
copyrights and licenses necessary for the conduct of their respective
businesses, and has and, after giving effect to the Recapitalization in
accordance with the terms of the Recapitalization Documents, will have no reason
to believe that the conduct of their respective business will conflict with, and
has and, after giving effect to the Recapitalization in accordance with the
terms of the Recapitalization Documents, will have not received any notice of
any claim of conflict with, any such rights of others, except as would not,
singly or in the aggregate, have a Material Adverse Effect.
(ff) PricewaterhouseCoopers LLP, who have certified certain
financial statements included in the Preliminary Offering Memorandum and the
Offering Memorandum, whose report appears therein and who have delivered the
letter referred to in Section 7(g) hereof, are independent public accountants
under Rule 101 of the American Institute of Certified Public Accountants' Code
of Professional Conduct and its interpretations and rulings thereunder.
(gg) The historical financial statements (including the
related notes and schedules) included or incorporated by reference in the
Offering Memorandum (and any amendment or supplement thereto) present fairly the
financial condition and results of operations of the entities purported to be
shown thereby, at the dates and for the periods indicated, and have been
prepared in conformity with generally accepted accounting principles of the
United States applied on a consistent basis throughout the periods involved; and
the other financial and statistical information and data set forth in the
Offering Memorandum (and any amendment or supplement thereto) are, in all
material respects, accurately presented and prepared on a basis consistent with
such financial statements and the books and records of the Issuers and the
Guarantor.
(hh) The pro forma financial statements included or
incorporated by reference in the Offering Memorandum (and any amendment or
supplement thereto) have been prepared on a basis consistent with the historical
financial statements included in the Offering
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Memorandum and give effect to assumptions used in the preparation thereof on a
reasonable basis and in good faith and present fairly the historical and
proposed transactions contemplated by the Offering Memorandum, and such pro
forma financial statements include all material adjustments to the historical
financial information required by Rule 11-02 of Regulation S-X under the
Securities Act to reflect the transactions described in the Offering Memorandum.
The other pro forma financial and statistical information and data included in
the Offering Memorandum are, in all material respects, accurately presented and
prepared on a basis consistent with the pro forma financial statements.
(ii) Neither of the Issuers nor any of their subsidiaries is
and, after giving effect to the Recapitalization in accordance with the
Recapitalization Documents and the offering and sale of the Units and the
application of the net proceeds thereof as described in the Offering Memorandum,
will be an "investment company" or a company "controlled" by an "investment
company" within the meaning of the Investment Company Act of 1940, as amended,
and the rules and regulations of the Commission thereunder.
(jj) Except as described in the Offering Memorandum, there are
and, after giving effect to the Recapitalization in accordance with the
Recapitalization Documents, will be no contracts, agreements or understandings
between the Issuers and any person granting such person the right to require the
Issuers to file a registration statement under the Securities Act with respect
to any securities of the Issuers owned or to be owned by such person or to
require the Issuers to include such securities in the securities registered
pursuant to the Registration Statements or in any securities being registered
pursuant to any other registration statement filed by the Issuers under the
Securities Act.
(kk) Neither the Issuers nor any of their subsidiaries, nor
any agent thereof acting on the behalf of them has taken, and none of them will
take, any action that might cause this Agreement or the issuance or sale of the
Securities to violate Regulation T (12 C.F.R. Part 220), Regulation U (12 C.F.R.
Part 221) or Regulation X (12 C.F.R. Part 224) of the Board of Governors of the
Federal Reserve System.
(ll) No "nationally recognized statistical rating
organization" as such term is defined for purposes of Rule 436(g)(2) under the
Securities Act (i) has imposed (or has informed the Issuers that it is
considering imposing) any condition (financial or otherwise) on any Issuer's
retaining any rating assigned to the Issuers, any securities of any Issuer or
(ii) has indicated to any Issuer that it is considering (a) the downgrading,
suspension, or withdrawal of, or any review for a possible change that does not
indicate the direction of the possible change in, any rating so assigned or (b)
any change in the outlook for any rating of any Issuer or any securities of any
Issuer.
(mm) Neither of the Issuers nor any of their subsidiaries has
sustained, since the date of the latest audited financial statements included or
incorporated by reference in the Offering Memorandum, any loss or interference
with its business from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court or governmental action,
order or decree, otherwise than as set forth or contemplated in the Offering
Memorandum that would, singly or in the aggregate, have a Material Adverse
Effect; and, since such date, otherwise than as set forth or contemplated in the
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Offering Memorandum, there has not been any change in the capital stock or
long-term debt of the Issuers or any of their subsidiaries or any change, or any
development involving a prospective change, in or affecting the general affairs,
management, financial position, stockholders' equity or results of operations of
the Issuers and their subsidiaries that would, singly or in the aggregate, have
a Material Adverse Effect.
(nn) Since the date as of which information is given in the
Preliminary Offering Memorandum through the date hereof, and except as may
otherwise be disclosed in the Offering Memorandum, (i) the Issuers have not
issued or granted any securities, other than those issued or granted under
employee stock option plans disclosed in the Offering Memorandum; (ii) neither
of the Issuers nor any of their subsidiaries have incurred any liability or
obligation, direct or contingent, other than liabilities and obligations that
were incurred in the ordinary course of business; (iii) neither of the Issuers
nor any of their subsidiaries has entered into any transaction not in the
ordinary course of business; and (iv) the Issuers have not declared or paid any
dividend on their capital stock.
(oo) Holdings has delivered to the Initial Purchaser true and
corrected conformed copies of the Agreement and Plan of Merger, including all
schedules and exhibits thereto, and there have been no amendments, alterations,
modifications or waivers thereto or in the exhibits or schedules thereto, except
as have been delivered to the Initial Purchaser.
(pp) No labor disturbance by the employees of the Issuers or
any of their subsidiaries exists and, after giving effect to the
Recapitalization in accordance with the Recapitalization Documents, will exist
or, to the knowledge of the Issuers, is and, after giving effect to the
Recapitalization in accordance with the Recapitalization Documents, will be
imminent which might be expected to have a Material Adverse Effect. To the best
knowledge of the Issuers, no collective bargaining organizing activities are
taking place with respect to the Issuers or any of their subsidiaries which
might be expected to have a Material Adverse Effect.
(qq) Each of the Issuers and their subsidiaries (i) makes and
keeps and, after giving effect to the Recapitalization in accordance with the
Recapitalization Documents, will make and keep accurate books and records and
(ii) maintains and, after giving effect to the Recapitalization in accordance
with the Recapitalization Documents, will maintain internal accounting controls
which provide reasonable assurance that (A) transactions are executed in
accordance with management's authorization, (B) transactions are recorded as
necessary to permit preparation of its financial statements and to maintain
accountability for its assets, (C) access to its assets is permitted only in
accordance with management's authorization and (D) the reported accountability
for its assets is compared with existing assets at reasonable intervals.
(rr) The Issuers and their subsidiaries have and, immediately
after giving effect to the Recapitalization in accordance with the
Recapitalization Documents, will have filed all material federal, state and
local income and franchise tax returns required to be filed
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through the date hereof and have and, after giving effect to the
Recapitalization in accordance with the Recapitalization Documents, will have
paid all material taxes due thereon, and no tax deficiency has and, immediately
after giving effect to the Recapitalization in accordance with the
Recapitalization Documents, will have been determined adversely to the Issuers
or any of their subsidiaries which has and, immediately after giving effect to
the Recapitalization in accordance with the Recapitalization Documents, will
have had (nor to the actual knowledge of the Issuers, has any deficiency been
asserted which, if determined adversely to the Issuers or any of their
subsidiaries, might have) a Material Adverse Effect.
(ss) Each of the Preliminary Offering Memorandum and the
Offering Memorandum, as of its date, contains all the information specified in,
and meeting the requirements of, Rule 144A(d)(4) under the Securities Act.
(tt) When the Securities and the Subsidiary Guarantee are
issued and delivered pursuant to this Agreement, such Securities and Subsidiary
Guarantee will not be of the same class (within the meaning of Rule 144A under
the Securities Act) as securities of any Issuer or the Guarantor that are listed
on a national securities exchange registered under Section 6 of the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT"), or that are quoted in a
United States automated inter-dealer quotation system.
(uu) Assuming (i) that your representations and warranties in
Section 2 are true, (ii) compliance by you with your covenants set forth in
Section 2 and (iii) that each of the Eligible Purchasers is a QIB or a person
who acquires the Units in an "offshore transaction" and is not a "U.S. Person"
(within the meaning of Regulation S under the Securities Act), the purchase of
the Units by pursuant hereto and the resale of the Units pursuant hereto
pursuant to Exempt Resales is exempt from the registration requirements of the
Securities Act. No form of general solicitation or general advertising was used
by any Issuer or the Guarantor or any of their representatives (other than you,
as to whom the Issuers and the Guarantor make no representation) in connection
with the offer and sale of the Units, including, but not limited to, articles,
notices or other communications published in any newspaper, magazine, or similar
medium or broadcast over television or radio or any seminar or meeting whose
attendees have been invited by any general solicitation or general advertising.
(vv) Prior to the effectiveness of any Registration Statement,
the Indenture is not required to be qualified under the TIA.
(ww) None of the Issuers, the Guarantor nor any of their
respective affiliates or any person acting on their behalf (other than the
Initial Purchaser, as to whom the Issuers and the Guarantor make no
representation) has engaged or will engage in any directed selling efforts
within the meaning of Regulation S with respect to the Units.
(xx) The Units offered and sold in reliance on Regulation S
have been and will be offered and sold only in offshore transactions.
(yy) The sale of the Units pursuant to Regulation S is not
part of a plan or scheme to evade the registration provisions of the Securities
Act.
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(zz) The Issuers, the Guarantors and their respective
affiliates and all persons acting on their behalf (other than the Initial
Purchaser, as to whom the Issuers and the Guarantor make no representation) have
complied with and, after giving effect to the Recapitalization in accordance
with the terms of the Recapitalization Documents, will comply with the offering
restrictions requirements of Regulation S in connection with the offering of the
Securities outside the United States and, in connection therewith, the Offering
Memorandum will contain the disclosure required by Rule 902(g)(2).
(aaa) The Securities sold in reliance on Regulation S will be
represented upon issuance by a temporary global security that may not be
exchanged for definitive securities until the expiration of the distribution
compliance periods referred to in Rule 903(c)(3) of the Securities Act and only
upon certification of beneficial ownership of such Security by non-U.S. persons
or U.S. persons who purchased such Securities in transactions that were exempt
from the registration requirements of the Securities Act.
(bbb) No registration under the Securities Act of the
Securities or the Subsidiary Guarantee is required for the sale of the
Securities and the Subsidiary Guarantee to the Initial Purchaser as contemplated
hereby or for the Exempt Resales assuming the accuracy of the Initial
Purchaser's representations and warranties and agreements set forth in Section 2
hereof.
(ccc) Each certificate signed by any officer of any Issuer or
the Guarantor and delivered to the Initial Purchaser or counsel for the Initial
Purchaser shall be deemed to be a representation and warranty by such Issuer or
Guarantor to the Initial Purchaser as to the matters covered thereby.
(ddd) The Issuers and each of their subsidiaries carry, or are
covered by, insurance in such amounts and covering such risks as the Issuers
believe is reasonably adequate for the conduct of their respective businesses
and the value of their respective properties and as is customary for companies
engaged in similar businesses in similar industries.
(eee) There are no contracts or other documents which are
required to be described in the Offering Memorandum by the Securities Act or by
the rules and regulations thereunder which have not been described in the
Offering Memorandum or incorporated therein by reference as permitted by the
rules and regulations.
(fff) No material relationship, direct or indirect, exists
between or among the Issuers or any of their subsidiaries on the one hand, and
the directors, officers, stockholders, customers or suppliers of the Issuers or
any of their subsidiaries on the other hand, except as described in the Offering
Memorandum.
(ggg) Neither of the Issuers nor any of their subsidiaries,
nor any director, officer, agent, employee and, to the knowledge of the Issuers,
no other person associated with or acting on behalf of the Issuers or any of
their subsidiaries, has used any corporate funds for any unlawful contribution,
gift, entertainment or other unlawful expense relating to political activity;
made any direct or indirect unlawful payment to any foreign or domestic
government
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official or employee from corporate funds; violated or is in violation of any
provision of the Foreign Corrupt Practices Act of 1977; or made any bribe,
rebate, payoff, influence payment, kickback or other unlawful payment.
(hhh) The statements set forth in the Offering Memorandum
under the captions "Description of Certain Indebtedness," "Description of
Units," "Description of Notes" and "Description of Warrants," insofar as they
describe the terms of the agreements and securities referred to therein, are
accurate and fairly present the information required to be shown in all material
respects.
(iii) The Offering Memorandum contains an accurate summary, in
all material respects, of the terms of the securities purchase agreement for the
senior notes of Holdings to be issued on the Closing Date (the "SECURITIES
PURCHASE AGREEMENT").
(jjj) The Offering Memorandum contains an accurate summary, in
all material respects, of the terms of the management services agreement between
BRS and the Company to be executed on the Closing Date (the "MANAGEMENT SERVICES
AGREEMENT").
2. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE INITIAL PURCHASER.
The Initial Purchaser represents and warrants with respect to itself that:
(a) It is a QIB or an institutional accredited investor as
defined in Rule 501(a)(1), (2), (3) and (7) under the Securities Act (each, an
"ACCREDITED INSTITUTION"), in either case with such knowledge and experience in
financial and business matters as are necessary in order to evaluate the merits
and risks of an investment in the Units.
(b) It (i) is not acquiring the Units with a view to any
distribution thereof or with any present intention of offering or selling any of
the Units in a transaction that would violate the Securities Act or the
securities laws of any State of the United States or any other applicable
jurisdiction; (ii) in connection with the Exempt Resales, will solicit offers to
buy the Units only from, and will offer to sell Units only to, the Eligible
Purchasers in accordance with this Agreement and on the terms contemplated by
the Offering Memorandum; and (iii) will not offer or sell the Units pursuant to,
nor has it offered or sold the Units by, or otherwise engaged in, any form of
general solicitation or general advertising (within the meaning of Regulation D,
including, but not limited to, advertisements, articles, notices or other
communications published in any newspaper, magazine, or similar medium or
broadcast over television or radio, or any seminar or meeting whose attendees
have been invited by any general solicitation or general advertising) in
connection with the offering of the Units.
(c) The Units have not been and will not be registered under
the Securities Act and may not be offered or sold within the United States or
to, or for the account or benefit of, U.S. persons except in accordance with
Regulation S under the Securities Act or pursuant to an exemption from the
registration requirements of the Securities Act. The Initial Purchaser
represents that it has not offered, sold or delivered the Units, and will not
offer, sell or deliver the Units (i) as part of its distribution at any time or
(ii) otherwise until one year after the later of the commencement of the
offering of the Units and the Closing Date or such longer period
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as may then be applicable under Regulation S (such period, the "DISTRIBUTION
COMPLIANCE PERIOD"), within the United States or to, or for the account or
benefit of U.S. persons, except in accordance with Rule 144A under the
Securities Act. Accordingly, the Initial Purchaser represents and agrees that
neither it, its affiliates nor any persons acting on its or their behalf has
engaged or will engage in any directed selling efforts within the meaning of
Rule 901(b) of Regulation S with respect to the Units, and it, its affiliates
and all persons acting on its behalf have complied and will comply with the
offering restrictions requirements of Regulation S.
(d) It agrees that, at or prior to confirmation of a sale of
Units (other than a sale pursuant to Rule 144A in transactions that are exempt
from the registration requirements of the Securities Act), it will have sent to
each distributor, dealer or person receiving a selling concession, fee or other
remuneration that purchases Units from it during the Restricted Period a
confirmation or notice substantially to the following effect:
"The Securities covered hereby have not been registered under
the U.S. Securities Act of 1933, as amended (the "Securities
Act"), and may not be offered and sold within the United
States or to, or for the account or benefit of, U.S. persons
(i) as part of their distribution at any time or (ii)
otherwise until one year (in the case of equity securities) or
40 days (in the case of debt securities) after the later of
the commencement of the offering or the closing date, except
in either case in accordance with Regulation S (or Rule 144A
if available) under the Securities Act. Terms used above have
the meanings assigned to them in Regulation S."
(e) The Initial Purchaser further agrees that it has not
entered and will not enter into any contractual arrangement with respect to the
distribution or delivery of the Units, except with its affiliates or with the
prior written consent of the Issuers.
(f) The Initial Purchaser agrees not to cause any
advertisement of the Units to be published in any newspaper or periodical or
posted in any public place and not to issue any circular relating to the Units,
except such advertisements as include the statements required by Regulation S.
(g) The sales of the Units pursuant to Regulation S are
"offshore transactions" and are not part of a plan or scheme to evade the
registration provisions of the Securities Act.
(h) The Initial Purchaser understands that the Issuers and the
Guarantor and, for purposes of the opinions to be delivered to the Initial
Purchaser pursuant to Section 7 hereof, counsel to the Issuers and the Guarantor
and counsel to the Initial Purchaser, will rely upon the accuracy and truth of
the foregoing representations and the Initial Purchaser hereby consents to such
reliance.
The terms used in this Section 2 that have meanings assigned
to them in Regulation S are used herein as so defined.
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3. PURCHASE OF THE UNITS BY THE INITIAL PURCHASER. On the basis of the
representations and warranties contained in, and subject to the terms and
conditions of, this Agreement, the Issuers agree to sell the Units to the
Initial Purchaser and the Initial Purchaser agrees to purchase $100,000,000
aggregate principal amount of Units. The Initial Purchaser will purchase such
aggregate principal amount of Units at an aggregate purchase price equal to
$950.46 per Unit (the "PURCHASE PRICE").
(a) The Issuers shall not be obligated to deliver any of the
Units to be delivered on the Closing Date (as defined herein), except upon
payment for all the Units to be purchased on the Closing Date as provided
herein.
4. DELIVERY OF THE UNITS AND PAYMENT THEREFOR.
(a) Delivery to the Initial Purchaser of and payment for the
Units shall be made at the office of Kirkland & Ellis, 153 East 53rd Street, New
York, New York, at 9:00 A.M., New York City time, on November 30, 1999 (the
"CLOSING DATE"). The place of closing for the Units and the Closing Date may be
varied by agreement between the Initial Purchaser and the Issuers.
(b) The Units will be delivered to the Initial Purchaser
against payment of the purchase price therefor in immediately available funds.
The Units will be evidenced by one or more global securities in definitive form
(the "GLOBAL UNIT") and/or by additional definitive securities, and will be
registered, in the case of the Global Unit, in the name of Cede & Co. as nominee
of The Depository Trust Company ("DTC"), and in the other cases, in such names
and in such denominations as the Initial Purchaser shall request prior to 9:30
A. M., New York City time, on the second business day preceding the Closing
Date. The Units to be delivered to the Initial Purchaser shall be made available
to the Initial Purchaser in New York City for inspection and packaging not later
than 9:30 A.M., New York City time, on the business day next preceding the
Closing Date.
(c) Time shall be of the essence, and delivery at the time and
place specified pursuant to this Agreement is a further condition of the
obligation of the Initial Purchaser hereunder.
5. FURTHER AGREEMENTS OF THE ISSUERS AND THE GUARANTOR. The Issuers and
the Guarantor agree with the Initial Purchaser as follows:
(a) The Issuers and the Guarantor will advise the Initial
Purchaser promptly and, if requested by the Initial Purchaser, to confirm such
advice in writing, of (i) the issuance by any state securities commission of any
stop order suspending the qualification or exemption from qualification of any
Securities for offering or sale in any jurisdiction, or the initiation or
threatening of any proceeding for such purpose by the Commission or any state
securities commission or other regulatory authority, and (ii) the happening of
any event that makes any statement of a material fact made in the Offering
Memorandum untrue or which requires the making of any additions to or changes in
the Offering Memorandum in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
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The Issuers and the Guarantor shall use all commercially reasonable efforts to
prevent the issuance of any stop order or order suspending the qualification or
exemption of any Securities under any state securities or Blue Sky laws and, if
at any time any state securities commission shall issue any stop order
suspending the qualification or exemption of any Securities under any state
securities or Blue Sky laws, the Issuers and the Guarantor shall use every
reasonable effort to obtain the withdrawal or lifting of such order at the
earliest possible time.
(b) The Issuers and the Guarantor will furnish to the Initial
Purchaser, without charge, as of the date of the Offering Memorandum, such
number of copies of the Offering Memorandum, and any amendments or supplements
thereto, as it may reasonably request.
(c) The Issuers and the Guarantor will not make any amendment
or supplement to the Preliminary Offering Memorandum or to the Offering
Memorandum of which the Initial Purchaser shall not previously have been advised
or to which it shall reasonably object after being so advised.
(d) Prior to the execution and delivery of this Agreement, the
Issuers and the Guarantor shall have delivered or will deliver to the Initial
Purchaser, without charge, in such quantities as the Initial Purchaser shall
have requested or may hereafter reasonably request, copies of the Preliminary
Offering Memorandum.
(e) The Company and the Guarantor consent to the use, in
accordance with the securities or Blue Sky laws of the jurisdictions in which
the Notes are offered by the Initial Purchaser and by dealers, prior to the date
of the Offering Memorandum, of each Preliminary Offering Memorandum so furnished
by them. The Issuers and the Guarantor consent to the use of the Offering
Memorandum in accordance with the securities or Blue Sky laws of the
jurisdictions in which the Units are offered by the Initial Purchaser and by all
dealers to whom Units may be sold, in connection with the offering and sale of
the Units.
(f) If, at any time prior to completion of the distribution of
the Units by the Initial Purchaser to Eligible Purchasers, any event shall occur
that in the judgment of any Issuer or the Guarantor or in the opinion of counsel
for the Initial Purchaser should be set forth in the Offering Memorandum in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading, or if it is necessary to supplement or
amend the Offering Memorandum in order to comply with any law, the Issuers and
the Guarantor will forthwith prepare an appropriate supplement or amendment
thereto or such document, and will expeditiously furnish to the Initial
Purchaser and dealers a reasonable number of copies thereof.
(g) The Issuers and the Guarantor will cooperate with the
Initial Purchaser and with its counsel in connection with the qualification of
the Units for offering and sale by the Initial Purchaser and by dealers under
the securities or Blue Sky laws of such jurisdictions as the Initial Purchaser
may designate and will file such consents to service of process or other
documents necessary or appropriate in order to effect such qualification;
PROVIDED that in no event shall either of the Issuers or the Guarantor be
obligated to qualify to do business in any
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jurisdiction where it is not now so qualified or to take any action that would
subject it to service of process in suits, other than those arising out of the
offering or sale of the Units, in any jurisdiction where it is not now so
subject.
(h) During the period beginning on the date hereof and
continuing to and including the date 180 days after the Closing Date, the
Issuers and the Guarantor will not offer, sell, contract to sell or otherwise
transfer or dispose of any debt or equity securities (except pursuant to the
Exchange Offer) of the Issuers or the Guarantor or any of their subsidiaries or
any warrants, rights or options to purchase or otherwise acquire debt or equity
securities of the Issuers or the Guarantor or any of their subsidiaries
substantially similar to the Securities and the Subsidiary Guarantee (other than
(i) the Securities and the Subsidiary Guarantee, (ii) debt to be incurred or
equity to be sold or issued in connection with the Recapitalization, as
described in the Offering Memorandum, and (iii) commercial paper issued in the
ordinary course of business), without the prior written consent of the Initial
Purchaser.
(i) So long as any of the Securities are outstanding, the
Issuers and the Guarantor will furnish to the Initial Purchaser (i) as soon as
available, a copy of each report of the Issuers mailed to stockholders generally
or filed with any stock exchange or regulatory body and (ii) from time to time
such other information concerning the Issuers and/or the Guarantor as the
Initial Purchaser may reasonably request.
(j) The Issuers and the Guarantor will apply the net proceeds
from the sale of the Units to be sold by it hereunder substantially in
accordance with the description set forth in the Offering Memorandum under the
caption "Use of Proceeds."
(k) Except as stated in this Agreement and in the Preliminary
Offering Memorandum and Offering Memorandum, the Issuers and the Guarantor have
not taken, nor will any of them take, directly or indirectly, any action
designed to or that might reasonably be expected to cause or result in
stabilization or manipulation of the price of the Units to facilitate the sale
or resale of the Units. Except as permitted by the Securities Act, the Issuers
and the Guarantor will not distribute any offering material in connection with
the Exempt Resales.
(l) The Issuers and the Guarantor will use their best efforts
to permit the Units, Series A Notes and Warrants to be designated Private
Offerings, Resales and Trading through Automated Linkages ("PORTAL") market
securities in accordance with the rules and regulations adopted by the National
Association of Securities Dealers, Inc. relating to trading in the PORTAL Market
and to permit the Units, Series A Notes and Warrants to be eligible for
clearance and settlement through DTC.
(m) From and after the Closing Date, so long as any of the
Securities are outstanding and are "restricted securities" within the meaning of
the Rule 144(a)(3) under the Securities Act or, if earlier, until two years
after the Closing Date, but only during any period in which the Company is not
subject to Section 13 or 15(d) of the Exchange Act, the Issuers and the
Guarantor will furnish to holders of the Securities and prospective purchasers
of Securities designated by such holders, upon request of such holders or such
prospective purchasers, the information required to be delivered pursuant to
Rule 144A(d)(4) under the
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Securities Act to permit compliance with Rule 144A in connection with resale of
the Securities.
(n) The Issuers and the Guarantor agree not to sell, offer for
sale or solicit offers to buy or otherwise negotiate in respect of any security
(as defined in the Securities Act) that would be integrated with the sale of the
Units in a manner that would require the registration under the Securities Act
of the sale to the Initial Purchaser or the Eligible Purchasers of the Units.
(o) The Issuers and the Guarantor (as applicable) agree to
comply with all the terms and conditions of the Registration Rights Agreements,
the Indenture, the Unit Agreement and the Warrant Agreements and all agreements
set forth in the representation letters of the Issuers and the Guarantor to DTC
relating to the approval of the Units, Notes and Warrants by DTC for "book
entry" transfer.
(p) The Company and the Guarantor agree to cause the Exchange
Offer to be made in the appropriate form, as contemplated by the Debt
Registration Rights Agreement, to permit registration of the Exchange Notes to
be offered in exchange for the Series A Notes, and to comply with all applicable
federal and state securities laws in connection with the Exchange Offer.
(q) The Company and the Guarantor agree that prior to any
registration of the Exchange Notes pursuant to the Debt Registration Rights
Agreement, or at such earlier time as may be required, the Indenture shall be
qualified under the 1939 Act and any necessary supplemental indentures will be
entered into in connection therewith.
(r) Holdings agrees to cause the filing of the Equity
Registration Statement to be made on the appropriate form, as contemplated by
the Equity Registration Rights Agreement.
(s) The Issuers and the Guarantor will not voluntarily claim,
and will resist actively all attempts to claim, the benefit of any usury laws
against holders of the Securities.
(t) The Issuers and the Guarantor will do and perform all
things required or necessary to be done and performed under this Agreement by
them prior to the Closing Date, and to satisfy all conditions precedent to the
Initial Purchaser's obligations hereunder to purchase the Units.
6. EXPENSES. The Issuers and the Guarantor agree to pay all costs,
expenses, fees and taxes incident to and in connection with: (i) the
preparation, printing, filing and distribution of the Preliminary Offering
Memorandum and the Offering Memorandum (including, without limitation, financial
statements and exhibits) and all amendments and supplements thereto (but not,
however, legal fees and expenses of your counsel incurred in connection
therewith), (ii) the preparation, printing (including, without limitation, word
processing and duplication costs) and delivery of this Agreement, the other
Operative Documents, all Blue Sky Memoranda and all other agreements, memoranda,
correspondence
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and other documents printed and delivered in connection wherewith and with the
Exempt Resales (but not, however, legal fees and expenses of your counsel
incurred connection with any of the foregoing other than fees of such counsel
plus reasonable disbursements incurred in connection with the preparation,
printing and delivery of such Blue Sky Memoranda), (iii) the authorization,
issuance, sale and delivery by the Issuers and the Guarantor of the Units and
the Subsidiary Guarantee, (iv) the qualification of the Units and the Subsidiary
Guarantee for offer and sale under the securities or Blue Sky laws of the
several states (including, without limitation, the reasonable fees and
disbursements of your counsel relating to such registration or qualification),
(v) furnishing such copies of the Preliminary Offering Memorandum and the
Offering Memorandum, and all amendments and supplements thereto, as may be
reasonably requested for use in connection with the Exempt Resales, (vi) the
preparation of certificates for the Securities and the Subsidiary Guarantee
(including, without limitation, printing and engraving thereof), (vii) the fee,
disbursements and expenses of the Issuers' and the Guarantor's counsel and
accountants, (viii) the fees, disbursements and expenses and listing fees in
connection with the application for quotation of the Securities in PORTAL, (ix)
all fees and expenses (including fees and expenses of counsel) of the Issuers
and the Guarantor in connection with approval of the Units, Notes and Warrants
by DTC for "book-entry" transfer, (x) any fees charged by securities rating
services for rating the Notes and (xi) the performance by the Issuers and the
Guarantor of their other obligations under this Agreement.
7. CONDITIONS OF INITIAL PURCHASER'S OBLIGATIONS. The obligations of
the Initial Purchaser hereunder are subject to the accuracy, when made and on
the Closing Date, of the representations and warranties of the Issuers and the
Guarantor contained herein, to the performance by the Issuers and the Guarantor
of their obligations hereunder, and to each of the following additional terms
and conditions:
(a) The Offering Memorandum shall have been printed and copies
made available to you not later than 6:00 p.m., New York City time, on the
Business Day following the date of this Agreement, or at such later date and
time as you may approve in writing.
(b) The Initial Purchaser shall not have discovered and
disclosed to the Company on or prior to the Closing Date that the Offering
Memorandum or any amendment or supplement thereto contains an untrue statement
of a fact which, in the opinion of Latham & Watkins, counsel for the Initial
Purchaser, is material or omits to state a fact which, in the opinion of such
counsel, is material and is required to be stated therein or is necessary to
make the statements therein not misleading.
(c) All corporate proceedings and other legal matters incident
to the authorization, form and validity of this Agreement, the other Operative
Documents and the Offering Memorandum, and all other legal matters relating to
this Agreement and the transactions contemplated hereby shall be reasonably
satisfactory in all material respects to counsel for the Initial Purchaser, and
the Issuers and the Guarantor shall have furnished to such counsel all documents
and information that they may reasonably request to enable them to pass upon
such matters.
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<PAGE>
(d) Kirkland & Ellis shall have furnished to the Initial
Purchaser, its written opinion (based on the assumptions and subject to the
exclusions contained therein), as counsel to the Issuers and the Guarantor,
addressed to the Initial Purchaser and dated the Closing Date, substantially in
the form of Exhibit A hereto.
(e) Hogan & Hartson L.L.P. shall have furnished to the Initial
Purchaser, its written opinion, as special Virginia counsel to the Issuers and
the Guarantor, addressed to the Initial Purchaser and dated the Closing Date,
substantially in the form of Exhibit B hereto.
(f) The Initial Purchaser shall have received from Latham &
Watkins, counsel for the Initial Purchaser, such opinion or opinions, dated the
Closing Date, with respect to the issuance and sale of the Units, the Offering
Memorandum and other related matters as the Initial Purchaser may reasonably
require, and the Issuers and the Guarantor shall have furnished to such counsel
such documents as they reasonably request for the purpose of enabling them to
pass upon such matters.
(g) At the time of execution of this Agreement, the Initial
Purchaser shall have received from PricewaterhouseCoopers LLP a letter, in form
and substance satisfactory to the Initial Purchaser, addressed to the Initial
Purchaser and dated the date hereof (i) confirming that they are independent
public accountants under Rule 101 of the American Institute of Certified Public
Accountants' Code of Professional Conduct and its interpretations and rulings
thereunder and (ii) stating, as of the date hereof (or, with respect to matters
involving changes or developments since the respective dates as of which
specified financial information is given in the Offering Memorandum, as of a
date not more than five days prior to the date hereof), the conclusions and
findings of such firm with respect to the financial information (including pro
forma financial information) and other matters ordinarily covered by
accountants' "comfort letters" to underwriters in connection with registered
public offerings.
(h) With respect to the letter of PricewaterhouseCoopers LLP
referred to in the preceding paragraph and delivered to the Initial Purchaser
concurrently with the execution of this Agreement (the "INITIAL LETTER"), the
Issuers and the Guarantor shall have furnished to the Initial Purchaser a letter
(the "BRING-DOWN LETTER") of such accountants, addressed to the Initial
Purchaser and dated the Closing Date (i) confirming that they are independent
public accountants under Rule 101 of the American Institute of Certified Public
Accountants' Code of Professional Conduct and its interpretations and rulings
thereunder, (ii) stating, as of the date of the bring-down letter (or, with
respect to matters involving changes or developments since the respective dates
as of which specified financial information is given in the Offering Memorandum,
as of a date not more than five days prior to the date of the bring-down
letter), the conclusions and findings of such firm with respect to the financial
information (including pro forma financial information) and other matters
covered by the initial letter and (iii) confirming in all material respects the
conclusions and findings set forth in the initial letter.
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(i) The Issuers and the Guarantor shall have furnished to the
Initial Purchaser a certificate, dated the Closing Date, of its Chief Executive
Officer, its President or a Vice President and its chief financial officer
stating that:
(j) The representations, warranties and agreements of the
Issuers and the Guarantor in Section 1 are true and correct in all material
respects, except for those representations and warranties qualified by
materiality, in which case such representations and warranties are true in all
respects as of the Closing Date; the Issuers and the Guarantor have complied
with all its agreements contained herein in all material respects; and the
conditions set forth in Sections 7(j) and 7(l) have been fulfilled in material
respects; and
(k) They have carefully examined the Offering Memorandum and,
in their opinion (A) as of its date, the Offering Memorandum did not include any
untrue statement of a material fact and did not omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and (B) since the date of such Offering Memorandum no event has
occurred which should have been set forth in a supplement or amendment to the
Offering Memorandum.
(l) Neither of the Issuers nor any of their subsidiaries shall
have sustained since the date of the latest audited financial statements
included or incorporated by reference in the Offering Memorandum any loss or
interference with its business from fire, explosion, flood or other calamity,
whether or not covered by insurance, or from any labor dispute or court or
governmental action, order or decree, otherwise than as set forth or
contemplated in the Offering Memorandum or (ii) since such date there shall not
have been any change in the capital stock or long-term debt of the Issuers or
any of their subsidiaries or any change, or any development involving a
prospective change, in or affecting the general affairs, management, financial
position, stockholders' equity or results of operations of the Issuers and their
subsidiaries, otherwise than as set forth or contemplated in the Offering
Memorandum, the effect of which, in any such case described in clause (i) or
(ii), is, in the judgment of the Initial Purchaser, so material and adverse as
to make it impracticable or inadvisable to proceed with the delivery of the
Units being delivered on the Closing Date on the terms and in the manner
contemplated in the Offering Memorandum.
(m) Subsequent to the execution and delivery of this Agreement
there shall not have occurred any of the following: (i) trading in securities
generally on the New York Stock Exchange or the American Stock Exchange or in
the over-the-counter market, or trading in any securities of the Company on any
exchange or in the over-the-counter market, shall have been suspended or minimum
prices shall have been established on any such exchange or such market by the
Commission, by such exchange or by any other regulatory body or governmental
authority having jurisdiction, (ii) a banking moratorium shall have been
declared by Federal or state authorities, (iii) the United States shall have
become engaged in hostilities, there shall have been an escalation in
hostilities involving the United States or there shall have been a declaration
of a national emergency or war by the United States or (iv) there shall have
occurred such a material adverse change in general economic, political or
financial conditions (or the effect of international conditions on the financial
markets in the United States shall be
26
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such) as to make it, in the judgment of the Initial Purchaser, impracticable or
inadvisable to proceed with the public offering or delivery of the Units being
delivered on the Closing Date on the terms and in the manner contemplated in the
Offering Memorandum.
(n) Subsequent to the execution and delivery of this Agreement
(i) no downgrading shall have occurred in the rating accorded debt securities or
preferred stock of any Issuer or Guarantor by any "nationally recognized
statistical rating organization," as that term is defined by the Commission for
purposes of Rule 436(g)(2) of the Rules and Regulations and (ii) no such
organization shall have publicly announced that it has under surveillance or
review, with possible negative implications, its rating of any of the Issuers'
debt securities or preferred stock.
(o) Each of the Issuers and the Guarantor shall have furnished
a Secretary's Certificate in form and substance satisfactory to the Initial
Purchaser.
(p) The Initial Purchaser shall have received, addressed to
the Initial Purchaser a solvency certificate that is identical to the solvency
certificate required to be delivered to the lenders under the Senior Credit
Facilities.
(q) Latham & Watkins shall have been furnished with such other
documents and opinions, in addition to those set forth above, as they may
reasonably require for the purpose of enabling them to review or pass upon the
matters referred to in this Agreement and in order to evidence the accuracy,
completeness or satisfaction in all material respects of any of the
representations, warranties or conditions herein contained.
(r) The issuance and sale of notes contemplated by the
Securities Purchase Agreement shall have been consummated on the terms described
in the Offering Memorandum.
(s) The Initial Purchaser shall have received an executed copy
of the Management Services Agreement in form and substance satisfactory to the
Initial Purchaser.
All opinions, letters, evidence and certificates mentioned
above or elsewhere in this Agreement shall be deemed to be in compliance with
the provisions hereof only if they are in form and substance reasonably
satisfactory to counsel for the Initial Purchaser.
8. INDEMNIFICATION AND CONTRIBUTION.
(a) The Issuers and the Guarantor shall indemnify and hold
harmless the Initial Purchaser, its officers and employees and each person, if
any, who controls the Initial Purchaser within the meaning of the Securities
Act, from and against any loss, claim, damage or liability, joint or several, or
any action in respect thereof (including, but not limited to, any loss, claim,
damage, liability or action relating to purchases and sales of Units), to which
the Initial Purchaser, that officer, employee or controlling person may become
subject, under the Securities Act or otherwise, insofar as such loss, claim,
damage, liability or action arises out of, or is based upon, (i) any untrue
statement or alleged untrue statement of a material fact contained (A) in the
Preliminary Offering Memorandum or the Offering Memorandum or in
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any amendment or supplement thereto or (B) in any blue sky application or other
document prepared or executed by the Issuers (or based upon any written
information furnished by the Issuers) specifically for the purpose of qualifying
any or all of the Securities under the securities laws of any state or other
jurisdiction (any such application, document or information being hereinafter
called a "BLUE SKY APPLICATION"), (ii) the omission or alleged omission to state
in the Preliminary Offering Memorandum or the Offering Memorandum, or in any
amendment or supplement thereto, or in any Blue Sky Application any material
fact required to be stated therein or necessary to make the statements therein
not misleading or (iii) any act or failure to act or any alleged act or failure
to act by the Initial Purchaser in connection with, or relating in any manner
to, the Units or the offering contemplated hereby, and which is included as part
of or referred to in any loss, claim, damage, liability or action arising out of
or based upon matters covered by clause (i) or (ii) above (PROVIDED that the
Issuers and the Guarantor shall not be liable under this clause (iii) to the
extent that it is determined in a final judgment by a court of competent
jurisdiction that such loss, claim, damage, liability or action resulted
directly from any such acts or failures to act undertaken or omitted to be taken
by the Initial Purchaser through its gross negligence or willful misconduct),
and shall reimburse the Initial Purchaser and each such officer, employee or
controlling person promptly upon demand for any legal or other expenses
reasonably incurred by the Initial Purchaser, that officer, employee or
controlling person in connection with investigating or defending or preparing to
defend against any such loss, claim, damage, liability or action as such
expenses are incurred; PROVIDED, HOWEVER, that the Issuers and the Guarantor
shall not be liable in any such case to the extent that any such loss, claim,
damage, liability or action arises out of, or is based upon, any untrue
statement or alleged untrue statement or omission or alleged omission made in
the Offering Memorandum, or in any such amendment or supplement, or in any Blue
Sky Application, in reliance upon and in conformity with written information
concerning the Initial Purchaser furnished to the Issuers and the Guarantor by
or on behalf of the Initial Purchaser specifically for inclusion therein; and
PROVIDED FURTHER, that the foregoing indemnity agreement with respect to any
Preliminary Offering Memorandum shall not inure to the benefit of the Initial
Purchaser from whom the person asserting any such losses, claims, damages or
liabilities purchased Units, or any person controlling such Initial Purchaser,
if a copy of the Offering Memorandum (as then amended or supplemented if the
Issuers and the Guarantor shall have furnished any amendments or supplements
thereto) was not seen or given by or on behalf of such Initial Purchaser to such
person, if required by law so to have been delivered, at or prior to the written
confirmation of the sale of the Units to such person, and if the Offering
Memorandum (as so amended or supplemented) would have corrected any such untrue
statement of a material fact contained in, and each omission or alleged omission
of material fact from, such Preliminary Offering Memorandum giving rise to such
losses, claims, damages or liabilities, unless such failure is the result of
noncompliance by the Issuers and the Guarantor with Section 5(b) hereof. The
foregoing indemnity agreement is in addition to any liability which the Issuers
and the Guarantor may otherwise have to the Initial Purchaser or to any officer,
employee or controlling person of the Initial Purchaser.
(b) The Initial Purchaser shall indemnify and hold harmless
the Issuers and the Guarantor, their officers and employees, each of their
directors, and each person, if any, who controls any Issuer or the Guarantor
within the meaning of the Securities Act, from and
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against any loss, claim, damage or liability, joint or several, or any action in
respect thereof, to which any Issuer or the Guarantor or any such director,
officer or controlling person may become subject, under the Securities Act or
otherwise, insofar as such loss, claim, damage, liability or action arises out
of, or is based upon, (i) any untrue statement or alleged untrue statement of a
material fact contained (A) in the Preliminary Offering Memorandum or the
Offering Memorandum or in any amendment or supplement thereto, or (B) in any
Blue Sky Application or (ii) the omission or alleged omission to state in the
Preliminary Offering Memorandum or the Offering Memorandum, or in any amendment
or supplement thereto, or in any Blue Sky Application any material fact required
to be stated therein or necessary to make the statements therein not misleading,
but in each case only to the extent that the untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information concerning the Initial Purchaser furnished
to the Issuers and the Guarantor by or on behalf of the Initial Purchaser
specifically for inclusion therein, and shall reimburse the Issuers and the
Guarantor and any such director, officer or controlling person for any legal or
other expenses reasonably incurred by the Issuers and the Guarantor or any such
director, officer or controlling person in connection with investigating or
defending or preparing to defend against any such loss, claim, damage, liability
or action as such expenses are incurred. The foregoing indemnity agreement is in
addition to any liability which the Initial Purchaser may otherwise have to the
Issuers and the Guarantor or any such director, officer, employee or controlling
person.
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party under this Section 8, notify the indemnifying party in
writing of the claim or the commencement of that action; PROVIDED, HOWEVER, that
the failure to notify the indemnifying party shall not relieve it from any
liability which it may have under this Section 8 except to the extent it has
been materially prejudiced by such failure and, PROVIDED FURTHER, that the
failure to notify the indemnifying party shall not relieve it from any liability
which it may have to an indemnified party otherwise than under this Section 8.
If any such claim or action shall be brought against an indemnified party, and
it shall notify the indemnifying party thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it wishes, jointly with
any other similarly notified indemnifying party, to assume the defense thereof
with counsel reasonably satisfactory to the indemnified party. After notice from
the indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 8 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation; PROVIDED, HOWEVER, any
indemnified party shall have the right to employ separate counsel in any such
action and to participate in the defense thereof but the fees and expenses of
such counsel shall be at the expense of the indemnified party unless (i) the
employment thereof has been specifically authorized by the indemnifying party in
writing, (ii) such indemnified party shall have been advised by such counsel
that there may be one or more legal defenses available to it which are different
from or additional to those available to the indemnifying party and in the
reasonable judgment of such counsel, it is advisable for such indemnified party
to employ separate counsel or (iii) the indemnifying party has failed to
29
<PAGE>
assume the defense of such action and employ counsel reasonably satisfactory to
the indemnified party, in which case, if such indemnified party notifies the
indemnifying party in writing that it elects to employ separate counsel at the
expense of the indemnifying party, the indemnifying party shall not have the
right to assume the defense of such action on behalf of such indemnified party,
it being understood, however that the indemnifying party shall not, in
connection with any one such action or separate but substantially similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and expenses of
more than one separate firm of attorneys (in addition to one local counsel) at
any time for all such indemnified parties, which firm shall be designated in
writing by the Initial Purchaser, if the indemnified parties under this Section
8 consist of the Initial Purchaser or any of its officers, employees or
controlling persons, or by the Issuers and the Guarantor, if the indemnified
parties under this Section 8 consist of the Issuers, the Guarantor or any of
their directors, officers, employees or controlling persons. No indemnifying
party shall (i) without the prior written consent of the indemnified parties
(which consent shall not be unreasonably withheld), settle or compromise or
consent to the entry of any judgment with respect to any pending or threatened
claim, action, suit or proceeding in respect of which indemnification or
contribution may be sought hereunder (whether or not the indemnified parties are
actual or potential parties to such claim or action) unless such settlement,
compromise or consent includes an unconditional release of each indemnified
party from all liability arising out of such claim, action, suit or proceeding,
or (ii) be liable for any settlement of any such action effected without its
written consent (which consent shall not be unreasonably withheld), but if
settled with the consent of the indemnifying party or if there be a final
judgment for the plaintiff in any such action, the indemnifying party agrees to
indemnify and hold harmless any indemnified party from and against any loss or
liability by reason of such settlement or judgment.
(d) If the indemnification provided for in this Section 8
shall for any reason be unavailable to or insufficient to hold harmless an
indemnified party under Section 8(a) or 8(b) in respect of any loss, claim,
damage or liability, or any action in respect thereof, referred to therein, then
each indemnifying party shall, in lieu of indemnifying such indemnified party,
contribute to the amount paid or payable by such indemnified party as a result
of such loss, claim, damage or liability, or action in respect thereof, (i) in
such proportion as shall be appropriate to reflect the relative benefits
received by the Issuers and the Guarantor, on the one hand, and the Initial
Purchaser, on the other, from the offering of the Units or (ii) if the
allocation provided by clause (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 (i) above but also the relative fault of the Issuers and
the Guarantor, on the one hand, and the Initial Purchaser, on the other, 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. The relative benefits received by the Issuers and the
Guarantor, on the one hand, and the Initial Purchaser, on the other, with
respect to such offering shall be deemed to be in the same proportion as the
total net proceeds from the offering of the Units purchased under this Agreement
(before deducting expenses) received by the Issuers and the Guarantor, on the
one hand, and the total discounts and commissions received by the Initial
Purchaser with respect to the Units purchased under this Agreement, on the other
hand, bear to the total gross
30
<PAGE>
proceeds from the offering of the Units under this Agreement, in each case as
set forth in the table on the cover page of the Offering Memorandum. The
relative fault shall be determined by reference to whether the untrue or alleged
untrue statement of a material fact or omission or alleged omission to state a
material fact relates to information supplied by the Issuers or the Guarantor or
the Initial Purchaser, the intent of the parties and their relative knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The Issuers and the Guarantor and the Initial Purchaser agree that it
would not be just and equitable if contributions pursuant to this Section 8(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 herein. The amount paid or payable by an indemnified party as a
result of the loss, claim, damage or liability, or action in respect thereof,
referred to above in this Section 8(d) shall be deemed to include, for purposes
of this Section 8(d), 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(d), the Initial
Purchaser shall not be required to contribute any amount in excess of the amount
by which the total price at which the Units purchased by it were resold to the
Eligible Purchasers exceeds the amount of any damages which the Initial
Purchaser has otherwise paid or become liable to pay by reason of any 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.
(e) The Initial Purchaser confirms and the Issuers and the
Guarantor acknowledge that the statements with respect to the offering of the
Units by the Initial Purchaser set forth in the first sentence of the second
paragraph, in the second to last sentence in the third paragraph, in the first
and second sentence of the fourth paragraph and in all of the sixth paragraph
under the caption "Plan of Distribution" in the Offering Memorandum are correct
and constitute the only information concerning the Initial Purchaser furnished
in writing to the Issuers and the Guarantor by or on behalf of the Initial
Purchaser specifically for inclusion in the Offering Memorandum.
9. TERMINATION. The obligations of the Initial Purchaser hereunder may
be terminated by the Initial Purchaser by notice given to and received by the
Issuers and the Guarantor prior to delivery of and payment for the Units if,
prior to that time, any of the events described in Sections 7(j), 7(k) or 7(l)
shall have occurred, or if the Initial Purchaser shall decline to purchase the
Units for any reason permitted under this Agreement.
10. REIMBURSEMENT OF INITIAL PURCHASER'S EXPENSES. If the Issuers and
the Guarantor shall fail to tender the Units for delivery to the Initial
Purchaser by reason of any failure, refusal or inability on the part of the
Issuers and the Guarantor to perform any agreement on their part to be
performed, or because any other condition of the obligations hereunder required
to be fulfilled by the Issuers and the Guarantor is not fulfilled, the Issuers
and the Guarantor will reimburse the Initial Purchaser for all reasonable
out-of-pocket expenses (including fees and disbursements of counsel) incurred by
the Initial Purchaser in
31
<PAGE>
connection with this Agreement and the proposed purchase of the Units, and upon
demand the Issuers and the Guarantor shall pay the full amount thereof to the
Initial Purchaser.
11. NOTICES, ETC. All statements, requests, notices and agreements
hereunder shall be in writing, and:
(a) if to the Initial Purchaser, shall be delivered or sent by
mail, telex or facsimile transmission to Lehman Brothers Inc., Three World
Financial Center, New York, New York 10285, Attention: Syndicate Department,
(Fax: 212-526-6588), with a copy to Latham & Watkins, 885 Third Avenue, New
York, New York 10022, Attention: Kirk A. Davenport (Fax: 212-751-4864) and, in
the case of any notice pursuant to Section 8(d), to the Director of Litigation,
Office of the General Counsel, Lehman Brothers Inc., Three World Financial
Center, 10th Floor, New York, NY 10285; and
(b) if to the Company, shall be delivered or sent by mail,
telex or facsimile transmission to the address of the Company set forth in the
Offering Memorandum, Attention: Rowland H. Geddie, III, Esq. (Fax:
417-682-8113), with a copy to Kirkland & Ellis, International Financial Centre,
Old Broad Street, London EC2N 1HQ, UK, Attention: M. Gilbey Strub
(Fax: 44 171 816-8800).
Any such statements, requests, notices or agreements shall
take effect at the time of receipt thereof. The Issuers and the Guarantor shall
be entitled to act and rely upon any request, consent, notice or agreement given
by the Initial Purchaser.
12. PERSONS ENTITLED TO BENEFIT OF AGREEMENT. This Agreement shall
inure to the benefit of and be binding upon the Initial Purchaser, the Issuers
and the Guarantor and their respective successors. This Agreement and the terms
and provisions hereof are for the sole benefit of only those persons, except
that (A) the representations, warranties, indemnities and agreements of the
Issuers and the Guarantor contained in this Agreement shall also be deemed to be
for the benefit of the person or persons, if any, who control the Initial
Purchaser within the meaning of Section 15 of the Securities Act and (B) the
indemnity agreement of the Initial Purchaser contained in Section 8(c) of this
Agreement shall be deemed to be for the benefit of directors of the Issuers and
the Guarantor and any person controlling any Issuer or the Guarantor within the
meaning of Section 15 of the Securities Act. Nothing in this Agreement is
intended or shall be construed to give any person, other than the persons
referred to in this Section 12, any legal or equitable right, remedy or claim
under or in respect of this Agreement or any provision contained herein.
13. SURVIVAL. The respective indemnities, representations, warranties
and agreements of the Issuers and the Guarantor and the Initial Purchaser
contained in this Agreement or made by or on behalf on them, respectively,
pursuant to this Agreement, shall survive the delivery of and payment for the
Units and shall remain in full force and effect, regardless of any investigation
made by or on behalf of any of them or any person controlling any of them.
32
<PAGE>
14. DEFINITION OF THE TERMS "BUSINESS DAY" AND "SUBSIDIARY." For
purposes of this Agreement, (a) "business day" means any day on which the New
York Stock Exchange, Inc. is open for trading and (b) "subsidiary" has the
meaning set forth in Rule 405 of the rules and regulations of the Commission
under the Securities Act.
15. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of New York without regard to principles of
conflicts of laws.
Each party irrevocably agrees that any legal suit, action or
proceeding arising out of or based upon this Agreement or the transactions
contemplated hereby ("RELATED PROCEEDINGS") may be instituted in the federal
courts of the United States of America located in the City of New York or the
courts of the State of New York in each case located in the Borough of Manhattan
in the City of New York (collectively, the "SPECIFIED COURTS"), and irrevocably
submits to the exclusive jurisdiction (except for proceedings instituted in
regard to the enforcement of a judgment of any such court (a "RELATED
JUDGMENT"), as to which such jurisdiction is non-exclusive) of such courts in
any such suit, action or proceeding. The parties further agree that service of
any process, summons, notice or document by mail to such party's address set
forth above shall be effective service of process for any lawsuit, action or
other proceeding brought in any such court. The parties hereby irrevocably and
unconditionally waive any objection to the laying of venue of any lawsuit,
action or other proceeding in the Specified Courts, and hereby further
irrevocably and unconditionally waive and agree not to plead or claim in any
such court that any such lawsuit, action or other proceeding brought in any such
court has been brought in an inconvenient forum.
16. PRIOR AGREEMENTS. The parties to this Agreement acknowledge and
agree that this Agreement supersedes Section 2 of that certain Interim Loan Fee
Letter, dated as of October 17, 1999, by and among the Initial Purchaser, OSI
and the other parties thereto (the "INTERIM LOAN FEE LETTER") and that from and
after the date hereof, the Interim Loan Commitment (as defined in that certain
Commitment Letter, dated as of October 17, 1999, by and among the Initial
Purchaser, OSI and the other parties thereto) and Section 2 of the Interim Loan
Fee Letter shall have no further force and effect.
17. COUNTERPARTS. This Agreement may be executed in one or more
counterparts and, if executed in more than one counterpart, the executed
counterparts shall each be deemed to be an original but all such counterparts
shall together constitute one and the same instrument.
18. HEADINGS. The headings herein are inserted for convenience of
reference only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.
(Signature Pages Follow)
33
<PAGE>
If the foregoing correctly sets forth the agreement between the Issuers
and the Guarantor and the Initial Purchaser, please indicate your acceptance in
the space provided for that purpose below.
Very truly yours,
O'SULLIVAN INDUSTRIES, INC.
By: /s/ Phillip J. Pacey
-----------------------
Name:
Title:
O'SULLIVAN INDUSTRIES HOLDINGS, INC.
By: /s/ Phillip J. Pacey
-----------------------
Name:
Title:
O'SULLIVAN INDUSTRIES - VIRGINIA, INC.
By: /s/ Phillip J. Pacey
-----------------------
Name:
Title:
34
<PAGE>
Accepted:
LEHMAN BROTHERS INC.
By: /s/ Mark W. Filipski
-------------------------
AUTHORIZED REPRESENTATIVE
35
<PAGE>
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
O'SULLIVAN INDUSTRIES, INC.
Pursuant to the General Corporation Law Of the State Of Delaware
FIRST: The name of the Corporation is O'SULLIVAN INDUSTRIES, INC.
SECOND: The address of the Corporation's registered office in the State
of Delaware is No. 100 West Tenth Street, in the City of Wilmington, County of
New Castle. The name of its registered agent at such address is The Corporation
Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
FOURTH: The total number of shares which the Corporation shall have
authority to issue is 100 shares of Common Stock, par value $1.00 per share.
FIFTH: The name of the incorporator is Allen Isaacson. The mailing
address of the incorporator is 120 Broadway, New York, New York 10005.
SIXTH: The private property of the stockholders shall not be subject to
the payment of corporate debts to any extent whatsoever.
SEVENTH: All corporate powers shall be exercised by the Board of
Directors, except as otherwise provided herein or by law. in furtherance and not
in limitation of the powers conferred by statute, the Board of Directors is
expressly authorized to make, alter or repeal the By-laws of the Corporation.
EIGHTH: The books of the Corporation may be kept (subject to any
provision contained In the statutes) outside the State of Delaware at such place
or places as may be designated from time to time by the Board of Directors or in
the By-laws of the corporation.
NINTH: Meetings of the stockholders of the Corporation, for all
purposes, may be hold within or without the State of Delaware as the By-laws may
provide. The election of directors need not be written by ballot unless the
By-laws so provide.
TENTH: The Corporation reserves right to amend, alter or change any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by
<PAGE>
statute, and all rights conferred upon the stockholders herein are granted
subject to this reservation.
THE UNDERSIGNED, being the incorporator hereinbefore named, for the
purpose of forming a corporation pursuant to the General Corporation Law of the
State of Delaware, does make this certificate, hereby declaring and certifying
that this is his act and deed and the facts herein stated are true, and
accordingly has set his hand this 2nd day of July, 1969.
/s/ Allen Isaacson
-----------------------
Allen Isaacson
Incorporator
-2-
<PAGE>
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
BE IT REMEMBERED, that -on this 2nd day of July, A.D. 1969, personally
came before me, a Notary Public for the State of New York, ALLEN ISAACSON, the
party to the foregoing certificate of incorporation, known to be personally to
be such, and acknowledged the said certificate to be his act and deed and that
the facts stated therein are true.
GIVEN under my hand and seal of office the day and year aforesaid.
/s/ Kenneth R. Blackman
---------------------------------
Notary Public
KENNETH R. BLACKMAN
Notary Public, State of New York
No. 41-5331940
Qualified in Queens County
Commission Expires March 30, 1970
[Seal]
-3-
<PAGE>
FILED
APR 17 1986
/s/ [ILLEGIBLE]
SECRETARY OF STATE
CERTIFICATE OF CHANCE OF LOCATION OF REGISTERED
OFFICE AND/OR REGISTERED AGENT
OF
O'Sullivan Industries, Inc.
-----------------------------------------------
The Board of Directors of the O'Sullivan Industries, Inc., a Corporation
of Delaware, on this 8th Day of April, A.D. 1986, do hereby resolve and order
that the location of the Registered Office of this Corporation within this State
be, and the same hereby is c/o Radio Shack, 4723 Concord Pike, Suite 2, Concord
Pike Village Street, in the City of Wilmington, Zip Code 19803, in the County of
New Castle.
The name of the Registered Agent therein and in charge thereof upon whom
process against this Corporation may be served, is W. Riley Daniels.
The O'Sullivan Industries, Inc., a Corporation of Delaware, does hereby
certify that the foregoing is a true copy of a resolution adopted by the Board
of Directors at a meeting held as herein stated.
IN WITNESS WHEREOF, said Corporation has caused this certificate to be
signed by its Vice President and Attested by its Secretary, the 8th day of April
A.D., 1986.
BY: /s/ C. W. Tindall
-----------------------------------
Vice President
ATTEST:
/s/ H. C. Winn
- -----------------------------------
Assistant Secretary
<PAGE>
STATE OF TEXAS
COUNTY OF TARRANT
Before me, a Notary public, on this 8th day of April, 1986, personally
appeared C. W. Tindall to be known to be the identical person who subscribed the
name of the maker thereof to the foregoing Statement, as Vice President
O'Sullivan Industries, Inc. and acknowledged to me that he executed the same as
his free and voluntary act and deed, and as the free and voluntary act and deed
of such corporation, for the uses and purposes therein so forth.
/s/ Marian S. Massey
-----------------------------------
Notary Public, State of Texas
[NOTARY SEAL]
My commission expires 3-24-90.
<PAGE>
FILED
NOV 30 1987
/s/ [ILLEGIBLE]
SECRETARY OF STATE
CERTIFICATE OF AMENDMENT
OF CERTIFICATE OF INCORPORATION
OF
O'SULLIVAN INDUSTRIES, INC.
O'Sullivan Industries, Inc., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, DOES HEREBY
CERTIFY:
FIRST: That by written consent in lieu of a meeting of the Board of Directors of
O'Sullivan Industries, Inc. a resolution was duly adopted setting forth a
proposed amendment of the Certificate of Incorporation of the corporation,
declaring said amendment to be advisable. The resolution setting forth the
proposed agreement is as follows:
RESOLVED, That the Certificate of Incorporation be amended by adding a new
Article ELEVENTH reading in its entirety as follows:
"ELEVENTH: The personal liability of the directors of the Corporation is
[ILLEGIBLE] eliminated to the fullest extent permitted by paragraph (7) of
subsection (b) of Section 102 of the [ILLEGIBLE] Corporation Law of the
State of Delaware, as the [ILLEGIBLE] may be amended and supplemented. No
amendment to or repeal of this Article ELEVENTH 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 or repeal."
SECOND: That thereafter, by written consent in lieu of a special meeting of
stockholder, pursuant to Section 228(a) of the General corporation Law of the
State of Delaware and Section 2.09 of the Bylaws of the corporation, the sole
stockholder of the Corporation consented to the resolution.
THIRD: That said amendment was duly adopted in accordance the provisions of
Section 242 of the General Corporation Law of the State of Delaware.
FOURTH: That the capital of said corporation shall not be reduced under or by
reason of said amendment.
<PAGE>
IN WITNESS WHEREOF, O'Sullivan Industries, Inc. has caused this certificate to
be signed by H. C. Winn, its Vice President and Secretary and attested by Jim
Sheets, its Assistant Secretary this 13th day of November 1987.
BY: /s/ H. C. Winn
-----------------------------------
H. C. Winn
Vice President
and Secretary
Attest:
/s/ Jim Sheets
- -----------------------------------
Jim Sheets
Assistant Secretary
<PAGE>
8801300318
9AM
FILED
MAY 9 1988
/s/ [ILLEGIBLE]
SECRETARY OF STATE
CERTIFICATE OF CHANGE OF LOCATION OF REGISTERED
OFFICE AND/OR REGISTERED AGENT
OF
O'Sullivan Industries, Inc.
The Board of Directors of the O'Sullivan Industries, Inc., a Corporation
of Delaware, on this 20th Day of April, A.D. 1988, do hereby resolve and order
that the location of the Registered Office of this Corporation within this State
be, and the same hereby is c/o Radio Shack 4723 Concord Pike Suite 2, Concord
Pike Village Street, in the City of Wilmington, Zip Code 19803, in the County of
New Castle.
The name of the Registered Agent therein and in charge thereof upon whom
process against this Corporation may be served, is Phil Oman.
The O'Sullivan Industries, Inc., a Corporation of Delaware, does hereby
certify that the foregoing is a true copy of a resolution adopted by the Board
of Directors at a meeting held as herein stated.
IN WITNESS WHEREOF, said Corporation has caused this certificate to be
signed by its Vice President and Attested by its Asst. Treasurer, the 20th day
of April A.D., 1988.
BY: /s/ Richard L. Ramsey
--------------------------------
Vice President and Controller
ATTEST:
/s/ [ILLEGIBLE]
- -----------------------------
Asst. Treasurer
<PAGE>
STATE OF TEXAS
COUNTY OF TARRANT
Before me, a Notary public, on this 21st day of April, 1988, personally
appeared Richard L. Ramsey to be known to be the identical person who subscribed
the name of the maker thereof to the foregoing Statement, as Vice President and
Controller Tandy Corporation and acknowledged to me that he executed the same as
his free and voluntary act and deed, and as the free and voluntary act and deed
of such corporation, for the uses and purposes therein set forth.
/s/ Monica Ledbetter
-----------------------------
Notary Public, State of Texas
(NOTARIAL SEAL)
-----------------------------------------
[SEAL] MONICA LEDBETTER
Notary Public, State of Texas
My Commission Expires Nov. 9, [ILLEGIBLE]
-----------------------------------------
<PAGE>
6903240191
FILED
NOV 20 1989
9 AM
/s/ [ILLEGIBLE]
SECRETARY OF STATE
CERTIFICATE OF CHANGE OF LOCATION OF REGISTERED
OFFICE AND/OR REGISTERED AGENT
OF
OSULLIVAN INDUSTRIES, INC.
By the authority granted by
The Board of Directors of O'Sullivan Industries, Inc., a Corporation of
Delaware, on the 30th Day of December, A.D. 1983, I do hereby order that the
location of the Registered Office of this Corporation within this State be, and
the same hereby is 605 Naamans Road, in the City of Claymont, Zip Code 19703, in
the County of New Castle.
The name of the Registered Agent therein and in charge thereof upon whom
process against this Corporation nay be served, is Phil Oman.
O'Sullivan Industries, Inc., a Corporation of Delaware, does hereby
certify that the attached is a true copy of a resolution adopted by the Board of
Directors as herein stated.
IN WITNESS WHEREOF, said Corporation has caused this certificate to be
signed by its Vice President and Attested by its Asst. Secretary, the 13th day
of November A.D., 1989.
O'SULLIVAN INDUSTRIES, INC.
BY: /s/ H.C. Winn
--------------------------------
Vice President, H. C. Winn
ATTEST:
/s/ Jim Sheets
- -------------------------------
Asst. Secretary, Jim Sheets
<PAGE>
CERTIFIED EXTRACT OF MINUTES
I, Jim Sheets, Assistant Secretary of O'Sullivan Industries, Inc., a Delaware
Corporation, hereby certify that the following is a true and correct extract of
minutes of a written consent in lieu of a meeting of the Board of Directors of
O'Sullivan Industries, Inc. held on December 30, 1983, to wit:
* * *
RESOLVED: That the officers of this Corporation are authorized and
directed to change the name of the registered agent and the address of the
registered office of the Corporation pursuant to the provisions of the
Delaware Business Corporation Act, and to execute all documents or
instruments deemed necessary or appropriate to effect such change.
* * *
And I further certify that this resolution has been neither amended nor
rescinded, and remains in full force and effect.
IN WITNESS WHEREOF, I have hereunto set my hand and caused the seal of said
Corporation to be affixed hereto this 13th day of November, 1989.
/s/ Jim Sheets
--------------------------------
Jim Sheets
Assistant Secretary
119/89-37. 1sl
11-09-89
<PAGE>
STATE OF DELAWARE
[LOGO] CERTIFICATE OF SECRETARY OF STATE
CHANGE OF LOCATION DIVISION OF CORPORATIONS
of Registered Office FILED 09:00 AM 08/08/1990
and/or Registered Agent 902205160 - 719723
================================================================================
By the authority granted by
- -- The Board of Directors of O'Sullivan Industries, Inc., a Corporation of
Delaware, on the 30th day of December, A.D. 1983,
I do hereby resolve and order that the location of the Registered Office
of this Corporation within this State be, and the same hereby is 605
Naamans Road in the City of Claymont, County of New Castle ZipCode 19703.
- -- The name of the Registered Agent therein and in charge thereof upon whom
process against this Corporation may be served, is Jim Quigley
- -- O'Sullivan Industries, Inc. a Corporation of Delaware, does hereby certify
that the attached is a true copy of a resolution adopted by the Board of
Directors at a meeting held as herein stated.
- -- IN WITNESS WHEREOF, said Corporation has caused this certificate to be
signed by its Vice President and Attested by its Secretary, the 19th day
of July, A.D., 1990
BY: /s/ H.C. Winn
-----------------------------
H.C. Winn, Vice President
ATTEST: /s/ Jim Sheets
-------------------------
Jim Sheets, Asst. Secretary
<PAGE>
CERTIFIED EXTRACT OF MINUTES
I, Jim Sheets, Assistant Secretary of O'Sullivan Industries, Inc., a Delaware
Corporation, hereby certify that the following is a true and correct extract of
minutes of a written consent in lieu of a meeting of the Board of Directors of
O'Sullivan Industries, Inc. held on December 30, 1983, to wit:
***
RESOLVED: That the officers of this Corporation are authorized and
directed to change the name of the registered agent and the address of the
registered office of the Corporation pursuant to the provisions of the
Delaware Business Corporation Act, and to execute all documents or
instruments deemed necessary or appropriate to effect such change.
***
And I further certify that this resolution has been neither amended nor
rescinded, and remains in full force and effect.
IN WITNESS WHEREOF, I have hereunto set my hand and caused the seal of said
Corporation to be affixed hereto this 19th day of July, 1990.
/s/ Jim Sheets
-------------------
Jim Sheets
Assistant Secretary
<PAGE>
[LOGO] CERTIFICATE OF STATE OF DELAWARE
CHANGE OF LOCATION SECRETARY OF STATE
of Registered Office DIVISION OF CORPORATIONS
and/or Registered Agent FILED 02:50 PM 12/22/1992
923665300 - 719723
================================================================================
- -- By the authority granted by The Board of Directors of O'Sullivan
Industries, Inc. a Corporation of Delaware on the 30th day of December,
A.D. 1983.
I do hereby order that the location of the Registered Office of this
Corporation within this State be, and the same hereby is 3202 Kirkwood
Highway, Suite 204 Street, in the City of Wilmington, County of New Castle
Zip Code 19808.
- -- The name of the Registered Agent therein and in charge thereof upon whom
process against this Corporation may be served, is Ron Fregeolle
- -- _________________________________________________________________________,
a Corporation of Delaware, does hereby certify that the attached is a true
copy of a resolution adopted by the Board of Directors at a meeting held
as herein stated.
- -- IN WITNESS WHEREOF, said Corporation has caused this certificate to be
signed by its President and Attested by its Secretary, the 10th day of
December, AD., 1992.
By: /s/ H.C. Winn
------------------------------------
Vice President H.C. Winn
ATTEST: /s/ Jim Sheets
-------------------------------
Assistant Secretary Jim Sheets
<PAGE>
CERTIFIED EXTRACT OF MINUTES
I, Jim Sheets, Assistant Secretary of O'Sullivan Industries, Inc., a
Delaware Corporation, hereby certify that the following is a true and correct
extract of minutes of a written consent in lieu of a meeting of the Board of
Directors of O'Sullivan Industries, Inc. held on December 30, 1983, to wit:
***
RESOLVED: That the officers of this Corporation are authorized and
directed to change the name of the registered agent and the address of the
registered office of the Corporation pursuant to the provisions of the
Delaware Business Corporation Act, and to execute all documents or
instruments deemed necessary or appropriate to effect such change.
***
And I further certify that this resolution has been neither amended nor
rescinded, and remains in full force and effect.
IN WITNESS WHEREOF, I have hereunto set my hand and caused the seal of
said Corporation to be affixed hereto this 10th day of December, 1992.
/s/ Jim Sheets
-------------------
Jim Sheets
Assistant Secretary
<PAGE>
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 10:00 AM 07/11/1994
944126041 - 719723
CERTIFICATE OF CHANGE OF REGISTERED AGENT
AND
REGISTERED OFFICE
*****
O'SULLIVAN INDUSTRIES, INC., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, DOES HEREBY
CERTIFY:
The present registered agent of the corporation is RON FREGEOLLE and the
present registered office of the corporation is in the county of New Castle.
The Board of Directors of O'SULLIVAN INDUSTRIES, INC. adopted the
following resolution on the 29th day of June, 1994.
Resolved, that the registered office of O'SULLIVAN INDUSTRIES, INC.
in the state of Delaware be and it hereby is changed to Corporation Trust
Center, 1209 Orange Street, in the City of Wilmington, County of New
Castle, and the authorization of the present registered agent of this
corporation be and the same is hereby withdrawn, and THE CORPORATION TRUST
COMPANY, shall be and is hereby constituted and appointed the registered
agent of this corporation at the address of its registered office.
IN WITNESS WHEREOF, O'SULLIVAN INDUSTRIES, INC. has caused this statement
to be signed by DANIEL F. O'SULLIVAN , its President and attested by ROWLAND H.
GEDDIE, III, its Secretary this 29th day of June, 1994.
By /s/ Daniel F. O'Sullivan
--------------------------------
DANIEL F. O'SULLIVAN President
ATTEST:
By /s/ Rowland H. Geddie, III
------------------------------
ROWLAND H. GEDDIE, III Secretary
<PAGE>
EXHIBIT 3.2
Commonwealth of Virginia
State Corporation Commission
I Certify the Following from the Records of the Commission:
The foregoing is a true copy of all documents constituting the charter of
O'SULLIVAN INDUSTRIES - VIRGINIA, INC.
Nothing more is hereby certified.
Signed and Sealed at Richmond on this Date:
November 16, 1999
/s/ Joel H. Peck
- ---------------------- [SEAL]
Joel H. Peck, Clerk of the Commission
<PAGE>
CIS090
316229
COMMONWEALTH OF VIRGINIA
STATE CORPORATION COMMISSION
February 3, 1988
CERTIFICATE OF INCORPORATION
The State Corporation Commission has found the accompanying articles submitted
on behalf of
O'SULLIVAN INDUSTRIES - VIRGINIA, INC.
to comply with the requirements of law, and confirms payment of all related
fees.
Therefore, it is ordered that this
CERTIFICATE OF INCORPORATION
be issued, and admitted to record with the articles In this office of the
Commission, effective February 3, 1988.
The corporation is granted the authority conferred on it by law in accordance
with the articles, subject to the conditions and restrictions imposed by law.
STATE CORPORATION COMMISSION
By: /s/ Elizabeth B. Lacy
---------------------
Commissioner
Court Number: 216
01519NEW
-2-
<PAGE>
ARTICLES OF INCORPORATION OF
O'SULLIVAN INDUSTRIES - VIRGINIA, INC.
I, the undersigned natural person of the age of twenty-one (21) years
or more, a citizen of the State of Texas, acting as incorporator of a
corporation under the Virginia Stock Corporation Act, do hereby adopt the
following Articles of Incorporation for such corporation.
ARTICLE ONE
The name of the corporation is:
O'SULLIVAN INDUSTRIES - VIRGINIA, INC.
ARTICLE TWO
The total number of authorized shares of capital stock of the
corporation shall be One Thousand (1,000) shares of common stock, with a par
value of $1.00 per share.
ARTICLE THREE
The post office address of the initial registered office of the
corporation is 5511 Staples Mill Road, Richmond, Virginia 23228, County of
Henrico, and the name of its initial registered agent is Edward R. Parker, a
resident of the Commonwealth of Virginia, a member of the Virginia State Bar and
whose business office and address is identical with the initial registered
office of the corporation.
ARTICLE FOUR
The members of the governing board of the corporation shall be styled
directors. The initial directors shall serve until their successors are duly
qualified and elected, and their names and post office addresses are as follows:
-3-
<PAGE>
Name Address
John V. Roach 1900 One Tandy Center
Fort Worth, Texas 76102
Herschel C. Winn 1800 One Tandy Center
Fort Worth, Texas 76102
Robert M. McClure 1600 One Tandy Center
Fort Worth, Texas 76102
ARTICLE FIVE
The purposes for which the corporation is organized are:
To engage in the business of manufacturing; marketing various products
at retail and at wholesale; importing and exporting various products; acquiring,
owning and operating businesses and corporations engaged in such activities; and
for any other lawful purpose within or without the Commonwealth of Virginia.
To acquire by purchase, lease, or otherwise, property of all kinds and
descriptions which may be useful or necessary in connection with the operation
of said business including the acquisition of going concerns or businesses that
may be related to the primary business of this corporation or that may be
beneficial to the corporation to acquire, own or control.
And, generally, to engage in any business not required to be
specifically stated in these Articles by the Virginia Stock Corporation Act,
Section 13.1-620 of the Code of Virginia, and to do any and all. things
necessary, incident to or in the furtherance of the said business; or to do and
perform any and all acts or things necessary to the proper conduct of the said
business or to transact any other business of whatever nature, or to operate any
other trade or business necessary or incident to the said business, including
the acquisition and holding of stock, securities or investments in any other
company or commercial entity, and for such purposes to pledge the assets of the
corporation, to borrow money, and generally to perform any act or thing
necessary in connection with the said business.
-4-
<PAGE>
ARTICLE SIX
In any proceeding brought by a shareholder in the right of the
corporation or brought by or on behalf of shareholders of the corporation, the
officers and directors of the corporation shall not be liable for monetary
damages in any amount arising out of any omission, act, transaction, occurrence
or course of conduct and such liability is eliminated to the fullest extent
permitted by the Virginia Stock Corporation Act, Section 13.1-692.1 of the Code
of Virginia, as the same may be amended and supplemented. No amendment to or
repeal of this ARTICLE SIX shall apply to or have any effect on the liability or
alleged liability of any officer or director of the corporation for or with
respect to any omissions, acts, transactions, occurrences or course of conduct
of such officers and directors occurring prior to such amendment or repeal.
ARTICLE SEVEN
The period of duration for the corporation is perpetual.
IN WITNESS WHEREOF, I have hereunto set my hand this 1st day of
February, 1988.
/s/ H.C. Winn
--------------------------
H. C. Winn, Incorporator
1800 One Tandy Center
Fort Worth, Texas 76102
Telephone: (817) 390-3752
-5-
<PAGE>
EXHIBIT 3.3
BYLAWS OF
O'SULLIVAN INDUSTRIES, INC.
ARTICLE I
REGISTERED OFFICE
1.01. The registered office of the corporation is located at 1900 One
Tandy Center, Port Worth, Tarrant County, Texas 76102, and the name of the
registered agent of the corporation at such address is R. C. Winn.
ARTICLE II
SHAREHOLDERS' MEETING
Place of Meetings
2.01. All meetings of the shareholders shall be held at the registered
office of the corporation, or any other place within or without this State, as
may be designated for that purpose from time to time by the Board of Directors.
Time of Annual Meeting
2.02. The annual meeting of the shareholders shall be held each year at
10:00 a.m. an the third Thursday of July. If this day falls on a legal holiday,
the annual meeting shall be held at the same time on the next following
business-day thereafter.
Notice of Meeting
2.03. Notice of the meeting, stating the place, day, and hour of the
meeting, and., in the case of a special meeting, the purpose or purposes for
which the meeting is called, shall be given in writing to each shareholder
entitled to vote at the meeting at least ten (10), but not more than fifty (50).
days before the date of the meeting either personally or by mail or other means
of written communication, addressed to the shareholder at his address appearing
on the books of the corporation or given by him to the corporation for the
purpose of notice. Notice of adjourned meetings is not necessary, unless the
meeting is adjourned for thirty (30) days or more, in which case notice of the
adjourned meeting shall he given as in the case of any special meeting.
<PAGE>
Special Meetings
2.04. Special meetings of the shareholders for any purpose or purposes
whatsoever may be called at any time by the Chairman of the Board, President, or
by the Board of Directors, or by any two (2) or more Directors, Secretary, or by
one (1) or more shareholders holding not less than one-tenth (1/10) of all the
shares entitled to vote at the meeting.
Quorum
2.05. A majority of the voting shares constitutes a quorum for the
transaction of business. Business way be continued after withdrawal of enough
shareholders to leave less than a quorum.
Voting
2.06. Only persons in whose names shares appear on the share records of
the corporation on the date on which notice of the matting is mailed shall be
entitled to vote at such meeting, unless some other day is fixed by the Board of
Directors for the determination of shareholders of record. Each shareholder is
entitled to a number of votes equal to the number of Directors to be elected,
multiplied by the number of shares which he is entitled to vote. Voting for the
election of Directors shall be by voice, unless any shareholder demands a ballot
vote before the voting begins.
Proxies
2.07. Every person entitled to vote or execute consents may do so
either in person or by written proxy executed in writing by the shareholder or
his duly authorized attorney in fact.
Consent of Absentees
2.08. No defect in the calling or noticing of a shareholders' meeting
will affect the validity of any action at the meeting if a quorum was present,
and if each shareholder not present in person or by proxy signs a written waiver
of notice, consent to the holding of the meeting, or approval of the minutes,
either before or after the meeting, and such waivers, consents, or approvals are
filed with the corporate records or made a part of the minutes of the meeting.
Action Without Meeting
2.09. Action may be taken by shareholders without a meeting if each
shareholder entitled to vote signs a written consent to-the action, and such
consents are filed with the Secretary of the corporation.
-2-
<PAGE>
ARTICLE III
DIRECTORS
Powers
3.01. The Directors shall act only as a board and an individual
Director shall have no power as such. All corporate powers of the corporation
shall be exercised by, or under the authority of, and the business and affairs
of the corporation shall be controlled by, the Board of Directors, subject
however to such limitations as are imposed by law, the Articles of
Incorporation, or these Bylaws, as to actions to be authorized or approved by
the shareholders. The Board of Directors may, by contract or otherwise, give
general or limited or special power and authority to the officers and employees
of the corporation to transact the general business, or any special business, of
the corporation, and may give powers of attorney to agents of the corporation to
transact any special business requiring such authorization.
Number and Qualifications of Directors
3.02. The authorized number of Directors of this corporation shall be
three (3). The Directors need not be shareholders of this corporation or
residents of Texas. The number of Directors may be increased or decreased from
time to time by amendment to these Bylaws, but no decrease shall have the effect
of shortening the term of any incumbent Director. Amy directorship to be filled
by reason of an increase in the number of Directors shall be filled by election
at an annual meting or at a special meeting of shareholders called for that
purpose.
Election and Term of Office
3.03. The Directors shall be elected annually by the shareholders
entitled to vote, and shall hold office until their respective successors are
elected, or until their death, resignation, or removal.
Vacancies
3.04. Vacancies in the Board of Directors may be filled by a majority
of the remaining Directors, though less than a quorum, or by a sole remaining
Director. The shareholders may elect a Director at any time to fill any vacancy
not filled by the Directors.
Removal of Directors
3.05. The entire Board of Directors, or any individual Director, may be
removed from office with or without cause by vote of the holders of a majority
of the shares entitled to vote for directors, at any regular or special meeting
of such shareholders.
-3-
<PAGE>
Place of Meetings
3.06. All meetings of the Board of Directors shall be held at the
principal office of the corporation or at such place within or without the State
as may be designated from time to time by resolution of the Board or by written
consent of all of the members of the Board.
Regular Meetings
3.07. Regular meetings of the Board shall be held, without call or
notice, immediately following each annual meeting of the shareholders of this
corporation, and at such other times as the Directors may determine.
Special Meetings - Call and Notice
3.08. Special meetings of the Board of Directors for any purpose shall
be called at any time by the Chairman of the Board, the President, any Vice
President, the Secretary, or any two Directors. Written notices of the special
meetings, stating the time, and in general terms the purpose or purposes
thereof, shall be mailed or telegraphed or personally delivered to each Director
not later than the day before the day appointed for the meeting.
Quorum
3.09. A Majority of the authorized number of Directors shall be
necessary to constitute a quorum for the transaction of business, except to
adjourn as hereinafter provided. Every act or decision done or made by a
majority of the Directors present shall be regarded as the act of the Board of
Directors, unless a greater number be required by law or by the Articles of
Incorporation.
Board Action Without Meeting
3.10. Any action required or permitted to be taken by the Board of
Directors may be taken without a meeting, and with the same force and effect as
a unanimous vote of Directors, if all members of the Board shall individually or
collectively consent in writing to such action.
Adjournment Notice
3.11. A quorum of the Directors may adjourn any Directors' meeting to
meet again at a stated day and hour. Notice of the time and place of holding an
adjourned meeting need not be given to absent Directors if the time and place is
fixed at the meeting adjourned. In the absence of a quorum, a majority of the
Directors present at any Directors' meeting, either regular or special, may
adjourn from time to time until the time fixed for the next regular meeting of
the Board.
-4-
<PAGE>
Conduct of Meetings
3.12. The Chairman of the Board, or, in his absence, any Director
selected by the Directors present, shall preside at meetings of the Board of
Directors. The Secretary of the corporation, or in his absence, any person
appointed by the presiding officer, shall act as Secretary of the Board of
Directors.
Compensation
3.13. Directors and members of committees shall receive no compensation
for their services as a Director unless authorized by a resolution adopted by
this Board of Directors, but shall receive reimbursement for expenses, as may be
fixed or determined by resolution of the Board.
Indemnification of Directors and Officers
3.14. The Board of Directors may authorize the corporation to pay
expenses incurred by, or to satisfy a judgment or fine rendered or levied
against present or former Directors, officers, or employees of this corporation
as provided by Article 2.02(A)(16) of the Texas Business Corporation Act.
ARTICLE IV
OFFICERS
Title and Appointment
4.01. The officers of the corporation shall be President, Executive
Vice President, one (1) or more Vice Presidents, a Secretary, a Treasurer, and
such assistants and other officers as the Board of Directors shall from time to
time determine. Any two offices, except President and Secretary, may be hold by
one (1) person. All officers shall be elected by and hold office at the pleasure
of the Board of Directors, which shall fix the compensation and tenure of all
others.
Powers and Duties of Officers
4.02. The officers of the corporation shall have the powers and duties
generally ascribed to the respective offices, and such additional authority or
duty as may from time to time be established by the Board of Directors.
Removal
4.03. Any officer may be removed at any time with or without cause by
affirmative vote of the majority of the Board of Directors at any meeting of the
Board of Directors called and held for that purpose.
-5-
<PAGE>
ARTICLE V
EXECUTION OF INSTRUMENTS
5.01. The Board of Directors may, in its discretion, determine the
method and designate the signatory officer or officers, or other person or
persons, to execute any corporate instrument or document, or to sign the
corporate name without limitation, except where otherwise provided by law, and
such execution or signature shall be binding upon the corporation.
ARTICLE VI
ISSUANCE AND TRANSFER OF SHARES
6.01. Certificates for shares of the corporation shall be issued only
when fully paid.
Share Certificates
6.02. The corporation shall deliver certificates representing all
shares to which shareholders are entitled, which certificates shall be in such
form and device as the Board of Directors may provide. Each certificate shall
bear upon its face the statement that the corporation is organized in Texas, the
name in which it is issued, the number and class of shares and series, and the
par value or a statement that the shares are without par value. The certificates
shall be signed by the Chairman of the Board, the President, a Vice President,
or the Secretary or an Assistant Secretary, which signatures may be in facsimile
if the certificates are to be countersigned by a transfer agent or registered by
a registrar, and the seal of the corporation shall be affixed thereto. The
certificates shall contain on the faces or backs such recitation or references
as are required by law.
Replacement of Certificates
6.03. No new certificates shall be issued until the former certificate
for the shares represented thereby shall have been surrendered and cancelled,
except in the case of lost or destroyed certificates for which the Board of
Directors may order mew certificates to be issued upon such terms, conditions,
and guarantees as the Board may see fit to impose, including the filing of
sufficient indemnity.
Transfer of Shares
6.04. Shares of the corporation may be transferred by endorsement by
the signature of the owner, his agent, attorney, or legal representative, and
the delivery of the certificate. The transferee in any transfer of shares shall
be deemed to have full notice of, and to consent to, the Bylaws of the
corporation to the same extent as if he had signed a written assent thereto.
-6-
<PAGE>
ARTICLE VII
RECORDS AND REPORTS
Inspection of Books and Records
7.01. All books and records provided for by statute shall be open to
inspection of the shareholders from time to time and to the extent expressly
provided by statute, and not otherwise. The Directors may examine such books and
records at all reasonable times.
Closing Stock Transfer Books
7.02. The Board of Directors may close the transfer books in its
discretion for a period not exceeding fifty (50) days preceding any meeting,
annual or special, of the shareholders, or the day appointed for the payment of
a dividend.
ARTICLE VIII
AMENDMENT OF BYLAWS
8.01. The power to alter, amend, or repeal these Bylaws is vested it
the Directors, subject to repeal or change by action of the shareholders.
IN WITNESS WHEREOF, the Directors have hereunto set their hands this
30th day of December, 1983.
/s/ John V. Roach
----------------------------------------
John V. Roach
/s/ H.C. Winn
----------------------------------------
H.C. Winn
/s/ Robert McClure
----------------------------------------
Robert McClure
-7-
<PAGE>
Attachment B
O'SULLIVAN INDUSTRIES, INC.
Resolutions Amending By-Laws adopted July 21, 1994
RESOLVED, that Section 1.01 of the By-laws of the Corporation be and it hereby
is amended to read as follows:
1.01. The principal office of the corporation is located at 1900 Gulf
Street, Lamar, Barton County, Missouri;
and further
RESOLVED, that Section 2.02 of the By-laws of the Corporation be and it hereby
is amended to read as follows:
2.02. The annual meeting of the shareholders shall be held each year at
10:00 a.m. on the third Thursday of July; provided, however, that
commencing in 1995 the annual meeting of the shareholders shall be held
each year at 10:00 a.m. on the second Thursday of November. If this day
falls on a legal holiday, the annual meeting shall be held at the same
time on the next following business day thereafter.
-8-
<PAGE>
O'SULLIVAN INDUSTRIES, INC.
Resolutions Amending By-Laws adopted July 8, 1996
(Amendment of By-laws)
RESOLVED, that the first sentence of Section 3.02 of the By-laws of the
corporation is hereby amended to read as follows:
"The authorized number of Directors of this corporation shall
be five (5)."
-9-
<PAGE>
O'SULLIVAN INDUSTRIES, INC.
Unanimous Consent of Directors in Lieu of Annual Meeting
July 21, 1994
The undersigned, being all of the members of the Board of Directors of
O'Sullivan Industries, Inc., a corporation organized and existing under the laws
of the State of Delaware (the "Corporation"), do hereby waive all notice of the
annual meeting of the Board of Directors of the Corporation and hereby
individually and collectively consent, pursuant to Section 141(f) of the General
Corporation Law of the State of Delaware and Section 3.10 of the By-laws of the
Corporation, to the adoption of the following resolutions in lieu of a special
meeting of the Board of Directors of the Corporation held an July 21, 1994;
(Approval of Minutes)
RESOLVED, that the minutes of the Special Meeting of 'the Board of
Directors held on January 31, 1994 be and they hereby are approved; and
further
(Election of Officers).
RESOLVED, that the following persons be elected as officers of the
Corporation, to hold office for the ensuing year or until their
successors are elected and qualified:
Daniel F. O'Sullivan Chairman of the Board, Chief Executive
Officer and President
Tyrone E. Riegel Executive Vice President
Gregory C. Kowert Vice President-Finance and Chief Financial
Officer
Thomas M. O'Sullivan, Jr. Vice President-Sales
Rowland H. Geddie, III Vice President, General Counsel and
Secretary
E. Thomas Riegel Vice President-Marketing
James C. Hillman Vice President-Industrial Relations
Terry J. Braden Controller and Assistant Secretary
and further
RESOLVED. that Section 1.01 of the By-laws of the Corporation be and it hereby
is amended to read as follows:
-10-
<PAGE>
1.01. The Principal office of the Corporation is located at 100 Gulf
Street, Lamar, Barton County, Missouri;
and further
RESOLVED, that Section 2.02 of the By-laws of the Corporation be and it hereby
is amended to read as follows:
2.02. The annual meeting of the shareholders shall be held each year at
10:00 am. on the third Thursday of July, provided, however, that
commencing in 1995 the annual meeting of the shareholders shall be held
each year at 10:00 a.m. on the second Thursday of November. If this day
falls on a legal holiday, the annual meeting shall be held at the same
time on the next following business day thereafter.
IN WITNESS WHEREOF, the Directors have hereunto set their hands as of
the 21st day of July, 1994.
/s/ Rowland H. Geddie, III
- --------------------------------------------
Rowland H. Geddie, III
/s/ Gregory C. Kowert
- --------------------------------------------
Gregory C. Kowert
/s/ Daniel F. O'Sullivan
- --------------------------------------------
Daniel F. O'Sullivan
/s/ Tyrone E. Riegel
- --------------------------------------------
Tyrone E. Riegel
-11-
<PAGE>
EXHIBIT 3.4
BYLAWS
OF
O'SULLIVAN INDUSTRIES-VIRGINIA, INC.
ARTICLE I
REGISTERED AND PRINCIPAL OFFICES
1.01. The registered office of the corporation is located at 5511
Staples Mill Road, Richmond, Virginia 23228, County of Henrico, and the name of
the registered agent of the corporation at such address is Edward R. Parker.
1.02. The principal office of the corporation is located at 1800 One
Tandy Center, Fort Worth, Tarrant County, Texas 76102, and the name of the
agent of the corporation at such address is H. C. Winn.
ARTICLE II
SHAREHOLDERS' MEETING
Place of Meetings
2.01. All meetings of the shareholders shall be held at the principal
office of the corporation, or any other place within or without the State of
Virginia, as may be designated for that purpose from time to time by the Board
of Directors.
Time of Annual Meeting
2.02. The annual meeting of the shareholders shall be held each year at
10:00 a.m. on the third Thursday of July. If this day falls on a legal holiday,
the annual meeting shall be held at the same time on the next following business
day thereafter.
Notice of Meeting
2.03. Notice of the meeting, stating the place, day, and hour of the
meeting, and, in the case of a special meeting, the purpose or purposes for
which the meeting is called, shall be given in writing to each shareholder
entitled to vote at the meeting at least ten (10), but not more than fifty (50),
days before the date of the meeting either personally or by mail or other means
of written communication, addressed to the shareholder at his address appearing
on the books of the corporation or given by him to the corporation for the
purpose of notice. Notice of adjourned meetings is not necessary, unless the
meeting is adjourned for thirty (30) days or more, in which case notice of the
adjourned meeting shall be given as in the case of any special meeting.
<PAGE>
Special Meetings
2.04. Special meetings of the shareholders for any purpose or purposes
whatsoever may be called at any time by the Chairman of the Board, President, or
by the Board of Directors, or by any two (2) or more Directors, Secretary, or by
one (1) or more shareholders holding not less than one-tenth (1/10) of all the
shares entitled to vote at the meeting.
Quorum
2.05. A majority of the voting shares constitutes a quorum for the
transaction of business. Business may be continued after withdrawal of enough
shareholders to leave less than a quorum.
Voting
2.06. Only persons in whose names shares appear on the share records of
the corporation on the date on which notice of the meeting is mailed shall be
entitled to vote at such meeting, unless some other day is fixed by the Board of
Directors for the determination of shareholders of record. Each shareholder is
entitled to a number of votes equal to the number of Directors to be elected,
multiplied by the number of shares which he is entitled to vote. Voting for the
election of Directors shall be by voice, unless any shareholder demands a ballot
vote before the voting begins.
Proxies
2.07. Every person entitled to vote or execute consents may do so
either in person or by written proxy executed in writing by the shareholder or
his duly authorized attorney in fact.
Consent of Absentees
2.08. No defect in the calling or noticing of a shareholders' meeting
will affect the validity of any action at the meeting if a quorum was present,
and if each shareholder not present in person or by proxy signs a written waiver
of notice, consent to the holding of the meeting, or approval of the minutes,
either before or after the meeting, and such waivers, consents, or approvals are
filed with the corporate records or made a part of the minutes of the meeting.
Action Without Meeting
2.09. Action may be taken by shareholders without a meeting if each
shareholder entitled to vote signs a written consent to the action, and such
consents are filed with the Secretary of the corporation.
-2-
<PAGE>
ARTICLE III
DIRECTORS
Powers
3.01. The Directors shall act only as a board and an individual
Director shall have no power as such. All corporate powers of the corporation
shall be exercised by, or under the authority of, and the business and affairs
of the corporation shall be controlled by, the Board of Directors, subject
however to such limitations as are imposed by law, the Articles of
Incorporation, or these Bylaws, as to actions to be authorized or approved by
the shareholders. The Board of Directors may, by contract or otherwise, give
general or limited or special power and authority to the officers and employees
of the corporation to transact the general business, or any special business, of
the corporation, and may given powers of attorney to agents of the corporation
'-o transact any special business requiring such authorization.
Number and Qualifications of Directors
3.02. The authorized number of Directors of this corporation shall be
three (3). The Directors need not be shareholders of this corporation or
residents of Delaware. The number of Directors may be increased or decreased
from time to time by amendment to these Bylaws, but no decrease shall have the
effect of shortening the term of any incumbent Director. Any directorship to be
filled by reason of an increase in the number of Directors shall be filled by
election at an annual meeting or at a special meeting of shareholders called for
that purpose.
Election and Term of Office
3.03. The Directors shall be elected annually by the shareholders
entitled to vote, and shall hold office until their respective successors are
elected, or until their death, resignation, or removal.
Vacancies
3.04. Vacancies in the Board of Directors may be filled by a majority
of the remaining Directors, though less than a quorum, or by a sole remaining
Director. The shareholders may elect a Director at any time to fill any vacancy
not filled by the Directors.
Removal of Directors
3.05. The entire Board of Directors, or any individual Director, may be
removed from office with or without cause by vote of the holders of a majority
of the shares entitled to vote for directors, at any regular or special meeting
of such shareholders.
-3-
<PAGE>
Place of Meetings
3.06. All meetings of the Board of Directors shall be held at the
principal office of the corporation or at such place within or without the State
of Virginia as may be designated from time to time by resolution of the Board or
by written consent of all of the members of the Board.
Regular Meetings
3.07. Regular meetings of the Board shall be held, without call or
notice, immediately following each annual meeting of the shareholders of this
corporation, and at such other times as the Directors may determine.
Special meetings - Call and Notice
3.08. Special meetings of the Board of Directors for any purpose shall
be called at any time by the Chairman of the Board, the President, any Vice
President, the Secretary, or any two Directors. Written notices of the special
meetings, stating the time, and in general terms the purpose or purposes
thereof, shall be mailed or telegraphed or personally delivered to each Director
not later than the day before the day appointed for the meeting.
Quorum
3.09. A majority of the authorized number of Directors shall be
necessary to constitute a quorum for the transaction of business, except to
adjourn as hereinafter provided. Every act or decision done or made by a
majority of the Directors present shall be regarded as the act of the Board of
Directors, unless a greater number be required by law or by the Articles of
Incorporation.
Board Action Without Meeting
3.10. Any action required or permitted to be taken by the Board of
Directors may be taken without a meeting, and with the same force and effect as
a unanimous vote of Directors, if all members of the Board shall individually or
collectively consent in writing to such action.
Adjournment - Notice
3.11. A quorum of the Directors may adjourn any Directors' meeting to
meet again at a stated day and hour. Notice of the time and place of holding an
adjourned meeting need not be given to absent Directors if the time and place is
fixed at the meeting adjourned. In the absence of a quorum, a majority of the
Directors present at any Directors' meeting, either regular or special, may
adjourn from time to time until the time fixed for the next regular meeting of
the Board.
-4-
<PAGE>
Conduct of Meetings
3.12. The Chairman of the Board, or, in his absence, any Director
selected by the Directors present, shall preside at meetings of the Board of
Directors. The Secretary of the corporation, or in his absence, any person
appointed by the presiding officer, shall act as Secretary of the Board of
Directors.
Compensation
3.13. Directors and members of committees shall receive no compensation
for their services as a Director unless authorized by a resolution adopted by
this Board of Directors, but shall receive reimbursement for expenses, as may be
fixed or determined by resolution of the Board.
Indemnification of Directors and Officers
3.14. The Board of Directors shall authorize the corporation to pay
expenses incurred by, or to satisfy a judgment or fine rendered or levied
against present or former Directors, officers, or employees of this corporation
as provided by the Virginia Stock Corporation Act, Sections 13.1- 698 and
13.1-702 of the Code of Virginia.
ARTICLE IV
OFFICERS
Title and Appointment
4.01. The officers of the corporation shall be President, Executive
Vice President, one (1) or more Vice Presidents, a Secretary, a Treasurer, and
such assistants and other officers as the Board of Directors shall from time to
time determine. Any two offices, except President and Secretary, may be held by
one (1) person. All officers shall be elected by and hold office at the pleasure
of the Board of Directors, which shall fix the compensation and tenure of all
others.
Powers and Duties of Officers
4.02. The officers of the corporation shall have the powers and duties
generally ascribed to the respective offices, and such additional authority or
duty as may from time to time be established by the Board of Directors.
Removal
4.03. Any officer may be removed at any time with or without cause by
affirmative vote of the majority of the Board of Directors at any meeting of the
Board of Directors called and held for that purpose.
-5-
<PAGE>
ARTICLE V
EXECUTION OF INSTRUMENTS
5.01. The Board of Directors may, in its discretion, determine the
method and designate the signatory officer or officers, or other person or
persons, to execute any corporate instrument or document, or to sign the
corporate name without limitation, except where otherwise provided by law, and
such execution or signature shall be binding upon the corporation.
ARTICLE VI
ISSUANCE AND TRANSFER OF SHARES
6.01. Certificates for shares of the corporation shall be issued only
when fully paid.
Share Certificates
6.02. The corporation shall deliver certificates representing all
shares to which shareholders are entitled, which certificates shall be in such
form and device as the Board of Directors may provide. Each certificate shall
bear upon its face the statement that the corporation is organized in Virginia,
the name in which it is issued, the number and class of shares and series and
the par value or a statement that the shares are without par value. The
certificates shall be signed by the Chairman of the Board, the President, a Vice
President, or the Secretary or an Assistant Secretary, which signatures may be
in facsimile if the certificates are to be countersigned by a transfer agent or
registered by a registrar, and the seal of the corporation shall be affixed
thereto. The certificates shall contain on the faces or backs such recitation or
references as are required by law.
Replacement of Certificates
6.03. No new certificates shall be issued until the former certificate
for the shares represented thereby shall have been surrendered and cancelled,
except in the case of lost or destroyed certificates for which the Board of
Directors may order new certificates to be issued upon such terms, conditions,
and guarantees as the Board may see fit to impose, including the filing of
sufficient indemnity.
Transfer of Shares
6.04. Shares of the corporation may be transferred by endorsement by
the signature of the owner, his agent, attorney, or legal representative, and
the delivery of the certificate. The transferee in any transfer of shares shall
be deemed to have full notice of, and to consent to, the Bylaws of the
corporation to the same extent as if he had signed a written assent thereto.
-6-
<PAGE>
ARTICLE VII
RECORDS AND REPORTS
Inspection of Books and Records
7.01. All books and records provided for by statute shall be open to
inspection of the shareholders from time to time and to the extent expressly
provided by statute, and not otherwise. The Directors may examine such books and
records at all reasonable times.
Closing Stock Transfer Books
7.02. The Board of Directors may close the transfer books in its
discretion for a period not exceeding fifty (50) days preceding any meeting,
annual or special, of the shareholders, or the day appointed for the payment of
a dividend.
ARTICLE VIII
AMENDMENT OF BYLAWS
8.01. The power to alter, amend, or repeal these Bylaws is vested in
the Directors, subject to repeal or change by action of the shareholders.
-7-
<PAGE>
Attachment B
O'SULLIVAN INDUSTRIES, INC.
Resolutions Amending By-Laws adopted July 21, 1994
RESOLVED, that Section 1.01 of the By-laws of the Corporation be and it hereby
is amended to read as follows:
1.01. The principal office of the corporation is located at
1900 Gulf Street, Lamar, Barton County, Missouri-,
and further
RESOLVED, that Section 2.02 of the By-laws of the Corporation be and it hereby
is amended to read as follows:
2.02 The annual meeting of the shareholders shall be held each
year at 10:00 a.m. on the third Thursday of July; provided,
however, that commencing in 1995 the annual meeting of the
shareholders shall be held each year at 10:00 a.m. on the
second Thursday of November. If this day falls on a legal
holiday, the annual meeting shall be held at the same time on
the next following business day thereafter.
-8-
<PAGE>
O'SULLIVAN INDUSTRIES, INC.
Resolution Amending By-Laws adopted July 8, 1996
(Amendment of By-laws)
RESOLVED, that the first sentence of Section 3.02 of the By-laws of the
Corporation is hereby amended to read as follows:
"The authorized number of Directors of this corporation shall
be five (5)."
-9-
<PAGE>
Exhibit 5
To Call Writer Directly:
(212) 446-4800
February 28, 2000
O'Sullivan Industries, Inc.
O'Sullivan Industries - Virginia, Inc.
1600 Gulf Street
Lamar, Missouri 64759
Ladies and Gentlemen:
Re: Series B 13 3/8% Senior Subordinated Notes Due 2009
We are acting as special counsel to O'Sullivan Industries,
Inc., a Delaware corporation (the "Company") and O'Sullivan Industries -
Virginia, Inc., a Virginia corporation, (the "Subsidiary Guarantor" and together
with the Company, the "Registrants") in connection with the proposed
registration by the Company of up to $100,000,000 in aggregate principal amount
of the Company's Series B 13 3/8% Senior Subordinated Notes Due 2009 (the
"Exchange Notes") which are to be guaranteed (the "Guarantee") by the Subsidiary
Guarantor, pursuant to a Registration Statement on Form S-4 filed with the
Securities and Exchange Commission (the "Commission") on February 28, 2000 under
the Securities Act of 1933, as amended (the "Securities Act") (such Registration
Statement, as amended or supplemented, is hereinafter referred to as the
"Registration Statement"), for the purpose of effecting an exchange offer (the
"Exchange Offer") for the Company's old 13 3/8% Senior Subordinated Notes Due
2009 (the "Old Notes").
The Exchange Notes and Guarantee are to be issued pursuant to
the Indenture (the "Indenture"), dated as of November 30, 1999, among the
Registrants and Norwest Bank of Minnesota, National Association, as Trustee, in
exchange for and in replacement of the Company's outstanding Old Notes, of which
$100,000,000 in aggregate principal amount is outstanding.
In that connection, we have examined originals, or copies
certified or otherwise identified to our satisfaction, of such documents,
corporate records and other instruments as we have deemed necessary for the
purposes of this opinion, including (i) the corporate and organizational
documents of each of the Registrants, (ii) minutes and records of the corporate
proceedings of each of the Registrants, (ii) minutes and records of the
corporate proceedings of each of the Registrants with respect to the issuance of
the Exchange Notes, (iii) the Registration Statement and exhibits thereto and
(iv) the Registration Rights Agreement, dated as
<PAGE>
O'Sullivan Industries, Inc.
O'Sullivan Industries - Virginia, Inc.
February 28, 2000
Page 2
of November 30, 1999, among the Registrants and Lehman Brothers, Inc.
For purposes of this opinion, we have assumed the authenticity
of all documents submitted to us as originals, the conformity to the originals
of all documents submitted to us as copies and the authenticity of the originals
of all documents submitted to us as copies. We have also assumed the genuineness
of the signatures of persons signing all documents in connection with which this
opinion is rendered, the authority of such persons signing on behalf of the
parties thereto other than the Registrants, and the due authorization, execution
and delivery of all documents by the parties thereto other than the Registrants.
As to any fact material to the opinions expressed herein which we have not
independently established or verified, we have relied upon statements and
representations of officers and other representatives of the Registrants and
others.
All of the opinions contained in this letter with respect the
Registrants are subject to the assumption that, under the laws of their
jurisdictions of incorporation, each Registrant: (i) is duly authorized, validly
existing and in good standing, and (ii) has full corporate power and authority
to execute, deliver and perform its obligations under the Indenture, the
Exchange Notes and the Guarantee.
Based upon and subject to the foregoing qualifications,
assumptions and limitations and the further limitations set forth below, we are
of the opinion that when, as and if:
1. the Registration Statement shall have become effective
pursuant to the provisions of the Securities Act; and
2. the Exchange Notes are issued pursuant to the Exchange
Offer, the Exchange Notes will constitute valid and binding obligations of the
Registrants and the Indenture will be enforceable in accordance with its terms.
Our opinions expressed above are subject to the qualifications
that we express no opinion as to the applicability of, compliance with, or
effect of (i) any bankruptcy, insolvency, reorganization,
<PAGE>
O'Sullivan Industries, Inc.
O'Sullivan Industries - Virginia, Inc.
February 28, 2000
Page 3
fraudulent transfer, fraudulent conveyance, moratorium or other similar law
affecting the enforcement or creditors' rights generally, (ii) general
principles of equity (regardless of whether enforcement is considered in a
proceeding in equity or at law), (iii) public policy considerations which may
limit the rights of parties to obtain certain remedies and (iv) except for
purposes of the opinion in paragraph 1, any laws except the laws of the State of
New York.
We hereby consent to the filing of this opinion as Exhibit 5.1
to the Registration Statement. We also consent to the reference to our firm
under the heading "Legal Matters" in the Registration Statement. In giving this
consent, we do not thereby admit that we are in the category of persons whose
consent is required under Section 7 of the Securities Act of the rules and
regulations of the Commission.
We do not find it necessary for the purposes of this opinion,
and accordingly we do not purport to cover herein, the application of the
securities or "Blue Sky" laws of the various states to the issuance of the
Exchange Notes.
This opinion is limited to the specific issues addressed
herein, and no opinion may be inferred or implied beyond that expressly stated
herein. We assume no obligation to revise or supplement this opinion should the
present laws of the State of New York be changed by legislative action, judicial
decision or otherwise.
This opinion is furnished to you in connection with the filing
of the Registration Statement, and is not to be used, circulated, quoted or
otherwise relied upon for any other purposes.
Yours truly,
/s/ Kirkland & Ellis
-------------------------
Kirkland & Ellis
<PAGE>
EXHIBIT 8
February 28, 2000
O'Sullivan Industries, Inc.
1600 Gulf Street
Lamar, Missouri 64759
Re: Offer by O'Sullivan Industries, Inc. to Exchange any and all
of Its Outstanding 13 3/8% Senior Subordinated Notes Due 2009
for Its Series B 13 3/8% Senior Subordinated Notes Due 2009
We have acted as counsel to O'Sullivan Industries, Inc. (the
"Company") in connection with its offer (the "Exchange Offer") to exchange any
and all of its old 13 3/8% Senior Subordinated Notes Due 2009 (the "Old
Securities") for its Series B 13 3/8% Senior Subordinated Notes due 2009 (the
"New Securities").
Your have requested our opinion as to certain United States
federal income tax consequences of the Exchange Offer. In preparing our
opinion, we have reviewed and relied upon the Company's Registration
Statement on Form S-4, filed with the Securities and Exchange Commission on
February 28, 2000 (the "Registration Statement"), and such other documents as
we deemed necessary.
On the basis of the foregoing, it is our opinion that the
exchange of the Old Securities for the New Securities pursuant to the Exchange
Offer will not be treated as an "exchange" for United States federal income tax
purposes, because the New Securities will not be considered to differ
materially in kind or extent from the Old Securities. Rather, the New
Securities received by a holder will be treated as a continuation of teh Old
Securities in the hands of that holder. Accordingly, there will be no
federal income tax consequences to holders solely as a result of the exchange
of the Old Securities for New Securities under the Exchange Offer.
The opinion set forth above is based upon the applicable
provisions of the Internal Revenue Code of 1986, as amended, the Treasury
Regulations promulgated or proposed thereunder, current positions of the
Internal Revenue Service (the "IRS") contained in published revenue rulings,
revenue procedures, and announcements, existing judicial decisions and other
applicable authorities. No tax ruling has been sought from the IRS with
respect to any of the matters discussed herein. Unlike a ruling from the IRS,
an opinion of counsel is not binding on the IRS. Hence, no assurance can be
given that a court would reach the same conclusion as the opinion stated in
this letter, or that such opinion will not be successfully challenged by the
IRS. We express no opinion concerning any tax consequences of the Exchange
Offer except as expressly set forth above.
Very truly yours,
/s/ Kirkland & Ellis
<PAGE>
Exhibit 10.1
EXECUTION COPY
O'SULLIVAN INDUSTRIES, INC.
O'SULLIVAN INDUSTRIES - VIRGINIA,
INC.
----------------------------------
$100,000,000
13 3/8% SENIOR SUBORDINATED NOTES DUE 2009
of O'SULLIVAN INDUSTRIES, Inc.
------------------------------
------------------------
REGISTRATION RIGHTS AGREEMENT
DATED AS OF NOVEMBER 30, 1999
------------------------
LEHMAN BROTHERS INC.
<PAGE>
This Registration Rights Agreement (this "AGREEMENT") is made and
entered into as of November 30, 1999, by and between O'Sullivan Industries,
Inc., a Delaware corporation (the "COMPANY"), O'Sullivan Industries - Virginia,
Inc. (the "GUARANTOR") and Lehman Brothers Inc. (the "INITIAL PURCHASER"), each
of whom has agreed to purchase the Company's 13 3/8% Senior Subordinated Notes
due 2009 (the "SENIOR SUBORDINATED NOTES"), pursuant to the Purchase Agreement
(as defined below).
This Agreement is made pursuant to the Purchase Agreement, dated
November 23, 1999, (the "PURCHASE AGREEMENT"), by and among the Company, the
Guarantor and the Initial Purchaser. In order to induce the Initial Purchaser to
purchase the Senior Subordinated Notes, the Company has agreed to provide the
registration rights relating to the Senior Subordinated Notes set forth in this
Agreement. The execution and delivery of this Agreement is a condition to the
obligations of the Initial Purchaser set forth in Section 3 of the Purchase
Agreement. Capitalized terms used herein and not otherwise defined shall have
the meaning assigned to them in the Indenture, dated the Closing Date, between
the Company and Norwest Bank Minnesota, National Association, as Trustee,
relating to the Senior Subordinated Notes and the New Senior Subordinated Notes,
as such indenture is amended or supplemented from time to time (the
"INDENTURE").
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have
the following meanings:
ACT: The Securities Act of 1933, as amended.
AFFILIATE: As defined in Rule 144 of the Act.
BROKER-DEALER: Any broker or dealer registered under the Exchange Act.
BUSINESS DAY: Any day other than a Saturday, Sunday or day on which
commercial banks in the City of New York are authorized or required by law,
regulation or executive order to remain closed.
CERTIFICATED SECURITIES: Definitive Notes, as defined in the
Indenture.
CLOSING DATE: The date hereof.
COMMISSION: The Securities and Exchange Commission.
CONSUMMATE: An Exchange Offer shall be deemed "Consummated" for
purposes of this Agreement upon the occurrence of (a) the filing and
effectiveness under the Act of the Exchange Offer Registration Statement
relating to the New Senior Subordinated Notes to be issued in the Exchange
Offer, (b) the maintenance of such Exchange Offer Registration Statement
continuously effective and the keeping of the Exchange Offer open for a period
not less than the period required pursuant to Section 3(b) hereof and (c) the
delivery by the Company to the
1
<PAGE>
Registrar under the Indenture of New Senior Subordinated Notes in the same
aggregate principal amount as the aggregate principal amount of Senior
Subordinated Notes tendered by Holders thereof pursuant to the Exchange Offer.
CONSUMMATION DEADLINE: As defined in Section 3(b) hereof.
EFFECTIVENESS DEADLINE: As defined in Sections 3(a) and 4(a) hereof.
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended.
EXCHANGE OFFER: The exchange and issuance by the Company of a principal
amount of New Senior Subordinated Notes (which shall be registered pursuant to
the Exchange Offer Registration Statement) equal to the outstanding principal
amount of Senior Subordinated Notes that are tendered by such Holders in
connection with such exchange and issuance.
EXCHANGE OFFER REGISTRATION STATEMENT: The Registration Statement
relating to the Exchange Offer, including the related Prospectus.
EXEMPT RESALES: The transactions in which the Initial Purchaser
proposes to sell the Senior Subordinated NotesNotes to certain "qualified
institutional buyers," as such term is defined in Rule 144A under the Act.
FILING DEADLINE: As defined in Sections 3(a) and 4(a) hereof.
HOLDERS: As defined in Section 2 hereof.
NEW SENIOR SUBORDINATED NOTES: The Company's new 13 3/8% Senior
Subordinated Notes due 2009 to be issued pursuant to the Indenture: (i) in the
Exchange Offer or (ii) as contemplated by Section 4 hereof.
NOTES: The Senior Subordinated Notes and the New Senior Subordinated
Notes.
PERSON: An individual, partnership, limited liability company,
corporation, trust, unincorporated organization, or a government or agency or
political subdivision thereof.
PROSPECTUS: The prospectus included in a Registration Statement at the
time such Registration Statement is declared effective, as amended or
supplemented by any prospectus supplement and by all other amendments thereto,
including post-effective amendments, and all material incorporated by reference
into such Prospectus.
RECOMMENCEMENT DATE: As defined in Section 6(d) hereof.
REGISTRATION DEFAULT: As defined in Section 5 hereof.
REGISTRATION STATEMENT: Any registration statement of the Company and
the Guarantor relating to (a) an offering of New Senior Subordinated Notes
pursuant to an Exchange Offer or (b) the registration for resale of Transfer
Restricted Securities pursuant to the Shelf Registration
2
<PAGE>
Statement, in each case, (i) that is filed pursuant to the provisions of this
Agreement and (ii) including the Prospectus included therein, all amendments and
supplements thereto (including post-effective amendments) and all exhibits and
material incorporated by reference therein.
RULE 144: Rule 144 promulgated under the Act.
SHELF REGISTRATION STATEMENT: As defined in Section 4 hereof.
SUSPENSION NOTICE: As defined in Section 6(d) hereof.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb)
as in effect on the date of the Indenture.
TRANSFER RESTRICTED SECURITIES: Each (A) Senior Subordinated Note,
until the earliest to occur of (i) the date on which such Senior Subordinated
Note is exchanged in the Exchange Offer for a New Senior Subordinated Note which
is entitled to be resold to the public by the Holder thereof without complying
with the prospectus delivery requirements of the Act, (ii) the date on which
such Senior Subordinated Note has been disposed of in accordance with a Shelf
Registration Statement (and the purchasers thereof have been issued New Senior
Subordinated Notes), or (iii) the date on which such Senior Subordinated Note is
distributed to the public pursuant to Rule 144 under the Act and each (B) New
Senior Subordinated Note held by a Broker-Dealer until the date on which such
New Senior Subordinated Note is disposed of by a Broker-Dealer pursuant to the
"Plan of Distribution" contemplated by the Exchange Offer Registration Statement
(including the delivery of the Prospectus contained therein).
SECTION 2. HOLDERS
A Person is deemed to be a holder of Transfer Restricted Securities
(each, a "HOLDER") whenever such Person owns Transfer Restricted Securities.
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permitted by applicable
federal law or policy of the Commission (after the procedures set forth in
Section 6(a)(i) below have been complied with), the Company and the Guarantor
shall (i) cause the Exchange Offer Registration Statement to be filed with the
Commission as soon as practicable after the Closing Date, but in no event later
than 90 days after the Closing Date (such 90th day being the "FILING DEADLINE"),
(ii) use all commercially reasonable efforts to cause such Exchange Offer
Registration Statement to become effective at the earliest possible time, but in
no event later than 180 days after the Closing Date (such 180th day being the
"EFFECTIVENESS DEADLINE"), (iii) in connection with the foregoing, (A) file all
pre-effective amendments to such Exchange Offer Registration Statement as may be
necessary in order to cause it to become effective, (B) file, if applicable, a
post-effective amendment to such Exchange Offer Registration Statement pursuant
to Rule 430A under the Act and (C) cause all necessary filings, if any, in
connection with the registration and qualification of the New Senior
Subordinated Notes to be made under the Blue Sky laws of such jurisdictions as
are necessary to permit Consummation of the Exchange Offer, and (iv) upon the
effectiveness of such Exchange Offer Registration Statement, use its best
efforts to commence and Consummate the
3
<PAGE>
Exchange Offer. The Exchange Offer shall be on the appropriate form permitting
(i) registration of the New Senior Subordinated Notes to be offered in exchange
for the Senior Subordinated Notes that are Transfer Restricted Securities and
(ii) resales of New Senior Subordinated Notes by Broker-Dealers that tendered
into the Exchange Offer Senior Subordinated Notes that such Broker-Dealer
acquired for its own account as a result of market making activities or other
trading activities (other than Senior Subordinated Notes acquired directly from
the Company or any of its Affiliates) as contemplated by Section 3(c) below.
(b) The Company and the Guarantor shall use their respective best
efforts to cause the Exchange Offer Registration Statement to be effective
continuously, and shall keep the Exchange Offer open for a period of not less
than the minimum period required under applicable federal and state securities
laws to Consummate the Exchange Offer; PROVIDED, HOWEVER, that in no event shall
such period be less than 20 Business Days. The Company and the Guarantor shall
cause the Exchange Offer to comply with all applicable federal and state
securities laws. No securities other than the New Senior Subordinated Notes
shall be included in the Exchange Offer Registration Statement. The Company and
the Guarantor shall use all commercially reasonable efforts to cause the
Exchange Offer to be Consummated on the earliest practicable date after the
Exchange Offer Registration Statement has become effective, but in no event
later than 30 business days thereafter (such 30th day being the "CONSUMMATION
DEADLINE").
(c) The Company shall include a "Plan of Distribution" section in the
Prospectus contained in the Exchange Offer Registration Statement and indicate
therein that any Broker-Dealer who holds Transfer Restricted Securities that
were acquired for the account of such Broker-Dealer as a result of market-making
activities or other trading activities (other than Senior Subordinated Notes
acquired directly from the Company or any Affiliate of the Company), may
exchange such Transfer Restricted Securities pursuant to the Exchange Offer;
however, such Broker-Dealer may be deemed to be an "underwriter" within the
meaning of the Act and must, therefore, deliver a prospectus meeting the
requirements of the Act in connection with its initial sale of any New Senior
Subordinated Notes received by such Broker-Dealer in the Exchange Offer, and the
Company shall permit the use of the Prospectus contained in the Exchange Offer
Registration Statement by such Broker-Dealer to satisfy such prospectus delivery
requirement. Such "Plan of Distribution" section shall also contain all other
information with respect to such sales by such Broker-Dealers that the
Commission may require in order to permit such sales pursuant thereto, but such
"Plan of Distribution" shall not name any such Broker-Dealer or disclose the
amount of Transfer Restricted Securities held by any such Broker-Dealer, except
to the extent required by the Commission as a result of a change in policy,
rules or regulations after the date of this Agreement. See the Shearman &
Sterling no-action letter (available July 2, 1993).
To the extent necessary to ensure that the prospectus contained in the
Exchange Offer Registration Statement is available for sales of New Senior
Subordinated Notes by Broker-Dealers, the Company and the Guarantor agree to use
their respective best efforts to keep the Exchange Offer Registration Statement
continuously effective, supplemented, amended and current as required by and
subject to the provisions of Section 6(a) and (c) hereof and in conformity with
the requirements of this Agreement, the Act and the policies, rules and
regulations of the Commission as announced from time to time, for a period of
one year from the Consummation Deadline or such shorter period as will terminate
when all Transfer Restricted Securities covered by such
4
<PAGE>
Registration Statement have been sold pursuant thereto. The Company and the
Guarantor shall provide sufficient copies of the latest version of such
Prospectus to such Broker-Dealers, promptly upon request, and in no event later
than one day after such request, at any time during such period.
SECTION 4. SHELF REGISTRATION
(a) SHELF REGISTRATION. If (i) the Exchange Offer is not permitted by
applicable law or policy of the Commission (after the Company and the Guarantor
have complied with the procedures set forth in Section 6(a)(i) below) or (ii) if
any Holder of Transfer Restricted Securities shall notify the Company within 20
days following the Consummation of the Exchange Offer that (A) such Holder was
prohibited by law or Commission policy from participating in the Exchange Offer
or (B) such Holder may not resell the New Senior Subordinated Notes acquired by
it in the Exchange Offer to the public without delivering a prospectus and the
Prospectus contained in the Exchange Offer Registration Statement is not
appropriate or available for such resales by such Holder or (C) such Holder is a
Broker-Dealer and holds Senior Subordinated Notes acquired directly from the
Company or any of its Affiliates, then the Company and the Guarantor shall:
(x) cause to be filed, on or prior to 30 days after the earlier of (i)
the date on which the Company determines that the Exchange Offer Registration
Statement cannot be filed as a result of clause (a)(i) above and (ii) the date
on which the Company receives the notice specified in clause (a)(ii) above,
(such earlier date, the "FILING DEADLINE"), a shelf registration statement
pursuant to Rule 415 under the Act (which may be an amendment to the Exchange
Offer Registration Statement (the "SHELF REGISTRATION STATEMENT")), relating to
all Transfer Restricted Securities, and
(y) shall use their respective best efforts to cause such Shelf
Registration Statement to become effective on or prior to 60 days after the
Filing Deadline (such 60th day the "EFFECTIVENESS DEADLINE").
If, after the Company has filed an Exchange Offer Registration
Statement that satisfies the requirements of Section 3(a) above, the Company is
required to file and make effective a Shelf Registration Statement solely
because the Exchange Offer is not permitted under applicable federal law or
policy of the Commission (i.e., clause (a)(i) above), then the filing of the
Exchange Offer Registration Statement shall be deemed to satisfy the
requirements of clause (x) above; PROVIDED that, in such event, the Company
shall remain obligated to meet the Effectiveness Deadline set forth in clause
(y).
To the extent necessary to ensure that the Shelf Registration Statement
is available for sales of Transfer Restricted Securities by the Holders thereof
entitled to the benefit of this Section 4(a) and the other securities required
to be registered therein pursuant to Section 6(b)(ii) hereof, the Company and
the Guarantor shall use their respective best efforts to keep any Shelf
Registration Statement required by this Section 4(a) continuously effective,
supplemented, amended and current as required by and subject to the provisions
of Sections 6(b) and (c) hereof and in conformity with the requirements of this
Agreement, the Act and the policies, rules and regulations of the Commission as
announced from time to time, for a period of at least two years (as extended
pursuant to Section 6(c)(i)) following the Closing Date, or such shorter period
as will terminate
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when all Transfer Restricted Securities covered by such Shelf Registration
Statement have been sold pursuant thereto.
(b) PROVISION BY HOLDERS OF CERTAIN INFORMATION IN CONNECTION WITH THE
SHELF REGISTRATION STATEMENT. No Holder of Transfer Restricted Securities may
include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Company in writing, within 20 days after receipt of a request therefor, the
information specified in Item 507 or 508 of Regulation S-K, as applicable, of
the Act for use in connection with any Shelf Registration Statement or
Prospectus or preliminary Prospectus included therein. No Holder of Transfer
Restricted Securities shall be entitled to liquidated damages pursuant to
Section 5 hereof unless and until such Holder shall have provided all such
information. Each selling Holder agrees to promptly furnish additional
information required to be disclosed in order to make the information previously
furnished to the Company by such Holder not materially misleading.
SECTION 5. LIQUIDATED DAMAGES
If (i) any Registration Statement required by this Agreement is not
filed with the Commission on or prior to the applicable Filing Deadline, (ii)
any such Registration Statement has not been declared effective by the
Commission on or prior to the applicable Effectiveness Deadline, (iii) the
Exchange Offer has not been Consummated on or prior to the Consummation Deadline
or (iv) any Registration Statement required by this Agreement is filed and
declared effective but shall thereafter cease to be effective or fail to be
usable for its intended purpose without being succeeded within 2 days by a
post-effective amendment to such Registration Statement that cures such failure
and that is itself declared effective within 5 days of filing such
post-effective amendment to such Registration Statement (each such event
referred to in clauses (i) through (iv), a "REGISTRATION DEFAULT"), then the
Company and the Guarantor hereby jointly and severally agree to pay to each
Holder of Transfer Restricted Securities affected thereby liquidated damages in
an amount equal to $.05 per week per $1,000 in principal amount of Transfer
Restricted Securities held by such Holder for each week or portion thereof that
the Registration Default continues for the first 90-day period immediately
following the occurrence of such Registration Default. The amount of the
liquidated damages shall increase by an additional $.05 per week per $1,000 in
principal amount of Transfer Restricted Securities with respect to each
subsequent 90-day period until all Registration Defaults have been cured, up to
a maximum amount of liquidated damages of $.25 per week per $1,000 in principal
amount of Transfer Restricted Securities; PROVIDED that the Company and the
Guarantor shall in no event be required to pay liquidated damages for more than
one Registration Default at any given time. Notwithstanding anything to the
contrary set forth herein, (1) upon filing of the Exchange Offer Registration
Statement (and/or, if applicable, the Shelf Registration Statement), in the case
of (i) above, (2) upon the effectiveness of the Exchange Offer Registration
Statement (and/or, if applicable, the Shelf Registration Statement), in the case
of (ii) above, (3) upon Consummation of the Exchange Offer, in the case of (iii)
above, or (4) upon the filing of a post-effective amendment to the Registration
Statement or an additional Registration Statement that causes the Exchange Offer
Registration Statement (and/or, if applicable, the Shelf Registration Statement)
to again be declared effective or made usable in the case of (iv) above, the
liquidated damages payable with respect to the Transfer Restricted Securities as
a result of such clause (i), (ii), (iii) or (iv), as applicable, shall cease.
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All accrued liquidated damages shall be paid to the Holders entitled
thereto, in the manner provided for the payment of interest in the Indenture, on
each Interest Payment Date, as more fully set forth in the Indenture and the
Notes. Notwithstanding the fact that any securities for which liquidated damages
are due cease to be Transfer Restricted Securities, all obligations of the
Company and the Guarantor to pay liquidated damages with respect to such
securities shall survive until such time as such obligations with respect to
such securities shall have been satisfied in full.
SECTION 6. REGISTRATION PROCEDURES
(a) EXCHANGE OFFER REGISTRATION STATEMENT. In connection with the
Exchange Offer, the Company and the Guarantor shall (x) comply with all
applicable provisions of Section 6(c) below, (y) use their commercially
reasonable efforts to effect such exchange and to permit the resale of New
Senior Subordinated Notes by Broker-Dealers that tendered in the Exchange Offer
Senior Subordinated Notes that such Broker-Dealer acquired for its own account
as a result of its market making activities or other trading activities (other
than Senior Subordinated Notes acquired directly from the Company or any of its
Affiliates) being sold in accordance with the intended method or methods of
distribution thereof, and (z) comply with all of the following provisions:
(i) If, following the date hereof there has been announced a change
in Commission policy with respect to exchange offers such as the Exchange Offer,
that in the reasonable opinion of counsel to the Company raises a substantial
question as to whether the Exchange Offer is permitted by applicable federal
law, the Company and the Guarantor hereby agree to seek a no-action letter or
other favorable decision from the Commission allowing the Company and the
Guarantor to Consummate an Exchange Offer for such Transfer Restricted
Securities. The Company and the Guarantor hereby agree to pursue the issuance of
such a decision to the Commission staff level. In connection with the foregoing,
the Company and the Guarantor hereby agree to take all such other actions as may
be requested by the Commission or otherwise required in connection with the
issuance of such decision, including without limitation (A) participating in
telephonic conferences with the Commission, (B) delivering to the Commission
staff an analysis prepared by counsel to the Company setting forth the legal
bases, if any, upon which such counsel has concluded that such an Exchange Offer
should be permitted and (C) diligently pursuing a resolution (which need not be
favorable) by the Commission staff.
(ii) As a condition to its participation in the Exchange Offer,
each Holder of Transfer Restricted Securities (including, without limitation,
any Holder who is a Broker-Dealer) shall furnish, upon the request of the
Company, prior to the Consummation of the Exchange Offer, a written
representation to the Company and the Guarantor (which may be contained in the
letter of transmittal contemplated by the Exchange Offer Registration Statement)
to the effect that (A) it is not an Affiliate of the Company, (B) it is not
engaged in, and does not intend to engage in, and has no arrangement or
understanding with any person to participate in, a distribution of the New
Senior Subordinated Notes to be issued in the Exchange Offer and (C) it is
acquiring the New Senior Subordinated Notes in its ordinary course of business.
As a condition to its participation in the Exchange Offer, each Holder using the
Exchange Offer to participate in a distribution of the New Senior
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Subordinated Notes shall acknowledge and agree that, if the resales are of New
Senior Subordinated Notes obtained by such Holder in exchange for Senior
Subordinated Notes acquired directly from the Company or an Affiliate thereof,
it (1) could not, under Commission policy as in effect on the date of this
Agreement, rely on the position of the Commission enunciated in MORGAN STANLEY
AND CO., INC. (available June 5, 1991) and EXXON CAPITAL HOLDINGS CORPORATION
(available May 13, 1988), as interpreted in the Commission's letter to SHEARMAN
& STERLING dated July 2, 1993, and similar no-action letters (including, if
applicable, any no-action letter obtained pursuant to clause (i) above), and (2)
must comply with the registration and prospectus delivery requirements of the
Act in connection with a secondary resale transaction and that such a secondary
resale transaction must be covered by an effective registration statement
containing the selling security holder information required by Item 507 or 508,
as applicable, of Regulation S-K.
(iii) Prior to effectiveness of the Exchange Offer Registration
Statement, the Company and the Guarantor shall provide a supplemental letter to
the Commission (A) stating that the Company and the Guarantor are registering
the Exchange Offer in reliance on the position of the Commission enunciated in
EXXON CAPITAL HOLDINGS CORPORATION (available May 13, 1988), MORGAN STANLEY AND
CO., INC. (available June 5, 1991) as interpreted in the Commission's letter to
SHEARMAN & STERLING dated July 2, 1993, and, if applicable, any no-action letter
obtained pursuant to clause (i) above, (B) including a representation that
neither the Company nor the Guarantor has entered into any arrangement or
understanding with any Person to distribute the New Senior Subordinated Notes to
be received in the Exchange Offer and that, to the best of the Company's and the
Guarantor's information and belief, each Holder participating in the Exchange
Offer is acquiring the New Senior Subordinated Notes in its ordinary course of
business and has no arrangement or understanding with any Person to participate
in the distribution of the New Senior Subordinated Notes received in the
Exchange Offer and (C) any other undertaking or representation required by the
Commission as set forth in any no-action letter obtained pursuant to clause (i)
above, if applicable.
(b) SHELF REGISTRATION STATEMENT. In connection with the Shelf
Registration Statement, the Company and the Guarantor shall:
(i) comply with all the provisions of Section 6(c) below and use
their respective best efforts to effect such registration to permit the sale of
the Transfer Restricted Securities being sold in accordance with the intended
method or methods of distribution thereof (as indicated in the information
furnished to the Company pursuant to Section 4(b) hereof), and pursuant thereto
the Company and the Guarantor will prepare and file with the Commission a
Registration Statement relating to the registration on any appropriate form
under the Act, which form shall be available for the sale of the Transfer
Restricted Securities in accordance with the intended method or methods of
distribution thereof within the time periods and otherwise in accordance with
the provisions hereof, and
(ii) issue, upon the request of any Holder or purchaser of Senior
Subordinated Notes covered by any Shelf Registration Statement contemplated by
this Agreement, New Senior Subordinated Notes having an aggregate principal
amount equal to the aggregate principal amount of Senior Subordinated Notes sold
pursuant to the Shelf
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Registration Statement and surrendered to the Company for cancellation; the
Company shall register New Senior Subordinated Notes on the Shelf Registration
Statement for this purpose and issue the New Senior Subordinated Notes to the
purchaser(s) of securities subject to the Shelf Registration Statement in the
names as such purchaser(s) shall designate.
(c) GENERAL PROVISIONS. In connection with any Registration Statement
and any related Prospectus required by this Agreement, the Company and the
Guarantor shall:
(i) use their respective best efforts to keep such Registration
Statement continuously effective and provide all requisite financial statements
for the period specified in Section 3 or 4 of this Agreement, as applicable.
Upon the occurrence of any event that would cause any such Registration
Statement or the Prospectus contained therein (A) to contain an untrue statement
of material fact or omit to state any material fact necessary to make the
statements therein not misleading or (B) not to be effective and usable for
resale of Transfer Restricted Securities during the period required by this
Agreement, the Company and the Guarantor shall file promptly an appropriate
amendment to such Registration Statement curing such defect, and, if Commission
review is required, use their respective best efforts to cause such amendment to
be declared effective as soon as practicable.
(ii) prepare and file with the Commission such amendments and
post-effective amendments to the applicable Registration Statement as may be
necessary to keep such Registration Statement effective for the applicable
period set forth in Section 3 or 4 hereof, as the case may be; cause the
Prospectus to be supplemented by any required Prospectus supplement, and as so
supplemented to be filed pursuant to Rule 424 under the Act, and to comply fully
with Rules 424, 430A and 462, as applicable, under the Act in a timely manner;
and comply with the provisions of the Act with respect to the disposition of all
securities covered by such Registration Statement during the applicable period
in accordance with the intended method or methods of distribution by the sellers
thereof set forth in such Registration Statement or supplement to the
Prospectus;
(iii) advise each selling Holder promptly and, if requested by such
Holder, confirm such advice in writing, (A) when the Prospectus or any
Prospectus supplement or post-effective amendment has been filed, and, with
respect to any applicable Registration Statement or any post-effective amendment
thereto, when the same has become effective, (B) of any request by the
Commission for amendments to the Registration Statement or amendments or
supplements to the Prospectus or for additional information relating thereto,
(C) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement under the Act or of the suspension
by any state securities commission of the qualification of the Transfer
Restricted Securities for offering or sale in any jurisdiction, or the
initiation of any proceeding for any of the preceding purposes, (D) of the
existence of any fact or the happening of any event that makes any statement of
a material fact made in the Registration Statement, the Prospectus, any
amendment or supplement thereto or any document incorporated by reference
therein untrue, or that requires the making of any additions to or changes in
the Registration
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Statement in order to make the statements therein not misleading, or that
requires the making of any additions to or changes in the Prospectus in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading. If at any time the Commission shall issue any stop
order suspending the effectiveness of the Registration Statement, or any state
securities commission or other regulatory authority shall issue an order
suspending the qualification or exemption from qualification of the Transfer
Restricted Securities under state securities or Blue Sky laws, the Company and
the Guarantor shall use their respective best efforts to obtain the withdrawal
or lifting of such order at the earliest possible time;
(iv) subject to Section 6(c)(i), if any fact or event contemplated
by Section 6(c)(iii)(D) above shall exist or have occurred, prepare a supplement
or post-effective amendment to the Registration Statement or related Prospectus
or any document incorporated therein by reference or file any other required
document so that, as thereafter delivered to the purchasers of Transfer
Restricted Securities, the Prospectus will not contain an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading;
(v) furnish to each selling Holder in connection with such exchange
or sale, if any, before filing with the Commission, copies of any Registration
Statement or any Prospectus included therein or any amendments or supplements to
any such Registration Statement or Prospectus (including all documents
incorporated by reference after the initial filing of such Registration
Statement), which documents will be subject to the review and comment of such
Holders in connection with such sale, if any, for a period of at least five
Business Days, and the Company will not file any such Registration Statement or
Prospectus or any amendment or supplement to any such Registration Statement or
Prospectus (including all such documents incorporated by reference) to which
such selling Holders of the Transfer Restricted Securities covered by such
Registration Statement in connection with such exchange or sale, if any, shall
reasonably object within five Business Days after the receipt thereof. A Holder
shall be deemed to have reasonably objected to such filing if such Registration
Statement, amendment, Prospectus or supplement, as applicable, as proposed to be
filed, contains an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein not misleading or fails
to comply with the applicable requirements of the Act;
(vi) promptly prior to the filing of any document that is to be
incorporated by reference into a Registration Statement or Prospectus, provide
copies of such document to each selling Holder in connection with such exchange
or sale, if any, make the Company's and the Guarantor's representatives
available for discussion of such document and other customary due diligence
matters, and include such information in such document prior to the filing
thereof as such selling Holders may reasonably request;
(vii) make available, at reasonable times, for inspection by each
selling Holder and any attorney or accountant retained by such selling Holders,
all financial and other records, pertinent corporate documents of the Company
and the Guarantor and cause
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the Company's and the Guarantor's officers, directors and employees to supply
all information reasonably requested by any such selling Holder, attorney or
accountant in connection with such Registration Statement or any post-effective
amendment thereto subsequent to the filing thereof and prior to its
effectiveness;
(viii) if requested by any selling Holders in connection with such
exchange or sale, if any, promptly include in any Registration Statement or
Prospectus, pursuant to a supplement or post-effective amendment if necessary,
such information as such selling Holders may reasonably request to have included
therein, including, without limitation, information relating to the "Plan of
Distribution" of the Transfer Restricted Securities, and make all required
filings of such Prospectus supplement or post-effective amendment as soon as
practicable after the Company is notified of the matters to be included in such
Prospectus supplement or post-effective amendment;
(ix) furnish to each selling Holder in connection with such
exchange or sale, if any, without charge, at least one copy of the Registration
Statement, as first filed with the Commission, and of each amendment thereto,
including all documents incorporated by reference therein and all exhibits
(including exhibits incorporated therein by reference);
(x) deliver to each selling Holder, without charge, as many copies
of the Prospectus (including each preliminary prospectus) and any amendment or
supplement thereto as such Persons reasonably may request; the Company and the
Guarantor hereby consent to the use (in accordance with law) of the Prospectus
and any amendment or supplement thereto by each selling Holder in connection
with the offering and the sale of the Transfer Restricted Securities covered by
the Prospectus or any amendment or supplement thereto;
(xi) upon the request of any selling Holder, make such
representations and warranties and take all such other actions in connection
therewith in order to expedite or facilitate the disposition of the Transfer
Restricted Securities pursuant to any applicable Registration Statement
contemplated by this Agreement as may be reasonably requested by any Holder in
connection with any sale or resale pursuant to any applicable Registration
Statement. In such connection, the Company and the Guarantor shall, upon request
of any selling Holder, furnish (or in the case of paragraphs (2) and (3), use
its best efforts to cause to be furnished) to each selling Holder, upon
Consummation of the Exchange Offer or upon the effectiveness of the Shelf
Registration Statement, as the case may be, a certificate, dated such date,
signed on behalf of the Company and the Guarantor by (x) the President or any
Vice President and (y) a principal financial or accounting officer of the
Company and the Guarantor, confirming, as of the date thereof, the matters set
forth in Section 7(i) of the Purchase Agreement and such other similar matters
as such Holders may reasonably request;
(xii) prior to any public offering of Transfer Restricted
Securities, cooperate with the selling Holders and their counsel in connection
with the registration and qualification of the Transfer Restricted Securities
under the securities or Blue Sky laws of
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such jurisdictions as the selling Holders may request and do any and all other
acts or things necessary or advisable to enable the disposition in such
jurisdictions of the Transfer Restricted Securities covered by the applicable
Registration Statement; PROVIDED, HOWEVER, that neither the Company nor the
Guarantor shall be required to register or qualify as a foreign corporation
where it is not now so qualified or to take any action that would subject it to
the service of process in suits or to taxation, other than as to matters and
transactions relating to the Registration Statement, in any jurisdiction where
it is not now so subject;
(xiii) in connection with any sale of Transfer Restricted
Securities that will result in such securities no longer being Transfer
Restricted Securities, cooperate with the selling Holders to facilitate the
timely preparation and delivery of certificates representing Transfer Restricted
Securities to be sold and not bearing any restrictive legends; and to register
such Transfer Restricted Securities in such denominations and such names as the
selling Holders may request at least two Business Days prior to such sale of
Transfer Restricted Securities;
(xiv) use their respective best efforts to cause the disposition of
the Transfer Restricted Securities covered by the Registration Statement to be
registered with or approved by such other governmental agencies or authorities
as may be necessary to enable the seller or sellers thereof to consummate the
disposition of such Transfer Restricted Securities, subject to the proviso
contained in clause (xii) above;
(xv) provide a CUSIP number for all Transfer Restricted Securities
not later than the effective date of a Registration Statement covering such
Transfer Restricted Securities and provide the Trustee under the Indenture with
printed certificates for the Transfer Restricted Securities which are in a form
eligible for deposit with the Depository Trust Company;
(xvi) otherwise use their respective best efforts to comply with
all applicable rules and regulations of the Commission, and make generally
available to its security holders with regard to any applicable Registration
Statement, as soon as practicable, a consolidated earnings statement meeting the
requirements of Rule 158 (which need not be audited) covering a twelve-month
period beginning after the effective date of the Registration Statement (as such
term is defined in paragraph (c) of Rule 158 under the Act);
(xvii) cause the Indenture to be qualified under the TIA not later
than the effective date of the first Registration Statement required by this
Agreement and, in connection therewith, cooperate with the Trustee and the
Holders to effect such changes to the Indenture as may be required for such
Indenture to be so qualified in accordance with the terms of the TIA; and
execute and use its best efforts to cause the Trustee to execute, all documents
that may be required to effect such changes and all other forms and documents
required to be filed with the Commission to enable such Indenture to be so
qualified in a timely manner; and
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(xviii) provide promptly to each Holder, upon request, each
document filed with the Commission pursuant to the requirements of Section 13 or
Section 15(d) of the Exchange Act.
(d) RESTRICTIONS ON HOLDERS. Each Holder agrees by acquisition of a
Transfer Restricted Security that, upon receipt of the notice referred to in
Section 6(c)(iii)(C) or any notice from the Company of the existence of any fact
of the kind described in Section 6(c)(iii)(D) hereof (in each case, a
"SUSPENSION NOTICE"), such Holder will forthwith discontinue disposition of
Transfer Restricted Securities pursuant to the applicable Registration Statement
until (i) such Holder has received copies of the supplemented or amended
Prospectus contemplated by Section 6(c)(iv) hereof, or (ii) such Holder is
advised in writing by the Company that the use of the Prospectus may be resumed,
and has received copies of any additional or supplemental filings that are
incorporated by reference in the Prospectus (in each case, the "RECOMMENCEMENT
DATE"). Each Holder receiving a Suspension Notice hereby agrees that it will
either (i) destroy any Prospectuses, other than permanent file copies, then in
such Holder's possession which have been replaced by the Company with more
recently dated Prospectuses or (ii) deliver to the Company (at the Company's
expense) all copies, other than permanent file copies, then in such Holder's
possession of the Prospectus covering such Transfer Restricted Securities that
was current at the time of receipt of the Suspension Notice. The time period
regarding the effectiveness of such Registration Statement set forth in Section
3 or 4 hereof, as applicable, shall be extended by a number of days equal to the
number of days in the period from and including the date of delivery of the
Suspension Notice to the date of delivery of the Recommencement Date.
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to the Company's and the Guarantor's
performance of or compliance with this Agreement will be borne by the Company,
regardless of whether a Registration Statement becomes effective, including
without limitation: (i) all registration and filing fees and expenses; (ii) all
fees and expenses of compliance with federal securities and state Blue Sky or
securities laws; (iii) all expenses of printing (including printing certificates
for the New Senior Subordinated Notes to be issued in the Exchange Offer and
printing of Prospectuses), messenger and delivery services and telephone; (iv)
all fees and disbursements of counsel for the Company, the Guarantor and the
Holders of Transfer Restricted Securities; (v) all application and filing fees
in connection with listing the New Senior Subordinated Notes on a national
securities exchange or automated quotation system pursuant to the requirements
hereof; and (vi) all fees and disbursements of independent certified public
accountants of the Company and the Guarantor (including the expenses of any
special audit and comfort letters required by or incident to such performance).
The Company will, in any event, bear its and the Guarantor's internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expenses of
any annual audit and the fees and expenses of any Person, including special
experts, retained by the Company or the Guarantor.
(b) In connection with any Registration Statement required by this
Agreement (including, without limitation, the Exchange Offer Registration
Statement and the Shelf
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Registration Statement), the Company and the Guarantor will reimburse the
Initial Purchaser and the Holders of Transfer Restricted Securities who are
tendering Senior Subordinated Notes into in the Exchange Offer and/or selling or
reselling Senior Subordinated Notes or New Senior Subordinated Notes pursuant to
the "Plan of Distribution" contained in the Exchange Offer Registration
Statement or the Shelf Registration Statement, as applicable, for the reasonable
fees and disbursements of not more than one counsel, who shall be Latham &
Watkins, unless another firm shall be chosen by the Holders of a majority in
principal amount of the Transfer Restricted Securities for whose benefit such
Registration Statement is being prepared. Such Holders shall be responsible for
any and all other out-of-pocket expenses of the Holders incurred in connection
with the registration of the Notes.
SECTION 8. INDEMNIFICATION
(a) The Company and the Guarantor agree, jointly and severally, to
indemnify and hold harmless each Holder, its directors, officers and each
Person, if any, who controls such Holder (within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act), from and against any and all losses,
claims, damages, liabilities, judgments, (including without limitation, any
legal or other expenses incurred in connection with investigating or defending
any matter, including any action that could give rise to any such losses,
claims, damages, liabilities or judgments) caused by any untrue statement or
alleged untrue statement of a material fact contained in any Registration
Statement, preliminary prospectus or Prospectus (or any amendment or supplement
thereto) provided by the Company to any Holder or any prospective purchaser of
New Senior Subordinated Notes, or caused by any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, except insofar as such losses, claims,
damages, liabilities or judgments are caused by an untrue statement or omission
or alleged untrue statement or omission that is based upon information relating
to any of the Holders furnished in writing to the Company by any of the Holders.
(b) Each Holder of Transfer Restricted Securities agrees, severally and
not jointly, to indemnify and hold harmless the Company and the Guarantor and
their respective directors and officers, and each person, if any, who controls
(within the meaning of Section 15 of the Act or Section 20 of the Exchange Act)
the Company or the Guarantor, to the same extent as the foregoing indemnity from
the Company and the Guarantor set forth in section (a) above, but only with
reference to information relating to such Holder furnished in writing to the
Company by such Holder expressly for use in any Registration Statement. In no
event shall any Holder, its directors, officers or any Person who controls such
Holder be liable or responsible for any amount in excess of the amount by which
the total amount received by such Holder with respect to its sale of Transfer
Restricted Securities pursuant to a Registration Statement exceeds (i) the
amount paid by such Holder for such Transfer Restricted Securities and (ii) the
amount of any damages that such Holder, its directors, officers or any Person
who controls such Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission.
(c) In case any action shall be commenced involving any person in
respect of which indemnity may be sought pursuant to Section 8(a) or 8(b) (the
"INDEMNIFIED PARTY"), the indemnified party shall promptly notify the person
against whom such indemnity may be sought (the "INDEMNIFYING PERSON") in writing
and the indemnifying party shall assume the defense of
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such action, including the employment of counsel reasonably satisfactory to the
indemnified party and the payment of all fees and expenses of such counsel, as
incurred (except that in the case of any action in respect of which indemnity
may be sought pursuant to both Sections 8(a) and 8(b), a Holder shall not be
required to assume the defense of such action pursuant to this Section 8(c), but
may employ separate counsel and participate in the defense thereof, but the fees
and expenses of such counsel, except as provided below, shall be at the expense
of the Holder). Any indemnified party shall have the right to employ separate
counsel in any such action and participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of the indemnified party
unless (i) the employment of such counsel shall have been specifically
authorized in writing by the indemnifying party, (ii) the indemnifying party
shall have failed to assume the defense of such action or employ counsel
reasonably satisfactory to the indemnified party or (iii) the named parties to
any such action (including any impleaded parties) include both the indemnified
party and the indemnifying party, and the indemnified party shall have been
advised by such counsel that there may be one or more legal defenses available
to it which are different from or additional to those available to the
indemnifying party (in which case the indemnifying party shall not have the
right to assume the defense of such action on behalf of the indemnified party).
In any such case, the indemnifying party shall not, in connection with any one
action or separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the fees and expenses of more than one separate firm of attorneys (in
addition to any local counsel) for all indemnified parties and all such fees and
expenses shall be reimbursed as they are incurred. Such firm shall be designated
in writing by a majority of the Holders, in the case of the parties indemnified
pursuant to Section 8(a), and by the Company and the Guarantor, in the case of
parties indemnified pursuant to Section 8(b). The indemnifying party shall
indemnify and hold harmless the indemnified party from and against any and all
losses, claims, damages, liabilities and judgments by reason of any settlement
of any action (i) effected with its written consent or (ii) effected without its
written consent if the settlement is entered into more than twenty business days
after the indemnifying party shall have received a request from the indemnified
party for reimbursement for the fees and expenses of counsel (in any case where
such fees and expenses are at the expense of the indemnifying party) and, prior
to the date of such settlement, the indemnifying party shall have failed to
comply with such reimbursement request. No indemnifying party shall, without the
prior written consent of the indemnified party, effect any settlement or
compromise of, or consent to the entry of judgment with respect to, any pending
or threatened action in respect of which the indemnified party is or could have
been a party and indemnity or contribution may be or could have been sought
hereunder by the indemnified party, unless such settlement, compromise or
judgment (i) includes an unconditional release of the indemnified party from all
liability on claims that are or could have been the subject matter of such
action and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act, by or on behalf of the indemnified party.
(d) To the extent that the indemnification provided for in this Section
8 is unavailable to an indemnified party in respect of any losses, claims,
damages, liabilities or judgments referred to therein, then each indemnifying
party, in lieu of indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages, liabilities or judgments (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company and the
Guarantor, on the one hand, and the Holders, on
15
<PAGE>
the other hand, from their sale of Transfer Restricted Securities or (ii) if the
allocation provided by clause 8(d)(i) is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause 8(d)(i) above but also the relative fault of the Company
and the Guarantor, on the one hand, and of the Holder, on the other hand, in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or judgments, as well as any other relevant
equitable considerations. The relative fault of the Company and the Guarantor,
on the one hand, and of the Holder, on the other hand, shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or the Guarantor, on the one
hand, or by the Holder, on the other hand, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The amount paid or payable by a party as a result of the
losses, claims, damages, liabilities and judgments referred to above shall be
deemed to include, subject to the limitations set forth in the second paragraph
of Section 8(a), any legal or other fees or expenses reasonably incurred by such
party in connection with investigating or defending any action or claim.
The Company, the Guarantor and each Holder agree that it would not be
just and equitable if contribution pursuant to this Section 8(d) were determined
by pro rata allocation (even if the Holders were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any matter, including any
action that could have given rise to such losses, claims, damages, liabilities
or judgments. Notwithstanding the provisions of this Section 8, no Holder, its
directors, its officers or any Person, if any, who controls such Holder shall be
required to contribute, in the aggregate, any amount in excess of the amount by
which the total received by such Holder with respect to the sale of Transfer
Restricted Securities pursuant to a Registration Statement exceeds (i) the
amount paid by such Holder for such Transfer Restricted Securities plus (ii) the
amount of any damages which such Holder has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Holders'
obligations to contribute pursuant to this Section 8(c) are several in
proportion to the respective principal amount of Transfer Restricted Securities
held by each Holder hereunder and not joint.
SECTION 9. RULE 144A AND RULE 144
The Company and the Guarantor agree with each Holder, for so long as
any Transfer Restricted Securities remain outstanding and during any period in
which the Company or the Guarantor (i) is not subject to Section 13 or 15(d) of
the Exchange Act, to make available, upon request of any Holder, to such Holder
or beneficial owner of Transfer Restricted Securities in connection with any
sale thereof and any prospective purchaser of such Transfer Restricted
Securities designated by such Holder or beneficial owner, the information
required by Rule 144A(d)(4) under the Act in order to permit resales of such
Transfer Restricted Securities pursuant
16
<PAGE>
to Rule 144A, and (ii) is subject to Section 13 or 15 (d) of the Exchange Act,
to make all filings required thereby in a timely manner in order to permit
resales of such Transfer Restricted Securities pursuant to Rule 144.
SECTION 10. MISCELLANEOUS
(a) REMEDIES. The Company and the Guarantor acknowledge and agree that
any failure by the Company and/or the Guarantor to comply with their respective
obligations under Sections 3 and 4 hereof may result in material irreparable
injury to the Initial Purchaser or the Holders for which there is no adequate
remedy at law, that it will not be possible to measure damages for such injuries
precisely and that, in the event of any such failure, the Initial Purchaser or
any Holder may obtain such relief as may be required to specifically enforce the
Company's obligations under Sections 3 and 4 hereof. The Company and the
Guarantor further agree to waive the defense in any action for specific
performance that a remedy at law would be adequate.
(b) NO INCONSISTENT AGREEMENTS. Neither the Company nor the Guarantor
will, on or after the date of this Agreement, enter into any agreement with
respect to its securities that is inconsistent with the rights granted to the
Holders in this Agreement or otherwise conflicts with the provisions hereof.
Neither the Company nor the Guarantor has previously entered into any agreement
granting any registration rights with respect to its debt securities to any
Person. The rights granted to the Holders hereunder do not in any way conflict
with and are not inconsistent with the rights granted to the holders of the
Company's and the Guarantor's securities under any agreement in effect on the
date hereof.
(c) AMENDMENTS AND WAIVERS. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to or departures from
the provisions hereof may not be given unless (i) in the case of Section 5
hereof and this Section 10(c)(i), the Company has obtained the written consent
of Holders of all outstanding Transfer Restricted Securities and (ii) in the
case of all other provisions hereof, the Company has obtained the written
consent of Holders of a majority of the outstanding principal amount of Transfer
Restricted Securities (excluding Transfer Restricted Securities held by the
Company or its Affiliates). Notwithstanding the foregoing, a waiver or consent
to departure from the provisions hereof that relates exclusively to the rights
of Holders whose Transfer Restricted Securities are being tendered pursuant to
the Exchange Offer, and that does not affect directly or indirectly the rights
of other Holders whose Transfer Restricted Securities are not being tendered
pursuant to such Exchange Offer, may be given by the Holders of a majority of
the outstanding principal amount of Transfer Restricted Securities subject to
such Exchange Offer.
(d) THIRD PARTY BENEFICIARY. The Holders shall be third party
beneficiaries to the agreements made hereunder between the Company and the
Guarantor, on the one hand, and the Initial Purchaser, on the other hand, and
shall have the right to enforce such agreements directly to the extent they may
deem such enforcement necessary or advisable to protect its rights or the rights
of Holders hereunder.
17
<PAGE>
(e) NOTICES. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of the
Registrar under the Indenture, with a copy to the Registrar under the Indenture;
and
(ii) if to the Company or the Guarantor:
O'Sullivan Industries, Inc.
1900 Gulf Street
Lamar, Missouri 64759
Telecopier No.: (417) 682-8113
Attention: Rowland H. Geddie, III, Esq.
With a copy to:
Kirkland & Ellis
International Financial Centre
Old Broad Street
London EC2N 1HQ, UK
Telecopier No.: 44 171 816-8800
Attention: M. Gilbey Strub, Esq.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when receipt
acknowledged, if telecopied; and on the next Business Day, if timely delivered
to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
(f) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties,
including without limitation and without the need for an express assignment,
subsequent Holders; PROVIDED, that nothing herein shall be deemed to permit any
assignment, transfer or other disposition of Transfer Restricted Securities in
violation of the terms hereof or of the Purchase Agreement or the Indenture. If
any transferee of any Holder shall acquire Transfer Restricted Securities in any
manner, whether by operation of law or otherwise, such Transfer Restricted
Securities shall be held subject to all of the terms of this Agreement, and by
taking and holding such Transfer Restricted Securities such Person shall be
conclusively deemed to have agreed to be bound by and to perform all of the
terms and provisions of this Agreement, including the restrictions on resale set
forth in this Agreement and, if applicable, the Purchase Agreement, and such
Person shall be entitled to receive the benefits hereof.
(g) COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
18
<PAGE>
(h) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
(j) SEVERABILITY. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(k) ENTIRE AGREEMENT. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted with respect to the Transfer
Restricted Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
19
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
O'SULLIVAN INDUSTRIES, INC.
By: /s/ Richard D. Davidson
------------------------------------
Name:
Title:
O'SULLIVAN INDUSTRIES - VIRGINIA, INC.
By: /s/ Richard D. Davidson
------------------------------------
Name:
Title:
LEHMAN BROTHERS INC.
By: /s/ M. W. Filipski
----------------------------------
Name:
Title:
<PAGE>
Exhibit 10.2
EXECUTION COPY
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT is dated as of November 30,
1999, between Bruckmann, Rosser, Sherrill & Co. II, L.P. ("BRS") and the
individuals whose signatures appear on the signature pages hereto (collectively,
the "EXECUTIVES" and each individually, an "EXECUTIVE").
WHEREAS, BRS and the Executives desire to enter into an
agreement to provide for (i) the sale by each Executive of the number of shares
of common stock of O'Sullivan Industries Holdings, Inc. (the "STOCK"), set forth
opposite each Executive's name on SCHEDULE 1 hereto, and (ii) the purchase by
BRS of such Stock, in each case upon the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual undertakings
contained herein, the parties hereto agree as follows:
1. PURCHASE AND SALE OF STOCK
(a) Upon the execution of this Agreement, each Executive
will sell and BRS will purchase the number of shares of Stock set forth opposite
each Executive's name on the attached SCHEDULE 1 for a per share purchase price
equal to (x) $16.75 in cash and (y) subject to "Note (A)" to SCHEDULE 1, one
share of Senior Preferred Stock of OSI Acquisition, Inc. having a liquidation
value of $1.50 per share (the "PREFERRED STOCK"). In furtherance thereof, at the
closing of such purchase and sale, each Executive will deliver to BRS a
certificate (or certificates) representing the number of shares of Stock set
forth opposite such Executive's name on the attached SCHEDULE 1, and BRS will
deliver to each Executive, (i) a certified or cashier's check or wire transfer
of immediately available funds in the aggregate amount set forth opposite such
Executive's name in the attached SCHEDULE 1, and (ii) a certificate representing
the number of shares of Preferred Stock set forth opposite such Executive's name
in the attached SCHEDULE 1.
2. REPRESENTATIONS AND WARRANTIES OF THE EXECUTIVES. In
connection with the transactions contemplated hereunder, each Executive
represents and warrants to the Company that:
(a) THE STOCK. The shares of Stock held by such Executive
are held of record and owned beneficially by the Executive, free and clear of
any liens, restrictions on transfer, Taxes, options, warrants, purchase rights,
contracts, commitments, equities, claims and demands
(b) PREFERRED STOCK.
(i) The Preferred Stock to be acquired by such Executive
will be acquired for such Executive's own account and not with a view
to, or any present intention of, distribution thereof in violation of
the Securities Act of 1933, as amended from time to time (the
"SECURITIES ACT"), or any applicable state securities laws, and the
Preferred Stock will
<PAGE>
not be disposed of in contravention of the Securities Act or any
applicable state securities laws.
(ii) no commission, fee or other remuneration is to be paid
or given, directly or indirectly, to any Person for soliciting such
Executive to purchase the Preferred Stock.
(iii) such Executive is an officer or employee of the
Company or one of its Subsidiaries, is sufficiently sophisticated in
financial matters to analyze the investment in the Preferred Stock, is
able to evaluate the risks and benefits of the investment in the
Preferred Stock, and has determined that such investment in the
Preferred Stock is suitable for such Executive, based upon such
Executive's financial situation and needs, as well as such Executive's
other securities holdings.
(iv) such Executive:
(A) has not been convicted within the last five years of
any felony or misdemeanor in connection with the offer, purchase, or
sale of any security or any felony involving fraud or deceit,
including, but not limited to, forgery, embezzlement, obtaining
money under false pretenses, larceny, or conspiracy to defraud;
(B) is not currently subject to any state administrative
enforcement order or judgment entered by a state securities
administrator within the last five years or is subject to any
state's administrative enforcement order or judgment in which fraud
or deceit, including, but not limited to, making untrue statements
of material facts and omitting to state material facts, was found
and the order or judgment was entered within the last five years;
(C) is not subject to any state's administrative
enforcement order or judgment which prohibits, denies or revokes the
use of any exemption from registration in connection with the offer,
purchase or sale of securities; or
(D) is not currently subject to any order, judgment or
decree of any court of competent jurisdiction, entered within the
last five years, temporarily or preliminarily restraining or
enjoining such Executive from engaging in or continuing any conduct
or practice in connection with the purchase or sale of any security
or involving the making of any false filing with the state.
(v) such Executive is able to bear the economic risk of
such Executive's investment in the Preferred Stock for an indefinite
period of time and the Executive understands that the Preferred Stock
has not been registered under the Securities Act and cannot be sold
unless subsequently registered under the Securities Act or an exemption
from such registration is available.
(vi) such Executive has had an opportunity to ask questions
and receive answers concerning the terms and conditions of the offering
of Preferred Stock and has had full access to
-2-
<PAGE>
such other information concerning the Company as the Executive has
requested. The Executive has reviewed, or has had an opportunity to
review the Company's Amended and Restated Certificate of Incorporation
and Bylaws;
(c) MISCELLANEOUS. This Agreement constitutes the legal,
valid and binding obligation of such Executive, enforceable in accordance with
its terms, and the execution, delivery and performance of this Agreement by such
Executive does not and will not conflict with, violate or cause a breach of any
agreement, contract or instrument to which such Executive is a party or any
judgment, order or decree to which such Executive is subject.
3. REPRESENTATIONS AND WARRANTIES OF BRS. In connection with
the transactions contemplated hereunder BRS represents and warrants to each
Executive that the Preferred Stock to be transferred to such Executive is held
of record and owned beneficially by BRS, free and clear of any liens,
restrictions on transfer, taxes, options, warrants, purchase rights, contracts,
commitments, equities, claims and demands.
4. RESTRICTIONS ON TRANSFERS.
(a) Each of the Executives hereby agrees that he will not
transfer any of the shares of Preferred Stock he receives pursuant to Section 2
hereof, other than any transfers contemplated by that certain Agreement and Plan
of Merger date as of May 17, 1999, between OSI Acquisition, Inc. and O'Sullivan
Industries Holdings, Inc. (as in effect from time to time).
(b) Any transfer or attempted transfer of any Securities in
violation of any provision of this Agreement shall be null and void, and the
Company shall not record such transfer on its books or treat any purported
transferee of such Securities as the owner of such Securities for any purpose.
5. NOTICES. All notices, demands or other communications to be
given or delivered under or by reason of the provisions of this Agreement will
be in writing and will be deemed to have been given when delivered personally,
mailed by certified or registered mail, return receipt requested and postage
prepaid, or sent via a nationally recognized overnight courier, or sent via
facsimile to the recipient (followed by telephone confirmation to the receiving
party). Such notices, demands and other communications will be sent to the
address indicated below:
TO BRS:
Bruckmann, Rosser, Sherrill & Co. II, L.P.
126 East 56th Street, 29th Floor
New York, NY 10022
Attention: Stephen Edwards
Facsimile No.: 212-521-3799
-3-
<PAGE>
WITH A COPY, WHICH SHALL NOT CONSTITUTE NOTICE TO BRS, TO:
Kirkland & Ellis
Citicorp Center
153 East 53rd Street
New York, NY 10022-4675
Attention: Kirk A. Radke, Esq.
Facsimile No.: (212) 446-4900
TO EACH EXECUTIVE:
[EXECUTIVE]
c/o O'Sullivan Industries, Inc.
1900 Gulf Street
Lamar, Missouri, 64759 - 1899
Attention: Secretary
Facsimile: 417-682-8113
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party.
7. MISCELLANEOUS.
(a) SEVERABILITY. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
(b) COMPLETE AGREEMENT. This Agreement embodies the
complete agreement and understanding among the parties and supersede and preempt
any prior under standings, agreements or representations by or among the
parties, written or oral, which may have related to the subject matter hereof in
any way.
(c) COUNTERPARTS. This Agreement may be executed in
separate counterparts, each of which is deemed to be an original and all of
which taken together constitute one and the same agreement.
(c) SUCCESSORS AND ASSIGNS. Except as otherwise provided
herein, this Agreement shall bind and inure to the benefit of and be enforceable
by the Executive, the Company and their respective successors and assigns
(including subsequent holders of Executive Stock); provided, that the rights and
obligations of the Executive under this Agreement shall not be assignable except
in connection with a permitted transfer of Executive Stock hereunder.
-4-
<PAGE>
(d) GOVERNING LAW. THE CORPORATE LAW OF THE STATE OF
DELAWARE WILL GOVERN ALL QUESTIONS CONCERNING THE RELATIVE RIGHTS OF THE COMPANY
AND ITS STOCKHOLDERS. ALL OTHER QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY
AND INTERPRETATION OF THIS AGREEMENT AND THE EXHIBITS HERETO WILL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE DOMESTIC LAWS OF THE STATE OF NEW YORK,
WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAW PROVISION OR RULE
(WHETHER OF THE STATE OF NEW YORK OR ANY OTHER JURISDICTION) THAT WOULD CAUSE
THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF NEW
YORK.
(e) REMEDIES. Each of the parties to this Agreement will be
entitled to enforce its rights under this Agreement specifically, to recover
damages and costs (including reasonable attorneys' fees) caused by any breach of
any provision of this Agreement and to exercise all other rights existing in its
favor. The parties hereto agree and acknowledge that money damages may not be an
adequate remedy for any breach of the provisions of this Agreement and that any
party may in its sole discretion apply to any court of law or equity of
competent jurisdiction (without posting any bond or deposit) for specific
performance and/or other injunctive relief in order to enforce or prevent any
violations of the provisions of this Agreement.
(f) AMENDMENT AND WAIVER. The provisions of this Agreement
may be amended and waived only with the prior written consent of the Company and
the Executives.
* * * * *
-5-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Stock Purchase Agreement as of the date first written above.
BRUCKMANN, ROSSER, SHERRILL & CO. II,
L.P.
By: B.R.S.E., L.L.C.
Its: General Partner
By: /s/ STEPHEN F. EDWARDS
-------------------------------------
Name: Stephen F. Edwards
Its:
/s/ RONALD E. WEGENER
-------------------------------------
RONALD E. WEGENER
/s/ DAVID S. THIESSE
-------------------------------------
DAVID S. THIESSE
/s/ TYRONE E. RIEGEL
-------------------------------------
TYRONE E. RIEGEL
/s/ JOE J. WHYMAN
-------------------------------------
JOE J. WHYMAN
/s/ TERRY J. BRADEN
-------------------------------------
TERRY J. BRADEN
/s/ DANIEL F. O'SULLIVAN
-------------------------------------
DANIEL F. O'SULLIVAN
/s/ LINDA O'SULLIVAN
-------------------------------------
LINDA O'SULLIVAN
<PAGE>
O'SULLIVAN PROPERTIES, INC.
By: /s/ TIM O'SULLIVAN
------------------------------------
Name: Tim O'Sullivan
Its:
<PAGE>
SCHEDULE 1
<TABLE>
<CAPTION>
CONSIDERATION TO BE RECEIVED FOR STOCK
----------------------------------------------------------------
CASH FOR
FRACTIONAL
SHARES IN LIEU
OF RECIEVING
PREFERRED PREFERRED
EXECUTIVE STOCK TO BE SOLD CASH STOCK STOCK (A)
- ------------------------- ----------------------- ------------------- --------------------- - ---------------------
<S> <C> <C> <C> <C>
Tyrone E. Riegel 12,273.668 shares $205,583.939 12,273 shares $1.02
David S. Thiesse 28.239 shares $473.003 28 shares $.36
Joe J. Whyman 855.279 shares $14,325.923 855 shares $.42
Ronald E. Wegener 1,714.279 shares $28,714.173 1,714 shares $.42
Terry J. Braden 7,609.465 shares $127,458.539 7,609 shares $.70
Daniel O'Sullivan 34,870 shares $584,072.50 34,870 shares $.00
Daniel O'Sullivan and 3,012 shares $50,451.00 3,012 shares $.00
Linda O'Sullivan, joint
tenants
O'Sullivan Properties, 112,958.404 shares $1,892,053.267 112,958 shares $.61
Inc.
TOTAL 173,321.334 SHARES $2,903,132.34 173,319 SHARES $3.53
</TABLE>
(A) In lieu of issuing fractional shares of Preferred Stock, fractional
shares of Stock will be paid an additional cash amount equal to the
product of (i) $1.50 MULTIPLIED BY (ii) the fractional share.
<PAGE>
Exhibit 10.3
EXECUTION COPY
================================================================================
UNIT AGREEMENT
Among
O'SULLIVAN INDUSTRIES, INC.
O'SULLIVAN INDUSTRIES HOLDINGS, INC.
O'SULLIVAN INDUSTRIES - VIRGINIA, INC.
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
as Unit Agent
--------------------------
November 30, 1999
--------------------------
================================================================================
<PAGE>
UNIT AGREEMENT, dated as of November 30, 1999, among
O'Sullivan Industries, Inc. (the "Company"), O'Sullivan Industries Holdings,
Inc., a Delaware corporation ("HOLDINGS" and, together with the Company, the
"ISSUERS"), O'Sullivan Industries - Virginia, Inc., a Virginia corporation (the
"GUARANTOR"), and Norwest Bank Minnesota, National Association, as Unit Agent,
Warrant Agent and Trustee.
WHEREAS, the Company proposes to issue $100,000,000 aggregate
principal amount of its 13 3/8% Senior Subordinated Notes due 2009 (the "NOTES")
pursuant to an Indenture, dated as of November 30, 1999 (the "INDENTURE"), among
the Company, the Guarantor and Norwest Bank Minnesota, National Association, as
Trustee (the "TRUSTEE"), and Holdings proposes to issue 100,000 warrants (the
"COMMON WARRANTS"), each Common Warrant entitling the holder thereof to purchase
initially 0.9327 shares of Holdings' common stock, par value $0.01 per share
(the "COMMON STOCK") at a purchase price of $0.01 per share, and 100,000
warrants (the "PREFERRED WARRANTS" and, together with the Common Warrants, the
"WARRANTS"), each Preferred Warrant entitling the holder thereof to purchase
initially 0.3927 shares of Holdings' series B junior preferred stock, par value
$0.01 per share (the "PREFERRED STOCK") at a purchase price of $0.01 per share.
The Notes and the Warrants will initially be represented by units (the "UNITS"),
with each Unit consisting of $1,000 principal amount of Notes and one Common
Warrant and one Preferred Warrant. Norwest Bank Minnesota, National Association
has agreed with Holdings to act as warrant agent for the Warrants (the "WARRANT
AGENT").
WHEREAS, the Issuers, the Guarantor, the Trustee and the
Warrant Agent desire to appoint Norwest Bank Minnesota, National Association to
act as their agent for the purpose of issuing certificates ("UNIT CERTIFICATES")
representing the Units and for the registration of transfers and exchanges
thereof. Norwest Bank Minnesota, National Association, in such capacity, is
referred to herein as the "UNIT AGENT."
WHEREAS, the Units will be exchangeable for the Notes and the
Warrants represented thereby upon the earliest to occur of: (i) 180 days after
the closing of the offering of the Units, (ii) the date on which an exchange
offer registration statement for the Notes is declared effective under the
Securities Act, (iii) the date on which a shelf registration statement for the
Notes is declared effective under the Securities Act, (iv) such date as Lehman
Brothers Inc., in its sole discretion, shall determine or (v) in the event the
Company is required to make an offer to purchase Notes pursuant to the terms of
the Indenture, the date the Company mails notice of the offer to the holders of
the Notes. The earliest date on which an event listed in the preceding sentence
occurs is referred to as the "SEPARATION DATE."
NOW, THEREFORE, in consideration of the premises and the
mutual agreements herein set forth, the parties hereto agree as follows (all
capitalized terms not defined herein are as defined in the Indenture):
Section 1. APPOINTMENT OF UNIT AGENT.
(a) The Issuers and the Guarantor hereby appoint the Unit
Agent to act as agent for the Issuers and the Guarantor in accordance with and
subject to the terms and conditions set forth in this Agreement, and the Unit
Agent hereby accepts such appointment.
(b) The Trustee, the Company and the Guarantor hereby appoint
the Unit Agent as Authenticating Agent and Registrar (as such terms are defined
in the Indenture) for the Notes for so long as the Notes are represented by the
Units. In its capacity as Authenticating Agent and Registrar, the Unit Agent
shall have the rights and obligations provided for such capacities in the
Indenture.
<PAGE>
(c) The Warrant Agent and Holdings hereby appoint the Unit
Agent as Authenticating Agent and Warrant Registrar (as such terms are defined
in the Warrant Agreements) for the Warrants for so long as the Warrants are
represented by the Units. In its capacity as Warrant Authenticating Agent and
Warrant Registrar, the Unit Agent shall have the rights and obligations provided
for such capacities in the Warrant Agreements.
Section 2. DEFINITIONS.
"144A GLOBAL UNIT" means a global unit in the form of Exhibit
A1 hereto bearing the Global Unit Legend and the Private Placement Legend and
deposited with or on behalf of, and registered in the name of, the Depositary or
its nominee that will be issued in a denomination equal to the outstanding
number of the Units sold in reliance on Rule 144A.
"AFFILIATE" of any specified Person means (A) any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person and (B) any director, officer or
employee of such specified person. For purposes of this definition "CONTROL"
(including, with correlative meanings, the terms "CONTROLLING," "CONTROLLED BY"
and "UNDER COMMON CONTROL WITH") as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise.
"APPLICABLE PROCEDURES" means, with respect to any transfer or
exchange of or for beneficial interests in any Global Unit, the rules and
procedures of the Depositary, Euroclear and Cedelbank that apply to such
transfer or exchange.
"CEDELBANK" means Cedelbank, a limited liability company (a
societe anonyme) organized under Luxembourg law.
"DEFINITIVE UNIT" means a certificated Unit registered in the
name of the Holder thereof and issued in accordance with Section 3.6 hereof, in
the form of Exhibit A1 hereto except that such Unit shall not bear the Global
Unit Legend and shall not have the "Schedule of Exchanges of Interests in the
Global Unit" attached thereto.
"DEPOSITARY" means, with respect to the Units issuable or
issued in whole or in part in global form, the Person specified in Section 3.3
hereof as the Depositary with respect to the Units, and any and all successors
thereto appointed as depositary hereunder and having become such pursuant to the
applicable provision of this Unit Agreement.
"EUROCLEAR" means Morgan Guaranty Trust Company of New York,
Brussels office, as operator of the Euroclear system.
"GLOBAL UNITS" means, individually and collectively, each of
the Restricted Global Units, in the form of Exhibits A1 and A2 hereto issued in
accordance with Section 3.1 hereof.
"GLOBAL UNIT LEGEND" means the legend set forth in Section
3.6(f)(ii), which is required to be placed on all Global Units issued under this
Unit Agreement.
"HOLDER" means a Person in whose name a Unit is registered.
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"INDIRECT PARTICIPANT" means a Person who holds a beneficial
interest in a Global Unit through a Participant.
"INSTITUTIONAL ACCREDITED INVESTOR" means an institution that
is an "accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under
the Securities Act, who are not also QIBs.
"NON-U.S. PERSON" means a Person who is not a U.S. Person.
"OFFICER" means, with respect to any Person, the Chairman of
the Board, the Chief Executive Officer, the President, the Chief Operating
Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer,
the Controller, the Secretary or any Vice-President of such Person.
"OFFICERS' CERTIFICATE" means a certificate signed on behalf
of an Issuer and the Guarantor by two Officers of such Issuer and the Guarantor
one of whom must be the principal executive officer, the principal financial
officer, the treasurer or the principal accounting officer of such Issuer and
the Guarantor, that meets the requirements of Section 13.04 and Section 13.05 of
the Indenture.
"OPINION OF COUNSEL" means an opinion from legal counsel who
is reasonably acceptable to the Unit Agent, that meets the requirements of
Section 13.04 and Section 13.05 of the Indenture. The counsel may be an employee
of or counsel to the Issuers and the Guarantor, any Subsidiary of the Issuers
and the Guarantor or the Unit Agent.
"PARTICIPANT" means, with respect to the Depositary, Euroclear
or Cedelbank, a Person who has an account with the Depositary, Euroclear or
Cedelbank, respectively (and, with respect to The Depository Trust Company,
shall include Euroclear and Cedelbank).
"PRIVATE PLACEMENT LEGEND" means the legend set forth in
Section 3.6(f)(i) to be placed on all Units issued under this Unit Agreement
except where otherwise permitted by the provisions of this Unit Agreement.
"QIB" means a "qualified institutional buyer" as defined in
Rule 144A.
"REGULATION S" means Regulation S promulgated under the
Securities Act.
"REGULATION S GLOBAL UNIT" means a Regulation S Temporary
Global Unit or Regulation S Permanent Global Unit, as appropriate.
"REGULATION S PERMANENT GLOBAL UNIT" means a permanent global
unit in the form of Exhibit A1 hereto bearing the Global Unit Legend and the
Private Placement Legend and deposited with or on behalf of and registered in
the name of the Depositary or its nominee, issued in a denomination equal to the
number of the Regulation S Temporary Global Units upon expiration of the
Restricted Period.
"REGULATION S TEMPORARY GLOBAL UNIT" means a temporary global
unit in the form of Exhibit A2 hereto bearing the Private Placement Legend and
deposited with or on behalf of and registered in the name of the Depositary or
its nominee, issued in a denomination equal to the outstanding number of Units
initially sold in reliance on Rule 903 of Regulation S.
"RESTRICTED DEFINITIVE UNIT" means a Definitive Unit bearing
the Private Placement Legend.
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"RESTRICTED GLOBAL UNIT" means a Global Unit bearing the
Private Placement Legend.
"RESTRICTED PERIOD" means the one year distribution compliance
period as defined in Regulation S.
"RULE 144" means Rule 144 promulgated under the Securities
Act.
"RULE 144A" means Rule 144A promulgated under the Securities
Act.
"RULE 903" means Rule 903 promulgated under the Securities
Act.
"RULE 904" means Rule 904 promulgated under the Securities
Act.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"UNIT AGENT" means the party named as such above until a
successor replaces it in accordance with the applicable provisions of this Unit
Agreement and thereafter means the successor serving hereunder.
"UNIT CUSTODIAN" means the Unit Agent, as custodian with
respect to the Units in global form, or any successor entity thereto.
"U.S. PERSON" means a U.S. person as defined in Rule 902(o)
under the Securities Act.
Section 3. UNITS.
Section 3.1. FORM AND DATING.
(a) GENERAL. The Units and the Unit Agent's certificate of
authentication shall be substantially in the form of Exhibits A1 and A2 hereto.
The Units may have notations, legends or endorsements required by law, stock
exchange rule or usage.
The terms and provisions contained in the Units shall
constitute, and are hereby expressly made, a part of this Unit Agreement, and
the Issuers, the Guarantor and the Unit Agent, by their execution and delivery
of this Unit Agreement, expressly agree to such terms and provisions and to be
bound thereby. However, to the extent any provision of any Unit conflicts with
the express provisions of this Unit Agreement, the provisions of this Unit
Agreement shall govern and be controlling.
(b) GLOBAL UNITS. Units issued in global form shall be
substantially in the form of Exhibits A1 or A2 attached hereto (including the
Global Units Legend thereon and the "Schedule of Exchanges of Interests in the
Global Unit" attached thereto). Units issued in definitive form shall be
substantially in the form of Exhibit A1 attached hereto (but without the Global
Unit Legend thereon and without the "Schedule of Exchanges of Interests in the
Global Unit" attached thereto). Each Global Unit shall represent such of the
outstanding Units as shall be specified therein and each shall provide that it
shall represent the outstanding Units from time to time endorsed thereon and
that the outstanding Units represented thereby may from time to time be reduced
or increased, as appropriate, to reflect exchanges and redemptions. Any
endorsement of a Global Unit to reflect the amount of any increase or decrease
in the aggregate amount of outstanding Units represented thereby shall be made
by the Unit Agent or the Unit Custodian, at the direction of the Unit Agent, in
accordance with instructions given by the Holder thereof as required by Section
3.6 hereof.
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(c) TEMPORARY GLOBAL UNITS. Units offered and sold in reliance
on Regulation S shall be issued initially in the form of the Regulation S
Temporary Global Unit, which shall be deposited on behalf of the purchasers of
the Units represented thereby with the Unit Agent, as custodian for the
Depositary, and registered in the name of the Depositary or the nominee of the
Depositary for the accounts of designated agents holding on behalf of Euroclear
or Cedelbank, duly executed by the Issuers and authenticated by the Unit Agent
as hereinafter provided. The Restricted Period shall be terminated upon the
receipt by the Unit Agent of (i) a written certificate from the Depositary,
together with copies of certificates from Euroclear and Cedelbank certifying
that they have received certification of non-U.S. beneficial ownership of 100%
of the Regulation S Temporary Global Unit (except to the extent of any
beneficial owners thereof who acquired an interest therein during the Restricted
Period pursuant to another exemption from registration under the Securities Act
and who will take delivery of a beneficial ownership interest in a 144A Global
Unit bearing a Private Placement Legend, all as contemplated by Section
3.6(b)(iii) hereof), and (ii) an Officers' Certificate from the Issuers.
Following the termination of the Restricted Period, beneficial interests in the
Regulation S Temporary Global Unit shall be exchanged for beneficial interests
in Regulation S Permanent Global Units pursuant to the Applicable Procedures.
Simultaneously with the authentication of Regulation S Permanent Global Units,
the Unit Agent shall cancel the Regulation S Temporary Global Unit. The
aggregate number of the Regulation S Temporary Global Unit and the Regulation S
Permanent Global Units may from time to time be increased or decreased by
adjustments made on the records of the Unit Agent and the Depositary or its
nominee, as the case may be, in connection with transfers of interest as
hereinafter provided.
(d) EUROCLEAR AND CEDELBANK PROCEDURES APPLICABLE. The
provisions of the "Operating Procedures of the Euroclear System" and "Terms and
Conditions Governing Use of Euroclear" and the "General Terms and Conditions of
Cedelbank" and "Customer Handbook" of Cedelbank shall be applicable to transfers
of beneficial interests in the Regulation S Temporary Global Unit and the
Regulation S Permanent Global Units that are held by Participants through
Euroclear or Cedelbank.
Section 3.2. EXECUTION AND AUTHENTICATION. An Officer shall
sign the Units for each of the Issuers by manual or facsimile signature.
If the Officer whose signature is on a Unit no longer holds
that office at the time a Unit is authenticated, the Unit shall nevertheless be
valid.
A Unit shall not be valid until authenticated by the manual
signature of the Unit Agent and such signature shall be conclusive evidence that
the Unit has been authenticated under this Unit Agreement.
The Unit Agent shall, upon a written order of each of the
Issuers signed by an Officer (a "UNIT AUTHENTICATION ORDER"), authenticate Units
for original issue up to the number stated in the Units. The aggregate number of
Units outstanding at any time may not exceed such amount except as provided in
Section 3.7 hereof.
The Unit Agent may appoint an authenticating agent acceptable
to the Issuers to authenticate Units. An authenticating agent may authenticate
Units whenever the Unit Agent may do so. Each reference in this Unit Agreement
to authentication by the Unit Agent includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with Holders or an
Affiliate of the Issuers.
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Section 3.3. UNIT REGISTRAR AND UNIT PAYING AGENT. The Issuers
shall maintain an office or agency where Units may be presented for registration
of transfer or for exchange (the "UNIT REGISTRAR") and an office or agency where
Units may be presented for payment (the "UNIT PAYING AGENT"). The Unit Registrar
shall keep a register of the Units and of their transfer and exchange. The
Issuers may appoint one or more co-registrars and one or more additional paying
agents. The term "UNIT REGISTRAR" includes any co-registrar and the term "UNIT
PAYING AGENT" includes any additional paying agent. The Issuers may change any
Unit Paying Agent or Unit Registrar without notice to any Holder. The Issuers
shall notify the Unit Agent in writing of the name and address of any Agent not
a party to this Unit Agreement. If the Issuers fail to appoint or maintain
another entity as Unit Registrar or Unit Paying Agent, the Unit Agent shall act
as such. Each of the Issuers or any of their Subsidiaries may act as Unit Paying
Agent or Unit Registrar. The Issuers initially appoint The Depository Trust
Company ("DTC") to act as Depositary with respect to the Global Units.
The Issuers initially appoint the Unit Agent to act as the
Unit Registrar and Unit Paying Agent and to act as Unit Custodian with respect
to the Global Units.
Section 3.4. UNIT PAYING AGENT TO HOLD MONEY IN TRUST. The
Issuers shall require each Unit Paying Agent other than the Unit Agent to agree
in writing that the Unit Paying Agent will hold in trust for the benefit of
Holders or the Unit Agent all money held by the Unit Paying Agent for the
payment of principal, premium or Liquidated Damages, if any, or interest on the
Notes, or on the Warrants, and will notify the Unit Agent of any default by the
Issuers in making any such payment. While any such default continues, the Unit
Agent may require a Unit Paying Agent to pay all money held by it to the Unit
Agent. The Issuers at any time may require a Unit Paying Agent to pay all money
held by it to the Unit Agent. Upon payment over to the Unit Agent, the Unit
Paying Agent (if other than the Issuers or a Subsidiary) shall have no further
liability for the money. If the Issuers or a Subsidiary acts as Unit Paying
Agent, it shall segregate and hold in a separate trust fund for the benefit of
the Holders all money held by it as Unit Paying Agent. Upon any bankruptcy or
reorganization proceedings relating to the Issuers, the Unit Agent shall serve
as Unit Paying Agent for the Units.
Section 3.5. HOLDER LISTS. The Unit Agent shall preserve in as
current a form as is reasonably practicable the most recent list available to it
of the names and addresses of all Holders and shall otherwise comply with TIA
Section 312(a). If the Unit Agent is not the Registrar, the Issuers shall
furnish to the Unit Agent at least seven Business Days before each interest
payment date and at such other times as the Unit Agent may request in writing, a
list in such form and as of such date as the Unit Agent may reasonably require
of the names and addresses of the Holders of Units and the Issuers shall
otherwise comply with TIA Section 312(a).
Section 3.6. TRANSFER AND EXCHANGE.
(a) TRANSFER AND EXCHANGE OF GLOBAL UNITS. A Global Unit may
not be transferred as a whole except by the Depositary to a nominee of the
Depositary, by a nominee of the Depositary to the Depositary or to another
nominee of the Depositary, or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary. All Global Units
will be exchanged by the Issuers for Definitive Units if (i) the Issuers deliver
to the Unit Agent notice from the Depositary that it is unwilling or unable to
continue to act as Depositary or that it is no longer a clearing agency
registered under the Exchange Act and, in either case, a successor Depositary is
not appointed by the Issuers within 120 days after the date of such notice from
the Depositary or (ii) the Issuers in their sole discretion determines that the
Global Units (in whole but not in part) should be exchanged for Definitive Units
and delivers a written notice to such effect to the Unit Agent or (iii) the
Depositary in its sole
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discretion determines that the Global Notes (in whole but not in part) should be
exchanged for Definitive Notes following an Event of Default and delivers a
written notice to such effect to the Unit Agent; provided that in no event shall
the Regulation S Temporary Global Unit be exchanged by the Issuers for
Definitive Units prior to (x) the expiration of the Restricted Period and (y)
the receipt by the Registrar of any certificates required pursuant to Rule
903(c)(3)(ii)(B) under the Securities Act. Upon the occurrence of any of the
preceding events in (i), (ii) or (iii) above, Definitive Units shall be issued
in such names as the Depositary shall instruct the Unit Agent. Global Units also
may be exchanged or replaced, in whole or in part, as provided in Sections 3.7
and 3.10 hereof. Every Unit authenticated and delivered in exchange for, or in
lieu of, a Global Unit or any portion thereof, pursuant to this Section 3.6 or
Section 3.7 or 3.10 hereof, shall be authenticated and delivered in the form of,
and shall be, a Global Unit. A Global Unit may not be exchanged for another Unit
other than as provided in this Section 3.6(a), however, beneficial interests in
a Global Unit may be transferred and exchanged as provided in Section 3.6(b) or
(c) hereof.
(b) TRANSFER AND EXCHANGE OF BENEFICIAL INTERESTS IN THE
GLOBAL UNITS. The transfer and exchange of beneficial interests in the Global
Units shall be effected through the Depositary, in accordance with the
provisions of this Unit Agreement and the Applicable Procedures. Beneficial
interests in the Restricted Global Units shall be subject to restrictions on
transfer comparable to those set forth herein to the extent required by the
Securities Act. Transfers of beneficial interests in the Global Units also shall
require compliance with either subparagraph (i) or (ii) below, as applicable, as
well as one or more of the other following subparagraphs, as applicable:
(i) TRANSFER OF BENEFICIAL INTERESTS IN THE SAME GLOBAL
UNIT. Beneficial interests in any Restricted Global Unit may be
transferred to Persons who take delivery thereof in the form of a
beneficial interest in the same Restricted Global Unit in accordance
with the transfer restrictions set forth in the Private Placement
Legend; PROVIDED, HOWEVER, that prior to the expiration of the
Restricted Period, transfers of beneficial interests in the Temporary
Regulation S Global Unit may not be made to a U.S. Person or for the
account or benefit of a U.S. Person (other than an Initial Purchaser).
No written orders or instructions shall be required to be delivered to
the Registrar to effect the transfers described in this Section
3.6(b)(i).
(ii) ALL OTHER TRANSFERS AND EXCHANGES OF BENEFICIAL
INTERESTS IN GLOBAL UNITS. In connection with all transfers and
exchanges of beneficial interests that are not subject to Section
3.6(b)(i) above, the transferor of such beneficial interest must
deliver to the Registrar either (A) (1) a written order from a
Participant or an Indirect Participant given to the Depositary in
accordance with the Applicable Procedures directing the Depositary to
credit or cause to be credited a beneficial interest in another Global
Unit in an amount equal to the beneficial interest to be transferred or
exchanged and (2) instructions given in accordance with the Applicable
Procedures containing information regarding the Participant account to
be credited with such increase or (B) (1) a written order from a
Participant or an Indirect Participant given to the Depositary in
accordance with the Applicable Procedures directing the Depositary to
cause to be issued a Definitive Unit in an amount equal to the
beneficial interest to be transferred or exchanged and (2) instructions
given by the Depositary to the Registrar containing information
regarding the Person in whose name such Definitive Unit shall be
registered to effect the transfer or exchange referred to in (1) above;
provided that in no event shall Definitive Units be issued upon the
transfer or exchange of beneficial interests in the Regulation S
Temporary Global Unit prior to (x) the expiration of the Restricted
Period and (y) the receipt by the Registrar of any certificates
required pursuant to Rule 903 under the Securities Act. Upon
consummation of an Exchange Offer by the Company in accordance with the
Indenture, hereof, the requirements of
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this Section 3.6(b)(ii) shall be deemed to have been satisfied upon
receipt by the Registrar of the instructions contained in the Letter of
Transmittal delivered by the Holder of such beneficial interests in the
Restricted Global Units. Upon satisfaction of all of the requirements
for transfer or exchange of beneficial interests in Global Units
contained in this Unit Agreement and the Units and satisfaction of such
other requirements as the Unit Agent may determine in good faith to be
applicable, the Unit Agent shall adjust the number amount of the
relevant Global Unit(s) pursuant to Section 3.6(g) hereof.
(iii) TRANSFER OF BENEFICIAL INTERESTS TO ANOTHER
RESTRICTED GLOBAL UNIT. A beneficial interest in any Restricted Global
Unit may be transferred to a Person who takes delivery thereof in the
form of a beneficial interest in another Restricted Global Unit if the
transfer complies with the requirements of Section 3.6(b)(ii) above and
the Registrar receives the following:
(A) if the transferee will take delivery in the
form of a beneficial interest in the 144A Global Unit, then
the transferor must deliver a certificate in the form of
Exhibit B hereto, including the certifications in item (1)
thereof; and
(B) if the transferee will take delivery in the
form of a beneficial interest in the Regulation S Temporary
Global Unit or the Regulation S Global Unit, then the
transferor must deliver a certificate in the form of Exhibit B
hereto, including the certifications in item (2) thereof.
(c) TRANSFER OR EXCHANGE OF BENEFICIAL INTERESTS IN RESTRICTED
GLOBAL UNITS TO RESTRICTED DEFINITIVE UNITS. If any holder of a beneficial
interest in a Restricted Global Unit proposes to exchange such beneficial
interest for a Restricted Definitive Unit or to transfer such beneficial
interest to a Person who takes delivery thereof in the form of a Restricted
Definitive Unit, then, upon receipt by the Registrar of the following
documentation:
(A) if the holder of such beneficial interest in
a Restricted Global Unit proposes to exchange such beneficial
interest for a Restricted Definitive Unit, a certificate from
such holder in the form of Exhibit C hereto, including the
certifications in item (1)(a) thereof;
(B) if such beneficial interest is being
transferred to a QIB in accordance with Rule 144A under the
Securities Act, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (1)
thereof;
(C) if such beneficial interest is being
transferred to a Non-U.S. Person in an offshore transaction in
accordance with Rule 903 or Rule 904 under the Securities Act,
a certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (2) thereof;
(D) if such beneficial interest is being
transferred pursuant to an exemption from the registration
requirements of the Securities Act in accordance with Rule 144
under the Securities Act, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in
item (3)(a) thereof;
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(E) if such beneficial interest is being
transferred to an Institutional Accredited Investor in
reliance on an exemption from the registration requirements of
the Securities Act other than those listed in subparagraphs
(B) through (D) above, a certificate to the effect set forth
in Exhibit B hereto, including the certifications,
certificates and Opinion of Counsel required by item (3)
thereof, if applicable;
(F) if such beneficial interest is being
transferred to the Issuers or any of their Subsidiaries, a
certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (3)(b) thereof; or
(G) if such beneficial interest is being
transferred pursuant to an effective registration statement
under the Securities Act, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in
item (3)(c) thereof,
the Unit Agent shall cause the aggregate number of the applicable
Global Unit to be reduced accordingly pursuant to Section 3.6(g)
hereof, and the Issuers shall execute and, upon receipt of a Unit
Authentication Order, the Unit Agent shall authenticate and deliver to
the Person designated in the instructions a Definitive Unit in the
appropriate number. Any Definitive Unit issued in exchange for a
beneficial interest in a Restricted Global Unit pursuant to this
Section 3.6(c) shall be registered in such name or names and in such
authorized denomination or denominations as the holder of such
beneficial interest shall instruct the Unit Registrar through
instructions from the Depositary and the Participant or Indirect
Participant. The Unit Agent shall deliver such Definitive Units to the
Persons in whose names such Units are so registered. Any Definitive
Unit issued in exchange for a beneficial interest in a Restricted
Global Unit pursuant to this Section 3.6(c) shall bear the Private
Placement Legend and shall be subject to all restrictions on transfer
contained therein.
Notwithstanding Sections 3.6(c)(A) and (C) hereof, a
beneficial interest in the Regulation S Temporary Global Unit may not be
exchanged for a Definitive Unit or transferred to a Person who takes delivery
thereof in the form of a Definitive Unit prior to (x) the expiration of the
Restricted Period and (y) the receipt by the Registrar of any certificates
required pursuant to Rule 903(c)(3)(ii)(B) under the Securities Act, except in
the case of a transfer pursuant to an exemption from the registration
requirements of the Securities Act other than Rule 903 or Rule 904.
(d) TRANSFER AND EXCHANGE OF RESTRICTED DEFINITIVE UNITS TO
BENEFICIAL INTERESTS IN RESTRICTED GLOBAL Units. If any Holder of a Restricted
Definitive Unit proposes to exchange such Unit for a beneficial interest in a
Restricted Global Unit or to transfer such Restricted Definitive Units to a
Person who takes delivery thereof in the form of a beneficial interest in a
Restricted Global Unit, then, upon receipt by the Units Registrar of the
following documentation:
(A) if the Holder of such Restricted Definitive
Unit proposes to exchange such Unit for a beneficial interest
in a Restricted Global Unit, a certificate from such Holder in
the form of Exhibit C hereto, including the certifications in
item (1)(b) thereof;
(B) if such Restricted Definitive Unit is being
transferred to a QIB in accordance with Rule 144A under the
Securities Act, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (1)
thereof;
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(C) if such Restricted Definitive Unit is being
transferred to a Non-U.S. Person in an offshore transaction in
accordance with Rule 903 or Rule 904 under the Securities Act,
a certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (2) thereof;
(D) if such Restricted Definitive Unit is being
transferred pursuant to an exemption from the registration
requirements of the Securities Act in accordance with Rule 144
under the Securities Act, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in
item (3)(a) thereof;
(E) if such Restricted Definitive Unit is being
transferred to an Institutional Accredited Investor in
reliance on an exemption from the registration requirements of
the Securities Act other than those listed in subparagraphs
(B) through (D) above, a certificate to the effect set forth
in Exhibit B hereto, including the certifications,
certificates and Opinion of Counsel required by item (3)
thereof, if applicable;
(F) if such Restricted Definitive Unit is being
transferred to the Issuers or any of their Subsidiaries, a
certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (3)(b) thereof; or
(G) if such Restricted Definitive Unit is being
transferred pursuant to an effective registration statement
under the Securities Act, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in
item (3)(c) thereof,
the Unit Agent shall cancel the Restricted Definitive Unit, increase or
cause to be increased the number of, in the case of clause (A) above,
the appropriate Restricted Global Unit, in the case of clause (B)
above, the 144A Global Unit, in the case of clause (c) above, the
Regulation S Global Unit.
(e) TRANSFER AND EXCHANGE OF RESTRICTED DEFINITIVE UNITS TO
RESTRICTED DEFINITIVE UNITS. Upon request by a Holder of Definitive Units and
such Holder's compliance with the provisions of this Section 3.6(e), the
Registrar shall register the transfer or exchange of Definitive Units. Prior to
such registration of transfer or exchange, the requesting Holder shall present
or surrender to the Unit Registrar the Definitive Units duly endorsed or
accompanied by a written instruction of transfer in form satisfactory to the
Unit Registrar duly executed by such Holder or by his attorney, duly authorized
in writing. In addition, the requesting Holder shall provide any additional
certifications, documents and information, as applicable, required pursuant to
the following provisions of this Section 3.6(e).
Any Restricted Definitive Unit may be transferred
to and registered in the name of Persons who take delivery thereof in
the form of a Restricted Definitive Unit if the Unit Registrar receives
the following:
(A) if the transfer will be made pursuant to Rule
144A under the Securities Act, then the transferor must
deliver a certificate in the form of Exhibit B hereto,
including the certifications in item (1) thereof;
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(B) if the transfer will be made pursuant to Rule
903 or Rule 904, then the transferor must deliver a
certificate in the form of Exhibit B hereto, including the
certifications in item (2) thereof; and
(C) if the transfer will be made pursuant to any
other exemption from the registration requirements of the
Securities Act, then the transferor must deliver a certificate
in the form of Exhibit B hereto, including the certifications,
certificates and Opinion of Counsel required by item (3)
thereof, if applicable.
(f) LEGENDS. The following legends shall appear on the face of
all Global Units and Definitive Units issued under this Unit Agreement unless
specifically stated otherwise in the applicable provisions of this Unit
Agreement.
(i) PRIVATE PLACEMENT LEGEND. Each Global Unit and each
Definitive Unit (and all Units issued in exchange therefor or
substitution thereof) shall bear the legend in substantially the
following form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 (THE "SECURITIES ACT"), AND THIS SECURITY MAY NOT
BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR IN
ACCORDANCE WITH AN APPLICABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT (SUBJECT TO THE DELIVERY OF
SUCH EVIDENCE, IF ANY, REQUIRED UNDER THE [INDENTURE] [WARRANT
AGREEMENT] PURSUANT TO WHICH THIS SECURITY IS ISSUED) AND IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF
THE UNITED STATES OR ANY OTHER JURISDICTION. EACH PURCHASER OF
THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE
SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF
SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A
THEREUNDER OR ANOTHER EXEMPTION UNDER THE SECURITIES ACT. THE
HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT
OF THE COMPANY THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED
OR OTHERWISE TRANSFERRED, ONLY (1)(a) TO A PERSON WHO THE
SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER
(AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE
SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A FOREIGN
PURCHASER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
904 UNDER THE SECURITIES ACT OR (d) IN ACCORDANCE WITH ANOTHER
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO
REQUESTS), (2) TO THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH
ANY APPLICABLE SECURITIES
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LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE
JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT
HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE
SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH
IN (A) ABOVE."
(ii) GLOBAL UNIT LEGEND. Each Global Unit shall bear a
legend in substantially the following form:
"THIS GLOBAL UNIT IS HELD BY THE DEPOSITARY (AS
DEFINED IN THE UNIT AGREEMENT GOVERNING THIS UNIT) OR ITS
NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS
HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY
CIRCUMSTANCES EXCEPT THAT (I) THE UNIT AGENT MAY MAKE SUCH
NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 3.6 OF
THE UNIT AGREEMENT, (II) THIS GLOBAL UNIT MAY BE EXCHANGED IN
WHOLE BUT NOT IN PART PURSUANT TO SECTION 3.6(A) OF THE UNIT
AGREEMENT, (III) THIS GLOBAL UNIT MAY BE DELIVERED TO THE UNIT
AGENT FOR CANCELLATION PURSUANT TO SECTION 3.11 OF THE UNIT
AGREEMENT AND (IV) THIS GLOBAL UNIT MAY BE TRANSFERRED TO A
SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE
COMPANY."
(iii) REGULATION S TEMPORARY GLOBAL UNIT LEGEND. The
Regulation S Temporary Global Unit shall bear a legend in substantially
the following form:
"THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY
GLOBAL UNIT, AND THE CONDITIONS AND PROCEDURES GOVERNING ITS
EXCHANGE FOR CERTIFICATED UNITS, ARE AS SPECIFIED IN THE UNIT
AGREEMENT. NEITHER THE HOLDER NOR THE BENEFICIAL OWNERS OF
THIS REGULATION S TEMPORARY GLOBAL UNIT SHALL BE ENTITLED TO
RECEIVE PAYMENT OF INTEREST HEREON."
(g) CANCELLATION AND/OR ADJUSTMENT OF GLOBAL UNITS. At such
time as all beneficial interests in a particular Global Unit have been exchanged
for Definitive Units or a particular Global Unit has been redeemed, repurchased
or canceled in whole and not in part, each such Global Unit shall be returned to
or retained and canceled by the Unit Agent in accordance with Section 3.11
hereof. At any time prior to such cancellation, if any beneficial interest in a
Global Unit is exchanged for or transferred to a Person who will take delivery
thereof in the form of a beneficial interest in another Global Unit or for
Definitive Units, the aggregate number of Units represented by such Global Unit
shall be reduced accordingly and an endorsement shall be made on such Global
Unit by the Unit Agent or by the Depositary at the direction of the Unit Agent
to reflect such reduction; and if the beneficial interest is being exchanged for
or transferred to a Person who will take delivery thereof in the form of a
beneficial interest in another Global Unit, such other Global Unit shall be
increased accordingly and an endorsement shall be made on such Global Unit by
the Unit Agent or by the Depositary at the direction of the Unit Agent to
reflect such increase.
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(h) GENERAL PROVISIONS RELATING TO TRANSFERS AND EXCHANGES.
(i) To permit registrations of transfers and exchanges,
the Issuers shall execute and the Unit Agent shall authenticate Global
Units and/or Definitive Units upon the Issuers' order or at the Unit
Registrar's request.
(ii) No service charge shall be made to a holder of a
beneficial interest in a Global Unit or to a Holder of a Definitive
Unit for any registration of transfer or exchange, but the Issuers may
require payment of a sum sufficient to cover any transfer tax or
similar governmental charge payable in connection therewith (other than
any such transfer taxes or similar governmental charge payable upon
exchange or transfer pursuant to Section 3.10 hereof).
(iii) The Unit Registrar shall not be required to
register the transfer of or exchange any Unit selected for redemption
in whole or in part, except the unredeemed portion of any Unit being
redeemed in part.
(iv) All Global Units and/or Definitive Units issued
upon any registration of transfer or exchange of Global Units or
Definitive Units shall be the valid obligations of the Issuers,
evidencing the same right or debt and entitled to the same benefits
under this Unit Agreement, as the Global Units or Definitive Units
surrendered upon such registration of transfer or exchange.
(v) Prior to due presentment for the registration of a
transfer of any Unit, the Unit Agent, any Agent and the Issuers may
deem and treat the Person in whose name any Unit is registered as the
absolute owner of such Unit for the purpose of receiving payment of
principal of and interest and Liquidated Damages, if any, on such Units
and for all other purposes, and none of the Unit Agent, any Agent or
the Issuers shall be affected by notice to the contrary.
(vi) The Unit Agent shall countersign Global Units
and/or Definitive Units in accordance with the provisions of Section
3.2 hereof.
(vii) All certifications, certificates and Opinions of
Counsel required to be submitted to the Registrar pursuant to this
Section 3.6 to effect a registration of transfer or exchange may be
submitted by facsimile.
Section 3.7. REPLACEMENT UNITS. If any mutilated Unit is
surrendered to the Unit Agent or the Issuers and the Unit Agent and the Issuers
receives evidence to their satisfaction of the destruction, loss or theft of any
Unit and the Issuers shall issue and the Unit Agent, upon receipt of an order to
authenticate the Units, shall authenticate a replacement Unit if the Unit
Agent's requirements are met. If required by the Unit Agent or the Issuers, an
indemnity bond must be supplied by the Holder that is sufficient in the judgment
of the Unit Agent and the Issuers to protect the Issuers, the Unit Agent, any
Agent and any authenticating agent from any loss that any of them may suffer if
a Unit is replaced. The Issuers may charge for their expenses in replacing a
Unit.
Every replacement Unit is an additional obligation of the
Issuers and the Guarantor and shall be entitled to all of the benefits of this
Unit Agreement equally and proportionately with all other Units duly issued
hereunder.
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Section 3.8. OUTSTANDING UNITS. The Units outstanding at any
time are all the Units authenticated by the Unit Agent except for those canceled
by it, those delivered to it for cancellation, those reductions in the interest
in a Global Unit effected by the Unit Agent in accordance with the provisions
hereof, and those described in this Section as not outstanding. Except as set
forth in Section 3.9 hereof, a Unit does not cease to be outstanding because the
Issuers or an Affiliate of the Issuers holds the Unit.
If a Unit is replaced pursuant to Section 3.7 hereof, it
ceases to be outstanding unless the Unit Agent receives proof satisfactory to it
that the replaced Unit is held by a bona fide purchaser.
If the principal amount of any Note is considered paid under
Section 4.01 of the Indenture, it ceases to be outstanding and interest on it
ceases to accrue.
If the Paying Agent (other than the Issuers, a Subsidiary or
an Affiliate of any thereof) holds, on a redemption date or maturity date, money
sufficient to pay Notes payable on that date, then on and after that date such
Notes shall be deemed to be no longer outstanding and shall cease to accrue
interest.
Section 3.9. TREASURY UNITS. In determining whether the
Holders of the required amount of Units have concurred in any direction,
waiver or consent, Units owned by the Issuers, or by any Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with the Issuers, shall be considered as though not outstanding,
except that for the purposes of determining whether the Unit Agent shall be
protected in relying on any such direction, waiver or consent, only Units
that the Unit Agent knows are so owned shall be so disregarded.
Section 3.10. TEMPORARY UNITS. Until certificates representing
Units are ready for delivery, the Issuers may prepare and the Unit Agent, upon
receipt of a Unit Authentication Order, shall authenticate temporary Units.
Temporary Units shall be substantially in the form of certificated Units but may
have variations that the Issuers consider appropriate for temporary Units and as
shall be reasonably acceptable to the Unit Agent. Without unreasonable delay,
the Issuers shall prepare and, upon receipt of a Unit Authentication Order, the
Unit Agent shall authenticate Definitive Units in exchange for temporary Units.
Holders of temporary Units shall be entitled to all of the
benefits of this Unit Agreement.
Section 3.11. CANCELLATION. The Issuers at any time may
deliver Units to the Unit Agent for cancellation. The Registrar and Paying Agent
shall forward to the Unit Agent any Units surrendered to them for registration
of transfer, exchange or payment. The Unit Agent and no one else shall cancel
all Units surrendered for registration of transfer, exchange, payment,
replacement or cancellation and shall destroy canceled Units (subject to the
record retention requirement of the Exchange Act). Certification of the
destruction of all canceled Units shall be delivered to the Issuers. The Issuers
may not issue new Units to replace Units that it has paid or that have been
delivered to the Unit Agent for cancellation.
Section 4. RIGHTS OF UNIT HOLDERS. The registered owner of a
Unit Certificate shall have all the rights and privileges of a registered owner
of the aggregate principal amount of Notes represented thereby and the number of
Warrants represented thereby and shall be treated as the registered owner
thereof for all purposes.
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<PAGE>
Section 5. UNIT AGENT. The Unit Agent undertakes the duties
and obligations imposed by this Agreement upon the following terms and
conditions, by which the Issuers and the holders of Units, by their acceptance
thereof, shall be bound:
(a) The statements contained herein and in the Unit
Certificates shall be taken as statements of the Issuers, and the Unit Agent
assumes no responsibility for the correctness of any of the same except such as
expressly describe the Unit Agent. The Unit Agent assumes no responsibility with
respect to the distribution of the Unit Certificates except as herein otherwise
specifically provided.
(b) The Unit Agent shall not be responsible for any failure of
the Issuers to comply with any of the covenants in this Unit Agreement, the Unit
Certificates, the Warrant Agreements or the Indenture. The Unit Agent shall not
be required to ascertain in any manner whether the Applicable Procedures or
securities laws are being complied with.
(c) The Unit Agent may consult at any time with counsel
satisfactory to it (who may be counsel for the Issuers and the Guarantor) and
the Unit Agent shall incur no liability or responsibility to the Issuers or to
any holder of any Unit in respect of any action taken, suffered or omitted by it
hereunder in good faith and in accordance with the opinion or the advice of such
counsel.
(d) The Unit Agent shall incur no liability or responsibility
to the Issuers or to any holder of any Unit Certificate for any action taken in
reliance on any Unit Certificate, certificate of shares, notice, resolution,
waiver, consent, order, certificate, or other paper, document or instrument
believed by the Unit Agent to be genuine and to have been signed, sent or
presented by the proper party or parties.
(e) The Issuers agree to pay to the Unit Agent compensation
for all services rendered by the Unit Agent in connection with the execution and
performance of this Unit Agreement at such rates as have been separately agreed
to by the Issuers and the Unit Agent and to reimburse the Unit Agent for all
expenses, taxes and governmental charges and other charges of any kind and
nature incurred by the Unit Agent in the execution and performance of this Unit
Agreement. The Issuers shall indemnify the Unit Agent and its agents and save
each of them harmless against any and all losses, liabilities and expenses,
including judgments, costs and reasonable counsel fees and the costs and
reasonable expenses of investigating or defending any claim of such liability,
for any action taken or omitted by the Unit Agent or its agents in the execution
of and performance of its obligations under this Unit Agreement except as a
result of its negligence, willful misconduct or bad faith. The Unit Agent shall
notify the Issuers promptly of any claim for which it may seek indemnity;
PROVIDED that failure by the Unit Agent to so notify the Issuers shall not
relieve its obligations hereunder, except to the extent the Issuers are
materially prejudiced as a result of such failure. The Issuers shall defend the
claim and the Unit Agent shall cooperate in the defense at the Issuers' expense;
PROVIDED that the Issuers must consult with the Unit Agent with respect to the
conduct of such defense. The Unit Agent may have separate counsel reasonably
acceptable to the Issuers, and the Issuers shall pay the reasonable fees and
expenses of such counsel. The Issuers need not pay for any settlement made
without its consent, which consent shall not be unreasonably withheld.
(f) The Unit Agent shall be under no obligation to consider
instituting any action, suit or legal proceeding or taking any other action
likely to involve expense unless the Issuers or one or more registered holders
of Unit Certificates shall furnish the Unit Agent with security and indemnity
reasonably satisfactory to it for any costs and expenses which may be incurred,
but this provision shall not affect the power of the Unit Agent to take such
action as it may consider proper, whether with or
15
<PAGE>
without any such security or indemnity. All rights of action under this Unit
Agreement or under any of the Units may be enforced by the Unit Agent without
the possession of any of the Unit Certificates or the production thereof at any
trial or other proceeding relative thereto, and any such action, suit or
proceeding instituted by the Unit Agent shall be brought in its name as Unit
Agent and any recovery of judgment shall be for the ratable benefit of the
registered holders of the Units, as their respective rights or interests may
appear.
(g) The Unit Agent, and any stockholder, director, officer or
employee of it, may buy, sell or deal in any of the Units or other securities of
the Issuers or become pecuniarily interested in any transaction in which the
Issuers may be interested, or contract with or lend money to the Issuers or
otherwise act as fully and freely as though it were not the Unit Agent under
this Unit Agreement. Nothing herein shall preclude the Unit Agent from acting in
any other capacity for the Issuers or for any other legal entity.
(h) The Unit Agent shall act hereunder solely as agent for the
Issuers, its duties shall be determined solely by the provisions hereof and no
implied covenants or obligations shall be read into this Unit Agreement against
the Unit Agent. The Unit Agent shall not be liable for anything which it may do
or refrain from doing in connection with this Unit Agreement except for its own
negligence, willful misconduct or bad faith.
Section 6. CHANGE OF UNIT AGENT. The Unit Agent may resign at
any time by so notifying the Issuers. If the Unit Agent shall resign or become
incapable of acting as Unit Agent, the Issuers shall appoint a successor to such
Unit Agent. If the Issuers shall fail to make such appointment within a period
of 30 days after they have been notified in writing of such incapacity or
resignation by the Unit Agent or by the registered holder of a Unit Certificate,
then the registered holder of any Unit Certificate or the Unit Agent may apply
to any court of competent jurisdiction for the appointment of a successor to the
Unit Agent. Pending appointment of a successor to such Unit Agent, either by the
Issuers or by such a court, the duties of the Unit Agent shall be carried out by
the Issuers. After appointment, the successor to the Unit Agent shall be vested
with the same powers, rights, duties and responsibilities as if it had been
originally named as Unit Agent without further act or deed; but the former Unit
Agent, after the payment of all outstanding amounts owed to it hereunder, shall
deliver and transfer to the successor to the Unit Agent any property at the time
held by it hereunder and execute and deliver any further assurance, conveyance,
act or deed necessary for such purpose. Failure to give any notice provided for
in this Section 6, however, or any defect therein, shall not affect the legality
or validity of the appointment of a successor to the Unit Agent. The provisions
of Section 5 with respect to any Unit Agent shall survive such Unit Agents
resignation or removal and the termination of this Agreement.
Section 7. SUCCESSOR UNIT AGENT BY MERGER, ETC. If the Unit
Agent consolidates with, merges or converts into, or transfers all or
substantially all of its corporate trust business to, another corporation, the
resulting, surviving or transferee corporation without any further act shall, if
such resulting, surviving or transferee corporation is otherwise eligible
hereunder, be the successor Unit Agent.
Section 8. NOTICES TO THE ISSUERS AND UNIT AGENT, TRUSTEE,
WARRANT AGENT AND TRANSFER AGENT. Any notice or demand authorized by this
Agreement to be given or made to or on the Issuers shall be sufficiently given
or made when and if telecopied to the number indicated below or deposited in the
mail, first class or registered, postage paid, addressed (until another telecopy
number or address is filed in writing by the Issuers with the Unit Agent, the
Trustee and the Warrant Agent), as follows:
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<PAGE>
O'Sullivan Industries, Inc.
O'Sullivan Industries Holdings, Inc.
1900 Gulf Street
Lamar, Missouri 64759
Telecopier No.: (417) 682-8113
Attention: Rowland H. Geddie, III, Esq.
With a copy to:
Kirkland & Ellis
International Financial Centre
Old Broad Street
London EC2N 1HQ, UK
Telecopier No.: 44 171 816-8800
Attention: M. Gilbey Strub, Esq.
In case the Issuers shall fail to maintain such office or
shall fail to give such notice of any change in the location thereof,
presentations may be made and notices and demands may be served at the principal
office of the Unit Agent.
Any notice pursuant to this Unit Agreement to be given by the
Issuers or by registered holder(s) of any Unit Certificate to the Unit Agent,
the Trustee or the Warrant Agent shall be sufficiently given when and if
telecopied to the number indicated below or deposited in the mail, first class
or registered, postage prepaid, addressed (until another telecopy number or
address is filed in writing by the Unit Agent, the Trustee and the Warrant Agent
with the Issuers), as follows:
Norwest Bank Minnesota, National Association
N9303-120
Sixth and Marquette
Minneapolis, MN 55479
Facsimile No.: (612) 667-9825
Attention: Corporate Trust Services
Any notice to be mailed to a registered holder of Units shall
be mailed to each holder at its address as it appears on the register of Units
maintained by the Unit Agent. Copies of any such communication shall also be
mailed to the Unit Agent, the Trustee and the Warrant Agent. The Unit Agent
shall furnish the Issuers, the Trustee or the Warrant Agent promptly when
requested with a list of registered holders of Units for the purpose of mailing
any notice or communication to the registered holders of the Units, the Notes or
the Warrants and at such other times as may be reasonably requested.
Section 9. SUPPLEMENTS AND AMENDMENTS. The Issuers and the
Unit Agent may from time to time supplement or amend this Unit Agreement without
the approval of any registered holders of Units in order to cure any ambiguity
or to correct or supplement any provision contained herein which may be
defective or inconsistent with any other provision herein, or to make any other
provisions in regard to matters or questions arising hereunder which the
Issuers, the Trustee, the Warrant Agent and the Unit Agent may deem necessary or
desirable and which shall not, as evidenced by an opinion of counsel delivered
to the Unit Agent, the Trustee and the Warrant Agent, in any way adversely
affect the interests of the registered holders of Units. Any amendment or
supplement to this Unit Agreement that has a material adverse effect on the
interests of Unit holders shall require the written consent of the registered
17
<PAGE>
holders of not less than a majority of the outstanding Units. Each of the Unit
Agent, the Trustee and the Warrant Agent shall be entitled to receive and,
subject to Section 5, shall be fully protected in relying upon an officers'
certificate and opinion of counsel as conclusive evidence that any such
amendment or supplement is authorized or permitted hereunder, that it is not
inconsistent herewith, and that it will be valid and binding upon the Issuers in
accordance with its terms. The Issuers may not sign any amendment or supplement
until the Issuers' board of directors approves it.
Section 10. SUCCESSORS. All the covenants and provisions of
this Unit Agreement by or for the benefit of the Issuers, the Trustee, the
Warrant Agent or the Unit Agent shall bind and inure to the benefit of their
respective successors and assigns hereunder.
Section 11. GOVERNING LAW. THIS UNIT AGREEMENT AND EACH UNIT
CERTIFICATE ISSUED HEREUNDER SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE
LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES.
Section 12. BENEFITS OF THIS UNIT AGREEMENT. Nothing in this
Unit Agreement shall be construed to give to any person or corporation other
than the Issuers, the Trustee, the Warrant Agent, the Unit Agent and the
registered holders of the Units any legal or equitable right, remedy or claim
under this Agreement; but this Agreement shall be for the sole and exclusive
benefit of the Issuers, the Trustee, the Warrant Agent, the Unit Agent and the
registered holders of the Unit Certificates.
Section 13. COUNTERPARTS. This Unit Agreement may be executed
in any number of counterparts and each of such counterparts shall for all
purposes be deemed to be an original, and all such counterparts shall together
constitute but one and the same instrument.
Section 14. HEADINGS. The headings in this Unit Agreement are
for convenience of reference only and shall not limit or otherwise affect the
meaning of any provision hereof.
Section 15. SEVERABILITY. The provisions of this Unit
Agreement are severable, and if any clause or provision shall be held invalid,
illegal or unenforceable in whole or in part in any jurisdiction, then such
invalidity or unenforceability shall affect in that jurisdiction only such
clause or provision, or part thereof, and shall not in any manner affect such
clause or provision in any other jurisdiction or any other clause or provision
of this Unit Agreement in any jurisdiction.
Section 16. TERMINATION. This Unit Agreement shall terminate
and be of no further force and effect upon the 30th day following the Separation
Date, unless extended in writing by all the parties hereto.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have caused this Unit
Agreement to be duly executed, as of the day and year first above written.
O'SULLIVAN INDUSTRIES, INC.
By: /s/ Richard D. Davidson
------------------------------------
Name:
Title:
O'SULLIVAN INDUSTRIES HOLDINGS, INC.
By: /s/ Richard D. Davidson
------------------------------------
Name:
Title:
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION
as Unit Agent
By: /s/ Timothy P. Mowdy
------------------------------------
Name:
Title:
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION
as Trustee
By: /s/ Timothy P. Mowdy
------------------------------------
Name:
Title:
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION
as Warrant Agent
By: /s/ Timothy P. Mowdy
------------------------------------
Name:
Title:
<PAGE>
O'SULLIVAN INDUSTRIES - VIRGINIA, INC.
By: /s/ Richard D. Davidson
------------------------------------
Name:
Title:
<PAGE>
EXHIBIT 10.5
Prepared by and after recording return to:
Latham & Watkins
885 Third Avenue
New York, New York 10022
Attn: Wylie S. Allen, Esq.
DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND FIXTURE FILING
from
O'SULLIVAN INDUSTRIES - VIRGINIA, INC.,
as Trustor
to
JAMES D. KEPLEY, JR., ESQ.,
as Trustee
for the benefit of
LEHMAN COMMERCIAL PAPER INC.,
as Administrative Agent and Beneficiary,
as Beneficiary
DATED AS OF November 30 , 1999
<PAGE>
Virginia
DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND FIXTURE FILING
THIS DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND FIXTURE FILING, dated as of November 30, 1999, is made by
O'SULLIVAN INDUSTRIES -VIRGINIA, INC., a Virginia corporation ("TRUSTOR"), whose
address is 1900 Gulf Street, Lamar, Missouri 64759-1899, to James D. Kepley,
Jr., Esq. ("TRUSTEE"), whose address is 7201 Glen Forest Drive, Suite 102,
Richmond, VA 23226, for the benefit of LEHMAN COMMERCIAL PAPER INC., as
Administrative Agent for the Lenders referred to below and for the other Secured
Parties (in such capacity and herein, "BENEFICIARY"), having its address c/o 3
World Financial Center, New York, New York 10285, Attention: Michael O'Brien.
References to this "MORTGAGE" shall mean this instrument and any and all
renewals, modifications, amendments, supplements, extensions, consolidations,
substitutions, spreaders and replacements of this instrument.
BACKGROUND
A. Trustor has entered into the Credit Agreement dated as of the date
hereof (as the same may be amended, supplemented, replaced or otherwise modified
from time to time, the "CREDIT AGREEMENT") with the several banks and other
financial institutions and other entities from time to time parties thereto (the
"LENDERS"), Lehman Brothers Inc., as advisor, lead arranger and book manager,
and Lehman Commercial Paper Inc., as syndication agent and as administrative
agent. The terms of the Credit Agreement are incorporated by reference in this
Mortgage as if the terms thereof were fully set forth herein. In the event of
any conflict between the provisions of this Mortgage and the provisions of the
Credit Agreement, the applicable provisions of the Credit Agreement shall govern
and control, PROVIDED, that in the case of a provision in this Mortgage which is
more specific and detailed than the related provision in the Credit Agreement
(including by way of illustration, the sections of this Mortgage entitled
"LEASES" and "INSURANCE"), such Mortgage provision shall not be deemed to be in
conflict with the related provision in the Credit Agreement.
Capitalized terms not otherwise defined herein shall have the meanings
ascribed thereto in the Credit Agreement. References in this Mortgage to the
"DEFAULT RATE" shall mean the interest rate provided in subsection 2.15(c) of
the Credit Agreement.
B. Trustor is the owner of (i) the fee simple estate in the parcel(s)
of real property, described on "EXHIBIT A" attached hereto (the "LAND"; such
real property, together with all buildings, improvements, structures and
fixtures now or subsequently located thereon (the "IMPROVEMENTS"); the Land and
the Improvements being collectively referred to as the "REAL ESTATE").
C. Pursuant to the terms and conditions of the Credit Agreement, INTER
ALIA: (1) the Term Loan Lenders have severally agreed to make certain Term Loans
to Trustor in an aggregate principal amount of up to $125,000,000 on the Closing
Date; (2) the Revolving Credit Lenders have severally agreed to make certain
Revolving Credit Loans to Trustor in an aggregate
<PAGE>
principal amount of up to $35,000,000; (3) the Issuing Lender has agreed to
issue, and the other Revolving Credit Lenders who are L/C Participants have
severally agreed to acquire participating interests in, certain Letters of
Credit for the account of Trustor, PROVIDED that the sum of (i) the aggregate
then undrawn and unexpired amount of the then outstanding Letters of Credit and
(ii) the aggregate amount of drawings under Letters of Credit which have not
then been reimbursed pursuant to Section 3.5 of the Credit Agreement shall not
exceed $20,000,000; and (4) the Swing Line Lender has agreed to make, and the
other Revolving Credit Lenders have severally agreed to acquire participating
interests in, Swing Line Loans to Trustor in an aggregate principal amount of up
to $10,000,000. The maximum aggregate principal amount of the Loans and the L/C
Obligations outstanding at any one time shall not exceed $160,000,000.
D. The obligations of the Lenders to make the Loans and to issue and
participate in Letters of Credit and of the Secured Parties to enter into any
Specified Hedge Agreement are conditioned upon, among other things, the
execution and delivery by Trustor of this Mortgage.
GRANTING CLAUSES
For good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, Trustor agrees that to secure:
(a) repayment of the principal of and payment of interest
(including, without limitation, interest accruing after the
maturity of the Loans and interest accruing at the then
applicable rate provided in the Credit Agreement after the
filing of any petition in bankruptcy, or the commencement of
any insolvency, reorganization or like proceeding, relating to
Trustor, whether or not a claim for post-filing or
post-petition interest is allowed in such proceeding) on the
Loans made by each Lender to, and the Notes, if any, held by
each Lender of, Trustor;
(b) payment of all Reimbursement Obligations (including, without
limitation, interest accruing after the maturity of the
Reimbursement Obligations and interest accruing at the then
applicable rate provided in the Credit Agreement after the
filing of any petition in bankruptcy, or the commencement of
any insolvency, reorganization or like proceeding, relating to
Trustor, whether or not a claim for post-filing or
post-petition interest is allowed in such proceeding) with
respect to drawings under the Letters of Credit;
(c) payment and performance by Trustor of all its obligations and
liabilities, whether direct or indirect, absolute or
contingent, due or to become due, or now existing or
hereinafter incurred, under, arising out of or otherwise in
connection with the Guarantee and Collateral Agreement;
(d) payment and performance of all obligations under any Specified
Hedge Agreement;
(e) payment of all other obligations and liabilities of Trustor to
Beneficiary and the Secured Parties, whether direct or
indirect, absolute or contingent, due or to become due, or now
existing or hereafter incurred, which may arise under, out of,
or in connection with, the Credit Agreement, the Notes, the
Letters of Credit, the
2
<PAGE>
Guarantee and Collateral Agreement, any Specified Hedge
Agreement, this Mortgage, the other Loan Documents or any
other document made, delivered or given in connection herewith
or therewith, in each case whether on account of principal,
interest, reimbursement obligations, fees, indemnities, costs,
expenses or otherwise (including, without limitation, all
reasonable fees and disbursements of counsel to Beneficiary or
to the Secured Parties that are required to be paid by Trustor
pursuant to the terms of the Credit Agreement, this Mortgage,
any Specified Hedge Agreement, or any other Loan Documents)
(the items set forth in clauses (a) through (e) collectively
referred to herein as the "INDEBTEDNESS"); and
(f) the performance and observance of each obligation, term,
covenant and condition to be performed or observed by Trustor
(the "OBLIGATIONS") under, in connection with or pursuant to
the provisions of the Credit Agreement, the Notes, the Letters
of Credit, the Guarantee and Collateral Agreement, any
Specified Hedge Agreement, this Mortgage and any of the other
Security Documents or any of the other Loan Documents;
TRUSTOR HAS GRANTED, CONVEYED, BARGAINED, SOLD, ALIENED, ENFEOFFED, RELEASED,
CONFIRMED, MORTGAGED, ASSIGNED AND WARRANTED, AND HEREBY GRANTS, CONVEYS,
BARGAINS, SELLS, ALIENS, ENFEOFFS, RELEASES, CONFIRMS, MORTGAGES, ASSIGNS AND
WARRANTS IRREVOCABLY UNTO TRUSTEE, IN TRUST FOREVER FOR THE BENEFIT OF
BENEFICIARY WITH A POWER OF SALE AND A RIGHT OF ENTRY AS PROVIDED BY THIS
MORTGAGE, THE FOLLOWING PROPERTY OF TRUSTOR:
(A) the Real Estate;
(B) all the estate, right, title, claim or demand whatsoever
of Trustor, in possession or expectancy, in and to the Real Estate or
any part thereof;
(C) all right, title and interest of Trustor in, to and under
all easements, rights of way, gores of land, streets, ways, alleys,
passages, sewer rights, waters, water courses, water and riparian
rights, development rights, air rights, mineral rights and all estates,
rights, titles, interests, privileges, licenses, tenements,
hereditaments and appurtenances belonging, relating or appertaining to
the Real Estate, and any reversions, remainders, rents, issues, profits
and revenue thereof and all land lying in the bed of any street, road
or avenue, in front of or adjoining the Real Estate to the center line
thereof;
(D) all of the fixtures, chattels, business machines,
machinery, apparatus, equipment, furnishings, fittings and articles of
personal property of every kind and nature whatsoever, and all
appurtenances and additions thereto and substitutions or replacements
thereof (together with, in each case, attachments, components, parts
and accessories) currently owned or subsequently acquired by Trustor
and now or subsequently attached to, or contained in or used or usable
in any way in connection with any operation or letting of the Real
Estate, including but without limiting the generality of the foregoing,
all screens, awnings, shades, blinds, curtains, draperies, artwork,
carpets, rugs, storm doors and windows, furniture and furnishings,
heating, electrical, and mechanical
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equipment, lighting, switchboards, plumbing, ventilating, air
conditioning and air-cooling apparatus, refrigerating, and incinerating
equipment, escalators, elevators, loading and unloading equipment and
systems, stoves, ranges, laundry equipment, cleaning systems (including
window cleaning apparatus), telephones, communication systems
(including satellite dishes and antennae), televisions, computers,
sprinkler systems and other fire prevention and extinguishing apparatus
and materials, security systems, motors, engines, machinery, pipes,
pumps, tanks, conduits, appliances, fittings and fixtures of every kind
and description (all of the foregoing in this paragraph(D),
collectively referred to herein as the "EQUIPMENT");
(E) all right, title and interest of Trustor in and to all
substitutes and replacements of, and all additions and improvements to,
the Real Estate and the Equipment, subsequently acquired by or released
to Trustor or constructed, assembled or placed by Trustor on the Real
Estate, immediately upon such acquisition, release, construction,
assembling or placement, including, without limitation, any and all
building materials whether stored at the Real Estate or offsite, and,
in each such case, without any further Mortgage, conveyance, assignment
or other act by Trustor;
(F) all right, title and interest of Trustor in, to and under
all leases, subleases, underlettings, concession agreements, management
agreements, licenses and other agreements relating to the use or
occupancy of the Real Estate or the Equipment or any part thereof, now
existing or subsequently entered into by Trustor and whether written or
oral and all guarantees of any of the foregoing (collectively, as any
of the foregoing may be amended, restated, extended, renewed or
modified from time to time, the "LEASES"), and all rights of Trustor in
respect of cash and securities deposited thereunder and the right
------- to receive and collect the revenues, income, rents, issues and
profits thereof, together with all other rents, royalties, issues,
profits, revenue, income and other benefits arising from the use and
enjoyment of the Mortgaged Property (as defined below) (collectively,
the "RENTS"); -----
(G) all trade names, trade marks, logos, copyrights, other
intellectual property, good will and books and records relating to or
used in connection with the operation of the Real Estate or the
Equipment or any part thereof; all general intangibles related to the
operation of the Improvements now existing or hereafter arising;
(H) all unearned premiums under insurance policies now or
subsequently obtained by Trustor relating to the Real Estate or
Equipment and Trustor's interest in and to all proceeds of any such
insurance policies (including title insurance policies) including the
right to collect and receive such proceeds, subject to the provisions
relating to insurance generally set forth below; and all awards and
other compensation, including the interest payable thereon and the
right to collect and receive the same, made to the present or any
subsequent owner of the Real Estate or Equipment for the taking by
eminent domain, condemnation or otherwise, of all or any part of the
Real Estate or any easement or other right therein;
(I) all right, title and interest of Trustor in and to (i) all
contracts from time to time executed by Trustor or any manager or agent
on its behalf relating to the ownership,
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construction, maintenance, repair, operation, occupancy, sale or
financing of the Real Estate or Equipment or any part thereof and all
agreements relating to the purchase or lease of any portion of the Real
Estate or any property which is adjacent or peripheral to the Real
Estate, together with the right to exercise such options and all leases
of Equipment (collectively, the "CONTRACTS"), (ii) all consents,
licenses, building permits, certificates of occupancy and other
governmental approvals relating to construction, completion, occupancy,
use or operation of the Real Estate or any part thereof (collectively,
the "PERMITS") and (iii) all drawings, plans, specifications and
similar or related items relating to the Real Estate (collectively, the
"PLANS");
(J) any and all monies now or subsequently on deposit for the
payment of real estate taxes or special assessments against the Real
Estate or for the payment of premiums on insurance policies covering
the foregoing property or otherwise on deposit with or held by
Beneficiary as provided in this Mortgage; and
(K) all proceeds, both cash and noncash, of the foregoing;
(All of the foregoing property and rights and interests now owned or
held or subsequently acquired by Trustor and described in the foregoing clauses
(A) through (E) are collectively referred to as the "PREMISES", and those
described in the foregoing clauses (A) through (K) are collectively referred to
as the "MORTGAGED PROPERTY").
TO HAVE AND TO HOLD the Mortgaged Property and the rights and
privileges hereby mortgaged unto Trustee forever, in trust for the benefit of
Beneficiary, its successors and assigns for the uses and purposes set forth,
until the Indebtedness is fully paid and all of the Obligations are fully
performed. PROVIDED ALWAYS, that if Trustor shall promptly and fully pay all of
the Indebtedness in immediately available funds and perform all of the
Obligations, then the estate hereby granted shall cease, terminate and become
void (and, upon Trustor's request and at Trustor's expense, Beneficiary shall
execute and acknowledge a recordable release or reconveyance of this Deed of
Trust); PROVIDED; HOWEVER, that Trustor's obligation to indemnify and hold
Beneficiary harmless pursuant to the provisions hereof with respect to matters
relating to any period of time during which the Deed of Trust was in effect
shall survive any such payment or release.
TERMS AND CONDITIONS
Trustor further represents, warrants, covenants and agrees with
Beneficiary as follows:
1. WARRANTY OF TITLE. Trustor warrants that it has good and marketable
record title in fee simple to the Real Estate, and good title to the rest of the
Mortgaged Property, subject only to the matters that are set forth in Schedule B
of the title insurance policy or policies being issued to Beneficiary to insure
the lien of this Mortgage and any other lien as permitted by Section 7.3 of the
Credit Agreement (the "PERMITTED EXCEPTIONS"). Trustor shall warrant, defend and
preserve such title and the lien of this Mortgage against all claims of all
persons and entities. Trustor represents and warrants that it has the full
power, authority and legal right to mortgage, grant, bargain, sell, transfer and
convey the Mortgaged Property pursuant to the terms hereof.
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2. PAYMENT OF INDEBTEDNESS. Trustor shall pay the Indebtedness at the
times and places and in the manner specified in the Notes, the Credit Agreement,
the Guarantee and Collateral Agreement and in any Hedge Agreement, and shall
perform all the Obligations.
3. REQUIREMENTS.
(a) Trustor shall promptly comply with, or cause to be complied with,
and conform to all present and future laws, statutes, codes, ordinances, orders,
judgments, decrees, rules, regulations and requirements, and irrespective of the
nature of the work to be done, of each of the United States of America, any
State and any municipality, local government or other political subdivision
thereof and any agency, department, bureau, board, commission or other
instrumentality of any of them, now existing or subsequently created
(collectively, "GOVERNMENTAL AUTHORITY") which has jurisdiction over the
Mortgaged Property and all covenants, restrictions and conditions now or later
of record which may be applicable to any of the Mortgaged Property, or to the
use, manner of use, occupancy, possession, operation, maintenance, alteration,
repair or reconstruction of any of the Mortgaged Property, except to the extent
that failure to comply therewith could not, in the aggregate, reasonably be
expected to have a Material Adverse Effect. All present and future laws,
statutes, codes, ordinances, orders, judgments, decrees, rules, regulations and
requirements of every Governmental Authority applicable to Trustor or to any of
the Mortgaged Property and all covenants, restrictions, and conditions which now
or later may be applicable to any of the Mortgaged Property are collectively
referred to as the "LEGAL REQUIREMENTS".
(b) From and after the date of this Mortgage, Trustor shall not by act
or omission permit any building or other improvement on any premises not subject
to the lien of this Mortgage to rely on the Premises or any part thereof or any
interest therein to fulfill any Legal Requirement, and Trustor hereby assigns to
Beneficiary any and all rights to give consent for all or any portion of the
Premises or any interest therein to be so used. Trustor shall not by act or
omission impair the integrity of any of the Real Estate as a single zoning lot
separate and apart from all other premises. Trustor represents that each parcel
of the Real Estate constitutes a legally subdivided lot, in compliance with all
subdivision laws and similar Legal Requirements. Any act or omission by Trustor
which would result in a violation of any of the provisions of this subsection
shall be void.
(c) PAYMENT OF TAXES AND OTHER IMPOSITIONS. (a) Promptly when due, but
in any event before any delinquency occurs, Trustor shall pay and discharge all
taxes of every kind and nature (including, without limitation, all real and
personal property, income, franchise, withholding, transfer, gains, profits and
gross receipts taxes), all charges for any easement or agreement maintained for
the benefit of any of the Mortgaged Property, all general and special
assessments, levies, permits, inspection and license fees, all water and sewer
rents and charges, vault taxes, and all other public charges even if unforeseen
or extraordinary, imposed upon or assessed against or which may become a lien on
any of the Mortgaged Property, or arising in respect of the occupancy, use or
possession thereof, together with any penalties or interest on any of the
foregoing (all of the foregoing are collectively referred to as the
"IMPOSITIONS"). Upon request by Beneficiary, Trustor shall deliver to
Beneficiary (i) original or copies of receipted bills and cancelled checks
evidencing payment of such Imposition if it is a real estate tax or other public
charge and (ii) evidence acceptable to Beneficiary showing the payment of any
other such
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Imposition. If by law any Imposition, at Trustor's option, may be paid in
installments (whether or not interest shall accrue on the unpaid balance of such
Imposition), Trustor may elect to pay such Imposition in such installments and
shall be responsible for the payment of such installments with interest, if any.
(b) Nothing herein shall affect any right or remedy of Beneficiary
under this Mortgage or otherwise, without notice or demand to Trustor, to pay
any Imposition after the date such imposition shall have become due if (i) a
Default or Event of Default shall have occurred, or (ii) the failure to make
such payment could result in the imposition of a lien. Any sums paid by
Beneficiary in discharge of any Impositions shall be payable on demand by
Trustor to Beneficiary together with interest at the Default Rate.
(c) Trustor shall have the right before any delinquency occurs to
contest or object in good faith to the amount or validity of any Imposition by
appropriate legal proceedings, but such right shall not be deemed or construed
in any way as relieving, modifying, or extending Trustor's covenant to pay any
such Imposition at the time and in the manner provided in this Section unless
(i) Trustor has given prior written notice to Beneficiary of Trustor's intent so
to contest or object to an Imposition, (ii) Trustor shall demonstrate to
Beneficiary's satisfaction that the legal proceedings shall operate conclusively
to prevent the sale of the Mortgaged Property, or any part thereof, to satisfy
such Imposition prior to final determination of such proceedings and (iii)
Trustor shall maintain adequate reserves with respect thereto on its books in
conformity with GAAP or shall furnish a good and sufficient bond or surety as
requested by and reasonably satisfactory to Beneficiary in the amount of the
Impositions which are being contested plus any interest and penalty which may be
imposed thereon and which could become a lien against the Real Estate or any
part of the Mortgaged Property.
4. INSURANCE. (a) Trustor shall maintain or cause to be maintained on
all of the Premises, with financially sound and reputable insurance companies:
(i) property insurance against loss or damage by fire,
lightning, windstorm, tornado, water damage, flood, earthquake,
explosion, theft and by such other further risks and hazards as now are
or subsequently may be covered by an "all risk" policy or a fire policy
covering "special" causes of loss and the repair or replacement cost of
all such property, the policy limits of which property insurance shall
be automatically reinstated after each loss;
(ii) commercial general liability insurance under a policy
including the "broad form CGL endorsement" (or which incorporates the
language of such endorsement), covering all claims for personal injury,
bodily injury or death, or property damage occurring on, in or about
the Premises in an amount not less than $2,000,000 combined single
limit with respect to injury and property damage relating to any one
occurrence plus such excess limits as Beneficiary shall reasonably
request from time to time;
(iii) insurance against rent loss, business interruption or
extra expense (which shall include construction expenses and such other
business interruption expenses
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as are otherwise generally available to similar businesses) in amounts
satisfactory to Beneficiary, but not less than one year's gross rent or
gross income;
(iv) if any portion of the Premises are located in an area
identified as a special flood hazard area by the Federal Emergency
Management Agency or other applicable agency, flood insurance in an
amount reasonably satisfactory to Beneficiary, but in no event less
than the maximum limit of coverage available under the National Flood
Insurance Act of 1968, as amended; and
(v) such other insurance in such amounts as Beneficiary may
reasonably request from time to time against loss or damage by any
other risk commonly insured against by persons occupying or using like
properties in the locality or localities in which the Real Estate is
situated.
(b) All such insurance with respect to Trustor shall be provided by
insurers or reinsurers which (x) in the case of United States insurers or
reinsurers, have an A.M. Best policyholders rating of not less than A- with
respect to primary insurance and B+ with respect to excess insurance and (y) in
the case of non-United States insurers or reinsurers, the providers of at least
80% of such insurance have either an ISI policyholders rating of not less than
A, an A.M. Best policyholders rating of not less than A- or a surplus of not
less than $500,000,000 with respect to primary insurance, and an ISI
policyholders rating of not less than BBB with respect to excess insurance, or,
if the relevant insurance is not available from such insurers, such other
insurers as Beneficiary may approve in writing.
(c) Subject to and in accordance with the provisions of Section 2.12(b)
of the Credit Agreement, each insurance policy (other than flood insurance)
shall (x) provide that it shall not be cancelled, non-renewed or materially
amended without 30-days' prior written notice to Beneficiary, and (y) with
respect to all property insurance, provide for deductibles in an amount
reasonably satisfactory to Beneficiary and contain a "Replacement Cost
Endorsement" without any deduction made for depreciation and with no
co-insurance penalty (or attaching an agreed amount endorsement satisfactory to
Beneficiary), with loss payable solely to Beneficiary (modified, if necessary,
to provide that proceeds in the amount of replacement cost may be retained by
Beneficiary without the obligation to rebuild) as its interest may appear,
without contribution, under a "standard" or "New York" Beneficiary clause
acceptable to Beneficiary. Liability insurance policies shall name Beneficiary
as an additional insured and contain a waiver of subrogation against
Beneficiary. Each policy shall expressly provide that any proceeds which are
payable to Beneficiary shall be paid by check payable to the order of
Beneficiary only and requiring the endorsement of Beneficiary only, subject,
however, to the provisions of section 2.12(b) of the Credit Agreement.
(d) Trustor shall deliver to Beneficiary on behalf of the Secured
Parties, (i) on the Closing Date, an original of each insurance policy required
to be maintained, or Acord - 27 certificate evidencing such policy and
acceptable to Beneficiary, together with a copy of the declaration page for each
such policy, showing the amount and type of insurance coverage as of such date,
(ii) upon request of any Secured Party from time to time, full information as to
the insurance carried, (iii) promptly following receipt of notice from any
insurer, a copy of notice of cancellation or material change in coverage from
that existing on the Closing Date, (iv)
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forthwith, notice of any cancellation or nonrenewal of coverage by Trustor, and
(v) promptly after such information is available to Trustor, full information as
to any claim in excess of $1,000,000 with respect to any property and casualty
insurance policy maintained by Trustor. Each Secured Party shall be named as an
additional insured on all such liability policies of Trustor and Beneficiary
shall be named as loss payee on all property and casualty insurance policies of
Trustor (subject, however, to the provisions of section 2.12(b) of the Credit
Agreement) . Trustor shall (i) pay as they become due all premiums for such
insurance, and (ii) not later than 5 days prior to the expiration of each policy
to be furnished pursuant to the provisions of this Section, deliver evidence of
renewal of each policy reasonably satisfactory to Beneficiary.
(e) If Trustor is in default of its obligations to insure or deliver
any such prepaid policy or policies, then Beneficiary, at its option and without
notice, may effect such insurance from year to year, and pay the premium or
premiums therefor, and Trustor shall pay to Beneficiary on demand such premium
or premiums so paid by Beneficiary with interest from the time of payment at the
Default Rate.
(f) Trustor promptly shall comply with and conform to (i) all
provisions of each such insurance policy, and (ii) all requirements of the
insurers applicable to Trustor or to any of the Mortgaged Property or to the
use, manner of use, occupancy, possession, operation, maintenance, alteration or
repair of any of the Mortgaged Property. Trustor shall not use or permit the use
of the Mortgaged Property in any manner which would permit any insurer to cancel
any insurance policy or void coverage required to be maintained by this
Mortgage.
(g) If the Mortgaged Property, or any part thereof, shall be destroyed
or damaged, Trustor shall give immediate notice thereof to Beneficiary. Subject
to and in accordance with the provisions of Section 2.12(b) of the Credit
Agreement, all insurance proceeds shall be paid to Beneficiary to be held by
Beneficiary as collateral to secure the payment and performance of the
Indebtedness and the Obligations.
(h) In the event of foreclosure of this Mortgage or other transfer of
title to the Mortgaged Property, all right, title and interest of Trustor in and
to any insurance policies then in force shall pass to the purchaser or grantee.
(i) Trustor may maintain insurance required under this Mortgage by
means of one or more blanket insurance policies maintained by Trustor; PROVIDED,
HOWEVER, that (A) any such policy shall specify, or Trustor shall furnish
promptly to Beneficiary a written statement from the insurer so specifying, the
maximum amount of the total insurance afforded by such blanket policy that is
allocated to the Premises and the other Mortgaged Property and any sublimits in
such blanket policy applicable to the Premises and the other Mortgaged Property,
(B) each such blanket policy shall include an endorsement providing that, in the
event of a loss resulting from an insured peril, insurance proceeds shall be
allocated to the Mortgaged Property in an amount equal to the coverages required
to be maintained by Trustor as provided above and (C) the protection afforded
under any such blanket policy shall be no less than that which would have been
afforded under a separate policy or policies relating only to the Mortgaged
Property.
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5. RESTRICTIONS ON LIENS AND ENCUMBRANCES. Except for the lien of this
Mortgage and the Permitted Exceptions, Trustor shall not further mortgage, nor
otherwise encumber the Mortgaged Property nor create or suffer to exist any
lien, charge or encumbrance on the Mortgaged Property, or any part thereof,
whether superior or subordinate to the lien of this Mortgage and whether
recourse or non-recourse.
6. DUE ON SALE AND OTHER TRANSFER RESTRICTIONS. Except as expressly
permitted under the Credit Agreement, Trustor shall not sell, transfer, convey
or assign all or any portion of, or any interest in, the Mortgaged Property.
7. MAINTENANCE; NO ALTERATION; INSPECTION; UTILITIES. (a) To the extent
required by and in accordance with the Credit Agreement, Trustor shall (i)
maintain or cause to be maintained all the Improvements in good working
condition and repair and shall not commit or suffer any waste of the
Improvements, ordinary wear and tear excepted, and (ii) repair, restore, replace
or rebuild promptly any part of the Premises which may be damaged or destroyed
by any casualty whatsoever. To the extent prohibited by and in accordance with
the Credit Agreement, the Improvements shall not be demolished or materially
altered, nor any material additions built, without the prior written consent of
Beneficiary, which consent shall not be unreasonably withheld or delayed.
(b) Beneficiary and any persons authorized by Beneficiary shall have
the right, after reasonable notice to Trustor at any reasonable time and as
often as may reasonably be desired to enter and inspect the Premises and all
work done, labor performed and materials furnished in and about the Improvements
and to inspect and make copies of all books, contracts and records of Trustor
relating to the Mortgaged Property.
(c) Trustor shall pay or cause to be paid when due all utility charges
which are incurred for gas, electricity, water or sewer services furnished to
the Premises and all other assessments or charges of a similar nature, whether
public or private, affecting the Premises or any portion thereof, whether or not
such assessments or charges are liens thereon.
8. CONDEMNATION/EMINENT DOMAIN. Immediately upon obtaining knowledge of
the institution of any proceedings for the condemnation of the Mortgaged
Property, or any portion thereof, Trustor will notify Beneficiary in writing of
the pendency of such proceedings. To the extent required by and in accordance
with the Credit Agreement, Beneficiary is hereby authorized and empowered by
Trustor to settle or compromise any claim in connection with such condemnation
and to receive all awards and proceeds thereof to be held by Beneficiary as
collateral to secure the payment and performance of the Indebtedness and the
Obligations.
9. RESTORATION. Except as set forth in subsection 2.12(b) of the Credit
Agreement, Trustor shall use all insurance proceeds and all condemnation
proceeds and awards to promptly restore the Mortgaged Property to its condition
prior to such casualty or condemnation, (giving effect to the remaining
configuration of the Premises after such condemnation) and in compliance with
all Legal Requirements.
10. LEASES. (a) Trustor shall not (i) execute an assignment or pledge
of any Lease relating to all or any portion of the Mortgaged Property other than
in favor of Beneficiary, or (ii)
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except as expressly permitted under the Credit Agreement, without the prior
written consent of Beneficiary, execute or permit to exist any Lease of any of
the Mortgaged Property.
(b) Trustor shall deliver to Beneficiary, within 15 days after a
request by Beneficiary, a written statement, certified by Trustor as being true,
correct and complete, containing the names of all lessees and other occupants of
the Mortgaged Property, the terms of all Leases and the spaces occupied and
rentals payable thereunder, and a list of all Leases which are then in default,
including the nature and magnitude of the default; such statement shall be
accompanied by such credit information with respect to the lessees and such
other information as Beneficiary may reasonably request and as shall be in the
possession of or readily available to Trustor.
11. FURTHER ASSURANCES. To further assure Beneficiary's rights under
this Mortgage, Trustor agrees upon demand of Beneficiary to do any act or
execute any additional documents (including, but not limited to, security
agreements on any personalty included or to be included in the Mortgaged
Property and a separate assignment of each Lease in recordable form) as may be
reasonably required by Beneficiary to confirm the lien of this Mortgage and all
other rights or benefits conferred on Beneficiary.
12. BENEFICIARY'S RIGHT TO PERFORM. If Trustor fails to perform any of
the covenants or agreements of Trustor within the time period provided for such
performance or cure period provided with respect thereto, Beneficiary, without
waiving or releasing Trustor from any obligation or default under this Mortgage,
may, at any time (but shall be under no obligation to) pay or perform the same,
and the amount or cost thereof, with interest at the Default Rate, shall
immediately be due from Trustor to Beneficiary. To the extent that any such
amounts or costs paid by Beneficiary shall constitute payment of (i)
Impositions; (ii) premiums on insurance policies covering the Premises; (iii)
expenses incurred in upholding or enforcing the lien of this Mortgage,
including, but not limited to the expenses of any litigation to prosecute or
defend the rights and lien created by this Mortgage; (iv) costs of removal of or
otherwise related to hazardous materials or asbestos; or (v) any amount, costs
or charge to which Beneficiary becomes subrogated, upon payment, whether under
recognized principles of law or equity, or under express statutory authority;
then, and in each such event, such amounts or costs, together with interest
thereon at the Default Rate, shall be added to the Indebtedness and shall be
secured by this Mortgage and shall be a lien on the Mortgaged Property prior to
any right, title to, interest in, or claim upon the Mortgaged Property attaching
subsequent to the lien of this Mortgage. No payment or advance of money by
Beneficiary under this Section shall be deemed or construed to cure Trustor's
default or waive any right or remedy of Beneficiary.
13. EVENTS OF DEFAULT. The occurrence of any one or more of the
following events shall constitute an "EVENT OF DEFAULT" hereunder:
(a) an Event of Default (as defined in the Credit Agreement)
shall occur under the Credit Agreement; or
(b) a failure (i) to keep in force the insurance required by
this Mortgage, or (ii) to comply with any other material provisions of
this Mortgage regarding insurance; or
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(c) a failure of Trustor to duly perform and observe, or a
violation or breach of, any other terms, covenants, provisions or
conditions of Sections 6 or 7 of this Mortgage.
14. REMEDIES. (a) Upon the occurrence of any Event of Default, in
addition to any other rights and remedies Beneficiary may have pursuant to the
Loan Documents, or as provided by law or otherwise, and without limitation, (x)
if such event is an Event of Default specified in clause (i) or (ii) of Section
8(f) of the Credit Agreement with respect to Trustor, automatically the
Commitments shall immediately terminate and the Loans (with accrued interest
thereon) and all other amounts owing under the Credit Agreement and the other
Loan Documents (including, without limitation, all amounts of L/C Obligations,
whether or not the beneficiaries of the then outstanding Letters of Credit shall
have presented the documents required thereunder) shall immediately become due
and payable, and (y) if such event is any other Event of Default, either or both
of the following actions may be taken: (i) with the consent of the Majority
Revolving Credit Facility Lenders, Beneficiary may, or upon the request of the
Majority Revolving Credit Facility Lenders, Beneficiary shall, by notice to
Trustor declare the Revolving Credit Commitments to be terminated forthwith,
whereupon the Revolving Credit Commitments shall immediately terminate; and (ii)
with the consent of the Required Lenders, Beneficiary may, or upon the request
of the Required Lenders, Beneficiary shall, by notice to Trustor, declare the
Loans (with accrued interest thereon) and all other amounts owing under the
Credit Agreement and the other Loan Documents (including, without limitation,
all amounts of L/C obligations, whether or not the beneficiaries of the then
outstanding Letters of Credit shall have presented the documents required
thereunder) to be due and payable forthwith, whereupon the same shall
immediately become due and payable. Except as expressly provided above in this
Section, presentment, demand, protest and all other notices of any kind are
hereby expressly waived. In addition, upon the occurrence of any Event of
Default, Beneficiary may immediately take such action, without notice or demand,
as it deems advisable to protect and enforce its rights against Trustor and in
and to the Mortgaged Property, including, but not limited to, the following
actions, each of which may be pursued concurrently or otherwise, at such time
and in such manner as Beneficiary may determine, in its sole discretion, without
impairing or otherwise affecting the other rights and remedies of Beneficiary:
(i) RIGHT TO PERFORM TRUSTOR'S COVENANTS, ETC. The Beneficiary
or, at the request of the Beneficiary, the Trustee, without waiving or
releasing any obligation or Event of Default, may (but shall be under
no obligation to) at any time thereafter make such payment or perform
such act for the account and at the expense of the Trustor, and may
enter upon the Mortgaged Property or any part thereof for such purpose
and take all such action thereon as, in the opinion of the Beneficiary
or the Trustee, may be reasonably necessary or appropriate therefor.
All sums so paid by the Beneficiary or the Trustee and all fees, costs
and expenses (including, without limitation, reasonable attorneys' and
consultants' fees and other charges) so incurred, together with
interest thereon from the date of payment or incurrence at the Default
Rate, shall constitute indebtedness secured by this Mortgage and shall
be paid by the Trustor to the Beneficiary or the Trustee on demand.
(ii) POSSESSION UPON DEFAULT.
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(A) SURRENDER OR TAKING OF POSSESSION. The Trustor, upon
demand of the Beneficiary, shall forthwith surrender to the Beneficiary or to
the Trustee the actual possession of the Mortgaged Property, and to the extent
permitted by law, the Beneficiary or the Trustee may enter and take possession
of the Mortgaged Property and may exclude the Trustor and the Trustor's agents,
invitees and employees wholly therefrom. In taking possession of the Mortgaged
Property, the Beneficiary or the Trustee may proceed without legal process, if
this can be done without breach of the peace. If the Trustor shall fail to
surrender to the Beneficiary or to the Trustee the actual possession of the
Mortgaged Property upon demand, then the Beneficiary or the Trustee, to the
extent permitted under applicable law, without further notice, may: (i) enter
upon and take possession of the Mortgaged Property or any part thereof by force,
summary proceedings, ejectment or otherwise; (ii) remove the Trustor and all
other persons; and (iii) remove from the Mortgaged Property any and all property
owned by other persons.
(B) ENTERING INTO POSSESSION. If an Event of Default shall
have occurred and the entire indebtedness shall have become immediately due and
payable in full, the Trustor, upon demand of the Beneficiary, shall forthwith
surrender to the Beneficiary or to the Trustee the actual possession of the
Mortgaged Property. Upon every such entering and taking of possession, the
Beneficiary or the Trustee may hold, store, use, operate, manage, control and
maintain the Mortgaged Property and conduct the business thereof, including,
without limitation: (i) make all necessary and proper repairs, renewals,
replacements, additions, betterments and improvements thereto and thereon and
purchase and otherwise acquire additional fixtures, personalty and other
property; (ii) insure or keep the Mortgaged Property insured; (iii) manage and
operate the Mortgaged Property and exercise all the rights and powers of the
Trustor, in its name or otherwise, with respect to the Mortgaged Property; and
(iv) enter into any agreements with respect to the exercise by others of any of
the powers herein granted to the Beneficiary or the Trustee, all as the
Beneficiary or the Trustee may from time to time determine, in their sole
discretion, to be necessary or desirable. The Beneficiary or the Trustee also
may collect and receive all of the earnings, income, rents, profits, issues and
revenues of the Mortgaged Property or any part thereof, including those past due
as well as those accruing thereafter and thereupon the Beneficiary may, to the
maximum extent permitted by law, apply the receipts from the Mortgaged Property
to Trustor's Obligations, after deducting therefrom all expenses (including
reasonable attorneys' fees and other charges incurred by the Beneficiary)
incurred in connection therewith and all amounts necessary to pay the taxes,
assessments, insurance and other charges in connection with the Mortgaged
Property, as well as just and reasonable compensation for the services of the
Beneficiary, its attorneys, agents and employees. The Beneficiary and the
Trustee shall not be liable for or by reason of any such entry, taking of
possession or removal, or holding, operation or management, except that any
amount so received by the Trustee shall be applied as provided in this SECTION
14. All sums expended by the Beneficiary or the Trustee pursuant to this SECTION
14(A)(II), including any such amount in excess of the principal amount of the
Note, shall be deemed to have been advanced to the Trustor by the Beneficiary,
shall bear interest until paid at the Default Rate and shall be secured by this
Mortgage.
(C) ATTORNEY-IN-FACT. For the purpose of carrying out the
provisions of this Section 14, the Trustor hereby constitutes the Beneficiary
and the Trustee or either of them, with full power of substitution, as the true
and lawful attorneys-in-fact of the Trustor to do and perform any and all
actions permitted by this SECTION 14(A)(II), including, without limitation: (i)
to use any funds of the Trustor for the purpose of paying, settling or
compromising all existing bills and claims which are or may be liens against the
Mortgaged Property, clearing title or paying for the account of the Trustor any
amounts payable by the Trustor under this Mortgage; (ii) to employ such agents,
architects, engineers and inspectors as shall be required to develop, maintain
or operate the Mortgaged Property; and (iii) to execute all applications and
certificates in the name of the Trustor which may be required by any of the Loan
Documents and to do any and every act which the Trustor might do in its own
behalf. Such appointment shall be deemed to be coupled with an interest which
cannot be revoked. The attorneys-in-fact also shall have power to prosecute and
defend all actions or proceedings in connection with the
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Mortgaged Property. The Trustor hereby ratifies and confirms any and all actions
of said attorneys-in-fact with respect to the Mortgaged Property.
(D) SATISFACTION OF DEFAULT. Whenever all Events of Default
hereunder have been cured and satisfied, the Beneficiary shall surrender, upon
receipt of a written request therefor from the Trustor, possession or direct the
Trustee to promptly surrender possession of the Mortgaged Property to the
Trustor, provided that the right of the Beneficiary to take possession of the
Mortgaged Property from time to time pursuant to this SECTION 14(A)(II)(D) shall
exist if any subsequent Event of Default shall occur.
(iii) FORECLOSURE. The Trustee may at any time, and at the direction of
the Beneficiary shall, proceed at law or in equity or otherwise to foreclose the
lien of this Mortgage as against all or any part of the Mortgaged Property,
either by strict foreclosure or foreclosure by sale, or in part by each such
method.
(iv) APPOINTMENT OF RECEIVER. If an Event of Default shall have
occurred and after the indebtedness hereby secured shall have become immediately
due and payable, the Trustee shall, as a matter of right, to the extent
permitted under applicable law, be entitled to, and at the direction of the
Beneficiary shall, appoint a receiver for all or any part of the Mortgaged
Property, whether such receivership be incidental to a proposed sale of the
Mortgaged Property or otherwise. In addition to the foregoing, in the event of
any Event of Default by the Trustor under this Mortgage or under any other of
the Loan Documents, and after the indebtedness hereby secured shall have become
due and payable immediately, the Beneficiary shall be entitled as a matter of
right, to the extent permitted under applicable law, without regard to the value
of the Mortgaged Property as security for the amount due or the solvency of the
Trustor or any other person or persons liable for the payment of such amount,
and without notice to the Trustor or any other person or persons liable for the
payment of such amount (such notice being hereby waived), to the appointment of
a receiver with full and complete authority to enter upon the Mortgaged
Property, to continue any and all outstanding contracts, and to pay and
discharge all debts, obligations and liabilities and all mechanics',
materialmen's or other liens affecting the Mortgaged Property to the extent
permitted by applicable law. All disbursements made by the receiver under this
SECTION 14(A)(IV) and the expenses of receivership shall be secured by this
Mortgage.
(v) POWER OF SALE. The Trustee may, and at the request of the
Beneficiary shall, sell (and, in case of default of any purchaser, resell),
assign, transfer and deliver, the whole or, from time to time, any part of the
Mortgaged Property, or any interest in any part thereof, at such time and place
in the city or county wherein the Mortgaged Property is located as the Trustee
shall deem advantageous and proper, for cash, on credit or for other property,
for immediate or future delivery, and for such price or prices and on such terms
as the Trustee shall deem advantageous and proper, and as required by the Code
of Virginia. Prior to the sale, the Trustee shall first advertise the time,
place and terms of sale at least once a week for two (2) consecutive weeks in
advance of the date of such sale, in a newspaper published or having general
circulation in the county or city in which the Mortgaged Property or some
portion thereof is located. Upon compliance with the terms of the sale, the
Trustee shall convey in fee simple to and at the cost of the purchaser the
Mortgaged Property so sold, free and discharged of and from all estate, right,
title or interest of the Trustor and the Trustor's successors or assigns at law
or in equity, such purchaser being hereby discharged from all liability to see
to the application of the purchase money; and the Trustee shall apply the
proceeds of sale in accordance with the provisions of SECTION 14(V)(F) hereof.
The Mortgaged Property shall be sold in one parcel or in such parcels, manner or
order as the Beneficiary, at its option, may elect.
(A) Upon any sale hereunder, whether pursuant to foreclosure or power
of sale or otherwise, the Beneficiary may bid for and purchase the Mortgaged
Property or any part thereof without
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forfeiting its rights to collect any deficiency from the Trustor. As part of its
bid the Beneficiary may use all or part of the indebtedness as a credit towards
the purchase price. In the event the trustees require a deposit as one of the
terms of sale, the deposit may be waived in the case of the Beneficiary.
It is specifically understood and agreed that if the Mortgaged Property
or any part thereof shall be advertised for sale under the provisions
of this Mortgage and is not sold, the Trustor will pay all expenses of
and attending such advertisement and intended sale, including
attorneys' fees and other charges, expenses, and a reasonable Trustee's
fee, and the payment of same is hereby secured in like manner as other
charges and expenses attending the execution of and performance under
this Mortgage.
(B) The Trustor irrevocably appoints the Trustee its true and
lawful attorneys-in-fact, with full power of substitution, in its name and stead
and on its behalf, for the purpose of effectuating any sale, assignment,
transfer or delivery for the enforcement of this Mortgage pursuant to
foreclosure or power of sale or otherwise, to execute and deliver all such
certificates, deeds, bills of sale, assignments and other instruments as the
Trustee may consider necessary or appropriate. The Trustor hereby ratifies and
confirms all that such attorneys-in-fact or any substitute therefor shall
lawfully do by virtue hereof. Nevertheless, if so requested by the Trustee or
any purchaser, the Trustor shall ratify and confirm any such sale, assignment,
transfer or delivery by executing and delivering to the Trustee or such
purchaser all proper certificates, deeds, bills of sale, assignments, releases
and other instruments as may be designated in any such request.
(C) The Beneficiary may be a purchaser of the Mortgaged
Property or of any part thereof or of any interest therein at any public sale
thereof, whether pursuant to foreclosure or power of sale or otherwise
hereunder, and may apply upon the purchase price the indebtedness secured hereby
owing to the Beneficiary. The Beneficiary shall, upon any such purchase, acquire
good title to the properties so purchased, free of the lien of this Mortgage,
free of all rights of redemption in the Trustor and free of all liens and
encumbrances subordinate to this Mortgage.
(D) Upon any sale of the Mortgaged Property or any part thereof
or any interest therein, whether pursuant to foreclosure or power of sale or
otherwise hereunder, the receipt of the officer making the sale under judicial
proceedings or of the Trustee shall be sufficient discharge to the purchaser for
the purchaser money, and such purchaser shall not be obligated to see to the
application thereof.
(E) Upon the occurrence of an Event of Default, should the
Beneficiary elect to cause any of the Mortgaged Property to be disposed of as
personal property because the same consists of a right of action or is property
that can be severed from the Land or the Improvements without causing structural
damage thereto, the Beneficiary may dispose of all or any part thereof in any
manner now or hereafter permitted under the Uniform Commercial Code or in
accordance with any other remedy provided by law. Any such disposition may be
conducted by an employee or agent of the Beneficiary or the Trustee. The
Beneficiary shall be eligible to purchase any part or all of such Mortgaged
Property at such disposition. Any such disposition may be by public or private
sale as the Beneficiary may so elect, subject to the provisions of the Uniform
Commercial Code. The Beneficiary shall have all the rights and remedies of a
secured party under the Uniform Commercial Code. Expenses of retaking, holding,
preparing for sale, selling or the like shall include the Beneficiary's and the
Trustee' reasonable attorneys' fees and disbursements, and upon the occurrence
of any Event of Default, the Trustor, upon demand of the Beneficiary, shall
assemble such personal property and make it available to the Beneficiary and the
Trustee at the Land, or at a place which is deemed to be reasonably convenient
to the Beneficiary and the Trustee and the Trustor; PROVIDED, HOWEVER, that with
respect to any of the Mortgaged Property that consists of tangible personal
property that is located on the Land, the Trustor may assemble Mortgaged
Property to the extent practicable at a location in the County of Barton,
Virginia. The Beneficiary or the
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Trustee shall give the Trustor at least ten (10) days prior written notice (or
notice within such other period if then required in accordance with the laws of
the state or jurisdiction in which the personal property is located) of the time
and place of any public sale or other disposition of such property or of the
time at or after which any private sale or any other intended disposition is to
be made. If such notice is sent to the Trustor in the manner and at the address
specified in Section 6.01 hereof, it shall constitute reasonable notice to the
Trustor.
(F) The proceeds of any sale of the Mortgaged Property or any
part thereof or any interest therein, whether pursuant to foreclosure or power
of sale or otherwise hereunder, together with any other monies at any time held
by the Trustee pursuant to this Mortgage, shall be applied to pay:
FIRST: All costs and expenses of enforcing this Mortgage,
including, without limitation, a reasonable Trustee' commission not
less than the commission required by applicable law, all reasonable
costs and expenses of the sale of the Mortgaged Property or any part
thereof or any interest therein, and all costs and expenses of entering
upon, taking possession of, removing, holding, constructing
improvements on, and operating and managing the Mortgaged Property or
any part thereof, and all costs and expenses of repairs, renewals,
replacements, additions, betterments and improvements to the Mortgaged
Property, and all attorneys' fees and other charges incurred in
connection with any of the foregoing, as the case may be, together with
compensation of the Trustee not to exceed one percent (1%);
SECOND: Any taxes, levies, assessments or other charges,
together with costs and interest, which have, or in the opinion of the
Trustee may have, priority over the lien of this Mortgage, including
the pro rata portion thereof applicable to the taxable period during
which any payment is made pursuant to this SECTION 14(V)(F);
THIRD: All amounts of principal and interest due and payable
on the Note (whether at maturity, on a date fixed for any payment or
prepayment thereof, upon acceleration, or otherwise), including any
late charges accrued thereon (to the extent permitted under applicable
law) and any other indebtedness secured by this Mortgage; and in case
such proceeds shall be insufficient to pay in full the amount so due
and unpaid upon the Note, then, FIRST, to the payment of all amounts of
interest due and payable on the Note, without preference or priority of
any installment of interest over any other installment of interest;
SECOND, to the payment of any indebtedness (other than the principal
due and payable on the Note) secured by this Mortgage which is due and
payable; and THIRD, to the payment of all amounts of principal due and
payable on the Note, in the inverse order of their maturity;
FOURTH: The amount of any liens of record inferior to this
Mortgage, together with lawful interest, and enforceable claims of
third parties against the proceeds of any sale; and
FIFTH: The amount of any surplus then remaining from such
proceeds to the Trustor, unless otherwise required by law or directed
by a court of competent jurisdiction.
In the event that the proceeds of any such sale or sales, together with all
other monies at the time held by the Trustee under this Mortgage, are
insufficient to pay the foregoing costs and expenses, the Beneficiary may, at
its sole option, advance such sums as the Beneficiary in its sole and absolute
discretion shall determine for the purpose of paying all or any part of such
costs and expenses, and all such sums so advanced shall be secured by this
Mortgage and payable on demand with interest at the Default Rate, from and
including the date each such advance is made.
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(G) During the continuation of any Event of Default, the
Beneficiary shall be entitled and empowered to institute such actions or
proceedings at law or in equity as it may consider advisable for the collection
of the entire unpaid balance of the indebtedness hereby secured, may prosecute
any such action or proceedings to judgment or final decree, and may enforce any
such judgment or final decree against the Trustor in any manner provided by law.
The Beneficiary shall be entitled to recover judgment as aforesaid either
before, after or during the pendency of any proceeding for the enforcement of
any remedies provided for in the Note or the Loan Documents and the right of the
Beneficiary to recover judgment as aforesaid shall not be affected by any sale
hereunder, by the passage or entry of a decree for the sale of the Mortgaged
Property or any part thereof, by the enforcement of the provisions of the Note
and the Loan Documents or the foreclosure of the lien hereof. In the event of a
sale of the Mortgaged Property, and of the application of the proceeds of sale,
as provided in this Mortgage, to the payment of the indebtedness hereby secured,
the Beneficiary shall be entitled to enforce payment of, and to receive all
amounts then remaining due and unpaid upon the indebtedness hereby secured and
shall be entitled to recover judgment for any portion of such indebtedness
remaining unpaid, with interest at the Default Rate.
No recovery of any judgment upon the Mortgaged Property or
upon any other property of the Trustor shall affect, in any manner or to any
extent, the lien of this Mortgage upon the Mortgaged Property or any part
thereof, or any liens, rights, powers or remedies of the Trustee or the
Beneficiary hereunder, but such liens, rights, powers and remedies of the
Trustee and the Beneficiary shall continue unimpaired as before.
(H) The Trustor shall not be relieved of any obligation by
reason of the failure of the Beneficiary to comply with any request of the
Trustor or of any other person to take action to foreclose on this Mortgage or
otherwise to enforce any provisions of the Note or the Loan Documents, or by
reason of the release, regardless of consideration, of all or any part of the
Mortgaged Property.
15. EXTENSION, RELEASE, ETC. (a) Without affecting the lien or charge
of this Mortgage upon any portion of the Mortgaged Property not then or
theretofore released as security for the full amount of the Indebtedness and the
Obligations, Beneficiary may, from time to time and without notice, (i) release
any person liable for the Indebtedness, (ii) agree with Trustor to extend the
maturity or alter any of the terms of the Indebtedness or the Obligations or any
guaranty thereof, (iii) grant other indulgences, (iv) release or reconvey, or
cause to be released or reconveyed at any time at Beneficiary's option any
parcel, portion or all of the Mortgaged Property, (v) agree with Trustor to take
or release any other or additional security for any obligation herein mentioned,
or (vi) make compositions or other arrangements with debtors in relation
thereto. If at any time this Mortgage shall on its face secure less than all of
the principal amount of the Indebtedness, it is expressly agreed that any
repayments of the principal amount of the Indebtedness shall not reduce the
amount of the lien of this Mortgage until the lien amount shall equal the
principal amount of the Indebtedness outstanding.
(b) No recovery of any judgment by Beneficiary and no levy of an
execution under any judgment upon the Mortgaged Property or upon any other
property of Trustor shall affect the lien of this Mortgage or any liens, rights,
powers or remedies of Beneficiary hereunder, and such liens, rights, powers and
remedies shall continue unimpaired.
(c) If Beneficiary shall have the right to foreclose under this
Mortgage, Trustor authorizes Beneficiary, and Trustee, at Beneficiary's
direction, at its option to foreclose the lien of this Mortgage subject to the
rights of any tenants of the Mortgaged Property. The
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failure to make any such tenants parties defendant to any such foreclosure
proceeding and to foreclose their rights will not be asserted by Trustor as a
defense to any proceeding instituted by Beneficiary, and Trustee, at
Beneficiary's direction, to collect the Indebtedness or to foreclose under the
lien of this Mortgage.
(d) Unless expressly provided otherwise, in the event that ownership of
this Mortgage and title to the Mortgaged Property or any estate therein shall
become vested in the same person or entity, this Mortgage shall not merge in
such title but shall continue as a valid lien on the Mortgaged Property for the
amount secured hereby.
16. SECURITY AGREEMENT UNDER UNIFORM COMMERCIAL CODE. (a) It is the
intention of the parties hereto that this Mortgage shall constitute a "security
agreement" within the meaning of the Uniform Commercial Code in the state in
which the Premises are located, as in effect on the date hereof, and Trustor
hereby grants to Beneficiary a lien and security interest in the Mortgaged
Property that is subject to the Code. If an Event of Default shall occur under
this Mortgage, then in addition to having any other right or remedy available at
law or in equity, Beneficiary shall have the option of either (i) proceeding
under the Uniform Commercial Code as in effect from time to time in the state in
which the Premises are located (the "CODE") and exercising such rights and
remedies as may be provided to a secured party by the Code with respect to all
or any portion of the Mortgaged Property which is personal property (including,
without limitation, taking possession of and selling such property) or (ii) to
the extent permitted by applicable law, treating such property as real property
and proceeding with respect to both the real and personal property constituting
the Mortgaged Property in accordance with Beneficiary's rights, powers and
remedies with respect to the real property (in which event the default
provisions of the Code shall not apply). If Beneficiary shall elect to proceed
under the Code, then ten days' notice of sale of the personal property shall be
deemed reasonable notice and the reasonable expenses of retaking, holding,
preparing for sale, selling and the like incurred by Beneficiary shall include,
but not be limited to, attorneys' fees and legal expenses. At Beneficiary's
request, Trustor shall assemble the personal property and make it available to
Beneficiary at a place designated by Beneficiary which is reasonably convenient
to both parties.
(b) Trustor and Beneficiary agree, to the extent permitted by law,
that: (i) all of the goods described within the definition of the word
"Equipment" are or are to become fixtures on the Real Estate; (ii) this Mortgage
upon recording or registration in the real estate records of the proper office
shall constitute a financing statement filed as a "fixture filing" within the
meaning of Sections 9-313 and 9-402 (as enumerated therein) of the Uniform
Commercial Code as in effect as of the date hereof in the state in which the
Premises are located; (iii) Trustor is the record owner of the Land; and (iv)
the addresses of Trustor and Beneficiary are as set forth on the first page of
this Mortgage.
(c) Trustor, upon reasonable request by Beneficiary from time to time,
shall execute, acknowledge and deliver to Beneficiary one or more separate
security agreements, in form reasonably satisfactory to Beneficiary, covering
all or any part of the Mortgaged Property and will further execute, acknowledge
and deliver, or cause to be executed, acknowledged and delivered, any financing
statement, affidavit, continuation statement or certificate or other document as
Beneficiary may reasonably request in order to perfect, preserve, maintain,
continue or extend the security interest under and the priority of this Mortgage
and such security
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instrument. Trustor further agrees to pay to Beneficiary on demand all
reasonable costs and expenses incurred by Beneficiary in connection with the
preparation, execution, recording, filing and re-filing of any such document and
all reasonable costs and expenses of any record searches for financing
statements Beneficiary shall reasonably require. If Trustor shall fail to
furnish any financing or continuation statement within 10 days after request by
Beneficiary, then pursuant to the provisions of the Code, Trustor hereby
authorizes Beneficiary, without the signature of Trustor, to execute and file
any such financing and continuation statements. The filing of any financing or
continuation statements in the records relating to personal property or chattels
shall not be construed as in any way impairing the right of Beneficiary to
proceed against any personal property encumbered by this Mortgage as real
property, as set forth above.
17. ASSIGNMENT OF RENTS. Trustor hereby assigns to Beneficiary the
Leases and Rents as further security for the payment of the Indebtedness and
performance of the Obligations, and Trustor grants to Beneficiary the right to
enter the Mortgaged Property for the purpose of collecting the Rents and to let
the Mortgaged Property or any part thereof, and to apply the Rents on account of
the Indebtedness and the Obligations. The foregoing assignment and grant is
present and absolute and shall continue in effect until the Indebtedness is paid
in full in immediately available funds and the Obligations are performed in
full, but Beneficiary hereby waives the right to enter the Mortgaged Property
for the purpose of collecting the Rents and Trustor shall be entitled to
collect, receive, use and retain the Rents until the occurrence of an Event of
Default under this Mortgage; such right of Trustor to collect, receive, use and
retain the Rents may be revoked by Beneficiary upon the occurrence of any Event
of Default under this Mortgage by giving not less than 30 days' written notice
of such revocation to Trustor; in the event such notice is given, Trustor shall
pay over to Beneficiary, or to any receiver appointed to collect the Rents, any
lease security deposits, and shall pay monthly in advance to Beneficiary, or to
any such receiver, the fair and reasonable rental value as determined by
Beneficiary for the use and occupancy of the Mortgaged Property or of such part
thereof as may be in the possession of Trustor or any affiliate of Trustor, and
upon default in any such payment Trustor and any such affiliate will vacate and
surrender the possession of the Mortgaged Property to Beneficiary or to such
receiver, and in default thereof may be evicted by summary proceedings or
otherwise. Trustor shall not accept prepayments of installments of Rent to
become due for a period of more than one month in advance (except for security
deposits and estimated payments of percentage rent, if any).
18. TRUST FUNDS. All lease security deposits of the Real Estate shall
be treated as trust funds not to be commingled with any other funds of Trustor.
Within 30 days after request by Beneficiary, or forthwith following the
occurrence of an Event of Default, Trustor shall furnish Beneficiary
satisfactory evidence of compliance with this Section, together with a statement
of all lease security deposits by lessees and copies of all Leases not
previously delivered to Beneficiary, which statement shall be certified by
Trustor.
19. ADDITIONAL RIGHTS. Unless prohibited by applicable law, the holder
of any subordinate lien on the Mortgaged Property shall have no right to
terminate any Lease whether or not such Lease is subordinate to this Mortgage
nor shall any holder of any subordinate lien join any tenant under any Lease in
any action to foreclose the lien or modify, interfere with, disturb or terminate
the rights of any tenant under any Lease. By recordation of this Mortgage all
subordinate lienholders are subject to and notified of this provision, and any
action taken by
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any such lienholder contrary to this provision shall be null and void. Upon the
occurrence of any Event of Default, Beneficiary may, in its sole discretion and
without regard to the adequacy of its security under this Mortgage, apply all or
any part of any amounts on deposit with Beneficiary under this Mortgage against
all or any part of the Indebtedness or the Obligations. Any such application
shall not be construed to cure or waive any Default or Event of Default or
invalidate any act taken by Beneficiary on account of such Default or Event of
Default.
20. NOTICES. All notices, requests, demands and other communications
hereunder shall be given in accordance with the provisions of Section 10.2 of
the Credit Agreement to Trustor and to Beneficiary as specified therein.
21. NO ORAL MODIFICATION. This Mortgage may not be amended,
supplemented or otherwise modified except in accordance with the provisions of
Section 10.1 of the Credit Agreement. Any agreement made by Trustor and
Beneficiary after the date of this Mortgage relating to this Mortgage shall be,
to the extent permitted by applicable law, superior to the rights of the holder
of any intervening or subordinate lien or encumbrance.
22. PARTIAL INVALIDITY. In the event any one or more of the provisions
contained in this Mortgage shall for any reason be held to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision hereof, but each shall be construed as if
such invalid, illegal or unenforceable provision had never been included.
Notwithstanding to the contrary anything contained in this Mortgage or in any
provisions of the Indebtedness or Loan Documents, the obligations of Trustor and
of any other obligor under the Indebtedness or Loan Documents shall be subject
to the limitation that Beneficiary shall not charge, take or receive, nor shall
Trustor or any other obligor be obligated to pay to Beneficiary, any amounts
constituting interest in excess of the maximum rate permitted by law to be
charged by Beneficiary.
23. TRUSTOR'S WAIVER OF RIGHTS. To the fullest extent permitted by law,
Trustor waives the benefit of all laws now existing or that may subsequently be
enacted providing for (i) any appraisement before sale of any portion of the
Mortgaged Property, (ii) any extension of the time for the enforcement of the
collection of the Indebtedness or the creation or extension of a period of
redemption from any sale made in collecting such Indebtedness and (iii)
exemption of the Mortgaged Property from attachment, levy or sale under
execution or exemption from civil process. To the full extent Trustor may do so,
Trustor agrees that Trustor will not at any time insist upon, plead, claim or
take the benefit or advantage of any law now or hereafter in force providing for
any appraisement, valuation, stay, exemption, extension or redemption, or
requiring foreclosure of this Mortgage before exercising any other remedy
granted hereunder and Trustor, for Trustor and its successors and assigns, and
for any and all persons ever claiming any interest in the Mortgaged Property, to
the extent permitted by law, hereby waives and releases all rights of
redemption, valuation, appraisement, stay of execution, notice of election to
mature or declare due the whole of the secured indebtedness and marshalling in
the event of foreclosure of the liens hereby created.
24. REMEDIES NOT EXCLUSIVE. Beneficiary shall be entitled to enforce
payment of the Indebtedness and performance of the Obligations and to exercise
or cause Trustee to exercise all rights and powers under this Mortgage or under
any of the other Loan Documents or other
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agreement or any laws now or hereafter in force, notwithstanding some or all of
the Indebtedness and Obligations may now or hereafter be otherwise secured,
whether by mortgage, security agreement, pledge, lien, assignment or otherwise.
Neither the acceptance of this Mortgage nor its enforcement, shall prejudice or
in any manner affect Beneficiary's or Trustee's right to realize upon or enforce
any other security now or hereafter held by or for the benefit of Beneficiary,
it being agreed that Beneficiary shall be entitled to enforce and to cause
Trustee to enforce this Mortgage and any other security now or hereafter held by
or for the benefit of Beneficiary in such order and manner as Beneficiary may
determine in its absolute discretion. No remedy herein conferred upon or
reserved to Beneficiary or Trustee is intended to be exclusive of any other
remedy herein or by law provided or permitted, but each shall be cumulative and
shall be in addition to every other remedy given hereunder or now or hereafter
existing at law or in equity or by statute. Every power or remedy given by any
of the Loan Documents to Beneficiary or Trustee or to which Beneficiary or
Trustee may otherwise be entitled, may be exercised, concurrently or
independently, from time to time and as often as may be deemed expedient by
Beneficiary. In no event shall Beneficiary, in the exercise of the remedies
provided in this Mortgage (including, without limitation, in connection with the
assignment of Rents to Beneficiary, or the appointment of a receiver and the
entry of such receiver on to all or any part of the Mortgaged Property), unless
otherwise provided by applicable law, be deemed a "mortgagee in possession," and
Beneficiary shall not in any way be made liable for any act, either of
commission or omission, in connection with the exercise of such remedies.
25. MULTIPLE SECURITY. If (a) the Premises shall consist of one or more
parcels, whether or not contiguous and whether or not located in the same
county, or (b) in addition to this Mortgage, Beneficiary, Trustee or any other
trustee on behalf of Beneficiary, shall now or hereafter hold one or more
additional mortgages, liens, deeds of trust or other security (directly or
indirectly) for the Indebtedness upon other property in the State or
Commonwealth in which the Premises are located (whether or not such property is
owned by Trustor or by others) or (c) both the circumstances described in
clauses (a) and (b) shall be true, then to the fullest extent permitted by law,
Beneficiary may, at its election, or Trustee may, at Beneficiary's election,
commence or consolidate in a single foreclosure action all foreclosure
proceedings against all such collateral securing the Indebtedness and the
Obligations (including the Mortgaged Property), which action may be brought or
consolidated in the courts of any county in which any of such collateral is
located. Trustor acknowledges that the right to maintain a consolidated
foreclosure action is a specific inducement to Beneficiary to extend the
Indebtedness, and Trustor, to the extent permitted by applicable law, expressly
and irrevocably waives any objections to the commencement or consolidation of
the foreclosure proceedings in a single action and any objections to the laying
of venue or based on the grounds of FORUM NON CONVENIENS which it may now or
hereafter have. Trustor further agrees, to the extent permitted by applicable
law, that if Beneficiary or Trustee shall be prosecuting one or more foreclosure
or other proceedings against a portion of the Mortgaged Property or against any
collateral other than the Mortgaged Property, which collateral directly or
indirectly secures the Indebtedness or the Obligations, or if Beneficiary or
Trustee shall have obtained a judgment of foreclosure and sale or similar
judgment against such collateral, then, whether or not such proceedings are
being maintained or judgments were obtained in or outside the State or
Commonwealth in which the Premises are located, Beneficiary, or Trustee, at
Beneficiary's direction, may commence or continue foreclosure proceedings and
exercise the other remedies granted in this Mortgage against all or any part of
the Mortgaged Property and Trustor waives any objections to the
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commencement or continuation of a foreclosure of this Mortgage or exercise of
any other remedies hereunder based on such other proceedings or judgments, and
waives any right to seek to dismiss, stay, remove, transfer or consolidate
either any action under this Mortgage or such other proceedings on such basis.
Neither the commencement nor continuation of proceedings to foreclose this
Mortgage nor the exercise of any other rights hereunder nor the recovery of any
judgment by Beneficiary in any such proceedings shall prejudice, limit or
preclude Beneficiary's right to commence or continue one or more foreclosure or
other proceedings or obtain a judgment against any other collateral (either in
or outside the State or Commonwealth in which the Premises are located) which
directly or indirectly secures the Indebtedness, and Trustor expressly waives,
to the extent permitted by applicable law, any objections to the commencement
of, continuation of, or entry of a judgment in such other proceedings or
exercise of any remedies in such proceedings based upon any action or judgment
connected to this Mortgage, and Trustor also waives, to the extent permitted by
applicable law, any right to seek to dismiss, stay, remove, transfer or
consolidate either such other proceedings or any action under this Mortgage on
such basis. It is expressly understood and agreed that to the fullest extent
permitted by law, Beneficiary may, at its election, cause the sale of all
collateral which is the subject of a single foreclosure action at either a
single sale or at multiple sales conducted simultaneously and take such other
measures as are appropriate in order to effect the agreement of the parties to
dispose of and administer all collateral securing the Indebtedness or the
Obligations (directly or indirectly) in the most economical and least
time-consuming manner.
26. SUCCESSORS AND ASSIGNS. All covenants of Trustor contained in this
Mortgage are imposed solely and exclusively for the benefit of Beneficiary,
Trustee, the Secured Parties, and their successors and/or assigns, and no other
person or entity shall have standing to require compliance with such covenants
or be deemed, under any circumstances, to be a beneficiary of such covenants,
any or all of which may be freely waived in whole or in part by Beneficiary at
any time if in its sole discretion it deems such waiver advisable. All such
covenants of Trustor shall run with the land and bind Trustor, the successors
and assigns of Trustor (and each of them) and all subsequent owners,
encumbrancers and tenants of the Mortgaged Property, and shall inure to the
benefit of Beneficiary, Trustee, the Secured Parties, and their successors and
assigns. The word "Trustor" shall be construed as if it read "Trustors" whenever
the sense of this Mortgage so requires and if there shall be more than one
Trustor, the obligations of the Trustors shall be joint and several. Each
Trustor hereby waives any and all defenses applicable or available to guarantors
or sureties arising as a result of the joint and several nature of the
obligations of Trustors hereunder. Without limiting the generality of the
foregoing, the waivers of the Guarantors (as defined in the Guarantee and
Collateral Agreement) set forth in Section 2.5 of the Guarantee and Collateral
Agreement are hereby incorporated by this reference MUTATIS MUTANDIS and such
waivers shall be deemed to be made by Trustors hereunder as if such waivers had
been expressly set forth herein.
27. NO WAIVERS, ETC. Any failure by Beneficiary or Trustee to insist
upon the strict performance by Trustor of any of the terms and provisions of
this Mortgage shall not be deemed to be a waiver of any of the terms and
provisions hereof, and Beneficiary and Trustee, notwithstanding any such
failure, shall have the right thereafter to insist upon the strict performance
by Trustor of any and all of the terms and provisions of this Mortgage to be
performed by Trustor. Beneficiary, and at Beneficiary's direction, Trustee, may
release, regardless of consideration and without the necessity for any notice to
or consent by the holder of
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any subordinate lien on the Mortgaged Property, any part of the security held
for the obligations secured by this Mortgage without, as to the remainder of the
security, in any way impairing or affecting the lien of this Mortgage or the
priority of such lien over any subordinate lien.
28. GOVERNING LAW, ETC. This Mortgage shall be governed by and
construed and interpreted in accordance with the laws of the state in which the
Mortgaged Property is located, except that Trustor expressly acknowledges that
by their respective terms the Credit Agreement and the Notes shall be governed
and construed in accordance with the laws of the State of New York, and for
purposes of consistency, Trustor agrees that in any IN PERSONAM proceeding
related to this Mortgage the rights of the parties to this Mortgage shall also
be governed by and construed in accordance with the laws of the State of New
York governing contracts made and to be performed in that State, without regard
to principles of conflict of law.
29. CERTAIN DEFINITIONS. Unless the context clearly indicates a
contrary intent or unless otherwise specifically provided herein, words used in
this Mortgage shall be used interchangeably in singular or plural form and the
word "Trustor" shall mean "each Trustor or any subsequent owner or owners of the
Mortgaged Property or any part thereof or interest therein," the word
"Beneficiary" shall mean "Beneficiary or any successor agent for the Lenders,"
the word "Trustee" shall mean "Trustee or any other trustee acting on behalf of
Beneficiary," the word "Notes" shall mean "the Notes, the Credit Agreement or
any other evidence of indebtedness secured by this Mortgage," the word "person"
shall include any individual, corporation, partnership, trust, unincorporated
association, government, governmental authority, or other entity, and the words
"Mortgaged Property" shall include any portion of the Mortgaged Property or
interest therein. Whenever the context may require, any pronouns used herein
shall include the corresponding masculine, feminine or neuter forms, and the
singular form of nouns and pronouns shall include the plural and vice versa. The
captions in this Mortgage are for convenience or reference only and in no way
limit or amplify the provisions hereof.
30. LAST DOLLARS SECURED; PRIORITY. This Mortgage secures only a
portion of the indebtedness and obligations owing or which may become owing by
the Trustor to the Secured Parties. The parties agree that any payments or
repayments of such indebtedness or obligations shall be and be deemed to be
applied first to the portion of the indebtedness or obligations that is not
secured hereby, it being the parties' intent that the portion of the
indebtedness and obligations last remaining unpaid shall be secured hereby.
31. FUTURE ADVANCES. This Mortgage is executed and delivered to secure,
among other things, future advances and re-advances. It is understood and agreed
that this Mortgage secures present and future advances and re-advances made for
the benefit of Trustor and that the lien of such future advances and re-advances
shall relate back to the date this Mortgage, and Trustor and Beneficiary intend
that this Mortgage be a credit line deed of trust pursuant to Section 55-58.2 of
the Virginia Code, as amended.
32. RECEIPT OF COPY. Trustor acknowledges that it has received a true
copy of this Mortgage.
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33. RELEASE. If Trustor shall and does pay the Indebtedness to
Beneficiary in immediately available funds and fully perform the Obligations,
all in the manner and at the times set forth herein or in the Guarantee and
Collateral Agreement and in the other Loan Documents, and if Trustor shall also
pay all satisfaction costs, including, but not limited to, reasonable attorneys'
fees and the cost of recording a satisfaction piece and, if appropriate, a
power-of-attorney to satisfy this Mortgage, then and from thenceforth this
Mortgage and the estate hereby created, granted, transferred and assigned shall
cease and become void; and, upon Trustor's request and at Trustor's expense,
Beneficiary shall execute and acknowledge a recordable release or reconveyance
of this Deed of Trust.
34. DEED OF TRUST PROVISIONS.
(a) If this Mortgage is recorded in the Commonwealth or State of
Arizona, California, Colorado, Idaho, Maryland, Missouri, Nebraska, Nevada, New
Mexico, North Carolina, Oregon, Tennessee, Texas, Utah, Virginia, Washington
State, West Virginia or in the District of Columbia, then this Mortgage is
intended to legally constitute a deed of trust, and all provisions of this
Section 34 shall apply to this Mortgage and to the Trustee hereunder. If this
Mortgage is recorded in any other state (except for Georgia or Louisiana), then
this Mortgage is intended to constitute a mortgage. In any state where this
instrument is a mortgage, Beneficiary shall hold and may exercise any and all
rights and remedies which are available to Beneficiary hereunder or Trustee
hereunder.
(b) Trustee shall be under no duty to take any action hereunder except
as expressly required hereunder or by law, or to perform any act which would
involve Trustee in any expense or liability or to institute or defend any suit
in respect hereof, unless properly indemnified to Trustee's reasonable
satisfaction. Trustee, by acceptance of this Mortgage, covenants to perform and
fulfill the trusts herein created, being liable, however, only for gross
negligence or willful misconduct, and hereby waives any statutory fee and agrees
to accept reasonable compensation, in lieu thereof, for any services rendered by
Trustee in accordance with the terms hereof. Trustee may resign at any time upon
giving notice to Trustor and to Beneficiary. Beneficiary may remove Trustee at
any time or from time to time and select a successor trustee. In the event of
the death, removal, resignation, refusal to act, or inability to act of Trustee,
or in its sole discretion for any reason whatsoever Beneficiary may, without
notice and without specifying any reason therefor and without applying to any
court, select and appoint a successor trustee, by an instrument recorded
wherever this Mortgage is recorded and all powers, rights, duties and authority
of Trustee, as aforesaid, shall thereupon become vested in such successor. Such
substitute trustee shall not be required to give bond for the faithful
performance of the duties of Trustee hereunder unless required by Beneficiary.
The procedure provided for in this Section 34 for substitution of Trustee shall
be in addition to and not in exclusion of any other provisions for substitution,
by law or otherwise.
(c) Trustor shall pay all reasonable costs, fees and expenses incurred
by Trustee and Trustee's agents and counsel in connection with the performance
by Trustee of Trustee's duties hereunder and all such costs, fees and expenses
shall be secured by this Mortgage.
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(d) With the approval of Beneficiary, Trustee shall have the right to
take any and all of the following actions: (i) to select, employ, and advise
with counsel (who may be, but need not be, counsel for Beneficiary) upon any
matters arising hereunder, including the preparation, execution, and
interpretation of the Credit Agreement, the Notes, this Mortgage or the other
Loan Documents, and shall be fully protected in relying as to legal matters on
the advice of counsel; (ii) to execute any of the trusts and powers hereof and
to perform any duty hereunder either directly or through his/her agents or
attorneys, and (iii) to select and employ, in and about the execution of his/her
duties hereunder, suitable accountants, engineers and other experts, agents and
attorneys in fact, either corporate or individual, not regularly in the employ
of Trustee, and Trustee shall not be answerable for any act, default,
negligence, or misconduct of any such accountant, engineer or other expert,
agent or attorney in fact, if selected with reasonable care, or for any error of
judgment or act done by Trustee in good faith, or be otherwise responsible or
accountable under any circumstances whatsoever, except for Trustee's gross
negligence or willful misconduct, and (iv) any and all other lawful action as
Beneficiary may instruct Trustee to take to protect or enforce Beneficiary's
rights hereunder. Trustee shall not be personally liable in case of entry by
Trustee, or anyone entering by virtue of the powers herein granted to Trustee,
upon the Mortgaged Property for debts contracted for or liability or damages
incurred in the management or operation of the Mortgaged Property. Trustee shall
have the right to rely on any instrument, document, or signature authorizing or
supporting an action taken or proposed to be taken by Trustee hereunder,
believed by Trustee in good faith to be genuine. Trustee shall be entitled to
reimbursement for actual expenses incurred by Trustee in the performance of
Trustee's duties hereunder and to reasonable compensation for such of Trustee's
services hereunder as shall be rendered.
(e) All moneys received by Trustee shall, until used or applied as
herein provided, be held in trust for the purposes for which they were received,
but need not be segregated in any manner from any other moneys (except to the
extent required by applicable law) and Trustee shall be under no liability for
interest on any moneys received by Trustee hereunder.
(f) Should any deed, conveyance, or instrument of any nature be
required from Trustor by the Trustee or substitute trustee to more fully and
certainly vest in and confirm to the Trustee or substitute trustee such estates
rights, powers, and duties, then, upon request by the Trustee or substitute
trustee, any and all such deeds, conveyances and instruments shall be made,
executed, acknowledged, and delivered and shall be caused to be recorded and
filed by Trustor.
(g) Any substitute trustee appointed pursuant to any of the provisions
hereof shall, without any further act, deed, or conveyance, become vested with
all the estates, properties, rights, powers, and trusts of its or his
predecessor in the rights hereunder with like effect as if originally named as
Trustee herein; but nevertheless, upon the written request of Beneficiary or of
the substitute trustee, the Trustee ceasing to act shall execute and deliver any
instrument transferring to such substitute trustee, upon the trusts herein
expressed, all the estates, properties, rights, powers, and trusts of the
Trustee so ceasing to act, and shall duly assign, transfer and deliver any of
the property and moneys held by such Trustee to the substitute trustee so
appointed in the Trustee's place. If one or more persons shall be appointed as
substitute
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trustees, any one of such substitute trustees may exercise the powers granted to
the Trustee without the joinder of the other substitute trustees.
35. STATE SPECIFIC PROVISIONS. Notwithstanding anything to the contrary
elsewhere in this Mortgage, as to any Mortgaged Property located in the
Commonwealth of Virginia:
This Mortgage is made under and pursuant to the provisions of Sections
55-59 to 55-60 and 26-49 of the Virginia Code, as amended, and shall be
construed to impose and confer upon the parties hereto and Beneficiary
all the rights. duties and obligations prescribed by such provisions,
except as herein otherwise restricted, expanded, or changed, including
without limitation the following rights, duties, and obligations
described in short form:
(a) Exemptions waived.
(b) Subject to call on default.
(c) Renewal, extension or reinstatement permitted.
(d) Substitution of trustees collectively or of any reason
whatsoever, and any number of times without exhaustion of the right to
do so permitted.
(e) Any Trustee may act.
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IN WITNESS WHEREOF, this Mortgage has been duly executed by Trustor on
November 30, 1999, and is intended to be effective as of November 30, 1999.
TRUSTOR:
O'Sullivan Industries - Virginia, Inc., a
Virginia corporation
By: /s/ Richard D. Davidson
------------------------------------
Name:
Title:
The address of the within-named Beneficiary is:
3 World Financial Center
New York, New York 10285
Attention: Michael O'Brien
27
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STATE OF NEW YORK,
COUNTY OF NEW YORK, to wit:
I HEREBY CERTIFY, that on this ___ day of November, 1999, before me,
the undersigned notary, appeared, the of O'Sullivan Industries - Virginia,
Inc., acknowledged the foregoing instrument before me on behalf of Trustor.
/s/ Diane C. Skudin (SEAL)
------------------------------
Notary Public
My commission expires: April 30, 2001
<PAGE>
Exhibit 10.6
================================================================================
GUARANTEE AND COLLATERAL AGREEMENT
made by
O'SULLIVAN INDUSTRIES HOLDINGS, INC.,
O'SULLIVAN INDUSTRIES, INC.
and certain Subsidiaries of O'Sullivan Industries, Inc.
in favor of
LEHMAN COMMERCIAL PAPER INC.
as Administrative Agent
Dated as of November 30, 1999
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
Section 1. DEFINED TERMS....................................................2
1.1 Definitions......................................................2
1.2 Other Definitional Provisions....................................7
Section 2. GUARANTEE........................................................8
2.1 Guarantee........................................................8
2.2 Right of Contribution............................................8
2.3 No Subrogation...................................................9
2.4 Amendments, etc. with respect to the Borrower Obligations........9
2.5 Guarantee Absolute and Unconditional............................10
2.6 Reinstatement...................................................10
2.7 Payments........................................................11
Section 3. GRANT OF SECURITY INTEREST......................................11
Section 4. REPRESENTATIONS AND WARRANTIES..................................12
4.1 Representations in Credit Agreement.............................12
4.2 Title; No Other Liens...........................................12
4.3 Perfected First Priority Liens..................................13
4.4 Chief Executive Office..........................................13
4.5 Inventory, Equipment and Books and Records......................13
4.6 Farm Products...................................................13
4.7 Investment Property.............................................13
4.8 Receivables.....................................................14
4.9 Intellectual Property...........................................14
4.10 Vehicles........................................................16
Section 5. COVENANTS.......................................................17
5.1 Covenants in Credit Agreement...................................17
5.2 Delivery and Control of Instruments, Chattel Paper
and Investment Property........................................17
5.3 Maintenance of Insurance........................................18
5.4 Payment of Obligations..........................................19
5.5 Maintenance of Perfected Security Interest;
Further Documentation..........................................19
5.6 Changes in Locations, Name, etc.................................20
5.7 Notices. 20
5.8 Investment Property.............................................20
5.9 Receivables.....................................................21
5.10 Intellectual Property...........................................22
5.11 Vehicles........................................................25
i
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Page
----
5.12 Value of Certain Assets.........................................25
Section 6. REMEDIAL PROVISIONS.............................................25
6.1 Certain Matters Relating to Receivables.........................25
6.2 Communications with Obligors; Grantors Remain Liable............26
6.3 Pledged Securities..............................................26
6.4 Proceeds to be Turned Over To Administrative Agent..............27
6.5 Application of Proceeds.........................................28
6.6 Code and Other Remedies.........................................28
6.7 Registration Rights.............................................29
6.8 Waiver; Deficiency..............................................30
Section 7. THE ADMINISTRATIVE AGENT........................................31
7.1 Administrative Agent's Appointment as Attorney-in-Fact, etc.....31
7.2 Duty of Administrative Agent....................................32
7.3 Execution of Financing Statements...............................33
7.4 Authority of Administrative Agent...............................33
Section 8. MISCELLANEOUS...................................................33
8.1 Amendments in Writing...........................................33
8.2 Notices. 33
8.3 No Waiver by Course of Conduct; Cumulative Remedies.............34
8.4 Enforcement Expenses; Indemnification...........................34
8.5 Successors and Assigns..........................................35
8.6 Set-Off. 35
8.7 Counterparts....................................................35
8.8 Severability....................................................35
8.9 Section Headings................................................35
8.10 Integration.....................................................36
8.11 GOVERNING LAW...................................................36
8.12 Submission To Jurisdiction; Waivers.............................36
8.13 Acknowledgments.................................................37
8.14 Additional Grantors.............................................37
8.15 Releases........................................................37
8.16 WAIVER OF JURY TRIAL............................................38
ii
<PAGE>
FORM OF
GUARANTEE AND COLLATERAL AGREEMENT
GUARANTEE AND COLLATERAL AGREEMENT, dated as of November 30, 1999, made
by each of the signatories hereto (together with any other entity that may
become a party hereto as provided herein, the "GRANTORS"), in favor of Lehman
Commercial Paper Inc., as administrative agent (in such capacity, the
"ADMINISTRATIVE AGENT") for (i) the banks and other financial institutions or
entities (the "LENDERS") from time to time parties to the Credit Agreement,
dated as of November 30, 1999 (as amended, supplemented or otherwise modified
from time to time, the "CREDIT AGREEMENT"), among O'Sullivan Industries Inc., a
Delaware corporation (the "BORROWER"), O'Sullivan Industries Holdings, Inc.
("Holdings"), the several banks and other financial institutions or entities
from time to time parties thereto (the "LENDERS"), Lehman Brothers Inc., as
advisor, lead arranger and book manager (in such capacity, the "ARRANGER"),
Wachovia Bank, N.A., as syndication agent (in such capacity, the "SYNDICATION
AGENT"), and the Administrative Agent, and (ii) the other Secured Parties (as
hereinafter defined).
W I T N E S S E T H:
WHEREAS, pursuant to the Credit Agreement, the Lenders have severally
agreed to make extensions of credit to the Borrower upon the terms and subject
to the conditions set forth therein;
WHEREAS, the Borrower is a member of an affiliated group of companies
that includes each other Grantor;
WHEREAS, the proceeds of the extensions of credit under the Credit
Agreement will be used in part to enable the Borrower to make valuable transfers
to one or more of the other Grantors in connection with the operation of their
respective businesses;
WHEREAS, the Borrower and the other Grantors are engaged in related
businesses, and each Grantor will derive substantial direct and indirect benefit
from the making of the extensions of credit under the Credit Agreement; and
WHEREAS, it is a condition precedent to the obligation of the Lenders
to make their respective extensions of credit to the Borrower under the Credit
Agreement that the Grantors shall have executed and delivered this Agreement to
the Administrative Agent for the ratable benefit of the Secured Parties;
NOW, THEREFORE, in consideration of the premises and to induce the
Arranger, the Administrative Agent and the Lenders to enter into the Credit
Agreement and to induce the Lenders to make their respective extensions of
credit to the Borrower thereunder, each Grantor hereby agrees with the
Administrative Agent, for the ratable benefit of the Secured Parties, as
follows:
<PAGE>
SECTION 1. DEFINED TERMS
1.1 DEFINITIONS. Unless otherwise defined herein, terms defined in the
Credit Agreement and used herein shall have the meanings given to them in the
Credit Agreement, and the following terms which are defined in the Uniform
Commercial Code in effect in the State of New York on the date hereof are used
herein as so defined: Accounts, Certificated Security, Chattel Paper, Commodity
Account, Commodity Contract, Commodity Intermediary, Documents, Entitlement
Order, Equipment, Farm Products, Financial Asset, Goods, Instruments, Inventory,
Securities Account, Securities Intermediary, Security, Security Entitlement and
Uncertificated Security.
(b) The following terms shall have the following meanings:
"AGREEMENT": this Guarantee and Collateral Agreement, as the
same may be amended, supplemented, replaced or otherwise modified from
time to time.
"BORROWER OBLIGATIONS": the collective reference to the
Obligations (as defined in the Credit Agreement).
"COLLATERAL": as defined in Section 3.
"COLLATERAL ACCOUNT": (i) any collateral account established
by the Administrative Agent as provided in Section 6.1 or 6.4 or (ii)
any cash collateral account established as provided in the definition
of "Net Cash Proceeds" in Section 1.1 of the Credit Agreement or 8 of
the Credit Agreement.
"COPYRIGHT LICENSES": any written agreement naming any Grantor
(other than Holdings) as licensor or licensee (including, without
limitation, those listed in SCHEDULE 6), granting any right under any
Copyright, including, without limitation, the grant of rights to
manufacture, distribute, exploit and sell materials derived from any
Copyright.
"COPYRIGHTS": (i) all copyrights, whether or not the
underlying works of authorship have been published, and all works of
authorship and other intellectual property rights therein, all
copyrights of works based on, incorporated in, derived from or relating
to works covered by such copyrights, all right, title and interest to
make and exploit all derivative works based on or adopted from works
covered by such copyrights, and all copyright registrations and
copyright applications, and any renewals or extensions thereof,
including, without limitation, each registration and application
identified in SCHEDULE 6, (ii) the rights to print, publish and
distribute any of the foregoing, (iii) the right to sue or otherwise
recover for any and all past, present and future infringements and
misappropriations thereof, (iv) all income, royalties, damages and
other payments now and hereafter due and/or payable with respect
thereto (including, without limitation, payments under all Copyright
Licenses entered into in connection therewith, and damages and payments
for past, present or future infringements thereof), and (v) all other
rights of any kind whatsoever accruing thereunder or pertaining
thereto.
2
<PAGE>
"DEPOSIT ACCOUNT": as defined in the Uniform Commercial Code
of any applicable jurisdiction and, in any event, including, without
limitation, any demand, time, savings, passbook or like account
maintained with a depositary institution.
"EXCLUDED ASSETS": collectively, Copyright Licenses, Trademark
Licenses or Patent Licenses as to which any Grantor (other than
Holdings) is the licensee, sub-licensee or the equivalent to the extent
the grant by such Grantor of a security interest therein pursuant to
this Agreement in its right, title and interest therein is prohibited
by the terms of any agreement governing the terms of such Intellectual
Property without the consent of any other party thereto (other than
Holdings or any of its Subsidiaries); PROVIDED, that the foregoing
limitation shall not affect, limit, restrict or impair the grant by
such Grantor of a security interest pursuant to this Agreement in any
Receivable or any money or other amounts due or to become due under any
such contract, agreement, instrument, license or permit, or in the
Proceeds from the Disposition of any such contract, agreement,
instrument, license or permit.
"EXCLUDED FOREIGN SUBSIDIARY": as of the date of
determination, any Foreign Subsidiary which is a foreign corporation
(within the meaning of Section 7701(a)(5) of the Code.
"EXCLUDED FOREIGN SUBSIDIARY VOTING STOCK": the voting Capital
Stock of any Excluded Foreign Subsidiary.
"FOREIGN SUBSIDIARY": any Subsidiary organized under the laws
of any jurisdiction outside the United States of America.
"GENERAL INTANGIBLES": all "general intangibles" as such term
is defined in Section 9-106 of the Uniform Commercial Code in effect in
the State of New York on the date hereof and, in any event, including,
without limitation, with respect to any Grantor (other than Holdings),
all contracts, agreements, instruments and indentures and all licenses
and permits issued by Governmental Authorities in any form, and
portions thereof, to which such Grantor is a party or under which such
Grantor has any right, title or interest or to which such Grantor or
any property of such Grantor is subject, as the same may from time to
time be amended, supplemented, replaced or otherwise modified,
including, without limitation, (i) all rights of such Grantor to
receive moneys due and to become due to it thereunder or in connection
therewith, (ii) all rights of such Grantor to receive proceeds of any
insurance, indemnity, warranty or guaranty with respect thereto, (iii)
all rights of such Grantor to damages arising thereunder, (iv) all
rights of such Grantor to receive any tax refunds, and (v) all rights
of such Grantor to terminate and to perform, compel performance and to
exercise all remedies thereunder, in each case to the extent the grant
by such Grantor of a security interest pursuant to this Agreement in
its right, title and interest in such contract, agreement, instrument,
indenture, license or permit is not prohibited by such contract,
agreement, instrument, indenture, license or permit without the consent
of any other party thereto (other than Holdings or any of its
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Subsidiaries), would not give any other party (other than Holdings or
any of its Subsidiaries) to such contract, agreement, instrument,
indenture, license or permit the right to terminate its obligations
thereunder, or is permitted with consent if all necessary consents to
such grant of a security interest have been obtained from the other
parties thereto (other than Holdings and any of its Subsidiaries);
PROVIDED, that the foregoing limitation shall not affect, limit,
restrict or impair the grant by such Grantor of a security interest
pursuant to this Agreement in any Receivable or any money or other
amounts due or to become due under any such contract, agreement,
instrument, indenture, license or permit, or in the Proceeds from the
Disposition of any such contract, agreement, instrument, indenture,
license or permit.
"GUARANTOR OBLIGATIONS": with respect to any Guarantor, all
obligations and liabilities of such Guarantor which may arise under or
in connection with this Agreement (including, without limitation,
Section 2) or any other Loan Document to which such Guarantor is a
party, in each case whether on account of guarantee obligations,
reimbursement obligations, fees, indemnities, costs, expenses or
otherwise (including, without limitation, all fees and disbursements of
counsel to any Secured Party that are required to be paid by such
Guarantor pursuant to the terms of this Agreement or any other Loan
Document).
"GUARANTORS": the collective reference to each Grantor other
than Holdings and the Borrower.
"HEDGE AGREEMENTS": as to any Person, all interest rate swaps,
caps or collar agreements or similar arrangements entered into by such
Person providing for protection against fluctuations in interest rates
or currency exchange rates or the exchange of nominal interest
obligations, either generally or under specific contingencies.
"INTELLECTUAL PROPERTY": the collective reference to all
rights, priorities and privileges relating to intellectual property,
whether arising under United States, multinational or foreign laws or
otherwise, including, without limitation, the Copyrights, the Copyright
Licenses, the Patents, the Patent Licenses, the Trademarks, the
Trademark Licenses, the Trade Secrets and the Trade Secret Licenses,
and all rights to sue at law or in equity for any infringement or other
impairment thereof, including the right to receive all proceeds and
damages therefrom.
"INTERCOMPANY NOTE": any promissory note evidencing loans made
by any Grantor (other than Holdings) to Holdings or any of its
Subsidiaries, including, without limitation, the Subordinated
Intercompany Note.
"INVESTMENT PROPERTY": the collective reference to (i) all
"investment property" as such term is defined in Section 9-115 of the
Uniform Commercial Code in effect in the State of New York on the date
hereof including, without limitation, all Certificated Securities and
Uncertificated Securities, all Security Entitlements, all Securities
Accounts, all Commodity Contracts and all Commodity Accounts (other
than any Excluded Foreign Subsidiary Voting Stock excluded from the
definition of "Pledged Stock"), (ii) security entitlements, in the case
of any United States Treasury book-entry
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securities, as defined in 31 C.F.R. Section 357.2, or, in the case of
any United States federal agency book-entry securities, as defined in
the corresponding United States federal regulations governing such
book-entry securities, and (iii) whether or not constituting
"investment property" as so defined, all Pledged Notes, all Pledged
Stock, all Pledged Security Entitlements and all Pledged Commodity
Contracts.
"ISSUERS": the collective reference to each issuer of a
Pledged Security.
"NEW YORK UCC": the Uniform Commercial Code as from time to
time in effect in the State of New York.
"OBLIGATIONS": (i) in the case of the Borrower, the Borrower
Obligations, and (ii) in the case of each Guarantor, its Guarantor
Obligations.
"PATENT LICENSE": all agreements, whether written or oral,
providing for the grant by or to any Grantor (other than Holdings) of
any right to manufacture, use or sell any invention covered in whole or
in part by a Patent, including, without limitation, any of the
foregoing referred to in SCHEDULE 6.
"PATENTS": (i) all patents, patent applications and patentable
inventions, including, without limitation, each patent and patent
application identified in SCHEDULE 6, (ii) all inventions and
improvements described and claimed therein, (iii) the right to sue or
otherwise recover for any and all past, present and future
infringements and misappropriations thereof, (iv) all income,
royalties, damages and other payments now and hereafter due and/or
payable with respect thereto (including, without limitation, payments
under all Patent Licenses entered into in connection therewith, and
damages and payments for past, present or future infringement thereof),
and (v) all reissues, divisions, continuations, continuations-in-art,
substitutes, renewals, and extensions thereof, all improvements thereon
and all other rights of any kind whatsoever accruing thereunder or
pertaining thereto.
"PLEDGED COMMODITY CONTRACTS": all commodity contracts listed
on SCHEDULE 2 and all other commodity contracts to which any Grantor
(other than Holdings) is party from time to time.
"PLEDGED DEBT SECURITIES": the debt securities listed on
SCHEDULE 2, together with any other certificates, options, rights or
security entitlements of any nature whatsoever in respect of the debt
securities of any Person that may be issued or granted to, or held by,
any Grantor (other than Holdings) while this Agreement is in effect.
"PLEDGED NOTES": all promissory notes listed on SCHEDULE 2,
all Intercompany Notes at any time issued to any Grantor (other than
Holdings) and all other promissory notes issued to or held by any
Grantor (other than Holdings) (other than promissory notes in an
aggregate principal amount not to exceed $250,000 at any time
outstanding issued in connection with extensions of trade credit by any
Grantor (other than Holdings) in the ordinary course of business).
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"PLEDGED SECURITIES": the collective reference to the Pledged
Debt Securities, the Pledged Notes and the Pledged Stock.
"PLEDGED SECURITY ENTITLEMENTS": all security entitlements
with respect to the financial assets listed on SCHEDULE 2 and all other
security entitlements of any Grantor (other than Holdings).
"PLEDGED STOCK": the shares of Capital Stock listed on
SCHEDULE 2, together with any other shares, stock certificates,
options, rights or security entitlements of any nature whatsoever in
respect of the Capital Stock of any Person that may be issued or
granted to, or held by, any Grantor while this Agreement is in effect;
provided that in no event shall more than 65% of the total outstanding
Excluded Foreign Subsidiary Voting Stock of any Excluded Foreign
Subsidiary be required to be pledged hereunder.
"PROCEEDS": all "proceeds" as such term is defined in Section
9-306(1) of the Uniform Commercial Code in effect in the State of New
York on the date hereof and, in any event, shall include, without
limitation, all dividends or other income from the Pledged Securities,
collections thereon or distributions or payments with respect thereto.
"RECEIVABLE": any right to payment for goods sold or leased or
for services rendered, whether or not such right is evidenced by an
Instrument or Chattel Paper and whether or not it has been earned by
performance (including, without limitation, any Account).
"SECURED PARTIES": collectively, the Arranger, the
Administrative Agent, the Syndication Agent, the Lenders and, with
respect to any Specified Hedge Agreement, any affiliate of any Lender
party thereto that has agreed to be bound by the provisions of Section
7.2 hereof as if it were a party hereto and by the provisions of
Section 9 of the Credit Agreement as if it were a Lender party thereto.
"SECURITIES ACT": the Securities Act of 1933, as amended.
"TRADEMARK LICENSE": any agreement, whether written or oral,
providing for the grant by or to any Grantor (other than Holdings) of
any right to use any Trademark, including, without limitation, any of
the foregoing referred to in SCHEDULE 6.
"TRADEMARKS": (i) all trademarks, service marks, trade names,
corporate names, company names, business names, trade dress, trade
styles, logos, or other indicia of origin or source identification,
trademark and service mark registrations, and applications for
trademark or service mark registrations and any renewals thereof,
including, without limitation, each registration and application
identified in SCHEDULE 6, (ii) the right to sue or otherwise recover
for any and all past, present and future infringements and
misappropriations thereof, (iii) all income, royalties, damages and
other payments now and hereafter due and/or payable with respect
thereto (including, without limitation, payments under all Trademark
Licenses entered into in connection therewith, and damages and payments
for past, present or future infringements thereof), and (iv) all other
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rights of any kind whatsoever accruing thereunder or pertaining
thereto, together in each case with the goodwill of the business
connected with the use of, and symbolized by, each of the above.
"TRADE SECRET LICENSE": any agreement, whether written or
oral, providing for the grant by or to any Grantor (other than
Holdings) of any right to use any Trade Secret, including, without
limitation, any of the foregoing referred to in SCHEDULE 6.
"TRADE SECRETS": (i) all trade secrets and all confidential
and proprietary information, including know-how, manufacturing and
production processes and techniques, inventions, research and
development information, technical data, financial, marketing and
business data, pricing and cost information, business and marketing
plans, and customer and supplier lists and information, including,
without limitation, all material trade secrets referred to in SCHEDULE
6, (ii) the right to sue or otherwise recover for any and all past,
present and future infringements and misappropriations thereof, (iii)
all income, royalties, damages and other payments now and hereafter due
and/or payable with respect thereto (including, without limitation,
payments under all licenses entered into in connection therewith, and
damages and payments for past, present or future infringements
thereof), and (iv) all other rights of any kind whatsoever of any
Grantor (other than Holdings) accruing thereunder or pertaining
thereto.
"VEHICLES": all cars, trucks, trailers, construction and earth
moving equipment and other vehicles covered by a certificate of title
law of any jurisdiction and, in any event including, without
limitation, the vehicles listed on SCHEDULE 7 and all tires and other
appurtenances to any of the foregoing.
1.2 OTHER DEFINITIONAL PROVISIONS. (a) The words "hereof", "herein",
"hereto" and "hereunder" and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any particular provision of
this Agreement, and Section and Schedule references are to this Agreement unless
otherwise specified.
(b) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
(c) Where the context requires, terms relating to the Collateral or any
part thereof, when used in relation to a Grantor, shall refer to such Grantor's
Collateral or the relevant part thereof.
(d) The expressions "payment in full," "paid in full" and any other
similar terms or phrases when used herein with respect to the Borrower
Obligations or the Guarantor Obligations shall mean the payment in full, in
immediately available funds, of all of the Borrower Obligations or the Guarantor
Obligations, as the case may be.
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SECTION 2. GUARANTEE
2.1 GUARANTEE. (a) Each of the Guarantors hereby, jointly and
severally, unconditionally and irrevocably, guarantees to the Administrative
Agent, for the ratable benefit of the Secured Parties and their respective
successors, indorsees, transferees and assigns, the prompt and complete payment
and performance by the Borrower when due (whether at the stated maturity, by
acceleration or otherwise) of the Borrower Obligations.
(b) Anything herein or in any other Loan Document to the contrary
notwithstanding, the maximum liability of each Guarantor hereunder and under the
other Loan Documents shall in no event exceed the amount which can be guaranteed
by such Guarantor under applicable federal, state and other laws relating to the
insolvency of debtors (after giving effect to the right of contribution
established in Section 2.2).
(c) Each Guarantor agrees that the Borrower Obligations may at any time
and from time to time exceed the amount of the liability of such Guarantor
hereunder without impairing the guarantee contained in this Section 2 or
affecting the rights and remedies of any Secured Party hereunder.
(d) The guarantee contained in this Section 2 shall remain in full
force and effect until all the Borrower Obligations and Guarantor Obligations
shall have been satisfied by payment in full, no Letter of Credit shall be
outstanding and the Commitments shall be terminated or have expired,
notwithstanding that from time to time during the term of the Credit Agreement
the Borrower may be free from any Borrower Obligations.
(e) No payment made by the Borrower, any of the Guarantors, any other
guarantor or any other Person or received or collected by any Secured Party from
the Borrower, any of the Guarantors, any other guarantor or any other Person by
virtue of any action or proceeding or any set-off or appropriation or
application at any time or from time to time in reduction of or in payment of
the Borrower Obligations shall be deemed to modify, reduce, release or otherwise
affect the liability of any Guarantor hereunder which shall, notwithstanding any
such payment (other than any payment made by such Guarantor in respect of the
Borrower Obligations or any payment received or collected from such Guarantor in
respect of the Borrower Obligations), remain liable for the Borrower Obligations
up to the maximum liability of such Guarantor hereunder until the Borrower
Obligations (other than Obligations in respect of any Specified Hedge Agreement)
are paid in full, no Letter of Credit shall be outstanding and the Commitments
are terminated or have expired.
2.2 RIGHT OF CONTRIBUTION. Each Guarantor hereby agrees that to the
extent that a Guarantor shall have paid more than its proportionate share of any
payment made hereunder, such Guarantor shall be entitled to seek and receive
contribution from and against any other Guarantor hereunder which has not paid
its proportionate share of such payment. Each Guarantor's right of contribution
shall be subject to the terms and conditions of Section 2.3. The provisions of
this Section 2.2 shall in no respect limit the obligations and liabilities of
any Guarantor to the Secured Parties and each Guarantor shall remain liable to
the Secured Parties for the full amount guaranteed by such Guarantor hereunder.
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2.3 NO SUBROGATION. Notwithstanding any payment made by any Guarantor
hereunder or any set-off or application of funds of any Guarantor by any Secured
Party, no Guarantor shall be entitled to be subrogated to any of the rights of
any Secured Party against the Borrower or any other Guarantor or Grantor or any
collateral security or guarantee or right of offset held by any Secured Party
for the payment of the Borrower Obligations, nor shall any Guarantor seek or be
entitled to seek any contribution or reimbursement from the Borrower or any
other Guarantor or Grantor in respect of payments made by such Guarantor
hereunder, until all amounts owing to the Secured Parties by the Borrower on
account of the Borrower Obligations (other than Obligations in respect of any
Specified Hedge Agreement) are paid in full, no Letter of Credit shall be
outstanding and the Commitments are terminated or have expired. If any amount
shall be paid to any Guarantor on account of such subrogation rights at any time
when all of the Borrower Obligations (other than Obligations in respect of any
Specified Hedge Agreement) shall not have been paid in full, any Letter of
Credit is outstanding or the Commitments remain in effect, such amount shall be
held by such Guarantor in trust for the Secured Parties, segregated from other
funds of such Guarantor, and shall, forthwith upon receipt by such Guarantor, be
turned over to the Administrative Agent in the exact form received by such
Guarantor (duly endorsed by such Guarantor to the Administrative Agent, if
required), to be applied against the Borrower Obligations, whether matured or
unmatured, in such order as the Administrative Agent may determine.
2.4 AMENDMENTS, ETC. WITH RESPECT TO THE BORROWER OBLIGATIONS. Each
Guarantor shall remain obligated hereunder notwithstanding that, without any
reservation of rights against any Guarantor and without notice to or further
assent by any Guarantor, any demand for payment of any of the Borrower
Obligations made by any Secured Party may be rescinded by such Secured Party and
any of the Borrower Obligations continued, and the Borrower Obligations, or the
liability of any other Person upon or for any part thereof, or any collateral
security or guarantee therefor or right of offset with respect thereto, may,
from time to time, in whole or in part, be renewed, extended, amended, modified,
accelerated, compromised, waived, surrendered or released by any Secured Party,
and the Credit Agreement and the other Loan Documents and any other documents
executed and delivered in connection therewith may be amended, modified,
supplemented or terminated, in whole or in part, as the Administrative Agent (or
the requisite Lenders under the Credit Agreement or all Lenders, as the case may
be) may deem advisable from time to time, and any collateral security, guarantee
or right of offset at any time held by any Secured Party for the payment of the
Borrower Obligations may be sold, exchanged, waived, surrendered or released. No
Secured Party shall have any obligation to protect, secure, perfect or insure
any Lien at any time held by it as security for the Borrower Obligations or for
the guarantee contained in this Section 2 or any property subject thereto.
2.5 GUARANTEE ABSOLUTE AND UNCONDITIONAL. Each Guarantor waives any and
all notice of the creation, renewal, extension or accrual of any of the Borrower
Obligations and notice of or proof of reliance by any Secured Party upon the
guarantee contained in this Section 2 or acceptance of the guarantee contained
in this Section 2; the Borrower Obligations, and any of them, shall conclusively
be deemed to have been created, contracted or incurred, or renewed, extended,
amended or waived, in reliance upon the guarantee contained in this Section 2;
and all dealings between the Borrower and any of the Guarantors, on the one
hand, and the Secured
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Parties, on the other hand, likewise shall be conclusively presumed to have been
had or consummated in reliance upon the guarantee contained in this Section 2.
Each Guarantor waives diligence, presentment, protest, demand for payment and
notice of default or nonpayment to or upon the Borrower or any of the Guarantors
with respect to the Borrower Obligations. Each Guarantor understands and agrees
that the guarantee contained in this Section 2 shall be construed as a
continuing, absolute and unconditional guarantee of payment and performance
without regard to (a) the validity or enforceability of the Credit Agreement or
any other Loan Document, any of the Borrower Obligations or any other collateral
security therefor or guarantee or right of offset with respect thereto at any
time or from time to time held by any Secured Party, (b) any defense, set-off or
counterclaim (other than a defense of payment or performance hereunder) which
may at any time be available to or be asserted by the Borrower or any other
Person against any Secured Party, or (c) any other circumstance whatsoever (with
or without notice to or knowledge of the Borrower or such Guarantor) which
constitutes, or might be construed to constitute, an equitable or legal
discharge of the Borrower for the Borrower Obligations, or of such Guarantor
under the guarantee contained in this Section 2, in bankruptcy or in any other
instance. When making any demand hereunder or otherwise pursuing its rights and
remedies hereunder against any Guarantor, any Secured Party may, but shall be
under no obligation to, make a similar demand on or otherwise pursue such rights
and remedies as it may have against the Borrower, any other Guarantor or any
other Person or against any collateral security or guarantee for the Borrower
Obligations or any right of offset with respect thereto, and any failure by any
Secured Party to make any such demand, to pursue such other rights or remedies
or to collect any payments from the Borrower, any other Guarantor or any other
Person or to realize upon any such collateral security or guarantee or to
exercise any such right of offset, or any release of the Borrower, any other
Guarantor or any other Person or any such collateral security, guarantee or
right of offset, shall not relieve any Guarantor of any obligation or liability
hereunder, and shall not impair or affect the rights and remedies, whether
express, implied or available as a matter of law, of any Secured Party against
any Guarantor. For the purposes hereof "demand" shall include the commencement
and continuance of any legal proceedings.
2.6 REINSTATEMENT. The guarantee contained in this Section 2 shall
continue to be effective, or be reinstated, as the case may be, if at any time
payment, or any part thereof, of any of the Borrower Obligations is rescinded or
must otherwise be restored or returned by any Secured Party upon the insolvency,
bankruptcy, dissolution, liquidation or reorganization of the Borrower or any
Guarantor, or upon or as a result of the appointment of a receiver, intervenor
or conservator of, or trustee or similar officer for, the Borrower or any
Guarantor or any substantial part of its property, or otherwise, all as though
such payments had not been made.
2.7 PAYMENTS. Each Guarantor hereby guarantees that payments hereunder
will be paid to the Administrative Agent without set-off or counterclaim in
Dollars in immediately available funds at the office of the Administrative Agent
located at the Payment Office specified in the Credit Agreement.
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SECTION 3. GRANT OF SECURITY INTEREST
Each Grantor hereby assigns and transfers to the Administrative Agent,
and hereby grants to the Administrative Agent, for the ratable benefit of the
Secured Parties, a security interest in, all of the following property now owned
or at any time hereafter acquired by such Grantor or in which such Grantor now
has or at any time in the future may acquire any right, title or interest
(collectively, the "COLLATERAL"), as collateral security for the prompt and
complete payment and performance when due (whether at the stated maturity, by
acceleration or otherwise) of such Grantor's Obligations or, in the case of
Holdings, for the Borrower Obligations:
(a) all Accounts;
(b) all Chattel Paper;
(c) all Contracts;
(d) all Deposit Accounts;
(e) all Documents;
(f) all Equipment;
(g) all General Intangibles;
(h) all Instruments;
(i) all Intellectual Property (other than in any country to the extent
that the granting of a security interest therein is prohibited under the laws of
such country);
(j) all Inventory;
(k) all Investment Property;
(l) all Vehicles;
(m) all Goods and other property not otherwise described above:
(n) all bank accounts, all funds held therein and all certificates and
instruments, if any, from time to time representing or evidencing such bank
accounts;
(o) all books and records pertaining to the Collateral; and
(p) to the extent not otherwise included, all Proceeds and products of
any and all of the foregoing and all collateral security and guarantees given by
any Person with respect to any of the foregoing.
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Notwithstanding anything to the contrary herein (A) Holdings hereby
assigns and transfers to the Administrative Agent, and hereby grants to the
Administrative Agent, for the ratable benefit of the Secured Parties, a security
interest in only the following property now owned or at any time hereafter
acquired by Holdings or in which Holdings now has or at any time in the future
may acquire any right, title or interest: (i) all of the Capital Stock of the
Borrower and any other Pledged Stock held by Holdings, (ii) all books and
records pertaining to such Capital Stock, and (iii) to the extent not otherwise
included, all Proceeds and products of any and all of the Collateral described
in clauses (i) and (ii) and all collateral security and guarantees given by any
Person with respect thereto, and (B) none of the Excluded Assets shall
constitute Collateral.
SECTION 4. REPRESENTATIONS AND WARRANTIES
To induce the Arranger, the Administrative Agent, the Syndication Agent
and the Lenders to enter into the Credit Agreement and to induce the Lenders to
make their respective extensions of credit to the Borrower thereunder, each
Grantor (other than Holdings) hereby represents and warrants to the Secured
Parties and Holdings hereby represents and warrants to the Secured Parties with
respect to Sections 4.2, 4.3 and 4.7 only that:
4.1 REPRESENTATIONS IN CREDIT AGREEMENT. In the case of each Guarantor,
the representations and warranties set forth in Section 4 of the Credit
Agreement as they relate to such Guarantor or to the Loan Documents to which
such Guarantor is a party, each of which is hereby incorporated herein by
reference, are true and correct, and the Secured Parties shall be entitled to
rely on each of them as if they were fully set forth herein, PROVIDED that each
reference in each such representation and warranty to the Borrower's knowledge
shall, for the purposes of this Section 4.l, be deemed to be a reference to such
Guarantor's knowledge.
4.2 TITLE; NO OTHER LIENS. Except for the security interest granted to
the Administrative Agent for the ratable benefit of the Secured Parties pursuant
to this Agreement and the other Liens permitted to exist on the Collateral by
the Credit Agreement, such Grantor owns each item of the Collateral free and
clear of any and all Liens or claims of others. No financing statement or other
public notice with respect to all or any part of the Collateral is on file or of
record in any public office, except such as have been filed in favor of the
Administrative Agent, for the ratable benefit of the Secured Parties, pursuant
to this Agreement or as are permitted by the Credit Agreement.
4.3 PERFECTED FIRST PRIORITY LIENS. The security interests granted
pursuant to this Agreement (a), as a result of the filings and other actions
specified on SCHEDULE 3 (which in the case of all filings and other documents
referred to on said Schedule shall have been delivered to the Administrative
Agent in appropriate form for filing and recordation) constitute valid perfected
security interests in all of the Collateral in favor of the Administrative
Agent, for the ratable benefit of the Secured Parties, as collateral security
for such Grantor's Obligations or, in the case of Holdings, for the Borrower
Obligations, enforceable in accordance with the terms hereof against all
creditors of such Grantor and any Persons purporting to purchase any Collateral
from such Grantor and (b) are prior to all other Liens on the Collateral except
(i) in the
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case of Collateral other than Pledged Stock, for Liens permitted by Section 7.3
of the Credit Agreement and (ii) in the case of Collateral consisting of Pledged
Stock, for non-consensual Liens permitted by Section 7.3 of the Credit Agreement
to the extent arising by operation of law.
4.4 CHIEF EXECUTIVE OFFICE. On the date hereof, such Grantor's
jurisdiction of organization and the location of such Grantor's chief executive
office or sole place of business are specified on SCHEDULE 4.
4.5 INVENTORY, EQUIPMENT AND BOOKS AND RECORDS. On the date hereof, the
Inventory and the Equipment (other than mobile goods) and the books and records
pertaining to the Collateral are kept at the locations listed on SCHEDULE 5.
4.6 FARM PRODUCTS. None of the Collateral constitutes, or is the
Proceeds of, Farm Products.
4.7 INVESTMENT PROPERTY. (a) The shares of Pledged Stock pledged by
such Grantor hereunder constitute all of the issued and outstanding shares of
all classes of the Capital Stock of each Issuer owned by such Grantor or, in the
case of Excluded Foreign Subsidiary Voting Stock, if less, 65% of the
outstanding Excluded Foreign Subsidiary Voting Stock of each relevant Issuer.
(b) All the shares of the Pledged Stock have been duly and validly
issued and are fully paid and nonassessable.
(c) The terms of any uncertificated limited liability company interests
and partnership interests included in the Pledged Stock expressly provide that
they are securities governed by Article 8 of the Uniform Commercial Code in
effect from time to time in the "issuer's jurisdiction" of each Issuer thereof
(as such term is defined in the Uniform Commercial Code in effect in such
jurisdiction).
(d) Each of the Pledged Notes constitutes the legal, valid and binding
obligation of the obligor with respect thereto, enforceable in accordance with
its terms, subject to the effects of bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally, general equitable principles (whether
considered in a proceeding in equity or at law) and an implied covenant of good
faith and fair dealing.
(e) Such Grantor is the record and beneficial owner of, and has good
and marketable title to, the Investment Property pledged by it hereunder, free
of any and all Liens or options in favor of, or claims of, any other Person,
except the security interest created by this Agreement.
(f) Each Issuer that is not a Grantor hereunder has executed and
delivered to the Administrative Agent an Acknowledgment and Agreement, in
substantially the form of Exhibit A, to the pledge of the Pledged Securities
pursuant to this Agreement.
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4.8 RECEIVABLES. (a) No amount payable to such Grantor under or in
connection with any Receivable is evidenced by any Instrument or Chattel Paper
which has not been delivered to the Administrative Agent.
(b) None of the obligors on any Receivables is a Governmental
Authority.
(c) The amounts represented by such Grantor to the Secured Parties from
time to time as owing to such Grantor in respect of the Receivables will at such
times be accurate.
4.9 INTELLECTUAL PROPERTY. (a) SCHEDULE 6 lists all registrations and
applications for Intellectual Property and all other Intellectual Property
material to the Business of such Grantor owned by such Grantor in its own name
on the date hereof. Except as set forth in Schedule 6, such Grantor is the
exclusive owner of the entire and unencumbered right, title and interest in and
to such Intellectual Property and is otherwise entitled to use all such
Intellectual Property, without limitation, subject only to the license terms of
the licensing or franchise agreements referred to in paragraph (c) below.
(b) On the date hereof, all Intellectual Property owned by such Grantor
(and all material Intellectual Property otherwise held by such Grantor) is
subsisting, unexpired and enforceable, has not been abandoned or adjudged
invalid or unenforceable and does not infringe in any material respect the
intellectual property rights of any other Person.
(c) Except as set forth in SCHEDULE 6, on the date hereof (i) none of
the Intellectual Property held by such Grantor is the subject of any licensing
or franchise agreement pursuant to which such Grantor is the licensor or
franchisor, and (ii) there are no other agreements, obligations, orders or
judgments which affect the use of any such Intellectual Property.
(d) The rights of such Grantor in or to the Intellectual Property do
not conflict with or infringe upon the rights of any third party in any material
respect, and no claim has been asserted that the use of such Intellectual
Property does or may infringe upon the rights of any third party.
(e) No holding, decision or judgment has been rendered by any
Governmental Authority which would limit, cancel or question the validity or
enforceability of, or such Grantor's rights in, any Intellectual Property in any
respect that could reasonably be expected to have a Material Adverse Effect.
Such Grantor is not aware of any uses of any item of Intellectual Property that
could reasonably be expected to lead to such item becoming invalid or
unenforceable including, without limitation, unauthorized uses by third parties
and uses which were not supported by the goodwill of the business connected with
Trademarks and Trademark Licenses.
(f) No action or proceeding is pending, or, to the knowledge of such
Grantor, threatened, on the date hereof (i) seeking to limit, cancel or question
the validity of any Intellectual Property owned by such Grantor or such
Grantor's ownership interest therein, (ii) alleging that any services provided
by, processes used by, or products manufactured or sold
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by such Grantor infringe any patent, trademark, copyright, or any other right of
any third party, (iii) alleging that any material Copyright, Patent or Trademark
held by such Grantor is being licensed, sublicensed or used in violation of any
patent, trademark, copyright or any other right of any third party, or (iv)
which, if adversely determined, could reasonably be expected to have a Material
Adverse Effect. To the knowledge of such Grantor, no Person is engaging in any
activity that infringes upon the Intellectual Property or upon the rights of
such Grantor therein. Except as set forth in SCHEDULE 6 hereto, such Grantor has
not granted any license, release, covenant not to sue, non-assertion assurance,
or other right to any person with respect to any part of such Grantor's
Intellectual Property. The consummation of the transactions contemplated by this
Agreement will not result in the termination or impairment of any of the
Intellectual Property held by such Grantor.
(g) With respect to each Copyright License, Trademark License and
Patent License: (i) such license is valid and binding and in full force and
effect subject to applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting the enforcement of creditors' rights generally and by
general equitable principles and represents the entire agreement between the
respective licensor and licensee with respect to the subject matter of such
license; (ii) such license will not cease to be valid and binding and in full
force and effect on terms identical to those currently in effect as a result of
the rights and interests granted herein, nor will the grant of such rights and
interests constitute a breach or default under such license or otherwise give
the licensor or licensee a right to terminate such license; (iii) such Grantor
has not received any notice of termination or cancellation under such license;
(iv) such Grantor has not received any notice of a breach or default under such
license, which breach or default has not been cured; and (v) such Grantor is not
in breach or default in any material respect, and no event has occurred that,
with notice and/or lapse of time, would constitute such a breach or default or
permit termination, modification or acceleration under such license.
(h) Except as set forth in SCHEDULE 6, such Grantor has performed all
acts and has paid all required fees and taxes to maintain each and every item of
material Intellectual Property held by such Grantor in full force and effect and
to protect and maintain its interest therein. Such Grantor has, to the extent
applicable, used proper statutory notice in connection with its use of each
material Patent, Trademark and Copyright included in the Intellectual Property.
(i) None of the material Trade Secrets of such Grantor has been used,
divulged, disclosed or appropriated to the detriment of such Grantor for the
benefit of any other Person; (ii) to the knowledge of such Grantor, no employee,
independent contractor or agent of such Grantor has misappropriated any trade
secrets of any other Person in the course of the performance of his or her
duties as an employee, independent contractor or agent of such Grantor; and
(iii) to the knowledge of such Grantor, no employee, independent contractor or
agent of such Grantor is in default or breach of any term of any employment
agreement, non-disclosure agreement, assignment of inventions agreement or
similar agreement or contract relating in any way to the protection, ownership,
development, use or transfer of such Grantor's Intellectual Property.
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(j) Such Grantor has made all filings and recordations necessary to
adequately protect its interest in its material Intellectual Property.
(k) Such Grantor has taken all steps to use consistent standards of
quality in the manufacture, distribution and sale of all products sold and
provision of all services provided under or in connection with any item of such
Grantor's Intellectual Property held by such Grantor and has taken all
reasonable steps to ensure that all licensed users of any kind of Intellectual
Property use such consistent standards of quality.
4.10 VEHICLES. SCHEDULE 7 is a complete and correct list of all
Vehicles owned by such Grantor on the date hereof.
SECTION 5. COVENANTS
Each Grantor (other than Holdings) and Holdings, as to Sections 5.1,
5.2 and 5.4 through 5.8 only, covenants and agrees with the Secured Parties
that, from and after the date of this Agreement until the Obligations (other
than Obligations in respect of any Specified Hedge Agreement) shall have been
paid in full, no Letter of Credit shall be outstanding and the Commitments shall
have terminated or expired:
5.1 COVENANTS IN CREDIT AGREEMENT. Each Guarantor shall take, or shall
refrain from taking, as the case may be, each action that is necessary to be
taken or not taken, as the case may be, so that no Default or Event of Default
is caused by the failure to take such action or to refrain from taking such
action by such Guarantor or any of its Subsidiaries.
5.2 DELIVERY AND CONTROL OF INSTRUMENTS, CHATTEL PAPER AND INVESTMENT
PROPERTY. (a) If any of the Collateral shall be or become evidenced or
represented by any Instrument, Certificated Security or Chattel Paper, such
Instrument, Certificated Security or Chattel Paper shall be immediately
delivered to the Administrative Agent, duly endorsed in a manner satisfactory to
the Administrative Agent, to be held as Collateral pursuant to this Agreement,
PROVIDED that the Grantors need not deliver Instruments received in the ordinary
course of business unless an Event of Default exists or delivery of such
Instruments is requested by the Administrative Agent.
(b) If any of the Collateral shall be or become evidenced or
represented by an Uncertificated Security, such Grantor shall cause the Issuer
thereof either (i) to register the Administrative Agent as the registered owner
of such Uncertificated Security, upon original issue or registration of transfer
or (ii) to agree in writing with such Grantor and the Administrative Agent that
such Issuer will comply with instructions with respect to such Uncertificated
Security originated by the Administrative Agent without further consent of such
Grantor, such agreement to be in substantially the form of Exhibit C.
(c) If any of the Collateral shall be or become evidenced or
represented by a Security Entitlement, such Grantor shall cause the Securities
Intermediary with respect to such Security Entitlement either (i) to identify in
its records the Administrative Agent as having such Security Entitlement against
such Securities Intermediary or (ii) to agree in writing with such
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Grantor and the Administrative Agent that such Securities intermediary will
comply with Entitlement Orders originated by the Administrative Agent without
further consent of such Grantor, such agreement to be in substantially the form
of Exhibit D.
(d) If any of the Collateral shall be or become evidenced or
represented by a Commodity Contract, such Grantor shall cause the Commodity
Intermediary with respect to such Commodity Contract to agree in writing with
such Grantor and the Administrative Agent that such Commodity Intermediary will
apply any value distributed on account of such Commodity Contract as directed by
the Administrative Agent without further consent of such Grantor, such agreement
to be in substantially the form of Exhibit E.
(e) If any of the Collateral shall be or become evidenced or
represented by or held in a Securities Account or a Commodity Account, such
Grantor shall, in the case of a Securities Account, comply with subsection (c)
of this Section 5.2 with respect to all Security Entitlements carried in such
Securities Account and, in the case of a Commodity Account, comply with
subsection (d) of this Section 5.2 with respect to all Commodity Contracts
carried in such Commodity Account.
5.3 MAINTENANCE OF INSURANCE. (a) Such Grantor will maintain, with
financially sound and reputable insurance companies, insurance on all its
property (including, without limitation, all Inventory, Equipment and Vehicles)
in at least such amounts and against at least such risks as are usually insured
against in the same general area by companies engaged in the same or a similar
business; and furnish to the Administrative Agent with copies for each Secured
Party, upon written request, full information as to the insurance carried;
provided that in any event such Grantor will maintain, (i) property and casualty
insurance on all real and personal property on an all risks basis (including the
perils of flood and quake and loss by fire, explosion and theft), covering the
repair or replacement cost of all such property and consequential loss coverage
for business interruption and extra expense (which shall include construction
expenses and such other business interruption expenses as are otherwise
generally available to similar businesses); PROVIDED that, with respect to any
such property located in a flood hazard zone, any such insurance must comply
with Section 5.1(r)(iii) of the Credit Agreement, and (ii) public liability
insurance. All such insurance with respect to such Grantor shall be provided by
insurers or reinsurers which (x) in the case of United States insurers and
reinsurers, have an A.M. Best policyholders rating of not less than A- with
respect to primary insurance and B+ with respect to excess insurance and (y) in
the case of non-United States insurers or reinsurers, the providers of at least
80% of such insurance have either an ISI policyholders rating of not less than
A, an A.M. Best policyholders rating of not less than A- or a surplus of not
less than $500,000,000 with respect to primary insurance, and an ISI
policyholders rating of not less than BBB with respect to excess insurance, or,
if the relevant insurance is not available from such insurers, such other
insurers as the Administrative Agent may approve in writing. All insurance shall
(i) provide that no cancellation, material reduction in amount or material
change in coverage thereof shall be effective until at least 30 days after
receipt by the Administrative Agent of written notice thereof, (ii) if
reasonably requested by the Administrative Agent, include a breach of warranty
clause and (iii) be reasonably satisfactory in all other respects to the
Administrative Agent.
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(b) Such Grantor will deliver to the Administrative Agent on behalf of
the Secured Parties, (i) on the Closing Date, a certificate dated such date
showing the amount and types of insurance coverage as of such date, (ii) upon
request of any Secured Party from time to time, full information as to the
insurance carried, (iii) promptly following receipt of notice from any insurer,
a copy of any notice of cancellation or material change in coverage from that
existing on the Closing Date, (iv) forthwith, notice of any cancellation or
nonrenewal of coverage by such Grantor, and (v) promptly after such information
is available to such Grantor, full information as to any claim for an amount in
excess of $1,000,000 with respect to any property and casualty insurance policy
maintained by such Grantor. Each Secured Party shall be named as additional
insured on all such liability insurance policies of such Grantor and the
Administrative Agent shall be named as loss payee on all property and casualty
insurance policies of such Grantor.
(c) The Borrower shall deliver to the Secured Parties a report of a
reputable insurance broker with respect to such insurance substantially
concurrently with the delivery by the Borrower to the Administrative Agent of
its audited financial statements for each fiscal year and such supplemental
reports with respect thereto as the Administrative Agent may from time to time
reasonably request.
5.4 PAYMENT OF OBLIGATIONS. Such Grantor will pay and discharge or
otherwise satisfy at or before maturity or before they become delinquent, as the
case may be, all taxes, assessments and governmental charges or levies imposed
upon the Collateral or in respect of income or profits therefrom, as well as all
claims of any kind (including, without limitation, claims for labor, materials
and supplies) against or with respect to the Collateral, except that no such
charge need be paid if the amount or validity thereof is currently being
contested in good faith by appropriate proceedings, reserves in conformity with
GAAP with respect thereto have been provided on the books of such Grantor and
such proceedings could not reasonably be expected to result in the sale,
forfeiture or loss of any material portion of the Collateral or any interest
therein.
5.5 MAINTENANCE OF PERFECTED SECURITY INTEREST; FURTHER DOCUMENTATION.
(a) Such Grantor shall maintain the security interest created by this Agreement
as a perfected security interest having at least the priority described in
Section 4.3 and shall defend such security interest against the claims and
demands of all Persons whomsoever.
(b) Such Grantor will furnish to the Secured Parties from time to time
statements and schedules further identifying and describing the Collateral and
such other reports in connection with the assets and property of such Grantor as
the Administrative Agent may reasonably request, all in reasonable detail.
(c) At any time and from time to time, upon the written request of the
Administrative Agent, and at the sole expense of such Grantor, such Grantor will
promptly and duly execute and deliver, and have recorded, such further
instruments and documents and take such further actions as the Administrative
Agent may reasonably request for the purpose of obtaining or preserving the full
benefits of this Agreement and of the rights and powers herein
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granted, including, without limitation, (i) the filing of any financing or
continuation statements under the Uniform Commercial Code (or other similar
laws) in effect in any jurisdiction with respect to the security interests
created hereby and (ii) in the case of Investment Property, Deposit Accounts and
any other relevant Collateral, taking any actions necessary to enable the
Administrative Agent to obtain "control" (within the meaning of the applicable
Uniform Commercial Code) with respect thereto (or, in the case of Deposit
Accounts, taking sole dominion and control thereof).
5.6 CHANGES IN LOCATIONS, NAME, ETC. Such Grantor will not, except upon
15 days' prior written notice to the Administrative Agent and delivery to the
Administrative Agent of (a) all additional executed financing statements and
other documents reasonably requested by the Administrative Agent to maintain the
validity, perfection and priority of the security interests provided for herein
and (b) if applicable, a written supplement to SCHEDULE 5 showing any additional
location at which Inventory or Equipment (other than mobile goods) or books and
records pertaining to the Collateral shall be kept:
(i) permit any of the Inventory or Equipment (other than
mobile goods) or books and records pertaining to the Collateral to be
kept at a location other than those listed on SCHEDULE 5;
(ii) change its jurisdiction of organization or the location
of its chief executive office or sole place of business from that
referred to in Section 4.4; or
(iii) change its name, identity or structure to such an extent
that any financing statement filed by the Administrative Agent in
connection with this Agreement would become misleading.
5.7 NOTICES. Such Grantor will advise the Secured Parties promptly, in
reasonable detail, of:
(a) any Lien (other than, in the case of Collateral other than Pledged
Stock, Liens permitted by Section 7.3 of the Credit Agreement and, in the case
of Pledged Stock, non-consensual Liens permitted by Section 7.3 of the Credit
Agreement to the extent arising by operation of law) on any of the Collateral
which would adversely affect the ability of the Administrative Agent to exercise
any of its remedies hereunder; and
(b) of the occurrence of any other event which could reasonably be
expected to have a material adverse effect on the aggregate value of the
Collateral or on the security interests created hereby.
5.8 INVESTMENT PROPERTY. (a) If such Grantor shall become entitled to
receive or shall receive any stock or other ownership certificate (including,
without limitation, any certificate representing a stock dividend or a
distribution in connection with any reclassification, increase or reduction of
capital or any certificate issued in connection with any reorganization), option
or rights in respect of the Capital Stock of any Issuer, whether in addition to,
in substitution of, as a conversion of, or in exchange for, any shares of or
other ownership interests
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in the Pledged Stock, or otherwise in respect thereof, such Grantor shall accept
the same as the agent of the Secured Parties, hold the same in trust for the
Secured Parties and deliver the same forthwith to the Administrative Agent in
the exact form received, duly endorsed by such Grantor to the Administrative
Agent, if required, together with an undated stock power covering such
certificate duly executed in blank by such Grantor and with, if the
Administrative Agent so requests, signature guaranteed, to be held by the
Administrative Agent, subject to the terms hereof, as additional collateral
security for the Obligations. Any sums paid upon or in respect of the Pledged
Securities upon the liquidation or dissolution of any Issuer shall be paid over
to the Administrative Agent to be held by it hereunder as additional collateral
security for the Obligations, and in case any distribution of capital shall be
made on or in respect of the Pledged Securities or any property shall be
distributed upon or with respect to the Pledged Securities pursuant to the
recapitalization or reclassification of the capital of any Issuer or pursuant to
the reorganization thereof, the property so distributed shall, unless otherwise
subject to a perfected security interest in favor of the Administrative Agent,
be delivered to the Administrative Agent to be held by it hereunder as
additional collateral security for the Obligations. If any sums of money or
property so paid or distributed in respect of the Pledged Securities shall be
received by such Grantor, such Grantor shall, until such money or property is
paid or delivered to the Administrative Agent, hold such money or property in
trust for the Secured Parties, segregated from other funds of such Grantor, as
additional collateral security for the Obligations.
(b) Without the prior written consent of the Administrative Agent, such
Grantor will not (i) vote to enable, or take any other action to permit, any
Issuer to issue any stock or other equity securities of any nature or to issue
any other securities convertible into or granting the right to purchase or
exchange for any stock or other equity securities of any nature of any Issuer
except, unless an Event of Default exists, to a Grantor to the extent the
Administrative Agent acquires a perfected security interest therein with the
priority required hereunder, (ii) sell, assign, transfer, exchange, or otherwise
dispose of, or grant any option with respect to, any of the Investment Property
or Proceeds thereof or any interest therein (except pursuant to a transaction
expressly permitted by the Credit Agreement), (iii) create, incur or permit to
exist any Lien or option in favor of, or any claim of any Person with respect
to, any of the Investment Property or Proceeds thereof, or any interest therein,
except for the security interests created by this Agreement or (iv) enter into
any agreement or undertaking restricting the right or ability of such Grantor or
the Administrative Agent to sell, assign or transfer any of the Investment
Property or Proceeds thereof or any interest therein.
(c) In the case of each Grantor which is an Issuer, such Issuer agrees
that (i) it will be bound by the terms of this Agreement relating to the Pledged
Securities issued by it and will comply with such terms insofar as such terms
are applicable to it, (ii) it will notify the Administrative Agent promptly in
writing of the occurrence of any of the events described in Section 5.8(a) with
respect to the Pledged Securities issued by it and (iii) the terms of Sections
6.3(c) and 6.7 shall apply to it, MUTATIS MUTANDIS, with respect to all actions
that may be required of it pursuant to Section 6.3(c) or 6.7 with respect to the
Pledged Securities issued by it.
5.9 RECEIVABLES. (a) Other than in the ordinary course of business
consistent with its past practice and so long as no Event of Default shall have
occurred and be continuing,
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such Grantor will not (i) grant any extension of the time of payment of any
Receivable, (ii) compromise or settle any Receivable for less than the full
amount thereof, (iii) release, wholly or partially, any Person liable for the
payment of any Receivable, (iv) allow any credit or discount whatsoever on any
Receivable or (v) amend, supplement or modify any Receivable in any manner that
could adversely affect the value thereof.
(b) Such Grantor will deliver to the Administrative Agent a copy of
each material demand, notice or document received by it that questions or calls
into doubt the validity or enforceability of more than 5% of the aggregate
amount of the then outstanding Receivables.
5.10 INTELLECTUAL PROPERTY. (a) Such Grantor (either itself or through
licensees) will (i) continue to use each material Trademark on each and every
trademark class of goods applicable to its then current line as reflected in its
then current catalogs, brochures and price lists in order to maintain such
Trademark in full force free from any claim of abandonment for non-use, (ii)
maintain substantially as in the past the quality of products and services
offered under such Trademark and take all necessary steps to ensure that all
licensed users of such Trademark maintain substantially as in the past such
quality, (iii) use such Trademark with the appropriate notice of registration
and all other notices and legends required by applicable Requirements of Law,
(iv) not adopt or use any mark which is confusingly similar or a colorable
imitation of such Trademark unless the Administrative Agent, for the ratable
benefit of the Secured Parties, shall obtain a perfected security interest in
such mark pursuant to this Agreement and the Intellectual Property Security
Agreement, and (v) not (and not permit any licensee or sublicensee thereof to)
do any act or knowingly omit to do any act whereby such Trademark could
reasonably be expected to become invalidated or impaired in any material way.
Notwithstanding the foregoing, it is understood and agreed that nothing in this
Section 5.10(a) shall prohibit any Grantor from abandoning or failing to
maintain, renew or prosecute any Trademark of such Grantor that such Grantor
determines in its reasonable business judgment to no longer be necessary or
desirable in the conduct of its business, except where abandoning or failing to
maintain, renew or prosecute such Trademark could reasonably be expected to have
a Material Adverse Effect.
(b) Such Grantor (either itself or through licensees) will not do any
act, or omit to do any act, whereby any material Patent could reasonably be
expected to become forfeited, abandoned or dedicated to the public.
Notwithstanding the foregoing, it is understood and agreed that nothing in this
Section 5.10(b) shall prohibit any Grantor from abandoning or failing to
maintain, renew or prosecute any Patent of such Grantor that such Grantor
determines in its reasonable business judgment to no longer be necessary or
desirable in the conduct of its business, except where abandoning or failing to
maintain, renew or prosecute such Patent could reasonably be expected to have a
Material Adverse Effect.
(c) Such Grantor (either itself or through licensees) (i) will employ
each material Copyright and (ii) will not (and will not permit any licensee or
sublicensee thereof to) do any act or knowingly omit to do any act whereby any
material portion of the Copyrights could reasonably be expected to become
invalidated or otherwise impaired. Such Grantor will not (either itself or
through licensees) do any act whereby any material portion of the Copyrights
could reasonably be expected to fall into the public domain. Notwithstanding the
foregoing, it is
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understood and agreed that nothing in this Section 5.10(c) shall prohibit any
Grantor from abandoning or failing to maintain, renew or prosecute any Copyright
of such Grantor that such Grantor determines in its reasonable business judgment
to no longer be necessary or desirable in the conduct of its business, except
where abandoning or failing to maintain, renew or prosecute such Copyright could
reasonably be expected to have a Material Adverse Effect.
(d) Such Grantor (either itself or through licensees) will not do any
act that knowingly uses any material Intellectual Property to infringe the
intellectual property rights of any other Person.
(e) Such Grantor (either itself or through licensees) will, to the
extent applicable, use proper statutory notice in connection with the use of
each material Patent, Trademark and Copyright included in such Grantor's
Intellectual Property.
(f) Such Grantor will notify the Secured Parties promptly if it knows
that any application or registration relating to any material Intellectual
Property is likely to become forfeited, abandoned or dedicated to the public, or
of any material adverse determination or development (including, without
limitation, the institution of, or any such determination or development in, any
proceeding in the United States Patent and Trademark Office, the United States
Copyright Office or any court or tribunal in any country) regarding such
Grantor's ownership of, or the validity of, any material Intellectual Property
or such Grantor's right to register the same or to own and maintain the same.
(g) Whenever such Grantor, either by itself or through any agent,
employee, licensee or designee, shall file an application for the registration
of any Intellectual Property with the United States Patent and Trademark Office,
the United States Copyright Office or any similar office or agency in any other
country or any political subdivision thereof, such Grantor shall report such
filing to the Administrative Agent within 10 Business Days after the last day of
the fiscal quarter in which such filing occurs. Upon request of the
Administrative Agent, such Grantor shall execute and deliver, and have recorded,
any and all agreements, instruments, documents, and papers as the Administrative
Agent may reasonably request to evidence the Secured Parties' security interest
in any Copyright, Patent, Trademark or other Intellectual Property and the
goodwill and general intangibles of such Grantor relating thereto or represented
thereby.
(h) Such Grantor will take all reasonable and necessary steps,
including, without limitation, in any proceeding before the United States Patent
and Trademark Office, the United States Copyright Office or any similar office
or agency in any other country or any political subdivision thereof, to maintain
and pursue each application (and to obtain the relevant registration) and to
maintain each registration of material Intellectual Property, including, without
limitation, the payment of required fees and taxes, the filing of responses to
office actions issued by the United States Patent and Trademark Office and the
United States Copyright Office, the filing of applications for renewal or
extension, the filing of affidavits of use and affidavits of incontestability,
the filing of divisional, continuation, continuation-in-part, reissue, and
renewal applications or extensions, the payment of maintenance fees, and the
participation in
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interference, reexamination, opposition, cancellation, infringement and
misappropriation proceedings, except with respect to any Patent, Trademark or
Copyright that such Grantor determines in its reasonable business judgment to no
longer be necessary or desirable in the operation of its business (unless the
failure to otherwise comply with this Section 5.10(h) could reasonably be
expected to have a Material Adverse Effect).
(i) Such Grantor (either itself or through licensees) will not, without
the prior written consent of the Administrative Agent, discontinue use of or
otherwise abandon any Intellectual Property, or abandon any application or any
right to file an application for letters patent, trademark, or copyright, unless
such Grantor shall have previously determined that such use or the pursuit or
maintenance of such Intellectual Property is no longer desirable in the conduct
of such Grantor's business and that the loss thereof could not reasonably be
expected to have a Material Adverse Effect and, in which case, such Grantor
shall give notice of any such abandonment of a patent, registration or
application for patent or registration to the Administrative Agent within 10
Business Days after the last day of the fiscal quarter in which such abandonment
occurs.
(j) In the event that any material Intellectual Property is infringed,
misappropriated or diluted by a third party, such Grantor shall (i) take such
actions as such Grantor shall reasonably deem appropriate under the
circumstances to protect such Intellectual Property and (ii) if such
Intellectual Property is of material economic value, promptly notify the
Administrative Agent after it learns thereof and sue for infringement,
misappropriation or dilution, to seek injunctive relief where appropriate and to
recover any and all damages for such infringement, misappropriation or dilution.
(k) Such Grantor agrees that, should it obtain an ownership interest in
any item of intellectual property which is not now a part of the Intellectual
Property Collateral (the "AFTER-ACQUIRED INTELLECTUAL PROPERTY"), (i) the
provisions of Section 3 shall automatically apply thereto, (ii) any such
After-Acquired Intellectual Property, and in the case of trademarks, the
goodwill of the business connected therewith or symbolized thereby, shall
automatically become part of the Intellectual Property Collateral, (iii) with
respect to registrations, patents or applications, it shall give prompt (and, in
any event within 30 days after the date of such acquisition) written notice
thereof to the Administrative Agent in accordance herewith, and (iv) with
respect to registrations, patents or applications, it shall provide the
Administrative Agent promptly (and, in any event within 30 days after the date
of such acquisition) with an amended SCHEDULE 6 hereto and amended schedules to
the Intellectual Property Security Agreement reflecting the acquisition of such
After-Acquired Intellectual Property. Such Grantor authorizes the Administrative
Agent to modify this Agreement by amending SCHEDULE 6 hereto and to modify the
schedules to the Intellectual Property Security Agreement if such Grantor fails
to provide the Administrative Agent with satisfactory amended schedules hereto
or thereto within the time period required hereunder (and will cooperate with
the Administrative Agent in effecting any such amendment) to include any
After-Acquired Intellectual Property which becomes part of the Intellectual
Property Collateral under this Section, and to record any such modified
agreement with the United States Patent and Trademark Office, the United States
Copyright Office, or any other applicable Governmental Authority.
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(l) Such Grantor agrees to execute an Intellectual Property Security
Agreement with respect to its Intellectual Property in substantially the form of
Exhibit B in order to record the security interest granted herein to the
Administrative Agent for the ratable benefit of the Secured Parties with the
United States Patent and Trademark Office, the United States Copyright Office,
and any other applicable Governmental Authority.
5.11 VEHICLES. Outside the ordinary course of business, no Vehicle
shall be removed from the state which has issued the certificate of title or
ownership therefor for a period in excess of four months.
5.12 VALUE OF CERTAIN ASSETS. The fair market value of the assets and
property of the Grantors located in (i) the United Kingdom does not exceed
$350,000 in the aggregate and (ii) Canada does not exceed $250,000 in the
aggregate.
SECTION 6. REMEDIAL PROVISIONS
6.1 CERTAIN MATTERS RELATING TO RECEIVABLES. (a) The Administrative
Agent shall have the right to make test verifications of the Receivables in any
manner and through any medium that it reasonably considers advisable, and each
Grantor (other than Holdings) shall furnish all such assistance and information
as the Administrative Agent may require in connection with such test
verifications; PROVIDED that for so long as no Default or Event of Default
exists, the Administrative Agent shall not request such information more than
once per fiscal quarter. At any time and from time to time, upon the
Administrative Agent's reasonable request and at the expense of the relevant
Grantor (other than Holdings), such Grantor shall cause independent public
accountants or others satisfactory to the Administrative Agent to furnish to the
Administrative Agent reports showing reconciliations, aging and test
verifications of, and trial balances for, the Receivables.
(b) The Administrative Agent hereby authorizes each Grantor to collect
such Grantor's Receivables, subject to the Administrative Agent's direction and
control, and the Administrative Agent may curtail or terminate said authority
(except with respect to Holdings) at any time after the occurrence and during
the continuance of an Event of Default. If required by the Administrative Agent
at any time during the existence of an Event of Default, any payments of
Receivables, when collected by any Grantor (other than Holdings), (i) shall be
forthwith (and, in any event, within two Business Days) deposited by such
Grantor in the exact form received, duly endorsed by such Grantor to the
Administrative Agent if required, in a Collateral Account maintained under the
sole dominion and control of the Administrative Agent, subject to withdrawal by
the Administrative Agent for the account of the Secured Parties only as provided
in Section 6.5, and (ii) until so turned over, shall be held by such Grantor in
trust for the Secured Parties, segregated from other funds of such Grantor. Each
such deposit of Proceeds of Receivables shall be accompanied by a report
identifying in reasonable detail the nature and source of the payments included
in the deposit.
(c) At the Administrative Agent's request, each Grantor (other than
Holdings) shall deliver to the Administrative Agent all original and other
documents evidencing, and
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relating to, the agreements and transactions which gave rise to the Receivables,
including, without limitation, all original orders, invoices and shipping
receipts.
6.2 COMMUNICATIONS WITH OBLIGORS; GRANTORS REMAIN LIABLE. (a) The
Administrative Agent in its own name or in the name of others may at any time
during the existence of an Event of Default communicate with obligors under the
Receivables to verify with them to the Administrative Agent's satisfaction the
existence, amount and terms of any Receivables.
(b) Upon the request of the Administrative Agent at any time during the
existence of an Event of Default, each Grantor shall notify obligors on the
Receivables that the Receivables have been assigned to the Administrative Agent
for the ratable benefit of the Secured Parties and that payments in respect
thereof shall be made directly to the Administrative Agent.
(c) Anything herein to the contrary notwithstanding, each Grantor
(other than Holdings) shall remain liable under each of the Receivables to
observe and perform all the conditions and obligations to be observed and
performed by it thereunder, all in accordance with the terms of any agreement
giving rise thereto. No Secured Party shall have any obligation or liability
under any Receivable (or any agreement giving rise thereto) by reason of or
arising out of this Agreement or the receipt by any Secured Party of any payment
relating thereto, nor shall any Secured Party be obligated in any manner to
perform any of the obligations of any Grantor under or pursuant to any
Receivable (or any agreement giving rise thereto), to make any payment, to make
any inquiry as to the nature or the sufficiency of any payment received by it or
as to the sufficiency of any performance by any party thereunder, to present or
file any claim, to take any action to enforce any performance or to collect the
payment of any amounts which may have been assigned to it or to which it may be
entitled at any time or times.
6.3 PLEDGED SECURITIES. (a) Unless an Event of Default exists and the
Administrative Agent shall have given notice to the relevant Grantor of the
Administrative Agent's intent to exercise its corresponding rights pursuant to
Section 6.3(b), each Grantor shall be permitted to receive all cash dividends
paid in respect of the Pledged Stock and all payments made in respect of the
Pledged Notes, in each case paid in the normal course of business of the
relevant Issuer and consistent with past practice, to the extent permitted in
the Credit Agreement, and to exercise all voting and corporate rights with
respect to the Pledged Securities; PROVIDED, HOWEVER, that no vote shall be cast
or corporate or other ownership right exercised or other action taken which, in
the Administrative Agent's reasonable judgment, would impair the Collateral or
which would be inconsistent with or result in any violation of any provision of
the Credit Agreement, this Agreement or any other Loan Document.
(b) If an Event of Default exists and the Administrative Agent shall
give notice of its intent to exercise such rights to the relevant Grantor or
Grantors, (i) the Administrative Agent shall have the right to receive any and
all cash dividends, payments or other Proceeds paid in respect of the Pledged
Securities and make application thereof to the Obligations in the order set
forth in Section 6.5, and (ii) any or all of the Pledged Securities shall
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be registered in the name of the Administrative Agent or its nominee, and the
Administrative Agent or its nominee may thereafter exercise (x) all voting,
corporate and other rights pertaining to such Pledged Securities at any meeting
of shareholders of the relevant Issuer or Issuers or otherwise and (y) any and
all rights of conversion, exchange and subscription and any other rights,
privileges or options pertaining to such Pledged Securities as if it were the
absolute owner thereof (including, without limitation, the right to exchange at
its discretion any and all of the Pledged Securities upon the merger,
consolidation, reorganization, recapitalization or other fundamental change in
the corporate or other structure of any Issuer, or upon the exercise by any
Grantor or the Administrative Agent of any right, privilege or option pertaining
to such Pledged Securities, and in connection therewith, the right to deposit
and deliver any and all of the Pledged Securities with any committee,
depositary, transfer agent, registrar or other designated agency upon such terms
and conditions as the Administrative Agent may determine), all without liability
except to account for property actually received by it, but the Administrative
Agent shall have no duty to any Grantor to exercise any such right, privilege or
option and shall not be responsible for any failure to do so or delay in so
doing.
(c) Each Grantor hereby authorizes and instructs each Issuer of any
Pledged Securities pledged by such Grantor hereunder to (i) comply with any
instruction received by it from the Administrative Agent in writing that (x)
states that an Event of Default exists and (y) is otherwise in accordance with
the terms of this Agreement, without any other or further instructions from such
Grantor, and each Grantor agrees that each Issuer shall be fully protected in so
complying, and (ii) unless otherwise expressly permitted hereby, pay any
dividends or other payments with respect to the Pledged Securities directly to
the Administrative Agent.
6.4 PROCEEDS TO BE TURNED OVER TO ADMINISTRATIVE AGENT. In addition to
the rights of the Secured Parties specified in Section 6.1 with respect to
payments of Receivables, if an Event of Default exists, all Proceeds received by
any Grantor consisting of cash, Cash Equivalents, checks and other near-cash
items shall be held by such Grantor in trust for the Secured Parties, segregated
from other funds of such Grantor, and shall, forthwith upon receipt by such
Grantor, be turned over to the Administrative Agent in the exact form received
by such Grantor (duly endorsed by such Grantor to the Administrative Agent, if
required). All Proceeds received by the Administrative Agent hereunder shall be
held by the Administrative Agent in a Collateral Account maintained under its
sole dominion and control. All Proceeds while held by the Administrative Agent
in a Collateral Account (or by such Grantor in trust for the Secured Parties)
shall continue to be held as collateral security for all the Obligations and
shall not constitute payment thereof until applied as provided in Section 6.5.
6.5 APPLICATION OF PROCEEDS. At such intervals as may be agreed upon by
the Borrower and the Administrative Agent, or, if an Event of Default exists, at
any time at the Administrative Agent's election, the Administrative Agent may,
notwithstanding the provisions of Section 2.12 of the Credit Agreement, apply
all or any part of Proceeds constituting Collateral realized through the
exercise by the Administrative Agent of its remedies hereunder, whether or not
held in any Collateral Account, and any proceeds of the guarantee set forth in
Section 2, in payment of the Obligations in the following order:
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FIRST, to pay incurred and unpaid fees and expenses of the
Secured Parties under the Loan Documents;
SECOND, to the Administrative Agent, for application by it
towards payment of amounts then due and owing and remaining unpaid in
respect of the Obligations, PRO RATA among the Lenders according to the
amounts of the Obligations then due and owing and remaining unpaid to
the Lenders;
THIRD, to the Administrative Agent, for application by it
towards prepayment of the Obligations, PRO RATA among the Lenders
according to the amounts of the Obligations then held by the Lenders;
and
FOURTH, any balance of such Proceeds remaining after the
Obligations (other than Obligations in respect of any Specified Hedge
Agreement) shall have been paid in full, no Letters of Credit shall be
outstanding and the Commitments shall have terminated or expired shall
be paid over to the Borrower or to whomsoever may be lawfully entitled
to receive the same.
6.6 CODE AND OTHER REMEDIES. (a) If an Event of Default exists, the
Administrative Agent, on behalf of the Secured Parties, may exercise, in
addition to all other rights and remedies granted to them in this Agreement and
in any other instrument or agreement securing, evidencing or relating to the
Obligations, all rights and remedies of a secured party under the New York UCC
(whether or not the New York UCC applies to the affected Collateral) or any
other applicable law. Without limiting the generality of the foregoing, the
Administrative Agent, without demand of performance or other demand,
presentment, protest, advertisement or notice of any kind (except any notice
required by law referred to below) to or upon any Grantor or any other Person
(all and each of which demands, defenses, advertisements and notices are hereby
waived), may in such circumstances forthwith collect, receive, appropriate and
realize upon the Collateral, or any part thereof, and/or may forthwith sell,
lease, assign, give option or options to purchase, or otherwise dispose of and
deliver the Collateral or any part thereof (or contract to do any of the
foregoing), in one or more parcels at public or private sale or sales, at any
exchange, broker's board or office of any Secured Party or elsewhere upon such
terms and conditions as it may deem advisable and at such prices as it may deem
best, for cash or on credit or for future delivery without assumption of any
credit risk. Each Secured Party shall have the right upon any such public sale
or sales, and, to the extent permitted by law, upon any such private sale or
sales, to purchase the whole or any part of the Collateral so sold, free of any
right or equity of redemption in any Grantor, which right or equity is hereby
waived and released. Each Grantor further agrees, at the Administrative Agent's
reasonable request, to assemble the Collateral and make it available to the
Administrative Agent at places which the Administrative Agent shall reasonably
select, whether at such Grantor's premises or elsewhere. The Administrative
Agent shall apply the net proceeds of any action taken by it pursuant to this
Section 6.6, after deducting all reasonable costs and expenses of every kind
incurred in connection therewith or incidental to the care or safekeeping of any
of the Collateral or in any way relating to the Collateral or the rights of the
Secured Parties hereunder, including, without limitation, reasonable attorneys'
fees and disbursements, to the payment in whole or in part of
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the Obligations, in such order as the Administrative Agent may elect, and only
after such application and after the payment by the Administrative Agent of any
other amount required by any provision of law, including, without limitation,
Section 9-504(l)(c) of the New York UCC, need the Administrative Agent account
for the surplus, if any, to any Grantor. To the extent permitted by applicable
law, each Grantor waives all claims, damages and demands it may acquire against
any Secured Party arising out of the exercise by them of any rights hereunder.
If any notice of a proposed sale or other disposition of Collateral shall be
required by law, such notice shall be deemed reasonable and proper if given at
least 10 days before such sale or other disposition.
(b) In the event of any Disposition of any of the Intellectual
Property, the goodwill of the business connected with and symbolized by any
Trademarks subject to such Disposition shall be included, and the applicable
Grantor (other than Holdings) shall supply the Administrative Agent or its
designee with such Grantor's know-how and expertise, and with documents and
things embodying the same, relating to the manufacture, distribution,
advertising and sale of products or the provision of services relating to any
Intellectual Property subject to such Disposition, and such Grantor's customer
lists and other records and documents relating to such Intellectual Property and
to the manufacture, distribution, advertising and sale of such products and
services.
6.7 REGISTRATION RIGHTS. (a) If the Administrative Agent shall
determine to exercise its right to sell any or all of the Pledged Stock or the
Pledged Debt Securities pursuant to Section 6.6, and if in the opinion of the
Administrative Agent it is necessary or advisable to have the Pledged Stock or
the Pledged Debt Securities, or that portion thereof to be sold, registered
under the provisions of the Securities Act, the relevant Grantor will cause the
Issuer thereof to (i) execute and deliver, and cause the directors and officers
of such Issuer to execute and deliver, all such instruments and documents, and
do or cause to be done all such other acts as may be, in the opinion of the
Administrative Agent, necessary or advisable to register the Pledged Stock or
the Pledged Debt Securities, or that portion thereof to be sold, under the
provisions of the Securities Act, (ii) use its best efforts to cause the
registration statement relating thereto to become effective and to remain
effective for a period of nine months from the date of the first public offering
of the Pledged Stock or the Pledged Debt Securities, or that portion thereof to
be sold, and (iii) make all amendments thereto and/or to the related prospectus
which, in the opinion of the Administrative Agent, are necessary or advisable,
all in conformity with the requirements of the Securities Act and the rules and
regulations of the SEC applicable thereto. Each Grantor agrees to cause such
Issuer to comply with the provisions of the securities or "Blue Sky" laws of any
and all jurisdictions which the Administrative Agent shall designate and to make
available to its security holders, as soon as practicable, an earnings statement
(which need not be audited) which will satisfy the provisions of Section 11(a)
of the Securities Act.
(b) Each Grantor recognizes that the Administrative Agent may be unable
to effect a public sale of any or all the Pledged Stock or the Pledged Debt
Securities, by reason of certain prohibitions contained in the Securities Act
and applicable state securities laws or otherwise, and may be compelled to
resort to one or more private sales thereof to a restricted group of purchasers
which will be obliged to agree, among other things, to acquire such
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securities for their own account for investment and not with a view to the
distribution or resale thereof. Each Grantor acknowledges and agrees that any
such private sale may result in prices and other terms less favorable than if
such sale were a public sale and, notwithstanding such circumstances, agrees
that any such private sale shall be deemed to have been made in a commercially
reasonable manner. The Administrative Agent shall be under no obligation to
delay a sale of any of the Pledged Stock or the Pledged Debt Securities for the
period of time necessary to permit the Issuer thereof to register such
securities for public sale under the Securities Act, or under applicable state
securities laws, even if such Issuer would agree to do so.
(c) Each Grantor agrees to use its best efforts to do or cause to be
done all such other acts as may be necessary to make such sale or sales of all
or any portion of the Pledged Stock or the Pledged Debt Securities pursuant to
this Section 6.7 valid and binding and in compliance with any and all other
applicable Requirements of Law. Each Grantor further agrees that a breach of any
of the covenants contained in this Section 6.7 will cause irreparable injury to
the Secured Parties, that the Secured Parties have no adequate remedy at law in
respect of such breach and, as a consequence, that each and every covenant
contained in this Section 6.7 shall be specifically enforceable against such
Grantor, and such Grantor hereby waives and agrees not to assert any defenses
against an action for specific performance of such covenants except for a
defense that no Event of Default exists under the Credit Agreement or a defense
of payment.
6.8 WAIVER; DEFICIENCY. Holdings and each Guarantor waives and agrees
not to assert any rights or privileges which it may acquire under Section 9-112
of the New York UCC. Each Grantor shall remain liable for any deficiency if the
proceeds of any sale or other disposition of the Collateral are insufficient to
pay its Obligations and the fees and disbursements of any attorneys employed by
any Secured Party to collect such deficiency.
SECTION 7. THE ADMINISTRATIVE AGENT
7.1 ADMINISTRATIVE AGENT'S APPOINTMENT AS ATTORNEY-IN-FACT, ETC. (a)
Each Grantor hereby irrevocably constitutes and appoints the Administrative
Agent and any officer or agent thereof notified to such Grantor, with full power
of substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of such Grantor and in the name of
such Grantor or in its own name, for the purpose of carrying out the terms of
this Agreement, to take any and all appropriate action and to execute any and
all documents and instruments which may be necessary or desirable to accomplish
the purposes of this Agreement, and, without limiting the generality of the
foregoing, each Grantor hereby gives the Administrative Agent the power and
right, on behalf of such Grantor, without notice to or assent by such Grantor,
to do any or all of the following upon the occurrence of and during the
continuation of an Event of Default:
(i) in the name of such Grantor or its own name, or otherwise,
take possession of and endorse and collect any checks, drafts, notes,
acceptances or other instruments for the payment of moneys due under
any Receivable or with respect to any other Collateral and file any
claim or take any other action or proceeding in any court of
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law or equity or otherwise deemed necessary by the Administrative Agent
for the purpose of collecting any and all such moneys due under any
Receivable or with respect to any other Collateral whenever payable;
(ii) in the case of any Intellectual Property, execute and
deliver, and have recorded, any and all agreements, instruments,
documents and papers as the Administrative Agent may request to
evidence the Secured Parties' security interest in such Intellectual
Property and the goodwill and general intangibles of such Grantor
relating thereto or represented thereby;
(iii) pay or discharge taxes and Liens levied or placed on or
threatened against the Collateral, effect any repairs or any insurance
called for by the terms of this Agreement and pay all or any part of
the premiums therefor and the costs thereof;
(iv) execute, in connection with any sale provided for in
Section 6.6 or 6.7, any endorsements, assignments or other instruments
of conveyance or transfer with respect to the Collateral; and
(v) (1) direct any party liable for any payment under any of
the Collateral to make payment of any and all moneys due or to become
due thereunder directly to the Administrative Agent or as the
Administrative Agent shall direct; (2) ask or demand for, collect, and
receive payment of and receipt for, any and all moneys, claims and
other amounts due or to become due at any time in respect of or arising
out of any Collateral; (3) sign and endorse any invoices, freight or
express bills, bills of lading, storage or warehouse receipts, drafts
against debtors, assignments, verifications, notices and other
documents in connection with any of the Collateral; (4) commence and
prosecute any suits, actions or proceedings at law or in equity in any
court of competent jurisdiction to collect the Collateral or any
portion thereof and to enforce any other right in respect of any
Collateral; (5) defend any suit, action or proceeding brought against
such Grantor with respect to any Collateral; (6) settle, compromise or
adjust any such suit, action or proceeding and, in connection
therewith, give such discharges or releases as the Administrative Agent
may deem appropriate; (7) assign any Copyright, Patent or Trademark
(along with the goodwill of the business to which any such Copyright,
Patent or Trademark pertains), throughout the world for such term or
terms, on such conditions, and in such manner, as the Administrative
Agent shall in its sole discretion determine; and (8) generally, sell,
transfer, pledge and make any agreement with respect to or otherwise
deal with any of the Collateral as fully and completely as though the
Administrative Agent were the absolute owner thereof for all purposes,
and do, at the Administrative Agent's option and such Grantor's
expense, at any time, or from time to time, all acts and things which
the Administrative Agent deems necessary to protect, preserve or
realize upon the Collateral and the Secured Parties' security interests
therein and to effect the intent of this Agreement, all as fully and
effectively as such Grantor might do.
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(b) If any Grantor fails to perform or comply with any of its
agreements contained herein, the Administrative Agent, at its option, but
without any obligation so to do, may perform or comply, or otherwise cause
performance or compliance, with such agreement.
(c) The expenses of the Administrative Agent incurred in connection
with actions undertaken as provided in this Section 7.1, together with interest
thereon at a rate per annum equal to the rate per annum at which interest would
then be payable on past due Revolving Credit Loans that are Base Rate Loans
under the Credit Agreement, from the date of payment by the Administrative Agent
to the date reimbursed by the relevant Grantor, shall be payable by such Grantor
to the Administrative Agent on demand.
(d) Each Grantor hereby ratifies all that said attorneys shall lawfully
do or cause to be done by virtue hereof. All powers, authorizations and agencies
contained in this Agreement are coupled with an interest and are irrevocable
until this Agreement is terminated and the security interests created hereby are
released.
7.2 DUTY OF ADMINISTRATIVE AGENT. The Administrative Agent's sole duty
with respect to the custody, safekeeping and physical preservation of the
Collateral in its possession, under Section 9-207 of the New York UCC or
otherwise, shall be to deal with it in the same manner as the Administrative
Agent deals with similar property for its own account. Neither the
Administrative Agent, nor any other Secured Party nor any of their respective
officers, directors, partners, employees, agents, attorneys and other advisors,
attorneys-in-fact or affiliates shall be liable for failure to demand, collect
or realize upon any of the Collateral or for any delay in doing so or shall be
under any obligation to sell or otherwise dispose of any Collateral upon the
request of any Grantor or any other Person or to take any other action
whatsoever with regard to the Collateral or any part thereof. The powers
conferred on the Secured Parties hereunder are solely to protect the Secured
Parties' interests in the Collateral and shall not impose any duty upon any
Secured Party to exercise any such powers. The Secured Parties shall be
accountable only for amounts that they actually receive as a result of the
exercise of such powers, and neither they nor any of their officers, directors,
partners, employees, agents, attorneys and other advisors, attorneys-in-fact or
affiliates shall be responsible to any Grantor for any act or failure to act
hereunder, except to the extent that any such act or failure to act is found by
a final and nonappealable decision of a court of competent jurisdiction to have
resulted solely from their own gross negligence or willful misconduct.
7.3 EXECUTION OF FINANCING STATEMENTS. Pursuant to Section 9-402 of the
New York UCC and any other applicable law, each Grantor authorizes the
Administrative Agent to file or record financing statements and other filing or
recording documents or instruments with respect to the Collateral without the
signature of such Grantor in such form and in such offices as the Administrative
Agent reasonably determines appropriate to perfect or maintain the perfection of
the security interests of the Administrative Agent under this Agreement. A
photographic or other reproduction of this Agreement shall be sufficient as a
financing statement or other filing or recording document or instrument for
filing or recording in any jurisdiction.
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7.4 AUTHORITY OF ADMINISTRATIVE AGENT. Each Grantor acknowledges that
the rights and responsibilities of the Administrative Agent under this Agreement
with respect to any action taken by the Administrative Agent or the exercise or
non-exercise by the Administrative Agent of any option, voting right, request,
judgment or other right or remedy provided for herein or resulting or arising
out of this Agreement shall, as between the Administrative Agent and the other
Secured Parties, be governed by the Credit Agreement and by such other
agreements with respect thereto as may exist from time to time among them, but,
as between the Administrative Agent and the Grantors, the Administrative Agent
shall be conclusively presumed to be acting as agent for the Secured Parties
with full and valid authority so to act or refrain from acting, and no Grantor
shall be under any obligation, or entitlement, to make any inquiry respecting
such authority.
SECTION 8. MISCELLANEOUS
8.1 AMENDMENTS IN WRITING. None of the terms or provisions of this
Agreement may be waived, amended, supplemented or otherwise modified except in
accordance with Section 10.1 of the Credit Agreement.
8.2 NOTICES. All notices, requests and demands to or upon the
Administrative Agent or any Grantor hereunder shall be effected in the manner
provided for in Section 10.2 of the Credit Agreement; PROVIDED that any such
notice, request or demand to or upon any Guarantor shall be addressed to such
Guarantor at its notice address set forth on SCHEDULE 1.
8.3 NO WAIVER BY COURSE OF CONDUCT; CUMULATIVE REMEDIES. No Secured
Party shall by any act (except by a written instrument pursuant to Section 8.1),
delay, indulgence, omission or otherwise be deemed to have waived any right or
remedy hereunder or to have acquiesced in any Default or Event of Default. No
failure to exercise, nor any delay in exercising, on the part of any Secured
Party, any right, power or privilege hereunder shall operate as a waiver
thereof. No single or partial exercise of any right, power or privilege
hereunder shall preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. A waiver by any Secured Party of any
right or remedy hereunder on any one occasion shall not be construed as a bar to
any right or remedy which such Secured Party would otherwise have on any future
occasion. The rights and remedies herein provided are cumulative, may be
exercised singly or concurrently and are not exclusive of any other rights or
remedies provided by law.
8.4 ENFORCEMENT EXPENSES; INDEMNIFICATION. (a) Each Grantor (other than
Holdings) agrees to pay or reimburse each Secured Party for all its costs and
expenses incurred in collecting against such Grantor under the guarantee
contained in Section 2 and each Grantor agrees to pay or reimburse each Secured
Party for all its costs and expenses incurred in otherwise enforcing or
preserving any rights under this Agreement and the other Loan Documents to which
such Grantor is a party, including, without limitation, the fees and
disbursements of counsel to each Secured Party and of counsel to the
Administrative Agent.
(b) Each Grantor agrees to pay, and to save the Secured Parties
harmless from, any and all liabilities with respect to, or resulting from any
delay in paying, any and all stamp,
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excise, sales or other similar taxes which may be payable or determined to be
payable with respect to any of the Collateral or in connection with any of the
transactions contemplated by this Agreement.
(c) Each Grantor agrees to pay, and to save the Secured Parties
harmless from, any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever with respect to the execution, delivery, enforcement,
performance and administration of this Agreement to the extent the Borrower
would be required to do so pursuant to Section 10.5 of the Credit Agreement.
(d) The agreements in this Section shall survive repayment of the
Obligations and all other amounts payable under the Credit Agreement and the
other Loan Documents.
(e) Each Grantor agrees that the provisions of Section 2.20 of the
Credit Agreement are hereby incorporated herein by reference, MUTATIS MUTANDIS,
and each Secured Party shall be entitled to rely on each of them as if they were
fully set forth herein.
8.5 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
successors and assigns of each Grantor and shall inure to the benefit of the
Secured Parties and their successors and assigns; PROVIDED that no Grantor may
assign, transfer or delegate any of its rights or obligations under this
Agreement without the prior written consent of the Administrative Agent.
8.6 SET-OFF. Each Grantor hereby irrevocably authorizes each Secured
Party at any time and from time to time during the existence of an Event of
Default, upon any amount becoming due and payable by such Grantor whether at
stated maturity by acceleration or otherwise, without notice to such Grantor or
any other Grantor, any such notice being expressly waived by each Grantor, to
set-off and appropriate and apply any and all deposits (general or special, time
or demand, provisional or final), in any currency, and any other credits,
indebtedness or claims, in any currency, in each case whether direct or
indirect, absolute or contingent, matured or unmatured, at any time held or
owing by such Secured Party to or for the credit or the account of such Grantor,
or any part thereof in such amounts as such Secured Party may elect, against and
on account of the obligations and liabilities of such Grantor to such Secured
Party hereunder and claims of every nature and description of such Secured Party
against such Grantor, in any currency, whether arising hereunder, under the
Credit Agreement, any other Loan Document or otherwise, as such Secured Party
may elect, whether or not any Secured Party has made any demand for payment and
although such obligations, liabilities and claims may be contingent or
unmatured. Each Secured Party shall notify such Grantor promptly of any such
set-off and the application made by such Secured Party of the proceeds thereof;
PROVIDED that the failure to give such notice shall not affect the validity of
such set-off and application. The rights of each Secured Party under this
Section are in addition to other rights and remedies (including, without
limitation, other rights of set-off) which such Secured Party may have.
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8.7 COUNTERPARTS. This Agreement may be executed by one or more of the
parties to this Agreement on any number of separate counterparts (including by
telecopy), and all of said counterparts taken together shall be deemed to
constitute one and the same instrument.
8.8 SEVERABILITY. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
8.9 SECTION HEADINGS. The Section headings used in this Agreement are
for convenience of reference only and are not to affect the construction hereof
or be taken into consideration in the interpretation hereof.
8.10 INTEGRATION. This Agreement and the other Loan Documents represent
the agreement of the Grantors, the Administrative Agent and the other Secured
Parties with respect to the subject matter hereof and thereof, and there are no
promises, undertakings, representations or warranties by any Secured Party
relative to subject matter hereof and thereof not expressly set forth or
referred to herein or in the other Loan Documents.
8.11 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
8.12 SUBMISSION TO JURISDICTION; WAIVERS. Each Grantor hereby
irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to
which it is a party, or for recognition and enforcement of any judgment
in respect thereof, to the non-exclusive general jurisdiction of the
Courts of the State of New York, the courts of the United States of
America for the Southern District of New York, and appellate courts
from any thereof;
(b) consents that any such action or proceeding may be brought
in such courts and waives any objection that it may now or hereafter
have to the venue of any such action or proceeding in any such court or
that such action or proceeding was brought in an inconvenient court and
agrees not to plead or claim the same;
(c) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage
prepaid, to such Grantor at its address referred to in Section 8.2 or
at such other address of which the Administrative Agent shall have been
notified pursuant thereto;
34
<PAGE>
(d) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or shall
limit the right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any
right it may have to claim or recover in any legal action or proceeding
referred to in this Section any special, exemplary, punitive or
consequential damages.
8.13 ACKNOWLEDGMENTS. Each Grantor hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution and
delivery of this Agreement and the other Loan Documents to which it is a party;
(b) no Secured Party has any fiduciary relationship with or duty to any
Grantor arising out of or in connection with this Agreement or any of the other
Loan Documents, and the relationship between the Grantors, on the one hand, and
the Secured Parties, on the other hand, in connection herewith or therewith is
solely that of debtor and creditor; and
(c) no joint venture is created hereby or by the other Loan Documents
or otherwise exists by virtue of the transactions contemplated hereby among the
Secured Parties or among the Grantors and the Secured Parties.
8.14 ADDITIONAL GRANTORS. Each Subsidiary of the Borrower that is
required to become a party to this Agreement pursuant to Section 6.10 of the
Credit Agreement shall become a Grantor for all purposes of this Agreement upon
execution and delivery by such Subsidiary of an Assumption Agreement in the form
of Annex 1 hereto.
8.15 RELEASES. (a) At such time as the Loans, the Reimbursement
Obligations in respect of Letters of Credit have been paid in full and all other
Obligations (excluding Obligations in respect of any Specified Hedge Agreement
and unmatured contingent reimbursement and indemnification obligations) shall
have been paid in full, the Commitments have been terminated or expired and no
Letters of Credit shall be outstanding, the Collateral shall be released from
the Liens created hereby, and this Agreement and all obligations (other than
those expressly stated to survive such termination) of the Administrative Agent
and each Grantor hereunder shall terminate, all without delivery of any
instrument or performance of any act by any party, and all rights to the
Collateral shall revert to the Grantors. At the request and sole expense of any
Grantor following any such termination, the Administrative Agent shall deliver
to such Grantor any Collateral held by the Administrative Agent hereunder, and
execute and deliver to such Grantor such documents as such Grantor shall
reasonably request to evidence such termination.
(b) If any of the Collateral shall be Disposed of by any Grantor in a
transaction permitted by the Credit Agreement, then the Administrative Agent, at
the request and sole expense of such Grantor, shall execute and deliver to such
Grantor all releases or other documents reasonably necessary or desirable for
the release of the Liens created hereby on such Collateral. At the request and
sole expense of the Borrower, a Guarantor shall be released from
35
<PAGE>
its obligations hereunder in the event that all the Capital Stock of such
Guarantor shall be Disposed of in a transaction permitted by the Credit
Agreement; PROVIDED that the Borrower shall have delivered to the Administrative
Agent, at least five Business Days prior to the date of the proposed release, a
written request for release identifying the relevant Guarantor and the terms of
the Disposition in reasonable detail, including the price thereof and any
expenses in connection therewith, together with a certification by the Borrower
stating that such transaction is in compliance with the Credit Agreement and the
other Loan Documents and that the Proceeds of such Disposition will be applied
in accordance therewith.
8.16 WAIVER OF JURY TRIAL. EACH GRANTOR HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING
TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
36
<PAGE>
IN WITNESS WHEREOF, each of the undersigned has caused this Guarantee
and Collateral Agreement to be duly executed and delivered as of the date first
above written.
O'SULLIVAN INDUSTRIES, INC.
By: /s/ Richard D. Davidson
------------------------------------
Name:
Title:
O'SULLIVAN INDUSTRIES - VIRGINIA, INC.
By: /s/ Richard D. Davidson
------------------------------------
Name:
Title:
O'SULLIVAN INDUSTRIES HOLDINGS, INC.
By: /s/ Richard D. Davidson
------------------------------------
Name:
Title:
LEHMAN COMMERCIAL PAPER INC., as
Administrative Agent
By: /s/ Mark W. Filipski
------------------------------------
Name:
Title:
37
<PAGE>
Exhibit 10.7
FORM OF INTELLECTUAL PROPERTY SECURITY AGREEMENT
This INTELLECTUAL PROPERTY SECURITY AGREEMENT, dated as of November 30,
1999 (as amended, supplemented or otherwise modified from time to time, the
"INTELLECTUAL PROPERTY SECURITY AGREEMENT"), is made by each of the signatories
hereto (collectively, the "GRANTORS") in favor of Lehman Commercial Paper Inc.,
as administrative agent (in such capacity, the "ADMINISTRATIVE AGENT") for the
Secured Parties (as defined in the Credit Agreement referred to below).
WHEREAS, O'Sullivan Industries, Inc., a Delaware corporation (the
"BORROWER"), and O'Sullivan Industries Holdings, Inc., a Delaware corporation,
have entered into a Credit Agreement, dated as of November 30, 1999 (as amended,
supplemented, replaced or otherwise modified from time to time, the "CREDIT
AGREEMENT"), with the banks and other financial institutions and entities from
time to time party thereto, Lehman Brothers Inc., as advisor, lead arranger and
book manager and Lehman Commercial Paper Inc., as administrative agent and
Wachovia Bank, N.A., as syndication agent. Capitalized terms used and not
defined herein have the meanings given such terms in the Credit Agreement.
WHEREAS, it is a condition precedent to the obligation of the Lenders
to make their respective extensions of credit to the Borrower under the Credit
Agreement that the Grantors shall have executed and delivered that certain
Guarantee and Collateral Agreement, dated as of November 30, 1999, in favor of
the Administrative Agent (as amended, supplemented, replaced or otherwise
modified from time to time, the "GUARANTEE AND COLLATERAL AGREEMENT").
WHEREAS, under the terms of the Guarantee and Collateral Agreement, the
Grantors have granted a security interest in certain Property, including,
without limitation, certain Intellectual Property of the Grantors to the
Administrative Agent for the ratable benefit of the Secured Parties, and have
agreed as a condition thereof to execute this Intellectual Property Security
Agreement for recording with the United States Patent and Trademark Office, the
United States Copyright Office, and other applicable Governmental Authorities.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Grantors party hereto agree as
follows:
SECTION 1. GRANT OF SECURITY. Each Grantor party hereto hereby grants
to the Administrative Agent for the ratable benefit of the Secured Parties a
security interest in and to all of such Grantor's right, title and interest in
and to the following (the "INTELLECTUAL PROPERTY COLLATERAL"), as collateral
security for the prompt and complete payment and performance when due (whether
at the stated maturity, by acceleration or otherwise) of such Grantor's
Obligations:
(a) (i) all trademarks, service marks, trade names, corporate names,
company names, business names, trade dress, trade styles, logos, or other
indicia of origin or source
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identification, trademark and service mark registrations, and applications for
trademark or service mark registrations and any new renewals thereof, including,
without limitation, each registration and application identified in Schedule 1,
(ii) the right to sue or otherwise recover for any and all past, present and
future infringements and misappropriations thereof, (iii) all income, royalties,
damages and other payments now and hereafter due and/or payable with respect
thereto (including, without limitation, payments under all licenses entered into
in connection therewith, and damages and payments for past, present or future
infringements thereof), and (iv) all other rights of any kind whatsoever of such
Grantor accruing thereunder or pertaining thereto, together in each case with
the goodwill of the business connected with the use of, and symbolized by, each
of the above (collectively, the "TRADEMARKS");
(b) (i) all patents, patent applications and patentable inventions,
including, without limitation, each patent and patent application identified in
Schedule 1, (ii) all inventions and improvements described and claimed therein,
(iii) the right to sue or otherwise recover for any and all past, present and
future infringements and misappropriations thereof, (iv) all income, royalties,
damages and other payments now and hereafter due and/or payable with respect
thereto (including, without limitation, payments under all licenses entered into
in connection therewith, and damages and payments for past, present or future
infringements thereof), and (v) all reissues, divisions, continuations,
continuations-in-art, substitutes, renewals, and extensions thereof, all
improvements thereon and all other rights of any kind whatsoever of such Grantor
accruing thereunder or pertaining thereto (collectively, the "PATENTS");
(c) (i) all copyrights, whether or not the underlying works of
authorship have been published, and all works of authorship and other
intellectual property rights therein, all copyrights of works based on,
incorporated in, derived from or relating to works covered by such copyrights,
all right, title and interest to make and exploit all derivative works based on
or adopted from works covered by such copyrights, and all copyright
registrations and copyright applications, and any renewals or extensions
thereof, including, without limitation, each registration and application
identified in Schedule 1, (ii) the rights to print, publish and distribute any
of the foregoing, (iv) the right to sue or otherwise recover for any and all
past, present and future infringements and misappropriations thereof, (iv) all
income, royalties, damages and other payments now and hereafter due and/or
payable with respect thereto (including, without limitation, payments under all
licenses entered into in connection therewith, and damages and payments for
past, present or future infringements thereof), and (v) all other rights of any
kind whatsoever of such Grantor accruing thereunder or pertaining thereto
("COPYRIGHTS");
(d) (i) all trade secrets and all confidential and proprietary
information, including know-how, manufacturing and production processes and
techniques, inventions, research and development information, technical data,
financial, marketing and business data, pricing and cost information, business
and marketing plans, and customer and supplier lists and information, including,
without limitation, all material trade secrets identified in Schedule 1, (ii)
the right to sue or otherwise recover for any and all past, present and future
infringements and misappropriations thereof, (iii) all income, royalties,
damages and other payments now and hereafter due and/or payable with respect
thereto (including, without limitation, payments under all licenses entered into
in connection therewith, and damages and payments for past, present or
2
<PAGE>
future infringements thereof), and (iv) all other rights of any kind whatsoever
of such Grantor accruing thereunder or pertaining thereto (collectively, the
"TRADE SECRETS");
(e) (i) all licenses or agreements, whether written or oral, providing
for the grant by or to any Grantor of: (A) any right to use any Trademark or
Trade Secret, (B) any right to manufacture, use or sell any invention covered in
whole or in part by a Patent, and (C) any right under any Copyright including,
without limitation, the grant of rights to manufacture, distribute, exploit and
sell materials derived from any Copyright including, without limitation, any of
the foregoing identified in Schedule 1, (ii) the right to sue or otherwise
recover for any and all past, present and future infringements and
misappropriations of any of the foregoing, (iii) all income, royalties, damages
and other payments now and hereafter due and/or payable with respect thereto
(including, without limitation, payments under all licenses entered into in
connection therewith, and damages and payments for past, present or future
infringements thereof), and (iv) all other rights of any kind whatsoever of such
Grantor accruing thereunder or pertaining thereto; and
(f) any and all proceeds of the foregoing.
SECTION 2. RECORDATION. Each Grantor party hereto authorizes and
requests that the Register of Copyrights, the Commissioner of Patents and
Trademarks and any other applicable government officer record this Intellectual
Property Security Agreement.
SECTION 3. EXECUTION IN COUNTERPARTS. This Agreement may be executed in
any number of counterparts (including by telecopy), each of which when so
executed shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
SECTION 4. GOVERNING LAW. This Intellectual Property Security Agreement
shall be governed by, and construed and interpreted in accordance with, the law
of the State of New York.
SECTION 5. CONFLICT PROVISION. This Intellectual Property Security
Agreement has been entered into in conjunction with the provisions of the
Guarantee and Collateral Agreement and the Credit Agreement. The rights and
remedies of each party hereto with respect to the security interest granted
herein are without prejudice to, and are in addition to those set forth in the
Guarantee and Collateral Agreement and the Credit Agreement, all terms and
provisions of which are incorporated herein by reference. In the event that any
provisions of this Intellectual Property Security Agreement are in conflict with
the Guarantee and Collateral Agreement or the Credit Agreement, the provisions
of the Guarantee and Collateral Agreement or the Credit Agreement shall govern.
3
<PAGE>
IN WITNESS WHEREOF, each of the undersigned has caused this
Intellectual Property Security Agreement to be duly executed and delivered as of
the date first above written.
O'SULLIVAN INDUSTRIES, INC.
By /s/ Richard D. Davidson:
--------------------------------------
Name:
Title:
O'SULLIVAN INDUSTRIES VIRGINIA, INC.
By: /s/ Richard D. Davidson
--------------------------------------
Name:
Title:
4
<PAGE>
INTERCOMPANY SUBORDINATED DEMAND PROMISSORY NOTE
Note Number: 1 Dated November 30, 1999
FOR VALUE RECEIVED, the Borrower and each of its Subsidiaries
(collectively, the "GROUP MEMBERS" and each, a "GROUP MEMBER") which is a
party to this intercompany subordinated demand promissory note (the
"PROMISSORY NOTE") promises to pay to the order of such other_ as makes loans
to such (each _ which borrows money pursuant to this Promissory Note is
referred to herein as a "PAYOR" and each_ which makes loans and advances
pursuant to this Promissory Note is referred to herein as a "PAYEE"), on
demand, in lawful money of the United States of America, in immediately
available funds and at the appropriate office of the Payee, the aggregate
unpaid principal amount of all loans and advances heretofore and hereafter
made by such Payee to such Payor and any other indebtedness now or hereafter
owing by such Payor to such Payee as shown either on Schedule A attached
hereto (and any continuation thereof) or in the books and records of such
Payee. The failure to show any such Indebtedness or any error in showing such
Indebtedness shall not affect the obligations of any Payor hereunder.
Capitalized terms used herein but not otherwise defined herein shall have the
meanings given such terms in the Credit Agreement, dated as of November 30,
1999 (as amended, supplemented, replaced or otherwise modified from time to
time, the "CREDIT AGREEMENT"), among O'Sullivan Industries, Inc. (the
"BORROWER"), each bank and other financial institution or entity from time to
time party thereto, Lehman Brothers Inc., as advisor, lead arranger and book
manager, Wachovia Bank, N.A., as syndication agent, and Lehman Commercial
Paper Inc., as administrative agent (in such capacity and including its
successors and assigns, the "ADMINISTRATIVE AGENT").
The unpaid principal amount hereof from time to time outstanding
shall bear interest at a rate equal to the rate as may be agreed upon in
writing from time to time by the relevant Payor and Payee or, at the
Administrative Agent's option following the occurrence and during the
continuation of an Event of Default, at the rate per annum then applicable to
Base Rate Loans under the Revolving Credit Facility or, following expiration
or termination of the Revolving Credit Commitments, the rate applicable to
Base Rate Loans thereunder immediately prior to such expiration or
termination, in each case, PLUS 2.0% per annum. Interest shall be due and
payable on the last day of each month commencing after the date hereof or at
such other times as may be agreed upon in writing from time to time by the
relevant Payor and Payee. Upon demand for payment of any principal amount
hereof, accrued but unpaid interest on such principal amount shall also be
due and payable. Interest shall be paid in lawful money of the United States
of America and in immediately available funds. Interest shall be computed for
the actual number of days elapsed on the basis of a year consisting of 365
days.
Each Payor and any endorser of this Promissory Note hereby waives
presentment, demand, protest and notice of any kind. No failure to exercise,
and no delay in exercising, any rights hereunder on the part of the holder
hereof shall operate as a waiver of such rights.
This Promissory Note has been pledged by each Payee to the
Administrative Agent, for the benefit of the Secured Parties, as security for
such Payee's Obligations, if any,
<PAGE>
under the Credit Agreement, the Guarantee and Collateral Agreement and the
other Loan Documents to which such Payee is a party. Each Payor acknowledges
and agrees that the Administrative Agent and the other Secured Parties may
exercise all the rights of the Payees under this Promissory Note and will not
be subject to any abatement, reduction, recoupment, defense, setoff or
counterclaim available to such Payor.
Each Payee agrees that any and all claims of such Payee against any
Payor or any endorser of this Promissory Note, or against any of their
respective properties, shall be subordinate and subject in right of payment to
the Obligations until all of the Obligations have been performed and paid in
full in immediately available funds, no Letters of Credit are outstanding and
the Commitments have been terminated; PROVIDED, that each Payor may make
payments to the applicable Payee so long as no Default or Event of Default
shall have occurred and be continuing; and PROVIDED, FURTHER, that all loans
and advances made by a Payee pursuant to this Promissory Note shall be
received by the applicable Payor subject to the provisions of the Credit
Agreement including, without limitation, the provisions thereof relating to
mandatory prepayment. Notwithstanding any right of any Payee to ask, demand,
sue for, take or receive any payment from any Payor, all rights, Liens and
security interests of such Payee, whether now or hereafter arising and
howsoever existing, in any assets of any Payor (whether constituting part of
the security or collateral given to the Administrative Agent or any Secured
Party to secure payment of all or any part of the Obligations or otherwise)
shall be and hereby are subordinated to the rights of the Administrative
Agent or any Secured Party in such assets. Except as expressly permitted by
the Credit Agreement, the Payees shall have no right to possession of any such
asset or to foreclose upon, or exercise any other remedy in respect of, any
such asset, whether by judicial action or otherwise, unless and until all of
the Obligations shall have been performed and paid in full in immediately
available funds, no Letters of Credit are outstanding and the Commitments
under the Credit Agreement have been terminated.
If all or any part of the assets of any Payor, or the proceeds
thereof, are subject to any distribution, division or application to the
creditors of any Payor, whether partial or complete, voluntary or
involuntary, and whether by reason of liquidation, bankruptcy, arrangement,
receivership, assignment for the benefit of creditors or any other action or
proceeding, or if the business of any Payor is dissolved or if (except as
expressly permitted by the Credit Agreement) all or substantially all of the
assets of any Payor are sold, then, and in any such event, any payment or
distribution of any kind or character, whether in cash, securities or other
investment property, or otherwise, which shall be payable or deliverable upon
or with respect to any indebtedness of such Payor to any Payee ("PAYOR
INDEBTEDNESS") shall be paid or delivered directly to the Administrative
Agent for application to any of the Obligations, due or to become due, until
the date on which the Obligations shall have been performed and paid in full
in immediately available funds, no Letters of Credit shall be outstanding and
the Commitments shall have been terminated. Each Payee irrevocably
authorizes, empowers and appoints the Administrative Agent as such Payee's
attorney-in-fact (which appointment is coupled with an interest and is
irrevocable) to demand, sue for, collect and receive every such payment or
distribution and give acquittance therefor and to make and present for and on
behalf of such Payee such proofs of claim and take such other action, in the
Administrative Agent's own name or in the name of such Payee or otherwise, as
the Administrative Agent may deem necessary or
2
<PAGE>
advisable for the enforcement of this Promissory Note. Each Payee also agrees
to execute, verify, deliver and file any such proofs of claim in respect of
the Payor Indebtedness requested by the Administrative Agent. The
Administrative Agent may vote such proofs of claim in any such proceeding
(and the applicable Payee shall not be entitled to withdraw such vote),
receive and collect any and all dividends or other payments or disbursements
made on Payor Indebtedness in whatever form the same may be paid or issued
and apply the same on account of any of the Obligations. Except as otherwise
expressly permitted under the Credit Agreement, should any payment,
distribution, security or other investment property or instrument or any
proceeds thereof be received by an Payee upon or with respect to Payor
Indebtedness owing to such Payee prior to such time as the Obligations have
been performed and paid in full in immediately available funds, no Letters of
Credit are outstanding and the Commitments have been terminated, such Payee
shall receive and hold the same in trust, as trustee, for the benefit of the
Administrative Agent and the Secured Parties, and shall forthwith deliver the
same to the Administrative Agent, for the benefit of the Secured Parties, in
precisely the form received (except for the endorsement or assignment of such
Payee where necessary or advisable in the Administrative Agent's judgment),
for application to any of the Obligations, due or not due, and until so
delivered, the same shall be segregated from the other assets of such Payee
and held in trust by such Payee as the property of the Administrative Agent,
for the benefit of the Secured Parties. If such Payee fails to make any such
endorsement or assignment to the Administrative Agent, the Administrative
Agent or any of its officers, employees or representatives are hereby
irrevocably authorized to make the same. Each Payee agrees that until the
Obligations have been performed and paid in full in immediately available
funds, no Letters of Credit are outstanding and the Commitments have been
terminated, such Payee will not (i) assign or transfer, or agree to assign or
transfer, to any Person (other than in favor of the Administrative Agent for
the benefit of the Secured Parties pursuant to the Guarantee and Collateral
Agreement or otherwise) any claim such Payee has or may have against any
Payor, (ii) discount or extend the time for payment of any Payor
Indebtedness, or (iii) otherwise amend, modify, supplement, waive or fail to
enforce any provision of this Promissory Note.
NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN, IN ANY
OTHER LOAN DOCUMENT OR IN ANY SUCH PROMISSORY NOTE OR OTHER INSTRUMENT, THIS
PROMISSORY NOTE (i) REPLACES AND SUPERSEDES ANY AND ALL PROMISSORY NOTES OR
OTHER INSTRUMENTS WHICH CREATE OR EVIDENCE ANY LOANS OR ADVANCES MADE ON OR
BEFORE THE DATE HEREOF BY ANY GROUP MEMBER TO ANY OTHER GROUP MEMBER, AND
(ii) SHALL NOT BE DEEMED REPLACED, SUPERSEDED OR IN ANY WAY MODIFIED BY AN
PROMISSORY NOTE OR OTHER INSTRUMENT ENTERED INTO ON OR AFTER THE DATE HEREOF
WHICH PURPORTS TO CREATE OR EVIDENCE ANY LOAN OR ADVANCE BY ANY GROUP MEMBER
TO ANY OTHER GROUP MEMBER.
THIS PROMISSORY NOTE AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
UNDER THIS PROMISSORY NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
From time to time after the date hereof, additional Subsidiaries of
the Group Members may become parties hereto by executing a counterpart
signature page to this
3
<PAGE>
Promissory Note (each additional Subsidiary, an "ADDITIONAL PAYOR"). Upon
delivery of such counterpart signature page to the Payees, notice of which is
hereby waived by the other Payors, each Additional Payor shall be a Payor and
shall be as fully a party hereto as if such Additional Payor were an original
signatory hereof. Each Payor expressly agrees that its obligations arising
hereunder shall not be affected or diminished by the addition or release of
any other Payor hereunder. This Promissory Note shall be fully effective as to
any Payor that is or becomes a party hereto regardless of whether any other
Person becomes or fails to become or ceases to be a Payor hereunder.
This Promissory Note may be executed in any number of counterparts and
by different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together
shall constitute one and the same agreement.
[Signature page follows]
4
<PAGE>
IN WITNESS WHEREOF, each Payor has caused this Intercompany
Subordinated Demand Promissory Note to be executed and delivered by its proper
and duly authorized officer as of the date set forth above.
O'SULLIVAN INDUSTRIES, INC.
By: /s/ Richard D. Davidson
-------------------------------
Name: Richard D. Davidson
Title: President
O'SULLIVAN INDUSTRIES -- VIRGINIA, INC.
By: /s/ Richard D. Davidson
-------------------------------
Name: Richard D. Davidson
Title: President
<PAGE>
SCHEDULE A
TRANSACTIONS
ON
INTERCOMPANY SUBORDINATED DEMAND PROMISSORY NOTE
<TABLE>
_______________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
OUTSTANDING
AMOUNT OF PRINCIPAL
AMOUNT OF PRINCIPAL BALANCE FROM
NAME OF ADVANCE PAID PAYOR TO PAYEE NOTATION
DATE NAME OF PAYOR PAYEE THIS DATE THIS DATE THIS DATE MADE BY
_______________________________________________________________________________________________________
_______________________________________________________________________________________________________
_______________________________________________________________________________________________________
_______________________________________________________________________________________________________
_______________________________________________________________________________________________________
_______________________________________________________________________________________________________
_______________________________________________________________________________________________________
_______________________________________________________________________________________________________
_______________________________________________________________________________________________________
_______________________________________________________________________________________________________
_______________________________________________________________________________________________________
_______________________________________________________________________________________________________
_______________________________________________________________________________________________________
_______________________________________________________________________________________________________
_______________________________________________________________________________________________________
_______________________________________________________________________________________________________
_______________________________________________________________________________________________________
_______________________________________________________________________________________________________
_______________________________________________________________________________________________________
_______________________________________________________________________________________________________
_______________________________________________________________________________________________________
_______________________________________________________________________________________________________
_______________________________________________________________________________________________________
_______________________________________________________________________________________________________
</TABLE>
<PAGE>
ENDORSEMENT
FOR VALUE RECEIVED, each of the undersigned does hereby sell, assign
and transfer to _____________________________all of its right, title and
interest in and to the Intercompany Subordinated Demand Promissory Note,
dated November 30, 1999 (as amended, supplemented, replaced or otherwise
modified from time to time, the "PROMISSORY NOTE"), made by O'Sullivan
Industries, Inc. (the "BORROWER"), and each other Subsidiary of the Borrower
or any other Person that becomes a party thereto, and payable to the
undersigned. This endorsement is intended to be attached to the Promissory
Note and, when so attached, shall constitute an endorsement thereof.
The initial undersigned shall be the Group Members (as defined in
the Promissory Note) party to the Loan Documents on the date of the
Promissory Note. From time to time after the date thereof, additional
Subsidiaries of the Group Members shall become parties to the Promissory Note
(each, an "ADDITIONAL PAYEE") and a signatory to this endorsement by executing
a counterpart signature page to the Promissory Note and to this endorsement.
Upon delivery of such counterpart signature page to the Payors, notice of
which is hereby waived by the other Payees, each Additional Payee shall be a
Payee and shall be as fully a Payee under the Promissory Note and a signatory
to this endorsement as if such Additional Payee were an original Payee under
the Promissory Note and an original signatory hereof. Each Payee expressly
agrees that its obligations arising under the Promissory Note and hereunder
shall not be affected or diminished by the addition or release of any other
Payee under the Promissory Note or hereunder. This endorsement shall be fully
effective as to any Payee that is or becomes a signatory hereto regardless
of whether any other Person becomes or fails to become or ceases to be a
Payee to the Promissory Note or hereunder.
Dated:----------------------
[Signature page follows]
<PAGE>
O'SULLIVAN INDUSTRIES, INC.
By: /s/ Richard D. Davidson
-------------------------------
Name: Richard D. Davidson
Title: President
O'SULLIVAN INDUSTRIES -- VIRGINIA, INC.
By: /s/ Richard D. Davidson
-------------------------------
Name: Richard D. Davidson
Title: President
<PAGE>
EXHIBIT 10.10
EXECUTION COPY
SUBSCRIPTION AGREEMENT
SUBSCRIPTION AGREEMENT (this "AGREEMENT"), dated as of November 30,
1999, by and among OSI Acquisition, Inc., a Delaware corporation (the
"COMPANY"), Bruckmann, Rosser, Sherrill & Co. II, L.P. ("BRS") and the
individuals whose names appear on the signature pages attached hereto (together
with BRS, the "PURCHASERS"). Except as otherwise indicated herein, capitalized
terms used herein are defined in Section 5 hereof.
WHEREAS, the Purchasers wish to conduct the operations of the Company
and have agreed to make certain capital contributions to the Company in
consideration for certain shares of capital stock of the Company; and
WHEREAS, the Company and the Purchasers desire to enter into an
agreement pursuant to which the Company will sell to the Purchasers and the
Purchasers will buy from the Company certain shares of the Company's Common
Stock, Junior Preferred Stock and, in the case of BRS, Senior Preferred Stock
(collectively, the "SECURITIES") in each case having the rights and preferences
set forth in the Amended and Restated Certificate of Incorporation of the
Company, a copy of which is attached hereto as EXHIBIT A.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. AUTHORIZATION AND CLOSING.
(a) THE SECURITIES. The Company has authorized the issuance and sale to
each Purchaser the classes and quantities of Securities set forth opposite such
Purchaser's name on the attached SCHEDULE 1, in each case at a purchase price
equal to $1.00 per share of Common Stock, $100.00 per share of Junior Preferred
Stock and $1.50 per share of Senior Preferred Stock.
(b) PURCHASE AND SALE OF THE SECURITIES. At the Closings (as defined
below), the Company shall sell to the Purchasers, and subject to the terms and
conditions set forth herein, the Purchasers shall purchase from the Company the
Securities.
(c) THE CLOSINGS. The closings of the transactions contemplated by this
Agreement shall take place as described below at the offices of Kirkland &
Ellis, Citicorp Center, 153 East 53rd Street, New York, New York, 10022 at 10:00
a.m. on each of November 29, 1999 (the "FIRST CLOSING DATE"), and November 30,
1999, (the "SECOND CLOSING DATE"). The closing of the transactions to be
effectuated on the First Closing Date under paragraph (i) below is referred to
herein as the "FIRST CLOSING." The closing of the transactions to be effectuated
on the Second Closing
<PAGE>
Date pursuant to paragraph (ii) below is referred to herein as the "SECOND
CLOSING." The First Closing and the Second Closing are referred to herein,
collectively, as the "CLOSINGS."
(i) FIRST CLOSING. On the First Closing Date, (x) BRS shall
contribute to the capital of the Company an amount equal to $259,978.50, payable
by check or wire transfer of immediately available funds, and (y) in exchange
therefor, the Company shall issue to BRS 173,319 shares of Senior Preferred
Stock. In furtherance thereof, the Company shall deliver to BRS a certificate
(or certificates) representing such shares of Senior Preferred Stock and bearing
the legend described in Section 3 below.
(ii) SECOND CLOSING. On the Second Closing Date, (x) each
Purchaser shall contribute to the capital of the Company an amount equal to the
"contribution amount" set forth opposite such Purchaser's name on the attached
SCHEDULE 1 (except, in the case of BRS, any amount payable in respect of shares
of Senior Preferred Stock to the extent such amount was previously contributed
to the Company pursuant to paragraph (i) above), payable by check or wire
transfer of immediately available funds, and (y) the Company shall issue to each
Purchaser the classes and quantities of Securities set forth opposite such
Purchaser's name on the attached SCHEDULE 1 (except, in the case of BRS, any
shares of Senior Preferred Stock).
SECTION 2. PURCHASERS' INVESTMENT REPRESENTATIONS.
Each Purchaser hereby represent that:
(i) such Purchaser is acquiring the Securities to be purchased
by them hereunder or to be acquired by them pursuant hereto for their own
account with the present intention of holding such securities for investment
purposes and that they have no intention of selling such securities in a public
distribution in violation of the federal securities laws or any applicable state
securities laws;
(ii) such Purchaser is able to bear the economic risk of the
investment in the Securities for an indefinite period of time because the
Securities are subject to the transfer restrictions contained herein and have
not been registered under the 1933 Act;
(iii) such Purchaser has had an opportunity to ask questions
and receive answers concerning the terms and conditions of the offering of the
Securities and has had full access to such other information concerning the
Company as the Purchaser has requested. Purchaser has reviewed, or has had an
opportunity to review copies of the following documents, (A) the Stockholders
Agreement, (B) Amended and Restated Certificate of Incorporation of the Company,
and (C) the Registration Rights Agreement;
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<PAGE>
(iv) such Purchaser either (A) is an "accredited investor" as
defined in rule 501(a) under the 1933 Act or (B) has such knowledge,
sophistication and experience in business and financial matters so as to be
capable of evaluating the merits and risks of its prospective investment in the
Securities, is able to bear the economic risk of such investment and, at the
present time, is able to afford a complete loss of such investment; and
(v) this Agreement constitutes the legal, valid and binding
obligation of such Purchaser, enforceable in accordance with its terms, and the
execution, delivery, and performance of this Agreement by such Purchaser does
not and will not conflict with, violate, or cause a breach of any agreement,
contract, or instrument to which such Purchaser is a party or any judgment,
order, or decree to which such Purchaser is subject.
SECTION 3. SECURITIES ACT LEGEND
In the event that certificates representing the securities are issued
("CERTIFICATED SECURITIES") each certificate for Restricted Securities will be
imprinted with a legend in substantially the following form (the "SECURITIES ACT
LEGEND"):
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIG INALLY ISSUED
ON NOVEMBER 30, 1999, AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED. THE TRANSFER OF SUCH SECURITIES IS SUBJECT TO
THE CONDITIONS SPECIFIED IN THE AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION AND THE SECURITIES PURCHASE AGREEMENT, DATED AS OF
NOVEMBER 30, 1999, BETWEEN THE ISSUER (THE "COMPANY") AND CERTAIN
INVESTORS, AND THE COMPANY RESERVES THE RIGHT TO REFUSE TO TRANSFER
SUCH SECURITIES UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED WITH RESPECT
TO SUCH TRANSFER. UPON WRITTEN REQUEST, A COPY OF SUCH CONDITIONS WILL
BE FURNISHED BY THE COMPANY TO THE HOLDER HEREOF WITHOUT CHARGE."
Whenever any of the Securities cease to be Restricted Securities and are not
otherwise restricted securities, the holder thereof will be entitled to receive
from the Company, without expense, upon surrender to the Company of the
certificate or instrument, as the case may be, representing such Restricted
Securities, a new certificate or instrument, as the case may be, representing
such Restricted Securities of like tenor but not bearing a legend of the
character set forth above.
- 3 -
<PAGE>
SECTION 4. RESTRICTIONS ON TRANSFER.
(a) Each of the Purchasers hereby agrees that such Purchaser will not
transfer any of the Securities such Purchasers receives pursuant to Section 1
hereof, other than (i) in the case of BRS, transfers made pursuant to the terms
of the Stock Purchase Agreement dated as of the First Closing Date among BRS and
the several other parties thereto, and (ii) in the case of each Purchaser (and
in the case of BRS, its permitted transferees), transfers made pursuant to the
Merger Agreement.
(b) Any transfer or attempted transfer of any Securities in violation
of any provision of this Agreement shall be null and void, and the Company shall
not record such transfer on its books or treat any purported transferee of such
Securities as the owner of such Securities for any purpose.
SECTION 5. DEFINITIONS.
For the purposes of this Agreement, the following terms have the
meanings set forth below:
"AFFILIATE" of any particular Person means any other Person that
directly or indirectly controls, is controlled by or is under common control
with such Person. "CONTROL" means the posses sion, directly or indirectly, of
the power to direct or cause the direction of the management and policies of a
Person, whether through ownership of voting securities, by contract or
otherwise.
"AMENDED AND RESTATED CERTIFICATE OF INCORPORATION" means the Company's
Certificate of Incorporation as in effect on the Closing Date, a copy of which
is attached hereto as EXHIBIT A.
"COMMON STOCK" has the meaning set forth in the Amended and Restated
Certificate of Incorporation.
"JUNIOR PREFERRED STOCK" has the meaning set forth in the Amended and
Restated Certificate of Incorporation.
"MERGER AGREEMENT" means that certain Agreement and Plan of Merger date
as of May 17, 1999, between OSI Acquisition, Inc. and O'Sullivan Industries
Holdings, Inc., as in effect from time to time.
"PERSON" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization or any other entity (including,
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<PAGE>
without limitation, any governmental entity or any department, agency or
political subdivision thereof).
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement
(as amended, restated or modified from time to time) to be entered into by and
among the Company, BRS and the other stockholders of the Company in connection
with the transactions contemplated under the Merger Agreement.
"RESTRICTED SECURITIES" means (i) the Securities issued hereunder and
(ii) any securities issued with respect to any of the Restricted Securities.
Restricted Securities will continue as such in the hands of any transferee;
PROVIDED, that as to any particular Restricted Securities, such securities shall
cease to be Restricted Securities when they have (a) been effectively registered
under the Securities Act and disposed of in accordance with the registration
statement covering them, (b) become eligible for sale pursuant to Rule 144 of
the Securities and Exchange Commission and disposed of in accordance therewith.
Whenever any particular certificated securities cease to be Restricted
Securities, the holder thereof shall be entitled to receive from the Company,
without expense, new certificates or instruments, as the case may be, not
bearing a Securities Act Legend of the character set forth in paragraph 3.
"SECURITIES ACT" means the Securities Act of 1933, as amended, or any
similar federal law then in force.
"SECURITIES AND EXCHANGE COMMISSION" includes any governmental body or
agency succeeding to the functions thereof.
"SENIOR PREFERRED STOCK" has the meaning set forth in the Amended and
Restated Certificate of Incorporation attached hereto as EXHIBIT A.
"STOCKHOLDERS AGREEMENT" means the Stockholders Agreement (as amended,
restated or modified from time to time) to be entered into by and among the
Company, BRS and the other stockholders of the Company in connection with the
transactions contemplated under the Merger Agreement.
SECTION 6. MISCELLANEOUS.
(a) GOVERNING LAW. THE CORPORATE LAW OF THE STATE OF DELAWARE WILL
GOVERN ALL QUESTIONS CONCERNING THE RELATIVE RIGHTS OF THE COMPANY AND THE
PURCHASERS. ALL OTHER QUESTIONS CONCERNING THE CONSTRUCTION, ENFORCEABILITY,
VALIDITY AND BINDING EFFECT OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO
ANY CHOICE OF LAW OR CONFLICT OF LAW PROVISION OR RULE (WHETHER
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<PAGE>
OF THE STATE OF NEW YORK OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE
APPLICATION OF THE LAW OF ANY JURISDICTION OTHER THAN THE STATE OF NEW YORK.
(b) NOTICES. All notices, demands or other communications to be given
or delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been given when delivered personally to the
recipient, sent to the recipient by reputable express courier service (charges
prepaid) or mailed to the recipient by certified or registered mail, return
receipt requested and postage prepaid. Such notices, demands and other
communications shall be sent to the Purchasers and to the Company at the
addresses indicated below:
If to the Company:
c/o Bruckmann, Rosser, Sherrill & Co., L.P.
126 East 56th Street, 29th Floor
New York, NY 10022
Attention: S. Edwards
Facsimile No.: 212-521-3799
WITH A COPY (WHICH SHALL NOT CONSTITUTE NOTICE) TO:
Kirkland & Ellis
153 East 53rd Street
New York, NY 10022
Attention: Kirk A. Radke, Esq.
Telecopy No.: (212) 446-4900
If to any Purchaser:
[PURCHASER]
c/o Bruckmann, Rosser, Sherrill & Co., L.P.
126 East 56th Street, 29th Floor
New York, NY 10022
Attention: [PURCHASER]
Facsimile No.: 212-521-3799
WITH A COPY (WHICH SHALL NOT CONSTITUTE NOTICE) TO:
Kirkland & Ellis
153 East 53rd Street
New York, NY 10022
Attention: Kirk A. Radke, Esq.
Telecopy No.: (212) 446-4900
- 6 -
<PAGE>
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
(c) COMPLETE AGREEMENT. This Agreement embodies the complete agreement
and understanding among the parties and supersede and preempt any prior
understandings, agreements or representations by or among the parties, written
or oral, which may have related to the subject matter hereof in any way.
(d) COUNTERPARTS. This Agreement may be executed in separate
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.
(e) SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, this
Agreement shall bind and inure to the benefit of and be enforceable by each
Purchaser, the Company and their respective successors and assigns (including
subsequent holders of Securities); PROVIDED, that the rights and obligations of
the Purchasers under this Agreement shall not be assignable except in connection
with a permitted transfer of Securities hereunder.
* * *
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Subscription
Agreement on the date first written above.
OSI ACQUISITION, INC.
By: /s/ Richard D. Davidson
------------------------------------
Name:
Title:
BRUCKMANN, ROSSER, SHERRILL & CO. II, L.P.
By: /s/ Stephen F. Edwards
------------------------------------
Name:
Title:
/s/ BONNIE DIETRICH
------------------------------
BONNIE DIETRICH
/s/ RICE EDMONDS
------------------------------
RICE EDMONDS
/s/ JULIET FRIST
------------------------------
JULIET FRIST
/s/ SUSAN KAIDER
------------------------------
SUSAN KAIDER
/s/ SARAH POLIZOTTO
------------------------------
SARAH POLIZOTTO
/s/ WALKER SIMMONS
------------------------------
WALKER SIMMONS
/s/ MARILENA TIBREA
------------------------------
MARILENA TIBREA
- 8 -
<PAGE>
SCHEDULE 1
SECURITIES TO BE ISSUED AND PURCHASED
<TABLE>
<CAPTION>
SECURITIES TO PURCHASE
------------------------------------------------------------
SHARES OF SHARES OF
SENIOR JUNIOR SHARES OF
PREFERRED PREFERRED COMMON CONTRIBUTION
PURCHASER STOCK STOCK STOCK TO CAPITAL
- --------------------------------- ---------------- ------------------ ---------------- ---------------------
<S> <C> <C> <C> <C>
BRS 173,319 408,893.172 920,013.963 $ 41,964,226.44
Bonnie Dietrich - 44.29 99.66 $ 4,528.99
Rice Edmonds - 1,129.48 2,541.33 $ 115,489.33
Juliet Frist - 577.59 1,299.57 $ 59,058
Susan Kaider - 44.29 99.66 $ 4,528.99
Sarah Polizotto - 44.29 99.66 $ 4,528.99
Walker Simmons - 1,129.48 2,541.33 $ 115,489.33
Marilena Tibrea - 132.88 298.98 $ 13,586.98
</TABLE>
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<PAGE>
EXHIBIT A
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
OSI ACQUISITION, INC.
(SEE ATTACHED)
- 10 -
<PAGE>
Exhibit 10.11
================================================================================
O'SULLIVAN INDUSTRIES HOLDINGS, INC.
1999 COMMON STOCK OPTION PLAN
================================================================================
<PAGE>
O'SULLIVAN INDUSTRIES HOLDINGS, INC.
1999 STOCK OPTION PLAN
ARTICLE I
PURPOSE OF PLAN
The 1999 Stock Option Plan (the "PLAN") of O'Sullivan Industries
Holdings, Inc., a Delaware corporation (the "COMPANY"), adopted by the Board of
Directors effective November 30, 1999, is intended to advance the best interests
of the Company by providing executives and other key employees of the Company or
any Subsidiary who have substantial responsibility for the management and growth
of the Company or any Subsidiary with additional incentives by allowing such
employees to acquire an ownership interest in the Company. The Plan is a
compensatory benefit plan within the meaning of Rule 701 under the Securities
Act of 1933, as amended (the "SECURITIES ACT") and, unless and until the Common
Stock is publicly traded, the issuance of options and Common Stock pursuant to
the Plan is intended to qualify for the exemption from registration under the
Securities Act provided by Rule 701.
ARTICLE II
DEFINITIONS
For purposes of the Plan the following terms have the indicated
meanings:
"BOARD" means the Board of Directors of the Company.
"COMMON STOCK" means the Common Stock, par value $0.01 per share, of
the Company.
"CODE" means the Internal Revenue Code of 1986, as amended, and any
successor statute.
"COMMITTEE" means the Compensation Committee or such other committee of
the Board as the Board may designate to administer the Plan or, if for any
reason the Board has not designated such a committee, the Board. The Committee,
if other than the Board, shall be composed of not fewer than two directors as
appointed from time to time by the Board.
"FAIR MARKET VALUE" per share on any given date means the average of
the closing prices of the sales of the Common Stock on all securities exchanges
on which such stock may at the time be listed, or, if there have been no sales
of Common Stock on any such exchange on any day, the average of the highest bid
and lowest
<PAGE>
asked prices for such stock on all such exchanges at the end of such day, or, if
on any day such stock is not so listed, the average of the representative bid
and asked prices quoted for such stock on the Nasdaq National Market System as
of 4:00 P.M., New York time, or, if on any day such stock is not quoted on the
Nasdaq National Market System, the average of the highest bid and lowest asked
prices for such stock on such day in the domestic over-the-counter market as
reported by the National Quotation Bureau, Incorporated, or any similar
successor organization. If at any time the Common Stock is not listed or quoted,
the Fair Market Value per share shall be the fair market value of the Common
Stock determined by the Board in good faith, giving effect to the preferences
and priorities set forth in the Company's Certificate of Incorporation (as
amended from time to time) with respect to other series or classes of the
Company's capital stock, and also based on such other factors as the members
thereof in the exercise of their business judgment, consider relevant.
"OPTION SHARES" shall mean (i) all shares of Common Stock issued or
issuable upon the exercise of an Option and (ii) all shares of Common Stock
issued with respect to the Common Stock referred to in clause (i) above by way
of stock dividend or stock split or in connection with any conversion, merger,
exchange, consolidation, reclassification or recapitalization or other
reorganization affecting the Common Stock. Unless provided otherwise herein or
in the Participant's Option Agreement, Option Shares will continue to be Option
Shares in the hands of any holder other than the Participant (except for the
Company), and each such transferee thereof will succeed to the rights and
obligations of a holder of Option Shares hereunder.
"OPTIONS" has the meaning set forth in Article IV.
"PARTICIPANT" means any executive or other key employee of the Company
or any Subsidiary who has been selected to participate in the Plan by the
Committee or the Board, as the case may be.
"SALE OF THE COMPANY" means a merger or consolidation effecting a
change in control of the Company, a sale of all or substantially all of the
assets of the Company or a sale of a majority of the outstanding voting
securities of the Company effecting a change in control of the Company.
"SECURITIES ACT" has the meaning ascribed thereto in Article 1 hereof.
"SUBSIDIARY" means any subsidiary corporation (as such term is defined
in Section 424(f) of the Code) of the Company.
"TAX DATE" means the date on which any taxable income resulting from
the exercise of an Option is determined under applicable federal income tax law.
"TERMINATION DATE" shall mean the date upon which such Participant's
employment with the Company and the Subsidiaries terminated.
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<PAGE>
ARTICLE III
ADMINISTRATION
The Plan shall be administered by the Committee; provided that if at
any time Rule 16b-3 or any successor rule ("RULE 16B-3") under the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT"), so permits without
adversely affecting the ability of the Plan to comply with the conditions for
exemption from Section 16 of the Exchange Act (or any successor provision)
provided by Rule 16b-3, the Committee may delegate the administration of the
Plan in whole or in part, on such terms and conditions, and to such person or
persons as it may determine in its discretion, as it relates to persons not
subject to Section 16 of the Exchange Act (or any successor provision).
References to the Committee hereunder shall include the Board where appropriate.
The membership of the Committee or such successor committee shall be constituted
so as to comply at all times with the applicable requirements of Rule 16b-3.
Subject to the limitations of the Plan, the Committee shall have the sole and
complete authority to: (i) select Participants, (ii) grant Options to
Participants in such forms and amounts as it shall determine, (iii) impose such
limitations, restrictions and conditions upon such Options as it shall deem
appropriate, (iv) interpret the Plan and adopt, amend and rescind administrative
guidelines and other rules and regulations relating to the Plan, (v) correct any
defect or omission or reconcile any inconsistency in the Plan or in any Options
granted under the Plan, and (vi) make all other determinations and take all
other actions necessary or advisable for the implementation and administration
of the Plan. The Committee's determinations on matters within its authority
shall be conclusive and binding upon the Participants, the Company and all other
persons. All expenses associated with the administration of the Plan shall be
borne by the Company. The Committee may, as approved by the Board and to the
extent permissible by law, delegate any of its authority hereunder to such
persons or entities as it deems appropriate.
ARTICLE IV
LIMITATION ON AGGREGATE SHARES
The number of shares of Common Stock with respect to which stock
purchase options ("OPTIONS") may be granted under the Plan shall not exceed, in
the aggregate, 81,818 shares, subject to adjustment in accordance with Section
6.4. To the extent any Options expire unexercised or are canceled, terminated or
forfeited in any manner without the issuance of Common Stock thereunder, such
shares shall again be available under the Plan. The shares of Common Stock
available under the Plan may consist of authorized and unissued shares, treasury
shares or a combination thereof, as the Committee shall determine.
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<PAGE>
ARTICLE V
AWARDS
5.1 GRANT OF OPTIONS. The Committee may grant Options to Participants
in accordance with this Article V. Options granted under this Plan may be
"nonqualified" stock options or "incentive stock options" within the meaning of
Section 422 of the Code or any successor provision as specified by the
Committee; PROVIDED, that no incentive stock option may be granted to any Person
who, at the time an Option is granted, owns stock of the company possessing more
than 10% of the total combined voting power of all classes of stock of the
Company (a "TEN PERCENT HOLDER") except subject to the limitations set forth in
Sections 5.2, 5.3, 5.6 and 5.7 below and such other statutory requirements as
the Committee determines may be applicable.
5.2 EXERCISE PROCEDURE. Options shall be exercisable, to the extent
they are vested, by written notice to the Company (to the attention of the
Company's Secretary) accompanied by payment in full of the applicable exercise
price. Payment of such exercise price may be made (i) in cash (including check,
bank draft, money order or wire transfer of immediately available funds), (ii)
in shares of Common Stock valued at their Fair Market Value as of the date of
exercise as provided in Section 5.3 below (to the extent permitted by the
Company's material agreements for indebtedness for borrowed money), (iii) by a
reduction in the number of Option Shares to be delivered to the Participant
pursuant to such exercise of Options by the number of Option Shares, the Fair
Market Value of which is equal to the option exercise price that would otherwise
be payable by the Participant in connection with such exercise or (iv) in a
combination of the foregoing.
5.3 EXCHANGE OF PREVIOUSLY ACQUIRED STOCK. At the discretion of the
Committee, exercised at the time of grant, the exercise price for the shares
being acquired upon the exercise of an Option may be paid, in full or in part,
by the delivery to the Company of Common Stock (to the extent permitted by the
Company's material agreements for indebtedness for borrowed money). Any Common
Stock so delivered shall be treated as the payment of cash equal to the
aggregate Fair Market Value on the date of delivery of such Common Stock.
5.4 WITHHOLDING TAX REQUIREMENTS.
(a) AMOUNT OF WITHHOLDING. It shall be a condition of the
exercise of any Option that the Participant exercising the Option make
appropriate payment or other provision acceptable to the Company with respect to
any withholding tax requirement arising from such exercise. The amount of
withholding tax required, if any, with respect to any Option exercise (the
"WITHHOLDING AMOUNT") shall be determined by a financial or other appropriate
officer of the Company, and the Participant shall furnish such information and
make such representations as such officer requires to make such determination.
-4-
<PAGE>
(b) WITHHOLDING PROCEDURE. If the Company determines that
withholding tax is required with respect to any Option exercise, the Company
shall notify the Participant of the Withholding Amount, and the Participant
shall pay to the Company an amount not less than the Withholding Amount. In lieu
of making such payment, the Participant may elect to pay the Withholding Amount
by either (i) delivering to the Company a number of shares of Common Stock
having an aggregate Fair Market Value as of the Measurement Date not less than
the Withholding Amount or (ii) directing the Company to withhold (and not to
deliver or issue to the Participant) a number of shares of Common Stock,
otherwise issuable upon the exercise of an Option, having an aggregate Fair
Market Value as of the Measurement Date not less than the Withholding Amount.
Any fractional share interests resulting from the delivery or withholding of
shares of Common Stock to meet withholding tax requirements shall be settled in
cash. All amounts paid to or withheld by the Company and the value of all shares
of Common Stock delivered to or withheld by the Company pursuant to this Section
5.4 shall be deposited in accordance with applicable law by the Company as
withholding tax for the Participant's account. If the Treasurer or other
appropriate officer of the Company determines that no withholding tax is
required with respect to the exercise of any Option, but subsequently it is
determined that the exercise resulted in taxable income as to which withholding
is required (as a result of a disposition of shares or otherwise), the
Participant shall promptly, upon being notified of the withholding requirement,
pay to the Company, by means acceptable to the Company, the amount required to
be withheld.
5.5 NOTIFICATION OF INQUIRIES AND AGREEMENTS. Each Participant and each
Permitted Transferee shall notify the Company in writing within 10 days after
the date such Participant or Permitted Transferee (i) first obtains knowledge of
any Internal Revenue Service inquiry, audit, assertion, determination,
investigation, or question relating in any manner to the value of Options
granted hereunder; (ii) includes or agrees (including, without limitation, in
any settlement, closing or other similar agreement) to include in gross income
with respect to any Option granted under this Plan (A) any amount in excess of
the amount reported on Form 1099 or Form W-2 to such Participant by the Company,
or (B) if no such Form was received, any amount; and/or (iii) exercises, sells,
disposes of, or otherwise transfers an Option acquired pursuant to this Plan.
Upon request, a Participant or Permitted Transferee shall provide to the Company
any information or document relating to any event described in the preceding
sentence which the Company (in its sole discretion) requires in order to
calculate and substantiate any change in the Company's tax liability as a result
of such event.
5.6 CONDITIONS AND LIMITATIONS ON EXERCISE. At the discretion of the
Committee, exercised at or subsequent to the time of grant, Options may vest, in
one or more installments, upon (i) the fulfilment of certain conditions, (ii)
the passage of a specified period of time, and/or (iii) the achievement by the
Company or any Subsidiary of certain performance goals.
-5-
<PAGE>
(a) NORMAL VESTING. Unless the Committee specifies otherwise
in an Option grant, an Option shall fully vest and become exercisable with
respect to all of the Option Shares that are subject to such Option on the
earlier of (i) the day before the Option's expiration date and (ii) the seventh
(7th ) anniversary of the date of the grant (such date being the "VESTING
DATE"), IF AND ONLY IF the holder thereof was continuously employed by the
Company from the date on which such Option was granted through the date on which
such Option vests. Notwithstanding the foregoing, unless the Committee specifies
otherwise, an Option shall vest and become exercisable with respect to 20% of
the Option Shares that are subject to such Option (rounded to the nearest whole
share) upon the issuance of the Company's audited financial statements for each
of the first five fiscal years of the Company following the date of grant, IF
AND ONLY IF (i) as of the end of each such fiscal year the Company achieves
certain financial performance targets (or such other performance target) which
will be specified in each Option Agreement (the "PERFORMANCE TARGET") and (ii)
the holder of such Option has been continuously employed by the Company from the
date on which such Option was granted through the date on which such financial
statements are issued. If the Company has not achieved its Performance Target
with respect to any of the years described above, then no portion of the Option
shall vest and become exercisable for any such year; PROVIDED, HOWEVER, that if
the Company achieves its Performance Target as of the end of a subsequent fiscal
year (up to and including the fifth fiscal year end of the Company following the
date of the grant), then the Option shall vest and become exercisable with
respect to all of the Option Shares that are subject to such Option (rounded to
the nearest whole share) for each such prior year or years upon the issuance of
the Company's audited financial statements for such subsequent fiscal year, so
long as the holder thereof has been continuously employed by the Company from
the date on which such Option was granted through the end of such subsequent
fiscal year. In addition, Options (i) shall be subject to milestone vesting in
accordance with the provisions of Section 5(b) and (ii) shall vest on an
accelerated basis as the Committee may determine and specify in any Option
Agreement.
(b) SALE OF THE COMPANY. In the event of a Sale of the
Company, all unvested Options shall become immediately vested. All Options shall
terminate if not exercised as of the date of the Sale of the Company or any
other designated date (the "DESIGNATED DATE") or all such Options shall
thereafter represent only the right to receive the excess of the consideration
per share of Common Stock offered in such Sale of the Company over the exercise
price of such Options. The Company shall give all Participants notice of an
impending Sale of the Company at least 15 days prior to the date of such Sale of
the Company or the Designated Date, whichever is earlier.
5.7 EXPIRATION OF OPTIONS.
(a) NORMAL EXPIRATION. In no event shall any part of any
Option be exercisable after the stated date of expiration thereof.
-6-
<PAGE>
(b) EARLY EXPIRATION UPON TERMINATION OF EMPLOYMENT. Any part
of any Option that was not vested on a Participant's Termination Date shall
expire and be forfeited on such date, and any part of any Option that was vested
on the Termination Date shall also expire and be forfeited to the extent not
theretofore exercised on the thirtieth (30th) day (one year if termination is
caused by the Participant's death or disability) following the Termination Date,
but in no event after the stated date of expiration thereof.
5.8 STOCKHOLDERS AGREEMENT. It shall be a condition of the exercise of
any Option that the Participant exercising the Option shall become a party to
the Stockholders Agreement, dated as of November 30, 1999, by and among the
Company and certain of its stockholders (the "STOCKHOLDERS AGREEMENT"), and the
Option Shares shall be deemed Stockholder Shares for all purposes of the
Stockholders Agreement; PROVIDED, that if the Stockholders Agreement has
terminated by its terms, the provisions of this Section 5.8 shall no longer
apply.
ARTICLE VI
GENERAL PROVISIONS
6.1 WRITTEN AGREEMENT. Each Option granted hereunder shall be embodied
in a written agreement (the "OPTION AGREEMENT") which shall be signed by the
Participant to whom the Option is granted and shall be subject to the terms and
conditions set forth herein. For the avoidance of doubt, in the event there is a
conflict between the terms and conditions in any Option Agreement and the terms
and conditions in this Plan, the terms and conditions set forth in this Plan
shall control.
6.2 LISTING, REGISTRATION AND LEGAL COMPLIANCE. If at any time the
Committee determines, in its discretion, that the listing, registration or
qualification of the shares subject to Options upon any securities exchange or
under any state or federal securities or other law or regulation, or the consent
or approval of any governmental regulatory body, is necessary or desirable as a
condition to or in connection with the granting of Options or the purchase or
issuance of shares thereunder, no Options may be granted or exercised, in whole
or in part, unless such listing, registration, qualification, consent or
approval shall have been effected or obtained free of any conditions not
acceptable to the Committee. The holders of such Options will supply the Company
with such certificates, representations and information as the Company shall
request and shall otherwise cooperate with the Company in obtaining such
listing, registration, qualification, consent or approval, which listing,
registration, qualification, consent or approval the Company hereby undertakes
to use commercially reasonable efforts to obtain. In the case of officers and
other persons subject to Section 16(b) of the Securities Exchange Act of 1934,
as amended, the Committee may at any time impose any limitations upon the
exercise of Options that, in the Committee's discretion, are necessary or
desirable in order to comply with such Section 16(b) and the rules and
-7-
<PAGE>
regulations thereunder. If the Company, as part of an offering of securities or
otherwise, finds it desirable because of federal or state regulatory
requirements to reduce the period during which any Options may be exercised, the
Committee may, in its discretion and without the Participant's consent, so
reduce such period on not less than 15 days' written notice to the holders
thereof.
6.3 OPTIONS NOT TRANSFERRABLE. Options may not be transferred other
than by will or the laws of descent and distribution and, during the lifetime of
the Participant to whom they were granted, may be exercised only by such
Participant (or, if such Participant is incapacitated, by such Participant's
legal guardian or legal representative). In the event of the death of a
Participant, Options which are not vested on the date of death shall terminate;
exercise of Options granted hereunder to such Participant, which are vested as
of the date of death, may be made only by the executor or administrator of such
Participant's estate or the person or persons to whom such Participant's rights
under the Options will pass by will or the laws of descent and distribution.
6.4 ADJUSTMENTS. In the event of a reorganization, recapitalization,
stock dividend or stock split, or combination or other change in the shares of
Common Stock, the Board or the Committee may, in order to prevent the dilution
or enlargement of rights under the Plan or outstanding Options, adjust (i) the
number and type of shares as to which options may be granted under the Plan,
(ii) the number and type of shares covered by outstanding Options, (iii) the
exercise prices specified therein and (iv) other provisions of this Plan which
specify a number of shares, all as such Board or Committee determines to be
appropriate and equitable.
6.5 RIGHTS OF PARTICIPANTS. Nothing in the Plan shall interfere with or
limit in any way the right of the Company or any Subsidiary to terminate any
Participant's employment at any time (with or without cause), or confer upon any
Participant any right to continue in the employ of the Company or any Subsidiary
for any period of time or to continue to receive such Participant's current (or
other) rate of compensation. No employee shall have a right to be selected as a
Participant or, having been so selected, to be selected again as a Participant.
6.6 AMENDMENT, SUSPENSION AND TERMINATION OF PLAN. The Board or the
Committee may suspend or terminate the Plan or any portion thereof at any time
and may amend it from time to time in such respects as the Board or the
Committee may deem advisable; PROVIDED, that no such amendment shall be made
without stockholder approval to the extent such approval is required by law,
agreement or the rules of any exchange upon which the Common Stock is listed,
and no such amendment, suspension or termination shall impair the rights of
Participants under outstanding Options without the consent of the Participants
affected thereby, except as provided in Section 6.7. No Options shall be granted
hereunder after the tenth anniversary of the earlier of the adoption of the Plan
or its approval by the Company's shareholders.
-8-
<PAGE>
6.7 AMENDMENT OF OUTSTANDING OPTIONS. The Committee may amend or modify
any Option in any manner to the extent that the Committee would have had the
authority under the Plan initially to grant such Option; PROVIDED, that except
as expressly contemplated elsewhere herein or in any agreement evidencing such
Option, no such amendment or modification shall impair the rights of any
Participant under any outstanding Option without the consent of such
Participant.
6.8 INDEMNIFICATION. In addition to such other rights of
indemnification as they may have as members of the Board or the Committee, the
members of the Committee shall be indemnified by the Company against (i) all
costs and expenses reasonably incurred by them in connection with any action,
suit or proceeding to which they or any of them may be party by reason of any
action taken or failure to act under or in connection with the Plan or any
Option granted under the Plan, and (ii) all amounts paid by them in settlement
thereof (provided such settlement is approved by independent legal counsel
selected by the Company) or paid by them in satisfaction of a judgment in any
such action, suit or proceeding; PROVIDED, that any such Committee member shall
be entitled to the indemnification rights set forth in this Section 6.8 only if
such member (1) acted in good faith and in a manner that such member reasonably
believed to be in, and not opposed to, the best interests of the Company, and
(2) with respect to any criminal action or proceeding, (A) had no reasonable
cause to believe that such conduct was unlawful, and (B) upon the institution of
any such action, suit or proceeding a Committee member shall give the Company
written notice thereof and an opportunity to handle and defend the same before
such Committee member undertakes to handle and defend it on his own behalf.
6.9 RESTRICTED SECURITIES. All Common Stock issued pursuant to the
terms of this Plan shall constitute "restricted securities," as that term is
defined in Rule 144 promulgated by the Securities and Exchange Commission
pursuant to the Securities Act, and may not be transferred except in compliance
with the registration requirements of the Securities Act or an exemption
therefrom.
* * * * *
-9-
<PAGE>
Exhibit 10.15
ACKNOWLEDGMENT AND AGREEMENT
OF OPTIONEE
This Acknowledgment and Agreement of Optionee is entered into as of
this __ day of _____, 1999 by and between O'Sullivan Industries Holdings, Inc.
("O'SULLIVAN") and the undersigned holder (the "OPTIONEE") of an option to
purchase shares of the common stock, par value $1.00 per share (the "COMMON
STOCK"), of O'Sullivan.
1. Pursuant to the O'Sullivan Industries Holdings, Inc. Amended and
Restated 1994 Incentive Stock Option Plan, as amended (the "EMPLOYEE STOCK
OPTION PLAN"), O'Sullivan has issued to Optionee one or more options
(collectively, the "COMMON STOCK OPTION") to purchase that number of shares of
Common Stock set forth across from the heading "AGGREGATE NUMBER OF SHARES OF
COMMON STOCK SUBJECT TO THE COMMON STOCK OPTION" on SCHEDULE A hereto (each a
"SHARE", and collectively, the "SHARES"). Optionee represents and warrants that,
except as set forth on SCHEDULE A hereto, Optionee has no options or other
rights to acquire capital stock or other securities of O'Sullivan.
2. Optionee acknowledges and agrees that, notwithstanding anything to
the contrary in the Employee Stock Option Plan or in any other agreement or
instrument evidencing the Common Stock Option, including the O'Sullivan
Industries Holdings, Inc. 1994 Incentive Stock Plan Incentive Stock Option
Agreement(s) listed on SCHEDULE A hereto (each an "OPTION AGREEMENT" and
collectively, the "OPTION AGREEMENTS"), from and after the effective time of the
merger (the "MERGER") of OSI Acquisition, Inc. with and into O'Sullivan pursuant
to and in accordance with the Agreement and Plan of Merger between OSI
Acquisition, Inc. and O'Sullivan dated May 17, 1999, as amended, that:
(a) other than as described in clause (c) below, the Common
Stock Option will no longer be exercisable for Common Stock or any
other securities of O'Sullivan;
(b) the Employee Stock Option Plan, the Option Agreement(s)
and the other agreements and other instruments evidencing the Option,
whether or not returned to O'Sullivan for cancellation, shall be of no
further force and effect; and
(c) the Common Stock Option outstanding immediately prior to
the effective time of the Merger will represent only the right to
receive the following with respect to each Share issuable upon exercise
of the Common Stock Option:
(i) the options to purchase the number of shares in
the column headed "Cashed Shares" on SCHEDULE A hereto will
each be converted into (x) a cash payment in an amount equal
to $16.75 MINUS the purchase price Optionee is required to pay
for such share as set forth under the heading "PURCHASE PRICE
PAYABLE BY OPTIONEE UPON EXERCISE OF OPTION" on SCHEDULE A
hereto; and (y) one share of
<PAGE>
Senior Preferred Stock, par value $1.00 per share of
O'Sullivan ("SENIOR PREFERRED STOCK"); and
(ii) the options to purchase the number of shares in
the column headed "Rolled Shares" on SCHEDULE A hereto will be
converted into a Preferred Stock Option to acquire that number
of shares of O'Sullivan's Series A Junior Preferred Stock, par
value $0.01 per share, set forth under the heading "SHARES OF
SERIES A JUNIOR PREFERRED STOCK SUBJECT TO THE PREFERRED STOCK
OPTION" on SCHEDULE A hereto pursuant to and in accordance
with the Preferred Stock Option Agreement attached as Exhibit
A hereto.
(d) Except for the consideration described in clause (c)
above, Optionee expressly acknowledges and agrees that he/she has no
further rights under the Employee Stock Option Plan or any Option
Agreement and that he/she is entitled to no additional consideration.
3. Optionee hereby represents and warrants to O'Sullivan that Optionee
is the sole record and beneficial owner of the Option and that Optionee has not
sold, transferred, conveyed, pledged or hypothecated any interest in the Option,
and Optionee agrees not to take any action that would cause the foregoing
representations and warranties not to be true as of the effective time of the
Merger.
4. Optionee hereby agrees to take such other action as may be
reasonably requested by O'Sullivan to further evidence the foregoing.
(Signature Page Follows)
-2-
<PAGE>
SIGNATURE PAGE OF ACKNOWLEDGMENT AND
AGREEMENT OF OPTIONEE
IN WITNESS WHEREOF, the undersigned parties have duly executed this
Agreement as of the date first above written.
O'SULLIVAN INDUSTRIES HOLDINGS, INC.
By:
---------------------------------
Name:
---------------------------------
Title:
---------------------------------
OPTIONEE
----------------------------------------
(Name)
<PAGE>
EXHIBIT 10.16
November 30, 1999
Bruckmann, Rosser, Sherrill & Co. II, L.P.
126 East 56th Street, 29th Floor
New York, New York 10022
Re: Your Election to Receive Shares of the Surviving Corporation
in Lieu of the Merger consideration for Your Shares of
O'Sullivan Common Stock
Dear Sirs:
Reference is hereby made to the contemplated merger (the
"MERGER") of OSI Acquisition, Inc., a Delaware corporation, with and into
O'Sullivan Industries Holdings, Inc., a Delaware corporation (the "COMPANY"),
pursuant to the Agreement and Plan of Merger dated as of May 17, 1999, as
amended (the "MERGER AGREEMENT"). Certain capitalized terms used herein but not
otherwise defined herein are defined in the Merger Agreement. Your signature
below indicates your agreement to retain your equity investment in the Company
by rolling over that number of shares of Common Stock of the Company held by or
beneficially owned by you set forth beneath your signature below (the "ROLLOVER
SHARES"), into shares of Series B Preferred Stock (the "SERIES B PREFERRED"),
and Common Stock of the Surviving Corporation (the "SURVIVING CORPORATION COMMON
STOCK"). You shall be entitled to receive for each Rollover Share 0.1785 shares
of Series B Junior Preferred and 0.4016 shares of Surviving Corporation Common
Stock (collectively, the "ROLLOVER CONSIDERATION"). You hereby acknowledge and
agree that you are electing to receive the Rollover Consideration in lieu of the
Merger Consideration and that you shall not be entitled to receive any further
consideration in the Merger for such Rollover Shares.
This letter agreement shall be governed by and construed in
accordance with the internal laws of the State of Delaware.
Very truly yours,
O'SULLIVAN INDUSTRIES HOLDINGS, INC.
By: /s/ Richard D. Davidson
--------------------------------------
Richard D. Davidson, President and
Chief Operating Officer
ACKNOWLEDGED AND AGREED,
/s/ Stephen F. Edwards
- ---------------------------------
BRUCKMANN, ROSSER, SHERRILL &
CO. II, L.P.
Number of Rollover Shares:
---------------------------
<PAGE>
Exhibit 10.20(b)
SECOND AMENDMENT TO
O'SULLIVAN INDUSTRIES HOLDINGS, INC.
DEFERRED COMPENSATION PLAN
WHEREAS, O'Sullivan Industries Holdings, Inc. (the "Company") has
established a nonqualified deferred compensation plan for the benefit of a
select group of management and highly compensation employees; and
WHEREAS, pursuant to the terms of the Plan, the Company reserved the
right to amend the Plan from time to time in its discretion; and
WHEREAS, the Plan was heretofore amended by the First Amendment dated
effective as of July 1, 1997; and
WHEREAS, the Company desires to further amend the Plan as set forth
below;
NOW, THEREFORE, in consideration of these premises, the Plan is amended
as follows, effective as of June 30, 1999, and subject to the closing of the
Agreement and Plan of Merger Between OSI Acquisition, Inc. and O'Sullivan
Industries Holdings, Inc. dated as of May 17, 1999:
A. Article IV is amended to read in its entirety as follows:
ARTICLE IV--INVESTMENT OF ACCOUNTS
4.1 INVESTMENT ALTERNATIVES. Each Participant may elect to have his
Elective Deferral Contributions Account, Matching Contributions Account and
his Profit Sharing Contributions Account allocated among the following two
investment alternatives. The investment percentage for each investment
alternative selected by the Participant must be a multiple of 25%.
(a) Fixed Interest Rate. The amount owed by the Company with respect to
any amount allocated to the Fixed Interest Rate investment shall be
determined by crediting earnings on such amount (whether gains or losses)
equal to the percentage changes in the PIMCO Total Return II Fund, assuming
reinvestment of all dividends and distributions. Earnings shall be credited
to Accounts as of the last day of each calendar quarter.
(b) S&P 500. The amount owed by the Company with respect to any amount
allocated to the S&P 500 investment shall be determined by crediting
earnings on such amount (whether gains or losses) equal to the percentage
changes in the Vanguard 500 Index Fund, assuming reinvestment of all
dividends and distributions. Earnings shall be credited to Accounts as of
the last day of each calendar quarter.
The Participant shall make his initial investment selection by filing a
form with the Administrator at least 15 days prior to the effective date of
his participation.
4.2 TRANSFERS BETWEEN INVESTMENTS. The Participant's investment
direction shall remain in effect unless and until the Participant replaces
the direction in accordance with this Section 4.2. Participants may change
the percentages of their future Elective Deferral Contributions, Matching
Contribution, and Profit Sharing Contributions, or the percentages of their
existing Account balances, among the investment alternatives as of
January 1 and July 1 of each Plan Year (each, an "Allocation Date") by
filing a form with the Administrator. Any election must be filed on or
before 15 days prior to the effective date.
4.3 ELIMINATION OF THE PHANTOM STOCK MEASURING INVESTMENT. Effective as
of July 1, 1999, O'Sullivan Industries Holdings, Inc. common stock (the
"Phantom Stock Unit" investment) shall cease to be a measuring investment
with respect to Elective Deferral Contributions, Matching Contributions
and/or Profit Sharing Contributions credited to a Participant's Accounts, in
accordance with the other provisions of this Plan, on or after such date.
Further, any amounts credited to a Participant's Accounts which are deemed
invested in Phantom Stock Units immediately prior to the closing of the
Agreement and Plan of Merger
1
<PAGE>
Between OSI Acquisition, Inc. and O'Sullivan Industries Holdings, Inc. dated
as of May 17, 1999, shall be valued as of the most recent trading date
immediately preceding such Closing and an equivalent amount shall be deemed
invested in the S&P 500 investment unless and until changed at a later date
in the manner set forth in Section 4.2.
B. Section 5.5 is amended to read in its entirety as follows:
5.5 DISTRIBUTION OF ELECTIVE DEFERRALS. Prior to the beginning of each
Plan Year, at the time that the Participant elects to make Elective Deferral
Contributions for such Plan Year, the Participant may elect to receive a
distribution of any such Elective Deferral Contributions that are not
eligible for a Matching Contribution under Section 3.2, at any time after
the end of the fifth Plan Year following the Plan Year during which such
election is made. All distributions shall be made in lump sum cash payment.
Any election made pursuant to this Section 5.5 shall be made on a form
prescribed by the Administrator and shall be irrevocable once made.
C. Section 5.6 is amended to read in its entirety as follows:
5.6 METHOD OF PAYMENT. A Participant may elect distribution of his or
her Accounts in a lump sum or in installments over a period of years (not to
exceed ten). Any such election must be made no later than twelve months
prior to the time a Participant first becomes eligible to receive a
distribution of his Accounts under the Plan. If the Participant elects
installment payments, the unpaid amount shall continue to be invested as
provided in Article IV and shall continue to accrue earnings until paid. All
distributions shall be made in cash. Any election pursuant to this
Section 5.6 shall be made on a form prescribed by the Administrator and
shall be irrevocable once made.
D. Section 5.7 is amended by deleting the last sentence thereunder
reading: "Notwithstanding the foregoing, the restrictions specified in
Section 4.2 shall apply to the election by an Officer, as defined in
Section 4.2, to receive a distribution under this Section."
E. Notwithstanding the foregoing, this Amendment is expressly conditioned
upon the closing of the Agreement and Plan of Merger Between OSI
Acquisition, Inc. and O'Sullivan Industries Holdings, Inc. dated as of May 17,
1999, and if such closing does not occur, then this Amendment shall be null and
void.
2
<PAGE>
SIGNATURE PAGE
IN WITNESS WHEREOF, this Second Amendment has been duly executed as of
the day of , 1999.
<TABLE>
<S> <C>
O'SULLIVAN INDUSTRIES HOLDINGS, INC.
By: /s/ RICHARD D. DAVIDSON
--------------------------------------------------
Richard D. Davidson
PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>
ATTEST:
<TABLE>
<S> <C>
/s/ ROWLAND H. GEDDIE, III
- -------------------------------------------
Rowland H. Geddie, III
Vice President, General Counsel and Secretary
</TABLE>
3
<PAGE>
EXHIBIT 12.1
O'SULLIVAN INDUSTRIES HOLDINGS, INC.
RATIO OF EARNINGS TO COMBINED FIXED CHARGES
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SIX MONTHS ENDED
JUNE 30, 1999 DECEMBER 31, 1999
---------------------- ----------------------
HISTORICAL PRO FORMA HISTORICAL PRO FORMA
---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Pre-tax income from continuing operations................... 34,195 6,369 6,285 5,108
Fixed charges:
Interest expense.......................................... 2,844 29,287 3,091 14,644
Rent expense interest factor.............................. 504 504 252 252
------ ------ ------ ------
Total fixed charges......................................... 3,348 29,791 3,343 14,896
Earnings before income taxes and fixed charges.............. 37,544 36,160 9,628 20,004
Total fixed charges......................................... 3,348 29,791 3,343 14,896
------ ------ ------ ------
Ratio of earnings to combined fixed charges................. 11.21 1.21 2.88 1.34
====== ====== ====== ======
</TABLE>
<PAGE>
EXHIBIT 21
Subsidiaries of the Registrant and their respective States of Incorporation
O'SULLIVAN INDUSTRIES - VIRGINIA, INC. Virginia
O'SULLIVAN INDUSTRIES INTERNATIONAL, LIMITED Barbados
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-4 of
O'Sullivan Industries, Inc. ("O'Sullivan") of our report dated August 4,
1999, except as to Note 3 and paragraphs one through five of Note 12 which
are as of October 28, 1999, relating to the consolidated financial statements
of O'Sullivan, which appear in such Registration Statement. We also consent
to the references to us under the headings "Experts" in such Registration
Statement.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Fort Worth, Texas
February 28, 2000
<PAGE>
Exhibit 23.3
[LETTERHEAD OF BLACKWELL SANDERS PEPER MARTIN LLP]
The Board of Directors
O'Sullivan Industries Holdings, Inc.
1900 Gulf Street
Lamar, Missouri 64759
Members of the Board:
We hereby consent to the references to our opinion letter dated
June 29, 1999 in the Prospectus of O'Sullivan Industries, Inc. ("O'Sullivan")
relating to the planned exchange of O'Sullivan's outstanding 13 3/8% Senior
Subordinated Notes due 2009 for 13 3/8% Series B Senior Subordinated Notes
due 2009, which Prospectus is part of the Registration Statement filed on
Form S-4 of O'Sullivan.
By /s/ Blackwell Sanders Peper Martin LLP
--------------------------------------
BLACKWELL SANDERS PEPER MARTIN LLP
New York, New York
February 28, 2000
<PAGE>
Exhibit 25
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
-----------------------------
/ / CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE
PURSUANT TO SECTION 305(b) (2)
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
(Exact name of trustee as specified in its charter)
A U.S. NATIONAL BANKING ASSOCIATION 41-1592157
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national Identification No.)
bank)
SIXTH STREET AND MARQUETTE AVENUE
Minneapolis, Minnesota 55479
(Address of principal executive offices) (Zip code)
Stanley S. Stroup, General Counsel
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479
(612) 667-1234
(Agent for Service)
-----------------------------
O'SULLIVAN INDUSTRIES, INC.
(Exact name of obligor as specified in its charter)
DELAWARE 43-0923022
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1900 GULF STREET
LAMAR, MISSOURI 64759
(Address of principal executive offices) (Zip code)
-----------------------------
13 3/8% SENIOR SUBORDINATED NOTES DUE 2009
(Title of the indenture securities)
===============================================================================
<PAGE>
Item 1. GENERAL INFORMATION. Furnish the following information as to
the trustee:
(a) Name and address of each examining or supervising
authority to which it is subject.
Comptroller of the Currency
Treasury Department
Washington, D.C.
Federal Deposit Insurance Corporation
Washington, D.C.
The Board of Governors of the Federal Reserve System
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust
powers.
The trustee is authorized to exercise corporate trust
powers.
Item 2. AFFILIATIONS WITH OBLIGOR. If the obligor is an affiliate of the
trustee, describe each such affiliation.
None with respect to the trustee.
No responses are included for Items 3-14 of this Form T-1 because the obligor is
not in default as provided under Item 13.
Item 15. FOREIGN TRUSTEE. Not applicable.
Item 16. LIST OF EXHIBITS. List below all exhibits filed as a part of
this Statement of Eligibility. Norwest Bank
incorporates by reference into this Form T-1
the exhibits attached hereto.
Exhibit 1. a. A copy of the Articles of Association of the
trustee now in effect.*
Exhibit 2. a. A copy of the certificate of authority of
the trustee to commence business issued June
28, 1872, by the Comptroller of the Currency
to The Northwestern National Bank of
Minneapolis.*
b. A copy of the certificate of the Comptroller
of the Currency dated January 2, 1934,
approving the consolidation of The
Northwestern National Bank of Minneapolis
and The Minnesota Loan and Trust Company of
Minneapolis, with the surviving entity being
titled Northwestern National Bank and Trust
Company of Minneapolis.*
c. A copy of the certificate of the Acting
Comptroller of the Currency dated January
12, 1943, as to change of corporate title of
Northwestern National Bank and Trust Company
of Minneapolis to Northwestern National Bank
of Minneapolis.*
<PAGE>
d. A copy of the letter dated May 12, 1983 from
the Regional Counsel, Comptroller of the
Currency, acknowledging receipt of notice of
name change effective May 1, 1983 from
Northwestern National Bank of Minneapolis to
Norwest Bank Minneapolis, National
Association.*
e. A copy of the letter dated January 4, 1988
from the Administrator of National Banks for
the Comptroller of the Currency certifying
approval of consolidation and merger
effective January 1, 1988 of Norwest Bank
Minneapolis, National Association with
various other banks under the title of
"Norwest Bank Minnesota, National
Association."*
Exhibit 3. A copy of the authorization of the trustee to
exercise corporate trust powers issued January 2,
1934, by the Federal Reserve Board.*
Exhibit 4. Copy of By-laws of the trustee as now in effect.*
Exhibit 5. Not applicable.
Exhibit 6. The consent of the trustee required by Section 321(b)
of the Act.
Exhibit 7. A copy of the latest report of condition of the
trustee published pursuant to law or the requirements
of its supervising or examining authority.**
Exhibit 8. Not applicable.
Exhibit 9. Not applicable.
- -------------------
* Incorporated by reference to exhibit number 25 filed with
registration statement number 33-66026.
** Incorporated by reference to exhibit number 25.1 filed with
registration statement number 333-93499
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the
trustee, Norwest Bank Minnesota, National Association, a national banking
association organized and existing under the laws of the United States of
America, has duly caused this statement of eligibility to be signed on its
behalf by the undersigned, thereunto duly authorized, all in the City of
Minneapolis and State of Minnesota on the 5th day of January 2000.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
/s/ Timothy P. Mowdy
--------------------
Timothy P. Mowdy
Corporate Trust Officer
<PAGE>
EXHIBIT 6
January 5, 2000
Securities and Exchange Commission
Washington, D.C. 20549
Gentlemen:
In accordance with Section 321(b) of the Trust Indenture Act of 1939, as
amended, the undersigned hereby consents that reports of examination of the
undersigned made by Federal, State, Territorial, or District authorities
authorized to make such examination may be furnished by such authorities to the
Securities and Exchange Commission upon its request therefor.
Very truly yours,
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
/s/ Timothy P. Mowdy
--------------------
Timothy P. Mowdy
Corporate Trust Officer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF O'SULLIVAN INDUSTRIES, INC. FOR THE PERIOD ENDED
JUNE 30, 1999, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001107978
<NAME> O'Sullivan Industries, Inc.
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> JUN-30-1999
<CASH> 3,740
<SECURITIES> 0
<RECEIVABLES> 65,684
<ALLOWANCES> 2,416
<INVENTORY> 56,134
<CURRENT-ASSETS> 126,952
<PP&E> 157,896
<DEPRECIATION> 61,212
<TOTAL-ASSETS> 266,967
<CURRENT-LIABILITIES> 41,690
<BONDS> 22,000
0
0
<COMMON> 0
<OTHER-SE> 157,103
<TOTAL-LIABILITY-AND-EQUITY> 269,967
<SALES> 379,632
<TOTAL-REVENUES> 379,632
<CGS> 267,630
<TOTAL-COSTS> 267,630
<OTHER-EXPENSES> 267,630
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,844
<INCOME-PRETAX> 37,040
<INCOME-TAX> 12,311
<INCOME-CONTINUING> 21,885
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21,885
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF O'SULLIVAN INDUSTRIES, INC. FOR THE PERIOD ENDED
DECEMBER 31, 1999, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001107978
<NAME> O'Sullivan Industries, Inc.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 15,633
<SECURITIES> 0
<RECEIVABLES> 72,281
<ALLOWANCES> 2,659
<INVENTORY> 54,524
<CURRENT-ASSETS> 145,602
<PP&E> 161,954
<DEPRECIATION> 66,135
<TOTAL-ASSETS> 297,426
<CURRENT-LIABILITIES> 53,177
<BONDS> 237,569
0
0
<COMMON> 0
<OTHER-SE> (12,854)
<TOTAL-LIABILITY-AND-EQUITY> 297,426
<SALES> 213,015
<TOTAL-REVENUES> 213,015
<CGS> 149,448
<TOTAL-COSTS> 149,448
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,091
<INCOME-PRETAX> 6,285
<INCOME-TAX> 2,263
<INCOME-CONTINUING> 4,022
<DISCONTINUED> 0
<EXTRAORDINARY> 305
<CHANGES> 0
<NET-INCOME> 3,717
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
<PAGE>
LETTER OF TRANSMITTAL
TO TENDER FOR EXCHANGE
13 3/8% SENIOR SUBORDINATED NOTES DUE 2009
OF
O'SULLIVAN INDUSTRIES, INC.
PURSUANT TO THE PROSPECTUS DATED , 2000
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON [ ], 2000 UNLESS EXTENDED
(THE "EXPIRATION DATE").
- --------------------------------------------------------------------------------
PLEASE READ CAREFULLY THE ATTACHED INSTRUCTIONS
If you desire to accept the Exchange Offer, this Letter of Transmittal
should be completed, signed and submitted to the Exchange Agent: NORWEST BANK
MINNESOTA NATIONAL ASSOCIATION.
<TABLE>
<S> <C> <C>
BY REGISTERED OR CERTIFIED BY REGULAR MAIL OR OVERNIGHT IN PERSON BY HAND ONLY:
MAIL: COURIER: 12th Floor--Northstar East
Corporate Trust Operations Corporate Trust Operation Building
MAC N9303-111 MAC N9303-121 Corporate Trust Services
P.O. Box 1517 Sixth and Marquette Avenue 608 Second Avenue South
Minneapolis, MN 55480 Minneapolis, MN 55479 Minneapolis, MN
BY FACSIMILE (FOR ELIGIBLE
INSTITUTIONS ONLY):
(612) 667-4927
CONFIRM BY PHONE:
(612) 667-9764
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN THOSE LISTED ABOVE WILL
NOT CONSTITUTE A VALID DELIVERY.
FOR ANY QUESTIONS REGARDING THIS LETTER OF TRANSMITTAL OR FOR ANY ADDITIONAL
INFORMATION, YOU MAY CONTACT THE EXCHANGE AGENT BY TELEPHONE AT (612) 667-9764
OR BY FACSIMILE AT (612) 667-4927.
The undersigned hereby acknowledge receipt of the Prospectus dated [ ],
2000 (the "Prospectus") of O'Sullivan Industries, Inc., a Delaware corporation,
(the "Issuer"), and this Letter of Transmittal (the "Letter of Transmittal"),
that together constitute the Issuer's offer (the "Exchange Offer") to exchange
$1,000 principal amount of its 13 3/8% Senior Subordinated Notes due 2009 (the
"Exchange Notes"), which have been registered under the Securities Act of 1933,
as amended (the "Securities Act"), pursuant to a Registration Statement, for
each $1,000 principal amount of its outstanding 13 3/8% Senior Subordinated
Notes due 2009 (the "Notes"), of which [$ ] aggregate principal
amount is outstanding. Capitalized terms used but not defined herein have the
meanings ascribed to them in the Prospectus.
<PAGE>
The undersigned hereby tenders the Notes described in Box I below (the
"TENDERED NOTES") pursuant to the terms and conditions described in the
Prospectus and this Letter of Transmittal. The undersigned is the registered
owner of all the Tendered Notes and the undersigned represents that it has
received from each beneficial owner of the Tendered Notes ("BENEFICIAL OWNERS")
a duly completed and executed form of "INSTRUCTION TO REGISTERED HOLDER AND/OR
BOOK-ENTRY TRANSFER FACILITY PARTICIPANT FROM BENEFICIAL OWNER" accompanying
this Letter of Transmittal, instructing the undersigned to take the action
described in this Letter of Transmittal.
Subject to, and effective upon, the acceptance for exchange of the Tendered
Notes, the undersigned hereby exchanges, assigns, and transfers to, or upon the
order of, the Issuer, all right, title, and interest in, to, and under the
Tendered Notes.
Please issue the Exchange Notes exchanged for Tendered Notes in the name(s)
of the undersigned. Similarly, unless otherwise indicated under "SPECIAL
DELIVERY INSTRUCTIONS" below (Box 3), please send or cause to be sent the
certificates for the Exchange Notes (and accompanying documents, as appropriate)
to the undersigned at the address shown below in Box 1.
The undersigned hereby irrevocably constitutes and appoints the Exchange
Agent as the true and lawful agent and attorney in fact of the undersigned with
respect to the Tendered Notes, with full power of substitution (such power of
attorney being deemed to be an irrevocable power coupled with an interest), to
(i) deliver the Tendered Notes to the Issuer or cause ownership of the Tendered
Notes to be transferred to, or upon the order of, the Issuer, on the books of
the registrar for the Notes and deliver all accompanying evidences of transfer
and authenticity to, or upon the order of, the Issuer upon receipt by the
Exchange Agent, as the undersigned's agent, of the Exchange Notes to which the
undersigned is entitled upon acceptance by the Issuer of the Tendered Notes
pursuant to the Exchange Offer, and (ii) receive all benefits and otherwise
exercise all rights of beneficial ownership of the Tendered Notes, all in
accordance with the terms of the Exchange Offer.
The undersigned understands that tenders of Notes pursuant to the procedures
described under the caption "The Exchange Offer" in the Prospectus and in the
instructions hereto will constitute a binding agreement between the undersigned
and the Issuer upon the terms and subject to the conditions of the Exchange
Offer, subject only to withdrawal of such tenders on the terms in the Prospectus
under the caption "Exchange Offer--Withdrawal of Tenders." All authority herein
conferred or agreed to be conferred shall survive the death or incapacity of the
undersigned and any Beneficial Owner(s), and every obligation of the undersigned
or any Beneficial Owners hereunder shall be binding upon the heirs,
representatives, successors, and assigns of the undersigned and such Beneficial
Owner(s).
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, exchange, assign, and transfer the Tendered Notes
and that the Issuer will acquire good and unencumbered title thereto, free and
clear of all liens, restrictions, charges, encumbrances, and adverse claims when
the Tendered Notes are acquired by the Issuer as contemplated herein. The
undersigned and each Beneficial Owner will, upon request, execute and deliver
any additional documents reasonably requested by the Issuer or the Exchange
Agent as necessary or desirable to complete and give effect to the transactions
contemplated hereby.
The undersigned hereby represents and warrants that the information in
Box 2 is true and correct.
By accepting the Exchange Offer, the undersigned hereby represents and
warrants that (i) the Exchange Notes to be acquired by the undersigned and any
Beneficial Owner(s) in connection with the Exchange Offer are being acquired by
the undersigned and any Beneficial Owner(s) in the ordinary course of business
of the undersigned and any Beneficial Owner(s), (ii) the undersigned and each
Beneficial Owner are not participating, do not intend to participate, and have
no arrangement or understanding with any person to participate, in the
distribution of the Exchange Notes, (iii) except as otherwise disclosed in
writing herewith, neither the undersigned nor any Beneficial Owner is an
"affiliate," as defined in Rule 405
2
<PAGE>
under the Securities Act, of the Issuer, and (iv) the undersigned and each
Beneficial Owner acknowledge and agree that any person participating in the
Exchange Offer with the intention or for the purpose of distributing the
Exchange Notes must comply with the registration and prospectus delivery
requirements of the Securities Act of 1933, as amended (together with the rules
and regulations promulgated thereunder, the "Securities Act"), in connection
with a secondary resale of the Exchange Notes acquired by such person and cannot
rely on the position of the Staff of the Securities and Exchange Commission (the
"Commission") described in the no-action letters that are discussed in the
section of the Prospectus entitled "Exchange Offer." In addition, by accepting
the Exchange Offer, the undersigned hereby (i) represents and warrants that, if
the undersigned or any Beneficial Owner of the Notes is a Participating
Broker-Dealer, such Participating Broker-Dealer acquired the Notes for its own
account as a result of market-making activities or other trading activities and
has not entered into any arrangement or understanding with the Issuer or any
affiliate of the Issuer (within the meaning of Rule 405 under the Securities
Act) to distribute the New Notes to be received in the Exchange Offer, and
(ii) acknowledges that, by receiving New Notes for its own account in exchange
for Notes, where such Notes were acquired as a result of market-making
activities or other trading activities, such Participating Broker-Dealer will
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such New Notes.
/ / CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED HEREWITH.
/ / CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY DELIVERED TO THE EXCHANGE AGENT AND COMPLETE
"USE OF GUARANTEED DELIVERY" BELOW (Box 4).
/ / CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY
TRANSFER FACILITY AND COMPLETE "USE OF BOOK-ENTRY TRANSFER" BELOW (Box 5).
3
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING THE BOXES
- ------------------------------------------------------------------------------------------------------------
BOX 1
DESCRIPTION OF NOTES TENDERED
(ATTACH ADDITIONAL SIGNED PAGES, IF NECESSARY)
- ------------------------------------------------------------------------------------------------------------
AGGREGATE
NAMES AND ADDRESS(ES) OF REGISTERED NOTE HOLDER(S), CERTIFICATE PRINCIPAL AMOUNT AGGREGATE
EXACTLY AS NAME(S) APPEAR(S) ON NOTE CERTIFICATE(S) NUMBER(S) OF REPRESENTED BY PRINCIPAL AMOUNT
(PLEASE FILL IN, IF BLANK) NOTES* CERTIFICATE(S) TENDERED**
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
TOTAL
- ------------------------------------------------------------------------------------------------------------
* Need not be completed by persons tendering by book-entry transfer.
** The minimum permitted tender is $1,000 in principal amount of Notes. All other tenders must be in
integral multiples of $1,000 of principal amount Unless otherwise indicated in this column, the
principal amount of all Note Certificates identified in this Box 1 or delivered to the Exchange Agent
herewith shall be deemed tendered. See Instruction 4.
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
BOX 2
BENEFICIAL OWNER(S)
- --------------------------------------------------------------------------------------------
STATE OF PRINCIPAL RESIDENCE OF PRINCIPAL AMOUNT OF TENDERED NOTES HELD
EACH BENEFICIAL OWNER OF TENDERED NOTES FOR ACCOUNT OF BENEFICIAL OWNER
<S> <C>
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
- --------------------------------------------------------------------------------
BOX 3
SPECIAL DELIVERY INSTRUCTION'S
(SEE INSTRUCTIONS 5, 6 AND 7)
TO BE COMPLETED ONLY IF EXCHANGE NOTES EXCHANGED FOR NOTES AND UNTENDERED
NOTES ARE TO BE SENT TO SOMEONE OTHER THAN THE UNDERSIGNED, OR TO THE
UNDERSIGNED AT AN ADDRESS OTHER THAN THAT SHOWN ABOVE.
Mail Exchange Note(s) and any untendered Notes to:
Name (s):
______________________________________________________________________________
(please print)
Address:
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
(include Zip Code)
Tax Identification or
Social Security No.: _________________________________________________________
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BOX 4
USE OF GUARANTEED DELIVERY
(SEE INSTRUCTION 2)
TO BE COMPLETED ONLY IF NOTES ARE BEING TENDERED BY MEANS OF A NOTICE OF
GUARANTEED DELIVERY.
Name(s) of Registered Holder(s):
______________________________________________________________________________
Date of Execution of Notice of Guaranteed Delivery: __________________________
Name of Institution which Guaranteed Delivery: _______________________________
------------------------------------------------------------------------------
5
<PAGE>
- --------------------------------------------------------------------------------
BOX 5
USE OF BOOK-ENTRY TRANSFER
(SEE INSTRUCTION 2)
TO BE COMPLETED ONLY IF DELIVERY OF TENDERED NOTES IS TO BE MADE BY BOOK-ENTRY
TRANSFER.
Name of Tendering Institution: _______________________________________________
Account Number: ______________________________________________________________
Transaction Code Number: _____________________________________________________
------------------------------------------------------------------------------
6
<PAGE>
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------
BOX 6
TENDERING HOLDER SIGNATURE
(SEE INSTRUCTIONS 1 AND 5)
IN ADDITION, COMPLETE SUBSTITUTE FORM W-9
- ------------------------------------------------------------------------------------------
X Signature Guarantee
(Signature of Registered (If required by Instruction 5)
Holder(s) or Authorized Signatory) Authorized Signature
Note: The above lines must be signed by the X
registered holder(s) of Notes as their Name:
name(s) appear(s) on the Notes or by (please print)
persons(s) authorized to become registered Title:
holder(s) (evidence of which authorization Name of Firm:
must be transmitted with this Letter of (Must be an Eligible Institution as defined
Transmittal). If signature is by a trustee, in Instruction 2)
executor, administrator, guardian, Address:
attorney-in-fact, officer, or other person (include Zip Code)
acting in a fiduciary or representative Area Code and Telephone Number:
capacity, such person must record his or her Dated:
full title below. See Instruction 5.
Name(s):
Capacity:
Street Address:
(include Zip Code)
Area Code and Telephone Number:
Tax Identification or Social Security
Number:
- ------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
BOX 7
BROKER-DEALER STATUS
- --------------------------------------------------------------------------------
/ / Check this box if the Beneficial Owner of the Notes is a Participating
Broker-Dealer and such Participating Broker-Dealer acquired the Notes for
its own acount as a result of market-making activities or other trading
activities.
- --------------------------------------------------------------------------------
7
<PAGE>
<TABLE>
<S> <C> <C>
---------------------------------------------------------------------------------------------------------------
PAYOR'S NAME: O'SULLIVAN INDUSTRIES, INC.
---------------------------------------------------------------------------------------------------------------
SUBSTITUTE Name (if joint names, list first and circle the name of the person or entity whose
number you enter in Part I below. See instructions if your name has changed.
------------------------------------------------------------------------------------
Address
FORM W-9
------------------------------------------------------------------------------------
City, State and ZIP Code
------------------------------------------------------------------------------------
List account number(s) (optional)
------------------------------------------------------------------------------------
DEPARTMENT OF THE PART 1--PLEASE PROVIDE YOUR TAXPAYER IDENTIFICATION NUMBER Social Security
TREASURY ("TIN") IN THE BOX AT RIGHT AND CERTIFY BY SIGNING AND Number or TIN
DATING BELOW
---------------------------------------------------------------------------------------------------------------
INTERNAL REVENUE PART 2--Check the box if you are NOT subject to backup withholding under the
SERVICE provisions of section 3406(a)(1)(C) of the Internal Revenue Code because (1) you
have not been notified that you are subject to backup withholding as a result of
failure to report all interest or dividends or (2) the Internal Revenue Service has
notified you that you are no longer subject to backup withholding./ /
---------------------------------------------------------------------------------------------------------------
CERTIFICATION--UNDER THE PENALTIES OF PERJURY, I CERTIFY PART 3--
THAT THE INFORMATION PROVIDED ON THIS FORM IS TRUE, CORRECT Awaiting TIN / /
AND COMPLETE.
SIGNATURE -------------- DATE ---------
---------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE EXCHANGE OFFER. PLEASE
REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
8
<PAGE>
INSTRUCTIONS TO LETTER OF TRANSMITTAL
FORMING PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND NOTES. A properly completed
and duly executed copy of this Letter of Transmittal, including Substitute
Form W-9, and any other documents required by this Letter of Transmittal must be
received by the Exchange Agent at its address herein, and either certificates
for Tendered Notes must be received by the Exchange Agent at its address herein
or such Tendered Notes must be transferred pursuant to the procedures for
book-entry transfer described in the Prospectus (and a confirmation of such
transfer received by the Exchange Agent), in each case prior to 5 00 p.m., New
York City time, on the Expiration Date. The method of delivery of certificates
for Tendered Notes, this Letter of Transmittal and all other required documents
to the Exchange Agent is at the election and risk of the tendering holder and
the delivery will be deemed made only when actually received by the Exchange
Agent. If delivery is by mail, registered mail with return receipt requested,
properly insured, is recommended. Instead of delivery by mail, it is recommended
that the Holder use an overnight or hand delivery service. In all cases,
sufficient time should be allowed to assure timely delivery. No Letter of
Transmittal or Notes should be sent to the Issuers. Neither the Issuers nor the
registrar are under any obligation to notify any tendering holder of the
Issuer's acceptance of Tendered Notes prior to the closing of the Exchange
Offer.
2. GUARANTEED DELIVERY PROCEDURES. Holders who wish to tender their Notes
but whose Notes are not immediately available, and who cannot deliver their
Notes, this Letter of Transmittal or any other documents required hereby to the
Exchange Agent prior to the Expiration Date must tender their Notes according to
the guaranteed delivery procedures described below, including completion of Box
4. Pursuant to such procedures: (i) such tender must be made by or through a
firm which is a member of a recognized Medallion Program approved by the
Securities Transfer Association Inc. (an "Eligible Institution") and the Notice
of Guaranteed Delivery must be signed by the holder; (ii) prior to the
Expiration Date, the Exchange Agent must have received from the holder and the
Eligible Institution a properly completed and duly executed Notice of Guaranteed
Delivery (by mail or hand delivery) setting forth the name and address of the
holder, the certificate number(s) of the Tendered Notes and the principal amount
of Tendered Notes, stating that the tender is being made thereby and
guaranteeing that, within five New York Stock Exchange trading days after the
Expiration Date, this Letter of Transmittal together with the certificate(s)
representing the Notes and any other required documents will be deposited by the
Eligible Institution with the Exchange Agent; and (iii) such properly completed
and executed Letter of Transmittal, as well as all other documents required by
this Letter of Transmittal and the certificate(s) representing all Tendered
Notes in proper form for transfer, must be received by the Exchange Agent within
five New York Stock Exchange trading days after the Expiration Date. Any holder
who wishes to tender Notes pursuant to the guaranteed delivery procedures
described above must ensure that the Exchange Agent receives the Notice of
Guaranteed Delivery relating to such Notes prior to 5:00 New York City time, on
the Expiration Date. Failure to complete the guaranteed delivery procedures
outlined above will not, of itself, affect the validity or effect a revocation
of any Letter of Transmittal form properly completed and executed by an Eligible
Holder who attempted to use the guaranteed delivery process.
3. BENEFICIAL OWNER INSTRUCTIONS TO REGISTERED HOLDERS. Only a holder in
whose name Tendered Notes are registered on the books of the registrar (or the
legal representative or attorney-in-fact of such registered holder) may execute
and deliver this Letter of Transmittal. Any Beneficial Owner of Tendered Notes
who is not the registered holder must arrange promptly with the registered
holder to execute and deliver this Letter of Transmittal on his or her behalf
through the execution and delivery to the registered holder of the INSTRUCTIONS
TO REGISTERED HOLDER AND/OR BOOK-ENTRY TRANSFER FACILITY PARTICIPANT FROM
BENEFICIAL OWNER form accompanying this Letter of Transmittal.
9
<PAGE>
4. PARTIAL TENDERS. Tenders of Notes will be accepted only in integral
multiples of $1,000 in principal amount. If less than the entire principal
amount of Notes held by the holder is tendered, the tendering holder should fill
in the principal amount tendered in the column labeled "Aggregate Principal
Amount Tendered" of the box entitled "Description of Notes Tendered" (Box
1) above. The entire principal amount of Notes delivered to the Exchange Agent
will be deemed to have been tendered unless otherwise indicated. If the entire
principal amount of all Notes held by the holder is not tendered, then Notes for
the principal amount of Notes not tendered and Exchange Notes issued in exchange
for any Notes tendered and accepted will be sent to the Holder at his or her
registered address, unless a different address is provided in the appropriate
box on this Letter of Transmittal, as soon as practicable following the
Expiration Date.
5. SIGNATURES ON THE LETTER OF TRANSMITTAL; BOND POWERS AND ENDORSEMENTS;
GUARANTEE OF SIGNATURES. If this Letter of Transmittal is signed by the
registered holder(s) of the Tendered Notes, the signature must correspond with
the name(s) as written on the face of the Tendered Notes without alteration,
enlargement or any change whatsoever.
If any of the Tendered Notes are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal. If any Tendered
Notes are held in different names, it will be necessary to complete, sign and
submit as many separate copies of the Letter of Transmittal as there are
different names in which Tendered Notes are held.
If this Letter of Transmittal is signed by the registered holder(s) of
Tendered Notes, and Exchange Notes issued in exchange therefor are to be issued
(and any untendered principal amount of Notes is to be reissued) in the name of
the registered holder(s), then such registered holder(s) need not and should not
endorse any Tendered Notes, nor provide a separate bond power. In any other
case, such registered holder(s) must either properly endorse the Tendered Notes
or transmit a properly completed separate bond power with this Letter of
Transmittal, with the signature(s) on the endorsement or bond power guaranteed
by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of any Tendered Notes, such Tendered Notes must be endorsed
or accompanied by appropriate bond powers, in each case, signed as the name(s)
of the registered holder(s) appear(s) on the Tendered Notes, with the
signature(s) on the endorsement or bond power guaranteed by an Eligible
Institution.
If this Letter of Transmittal or any Tendered Notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations, or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing and, unless waived by the
Issuers, evidence satisfactory to the Issuer of their authority to so act must
be submitted with this Letter of Transmittal.
Endorsements on Tendered Notes or signatures on bond powers required by this
Instruction 5 must be guaranteed by an Eligible Institution.
Signatures on this Letter of Transmittal must be guaranteed by an Eligible
Institution unless the Tendered Notes are tendered (i) by a registered holder
who has not completed the box entitled "Special Delivery Instructions" (Box
3) or (ii) by an Eligible Institution.
6. SPECIAL DELIVERY INSTRUCTIONS. Tendering holders should indicate, in
the applicable box (Box 3), the name and address to which the Exchange Notes
and/or substitute Notes for principal amounts not tendered or not accepted for
exchange are to be sent, if different from the name and address of the person
signing this Letter of Transmittal. In the case of issuance in a different name,
the taxpayer identification or social security number of the person named must
also be indicated.
7. TRANSFER TAXES. The Issuer will pay all transfer taxes, if any,
applicable to the Exchange of Tendered Notes pursuant to the Exchange Offer. If,
however, a transfer tax is imposed for any reason other
10
<PAGE>
than the transfer and exchange of Tendered Notes pursuant to the Exchange Offer,
then the amount of any such transfer taxes (whether imposed on the registered
holder or on any other person) will be payable by the tendering holder. If
satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted with this Letter of Transmittal, the amount of such transfer taxes
will be billed directly to such tendering holder.
Except as provided in this Instruction 7, it will not be necessary for
transfer tax stamps to be affixed to the Tendered Notes listed in this Letter of
Transmittal.
8. TAX IDENTIFICATION NUMBER. Federal income tax law requires that the
holder(s) of any Tendered Notes which are accepted for exchange must provide the
Issuer (as payor) with its correct taxpayer identification number ("TIN"),
which, in the case of a holder who is an individual, is his or her social
security number. If the Issuer is not provided with the correct TIN, the Holder
may be subject to backup withholding and a $50 penalty imposed by the Internal
Revenue Service. (If withholding results in an over-payment of taxes, a refund
may be obtained.) Certain holders (including, among others, all corporations and
certain foreign individuals) are not subject to these backup withholding and
reporting requirements. See the enclosed "Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9 for additional
instructions.
To prevent backup withholding, each holder of Tendered Notes must provide
such holder's correct TIN by completing the Substitute Form W-9 certifying that
the TIN provided is correct (or that such holder is awaiting a TIN, and that
(i) the holder has not been notified by the Internal Revenue Service that such
holder is subject to backup withholding as a result of failure to report all
interest or dividend or (ii) the Internal Revenue Service has notified the
holder that such holder is no longer subject to backup withholding. If the
Tendered Notes are registered in more than one name or are not in the name of
the actual owner, consult the "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for information on which TIN to
report.
The Issuer reserves the right in its sole discretion to take whatever steps
are necessary to comply with the Issuer's obligation regarding backup
withholding.
9. VALIDITY OF TENDERS. All questions as to the validity, form,
eligibility (including time of receipt), acceptance and withdrawal of Tendered
Notes will be determined by the Issuer in its sole discretion, which
determination will be final and binding. The Issuer reserves the right to reject
any and all Notes not validly tendered or any Notes the Issuer's acceptance of
which would, in the opinion of the Issuer or its counsel, be unlawful. The
Issuer also reserves the right to waive any conditions of the Exchange Offer or
defects or irregularities in tenders of Notes as to any ineligibility of any
holder who seeks to tender Notes in the Exchange Offer. The interpretation of
the terms and conditions of the Exchange Offer (including this Letter of
Transmittal and the instructions hereto) by the Issuer shall be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Notes must he cured within such time as the Issuer
shall determine. Neither the Issuer, the Exchange Agent nor any other person
shall be under any duty to give notification of defects or irregularities with
respect to tenders of Notes, nor shall any of them incur any liability for
failure to give such notification. Tenders of Notes will not be deemed to have
been made until such defects or irregularities have been cured or waived. Any
Notes received by the Exchange Agent that are not properly tendered and as to
which the defects or irregularities have not been cured or waived will be
returned by the Exchange Agent to the tendering holders, unless otherwise
provided in this Letter of Transmittal, as soon as practicable following the
Expiration Date.
10. WAIVER OF CONDITIONS. The Issuer reserves the absolute right to amend,
waive or modify any of the conditions in the Exchange Offer in the case of any
Tendered Notes.
11. NO CONDITIONAL TENDER. No alternative, conditional, irregular, or
contingent tender of Notes or transmittal of this Letter of Transmittal will be
accepted.
11
<PAGE>
12. MUTILATED, LOST, STOLEN OR DESTROYED NOTES. Any tendering Holder whose
Notes have been mutilated, lost, stolen or destroyed should contact the Exchange
Agent at the address indicated herein for further instructions.
13. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests
for assistance and requests for additional copies of the Prospectus or this
Letter of Transmittal may be directed to the Exchange Agent at the address
indicated herein. Holders may also contact their broker, dealer, commercial
bank, trust company or other nominee for assistance concerning the Exchange
Offer.
14. ACCEPTANCE OF TENDERED NOTES AND ISSUANCE OF NOTES; RETURN OF
NOTES. Subject to the terms and conditions of the Exchange Offer, the Issuer
will accept for exchange all validly tendered Notes as soon as practicable after
the Expiration Date and will issue Exchange Notes therefor as soon as
practicable thereafter. For purposes of the Exchange Offer, the Issuer shall be
deemed to have accepted tendered Notes when, as and if the Issuer has given
written or oral notice (immediately followed in writing) thereof to the Exchange
Agent. If any Tendered Notes are not exchanged pursuant to the Exchange Offer
for any reason, such unexchanged Notes will be returned, without expense, to the
undersigned at the address shown in Box 1 or at a different address as may be
indicated herein under "Special Delivery Instructions" (Box 3).
15. WITHDRAWAL. Tenders may be withdrawn only pursuant to the procedures
in the Prospectus under the caption "The Exchange Offer."
12
<PAGE>
NOTICE OF GUARANTEED DELIVERY
WITH RESPECT TO
13 3/8% SENIOR SUBORDINATED NOTES DUE 2009
OF
O'SULLIVAN INDUSTRIES, INC.
PURSUANT TO THE PROSPECTUS DATED , 2000
This form must be used by a holder of 13 3/8% Senior Subordinated Notes due
2009 (the "Notes") of O'Sullivan Industries, Inc., a Delaware corporation, (the
"Company"), who wishes to tender Notes to the Exchange Agent pursuant to the
guaranteed delivery procedures described in "Exchange Offer--Guaranteed Delivery
Procedures" of the Company's Prospectus, dated [ ], 2000 (the "Prospectus")
and in Instruction 2 to the related Letter of Transmittal. Any holder who wishes
to tender Notes pursuant to such guaranteed delivery procedures must ensure that
the Exchange Agent receives this Notice of Guaranteed Delivery prior to the
Expiration Date of the Exchange Offer. Capitalized terms used but not defined
herein have the meanings ascribed to them in the Prospectus or the Letter of
Transmittal.
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON [ ], 2000 UNLESS EXTENDED
(THE "EXPIRATION DATE").
- --------------------------------------------------------------------------------
Norwest Bank Minnesota National Association
(the "Exchange Agent")
<TABLE>
<S> <C> <C>
BY REGISTERED OR CERTIFIED BY REGULAR MAIL OR OVERNIGHT IN PERSON BY HAND ONLY:
MAIL: COURIER: 12th Floor--Northstar
Corporate Trust Operations Corporate Trust Operation East Building
MAC N9303-111 MAC N9303-121 Corporate Trust Services
P.O. Box 1517 Sixth and Marquette Avenue 608 Second Avenue South
Minneapolis, MN 55480 Minneapolis, MN 55479 Minneapolis, MN
BY FACSIMILE (FOR ELIGIBLE
INSTITUTIONS ONLY):
(612) 667-4927
CONFIRM BY PHONE:
(612) 667-9764
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN ONE LISTED ABOVE WILL NOT
CONSTITUTE A VALID DELIVERY.
FOR ANY QUESTIONS REGARDING THIS NOTICE OF GUARANTEED DELIVERY OR FOR ANY
ADDITIONAL INFORMATION, YOU MAY CONTACT THE EXCHANGE AGENT BY TELEPHONE AT
(612) 667-9764, OR BY FACSIMILE AT (612) 667-4927.
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an "Eligible Institution"
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to the Company, upon the terms and subject to
the condition, in the Prospectus and the related Letter of Transmittal, receipt
of which is hereby acknowledged, the principal amount of Notes as described
below pursuant to the guaranteed delivery procedures described in the Prospectus
and in Instruction 2 of the Letter of Transmittal.
The undersigned hereby tenders the Notes listed below:
<TABLE>
CERTIFICATE NUMBER(S) (IF KNOWN) OF NOTES OR AGGREGATE PRINCIPAL AGGREGATE PRINCIPAL
ACCOUNT NUMBER AT THE BOOK-ENTRY FACILITY AMOUNT REPRESENTED AMOUNT TENDERED
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
- -----------------------------------------------------------------------------------------------
PLEASE SIGN AND COMPLETE
- -----------------------------------------------------------------------------------------------
Signatures of Registered Holder(s) or
Authorized Signatory: Date: , 1999
Address:
Names of Registered Holder(s):
Area Code and Telephone No.:
- -----------------------------------------------------------------------------------------------
</TABLE>
This Notice of Guaranteed Delivery must be signed by the Holder(s) exactly
as their name(s) appear on certificates for Notes or on a security position
listing as the owner of Notes, or by person(s) authorized to become Holder(s) by
endorsements and documents transmitted with this Notice of Guaranteed Delivery.
If signature is by a trustee, executor, administrator, guardian,
attorney-in-fact, officer or other person acting in a fiduciary or
representative capacity, such person must provide the following information.
Please print name(s) and address(es)
Name(s): _______________________________________________________________________
________________________________________________________________________________
Capacity: ______________________________________________________________________
Address(es): ___________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
2
<PAGE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm which is a member of a registered national securities
exchange or of the National Association of Securities Dealers, Inc., or is a
commercial bank or trust company having an office or correspondent in the United
States, or is otherwise an "eligible guarantor institution" within the meaning
of Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended,
guarantees deposit with the Exchange Agent of the Letter of Transmittal (or
facsimile thereof), together with the Notes tendered hereby in proper form for
transfer (or confirmation of the book-entry transfer of such Notes into the
Exchange Agent's account at the Book-Entry Transfer Facility described in the
prospectus under the caption, "Exchange Offer--Guaranteed Delivery Procedures"
and in the Letter of Transmittal) and any other required documents, all by 5:00
p.m., New York City time, on the fifth New York Stock Exchange trading day
following the Expiration Date.
<TABLE>
<S> <C>
Name of firm: (AUTHORIZED SIGNATURE)
Address: Name:
(PLEASE PRINT)
Title:
(INCLUDE ZIP CODE)
Area Code and Tel. No.: Dated: , 1999
</TABLE>
DO NOT SEND SECURITIES WITH THIS FORM. ACTUAL SURRENDER OF SECURITIES MUST BE
MADE PURSUANT TO, AND BE ACCOMPANIED BY, AN EXECUTED LETTER OF TRANSMITTAL.
3
<PAGE>
INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY
1. DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY. A properly completed
and duly executed copy of this Notice of Guaranteed Delivery and any other
documents required by this Notice of Guaranteed Delivery must be received by the
Exchange Agent at its address prior to the Expiration Date. The method of
delivery of this Notice of Guaranteed Delivery and any other required documents
to the Exchange Agent is at the election and sole risk of the holder, and the
delivery will be deemed made only when actually received by the Exchange Agent.
If delivery is by mail, registered mail with return receipt requested, properly
insured, is recommended. As an alternative to delivery by mail, the holders may
wish to consider using an overnight or hand delivery service. In all cases,
sufficient time should be allowed to assure timely delivery. For a description
of the guaranteed delivery procedures, see Instruction 2 of the Letter of
Transmittal.
2. SIGNATURES ON THIS NOTICE OF GUARANTEED DELIVERY. If this Notice of
Guaranteed Delivery is signed by the registered holder(s) of the Notes referred
to herein, the signature must correspond with the name(s) written on the face of
the Notes without alteration, enlargement, or any change whatsoever. If this
Notice of Guaranteed Delivery is signed by a participant of the Book-Entry
Transfer Facility whose name appears on a security position listing as the owner
of the Notes, the signature must correspond with the name shown on the security
position listing as the owner of the Notes.
If this Notice of Guaranteed Delivery is signed by a person other than the
registered holder(s) of any Notes listed or a participant of the Book-Entry
Transfer Facility, this Notice of Guaranteed Delivery must be accompanied by
appropriate bond powers, signed as the name of the registered holder(s) appears
on the Notes or signed as the name of the participant shown on the Book-Entry
Transfer Facility's security position listing.
If this Notice of Guaranteed Delivery is signed by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation, or other
person acting in a fiduciary or representative capacity, such person should so
indicate when signing and submit with the Letter of Transmittal evidence
satisfactory to the Company of such person's authority to so act.
3. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests
for assistance and requests for additional copies of the Prospectus may be
directed to the Exchange Agent at the address specified in the Prospectus.
Holders may also contact their broker, dealer, commercial bank, trust company,
or other nominee for assistance concerning the Exchange Offer.
4
<PAGE>
INSTRUCTIONS TO REGISTERED HOLDER AND/OR
BOOK-ENTRY TRANSFER FACILITY PARTICIPANT FROM BENEFICIAL OWNER
OF
O'SULLIVAN INDUSTRIES, INC.
13 3/8% SENIOR SUBORDINATED NOTES DUE 2009
To Registered Holder and/or Participant of the
Book-Entry Transfer Facility:
The undersigned hereby acknowledges receipt of the Prospectus, dated
(the "Prospectus") of O'Sullivan Industries, Inc., a Delaware corporation
(the "Company"), and the accompanying Letter of Transmittal (the "Letter of
Transmittal"), that together constitute the Company's offer (the "Exchange
Offer"). Capitalized terms used but not defined herein have the meanings
ascribed to them in the Prospectus.
This will instruct you, the registered holder and/or book-entry transfer
facility participant, as to action to be taken by you relating to the Exchange
Offer with respect to the 13 3/8% Senior Subordinated Notes due 2009 (the
"Notes") held by you for the account of the undersigned.
The aggregate face amount of the Notes held by you for the account of the
undersigned is (FILL IN AMOUNT):
$ of the 13 3/8% Senior Subordinated Notes due 2009
With respect to the Exchange Offer, the undersigned hereby instructs you
(CHECK APPROPRIATE BOX):
[ ] TO TENDER the following Notes held by you for the account of the
undersigned (INSERT PRINCIPAL AMOUNT OF NOTES TO BE TENDERED, IF ANY): $
[ ] NOT TO TENDER any Notes held by you for the account of the undersigned.
If the undersigned instruct you to tender the Notes held by you for the
account of the undersigned, it is understood that you are authorized (a) to
make, on behalf of the undersigned (and the undersigned, by its signature below,
hereby makes to you), the representation and warranties contained in the Letter
of Transmittal that are to be made with respect to the undersigned as a
beneficial owner, including but not limited to the representations that (i) the
undersigned's principal residence is in the state of (FILL IN STATE) ,
(ii) the undersigned is acquiring the Exchange Notes in the ordinary course of
business of the undersigned, (iii) the undersigned is not participating, does
not participate, and has no arrangement or understanding with any person to
participate in the distribution of the Exchange Notes, (iv) the undersigned
acknowledges that any person participating in the Exchange Offer for the purpose
of distributing the Exchange Notes must comply with the registration and
prospectus delivery requirements of the Securities Act of 1933, as amended (the
"Act"), in connection with a secondary resale transaction of the Exchange Notes
acquired by such person and cannot rely on the position of the Staff of the
Securities and Exchange Commission set forth in no-action letters that are
discussed in the section of the Prospectus entitled "The Exchange Offer--Resales
of the Exchange Notes," and (v) the undersigned is not an "affiliate," as
defined in Rule 405 under the Act, of the Company; (b) to agree, on behalf of
the undersigned, as set forth in the Letter of Transmittal; and (c) to take such
other action as necessary under the Prospectus or the Letter of Transmittal to
effect the valid tender of such Notes.
<PAGE>
SIGN HERE
Name of beneficial owner(s):
- --------------------------------------------------------------------------------
Signature(s):
- --------------------------------------------------------------------------------
Name (please print):
- --------------------------------------------------------------------------------
Address:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Telephone number:
- --------------------------------------------------------------------------------
Taxpayer Identification or Social Security Number:
- --------------------------------------------------------------------------------
Date:
- --------------------------------------------------------------------------------
